Nursing Homes in Michigan Could See ‘Devastating’ Medicaid Cuts of $37M This Year

Skilled nursing facilities in Michigan could see their Medicaid reimbursement cut by tens of millions later this year if the state moves forward with a proposed change that would take effect November 1.

Crain’s Detroit Business first reported the news.

Under the plan, Michigan would make changes to the ceiling for costs that SNFs can claim for reimbursements, according to a proposed policy draft from the Michigan Department of Health and Human Services (DHHS), issued on September 30. Nursing facilities, county medical care facilities, hospital long-term care units, and ventilator-dependent care units would be affected.

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Comments on the proposed draft are due on November 4. If the changes take effect, they would be implemented for cost-reporting periods ending on or after November 1.

In Michigan, SNFs are reimbursed under a cost-based system, where SNFs must file cost reports summarizing how much they’ve spent on caring for residents, Health Care Association of Michigan CEO Melissa Samuel explained to Skilled Nursing News. The state looks at Medicaid days and rates for all providers in the state, and all costs are capped at the 80th percentile of operators.

The new policy would change that, capping costs and rates at the 65th percentile. The cut would represent about 20% of Medicaid reimbursement, or an average of $11.45 per resident day, Crain’s Detroit reported, citing nursing home officials.

The change is modeled on a proposal that was in Michigan Gov. Gretchen Whitmer’s executive budget recommendation, but was eliminated by the Republican-controlled legislature, DHHS public information officer Bob Wheaton told SNN via e-mail.

“The Legislature’s budget left significant holes in the MDHHS budget, and Gov. Whitmer asked MDHHS to look for cost efficiencies to fill those holes,” Wheaton said. “This policy change was one of those cost efficiencies.”

The change would bring about at least $15.3 million in gross savings and $5.5 million in savings for the general fund, he added.

But for SNFs, that will translate to a loss of $37 million for Michigan’s nursing homes this fiscal year, with almost $40 million on the line in the next fiscal year, Samuel said.

“Financially, it’s a devastating impact,” she told SNN. “We have a lot of providers in Michigan that are investing in employees, buildings and renovations, and we want those costs reflected because that’s the right thing to do. When you lower it to the 65th percentile, you’re jeopardizing quality of care in a race to the bottom.”

If the cuts are implemented, some SNFs could lay off as many as seven registered nurses and 12 nurse aides, Samuel told Crain’s Detroit.

“This could hit independent nursing homes that have a lot of Medicaid harder,” she told that publication.

For the cuts to not take effect on November 1, the governor’s office would have to formally rescind the plan, Samuel said. The DHHS, however, emphasized that it is taking public comments, “and will then make a final determination on the policy,” according to Wheaton.

While DHHS can decide to not put the policy into effect, it’s HCAM’s understanding that without the policy being specifically pulled back, the cuts will take effect November 1.

Skilled nursing providers in New York are grappling with a similar challenge, with millions in cuts to Medicaid reimbursement hanging in the balance and the outcome for SNFs uncertain. In Connecticut, several low-occupancy SNFs were targeted for Medicaid cuts in August, drawing criticism from operators and union officials alike.

A report from the Nursing Home Acuity Workgroup in New York bluntly summarized what the effect of the change would be for the state’s SNFs.

“A retroactive cut of this magnitude will without question damage the financial viability of numerous financially fragile nursing homes, endanger quality resident care, and put crucial health care jobs at risk,” the group said in a report submitted in June.

Michigan’s DHHS, for its part, has long supported this type of change to nursing home rates, Wheaton told SNN.

“This would have an effect on nursing homes,” he acknowledged. “It is, however, one factor in the rate setting and MDHHS would not be proposing the change if the department felt it would cause nursing homes that provide important care to Michigan’s seniors to close.”

Samuel is less optimistic — not least because the document created considerable confusion for providers when it was posted on September 30.

For one thing, cost report periods do not end on November 1, and the variable cost limit applies to rates and to Medicaid days, not to cost reports. But the language of the proposed change for the Indexed Variable Costs indicates that “these changes are effective for cost reporting periods ending on or after November 1, 2019.”

“Since the moment it came out, we’ve been questioning how it was written,” Samuel said.