Task Force: To Save Top Nursing Homes, Government Should Encourage Lower-Performing SNFs to Exit

As nursing homes’ operating margins dwindle due to insufficient Medicaid reimbursements, one state task force is encouraging lower performing facilities to simply shut down — and make more room for the remaining properties to grab a piece of a shrinking pie.

The Nursing Facility Task Force of Massachusetts released a report declaring that the state is oversaturated with smaller nursing homes unable to properly care for residents, and suggested that they should close so that the fuller, better equipped facilities could better utilize limited available resources.

Among the group’s policy goals was a call to reduce the state’s bed glut by targeting “chronically low quality facilities…with negative median total margins of -6.2% compared to the industry’s median total margin of -3.2%…[which is] not sustainable,” according to a task force study presented on January 31.

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Nursing homes in the Bay State have suffered in recent years amid payment rates that haven’t been substantially updated to match current operating and staffing costs.

Thomas Lavallee, chairman of the Massachusetts Senior Care Association, pointed to a “MassHealth payment system that has not kept pace with the cost of nursing facility care over the last decade” as reason for the state’s nursing home crisis at the end of January, according to a report from the State House News Service.

Industry advocates have blamed low rates for the shuttering of 32 nursing homes since 2018, with 95 more facilities at risk of closure because of increased costs of labor and higher demand for assisted living and home health care, Lavallee said.

But such closures wouldn’t necessarily be a bad thing, according to the task force, which asserted that officials should take steps to “right-size” the industry, including:

  • Boosting incentives for high-performing facilities that would lead to the closure of poorer performers
  • Empower the state health department with more explicit authority to revoke the licenses of “chronic under-performers in quality and occupancy”
  • Provide incentives for nursing home operators to convert their properties to other care settings or close, such as affordable senior housing or assisted living

At the heart of the task force’s argument is that Massachusetts simply has too many nursing home beds: Out of the 366 nursing homes that contract with MassHealth, the state’s Medicaid program, 16% remain in business with less than 80% occupancy.

“One in six nursing homes now operates with occupancy under 80%; facilities with low occupancy rates are not sustainable,” the task force stated.

In particular, the task force examined 18 facilities — which make up 5% of nursing homes, totaling 2,500 licensed beds — labeled as chronically low quality with consistently low occupancy rates. During 2017 to 2019, Medicare quality scores at these facilities mainly wavered between one and two stars, with an occupancy rate of lower than 80%; 12 facilities had census of 71% or below as of April 2019.

Seven of these chronically low quality/low occupancy facilities have experienced changes of ownership in the past year, and the task force noted that nearly all of the nursing facilities in the state are within 25 miles of a three-star facility with available capacity.

Encouraging closures was only one of the potential levers that the task force suggested; the group also recommended the development of a “new and simplified rate structure” that encourages higher occupancy and quality, while also mandating that a specific proportion of nursing home spending be dedicated to staff wages and direct care costs.

The task force is chaired by the Secretary of Health and Human Services and is comprised of policymakers, medical professionals, experts on long-term care and aging policy, and representatives from skilled nursing facilities appointed by Gov. Charlie Baker, a Republican.

“The policy options contained in the final report represent a strong foundation and framework for legislative and regulatory action to address the ongoing financial and workforce crisis impacting the Commonwealth’s 383 skilled nursing facilities,” Tara Gregorio, president of the Massachusetts Senior Care Association and a task force member, said in a statement.

She also called on lawmakers to continue updating the state Medicaid rate for nursing homes.

“Currently, 2020 funding levels for nursing home care are based on 2014 costs. A November 2019 Center for Health Information and Analysis Nursing Home Report shows that the state’s nursing facilities continue to experience an unsustainable five-year trend of financial losses with an overall negative -3.9% operating margin in 2017, with 70% of nursing facilities operating at a loss,” Gregorio said, pointing to the necessity of raising staff salaries and hiring more employees for the vacant 5,600 clinical care positions.

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