Skilled Nursing Sector Faces Defining Moment to Shape New Medicaid Models

The skilled nursing industry is facing a defining moment that could determine the future of Medicaid reimbursement, with a new model emerging that ties increased dollars to facility performance.

“I doubt that we’re going to get another chance,” Zimmet Healthcare Services CEO Marc Zimmet said Tuesday at the annual eCap conference in Miami.

This as a “generational” moment, he said, and the first opportunity of its kind that he has seen in his 30 years in the industry.

During the Covid-19 public health emergency (PHE), the federal government increased its share of Medicaid funding to states. Now, the enhanced federal funding is being gradually phased out, but states are reconsidering their Medicaid policies and in several instances have extended enhanced funding or rebased rates for nursing homes.

Illinois and Pennsylvania could offer case studies for the sector’s efforts to create a “new Medicaid,” and leaders from both states described the playbooks they followed to notch recent wins. In Illinois, that took the form of a $700 million increase, and in Pennsylvania, a $515 million package that included a 17.5% Medicaid rate increase.

One key message: A new era has begun, with payment and performance more intertwined.

“The states are not going to want to give you money for free; they want you to perform,” said Daniel Weiss, CEO of BRIA Health Services and co-president of the Health Care Council of Illinois. BRIA owns and operates 16 facilities in Illinois.

Pennsylvania Health Care Association CEO Zachary Shamberg underscored that point.

“We’re seeing across the United States that just asking for a market basket increase, just asking to supplement increased operating costs, those days are over, we’re not going to get the job done if we come to the table with that,” he said.

Start now, build a coalition

The Illinois and Pennsylvania playbooks shared several commonalities, with Weiss and Shamberg emphasizing the need to form coalitions with unlikely allies as an initial step in a lengthy process.

The push for Medicaid reform in Illinois began even before Covid-19, Weiss said. In Pennsylvania, operators started discussions in Nov. 2021, according to Shamberg.

“We brought them to the table, we closed the doors and said, ‘Okay, we’re trying to emerge from the pandemic, we’ve done well with CARES Act and ARP [American Rescue Plan] funding, but we’ve been flat-funded with our Medicaid rate since 2014, so what can we do?’” Shamberg said.

Operators are a key constituency, but alliances must be more wide-reaching, with organized labor a crucial partner in their efforts, said Shamberg and Weiss. 

“We’ve all had battles with unions … I think we have to look at unions in a different way,” Weiss said. “We have to look at them as our friend and our partner, because they have similar goals [that] we do. They want their staff to get paid more, they want to have more staff.”

In Pennsylvania, the unions were helpful in opening doors to Democratic lawmakers, Shamberg noted. He and Weiss said that gaining access to lawmakers is a must. To this end, skilled nursing operators must not be hesitant or fearful to communicate with legislators.

“If you don’t have their cellphone number, they’re not your friend, so it’s really important to talk to the legislature, talk to policy people,” Weiss said.

Administrators, nurses and frontline caregivers are particularly effective advocates, given their credibility in speaking about on-the-ground realities.

“Don’t just do the meetings in your state capitol, do them in your facility, show the legislators what’s happening on the ground floor, on the frontlines,” Shamberg said.

State chapters of LeadingAge and accounting firms — Plante Moran, in the case of Illinois — were other key partners named by Weiss and Shamberg.

Managed care organizations are a trickier proposition in terms of being coalition partners, depending on their relationship with providers in a given state; they were at the table in Illinois but not in Pennsylvania. But in both states, safeguards were put in place to ensure that rate increases flow through to providers, the panelists said.

Funding and rate construction

Another key to effective communication with Medicaid policymakers: Keep the message simple.

“It’s got to be simple, and it’s always got to come back to how it’s going to impact the resident,” Weiss said.

Keeping the message simple can be difficult because payment frameworks are complex, and operators, unions and other stakeholders within a coalition are likely to disagree on various points.

As coalition members work through a plan that will pass internal muster and be easily digestible to lawmakers, they must consider both funding and elements of rate construction, given that Medicaid dollars are pegged to direct costs, capital-related costs and other categories.

Zimmet was particularly adamant on this point, arguing that achieving a funding increase without addressing rate construction is “perpetuating the problem that is fundamental to the industry.”

That problem relates to the fact that Medicaid treats all nursing homes as the same, even though facilities can vary widely depending on where they are located, what patient populations they serve and other variables.

Zimmet cited the example of a facility in a major metro area that serves a large number of behavioral health patients. This facility has perpetually struggled to stay afloat financially, and is in a very different position than a SNF with a 30% Medicare population.

This issue is hard to address in the current model — Zimmet pointed out how the Centers for Medicare & Medicaid Services (CMS) recognizes many different types of hospitals and adjusts reimbursements accordingly, versus the one-size-fits-all approach to nursing homes.

“Neither one comes first, you have to do them both together,” Weiss said of funding and rate construction.

What’s working, what’s next

In Illinois and Pennsylvania, the push to address workforce issues brought providers, labor and policymakers into alignment, with increased funding tied to labor-related parameters.

“We said that 70% of our total costs are going to go to resident and resident-related care, so that we are supporting our workers and our residents; we made the choice to raise staffing levels,” Shamberg said.

Likewise, in Illinois, the Medicaid boost is connected to increased staffing and wages.

After notching these wins, efforts now must continue to refine the new models and push for further changes to better support nursing homes, the panelists agreed.

For instance, inflation has put increased cost pressures on operators since the new payment structures were set in Illinois and Pennsylvania, Shamberg and Weiss noted. And those state coalitions now must review how the new staffing standards and accountability measures are working in practice.

“The money is starting to flow, the accountability is starting to happen, and it’s working,” Weiss said of the new model in Illinois. “I think that part of our statute says that we review it at the end of this year, and after we review it, we can [convene a] stakeholder meeting, and we’ll discuss what we want to revise, what didn’t work, because not everything will work.”

But going forward, Shamberg said that he is confident in the ability of Pennsylvania’s coalition to build upon the work they’ve already done in creating a new Medicaid model.

“It’s building the reimbursement system to incentivize for increased quality,” he said.