Nursing Homes Face ‘Sobering Reality’ as PHE Ends Amid Operational, Financial Challenges

As the public health emergency (PHE) comes to an end on May 11, industry leaders point out that nursing home operators are still in pandemic recovery mode, and that adjusting to the old way of doing business will not be easy. 

The PHE was declared in response to the Covid-19 pandemic, and accompanied a wide array of policy changes, waivers and funding supports since its inception in March 2020.

Such waivers — including those pertaining to the 3-day stay rule, temporary nurse aide training, and telehealth flexibilities — have been a “critical lifeline” to nursing homes, American Health Care Association/National Center for Assisted Living (AHCA/NCAL) CEO and President Mark Parkinson said in a press release this week.

In addition to the loss of PHE-related waivers, the change of designation means some funding sources will no longer be available through the federal government. To add to these concerns, the burdens from the Medicaid redetermination process will also resume.

All this means that nursing home operators are meeting the moment with mixed feelings.

“We made it through an incredibly challenging period, and these flexibilities and the additional funding were central to enabling us to keep our doors open,” Fred Bentley, managing director for ATI Advisory’s Medicare Innovation Practice, said of nursing home operators, adding, however, “The business model and the flexibility and relaxation of certain requirements that the industry started to grow accustomed to are going away. So that’s a bit of a sobering reality.”

ATI Advisory is a health care research and advisory services firm.

Another source of funding was the provider relief fund (PRF). While not related to the PHE funding, PRF funds saw a greater use during the pandemic and that funding source has also whittled down, Bentley said.

“In the package of things that the federal government did during the pandemic, you can’t underscore enough how critical the provider relief funds were in enabling organizations to keep their doors open,” he said. “[PRF] had its own funding stream and that has essentially petered out.”

Still, even as some funding sources are drying up, the impact will depend on whether states are taking over the role of providing financial supports, and the size of the operator.

It’s the small operators who might feel the pinch of the “Band-Aid” coming off, Bentley said, but larger operators are likely used to the new reality by now.

“Part of the benefit of this PHE being on a three-month cycle is that the industry and industry leaders have been very attuned,” Bentley said. “… So now that it’s actually going to happen, it’s challenging, but it’s not as if the industry is getting caught flat footed or unprepared.”

All said, the end of the PHE should find large operators, doing okay, Bentley said.

Indeed, Rick Matros, CEO of California-based Sabra Health Care REIT (Nasdaq: SBRA), attests to that view.

“It’s going to be nothing too dramatic,” Matros told Skilled Nursing News.

Irvine, California-based Sabra is a real estate investment trust and one of the largest owners of skilled nursing facilities in the United States.

FMAP

One of the reasons Matros isn’t concerned, is because some of the guesswork on funding has largely been factored in by now. For example, it is well understood that the funding for the federal medical assistance percentage (FMAP) is going to be aided on the state level, Matros said.

“Any states, and there are several, that are extending FMAP …. can now do so regardless of PHE ending, and the states that weren’t going to do it, haven’t done it,” Matros said. “So it just depends on the state you’re in. So that’s a big deal. So PHE going away now doesn’t hurt that.”

FMAP is the portion paid by the federal government to states for their share of expenditures for providing Medicaid services and for administering the Medicaid program and certain other human services programs. It was decoupled from the PHE funding recently.

FMAP varies by state based on the state’s per capita income, and states with lower per capita income typically have a higher FMAP. And in some states, some uncertainty related to that can affect financials for providers.

“Long-term care is a big part of the Medicaid budget and Medicaid programs. So it stands to reason that there will be repercussions,” said Bentley.

In certain states, operators are likely left wondering, “What are states going to do with Medicaid funding with reimbursement with the FMAP?” he said, adding, “If you were accustomed to a certain level of federal support, and that drops, that impacts everything you do.”

Medicaid redetermination process

An area of concern and uncertainty remains the Medicaid redetermination process that states use to ensure that Medicaid enrollees continue to be eligible for Medicaid coverage. During the PHE, Medicaid recipients could not be disenrolled based on the Families First Coronavirus Response Act (FFCRA). The end of the PHE means that states, which received an increased federal reimbursement from Medicaid, will have to discontinue both the continuous coverage policy and the additional state reimbursements.

In essence, returning to the pre-pandemic system of redetermining Medicaid eligibility and reimbursements introduces uncertainty for providers and for Medicaid recipients.

“That just introduces a lot of disruption and a lot of uncertainty,” Bentley said. “So for the aged, blind and disabled, [Medicaid redetermination] takes longer, it’s a more involved process. So there’s a bit of a reentry shock associated with that coming out of the pandemic era to the post pandemic era.”

And even though redetermination is not a new thing, a lot of operators became relaxed over what is a time- and labor-intensive practice.

“It’s not that it’s foreign to [providers], but it is a challenge that they had to deal with pre-pandemic,” Bentley said, adding, “What’s more intense and challenging about it now is that essentially all states are doing this for essentially their entire Medicaid population. So the volume of work and labor … it’s a really big deal. What’s challenging this go round is that it’s happening in such a big way across all states.”

Bentley said that states are having to do this en masse in a way that they haven’t had to before.

“The numbers to be concerned about if you’re an operator are: what proportion of your long-stay resident population is going to be subject to redetermination?” Bentley said.

For many operators, this may mean a big chunk of residents requiring redetermination, and if the state takes a long time to make that determination, the operator is left with having to pay for services with the lack of assurance that they will be reimbursed. Or, wait a while before being reimbursed.

”Those are the kind of metrics that can have a really significant impact on an operator’s revenue,” Bentley said. “Any time you inject uncertainty around reimbursement, that’s not a good thing for business.”

Therapy services path via telehealth unclear

Accommodations for telehealth during the PHE were a great boon to providers of ancillary therapy services, particularly in rural areas, as well as to patients. However, the timing of the continued use of telehealth for rehab services remains shrouded, according to experts.

“Telehealth has been a lifeline for patients in areas of the country where we are not able to find a physical or occupational therapist or speech language pathologist,” said Cynthia Morton, executive VP at Advion, a trade association representing suppliers of ancillary services and providers to the long term and post-acute care sector. “In counties where we do not have a therapist, patients may have to wait for therapists to drive to multiple nursing facilities over multiple days. With telehealth, we can bring a therapist in for many services right away.”

However, the Centers for Medicare & Medicaid Services (CMS) has not been able to clarify whether rehab therapists have the ability to continue utilizing telehealth through the end of 2024, Morton said. This lack of clarity also applies to use of other telehealth flexibilities that Congress continued in the Consolidated Appropriations Act of 2023, she said. 

“There have been some inconsistencies in information that CMS has provided … The ability for therapists to continue was intended by Congress and we are asking that CMS provide clear guidance on this ability for providers,” Morton said.

3-day stay waiver

On the Medicare front, the 3-day hospital stay waiver, if not a “huge benefit,” did provide relief in terms of minimizing transitions and enabling skilling in place. The benefits to residents included reduced transportation and decreased chance of infections as well as fewer hassles. Moreover, the waiver opened up new referral channels for nursing homes, with the hospital no longer being the required gateway, Bentley said.

Matros said the 3-day stay waiver has been helpful from a patient care standpoint and because every little boost in profit margins helps.

“[The 3-day stay waiver] just helps on the margins,” he said. “And certainly anything on the margins, you can use all the help you can get these days.”

Still Matros does not expect that the end of the waiver will place operators in sudden “jeopardy,” and he believes that the industry’s push to make the waiver permanent is the right move.

“It’s a good policy to have it. It’s good for patients because it avoids transfer trauma,” Matros. “It’s definitely better from a patient care perspective. And then for operators that have higher acuity models.”

Training requirement for temporary nurse’s aides

During the PHE, CMS relaxed rules requiring temporary nurse aides (TNAs) to undergo at least 75 hours of state-approved training before being allowed to work at facilities for more than four months. The federal government said this TNA waiver will also come to end. However, while this issue has the potential to compound workforce shortages, states and facilities are allowed to ask for exemptions — and many states have done so.

Overall, while the PHE is officially ending, the recovery from the effects of the pandemic are ongoing, according to the nation’s largest nursing home trade organization.

“It is a relief to know that we are well on the other side of this clinical nightmare,” Parkinson said. “… As we move forward, we will carry on advocating to eliminate Medicare’s three-day-stay requirement and creating a realistic career pathway for temporary nurse aides. The Public Health Emergency may be ending, but the recovery from the pandemic continues. For long term care, that recovery has been slow, especially in rebuilding our workforce.”