While many states have enacted long-anticipated Medicaid rebasing, some nursing home leaders say it’s too little too late.
States like Iowa, with smaller facilities largely run by independent owners, are seeing closures despite receiving $15 million to increase Medicaid reimbursement rates beginning July 1. Reality has hit many such independent owners, according to Michael Beal, CEO of Iowa-based Care Initiatives.
“Some facilities, even with a rebase, are still losing money. Independent owners have run out of the ability to borrow any more money to keep them open. They’re looking to sell or are forced to close,” Beal told Skilled Nursing News.
Twenty-six Iowa SNFs have announced closures since January 2022, most recently with three nursing homes in Sioux City, as operating costs and wage increases cut into revenue. Medicaid in the state has been underfunded by about $30 per day, or $10,950 per year, an article from the Des Moines Gazette found. Meanwhile, state leaders believe local nursing homes are overbedded and look to operators to reduce their Medicaid beds.
Along with such state-level operator challenges, Beal spoke with SNN about the delayed federal staffing minimum mandate, his background at Kindred, and ancillary growth in the years ahead.
Care Initiatives is one of the largest skilled nursing operators in Iowa with 43 SNFs and eight assisted living centers, spanning about 2,800 beds.
This conversation has been edited for length and clarity.
Skilled Nursing News: What are some unique challenges for Iowa operators?
Beal: Iowa is a rural state with much smaller facilities, traditionally. It’s still a much more heavily leaning fee-for-service [Medicare FFS] environment in Iowa, and [Iowa] is dependent like any state on funding from the state government. The state does a rebasing process every other year – as we emerged from Covid, wage pressure was north of 10%. That was difficult when you had to wait two years for a Medicaid rate increase. We just received Medicaid rate increases this year so the financial environment is significantly improved in Iowa, but it’s still a state where there’s a number of buildings that are closing, and the state thinks that it’s over bedded.
We’ve seen a number of facilities close in the last two years; we just had two very small facilities close in the last couple of weeks. That is continuing even though there has been a significant rebasing and financial improvement in the state.
You said the state thinks local nursing homes are over bedded? How does that tie in with closures?
They would like to see a reduction in the number of Medicaid beds in the state and have vocalized that. The facilities that we’ve looked at more recently that are for sale, a lot of them are independent-owned facilities and their occupancy level is extremely low. I looked at one that was below 50% occupied, and they’re running a lot of contract labor on top of it. They’re just not financially viable.
And remember, these are very small facilities. I looked at another facility which was a 60-bed building that had 25 patients in it. It was losing money, even with the rebase. There were a lot of buildings that closed in the last couple of years, and then there was a little bit of a hiatus, hoping that the rebasing process would turn them around financially. Now I think the reality is some facilities, even with a rebase, are still losing money. Independent owners have run out of the ability to borrow any more money to keep them open. They’re looking to sell or are forced to close.
Let’s widen our conversation to the national stage. Any thoughts on the federal staffing minimum mandate that was supposed to be released this spring?
I think the delay is not a decision. It will still come out in some sort of more modified form. We have to see what it looks like to be able to react to it and continue to modify it to meet the ultimate goal of providing good staffing in our buildings.
Our challenge, obviously, is finding the staff. No nursing facility provider would say more staff is bad. We need to be able to hire those staff, and we have to have reimbursement that would pay for it. It’s much easier to say that than to do that, but hopefully we’ll see the rule soon so that the mystery will go away and then we can all digest what the proposal would mean to all of us out in the field.
What would you like to see from CMS ahead of the staffing minimum proposal?
Time is probably the most important thing. A long duration phase-in would be the most beneficial. Waivers, which positions are included in that number, if we’re able to include other clinical support staff that aren’t specifically CNAs, RNs or LPNs is important. Some states include additional positions in their calculation of hours. Any or all those modifications would allow this to be more digestible, but I think the most important thing is a long rollout timeframe, which would give the industry more time to prepare and react to the proposal.
How has Care Initiatives grown in the past couple years and what are plans for growth in the years ahead?
We’ve had hospice going on 15 years but it’s growing. We service about 400 patients across the state of Iowa. We have just recently started an I-SNP with two other partners in the state, along with a strategic partner, and then we just recently started a pharmacy. We’re now servicing all of our facilities with a strategic pharmacy partner.
So there’s been a lot of ancillary growth for Care Initiatives recently?
The I-SNP started in January of this year. It took us two-and-a-half, three years from when I got here; there was a conceptual discussion of it and we capitalized it. We worked with American Health Plans, along with two other nursing facility providers in the state of Iowa, to start our own I-SNP. You have to go through the insurance process, become an insurance company and then apply for Medicare Advantage plans.
What about the pharmacy addition?
We started our own JV pharmacy. We started planning about a year ago, and in February of this year, we started rolling it out in our facilities with two pharmacy locations in Iowa. As of the end of May, we had all our facilities rolled in. We’re now servicing all of our skilled facilities and assisted living facilities through our new JV pharmacy.
Any brick and mortar growth?
We are not right now looking to add any additional nursing facilities. The nursing side of the business has been more difficult, so we are rounding out our traditional ancillary businesses. That was something that they hadn’t done here at Care Initiatives before I got here. We are considering other ancillary businesses, but for right now we just started the I-SNP and pharmacy. Over the last couple of years we’ve also doubled the size of our hospice program and are looking to start a new [hospice] location outside of Iowa, in Nebraska.
So the skilled nursing side has been more difficult to grow?
We’ve had opportunities to take on some additional properties, either for lease or purchase. Capital costs are extremely high right now and the skilled market is difficult at best. Right now we’re hanging tough with what we have and not looking to expand. There are deals going on in Iowa, there’s some in the works and some that have recently transpired, but on that front, it’s not something that we’re looking to do at this current time.
Let’s talk about your career path. You started out at Kindred?
I did my administrator-in-training at Kindred. I was a single-site operator for about five to eight years. I was a turnaround person. Once I got a building turned around, I got sent to the next building. Then I had an opportunity to step into a regional role for Maine, New Hampshire, and Vermont for four or five years. Then at the time, similar to a lot of larger companies, we had a divisional position open and so I had all the New England states, about 50-60 properties.
As Kindred continued to divest properties, they consolidated regions. So I slowly took on more and more properties across the country. I took a position as president of the nursing center division. We had at that time about 120 properties in about 20 different states. When Kindred decided to get out of the skilled business, I stayed on for the transition of those buildings.
What tools and knowledge from your time at Kindred have you brought to your role at Care Initiatives?
I think Kindred, like a lot of the traditional larger companies, provides an excellent learning environment from a cultural perspective, learning how much culture means.
When you leave a company like that and go to another company, you also realize very quickly the systems and data that you have available to you. You realize that you don’t have a report for anything, you don’t have systems, you don’t have dashboards. I spent the last three years building some of those tools to allow the field operators to manage their day-to-day business and have data on quality, data on financials, data on labor, data on census. They’re able to better manage their daily business. Transitioning to a new, small organization, you realize what you’ve learned and what you miss and so you slowly bring those systems and processes.
Companies featured in this article:
