As inadequate funding squeezes nursing homes dry, with Medicare Advantage reimbursing lower than traditional Medicare, and Medicaid funding decades behind on meeting cost of care, facilities are shifting operations to optimize reimbursement. But even that may not be enough.
Richard Gamache, CEO of Aldersbridge Communities in Rhode Island, has had to make such operating decisions in order to stay open, repurposing nursing home rooms to assisted living and memory care at its Linn Health location. In terms of funding in the state, a lot of variables are still up in the air.
Linn Health, along with other nursing homes in the state, is awaiting $10 million in government funding added to the state budget – but the general assembly needs to approve it, he said. Along with the stopgap funding which may be approved as early as next month, Medicaid rate rebasing is due to occur in October.
Meanwhile, six nursing homes in the state have gone out of business since 2020, and three others have declared bankruptcy, primarily due to inadequate Medicaid, he said. Most recently, fellow nonprofit facility Scandinavian Communities Rehabilitation and Skilled Nursing Facility announced a downsizing by about 50 beds. They’ve been serving the community for nearly a decade, according to a report from WPRI.
Skilled Nursing News sat down with Gamache to talk about inadequate funding, and how that is impacting industry operations and business trends.
This conversation has been edited for length and clarity.
How has the shift to reduce the leverage in SNF assets and move toward more assisted living and memory care been going?
We’ve been taking our second floor and going room by room, taking the double nursing home rooms and making them single studio apartments for assisted living and memory care. At this point, half of the rooms are done. It was a 42-bed floor and when it’s done, it’ll be a 22-studio apartment floor. Right now 11 of those studio apartments are complete, and we hope to have the rest of them complete by mid-May.
The problem right now is [licensing]. We’ve sent in our application to the state for our license and for our certification. One goes to the Department of Health, one goes to the Department of Human Services, and they work with CMS in Washington to get your certification approved so that you can bill Medicaid for people who are on Medicaid in assisted living. When we met with Human Services and asked how long the process will take, the answer was, and I quote, ‘it may take a month, it may take six months, it may take a year, we just don’t know.’
If this lingers on for another six months, nevermind a year, we don’t have enough money to keep the place open. By doing this changeover to assisted living, what we did is we said, the state’s not going to help us. We have to figure out how to stay open on our own. We looked at the needs of the people who we care for and we said, I’ll bet that more than a dozen residents that we have currently in the nursing home could be cared for at an assisted living, memory care level, if it were available for people on Medicaid.
How have staff duties changed with the shift?
We have a certified dementia practitioner who has worked with [staff] individually and as a group on how to provide assisted living and memory care. We’ve upskilled them so that they are certified medication technicians so that they can pass medication. Our goals when we started out, we said we don’t want to discharge a single resident. And we don’t want to lay off a single staff member. We intend to keep to that.
Those 18 people alone will save the state of Rhode Island over $780,000 in a year because of the difference in rate between what they pay us for assisted living and what they pay us for Medicaid. As a whole, because we’re going from a 42-bed [SNF] floor to a 22-bed assisted living floor, the state is going to save $2.8 million per year in Medicaid dollars.
Any other funding challenges that have popped up?
There’s one other, which is just rubbing salt into the wounds here. The state had unveiled a new computerized Medicaid program in 2016 and the rollout of it was just filled with errors, stops and starts. As a result, the state ended up making advance payments to nursing homes, to assisted living, for people who are on Medicaid with the expectation that down the road there will be some reconciliation.
Prior to the pandemic, the state began to recoup Medicaid money but then when the pandemic started, everything stopped, repaying that stopped. Within the last couple of weeks, the state announced they’re going to recoup everything, all Medicaid dollars that were given in 2016 and 2017 that were in essence overpayments. They gave us an approximate amount, and it may have been higher or lower. We’re underpaid by so much. Our Medicaid rate currently is $255 a day and our cost currently is $411. It’s not like we have money in the bank somewhere that we’ve been holding to pay back. For Linn Health and Rehab, it’s over $700,000 that the state has said they want back. We’re planning to meet with them to work out some terms for a hardship. To me, it shows how completely tone deaf the state is at this point that they’ve been underpaying us for more than a dozen years, underfunding us.
How does the situation in Rhode Island compare to wider funding challenges for the skilled nursing space?
We don’t have a good payment mechanism for long term care. We’ve never addressed that at the federal level. State Medicaid systems are setting the rules and in the United States we have at least 51 different Medicaid systems – California has two different Medicaid systems, depending on where in the state you’re located.
Everyone has different rules, which when you think about it, it’s not doesn’t make sense to do it this way. But this is how it has evolved in this country.
It’s not just inadequate Medicaid, right? Medicare, especially the shift to Medicare Advantage, has played a role in funding challenges.
This is a huge issue – Medicare Advantage has basically replaced Medicare Part A [Fee-for-Service Medicare] for people who need care in nursing homes. We have zero Medicare Part A in the building. Anyone who is here for short term rehab right now is on Medicare Advantage. Medicare Advantage rates are considerably lower than Medicare Part A. The rates are somewhat regional, but I’ll tell you that the average rate for us is just under $700 a day for Medicare Part A. Medicare Advantage, for the same care, pays us between $379 and $490 a day.
The largest Medicare Advantage provider in Rhode Island, they have not increased their rate in 12 years, they’re still paying us this rate from 12 years ago. They haven’t increased it. Just as Medicaid is underfunding, Medicare used to be the thing that subsidized the losses in Medicaid, and now that subsidy has been drastically cut. There’s about a 50% penetration of Medicare Advantage [nationally] and in Rhode Island, it’s 60%. It’s even more here.
Any other thoughts on how inadequate funding has affected ownership, or business structure?
Everyone’s struggling financially, and the for-profit corporations are buying. Here in Rhode Island, in the last dozen years or so we’ve gone from a state where there were only two companies from out of state that owned nursing homes in Rhode Island. Now, more than 60% of the nursing homes in the state of Rhode Island are owned by out of state for-profit corporations.
This is a huge trend here in Rhode Island and across the country.
I think that that trend is going to continue, where small, not-for-profits, and independent owners are just going to be swallowed up by the for-profit out of state corporations. The government is playing a role in this … pushing more regulations, more inspections, more fines. It’s aimed at the bad actors, but all of us ended up paying the price for more inspections, more regulation.
Companies featured in this article:
