Close to 600 nursing homes across the nation could face increased risk of closure under proposed Medicaid cuts in the Republican budget bill, with the high-risk facilities disproportionately located in urban areas and concentrated in states like Illinois, Texas, California, Georgia, and Ohio. Nursing homes in some states will be even more deeply impacted by the provider tax issue.

The study was conducted at the request of Democratic ranking members of the Senate Finance Committee ahead of the Senate vote on the budget reconciliation bill, dubbed the “Big, Beautiful Bill.”

In its analysis, researchers from the Brown University School of Public Health study identified 579 U.S. nursing homes at high risk of closure using a model based on 10 years of data between 2011 through 2023. Facilities were flagged as “high-risk” if they had over 85% of residents on Medicaid, occupancy below 80%, and a 1- or 2-star quality rating issued by the Centers for Medicare and Medicaid Services (CMS).

Most high-risk facilities were concentrated in urban areas and states like Illinois with about 93 such facilities, Texas with 66, Ohio with 41, Missouri with 39, and Georgia 37. 

For Illinois nursing home operator Heritage Operations, which has already downsized its skilled nursing portfolio in recent years, COO Steven J. Hart told Skilled Nursing News that even small cuts will bear big consequences and “influence the success of some nursing home operators.”

If the cuts translate into a 10% decrease in the daily room and board rate, for example, that would greatly strain the average nursing home, Hart said.

The Brown researchers also found that about 1,749 nursing homes with a high Medicaid share were mostly located in the urban areas of Illinois, Texas, California, and Georgia.

“Like so many others, the nursing homes that Heritage manages are heavily reliant on Medicaid reimbursement and the revenue lost would be meaningful,” Hart said.

Nursing homes throughout Illinois should be prepared to adapt, Hart advised.

“Several months ago our team began prioritizing initiatives that would help us weather that storm,” he said.

As for Ohio, the proposed federal spending bill poses serious risks to Ohio’s Medicaid program and nursing homes, Pete Van Runkle, executive director at Ohio Health Care Association, told Skilled Nursing News.

“We are very concerned about the impact of the provider tax cuts, both reduction of the tax rate and elimination of the provider tax waivers, on Ohio’s Medicaid program,” Van Runkle said. “By removing Medicaid funding, these cuts jeopardize SNFs and other long-term services and support providers in Ohio and threaten services to Ohio’s frail elderly and people with disabilities.”

‘Where to apply the pain’

These changes would undermine Ohio’s plan to raise hospital provider taxes, which are expected to generate over $6 billion in Medicaid funding over two years, Van Runkle said. Although hospitals pay the tax, a sizable portion of the tax revenue generated supports the entire Medicaid program, including for services rendered by skilled nursing facilities (SNFs), he explained.

“While the hospital tax is not levied on SNFs or other long-term services and supports providers, 40% of the revenue it generates will go to support the rest of Medicaid, not just hospitals. If that revenue is unavailable or reduced, Ohio will have to cut provider rates or directly reduce access to services,” he said. “No one is exempt from these cuts. The administration and legislature will have to determine where to apply the pain.”

Ohio’s state budget, which just passed and is awaiting the Governor’s signature, includes a large increase in the hospital provider tax, he said, adding that the tax increase is a cornerstone of the Medicaid portion of the budget.

“The state is counting on the tax increase, which moves the tax rate above 5%, to provide $3.1 billion and $3.5 billion in added revenue for the Medicaid program over the next two years,” Van Runkle said.

The current Senate version of the proposed budget bill would start to cut the maximum tax rate in expansion states, including Ohio on October 1, 2027, eventually reducing it to 3.5% in federal fiscal year 2032. Additionally, all states are barred from raising existing provider tax rates or expanding the tax base to new providers or services.

While the reductions would not begin immediately, the prospect that they are coming will require the certain states like Ohio to reevaluate whether to proceed with the tax increase and if so, how to restructure it to stay within the new federal requirements, Van Runkle said.

The bill’s provision eliminating provider tax waivers also affects Ohio, which is one of seven states nationally that has such a waiver.

Together, these provisions could significantly weaken Ohio’s ability to fund long-term care services for the elderly and disabled, he said.

“Our Medicaid program generates about $2.5 billion per year from a managed care tax operated under a waiver since 2016. Again, although the tax is on managed care, it indirectly helps all Medicaid providers and beneficiaries by funding the state budget. Elimination of the tax, which under the Senate bill would take place within the next three years and possibly much sooner, would result in cuts to rates and services,” he said.

Senators are nearing a final vote on the reconciliation bill after wrapping up hours of debate. Their last hurdle is a vote-a-rama, where lawmakers can offer unlimited amendments. This process began Monday after a weekend of revisions to meet parliamentarian rules and win over key votes.

SNFs walking an ‘economic tightrope‘

Democratic senators also shared concerns for funding of nursing homes.

“The Medicaid nursing home benefit is the last line of defense protecting American seniors and those with disabilities from destitution,”Sen. Ron Wyden (D-Ore.) said in a news release. “These nursing homes are already walking on an economic tightrope, and many will be forced to close their doors.”

The bill aims to cut over $800 billion from Medicaid by some accounts.

The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) opposes cuts to Medicaid provider taxes. Leaders for the advocacy group for nursing homes have argued that these taxes are essential for funding nursing homes and long-term care facilities, stating that Medicaid already underfunds long-term care, and states rely on provider taxes to help bridge the gap and protect access to care.

The redrafted provision on provider taxes in the reconciliation bill is not subject to a 60-vote threshold for passage and can clear with a simple majority of 51 votes.