Low Medicaid reimbursement rates are making it increasingly difficult for hospitals to transfer patients to nursing homes because of beds that are offline. As state Medicaid payments fail to keep pace with rising costs, many skilled nursing facilities are becoming more selective – limiting the number of Medicaid patients they accept and instead prioritizing higher-paying Medicare and privately insured patients.
In states like New York, persistently low Medicaid reimbursement rates have meant that about 10% of nursing home beds are closed to admissions, according to Sebrina Barrett, president and CEO of LeadingAge New York.
Barrett told Skilled Nursing News that in just the past two years, 11 nursing homes have closed, resulting in a loss of more than 1,200 beds.
“We know there are more than 7,000 beds offline, and that more than 70,000 beds are operating in financial distress. Unless nursing homes receive Medicaid reimbursement rates that cover the actual cost of care, we expect more closures, which will lead to greater bottlenecks in hospitals,” she said.
Costs have risen by more than 50% in New York, reimbursement rates have increased by only 12.8%, Barrett said.
“We need permanent increases to the Medicaid reimbursement rate in order to stabilize the system and prevent further closures,” she said.
In Idaho, Steve LaForte, CFO and principal at Idaho-based Cascadia Healthcare, told SNN that each admission at Cascadia facilities is weighed against whether the facility will be able to recover the costs of care, which have risen due to inflationary pressures outpacing reimbursement, among other factors.
“In response to the cuts in Idaho, we have had to take an approach which has our facilities flipping different switches to ensure financial sustainability in order to ensure long-term care access and the quality we strive to deliver,” he said. “It has not included a blanket cut back on any specific type of admissions currently, although we do have to assess each admission with more scrutiny to ensure that the costs of care do not overly exceed what our reimbursement will be,” LaForte said.
Cascadia is calling on Idaho’s policymakers, yet again, to rebuild an understanding of what’s at stake for nursing home access – a problem that can easily compound.
“As we move forward, without collaborative consideration from the state on reimbursement we remain very concerned that admission criteria will have to change, access to care for Medicaid admissions will be more limited, and unfortunately hospital bottlenecks will occur,” LaForte said.
Cascadia operates more than 25 facilities in Idaho, with a total footprint of more than 58 facilities across Idaho, Washington, Montana, Oregon, Arizona and New Mexico.
“As the largest operator in [Idaho], we have dealt with this issue multiple times over the last eight years, including but not limited to the COVID period, and consistently we have sought to collaborate with the state to ensure access is maintained and/or enhanced,” he said. “We remain hopeful that the state’s approach to reimbursement will include the same consideration and that we can avoid a care crisis for our senior and vulnerable adult populations.”
And in Illinois, Steven Hart, COO of Illinois-based Heritage Operations Group, has seen bottlenecks at hospitals from too few nursing homes operating in certain parts of the state. For its part, the organization has tried to avert a crisis through proactive strategies.
Heritage operates 20 nursing homes across Illinois.
‘Imbalance in negotiating power’
Illinois’s Medicaid rates have affected how many Medicaid residents are admitted to Heritage facilities, Hart told SNN, given that hospitals are facing bottlenecks in the region. However, the reason is not simply low Medicaid rates, but also low managed care rates for Medicare – at least for his organization.
“I regularly see bottlenecks in hospitals because too few nursing home beds are available. I actually think these bottlenecks are driven by an imbalance in negotiating power between health insurers and regional skilled nursing operators,” Hart told SNN. “Managed Care Organizations reimburse nursing homes at strikingly low rates compared to traditional Medicare Part A coverage, and there isn’t much that skilled nursing operators can do to rectify that.”
And as for Medicaid rates and the impact of provider taxes in the future, here too, Hart said his organization has resorted to moves that have always worked for Heritage.
“As it relates to provider taxes, I’ve paid more attention in recent years to how tax rates change based on the average number of residents at a skilled nursing facility who receive Medicaid assistance,” Hart said. “If a location has a payer mix with a low proportion of Medicaid days, I’ve found it very important to cap the number of Medicaid residents that the location may take. Otherwise, I don’t have any strong objection to Medicaid funding at this time,” Hart said.
Staffing issues compound access crisis
A study in JAMA Internal Medicine published in January found that skilled nursing facility (SNF) operating capacity declined at least 5% nationwide from 2019 to 2024, with one in four counties losing 15% or more capacity. Losses were greatest in rural areas and counties with severe staffing shortages. Pandemic-driven workforce declines forced many facilities to reduce beds or limit admissions, leading to longer hospital stays and patients traveling farther for care, the study noted.
The findings highlighted a worsening access crisis, with industry leaders urging policymakers to strengthen Medicaid funding and invest in workforce recruitment and retention to stabilize long-term care capacity.
“This study confirms what we have been saying for years – that when nursing homes can’t find caregivers, residents and families must wait longer or look farther for the care they need,” said Clif Porter, president and CEO of the American Health Care Association and National Center for Assisted Living (AHCA/NCAL), the largest national association of nursing homes.
The study’s data matched anecdotal evidence tracked over time that underscores an attrition of operating capacity.
“Now we have numbers behind the countless stories we heard, but it may be worse than we thought,” Porter said in an emailed statement to SNN earlier. “The rippling effect on families, hospitals, and rural communities is real. This should be a signal to policymakers that when nursing homes say they need help with workforce challenges, believe them.”
New York’s nursing home advocates warn that without funding, facilities may continue to close despite a growing aging population. The proposed funding would help address infrastructure, equipment, and operational challenges, including staffing, allowing facilities to maintain capacity and better serve increasing demand, they argue.
Industry groups such as the New York State Health Facilities Association (NYSHFA) are calling to allocate half of a proposed $1.5 billion state fund to nursing homes.
“New York needs to reverse its policy of disinvestment in nursing homes. They need to get to a point where they cover the cost of care of a Medicaid resident,” Stephen Hanse, president and CEO of NYSHFA, told SNN. “That won’t happen in one budget cycle. That’s going to take some time to reverse over 15 years of disinvestment in nursing homes.”
Companies featured in this article:
Cascadia Healthcare, Heritage Operations Group, LeadingAge New York, NYSHFA
