Nursing home operators are getting a clearer picture of the Medicaid-rate environment – modest increases for most, while other states are seeing no change.
Eleven states have reported their Medicaid rate cycle turnover since July 1, with West Virginia seeing the highest median rate increase of 3.3%, followed by Indiana with a 2.5% increase and Utah at 2.4%. Rate updates ranged from flat to 3.3% for reporting states so far.
Medicaid rates are a major driver of nursing home economics and an important indicator for investors and owners, 3G Healthcare Real Estate, advisory and brokerage firm for the sector, said in its latest market report.
In addition to shedding light on the Medicaid-rate landscape, the report tracked distressed properties and consolidations.
Other states including Washington and Mississippi didn’t see any change to their median Medicaid rate, according to the firm’s report.
But rate changes don’t affect all nursing homes in a state equally, 3G found. In Illinois, for example, the median Medicaid rate rose 0.7%. About 368 nursing homes will see an increase in their Medicaid payments, while 206 will see cuts.
In one rare case, a facility in Illinois will see a 20% increase in its Medicaid payments, 3G reported.
“The July Medicaid cycle is the single most important repricing event of the year for most of these buildings,” 3G brokers said. “Public comparables remain thin across much of the country; many states disclose neither facility-level rates nor sale prices.”
Thirteen more states run July cycles but haven’t posted rate changes yet.
When monitoring distressed nursing homes, 3G factored in the Five Star Rating System, whether a nursing home was on the Special Focus Facility (SFF) list or candidate pool, and CMS fines on the record. About 41% had only one or two stars compared to the 2.99-star national average. Adding in SFF listing or candidacy, and CMS fines, or a distressed title flag from county records, 57% of all nursing homes in the country are distressed properties.
The firm also found that the nursing home market is large but fragmented; there’s no “dominant landlord” in the sector. For-profit nursing homes make up 73% of the sector, and have an average of 2.81 stars, a quality marker derived from the Five-Star Rating System.
Nonprofit and state-run nursing home operators make up 27% of the market but have higher star ratings, 3.58 on average for nonprofits. Government-owned nursing homes are mostly county nursing homes and hospital-district structures, 3G said, with an average star rating of 3.28.
Currently, 10 of the largest operating groups run 1,744 of the country’s 14,693 nursing homes – about 12% of the national market and 12% of licensed beds. Operating consolidation is on the rise, with the largest operators adding “double-digit” numbers of operations so far this year.
The remaining 12,949 nursing homes are run by a “long tail” of smaller operations, 3G said.
But operations and ownership data tell different stories, 3G reported, with property ownership held across a “far larger and more fragmented set of owners.” A market may look consolidated from the operating side is “anything but” when looking at ownership.
Companies featured in this article:
3G Healthcare Real Estate, Centers for Medicare & Medicaid Services, CMS
