Study Underscores Fiscal Challenges Facing Nursing Homes

HARRISBURG — As the commonwealth continues its review of spending priorities for the current and coming fiscal years, a new independent study underscores the significant financial challenges facing Pennsylvania’s skilled nursing homes because of chronic underfunding by the state, which puts centers caring for high Medicaid populations at the greatest risk.

“The pressures continue to mount on Pennsylvania’s nursing homes, especially those that serve our most vulnerable populations,” said Russ McDaid, President and Chief Executive Officer of the Pennsylvania Health Care Association (PHCA). “Pennsylvania’s population is aging rapidly. Two-thirds of nursing home residents rely on Medicaid. And the residents in care are sicker than ever before, with more complex and costly medical conditions. It’s a troubling equation.”

McDaid outlined the state of affairs in Pennsylvania’s nursing homes while taping a segment for a statewide public affairs TV program that begins airing this weekend.

Each and every day, Pennsylvania’s 700-plus nursing homes provide high-quality, compassionate care to more than 81,000 frail elderly and disabled residents who need around-the-clock support for clinically complex medical conditions, including debilitating afflictions such as dementia or Alzheimer’s disease.

According to Avalere Health, a respected Washington, D.C., research company focused on health care, nursing homes have seen their margins drop by 28 percent between 2007 and 2014, from 3.2 percent to 2.3 percent. Those margins dip even lower, from 1.4 percent to 1.2 percent, for facilities where 75 percent or more of residents in care rely on Medicaid, according to the study, “Skilled Nursing Facilities in Pennsylvania: Analysis of Total Profit Margins for Freestanding Facilities.”

Part of the problem, McDaid explained, is that even though the acuity (sickness) level of residents has increased over the years, resulting in more costly care, funding for long-term care has not kept pace, especially for Medicaid residents.

Right now, Pennsylvania ranks among the worst states for Medicaid reimbursements.

Pennsylvania reimburses nursing homes an average of $23 a day less per resident than the true cost of care, according the latest findings from Eljay LLC, which is expected to release updated numbers this spring. That shortfall has almost doubled since 2007, when it totaled $13.23 per resident per day. That means nursing homes on average lose about $8,500 annually for every Medicaid resident in their care.

McDaid said because of chronic underfunding, and with margins below basic inflationary costs, many nursing homes cannot invest in capital improvements or advanced technology that would enhance care, nor can they pay competitive wages that would increase staff retention, which is so vital to high-quality care. Some facilities have had to turn away seniors on Medicaid because they cannot afford their care, creating access to care issues in parts of the state.

He also said stronger legal reforms targeting frivolous lawsuits against nursing homes could pay big dividends in funding for care. Nursing homes today lose an average of $4.71 per day defending against mostly out-of-state predatory trial lawyers who file frivolous lawsuits seeking huge cash settlements. Those liability-related costs totaled about $90.5 million statewide in 2013 — money that could be used to improve the quality of care and the quality of life for nursing home residents.

“Our commonwealth faces some serious fiscal challenges. We all understand that. But our long-term care networks, especially our nursing homes, are under considerable stress. And it comes at a time when our rapidly aging population is in need of more specialized care,” McDaid said.

“The governor and legislature have shown time and again their commitment to seniors in Pennsylvania,” he concluded. “We look forward to working with them this budget season to ensure our frail elderly and disabled residents continue to have access to the quality care they need.”

“Pennsylvania Newsmakers” is one of the state’s premier politics and public policy television talk shows. The show is available at www.phca.org and will air regionally:

• WGAL Channel 8 (Harrisburg and Lancaster) Sunday, March 13 at 11:30 a.m.
• WBPH (Lehigh Valley and Philadelphia) Monday, March 14 at 8:30 p.m.
• WKBS 47 (Altoona) Saturday, March 19 at 9:30 a.m.
• WPCB 40 (Pittsburgh) Saturday, March 19 at 9:30 a.m.