Florida nursing homes stand to lose millions from Medicare

by | Jul 13, 2012

A little-noticed change in how Medicare pays for nursing home patients will hit Florida harder than any other state over the next three years. And the burden will be shouldered by facilities that can least afford it: those caring for a higher share of poor residents.

A physical therapist works with a patient at the Pines of Sarasota. The nursing home will be among the most affected by Medicare cuts.

Florida nursing homes stand to lose an estimated $60.5 million in Medicare funds, more than the next two hardest-hit states combined. The change is a gradual slicing away at the $144.50 disparity between what Medicare, the federal health insurance program for the elderly, and Medicaid, a joint federal and state health program for the poor, pay for the same bed.

Pines of Sarasota — a nonprofit facility with the greatest share of Medicaid patients in the coastal region from Bradenton to Naples — will be among the most affected facilities. CEO John Overton said the drive to keep services stable while payments fall means Pines will accept fewer of the high-need patients. Already the facility’s share of Medicaid beds is at 68 percent, down from 70 percent about six months ago.

“Our overall percentage will gradually decrease,” Overton said. “It’s a clear reality. We have to find other ways to make it work.”

At last count, in 2011, about 61 percent of Florida’s more than 82,000 nursing home beds were available to Medicaid patients. The state has maintained a moratorium on new beds since 2000, so Florida now ranks well behind Texas, California, New York and Illinois in the total number of spaces available. Of Florida’s more than 650 facilities, 75 percent are for-profit.

The newest reimbursement change is part of the hopeful-sounding “Middle Class Tax Relief and Job Creation Act of 2012,” passed in April.

It follows last year’s 6.5 percent rollback in Florida Medicaid payments for nursing homes and an 11.4 percent cut in the federal Medicare nursing home rate, and reflects the overall budget deficit struggle in Washington.

But it also represents a larger philosophical shift: the desire to find alternatives to costly long-term care, and shift from the nursing home model that has dominated for decades.

“All Americans — including people with disabilities and seniors — should be able to live at home with the supports they need, participating in communities that value their contributions — rather than in nursing homes or other institutions,” Health and Human Services Secretary Kathleen Sebelius said in a statement recently.

But it is a long way from “should” to “can.” Long-term care specialists agree that home care could be more cost-effective, and is what most patients prefer. But few states have made real progress in setting up viable home care networks, while Florida has repeatedly cut its fledgling community care program for disabled residents since 2003.

A home care revolution could be daunting, personally and financially, for many working people who struggle to care for aging parents. Few are equipped to pay for long nursing home stays, and Medicaid — a large and mushrooming part of Florida’s budget — is not funded to help them.

Meanwhile, without enough money for the system that exists, nursing home beds for Medicaid patients are quietly disappearing. As a result, more aging Floridians, with less family support and smaller savings than the generation before them, will find themselves stuck in the hospital with nowhere to go.

“I wouldn’t say it is occurring today,” said Tony Marshall, senior director of reimbursement for the Florida Healthcare Association, a trade group of some 500 facilities. “But there is the risk of admissions being delayed as the payments get lower.”

This could mean Medicare, in trying to shift its spending of tax dollars away from nursing homes, may wind up wasting them on hospital stays. Charges can vary widely, but the average day in a nursing home is estimated to cost $247, while a day in the hospital can easily exceed 10 times that amount.

A Medicare advantage

Florida nursing homes are such big losers under the new budget law, known as the Bad Debt Provision, because they gained so much under the old one. Marshall said the national average of nursing home patients who qualify for that $144.50-a-day reimbursement is 15 percent; in Florida, it is 24 percent.

Most of this is due to the higher number of Florida nursing home residents who are elderly and “dual-eligible” for both Medicare and Medicaid coverage. But some of it is because Florida nursing homes have been savvy about enrolling residents under Medicare, to offset their Medicaid losses.

Basically it works like this: A Medicare beneficiary who comes to a skilled nursing facility directly from the hospital after an illness or injury can qualify for up to 100 days of rehabilitation. The first 20 days are totally paid for, and nursing homes that offer rehab therapies make enough from these short-term stays to either turn a profit, or subsidize care for their Medicaid patients.

“Many of the better nursing homes want as many short-term patients as they can possibly get,” said Brian Lee, executive director of Families for Better Care, a Tallahassee patient advocacy group. “Many nursing homes are moving out of the long-term care business. Executives are calling it ‘transitional platforms.’ They see that the money is to be made in Medicare.”

After 20 days, Medicare patients who can afford it become responsible for hefty co-payments, either with private insurance or tapping their assets. If they do not pay, facilities can collect this “bad debt” from them or their families. But since Medicaid-eligible patients cannot be billed for the shortfall, the nursing home receives a “bad debt reimbursement” from Medicare.

This payment, now $144.50 a day, will be cut by about $18 in 2012, Overton said. This will swell to a $57 reduction by 2015.

“That’s real money,” Overton said. “There are only a couple of facilities in this area that accept no Medicaid patients whatsoever. But most of them have a certain number of beds they can make available. We’ve got to be heading in that same direction.”

Profits and losses

Lee, the patient advocate, said Medicare’s budgeting job is difficult because nursing home operating costs are a closely guarded secret at the for-profit chains. A recent study by The Moran Company said nursing home profit margins average a slim .75 percent — but added that “there is significant uncertainty” about what the facilities actually earn.

“We don’t even have the complete information to be able to have a good understanding,” said Lee. “They’ve structured their corporations with all these different entities. We’re taking their word for it, and their credibility is not very good.”

But Marshall said a large number of Florida homes are already operating with negative margins, and this latest blow could close some of them. Medicaid patients, he pointed out, tend to be in poorer health and more costly to treat.

“At some point,” he said, “we’re going to have to ask the state to become a better payer.”

With Medicare’s generosity eroding, Overton agreed, Medicaid will have to cover a larger share of actual care costs. But his talks with people in Tallahassee have not made him hopeful.

“Every year, I am actively involved with our legislative delegation. What I am told is, ‘Once a crisis develops, then we’ll respond,’” he said. “I really would rather have us avoid the crisis.”

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