Report says Medicaid funding shortfalls causing nursing homes to close

Steve Dean, mayor of the 3,500-population McLean County city of LeRoy, stands on the grounds of the now-closed LeRoy Manor and Liberty Village nursing home, which provided care for his aunt in her final days. The facility is one of 20 state-licensed nursing homes that have closed due to the state’s poor Medicaid reimbursement rates since 2014. (Photo by Jerry Nowicki/Capitol News Illinois)

SPRINGFIELD — Since March 2014, 20 state-licensed skilled-care nursing homes have closed for financial reasons, while many of those continuing to serve the state’s neediest elderly populations face staffing shortages and operating deficits caused by diminishing state government investment.

Nursing home advocates warn that the industry is already in crisis, and a continuance of this trend could mean an unavailability of care for Illinois’ aging population within a decade.

“These facilities are closing, and I can tell you more are going to close,” said Pat Comstock, executive director of the Health Care Council of Illinois, a nursing home advocacy group. “It’s happening because we have a situation in Illinois where they can no longer financially survive.”

The pace of closures has quickened in recent years, with five skilled-care nursing facilities — those that house the sickest and most vulnerable — closing from 2014 to 2016, six closing in each of 2017 and 2018, and three already shutting their doors in 2019, according to the Illinois Department of Public Health.

To fully quantify the issues facing the industry and their possible solutions, HCCI commissioned a study conducted by the business advisory firm Plante Moran, the Claude Pepper Center of Florida State University, and managed care Medicaid expert Meredith Duncan.

The 85-page report states Illinois’ Medicaid ranks 49th in the nation for Medicaid reimbursement rates, and nursing homes lose approximately $15,000 per year — or an average of $41 per day — for each Medicaid-funded patient. Those shortages create a $649 million single-year funding shortfall across the industry in Illinois.

While the story of the state’s disinvestment in nursing homes is largely a financial one, Comstock said facility closures take a human toll affecting communities across the state.

“One of the really sad things about this is that when you close facilities, you create access problems for the elderly and you create additional challenges for families,” she said. “And also, we know that when the elderly who are very sick, if they get displaced or moved to another location, it’s really difficult on them and some of them just don’t survive that displacement.”

Far behind neighboring states

The senior advocacy group AARP detailed in its own report earlier this year that Illinois nursing homes have the worst patient-to-staff ratio in the nation, leading to the second-worst rate for administering antipsychotic drugs to sedate patients without a psychiatric diagnosis.

“Inadequate staffing at many Illinois nursing homes leaves residents neglected, malnourished, suffering from bed sores or worse,” said Ryan Gruenenfelder, director of advocacy and outreach for AARP.

The poor staffing ratio persists despite state mandates on minimum hours of care per patient at state-licensed nursing facilities. Senate Bill 1510, which passed the Senate by a 39-19 vote on April 10, would require informed consent if an antipsychotic drug is to be administered, and would establish fines for nursing homes which fail to meet mandated staffing levels.

But the HCCI said the legislation fails to address the root cause of staffing shortages.

The LeRoy Manor and Liberty Village nursing home in the 3,500-population McLean County city of LeRoy is one of 20 state-licensed nursing homes that have closed due to the state’s poor Medicaid reimbursement rates since 2014. (Photo by Jerry Nowicki/Capitol News Illinois)

“Medicaid rates have failed to keep pace with the actual cost of care in Illinois,” said HCCI Vice President Amanda Ginther, adding that a statewide worker shortage also makes it difficult to fill staffing positions.

The state provides 27 percent of funding for the approximately 740 intermediate- and skilled-care homes it licenses. The facilities themselves provide 23 percent of their funding through a pair of taxes on beds, which legally cannot be passed on to residents. The federal government provides the other half of funding by matching state and provider contributions.

But the state’s share of the funding is shrinking, because Illinois’ structural reimbursement rate remains stagnant each year, as it is based on years-old market costs for nursing (2014), support (2004) and capital (1999) expenses.

“As a result, Illinois also has the lowest average total direct hours per patient day at 3.4169 hours. Providers in the state cannot afford to provide the staffing levels that providers like those in Michigan can afford,” the report said.

Like all state-funded entities, nursing homes were adversely affected by a multi-year budget impasse which included a temporary funding cut executed by former Republican Gov. Bruce Rauner’s administration in 2015.

“We never really recovered from that,” Comstock said.

‘Incredibly sick, fragile people’

Historically, the losses incurred by caring for Medicaid-dependent patients have been at least partially offset by private payers living at the same facility. But the number of those patients living at nursing homes is shrinking.

“Nursing homes are no longer like the old age homes that one would think of, they’re no longer grandma in the corner knitting and grandpa playing pinochle with his buddies,” Ginther said. “They’re incredibly sick, fragile people that require medically complex care around the clock.”

In recent years, Illinois has promoted nursing home alternatives such as aging-in-place programs, and seniors often stay in their own homes or move to lighter care facilities until their health deteriorates to a point that they need nursing home care.

While the HCCI supports age-in-place programs, the shift to a more Medicaid-dependent population in many nursing homes means an increase in homes operating at significant funding deficits.

In 2016 alone, nursing homes where more than half the patients are covered by Medicaid each lost, on average, $765,000 the report stated.

“This shows that even contribution margins from private, Medicare, and other payers cannot fully subsidize Medicaid losses,” the report said.

The state’s recent minimum wage increase to $15 per hour by 2025 will add another burden to cash-strapped homes, Comstock said, although the HCCI did not oppose the measure because it believes increased wages will lead to enhanced care.


Bureaucratic delays

According to the HCCI report, the financial strains of Illinois’ poor Medicaid funding rates are compounded by bureaucratic reimbursement delays.

The LeRoy Manor and Liberty Village nursing home in the 3,500-population McLean County city of LeRoy is one of 20 state-licensed nursing homes that have closed due to the state’s poor Medicaid reimbursement rates since 2014. (Photo by Jerry Nowicki/Capitol News Illinois)

It is “not uncommon,” the report said, to find high Medicaid facilities with 40 percent or more residents in pending status due to delays in the state’s processing of long-term benefits applications. During this period, the care provider must cover all costs.

“We’re in situations where we’ve been providing care for years without any compensation,” Comstock said, adding that legislation recently passed to expedite application processing has not yet yielded satisfactory results.

Reimbursement delays have also become more prevalent since the state adopted a privatized Medicaid managed care system in 2011, the report said.

That system uses private insurance companies known as managed care organizations, or MCOs, to coordinate each patient’s care. The state releases funds to MCOs at a statute-specified daily rate, and they pass it on to nursing homes that apply for reimbursement for the Medicaid-covered care they provide.

But according to a report from Meredith Duncan, one of the state’s leading legal experts on managed care, provider claims are often denied or delayed without explanation, and MCOs often refuse to pay state-mandated late payments. Often, Duncan said, the provider’s only recourse is a time-consuming legal process that often costs more than the amount recovered.

Because of that, many providers have been forced to triple the size of their billing departments and hire lawyers, consultants and lobbyists, further diverting resources that would be better directed at filling patient-care staffing shortages.

The implementation of managed care also removed a critical safety net for cash-strapped nursing homes — the ability to apply to the state comptroller’s office for hardship funding payments. Without that, providers awaiting payment are often forced to take out costly bridge loans just to make payroll.

Glenn Harston, a representative for the Illinois Association of Medicaid Health Plans, said MCOs are working with the state to address denial concerns.

“Our experience has been limitations with the eligibility system are the largest driver for denial reasons for nursing homes,” he said.


Preventing collapse

All of those factors have the industry worried about its sustainability as Illinois’ elderly population is set to triple in the next 30 years.

“I think a really big concern is that the destabilization of nursing homes in general is really going to put us in a difficult position when the baby boomers start to age into the system of needing more long-term care,” Ginther said. “We’re not going to have the long-term support available for them.”

The HCCI has proposed a series of legislative fixes, the cornerstone of which is a $100 million increase in state funding to skilled- and intermediate-care nursing homes for the upcoming fiscal year. The federal government would match that number, bringing the total added investment to $200 million.

The HCCI is optimistic about that request, as Democratic Gov. J.B. Pritzker’s proposed budget includes an estimated $390 million in added revenue from a tax on MCOs which would bring more money into the Medicaid system.

Harston said MCOs are working with the state on the MCO tax proposal in an effort to “continue to stabilize the Medicaid program.”

Senate Bill 42, carried by Oak Park Democrat state Sen. Don Harmon, passed committee unanimously as a vehicle to distribute the added funding. It will be amended once it is known if any new funding will be realized, Comstock said.

The $200 million, however, would make up less than one-third of the anticipated $649 million one-year industrywide funding shortfall.

“All that $200 million is really going to do is keep our infrastructure from falling apart,” Comstock said. “So we’ve got to continue to work with Illinois to revamp the system and create a reimbursement methodology that allows our services to the frail elderly in Illinois to be sustained. So this is just the beginning for us.”

The HCCI is also in talks with the Illinois Department of Healthcare and Family Services to offset increases to the minimum wage as it moves toward $15 per hour by 2025. Comstock said the goal is to increase the Medicaid reimbursement rate as the wage increases, which could be accomplished through a reallocation of funds in the existing budget.

In a statement, IDHFS Director of Communications John Hoffman said the department, “has been discussing anticipated costs with health care associations, other stakeholders and sister agencies such as the Department of Human Services and Department on Aging, to ensure that the raised minimum wage promotes quality care for Medicaid members.”

The HCCI is also backing Senate Bill 43 to remove the managed care enrollment mandate for Medicaid patients at nursing homes, putting them back in the fee-for-service program. The bill failed to pass the Senate by the April 12 deadline, and MCOs oppose the legislation which “limits how members access care coordination,” Harston said.

“It is important to collectively work together to strengthen the continuum of care rather than carving out proportions of the population,” he said.


The human toll

Since January 2018, the communities of Flanagan, Abingdon, Mattoon, Girard, Lawrenceville, Paxton, Johnston City, Decatur, LeRoy and Morton have felt the human effects of nursing home closures.

In LeRoy, a McLean County city of about 3,500, the closure of its Liberty Village and LeRoy Manor facilities meant relocation for its 60-plus residents and a loss of 75 full- and part-time jobs, The Pantagraph of Bloomington reported.

“LeRoy Manor was a 20-plus year blessing for the city of LeRoy,” LeRoy Mayor Steve Dean said. “It allowed our residents to remain in town when they needed long- or short-term care or therapy — an option they no longer have. The cost to the community is sad for all of us.”

But the home’s 90-percent Medicaid population caused $4 million in losses in the four years prior to its closure, facility administrator Jason Young told the newspaper.

“It was honestly painstaking,” Young said. “We tried to look at every feasible alternative … but we’re not in the industry to provide the minimum. We’re in the industry to provide outstanding care.”

In Girard, a Macoupin County city with a population of about 2,100, diminishing state investment meant closure of the Pleasant Hill Healthcare nursing home. The facility — known in the community simply as “The Home” — was operated by the Church of the Brethren for more than 100 years, the Illinois Times reported.

While Pleasant Hill continues to operate assisted and independent senior living apartments on its Girard campus, in September of last year, the community gathered “to give God thanks for the many days of loving care we have been able to provide for the least among us” as it prepared to close its nursing home.

Without a change in the way the state operates, Comstock said, countless communities across the state will face similar circumstances.

“There’s always an effort to keep a building open as long as possible,” Comstock said. “But with all of the stress in the system, this trend of closures is going to continue.”