3 states restrict retirement home profits in an effort to improve care

Nursing homes receive billions of taxpayer dollars annually to care for the chronically ill and frail elderly, but so far there has been no guarantee that the money will be spent on how the money will be spent.

Massachusetts, New Jersey and New York are taking unprecedented steps to get what they pay for after the devastating impact of COVID-19 exposed staff and infection control problems in nursing homes. The states have set requirements for how much nursing homes must spend on direct care for residents, and have imposed limits on what they can spend elsewhere, including administrative costs, executive salaries and advertising, and even how much they can pick up at quality of profit. Institutions that exceed these limits will be required to refund the difference to the state, or the state will deduct this amount before paying the invoice.

According to Cindy Mann, who served as head of Medicaid in the Obama administration, in accordance with state mandates, nursing homes were told for the first time how to spend payments from government programs and residents.

With this strategy, advocates believe, residents will not experience a shortage of care, and violations of federal quality standards should be reduced as money will be spent on residents’ needs. At least that’s a theory.

“If they can’t get that much money out of health care and spend it on staffing and actual services, that should go a long way,” said Charlene Harrington, professor emeritus at the University of California, San Francisco School of Nursing, who has studied the issues for four decades. compensation and regulation in nursing homes. “I expect the quality of care to improve significantly.”

“The actual effect will be exactly the opposite,” said Andrew Aronson, president and CEO of the New Jersey Health Care Association. “By trying to get providers to invest more in direct health care, you are discouraging people from investing in their buildings, which will result in lower quality.”

New York City nursing facilities will have to spend at least 70% of their total revenues, including payments from Medicaid, Medicare, and private insurance companies, on caring for residents next year, and at least 40% of those costs will have to be paid for direct health care. to pay the relevant employees. in practical care. In Massachusetts, Gov. Charlie Baker issued regulations requiring nursing homes to spend at least 75% of all income on caring for residents. New Jersey law requires nursing homes to spend at least 90% of their income on patient care. But its state regulators have suggested that the requirement only apply to Medicaid funding. The final definition has not yet been made.

All three states are promising to increase Medicaid payments to institutions that comply with the law.

Harrington and other advocates say the action is long overdue, but they are watching how regulators in each state determine who qualifies as a direct health worker, what counts as income, and whether it is accurately reported.

Jim Kline, president and chief executive officer of LeadingAge New York, a nonprofit healthcare provider, questions the legality of certain provisions of New York law. “I don’t think there is any doubt that the case will go to court,” he said.

Aronson said this mandate is based on a misconception – that nursing homes could keep COVID-19 out of their institutions if they only allocated their resources correctly. “As long as COVID is present in our communities, it will also infiltrate our facilities,” he said.

But poor infection control practice caused by inadequate staff has been most common violation cited by nursing home inspectors for many years, according to a study published last year by the Federal Government Accounts Service. The pandemic has hardly reversed this trend. In August 2020, a frustrated Sima Verma, then administrator of the Centers for Medicare and Medicaid Services, warned nursing home operators that “significant flaws in infection control practices” were responsible for the rise in COVID deaths and urged them to “really double down” about these methods. “

“From a philosophical point of view, if the payer wants to tell the provider how to use his funds within certain parameters, I understand this, but this is not what [New York] the law does, ”said Kline. “The law goes beyond that. The government tells the provider how much other people’s money they should also spend on treatment, not just state money. ”

Bills paid by Medicare or individuals should be excluded from government mandates, along with Medicaid funds earmarked for specific purposes, such as mortgage costs, he said.

The Medicaid program, funded by a state-federal partnership, provides health insurance for people on low incomes and typically pays for about 60% of nursing home care nationwide, typically for permanent residents with chronic health problems. Medicare, funded by federal dollars, insures seniors or people with disabilities and provides about 16% of health care providers’ revenues. The remainder comes from private Medicare Advantage companies and other health insurance companies, as well as from individuals who pay for their own health care.

“Nursing homes are mostly funded by government taxes, Medicaid or Medicare – and the public has reason to worry about how our dollars are being spent,” said Millie Silva, executive vice president of 1199SEIU, a union that represents 45,000 nursing home workers. … in New York and New Jersey, and has supported legislation in both states.

Cost requirements are not a new idea in healthcare. The Affordable Care Act requires insurance companies to spend at least 80 cents on every dollar in premiums. pay for the medical needs of beneficiaries… What is left can be spent on administrative costs, executive salaries, advertising, and profits. Companies that exceed the limit must refund the difference to the beneficiaries.

Harrington disagrees with industry officials who want to exclude Medicare dollars from how much nursing homes should spend on direct care. This will leave a large source of profit untouched and allow them to use the money “however you like”, she said.

Medicare paid nursing homes $ 27.8 billion in fiscal 2019according to the Medicare Benefits Advisory Commission, an independent commission appointed by Congress.

However, even if only Medicaid money is affected, there is still a big problem with the direct health care mandate, Aronson said. “Ninety percent of institutions are losing money,” he said because Medicaid payments do not cover the cost of treatment. In New Jersey, he added, the deficit is $ 40 a day per resident.

But some state legislators are not convinced. “Medicaid payments may not fully cover the cost of treatment, but somehow commercial nursing homes make money,” said New York State MP Richard Gottfried, who has chaired the Assembly’s Health Committee since 1987. Nursing homes operate as businesses and may hide some of that profits in related businesses that they also own and then hire, he said. They can “use real estate gimmicks and shell contracts to make it look like they’re spending money when in reality they’re just pumping income into their pockets,” he said. Use of such “related party” payments has been happening throughout the country for several years.

To disclose the true income and expenses of businesses, government regulations require accurate documentation. “If they submit false documentation, it will be a criminal offense,” Gottfried said.

The cost requirements are coming at a challenging time for an industry still recovering from its worst pandemic and facing staff shortages and low workloads. But New York Assembly member Ron Kim, whose uncle died in a nursing home from alleged COVID, said lawmakers should be able to tell nursing home operators how to spend taxpayer money. “If they choose to rely on government funds to provide assistance, they take on a lot of responsibility,” he said. “This is not like running a hotel.”

Kaiser Health News is the national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation and is not affiliated with Kaiser Permanente.

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