Nursing Homes Face Quality Assurance Fee

Arkansas nursing homes continue to slide into the red. More than half the long-term-care facilities in Northwest Arkansas reported a net loss for fiscal year 1999, mainly because providers housing Medicaid residents lost an average of $9 each day per Medicaid patient.

The 83rd General Assembly may arrest some of the damage done to nursing homes in the state. Randy Wyatt, executive director of the Arkansas Health Care Association (AHCA), said his association of nursing homes had lined up a number of sponsors — whom he wouldn’t list — for legislation imposing a “quality assurance fee” on the approximately 240 nursing homes in Arkansas.

Unlike an earlier proposal that would have imposed a per-bed tax, the bill would most likely call for nursing homes to pay the state about 5 percent of patient revenues. The exact percentage due for the fee would be determined when the state Department of Human Services releases the financial information for fiscal year 2000.

Each dollar of the new provider fee would be used to draw down $3 in federal matching money to increase the reimbursement nursing homes receive for housing the 76 percent of residents who are dependent on Medicaid.

The new method would provide an additional $80 million-$100 million a year, Wyatt said, and the bill was expected to be filed by Friday, Jan. 19.

Lines of support and opposition have begun to form on the issue. Backing the AHCA’s plan, former speaker of the house Ernest Cunningham has returned to this legislative session as the association’s chief lobbiest.

From District 70, State Rep. Bill Bevis, D-Scott, will be the lead sponsor for the bill. State Sen. John Brown, R-Siloam Springs, also said he would support the proposed bill. Brown, who represents District 34, said he wondered if private institutions might accept some Medicaid residents if they were reimbursed fully.

An opponent of the plan is already publicly declared.

To be eligible for federal matching dollars, the fee must also apply to about half-a-dozen nursing homes that do not accept Medicaid patients. And the likelihood that it would be passed along in the form of steeper bills for “private-pay” patients in both Medicaid and non-Medicaid facilities is the reason state Sen. Jim Argue, D-Little Rock, said he would oppose the funding plan.

“I agree we should increase the level of Medicaid funding. I just don’t think this is the proper method, and I will oppose it,” Argue said last week. “It places the burden on sick, elderly people who don’t happen to qualify for Medicaid. It’s a burden we all need to share.”

Sen. Gunner DeLay, R-Fort Smith, is sponsoring a bill that would raise extra nursing home money by tapping part of the Tobacco Settlement. However, it would have to overcome complaints that it tears apart the carefully constructed spending plan approved by the voters in November.

Argue acknowledged that he had no plan to introduce competing legislation that would raise Medicaid matching funds from a broad-based source.

“If I had a great idea, I wouldn’t hesitate to propose it. But I don’t,” he said.

Instead, Argue said, DHS and the governor’s office ought to be developing and promoting a solution.

Rex Nelson, spokesman for Gov. Mike Huckabee, said the governor wouldn’t determine a position on the nursing home fee proposal until a bill is filed and analyzed.

DHS spokesman Joe Quinn said the department remained supportive of the idea of using a fee paid by nursing homes to draw down increased federal Medicaid funding. But he indicated that the lobbying effort for the bill would be shouldered mainly by the nursing homes themselves.

Cost: per patient day

While the AHCA lobbies for approval of the provider fee, DHS will be submitting the new reimbursement plan to the federal Health Care Financing Administration for approval. DHS and the AHCA have worked since the last legislative session to define an agreeable payment method that would bring Medicaid reimbursements level to the cost of caring for those patients.

The AHCA’s research director, Lynn Rodgers, helped build the three-pronged plan.

“Direct care” of the patient is the most significant difference in the new system, Rodgers said, and money from it would manage expenses such as nurses’ and aides’ wages, medical supplies and resident physical therapy.

“In the old system, buying paper for the copy machine is more important than hiring a nurse,” Rodgers said. “Under the new system, hiring a nurse is the most important thing.”

Each nursing home would receive a flat rate to cover facility operations such as utility bills, laundry costs and administrators’ fees under the second portion of the new method.

Fluctuating expenses such as property taxes, property insurance and professional liability insurance would pass directly through for reimbursement within the third category of the system.

The plan, which was sent to the Health Care Financing Administration on Jan. 12, is a dramatic departure from the current flat-rate reimbursements used by nursing home operators in Arkansas.

The state currently reimburses nursing home operators an average of just under $70 a day for care provided to Medicaid-eligible patients, Wyatt said, but the costs per day per patient average $78.

However, a combination of the provider fee and the new reimbursement formula means that the reimbursement for some homes could be as high as $84 a day.

To maximize the reimbursement, a nursing home would have to maintain an average occupancy rate of 75 percent. Wyatt said 25-30 nursing homes might actually receive lower reimbursements than they currently do because they are licensed for far more patients than they generally have in residence.

The homes that might actually lose under the new plan are scattered around Arkansas — “everywhere but the northwest part of the state,” where occupancy rates are typically very high, Wyatt said.

Shannon Fay, administrator of Northwest Nursing & Retirement Center Inc. in Fayetteville, said he assumed that most nursing homes in the state would support the proposed bill. On the Northwest Arkansas Business Journal’s list of largest nursing homes, Northwest Nursing ranked second among 21 nursing homes in Washington and Benton counties, with a net income for 1999 of $314,959.

Comparing the center’s prosperity with other homes’ losses, Fay credited his company’s low ratio of Medicaid patients. Less than 50 percent of Northwest Nursing residents are Medicaid patients.

“If we were 100 percent Medicaid,” Fay said, “we’d be losing a lot of money.”

Rose Care Inc. of Rogers relies more heavily on Medicaid for reimbursement. Rose Care Center of Fort Smith was No. 18 and Heritage Park Nursing Center of Rogers was No. 5 on the Business Journal’s list.

A corporate counselor with Rose Care, Rick Lawrence, said, “We’ve not had a significant [Medicaid] rate increase since ’97, but wages have gone up, professional liability insurance has gone up, and we are required to have criminal-background checks.”

Such rising costs have created a lack of funds for simple operation, Lawrence said, and Rose Care withdrew from the AHCA because it couldn’t spare the expense of membership.