Kansas Health Institute | Information For Policy Makers. Health for Kansans.

TOPEKA — In Kansas, few nursing homes are as small as The Shepherd’s Center in Cimarron.

“We’re licensed for 32 residents,” said Jean Bryant, the home’s administrator. “Right now, we have 28.”

The nonprofit Shepherd’s Center, the only nursing home in Cimarron and one of two in Gray County, is almost 90 percent occupied, which is a little above the state average.

But the home’s finances, Bryant said, are in trouble because almost two thirds of the residents’ stays are paid for by Medicaid, which typically falls short of offsetting a nursing home’s costs.

“We’re struggling,” Bryant said. “We were very much in the red last year. We’ve been spending our reserves to keep from having to cut staff. The only way we’re making it is we have a lot of volunteers. We get a fair number of memorials. We’ve been able to get some grants to cover some of our equipment costs and we’re very frugal.”

The Good Shepherd’s situation is not unique. Across the state, nursing homes with high numbers of Medicaid residents are barely breaking even.

“The statewide average is around 55 percent Medicaid (occupancy),” said Deborah Zehr, executive director at the Kansas Association of Homes and Services for the Aging, which represents the state’s nonprofit nursing homes. “But if you get much above 50 percent, it’s tough to make ends meet because Medicaid only covers about 95 percent of your costs and you’re probably not going to have enough private-pay residents to make up the difference.”

The recent 10 percent cut in Medicaid reimbursements, she said, put many nursing homes with a high percentage of Medicaid residents on a path toward closure.

Lawmakers agreed last month to restore the reimbursement cut beginning July 1.

“To my knowledge, we’ve not had any homes close since Jan. 1,” Zehr said, “but if the 10 percent cut had remained in place for much longer, I think some would have. Those discussions would have taken place.”

Provider tax

In addition to restoring the reimbursement cut, lawmakers approved a bill designed to generate $86 million a year in additional Medicaid funding for the state’s nursing homes.

The new law calls for using a tax on licensed nursing home beds to generate about $30 million which, in turn, will be used to draw down $56 million in additional federal Medicaid funding.

The $86 million, assuming the initiative wins federal approval, would be returned to the nursing homes based on the number of Medicaid residents in their care. The more Medicaid residents a home has the more money it will receive.

According to initial projections by the Kansas Department on Aging, The Shepherd’s Center should be getting an additional $106,647 in the fiscal year that begins July 1,

“That would be wonderful,” Bryant said. “If it happens, we’ll put every penny of it back into resident care and to meeting residents’ needs because that’s what we’re about.”

Many winners

According to KDoA projections, 93 of the state’s 346 nursing homes are expected to break even or receive up to $99,999 in additional Medicaid reimbursement:

• 147 would each even receive between $100,000 and $199,999.
• 46 would each receive between $200,000 and $299,999.
• 18 would each receive between $300,000 and $399,999.
• 10 would each receive between $400,000 and $499,999.
• Seven would each receive between $500,000 and $599,999.
• Three would each receive between $600,000 and $649,999.

No nursing homes are expected to receive between $650,000 and $800,000.

Two nursing homes – Presbyterian Manor, Kansas City, and Aldersgate Village, Topeka – are expected to receive $821,650 and $878,725, respectively.

Bill Ward, chief executive of Presbyterian Manors of Mid-America, said the nonprofit chain would welcome the additional aid.

“There are a lot of hurdles to cross before these payments are actually in hand, but that said, our Kansas City facility is running 70-72 percent Medicaid and it’s a large facility, close to 165 beds,” Ward said. “That’s the most Medicaid in any of any of our facilities.”

Presbyterian Manors of Mid-America operates 14 homes in Kansas, three in Missouri.

Ward said the increase should not be seen as a windfall.

“There will be some additional money, that’s true,” he said, “but, really, most of what we’re talking about here is an opportunity to restore the Medicaid cut, restore some of the rate increases we haven’t gotten for the last two or three years and recoup some of the costs – uncompensated costs - that we’ve been paying all along.”

Ward said he plans on using the additional aid to offset the costs of caring for the home’s Medicaid residents.

“Our hope is that for some brief period of time we could be reimbursed for what it’s actually costing us to care for these residents,” he said. “That would be great. So whatever money there is will be going into resident care, most certainly.”

The state’s two facilities for veterans – Kansas Soldiers Home in Fort Dodge and Kansas Veterans Home in Winfield – are not affected by the tax because they are owned and operated by the state. Neither facility is Medicaid certified.

Fewer losers

Twenty facilities are expected to lose money. Most are short-term rehabilitation units with few – if any – residents on Medicaid.

Five of the 20 facilities are each expected to lose between $87,000 and $190,800:

• The Sweet Life at Rose Hill – $190,800.
• The Sweet Life at Grand Court, Overland Park - $180,000
• Providence Place, Kansas City - $162,000
• Derby Health and Rehabilitation - $110,749
• Family Health and Rehabilitation Center - $87,109.

The remaining 15 lose between $1,800 and $19,000.

Mixed views

The initiative divided the state’s nursing homes. Nonprofit nursing homes, generally, opposed the bill, calling it a “granny tax” and saying it would force them to raise their private pay residents’ rates.

For-profit homes supported it, arguing there was no other way to generate the funding needed to provide quality care for Medicaid residents.

The two sides settled their differences after a sit-down session with Gov. Mark Parkinson, during which he proposed changes that lessened the tax on retirement communities with few Medicaid residents, protected the initiative’s revenues from being “swept” into the State General Fund, created a way for homes to receive a portion of their increase before having to pay the tax, and strengthened the initiative’s commitment to quality of care.

“The governor made it pretty clear to both sides that there weren’t going to be sufficient revenues to make up for what we’d already lost and that if each side would compromise a little, those monies could be there,” said Cindy Luxem, executive director at Kansas Health Care Association, representing the state’s for-profit homes.

“And that’s what we did,” she said. “We compromised.”

Prior to becoming governor, Parkinson owned elder care facilities.

No one opposed the initiative more than Jamie Frazier, who runs Lake View Village in Lenexa, the largest retirement community in the state.

“In the end, we supported the compromise because after all was said and done the cost turned out to be revenue neutral for us, which was considerably better that the $200,000 it was going to cost us at first,” he said. “I’m glad it got worked out.”

Few Lake View village residents are on Medicaid.

If the initiative wins federal approval, the tax would remain in place for three years. In the fourth year, it will be reduced by at least 40 percent. After the fourth year, it would expire if not renewed by lawmakers.

“The fourth-year reduction and the sunsetting were some of the concessions that were made,” said Rep. Bob Bethell, R-Alden, the bill’s primary sponsor in the House. “The not-for-profits wanted some assurances that this wasn’t going to be a long-term thing. But I have a feeling that by the time the third year rolls around people are going to be saying, ‘Why are we reducing this? Why would anyone want to see this go away?’”

The law calls for using the first year’s revenue to restore the 10 percent cut in Medicaid, dating back to Jan. 1.

In the second, third and fourth years, most of the money would be used raise Medicaid reimbursement in ways intended to cause homes to hire more direct care staff. About $10 million would be set aside for projects aimed at improving quality of care.

Quality assessment

A nine-member Quality Care Assessment Panel will determine how the $10 million will be spent. The nine members:

• Two from the Kansas Association of Homes and Services for the Aging;
• Two from the Kansas Health Care Association;
• One from the Kansas Hospital Association;
• One from the Kansas Adult Care Executives Association;
• One from the Kansas Foundation for Medical Care;
• One from Kansas Advocates for Better Care;
• One nursing home resident or family member to be appointed by the governor.

KDoA and the Kansas Health Policy Authority will each have a non-voting member on the panel.

Kansas Advocates for Better Care Executive Director Mitzi McFatrich lobbied against the panel being weighted in favor of the nursing home industry.

“We’re out-gunned, seven to two,” McFatrich said. “Now, I don’t doubt for a minute that everybody on the panel is going to be well-intended and want to do the right thing, but I also know that last year, 132 of the 340 nursing homes in Kansas were cited (by KDoA) for abuse, neglect or exploitation.

“I don’t think you look at those numbers and say, ‘OK, we’re going to trust the industry,’” she said. “And I know there are a lot of good homes out there providing really good care, but they’re not the ones I worry about.”

Danna Legleiter runs the Good Samaritan Society nursing home in Liberal. She said she doesn’t need to be encouraged to spend the home’s additional aid – expected to be about $107,000 -- on resident care.

“After the Medicaid cut went into effect, I had to freeze wages and cut back on some people’s hours,” Legleiter said. “That was the toughest thing I’ve ever had to do – telling someone who works really, really hard that they’re not going to get a raise and then turn around and ask everybody to keep a positive attitude. So if there’s any extra money coming in, it’s all going into direct care”

About 70 percent of the home’s residents are on Medicaid, she said.

“There’s another home in town that gets most of the private-pay. It’s a for-profit. It’s a nice place and that’s fine,” Legleiter said. “But you know what? Somebody’s got to take care of the little people, too.”