Budget crunch could impact nursing homes

Last year's battle to send more money to nursing homes in Minnesota would unravel under Gov. Tim Pawlenty's proposal to fill a $938 million state budget gap, long-term care officials say.

Last year's battle to send more money to nursing homes in Minnesota would unravel under Gov. Tim Pawlenty's proposal to fill a $938 million state budget gap, long-term care officials say.

"Whether deliberate or not, the governor's budget appeared to treat nursing facilities differently and better than other providers, but it doesn't," Gayle Kvenvold, president and chief executive officer of the Minnesota Health and Housing Alliance, said last week in an interview.

Pawlenty's budget fix includes a provision to "increase NF rates," referring to nursing facilities, but then adds "eliminate rebasing."

"He strips rebasing out, and takes all the money associated with rebasing and cuts it, so the net effect is there is no increase," said Kvenvold. "Back where we were."

The issue was contentious at the close of the 2007 session, as Republicans and Democrats failed to boost a higher rate increase for nursing facilities past Pawlenty than he wanted in literally the closing minutes of the session. But approved was an effort to rebase nursing facilities rates over eight years to reflect actual costs starting Oct. 1, 2008. Without rebasing, rates in which nursing facilities are reimbursed through state programs such as Medical Assistance or Medicaid weren't allowed to keep pace with actual costs and with inflation. Estimates put that gap at $25 per resident a day.


The 2007 law laid a course that eventually would increase the state's investment in nursing facilities by $100 million.

The 2007 law would also increase nursing facility rates by up to 2.7 percent effective Oct. 1, 2009, but Pawlenty would now give nursing facilities an increase of 1.5 percent -- over the old baseline -- and an additional 1.2 percent would be awarded to facilities based on quality measures.

Translated into dollars, the Pawlenty budget would provide no rate increases in 2008 for any providers, Kvenvold said. And it cuts long-term care funding by $31.8 million for fiscal 2009, with $5.3 million from nursing homes and $26.5 million from community senior care, such as home health programs.

"There is no increase for care providers in this governor's budget," she said. And the governor's quality add-on increase is unattainable. "With rate freezes in three out of six years, care centers are not positioned to meet quality performance thresholds or even remain open."

Holding the line on nursing facilities means they won't be able to keep up with rising costs and will have no funding for salary increases to employees, Kvenvold said. And nursing facilities are an economic factor, providing 120,000 jobs statewide.

"One of the things that often gets overlooked in health and human services is that there are jobs that are associated," she said. "It's not just that you put money in -- it supports people. About 70 percent of a nursing home's budget staff, so that money goes in and it employs people."

The lack of rebasing and cutting back on the amount of rate increase will affect Neilson Place, said Sandy Bensen, vice president of senior and community living services for North Country Health Services. Neilson Place has about 91 full-time equivalent jobs, involving 140 people.

"My mind is reeling," Bensen said of trying to rebudget, if Pawlenty's proposal is accepted by the Legislature. "We know that we have contracts with our bargaining units and we are locked into certain percentages ... and when you're expecting absolutely nothing even under our best scenario we don't match what those increases are."


Said Bensen: "It's a gigantic challenge that we're facing and I don't have an answer right now on how we will do that. But clearly, you don't have coming in what's going out."

Kvenvold said the industry has run lean in recent years, but can't go much further and maintain quality. "We're all about providing the very, very best quality that we can for older adults."

Even with the boost from the 2007 session, state payments haven't kept pace with inflation, she said. From 2003 to 2007, the average nursing home rate increase of 6.6 percent didn't come close to covering the inflation increase during the same period for skilled nursing facilities -- 14.6 percent.

And more facilities than Kvenvold would like to see are operating on margins so close they could close their doors. In northwest Minnesota, 35.3 percent of facilities are in crisis, 50 percent in northeast Minnesota, she said.

Because of financial crisis, means that 1,311 jobs and 1,615 beds are at risk in northwest Minnesota, and 3,227 jobs and 2,806 beds in northeast Minnesota, she said.

"We've had three closures since the last legislative session," Kvenvold said. "If this budget stands, if there is no increase this fall in October of 2008, there will be more closures."

She hopes legislators realize what such cuts would mean to long-term care in Minnesota, and find a way to keep the 2007 provisions intact, including rebasing of rates.

Kvenvold suggests that instead of cutting the state sales tax rate as Pawlenty wants to offer as tax relief, those dollars could give all older adult service provides a 3 percent cost of living increase, the same as given to state-operated facilities.


That would cost about $50 million, she said. "The governor's proposal on sales tax relief is about $88 million. That would leave about $30 million to use for sales tax relief or other purposes."

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