It’s far easier to talk about “bending the cost curve” in health care than it is to actually do it. The current controversy at the Minnesota Capitol over a proposed $68 million funding cut to nursing homes offers a real-time illustration of this reality — one that should serve as a cautionary tale to those who push health spending reductions as a painless remedy to budget woes.
From a 30,000-foot view, the changes to the reimbursement formula for long-term-care facilities look like a logical place to find savings in the sprawling state Department of Human Services budget. The reforms were recommended in a report released this year by independent experts from the University of Minnesota and Purdue University.
They found that a 2015 legislative overhaul of nursing-home funding delivered on one key goal — helping boost staff salaries and benefits — but fell short of expectations when it came to improving the quality of care. These experts recommended changes in the state funding formula partly to drive improvements in quality and partly to decrease pressure on the state budget.
Again, a macro-level view of the $68 million cuts, which are spread out over four years, makes them appear manageable. The 2015 overhaul, dubbed “Value-Based Reimbursement,” significantly increased state payments to nursing homes to cover care for patients who qualify for medical assistance. Even if the proposed cuts are approved, because of the 2015 change average monthly payments for nursing facilities are still expected to rise each year. But the increases will be 6% on average instead of 7.5%.
Some additional perspective: $68 million in cuts amounts to 3% of the $2.3 billion the state will spend on this care over the next four years, according to Minnesota Management and Budget. Nationally, 6 in 10 residents of nursing homes are covered by the state-federal Medicaid program, according to the Kaiser Family Foundation, so Minnesota is not an outlier in covering this care.
As the legislative session careens to an end, Republicans have attacked the proposed cuts and have raised justifiable concerns about the impact on smaller rural facilities. The state’s long-term care industry is also battling the change, saying that the big-picture perspective ignores the harm to individual care centers.
North Shore Health CEO Kimber Wraalstad said she’s literally losing sleep at night over the reductions her 37-bed Grand Marais long-term care center would face. The facility appears to be hit harder by the formula change than others.
In 2020, she expects a reduction of $83,000, with that amount projected to rise to a minimum of $220,000 in 2023. The care center’s 2019 revenue is estimated at $4.3 million. Wraalstad said the facility, which is part of a broader operation that includes the local hospital and ambulance service, is already operating at a loss.
“Where am I supposed to cut?” she asked.
Larger facilities in the metro area also are sounding the alarm. Sholom Community Alliance CEO Barbara Klick said the reductions cannot be easily absorbed when margins are already perilously thin and when spending assumptions have been made based on the higher reimbursement level. Sholom operates two long-term-care centers — in St. Paul and St. Louis Park — for a total of 228 beds.
Klick also said the reductions would come at a challenging time when nursing homes badly need to invest in information technology, an area where long-term care has lagged other health care providers. In addition, Sholom leaders have said that the 2015 changes need to be given more time to realize the quality improvements that the legislation’s architects envisioned.
There’s not much time left in the 2019 session, but it would be worthwhile for the Walz administration to convene a meeting with the state’s nursing-home leaders to listen to their concerns and find out if there are measures to mitigate the financial pain that would be felt, especially by smaller care centers such as Wraalstad’s.
And an important note to all who are decrying these cuts: The state pot of money mainly funded by Minnesota’s medical provider tax contributes $439 million a year toward medical assistance spending, which includes long-term care. Extending the provider tax, which is set to sunset this year, is critical to ensuring the robust funding that nursing homes and their patients deserve.