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___________________
How Do Nursing Homes
Spend the Reimbursement
They Receive for Care?
January 26, 2022
As nursing
homes continue to ask for more reimbursement, a number of states have begun
to question more directly how facilities spend the reimbursement they
already receive, with some states enacting legislation to require more
transparency and accountability.[1]
Questions are also raised about how facilities have spent the many
additional billions of dollars they received,[2] and continue to receive,[3] from federal and
state governments during the coronavirus pandemic. In December 2021,
the Medicare Payment Advisory Commission (MedPAC) reported that Medicare
margins for skilled nursing facilities in 2020 were 19.2% when Provider
Relief Funds were counted (16.5% when Provider Relief Funds were not
counted), the 20th consecutive year of Medicare margins above 10%.[4] MedPAC also
reported that facilities’ total margins (counting all payers, including
Medicaid) increased from 0.6% in 2019 to 3% in 2020.[5] An analysis of three large
publicly-traded nursing home chains and eight real estate investment trusts
similarly found that all but two of the companies reported higher net
income in 2020 than 2019.[6]
In the absence of meaningful transparency about or accountability for
facility spending, there is skepticism, among some states and residents’
advocates, about increasing public funding for nursing facilities. A
case filed by 238 of New York State’s 615 nursing homes and three New York
State nursing home trade associations, which challenges new accountability
provisions that the Center for Medicare Advocacy supports, sheds some light
on facilities’ actual spending practices.
As part of
the state’s 2021-2022 budget, New York State enacted section 2828, which
(1) requires facilities to spend 70% of their reimbursement on care for
residents, including 40% on direct “resident-facing staff,” and (2)
requires facilities whose “total operating revenue exceeds total operating
and non-operating expenses by more than five percent” to “remit such excess
revenue” to the state, which will deposit the funds in the state’s nursing
home “quality pool.”[7]
The second provision essentially limits facility profits (or, for
not-for-profit facilities, surplus) to 5%. The budget law calls for
the State to deposit the excess funds from both the 70/40 spending mandate
and the 5% profit cap into the state’s quality pool.[8] Under regulations of the
Department of Health, the State distributes funds from the quality pool to
eligible facilities according to a methodology described annually by the
Department. Based on criteria in the Nursing Home Quality Initiative,
facilities in the top three quintiles (the top 60%) are eligible to receive
funds from the quality pool.[9]
The
nursing home industry lawsuit, Home
for the Aged of the Little Sisters of the Poor v. Mary T. Bassett,
No. 1:21-cv-01384 (BKS/CFH) (N.D.N.Y., filed Dec. 29, 2021),[10] filed days
before §2828 was scheduled to go into effect, alleges that if the two
provisions had been in effect and applied in 2019,
the
aggregate amount such facilities would have had to pay back to New York
State would be approximately $824 million, of which $313 million would be
attributable to the 5% profit/surplus cap spread among 176 facilities[11] including over
$20 million from not-for-profit facilities. . . . [and] Approximately $511
million would be attributable to the 70%/40% spending mandate spread among
334 facilities,[12]
including over $60 million from not-for-profit facilities. Of the
approximately $313 million that would have been taken back because of the
5% profit cap had this methodology been in place in 2019, approximately
$230 million would have been taken from facilities that DOH itself
recognized as “quality providers” under New York State’s Medicaid
reimbursement methodology.
Complaint
¶7. In other words, the plaintiff nursing facilities report that
nursing facilities in New York State were paid more than eight hundred
million dollars in 2019 for excess profits and spending not related to
resident care, as those terms are defined by the state’s 2021-2022 budget
law. The facilities do not report how they spent the $824 million.
Most of
the Complaint, Paragraphs 16-253, contains a facility-by-facility
description of the amounts each facility would be forced to give up as a
“penalty” under both the 5% profit cap and the 70%/40% spending mandate,
based on revenues and expenses for 2019.
Under the
Governor’s authority to suspend laws due to the health care emergency and
citing severe staffing shortages in health care facilities, New York
Governor Kathy Hochul delayed implementation of both challenged provisions
through January 30, 2022. Executive Order 4.4 (Dec. 31, 2021).[13]
The Long
Term Care Community Coalition (LTCCC), a New York-based national advocacy
organization for residents, describes the lawsuit as admitting facilities’
diversion of $511 million from resident care.[14] LTCCC finds that 36 of the
plaintiff facilities (15%) that were Special Focus Facilities (SFF) or SFF
candidates or that had overall ratings of one star (the lowest rating)
admitted to receiving overpayments of $45 million; that 85% of the
plaintiff facilities provide staffing below 4.1 hours per resident per day;
and that 73% of the plaintiff facilities provide less than .75 hours of
registered nurse coverage per resident per day. LTCCC notes that the
plaintiff facilities are not representative of facilities in the state: 95%
of the plaintiff facilities are for-profit facilities, although the only
65% of New York State’s nursing facilities are operated on a for-profit
basis. Finally, LTCCC suggests how nursing facilities could have
spent $511 million on staff – $511 million could have paid for an
additional 5,577 registered nurses or 111,971 hours of nurse aide time.
What else
do we know about these facilities? The Center for Medicare Advocacy
finds that some of the plaintiff facilities are Special Focus Facilities or
candidates for the SFF program and some were sued in June 2021 by the U.S.
Attorney for the Southern District of New York for allegedly overbilling
the Medicare program, in violation of the federal False Claims Act.
Special
Focus Facilities
The
Centers for Medicare & Medicaid Services (CMS) identifies about 88
nursing facilities – generally one to two facilities per state – that are
among the most poorly performing facilities in the country. These
nursing facilities, which CMS calls Special Focus Facilities (SFFs), have
“more problems” than other facilities,
“more serious problems” than other facilities, and “a pattern of
serious problems that has persisted over a long period of time” (i.e.,
the prior three years).[15]
CMS describes these especially troubled facilities as making “enough
improvements in the presenting problems” to be found in substantial compliance.
However, at the next survey, they are again cited as out of
compliance because they failed to address “underlying systemic problems.”[16] CMS
established the SFF initiative in order to address these “yo-yo” facilities. Since 2019,
CMS has also a published a list of “candidates,” facilities that meet the
criteria for the SFF program but are not included due to lack of resources.
As of the
most recent SFF lists, dated December 8, 2021, CMS identifies three SFFs in
New York. One of them, Pontiac Care and Rehabilitation Center, is an
SFF that has improved after eight months as an SFF. In the Complaint
(¶232), Pontiac Care and Rehabilitation Center reports that it would have
had to pay $151,876, under the 70/40 rule. It also describes itself
as in the fifth (bottom) quintile, ineligible to receive funding from New
York State’s quality pool.
In
addition, five of the 15 New York candidates for the SFF program are
plaintiffs in the provider litigation. None is eligible to receive
payments from the quality pool.
Plaintiff
Facilities that Are SFF Candidates, as of December 8, 2021
|
Licensee
Name (According to the Complaint)
|
Number of
months an SFF candidate
|
Paragraph
in Complaint
|
Total
overpayments (70/40 spending mandate; 5% profit cap)
|
Quintile
in quality pool
|
|
Buffalo Center for
Rehabilitation and Nursing
|
15
|
48
|
$4,975,291
|
Fourth
|
|
FoltsBrook Center for
Rehabilitation and Nursing
|
4
|
225
|
$ 212,352
|
Fourth
|
|
The Grand Rehabilitation and
Nursing at Guilderland
|
2
|
129
|
$1,253,313
|
Fifth
|
|
The Grand Rehabilitation and
Nursing at Barnwell
|
4
|
133
|
$1,159,019
|
Fifth
|
|
Wesley Gardens
|
24
|
214
|
$ 215,953
|
Fifth
|
Information
provided by the five SFF candidates in the Complaint, displayed in the
chart above, shows that all five facilities spent too little of their
reimbursement on care for residents, under New York state’s 2021 law (and,
as a result, all of them would have had overpayments, ranging from $212,352
to $4,975,291) and all five facilities were ineligible for payments under
the state’s quality pool (all of them were in the lowest two quartiles
(40%) of facilities in the state).
Buffalo
Center for Rehabilitation and Nursing reported the
largest overpayment of the SFF candidates, $4,975,291. The federal
website Care Compare
reports the following information about the facility, as of January 14,
2022. The Buffalo Center has one of five stars in health inspections,
two stars in staffing, and three stars in quality measures (on a five-point
scale for each measure, with one the lowest and five the highest).
Its overall rating is one star. The website also displays an icon
indicating that the facility was cited for resident abuse.
At the
most recent standard (annual) survey on July 20, 2021, which was also a
complaint survey, the facility was cited with 13 deficiencies, higher than
the average number of deficiencies cited in New York State (4.9) and the
average number of deficiencies cited in the United States (8.2).
A
complaint survey on May 3, 2021, cited an immediate jeopardy deficiency
(the highest of four levels of noncompliance) for insufficient staffing.[17] The
Statement of Deficiencies included 4½ pages describing the
deficiency. Surveyors wrote that actual staffing at the facility was
below the staffing numbers that the facility identified as necessary:
The
facility Daily Census dated 5/1/21 documented a census of 170 residents.
The actual staffing for the 5/1/21 11:00 PM to 7:00 AM shift was 5 LPNs and
3 CNAs (down 7 CNAs); the 5/2/21 7:00 AM to 3:00 PM shift was 5 LPNs and 11
CNAs (down 3 LPN's and 9 CNAs). The scheduled staffing for the 5/2/21 3:00
PM to 11:00 PM shift was 3 LPNs, 8.5 CNAs (down 5 LPN's and 7.5 CNAs).[18]
As a
result of insufficient staffing, surveyors documented care that was not
provided to residents. One resident, identified as Resident 1, was
observed at 6:14 a.m. on May 2, “lying in bed on soiled linens wearing an
incontinent brief and a soiled gown. The resident was covered in a foul
smelling yellow/brown liquid like substance from their head to their knees.
There were areas of this foul-smelling substance drying on the linens.”[19]
Resident
1’s care plan indicated that the resident needed two staff members and
extensive assistance with toileting. However, the certified nurse
aide (CNA) told surveyors that she and a licensed practical nurse were the
only staff on the night shift (11:00 p.m. to 7:00 a.m.) on May 1-2 for the
53 residents on the fourth floor, a designated dementia unit, making it
impossible for the resident to receive the care she required. The
minimal staff could not provide one-on-one care to Resident 2, as required
by her care plan, or to Resident 3, who, unknown to staff, left the
building (“eloped”), although her care plan required that she be supervised
while walking in the corridor.
As of
January 14, 2022, three federal civil money penalties had been imposed
against the facility in the prior three years: July 20, 2021: $8,037; May
3, 2021: $20,423; and April 30, 2020: $50,869. The federal fines
totaled $79,329.
False
Claims Act litigation filed by U.S. Attorney
In June
2021, the U.S. Attorney for the Southern District of New York filed a
lawsuit against 11 skilled nursing facilities (and their management company
and owner) for fraudulently billing Medicare for unnecessary services, in
violation of the federal False Claims Act.[20] The U.S. Attorney alleges that
between at least January 2010 through September 2019, defendant facilities
“systematically kept patients at the Facilities longer than necessary in
order to maximize the amount billed to Medicare for the patients’ stays”
and “systematically put patients on higher levels of rehabilitation therapy
than necessary based on their actual clinical needs in order to bill
Medicare at the highest rate.”
Seven of
the 11 defendant facilities sued by the U.S. Attorney are plaintiffs in the
provider litigation.
Plaintiff
Facilities, Sued by the U.S. Attorney, Southern District of New York,
in June 2021 for
Allegedly Overbilling the Medicare Program
|
Licensee
Name (According to the Complaint)
|
Paragraph
in Complaint
|
Total
overpayments (70/40 spending mandate; 5% profit cap)
|
Quintile
in quality pool
|
|
Excel at Woodbury
|
189
|
$ 519,484
|
First
|
|
Long Island Care Center
|
107
|
$1,754,989
|
First
|
|
North Westchester Restorative
Therapy & Nursing
|
253
|
$ 145,250
|
Fourth
|
|
Sutton Park Center for Nursing
& Rehabilitation
|
142
|
$1,068,463
|
Third
|
|
Suffolk Restorative Therapy
|
98
|
$1,969,416
|
Fourth
|
|
Oasis Rehabilitation and
Nursing
|
121
|
$1,484,966
|
Second
|
|
Surge Rehabilitation
&Nursing
|
195
|
$ 478,614
|
Third
|
Information
provided by the seven facilities in the Complaint, displayed in the chart
above, shows that all seven facilities spent too little of their
reimbursement on care for residents, under New York state’s 2021 law (and,
as a result, all of them would have had overpayments, ranging from $145,250
to $1,969,16) and two of the seven facilities were ineligible for payments
under the state’s quality pool (the two facilities were in the lowest two
quartiles (40%) of facilities in the state).
Conclusion
In their
lawsuit against the state, New York State nursing facilities describe their
spending. They report that in 2019, they spent hundreds of millions
of dollars that the State, in 2021 legislation, does not consider related
to resident care and on profits in excess of 5%. The five SFF
candidates report large overpayments and poor quality care, as reflected in
their ineligibility for payments from the state’s quality pool.
Facilities sued by the U.S. Attorney for allegedly overbilling Medicare
similarly show large overpayments, although five of seven qualified for
payments from the quality pool.
Nursing
facilities receiving reimbursement from the Medicare and Medicaid programs
are coming under increasing scrutiny for how they spend their
reimbursement. The New York provider lawsuit shows that nursing
facilities already receive hundreds of millions of dollars that they could
redirect to care of residents. Policy makers must require greater
transparency and accountability in how facilities spend the money they
receive for care before they consider increasing payments to facilities.
___________________
[1] New Jersey
enacted a “direct care ratio,” requiring that at least 90% of a facility’s
aggregate revenue be spent on care of residents, P.L. 2020, Chapter 89
(Sep. 16, 2020), https://legiscan.com/NJ/text/A4482/id/2212711;
New Jersey also requires specific disclosures, and requirements for prior
state approval, of transfers of ownership of nursing facilities and
“substantial management control,” P.L. 2021, Chapter 95 (May 12, 2021),
https://www.njleg.state.nj.us/Bills/2020/PL21/95_.PDF;
California enacted the Corporate Transparency in Elder Care Act of
2021, SB650, https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220SB650,
which requires organizations that operate, conduct, own, manage, or
maintain a skilled nursing facility to prepare and submit to the state an
annual consolidated financial report for related parties (with 5% or more
ownership or control interest) and for unrelated parties (that are paid
more than $200,000 by the skilled nursing facility); legislation pending in
Florida, HB539, https://www.flsenate.gov/Session/Bill/2022/539/BillText/Filed/PDF,
and an identical companion state Senate bill, SB1324, https://m.flsenate.gov/session/bill/2022/1324/billtext/filed/html,
requires facilities to submitted audited financial information.
[2] Center for
Medicare Advocacy, “Special Report: Nursing Facilities Have Received
Billions of Dollars in Direct Financial and Non-Financial Support During
Coronavirus Pandemic” (Mar. 17, 2021), https://medicareadvocacy.org/report-snf-financial-support-during-covid/;
“Center Report: Billions of Dollars to Nursing Homes in Covid-19 Relief”
(CMA Alert, Mar. 25, 2021), https://medicareadvocacy.org/center-report-billions-of-dollars-to-nursing-homes-in-covid-19-relief/.
The HHS Office of Inspector General (OIG) announced that it will “identify
how nursing homes used the [COVID-19 Provider Relief] funds to support
their COVID-19 response, improve infection control practices, and assess
selected outcomes from that use of funds.” OIG, “COVID-19 Pandemic
Relief Funding and Its Effects on Nursing Homes: Case Study,” https://oig.hhs.gov/reports-and-publications/workplan/summary/wp-summary-0000634.asp.
OIG anticipates that it will release the report, “COVID-19 Pandemic Relief
Fundings and Its Effects on Nursing Homes: Case Study,” OEI-06-22-00040, in
2023.
[3] Minnesota’s
Governor announced that the state of Human Services will exercise emergency
authority to expedite Medicaid funding of $83 million to nursing homes and
direct services providers to address staffing and that nursing facilities
will receive “a temporary 5% increase on average in state [Medicaid]
payment rates” (about $52 million). Governor Tim Walz, “Governor Walz
Announces Expedited Funding to Address Staffing Shortages at Hard-Hit
Nursing Homes and Services for People with Disabilities” (News Release,
Jan. 11, 2022), https://mn.gov/governor/news/#/detail/appId/1/id/515208;
Pennsylvania launched an $80.5 million grant program, Department of Health,
“LTC RISE (Long-Term Care Resiliency, Infrastructure Supports and
Empowerment),” https://www.health.pa.gov/topics/disease/coronavirus/Pages/LTC-RISE.aspx;
Kimberly Bonvissuto, “$80.5 million grant meant to help providers address
lingering pandemic effects,” McKnight’s
Senior Living (Jan. 12, 2022), https://www.mcknightsseniorliving.com/home/news/80-5-million-grant-meant-to-help-providers-address-lingering-pandemic-effects/
[4] Carol Carter,
MedPAC, “Assessing payment adequacy and updating payments: Skilled nursing
facility services,” slide 11 (PowerPoint, Dec. 10, 2021), https://www.medpac.gov/wp-content/uploads/2021/09/SNF-update-MedPAC-Dec-2021.pdf.
[5] Id. slide 9
[6] David E.
Kingsley and Charlene Harrington, “COVID-19 had little financial impact on
publicly traded nursing home companies,” Journal
of the American Geriatrics Society, Vol. 69, Issue 8, pp
2099-2102 (2021), https://agsjournals.onlinelibrary.wiley.com/doi/10.1111/jgs.17288
[7] New York State
Budget for State Fiscal Year 2021-22, §2828 (Residential health care
facilities; minimum direct resident care spending), https://www.nysenate.gov/legislation/laws/PBH/2828
[8] Id. §2828(c)
[9] The New York
Nursing Home Quality Pool, 10 N.Y.C.R.R. §8602.42, https://regs.health.ny.gov/volume-2-title-10/1954015388/section-86-242-residential-health-care-facility-quality-pool,
provides financial incentives to nursing facilities receiving Medicaid
reimbursement. Based on a methodology updated and described annually,
the Department of Health distributes a budget-neutral $50 million pool to
facilities in the top three quintiles (the top 60%) based on their
performance on certain quality measures in the Nursing Home Quality
Initiative. Facilities in the top quintile receive approximately
44.4% of the total Quality Pool; facilities in the second quintile receive
33.3%; and facilities in the third quantile receive 22.2%. See New York State
Department of Health, “Nursing Home Quality Initiative,” https://www.health.ny.gov/health_care/medicaid/redesign/nursing_home_quality_initiative.htm.
The 2021-22 Budget law also requires the State to deposit facilities’
excess funds due to the 70/40 spending mandate and 5% profit cap into the
quality pool. See
Department of Health, “Dear Administrator” letter (Dec. 2, 2021), https://www.health.ny.gov/facilities/long_term_care/reimbursement/letters/2021-12-02_dal.htm
[10] The Complaint
is available at https://medicareadvocacy.org/wp-content/uploads/2022/01/Nursing-homes-NY-nh-case-21-cv-1384-BKS-CFH-complaint-U.S.-District-Court-NYND-2.pdf
[11] This number –
176 – is different from the 239 facilities that filed the lawsuit.
The Complaint does not describe how the remaining plaintiff facilities
would have been affected by the 5% profit cap.
[12] This number –
334 – is different from the 239 facilities that filed the lawsuit.
The Complaint does not identify the additional facilities that would have
had to pay back money to the State because of the 70/40 spending
mandate.
[13] https://www.governor.ny.gov/sites/default/files/2021-12/EO%204.4.pdf
[14] LTCCC, “LTCCC
Alert: NY Nursing Homes Admit Excess Profits” (Alert, Jan. 22, 2022), https://nursinghome411.org/nys-provider-lawsuit/
[15] CMS, “Special
Focus Facility (“SFF”) Initiative,” https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/CertificationandComplianc/Downloads/SFFList.pdf
[16] Id.
[17] The
deficiency report is at https://www.medicare.gov/care-compare/inspections/pdf/nursing-home/335638/health/complaint?date=2021-05-03
[18] Id. p. 10
[19] Id. p. 11
[20] U.S.
Attorney, “Manhattan U.S. Attorney Files Suit Against Eleven Skilled
Nursing Facilities And their Management Company, Owner, and A Senior
Employee For Fraudulently Billing Medicare for Unnecessary Services” (News
Release, Jun. 2, 2021), https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-files-suit-against-eleven-skilled-nursing-facilities-and-their
Read and download this report online at:
https://medicareadvocacy.org/how-nursing-homes-spend-public-money/
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