by James C. Sherlock

Nursing home costs and payments are complex subjects not often explained.

Patients need a place for round-the-clock skilled nursing care to continue to heal from surgeries after hospital discharge. For some, their care is too complex to get at home, or their homes are not suitable for such care. They need skilled nursing facility (SNF) beds.

The patient’s skilled nursing insurance, including but not limited to Medicare and Medicaid, pays the bill. Those with insurance co-pays pay their percentage either through a Medicare Advantage plan or something similar. The payers include the poor and middle class alike. The wealthy may or may not have other options.

Those needing institutional long-term care (LTC) and who do not have long-term care insurance have two options: Medicaid or out-of-pocket.  It is very expensive care. Most (80%) use Medicaid even if they have to pay down assets to qualify.

Nursing homes get the bulk of their money from those two government insurance programs. Some are demonstrably not earning what they are paid, but the government does not effectively assess value in Medicare and Medicaid payments.

Market forces are diminished by failures of government. Not enough hospitals assist patients in understanding their limited choices.

Bad Value Facilities

The three nursing facilities in Virginia Beach with the highest average Case-Mix-Indices (CMIs) are for-profit chain outposts. Those also happen to be among the worst staffed and worst-performing facilities here. They are also

• somehow very crowded; and
• predictably more expensive than their counterparts because of very high average CMIs based on assessments of new patients by the facilities upon admission.

Those are:

1. Lifework Rehab (ex-Medical Facilities of America) of Lakewood, New Jersey’s Princess Anne Health & Rehabilitation Center (Princess Anne).  It was banned from Medicare and Medicaid programs in August and closed temporarily because of consistently poor resident care. It is now operating under a consent agreement with VDH.

• Average nursing CMI has been 1.73 compared to a national average of 1.37.  That extraordinarily high CMI shows that Medicare payments per skilled nursing patient have been far higher than average.;
• Average occupancy 94%;
• Inspection rating: 2 stars (0f a potential five);
• Staffing rating: 1 star.  

    2. Eastern Healthcare Group of Montvale, New Jersey’s Bay Pointe Rehabilitation and Nursing (Bay Pointe).

• Average nursing CMI 1.69;
• Occupancy 90%
• Inspection rating one star; and
• Staffing rating one star

    3. Lifework Rehab’s Bayside Health & Rehabilitation Center (Bayside)

• Average nursing CMI 1.66;
• Occupancy 96%
• Inspection rating one star
• Staffing rating one star

Government and Hospital responsibilities unfulfilled  

Part of the reason the market has not worked in Virginia is that it is not free to adjust to demand or to innovate. Those three nursing homes can charge more, deliver poor care, and maintain very high occupancy rates because of failures of the government and the hospitals.  

One reason is the free-market intervention that is Virginia’s Certificate of Public Need (COPN) law. As designed, it protects existing facilities and blocks competition. The SNF occupancy rates in Virginia Beach average near 90%, statewide 87% vs. 79% for such facilities nationwide. As a direct result, there are very few open beds available, sometimes only one or two SNF beds at the time of discharge. COPN at work.

A second is that people, except outliers like your author, do not have enough information to choose wisely. Neither the overall average Nursing CMIs that help predict cost nor the average occupancy rates are available in the Medicare Compare data. And most do not consult Medicare Compare.

Hospitals can readily establish processes to:

• get the most important data through the Center for Medicare and Medicaid Services (CMS) Provider Information and Skilled Nursing Facility Quality Reporting Program – Provider Data databases, and
• interpret them for patients.  

Bottom lines and recommendations

Changes in law. Right now, citizens here and in other communities have no defense against poor and badly staffed nursing homes that charge too much. The good ones simply do not have nearly enough beds to support demand.

Hospitals can helpfully provide more information to patients about to transfer or their caregivers:

• the latest inspection and staffing ratings;
• average nursing CMI, and 
• current occupancy.

That does not happen, at least down here. It would make an excellent state law.

Important COPN updates would include:

• Exempt localities from nursing home COPN oversight if the average occupancy is above 85%;
• Exempt government facilities from COPN. A publicly owned facility exemption would enable long-term competition from city or county-owned facilities; and
• Discount for COPN calculations the long-term presence in regional markets of facilities with one-star inspection results, especially those on the Special Focus or Special Focus Candidate lists. Counting such facilities as fulfilling the need is simply not supported by the facts.

Local government facilities. The success of Dogwood Village of Orange County (Va.) Health and Rehab provides a model for local governments.

• Four-star health inspection rating;
• Four-star staffing rating;
• nursing CMI 1.29;
• 164 beds; and average occupancy 88%

Dogwood also posts better than statewide results in additional metrics people care about but are hard to reach in an obscure CMS database:

• A far lower percentage of infection patients got during their SNF stay that resulted in hospitalization, and
• a higher rate of successful return to home or community from an SNF.

Built by the county, Dogwood operates on its own income.

Virginia Beach throws money at developers like it was going out of style. Taxpayers are paying $335 million P&I for Atlantic Park. For that, we get the garage and the entertainment venue. I published in this blog a 10-part series about that debacle.

The city could build two full-size nursing facilities on city land in this geographically huge city for roughly $30 million. Like Dogwood Village, they should prove self-supporting after that, even when they pay rent to the city for land use, maintenance, and other services.

It is at least worth the city fathers taking a trip to Orange County to check it out. I make the same recommendation to other communities with equally dreadful choices.