Delivery of Care

Nursing homes are facing a financial crunch

An interview with John E. Gage, the president and CEO of RIHCA, the nursing home trade association.

Photo by Richard Asinof

John E. Gage, president and CEO of the Rhode Island Health Care Association.

By Richard Asinof
Posted 9/13/21
The nursing home industry is facing some urgent financial challenges – a new staffing mandate, the continuing impact of COVID, the difficulty in maintaining a quality workforce, and the chronic under-funding of Medicaid reimbursements by the state.
Will Gov. McKee waver in the efforts to deliver an Oct. 1 requirement to have all health care workers in state-licensed medical facilities vaccinated? What kinds of innovative programs can be created to meet the burgeoning need for health care workers in the state, in hospitals and in nursing homes? Would a messaging program designed by nurses improve the uptake of vaccines by vaccine-hesitant individuals? How can new affordable housing starts reflect a different kind of model that seeks to create a multi-generational approach to housing? What is the current age census of persons in Rhode Island nursing homes and is there a way to create de-identified data around the different kinds of chronic diseases afflicting nursing home residents?
With the Reinvention of Medicaid, the state was supposed to create accountable entities across the continuum of managed care for Medicaid patients in Rhode Island, but no accountable entity has been created for long-term services and supports, which is one of the major costs in state and federal funds for Medicaid. Until there is an accounting and accountability for the way that private managed care organizations have been spending state resources as part of Medicaid in Rhode Island, the R.I. General Assembly has no capability to measure the success or failure of the Reinvention of Medicaid.
The underlying issue, particularly in the behavioral health arena, is the poor reimbursement rates that insurers, including Medicaid, give to providers, making it impossible for them to retain a qualified workforce and meet the increasing unmet needs in demand for services.
At some point, the pendulum of power will shift away from the current status quo in the R.I. General Assembly, and when it does, it promises to upend many of the assumptions around how the health care continuum is financed.

WARWICK – It was just his fourth day on the job when John E. Gage, the new president and CEO of the Rhode Island Health Care Association, sat down to talk with ConvergenceRI in his second-floor office on Kilvert Street, having taken on the new role as head of the trade association representing more than 80 percent of the nursing homes in Rhode Island, having replaced Scott Fraser. The Association is the state affiliate of the American Healthcare Association.

The last 18 months have been a particularly hard time for nursing homes – between the impact of COVID-19 on vulnerable nursing home residents, the difficulties in being able to find and maintain a skilled nursing workforce, and being on the losing end of a legislative fight about a new law enacted earlier this year that created mandated staffing ratios for nursing homes, beginning in 2022.

For Gage, with more than 30 years working in the nursing home industry, the challenges are daunting, and Gage acknowledged that he has been handed the hot potato when it came to advocating for the nursing home industry.

It is hard to argue with the demographics – Rhode Island has one of the highest percentages of “old old” people in the nation, residents who are 85 years and older. And that trend is going to continue, given the falling birth rate and the aging of the Baby Boom generation.

“Sure, everybody wants to be at home,” Gage said. “And, we want everybody to be home that is able to be home, to be home safe, and to have all the services provided to them. At some point, that may mean moving to an assisted living facility; at another point that may mean that they need to come to the nursing home, because it is just not practical to stay at home.”

No one is coming to the nursing home because it is a destination of choice, Gage continued. “They are coming to us based out of need. Rhode Island has among the highest number of residents who are 85-plus years per capita of any state in the country.”

Gage voiced his fear that the “train is coming at us, the Baby Boomers are aging, and that population is going to explode in Rhode Island as it already has across the country.”

At the same time, Gage said, talking about the financial realities facing the nursing home industry in the state, saying: “Nursing homes are being challenged by chronic under-funding by the state.”

Further, the new staffing ratios mandated by the R.I. General Assembly, Gage continued, has created  what he called an “unfunded mandate,” which will result in the creation of an annual shortfall of between $47 million to $50 million in revenues for nursing homes in perpetuity. “There is no more urgent issue facing us in the nursing home industry then how that [financial gap] is going to be covered.”

Nursing homes are closing, Gage warned. “When I started in this profession, there more than 100 nursing homes in the state of Rhode Island. As of today, there are 77 nursing homes,” he said, citing the numbers on the Centers for Medicare and Medicaid Services website.

In the last year, Gage continued, three facilities have shut down – Watch Hill Manor [owned by Apple Rehab] in Westerly, Hallworth House in Providence, and Woodpecker Hill Health Center in Greene. “To be honest, I wouldn’t be surprised if there were more closings on the horizon.”

People are stretched thin, people are unable to pay for the cost to provide the adequate staffing, and they are unable to attract staffing, so they are limiting the number of people that they bring into their buildings, Gage said. “It is a highly precarious time for nursing homes.”

Here is the ConvergenceRI interview with John E. Gage, MBA, NHA, the president and CEO of the Rhode Island Health Care Association, discussing the details around the financial squeezes on nursing homes, the difficulties in maintaining a skilled workforce, and consequences of the new staffing mandate enacted by the R.I. General Assembly.

ConvergenceRI: It seems as if you have been handed the hot potato. I wouldn’t call it a great year for nursing homes. The industry is under a lot of stress and challenges. Let me begin by asking: How you do you view the landscape that you are in now, and where you would like to go?
GAGE: The landscape right now is very precarious, obviously.

We have been dealing with the COVID outbreak for the last 15-18 months. It has had devastating impact, as you know, on nursing homes across the country, on the highly vulnerable population that we serve.

Our staff have been truly heroes, but overworked. And, there are fewer staff out there currently, willing to come in and fulfill the needs that we have. So, we are using overtime and bonuses, and incentives and recruitment bonuses – and outside agency staff.

Some of my members are contracting with temporary staffing agencies to bring permanent people in from out of state to help with their staffing. Many have good, consistent staffing, but they are paying a premium for that.

ConvergenceRI: It seems to me that nursing homes are often misunderstood, in terms of the integral role that they play within the health care delivery system, as part of the health care continuum. Can you talk about the larger view of the importance of nursing homes and the care that you provide?
GAGE: I went to Providence College, I got my degree in health administration, and through a friend who owned a portable x-ray company that went into nursing homes, I went into some nursing homes with him,. I first got exposed to nursing homes that way.

When I graduated with a degree in health administration, I thought I would go work in a hospital. It was at a time when hospitals were cutting staff; they had switched their Medicare reimbursements model to a DRG system, a diagnostic related group system.

Because the funding changed, they were laying people off, and they were not looking to bring in any new management-type folks.

Through my friend, I met with a couple of nursing home administrators, who said: you have the right degree; this is a great career option; you should really look into it.

I started, I did my administrator-in-training at St. Antoine’s in North Smithfield, I had my first assistant administrator job at St. Clare Home in Newport. I started in the not-for-profit side of the nursing home [industry], then I moved over to the for-profit side, working for a couple of companies. My career has been 30 years of nursing home operation.

So, I know the challenges that we face because, up until a couple of months ago, I was facing them as a provider. And now, I am stepping in and looking to make a difference for the profession, from an advocacy role, at RIHCA.

ConvergenceRI: What is the landscape now, as you see it?
GAGE: You first asked me about nursing homes and their role. I think you are right, that nursing homes are misunderstood. When I came into the industry, it was more like a convalescent type facility, a nursing home.

A lot of people came for long-term care at the end of their life. Since then, however we have evolved, there are other options, as there should be. There are options to stay at home with home care, there is assisted living, then there is skilled nursing and long-term care nursing home care.

People aren’t coming to us because they choose us as a destination. They are coming to us because those other options, for whatever reason, are no longer viable. Or, they have already tried to stay at home with family and ended up burning out family members. And, they are at that point when they really require 24/7 oversight and pretty intensive care – and a lot of assistance with their ADLs [activities of daily living].

That is on the long-term side. On the short-term side, we take patients in from the hospital, help them to get rehabilitated and stronger, because hospital lengths of stay are so short.

There is that gap that gets them from acute care to home care with intensive therapy and rehab and nursing. We are kind of a hybrid [model], but you are right, we are misunderstood, but we are a very key component of the health care continuum.

ConvergenceRI: Right now, in terms of a census, how many people in Rhode Island are in nursing homes? Or, should I say, skilled nursing facilities? Is that a better term?
GAGE: In Rhode Island, they are termed nursing facilities. CMS calls them nursing homes. So, it is kind of a misnomer. Occupancy has definitely been impacted by COVID. I do not have the current percentage; I can certainly get back to you.

There has definitely been an impact on current occupancy. It has been a huge challenge.

Obviously, early on in the pandemic, the nursing homes were hit very hard. We serve a very vulnerable population. The virus was not well understood. And, like the rest of the country, there was an impact with the loss of lives of residents.

But, that has changed dramatically with the vaccinations. Our residents are vaccinated at about a 90 percent rate. And, the reason that it is not 100 percent is obviously, some residents decline, but also there are new people coming into the nursing homes from hospitals, and they may, or may not, yet have been vaccinated.

We are at 90 percent, versus 82 percent for the nation, for our residents. Our staff is at 75 percent currently, in Rhode Island, versus the national average of 60.5 percent. That is of the last data available.

Currently, with the recent outbreak that we are seeing here in Rhode Island, the increased numbers in Rhode Island and across the country, nursing homes really are not the reason for that, because the residents are highly vaccinated. The staff is vaccinated at a good rate, either at or above the average for the state in general.

ConvergenceRI: There has been some pushback by some health care workers that they don’t want to be vaccinated. Have you encountered that in terms of the workforce in nursing homes? Is there a resistance to getting vaccinated? Where does that come from?
GAGE: Yes. Our staff comes from the community. So, like the average population, there are those that have vaccine hesitancy; they are concerned about how the vaccine was developed, what have you. It is very similar to the population in general.

We’ve done our best as a profession to educate them, to have medical directors and nurse practitioners available to speak with individuals and staff. We have done-in-service trainings with them, to make them aware of the efficacy of the vaccine, the safety of the vaccine, and we strongly encourage that all the health care providers throughout all our member facilities get vaccinated.

ConvergenceRI: If I understand what the Governor has said and what the director of the Department of Health has said, that there is now, as of Oct. 1, everybody who is part of state-licensed medical care facility, which would include all nursing homes, needs to be vaccinated, or they cannot gain admission. Is that accurate?
GAGE: Yes, that is correct.

ConvergenceRI: It would seem that all workers, regardless, they have a choice to make about whether they continue to work by getting vaccinated.
GAGE: Correct. They have to have either the one Johnson & Johnson or the two Pfizer or Moderna vaccination by Oct. 1, or they are no longer allowed to come into the building.

The question is: Are they terminated? Are they self-terminating? That question has yet to be decided.

I believe the Department of Labor and Training is looking at that issue currently, and has said that within the next week, they will be providing guidance on how those health care workers will be looked at if they are not vaccinated by the deadline.

Nursing homes are very highly regulated, and we obviously do provide care to a vulnerable population. But we are no different in that way from hospitals, and other health care settings that provide care to elderly folks or people who are immuno-compromised.

No one is in the hospital because they are healthy and happy. They are in the hospital because something is going on with them. In Rhode Island, the mandate is across the continuum. I’m not sure how home care and assisted living feel about that, but from a nursing home perspective, we were glad that we were not singled out as the only industry or the only piece of the health care continuum to be mandated.

Because, the feeling was that some staff might pick up and go work elsewhere. That can still happen; people can, for instance, I’ve heard stories from members about losing nurses who have taken positions with managed care companies, that are going to work from home, that are going to do case management from home.

Our staffing is already precarious. Our staffing is already in an urgent state. This is yet another wrinkle in it. Lifespan and Care New England have mandated it, anyway, on their own, prior to the mandate, but I can’t imagine the assisted living facilities would be looking to scoop up all the nursing home staff that choose not to be vaccinated and bring them in as their employees, because their residents are also at risk.

ConvergenceRI: What is the best way to recruit new staff, which is at a critical juncture for you. I did a story recently about the Genesis Center, which is in Providence which has moved from working with the hospitality industry and the restaurant industry to try and gear workers up to become part of the health care industry, to train people to do that. Is there an opportunity to create programs where you can bring nurses and CNAs and train them?
GAGE: Many of our facilities serve as clinical sites with the nursing programs in Rhode Island. We work with CCRI and RIC, URI and New England Tech and serve as clinical sites for their nursing students.

That was limited during COVID, obviously. We were not looking to bring in a lot of additional, outside bodies into the buildings. Each company had to make their decision whether or not to bring students in, because you are potentially putting more people at risk by doing that.

There are [nursing homes] that have their own CNA training program—it varies in success; by bringing people in, you want to train them, and you hope that they stay. In my experience as an operator, the retention rate at the end of those CNA training programs is not very good. You train them for free, because you are not allowed to charge, and then they would go work for home care or go work in some other setting.

Certainly, every option is on the table, and in this staffing situation currently, people are really trying to think outside the box and look at ways to bring new folks in. But, like everywhere in the service industries, the restaurants and hospitality, everyone is struggling for staff.

ConvergenceRI: The botched launch of UHIP proved to be a major absolute disaster for the nursing home industry in Rhode Island. The inability to process a patient’s Medicaid eligibility in a timely fashion created a huge backlog, resulting in R.I. EOHHS having to make interim payments to nursing homes to keep them from going out of business Isa that still a continuing problem?
GAGE: I think it has fallen far below the radar screen. The length of time it takes to get someone approved for Medicaid has been an issue since I have been in this profession. However, UHIP took that to a whole new level; it was a total calamity. I do believe it has improved. It is not high on the radar screen.

ConvergenceRI: It seems as if you have a lot of fires that you have to put out.
GAGE: Correct. You are paying your staff every week, and if Medicaid eligibility ends up being denied after all that time, you can’t take the care back, obviously. We try to help with that process. We try to help the families understand the rules and make sure that we are not setting somebody up that is knowingly not gong to qualify.

ConvergenceRI: The other big issue is that the state has enacted a new law mandating staffing requirements. How is that new staffing mandate going to impact the industry moving forward?
GAGE: The staffing regulations are going to have a devastating impact. I don’t know how we are going to achieve those numbers; we are challenged enough to get the correct number of staff in the building, every day, every shift, to meet the needs of the residents.

We are doing so, but we are doing so regardless of whatever the expense is, whether that is outside agencies, overtime, bonuses, contracted staff, what have you.

It will be a challenge to implement the staffing mandate, which kicks in starting in January of 2022, at 3.58 hours per resident per day, and then it jumps up to a 3.81hours per patient per day, effective 1/1/23.

I was working in Massachusetts most recently. For the last five years, they have a state staffing mandate at 3.58 hours per resident day, so I believe Rhode Island picked 3.58 because Massachusetts had already settled on 3.58.

The difference is, the Massachusetts 3.58 hours mandate is an all-in nursing department number, similar to what you would see at the CMS website, if you look at staffing hours. So it includes the director of nurses, it includes the infection control nurse, it includes the staff development nurse, and it includes MBS nurses, who do the minimum dataset assessments on the residents.

Rhode Island’s 3.58 is for direct care staff hours only. I believe the thought was, make it on a par with Massachusetts, but it is really apples and oranges.

Theirs is based on the payroll-based journal [PBJ] that is mandated by CMS. PBJ data is universal, its collected automatically, it gets submitted by the nursing home electronically, it is actually granular data out of our payroll system, that provides to CMS the hours worked by discipline in the facilities, and it gets submitted quarterly.

The Massachusetts minimum of a 3.58 hours staffing mandate mirrors that of the CMS PBJ data requirement and uses the same definitions.

Rhode Island is direct care only. So, the direct care hours of RNs and CNAs have to be at 3.58 hours, and on top of that, you add on other nursing support people that are absolutely essential for your staff to be providing quality care on an ongoing basis – you need a really good staff development nurse.

Through the whole COVID crisis and beyond, your infection control practitioner is a key nurse. I believe the average cost for that position is around $85,000 a year for a nurse infection control practitioner. That is a mandated position, but that is not included in the 3.58 hours or the 3.81 hours staffing mandate enacted in Rhode Island.

ConvergenceRI: Following neck surgery in 2019, I ended up having to do rehab for two weeks at a nursing home in Rhode Island, it proved to be an eye-opening experience for me. Similar to the way that big box stores have a just-in-time supply system, it seems that a similar approach has been developed between hospitals and rehab facilities at skilled nursing facilities. Is that accurate?
GAGE: Nursing homes are a key component of the whole health care continuum. The post-acute service that is provided at the skilled nursing level, after the hospital, prior to going home with home care, is an essential piece of the home care continuum, especially for those patients with a lot of co-morbidities.

A lot of traditional patients in the past used to be people who had knee replacements and hip replacements, and now, those folks are going straight home, for the most part. They are bypassing nursing homes and going home, with home care, and doing quite well, as health care has evolved.

However, individuals who are going from the hospitals who have had knee replacements or hip replacements or a stroke, who also have co-morbidities, which may make their rehabilitation more challenging. And so we rely on our physical therapists, occupational therapists, speech language pathologists, and nurses to provide that intensive level of service.

Medicare provides the first 20 days of that stay, in full, and we are reimbursed by them based on the acuity of the patient and the diagnosis that we are treating under a per diem basis. There is no doubt that Medicare supplements our shortfall on Medicaid.

We lose, the last numbers that are available were from 2017, I believe, and we were losing $28 per day on average for nursing home residents on Medicaid.

I have no doubt that that number has increased dramatically, given the challenges of COVID.

To implement a staffing mandate, the law provides a very miniscule add-on in Medicaid reimbursements to supposedly cover the costs, but those add-ons are totally inadequate.

In fiscal year 2022, the add-on is 0.5 percent onto our Medicaid rate of reimbursement. We estimate the cost in the first year [of implementation of the staff mandate] to be $11.5 million. And, that 0.5 percent comes out to about $2 million. So, in the first year, it is an unfunded mandate of $9.5 million.

In year two, fiscal year 2023, they are giving out a 1 percent increase for our Medicaid rates. The 3.81 hours staffing mandate will cost a projected $46 million, with only a $6 million add-on to the Medicaid reimbursement, so that $9.5 million unfunded mandate in year one goes up to a $40 million unfunded mandate in year two, and in year three, it is $47 million, and from there in perpetuity, it is $47 to $50 million a year of an unfunded mandate.

There is no more urgent issue facing us [in the nursing home industry] than how those costs are going to be covered.

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