Nursing home labor costs rise on care for sickest

Rhode Island nursing home labor costs rose 13 percent from 2009 to 2012, according to a recent report, as the cost of skilled care for the oldest residents keeps rising.
Rhode Island has been first in the country or close to first for years in caring for populations aged 85 or older, according to administrators at nursing homes in Newport, Providence and surrounding communities. That need to care for the very old, plus those with acute health conditions, requires a higher skill level for many staff members, managerial skills for some registered nurses and compensation for that, administrators and industry experts say.
Virginia M. Burke, president and CEO of the Rhode Island Health Care Association, which represents 65 nursing homes in the state, said that although Rhode Island consistently is rated “excellent” in nursing home care inspections, according to the Centers for Medicare and Medicaid Services in Baltimore, it is “a precarious time” for the industry here.
“We are No. 1 in the country for the proportion of patients [older than] 85 and that is the group that is most at risk for needing nursing home care,” said Burke. “It’s a serious issue for our state.”
Caring for the sickest naturally drives labor costs up, she added.
BlumShapiro, a New England accounting, tax and business consulting firm headquartered in West Hartford, Conn., produced the 13 percent statistic based on a report it compiles annually for clients on Rhode Island nursing homes.
The firm analyzed occupancy percentages and labor and employee-related per diem expenses at all of the state’s 83 nursing homes from 2009 to 2012 by obtaining data through Freedom of Information requests from the R.I. Executive Office of Health and Human Services, said Monica A. Motta, a partner in the Providence office of BlumShapiro. The firm also found occupancy rates to be stable, nearing 93 percent.
But Rhode Island nursing home owners have struggled with cuts in state Medicaid reimbursements in recent years.
The 13 percent labor increase, said Motta, appears to be due to “more acute, sicker patients, which would require more nursing hours.”
Whether this increase will continue will depend on how nursing homes acclimate to a major new change from a cost-based to a price-based system to today’s flat rates, which pay nursing homes 48 different rates and a default rate based on acuity (or degree of sickness), Motta said.
A contractor, the Neighborhood Health Plan of Rhode Island, began assuming payment for residents here whose stay was paid for with Medicaid as of November 2013.
“We’re at a precipice where things could change dramatically; we’re in uncharted waters,” Motta said. “Some nursing homes may be forced to reduce their costs; the patient may have to make do with less care, which is really in nobody’s best interest – not the consumer, not the provider, not the resident.”
Neighborhood, a managed-care organization, is working in network with nearly all of the nursing homes in the state, said spokesman Tom Boucher.
In this new marketplace model, Neighborhood negotiates a rate with nursing homes for stays and some skilled services and manages the money coming from Medicaid. In a second phase, with dual eligibility, Neighborhood may eventually also manage coverage for additional services currently paid by Medicare.
“When that happens, it is expected that nursing homes will get paid less than they would have under the traditional benefit,” Motta explained. “What the nursing home stands to lose is money. If you’re getting so squeezed by inflation and high health insurance and paid less, something has to give, so it could result in more closures or having to reduce workforces.” How this affects nursing care labor costs remains to be seen, she said.
Of three providers interviewed, only one, Cindy Macioci, the administrator for the Heatherwood Nursing and Subacute Center in Newport, confirmed that her 114-bed facility has experienced “definite” increases in nursing costs.
Macioci did not elaborate on exactly how much her costs rose, but indicted this will be an area to watch in the coming year.
“There’s always an increase [in costs],” she said. “The residents definitely seem to be sicker, and everyone needs a place to go. We do take in a lot of tough residents, so I can see our costs going up, and we do have to do a lot of training with the nurses.”
Bethany Home of Rhode Island, in Providence, has 33 beds, and Health Concepts Ltd., a Providence-based chain of 12 facilities around the state ranging in size from 40 to 190 beds, with about 1,175 residents and patients, have not experienced anything like the 13 percent increase in nursing costs referenced by BlumShapiro, administrators said.
Neither could say what levels of increase they may have experienced or how costs break down for registered nurses, licensed practical nurses, nurse’s aides and certified nursing assistants.
Health Concepts confirmed, however, that it has “definitely” experienced a shift toward more of the highly skilled registered nurses on staff, said Chief Operating Officer John Gage. •

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