REGIONAL – Minnesota’s nursing homes will see a boost in Medicaid payments provided by the state beginning in 2016, thanks to legislation passed during the 2015 session.

Under the bill, the state will reimburse nursing homes based on their actual costs. The state had departed from that approach in 1995, doling out far more meager increases to nursing homes.

“We were really at the mercy of state legislators,” said Keri Thurlow, senior vice president of advocacy for LeadingAge Minnesota, an association funded by and advocating for the state’s nursing homes. “We were getting the crumbs left on the table.”

State Rep. Joe Schomacker, R-Luverne, who chairs the Minnesota House Aging and Long Term Care Policy Committee, said the measure, which will cost the state $196 million over the next two years, provides real reform for nursing homes.

“This allows nursing homes to be reimbursed for actual expenses as opposed to an amount the state is willing to give them,” said Schomacker, who with Sen. Tony Lourey, DFL-Kerrick, drafted the legislation. “This will be a tremendous benefit for Greater Minnesota nursing homes as it will finally level the playing field with their inner city counterparts.”

State Rep. David Dill, DFL-Crane Lake, also touted the legislation, saying it was long overdue.

The nursing home funding shortfall was compounded by the fact that Minnesota limits the rates charged to private residents to basically the same rates that Medicaid pays, meaning nearly all of the payment rates for Minnesota nursing homes are controlled by the government. The increase in Medicaid reimbursements means the rates can be lifted for private residents to match the increase, Thurlow said.

Legislators attempted to address the shortfall in 2007, beginning an eight-year phase-in of the rebasing of operating rates in October 2008. But a year later the Legislature suspended rebasing as a budget-saving measure. In 2011, the Legislature repealed rebasing.

The impact of those actions increased the funding gap, with Minnesota ranking seventh in the nation among states when it came to underfunding nursing homes by 2014.

Statewide, the reimbursement gap has caused 28 percent of all nursing facilities to suffer operating margins of negative five percent or more, putting them at risk of closure.

“It’s been terrible,” said Teresa Debevec, administrator at the Cook Hospital and Nursing Home, who said the healthcare district’s levy has helped offset some of the losses at the nursing home. She praised Senate Majority Leader Tom Bakk, DFL-Cook, and Rep. Dill, for their support of the increase.

“We were sucking air on our nursing home costs,” said Don Potter, chairman of Cook-Orr Area Healthcare District Board.

According to information provided by the Minnesota House, the Cook Nursing Home will receive $582,355, or a change of $70.54 (about 39 percent) in Medicaid revenue per resident day. But that figure also includes reimbursing the hospital for a subsidy it pays to the federal Equitable Cost Share for Publicly Owned Nursing Facilities. The program, which was authorized by the 2010 Legislature, enables nursing facilities owned by non-state governmental entities to benefit from a federal match of subsidies provided to the facility by the owner.

Debevec expects that the nursing home will lose the federal match of those dollars if the program is phased out, but still gain about $275,000.

For Ely’s Boundary Waters Care Center, the legislation means an additional $282,445, an increase of $24.07 in Medicaid payments per resident day.

But BWCC board member Gary Larson said that the facility would lose the additional $17 per resident per day it received for its Critical Care Access when the new reimbursement rates take effect.

“So instead of a $24 per day increase it comes to down to about a $7 per day difference, Larson told the Community Economic Development Joint Powers Board. “It will still mean an additional $67,000 per year, which is very positive.”

Increases for other area nursing homes include:

‰An increase of $835,870 for St. Michael’s Health and Rehab Center in Virginia.

‰An increase of $1.25 million for Essentia Health-Northern Pines in Aurora.

‰An increase of $849,613 for the Good Samaritan Nursing Home in International Falls.

The variability in Medicaid reimbursement rates is based on the facility’s historical costs with the amount of care needed by residents. Nursing homes receive higher levels of reimbursement for residents requiring more care.

Under the legislation, Thurlow noted that rates should be adjusted in the future to reflect rising costs in providing care to nursing home residents. In addition, nursing homes are eligible for incentives that result in additional funds if they provide high quality care.

Another highlight of the proposal improves the wages of care providers across the state. It also provides funds for scholarships for staff to enhance their skills and encourage others to pursue careers in long-term care.

“With low pay it’s been difficult to recruit and retain people to care for our most vulnerable residents,” Schomacker said. “This provision goes a long way to enhance the wages of our care providers.”

Kyle Hedlund, director of senior services at Bigfork Valley, said the funding shortfall made it impossible for facilities to pay their staff enough to compensate them for the hard work and difficult hours their jobs require.

Thurlow said had the state failed to act, the problem was only going to grow worse. Projections show that 60,000 Minnesotans will turn 65 this year and every year until 2030.

“We had to get ready for that,” she said.