Rolling with the punches

Nursing home woes exist, but opportunity remains

Nev's Health Law

Neville M. Bilimoria

Neville M. Bilimoria is a partner in the health law practice group, in the Chicago office of Duane Morris.
NMBilimoria@duanemorris.com

When you look around at the nursing home or the long-term care business today, these are particularly hard times. Nursing homes for years have been dealing with plaintiff lawsuits and bad PR in providing care for the most elderly and infirm of our population. Just look at the television or a plaintiff’s attorney ad or news reports on nursing home disasters and you will understand that there is little positive news in the media about nursing homes.

In the face of providing this needed care in our society, nursing home operators have kind of “rolled with the punches” for years. The current environment is perhaps one of the worst we have seen in a while in health care. Nursing homes are taking it from all sides.

For example, currently, nursing homes are trying to contract in Illinois with the new Medicaid managed care program, HealthChoice Illinois, which means delving into new contracts to provide services for the Medicaid residents they have served for many years.

Beleaguered nursing homes have to now negotiate these contracts favorably which is daunting under the HealthChoice Illinois Medicaid Program. Not to mention that the reimbursement under Medicaid through these Medicaid managed care organizations is fraught with problems and there will continue to be problems for nursing homes to receive payment under Medicaid.

And what about that payment under Medicaid in Illinois? It is not a mystery that Illinois provides among the lowest reimbursement in the nation when it comes to Medicaid nursing home reimbursement. Low Medicaid payments, combined with delays in Medicaid payments to nursing home providers, makes it very tough for providers to maintain quality care and often requires nursing homes to run on lean budgets, all the while maintaining a high quality of care at the same time to avoid costly plaintiff lawsuits.

If that weren’t enough, recent Requirements of Participation have come out from the Centers for Medicare and Medicaid Services requiring nursing homes to comply with myriad new federal regulations that govern nursing home operations.

For example, nursing homes now have to comply with a host of new Centers for Medicare and Medicaid Services regulations that would change operations dramatically: emergency/disaster procedures, new abuse and neglect procedures, additional documentation and new standards for drug administration and nursing care, just to name a few.

These new Requirements of Participation are not easy to deal with. Providers today are still digging through the regulations and even the federal Medicare and Medicaid Services and Illinois Department of Public Health surveyors are also learning how to survey nursing home facilities in the state under these new rules.

And if that weren’t enough, nursing home and the senior living census are down across the country, leaving many empty beds in certain areas of the state. This is a nationwide endemic, not isolated to Illinois. Why is that happening? Well, for one, there is a new focus on the person and focus on keeping people in their homes instead of an institutional senior living space.

But the real downward trend over the next five years in nursing home census is due to a very simple and often overlooked reason: demographics. In the early 1930s during the Great Depression, people had fewer children, meaning fewer seniors today at that critical 80-something age ripe for nursing home placement. Because there are fewer seniors now, nursing home providers can expect lower census and, therefore, lower margins.

With all of these problems, you might ask why anyone would run a nursing home. The clients I have seen that run nursing homes are folks that aren’t focused on profits, they are focused on taking care of the elderly infirm in their community.

It’s just sort of in their blood to care for our seniors. Many non-profits focus on their benevolent missions to care for the elderly infirm in their communities, but more and more today, missions are not enough for many nursing homes to make payrolls and ultimately keep their doors open.

We have seen a recent uptick in the amount of nursing home bankruptcies and reorganizations that are challenging nonprofit boards of directors and leaving nursing home operators oppressed by the current storm surrounding the operation of nursing homes today.

That being said, for those providers that are troubled by the current storm in long-term care, there is sunshine on the horizon. Those same demographics alluded to above are slated to change dramatically in the years 2023 to 2025. At that time, the baby boomer population will be increasing, with a huge demographic swing of seniors that will be on the uptick for years to come thereafter, and that will need long-term care support and services.

So if long-term care providers can weather the government regulatory, demographic and public scrutiny storm of today, the future and need for long-term care services should increase dramatically in the future. It is simple demographics, simple math, simple supply and demand with a huge demand for senior housing coming down the road. The question is, can many of these long-term care facilities survive in the interim?