Nursing home group at odds with Pritzker over payment reform
A political battle is shaping up between Gov. JB Pritzker’s administration and one segment of the nursing home industry over a key element of the governor’s budget proposal, expanding the state’s health care workforce, particularly in long-term care facilities.
On Wednesday, Pritzker outlined a $45.4 billion budget plan for the fiscal year that begins July 1 that included several elements aimed at recruiting and retaining nurses and other health care workers, such as more funding for college scholarships and increased pay.
But one of the biggest initiatives is a $500 million plan to overhaul the way Medicaid pays for nursing home care in order to improve staffing levels and the quality of care residents receive.
Funding would come from an increased assessment on nursing facilities that would be used to draw down additional federal matching funds. The money would then be distributed back to those facilities in a way that rewards those that increase their staffing to recommended levels.
It’s called the “patient driven payment model,” or PDPM, and it was first developed in 2018 within Medicare, the federal health care program for seniors.
Now, the Illinois Department of Healthcare and Family Services wants to adopt a similar model for the state’s Medicaid program, the joint state-federal program that provides health coverage to low-income individuals and families.
“To us, this is all about access and quality of care for Medicaid recipients. That's what this whole process is about,” HFS Director Theresa Eagleson said in a recent interview.
Incentives for staffing
Illinois stands out among all states for having the most understaffed nursing homes in the country, according to the U.S. Center for Medicare and Medicaid Services. That’s measured by the federal government’s Staff Time and Resource Intensity Verification system, or STRIVE. In 2021, 47 of the 100 least-staffed nursing facilities in the country were located in Illinois.
The proposed new payment model would replace the current model known as the Resource Utilization Group system, or RUG. In that system, facilities are reimbursed based on the level of care a resident needs. Medicaid pays more for residents that need higher levels of care such as therapeutic services than those who don’t.
The problem, HFS officials say, is that nursing homes have figured out ways to classify their residents as higher-needs residents in order to get higher reimbursements without actually providing those higher levels of service, a practice known as “upcoding.”
“Over time, facilities figure out how to maximize the coding within these rate methodology systems so that they can get the most money for the residents that they're serving,” said Kelly Cunningham, the state’s Medicaid administrator. “And so in part, the federal government moved to PDPM from RUG because they recognized that this upcoding was happening, particularly on the Medicare side in therapy, which was very high-dollar, very lucrative for facilities to code residents as needing rehabilitation.”
Over the last two years, HFS has negotiated with the nursing home industry and lawmakers on a new payment system and last fall reached a conceptual agreement. But they were not able to get it through the General Assembly during the fall veto session.
This year, HFS has proposed Senate Bill 2995, sponsored by Sen. Ann Gillespie, D-Arlington Heights, who chairs a subcommittee on Medicaid funding.
It would direct HFS to develop a reimbursement system through administrative rules in which nursing home residents would no longer be coded for their level of acuity. Instead, facilities would receive a base rate of $85 to $90 per day for each patient, plus graduated “add-ons” as their staffing levels approach their STRIVE targets.
Those add-ons would start at $9 per-day for facilities at 70 percent of their STRIVE target and would gradually ramp up to as much as $38.68 for facilities at or above 125 percent of their target.
Even combined with the higher assessments, most nursing homes would come out ahead under that plan. But the Health Care Council of Illinois, an association whose members are mainly for-profit nursing homes, argues that around 130 facilities would lose revenue under that plan, including 50 that would be at risk of having to close.
“And if that was the case, do we as a state really want to put 50 nursing homes out of business, close the facility, displace about 5,000 residents, possibly more, with absolutely no plan for where those residents would go,” HCCI Executive Director Matt Pickering said in an interview.
It, too, calls for establishing a patient driven payment model, but it would offer per-diem add-ons even to facilities below 70 percent of the STRIVE target. It also calls for an additional $6 per diem “Medicaid access” add-on for large facilities where Medicaid residents make up 70 percent or more of their case load.
Also, in developing that plan, HFS would have to report to a new 12-member Nursing Facility Oversight Committee appointed by legislative leaders, with one member recommended by nursing home trade associations.
That committee would have to sign off on any changes to the payment system. The bill also provides for a two-year “hold harmless” period during which no nursing home could see its reimbursements reduced.
Pickering said in an interview that HCCI members serve 60 percent of all the Illinois Medicaid patients in long-term care, and in order for them to agree to paying a higher assessment rate, they are insisting on more legislative oversight.
“We can't agree to all this unless it's transparent, there's accountability for everybody involved,” he said. “That that's what we can agree to. And you know, so far, I have to say that I think the General Assembly from early indications are that they agree with our position that should remain in statute.”
“I have called this bill a distraction, and I think quite appropriately,” Eagleson said of the HCCI proposal. “On one hand, they say this is critical, we're at a critical stage, we need more money to pay for staffing, we need all these things. And on the other hand, they just keep delaying.”
HFS recently published an analysis of HCCI’s claim that 50 nursing homes would be pushed to the brink of closure under the agency’s plan and found they were all for-profit facilities with low staffing and high percentages of Medicaid residents.
But when comparing them to other for-profit facilities of similar size, the analysis found that those 50 are currently “significantly more profitable” than other similar facilities and that they have significantly lower staffing levels than their peers.
“What we found is that the 50 were distinguished by exactly the targets of our reform, not by the Medicaid tax bracket that we're proposing, and really not by Medicaid utilization, because there are plenty of higher Medicaid homes in the state that aren't doing this,” said HFS Director Andy Allison, who led the review.
Allison also said HCCI’s prediction of the negative impacts of reform was based on an assumption that those facilities would continue operating just as they are with low staffing levels and that they would not adapt to the new payment structure.
“We don't think they will do nothing. We think they'll adapt just like they always have,” Eagleson said. “They'll either hire more staff or code appropriately or both, and thus have more income.”
Pickering said he could not comment on HFS’s analysis because he hadn’t seen the data behind it. But he did say he thinks a compromise will be reached sometime during this session.
“We all know that session is supposed to end April 8,” he said. “I'm hoping that this compromise comes sooner rather than later. It's hard for me to say, I don't think anybody can say when that compromise might happen. But I do think it's going to be sooner rather than later because really, the administration and all of the nursing homes, not just HCCI, we're all under enormous pressure to get this done.”