Oregon Bill Pushes Nursing Home Consolidation—Or Else

Legislation being pushed by Oregon Governor John Kitzhaber looks to save long-term healthcare costs by using incentives to reduce the number of excess nursing beds in the state, according to The Lund Report.

House Bill 2056 allows the Department of Human Services to establish negotiations with competing nursing facilities without breaking anti-trust laws, by offering financial incentives to close unneeded facilities.

The goal is to eliminate 1,500 excess nursing beds in Oregon by the end of 2015 and lower overhead costs for the remaining homes that operate at higher capacity, writes The Lund Report. As part of the incentive to consolidate facilities, if this goal is not met, Oregon will lower the Medicaid reimbursement rate to all nursing home facilities in the state. 


For example, the Lund Report notes four small-town nursing facilities all within blocks of each other. The facilities are only half-occupied on average, with the busiest one operating at 57% of capacity. 

On average, the town’s facilities cost $231 a day per patient to operate, but if two of the facilities were closed, costs would be reduced to $212 per day per patient, with occupancy rising to 88% and one facility still less than three-quarters full. 

Normally, these nursing homes would not be able to come together to save costs by closing facilities because that would be considered collusion. Kitzhaber’s plan, however, offers a safe harbor provision that allows the Department of Human Services to act as a mediator.


Oregon’s state Medicaid program currently reimburses nursing facilities at the same cost levels reported by a nursing home at the 63rd percentile, writes Lund Report. If 1,500 beds are not reduced statewide, according to Kitzhaber’s proposal, the rate could fall as low as the 53rd percentile. 

Kitzhaber’s proposal does stir some controversy among a number of seniors and continuing care retirement communities, as a removal of an exemption to the long-term care assessment will hit communities who don’t accept Medicaid beneficiaries. 

Nursing facilities with no Medicaid residents would have to pay the assessment tax on their beds even though they wouldn’t receive any state funds meant to help cover the cost of care for low-income seniors, the Lund Report explains. 

The removal of the exemption would generate an additional $3.9 million in the next fiscal year, with another $6.7 million leveraged from the federal government, for a total of $10.6 million in new revenues. 

Read The Lund Report article.

Written by Jason Oliva