Facing financial headwinds from low Medicaid reimbursements, some skilled nursing providers in Washington are eyeing a switch to other product types — including assisted living.
The state’s current Medicaid system, which took effect in 2016, has led to constrained reimbursements across the state. That, in turn, has resulted in serious struggles for providers, even with adjustments for acuity and geographic area.
Switching it up
For Josh Wester, who co-owns the Tekoa Care Center, in Tekoa, Wash., the Medicaid pressures have made operating a SNF even harder than it already was, adding to a list of reasons the 65-bed facility is in the process of converting to an assisted living community.
“[The Medicaid rate] wasn’t the thing that pushed us over the edge,” Wester told Senior Housing News. “But it was a thing where the low rates create a tough environment to operate in, and as the regulations become more burdensome … If you don’t meet them, you’re fined, and the fines were becoming burdensome. Couple that with the fact that you’re getting a rate that doesn’t give you much cushion, you start to wonder if it’s a viable proposition.”
Behavioral health was actually helping make up for the difference between the cost of providing skilled care and the Medicaid reimbursement for providing that care, Wester said. The facility has received some reimbursements from mental health programs in the state of Washington, which were then added onto the Medicaid rate and helped to “get us from the red to the black,” according to Wester. One program, Expanded Community Services (ECS), serves as an $80-per-day add-on to the Medicaid rate, though the extra cash is limited to 16 residents in the building. The ECS-Plus program replaces Medicaid entirely with a $425 daily reimbursement for up to four residents.
Those programs are limited to skilled nursing facilities, however, and Wester stressed that they are good programs with a definite place in the skilled nursing world. They won’t apply once Tekoa Care Center connects to an Enhanced Adult Residential Community, a kind of assisted living community promoted under a new state program targeted at skilled nursing facilities looking to convert.
“We have an agreement with the state to continue to provide the same services that we were providing as an ECS provider,” Wester explained. “However, we’re not going to be providing some of the skilled nursing services that we provided in the past. Essentially, we take care of the same group of people that we have in the past — maybe a little less complex clinically.”
The fact that Tekoa Care Center has been focused on populations in need of behavioral health services for more than a decade made the conversion process somewhat easier. Though its occupancy is currently low because of the transition, it typically sits at about 93% to 95%, Wester said, adding that the facility often limits itself to 58 or 59 beds to prevent overcrowding. The average age of residents is about 70, he said.
“We’re known in the state as a building that is able to deal with different behaviors, and a lot of residents that other nursing homes and other assisted living facilities can’t,” he told SHN.
Tekoa Care Center made the decision around the start of this year to make the transition to assisted living. This has entailed some changes in the forms of fire safety upgrades and code changes, as well as planning for a resident population that may be interested in more outings and other social programming, Wester said.
Ride out the storm
The Avamere Family of Companies — which is based in Wisonville, Ore., and operates more than 50 different senior living communities, including skilled nursing — has felt the pressure. On a recent earnings call, Irvine, Calif.-based Sabra Health Care REIT noted that Avamere has been pressured by the impact of the Medicaid rates in Washington, while praising the company’s overall health and performance.
There are essentially three options for skilled nursing facilities in the state, Avamere chief development officer Ryan Haller told SHN: Fight through the headwinds, repurpose the buildings, or exit the business entirely.
Avamere has in the past also looked to unique solutions to try to and ride out some of these operational headwinds, including pushing ahead with a number of “micro CCRCs” without any skilled nursing at all.
“Avamere has decided to look at both A and B,” he said. “We’ve made the determination that we’re going to be tough about this, and while we are losing a ton of money on our skilled nursing facilities in the state of Washington — I don’t think that’s any secret — we’re looking to get creative with our business plan. And our plan is to ride out the storm.”
One of the methods they’re hoping to use to get through the troubled waters is adding new business lines — one of which could be targeting behavioral health patients, Haller said. But he stressed that Avamere is not making any operational changes in its long-term SNF buildings.
“These Medicaid problems in Washington are not new,” he said.
Preparing for the future
However facilities decide to cope in Washington, there is a general sense that the current state of affairs can’t continue, Wester said.
“In Washington, it’s a necessity to have some other revenue stream aside from Medicaid,” he said. “Those other revenue streams get tougher to provide. In a normal nursing home, those Medicare dollars are getting squeezed. … even the HMOs are tougher to work with now. And that was kind was kind of what made up the difference in the past.”
Avamere is looking at other services that can be provided in a skilled nursing facility funded by Medicaid and Medicare in Washington, but Haller noted that operators all across the country are doing the same thing.
“The status quo of just staying a traditional skilled nursing-Medicaid facility — those days are long behind,” Haller added.
Written by Maggie Flynn