- The Washington Times - Wednesday, September 6, 2000

The nursing-home industry needs more funding to survive, health care industry leaders told a Senate panel yesterday.

Five of the nation's top nursing-home chains have filed for Chapter 11 bankruptcy protection in the past two years because of a 1997 bill that tightened Medicare spending, they said. Their hope now is to get a chunk of the budget surplus, which will be announced within a month.

The "long chain of chronic, systematic failures" is the result of federal government policies, Charles Roadman II, president of the American Health Care Association, told the Senate Special Committee on Aging.

"This is just the tip of the iceberg. Our long-term care community is facing a squeeze with the real potential for absolute collapse," he said.

But government officials insist that Medicare cuts are not to blame. Medicare is a federal program that pays for health care for the elderly.

The nursing homes' troubles are "a result of business decisions made during a period when Medicare exercised too little control over its payments," said Laura Dummit, associate director of health financing and public health issues for the General Accounting Office.

She said a GAO study shows that the new payment plan is sufficient to cover the needs of Medicare patients at nursing homes.

While the federal government cut back Medicare funds, the health care industry soared in the mid-1990s, prompting nursing centers to take advantage of the previous Medicare billing system, later causing their financial woes, Ms. Dummit said.

She added that some centers heavily invested in expensive services like rehabilitation therapies, which increased their troubles.

Medicare is the largest source of nursing-home revenue: In 1998, it made up 46 percent of revenues. Out-of-pocket payments were the next at 33 percent. Medicaid, the federal program that pays for health care for the poor, and private insurance accounted for 12 percent and 5 percent, respectively.

Medicare's share of the costs is high because patients typically don't stay in nursing homes that long. Health care leaders say another problem is a change in the nature of nursing homes: They once served mostly as residences for elderly people, but have become more medical-care oriented, hiring expensive doctors and nurses, as hospitals cut their budgets and began dismissing patients more quickly.

Medicare pays for a patient's first 100 days of care at a nursing home after a three-day minimum hospital stay. Medicaid takes over after that period, unless the patient can afford the medical bills.

The health care industry supported the creation of a fixed, daily reimbursement for nursing-home patients when Congress passed the Balanced Budget Act in 1997. Industry members knew the bill meant close to a 10 percent cut in Medicare, but figured that the new system would be simpler and worth it, said Lisa Salamon, a spokeswoman for Genesis Health Ventures.

But the move actually meant cuts as high as 25 percent, and as baby boomers aged, more patients came in than expected.

"We lose on most residents," Jean Yarnall, who runs Brandywine Hall, a nursing home in West Chester, Pa., said in an interview. "Where my hands get tied is quality of care, trying to get the staff with this small amount of reimbursement that we are getting."

She calculated that Brandywine Hall spends an average of at least $350 a day on a patient, depending on extra care they may need. Yet the facility gets only $285 for Medicare patients.

Kennett Square, Pa.-based Genesis runs 311 nursing homes throughout the country and filed for Chapter 11 recently.

"We eat up the rest," she said. "The concern is how much longer we can continue to do that unless they increase funding … [government officials] just don't see what we are dealing with."

Aside from Genesis, four large nursing-home companies Vencor of Louisville, Ky.; Sun HealthCare of Albuquerque, N.M.; Integrated Health Services of Owings Mills, Md., and Mariner Health Group of Framingham, Mass. filed for Chapter 11 bankruptcy protection in the past two years.

Chapter 11 allows bankrupt companies to keep operating while figuring out new payment schedules with creditors.

The five companies run 1,800 of the nation's 17,000 nursing homes. Because their facilities are centered in certain areas, some states are enduring more than others. Almost half of nursing homes in Nevada and New Mexico, for example, are operating in bankruptcy. More than 20 percent of 20 other states' facilities are also bankrupt.

Last year, the homes cared for 1.6 million elderly and disabled people, almost triple the number cared for in 1991, 671,000 persons.

Sen. Charles E. Grassley, Iowa Republican and committee chairman, said there is little evidence Medicare reforms have jeopardized patient care.

"The nursing-home industry blames the government for its financial problems and wants more money," Mr. Grassley said.

But it seems the problem is that "their investors and bankers gambled on a vision of ever-growing government largesse," he added. "They got hurt because this vision wasn't based on reality."

Earlier in the day, about 75 nursing-home advocates rallied on the Capitol steps to urge Congress to give nursing homes more funding.

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