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At County Nursing Homes, a Battle vs. Red Ink

Officials believe they can cut costs enough to balance the budget at Morris View, the county-run facility. But advocates for seniors worry that if they fail, there will be no safety net for patients many private nursing homes don't want to serve.

At County Nursing Homes, a Battle vs. Red Ink At County Nursing Homes, a Battle vs. Red Ink At County Nursing Homes, a Battle vs. Red Ink

Built on hillsides, near streams, or in other picturesque locations, county-run nursing homes once stood as monuments to local governments’ ability to care for people in need.

But that was long ago. Now they stand as targets. New Jersey’s county-owned nursing homes routinely operate at multimillion-dollar deficits that make it more and more difficult for county executives and freeholders to fulfill campaign promises to hold the line on taxes. And the fiscal outlook for the facilities continues to worsen with ongoing cuts in Medicaid and new state-imposed budget restrictions.

Meanwhile, the number of private-owned nursing homes in New Jersey has grown in recent decades to more than 300, and almost all of them have vacant beds. In counties across the state, government officials are considering whether to leave the financial challenges of the nursing home business to private operators.

Morris County officials have been trying to bring down the deficit at the county-run facility, , for more than five years. Once licensed for more than 400 beds, the facility in Morris Plains is down to 283, a reduction that has helped trim the bottom line.

“If you don’t watch the bottom line, it becomes a big political issue,’’ said Frank Pinto, Morris County’s director of human services, the department that oversees Morris View nursing home.

COUNTY NURSING HOMES: THE ULTIMATE SAFETY NET?

In recent decades, county officials in New Jersey came to view their nursing homes as safety nets, places where folks who had little resources could get the care they needed. On average, four of every five residents at county nursing homes pay for their stays with Medicaid, the health insurance for people with low incomes, according to the state county association. New Jersey requires that nursing homes reserve a minimum of 45 percent of their beds for Medicaid clients and experts say that about 60 percent of all New Jersey’s nursing home residents are on Medicaid. 

By taking percentages of Medicaid recipients that are higher than the state average, county nursing homes have put themselves in a difficult financial position, officials said. That’s because Medicaid pays the nursing homes less money than what it costs them to provide the care. On average, Medicaid payments to New Jersey nursing homes are $34 per resident per day lower than the actual costs, according to officials at LeadingAge New Jersey, the trade group representing nonprofit nursing homes in the state.

That $34 difference might not sound like much, but it would amount to about $2.5 million in lost revenue at a nursing home with 200 residents over the course of a year. In some cases, private insurance pays $100 per resident per day more than what Medicaid does, officials said.

Across New Jersey, county nursing home officials say they are trying to increase their numbers of clients with private insurance and or Medicare, which pays at higher rates. But changes in nursing home populations are something that comes slowly.

In wrestling with their nursing homes’ futures, county officials say they must balance their financial obligations to an increasingly overtaxed public with the facilities’ traditional role as a safety net for vulnerable senior citizens and people with disabilities. Talk of sales inevitability evokes emotional appeals to county officials from nursing home residents, family members and nursing home employees.

THE CHOICE: SELL OR BREAK EVEN

The choice for county officials—and the taxpayers who elect them—seems to be clear: either sell the homes to private companies, or find a way to make them profitable.

Mercer County reaped $7.5 million when it sold its nursing home to Ocean Healthcare LLC in November 2010. Mercer officials were looking at a $7 million shortfall at the facility if they kept it in 2011. They calculated the sale provided a $15 million benefit to taxpayers.

During the past 15 months, Mercer, Salem and Cumberland counties all decided to sell their nursing homes. Meanwhile, officials in Bergen, Sussex, Monmouth and Union counties are weighing whether to put their facilities up for sale.

But selling the homes to a private company may not be easy. Counties considering selling their nursing home are looking at some daunting numbers.

  • Bergen County’s 110-bed center in Rockleigh cost about $13.5 million to operate in 2010 and brought in about $9.7 million in revenue, resulting in a $3.8 million deficit. The numbers for 2011 aren't official yet, but preliminary indications are that the shortfall grew to $4.5 million, officials said. The gap could get even larger in 2012, especially after the state cut about $300,000 in Medicaid payments.
  • Sussex County is projecting a $1 million deficit at its 102-bed Homestead nursing home, which has an operating budget of about $10 million. Last year,  Sussex County’s total tax levy was $77 million, meaning the projected deficit for Homestead would equate to about a 1.3 percent tax increase. One of the factors confronting Sussex officials is a $414,000 loss in Medicaid payments.
  • Monmouth County’s Montgomery Care Center was a welfare hospital when it began operation in 1930. The county spent $11.2 million to operate its 156-bed Montgomery center in 2011, according to the county budget. Its revenues came in $2,742,856 short of expenses, according to Heine. Montgomery, which mainly provides care for people with disabilities, stands to lose $812,000 in Medicaid in 2112, according to the New Jersey Association of Counties. (Monmouth is not considering a sale of its other nursing home, the Thompson center in Wall which mainly has elderly residents. It also ran a $2.7 million deficit last year, according to the county.)
  • Union County in 2010 reaped $39 million in revenue from Runnells, more than enough to cover its budget line item of about $37.8 million in expenses. But that budget line item did not include about $10 million in employee benefits and another $4.6 million in indirect costs. In reality, Runnells’ deficit that year was close to $13.5 million. That’s just about the size of the $13.8 million increase in the county tax levy from 2010 to 2011. Runnells is expected to lose $792,000 in Medicaid funds in 2012.

CAN A COUNTY-RUN HOME MAKE MONEY?

Instead of looking for a private buyer, Morris and Middlesex counties have taken the more difficult path, trying to make their facilities profitable.

“Over the years, counties didn’t have the attitude that they were running a business,’’ with respect to nursing homes, said Cathy Engler, the administrator at Morris View.

In 2011, Morris View’s line item budget expenses, like salaries and operating costs, exceeded revenue at the facility by $1.9 million, according to data provided by Pinto. But those numbers do not include employee fringe benefits and other indirect expenses, such as debt payments. Exact numbers were not available from Morris County, but those expenses likely add several million dollars’ worth of red ink to Morris View’s bottom line.

Morris County has hired Premier Healthcare Resources, a private management firm, to operate its nursing home more efficiently. Under Premier, Morris View is outsourcing various services that used to be performed by county workers, including security, housekeeping, social work and occupational and physical therapy.

Moreover, Premier has overseen the creation of a brand new 15-bed sub-acute rehabilitation unit at Morris View. The sub-acute beds are covered by Medicare and promise to produce more revenue. Pinto said the county is projecting between $500,000 and $2 million from that the program in 2012, depending on how quickly it catches on.

Officials in Morris County say they believe the cost reductions engineered by Premier will help them avoid the question of whether to sell Morris View.

MIDDLESEX: EVEN MORE AMBITIOUS THAN MORRIS

But while Morris and other counties are trying to lower costs and avoid a sale,  Middlesex County recently did something in stark contrast to its counterparts—borrowing $47 million to build a new public nursing home in Old Bridge in addition to the one it operates in Edison. Moreover, Middlesex has set a goal for its Old Bridge center that no other county nursing home in New Jersey has managed to achieve—to break even.

“Philosophically, we feel very strongly that’s where we’re going,’’ said Frank Damiani, the administrator who oversees Middlesex County’s two facilities.

Middlesex County’s new 180-bed nursing home in Old Bridge looms as New Jersey’s great experiment when it comes to the bottom line. Damiani, its top administrator, acknowledges the goal of operating the facility at no deficit is an ambitious one.

One of the main reasons Damiani thinks that’s possible is because the brand new Old Bridge center was planned with operating efficiencies in mind. Many county nursing homes were built for other purposes, or have antiquated systems that drive up costs. The nursing home in Old Bridge, on the other hand, was designed to have pods of 15 beds with centralized nursing stations as part of a plan to minimize the number of staff members needed to care for residents.

Damiani said Middlesex has learned many efficiencies over the past two decades by cutting the deficit at Roosevelt Care Center in Edison from roughly $20 million to $7.5 million. “We tried to stay ahead of the curve as much as possible,’’ he said. “Other county facilities, they stayed at the status quo. They never renovated. They never changed. They never upgraded.’’

Damiani said Middlesex health officials already have achieved the “break even” mark at a 180-bed addition they opened at their Roosevelt Care Center Complex in Edison in 2005. That building benefits from having 60 sub-acute care beds and 30 beds for people with Alzheimer’s disease, both of project provide insurance payment rates.

The bottom line at Roosevelt also has been reduced through other cost-saving initiatives, like modernizations that allowed downsizing among the employees that oversee medical records and building boilers, Damiani said.

“We came to the realization we could run it efficiently and continue to be the safety net for Middlesex County,’’ said Damiani.

But some advocates for county facilities worry that the consequences could be dire if Morris and Middlesex officials fail in their efforts to keep their public facilities open.

They warn that the impact on clients would not come overnight, but instead would take place gradually as fewer and fewer Medicaid users are admitted.

“Yes, there are open beds, but many of these (private) facilities are finding ways not to take Medicaid patients,’’ said Middlesex’s Damiani. “A private company needs to make a profit. We’re a safety net that can provide these services without making a profit.’’

If county nursing homes continue to be sold to the private sector, Morris County human services director Pinto said, “Eventually, there’s going to be people who have no place to go.’’

This post is shared among several Patch sites serving communities in Morris County. Comments below may be by readers of any of those sites.

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