Medicaid Formula ‘Transformed' Nursing Homes

by Gwen Moritz  on Monday, Apr. 8, 2013 12:00 am  

Jim Cooper

Three quarters of Arkansas’ nursing homes were profitable in the fiscal year that ended in June 2012, a testament to the Medicaid formula developed in 2001 to reimburse the actual cost of patient care.

The Medicaid formula “has transformed us into the envy of the region,” said Jim Cooper, immediate past president of the Arkansas Health Care Association and chairman of its legislative committee. “We have increased our staffing by almost double. We have increased our wages and our benefits. Our food’s better, our buildings are better. … No longer do people think of us as cinderblock buildings with three people in a room.”

Full-year cost reports for fiscal 2012 were available from the Arkansas Department of Human Services for 183 of the state’s 225 nursing homes; cost reports were not available for new facilities or facilities that changed ownership during the fiscal year. Of those 183, 136 were profitable. The average net income for the year was about $427,000, although net income per bed ranged from less than $20 to more than $33,000.


Read this week's lists of the most-profitable and least-profitable nursing homes in Arkansas. Download a free printable PDF or purchase a spreadsheet version of the most-profitable list in the store.

Most-Profitable Arkansas Nursing Homes: PDF | Spreadsheet
Least-Profiable Arkansas Nursing Homes: PDF


The most profitable was Davis Life Care Center in Pine Bluff, where the bottom line changed from a loss of $691,000 in fiscal 2011 to net income of more than $6 million in 2012. A call to the administrator seeking an explanation for the swing was not returned, and Cooper said he had no explanation because Davis Life is not a member of AHCA.

The average annual loss for the 47 facilities that were unprofitable was $190,000. The 183 nursing homes for which net income was available generated total profits of more than $49 million on revenue of almost $804 million in fiscal 2012.

The Medicaid reimbursement formula depends on a bed tax — officially, a quality assurance fee paid by private-pay patients — that has tripled from $5.25 a day in 2001 to about $16 a day in 2013, or more than $5,800 a year. The state Medicaid program uses that bed tax money to draw down additional federal matching dollars, and Cooper said Medicaid payments to nursing homes have more than doubled to $670 million a year without any additional cost to the state’s general revenue.

Similarly, the Medicaid reimbursement rates paid to nursing homes have doubled and in some cases more than tripled during the past 12 years. The average daily rate being paid for January-June 2013 — which is weighted to account for overpayments or underpayments the previous year — is $165, compared with $69 a day before the bed tax was adopted. The highest weighted rate, $193.05 per day of care for a Medicaid patient, is being paid to Jonesboro Healthcare Center; the lowest, $120.97, is being paid to White River Health Care at Calico Rock.

The number of nursing home patients in Arkansas has remained stable at about 18,000 on any given day, Cooper said, but the profile of those patients has changed dramatically in the past decade.

They are older and sicker when they enter a nursing home because the state has dramatically expanded home-care and assisted living options, he said.

And many — as many as 30 percent — are short-term rehabilitation patients, mainly paid for by Medicare. In years past, Cooper said, those rehab patients would have been kept in hospitals “at about five times the rate that we can do it for. Or some of them would have gone directly home and not got hardly any therapy, or maybe a couple of home-health visits.”

Last year, about 17,000 Arkansans received rehab therapy in nursing homes, generally for five days to five weeks. “They came in, got therapy and left,” he said.

Baby boomers, the oldest of which are turning 67 this year, have not yet arrived in nursing homes in large numbers. “You’ll see that happen in about five years,” Cooper said.

Medicaid Daily Reimbursement Rates

1 Jonesboro Healthcare Center $193.05
2 Pines Nursing & Rehab Center, Pine Bluff $190.62
3 Green House Cottages of Southern Hills, Rison $188.03
4 Summit Health & Rehab Center, Taylor $187.96
5 Maumelle Health & Rehab $187.47
6 Byrd Haven Nursing Home, Searcy $187.01
7 Ridgewood Health & Rehab, Benton $186.41
8 Fountain Lake Health & Rehab, Hot Springs $185.97
9 White Hall Nursing & Rehabilitation $185.03
10 Rolling Hills Nursing Center, Batesville $184.79


1 White River Healthcare, Calico Rock $120.97
2 Southern Trace Rehabilitation & Care Center, Bryant $125.53
3 Longmeadow Nursing Center-Malvern $125.57
4 Yell County Nursing Home, Ola $131.3
5 Murfreesboro Rehab & Nursing $134.74
6 Ozark Nursing Home $139.8
7 Chambers Nursing Home Center Inc., Carlisle $140.07
8 River Ridge Rehabilitation & Care Center, Wynne $140.88
9 Mitchell’s Nursing Home Inc., Danville $141.02
10 Dermott City Nursing Home $141.57
State Average (225 facilities) $164.94

Source: Arkansas Department of Human Services. Ranked by daily reimbursement for January-June 2013, a weighted rate that compensates or penalizes nursing homes whose 2012 rates were either above or below their actual costs.

Legislative Agenda

AHCA, which represents more than 90 percent of the state’s nursing homes, has two items on its legislative agenda this session, but “they aren’t through yet,” Cooper said last week.

One would subject negligence and wrongful death lawsuits filed against nursing homes to the same procedural hurdles as medical malpractice cases. Litigation against nursing homes, big news a decade ago, “has become a way of life for us,” Cooper said. “It’s harder to get the big verdict anymore, but it’s still a big scare.”

The other bill, which Cooper called the “Don’t Kick Grandma Out of the Nursing Home Act,” would require legislative approval if DHS wants to balance its budget by cutting nursing home reimbursements.



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