DES MOINES — Many nursing homes in Iowa — particularly in rural areas — are struggling to make ends meet.
A big part of the problem, nursing home officials say, is that payments from a government health care program are insufficient and sometimes not timely.
And the state’s privately managed Medicaid system adds another layer of stress to nursing home budgets, officials say, because of the management companies’ appeals process and administrative burden.
More than 400 nursing homes in Iowa accept patients who pay through Medicaid or Medicare, government-run health care programs for the elderly, disabled and poor, according to a federal database.
Many of those facilities, industry officials say, are feeling a budget pinch, in large part, because Medicaid reimbursement rates are too low and payments often are delayed as claims are contested.
Medicaid is jointly funded by the federal government and states, which can set their level of payments to providers within federal guidelines.
States, including Iowa, must be thoughtful when setting Medicaid payment rates as the program continues to chew up a large share of the state budget. At $1.3 billion, Medicaid spending comprises 18 percent of Iowa’s general fund spending; that is second only to public education funding, according to the state’s nonpartisan legislative agency.
For states, that high price tag must be balanced with creating a payment system that is sufficient for health care providers to deliver adequate care to patients who use Medicaid.
A growing number of nursing homes are finding the payments too low, officials say.
Iowa’s state budget is experiencing its own struggles, with shortfalls that have led to spending cuts in each of the past two years.
Although the state has not cut Medicaid spending among its budget cuts, the Medicaid reimbursement levels are “inadequate,” said Brent Willett, president of the Iowa Health Care Association, which advocates on behalf of more than 700 long-term care facilities in the state.
Willett said long-term Medicaid residents in nursing homes are underfunded by an average of $30 per day, or $10,950 per year. He said because many nursing homes operate on profit margins of less than 1 percent and many at a loss, those costs are passed on to residents with private insurance in the form of higher rates.
Willett said often those residents with private insurance are then forced to spend down their savings, more quickly putting them in a position to need Medicaid, creating what he called “an unsustainable cycle.”
Rural facilities feel that pressure even more, Willett said, because they have more Medicaid patients than urban facilities, and thus fewer private patients to absorb the impact of low Medicaid payments. While more than a half of residents in Iowa long-term care facilities are covered by Medicaid, dozens of facilities have at least roughly two-thirds of their patients covered by Medicaid, Willett said.
And smaller, rural facilities do not have the resources to shoulder increasing costs, he said.
“This places rural facilities in an extremely precarious position: as state and federal Medicaid reimbursement continues to fall further and further behind the cost of care, and with fewer private pay residents to pass the costs along to, finding ways to absorb the losses becomes increasingly challenging,” Willett said.
Nursing homes closed last year in Charles City, Le Mars and Storm Lake. The Charles City facility cited financial constraints as the reason for closure; the Le Mars facility had received poor service ratings from federal regulators.
Iowa’s privately managed Medicaid system is compounding the problem for nursing homes, Willett said.
While the private companies that manage the state’s $4.7 billion Medicaid program do not set payment rates, they oversee claims and payments. Sometimes payments are denied and wind up in an appeals process; Willett said this can put financial stress on small nursing homes that do not have the resources to cover the loss of that payment while it is in the appeals process. He said some facilities are forced to take out loans to cover payroll costs while waiting for Medicaid payments from the managed care organizations, or MCOs.
“We continue to work with the managed care organizations to advocate for the development of more consistent managed care claims payment systems,” Willett said. “These denials — most of which subsequently enter an appeals process — are growing across the state and have resulted in providers accumulating large accounts receivable balances as they await approval for services rendered and costs incurred.”
A spokesman for United Healthcare, one of the two companies managing Iowa’s Medicaid program, said the company works closely with doctors and health care providers, and pointed to a recent state report that said 100 percent of medical and pharmacy claims were administered within 30 days, and that providers are reimbursed at the full Medicaid rate.
“Having operated in Iowa for more than 30 years, UnitedHealthcare maintains strong relationships with providers across the state and we are committed to working with those partners to address any questions,” said Jesse Harris, a spokesman for United Healthcare.
A spokesman said the state health department is working with the MCOs to ensure appropriately prompt Medicaid payments to providers, and that the state is hearing those payments are being paid more timely.
“While we’re hearing from providers that claims are being paid more timely, and the situation is improving, there may be some older outstanding claims that the MCOs are working to resolve. The department will continue to monitor this and is committed to providing strong oversight of our managed care partners,” state health department spokesman Matt Highland said.