Caught short in Virginia.

Virginia nursing facilities continue to struggle with Medicaid cuts that have eroded $60 million from the state nursing home coffers since 1982. According to Stephen Morrisette, president of the Virginia Health Care Association (VHCA), facilities statewide are showing the strain. "None are making any money and we are seeing more bankruptcies occurring--one in Richmond in October and we know of three to four more about to happen," he says.

In the past five years, six Virginia nursing facilities have gone bankrupt, not including the recent Sun Healthcare Group and Vencor Chapter 11 bankruptcies, Morrisette reports. Nearly 70 percent of all Virginia nursing facility residents are Medicaid beneficiaries.

The average sale of nursing facility beds in Virginia over the past five years has been 1.5 percent per year. This low rate, providers claim, effectively freezes capital, keeping new owners out of the business and preventing the industry from adapting to the rapidly changing needs of its elderly population.

When adjusted for resident acuity using HCFA data, Virginia's Medicaid rate came to $67.41, which ranked 50th in the nation for fiscal year 1998. Virginia nursing homes have patients with the highest average activities of daily living requirements of any state in the nation, explains Hobart Harvey, vice president of financial services for VHCA. Yet, the Medicaid rate is less than the cost of an inexpensive hotel, provider representatives note.

The industry is asking the legislature for a $104 million payment infusion this year, based on a study of the current Medicaid allowable costs. The state's cost would be $52 million based on the 50/50 federal matching formula. Trade group representatives have made progress, Morrisette says, in making legislators and the governor aware that the industry is reaching the breaking point. The key is to have the governor put the appropriation in his budget, which won't be complete until early March, he says. Providers believe the money is there: Virginia is prosperous and scores high in terms of per capita income, Morrisette says.