Medicaid reimbursement rate gap grows again.

Medicaid reimbursement rates continue to lag behind costs, with some states posting shortfalls nearly 20 percent of what they need to make ends meet, according to a new survey by BDO Seidman.

The 2005 report, which used the most recent data available (2002), showed an average reimbursement shortfall of $12.58 per Medicaid patient per day. That's up from $11.55 in last year's report, which covered 2001 figures.

The Chicago-based accounting firm was commissioned by the American Health Care Association (AHCA) in 2002 to measure the gap between the funding that nursing home providers receive from states through Medicaid and what the services actually cost providers. In that first report, the shortfall was $9.05 per day; the deficit has increased 39 percent since because rate increases have not kept pace with inflation, according to BDO Seidman.

The latest report was based upon data from 36 states, representing 86 percent of the Medicaid patient days nationwide, the firm reported. The biggest loser is New Hampshire, with a shortfall of $28.98 per patient per day. New Jersey was a close second at $27.85 per patient per day. Arizona was third at $23.19, according to the report.

Arthur O'Leary, first vice chairperson of the New Hampshire Health Care Association in Concord, N.H., said the shortfall exerts pressure on the daily management of nursing centers. Facilities are unable to offer competitive salaries necessary to hold on to staff, leading to a lack of continuity of care for residents, he said.

"New Hampshire has a history of providing some of the best quality long term care in the country," O'Leary said. "Starting with being the first state to begin widespread restraint reduction back in the 1980s to today with Quality First initiatives, New Hampshire has been on the long term care cutting edge. The outrageous shortfall in funding has made it difficult to remain in a leadership role."

Medicaid reimbursement rates are set at different levels for each state based upon the "allowable costs" of providing care in that state, according to Hal Daub, AHCA's president and chief executive officer. Such costs include 24-hour nursing care; grooming, bathing and eating; medical supplies such as beds and wheelchairs; and social activities.

As a result, the allocated rates and their actual costs to states vary widely. For example, Missouri has one of the lowest reimbursement rates ($97.17 per patient per day), but its actual costs ($119.98) gave it the biggest percentage of shortfall at 23.5 percent.

In contrast, Connecticut has the third-highest reimbursement rate at $162.81 per patient per day but also one of the smallest shortfalls at 9.6 percent due to its $178.48 actual costs.

None of the 36 states tracked actually finished in the black in regard to costs, but a few came close. Alabama's shortfall was a mere 26 cents per patient per day. North Dakota, at $2.06, and Texas at $2.70, were a distant second and third.

While not discounting BDO Seidman's findings, Hobart Harvey, vice president of financial services for the Virginia Health Care Association in Richmond, Va., noted that the picture may currently be different for many states, given that the fiscal data used is now three years old.

Virginia, he said, has been able to cut its shortfall dramatically since 2002, largely due to the support of that state's governor, Mark Warner. "We're estimating that as of 2004--our most recent data available--our shortfall was $6.75 per day, down from $11.64 (in the report), so that gives us some comfort," Harvey said. "It's not a total cure for our situation, but at least the trend for us is a positive one."

STILL COMING UP SHORT

The 10 states with the least and worst daily Medicaid reimbursement
shortfalls, according to the 2005 report by BDO Seidman:

                                 10 Worst

State                Rate          Cost        Difference

1. New Hampshire    $125.63       $154.61       -$28.98
2. New Jersey       $142.41       $170.26       -$27.85
3. Arizona          $112.43       $135.62       -$23.19
4. Missouri         $97.17        $119.98       -$22.81
5. New York         $173.55       $194.78       -$21.23
6. Rhode Island     $132.9        $154.01       -$21.09
7. Massachusetts    $139.31       $159.89       -$20.58
8. Delaware         $165.33       $185.00       -$19.67
9. Utah             $102.87       $119.75       -$16.88
10. South Dakota    $90.69        $107.00       -$16.33

                               10 Smallest

State                Rate          Cost       Difference

Arkansas            $94.48        $94.74        -$0.26
North Dakota        $125.37       $127.33       -$2.06
Texas               $95.68        $98.31        -$2.70
Georgia             $99.73        $102.69       -$2.96
Oklahoma            $93.51        $97.90        -$4.39
Iowa                $90.09        $99.08        -$5.99
Nebraska            $121.15       $127.48       -$6.33
Ohio                $146.52       $153.13       -$6.61
Maryland            $154.14       $161.83       -$7.69
Florida             $135.40       $143.47       -$8.07