Views from the top: nursing home chain executives on long-term care financing reform.

Nursing Home Chain Executives on Long-term Care Financing Reform

With long-term care financing still left out of the national hubbub over health care financing reform - despite recently introduced comprehensive long-term care legislation,(*) acute care and coverage of the uninsured are today's center of attention - NURSING HOMES sampled top executives of major nursing home chains for their views on three questions:

How do you size up today's long-term care financing situation?

What do you think should happen by the year 2000?

What do you think will happen by the year 2000?

Here are their responses:

Keith Weikel, MD, Executive Vice-president, Health Care and Retirement Corporation: "Clearly a lot of people today are being impoverished by long-term care costs, and we need to address this as a society and as an industry. We are also finding, increasingly, that very well-to-do individuals are transferring their assets to Medicaid-remote trusts and allowing the government to pay the costs of their care. This is, of course, driving up the costs to government.

"What should happen would include increased incentives for people to purchase longterm care insurance; a better way for upper income people to protect their assets, along with acceptance of some private responsibility to pay for one's own care if one can afford to; and a public program for those truly in need, addressing both adequate coverage and adequate reimbursement.

"As for what will happen, I don't believe that there are the public dollars available to provide comprehensive long-term care for the entire population; that could run as high as $60 or 70 billion. I think that, after the election, there will probably be some program addressing the broad issues of health insurance, but I don't think that the uninsured and long-term care can be addressed in the same bill in the same year. Probably the pressure will continue to build for long-term care insurance, perhaps for provisions to encourage purchase of private policies, but public policy in this area is very difficult to predict."

Several top executives with the GranCare, Inc. chain weighed in with individualized viewpoints:

Evrett Benton, Executive Vice President and General Counsel; Question 1: "Long-term health care seems to come at the end of all other health care considerations with regard to payment from government organizations, with doctors and acute care being the |squeaky wheels' that get the first grease. In addition, in those states in which we operate, we are seeing increasing pressure to have our reimbursement rates decreased because of states' budgetary problems.

"There has been a temporary respite from the onslaught of increasing costs and decreasing reimbursement rates primarily because of the Boren Amendment and the resulting court decisions enforcing the rights of long-term care facilities to receive reasonable rates of reimbursement. Nonetheless, reimbursement rates are still inadequate to find necessary capital improvements, adequate returns on investment and maintenance of facilities.

"Increased regulations from OBRA and state regulators have placed an incredible strain on long-term care providers' resources, without adequate means of guaranteeing payment to cover the additional costs attributable to them.

"Allowing the elderly to |divest of assets' has exacerbated the Medicaid dillemma shifting the burden from those who have adequate resources to privately pay for long-term care to the state and federal governments."

Question 2 (what should happen): "Funding of long-term care costs by private health insurance and health maintenance organizations offered as part of the employee compensation and/or pension packages;

"Greater individual responsibility for the payment of long-term care by restricting the eligibility requirements for those who would wrongfully rely upon Medicaid reimbursement;

"Substantial increases in reimbursement rates to adequately cover increases in capital expenditures, labor costs and allowance for reasonable returns on investment.

"Laws acknowledging responsibility of children to their parents with regard to costs of care, etc., much like present laws which require parents to care for their children."

Question 3 (what will happen): "Increasing numbers of elderly will make the question of funding long-term care a political football, with increasing regulations and greater scrutiny of rates charged for long-term health care services. But there will be no long-term solutions, unless the highly politicized atmosphere gives rise to a dramatic and drastic change in the present regulatory and reimbursement structure."

Joseph Higdon, Vice President and Director of Operations, Eastern Region; Question 1: "The three primary financing mechanisms, Medicare, Medicaid and private pay, are all moving targets. By that, I mean each is somewhat at the mercy of either governmental or self-serving interest groups. Our ability to predict future financing sources fully depends on the overall economic status of individual states and of the Federal government. Private pay persons, who in the past felt something of a moral obligation to pay their own way, are now astute enough to find other alternatives to using their own funds for care of individuals in need of long-term care. Private insurance, HMO'S, and other payment sources play a very small role in reimbursement, but are expected to have a larger role by the end of the decade."

Question 2: "I believe that, due to the continual shortage of dollars available for long term care, both at state and national levels, a major focus on health care spending should be set into motion. The result of this should be to fully analyze and develop a national strategy for fair and just health care for all members of society. The role our industry should play would be greatly enhanced, due to our ability to provide services, i.e., sub-acute at a much lower cost for similar services.

"We should also develop, for those individual willing and able to pay their own way, reasons to do so, i.e., a tax deduction for all costs associated with paying for care in a long-term care setting. In short, our industry must become a key and integral part of the health care environment, a role that we must take due to the ever-changing demographics that the nation faces."

Question 3: "From a purely negative focus, I think we will have continued decline in the private market, less than desirable reimbursement from both the Medicare and Medicaid funding sources, and a continued growth in regulations to monitor and control our industry because of perceived poor quality of care.

"Approaching the question with a little more optimism, I feel that with our continued involvement, both at state and national levels, our industry could by the year 2000 be a key factor in determining the future resolution of our national health crisis. As an industry, we are making major leaps into alternate care services, which could help to curb the expenses that some components of the healthcare market have bled dry.

"Long-term care is ever so slowly being acknowledged as the industry of the future. More and more hospital personnel are trying to break into this industry. This is due primarily to the fact that many persons see the future of long-term care as its being the one possible area of the health market that has no where to go but up as the year 2000 approaches."

PeterSteenblock, VicePresident and Director of Operations, Western Region: "Today's long-term care financing picture is being affected by our country's recession. As State and Federal tax revenues continue to fall, the pressure will be to further reduce costs of all providers of health care and to shift coverage to private industry.

"The short-term economic crunch will lead to many long-range benefits to SNF providers because we are the lowest-cost provider of inpatient health care service. As the burden of coverage shifts from government to private employers, case management will drive the vast majority of health care dollars. Therefore, we will see a tremendous growth of HMO type models of insurance coverage, continuing to expand into the senior Medicare market and quickly replacing the Medicaid program.

"Opportunities will be available to guarantee our market by becoming an exclusive provider to seniors on a capitated basis. A major trend will be the implementation of outcomes |outcomes management,' which is a unified scorekeeping system on patient outcome. The information obtained will educate consumers to be more participative in determining treatment methods.

"Greater patient decision making, more competitive shopping and government/private incentives to reduce cost will be the forces that decide future health care spending."

Mark Rubenstein, VicePresident and Director of Human Resources; Question 1: "One word sizes up today's financing situation - inadequate."

Question 2: "At a minimum, I would like to see the following changes in place by the year 2000:

- Increased difficulty in becoming eligible for state-supported aid for long-term care when assets were consciously divested during the period immediately prior to application for that aid;

- a larger number of players in the long-term care insurance field. I would like to see realistic coverage at an affordable cost. Long-term care insurance could even be tied into the |divestiture of assets' issue. Perhaps a significant portion or even all of any assets divested in the 12- month period prior to eligibility for any state-supported aid should go exclusively for long-term care insurance;

- continuing and substantial increases in state or federal reimbursement rates, with a reasonable portion of that increase mandated to be used specifically to improve the wage rates of our |care givers."'

Question 3: "I don't know what will happen by the year 2000. However, if the debate regarding long-term care for the infirm and/or indigent elderly is not elevated to a more visible level on a broader scale where a national policy can be formulated, I am concerned that these people will not find any |GranCares' to provide a home for them. They will live and die in either state-operated facilities,or possibly not-for-profit, religious-based facilities. For-profit long-term care companies may only be able to survive by catering exclusively to people who have private funds."

Brent H. Coeur-Barron, Vice President, Secretary and Associate Corporate Counsel; Question 1: "Reimbursement is not designed to promote or enable necessary construction of new facilities sufficient to meet growing demand. Additionally,reimbursement does not promote the upgrading, improvement or maintenance of existing facilities."

Question 2: "A global assessment of reimbursement models and regulation needs to be undertaken. An ideal model would develop a partnership between regulators and providers. Compliance and quality assurance reviews would eliminate inconsistencies of treatment among providers (i.e., attempt to define objective criteria and eliminate some of the current subjective assessments) and eliminate inconsistencies in regulation between state and federal regulatory systems. A forum for communication between regulators and providers which is designed to result in quality care outcomes, rather than in confrontations driven by the current |compliance and penalty' regulatory scheme, needs to be devised."

Question 3: "Partnerships between regulators and providers will be fostered by individual providers, rather than by regulatory agencies. Regulators will continue to see their role as adversarial and confrontational, and will minimize any incentive perceived by providers to cooperate with them."

Tom Zwicker, Vice President and Director of Operations, Northwestern Region; Question 1: "Current funding is primarily driven by the government,which limits funding to reasonable costs. This mechanism is political and cyclical, in that |reasonable costs' are redefined, based on allowable monies in state and federal budgets."

Question 2: "Private insurance should be expanded and modeled, similar to acute financial schemes. The government should get out of health care financing, with the exception of providing a baseline package for the indigent. Utilization of health care facilities should be expanded so that the advantages of economical care may be provided to more individuals. Quality assurance should be internalized and maintained through peer review and JCAHO surveys. Physicians must be incentivized,to visit long-term care facilities. What should ultimately distinguish acute from long-term care is: (1) duration of stay and (2) capital-versus labor-intensive care centers."

Question 3: "Very little (will happen). As long as the political dynamics of strong elderly vote and general non-participation by middle-aged individuals continues, the existing arrangement should continue for the next seven or eight years. The elderly increasingly view health care service as an entitlement program that was paid for by taxes during their working years. The current trend of acute care providers' scaling down from high-acuity long-term care services will continue, due to the availability of hospital beds and the perception of low quality in nursing homes. Concurrently, the movement by long-term care providers into higher acuity services will continue, due to the loss of the intermediate care market to community-based retirement facilities and the high levels of reimbursement in sub-acute care."

Joseph Barton, Senior Vice President; Question 1: "With costs increasing and with demand increasing rapidly, the states and the Federal Government caught in budget squeeze situations are finding it difficult to finance an ever increasing Medicaid bill.

"As families learn to |hide the family wealth' via family trusts, etc., many who in the past would be private pay are now Medicaid recipients. This adds to the ever increasing Medicaid cost factor for state and federal governments."

Question 2: "The funding of longterm care should be increased by a drastically reduced defense budget need. Longterm care should be covered by health insurance, and HMOs will be more involved in paying for long-term care."

Question 3: "The number of elderly in long-term care facilities will double, and I feel the answer to question 2 will pay for it. There will be more |home care.' Acute hospitals will release patients earlier into sub-acute facilities."

Kevin Pendergest, Chief Officer; Question 1: "The current financing situation is such that it does not provide for true quality care; rather, it provides for adequate care. As buildings start to age and need renovation and as labor costs increase, this problem will continue to get worse. Furthermore, as state and federal budget deficits continue to grow, the pressure to contain spending will significantly increase."

Question 2: "Alternate means of financing should be made more available and incentives provided for these programs (i.e. insurance programs to replace/reduce government programs). Additionally, regulation should be decreased to make it easier and less costly to operate, as well as easier to hire capable managers. Such changes could include changing Administrator License requirements, and making surveys required every 2 years rather than annually. Also existing funding should be increased to reflect |level of care' provided."

Question 3: "Regulations will not decrease. Cost containment pressures will increase. Case mix-type reimbursement will be implemented and the entire health care system will be streamlined to emphasize |low-cost' service providers (which should help the long term care providers)."

Edward Kuntz, Chairman and Chief Executive Officer, Living Centers of America: "Reimbursement continues to lag behind costs. Some states have made a responsible effort to pass through costs that are OBRA-related, minimum wage-related, etc., and I would say that of the states in which we operate, some have attempted to provide reimbursement based on increased regulatory requirements. However, I think the increasing demands on facilities to comply with regulations have to be watched closely because, unfortunately, the government agencies that impose the regulations are not the government agencies that set reimbursement.

"As for what should happen, I would like to see a patient acuity-oriented system based on services rendered, with reimbursements kept updated and not lagging behind actual costs. It would also be good to see a level playing field with the hospitals,which receive higher reimbursements than nursing homes for the same levels of care. The system should also provide incentives for people to pay for long-term care insurance, giving them tax and savings incentives similar to those in proposals being discussed these days.

"What will happen is impossible to predict. I suspect more and more states will adopt some variation of a prospective, acuity-based case-mix system, but any prediction beyond that would be sheer guesswork at this point."