Tying Staff Wages to Medicaid Rates May Help SNFs on the Brink, But CMS Blueprint Should be Flexible

While nursing home operators and industry trade groups appreciate the Biden administration’s proposal to use Medicaid as a tool to boost staff wages in the industry, some wonder if the federal government’s approach is too broad for an increasingly diverse industry.

Facilities vary widely based on region and community demographics, company culture and size.

Still, efforts to tie nursing home staff wages to Medicaid rate increases may help operators come back from the brink of bankruptcy, state associations have said, with 70% of facility costs allocated to personnel.

As part of the Biden administration’s reforms, the Centers for Medicare & Medicaid Services (CMS) seeks to strengthen the nursing home workforce by mandating adequate compensation and an achievable career ladder for prospective staff.

The agency will develop a “template to assist and encourage” states to tie Medicaid reimbursement to clinical staff wages and benefits, with additional pay allocated based on experience and specialization, according to a fact sheet published by the White House.

This initiative was part of the sweeping nursing home reform package proposed by the Biden administration at the end of February.

States like Florida, Minnesota and Kansas are already doing what the administration has suggested – either within budget plans or through drafted legislation, according to Stuart Lindeman, president and CEO of Mission Health Communities.

Tampa-based Mission Health manages and operates 47 skilled nursing, senior living, assisted living and short-stay rehabilitation facilities across nine states.

“There are states that are trying to improve reimbursement through the current cost, which is what’s needed, it’s the first step,” Lindeman told Skilled Nursing News.

Florida as a template

Florida is the furthest along in efforts to tie Medicaid rates to staff wage increases. State government is giving the skilled nursing industry additional Medicaid funding, but a certain amount of those extra funds would need to be paid to employees.

In Florida’s budget covering Fiscal Year 2023, Gov. Ron DeSantis in December recommended a 5% increase to Medicaid reimbursement for nursing homes, equating to an additional $185 million in funding or $270,000 per facility.

Florida lawmakers ended up cutting the bulk of federal subsidies that would have been used to expand Medicaid, but kept $293 million that must be spent on raising staff wages to $15 per hour.

That’s a 7.8% increase, a compromise between the state Senate’s 10% proposal and House proposal of 3.8%. Funding translates to $419,000 per facility.

Prior to this proposal passing, some nursing home workers made the state’s minimum wage of $10 per hour.

“What I would say on the Biden suggestions is maybe work with Florida and look to Florida as an example,” said Emmett Reed, executive director of the Florida Health Care Association (FHCA). “Nursing homes are different all throughout the country, all throughout the state. When you talk about a broad template, I think that’s good – as long as there’s plenty of flexibility. There’s not a one size fits all answer.”

Some facilities might specialize in memory care, others in respiratory, Reed said, while yet more might have a higher occupancy of people addicted to opioids or take on more behavioral health residents.

“We have to be really careful and considerate whenever we’re talking about a one size fits all template because I don’t believe that will work,” added Reed. “Look to states that are working and then offer flexibility, that’s the way to go.”

The Minnesota state legislature introduced House File 3729/Senate File 3195 in late February, which aims to increase the starting wage for nurses to $25 per hour by 2025, dedicating $500 million to caregiver wages. However no further movement has been seen on the bill.

Lindeman isn’t hopeful the bill will pass given a shift in state government. Still, Mission Health is testifying in support of the legislation.

“This may not be the right year to get that passed, maybe next year, but I know the bill is out there … our employees are supporting it because it’s going to directly benefit them too,” Lindeman said.

Kansas is finalizing its budget for the fiscal year set to begin in July, and has done a “great job” taking into account the latest cost reports of operators in the state, Lindeman said. State officials are looking at three years of facility cost reports to inform potential changes to the Medicaid rate this summer, he said.

Ripple effects of a Medicaid jump

Prior to its Medicaid increase, Florida was ranked 26th in Medicaid spending compared to other states, according to a WalletHub study conducted earlier this month; the study also took into account facility quality, patient eligibility and enrollment.

Not only will the Medicaid increase provide a “record” increase in nursing home reimbursement, it expedites the state’s minimum wage requirement by several years, Reed said.

“This is something that’s going to be very beneficial to our members because it’s going to help us compete with the professions that are really absorbing our workforce, for lack of a better term, because they can pay more,” Reed said.

He said the legislature was “thoughtful” in implementing an hourly rate of $15 for all employees as a condition of the rate increase – namely those outside of direct care like housekeeping and dietary.

“The cost of providing high quality care in the nursing home environment has skyrocketed in the last couple of years,” said Stephen Bahmer, president and CEO of LeadingAge Florida. “Among those, of course, is the cost of direct care and other staff.”

Some of its members were already ahead of the curve, Bahmer said, with certified nursing assistants (CNAs) getting $15 or more per hour. One operator in Jacksonville, Bahmer said, is paying upwards of $20 per hour for CNAs.

“Our folks saw this coming, recognized the need and began paying those higher rates,” Bahmer said. “We worked hard to make sure our legislature recognized the issue and the need … at the federal level, the idea of investing in direct care is a good thing.”

The budget increase is actually the second infusion in Medicaid funding, Bahmer added – a nearly $100 million increase at the end of 2021, but not tied to wages.

The rate increase couldn’t have come soon enough, Reed added, with the association having at least one company go bankrupt, referring to Consulate Health Care, with more on the verge of bankruptcy.

In Minnesota, 10 facilities have closed since the start of the pandemic, three in 2022 alone.

The Florida legislature and governor’s office recognized the industry’s increase in costs, coinciding with a loss of census to create “financial catastrophe,” Reed said.

“Our members drove in and flew in from all around the state to personally meet with leadership … to tell their story and to show their books and help them to see that the crisis is real. Nobody was crying wolf,” Reed said. “If we weren’t able to get help soon, it was going to be catastrophic for Florida’s frail and elderly. It really was a massive grassroots effort.”

Operators spoke to state officials, outlining Covid drivers of cost too, with infection control and personal protective equipment (PPE) ramping up overall cost.

“You had the perfect storm with Covid. Prices were going through the roof and the revenues were going down to the bottom, as low as they’ve ever got,” added Reed.