County-owned nursing homes in debt

Centre County officials look to buck statewide trend with nonprofit nursing home status

mmorgan@centredaily.comMarch 25, 2013 

Terry Tomassetti said it was just time to get out of the nursing home business.

The chairman of the Blair County Board of Commissioners voted Tuesday in favor of the sale of Valley View Home, making Blair the ninth county across the state that has sold its nursing home since 2004.

“At this point we decided simply that this was the best point of action for the county,” he said. “We don’t want to be in this business.”

The sale comes at a time when Centre County officials still mull the possibility of giving up direct control of Centre Crest, but the county would buck the recent trend of counties selling the asset.

The Centre County commissioners remain completely against the concept of a sale, and are looking at the option of turning the facility into a public nonprofit, run by a community-based board of directors.

Chairman Steve Dershem is adamant that selling Centre Crest has not and will not be an option for the sitting board.

“I’m committed to the success of Centre Crest whether it’s a not for profit or county home,” Dershem said.

The trend

Blair County’s idea to cut the asset and turn it over to a private company is not a new one.

In the past five years, counties such as Adams, Cambria, Lackawanna and Carbon have all decided to get out of the nursing home business completely to ease the burden on taxpayers. There has been on average about one less county-owned nursing home per year over the past 10 years and the total number now sits at 32 in the state.

In Carbon County, Weatherwood cost taxpayers about $3 million in 2009 when the board decided it was time for a change.

William O’Gurek, a current commissioner and chairman when the home was sold, said selling the asset was hard, and he knew that the lump sum would run out, but it was costing the county too much money.

“I know it runs out, but had we never sold the home, the losses would have never run out,” he said.

The situation was similar in Adams County. The facility had been running at a deficit for multiple years, and the board decided it was time to pull the plug.

Former commissioner George Weikert also cited growing competition and a lower reimbursement structure for county-owned homes as reasons to sell.

“You just can’t compete with them when you’re running a county facility,” he said, “County government is not as well trained to operate (nursing homes) as the private sector.”

Weikert said the transition went smoothly and didn’t meet too much opposition. Though no members of that board were re-elected, he said the sale of the nursing home likely wasn’t a big factor in that decision.

Cambria County looked at the idea of turning the facility into a public nonprofit, but ultimately the board members decided it wasn’t for them, former Chairman P.J. Stevens said.

The home lost about $4.5 million in 2008 when the commissioners decided they were in a hole that was only going to get deeper.

“There was no hope to even break even,” Stevens said.

And in Lackawanna County, Commissioner Corey O’Brien went as far as to say that no counties should be in the nursing home business.

He voted in favor of a sale in 2009 for a facility he said was losing about $1 million.

“Why are we in the business?” he said. “We’re not nursing home professionals.”

Pros and cons

When the Medicaid reimbursement structure was locked back in 2006 for county-owned homes, not many people were happy. Especially not Centre County, which was locked in at a rate of about $160 per day per resident — the third lowest rate in Pennsylvania.

“There isn’t as much incentive financially to take someone that needs more care,” said Mike Wilt, executive director of the.Pennsylvania Association of County Affiliated Homes.

The county home now has a larger rate of patients who need a high level of care, but it is not getting reimbursed for that increased number. If the county were to change to the public nonprofit format, it would likely be reimbursed at the higher rate.

The board is hoping that number helps offset some of Centre Crest’s $1.5 million shortfall — which combines operational losses at the facility and a fixed debt payment for renovations — getting the home back on track financially and not becoming an increased burden on taxpayers.

Commissioner Chris Exarchos has also said the new board of directors would allow the facility to have a longer range vision than with a board that changes every four years.

But some residents have complained that the people would no longer have a direct say in the operations. Because the commissioners will no longer control it, county residents can’t “vote out” the new board of directors.

There are also questions about maintaining the high number of Medicaid patients, which Commissioner Michael Pipe said can be stipulated in a transfer agreement.

Success stories

Despite the lack of funding for health care, it’s an industry that people are still looking to get into.

For every county that looks to sell its home, there are myriad potential buyers and the possibility of a financial turnaround.

“As bad as the reimbursements are from the state, whenever someone decides to sell there haven’t been a lack of buyers,” Wilt said.

Guardian Elder Care, which bought Weatherwood in 2010, turned the $3.5 million deficit into a profit within a year, and it only took about three months to ready the ship, Chief Financial Officer Brian Rendos said.

He said the company made offers to more than 95 percent of the existing employees and the facility still has about 75-80 percent Medicaid eligible residents.

“You really can’t have a good long-term care business without accepting Medicaid,” he said.

Transitions Healthcare is also looking to turn a profit this year after taking over the former Adams County nursing home, Chief Operating Officer Matt Maurano said.

That facility also runs at about 80 percent Medicaid patients, and Maurano said it’s in the best interest of the firm or board taking over the county home to accept those patients.

The model for transitions recently has been sales, but there are also success stories going to the public nonprofit format.

Dating back at least 30 years, at least seven county-owned facilities have gone to that format and are still alive and well today. Those counties include Elk, Clearfield, Wayne, Lycoming, Greene, Somerset and Jefferson.

Those homes vary in terms of size of board of directors but have the same overarching structure.

Wilt said the public nonprofit format is a viable option for county homes, and he’s wondered why more haven’t looked closer into that format in recent years.

And some county-owned homes still remain viable today.

Several county-operated homes have reimbursement rates locked at more than $200 per day per resident, with some as high as $250.

Communities at Indian Haven in Indiana County is only being reimbursed at about $170 per day, but the home is self-sustaining and doesn’t need help from the taxpayers.

Administrator Kim Cobaugh said the success comes from having a strong acute rehabilitation program. The facility is still able to have about 50-55 percent Medicaid residents offsetting that shortfall with the higher Medicare and private pay rates.

But this model isn’t an option for Centre Crest, county Administrator Tim Boyde said. He called it a “bricks and mortar” problem and said Centre Crest is not physically designed for that type of care.

Moving forward

Centre County is still exploring options for Centre Crest, and decisions are far from being made as the facts still come out.

The board is expecting to get numbers from the consultant, Complete HealthCare Resources Eastern, at its meeting Tuesday, which would shed more light on the effects that a transition would have on the financials of the home.

Questions remain regarding Centre Crest’s outstanding debt and a contingency plan if the nonprofit begins to lose money, but the board has said it will try to answer all questions and make sure it’s certain before voting. Pipe said he would like to make up his mind either way by July 1 after seeing other facilities that are running as nonprofits.

The board has held four public hearings so far, attracting no more than 23 people at any of them and having some with as few as three and six attendees. The final hearing will take place Wednesday at the Courthouse Annex in Bellefonte.

Matt Morgan can be reached at 235-3928. Follow him on Twitter @MetroMattMorgan.

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