The current financing structure of Pennsylvania nursing homes is not sustainable

Nursing homes play a critical role delivering long-term services and supports (LTSS) to older adults and individuals under the age of 65 with disabilities. Despite this, these facilities face serious threats to their financial viability. A new report documents the increasingly important role nursing homes play in Pennsylvania, the key demand and supply factors affecting nursing home performance, and highlight implications for the financial viability of nursing homes going forward.

Edward Alan Miller

Editor-in-chief Edward A. Miller

Using data from a variety of sources, the researchers demonstrate that the demand for nursing home care is expected to increase, but the reimbursement level from Medicaid — the growing source of payment for nursing home residents — is causing a financial strain on these institutions. The report, “The Case for Funding: What is Happening to Pennsylvania’s Nursing Homes,” was written by researchers with the LeadingAge LTSS Center @ UMass Boston and funded by The Jewish Healthcare Foundation.

Data between 2010 and 2018 indicate that nursing homes are serving lower income individuals with more challenging diagnoses, including more severe cognitive impairment and psychiatric illness, as length of stay and occupancy has declined. Coupled with Medicaid as a payment source for increasing numbers of residents, the researchers expect to see more nursing homes face financial challenges in the coming years.

“The current financing structure supporting nursing home care in Pennsylvania is not sustainable,” says Edward Alan Miller, PhD, one of the report’s authors and Professor of Gerontology at UMass Boston. “Unless the reimbursement rates paid by the Medicaid program are brought more in alignment with the costs of providing high quality care in a safe manner, providers will face increasing challenges caring for Pennsylvania’s most vulnerable residents.”

Data on professional and support staff in nursing homes also indicate a concerning trend:

  • Even as patients are presenting with more challenging diagnoses, overall staff hours among direct care workers have remained relatively unchanged over the last ten years and RN hours have declined slightly.
  • Compensation for direct care workers has remained relatively flat, increasing by only 1.9% per year from 2012 to 2019. When adjusted for the medical consumer price index, real wages have declined an average of .78% annually during the time examined.
  • While certain individual quality metrics have improved — such as declines in the numbers of bed sores — overall aggregated quality scores have not.Marc Cohen, PhD

“The growing gap between what facilities need, as reflected in charges, and the Medicaid reimbursement rate has come at a time when nursing homes are being asked to care for an increasingly complex and frail mix of residents,” says Marc Cohen, PhD, one of the report’s authors and Co-Director of the LeadingAge LTSS Center @ UMass Boston. “The result has been increased cost shifting to individuals and families who must pay for care privately or take on additional caregiving responsibilities. Nursing home services represent a critical component in Pennsylvania’s continuum of care. Our study demonstrates that more needs to be done to support them.”