What happens to LTC facilities without a state budget?
Long-term care facilities face regulatory and financial challenges right and left, but they are not alone. Illinois has been operating without a budget since July 1, 2015. Through a series of court orders and limited legislation, much of the state is still functioning at some level, but long-term care and social services are suffering.
As the Director of Public Relations at S4 Group, a government affairs firm specializing in helping LTC operators navigate these challenges and advocate for their needs at the state and federal level, I work with our clients on articulating their messages and informing the public on critical industry issues. This includes the current budget crisis in Illinois.
AA Healthcare Management operates skilled nursing facilities throughout Illinois and Wisconsin, and I spoke to their President, Aaron Topper, about how the lack of budget is affecting his Illinois operations.
First, Medicaid payments have never been timely or certain in Illinois. Topper says a normal payment cycle ranged from three to six months, but even then providers faced retroactive reimbursement rate cuts of as much as 12%. “Even during times when you are accruing revenue, you don't know if a retroactive rate cut is going to take that revenue back,” he said. Topper was quick to point out that the staff at the state comptroller's office, which controls payments, were always as helpful as they could be, but they rarely had any information on when a payment might come in, let alone how much it would cover.
This part of the uncertainty stems from a cash-flow problem: although a court order from the summer requires the state to make some Medicaid payments during the budget impasse, it does not guarantee that the funds will be there to pay out. “The state's cash flow becomes tighter with each passing day,” the state comptroller, Leslie Munger, told reporters last year. Most long-term care facility operators are sympathetic to the complex budget situation, but they are stuck with difficult decisions on how to run their facilities efficiently without sacrificing the care of their residents.
Over 80% of Topper's residents are covered by Medicaid and thus are not being paid for. Some providers have managed to get partial payments here and there, but most facilities that don't meet exceptionally narrow criteria for expedited payments have only been reimbursed for Medicaid services rendered four or five months ago. I asked Topper to outline his strategy for keeping his facilities running without so much as a timeline for anticipated payments, and the picture he painted is complex, requiring the active participation of everyone involved with his facilities.
Like many long-term care and social service businesses, AA Healthcare is counting on sympathetic banking partners and lines of credit to meet current obligations. At the same time, the company is containing costs and spreading them out wherever possible. Topper has negotiated extended terms with some of his more understanding vendors, who are allowing even longer payment cycles than usual. “It's almost become the norm in Illinois,” he said. “Vendors know you're going to ask them for extended terms. It's not a comfortable way to run a business.” Postponing payments doesn't solve anyone's problems in the long run, as Illinois's government knows well, but it allows the facilities to keep running and making payments that cannot be put off, like salaries.
Payroll is one of the largest budget items for many businesses, AA Healthcare included. Since reducing direct resident care is a last resort, Topper and his staff have had to get creative with their ancillary services, like laundry, housekeeping, and maintenance. Where some facilities previously had separate staff for laundry and housekeeping, for example, they now have one position responsible for both areas. This job-sharing strategy piles more work on fewer people, which requires a dedicated staff and an appreciative management team.
As for extra operational expenses, like cell phones for management staff, Topper said those were stripped away even before the budget impasse: “We don't have bells and whistles for the staff – we leave that for the residents.”
While countless businesses throughout the state have had to freeze wages due to nonpayment from the state, Topper has been able to protect his Illinois staff from such measures, thanks to revenue from his facilities in Wisconsin. The regulatory and reimbursement environment in Illinois led him to expand his business outside the state, where reimbursement rates are more consistent, payments are more timely, and the regulatory landscape is more favorable for providers and the elderly in need.
“I wanted to expand in my home state,” Topper said, “but it just hasn't been a place I could grow.”
Topper is concerned that even once a budget is in place, the next hurdle for long-term care providers will be reduced Medicaid payments. Illinois's Medicaid reimbursement rates are already among the lowest in the country, and this extended fiscal crisis does not bode well for future rates.
Before we hung up, Topper said something to me that I think applies to many health and social service businesses throughout the state: “We have been fortunate that people have dug in deep and are really committed to seeing this through. But it's not without sacrifice and difficult decisions.”
Kayleigh Metviner is the Director of Public Relations for the S4 Group, LLC in Chicago.