Jan1Written by:NHS Editor
1/1/2003 4:04 PM 
Despite predictions for an ever-increasing need for nursing homes, many nursing home owners struggle to keep beds full and payments rolling in. Part of the reason may be an insistence on attracting and retaining private-pay patients. Many nursing home operators labor under the mistaken notion that Medi-Cal/Medicaid is for low-income clients, time-consuming and provides only partial payment.
Yet, consider the case of one southern California nursing home operator with 15 years experience who avoided Medi-Cal/Medicaid, except in his East Los Angeles location. There, beds were always full, all medical expenses were reimbursed and profits were the highest in his chain.
The reason was simple: his East Los Angeles facility manager understood that private-pay, medically-insured and long-term care patients were not their clients. That left Medi-Cal patients. This manager learned how to bill Medi-Cal and how to work within the system's rules, turning an apparent liability into the chain's top performer. The owner was stunned, realizing he had been running his chain backwards, dooming himself to smaller profits and operational difficulties by avoiding government-pay patients.
You may be in a similar situation. However, by learning more about Medi-Cal/Medicaid and ignoring the myths about these programs, you could fill your facility, increase stability and raise revenues.
The Myth of Private Pay
Many nursing home operators prefer private-pay clients because billing the family is relatively easy. Yet, 24 percent of the nation's nursing home residents are private pay, according to the American Health Care Association (AHCA). Because these patients typically can afford only the first year, 55 percent of them impoverish themselves within a year to continue care under Medicaid, for total average stays of 2.3 years, according to the U.S. Senate Special Committee on Aging.
It's not hard to understand why this happens. For patients with extensive medical needs, costs can zoom from $4,000 monthly to $40,000 monthly. Most families are hard pressed to afford a bill of this size for more than a few months. Often, nursing home operators stand by helplessly as families go into arrears and accounts payable stretch to 180 days or more, negatively impacting revenues and operations.
By comparison, 69 percent of all those in nursing homes are under Medicaid, another 7 percent are on Medicare and 3 percent are on long-term care insurance. Thus, Medicaid, by default, has become the nation's largest funder of long-term care. It makes good business sense, therefore, for nursing home owners to learn more about Medicaid and stop chasing after private-pay patients, more than half of whom end up on Medicaid in the end.
The Myth of Partial Reimbursement
Many operators also seek private-pay patients because they want total reimbursement for costs and often believe Medi-Cal/Medicaid only partially reimburses. But the truth is that, once a patient is approved for care, Medicaid pays 100 cents on the dollar for patient needs while in the facility. That includes medications, speech and physical therapy, personal items such as diapers and equipment such as specialized beds. Reimbursement continues for as long as the patient needs care.
Yet, the experience of most operators is exactly the opposite. The Milwaukee-based accounting firm BDO Seidman recently found that Medicaid reimbursement shortfalls average $10 daily per patient, or $3.5 billion nationwide. But it also can be argued that if operators understood Medicaid better, such shortfalls could be avoided. The crisis may actually be of their own making. After all, the rash of nursing home bankruptcies in 1998 were blamed on Medicare cutbacks then, when, in truth, the crisis was sparked by too-rapid expansion by many operators.
Today, confusion often exists between the per deim or daily bed rate under Medicaid, which varies state-by-state, anywhere from $40 to $118, and reimbursement for other medical care costs, which are added on top of the bed rate. These medical costs must be documented and paperwork submitted for complete reimbursement via annual Treatment Authorization Requests (TAR).
Under TAR, a patient's underlying physical ailment or condition is assessed once yearly. Each separate treatment, such as respiratory therapy, prescriptions, etc. are approved and payment continues uninterrupted so long as documentation is provided. By comparison, long-term care insurance typically provides only a lump-sum, daily reimbursement rate of $80 to $100, with no additional medical cost reimbursements.
Finally, unlike other payers, Medicaid payments continue until the patient leaves the nursing home. Long-term care insurance often ends after one, two or three years. Medicare has time limits on its benefits. Indeed, when all available payment options are examined -- Medicare, private-pay, long-term insurance -- Medi-Cal/Medicaid offers the most complete payment for patients and provides the most reimbursement for nursing home operators. (See accompanying chart).
The Myth of Medicaid as a Poverty Program
Confusion concerning Medicaid also arises because it provides healthcare for both poverty-stricken families and for older adults under a "needs-tested" program. Although Medicaid fraud generates headlines, the fraud rate has been estimated at only 10 percent of total applications, most of it arising from the low-income family portion.
Some operators also mistakenly believe that accepting Medicaid patients means facilities filled with low-income and the poor. Indeed, many middle-income families also incorrectly assume that the asset and income limitations under Medicaid preclude them from enrolling at all and that they must seek, instead, long-term care or other insurance programs. This notion is fostered, in part, by long-term care insurance companies that obtain paying customers from these same mid-income families and by legislators trying to keep government costs down.
But Medi-Cal/Medicaid and private insurance are not mutually exclusive choices. Legislators in California and in New York recognized this and created "partnerships for long-term care," enabling individuals to use both private insurance and Medi-Cal/Medicaid. In truth, Medicaid, has become the nation's prime long-term care provider, with various rules and regulations that must be met in order to receive benefits.
The Myth of Medicaid Paperwork
Medi-Cal/Medicaid does involve complex rules and requirements, and federal licensing standards are strict, requiring a higher ratio of skilled to non-skilled personnel. The licensing procedure itself can take up to three years to complete. And the billing process is more complex, requiring documentation to back up costs for services.
Still, an estimated 90 percent of all nursing homes are currently Medi-Cal/Medicaid certified, meaning that most nursing home operators already possess a tool that could substantially improve their bottom line but are simply not using it effectively.
Training in Medi-Cal/Medicaid
To use Medi-Cal/Medicaid effectively training is needed. Continuing education courses on Medicaid billing and regulations are routinely provided and numerous software systems exist to help with proper billing. Most administrators are skilled at running facilities, but don't possess expertise in this particular body of knowledge. They would do well to enroll in training, along with staff members that handle billing. Secondly, counseling should be provided when patients transition from hospital care to nursing home medical care to custodial care. Don't leave existing patients stranded with a "pay the fee or leave" choice when insurance plan benefits are exhausted or patients no longer qualify under their plan rules.
Too often, nursing homes follow a scenario in which the patient transfers from a hospital after treatment, expenses are picked up mainly by medical insurance, an HMO or Medicare policy until the patient improves or stabilizes and requires custodial care. At this point, reimbursement typically stops.
Nursing home administrators then inform the family that they must now pick up the bill. Panicked family members remove the still-ailing family member from the nursing home, exhaust themselves physically and financially providing care on their own and the patient relapses, repeating the scenario.
An admissions or case manager can cut short this negative scenario by meeting with the family and planning ahead to qualify for Medi-Cal/Medicaid which does reimburse custodial care. Because most nursing homes are not qualified to offer detailed financial counseling, referrals can be made to specialty firms that provide such service. Nursing home operators should exercise due diligence in referrals, choosing only those firms that are expert in their field, have been successful at helping families and have an excellent reference list.
Many corporate nursing home chains have found that Medi-Cal/Medicaid patients are the key to stability and higher profits. Small and independent operators can also improve operations in the same way, increase revenues and profits, and, at the same time, better assist families, which in the end is the ultimate goal of every operator.
Zoran K. Basich is president of NHS, a financial and estate-planning company located in southern California. Basich is an attorney who has worked with senior citizens for more than 22 years. He is considered one of the nation's leading experts on long-term illness care and federal benefits. He can be reached at 818-558-6755 or 800-773-6467, Ext. 107.