03/18/2010 05:12 am ET | Updated May 25, 2011

State and Federal Cuts May Hit New York's Nursing Homes

"I said reach up," Marshall Swiney sings out over Corcoran Holt's steady drumbeat. Ten out of the 12 seated seniors facing him gamely raise their hands. Swiney, still singing directions, goes over to one of the culprits refusing to move. He lifts her hands up and from that point on she does all the exercises with gusto. As the group switches over to reaching forward and pulling back, another wave of people - some in wheelchairs and some with walkers - enter with the help of a few staff members.

Morning Rhythms has gotten off to a slow start today (it is the Monday after Thanksgiving, after all), but by the time the 45 minutes draw to a close, over 20 residents of the Greater Harlem Nursing Home and Rehabilitation Center are lifting their knees up and leaning over to touch their toes, following Swiney's stream of sung instructions. He walks around, all smiles, gently encouraging his charges to push themselves just a little further.

Swiney leads a pack of regulars through this workout every morning, Monday through Friday, as part of a state grant; it's the only regular exercise program offered at the facility. He is a strong proponent of exercising every day to keep healthy and says he's seen his calisthenics be particularly helpful for patients with dementia and stroke victims. "It's good for your soul," he tells everyone repeatedly toward the end of the session.

But with looming cuts at both the state and federal level, Swiney's holistic medicine might have to be scaled back to just two or three days a week, said Zakelma Batson, director of recreation at the home. It would be just one of the tough calls Greater Harlem fears having to make in the near future.

The House of Representatives health care bill would cuts Medicare by over $400 billion. And, while in the Senate bill nursing homes would be exempt from the cuts, there are still other causes for concern, like annual productivity cuts that would almost certainly cause nursing homes to lose money, experts say.

The problem is only augmented in New York where, in an effort to control ballooning health care costs, the state is poised to decrease the Medicaid budget by $471 million. The state currently contributes about $15 billion to a total annual Medicaid budget of around $45 billion.

On the federal level, bills in both houses also call for more transparency in nursing homes, background checks for all employees and additional steps to guard against elder abuse. If adopted, they'll be the first nursing home reforms passed in over 20 years.

These measures though, won't change daily operations at Greater Harlem; they take a back seat to budget cuts in CEO Tim Foristall's brain as he walks the halls of his facility. It looks, as he freely admits, institutional, like a hospital instead of a nursing home with its long hallways of tiled floors and florescent lighting. It's one of the many things he's trying to fix about the place - and with the help of a $25 million state grant at least that dream will most likely come to fruition. He hopes to renovate the entire space, adding a library, café and several small gathering areas.

But being able to keep his current staff? That's looking much less likely.

The picture for nursing homes in New York is already grim. In the last 32 months, nursing homes have lost over $1 billion through a series of six state budget cuts, said Scott Amrhein, president of the Continuing Care Leadership Coalition (CCLC). Nursing homes used to operate on thin margins, reporting total losses of about 2 or 3 percent annually. But this year, CCLC is projecting average losses of 11 percent. "We're seeing a real weakening in the bottom lines," Amrhein said, noting that in recent years, a home closes every two months.

If federal and state legislation were to go through, about 25 percent of the nursing homes in New York State would have to declare bankruptcy, estimated Foristall. He's been working late nights, crunching the numbers and looking for ways to keep his own establishment open. State Medicaid cuts alone would cost the facility $1.5 to $2 million.

The Greater Harlem Nursing home was built in the 1970s. The city was bankrupt and the community had to raise all the money. It was the first black-owned nursing facility in the city, Foristall said, adding that it is still heavily community based. "To allow a facility like this to close would be devastating," he said. "Where are these people going to go?"

Greater Harlem is the only nursing home in Central Harlem. There are a couple somewhat nearby to the south and a handful a subway's ride a way in the Bronx, but visiting relatives at other facilities would be more difficult for community members. "It's not pretty at all," Foristall said.


Like most non-profit nursing homes, Greater Harlem receives most of its money from Medicaid, which almost all of its 200 residents are on. But Medicare reimbursements are even more critical - that's the only place where homes have the chance of turning a profit. Or at least breaking even.

Medicaid is mainly used by the permanent residents at Greater Harlem - about 175 people, Foristall said. Medicare, however, covers short-term rehab patients for 100 days. The first 20 days are covered completely. After that, the program pays for everything except $133.50, meaning some people use both programs.

A complicated formula based on the medical problems and needs of each resident is used to determine how much reimbursement Greater Harlem gets from the state and federal governments.

For Medicare, each person is evaluated individually to determine how much care they need, and the nursing home is paid somewhere between $300 and $700 a day. For Medicaid, all the patients are assessed and assigned a score, but the information is combined and an averaged amount per person per day is allocated.

For each though, the sicker the patient or the more help they need doing daily activities, the more money the facility gets. Therefore, competition runs high to get the patient with the most problems, said Carlotta Brown, admissions director at Greater Harlem.

She receives stacks of patient reviews from hospitals every day and scans them to find the patients that need the most care. But she knows every other nursing home in Manhattan is doing the same.

"It's a rat race," Brown said. She thinks that looking for only the worst patients is a "terrible" problem resulting from the current health care system, but if cuts go through, these patients will only become more desirable.

New York's Medicaid program has underpaid nursing homes to a greater extent than any other state for years running, ranging from being $16 to $26 short a day, Amrhein said.

So, while Greater Harlem receives $225 a day per resident, it spends $240 to $250 a day on each person, Foristall said.

With the facility losing money on Medicaid patients each day, Medicare patients, although they make up a small portion of the population, are absolutely critical. Their reimbursements provide the extra cushion to cover what Medicaid misses. If state cuts increase difference between payments and money spent, Greater Harlem simply can't afford for its Medicare reimbursements to dwindle as well.

And while the exact fate of the relationship between Medicare and nursing homes is unknown, experts in the industry see warning signs of future harm.

Although on the surface the Senate bill would exempt nursing homes from reductions to the total Medicare program, it may still build in new decreases each year. The bill operates on an assumption that nursing homes become more productive year after year. While they won't get less money this year, an annual cut of 1.3 percent, attributed to productive gains will be applied in the future.

The figure is based off of "general industry" in the United States. Applying the standard to nursing homes "is kind of unfair," Amrhein said. "It's over-cutting nursing homes. Productivity just doesn't occur at that rate."

Medicare rates have also, in the past, increased each year based on a market basket index, which essentially keeps the rates in line with inflation. At the federal level, "they want to freeze the market basket for the next couple years," said Patrick Cucinelli senior financial policy analyst at the New York Association of Homes and Services for the Aging. "It would have a significant impact."

For 2010, there is already a cut of 1.1 percent to the market basket, meaning the net increase in Medicare payments will only be 2.2 percent. If the basket were frozen, then, reimbursements would not bump up by the 3.3 percent increase they need to keep up with inflation.

Some provisions in the bill are more ambiguous in their effects, but are worrisome nonetheless. "One thing that they have looming out there is an independent Medicare advisory panel that will be charged with finding savings from the nursing home sector," Amrhein said, calling it a "cause for concern."

Additionally, the Senate bill discusses bundled payments, in which instead of an individual paying nursing homes, home care and hospitals separately, the bill would be consolidated into one payment.

But if the hospital was the recipient of that payment, "could it choose how to pay a nursing home?" Amrhein asked. It's not clear if bundled payments would necessarily be bad, he said, but "nursing homes would have much less ability to know what they would be paid."


Whether it hits immediately or in a few years, the forecast for Medicare payments to nursing homes looks troubled at best. Between getting slammed on the state level with Medicaid cuts and predictions the federal government will pick up less of the tab for Medicare patients, some things at Greater Harlem - and most nursing homes - are going to have to change.

As 75 percent of the facility's expenses are labor related, trimming the staff is the easiest way to trim the budget, Foristall said, estimating he would have to get rid off 20 to 25 positions.

The home has 225 full-time employees, over 100 of whom are in the nursing department. The bulk of layoffs, between 15 and 20, would come from there. Food service, the second largest department, would also be hit, and a few clerical positions would be eliminated, he said.

But take away employees and the quality of care will suffer, he predicts. "Part of healing and getting better and staying better is human interaction," he said. Layoffs wouldn't mean that residents won't get their medicine on time. But it would mean that they would get less one-on-one interaction with staff and fewer recreational programs.

Greater Harlem offers a steady stream of programming throughout the day from Morning Rhythms to movie matinees, from a writing club to manicures and from bingo to violin performances. Many of the in-house programs would be able to survive, but anything that brings in outside entertainment would be the first to go, said Batson, the director of recreation.

"If the cuts do go through, my department is going to get hit the worst," she said.

The actual effect of staff cuts will never be easy, if possible at all, to quantify, but Foristall is certain it will have a distinct negative influence. With the fewer programs and less interaction, "will people decline quicker?" he asked. "You bet they will."


While the impact of the health care bills on Medicare won't be settled until the final bill is signed into law (or even for years after), at least one part of the reform looks certain at this time: the bill will include provisions to try to increase transparency in nursing homes and to decrease elder abuse, such as mandatory background checks for facility employees.

The proposed Patient Protection and Affordable Care Act, which includes the Elder Justice Act and the Patient Safety and Abuse Prevention Act, would take steps such as requiring nursing homes to disclose information about owners, operators and financers, improving the consumer complaint process and adding new information to Medicare's Nursing Home Compare website.

But Amrhein said that the measures are mostly directed at for-profit institutions; most places, including Greater Harlem, won't change much about the way they operate.

Cucinelli also questioned the necessity of the reforms. "Everything that nursing homes do is already a matter of public record in one form or another," Cucinelli said. "It would be redundant if anything."

In New York, background checks are already required for all non-licensed personal who have the possibility of having direct contact with the residents. Licensed personal already have undergone a check, Cucinelli said.

Furthermore, many of the transparency requirements included in the legislation are already adhered to in the state, Amrhein said.

"I'm not sure there could be any more transparency than what we have," Foristall added, noting that his facility could be visited by officials from the local, state or federal level on any day.

But Victoria Rizzo, an assistant professor at Columbia University's School of Social Work, thinks the proposed reforms are a much needed first step. She believes they will add a degree of transparency between homes and the general public to allow them to make a more informed choice. "They make think they're being transparent because they're reporting to the state," she said, but state agencies don't always make that information readily available to the public.

Right now, Medicare's Nursing Home Compare ranks nursing home on a scale of one to five stars. The grade is determined based on a mix of health inspections conducted by the state and self-reported information about nursing home staff and "quality measures," which include prevalence of things like bedsores and physical restraints.

Greater Harlem was given one star this year, along with one other New York home. Seven facilities in the state were awarded five stars, three received four and five were ranked average at three stars. Twenty-two percent of nursing homes nationwide are ranked as one-star facilities.

But the star rating system has its problems. For instance, it counts permanent and temporary staff members equally, even though the care they are able to give most likely is not. And even homes on a "Special Focus Facility list," which have had so many citations they are inspected twice a year, can get a three-star rating, according to an AARP bulletin.

Rizzo believes, though, that the main problem with the system is that the information nursing homes report are synthesized at all rather than being directly available to the public. She thinks people should be able to easily find information on things like the average length of stay in a nursing home or number of falls per month.

Foristall, who only arrived at the facility in February - two weeks before the last inspection - is not a fan of the star system either and admits it's complicated to interpret. He also isn't worried about the transparency measures - or even the budget cuts - stopping the facility from improving its ranking next year though.

"I expect dramatic changes," he said. "I've been making inroads. A lot of it is just getting the right people in the right places."