Funding for nursing homes up 25% after state increase

By: - December 6, 2023 4:41 pm
Director of the Executive Management Finance Office Steven Kohler (left) and Department of Human Services Secretary Shawnie Rechtenbaugh testify to the Joint Appropriations Committee on Dec. 5, 2023, at the Capitol in Pierre. (Makenzie Huber/South Dakota Searchlight)

Director of the Executive Management Finance Office Steven Kohler (left) and Department of Human Services Secretary Shawnie Rechtenbaugh testify to the Joint Appropriations Committee on Dec. 5, 2023, at the Capitol in Pierre. (Makenzie Huber/South Dakota Searchlight)

PIERRE — State funding for nursing homes is up an average of 25% statewide since the Legislature and Gov. Kristi Noem approved more money for them last winter.

When nursing home patients can’t pay for their own care, they go on Medicaid, which is a joint federal-state health insurance program for low-income people. For the care they provide to Medicaid patients, nursing homes’ reimbursements are calculated according to a formula that include occupancy rates, patient needs, and the time patients stay in the facility.

During the last legislative session, Noem and legislators approved 100% reimbursements for those costs. The move, which went into effect in July, was a reaction to 15 nursing homes closing across the state in recent years, in part due to insufficient reimbursement rates.

The Legislature sets reimbursement rates each year. Prior to the increase, the rate stood at 74.5%

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Mark Deak, South Dakota Health Care Association executive director, is hopeful the increase in funding will help nursing homes survive. In 2022, seven nursing homes announced they were closing. In 2023, only one has announced it will close so far (although three have closed in 2023 after previously announcing their closures).

“There certainly are facilities that continue to struggle, but it was a great step in the right direction,” Deak said.

Deak explained to South Dakota Searchlight earlier this year that a reimbursement rate of 100% still wouldn’t fully cover the costs of providers, because service costs aren’t updated frequently enough to address inflation and other factors.

“You hear the idea we’re getting 100% costs now through Medicaid, and that’s not technically the case. Actually it’s 100% of allowable costs, it’s a little over 92%,” Deak said.

During fiscal year 2024, the state pays about 45% of the Medicaid allowable costs and the federal government pays about 55%.

The higher reimbursement rate infused roughly an extra $49 million into nursing homes in the state.

The investments made last year boosted the average daily state Medicaid patient reimbursement rate in South Dakota from $212 to $259, Director of the Executive Management Finance Office Steven Kohler told the legislative Joint Appropriations Committee on Tuesday morning.

That increase in funding, Kohler said, will help nursing homes make more investments into their facilities as well as better hire and retain staff. The statewide occupancy level stood at 82.17% as of the end of November, according to the Department of Human Services monthly occupancy report. 

“We’re always going to need nursing homes in our state,” Kohler said. “… They would want to receive more people in their facilities but they don’t have enough funding to hire the people to serve those individuals. There are empty beds in the facilities because there are vacant positions.”

While other health care professions have recovered significantly from the pandemic’s impact on staffing, such as hospital nurses, nursing homes continue to struggle.

A graph presented to the legislative Joint Appropriations Committee on Dec. 5, 2023 shows the percent change increases at South Dakota nursing homes since reimbursement rates were increased this summer. (Makenzie Huber, South Dakota Searchlight)
A graph presented to the legislative Joint Appropriations Committee on Dec. 5, 2023, shows the percent change increases at South Dakota nursing homes since reimbursement rates were increased this summer. (Makenzie Huber/South Dakota Searchlight)

“There are folks that need long term care services in a nursing home but the nursing home can’t admit them because they don’t have the staff,” Deak said.

The funding increases will address that need, but there will be a delay before nursing facilities feel confident in the new funding amounts. Kohler believes it’ll take between six and 12 months to see an impact on staffing.

While the state saw 25% average growth in funding, not all facilities received the same increased amounts. Most facilities, 22, received between 20% and 30% increases, though some received less than 10% increases and some saw over 60% increases.

Occupancy “dramatically drives” state funding amounts, Kohler added.

Kohler said he’s confident that with the rate increase approved by the state last year that nursing facilities are in a better position to serve South Dakota residents.

Gov. Kristi Noem announced in her budget address Tuesday afternoon that she wants to increase state aid to health care providers by 4% in the 2025 fiscal year budget.

“Given the fact that we have moved to 100% allowable costs, the idea now is to keep up with nursing home inflation,” Deak said. “The nursing home inflation rate tends to track higher than the general inflation rate.”

Rep. Chris Karr, R-Sioux Falls, pressed Kohler during Tuesday’s Appropriations Committee meeting to understand how nursing homes are each being funded differently, calling nursing homes “quasi-government facilities that are operating based on government assistance.” Karr noted that two nursing homes near each other had significantly different costs to house a resident.

“I think if we do use Medicaid and taxpayer dollars, then we have to have the ability to step in and say, ‘How are you using these? How are you operating?’ So it’s not our job to make sure that somebody is profitable. That’s their job,” Karr said. “They can decide whether or not to take these Medicaid patients. If we’re paying a huge difference, we need to understand exactly what’s driving their costs in the specific areas.”

 

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Makenzie Huber
Makenzie Huber

Makenzie Huber is a lifelong South Dakotan whose work has won national and regional awards. She's spent five years as a journalist with experience reporting on workforce, development and business issues within the state.

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