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LTC Bullet:

HCFA Tells States to Prepare for Looming Crisis

Friday May 21, 1999


Earlier this month, Sally Richardson, Director of the Health Care Financing Administration's (HCFA) Center for Medicaid and State Operations, warned state Medicaid directors that several nursing home chains reporting significant financial difficulties may close or at least withdraw from the Medicare and Medicaid programs.

Ms. Richardson's May 7, 1999 letter, reprinted below, is more evidence that a growing number of nursing homes are struggling to survive on insufficient public financing. This is not academic. Ms. Richardson's letter describes quite starkly how states must prepare to protect publicly financed patients from the negative consequences of a nursing home's closure or financial decline.

Unless public policy changes to promote more private financing of long-term care, nursing homes which rely on inadequate Medicare and Medicaid reimbursement for the bulk of their financing will continue to invite the financial peril Richardson describes.

Ms. Richardson's letter is reprinted below:

May 7, 1999

Dear State Agency Director:

As you probably know, several national nursing home chains are reporting significant financial difficulties. While we hope that these organizations will see their way through these difficult periods, we are nevertheless concerned that the quality of care residents receive in chain facilities citing financial pressures be protected. Additionally, if financial difficulties persist, it is possible that some facilities may decide to withdraw their participation in the Medicare or Medicaid programs. As you may be aware, a situation like this arose in Texas recently and both HCFA and the State faced a tremendous challenge implementing new management, and virtually simultaneously, helping assure the residents of 13 nursing homes of the continued quality care they deserve.

For these reasons, we are asking that you pay particularly close attention to these situations should they develop. In particular, we want to be sure that resident health and safety are protected despite the financial decline of any nursing home or hospital organization. States should have adequate plans to assure a smooth transition to State receivership or that sufficient other resources exist to care for these residents.

To focus our collective thinking on this issue, we want to remind you of the plans and processes you must have in place and up to date:

o Contingency plans to handle closures of multiple nursing homes or hospitals in the event they should occur.

o A process to identify the availability of beds or alternative resources that can be drawn upon should the relocation of residents become necessary.

o Consideration of the use of revenues from collected civil money penalties to help underwrite transition costs of relocating residents should that become necessary.

o A review of state receivership laws to better prepare for new facility management should it become necessary to invoke these authorities.

o Development of plans to assure that any potential changes in facility management occur smoothly. For example, States should be thinking of what measures they might take to assure residents and their families that care will be provided in a manner consistent with residents' health and safety needs.

o Development of plans to assure that any resident relocation or facility management change is coordinated with the Ombudsman Program.

We greatly appreciate your prompt attention to this matter. Our regional office staff will follow up with the individual state survey agencies to discuss the contingency plans in more detail. I look forward to our continued collaboration as we ensure that our beneficiaries receive the quality of health care they deserve.

Sincerely yours,
Sally K. Richardson