Nursing homes call budget cuts threat to care

THE BALTIMORE SUN

The officers and directors of the Health Facilities Association of Maryland, the state's primary trade association for nursing homes, met all day and into the night Tuesday to address what they say is a threat to the quality of care of their patients and the financial viability of their members.

The association, which includes 140 of the 220 private nursing homes in Maryland, was reacting to the budget cuts announced last month by the Schaefer administration. On an annual basis, the cuts will reduce state Medicaid payments to the industry by $10.4 million.

The amount may seem small compared with the total of $127 million in cuts the state Board of Public Works approved the week before Thanksgiving. Of that amount, $44 million came from the Department of Health and Mental Hygiene, and of that sum, $28 million was cut from in the state portion of Medicaid.

But Fred Chew, executive director of the Health Facilities Association, said that at the meeting last week, "everybody there said that they thought this was going to have a devastating effect on the quality of care."

On a different level, the cuts are a case study in how the state, accustomed to divvying up growing budgets year after year, is handling the challenge of the first major budget cuts since 1982. The nursing home group thinks the administration is failing the test.

Rather than looking for short-term, temporary cuts in spending, cuts that easily could be restored to the industry when the economy recovers, the health department adopted most of the recommendations that were in a Department of Fiscal Services report from this summer, said Mr. Chew. Fiscal Services called for permanent changes in health department regulations and, therefore, permanent cuts.

The conflict centers on the nature of budget decisions in Annapolis. Once a level of funding is reduced in any budget year, it is difficult to restore that funding later, even when the state is running a surplus.

It is much easier to pass an entirely new program than to increase funding for an old one, except for inflation adjustments.

The nursing home group wants the health department to put a "sunset" date on the regulations, so that in a few years, when the economy may have recovered, the rules will expire and the Medicaid funding will return to its previous levels.

Nelson Sabatini, deputy health secretary, acknowledged that the nursing home industry cuts came out of the Fiscal Services report. Faced with an estimated $178 million budget shortfall this fiscal year, the administration must make some wrenching choices, Mr. Sabatini said. Fiscal Services has projected a deficit as high as $300 million if no steps are taken.

"While the choices . . . were made with a rationale and thought behind them," Mr. Sabatini said, "they also were made very quickly."

But he added that he has not committed himself to making the regulations permanent. "I am willing to consider the possibility of putting some kind of a sunset on the regulations," he said, "and unless the nursing home association has the capacity to crawl inside my brain, I don't know what basis they have" for assuming that his decision already has been made.

The Fiscal Services proposal called for what would have amounted to $8.4 million in cuts on an annual basis. Mr. Sabatini added $2 million to the amount by disallowing the reimbursement for legal fees and membership dues in the nursing homes' trade group.

The cuts come at a particularly bad time for the industry, Mr. Chew said, because they follow two years of reductions in payments to the industry that came from the state's general fund, and they coincide with new federal regulations on training and quality of care that will add to the companies' operating costs.

"They really were not rational," Mr. Chew said. "They just decided to make the cuts of the last [few] years permanent."

He said his group is adopting a three-pronged strategy to fight the cuts:

* Survey its membership to document how the reductions will affect quality of care.

* Talk with Mr. Sabatini in hopes of making the cuts temporary.

* Lobby the members of the legislature's Joint Committee on the Medical Assistance Program, which last week endorsed the Fiscal Services proposals in a draft report.

Delegate Charles J. Ryan, D-Prince George's, co-chairman of the joint committee, said the panel never intended the proposals to be permanent.

The legislature and the health-care industry worked out a complicated system for Medicaid reimbursement in 1980, Mr. Ryan said, a system that should not necessarily be changed without sufficient study and debate.

"I would think that we would not want these things to be considered permanent," he said, "because if [good] times come back, we would not want to harm what we consider a good industry."

The joint committee's draft report, issued after Mr. Sabatini announced his department's cuts, says, "The Committee endorses the Department of Fiscal Services recommendations and requests the Department of Health and Mental Hygiene to implement them as soon as possible."

Mr. Ryan, however, said the draft is "just a summer report" and "has no weight to it."

NB Mr. Sabatini said he welcomes any suggestions from the nursing

home industry, and from others hit by budget cuts, for less painful alternatives that would save the same amount of money.

But he said there is an argument to be made in this case for making the regulations permanent. "The cost and growth of this program is accelerating at an incredible rate," Mr. Sabatini said.

Eight or nine years ago, there were 365,000 people eligible for Medicaid coverage of all types in the state, he said. The program costabout $450 million at the time.

In July 1989, when his department began creating its fiscal 1991 budget, the number of people eligible was slightly lower, but the cost had soared to $1.2 billion. Since then, the estimate of the number of Medicaid patients has grown to 377,000 and probably will be higher before the year is out, Mr. Sabatini said.

"Even in the best of economic times we're going to look at ways to control this growth," he said.

A broader question the projected deficit is forcing on every state agency is whether the programs they fund can survive without their current level of money or whether there is any fat to be trimmed.

"Clearly, this is going to reduce the revenue stream into the nursing home industry," Mr. Sabatini said. "And if doing so reduces or impairs either access or quality of care, then that's a very real concern that we have to address."

Mr. Chew said his members will be able to document the decline inquality of care resulting from the cuts, and from the general decline in state and federal funding for the needy. "I'm thankful I'm not old, poor, handicapped or black," he said. "It's the wrong time to be any of those."

But Mr. Sabatini asked, "What if the impact is to reduce profit margins, and we are prudent buyers? [The debate] is going to be ongoing for some time, and it's the very debate that's going on in my mind while I try to make this decision."

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