Shutdown threat highlights thin financial margin for nursing homes

Doris Fevold and Sue Nelson
Doris Fevold, 89, (left) talks with Parkview Home Social Service Director Sue Nelson (right) about a possible state shutdown. Fevold is not worried about the situation. She says, "The government does some crazy things, but in the end, they come around to it and do the right thing."
MPR Photo/Lorna Benson

Nursing home officials in Minnesota are breathing a little easier now that Gov. Mark Dayton wants to include nursing homes in a list of essential state services that should be paid if the government shuts down July 1.

But they won't know for sure until a court takes the matter up Thursday, and the issue highlights just how thin the financial margin is for many nursing homes. Many rely heavily on state Medical Assistance payments, operating check-to-check with few or no reserves to bail them out in an emergency.

"We still feel that we have some significant uncertainties ahead and are still advising our members that we need to prepare for the possibility that there could be a shutdown without payment," said Gayle Kvenvold, president of Aging Services of Minnesota. The organization represents more than 700 care providers in the state, including nursing homes.

More than 60 Minnesota nursing homes are at risk of closing because they have negative operating margins of 5 percent or more, according to a recent audit of the state's nursing homes. That's about one out of six. The audit was done in 2010 by LarsonAllen on behalf of the Long-Term Care Imperative, a partnership between the state's two largest industry associations — Aging Services and the Care Providers of Minnesota.

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Gil-Mor Manor, a nursing home in Morgan in southwestern Minnesota, is not among that group. But the 35-bed nursing home doesn't have anything to spare either.

"Within this industry and having your rates frozen, it's been very difficult to save money," said Jim Broich, part-time administrator at the non-profit Gil-Mor. "It's just a struggle year after year."

About half of Gil-Mor residents use private insurance or their own money to pay for their stay. But for the other half, Gil-Mor relies heavily on Medical Assistance — the state's Medicaid program.

Gil-Mor Manor
Gil-Mor Manor in Morgan, Minn. doesn't have enough reserves to make it through one payroll if the state's Medical Assistance payments stop on July 1. The nursing home would have to draw on its $50,000 line of credit with a local bank, but that money probably wouldn't be enough to make a second payroll payment later in the month.
MPR Photo/Lorna Benson

For the past couple years, Gil-Mor has had a tougher time stretching its dollars due to a state freeze on nursing home rates. It was also required to pay $20,000 to remove 30-year-old carpet from its hallway walls because the nursing home didn't have documentation to prove that the carpet had been treated with fire retardant.

As a consequence, Broich has very little savings to tap in an emergency.

"We do have some money in a reserve account, but I believe right now it's probably in the neighborhood of maybe $30,000 dollars, which would not even meet a payroll for us," Broich said.

If he had to, Broich could tap at $50,000 line of credit from his bank, but that would only buy him an additional two weeks of payroll.

Broich hasn't talked with his employees about the state budget standoff because he's hoping the Ramsey County District Court will agree with Dayton's request to pay nursing homes during a shutdown.

While Broich has not suggested that Gil-Mor or his other nursing home in nearby Belview would stop caring for any of their Medical Assistance residents, that thought has crossed the minds of some of his residents.

Doris Fevold, 89, lives at Parkview Home in Belview. She jokingly told her daughter recently that she might end up on the street.

"And she said, 'Well mom, you've still got a room here.' So, I'm not too worried,'" Fevold said.

Actually, Fevold is convinced that lawmakers have no intention of allowing the government to shutdown.

"The government does some crazy things, but in the end, they come around to it and do the right thing."