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Politics & Government

Should Monmouth County Sell Its Nursing Homes?

Officials considered seeking buyers 80-year-old Montgomery Care Center. But advocates for seniors worry about the lack of a safety net for patients many private nursing homes don't want to serve.

Built on hillsides, near streams, or in other picturesque locations, county-run nursing homes once stood as monuments to local governments’ ability to care for people in need.

But that was long ago. Now they stand as targets. New Jersey’s county-owned nursing homes routinely operate at multimillion-dollar deficits that make it more and more difficult for county executives and freeholders to fulfill campaign promises to hold the line on taxes. And the fiscal outlook for the facilities continues to worsen with ongoing cuts in Medicaid and new state-imposed budget restrictions.

Meanwhile, the number of private-owned nursing homes in New Jersey has grown in recent decades to more than 300, and almost all of them have vacant beds. Increasingly, government officials are opting to leave the financial challenges of the nursing home business to private operators.

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During the past 15 months, Mercer, Salem and Cumberland counties all decided to sell their nursing homes. Meanwhile, officials in Monmouth, Bergen, Sussex and Union counties are weighing whether to put their facilities up for sale.

In Monmouth County officials considered selling the county's John L. Montgomery Care Center before opting in early February to delay a decision on a sale.

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John L. Montgomery Care Center was a welfare hospital when it began operation in 1930. The county spent $11.2 million to operate its 156-bed Montgomery center in 2011, according to the county budget. Its revenues came in $2,742,856 short of expenses, according to William Heine, a spokesperson for Monmouth County. Montgomery, which mainly provides care for people with disabilities, stands to lose $812,000 in Medicaid in 2012, according to the New Jersey Association of Counties. (Monmouth is not considering a sale of its other nursing home, the Thompson center in Wall which mainly has elderly residents. It also ran a $2.7 million deficit last year, according to the county.)

When discussion of privatizing Montgomery came up in July 2011, over 100 county employees, patients and family members of patients attended a meeting of the to voice their opposition to any potential sale. The board unanimously approved a resolution seeking private sector proposals for the facility at the time, though members indicated the vote to seek bids did not mean a sale would occur.

COUNTY NURSING HOMES: THE ULTIMATE SAFETY NET?

In recent decades, county officials in New Jersey came to view their nursing homes as safety nets, places where folks who had little resources could get the care they needed. On average, four of every five residents at county nursing homes pay for their stays with Medicaid, the health insurance for people with low incomes, according to the state county association. New Jersey requires that nursing homes reserve a minimum of 45 percent of their beds for Medicaid clients and experts say that about 60 percent of all New Jersey’s nursing home residents are on Medicaid.

By taking percentages of Medicaid recipients that are higher than the state average, county nursing homes have put themselves in a difficult financial position, officials said. That’s because Medicaid pays the nursing homes less money than what it costs them to provide the care. On average, Medicaid payments to New Jersey nursing homes are $34 per resident per day lower than the actual costs, according to officials at LeadingAge New Jersey, the trade group representing nonprofit nursing homes in the state.

That $34 difference might not sound like much, but it would amount to about $2.5 million in lost revenue at a nursing home with 200 residents over the course of a year. In some cases, private insurance pays $100 per resident per day more than what Medicaid does, officials said.

Across New Jersey, county nursing home officials say they are trying to increase their numbers of clients with private insurance and or Medicare, which pays at higher rates. But changes in nursing home populations are something that comes slowly.

In wrestling with their nursing homes’ futures, county officials say they must balance their financial obligations to an increasingly overtaxed public with the facilities’ traditional role as a safety net for vulnerable senior citizens and people with disabilities. Talk of sales inevitability evokes emotional appeals to county officials from nursing home residents, family members and nursing home employees.

THE CHOICE: SELL OR BREAK EVEN

The choice for county officials—and the taxpayers who elect them—seems to be clear: either sell the homes to private companies, or find a way to make them profitable.

Mercer County took the first option, reaping $7.5 million when it sold its nursing home to Ocean Healthcare LLC in November 2010. Mercer officials were looking at a $7 million shortfall at the facility if they kept it in 2011. They calculated the sale provided a $15 million benefit to taxpayers.

But selling the homes to a private company may not be easy. Other counties considering selling their nursing home are looking at some daunting numbers.

  • Bergen County’s 110-bed center in Rockleigh cost about $13.5 million to operate in 2010 and brought in about $9.7 million in revenue, resulting in a $3.8 million deficit. The numbers for 2011 aren't official yet, but preliminary indications are that the shortfall grew to $4.5 million, officials said. The gap could get even larger in 2012, especially after the state cut about $300,000 in Medicaid payments.
  • Sussex County is projecting a $1 million deficit at its 102-bed Homestead nursing home, which has an operating budget of about $10 million. Last year, the Sussex County’s total tax levy was $77 million, meaning the projected deficit for Homestead would equate to about a 1.3 percent tax increase. One of the factors confronting Sussex officials is a $414,000 loss in Medicaid payments.
  • Union County in 2010 reaped $39 million in revenue from the 300-bed center at Runnells, more than enough to cover its budget line item of about $37.8 million in expenses. But that budget line item did not include about $10 million in employee benefits and another $4.6 million in indirect costs. In reality, Runnells’ deficit that year was close to $13.5 million. That’s just about the size of the $13.8 million increase in the county tax levy from 2010 to 2011. Runnells is expected to lose $792,000 in Medicaid funds in 2012.

CAN A COUNTY-RUN HOME MAKE MONEY?

Instead of looking for a private buyer, Morris and Middlesex counties have taken the more difficult path, trying to make their facilities profitable.

Morris County officials have been trying to bring down the deficit at Morris View for more than five years. Once licensed for more than 400 beds, the facility in Morris Plains is down to 283, a reduction that has helped trim the bottom line.

“If you don’t watch the bottom line, it becomes a big political issue,’’ said Frank Pinto, Morris County’s director of human services, the department that oversees Morris View nursing home.

“Over the years, counties didn’t have the attitude that they were running a business,’’ with respect to nursing homes, said Cathy Engler, the administrator at Morris View.

In 2011, Morris View’s line item budget expenses, like salaries and operating costs, exceeded revenue at the facility by $1.9 million, according to data provided by Pinto. But those numbers do not include employee fringe benefits and other indirect expenses, such as debt payments. Exact numbers were not available from Morris County, but those expenses likely add several million dollars’ worth of red ink to Morris View’s bottom line.

Morris County has hired Premier Healthcare Resources, a private management firm, to operate its nursing home more efficiently. Under Premier, Morris View is outsourcing various services that used to be performed by county workers, including security, housekeeping, social work and occupational and physical therapy.

Moreover, Premier has overseen the creation of a brand new 15-bed sub-acute rehabilitation unit at Morris View. The sub-acute beds are covered by Medicare and promise to produce more revenue. Pinto said the county is projecting between $500,000 and $2 million from that the program in 2012, depending on how quickly it catches on.

Officials in Morris County say they believe the cost reductions engineered by Premier will help them avoid the question of whether to sell Morris View.

MIDDLESEX: EVEN MORE AMBITIOUS THAN MORRIS

Middlesex County's approach is even bolder than the one being tried in Morris—borrowing $47 million to build a new public nursing home in Old Bridge in addition to the one it operates in Edison. Moreover, Middlesex has set a goal for its Old Bridge center that no other county nursing home in New Jersey has managed to achieve—to break even.

“Philosophically, we feel very strongly that’s where we’re going,’’ said Frank Damiani, the administrator who oversees Middlesex County’s two facilities.

The new 180-bed nursing home in Old Bridge looms as New Jersey’s great experiment when it comes to the bottom line. Damiani, its top administrator, acknowledges the goal of operating the facility at no deficit is an ambitious one.

One of the main reasons Damiani thinks that’s possible is because the brand new Old Bridge center was planned with operating efficiencies in mind. Many county nursing homes were built for other purposes, or have antiquated systems that drive up costs. The nursing home in Old Bridge, on the other hand, was designed to have pods of 15 beds with centralized nursing stations as part of a plan to minimize the number of staff members needed to care for residents.

Damiani said Middlesex has learned many efficiencies over the past two decades by cutting the deficit at Roosevelt Care Center in Edison from roughly $20 million to $7.5 million. “We tried to stay ahead of the curve as much as possible,’’ he said. “Other county facilities, they stayed at the status quo. They never renovated. They never changed. They never upgraded.’’

Damiani said Middlesex health officials already have achieved the “break even” mark at a 180-bed addition they opened at their Roosevelt Care Center Complex in Edison in 2005. That building benefits from having 60 sub-acute care beds and 30 beds for people with Alzheimer’s disease, both of project provide insurance payment rates.

The bottom line at Roosevelt also has been reduced through other cost-saving initiatives, like modernizations that allowed downsizing among the employees that oversee medical records and building boilers, Damiani said.

“We came to the realization we could run it efficiently and continue to be the safety net for Middlesex County,’’ said Damiani.

But other counties have trimmed expenses and still ended up putting their nursing homes on the block.

In rural Cumberland County, for example, Premier helped officials reduce their nursing home deficit from $2.5 million in 2010 to $600,000 in 2011, said county administrator Ken Mecouch. But the impending loss of another $500,000 in Medicaid payments in 2012 convinced the freeholders on January 24 to vote to sell Cumberland Manor for $14 million to LTC Management of Old Bridge.

“We got to the point where we felt we couldn’t hold up that deficit,’’ said Mecouch.

MONMOUTH: POTENTIAL SALE ON HOLD

Monmouth County’s $2.7 million deficit at its Montgomery center in 2011 is significantly less than what the burden was in Mercer County. But Monmouth officials have made it clear they mean business when it comes to cutting county expenses. In 2011, they managed to reduce overall spending by a fraction of a percentage point, an uncommon achievement in government these days, and kept their tax levy at the amount it had been the year before.

Several freeholders in Monmouth have said their goal is to continue to shrink the size of county government. For example, last year, the county hired a private for crossings that open and close to accommodate aquatic traffic. That move is supposed to save about $500,000 a year, Heine said. In July 2011, it looked as if the Montgomery center would be next. After discussion with union representatives, the county opted in February to focus on filling more beds at the care center, said Pamela Murphy, a Montgomery employee and union leader.

Montgomery has 174 beds, although only about 108 are occupied on an average day, said Heine. About 95 percent of Montgomery’s residents are on Medicaid.

Monmouth’s other nursing home, the Thompson center, had about 85 percent of its 135 beds filled, on average, and about 85 percent of those were Medicaid clients.

In the meantime, Monmouth has been working to trim jobs at its nursing homes by training some employees for multiple positions and by hiring private firms for such things as dining services.

But advocates for county facilities worry that relying entirely on private-run homes, would not guarantee service to all. They warn that the impact on clients would not come overnight, but instead would take place gradually as fewer and fewer Medicaid users are admitted.

“Yes, there are open beds, but many of these (private) facilities are finding ways not to take Medicaid patients,’’ said Middlesex’s Damiani. “A private company needs to make a profit. We’re a safety net that can provide these services without making a profit.’’

If county nursing homes continue to be sold to the private sector, Morris County human service director Pinto said, “Eventually, there’s going to be people who have no place to go.’’

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