Outdated payment formula forcing facilities around the state to close, industry says
By PETER HANCOCK
Capitol News Illinois
phancock@capitolnewsillinois.com
SPRINGFIELD — Nursing home industry officials are urging Illinois lawmakers to increase the rates they receive from the state’s Medicaid system, arguing the current rates are outdated and are forcing many facilities around the state out of business.
“We've expressed our concerns that closures will happen. We've been saying that for years, and it's actually happening now, and it will continue to get worse,” Jonathan Aaron, co-president of the industry lobby group Health Care Council of Illinois, said during a recent interview.
The Illinois Medicaid program pays for the care of approximately 55,000 residents who live in 738 nursing homes, also known as skilled nursing facilities, according to the state Department of Healthcare and Family Services.
Nursing facilities are paid a flat rate per day for each Medicaid resident. The rate varies for each facility and is based on three components: nursing costs, capital costs and support costs.
In 2022, Gov. JB Pritzker signed legislation addressing the nursing cost component of the formula. That legislation was expected to provide an additional $700 million a year into nursing homes in the form of incentives for them to raise wages for nursing staff and increase their staffing levels.
The capital component of the formula is intended to reimburse facilities for costs like mortgage interest and asset depreciation.
The legislation now being considered in the General Assembly addresses the support component, which covers non-clinical, administrative costs such as food, laundry, housekeeping, utilities, maintenance, insurance, dietary and general office services.
“The challenge with this is, it is based on a snapshot in time, and the current support portion of the rate is based on 2017 costs,” Aaron said. “It’s no secret that costs have gone up exponentially over the past eight years. We simply can't keep up being that far behind in rightsizing what our reimbursement should be.”
Industry officials say the low reimbursement rates have led to at least 31 facilities in Illinois going out of business in recent years while one of the nation’s largest nursing home operators, Peoria-based Petersen Health Care, which operated facilities in Illinois, Iowa and Missouri, filed for bankruptcy last year.
The proposed legislation would give each facility nine years’ worth of inflation adjustment to the support services component of their rate structure, reflecting the increase in the consumer price index from September 2016 through September 2025.
That language is contained in Senate Bill 1606, sponsored by Sen. Dave Koehler, D-Peoria, and House Bill 2858, sponsored by Rep. Bob Rita, D-Blue Island. Both bills have attracted bipartisan support.
“It's basically a matter of trying to keep up with the costs,” Koehler said in an interview. “The current rates right now are all based on 2017 pre-pandemic costs. A lot has changed in terms of inflation today. So we're just trying to keep up with that and make sure that the nursing homes are getting what they need so we don't have any more closures.”
Although lawmakers are struggling with tight revenues this year, Koehler said the reimbursement increase can be accomplished without straining state resources. The increase would be paid for, he said, through the state’s nursing home bed tax — a tax levied on each Medicaid-funded resident day in Illinois nursing homes. The money generated by that tax is then used to draw down federal matching funds, which would then be used to fund the higher reimbursement rates.
“So in a sense, it is not really costing the state or DHFS any additional money,” Koehler said.
One question that will be on many lawmakers’ minds, however, is how long those federal matching funds will be available. Last week, the U.S. Senate gave its endorsement to a House-passed budget resolution that calls for potentially hundreds of billions of dollars in Medicaid cuts over the next 10 years.
Koehler, however, said he doesn’t believe the state should base its decision around concerns about what the federal government might do in the future.
“You know, the federal government under Trump has been so back-and-forth that who knows where it's going to land,” he said. “So I think we have to go forth with our best strategy and say, ‘This is what we think needs to happen.’ And if it doesn't happen, well then, we'll scramble after that. But I don't think we should stand by and just not do anything.”
Lawmakers are working this week to meet a Friday deadline for each chamber to pass most non-budget-related bills and send them to the other chamber.
Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.
