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Is privatization the cure?

Counties push to sell public nursing homes, citing budget pressures



Contributing writer

William “Beaver” Watkins remembers how “it all went to hell in a hand-basket.”

Two years ago, the Washington County Board of Supervisors began to consider privatizing Pleasant Valley Infirmary, the county-owned nursing home in Argyle. Watkins, the Cambridge town supervisor, is among a minority of supervisors who’ve opposed selling the nursing home to a private company in a deal that could be finalized this month.

“It all started snowballing as soon as they decided to sell,” Watkins said. “Employees started leaving, the state started finding things wrong, and the whole thing just fell apart.”
Pleasant Valley has been in the headlines for several months since the state Health Department cited the nursing home for a series of violations, including errors in dispensing medicines to patients. County officials say the problems are largely the result of staff shortages brought on by an exodus of longtime employees. As the facility’s sale approaches, the county has had to pay extra to fill nursing positions on a temporary basis through employment agencies.

Pleasant Valley has been a public facility since its birth in 1827, when it was known as the Washington County Poor House. Like other county-run nursing homes across New York, it was created to care for those who were no longer able to live independently – and who lacked the resources needed to pay for their own care.

But the county homes have become an ever-larger target for budget hawks in recent years. As Medicaid reimbursement rates have failed to keep pace with sharply rising medical costs, public nursing homes in many counties have posted progressively larger deficits that need to be covered by local taxpayers.

In Washington County, a study prepared for supervisors last year projected that Pleasant Valley’s annual deficit would grow to nearly $3 million by 2015. A majority of supervisors decided that the best way out was to sell the nursing home to private operator.


Statewide trend
A similar scenario is playing out in counties around the state. Across the length of eastern New York, at least a half-dozen other counties are considering or pursuing privatization of public nursing homes.

“This is a difficult situation we face,” said Thomas Wood, chairman of the Saratoga County Board of Supervisors.

This month, the Saratoga County board is expected to get the results of a $50,000 study of the financial situation of Maplewood Manor, the county-owned nursing home in Ballston Spa. Some county officials already have raised the prospect of privatization.

Costs exceeded revenues by more than $9 million last year at Maplewood Manor, and the gap is expected to be at least that large this year.

“The fact is that we cannot continue to sustain the magnitude of this loss, which is approaching $10 million,” Wood said.

The Saratoga County study is being prepared by Harris Beach, a law firm that caters to local governments. After the firm prepared a similar study for Ulster County, that county’s leaders developed to a proposal to privatize the 280-bed Golden Hill nursing home in Kingston.
Officially, the Saratoga County study is supposed to identify options regarding the future management and operation of Maplewood Manor.

“We’re looking forward to the results of that study to learn about the options available to us,” Wood said.

Around the wider region, Essex County supervisors voted in June to sell the Horace Nye Nursing Home in Elizabethtown to the Centers for Specialty Care, a private company based in the Bronx. The same company took over Fulton County’s nursing home earlier this year and is among those vying to acquire Orange County’s home. It also has reached a tentative deal to buy Pleasant Valley for $2.44 million.

In Warren County, a proposal to privatize Westmount Health Facility in Queensbury failed in 2009. But the issue could be revisited by 2014, when the home is expected to exhaust a reserve fund that has been covering its deficits.


Medicaid squeeze
The wave of nursing-home privatization is being spurred by a combination of tight county budgets and lagging reimbursement rates for Medicaid patients.

Medicaid is the largest payer for people who require long-term nursing home care, according to the American Health Care Association. By comparison, Medicare, the federal health insurance program for the elderly, only pays for nursing home care for a limited time after a hospital stay.

Critics warn that, by transferring public facilities to for-profit companies, the counties will reduce the availability of nursing home care for people who are the poorest and most vulnerable.

A 2007 study by the Center for Governmental Research, a nonprofit consulting group based in Rochester, concluded that county-owned nursing homes in New York serve as a safety net by admitting patients that other facilities are reluctant or unwilling to accept. The study estimated, based on the reports of nursing home administrators, that between 20 percent and 25 percent of county nursing home residents would not be served by other, private homes if the county facilities were to close.

Private homes, in other words, would be free to refuse admission to patients whose cases are deemed to costly or demanding, such as those with dementia or behavioral issues.
But because they accept a wider range of patients, county homes face higher costs, require more staff time, and receive less reimbursement than their private counterparts.
In some cases, county homes also see their Medicaid reimbursements reduced if they have a too many “lighter care” residents, whose more limited needs lower the average for a facility under Medicaid formulas. Lighter-care patients account for nearly one-third of those at Maplewood Manor in Ballston Spa.

“The cost per day here is almost double what we get from Medicaid,” said Diane Brown, Maplewood Manor’s administrator. County taxpayers make up the difference.
The Long Term Care Community Coalition, a statewide watchdog group formed after the nursing home scandals of the 1970s, described in a 2009 study how some lighter-care patients could suffer under privatization.

“Because facilities are paid higher rates for heavier care residents, there is a possibility that lighter care residents, those in the lower-paying categories who still need nursing home care, may not be attractive to nursing homes and will not get the care they need,” the group explained.


Bucking the trend
Not every upstate county is looking to get out of the nursing home business.
Rensselaer County’s 362-bed nursing facility at Van Rensselaer Manor is continuing unchanged as a county-owned facility, and officials in Columbia, Albany and Schenectady counties actually are discussing or pursuing investments in new buildings to replace their aging nursing-home facilities.

The work is already under way in Columbia County, where officials say they are in a unique financial situation when compared with many of their counterparts.

“It’s tough as reimbursement levels go down and the costs of benefits go up, but we’re maintaining it at break-even,” said Arthur Proper, administrator at Pine Haven Nursing and Rehabilitation Center in Philmont.

Proper said Pine Haven has not required operating subsidies from Columbia County taxpayers for the past two years. Ensuring the 120-bed facility is filled to capacity is one key element to ensuring its solvency, he said.

In 2008, when Proper first joined the staff, the home was at only 88 percent of capacity. That year, the county started a lengthy process of evaluating what to do with the center. Doing nothing, Proper said, was not a viable option because the current building needed to be upgraded.
A proposal to construct a new building in Valatie was rejected, and supervisors instead are pursuing a plan to put the new, 128-bed facility on the same property as the current one.
The new Pine Haven home is expected to cost $32.3 million, with the state picking up most of the tab. County taxpayers would have to cover up to $4 million, but that would be spread across a 20-year period. Proper said if all goes well, the new facility could be ready by 2014.


Unknown effects
There are more than 600 nursing homes in New York state, which basically fall under three categories: those run by private businesses or corporations; nonprofit homes often associated with religious groups; and county-run facilities.

At the time of the 2007 study by the Center for Governmental Research, county-run facilities accounted for about 10 percent of all nursing-home beds in the state. Patients entering the county homes, however, were two to three times more likely than patients at privately run nursing homes to depend on Medicaid from the first day of admission.

If many of New York’s county-run nursing homes wind up being privatized or closed in the next few years, the result could be fewer choices for some patients who need nursing-home care -- especially those who are poor.

But the trend toward privatization is new enough that little hard data is available. The Center for Governmental Research recently started a grant-funded study of the issue.

“The most significant thing is: We’ll look at the impact on counties that have made the decision to sell or to close their facility,” said Donald Pryor, the organization’s director of human services analysis. “We’ll look at what it has meant for the new facility owner, for county taxpayers, for [nursing home] residents and what it’s meant to employees and to what extent they were retained.”

The study is expected to be completed next spring.
“Nobody has really looked at this issue,” Pryor said. “There has been anecdotal information, but no one has really looked at what the actual impact has been. … One of the things we hope to look at are the counties who have made a decision, and whether that was the right decision. It’s an emotional issue, and too often decisions are made without factual information. We hope to provide the factual underpinnings.”

But the study’s results will be revealed too late to influence the decision making in Washington County. In June, the county Board of Supervisors approved a nonbinding deal to sell Pleasant Valley to the Centers for Specialty Care for $2.44 million, and a binding deal is expected to pass when it comes up for vote, perhaps as soon as this month.
Supervisors have opted to go ahead with a sale despite strong opposition voiced at public hearings earlier this year. Opponents urged county supervisors to find a way to hold on to the nursing home and a home health care operation that the county is selling to a different company.


Losing jobs
Even if the sale of Pleasant Valley wins final approval from the county, the transition to private ownership will take some time, in part because the state Health Department needs to sign off on the ownership change.

Peter Constantakes, a spokesman for the Health Department, said that after a county government approves a sale to a private entity, his agency reviews the potential sale and makes its recommendation to the Public Health and Health Planning Council, which makes the final determination to allow the sale. The Health Department examines the character, competence and financial standing of the company buying the home, Constantakes said.
In Fulton County, it took nearly a year from the time county supervisors approved the sale until the Centers for Specialty Care actually took ownership of the former county nursing home on April 1.

As in Washington County, supervisors backed a sale despite protests and petitions in opposition, said Ron Briggs, president of Fulton County CSEA Local 818.
In both counties, employees concerned about job losses have been a major force opposing privatization.

Briggs said that of the 200 people who worked at the Fulton County home when it was a public facility, 40 to 50 either were dismissed or resigned to find other employment.
A representative of the Centers for Specialty Care did not respond to a request to comment for this report.
Michael F. Gendron, chairman of the Fulton County Board of Supervisors, said his county’s nursing home had been losing $4 million annually and faced projected losses as high as $8 million in future years.

“It was not an easy decision for the Board of Supervisors,” Gendron said. “But I think we were thorough. The numbers were astronomical. It just wasn’t feasible.”

Gendron said that even after privatization, the county still has some ongoing legacy obligations regarding insurance and employee benefits. He expects it will be “a couple of years” before the home’s cost to the county reaches zero.

Gendron said he wasn’t aware of how the transition has progressed for the nursing home’s employees or residents since the April 1 takeover date. But he did say that the county offered “attendance incentives” to some longtime employees prior to the sale to entice them to stay on until the new owners took over.


Savings – and costs
In Washington County, officials say fears about the effects of privatization have affected the morale of Pleasant Valley’s staff, many of whom live in the area and are unsure about their future employment status and wages.

County-run facilities typically pay higher wages and benefits for employees than do non-public homes, according to the Center for Governmental Research.

The county began considering options for privatizing its nursing home and home health care services in 2010, but the path to an actual sale has been a rocky one. Key administrators resigned, and morale declined among members of a staff uncertain about their future.
Pleasant Valley has had a tough time filling the void left by employees who moved on. Last year, the county paid about $400,000 extra in employment agency costs for per-diem nurses to temporarily fill positions. County supervisors have since initiated hourly increases for per-diem nurses and approved bonuses for some staff members at Pleasant Valley in an attempt to keep workers on, but it has not gone well.

Earlier this year, the state Health Department cited Pleasant Valley for serious violations and flagged the home as being in an “immediate jeopardy” situation, citing deficiencies, including errors in dispensing medications, that could cause serious injury or death to residents.
The state imposed sanctions that prohibit the home from billing Medicaid and Medicare for any new residents. If the problems aren’t fixed by Sept. 20, the county faces the prospect that that Medicaid and Medicare payments will be halted for all patients at Pleasant Valley.
Because of the state sanctions, the home’s administrators are being “very cautious,” and the number of new patients admitted in recent months has been “very few,” County Attorney Roger Wickes said.

If the Sept. 20 deadline passes without a resolution, Wickes said, “We would either fill it with private-pay people -- or we’ll be in trouble.”

Watkins, the Cambridge supervisor, suggested the county’s efforts to save money through privatization could wind up costing local taxpayers a lot more in the short term.
“Sept. 20 is the drop-dead date,” Watkins said. “They won’t shut it down. But what would happen is the state would bring in someone to run it, and the county would have to pay for that.”

With the sanctions in place, Pleasant Valley is at about 80 percent of capacity, and an entire wing has been completely shut down, Watkins said.
Watkins also said he is unhappy with the $2.44 million sale price. He said Pleasant Valley – with a 122-bed skilled-nursing facility, a 33-bed adult home and a 24-slot adult day health care program facility, all on 99 acres of land – should command two to three times as much.

‘Fear of the unknown’
The issue of staff morale also has cropped up in Saratoga County as officials wait for the details of a report this month that could recommend privatization for Maplewood Manor.
“The staff is very nervous,” said Diane Brown, the administrator Maplewood Manor. “It’s the fear of the unknown: Will I still have a job if the county decides to sell it? How will it be different if I do have a job?

“Our biggest asset is our staff; they’re like a family,” she added. “We have a few people who left -- and there may be others looking right now -- but thankfully we have had very little turnover.”

Maplewood Manor has 315 full-time employees. The low rate of turnover so far results in greater cost efficiency and has eliminated the need in Saratoga County to use an outside agency for nursing positions.

Apart from employees, some of the nursing home’s residents are also nervous about the possibility of a change in ownership.

A sampling of residents interviewed last month said they expect to remain at the facility regardless of who ultimately owns it, however.

“This is where I want to be,” said 88-year-old Betty Retell, taking a break in between games of bingo and trivia.

Another Maplewood resident, Vincent “Jimmy” Granitto, is a fan of the seemingly never-ending list of musical entertainers who perform at the nursing home. He is not shy about joining the musical visitors in belting out Sinatra tunes.
Granitto, 81, said he likes the home just the way it is, although he knows he doesn’t really have a say in the matter.

“Look, if they sold it, I heard that the people who are here will stay here,” he said. “But what will happen to the quality of life? The quality of life is good here, and these people who work here go above and beyond their normal duty. They help us out -- a lot. It’s about the quality of life.

“That’s what I worry will change if it is sold,” he continued. “What will happen to the quality of life?”

It is a question that, for now, has no answer.

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