States increasingly are showing interest and participating in programs that provide supplemental payments to Medicaid-certified nursing facilities. The nursing facility supplemental payment programs are governed by federal regulations and are approved by the Centers for Medicare & Medicaid Services. States have great flexibility in crafting their programs, as long as they adhere to certain federal regulations.
States can designate participating facilities based on ownership, patient mix, occupancy, etc., and determine the methodology for supplemental payment calculation and funding frequency. In many cases, states have designated nonstate government-owned or -operated nursing facilities as eligible to participate. It should be noted that “ownership” refers to the entity that holds the facility license and is a party to the Medicaid and Medicare provider agreements.
Program participation isn’t contingent upon brick-and-mortar ownership of the nursing facility. A common approach is for a county hospital, or hospital district, to lease 100 percent of the nursing facility’s real and personal property. Because the lease doesn’t create a significant capital event, county hospitals, which typically lack substantial working capital, still can move forward.
As Medicare payment bundling becomes more prevalent, the benefits of partnership between acute-care providers and nursing facilities are growing, including reduced readmissions, enhanced communication, improved care and accelerated relationships. The supplemental payment program also provides meaningful financial support for capital improvements and facility care initiatives. For example, roughly 95 percent of all Medicaid-certified nursing facilities in Indiana are now owned by nonstate governmental entities and annually receive hundreds of millions of dollars in supplemental payments.
Identifying a suitable partner is critical, and effecting a transaction is more complicated than presented above. However, the benefits often greatly exceed the cost and any administrative efforts. If you’re interested in whether your state has, or is pursuing, a nursing facility supplemental payment program, contact your BKD advisor.