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Recession, Funding Cuts Push Nursing Homes to Brink

Recession, Funding Cuts Push Nursing Homes to Brink

The Pittsburgh Tribune-Review

March 02, 2010

David Gritzer, president of the Jewish Association on Aging, which runs the Charles Morris Nursing and Rehabilitation Center in Squirrel Hill, does not see a bright future for the nursing home business.

And not just for his nonprofit business, but for the whole industry from large for-profit corporations that run nursing home chains to religious and government-run nonprofit facilities.

About 55 percent of the residents in the Charles Morris center are on Medicaid, a percentage that’s lower than average, he said. But that’s still substantial at a time when a weak economy, spending cuts in cash-strapped states and a $16-billion reduction of funding from Medicare during the next decade threaten to make the industry’s margin of profitability even lower.

“We do not see a bright future. This industry has been a constant battle to get appropriate funding for the elderly, and reimbursement systems are so complicated,” said Gritzer, a 33-year veteran of the nursing home business.

For decades, nursing homes and assisted living facilities have operated within the narrowest of profit margins and at the whim of government officials and how much they want to spend, experts said.

The latest round of Medicare cuts leaves Pennsylvania’s nursing homes with $2.1 billion less in funding, potentially putting 2,300 jobs at risk, according to the Pennsylvania Health Care Association, which represents the skilled nursing home industry in the state.

“Pennsylvania’s population is old and getting older — fast. Now is when we should be shoring up programs that protect our most vulnerable residents — the frail elderly and those with disabilities — instead of dismantling them. You can’t achieve real health-care reform when you weaken the foundation of other key programs vital to American health,” said Stuart Shapiro, the association’s president and CEO.

So far this year, 24 states have cut funding for nursing home care and other health services needed by low-income people who are elderly or disabled, according to the Center on Budget and Policy Priorities, a nonprofit research firm in Washington.

Across the country, nursing homes have started to close because of money problems, while others have laid off workers because of what industry officials say are inadequate Medicaid reimbursement rates.

So far in Pennsylvania, there have not been significant nursing home closings or layoffs.

But, said Nicholas Castle, a professor of health policy and management at the University of Pittsburgh, “The economic downturn is affecting this like any other business. Medicare and Medicaid both have less money, and nursing homes are getting squeezed.”

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