Introduction

Good evening. I am Dan Heim, Vice President for Public Policy with the New York Association of Homes and Services for the Aging (NYAHSA). NYAHSA’s nearly 650 not-for-profit and publicly sponsored member nursing homes, home care agencies, assisted living and adult care facilities, day care providers, senior housing facilities, managed long term care programs and retirement communities provide continuing care services and housing to 500,000 elderly, disabled, and chronically ill New Yorkers each year. On NYAHSA’s behalf, I appreciate the opportunity to testify before the Hudson Valley Regional Advisory Committee (RAC) on the work of the Commission on Health Care Facilities in the 21^st Century, as it relates to continuing care.

NYAHSA has been an early and consistent supporter of ‘rightsizing’ and reconfiguring the health care delivery system. Indeed, NYAHSA was the first organization in the state to advance a nursing home rightsizing proposal, in keeping with its endorsement of the U.S. Supreme Court’s Olmstead decision, which addresses the need to deliver services in less restrictive, more integrated settings. NYAHSA’s proposed rightsizing program was enacted as a 2,500-bed demonstration as Chapter 750 of the Laws of 2004. As with the work of the Commission, this demonstration program will only succeed if it encourages flexible and innovative approaches to dealing with short-term excess bed capacity, bolsters other continuing care programs and services in a cost effective way and dovetails with other reform efforts underway.

The Commission’s charge—to rightsize and restructure the system of general hospitals and nursing homes in New York State—is inherently complicated. While acute care bears some similarities to continuing care, and while these systems intersect in multiple ways, there are vast differences between the two in terms of services, utilization and financing. Even within continuing care, two very different modalities of care have emerged—short-term care and chronic care. These complexities must be taken into account in the work of the Commission and the RACs.

Indeed, you and other RAC members face a daunting task— familiarizing yourselves with the complexities of the health care system in a large and diverse region, actively eliciting and evaluating local input from innumerable stakeholders, making sense out of enormous amounts of data, and ultimately making recommendations to the Commission on potential facility closures, rightsizing efforts and service delivery restructuring opportunities. Adding to the challenge is an aggressive timeframe within which to complete this critically important work. While you have been given some of the tools needed to consider issues around nursing home rightsizing and restructuring, my comments today will emphasize the need to consider the ramifications of your recommendations in the context of the broader, evolving continuing care system. NYAHSA is ready and willing to assist you and the Commission in those efforts.

Nursing Home Capacity and Demand

The Commission has developed estimates of service need, capacity and utilization to identify opportunities to shift long term care resources. These estimates have drawn a lot of attention from providers, the media and others—as they should—since they arguably provide a blueprint to the RACs for evaluating supply of and demand for services, and highlight certain counties where it is believed the potential for restructuring is greatest.

If, in fact, the Commission and the RACs use the estimates in this way, it is vitally important to clearly understand the current state of nursing home utilization, ensure that the most current, relevant and representative data are being used, and rely on reasonable assumptions. In this regard, we draw your attention to the following areas:

1. The fallacy of over-relying on occupancy. New York’s nursing homes have dramatically increased the numbers of people they serve. Short-term (i.e., subacute) care has become so prevalent that it has more than doubled total nursing home admissions since 1997. For example, the Hudson Valley region’s nursing homes averaged 1.7 admissions per bed in 2004, which equates to an average length of stay of 127 days (i.e., less than 5 months). These averages are very close to the statewide figures. Patient turnover invariably leads to vacant beds due to admission/discharge timing issues, the need to match roommates and other factors. Not surprisingly, NYAHSA has validated that there is an inverse relationship between admissions per bed and facility occupancy. Ironically, state and federal policies have expressly encouraged facilities to provide more short-term care, which has adversely affected occupancy.

2. Using updated occupancy data. Given that they may form the basis for some very important decisions, the 2003 nursing home occupancy data should be updated to 2004. NYAHSA’s analysis indicates that updating the data from 2003 to 2004 results in 2 of the 8 counties (25%) in the Hudson Valley Region alone going from being below to above 94.5% occupancy, or vice versa. This emphasizes the need to examine occupancy trends and understand why changes are occurring.

3. Accounting for capacity changes. If necessary, the listed number of existing nursing home beds by county should be updated to reflect closures and other changes that have occurred through the present. As is the case with hospitals, some nursing homes have taken certified beds out of active service, without formally decertifying them. This can distort the reported occupancy rate and noted supply of available beds. The RACs should take this circumstance into account when making recommendations.

4. County lines vs. service areas. In many ways, county lines are an artifice, since they often do not correspond at all with provider catchment areas. As the RACs conduct their reviews, they will need to consider this reality. It is entirely possible that a facility physically located in one county may receive most of its referrals from another county, and any decision relative to that facility should consider the service demand and capacity in both counties.

5. The questionable “50% assumption.” Amidst all of the factual data on facility need and capacity is a major assumption that half of nursing home residents in New York state scoring in the RUG-II system in the Physical A (PA) or Physical B (PB) categories could be living in settings other than a nursing home. Interestingly, a 1999 report on assisted living from the Department of Health concluded that only 19 percent of PAs and 13 percent of PBs could be appropriate for alternative settings.

This untested assumption looms large, since it leads to the conclusion that there are thousands of additional unneeded nursing home beds, even though the state’s need methodology suggests otherwise. For example, the Hudson Valley Region is considered under-bedded, and only shows excess beds when the PA and PB residents are considered.

Based on a NYAHSA survey of nursing home administrators and nursing directors, several clinical and non-clinical factors can prevent residents scoring as PAs and PBs from being placed in lower levels of care. There were wide ranging responses on the percentage of residents who could be transitioned out of the nursing home to a less restrictive setting (if they consented and the services were available). However, the average of the responses was well below 50 percent.

We respectfully urge you to consider these realities as you develop recommendations to the Commission on nursing home rightsizing and restructuring.

Continuing Care Service Alternatives

The Governor’s Health Care Reform Working Group—which proposed an overall reform framework—recommended that New York shift the focus of the state’s continuing care system from institutional care to community based care. NYAHSA supports this goal. Many NYAHSA members already provide a wide spectrum of continuing care services for those living in the community such as adult day care and home care, senior housing, intermediate residential options (e.g., adult homes, enriched housing, assisted living) and retirement communities.

However, a system focusing on intermediate and community-based care must have viable providers, be able to increase its service capacity, and be able to rely upon a supply of safe, affordable housing. Furthermore, a rebalancing of the continuing care system cannot occur if nursing homes are not on a solid financial footing today. For reasons cited below, these factors simply are not evident in many of New York’s communities. Without a concomitant increase in the capacity of community based and intermediate care services, reducing the number of nursing home beds is likely to lead to serious access issues. Using the Hudson Valley Region as an example, DOH and the Commission are estimating a current under-capacity of over 5,500 community-based and intermediate care slots, which would equate to a 60 percent increase in the current intermediate and community based service capacity in the region.

A few observations are in order about the state’s continuing care infrastructure:

1. All of the service alternatives should be considered. It does not appear that all of the available community based and intermediate care options are even on the radar screen. In determining what the true system capacity is and how many people are being served, it is important to consider other Medicaid funded options (e.g., adult day health care, managed long term care, personal care, etc.), non-Medicaid services (e.g., social day care, meals on wheels, respite, etc.) and private pay models (e.g., market rate assisted living and housing with supports). Paradoxically, non-Medicaid services and private pay models help to reduce reliance on the Medicaid program, one of the very concerns that led to the creation of the Commission in the first place.

2. Barriers to deploying community based services must be addressed. Various obstacles in the state’s Certificate of Need (CON) process—notably application processing moratoria and need methodology constraints—have prevented many organizations from initiating or expanding services. Labor shortages are a persistent problem for home care agencies due to their inability to pay competitive compensation, and other factors. The resulting wage pressures and government cutbacks have created serious financial challenges for providers. Reliable and affordable transportation is an issue for both care recipients and direct care workers. Finally, delivering community services in rural areas poses unique challenges in terms of workforce, lack of proximity to patients and economies of scale.

3. Assisted living is largely unavailable for low-income New Yorkers. The state passed an assisted living law in 2004, and increased Supplemental Security Income (SSI) benefits for people living in adult care facilities and assisted living. In spite of this, SSI barely covers room and board costs, much less the cost of providing personal care, medication supervision and administration, clinical assessments and health monitoring services. With an estimated 125 adult home closures in the state since 1999 and most remaining facilities unable to admit SSI recipients, assisted living and ACF care are largely out of the reach of low-income people. Without viable intermediate care options for people who cannot safely live in their own homes, many individuals will need to continue relying on nursing homes for their needs.

4. There is an affordable housing crisis underway. Senior housing provides the least restrictive, most affordable, and most flexible congregate living arrangement in the continuing care service spectrum. It is unique in its ability to promote independence, preserve dignity, and offer service choices in a cost-effective environment. The availability of safe, affordable housing is absolutely essential in any effort aimed at transitioning nursing home residents to community settings. With a growing affordability gap and federal funding cutbacks, the current unmet need for affordable senior housing is reaching crisis proportions in many areas, even before considering a potentially large influx of nursing home eligible people.

5. Nursing homes are closing and in financial distress. Since 2003, financial crises have caused 28 nursing homes statewide to close or announce plans to close. Many were located in communities that desperately needed their services. According to a new NYAHSA report, most nursing homes lost money on operations in 2004 and less than half had enough cash to cover three weeks of operations. Medicaid is the culprit; the gap between actual costs and Medicaid reimbursement has ballooned to $700 million per year. Indiscriminate closures pose a serious threat to service access in affected communities.

Proposed Nursing Home Ranking Criteria

NYAHSA agrees that the six criteria by which nursing homes and hospitals will be evaluated are reasonable, and appropriately reflect the legislation that created the Commission. While there could be other criteria, and arguably they could be weighed differently, vulnerable populations, availability, quality, utilization, viability and economic impact are valid standards against which to evaluate nursing homes.

The problems arise with the metrics that are proposed for nursing homes to measure the six criteria. In some cases, the selected metric fails to measure what is intended (e.g., Medicaid eligibility does not equal vulnerability); in other cases the metric isolates individual facility variables that are tied into broader system issues (e.g., “informal networks” and coordinated services in a community); and in still other cases the metrics have internal conflicts (e.g., facilities with rebased Medicaid rates could score higher on viability and service to “vulnerable” Medicaid recipients, while other facilities are deprived of adequate funding).

NYAHSA will soon be providing the Commission with a detailed analysis of the proposed nursing home metrics. This analysis will express a number of very specific, perhaps fatal, concerns with some of the selected metrics, provide specific recommendations for improving other measures, and make suggestions for alternative or additional metrics for consideration.

Necessary System Investments

As previously suggested, the state’s continuing care infrastructure is ill-equipped to handle major system restructuring and rebalancing, as contemplated by the Commission and the Health Care Reform Working Group. This is not to say that with the following strategic investments and well-crafted policy approaches that current obstacles could not be transformed into major opportunities:

1. Remove obstacles to community services delivery. The state should revisit the relevant need methodologies and facility/program capacities for these services and any other CON constraints. To address competition for scarce labor, NYAHSA has consistently supported additional investments in workforce funding to support recruitment and retention of professional and paraprofessional home care workers throughout the state. Access to services—particularly in rural areas—could be improved through telemedicine by directly funding technology acquisition through HEAL-NY and other programs, and by having Medicaid recognize and pay for telemedicine encounters as home care visits.

2. Provide funding for low-income assisted living. A NYAHSA proposal calls for state legislation to create a Medicaid-funded service package for assisted living residents, and to authorize annual cost of living adjustments to state SSI payments for assisted living and adult care facility residents. Making assisted living available to low-income people will provide consumers and their families with more choices, and dovetail with the reform efforts of the Commission, the nursing home “rightsizing” demonstration and the state’s new nursing home transition and diversion waiver program. The NYAHSA proposal pays for itself through avoidance of unnecessary nursing home stays.

3. Expand senior housing and related supports. As the federal government reduces its commitment to subsidized housing for low-income seniors, New York can help create capital financing and service coordination opportunities. On the capital side, the state should set aside a reasonable amount of low income housing tax credits for senior housing, and otherwise encourage retrofitting existing structures—vacant schools and government buildings—into housing facilities in areas where low-income housing is needed. Service coordinators help residents to maintain their independence by linking them to needed supports. The state should encourage this by funding service coordinator positions in low-income senior housing, and by increasing its funding commitment to naturally occurring retirement communities, which are housing facilities and neighborhoods where residents have aged in place and need help to stay in their homes.

4. Reform the nursing home reimbursement system. A reform proposal developed by a joint task force of NYAHSA, the New York State Health Facilities Association and the Healthcare Association of New York State is reflected in proposed legislation (S.5881/A.8983). The proposal is a culmination of two years’ work by experts from nursing homes, consulting firms and the associations to reform a payment system that still calculates rates based on 1983 costs and underpays facilities by $700 million per year relative to their actual costs. The new system will promote high quality of care, efficiency and innovation; maintain the safety net of services in rural and other areas, encourage admitting hard to place patients, and ensure the system is kept current and relevant. NYAHSA urges support for this critically important legislation.

You have probably seen the movie Field of Dreams and remember the line, “Build it and they will come.” When the discussion turns to shifting care from nursing homes to less restrictive settings, the adage should be, “They will come, so build it.” Without the strategic investments I have cited—most of which you do not control but need to be aware of—the service infrastructure that is needed simply will not be there.

Conclusion

The creation of a policy framework for continuing care service delivery is long overdue. Our state, like most of the country, has struggled to meet the growing and changing need for services in the face of workforce shortages and rapidly escalating costs. In part, the escalating costs can be attributed to the absence of a policy framework and the ‘form follows financing’ approach to developing programs and services. It is because the Commission creates an opportunity for helping to craft that policy framework that NYAHSA supported its creation.

The Commission will be unable to meet that objective without a well thought out and executed RAC process. As you undertake your review of the health care system in the Hudson Valley Region, NYAHSA strongly encourages you to devote the time and effort needed to make enlightened decisions about nursing homes in the context of the broader continuing care system. Meaningful reform means looking beyond simplistic comparisons and statistics, understanding system dynamics, empowering providers and consumers to adapt to needed change, using state and local resources effectively and efficiently, and above all, ensuring that frail and disabled New Yorkers of all ages receive the continuing care services and supports they expect and deserve.

While a great deal of focus is being placed on acute and primary care, nursing homes should not be relegated to an afterthought in the process. These facilities are and will remain an essential building block in the service system of the future.

As you and the Commission reach the point of making specific recommendations on restructuring, NYAHSA urges that appropriate ‘due process’ be given to affected communities, consumers and providers to promote a full understanding of any mitigating factors that need to be considered, a full exploration of available options, and minimization of adverse impacts on all stakeholders to the extent possible. On the latter point, multiple options should be considered in addition to facility closures, such as rightsizing, expansion or creation of alternative levels of care in the community, service specialization and merger/joint venture/affiliation.

It is also vitally important to ensure that the work of the Commission and the RACs is consistent with other reform efforts underway. The nursing home transition and diversion waiver, long term care point of entry and single statewide waiver proposal (i.e., “mega waiver”) individually and collectively have the potential to significantly change continuing care service options, navigation, authorization and financing. Accordingly, the Commission and RACs need to take these initiatives into account. Decisions made based on today’s service infrastructure may not stand the test of time as other major reform initiatives are implemented.

NYAHSA’s Continuing Care Restructuring Task Force is currently considering these issues, and will be issuing a report in the near future to relevant stakeholders. In the meantime, the group is finalizing its comments on the nursing home review criteria and metrics, as previously indicated.

Thank you again for the opportunity to speak with you today. NYAHSA and its members stand ready to assist in any way necessary as you work through the process, and look forward to working with you, the Commission and other stakeholders to confront the challenge of reforming the state’s health care system.