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To address budget issues, Ohio is spending less on nursing homes.

The new state budget means seismic policy shifts for Ohio’s Medicaid program, especially long-term care.

A hallmark of the largest Medicaid overhaul in decades is a funding transfer from institutional to home-based care, a move widely endorsed by consumer advocates such as AARP Ohio.

Effective Friday, nursing homes took a 5.8 percent rate cut per patient, on average. Over the next two years, the proportion Ohio spends on institutional care will drop from 64 percent to 58 percent, while spending on community-based services such as Passport, which helps ill elderly Ohioans stay in their homes, will grow from 36 percent to 42 percent.

An $8 billion budget gap and Gov. John Kasich’s leadership were both necessary catalysts for such big changes, said Greg Moody, who heads the governor’s Office of Health Transformation.

“Instead of politics picking winners and losers, this shifts to consumers choosing where they want to receive care,” Moody said.

 

“There was no way we could cut our way out of a problem. We had to abandon the old version of politics picking winners and losers because all we would have been doing is have everybody lose a lot.”

Some Medicaid providers, however, stand to lose more than others. Especially hard hit will be nonprofit nursing homes, which tend to have more staff than for-profit nursing homes, said Robert Applebaum, director of the Ohio Long-term Care Research Project at Miami University’s Scripps Gerontology Center.

The new budget completes Ohio’s years-long transition to a price-based system — a system that takes away an incentive to staff nursing homes beyond a state-set level, Applebaum said.

“Unfortunately, one of the important factors in quality is having more staff,” he said.

Mary Scott Nursing Center, 3109 Campus Drive, will likely have to cut employees who don’t provide direct patient care from its staff of 150, said Richard Binenfeld, executive director. The nursing center, which has pursued a mission of providing long-term care to the black community since 1914, is likely to lose $200,000 or more from its $8 million annual budget.

“This is a very dramatic and devastating cut,” Binenfeld said. “This is not business as usual.”

The recession already had taken a toll on Mary Scott, reducing its patient numbers from 112 to about 100. The nursing home will seek more philanthropic support and may sell the right to care for a certain number of patients (it pays taxes on beds, regardless of whether they’re filled or empty). Binenfeld compared such a move to “using the furniture for firewood.”

Peter Van Runkle, executive director of the Ohio Health Care Association, which ran television advertisements critical of the Medicaid rate cuts, said the final budget restored some Medicaid funding, but not enough. He estimates the overhaul will cost the industry 5,600 jobs.

“It’s going to come out of care one way or another,” he said.

The state mandates minimum staffing requirements in nursing homes, so cuts are only permissible up to a point, Moody said. He also noted the budget provides “pretty significant regulatory relief around staffing,” which should help blunt the impact of rate cuts.

“What the budget does is reflect the changing demand for services,” Moody said. “Fewer and fewer people are going into nursing homes, with or without our budget.”

Despite misgivings, Applebaum said the state’s elected officials did “reasonably well,” given budget constraints.

Ohio’s total Medicaid spending will increase 5.6 percent to $18.8 billion in fiscal 2012, which began Friday. It will rise another 4.9 percent to $19.8 billion in fiscal 2013. But the approved budget carves $1.47 billion out of the projected growth in Medicaid over the next two years.

Here’s a glimpse of how the budget will affect Medicare stakeholders other than long-term care providers:

CareSource, Ohio’s largest Medicaid managed-care provider, is likely to benefit from changes in the budget, including authorization to coordinate the care of even more Medicaid enrollees.

In July 2012, for example, CareSource and other managed-care providers will have a hand in coordinating care for 37,000 children enrolled in Medicaid’s aged, blind or disabled program. And there may be future opportunity to care for “dual-eligibles,” or Medicaid members who are also eligible for Medicare.

This October, the prescription drug benefit will be reintegrated into managed care. “That’s a big benefit for our members,” said Janet Grant, CareSource’s executive vice president for external affairs.

CareSource wasn’t left unscathed by the state’s austerity. It will no longer receive pay-for-performance funds up front, and it will take a 1 percent administrative rate cut. But Grant said CareSource will not cut jobs. With $2.4 billion in annual revenues, the Dayton-based nonprofit employs 1,009 people, including 845 at its Dayton headquarters. It coordinates care for more than 842,000 Medicaid enrollees in Ohio, an all-time high.

The Children’s Medical Center of Dayton, more than half of whose patients rely on Medicaid for their care, took far less of a hit from the approved budget than it would have under the one first proposed by Kasich.

Kasich’s proposal would have cut Medicaid funding by 7 percent, but the version he signed into law Thursday will mean less than a 2 percent cut in Dayton Children’s Medicaid funding, according to Vicki Giambrone, Dayton Children’s vice president for marketing and external relations.

Giambrone noted that Medicaid reimbursement already fell more than 20 percent short of Dayton Children’s costs of caring for Medicaid enrollees.

The original budget proposal also would have eliminated the Children’s Hospital Supplemental Payment program. That funding — $6 million in annual state funding that’s used to secure $12.5 million more in matching federal dollars — was restored by the state legislature. That means Dayton Children’s will continue to receive $1.9 million annually.

During the new two-year budget cycle, Dayton Children’s and other local hospitals will continue to be subject to franchise fees, money used as a match to secure federal Medicaid dollars. Those fees will be increased, but the hospitals’ net losses should be less than they were during the previous two-year budget period, said Bryan Bucklew, president and chief executive of the Greater Dayton Area Hospital Association.

Two years ago, when a decision was made to close the Twin Valley state mental hospital in Dayton, the budget process was more about meeting a specific budget number, Bucklew said.

“With this, we’re in worse fiscal shape (as a state), but the budget was driven more by public policy,” Bucklew said.