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Minnesota nursing homes brace for deepest funding cuts in decades

An improved financial outlook recently lowered Minnesota's deficit by more than $1 billion, but nursing homes still could take their biggest funding cuts in decades as lawmakers iron out the next budget while balancing a $5 billion shortfall.

A new budget forecast released Monday said the state's deficit will be about $5 billion for the two-year period beginning July 1, down from the $6.2 billion estimate a few months ago.

The revised outlook allowed Gov. Mark Dayton to restore some of the nursing home and assisted living center funding he targeted for cuts in his budget proposal last month.

But Barry Robertson, administrator of the Fair Meadow Nursing Home in Fertile, Minn., said the updated budget still has deep cuts to nursing homes after years of minimal funding increases and skyrocketing prices for food, energy and health insurance.

Dayton's original proposal would cause an annual reduction at Fair Meadow of more than $248,000, or about 8.2 percent of revenues. Robertson said even after the changes, the nursing home stands to lose about $166,000 or 5.5 percent of its revenues.

"5.5 percent is not manageable," he said. "It's better than the 8.23 percent cut, but it's still a lot."

Robertson said Fair Meadow would have to eliminate health insurance for employees and cut wages by 2.1 percent in order to make up the shortfall. But that's not an option because the federal health care reform package passed by Congress last year will require the nursing home to offer health insurance by 2014 in order to avoid penalties.

That means Fair Meadow would have to cut employee wages by 8.7 percent to cover the difference, he said, an amount that's too high considering that workers are not overpaid.

"It's still a pretty bad situation," he said.

The next step

Patti Cullen, president and CEO of Bloomington-based Care Providers of Minnesota, said last week that nursing homes in the state were "stunned" to see Dayton's original proposal.

"How deep the cut is and how wide it spreads across the entire continuing care community was quite a surprise," she said.

Cullen said the cuts don't make sense financially because nursing homes and assisted living centers pump almost $7 billion a year into Minnesota's economy between wages and purchasing.

"We are an economic driver and a growth industry," she said. "You don't cut a growth industry."

And Cullen said these cuts could lead to more nursing home closures -- a big issue because the state's facilities already have an average occupancy of more than 90 percent and are expecting to see a wave of new residents as the elderly population continues to grow.

The governor's original budget outline included a 2 percent operating rate cut across the board and $87 million in Medicaid payment cuts for long-term care.

The cuts were scaled back Monday when he announced that he will add back $200 million of reductions he had planned for health programs, and Sen. LeRoy Stumpf, R-Plummer, said the changes restored more than $30 million of nursing home funding.

"I think the good news is that Gov. Dayton wants to try to reduce those impacts and those reductions on nursing homes as much as he can," he said. "Now the question is if that budget will survive the majority in the Legislature."

Stumpf said Republicans, who hold the majority in both the House and Senate after the 2010 elections, are holding their own budget "very close to the vest" so it's hard to know what they'll propose to deal with the deficit. The next few weeks will be "critical," he said, because legislators need to have the details worked out by March 25.

"They're not giving us much indication other than they're not going to raise any taxes," he said. "But if there are no new revenues, they're going to have to reduce spending in a lot of different places."

Stumpf said he's hopeful both sides can work together to create a budget that works for everyone in the state, including elderly residents who could be put at risk by funding cuts to nursing homes and assisted living centers.

"I know we have to try to trim spending as much as we can and wherever we can," he said. "But when you get down to whether they can keep nursing homes open or they're going to close, I think we have a responsibility to protect and take care of those people who need help."

A compromise

Rick Failing, CEO and administrator of the Kittson Memorial Healthcare Center in Hallock, Minn., said Dayton's proposed cuts are the biggest that Minnesota nursing homes have seen in 25 years.

While he said all areas of the state budget need to take a cut and "share in this problem" of the $5 billion deficit, Failing said this big of a funding hit will be passed along to the very people the state is trying to care for -- its seniors.

"We'd like to be able to work with the governor and the Legislature to try to come up with something that can help in the effort to reduce the deficit, but not mean our role in that is disproportionately larger than other spending areas," he said.

Failing said Dayton's budget proposal made deep cuts to health and human services funding while maintaining the current level of funding for local government aid and increasing higher education funding -- despite the fact that these three areas each account for about a third of the state's general fund spending.

"To me, that's not shared pain," he said.

But it's just a proposal for now, Failing said, and there's still a lot that could happen before the next budget is finalized.

"I'm hoping that the Legislature now will come back with an acceptable compromise between the governor's office and the Legislature, and that they can come up with a plan that will be fair across the board," he said.

Robertson said Minnesota nursing homes are "in a box" right now, trapped between increasing costs and decreasing rates as they deal with increasingly packed facilities that are expected to fill up even more as the state's elderly population continues to rise.

"I'm hopeful they can reach a compromise," he said. "It hasn't worked that way in recent years, but we have a new governor now."