TRAVERSE CITY — More than $10 million in federal reimbursement funds expected by the Grand Traverse County Pavilions nursing home facility may not materialize. And if they do, it likely won’t be this year.
That’s according to Rob Long of Plante Moran, the financial consultant hired by the Pavilions to evaluate the county-owned facility’s financial condition and create a plan for improvement and long-term sustainability.
The plan includes increases in room rates for clients in the assisted and independent living cottages, including a 52-percent increase for those in a memory care unit. Increases were approved by the Department of Health and Human Services board at its regular meeting Thursday.
The facility is operating in the red, mostly because of low census and higher costs, and has been borrowing from the county since April to make up the shortfall.
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As of Wednesday, that debt came to more than $3.5 million, said Pavilions’ Finance Director J. Lindsey Dood.
Also approved on Thursday was an agreement between the county and the Pavilions on how that money will be repaid — with interest.
The board also gave DHHS board Chair Cecil McNally the go-ahead to make changes that may be outlined by county Administrator Nate Alger, who did not see it until late Wednesday.
The agreement is up for approval by the county board at its Sept. 6 regular meeting.
Trustee Gordie LaPointe voted against the agreement, saying he objected to a line that states “whereas DHHSB has a good faith expectation to receive a combined $10 million … in the near future” in reimbursement funds.
“I don’t have a good-faith expectation,” LaPointe said.
Pavilions Chief Executive Officer Rose Coleman has been reporting to the DHHS board for several months that the $10 million reimbursement would likely be received in September.
The reimbursement money included about $6.1 million in an Employee Retention Credit (ERC) for higher wages paid to some employees during the pandemic, as well as about $3.4 million in Medicaid reimbursement.
Long said it is also unclear whether the ERC will be paid. Ten county-owned nursing facilities around the state, including Pavilions and some that are in situations similar to the Pavilions, are being audited by the IRS, which pays out the credit. Two of those facilities were rejected this week, he said.
Long said the Pavilions qualifies according to the IRS rules and, if rejected, could appeal the decision. But he is unsure how long that would take and what the amount would be if an appeal was successful.
The Medicaid money is still coming, Long said, but the Pavilions will get $1.15 million this year and another $2.25 million at the end of next year. The money is the difference in what was reimbursed during COVID using inflated 2019 rates, though the rate was far below costs, which went up significantly during that time, Long said.
“The state has agreed to settle some of that, but the timing hasn’t been great,” Long said.
There’s also a gap between when services are provided and when facilities are reimbursed.
It’s a model that’s not sustainable, Long said, and has caused many facilities to permanently close their doors. Going forward, Medicare and Medicaid rates have been increased and will be reimbursed in the month following services, allowing for more stability, Long said.
Board members have said they were not aware of the financial shortfall at the Pavilions. LaPointe and Trustee Mary Marois asked for the financial statement to be clearer and easier to understand.
Marois said that, even though she reads the budget every month, she had no clue that the Pavilions had a $3 million deficit that keeps climbing. Financial documents are not clear for her – or for the public, she said.
“How do I look at the financials and understand what the true picture is without having to read between the lines?” Marois said.
In addition to Medicare and Medicaid reimbursement increases, room rate increases are expected to close the gap between costs and revenues for the Pavilions.
Monthly rates in the Willow cottages, which house the dementia unit, will increase from $4,945 to $7,500 per month, and will not go into effect until Jan. 1 so that families have time to plan for the change. Marois said she wants the board to be kept in the loop regarding feedback from families regarding the unit’s increase.
“I think the key here is not that we are using this mechanism to gain revenue to take care of an issue,” Marois said. “We are looking at what our true cost is. There’s no other way we could possibly look at it and stay sustainable.”
McNally said that, in coming up with the new memory care rates, six other county nursing homes were looked at. Those homes had rates ranging from $4,535 to $8,235 per month, he said.
Monthly rates for independent and assisted living cottages will go up by 13 percent to 22 percent, effective Nov. 1. Rates vary depending on the size of the room and will range from $2,209 to $6,412 in the Evergreen assisted living cottages; from $2,566 to $5,900 in the Hawthorn assisted living cottages; and from $3,112 to $3,801 in the Hawthorn independent living cottages.
The cost of meals for cottage residents will increase from $5 to $10 each.
The rate for private pay patients was increased Aug. 1 from $370 per day to $410 per day in anticipation of the increase in Medicaid, as the private pay rate has to be higher than the Medicaid rate. There are 18 private pay patients at the Pavilions.