Published in the Triangle Business Journal July 25, 2008

By Caterina Saraiva, csaraiva@bizjournals.com
 

RALEIGH – Debra Kirby is in a bind.

The four adult-care homes that she and a partner own in western North Carolina provide places for the state’s elderly and mentally ill poor to live and receive basic care.  In return, state and federal governments reimburse them for their expenses.

But Kirby and other adult-care home operators say they’re having trouble holding up their end of the bargain because government isn’t holding up its end.  They say reimbursements are barely enough to cover their costs.

The National Center on Caregiving, an advocacy group for the long-term care industry, says its research shows that it costs $2,916 per month to provide care for an individual in an adult-care home in North Carolina.  That’s far more than the average of $1,748 per month that adult care homes in the state are reimbursed to care for a resident.

Kirby says margins are razor-thin or don’t exist.  She says she received $1,715.50 per resident – slightly less than the current average rate due to allowances for some personal items – at the McDowell House, Inc. in 2007.  She reported spending $1,832 per resident in a cost report she sent to the state.  Her other three homes are breaking even, she says, but only because they have more beds with the same levels of staffing.

Kirby says she hasn’t been able to afford to give her employees a pay raise in four years.  There’s no money to make needed repairs.  The end of each month is a juggling act in which she shifts dollars from one account to prop up another.

This is the reality for many North Carolinians in the adult-care business – especially those running facilities that house residents who can’t afford to pay their own way.  Adult care home operators interviewed for this report say government reimbursements – while a significant chunk of federal and state resources – are not sufficient.

ADULT CARE: Lawmakers say they’re aware of funding issue, but many needs confront the state.

And the problem is getting worse.  The gap between what’s needed and what’s appropriated is growing when it’s considered that increases in reimbursements are not keeping up with the pace of inflation.

“It’s a nightmare, it’s horrible,” Kirby says.  “We barely have enough to survive.”

State legislators, who set the Special Assistance reimbursement rate every year, say there are money shortages across the board.

“I hear the complaints from the (adult-care) industry, but there’s just not enough money to go around,” says Rep. Beverly Earle, chairwoman of the House Appropriations Subcommittee on Health and Human Services and a member of the House Committee on Aging.

In North Carolina, nearly 60 percent of adult care home residents qualify for Special Assistance aid.  Data show that 13 percent of North Carolina’s elderly population lives in poverty, compared to 9.9 percent nationally.

To take care of those people, Special Assistant reimburses adult care home operators $151.8 million a year.  That’s up from $120 million in 2000 – barely meeting the rate of inflation.  While the North Carolina Department of Health and Human Services’ Office of the Controller makes recommendations as to what the rate should be to adequately reimburse adult care homes, the General Assembly has final say.

As for Medicaid, only a small part of it goes to adult care reimbursements in North Carolina.  The total North Carolina Medicaid budget was $8.6 billion in 2006.  Of that, $153 million went for adult care – 2 percent of the total.  That’s the same percentage as was appropriated for adult care in 2000.  While the North Carolina Division of Medical Assistance oversees the reimbursements, 60 percent of the total Medicaid budget comes from federal funds.

State, feds pay for care for the poor
There are two major sources of funding for adult care homes – a subsidy by the state and Medicaid.

The General Assembly each year sets the rate for what’s know as the State/County Special Assistance Fund, which pays for operations, maintenance, food, housekeeping, recreation and administrative expenses of adult care homes that take in indigent residents.

In 2000, the state paid $1,062 per resident monthly from that fund.  By 2007, the rate had risen to $1,173, which is less than the $1,336 is should be just to cover inflation during that period.  Medicaid spending, which is set by the North Carolina Department of Health and Human Services’ Division of Medical Assistance, covers the medical needs of residents.  Adult care homes residents may require some medical care, but they are not chronically ill, as are those in nursing homes.

The reimbursement rate for adult care homes is set by a formula based on the estimated amount of time a resident needs care daily.  The division has set that number at 1.1 hours daily per resident in a home of 31 or more beds.  That’s below the 1.92 hours of care the adult care industry says is being provided.  And it’s well below the 2.31 hours of care recommended in a 2004 report by a committee established by DHHS.

Adult care homes are reimbursed under a formula in which the 1.1 hour-per-patient figure is multiplied by an hourly payment rate of $21.09.  That figure, too, is below the $31.62 per hour the industry says is being spent and well below the $41.26 recommended by the DHHS committee.

Two-tiered System of Care
Adult care homes are those that provide room and board to elderly people who do not require ongoing medical care but may require some.  They are not to be confused with nursing homes, where residents with chronic medical conditions are given housing and care.

While some adult care homes also have under-65 mentally ill residents, such people account for only 13.1 percent of all care receivers in the state.

Across North Carolina, some 1,300 adult care homes provide space for 40,000 residents.  Not all cater to the poor.  In fact, the adult care business has emerged as a system in which those who can afford to pay hefty fees - $4,000 a month or more - live in luxury.  Left behind are those with some resources, but not a lot, and the poor, who can pay nothing.  They depend on what resources government affords to them.

The Triangle counties of Durham, Orange and Wake have 48 adult care homes, ranging from marble-floored communities with formal white table cloth dining rooms, spacious suites and myriad daily fitness classes to aging buildings with leaking roofs, cramped bedrooms and ragged carpet.

Most wealthy individuals end up in homes such as Glenaire in Cary, which in 2005 reported revenue of nearly $15 million and a profit of $2.4 million, according to federal tax filings.  Glenaire, which operates as a nonprofit, reported net assets of $8.2 million.

Kirby says her homes, which primarily house publicly funded residents who are mentally ill, charge the few residents who have money to contribute to their care even less than the government reimbursement rate.  Essentially, she charges what she can get.

To pay for extras such as patient outings, which are required by state regulations, she and her staff organize yard and bake sales.

Kirby says that if current funding stays the same, she’ll have to sell her business.  “I’m in this to make a living, and not only am I not making a living, it’s going backward,” she says.

The Future of Adult Care
While the number of elderly North Carolinians who are Medicaid-eligible has decreased slightly, by 2.8 percent, during this decade, the baby boomer influx is coming fast.  By 2030, the state’s above-65 population is expected to increase by 124.3 percent from current levels.  That would put the elderly at 18 percent of the state’s total population by 2030.

Advocates for increased funding for adult care homes say they’re making no progress in their efforts to persuade DHHS Secretary Dempsey Benton to negotiate an increase in funding from the U.S. Centers for Medicare & Medicaid Services (CMS).

In a letter to Benton, Lou Wilson, executive director of the North Carolina Association, Long Term Care Facilities, and Jerry Cooper, executive director of the North Carolina Assisted Living Association, said the two associations would bypass the state and go directly to CMS if the state doesn’t take action to start a dialogue among all parties about the “dire nature” of adult care home funding.

Wilson, whose family operates an adult care home in Randolph County, says the next shoe to drop will be when adult care homes start going out of business.