The long-term care industry is slated for big cuts in Gov. Chris Gregoire's proposed budget for the next biennium.

The governor's budget includes a $12 a day rate cut for skilled-nursing facilities, and compared with that proposal, other issues pale in importance, industry experts say. Because of that, they say, only a few policy issues will be raised during the current legislative session.

Those policy issues include a possible push for more transparency in the setting of reimbursement rates for boarding homes, and a request to consider regulating companies that offer long-term care placement services for the elderly.

"Long-term care represents about 4.3 percent of the state general fund budget, at $1.6 billion, but in terms of the reductions that we'll be seeing, it represents about 10 percent," says Sen. Chris Marr, D-Spokane, who is a member of the Senate health and long-term care committee. The most notable direct result from the cuts, if passed as proposed, would be a reduction in reimbursement rates for nursing homes, to $155 a day from $167 a day, Marr says.

Gary Weeks, executive director of the Washington Health Care Association, which primarily represents for-profit long-term care providers, says the association recognizes that this is not a year to be asking for money, but hopes to fight cuts it says would have far-reaching economic impacts.

"We know there isn't money; we aren't asking to raise rates. What we are saying is we ought not to be reducing the general fund for nursing homes at this time," Weeks says.

Marr says the adult day health sector also faces significant cuts, which would result in a net loss to that state program of about $18.5 million.

Bill Ulrich, president of Consolidated Billing Services Inc., a Spokane company that helps long-term-care facilities navigate Medicare and Medicaid billing processes, says the proposed cuts likely would result in cost increases to private-pay residents and in reduced staffing levels at nursing homes.

"No matter how you slice and dice it, it has to come out of labor," Ulrich says. "The profit margins are slim to negative in long-term care. These cuts have got to come out of wages in some way, probably in reduced staffing."

He adds, "They can cut costs, realizing 65 percent of costs are from wages, or the other thing they can do is increase their private pay rates." Ulrich says only about 25 percent of nursing home patients are private pay, so those patients can end up shouldering cost increases when funding is cut.

Randy Hyatt, whose Yakima-based company, Hyatt Family Facilities Inc., owns North Central Care Center here, says that 101-bed facility, which typically has 80 percent Medicare patients, would lose about $29,000 a month in revenue if reimbursement rates were slashed as proposed. He says that's roughly equivalent to the wages of five registered nurses.

"We engage in a contract with the state that says we'll give quality care to these people. If they take $28,800 a month away, that makes it difficult to hold up my end of the contract," Hyatt says. He says that though his company would find a way to keep its facilities open, some smaller facilities could be driven out of business by such dramatic cuts.

Nathan Dikes, chief executive officer of Sunshine Health Facilities Inc., including the 84-bed Sunshine Gardens nursing home, in Spokane Valley, says facilities often consider reducing the number of Medicare beds they offer when rates stagnate as costs rise. Rate reductions such as those proposed this year make it even more likely that such shifts will happen, he says.

"One ends up having to look at alternative ways of making sure you're still profitable," Dikes says.

This legislative session, the Washington Health Care Association hopes mainly to help nursing homes hold their budgetary ground, Weeks says.

To help make its case, the association commissioned an economic impact report to present to the Legislature, Weeks says.

The report, prepared by the Portland office of ECONorthwest, says that under the governor's proposed biennial budget, state funding for nursing homes would be reduced by $46.2 million, which it says would result in the loss of an additional $46.6 million in federal matching funds for a total funding reduction of $92.8 million. About half of the $12 a day reimbursement cut would come from state cuts and about half from the lost federal match.

The study says such a cut could result in the loss of more than 1,200 full- and part-time jobs in nursing homes, and about 220 jobs in other sectors of the economy. It says it would result in an overall reduction of $77 million in economic activity.

Marr says the Legislature is well aware of the pitfalls of budget reductions that could cost the state federal matching funds. In the face of difficult budget cuts, it will seek to preserve programs that have broader impacts than their direct services, he says.

One such program is the senior nutrition program, which puts volunteers in direct contact with seniors who still are living in their homes, Marr says. He says Spokane, which includes the third most boarding-home and nursing-home beds in the state, would feel such cuts.

One of the problems with such proposed cuts is the potential loss of state-funded contracts with programs and providers that are difficult or more costly to restart than to keep in operation, Marr says.

"Normally those contracts bring together various resources, and we already have sunk costs around program start-up and facilities. You cancel a contract, those resources go away," Marr says. Other programs rely heavily on volunteers or charitable organizations, and when they are cut, those volunteer resources are diverted into other efforts and can be hard to recapture later, he says.

Despite the gloomy outlook for funding, the association likes some things in the governor's proposed budget, Weeks says. They include, for example, money to provide an additional 100 beds at boarding homes in the state for patients with dementia, which could help delay some patients' entry into more expensive dementia units at nursing homes, Weeks says. He also says it's a positive sign that the governor's budget doesn't propose cuts in reimbursement levels for boarding homes.

Policy issues take a back seat

Marr says that trying to advance any policy proposals that would cost the state money likely will be a tough sell in this legislative session.

"Prior to the start of session there were suggestions we could look at increased funding for unpaid family caregivers, funding for fall prevention, dental access pilot (programs) for seniors, or a seniors farmers market. At this point those things look very, very difficult to try to pull out," Marr says. "You may see some policy movement, but it's going to have to be those things without a fiscal note."

Weeks says that because the budget is such a huge issue, the association is focusing on just two policy issues this session.

One is a revision to make more transparent the process through which the Department of Social and Health Services' Aging & Disability Services Administration sets rates for boarding homes, Weeks says.

"We think they should have to go through a public process," including holding public hearings on new rates and explaining what's considered in setting the rates, Weeks says. Currently, the department issues a rule each year, with little explanation of the process by which it has determined reimbursements, he asserts.

The other policy issue the association hopes to highlight is regulation of companies that charge boarding homes and nursing homes fees for placing residents in their facilities. Weeks says such "Medicaid placement services" aren't regulated, and the association is concerned that some of them might encourage families to move their elderly members from one facility to another unnecessarily merely to collect fees. Weeks asserts that when the services talk with families in hospitals, hospitals sometimes think a free social-work service is being offered to patients ready for discharge, but some nursing homes have sought legal protection to keep Medicaid placement services from intercepting family members of clients in their facilities' parking lots to talk with them about relocating elderly family members.

"We'll see what's reasonable regulation for these folks," Weeks says, adding that several legislators have already asked him about the issue, indicating that it's been raised as a concern by their constituents.

A number of key issues last year were resolved favorably in the Legislature, including passage of legislation to expand the giving of medications in boarding homes and changes in how capital funds are distributed so the oldest facilities receive priority for capital projects, Weeks says.

Meanwhile, a court decision recently declared unconstitutional a law passed last year that prevented boarding homes from dropping their Medicaid contracts if they housed clients who are on Medicaid or who are anticipated to become eligible for Medicaid later. Weeks says the association supports requiring such homes to notify patients when they're admitted whether the homes will accept Medicaid in the future, but believes that the law that was passed last year was unconstitutional.

Last year, the Legislature also passed legislation requiring disclosure of how premiums might increase over time for long-term care insurance policies in Washington, protecting consumers who buy those policies, Marr says.