Confronting a fiscal crisis unparalleled in the history of their membership, the state's two
largest nursing home associations* jointly engaged the national accounting firm of BDO
Seidman, LLP, to conduct an in-depth analysis of the condition of Wisconsin's nursing home
facilities. The study found that Wisconsin's nursing facilities are in fact in serious
financial condition.
It identified several factors contributing to their distressed status, but concluded "the
inadequacies of the Wisconsin Medicaid payment system have, without question, had the greatest
impact in the deterioration of the financial and operational conditions of the Wisconsin
nursing facilities."
The BDO Seidman** study examined nursing home cost and payment information collected by the
Wisconsin Department of Health and Family Services (DHFS) for its Medicaid rate setting
database. The data base consists of state-audited facility-specific resident care cost data
the state uses in setting 328 nursing home rates for the 1999-2000 payment year, which
commenced July 1, 1999. (While there are 417 nursing homes participating in the state's
Medicaid program, DHFS had established 1999-2000 Medicaid rates for 328 when the BDO study
commenced on May 15, 2000.)
The following are some of the major findings contained in the BDO study:
Wisconsin’s Medicaid program is the source of payment for nearly 70% of the 43,000
individuals living in Wisconsin’s nursing facilities.
State Medicaid payment to nursing facilities are woefully inadequate; In 1999-2000,
Medicaid paid facilities $100 million less than the cost of providing resident care.
In 1999-2000, 83% of the state’s Medicaid certified facilities did not receive Medicaid
payments sufficient to meet the cost of providing resident care.
In 1999-2000, facilities’ Medicaid losses average nearly $11 per day for each Medicaid
resident. For an average 100-bed facility with 70% Medicaid census, this translates into an
annual loss of $250,000.
Wisconsin’s nursing facilities operate in the red. Taking into account all payment
sources (Medicare, Medicaid, private payment and insurance) the average operating margin for
all Wisconsin nursing facilities in 1999-2000 was a negative 4.79%.
BDO Seidman’s analysis documents that, without question, inadequate Medicaid payments had
the single greatest impact on the deterioration of the financial and operational conditions of
Wisconsin’s nursing facilities.
During 2000-2001, the projected financial and operational conditions of Wisconsin’s
nursing facilities is even more bleak. The state Medicaid program has announced the Medicaid’s
2000-2001 cost recognition ceilings used to determine facility payments will be further
reduced and these cuts will be applied retroactively beginning July 1, 2000.
Wisconsin’s 2000-2001 Medicaid payment ceilings, measured as a percentage of nursing
facility costs paid, are the lowest in the United States. In 2000-2001, the average facility
Medicaid loss for a 100-bed facility with 70% Medicaid census is expected to reach $300,000.
Our solution: To improve Wisconsin’s Medicaid nursing facility payment system to a level
where only 40% of the state’s facilities experience Medicaid deficits, compared to 83% in
1999-2000, and to provide a 4% Medicaid rate increase for nursing facilities in each year of
the next biennium, a rate which mirrors current inflationary cost increases. The cost: $48.7
million GPR in 2001-02 and $65.4 million GPR in 2002-03.
*The Wisconsin Health Care Association (WHCA) represents 250 for-profit, not-for-profit,
and government-operated nursing facilities. The Wisconsin Association of Homes and Services
for the Aging (WAHSA) represents 198 not-for-profit and government-operated facilities.
(Some facilities belong to both organizations.) For more information, please contact WHCA at
608-257-0125 and WAHSA at 608-255-7060.
**BDO Seidman is a national accounting and business consulting firm with 40 offices around the
United States. The author, Joseph Lubarsky, is a CPA and in the firm. He specializes in the
redesign and development of state Medicaid payment systems.
10/18/00
