Interim Report Assessing the Adequacy of and Accountability for Supplemental Security Income (SSI), Medical Assistance (MA) and Safety Net Assistance Payments Made to Adult Care Facilities (ACFs) to or on Behalf of Residents of Adult Care Facilities

New York State Department Of Health - Office Of Long Term Care - Division Of Home And Community Based Services

January 2008

Table of Contents

Introduction

In Section 24-e of Part B of Chapter 58 of the Laws of 2007, the Legislature mandated a study to evaluate the adequacy of and accountability for SSI, MA and safety net assistance payments made to ACFs to or on behalf of the residents of ACFs. The results of the study are to be reported to the Governor and the Legislature no later than January 1, 2008. The full text of the legislation is attached as Exhibit 1.

The Department of Health (DOH or the Department) is designated as the lead agency in carrying out the study and other state agencies1 have been assigned to assist the Department in the completion of the study. The legislation requires an examination of the following issues:

  1. Assess whether SSI, MA and safety net payments are adequate to assure the health and safety of ACF residents;
  2. Determine if operators who receive payments on behalf of ACF residents assure that these funds are used for the health and safety of ACF residents;
  3. Determine whether new rates and models of compensation should be recommended to assure the health and safety of residents and assure adequate personal needs and clothing allowances; and
  4. Determine if SSI and MA financing should be restructured with respect to the services provided.

On June 28, 2007, an initial meeting was held among appropriate state agencies to determine the direction of the study. Each agency's concerns on SSI payments, related funding issues, and adequate service delivery, were discussed and evaluated. A second meeting was held in October on progress to date and a consensus was reached on the additional work and time that would be needed to meet the goals of the legislation.

Background

There are currently 488 licensed ACFs statewide under the jurisdiction of the DOH2. Of these, 305 are operated by for-profit entities (proprietary), 176 are operated by not-for-profit corporations and seven are operated by local social services districts. There are three types of ACFs that DOH regulates:

  • Adult Homes (AH) which provide long term residential care, room, board, housekeeping, personal care and supervision for five or more adults unrelated to the operator3 and which tend to be characterized as either single-or double-occupancy with congregate dining and activity areas, of which there are 383 licensed facilities;
  • Enriched Housing Programs (EHP) which provide long term residential care including room, board, housekeeping, personal care and supervision to five or more adults, primarily persons 65 years of age or older, in community integrated settings resembling independent housing units4 and which are generally an apartment-based model; and
  • Residences for Adults5 which provide room, board, housekeeping, case management activities and supervision to five or more adults.

Sixty-three ACFs are also licensed to provide limited medical services to residents under the Assisted Living Program (ALP) as explained in Exhibit 2.6 A separate component of the study is being undertaken to assess payments to ALPs.7

The statewide ACF capacity is 39,000 beds, of which approximately 3,800 are designated as ALP beds. The December 31, 2006, census for all facilities was 31,675. SSI and Safety Net recipients comprise 13,500 of the total ACF census8. Approximately 2,500 SSI recipients occupy ALP beds.

Determining Cost of Care9

To address the goals of the study, DOH determined it was necessary to select a sample of facilities and perform an analysis of the financial data contained in cost reports filed by facility operators. The 2003 reporting year was used as it is the most recent year for which we have complete data for all ACFs that were required to report. The cost report data was compiled to determine average per diem revenue and expenses to compare the various types of facilities by size, location and resident composition and in an effort to determine the number of facilities which were operating within the SSI Level III payments.

Beginning with the 2003 full data set, facilities with a census of less than 75% were removed from the sample so that only data from facilities at or near full operational capacity would be used. Facilities having less than 20% SSI occupancy were also removed to exclude high-end10 ACFs. These modifications resulted in a sample of 138 facilities. The federal COLA11 for 2004 – 2007 was then applied to the reported revenue and expenses of the sample group in order to make the numbers from the 2003 cost reports current. Finally, we added the legislated state share increase in benefits for SSI Level III residents for 2006 and 2007 to the base.

When analyzing the data, significant variations were observed in reported rental expense, mortgage interest, building depreciation and real estate taxes by facilities. It was decided that a standard was needed to bring building costs consistent for all facilities. To arrive at a building cost standard we applied a constant to allow for equality of building expenses for all ACFs. The building cost standard applied is explained in Exhibit 3.

After applying these adjustments to the cost reports, we computed revenue and expense per diems for Proprietary and Non Profit ACFs. We also separated the data by upstate vs. downstate.

Preliminary Findings

The adjusted revenue and expense per diems were calculated from the financial reports submitted by the 138 sample facilities considered as operating efficiently and housing primarily SSI recipients. The total adjusted revenue and total expenses were then divided by resident care days, to arrive at a per-person-per-day (per diem) amount. The sample of 138 facilities was also separated into several categories for further comparison of the financial data. The categories include: Not For Profit Facilities, Proprietary Facilities, Upstate vs. Downstate Facilities. We also plan to include a comparison of Impacted Facilities vs. Non-Impacted Facilities in the final report.

For comparison purposes, the SSI Level III benefit rate for 2007 (Exhibit 4) is shown on each of the graphs in Exhibits 5-8. The 2007 rate is $1,264 per month. The resident is entitled to a personal needs allowance stipend of $164/month, while the operator retains $1,100/month of facility revenue which is a per diem rate of $36.17.

The charts included in this interim report as Exhibits 5-8, illustrate the various adjusted per diem revenue and expenses from the sample of 138 non-ALP facilities.

  • Chart 1 This chart illustrates adjusted per diem revenues between upstate and downstate proprietary facilities. Approximately 75% of facilities statewide show average per diem revenue between $35 - $49. (See Exhibit 5.)
  • Chart 2 This chart illustrates adjusted per diem expenditures between upstate and downstate proprietary facilities. The chart shows 20 of 46 (43 %) proprietary facilities downstate operate within the per diem rate of $36.17, while 4 of 58 (6.8 %) upstate proprietary facilities are operating within the $36.17 rate. Approximately 70% of facilities statewide show average per diem expenses between $30 - $49. (See Exhibit 6.)
  • Chart 3 This chart illustrates adjusted per diem revenues12 between upstate and downstate Not-For-Profit facilities. A review of the chart shows there is no definable trend of revenue for Not-For-Profit operated facilities. This may be attributable to the fact that NFPs have additional outside sources of revenue that are not available to proprietary facility operators. (See Exhibit 7.)
  • Chart 4 This chart illustrates adjusted per diem expenditures between upstate and downstate Not-For-Profit facilities. None of the downstate NFP facilities operate below the per diem rate of $36.17, while 3 of the 25 (12 %) upstate NFP facilities are operating within (actually below) the $36.17 rate. Similar to NFP revenues, a review of the chart for NFP expenses shows there is no definable pattern of expenses for this group. (See Exhibit 8.)

Additional Factors13 that Need to be Considered when Addressing the Adequacy of SSI Payments

ACF Closings

One aspect of the measure of the adequacy/inadequacy of the cost of care for SSI eligible residents is the number of ACF closings in recent years. Since 2003, there have been 103 facility closings with a combined capacity of 5,374 beds. Statistical information on file indicates that SSI residents comprised 70% of the occupancy in these facilities.

As referenced in Exhibit 9, the number of facility closings has dropped significantly since 2006, suggesting that the increases in the State Share of the SSI Level III benefit rate in 2006, and again in 2007, has helped to stabilize the financial operation of predominately SSI facilities.14

ACF Openings

As illustrated in Exhibit 9, over the past five years there have been 61 new facility openings with a combined capacity of 3,651. However, only 10%, or 350 of the new facility beds, are occupied by SSI recipients.15

Medical Assistance Utilization in ACFs

An analysis of 2005 Medicaid utilization by ACF recipients who receive SSI benefits shows aggregate spending of $206 million in non-ALP facilities. This equates to approximately $75/day per eligible person for Medicaid services. We identified several categories of medical services that may directly supplement the services provided in ACFs to SSI residents, including services that are likely provided to ACF residents on site. See table below which shows spending for the four cost components comprising 25% of the MA services provided.

Category of service Payments Number of Claims Number of Recipients Per Diem Cost
Home Health Care $37,462,933 387,519 2,886 $35.56
Personal Care $2,041,104 34,434 244 $22.92
LTHHC (Long-Term Home Health Care) $998,593 20,353 103 $26.56
Case Management $4,704,460 13,924 1,395 $9.24

The extent to which these MA services subsidize ACF care to residents has yet to be determined.

Resident Personal Needs Allowance (PNA) Funds

The New York State Office of Mental Health (OMH) has collected data related to how SSI residents in Mental Health ACFs spend their PNA. The questionnaire used for this purpose is attached as Exhibit 10. Exhibit 11 provides a summary of the information collected. An evaluation of the OMH Personal Needs Allowance Survey indicates that 64% of people report that they rarely or never have money remaining until their next PNA stipend is received. Eighty-seven percent of those surveyed reported that they spend the full amount of their PNA within the first two weeks after receiving it. The highest categories of PNA expenditures were food (30%), cigarettes (29%) and clothing (17%). Sixty-eight percent stated that there are items that they need but cannot afford. Four out of ten respondents reported that item to be clothing.

The State Office for the Aging (SOFA) is still in the process of collecting the same data from frail elderly ACF residents in non-impacted facilities. SOFA expects to complete this task shortly.

Challenges to Date

  1. One significant issue has been the completeness and accuracy of financial data from Annual Financial Reports. The most recent complete set of financial reports is from the 2003 filing year. Filing delays for 2004 and 2005 are the result of an outdated manual reporting procedure. The Department is automating the cost report process beginning with the 2006 reporting year which should reduce processing time. This reporting system will be on-line in early 2008, making it possible for more accurate analysis by using more current data. The system will enable the Department to also utilize 2007 financial data later in 2008. Using the 2007 financial data will allow for a more thorough analysis of the significant increases in the state share of the SSI rate that occurred in 2006, and again in 2007. These increases raised the state share by a total of $250 (23.3 %) per month downstate and $280 (26.7 %) per month upstate. We expect the 2006 data to be available by June 2008 and the 2007 data by August 2008.
  2. A number of ACF operators formally objected to a request for more detailed cost report information concerning related party expenses, claiming that the Department is not entitled to this information. The letters have been referred to the Department's Division of Legal Affairs (DLA) for further action and advice on how to proceed. More detailed information is needed to adequately assess ACF expenditures and their relationship to resident health and safety.
  3. The approval of new staff dedicated to the study has only recently been received. The Office of Long Term Care is in the final stages of the hiring process.

Further Analysis/Recommendations

The amount of information obtained to date indicates that we need a further commitment of staff time dedicated directly to this study. In summary, additional analysis is needed in order to draw more appropriate conclusions regarding the adequacy of SSI payments to ACFs in supporting resident health and safety. This analysis must include the following issues and actions:

  • A process for measuring quality of service delivery in order to identify facilities that provide adequate and efficient care to residents;
  • Analyze other available funding sources which impact facility operations such as endowments, bequests, and donations made to NFPs, and Medicaid-covered long term care services provided to residents to determine the extent to which these additional funds support and/or substitute for ACF services and perform further analysis of the source of additional revenue often not identified in the financial reports;
  • Implement a separate study to examine ALP cost and service delivery to determine the extent to which MA payments impact and supplement quality care and services;
  • Analyze the effect of grant subsidies other than the Quality Incentive Payment Program (QUIP) on facility operations as a supplement to SSI;
  • Elicit the assistance of ACF associations in gaining insight into operating costs and services as well as assisting the Department in obtaining related party transaction information from operators;
  • Refine study findings by utilizing more current cost report data collected through the new automated process;
  • Identify the root cause(s) of the large number of facility closings over the past ten years;
  • Research funding methods used by other states' residential care programs and the extent and methods of oversight of their ACFs; and
  • Share preliminary report with the Assisted Living Reform Act Task for input and further recommendations.

Notes

  1. Mental Health, Commission on Quality of Care and Advocacy for Persons with Disabilities, Office for Aging, Office of Temporary and Disability Assistance, Assisted Living Reform Act Task Force. See Exhibit 1 for full legislation.
  2. Additional categories of ACFs, including shelters for adults (SSL § 2.23) and the family type home for adults (SSL § 2.22), are under the jurisdiction of other agencies.
  3. Social Services Law § 2.25
  4. Social Services Law § 2.28
  5. Three facilities are licensed as residences for adults (SSL § 2.24). Data related to these facilities is not included in the study, due to the fact that they are classified in a different living arrangement (SSI Level II Residential Care vs. Level III Enhanced Residential Care). See Exhibit 4, the 2007 SSI Benefit Levels Chart explaining the SSI Levels of Care and associated benefit rates.
  6. 18 NYCRR 494.5(a) and (b) See Exhibit 2.
  7. The potential impact of the Assisted Living Reform Act on occupancy and payments to ACFs is not intended to be considered in the study at this time. If sufficient data are available at the time of completion of the study, recommendations related to Assisted Living Residences (hereafter "ALR") may be included in the study.
  8. Safety Net is designed to serve as a short-term temporary payment structure paid by the counties to eligible persons until the federal SSI payments are processed. As a result, Safety Net recipients represent less than 2 percent of the SSI population. Approximately fifty percent of the Safety Net residents reside in publicly operated adult care facilities.
  9. Some components of our data may be incomplete. Further analysis is necessary in order to properly assess the data and conclusions which may be drawn from the data.
  10. A "high end" facility is one that is primarily private pay with high monthly fees for board and care.
  11. Every year the Social Security Administration (SSA) adjusts the federal SSI benefits to reflect the increase in the cost of living. This increase is based on the change in the Consumer Price Index (CPI) in the third quarter of the current year and the third quarter of the previous year.
  12. Not For Profit operated facilities do not show consistent patterns of revenue and expenses due to the availability of other sources of income such as endowments, bequests, charitable donations, interest on investments, etc.
  13. The Department believes that some components of our data remain incomplete and that further analysis is necessary in order to properly assess the data and conclusions which may be drawn from the data.
  14. Additional information needs to be obtained to assess if other factors besides the SSI rate may have had an effect on the facility closings.
  15. All but one of these facilities is predominately private pay. There is one facility located in New York City that was constructed utilizing United States Department of Housing and Urban Development (HUD) grant funding; this home will provide housing to another 100 SSI eligible residents in accordance with HUD low-income housing requirements.