More Than a Third of Georgia's Freestanding Nursing Centers Have Negative Margins
Summary of Key Findings
Eljay, LLC, a consulting firm specializing in development and modification of Medicaid payment systems for nursing facilities was engaged by GHCA to determine the financial margins of Medicaid nursing facilities in Georgia utilizing nursing facility revenues and expenses as reported on the 2015 Medicaid cost reports. Only freestanding nursing facilities were included in the analysis in that cost reports for most hospital-based facilities do not segregate nursing facility revenues and expenses from those of the hospital.
The scope of the project went well beyond a simple computation of margins based upon net income from nursing facility services divided by total nursing facility revenue as reported on the cost reports. It included extensive review and adjustments, as described below.
To present the most conservative analysis, costs incurred that could possibly be viewed as artificially inflated as the result of transactions with parties related to the owners of the nursing home were recognized only to the extent allowed by the Georgia Medicaid program, including costs for management fees, related party arrangements and owners' compensation. In total, almost $48 million of costs were excluded in computing nursing facility margins.
- The combined margin for the 293 nursing facilities in the database was $71.6 million, representing a margin percentage of 3.3% on reported revenue of almost $2.2 billion.
- 105 facilities (36%) incurred negative margins, reflecting a combined negative margin of 8.3%. Another 27 facilities had positive margins of 2% or less.
- The 146 facilities that rank in the bottom half of all facilities relative to margin had a combined negative margin percentage of 5.1%.
- The 142 facilities with high Medicaid volume (75% Medicaid volume or greater) have financial margins that are ten times lower than low volume Medicaid providers (less than 50% Medicaid volume). High volume Medicaid providers reflect an average margin of just nine-tenths of one percent (.9%) compared to nine percent (9%) for low volume Medicaid providers.
- The 20 facilities with less than 50% Medicaid volume represent just 8.7% of the total revenue of all facilities yet constitute almost 24% of the total combined margin for all facilities. In contrast, the 142 facilities with Medicaid volume of at least 75% represent almost 42% of total revenues, but just less than 12% of the total combined margin.
For additional information, please contact GHCA Vice President for Reimbursement Hope Hickman at email@example.com or 770-605-0400.