Cedarbrook nursing home struggling to attract residents

June 22--The accommodations at Cedarbrook nursing home are far from luxurious. Residents live three or four to a room and make trips down the hall to communal bathrooms, where a curtain at each stall protects their privacy.

Officials concede that Lehigh County-owned Cedarbrook is institutional and without the modern amenities that its more modern competitors offer. But they boast that the care is highly rated.

That reputation alone was once enough for Cedarbrook to be mostly self-sustaining and carry out its mission of taking care of the county's poor.

But today, without semi-private rooms and adjoining bathrooms -- and with an overabundance of residents on Medicaid -- Cedarbrook shares the shortcomings of neighboring Northampton County's Gracedale.

And like Gracedale, which was nearly privatized because of its financial struggles, Cedarbrook, in South Whitehall Township, is operating in the red.

From 2012 to the end of this year, Lehigh County is projected to pump $15.8 million into the nursing home to keep it afloat. That's $5.1 million more than the county contributed to Cedarbrook in the preceding 10 years combined.

Cedarbrook's fortunes changed more recently than Gracedale's. The Northampton County home has struggled for years to keep up occupancy, undermining its financial stability. But the threats to its bottom line are much the same at both: aging facilities, shrinking or flat federal and state reimbursement rates, high personnel costs, and increased competition.

The later arrival of financial problems at Cedarbrook is due at least in part to a decision made more than a decade ago to contract out management of the home, Lehigh County Executive Tom Muller said.

"I suspect that had Lehigh County not brought in some professionals to run the place," he said, "we might have been going down the same trail sooner."

Should it be sold?

Pennsylvania counties aren't mandated to run nursing homes, but many long ago chose to make a commitment to care for the frail and indigent.

"They were the poor houses," Cedarbrook Administrator Jamie Aurand said. "They were for people who had no other place to go."

Today, Cedarbrook's and Gracedale's financial losses -- and the underlying threat of privatization -- reflect statewide trends.

From 32 county-owned homes in Pennsylvania two years ago, there are 26 today, said Kelly Andrisano, executive director of the Pennsylvania Association of County Affiliated Homes. Blair, Centre, Montgomery, Butler, Beaver and Franklin counties all got out of the business during that time.

Cedarbrook once had waiting lists and would stick to its mission by turning away applicants with financial resources. Now, seniors have more alternatives and many aren't choosing Cedarbrook. The home has closed a wing and is still just 93 percent full, 623 of its beds occupied.

Even in the past decade, there were years when Cedarbrook was so flush with cash it returned as much as $2 million to the county's coffers. But that trend has reversed. From 2011 to 2013, Lehigh County's financial contribution to Cedarbrook rose from $535,576 to $6.3 million, a whopping 1,090 percent increase.

So jarring was the nursing home's financial slide that when administrators last fall announced the home would need millions of county dollars to operate through the end of the year, a county commissioner dubbed it the "September surprise."

The board demanded answers from the operator hired to manage the home, LW Consulting, and shelled out $18,000 for another firm to perform an independent assessment of the facility. The same firm, Complete HealthCare Resources-Eastern, churned out a similar report for Gracedale in 2010.

Gracedale's balance sheet has fluctuated widely for more than two decades but the home began losing money annually in 2009. Given its cost structure and reimbursement environment, Gracedale would continue to require large county subsidies, CHR reported. The firm advocated for the home's sale or lease "as the best strategy to guarantee no required contributions from Northampton County to fund cash flow losses at Gracedale."

Voters overwhelmingly rejected that notion in a 2011 grass-roots ballot referendum. Instead, the county hired a private company to run the home and begin implementing CHR's many recommendations.

Still, some doubt the home will ever be self-sufficient.

Lehigh County first made overtures to sell Cedarbrook in 2005, and talk of privatization last flared up in 2011, when a slate of GOP board candidates said it would be wise to sell the nursing home if its financial health took a turn for the worse.

"Do I think it should be sold? Yes," Commissioner Vic Mazziotti said at the time. "Do I think it should be sold under the circumstances? No."

But circumstances have changed considerably since 2011. And that leaves the county on the hook for Cedarbrook's problems.

The 2014 budget includes a nearly $6 million subsidy for Cedarbrook -- double the planned subsidy for 2013 and the highest budgeted subsidy in the home's history.

Out of balance

As state and federal reimbursement rates for Medicare and Medicaid continue to lag behind the rise in personnel costs, the need for county assistance will only grow.

The CHR report for Cedarbrook cited many of the same revenue challenges that ensnared Gracedale. The population includes too few insured by Medicare, which pays at a higher rate for short-term rehab stays; and too many on Medicaid, which pays for the long-term care of people with little income or assets. Called the payer mix, Cedarbrook's is out of balance.

According to a biannual Department of Public Welfare report, 86 percent of Cedarbrook's residents are insured through Medicaid. Just 6.5 percent are covered by Medicare, and fewer than 1 percent are patients with private insurance. The rest are the rare private payer.

In comparison, 54 percent of residents at Phoebe Home in Allentown are on Medicaid, 34 percent at Fellowship Manor in Whitehall Township and 67 percent at Holy Family Manor in Bethlehem.

Those homes have more Medicare and private payers who help subsidize or offset the Medicaid population.

"If you buy into the concept of the county should provide a safety net for those in need, the only way you can afford to do that is if you are also handling people who have some equity," Muller said.

Medicaid pays the county home $223 a day, compared with the $320 private payer daily rate. Medicare coverage varies based on how much therapy someone needs, but can range from $180 to $700 a day. On average, Cedarbrook reaps $460 a day.

The gap between Medicare and Medicaid is so large that the facility would operate at a loss even if it were 100 percent full with Medicaid patients, Aurand said.

"If you look at our model," he said, "we have absolutely no control over 95 percent of our revenue."

According to a study released by the Pennsylvania Health Care Association in February, overall profit margins fell 63 percent in nursing homes with a higher proportion of Medicaid patients from 2007 to 2012. Over the same period, margins for homes like Cedarbrook, with more than three-quarters of Medicaid patients, fell 80 percent to 0.3 percent.

The same study found the state's reimbursement rates fell short on average $26 a day on the actual cost of care per patient.

"When you have that gap per day per Medicaid resident, it's hard to be making money," Andrisano said.

Pennsylvania Medicaid reimbursements increased 2 percent for nursing home providers last year after four years without a raise. Gov. Tom Corbett proposed another small increase in the 2014-15 budget, but any extra money now is considered a long shot with news of a looming $1.2 billion budget deficit.

Making changes

Absent financing for a complete renovation, little can be done about Cedarbrook's physical shortcomings, such as communal bathrooms, multiple-bed rooms and scant storage space for personal items.

Meanwhile, many private homes are more modern, with semi-private rooms and adjoining bathrooms.

"As things changed in the industry and in the business -- and I hate to call it an industry but it is -- the older county facilities didn't really keep pace with what was going on in the market," Aurand said. "Families make decisions a lot of times based on location, care reputation and the amenities. 'Can I visit Mom? And if I can't visit Mom, then I want her to be in a place that looks nice'."

Garry Heintzelman moved his mother to Cedarbrook six years ago, because stopping by her house four or five times a day became untenable. She is legally blind and suffered a stroke that left her paralyzed on one side of her body.

Cedarbrook is roughly a half-mile from her former home and a quarter-mile farther for him. He visits her four times a week, he said.

Heintzelman, of South Whitehall, used to drive a tractor-trailer delivering linens to nursing homes. He made note of those with the putrid smell of urine but was impressed with Cedarbrook's cleanliness.

"It's as clean as any nursing home I've ever seen," he said.

But his mother's two-bed room, he added, is too small to maneuver in.

Before that, she was in a four-person room in the now-shuttered wing.

While the county homes were aging, other segments of the industry, such as assisted living homes, were growing their competitive edge.

"The average nursing facility that you're competing with today has flat-screen televisions in the rooms, they have Wi-Fi service, they have day rooms and dining rooms and separate little living rooms on each of the units," Edwin Balliet, regional vice president for Complete HealthCare Resources, told the county commissioners.

Increasingly, they also have secure floors for patients with dementia -- once the territory of county homes.

The 147 so-called memory support beds at Cedarbrook-South Whitehall and 39 at Cedarbrook-Fountain Hill are getting harder and harder to fill, Aurand said.

Competition isn't only from other nursing homes. Home and community-based services are increasingly popular, and Medicaid offers a waiver for people who want care in their home.

Programs like Senior LIFE Lehigh Valley represent an alternative, pairing in-home services with adult day care. The programs represent about 100 or so people who would otherwise be in nursing homes, Aurand said.

Cedarbrook's consultant says addressing the aging facility is key to a turnaround. To reduce the county subsidy, CHR recommended attracting more residents on Medicare, along with increasing its dining revenue, reducing staff and outsourcing housekeeping. It also recommended increasing marketing and advertising to make sure families know about the home and what it offers.

In some counties, those incremental changes have been enough, Andrisano said.

Implementing those changes could cut $1.4 million by the end of 2014 and $2.8 million when fully realized in 2015, according to CHR's report.

CHR raised the possibilities of the county building a new facility, transferring the South Whitehall and Fountain Hill homes to a nonprofit, or selling them to a private operator.

Muller would prefer to reopen Cedarbrook's vacant wing as a modern facility that could attract higher payers.

"I do want a full-court press on converting one of those units to modern, flat-screen TVs, Wi-Fi," Muller said. "Let's prove that if we make that investment, they will come."

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Cedarbrook subsidies

2002: $2.9 million

2003: $2.5 million

2004: $0

2005: $0

2006: $1.8 million

2007: $0

2008: $0

2009: $442,358

2010: $2.4 million

2011: $535,576

2012: $3.4 million

2013: $6.4 million

2014: $6 million

Source: Lehigh County

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