Local Government

Medicaid cut has Valley Hi Nursing Home, McHenry County Board on edge

WOODSTOCK – A Medicaid cut for the last two months of the state fiscal year for Valley Hi Nursing Home will translate to at least half a million dollars next fiscal year if made permanent.

The state imposed a 12.6-percent cut on Medicaid reimbursement for May and June for most nursing homes, supportive living programs and specialized mental-health rehabilitation facilities as part of a plan to make up for a multi-billion-dollar budget shortfall. That cut means a total loss of slightly more than $100,000 for May and June for the taxpayer-owned nursing home west of Woodstock, and at least $572,320 if it is extended into the next state fiscal year, which begins July 1, according to figures.

County Administrator Peter Austin told the McHenry County Board last week that the cuts represent “very real money” that, had they been in place for the entire current fiscal year, would have resulted in the home operating at a loss. Eighty of the home’s 128 beds are set aside for Medicaid patients, with the rest divided between Medicare and private-pay residents.

“What lies beyond July 1, we don’t know yet. We hope it won’t be as draconian as 12.6-percent cuts, but we have to prepare for that,” Austin said.

The likelihood of significant state cuts almost certainly increased last Friday with the Illinois Supreme Court’s rejection of the 2013 pension reform law as blatantly violating the state Constitution’s pension protection clause. But while Valley Hi has operated at a small profit since 2011 following a slew of reforms, it is subsidized on top of its per-bed revenues by a property-tax levy approved by voters who wanted a home to help care for the county’s seniors.

“With the pension ruling everything changes again, and we have yet to see how it’s going to look,” Valley Hi Administrator Tom Annarella said Monday. “I’m really praying that it’s not going to be any worse.”

At least one County Board member said the board may have to re-think its dedication to holding the budget line on Valley Hi, which was born from years of the institution bleeding red ink.

A scathing outside audit of Valley Hi in 2007 revealed that the home had run in the red since 2001, and ended 2006 with a $2 million deficit. The taxpayer levy, which was then $6 million, was what kept Valley Hi’s budget whole. The audit concluded that the home was “managerially dysfunctional” and in need of a “revenue catharsis.”

The County Board, following the former administrator’s resignation, temporarily turned over management of Valley Hi to Cary-based Revere Health Care, which over three years brought the nursing home out of its annual deficit hole. The board re-assumed control of Valley Hi in 2010, hired Annarella as the new administrator and gave oversight of the home to a County Board-appointed operating board similar to how other Illinois counties run their publicly-owned senior homes.

But with that fiscal control came an accumulation of the annual levy that in previous years filled the large budget gaps. The levy’s surplus has averaged between $30 million and $35 million a year, or enough to cover about three years of the home’s operations. The County Board since resuming control of Valley Hi has halved the annual levy to $3 million, and the home is in the process of drawing down some of that surplus through preventative-maintenance capital improvements.

The Valley Hi Operating Board wants at least $16 million kept on hand – $11 million for a one-year reserve of its operating expenses, and $5 million to cover unforeseen expenses that would otherwise have to be paid out of the county’s general fund. Talk among some County Board members to lower that surplus is tempered by cautions of what unpleasant surprises the future may hold for health care, from revenue cuts courtesy of a cash-strapped state government to future provisions of the Affordable Care Act or unfunded state mandates.

But County Board member Ken Koehler, R-Crystal Lake, said at Monday’s meeting that the county should focus on Valley Hi’s mission to take care of the less-fortunate, rather than demanding Valley Hi budget surpluses, which he dismissed as “kowtowing to the local blogger or a very uninformed newspaper.”

He said that Valley Hi’s mission will be even more vital if other nursing homes start cutting back on Medicaid beds as a result of cuts. Illinois now ranks 49th out of 50 states for Medicaid reimbursement.

“We as a board are going to have to soul-search and make a decision upcoming to continue the levy that we currently have and begin to show that we are either going to break even or we’re going have a deficit, because Valley Hi was never, never there to try to … show some sort of income. It was to take care of the indigent and we need to go back to that premise,” Koehler said.

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