Published in Health Care

Rule change brings flood of nursing home proposals

BY Sunday, March 15, 2020 05:15pm

An updated state estimate on the need for more nursing home beds has led operators to propose dozens of projects in Michigan that call for hundreds of new beds.

The flood of letters of intent and applications in late December and January came after the Michigan Certificate of Need Commission projected demand for nearly 3,000 more licensed nursing beds across the state. 

However, that figure is now considered as overestimating the actual market need. That resulted in a temporary amendment to state regulations that would require an occupancy rate of 85 percent in a given market before the state will consider licensing additional beds. The occupancy requirement reduced the statewide bed need to about 300.

“Everyone on the committee understands the problem with the current methodology,” said Don Haney, the administrator of Thornapple Manor nursing home in Hastings. Haney chairs an advisory committee that’s now crafting a new standard for state regulators when weighing applications for nursing home projects.

The advisory committee includes developing a methodology that more accurately depicts how many nursing home beds are needed in Michigan. It would replace the methodology adopted in 2019 that led to the roughly 50 nursing home proposals to the state through January.

“When we looked at that, that’s kind of when everybody said, ‘That’s not necessary. We don’t need that many beds in the state right now,’” Haney said. 

The advisory committee could finalize recommendations in April for a new review standard and methodology to determine bed need, Haney said. They likely will include a permanent occupancy threshold within local health care planning areas around the state to prevent an excess capacity of beds, which can drive up costs, he said.

Statewide, nursing homes average an occupancy rate of nearly 81 percent, Haney said, adding some markets are as low as 71 percent while others are as high as 96 percent.

The advisory committee looks to craft new criteria that would allow for projects in markets that need more nursing home beds, but without leading to projects in areas that now have plenty of capacity.

The goal is to make sure “there is a bed need where there is high occupancy and there truly is a need for more beds, and that it is acknowledged and that planning area gets more beds,” Haney said.

“We’re in agreement with what high-level principles should be included in a new methodology,” he added. “The devil’s kind of in the details on some of the nuances, and then testing the different models we’re looking at over a period of time to make sure this will hold up over time and truly give a better picture of what the needs in the state are.”

Ongoing process

The effort to craft a new review standard for Michigan’s certificate-of-need regulations — which are used to review proposed nursing home projects — goes back a year.

The CON Commission was scheduled last spring to form an advisory committee for a scheduled three-year review of the nursing home bed standard.

When the commission sought experts to serve on the advisory committee, not enough volunteered, said CON Commission Chairman James “Chip” Falahee. That led to a delay in appointing the advisory committee until late 2019.

In September, Michigan Department of Health and Human Services staff proposed — and the CON Commission adopted — the updated projection on how many new nursing beds were needed across the state. The measure took effect Nov. 1. The department developed the projection with Paul Delamater, an associate professor at the Carolina Population Center at North Carolina University, who often performs statistical analysis for the state.

When the 12-member advisory committee finally was seated in December, and soon concluded the new projection adopted was flawed, members moved to propose the 85 percent occupancy requirement to prevent the overdevelopment of nursing homes.

That temporary measure, now going through a public comment period before it’s finalized and put in place, drew strong objections from one nursing home operator that proposed multiple projects under the idea that 2,800 new beds were needed across Michigan.

In written testimony submitted at a Feb. 11 public hearing, Louisville, Ky.-based Trilogy Health Services LLC urged the advisory committee to table the occupancy requirement until its work is complete later this year.

“Trilogy believes this stand alone and temporary measure ignores the results of the existing bed need methodology and fails to promote access to high quality care for Michigan’s most vulnerable residents,” wrote Peter Massey, vice president of development and construction at Trilogy Health Services. “This measure simply enables existing providers to avoid making market-competitive investments in their properties that would benefit the quality of life of their residents.”

Competing views

The Health Care Association of Michigan that represents nursing homes across the state took the opposite view and voiced support for the occupancy requirement.

Patricia Anderson, executive vice president of reimbursement for the Health Care Association of Michigan, argues that “Michigan is a significantly over-bedded state right now.”

“To add nearly 3,000 beds to the system when we are already so significantly over bedded, it just didn’t make any sense,” said Anderson, who also serves on the advisory committee.

The proposed occupancy amendment to the existing nursing home standard could take effect in late May or early June, unless rejected by state lawmakers, Haney said.

Trilogy Health Services earlier this year submitted several letters of intent and applications to the state for nursing projects. They include three developments in Kalamazoo County at $36 million each. One proposal is for a facility on Oakland Drive in Portage with 58 beds, 54 “home for the aged” beds and 24 independent living apartments.

Trilogy Health Services’ other two proposals in Kalamazoo County are on Angling Road in Portage and Hudson Street in Kalamazoo, each with 58 nursing home beds, 41 beds in a home for the aged and 24 independent living apartments.

Trilogy Health Services proposed similar projects in Muskegon and Ottawa counties. The company operates nursing homes in Ohio, Indiana, Kentucky and Michigan. It has a dozen locations in Michigan, plus another under construction. Existing campuses in West Michigan are in Belmont, Battle Creek, Byron Center and Grand Rapids.

In Ottawa County, Trilogy Health Services submitted proposals for two projects in Holland and one on 32nd Avenue Hudsonville. As in other counties, each are for $36 million, 58 nursing home beds, 41 beds at a home for the aged, and 24 assisted-living apartments. Trilogy also has a proposal to the state for the same kind of project on Terrace Street in Muskegon.

Two more projects were proposed in Kalamazoo Country by other operators. Medilodge of Kalamazoo proposed developing a $15.4 million addition with 60 beds that would expand capacity at its 111-bed nursing home on 11th Street. Progressive Quality Care, based in Parma, Ohio, also proposed an $18.7 million, 123-bed facility on Gull Road.

In Kent County, Progressive Quality Care also submitted a proposal for a $16.6 million, 100-bed nursing home on Del Mar Drive in Wyoming, and a $17.3 million, 100-bed proposal for a location on 44th Street in Kentwood. The company also proposed a similar project in Holland Township in Ottawa County.

There were other projects proposed as well in Kent County.

Southfield-based Ciena Healthcare has proposals for a $16 million, 120-bed facility on Celebration Drive in Grand Rapids. Ciena also has proposed a $14 million project to expand a nursing home in Grand Haven in neighboring Ottawa County.

Brighton-based Nursing Centers of Michigan LLC has proposals to the state for two locations in Kent County: 150 beds for $18 million at 17 Mile Road and U.S. 131 in Cedar Springs, and 100 beds for $12 million on East Beltline Avenue near 4 Mile Road in Grand Rapids.

‘Not the case anymore’

Which of those projects goes forward depends on a review by staffers at the Department of Health and Human Services and the timing of a decision. Projects that require CON approval are judged by the standard in place at the time a decision is made, not when applications were filed, Falahee said.

The state considers those proposed projects as the advisory committee continues working on a new review standard for nursing homes, and as the overall industry adapts to changes that have been keeping down occupancy rates, even as the population ages.

“There’s a change going on within nursing homes and who stays in nursing homes,” Falahee said. “There are different ways to get that care.”

Those changes include evolving care models and a greater emphasis for people to remain in their homes longer, Anderson said. The emergence of assisted living, greater access to in-home care providers, and advances in care and technology have furthered that trend.

Any CON standard and methodology to determine bed need the advisory committee ultimately crafts must consider the changes occurring in long-term care, Anderson said.

“People are aging in their homes longer, and when they need services, they can access them in their homes,” she said. “People are falling into the other long-term care options before they require the most clinical level of care, which is a nursing facility.

“Thirty years ago, nursing facilities were the only option. That’s not the case anymore with these other settings.”

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