One-star nursing homes cost Medicaid over $100 million each year, OSC report finds

Facilities have failed to improve for years and 93 percent of them are operated by for-profit companies

  • Posted on - 02/2/2022

TRENTON – Fifteen one-star nursing homes in New Jersey are costing Medicaid more than one-hundred million dollars a year, have failed to improve for years, and are overwhelmingly operated for profit. Those findings were made public today in a new report from the Office of the State Comptroller (OSC), a government watchdog that oversees New Jersey’s Medicaid program.

OSC launched a digital data dashboard that allows the public to track New Jersey nursing homes – also known as long-term care facilities or LTCs – that are repeatedly rated one-star and receive Medicaid funds.

Fifteen LTCs have consistently been rated one out of five stars over the last two years. Some of the LTCs improved to two stars, but then dipped back down. Many have been rated among the lowest LTCs since 2013.

“Close to two thousand New Jerseyans woke up this morning in these one-star nursing homes,” said Acting State Comptroller Kevin D. Walsh. “We found that hundreds of millions of Medicaid dollars flowed to one-star facilities despite the facilities having been repeatedly cited for serious health and safety issues. Bottom line: New Jersey taxpayers should not be funding nursing homes that have failed to improve for years, appear unlikely to improve, and put residents in harm’s way.”

Ratings are based on issues found during health inspections, quality measures reported by nursing homes, and the number of nursing staff. Health inspectors show up unannounced to a nursing home and spend several days evaluating resident rights and quality of life at the facility.

Inspectors can cite a facility for “immediate jeopardy” if they find an issue that “has caused, or is likely to cause, serious injury, harm, impairment or death” that requires immediate correction. Nationally, nearly half – 45.2 percent – of one-star nursing homes have been cited for an “immediate jeopardy” violation. In comparison, just 0.1 percent of five-star nursing homes have received such a citation.

“Year after year, these 15 facilities are rated one-star and yet do not improve the quality of care for thousands of individuals,” said Laurie Brewer, New Jersey’s Long-Term Care Ombudsman, who consulted with OSC on its report. “A consistent one-star rating means the Department of Health has flagged problems that endanger residents time after time, and yet no significant changes have been made by that facility to protect residents.”

Medicaid is the single largest payer of nursing home care in the country and in New Jersey. OSC’s data dashboard tracks how much Medicaid money each one-star LTC in the report received between fiscal years 2017 and 2019. In total, the fifteen one-star LTCs received over $300 million from Medicaid during that time period.

New Jersey’s Division of Medical Assistance and Health Services (DMAHS) within the Department of Human Services oversees the Medicaid program, including LTCs that receive Medicaid funds. OSC is recommending that DMAHS impose restrictions on one-star LTCs to push them to improve the quality of their care, including barring LTCs from participating in Medicaid if they don’t improve.

“For too long, facilities have gotten away with widespread and uncorrected problems that have put people in harm’s way,” said Acting State Comptroller Kevin D. Walsh. “New Jersey should simply refuse to pay for substandard care. It’s time that we use taxpayer funds to demand better. Any nursing home that year after year gets the lowest rating should not get public funds.”

14 out of the 15 one-star LTCs – or 93 percent – are for-profit companies. The majority of LTCs overall in New Jersey are operated for-profit at 77 percent. Over the past few years, New Jersey has seen a steady decline in non-profit ownership of nursing homes and an increase in private companies operating these facilities.

At least one study has shown that LTCs operated for profit increase the mortality risk for patients. For-profit ownership has also been linked to declines in patient well-being, such as lower mobility, all while being paid for by taxpayers.

In many cases, private owners of one-star LTCs in New Jersey owned multiple low-rated facilities. OSC’s report found that five of the owners, managers, or administrators of a one-star LTC also operated at least two other one-star LTCs.

“Since there are no financial consequences to being a one-star facility, it is simply built into the cost of doing business,” said Laurie Brewer, New Jersey’s Long-Term Care Ombudsman. “It appears there’s been a business calculation made that one-star ratings are just fine. Owners of these chronically one-star facilities must be held to account.”

OSC’s data dashboard will be periodically updated. The website also includes a resources page for members of the public to file a complaint against a facility or research individual nursing homes across New Jersey.

The Office of the State Comptroller (OSC) is an independent State agency that works to make government in New Jersey more efficient, transparent and accountable. OSC is tasked with examining all aspects of government expenditures, conducts audits and investigations of government agencies throughout New Jersey, reviews government contracts, and works to detect and prevent fraud, waste and abuse in Medicaid.

Stay up-to-date with the latest from OSC by following us on Twitter, Facebook, LinkedIn, and on Instagram at @NewJerseyComptroller.

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