Analyzing the Valley Hi Surplus Situation

The following extensive analysis was performed by Susan Handlesman of rural Woodstock:

It came from her analysis of the model created by Scott Hartman, which appears below:

Model McHenry County's Administration is presenting to county officials.

Model McHenry County’s Administration is presenting to county officials.

Valley Hi analysis of outcomes

GIVEN:

  1. VH has $43 million in the bank.
  2. VH enterprise fund cannot levy much if anything at present. Levy in excess of 2.8 multiple of past years’ NET operating loss is called ‘Excess Accumulation” and taxpayers who object to this levy will get their money back.
  3. From 2011 (or further back) VH has run at an operating profit or near breakeven.
  4. 2015 showed a slight operating loss.
  5. The interest earned on the $35-$43 million surplus ranged between $65,000 and $93,000 in those years 2011-2015.
  6. 2015 interest earned was $79,000;$79000/$43,000,000=0.0018372= less than 2 tenths of one percent.
  7. Funds in excess of a certain amount which exceed FDIC insurance maximums in regular accounts at any given bank are at risk of total loss.
  8. In 2002 a referendum passed which read as follows: Shall McHenry County beauthorized to levy and collect a tax at a rate not to exceed .1%for the purpose of building, maintaining and operating a county nursing home? YES NO
  9. On 9-1-2015, a LLC (NOT a ‘non-profit’) filed an application with the Illinois Health Facilities and Services Review Board (HFSRB) for a Certificate of Need CON)in order to build a 98 bed ltc (long term care) facility on the campus of Centegra Hospital in McHenry.
  10. It is not clear how many, if any, Medicaid beds will be certified in that 98 bed, all private room, for-profit facility.
  11. Centegra can get around Medicare re-admission penalties by discharging to an on-campus facility and letting docs walk over to tend patients.
  12. Medicare pays more than double the reimbursement rate of Medicaid.
  13. HFSRB compiles data on ltc bed need, this is taken into account when issuing CON, and HFSRB data indicate a need for 127 new ltc beds in McHenry County by 2018.

GIVEN FURTHER:

  1. VH presented model on 3-23-16 indicating that between present and 2023, the $43 million will be spent down to below $20 million. This projection was based upon an 80-20-20-8 bed mix (80 Medicaid, 20 Medicare, 20 private pay, 8 variable).
  2. The model indicates increased Medicaid percentage of bed mix will exacerbate VH operating losses.
  3. It was indicated that Illinois Medicaid reimbursements were unreliable, late, and projected to shrink as much as 30% in the future.
  4. The model indicated that Medicaid beds were operating at around $75/day loss. Breakeven per bed-day was said to be $245 (the day rate charged private payers).
  5. It was indicated that the 2002 referendum is to be considered the guiding directive, with the interpretation that VH must be kept open as a County run home without regard for cost.
  6. It was indicated that the WIPFLII presentation is expected to show community need for some form of greater senior service provision.
  7. It was indicated that the Board believes VH serves the vulnerable needy elderly of McHenry County, and that is the mission of VH.
  8. According to Genworth 2015 study on cost of care by Statehttps://www.genworth.com/dam/Americas/US/PDFs/Consumer/corporate/cost-of-care/118928IL_040115_gnw.pdf

The daily semi-private room rate in Illinois in Chicago–Naperville–Elgin in 2015 was:

  • $135 (min)
  • $225 (median)
  • $355 (maximum)
  • $82,125 (median annual)
  • 4%       (5 year annual growth).

ASSUMPTIONS:

  1. Model predicting VH chewing through $23 million in the next 7 years with an accelerated rate of loss projected for later years seems to indicate VH will be broke by 2027.
  2. Because of PTELL, the levy cannot be reinstituted after 3 years of zero levies. When the surplus funds are gone, a new referendum will be needed, OR, McHenry County will have to find the funds for VH within their General Fund budget.
  3. With VH net loss expected to jump to  to be in the range of $1 million in 2016, a +/-$3 million levy could squeak by that pesky ‘excess accumulation’ limitation.
  4. The model may be in error. The past decade of profitable operations indicate that. The model may also be conservative, if expenses are allowed to skyrocket and Medicaid payments are cut, and profitable Medicare referrals are lost to new for-profit facility in Centegra parking lot.

If

VH model is correct, it indicates it will be running at a $4-5 million operating loss within 4 years with surplus extinguished by 2027.

State law caps nursing home property tax rate at 0.10%. [10 cents per $100 of assessed valuation.]

McHenry County EAV is $7 billion (and the trend is declining).

VH levy could be $7 million at most unless EAV rises.

VH projected operating loss will rise above $7 million within 15 years(according to model assumptions of 3.25% cost inflation).

Then 

VH will run through all $43 million surplus plus another $35 million or so of new levy in years 11-15.

At that time, VH will not be able to stay open, with operating losses exceeding maximum legal levy.

Furthermore 

Need for new nursing home beds within a County is determined by agency (HFSRB) which issues Certificates of Need.

McHenry County is said to need 127 ltc beds, and a for-profit LLC is applying for a CON for 98.

CONs may be issued conditionally upon bed mix (Medicare vs. Medicaid).

By law, a County nursing home must accept admissions from non-County residents.

Therefore

If primary objective is to serve needy vulnerable elderly of McHenry County, the money VH projects to spend over the next 15 years may be more effectively spent on vouchers for means-tested County resident recipients.

Vouchers could be offered to ltc facilities in the amount of the differential between Medicaid reimbursement rates and breakeven cost. This would enable more facilities to accept Medicaid patients.

Another possibility:

Rebate the $43 million excess accumulation to taxpayers.

Start fresh, with a tax levy that is legal and reasonable 2.8 x $160,000= $448,000.

(VH has 2 more years to bump back up to $3 mil levy under PTELL).

Spend within the budget.

Rather than stating wants and ‘needs’, VH will have to live within the budgetary constraints of Medicaid dictates, and Illinois law, and determine a figure which they will be allowed to spend prior to determining a spending plan.


Comments

Analyzing the Valley Hi Surplus Situation — 9 Comments

  1. Sell it before County administration fills it with Medicaid patients to eat up the surplus more rapdidly!

  2. I wonder if the new County Board is prepared for the recent increase of ‘watchdogs’ who are becoming very active?

    Thank you Susan!!!

  3. Medicaid reimbursement rates to Illinois County nursing homes published states Valley Hi day rate is $163.97.

    County Nursing Facility Payment Rates Effective 01-01-2016

    Capital Rate
    at 01-01-
    2016

    Support Rate at
    01-01-2016

    Nursing Rate
    at 01-01-2016

    Final Payment
    Rate 01-01-2016

    Interim County
    Contribution Rate
    01-01-2016

    Interim Total Rate
    01-01-2016

    K4
    V1
    CRATE16C
    SRATE16C
    nrate16c
    TRATE16C
    CEA16c
    totinfpd
    6001630

    CHAMPAIGN COUNTY NURSING HOME
    $16.85
    $54.84
    $70.52
    $142.21
    $51.07
    $193.28
    6001838

    CLAYBERG FULTON CO N CTR
    $10.69
    $55.63
    $74.93
    $141.25
    $61.88
    $203.13
    6015630

    DEKALB COUNTY REHAB AND NSG
    $16.84
    $48.93
    $79.93
    $145.70
    $68.43
    $214.13
    6002612

    DUPAGE CONV
    $12.98
    $66.81
    $100.15
    $179.94
    $115.92
    $295.86
    6002836

    ELMS NURSING HOME
    $10.38
    $52.79
    $73.62
    $136.79
    $51.67
    $188.46
    6000814

    HEDDINGTON OAKS
    $16.84
    $50.22
    $67.85
    $134.91
    $106.60
    $241.51
    6004402

    HILLCREST HOME
    $14.69
    $46.04
    $73.52
    $134.25
    $17.56
    $151.81
    6006761

    HOPE CREEK CARE CENTER
    $16.85
    $50.35
    $68.97
    $136.17
    $79.22
    $215.39
    6005060

    KNOX COUNTY NURSING HOME
    $14.24
    $51.77
    $72.23
    $138.24
    $53.82
    $192.06
    6005250

    LASALLE COUNTY NURSING HOME
    $12.09
    $54.60
    $70.32
    $137.01
    $109.92
    $246.93
    6005946

    MCLEAN COUNTY NURSING HOME
    $9.51
    $54.49
    $65.57
    $129.57
    $49.53
    $179.10
    6006274

    OAK HILL
    $16.85
    $47.78
    $74.94
    $139.57
    $43.70
    $183.27
    6007389

    PIATT COUNTY NURSING HOME
    $11.23
    $52.43
    $76.33
    $139.99
    $95.41
    $235.40
    6007702

    RANDOLPH COUNTY CARE CENTER
    $8.65
    $44.40
    $84.54
    $137.59
    $41.73
    $179.32
    6008007

    RIVER BLUFF NURSING HOME
    $14.24
    $53.75
    $70.40
    $138.39
    $105.99
    $244.38
    6008395

    SCOTT COUNTY NURSING CENTER
    $8.22
    $45.42
    $68.71
    $122.35
    $44.59
    $166.94
    6009161

    STEPHENSON NURSING CENTER
    $9.88
    $49.89
    $70.05
    $129.82
    $24.05
    $153.87
    6009245

    SUNNY ACRES NURSING HOME
    $12.52
    $43.81
    $67.04
    $123.37
    $37.98
    $161.35
    6009252

    SUNNY HILL NSG HOME OF W ILL CO
    $18.18
    $62.40
    $96.20
    $176.78
    $170.05
    $346.83
    6009542

    VALLEY HI NURSING HOME
    $18.18
    $62.41
    $83.38
    $163.97
    $63.89
    $227.86
    6010052

    WINCHESTER HOUSE
    $7.27
    $66.61
    $98.85
    $172.73
    $102.63
    $275.36

  4. this 2014 study:

    A Report on Shortfalls in Medicaid Funding for Nursing Center Care

    ELJAY, LLC
    FOR THE
    AMERICAN HEALTH CARE ASSOCIATION

    using older data predicted average daily shortfall in 2013 of $24.26.

    a study found at
    https://www.ahcancal.org/research_data/funding/Pages/2012-Medicaid-Shortfall-Report.aspx
    indicates ltc Medicaid average daily shortfall at $22.34 in 2012.

    If shortfall per Medicaid patient per day is $25 in 2012, and price inflation occurs at 4% annual rate,
    2016 shortfall would be: $29.25 per Medicaid patient per day

    VH operates with around $75 per Medicaid pt. per day shortfall and the model asserts this will increase dramatically over the next decade.

  5. It would be very interesting to know what the Fair Market Value is for Valley Hi.

    According to a 9/20/15 NWH article, Centegra is spending $19.3 million to construct a 98-Bed facility.

    Which is approximately $197,000/Bed.

    If we use that number as a proxy for current Fair Market Value, Valley Hi, with 128 beds should have a value of at least $25.2 million.

    Entertaining a scenario involving a sale of the operation would free-up the $43 million in Fund Balance and add another $25.2 million from the sales proceeds for a total of $68.2 million.

    At this point, it seems like a massive waste and mis-allocation of resources since the County effectively has $68.2 million in assets tied-up to support only 128 beds (or $533K for each bed).

    I think its time the County exit the Nursing Home business.

  6. How about creating assisted living and senior housing for mchenry county residents with the surplus and a comprehensive elder care services

  7. Perry, how about you use your own money for that?

    The idea here is to REDUCE our tax burden!

    The ides is NOT to find ways to spend whatever tax dollars can be re-directed to be used to lower our tax burden!!

    We do not have a surplus!

    We have money that was obtained from the tax payers under false pretenses!!

  8. The referendum was specifically for “County nursing home”. The money cannot be used for other purposes without new referendum I believe.

    Also, the County run (taxpayer funded) home seems to operate, or is projected to operate, at quite a higher operating expense than private (non-government run) nursing homes.

    It would seem that government competing with private industry is a lose-lose scenario.

    There is a fund of money being taxed (in addition to any Valley Hi taxation) which is specifically for Senior Services.

    If you would like that money spent on those projects described you should lobby the County Board who controls that fund’s disposition.

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