Fiscal Note & Local Impact Statement

124 th General Assembly of Ohio

Ohio Legislative Service Commission

77 South High Street, 9th Floor, Columbus, OH 43266-0342 ˛ Phone: (614) 466-3615

˛ Internet Web Site: http://www.lsc.state.oh.us/

BILL:

H.B. 34

DATE:

February 20, 2001

STATUS:

As Introduced

SPONSOR:

Rep. Barrett

LOCAL IMPACT STATEMENT REQUIRED:

No —

Minimal cost

 


CONTENTS:

Requires that nursing homes maintain specified ratios of nurses and nurse aides to residents

 

State Fiscal Highlights

 

STATE FUND

FY 2001

FY 2002

FUTURE YEARS

General Revenue Fund

     Revenues

-0-

$137.8 million gain*

$137.8 million gain or more*

     Expenditures

-0-

$234.3 million increase

At least $234.3 million increase

General Operations Fund (Fund 470)

     Revenues

-0-

Potential gain from fine revenue

Potential gain from fine revenue

     Expenditures

-0-

Minimal increase

Minimal increase

State Insurance Fund (BWC)

     Revenues

-0-

- 0 -

- 0 -

     Expenditures

-0-

- 0 -

Potential savings plus potential increase

Note: The state fiscal year is July 1 through June 30. For example, FY 2002 is July 1, 2001 – June 30, 2002.

* Federal Mediciad reimbursement

 

The potential effect on governmental expenditures resulting from the bill depends primarily on a complex interplay of market reactions to the events the bill could generate in the long-term care marketplace.

 

·        Implementation of these staffing ratios would substantially increase Medicaid program costs by over $200 million per year. Approximately 60 percent of that cost will be reimbursed to the GRF from the federal government.

·        Given current trends in the supply of nurses and nurse aides and continued shifts in the demand for long-term care alternatives, the ability of nursing facilities to meet these requirements would increase the reliance on expensive purchased nursing arrangements, and could result in additional increases in Medicaid costs.

·        The bill allows the Department of Health (DOH) to impose civil penalties for violations of the provisions contained in the bill. This revenue shall be deposited in the state treasury to the credit of the Department of Health’s General Operations Fund.

·        The Department of Health will incur minimal costs to provide a poster to each nursing home describing the staffing requirements contained in the bill.

·        Increased staffing levels should decrease the number of occupational-related injuries per staff person occurring in nursing homes. Therefore, there should be some potential savings from BWC’s State Insurance Fund due to fewer claims. However, increased number of staff could lead to more total occupational injuries, which could potentially offset some of the savings.

Local Fiscal Highlights

 

LOCAL GOVERNMENT

FY 2001

FY 2002

FUTURE YEARS

Franklin County Court of Common Pleas

     Revenues

- 0 -

- 0 -

- 0 -

     Expenditures

- 0 -

-0-

Minimal increase

Note: For most local governments, the fiscal year is the calendar year. The school district fiscal year is July 1 through June 30.

 

·        The Department of Health may impose civil penalties following adjudication in accordance with Chapter 119. of the Revised Code. Under ORC 119.12, any party adversely affected by a Chapter 119 adjudication may appeal the decision to the Franklin County Court of Common Pleas. LSC estimates that there will be minimal increases in expenditures for that Court related to its operating costs.


 

Detailed Fiscal Analysis

 
Effects on the Department of Health (DOH)

 

Under sections 3721.02 and 3721.07 of the Revised Code, the Department of Health licenses and inspects all nursing homes operating in the state. The annual nursing home license fee totals $150 for each 50 persons of the home’s capacity. This bill would require all licensed nursing homes to maintain specified staffing ratios and other provisions included in sections 3721.70 to 3721.75 of the Revised Code, as contained in the bill.

 

Staffing Issues

 

The bill establishes the following minimum ratios for nurse/nurse aide to nursing home resident.

 

 

Table 1

 

 

 

 

Shift

Nurse Aide (NA) Ratio

Nurse (RN) Ratio

6 AM – 2 PM

1 nurse aide to 5 residents

1 nurse to 15 residents

2 PM – 10 PM

1:10

1:25

10 PM – 6 AM

1:15

1:35

 


The bill also requires all nursing homes to employ the following individuals:

 

 

Of the ratios described above, the bill explicitly prohibits individuals involved in food preparation, housekeeping, laundry, or maintenance from being included in the staff employment total when determining the ratios.

 

Nursing homes in violation of the staffing provisions described above are subject to a civil penalty imposed by the Department of Health. The penalty shall be at least $1,000, but not more than $10,000, depending upon the severity of the violation. Penalty revenue collected for these violations are to be deposited into DOH Fund 470. LSC is unsure of the number of potential violations of these staffing requirements.

 

Information Postings

 

The bill also requires all nursing homes to prominently post information stating the average number of scheduled nurses and nurse aides and the average number of nurses and nurse aides that actually worked. This posting must also include the number of residents at the facility for the preceding month.

 

The Department of Health is required to provide to each facility a poster describing the staffing ratio requirements described above. The Department will incur a minimal increase in costs related to producing this poster. The bill also states that a nursing home violating the information posting requirements contained in the bill is subject to a civil penalty levied by the Department of Health. This penalty shall total $1,000.

 

DOH Licensure

 

Section 3721.05 of the Revised Code states that no one shall operate a nursing home without obtaining a license from the Department of Health. The bill states that violations of divisions (B) or (E) of this section are subject to a penalty of $100 for the first offense and $500 for subsequent offenses. Division (B) states that no one shall violate any of the conditions or requirements necessary for licensing after the license has been issued by DOH. Division (E) prohibits the licensee from violating any rule adopted by DOH that governs Chapter 3721. of the Revised Code. LSC believes that this will lead to minimal gain in revenue for the Department.

 

Legislative Committee to Study Staffing Ratios

 

The bill establishes a legislative committee to meet every six years to review the staffing ratios included in the bill and to make a recommendation to the legislative leadership and the Public Health Council on potential modifications to the existing ratios. The first committee is scheduled to meet on January 1, 2003.

 

Effects on Nursing Homes and Medicaid Expenditures

 

As mentioned above, this bill establishes minimum staffing levels for nurses (RN) and nurse aides (NA) in all nursing homes in Ohio. In many licensed facilities, this would require the addition of nursing staff and related cost increases. By the nature of the industry, a sizable portion of any added industry costs ultimately flow to the Medicaid program, which accounts for about 70 percent of the industry’s revenues. Furthermore, Section 5111.27 (F) of the Revised Code requires the Department of Job and Family Services (JFS) to adjust the rates calculated under sections 5111.23 to 5111.28 of the Revised Code to account for reasonable additional costs that must be incurred by nursing facilities (NF) and intermediate care facilities for the mentally retarded (ICF/MR) to comply with requirements of federal or state statutes, rules, or policies enacted or amended after January 1, 1992, or with orders issued by state or local fire authorities.

 

Medicaid/Health Care Program

 

Estimating the potential cost impact of these staffing ratios on nursing homes involves a complex analysis of nursing home cost reports compiled by JFS. The fiscal impact was estimated as the aggregate of the calculated impact for each nursing facility now below the requirement under the bill. For each NF, the cost increase was estimated by comparing the actual RN & NA hours per patient day (PPD) to the bill’s staffing ratios converted to hours per patient day, and then determining the associated costs of bringing the NF to the required standard. Details of the estimate are presented in Table 2. LSC estimates, based on JFS 1998 nursing home cost reports show what the effect would have been if these requirements were in place in CY 1998. Using that model, Medicaid program costs would have increased by $194.6 million. This cost is projected into the future based on the Health Care Financing Administration’s (HCFA) input price projections for Skilled Nursing Facilities and United States Bureau of Labor Statistics. This results in increased Medicaid program costs of $221.4 million in FY 2001, $234.3 million in FY 2002, and $247.9 million in FY 2003. These estimates do not include costs related to:

1)            the requirement of a full-time nursing director as that is currently mandated by federal regulations;

2)            the requirement for a supervising RN on duty 24 hours per day, also currently implied by Section 3701-17-08 (3) (4) (5) (6) of the Administrative Code (OAC).

 

One issue that presents an added burden to NFs and potentially to Medicaid costs is the availability of RNs and NAs given current shortages. According to a study conducted by the Scripps Gerontology Center at Miami University, recruiting enough qualified caregivers was a problem at 43 percent of Ohio nursing homes. We do know that to alleviate this problem, NFs have had to resort to purchase nursing services. The use of purchased nursing however, has reimbursement limitations from the Medicaid program. While NFs may look towards purchased nursing as a means to resolve current trends in the supply of nurses and nurse aides, and to meet the bill’s requirements, the continued shifts in the demand for long-term care alternatives, further complicates the ability of nursing facilities to meet these requirements. Thus, some NFs may possess the ability to increase the use of purchase nursing services, while staying within the reimbursement guidelines, leading to further increases in Medicaid costs. Other NFs may not have wiggle room within the purchased nursing reimbursement guidelines and those additional costs would not be reimbursed by Medicaid, either in full or in part.

 


 

Table 2

Estimated Increase in Medicaid Program Costs

Based on Medicaid 1998 Long-Term Care Cost Reports

 

 

 

 

 

FY 2001

FY 2002

FY 2003

Nurse Ratio

$12,741,644

$13,480,659

$14,262,538

 

 

 

 

Nurse Aide Ratio

$168,995,506

$178,797,245

$189,167,485

 

 

 

 

Full-Time Assistant Nursing Director1

$35,283,111

$37,329,532

$39,494,644

 

 

 

 

Full-Time Director of Nurse/Nurse Aide Education2

$4,403,659

$4,659,071

$4,929,297

 

 

 

 

Medicaid

$221,423,919

$234,266,507

$247,853,964

Est. Fed Share

$130,485,116

$137,842,413

$145,837,273

Est. State Share

$90,938,804

$96,424,094

$102,016,692

Notes & Assumptions:

 

 

 

Nurse Hours: The bill calls for a 1:15, 1:25, & 1:35 RNs per resident per 1st, 2nd, & 3rd shifts respectively.

     This translates into 1.08 RN Hrs. per patient day (0.067X8hrs+0.04X8hrs+0.029X8hrs).

 

     Based  on the 1998 LTC cost reports, a calculated 23.96% of NFs did not meet the requirement.

 

     The average RN Hrs. per patient day for these NFs was 1.042 hrs. per patient day.

 

 

     The fiscal impact was estimated as the aggregate of the calculated impact for each NF below the requirement.

     Facility cost increase was estimated as follows: [Base Cost=(calculated # of additional hrs required to meet the standard X

         the facility's inpatient days X the NFs weighted avg. RN/LPN wage) + 18% of base cost for related payroll expenses].

Nurse Aide Hours: The bill calls for a 1:5, 1:10, & 1:15 NAs per resident per 1st, 2nd, & 3rd shifts respectively.

     This translates into 2.933 NA Hrs. per patient day (0.2X8hrs+0.1X8hrs+0.067X8hrs).

 

     Based  on the 1998 LTC cost reports, a calculated 90.04% of NFs did not meet the requirement.

 

     The average NA Hrs. per patient day for these NFs was 2.180 hrs. per patient day.

 

 

     The fiscal impact was estimated as the aggregate of the calculated impact for each NF below the requirement.

     Facility cost increase was estimated in an identical manner described above for RNs.

 

     i.  By using the weighted avg. facility wage instead of the statewide wgt. avg. wage, in an attempt to capture NF

         managements' wage policy (as we believe this would better reflect regional differences resulting from staffing issues).

Costs were estimated on a facility level basis for CY 1998, and wage projections for subsequent years are based on

     1) HCFA's Input Price Projections for Skilled Nursing Facilities for year 1998 to 2000 ( 3.7% increase in wages)

     2) Unite States Bureau of Labor Statistics for year 2000 to 2003 (5.8% increase in wages)

 

Costs of the full-time nursing director requirement are not included (currently required)

 

Costs of the supervising RN on duty 24 hrs. per day requirement are not included (currently implied by OAC 3701-17-08).

1.  Cost reports indicate no NF reported costs for this position.

 

 

         Assumes an hourly rate that is the average of the median hourly cost of a nursing director

 

           and a charge nurse (RN) * 2080 FT hrs * # of NFs. However, LSC would expect some administrative shifts,

           that could reduce the net cost.

 

 

2.  Cost reports indicate that approx. 28.7% of NFs reported costs for in-house trainers.

 

         Based on reported costs & hours, these positions are not full-time positions.

 

         Estimate assumes conversion to FT positions for Education Directors.

 

         In addition, we have excluded the remaining NFs as 64.8% of the homes have less than 100 beds, and

           thus could have the assistant nursing director serve as education director.

 

Medicaid program costs were estimated at 70% of projected industry costs .

 

Data Source: JFS, Long Term Care Facilities - 1998 Cost Report.

 

 

Worker Health Issues

 

According to the Ohio Bureau of Workers’ Compensation, the base rate premium for nursing home personnel is $4.51 per $100 of payroll. This workers comp insurance premium has remained stable over the last several years. For all private industry in Ohio, however, the base rate premium is only $2.03 per $100 of payroll.

 

According to the United States Bureau of Labor Statistics (BLS), the injury and illness rate for nursing homes in 1994 were 18.2 per 100 full-time workers. By comparison, the rates in coal mining (6.2) and warehouse and trucking (13.8) were significantly lower. The BLS data also stated that 50 percent of injured nursing home workers must take days off work in order to recover.

 

The majority of these injuries, according to a 1994 BLS Survey of Occupational Injuries, were back injuries. These injuries made up 42 percent of all nursing home injuries, compared to 27 percent of all injuries reported in private industry. These back injuries are primarily caused by overexertion in lifting, holding, carrying, or turning, a patient.

 

For this reason, LSC believes that there potential will be a decrease in expenditures from the State Insurance Fund, the BWC fund that pays workers’ comp claims. This savings, however, could be offset if the increase in the number of nursing home workers causes the total number of workers’ comp claims to increase and/or offset the projected savings.

 


 

 

 

LSC fiscal staff:  Ivy Chen, Economist

 

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