EDITORIAL: Why can’t non-profit nursing homes make it

THE HUDSON RIVER MIGHT as well be the Pacific Ocean. Perhaps you’d cross one of those water bodies to get to work or because your dream vacation lies on the other side, but given the choice, we’ll stay on our own side, thank you.

The same rule applies to news. What happens on the west bank of the Hudson for the most part stays over there. Why would anybody here want to know about what’s happening in an exotic place like Catskill, for instance? So it took some time to grasp that the sale of a nursing home on the far side of the river qualifies as news in Columbia County. But because the seller is Columbia Memorial Hospital (CMH) in Hudson it’s local news.CMH, a non-profit hospital, has sold Kaaterskill Care Nursing and Rehabilitation Facility in the Town of Catskill to a for-profit, privately owned company called Premier Healthcare Management. The hospital says its research proved the buyer has a good record and will invest in the facility in ways the hospital would not be able to do. Kaaterskill Care wasn’t going to be able to pay its own way. The only responsible option was to sell it.

If this sounds vaguely familiar it’s because the Columbia County Board of Supervisors has faced a similar dilemma with the Pine Haven Nursing and Rehabilitation Facility in Philmont. Like Kaaterskill Care, Pine Haven is a non-profit facility with 120 beds; both are aging buildings and at each of them about a quarter of the beds are currently empty.

The underlying problem in both cases is that small, standalone facilities lack the bargaining power that large firms can bring to bear when dealing with suppliers. The technical term for this is that they can’t realize economies of scale, so maintaining independence means higher costs. And the ability to control costs has become more important than ever as state and federal regulations have changed the structure of reimbursements to healthcare providers.

Economies of scale help explain why a hospital like CMH can’t afford to run a small nursing facility like Kaaterskill Care but it could find a buyer even with all the other facilities in the area. The most upbeat way to look at the situation is that by controlling costs a savvy management firm can profit in the nursing home industry because the market of older people will continue to grow for years. Remember that Columbia County is either the oldest county in the state (as measured by the number of people 60 or over) or the third oldest (people over 65). This is where the customers live.

But it’s worth pointing out that nursing homes are an industry with revenues well over $100 billion annually, and nearly 80% of those dollars go to for-profit businesses. And there is research that indicates the quality of care drops when for-profit companies operate nursing facilities, which makes sense when you think about it. Other types of businesses might add new products or open more stores to boost profits. But nursing homes don’t have those options. About the only thing they can do is cut costs by reducing staff or taking other steps that seldom improve the quality of life of their residents.

Because this has been the pattern does not mean the sale of local non-profit nursing facilities will necessarily lead to a similar result. But what the record does suggest is that the sale of a nursing home is a way of shifting costs not eliminating them. Costs to taxpayers would go down with Pine Haven sold to a private firm and it’s reasonable to assume that the hospital might be more financially sound once it no longer has to finance a nursing home in this competitive market. At the same time there are costs associated with reduced employment and fewer opportunities for local suppliers of goods and services.

What we are witnessing is the wrenching process of healthcare cost containment–a challenge that as a nation we have decided should be handled by market forces. And though it certainly looks like CMH has found a well qualified and conscientious private buyer, the only guarantee of performance is adequately funded regulators and strong laws to protect our most vulnerable citizens. Don’t expect that task to be cheap either.

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