Vermont, which has the second-oldest population in the country, needs nursing homes. But as Vermonters age rapidly, the state's long-term care capacity has declined, dropping by 900 beds over the past two decades.
To keep the struggling system afloat, the state has bailed out nursing homes with about $38 million in state and federal Medicaid funds over the past five years in so-called extraordinary financial relief, according to records obtained by VtDigger.
The practice has not received media attention until now, but it has drawn intense scrutiny from lawmakers, who this year asked state leaders for a comprehensive report on the relief program and payment records.
State health officials say nursing homes in Vermont are an important part of senior care. Without the extraordinary financial relief, the state would have lost even more critical bed space, they say.
Efforts to address the root causes of the nursing home financial crisis, such as the state's reliance on traveling nurses, receive far less financial support.
Approximately half of the temporary fiscal requests for 2020 and beyond cite concerns about increased costs for staffing, particularly contract staffing. According to the state, staff and contract staff make up about 50% of the total cost of nursing home budgets.
Nursing homes in Vermont rely on traveling staff more than any other state, according to federal data from the Centers for Medicare and Medicaid Services.
There are many reasons why special financial relief is not a sustainable means of “filling the gap” in nursing homes, “but we needed something,” said Helen Rabun, executive director of the Vermont Health Care Association.
“We don't want EFR to become a standard option,” Rabun said. “That would be a truly unusual measure.”
Old programs meet urgent needs
Although Vermont's unusual financial relief program has been in existence for more than two decades, it only began to play a regular, sustained role for the state's nursing homes only after the coronavirus pandemic.
This bureaucratic program goes through multiple departments nested within the Vermont Human Services Agency.
The Vermont Department of Health Access's Pricing Division sets Medicaid reimbursement rates for nursing homes and reviews requests submitted by facilities. But funding for the temporary financial relief comes from Medicaid funds allocated through the Vermont Department of Disability, Aging and Independent Living, said Jill Bowen, the department's secretary.
Rabun said nursing homes, which receive special financial relief, provide the strongest level of care and serve people whose needs are not met in assisted living or residential care facilities. To be eligible for financial relief, these facilities must serve Medicaid patients, she said.
According to the Department of Disability, Aging and Independent Living, there are 33 nursing homes in the state, with a total of about 2,847 beds as of July, a decrease of nearly 900 beds over the past 20 years.
Bowen said the decline in beds in long-term care facilities in the state is concerning given Vermont's aging population, but he said part of the trend can be attributed to people seeking home care instead.
Angela Smithdien, DAIL's director of adult services, said the extra financial relief is “very important as a means to prevent nursing home closures” because states don't want to lose options for their large senior population.
One factor leading to the increase in emergency funding requests is the “rebasing” of Medicaid reimbursements, state leaders said. The most recent rebasing will occur in 2025 and 2023, changing Medicaid reimbursement rates based on previous cost data, state leaders said. In 2023, the state changed its reimbursement rates based on 2020 costs but had not yet grasped the new fiscal pressures brought on by the pandemic.
In July, the state again used 2023 costs to balance reimbursement rates. Mr Bowen hopes this will limit the need for extraordinary financial relief.
Bowen said the Department of Disability, Aging and Independent Living worked with Congress to advocate for changing the amount facilities pay based on their occupancy and reducing fines for failing to meet high standards.
In some cases, states have advanced funding for nursing homes through the relief process or provided more funding than the facilities requested. Bowen added that while the state may advance facility funding if it can't cover staff salaries, the state will likely provide less funding than businesses would like, if not more.
The state has collected all advance payments or was in the process of collecting them, according to the department's rate setting division.
Rate Setting Director Jamie Mooney said as part of the extraordinary financial review, the state will review a company's financial health and whether its facilities meet state and federal requirements.
After the rate-setting division reviews the request and reviews the financial information provided, including past due bills and the amount of cash on hand, the division makes a recommendation to the Department of Disability, Aging, and Independent Living.
The Pricing Department will also consult with DAIL regarding any issues that may arise regarding the care provided by the requesting facility. But Mooney said she doesn't remember ever denying a request for a facility based on quality of care.
If the application is approved, Mooney said, the state would limit the use of the grant money and facilities would not be able to use financial relief funds to pay fines or exorbitant owner-manager fees.
Once approved, the facility must meet reporting requirements, including providing up-to-date financial information, he said.
Rabun said nursing home owners would have to prove they don't have the money from other sources. This would prevent companies that own many properties from moving their investments into out-of-state housing and requesting relief from Vermont.
In the past, nursing homes have had savings they can fall back on if reimbursement rates don't cover costs, Rabun said. But during the COVID-19 pandemic, nursing home coffers were depleted and unusual financial relief measures were put in place to deal with the nursing home emergency, Rabun said.
“Abnormal value status”
Rabun said nursing homes typically took unusual financial relief measures during temporary cash-flow emergencies to “fight economic storms that they otherwise wouldn't have been able to weather.”
That has now changed, with care costs causing a crisis.
Rabun said facility costs for contract staff tend to be at least twice that of permanent staff, contributing to nursing homes' financial woes. Employment of contract workers in Vermont is down slightly, according to data from the Centers for Medicare and Medicaid Services. But the state's rate remains very high compared to the national average, and it remains to be seen whether this downward trend will continue, Rabun said.
“Vermont is an unusual state in terms of leveraging tourists as part of the regular workforce,” Rabun said.
Richard Mollot, executive director of the National Coalition for Long Term Care Communities, a national nonprofit organization, said the country saw an increase in contract employment rates at the beginning of the pandemic, but that employment rates have generally returned to pre-pandemic levels. Not so in Vermont.
Vermont nursing homes had the highest percentage of contract workers in 2024 compared to any other state, reaching 31% in the first quarter of 2024, according to an analysis of Medicaid data by the Long Term Care Community Coalition. The national average for the same period was 8%.
Mollot, an advocate for nursing home residents, said nursing homes often employ large numbers of contract workers when turnover among full-time staff is high, often due to poor working conditions such as workplace hazards and low pay.
Kaili Kuiper, long-term care ombudsman for Vermont Legal Aid, said staffing costs tend to be the most expensive expense for nursing homes, and nursing homes that work with staffing agencies are often contractually obligated to pay contract workers more than permanent staff. This means nursing homes spend much of their budgets filling gaps with temporary staff and don't have the money to invest in hiring long-term staff.
This is a “difficult cycle to break because there is only so much money in circulation,” Kuiper said. This cycle can also lead to a decline in the quality of care, and Kuiper said his office has seen “many issues related to not having enough staff to provide the care needed,” including response times and hygiene issues.
Not a sustainable way to “close the gap”
Rabun said Vermont's demographic issues are causing the underlying problem of the heavy use of contract workers in nursing homes.
Therefore, in recent years, Congress has appropriated funds to rebuild the nursing workforce.
In the current fiscal year's budget, the state committed $500,000 to attracting and retaining qualified nursing assistants. Sen. Richard Westman (R-Lamoille), a member of the Senate Appropriations Committee and a local hospital board member, said the investment was an attempt to address the root causes of nursing home financial difficulties.
Rabun said the state plans to withdraw federal funding for workforce development from the Civil Fines Reinvestment Program, which was on hold between the Joe Biden and President Donald Trump administrations and during the federal shutdown.
Although the legislative investment was far less than the funds spent on special relief, Westman argued that prioritization made sense given the fragile financial position of some facilities. In the past two years, about two-thirds of nursing homes have requested special relief, he said in an interview in May.
“I think you could make the argument that without that aid we probably would have gone out of business,” Westman said.
Westman, echoing others, said staffing is at the root of the financial challenges. Investing in nurse recruitment and retention and increasing the reimbursement rates nursing homes receive could prevent facilities from becoming dependent on bailout money, he suggested.
Kuiper said the use of temporary emergency staff is an important tool. As the state's advocate for nursing home residents, Kuiper said hiring contract staff is a better option than allowing facilities to be understaffed.
But in the long term, Kuiper said he would like to see “more of a shift away from temporary workers” and for the care industry to prioritize strategies that reduce the “current” heavy use of contract workers.
Former VtDigger reporter Peter D'Auria contributed reporting. This article was republished with permission from VtDigger. VtDigger provides free coverage to local news organizations through our Community News Sharing Project. For more information, visit vtdigger.org/community-news-sharing-project.
