Ailing nursing homes

Bankruptcies: Integrated Health Services latest to feel pain of Medicare cuts for treating elderly.

February 13, 2000

ONE of Maryland's big success stories -- Integrated Health Services -- has turned into a tale of failure and bankruptcy. A major reason: decisions in Washington to cut Medicare payments to companies that operate nursing homes and rehabilitation centers.

IHS, with headquarters in Hunt Valley, last week became the fourth big national nursing home company to declare bankruptcy. All told, 1,651 skilled nursing facilities are under court protection, putting at risk 175,000 patients in these facilities.

Here's what Congress and the Clinton administration did in their haste to cut the deficit: Instead of fortifying an already wobbly Medicare program, they agreed to save money by slashing payments to nursing homes and home health-care companies in 1997 by a staggering $15 billion.

Nursing homes started losing money on their Medicare patients. The companies no longer had enough resources to hire adequate staff, especially nurses already in short supply. Quality of care suffered. So did the companies' bottom lines.

The sickest patients, those in need of the most expensive and intensive services, were hurt the most. Drastic cuts in home health care also made it more difficult for these frail elderly to maintain their independence.

Even when Congresstried to undo the damage last fall, it failed. Only $2.7 billion of the $15 billion in Medicare reimbursements was restored. Since then, nursing home bankruptcies have continued to mount.

Integrated Health Services' woes went far beyond Medicare rates. It expanded too rapidly, borrowed too heavily, paid its CEO a king's ransom. But IHS felt the pain of Congress' Medicare cuts more than most health-care companies because its facilities often focus on treating sicker patients and providing rehabilitation services -- two areas that Washington hammered hard.

There's no money in President Clinton's 2000 budget to boost nursing home payments. That's a mistake. IHS' bankruptcy shows that Medicare rates shortchange the elderly in nursing homes. Congress should rectify this serious error before its members start campaigning full-time for reelection this year.

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