On November 15, 2022, a group of 32 Oak Hills Memorial Foundation donors came together at Oak Hills Living Center for an afternoon of appreciation and an update on the Oak Hills expansion and state of the long-term care industry.

Planning for Oak Hills’ “Growing Our Tomorrow” expansion began in 2019 with a market study conducted by Zellner Senior Health Consulting. Construction planning and capital campaign needs quickly followed, then in March 2020 our priorities shifted to managing a pandemic.

In July 2021, due to changes in licensure requirements, plans were finalized and submitted to the City of New Ulm for approval. The project consists of adding 15 memory care suites, 15 enhanced assisted living suites, remodeling our outdated private pay studio apartments into 1-bedrooms and adding a chapel space. The total estimated budget was approximately $13 million dollars — $8.3 million for new construction, $3.5 million for remodeling and $1.2 million for chapel and community space. Bids were released in early 2022 and came back in March of 2022 grossly over-budget — $9.5 million for new construction, $5.3 million for remodeling and $2.4 million for chapel and community space, or $17.2 million overall.

We pivoted, phasing the project a little differently and moving the chapel and community space to a future moratorium grant through the Department of Health and Human Services (DHS) bringing the total down to $14.8 million. We also worked to cut costs through value-based engineering. We basically went through every material selection and determined if there was a more cost-effective choice, and there were many. We cut down the costs by more than $600,000.

However, because we re-phased the project it had to be rebid and regardless of the cost saving measures, the bids soared from $14.8 million to $15.4 million within 6 weeks. Based on our debt service ratio and current building appraisal it was more than we could borrow. This is where the USDA comes in, they pick up community projects that are essential but fail traditional financing.

Now let’s pivot to the state of the long-term care industry. The Long-Term Care Imperative, A Minnesota Collaboration for Changes in Older Adult Services, published survey results in April 2022 outlining the seriousness of the long-term care crisis. For example, they note, “The average nursing facility will lose over $800K in 2022 (annualized) based on March results.” Oak Hills Living Center, your ONLY skilled nursing facility in New Ulm, is no exception to these kinds of losses. In fact, we have faced mid-upper six figure losses for the past two years. Why?

• Delayed Rates — Each year we should be receiving a rate notice in late fall requiring us to give a 30-day notice to our residents of any increases coming from the Minnesota Department of Health and Human Services (DHS). In 2022, our rates in rural Minnesota which were supposed to come in January 2022 were issued in August 2022. The Twin Cities facilities received their rates in April 2022. We are not treated equally. Twin Cities facilities both receive higher rates and faster reimbursement than rural facilities. We were notified this fall we will receive our 2023 rates by April 2024 requiring us to use our accounting firm to estimate rates. If we are too high, we must pay back our private pay residents and if we are too low, we cannot recoup those losses.

• Cost Report Delays — Each year rate increases are determined by our cost report submitted two years prior. So, in 2023, our rates will be based on 2021 expenses. The math does not work. With the inflation we have all experienced, the first time we will possibly see the full impact of rate increases will be in 2025.

• Increasing regulations — Did you know that skilled nursing facilities are the second most regulated industry in the US with the #1 being nuclear power plants? Skilled Nursing Facilities operate under a completely different set of standards than assisted living.

• Staffing — There is a labor shortage throughout our country. Fall 2021, we increased wages for all direct care staff without any additional compensation from DHS. We could not afford to this, but we could not afford not to either. The dependence on temporary/pool staff is cost prohibitive, decreases quality of care, and increases risk. At this time, we have 12 open beds at Oak Hills because we cannot staff them. Our wait list for interest in Oak Hills’ services is 101 females and 90 males. With the closures of both Fairfax and Winthrop there is an increased demand we cannot accommodate.

• Medicaid Equalization — North Dakota and Minnesota are the only two states in the United States that require us to charge our private pay residents no more or no less than the set Medicaid rates from DHS. The Long Term Care Imperative states, “In nursing homes, the State sets the rates for all those who receive care. In assisted living, low-income seniors use Medicaid dollars through a state-regulated program for Elderly Waiver. In both cases, the rates provided by the state no longer cover the cost of care for aging service. Unless the state increases funding for nursing home reimbursements and Elderly Waiver, senior care cannot recruit and retain the caregivers needed to provide Minnesota seniors with the care they need.”

At Oak Hills, nearly one-fourth of our revenue comes from Medicaid and private pay meaning the majority of our revenue does not cover the cost of care. With rising costs and an ever-shrinking days of cash on hand the business model is not conducive to long term operations. In September 2021, our days of cash on hand were 107 and September 2022 declined to 70. This dilemma is real for rural skilled nursing facilities throughout Minnesota. Who will care for our residents who can no longer care for themselves if the skilled nursing model ceases to exist? What impact would that have on you, your loved ones, and the community?

Our expansion requires some very strategic pieces. First, we are cutting expenses everywhere we can safely do so. Second, we are applying for a moratorium grant to remodel our existing building which will bring up the appraised value. This will require USDA funding. USDA funding requires a show of significant community support. The permanent fix to the reimbursement model for skilled nursing facilities requires our legislators to make changes to the law, increase caregiver wages, and ultimately care about their constituents who can no longer care for themselves in rural areas. Please stay with us, show your support by donating, making a pledge, writing a letter to the editor, call your legislator, rally influential community members to shout on our behalf. We need our community to light a spark to start a fire to keep skilled nursing in New Ulm.

Contact your house or senate committee on Health and Human Services. Follow their websites for updates on committee members and contact information.

https://www.senate.mn/committees/committee_bio.html?cmte_id=3095

https://www.house.leg.state.mn.us/committees

— Candas Schouvieller is the Oak Hills administrator