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Coalition Pushes HUD to Boost Nursing Home Quality of Care

Md. Parvez
nursing-home-quality-of-care

Members of the Moving Forward Nursing Home Quality Coalition call on the Department of Housing and Urban Development (HUD) to implement significant changes to its loan programs to better support nursing home quality of care.


Call for Loan Program Reforms


In an editorial published in Health Affairs, co-authored by David Grabowski, a healthcare policy researcher at Harvard, Alice Bonner, chair of Moving Forward, Richard Gamache, CEO of Aldersbridge Communities, and other coalition members, the need for HUD to incentivize improvements in nursing home quality of care was emphasized. The coalition advocates explicitly for transformations to "household models" in nursing homes.


The editorial highlighted the urgency of the situation. With interest rates predicted to be lower in 2024, the authors argue that now is the ideal time to align mortgage loans and associated costs with efforts to transform nursing homes. These transformations aim to achieve the quality improvements that residents need and deserve. The federal government's approach to financing nursing home care should be holistic and not limited to individual governmental funding streams.


Aligning Financial Incentives with Quality Improvements


The coalition's recommendations align with HUD's strategic goals for 2022–2026, which emphasize equity and improvement across all programs without requiring congressional action. By strategically adjusting loan terms and insurance premiums, HUD could significantly encourage the adoption of household models in nursing homes, enhancing resident outcomes and satisfaction.


"Nursing homes are people's homes," the authors wrote. "With lower interest rates predicted for 2024, there's no better time to align mortgage loans and associated costs with efforts to transform nursing homes to achieve the quality improvements that residents need. The federal government's approach to financing nursing home care should be holistic—not siloed to individual governmental funding streams."


Encouraging Transformations Through Financial Flexibility


The coalition suggests that HUD should allow nursing home operators to build household models or make improvements to borrow more than is currently permitted. This flexibility would help nursing homes invest in safety, privacy, and overall quality-of-life enhancements for residents.


Lower Mortgage Insurance Premiums


One key proposal is to lower the mortgage insurance premium (MIP) on loans for nursing homes that adopt household models or make associated physical plant improvements. Currently, the standard MIP is 65 basis points annually. The coalition proposes reducing this to 25 basis points for qualifying facilities, encouraging investments in nursing home quality of care.


Reducing the MIP would lower the overall cost of borrowing for nursing homes, making it more feasible for them to undertake significant improvements. These improvements range from structural changes that enhance safety and privacy to upgrades that create a more home-like environment for residents. By easing the financial burden, HUD would enable more nursing homes to invest in quality improvements.


Adjusting Debt Service Coverage Ratios


The coalition also recommends that HUD adjust its debt service coverage ratio (DSCR), which measures a borrower's ability to repay loans. This ratio limits the borrowing capacity of nursing homes, especially those reliant on Medicaid funding. More flexibility could enable nursing homes to renovate substantially to improve resident care without financial instability.


The DSCR is a critical metric for lenders, indicating the likelihood of a borrower defaulting. Nursing homes, particularly those heavily reliant on Medicaid, often struggle to meet the stringent DSCR requirements. HUD could facilitate renovations and upgrades by relaxing these requirements for nursing homes committed to quality improvements.


Waivers for the 232/223 Program


The coalition advocates for waivers within HUD's 232/223 program, which restricts borrowers to repairs and improvements costing no more than 15% of a nursing home's value post-completion. Eliminating this threshold would facilitate more comprehensive transformations of existing facilities into household models, prioritizing resident well-being and comfort.


"This restriction creates a barrier to transforming the nation's nursing homes from traditional quasi-hospitals to shared homes offering skilled nursing. The bulk of this transformation will need to occur through the rehabilitation and remodeling of existing nursing homes," the authors noted.


By removing the 15% cap, HUD would enable nursing homes to undertake more ambitious projects that could significantly enhance the quality of care. These projects include expanding communal areas, upgrading medical facilities, or redesigning spaces to provide a more home-like atmosphere.


Removing Barriers to Transformation


The editorial stressed that these financial barriers create significant obstacles to transforming nursing homes from traditional quasi-hospitals to actual homes offering skilled nursing care. Many nursing homes need to be updated and designed with modern care practices in mind. Transforming these facilities requires substantial investment, which is currently hindered by restrictive loan terms and financial metrics.


To address these challenges, the coalition calls for a more flexible HUD approach. This includes adjusting loan terms, reducing insurance premiums, and relaxing debt service coverage ratios. Such changes would provide nursing homes with the financial tools they need to undertake meaningful improvements.


The Bigger Picture: Holistic Funding Approaches


The editorial authors argue that the federal government's approach to financing nursing home care should be holistic. This means not limiting funding to specific streams or programs but considering the overall financial health and needs of nursing homes. By taking a comprehensive approach, HUD can ensure that nursing homes have the resources they need to provide high-quality care.


The coalition's recommendations align with HUD's broader strategic goals, which include promoting equity and improving outcomes across all HUD programs. By implementing these changes, HUD can support the broader adoption of household models in nursing homes, leading to better resident outcomes and satisfaction.


Looking Ahead


As discussions about HUD appropriations begin on Capitol Hill next Thursday, coalition members remain hopeful that HUD will embrace these recommendations to create a more supportive environment for nursing homes striving to enhance care standards.


Moving Forward is supported by The John A. Hartford Foundation, which advocates for improved nursing home quality of care nationwide. The foundation's support underscores the importance of these issues and the need for systemic change in how nursing homes are financed and operated.


Conclusion


The Moving Forward Nursing Home Quality Coalition's call for HUD to reform its loan programs is a crucial step toward improving the quality of care in nursing homes. By addressing financial barriers and incentivizing quality improvements, HUD can help transform nursing homes into actual homes for their residents.


The coalition's proposals are not just about financial metrics but about creating environments where residents can live with dignity, safety, and comfort. As the debate continues, policymakers must consider these recommendations and work toward a more supportive and holistic approach to financing nursing home care. By making these changes, HUD can play a pivotal role in enhancing the quality of life for nursing home residents nationwide.

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