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March 14, 2013

Details emerge on Manor's financial woes

By Joe Mahoney
The Daily Star

---- — COOPERSTOWN — As owner and operator of the Otsego Manor, Otsego County is facing millions of dollars in liabilities over and above the $5.5 million public subsidy the nursing home will receive this year, officials disclosed Wednesday.

The county has no money set aside to pay for long-term liabilities incurred as the result of its operation of the Manor, said Russell Bachman, the county’s acting treasurer.

“I don’t think the public understands that the liabilities are what is going to hurt us,” Bachman said.

In 2011, a financial statement prepared for the county by accounting firm Bryans & Gramuglia showed the total loss from operations at the Manor that year alone stood at more than $8.3 million. That figure includes depreciation of $1.3 million per year. The county has created no reserve to cover depreciation, but one should be included in the true cost of operating the nursing home, Bachman emphasized.

Bachman also revealed that concerns about how the county has been funding the Manor have prompted the agency that determines the county’s credit rating, Moody’s Investors Service, to initiate a “surveillance audit” of the county’s books, Bachman said.

If that leads to a reduction in the county’s rating — AA3, which is defined as high quality — the county could end up paying higher interest rates on its debts, Bachman explained.

“The basic question Moody’s is asking is: are you going to get reimbursed for funds you are putting into Otsego Manor?” Bachman said. The answer to that question, he added, is “no.”

One reason the county’s Manor subsidy has grown is the regional pricing scheme the state uses to determine Medicaid reimbursement rates, Bachman said.

Because wage and benefit costs for Manor employees are significantly above the median wages and benefits at other facilities in the region, the state has lowered the Medicaid reimbursement rate for Manor patients, adding to the county’s expense for caring for those patients.

For instance, a certified nursing assistant at the Manor typically earns between $14.49 and $16.88 per hour, with an average benefit cost of $7.63 per hour. In the region, the average pay for nursing assistants ranges from $10.85 to $13.06 per hour, with a benefit cost of $3.41 an hour.

In 2009, the Medicaid daily reimbursement rate for a patient at the Manor stood at $195. That figure has dropped to $189.87 for 2013, he said.

The lower rate transfers into a revenue reduction amounting to hundreds of thousands of dollars for the Manor, said Bachman, who is substituting for County Treasurer Daniel Crowell during the latter’s six-month military deployment.

Bachman also noted the county, which is self-insured, has no control over worker compensation costs arising from job-related injuries. That liability went from $590,523 in 2010 to $1,010,543 in 2011, and there is no way to predict what the trend will be in future years.

He also said intergovernmental transfer monies from the state to help pay for public nursing homes is far from a predictable stream of revenue. The county had budgeted $3.2 million in intergovernmental money for 2012. But it ended up receiving only $2.3 million, leaving the Manor with a significant shortage that had to be made up by the county, Bachman said.

In addition, the county is facing substantial obligations for health care costs for its employes, a sum that is projected to rise between 8 percent and 9 percent per year. Meanwhile, wages are projected to rise about 2.5 percent per year, he noted.

In response to questions from The Daily Star, Bachman said the county’s entire biweekly payroll for all workers amounts to $996,239. Of that, $330,112 — or about one-third — is paid to Manor employees, he said.

It’s important to not just consider what the county is putting into the Manor in cash, but what the total liability is, since the county will be on the hook for that cost expense until it is finally paid.

County officials have not yet decided how to market the Manor. One potential option is for the county board to create a local development corporation, which would manage the sale of the facility. The county board has retained Shawn Griffin, of law firm Harris Beach, to advise the panel on its options.

“Almost everybody on this board is more interested in doing what’s right than in getting re-elected,” said Rep. Kay Stuligross, D-Oneonta, the chairwoman of the Manor Committee and a self-described reluctant advocate for selling the facility to a private operator.

A grassroots group calling itself Save the Manor has argued privatizing the facility will lead to a reduction in the quality of care, and will hasten the exit of experienced Manor workers who will not accept significant wage and benefit reductions.

The Manor Committee and Manor administrator Edmond Marchi are scheduled to begin a series of three public informational meetings on selling the Manor at 1:30 p.m. Saturday at the American Legion hall in Worcester.