Nursing home operators are ramping up the pressure on lawmakers to reform a budget adjustment factor they say short-changes them at a time when too many nursing homes are closing as the state’s population is getting grayer.

Keystone Seniors, a coalition of long-term care operators in the state, has begun running issue advertising in the Philadelphia suburbs and northeastern Pennsylvania highlighting the impact of the budget adjustment factor that has been in place for two decades.

The adjustment factor is the state’s way of distributing Medicaid reimbursement funds when the state budget doesn’t provide enough to cover the full cost of care.

Mike Jacobs, president and CEO of the Pennsylvania Health Care Association, says the adjustment factor is the state’s way of cutting up the funding pie into smaller slices so that all operators get paid even though the state’s allocation doesn’t provide enough to fully cover what they are owed in Medicaid reimbursements.

The adjustment factor has been getting renewed for three-year terms and the current term expires June 30. That creates an opportunity to reform the adjustment factor by adding a floor to ensure that the gap between nursing homes’ costs and what the state pays them doesn’t grow larger.

Currently, due to the budget adjustment factor, nursing homes only get 80 cents in Medicaid reimbursement for every dollar they spend on care.

Pennsylvania is one of just five states — along with Nevada, Maryland, New Hampshire and Idaho — that use the adjustment factor for Medicaid reimbursements.

And due to a recalculation in the way Medicaid reimbursements are determined, the gap will grow wider in the coming year unless the General Assembly tweaks the factor.

The nursing homes hope lawmakers establish a floor for the adjustment factor so that they get at least 90% of what they’re owed.

Nursing home operators say that as costs increase, it will only get more difficult to close the gap between what the state pays and what their costs are.

“Last year, the cost to put in a 0.90 floor was just under $200 million in state money,” Jacobs said. “That number has more than doubled this year, and the reason is because costs have continued to increase, but funding has not been increased.”

Jacobs said nursing home operators typically look to offset some of their losses providing care to Pennsylvania patients with the proceeds from providing care in other states with better Medicaid reimbursement rates.

A review of Medicaid reimbursements for nursing homes completed by Jacobs’ group and the Service Employees International Union found that in 2025 facilities in neighboring states were getting reimbursed at substantially higher rates than those in Pennsylvania.

Reimbursement rates (per resident per day)

– Pennsylvania — $256

– Ohio — $275

– New Jersey — $275

– New York — $299

– Delaware — $326

– West Virginia — $355

– Maryland — $375

“Providers are using the better payment system in other states to prop up their facilities in Pennsylvania. If we continue down this path, they’re not going to be able to do that anymore, and they’re just going to sell, close or leave,” Jacobs said.

“This comes at a time when in the next 5-10 years, the Baby Boomers are going to be coming into our space, and we’re going to need every bed we have, if not more.”

Legislation to set the 90% floor for the adjustment factor has been introduced as House Bill 1310 in the state House and as Senate Bill 692 in that chamber.

Rep. Maureen Madden, D-Monroe, the chairwoman of the House Aging and Older Adult Services Committee, is a co-sponsor of HB 1310. Madden separately introduced legislation that would create a grant program to help nursing homes make capital upgrades to their facilities. Madden said the grants would be similar to a grant program available for school buildings.

“I think we need to do both [provide grants and address the budget adjustment factor],” Madden told CapitolWire/State Affairs in an interview earlier in March. “I think we give them more dollars in which to operate and help them so that we can get up to speed or we can do better than that. We can provide really state-of-the-art facilities where seniors don’t feel like they’re in an institution.”