A few months ago, the Pelican Valley Hospital District Board voted to close four nursing home beds in a move to cut costs and also offer more private rooms for its residents. The facility had to send an application to the state to utilize what is called the single bed incentive program. The application was approved a few weeks ago but the facility had to put out rate notices before the bed closure can take effect. Under this program, the state will give a small rate increase to facilities that delicense beds to make more private rooms.

When the facility was looking at ways to tighten up operations and find more ways to generate revenue, the bed closure option seemed like a good place to start. “Our rates are controlled by the state so even though our costs keep rising, we can’t increase the cost for our services,” said Pelican Valley Health Center’s Executive Director Barbara Garrity. “We are already facing a nearly $30 per person, per day rate gap between the actual cost of care and what we get reimbursed for. We were looking for ways we can try to get things back on track and closing beds made sense.” While there is still a strong demand for skilled care, it has decreased over the years as the trend is now moving towards lower level of care options like assisted living. “We did a nine year look back and our average census at the nursing home was around 35,” said Garrity. “The biggest need we are seeing right now is a need for private rooms so we decided we’d be ok closing those four beds and making four new private rooms.”

There are two things that won’t be changing with the closure: Staffing and the size and scope of the building project. The nursing home does not plan to change any of its staffing patterns with the bed closure since the facility didn’t operate regularly at full capacity. Even with four fewer beds, the proposed construction project wouldn’t have any changes. “We plan to use the four rooms for office space and family room space. We have several people who share a very small office area and we have had to turn family room spaces in to office space as well,” said Garrity. “We are so crowded at the nursing home that we will be able to find good uses for that space.”

The cost savings will come from licensing fees and surcharge fees. The facility expects to save about $12,000 per year having fewer beds to license. The closure will also generate extra revenue; the state of Minnesota will reimburse the facility about $4 per resident, per day for Medicaid residents. Due to rate equalization laws, private pay residents will also see that increase. The facility had about 11,000 resident days last year, so using that average, the $4 increase would increase revenue by $44,000 per year. By adding four new private rooms, the facility can also generate more money through the additional cost associated with having a private room. The facility hopes to see about $30,000 in extra revenue from the private room fee alone. “We have already had a good response from our residents and family members over the closure. Three of our four new private rooms are already spoken for,” said Garrity.

The facility will have 10 private rooms after the closure. “While it’s great to have more private rooms, this still reaffirms the need for our building project. Our residents and the residents of the future are expecting private rooms and more amenities and we have to be able to meet those needs if we want to continue our 50 year legacy of serving our community and be here for another 50 successful years,” said Garrity.