Mr. Chairman and Members of the Committee, thank you for the opportunity to submit testimony to you today.  I am Robert Tuke, and I am the Chairman of the Tennessee State Veterans Homes Board.  As a Marine Vietnam Veteran with a minor service connected disability, I am especially interested in supporting efforts to assist disabled veterans whenever possible.  So it is a double privilege and honor to address you today.

The Tennessee State Veterans Homes operate much in the same manner as private nursing homes.  The Tennessee State Veterans Homes Board does not receive funding for operations from the State.  Instead, it must maintain financial viability just as any other nursing home organization.  The Tennessee State Veterans Homes Board operates three nursing homes, each with 140 beds, dually certified for Medicare and Medicaid.  The revenues generated and collected by our Homes are the operating funds for the organization, from which the Board pays it employees, vendors, debt service, repair and replacement of equipment and buildings, and from which it funds its capital purchases. 

As you know, the VA Regulations promulgated pursuant to the Veterans Benefits, Health Care, and Information Technology Act of 2006 became effective on May 29, 2009.  At that time, there were a total of 13 residents in our three homes who met the criteria for the VA 70 Percent Program.  By the end of January 2010, eight months later, the total of such residents was 23, an 84.7 percent increase.  Of the 23 current residents, 18 require skilled nursing home care and the other 5 require standard, custodial nursing care.  Based on the average daily census of our three homes, 5 percent of the patient population are covered by the VA 70 Percent Program. 

We anticipate these numbers to continue to increase as more veterans become aware of the program and elect admission into the state veterans homes.  Tennessee does not limit and has no intention of limiting admissions to its nursing homes on the basis of payor source, and we will not limit admissions under the VA 70 Percent Program.  However, there are consequences to revenues and expenses arising from the VA 70 Percent Program that are problematic to the long-term financial viability of the Tennessee State Veterans Homes, just as there are to state veterans homes nationwide.    

As I have pointed out, the vast majority of the new admissions under this program require skilled nursing care services.  This means that the billings for services for these residents are submitted to the VA instead of to our fiscal intermediary for Medicare reimbursement.  Therefore, the loss of revenue calculations we are presenting today are based on actual payments received from VA compared to what our reimbursement from Medicare would have been had we been able to bill Medicare.  Additionally, many expense items that are reimbursed adequately under the consolidated billing rules for Medicare are not reimbursed adequately under the VA 70 Percent Program.  Examples include services by an attending physician, specialists, and emergency transportation.  In addition, we can no longer bill Medicare Parts B and D for services on this segment of our patient population.  In essence, when we admit residents who qualify for the VA 70 Percent Program, we incur higher expenses and receive lower reimbursements for services than we are able to bill for those same services to other applicable payor sources. 

The VA 70 Percent Program reimbursement is based on the lesser of the prevailing rate as established by the Secretary for Veterans’ Affairs or the average daily cost of care for all residents based on actual expenses incurred by the nursing home.  The average daily cost of care calculation results in a reimbursement skewed by the much larger percentage of intermediate care residents in each home as compared with skilled care residents.  For example, if 5 percent of the resident population in a given home qualify for the VA 70 Percent Program and 15 percent of residents in the home are covered by Medicare, the remaining 80 percent require only intermediate or custodial nursing care.  The expenses associated with custodial care are significantly lower on a per patient day basis than those for skilled care.  Moreover, as the calculation that follows shows, the VA 70 Percent Program residents incur expenses which are higher than those incurred by our Medicare residents.  When the total expenses are divided by the total patient days to obtain the ‘average daily cost of care,’ the resulting average is much less than the actual cost of care for the residents qualifying under the VA 70 Percent Program.

A comparison between the charges and reimbursements for skilled services billed to Medicare and billed to the VA 70 Percent Program follows. 

As you can see, the current reimbursement methodology does not provide sufficient funding to the State Veterans Homes.  Tennessee estimates the loss of $338,000 in revenues from May 29, 2009 to the present because of the funding constraints of the VA 70 Percent Program.  Please see the attached graphic demonstrations.  This substantial loss does not include the realized increase in provision of care costs experienced by the State Veterans Homes as prescribed under the VA 70 Percent Program.

Obviously, the Tennessee State Veterans Homes Board cannot continue to absorb this increase in expenses and reduction in reimbursement without dire fiscal consequences.  Therefore I urge you to support H.R. 4241. 

Thank you.