LEGISLATIVE FISCAL ESTIMATE
SENATE, No. 1951
STATE OF NEW JERSEY
221st LEGISLATURE
DATED: JULY 29, 2025
SUMMARY
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Synopsis: |
Establishes requirements for sanctions and other actions involving low-performing nursing homes. |
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Type of Impact: |
Potential State cost and revenue impacts. |
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Agencies Affected: |
Department of Human Services; Department of Health. |
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Office of Legislative Services Estimate |
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Fiscal Impact |
Annual |
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Potential State Cost Impact – Sanctions |
Indeterminate |
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Potential State Revenue Impact – Sanctions |
Indeterminate |
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State Expenditure Increase – Administration |
Indeterminate |
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· The Office of Legislative Services (OLS) estimates this bill will result in indeterminate impacts on State costs and revenues due to the imposition of sanctions on certain nursing homes, as described under the bill. The number of nursing homes that qualify for sanctions under the bill, and the nature of the sanctions imposed, drive the fiscal impacts of the bill; however, both of these factors are unpredictable.
· Any Medicaid cost savings experienced by the State under the bill due to imposed sanctions will result in a decrease in State revenue in the form of federal Medicaid matching funds. Similarly, any Medicaid expenses incurred by the State under the bill due to imposed sanctions will result in an increase in State revenue in the form of federal Medicaid matching funds.
· The OLS concludes that the Department of Human Services and, to a less significant extent, the Department of Health will incur an indeterminate amount of administrative expenses under the bill to monitor and review nursing home compliance with the bill’s provisions, as well as to fulfill reporting requirements established under the bill.
BILL DESCRIPTION
This bill requires the Division of Medical Assistance and Health Services in the Department of Human Services to take certain actions involving nursing homes that receive a one-star quality rating from the federal Centers for Medicare and Medicaid Services. The Centers for Medicare and Medicaid Services currently rates the quality of care in nursing homes on a scale of one to five stars.
Specifically, if the nursing home receives a one-star rating, but did not receive a one-star rating in the preceding quarter, the division will be required to issue a warning to the nursing home. If the nursing home receives a one-star Centers for Medicare and Medicaid Services rating in two consecutive quarters, the division will be required to evaluate whether to impose sanctions against the nursing home. If the nursing home receives a one-star rating in three consecutive quarters, the division will be required to evaluate whether to impose additional sanctions against the nursing home, which sanctions will be in addition to, and more severe than, any sanctions imposed for a one-star rating in two consecutive quarters. The division may additionally institute any actions as are necessary to protect the health and well-being of residents and staff at the nursing home.
When evaluating whether to impose sanctions against a nursing home, the division will be required to consult with the Department of Health concerning its recommendations for action against the nursing home and review the information concerning the nursing home that is available on the department’s nursing home data dashboard. In the event the division does not take action against a nursing home as authorized under the bill, the division will be required to document the reason why action was not taken.
The division is to require a nursing home that receives a one-star Centers for Medicare and Medicaid Services rating in three or more consecutive quarters to submit an improvement plan to the division. The division, in consultation with the Department of Health, will review the plan and either approve it or return it to the nursing home with a description of the changes needed for the plan to be approved.
A nursing home will be required to submit a report to the division documenting the execution of the nursing home’s improvement plan, as well as the outcomes of the action steps. The division, in consultation with the Department of Health, will evaluate the report and determine the nursing home’s compliance in implementing the plan as approved by the division. A nursing home that fails to comply with the requirements concerning the submission and implementation of an improvement plan will be ineligible to receive reimbursement under the Medicaid program, although reimbursement for services will continue until all Medicaid beneficiaries residing at the nursing home have been relocated. Nursing homes will have the right to appeal the determination of noncompliance.
The division will be required to prepare and submit a report to the Governor and the Legislature outlining the number, reason, and outcome of sanctions imposed against nursing homes under the bill.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS estimates this bill will result in indeterminate impacts on State costs and revenues due to the imposition of sanctions on certain nursing homes, as described under the bill. The number of nursing homes that qualify for sanctions under the bill, and the nature of the sanctions imposed, drive the fiscal impacts of the bill; however, both of these factors are unpredictable.
For example, the bill implements the recommendations of the Office of the State Comptroller outlined in its February 2, 2022 report titled, “An Examination of the Lowest-Rated Long Term Care Facilities Participating in New Jersey’s Medicaid Program.” According to the report, 15 long-term care facilities that received money from New Jersey Medicaid were rated one star, according to the Centers for Medicare and Medicaid Services rating system, for six of the last eight quarters. The Office of the State Comptroller indicated in a September 8, 2022 follow-up report that eight of those nursing homes had increased their CMS rating, six were still rated at a one star, and one had closed. In its second follow-up report, published on March 31, 2023, the Office of the State Comptroller stated that its “overall findings [in the March 31, 2023] report are almost identical to the original report—the consistently lowest-rated nursing homes continue to provide poor-quality care while continuing to be financed with public funds.” In total, there are currently 48 nursing homes in the State with an overall one-star rating on the CMS Care Compare website.
Moreover, the bill suggests a variety of sanctions under the bill, but provides the Department of Human Services discretion in applying these, or other, sanctions. Several of the suggested sanctions have no fiscal impact on the State, such as prohibiting a nursing home from admitting new residents; declining to approve or revoking the approval of an owner or operator to participate in Medicaid; and prohibiting a nursing home from obtaining interest in, or contracting with, any other nursing home in the State.
Certain sanctions may provide a cost savings to the State, such as reducing, limiting, or stopping payments to a nursing home under the Department of Human Services quality incentive payment program, which provides facilities bonus payments for meeting or exceeding certain quality metrics. Currently, these payments can add between $3.00 and $23.25 to the raw per diem rate of a nursing home. However, in FY 2025, 31 percent of all nursing homes did not qualify for any incentive; therefore, this type of sanction will not be applicable to all nursing homes.
Other sanctions may have countervailing fiscal effects. For example, removing Medicaid enrollees from a sanctioned nursing home and placing them in an alternative nursing home may increase or decrease the per diem rate paid by the Medicaid program for those residents, as each nursing home is provided a facility-specific Medicaid rate. The FY 2025 nursing home Medicaid reimbursement raw per diem rate ranged from $241.42 to $342.28. The aggregate per diem rate can be even higher if the nursing home qualifies for a quality incentive payment program payment. As such, a displaced nursing home resident’s per diem rate paid by the Medicaid program may increase or decrease depending on the resident’s new facility.
Any Medicaid cost savings experienced by the State under the bill will result in a decrease in State revenue in the form of federal Medicaid matching funds. Similarly, any Medicaid expenses incurred by the State under the bill will result in an increase in State revenue in the form of federal Medicaid matching funds.
Finally, the OLS concludes that the Department of Human Services and, to a less significant extent, the Department of Health will incur an indeterminate amount of administrative expenses under the bill to monitor and review nursing home compliance with the bill’s provisions, as well as to fulfill reporting requirements established under the bill. As the State’s Medicaid agency and entity responsible for health facility licensure, respectively, it is likely that the Department of Human Services and the Department of Health will be able to leverage existing resources to comply with these new administrative duties as both agencies maintain contact with nursing homes within the scope of their existing roles.
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Section: |
Human Services |
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Analyst: |
Principal Research Analyst |
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Approved: |
Thomas Koenig Legislative Budget and Finance Officer |
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).