Montana medical providers struggling as Medicaid gap grows to more than $80M

Hospitals, mental health, nursing homes all warn of problems without a change from the state

By: - August 4, 2022 2:43 pm

Photo illustration by Getty Images.

Editor’s note: This story was update on Aug. 12 to include additional information about a state-sponsored rate study for nursing homes.

A growing number of healthcare leaders from different areas of the state – from hospitals to mental health providers to nursing homes – have sounded the alarm about skyrocketing costs, abysmal reimbursement rates for their services, and the need to address the problem before the next state budget cycle which won’t begin for 11 months.

Since January, seven nursing homes from around the state have closed, and nearly 10 percent of the available beds have disappeared, leaving some rural communities having to send residents hundreds of miles away for care.

On Wednesday, the Bozeman Daily Chronicle reported that Bozeman Health was laying off nearly 30 employees and not filling other positions, resulting in a loss of 58 employees. This comes as costs for the organization shot up more than eight percent, leading to a loss of more than $14 million in the first half of 2022.

And last month, the Children, Families, Health and Human Services interim legislative committee sent a letter to Gov. Greg Gianforte that urged him and his administration to find budget solutions that helped keep healthcare providers afloat until lawmakers could tackle the problem.

While focusing on the mental health providers, which they said is beginning to crater, some lawmakers believe the problem goes far beyond just counselors or psychiatrists.

Currently, lawmakers and the state are studying Medicaid and Medicare reimbursement rates, which are funded through a cost-sharing combination of state and federal funds. However, lawmakers point out that study – and any results that come from it – could be as many as three years away with Montana’s short legislative sessions every other year.

The legislative committee, led by Rep. Ed Stafman, D-Bozeman, asked the governor or DPHHS to intervene to address a gap of more than $80 million.

“The Guidehouse study showed a gap of $82.4 million between the payments currently being made to all Medicaid providers and their actual costs of doing business. The state’s share of that difference totals $27.7 million,” the letter states.

Lawmakers on the committee have also asked that the governor’s office look into one-time use of other funds, including the ending fund balance, marijuana taxes or even funding from the American Rescue Plan Act.

Gianforte’s office did not respond to questions or inquiries from the Daily Montanan.

However, a statement from DPHHS pushed against the idea that the state could just authorize additional payments and said it will make a “data-informed process,” but held out that a fix for rates wouldn’t likely be possible until July 1, 2023, when the next biennial budget would go into effect.

The DPHHS also said that the current Guidehouse study, a provider rate study, does not include nursing homes. However, a nursing home rate study is being conducted separately from the recently completed rate study on behavioral health, developmental disabilities, and senior and long-term care populations. The nursing home rate study was initiated in May and will be completed in September.

DPHHS issued this statement in response to a series of questions by the Daily Montanan:

“DPHHS looks forward to continued dialogue on this topic with the Legislature, providers, and all key stakeholders. The department has been clear about our intentions to address Medicaid provider rates, in collaboration with the Legislature, and we remain committed to this project through a data-informed process. DPHHS will use the recently completed provider rate study on behavioral health, developmental disabilities, and senior and long-term care populations (excluding nursing homes) to inform its budget request for the next biennium. The reality is the Legislature has not authorized additional supplemental funding for DPHHS to address rates at this time.”


Lawmakers said that poor Medicaid reimbursement rates are also impeding residents from seeking access to care.

“Committee members learned that Montana’s reimbursement rates lag behind actual costs for most Medicaid providers and are likely a strong contributing factor to the lack of access many Montanans experience trying to obtain the health care services they need,” said the letter lawmakers sent to Gianforte on July 18.

News of closures, lay-offs and challenges to access come as federal and state funding that was meant to help buoy healthcare organizations through the pandemic are exhausted. Some healthcare leaders predicted that funding in the state would run out during the summer, and force closures or reductions, especially with sharply increasing housing costs.

“This falls squarely on the governor and his administration,” Stafman said. “When you have a crisis, it’s up to the governor to step in because we do not have the power to come in and fix it.”

Stafman, who represents part of Gallatin County which includes Bozeman, is beginning to hear more and more about the problem. In addition to Bozeman Health’s layoffs, the rapidly growing county now has just 69 nursing home beds in the area after a facility with more than 100 just announced it is closing. County Commissioners will ask voters to help support the nursing home facility.

“This is a very serious situation and I am hearing about it,” Stafman said.

While he said the letter sent to Gianforte was primarily about mental health care coverage, reimbursement, which doesn’t even cover the cost of doing business, is a common theme throughout healthcare, Stafman said.

He said a $1.7 billion budget surplus should be used, in part, to ease the crisis. He said the Gianforte administration is playing games with the money.

“That additional revenue comes because people’s incomes have become higher and that means we collected more,” Stafman said. “But our costs were higher due to inflation and the after effects of COVID. But our budget was passed at a time before those factors were known. But now we need to pay more because the cost of providing services has increased. The problem is: We can’t wait that long without risking service.

“And it’s a lot easier to save something than it is to rebuild it.”

He points out that many services from mental health to even nursing homes may have capacity or even facilities, but because of mandated staff-ratios or other staff requirements, these healthcare organizations cannot operate at full capacity, For example, more than half the beds reserved for children’s mental health across the state and in group homes are unavailable.

“It’s not that the beds have evaporated, it’s that they don’t have the staff. They can’t afford the staff,” Stafman said.

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Darrell Ehrlick
Darrell Ehrlick

Darrell Ehrlick is the editor-in-chief of the Daily Montanan, after leading his native state’s largest paper, The Billings Gazette. He is an award-winning journalist, author, historian and teacher, whose career has taken him to North Dakota, Minnesota, Wisconsin, Utah, and Wyoming. With Darrell at the helm, the Gazette staff took Montana’s top newspaper award six times in seven years. Darrell's books include writing the historical chapters of “Billings Memories” Volumes I-III, and “It Happened in Minnesota.” He has taught journalism at Winona State University and Montana State University-Billings, and has served on the student publications board of the University of Wyoming.