CARSON CITY -- Gov. Brian Sandoval could be forced to come up with another $20 million or more to balance the state's general fund budget if a legal analysis by nursing home operators is correct.
On Wednesday, the Nevada Health Care Association told a legislative committee that a federal court probably would block Sandoval's plan to save about $10.1 million by reducing Medicaid reimbursement rates for nursing home care.
And such a move could jeopardize matching funds the federal government provides for Medicaid and drive the state's cost up more than $20 million, plus legal costs.
That is the gist of a legal analysis from the law firm Lionel Sawyer & Collins based on Medicaid case rulings in the 9th U.S. Circuit Court of Appeals, which covers Nevada.
"Our ultimate position is that this redirection is a futile and expensive effort," said Renny Ashleman, a lobbyist for the nursing home industry.
In addition to bolstering the industry's argument against the proposed rate cuts, the analysis prompted more criticism from Democrats aimed at Sandoval's recommended 2011-13 general fund budget, in which he seeks to limit spending to about $5.8 billion.
"I'm convinced we need additional revenue," said Sen. Sheila Leslie, D-Reno, chairwoman of the Senate Finance Committee. "I think the cuts are too deep. They expose the state to potential lawsuits I think are very real."
The focus of the legal analysis is on a Sandoval proposal that would reduce reimbursement rates to nursing homes by about $20 per day. The reduction would cost an average nursing home about $500,000 per year and could cause some to close their doors, the association officials say.
It was presented to the Senate Finance Committee during testimony on Senate Bill 54, a bill the Sandoval administration needs approved to enact the cuts.
Lionel Sawyer & Collins in its report cites several cases from the 9th Circuit the firm contends show the court requires states considering reimbursement rate cuts must first provide an analysis on how the cuts would affect access to and the quality of care.
The memo also said the court cases show cutting reimbursements purely for budgetary reasons isn't allowed, and that if unlawful cuts are enacted, the federal government could withhold matching funds.
"Therefore, if the Legislature implements rate reductions to balance the budget, it will result in grave injuries to Nevada and its citizens on multiple fronts," the memo said.
The cost to the state could be higher if hospitals seek redress for Medicaid reimbursement cuts in the same way as the nursing homes.
If Sandoval's budget is enacted, the amount of reimbursement cuts for hospitals from 2009 to 2013 would be $190 million, according to the Nevada Hospital Association.
"This is a serious issue," said Jim Wadhams, a hospital lobbyist. "Providers under Medicaid are required to provide services; we just get paid less for them."
Mike Willden, director of the Department of Health and Human Services, said states across the country are awaiting guidance from the federal government that will govern how they approach cutting Medicaid spending. It's too early for the nursing homes and other providers to say whatever plan gets enacted will not pass muster with the courts, he said.
"It is a muddy issue, but we don't think the standards have been established yet," Willden said. "We think the state still could meet federal guidance on the issue."
Charles Duarte, administrator of the Nevada Division of Health Care Financing and Policy, added that if nursing home providers were to fight the cuts in court and prevail, there could be unintended consequences that could be more harmful to Medicaid patients.
Duarte said the Sandoval administration made a policy decision to reduce reimbursement rates rather than cut optional Medicaid services altogether, which would limit medical procedures available to clients.
"It leaves us with very onerous choices," Duarte said. "Unless there is revenue, then we have to look at other cuts. If we can't cut rates, then we have to cut services."