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Nursing Homes Raise Private Rates to Keep Up with Medi-Cal

Proving that fact is sometimes stranger than fiction, some California nursing homes are boosting private pay rates to keep pace with rising Medi-Cal rates. Historically, of course, nursing homes have always complained that their private pay patients are forced to subsidize Medi-Cal residents due to low Medi-Cal payments.

On July 29, 2005, the Department of Health Services (DHS) notified freestanding skilled nursing facilities (SNFs) of tentative new Medi-Cal rates taking effect on August 1, 2005. Pursuant to AB 1629 (Frommer, 2004), Medi-Cal is replacing the existing flat rate system for freestanding skilled nursing facilities with individualized rates for each facility. Under the flat rate system, Medi-Cal rates ranged from $107 to $139 per day depending on location and facility size. The new individualized rates are based on each facility’s costs plus a profit component. Many nursing homes are getting rate increases of $20 – $70 per day; about 200 skilled nursing facilities have tentative daily rates ranging from $160 to $211 per day.

To help set the new rates, Medi-Cal collected liability insurance cost information from SNFs. The new rate system will provide direct passthrough payment of liability insurance costs. According to rate information posted on the DHS website, tentative per diem payments for liability insurance range from 1 cent to $24.13 per resident, per day. Individual facility rate information is available on the site at:

Private paying patients are already feeling the pain. Because Medi-Cal will not pay more than a facility’s private rate, nursing homes whose private rates are less than the tentative Medi-Cal rates are boosting charges to private residents to qualify for the full Medi-Cal rate.

As a result, some private paying residents are being stung twice by the new payment system, having already faced increased rates to cover AB 1629’s bed tax.

By law, nursing homes must give at least 30 days advance written notice of any rate increase.

In a related development, the Department of Health Services announced that daily Medi-Cal rates for distinct part (part of a hospital) skilled nursing facilities are being raised, on average, to $275 per day, a 22 percent increase.