Why HUD funding has the potential to propel the nursing home industry forward
Loans and other types of funding through the Department of Housing and Urban Development (HUD) can be key to incentivizing operators to seek innovation, such as scaling up the tiny house model in a meaningful way – but the program is not there yet.
The report from the National Academy of Sciences, Engineering, and Medicine (NASEM) says as much in its “ambitious vision for the future of home care nursing,” according to an article on the subject in Health Affairs.
The authors of the article include notable names such as Professor David Grabowski of Harvard University, Anne Tumlinson, CEO of ATI Advisory; Robert Kramer, co-founder and strategic adviser at the National Investment Center for Seniors Housing and Care (NIC); and Conner Esworthy, advisor to ATI Advisory.
Specifically, NASEM called on HUD and the Centers for Medicare & Medicaid Services (CMS) to develop incentives to support changes in facility structure. These renovations would include a smaller, more family-friendly environment or smaller units within a larger campus to promote infection control and person-centered care.
The Green House Project, founded in 2001 by Dr. Bill Thomas and supported by a $10 million grant from the Robert Wood Johnson Foundation, is a great example of a tiny house model in action, but these houses only represent ‘about 2% of the country’s 15,000 nursing homes, according to the article.
That could change if HUD better aligns itself with federal sector goals — faster access to HUD funds tied to nursing home innovations would be a start, the authors noted.
Currently, HUD remains the preferred lender for retirement homes thanks to its long-term financing terms and lower interest rates.
The majority of the $4.9 billion in loans were made through the program in 2021, according to HUD’s Office of Residential Care Facilities. But, the program as it stands has failed to adequately incentivize capital investments tied to broader federal goals included in the Biden reforms.
“These specific funds could be structured as outright grants that would reduce the time it takes to raise capital and incentivize the kind of change needed to modernize nursing homes nationwide,” the Health Affairs authors wrote. “These special grant structures could be contingent on consistent ownership and operator commitment to use the funds for specific purposes over a specified duration.”
CMS and HUD could work together on a list of approved grant items, the authors said, such as construction and renovation for implementing small home design, or less “capital-intensive” options. such as investing in technology and telecommunications upgrades or air purification systems.
HUD has used such grants in the past; the model would be more of a supplement than a replacement for HUD’s basic loan process, according to the article.
Innovation initiatives must carry more weight in HUD’s current lending process, preserving the lowest rates for borrowers with a progressive plan in mind; The Health Affairs authors suggest a point system for certain initiatives, such as designing private rooms, implementing telehealth or remote patient monitoring, and investing in data systems and analytics .
A special level of HUD loans tied to CMS quality metrics, such as those that implement a creative staffing model or have a high universal worker ratio, doubles the link between favorable loan terms and innovation.
“The likely benefits of these initiatives, including consistency of patient-staff relationships, minimization of disease exposure, and reduction of staff gaps in particular specialties, are all consistent with CMS quality objectives,” said added the Health Affairs authors.
It’s an interesting and inventive companion to what’s already happening with state Medicaid rates. Illinois, for example, tied its $700 million increase in nursing home funding to incentives for staffing and compensation for direct care staff, among other long-term goals.
“Given the dominance of the HUD program among retirement homes of all sizes, it has the potential to bring about rapid changes in the industry,” the authors said, calling the potential expansion a “significant opportunity” to support more all facilities and, by extension, the communities they serve. .