Breaking Rank: Long-Term Concerns

Despite considerable sales growth, nursing facility Hale Makua worries about rising health care costs.

August, 2002

Hale Makua translates into English as “Home of Respected Elders.” Founded in 1946, the company first served as a nursing home for seniors who had no caregivers and no means to pay for services.

Today, its two Maui facilities, in Wailuku and Kahului, can accommodate 362 residents. The company also provides home health services, rehabilitation, day health activities, short-term respite services and foster-family programs for the elderly.

The company’s gross sales for 2001 were $24 million, up 12.7 percent from $21.3 million the previous year.

“Revenues went up because we have been admitting more clients and filling up more of our beds, which are now pretty much full,” says Tony Krieg, Hale Makua president and chief executive officer. “Home health revenues increased as well because payment is no longer based on the number of visits we perform. Now it’s per episode, so we have a set payment no matter how many visits we make.”

But Hale Makua’s sales increases haven’t curbed Krieg’s growing concern over the risings costs of providing healthcare in the United States. The company’s professional liability insurance premiums have shot up 33 percent in just the past year.

“It’s a national crisis,” Krieg says. “Professional liability insurance premiums for nursing facilities have risen at exponential rates, primarily because of jury settlements in Florida and Texas where facilities were sued. One of the real issues over the next couple of years is: Are insurance companies going to even offer professional liability insurance?”

And with Hawaii’s rapidly growing elderly population, Krieg also worries about the shortage of nursing home beds on Maui. About 85 percent to 90 percent of those are paid for by Medicaid, he says.

“Medicaid continues to run short of money every year,” Krieg says. “The mindset of the public is that long-term care should be something the government should be paying for, regardless of income or assets. We need to find ways to encourage people to pay privately or to insure themselves against the problem of paying what it costs for nursing homes, $6,000 to $8,000 per person per month.”

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