The Challenges of Operating Skilled Nursing and Assisted Living Facilities in Indian Country

The Challenges of Operating Skilled Nursing and Assisted Living Facilities in Indian Country and Mechanisms to Address the Challenge

By Judith M. Dworkin and Candace D. French

I. Introduction

The world of healthcare in the United States has changed dramatically in the past decade, and this is true in Indian Country as well. The COVID-19 pandemic brought unprecedented devastation and strained the U.S. healthcare system. The morbidity and mortality in skilled nursing and assisted living facilities were some of the greatest impacted during the COVID-19 pandemic. Changing rules by the Centers for Medicare and Medicaid Services (“CMS”) have adversely impacted the rebounding of skilled nursing and assisted living facilities in the post-pandemic period. In this article, we address the challenges experienced by a tribal-owned and operated facility and the various opportunities available through compacting or contracting with the Indian Health Service (“IHS”).  

II. The Experience of the Tohono O’odham Nursing Care Authority

There are few tribal-operated skilled nursing and assisted living facilities across the United States Nation and even fewer within Arizona. The experience of the Tohono O’odham Nursing Care Authority (“TONCA”) provides one set of experiences, which may prove insightful for other Arizona tribes considering whether to construct and operate skilled nursing and assisted living facilities.  

TONCA was formed in 1998 as a tribal enterprise of the Tohono O’odham Nation (the “Nation”) to operate a skilled nursing facility: the Archie Hendricks, Sr. Skilled Nursing Facility (“SNF”). The Nation’s goal was to “bring our elders home,” which served as the slogan for providing a facility on the Tohono O’odham Reservation where elder O’odham in need of skilled nursing could live out their days, near family, where the O’odham language could be spoken and understood, where medicine people would be welcome, and where traditional foods and ceremonies could be enjoyed.  

In its organizational documents, the Nation charged TONCA with assuming a leadership role in providing a continuum of care and services for aging O’odham. Pursuant to its Charter, TONCA controls its budget, opens bank accounts, hires professionals (including legal counsel), invests funds, establishes a capital improvement fund, develops an annual budget, forms subsidiary organizations, and otherwise operates independent of the tribal government. 

TONCA opened the SNF in November 2002, and a decade later, opened the Tohono O’odham Elder Assisted Living Residence (“ALR”) in 2012. Since then, and until March 2020, the start of the COVID-19 pandemic, TONCA operated at or near its skilled nursing 60-bed capacity and its assisted living 10-bed capacity, providing short and long-term care to O’odham members. 

The Nation formed TONCA, built the SNF, and expected TONCA to operate, with the knowledge that the federal government did not fund skilled nursing or assisted living facilities for tribal members. From its inception, TONCA has been financially supported by an annual subsidy from the Nation. TONCA bills and collects from Arizona Health Care Cost Containment System (“AHCCCS”), the State’s Medicaid provider, for residents who meet the limited-income Medicaid eligibility; a small number of residents are covered by Medicare or private insurance. Although the federal government’s trust responsibility includes providing healthcare to Indian people in the form of long-term care and support, funding has not historically been extended to support skilled nursing and assisted living facilities. 

III. Tribal assumption of responsibilities of the federal government through the self-governance and self-determination provisions

The basis of the federal government’s trust obligation stems from the unique relationship between tribes and the United States and is memorialized in (i) the Constitution through the Indian commerce and treaty clauses, (ii) tribal treaties, and (iii) Supreme Court cases that identified the relationship between the federal government and tribes to be like that of a “ward to his guardian.” Over the years, Congress has passed various acts that carry out this obligation, including those that are aimed at promoting health. 

IHS, located within the Department of Health and Human Services (“DHHS”) is charged with providing healthcare to Indian tribes and individual Indians both on and off-reservation. However, IHS and its predecessor agencies have struggled in meeting its trust obligation. It has been severely underfunded which has led to substantial challenges to delivering adequate, proper, and culturally sensitive healthcare to a population that has been historically plagued with health disparities caused by detrimental federal Indian policies and exacerbated by substandard socioeconomic conditions.

The opportunity for tribes to operate and provide their own healthcare emerged in the “self-determination era.” The Indian Self-Determination and Education Assistance Act (“ISDEAA” or “P.L. 93-638”) was enacted on January 4, 1975. Under the ISDEAA, Indian tribes could exercise greater autonomy by assuming the responsibility to provide services that had traditionally been administered by the Department of Interior (“DOI”) and DHHS-IHS, through “compacting” or “contracting”. 

Under Title I of the ISDEAA, tribes or tribal organizations (“TOs”), may apply for a self-determination contract to plan, conduct, and administer specific programs, functions, services, and activities (“PFSAs”) to an Indian tribe, its members, and other Indians that would otherwise be provided by IHS, whereas under Title V, tribes/TOs, may apply for a self-governance compact to assume full funding and control over the delivery of the identified PFSAs. Operating under a tribal contract includes (i) the model agreement which can be modified with additional provisions negotiated between the tribe/TO and DHHS and (ii) an annual funding agreement which describes the amount of funding, payment method(s), and the PFSAs to be performed under the contract. Essentially, P.L. 93-638 contracts still require oversight by the federal agency through annual monitoring, are subject to federal agency approvals for certain actions, and can result in the recission of contracts if certain requirements are not met.

Under self-governance compacts, tribes/TOs assume the full responsibility of providing PFSAs identified in the compact and are able to uniquely design PFSAs to reflect the culture, language, customs, and values of the community it serves; concepts that have historically been ignored by the federal government in the delivery of treaty and trust obligations. Compacts require a higher threshold for approval that involves the tribe/TO demonstrating successful planning and multiyear fiscal responsibility. Compacts also differ from contracts in that they do not follow a set model and can differ from compact to compact based on the tribe/TO’s organization, structure, and needs. Additionally, compacts allow a tribe/TO the discretion to provide for multi-year funding, thereby allowing great flexibility to budget and prioritize its PFSAs. While compacts do not require federal monitoring, they do set forth the remaining responsibilities of the federal agency. Through P.L. 93-638 compacts and contracts, tribes administer over 60 percent of the total IHS budget. Tribal Self-Determination Authorities: Overview and Issues for Congress at 2.

Effective July 1, 2016, the Nation entered into a self-governance compact pursuant to Title V of the ISDEAA (the “Compact”). The Compact included the primary healthcare facilities operated by IHS: the Sells Hospital, several clinics and certain home and community-based services operated by the Tohono O’odham Health Department. While the SNF and the ALR are listed as locations at which PFSAs are conducted, because IHS was not providing those services, the execution of the Compact did not come with funding for TONCA’ s programs. However, DHHS has supported these facilities through the Medicaid program.  

The federal government through CMS jointly shares, with each state, payment of a portion of the bed and board charges at the SNF for limited income Medicaid eligible individuals. The Federal Medical Assistance Percentage (“FMAP”) is the percentage that the federal government contributes. This rate varies depending on the average per capita income for each state, but is never less than fifty percent. While adjusted annually, in Arizona, the federal government pays approximately seventy percent and Arizona pays thirty percent of the state’s Medicaid expenditures. If the skilled nursing or assisted living facility is an IHS or tribal facility, the federal government pays one hundred percent pursuant to the State Plan.  

IV. TONCA’s Challenges in the Post-Pandemic Period

Prior to the pandemic, TONCA’s census remained close to each facility’s capacities. During those years, staffing continued to become more specialized as the SNF was asked to handle more complex skilled nursing cases. By 2020, more than 1,100 O’odham members had spent time as a resident of the SNF. During the pandemic, services were substantially restricted in order to protect SNF residents. The ALR was closed and residents that did not return to family homes were relocated to the SNF. The census of the SNF dropped to the 30s. At the end of the pandemic period, TONCA was faced with critical challenges to funding. TONCA was able to use its status as a compacted tribal organization to access funds and provide other support that were not available without inclusion in the Compact. The funding crisis was brought about by the cost of staffing and the limited revenue stream from AHCCCS.

  A.      Staffing

The SNF requires direct care nursing staff along with dietary, maintenance, housekeeping, and business office staff. While much of the TONCA staff is O’odham, TONCA relies significantly on non-tribal staff to fill its direct care needs. The remote location of TONCA and its distance from major cities like Phoenix and Tucson has always been a challenge but the problem was exacerbated by the COVID-19 pandemic. Direct care staff resigned and were difficult to replace. Those who remained were provided “premium” pay. While a substantial portion of the premium pay was funded by the federal government through CARES and ARPA funding, once the pandemic was over and the federal funding ran out, it was not possible to reduce salaries. Thus, the cost of operations increased, while at the same time the census at the facilities had dramatically decreased.  

The operational costs were further increased by the national trend of nurses and CNAs leaving permanent positions to become travel nurses. Travel nurses played a critical role in staffing throughout the U.S. during the pandemic and TONCA was no exception. Travel nurses were compensated at significantly higher rates than permanent staff. For TONCA, this meant that operations costs increased significantly, although revenues were being generated by significantly fewer residents. In addition, because travel nurses only stay at TONCA’s facilities for weeks or months, TONCA faced the challenge of retaining the O’odham culture at the facility, with a changing direct care staff.  

  B.      Reduced Income from AHCCCS

TONCA accepts all O’odham members for whom TONCA has the medical capability to provide service. The challenge is to establish an operating budget based on the more limited census and recognizing that the facility may not have a payor for some residents. For those tribal members eligible for Medicaid, the rates ranged from $175 to $200 per day based on level of care in the AHCCCS system. TONCA’s annual budget projects that a certain number of the residents will not contribute to their bed and board charges whether through public or private insurance or personal contributions. These “charitable care” residents have doubled since 2019 and the number of residents had reduced from nearly 60 to less than 50.  

  C.      Increased Cost of Operations

Inflation in the healthcare industry has increased substantially between 2019 and 2025. Primary causes were the increased salaries of permanent employees and the significant additional cost of travel nurse contractors. Medical equipment and products and pharmaceuticals similarly increased. The total cost for TONCA to operate the SNF and ALR between pre-pandemic FY 2019 and FY 2024 increased by 62 percent. To survive, TONCA had no choice but to seek new sources of funding.   

V. TONCA’s Efforts to Overcome Challenges

From its inception, TONCA has worked to overcome the ongoing challenges of balancing operating costs with revenues in order to maintain an acceptable subsidy by the Nation. It retained its census at capacity by improving the staff’s expertise to meet the short-term, post-hospital rehabilitation needs. To attract and retain staff, TONCA constructed employee housing, which is available for a modest rent, primarily for tribal members and their families. Certain units are made available for staff who have permanent housing off the Reservation but need accommodations for the two or three nights per week that they work on-site. TONCA has also invested in developing its own trained staff through contributing generously to education and workforce training programs. Notwithstanding these continuing efforts, it is the mechanisms available through P.L. 93-638 compacting that have been the key to TONCA’s post-pandemic success

    A.      Medicaid Enhancement Rates

A minimum of 65 percent of TONCA’s residents are eligible to participate in AHCCCS. Through AHCCCS, for off-Reservation facilities the State pays approximately 30 percent and the federal government pays 70 percent of the daily room and board charge at a skilled nursing facility. In 2019, the AHCCCS rate for a skilled nursing facility was approximately $200 per day. 

If a facility is compacted or contracted with IHS, then the federal government pays 100 percent of the room and board charge, which is a benefit to the State, but not to TONCA. However, the contract between the State and the federal government (the “State Plan”) could be amended to modify the standard rates to Medicaid “enhanced” rates. The State Plan was amended to provide for an “all-inclusive rate” (“AIR”) for skilled nursing facilities and currently is considering enhanced rates for the assisted living facilities. The AIR is a per encounter reimbursement rate that covers all the costs associated with providing care to a Medicaid member. The AIR is calculated by IHS and published annually in the Federal Register. The Arizona State Plan was amended to provide for the AIR for skilled nursing facilities operated by IHS or TO. The AIR rate went into effect on October 1, 2020. With this Medicaid enhanced rate, TONCA is now able to receive approximately $800 per day for any resident of the skilled nursing facility eligible for AHCCCS.  

  B.      105(l) Leasing 

A second source of additional revenue is the Section 105(l) Facility Lease Program which allows contracted and compacted entities to receive payment for facility operating costs. These costs may include rent, depreciation, reserve funds principal and interest, and operation and maintenance expenses. Because TONCA has a leasehold interest in the campus where the SNF and ALR are located and currently uses the facilities to carry out and deliver compacted PFSAs, it qualifies for a 105(l) lease contract. TONCA is currently developing the documentation to be considered under this program.  

  C.      Federal Tort Claims Act Protection

An additional benefit of a contract or compact is the protection of the Federal Tort Claims Act (“FTCA”). In enacting the ISDEAA, Congress recognized that the PFSAs are responsibilities owed by the federal government to Indians, and as such, the ultimate responsibility for civil claims arising under the performance of the functions contracted by the tribes pursuant to a compact or contract should also remain with the federal government. For personal injury claims, including death, resulting from the performance of medical or related functions, the TONCA employees are deemed employees of the DHHS while acting within the scope of their employment. For TONCA this means that it may limit its insurance to cover only those claims not covered by federal law. Furthermore, to the extent that such a claim occurs, it is the federal government and not TONCA or its insurers that pays for litigating and/or settling the claim.

VI. In Closing

Although contracting or compacting skilled nursing and assisted living facilities does not provide a transfer of funds to operate these programs, the benefits of enhanced Medicaid rates for room and board charges, the 105(l) leasing program, and the protections of the FTCA are significant benefits that should not be overlooked by tribes seeking to provide LTSS programs to its members.