LITTLE VALLEY – One of the two county-operated nursing homes is going to need a subsidy this year, while the other should be financially sustainable for the next couple of years.

That was the mixed review auditors gave members of the Cattaraugus County Legislature on Wednesday.

The Pines Healthcare and Rehabilitation Center of Machias, one of the homes, has had cash-flow problems in recent years, and the situation doesn’t look to be getting any better, according to Michael McCarthy of the auditing firm McCarthy & Conlon LLP.

“The Machias facility was out of cash at the end of 2012,” he said. “Cash flow will continue to be tight again this year.”

Some of the problems with the county nursing homes are due to new methodology for calculating Medicaid benefits, McCarthy said. Since assuming more and more responsibility for the program from the federal government, new procedures have resulted in a spiral of lost revenue for homes throughout the state, he said.

“The Machias facility is not in a strong financial position and will not be for the foreseeable future,” he said. “Funds are going to have to come from somewhere – general fund or from the taxpayers. It is going to need a subsidy before the end of the year.”

Over previous years, the Machias facility has had to borrow from county coffers to stay in business, according to the auditing firm’s report.

The Pines Olean facility is in a bit better situation, but not by much, McCarthy said.

While Olean is in a similar cash position, its assets-to-liabilities ratio is better. Olean has roughly $5 million in assets and $1 million in liabilities. Machias has roughly $4.8 million in assets, with $2.9 million in liabilities.

While Machias is likely to need a subsidy this year, McCarthy said Olean will not and should be financially sustainable for the next couple of years. But at some future point, it will need a subsidy, as well.

Part of the issue, McCarthy said, is the way federal programs will be affecting Medicaid payments. Once payments are made out of the allotted pool, the remaining amount is distributed to programs like the county nursing homes, McCarthy said.

In 2014, when the Affordable Care Act goes fully into effect, the pool of money to be divided will be smaller, according to McCarthy, resulting in less and less funding to help keep the nursing homes afloat.