Nursing homes across the country will face a $4-billion reduction in annual Medicare reimbursements for “post-acute care,” or rehabilitative care received following a hospitalization. In July, the Centers for Medicare & Medicaid Services (CMS) announced the cuts, which go into effect in October. The nursing home industry has protested the move.

The cuts come after adjustments were made last year in the way skilled nursing services are reimbursed by CMS. This led to nursing homes being paid different rates for different types of post-acute care. More complex and expensive types of care resulted in higher reimbursement rates, a change the industry applauded.

Unfortunately, some care providers took advantage of the change and found ways to overstate the care of some patients in order to receive higher reimbursements. After an unexpected $4-billion increase in reimbursements, CMS decided to reduce reimbursements by a corresponding amount for the subsequent year.

Critics of the move say it’s not fair to punish the entire industry for the actions of a handful of care providers. CMS was advised that loopholes in its payment structure needed to be fixed in order to combat overcharging, but the agency elected not to do so.

Because two-thirds of a typical facility’s expenses are eaten up by staffing costs, the reduction in reimbursements will likely result in job cuts.

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