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Life Health > Long-Term Care Planning

CMS Funding Changes Hit Nursing Homes

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Skilled nursing facilities will depend on private-pay patients more than before now that a regulation cutting Medicare skilled nursing care funding has taken effect.

The Alliance for Quality Nursing Home Care (AQNHC), Washington, a coalition of groups that represent nursing homes and rehabilitation centers, has been mounting a media campaign to try to draw attention to the impact the cuts have had on member facilities.

The Centers for Medicare & Medicaid Services (CMS), an arm of the U.S. Department of Health and Human Services (HHS), imposed about $4 billion in cuts on skilled nursing facility payments – or about 11% of total anticipated “Reimbursement Utilization Group Protocols” spending – for the fiscal year that started Oct. 1.

CMS said they cuts are necessary because skilled nursing facilities responded to payment changes that were supposed to reduce spending on care in the facilities by submitting more bills for high-cost care and driving up total claims costs.

Although Medicare does not pay for true long-term care, it does cover the cost of much of the skilled nursing care patients receive between the time they leave the hospital for care for acute conditions, such as strokes or heart attacks, and the time when they return home.

The CMS cuts will have no direct effect on the long-term care nursing homes provide, but many nursing homes that provide long-term care also provide transitional skilled nursing care, to help patients, increase overall revenue, and bring in transitional patients who, in some cases, turn out to be sicker than expected and end up needing long-term care.

Meanwhile, the congressional Joint Select Committee on Deficit Reduction – the 12-member “Super Committee” — is racing to come up with $1.2 trillion in deficit reduction proposals by Thanksgiving, and that committee could call for further cuts both in Medicare skilled nursing care reimbursement spending and Medicaid long-term care spending, according to Contemporary Healthcare Capital L.L.C., Shrewsbury, N.J., a company that specializes in health care facility finance.

The groups in AQNHC estimate their members have been employing about 1.7 million people in the United States and generating about $200 billion in total U.S. economic activity.

Avalere Health L.L.C., Washington, a health policy firm, has estimated the reimbursement change that took effect Oct. 1 led to a $484 million reduction in Medicare spending in California, the hardest-hit state, and a $448 million reduction in Florida, the second-hardest-hit state, according to AQNHC.

Meanwhile, states are cutting their spending on facility care, AQNHC said.

In Florida, for example, the state has cut state nursing home Medicaid reimbursements 6.5%, AQNHC said.

AQNHC said the funding cuts are already starting to lead to nursing home staff layoffs.

Additional cuts “would hurt Florida seniors, and undermine facilities’ ability to admit, treat and return to home a rapidly increasing number of patients requiring intensive post-acute rehabilitation and care for multiple chronic illnesses,” AQNHC President Alan Rosenbloom said in a statement.

AQNHC is making the case against further cuts in a wave of press releases distributed through PR Newswire.

Douglas Korey, a managing director at Contemporary Healthcare Capital, is arguing that, although the cuts are significant, investors and others may be exaggerating the extent of the damage done.

Even after the cuts, overall spending on skilled facility care will be about 3% than it was before CMS made the payment system changes that ended up triggering the new changes.

There are still opportunities in the market for nimble, midsize facility operators that run from 5 to 25 facilities, Korey said in an analysis of the changes.


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