A new regulation issued by the Centers for Medicare and Medicaid Services could cut Medicare payments to the country’s skilled nursing facility sector by $79 billion over 10 years while reducing economic activity by $6.8 billion in fiscal year 2012 alone, according to an analysis released Aug. 15.
Avalere Health, a healthcare advisory company that focuses on business strategy and public policy, published the study, which estimates the impact of a new CMS rule on the U.S. healthcare sector.
In a final rule, “Skilled Nursing Facility Prospective Payment System,” announced Aug. 1, CMS revised Medicare payments to long-term care facilities. The rule, effective Oct. 1, reduces Medicare payments to these facilities by $3.87 billion for fiscal year 2012.
The cut is an 11.1 percent drop from fiscal year 2011 but is 3.4 percent higher than fiscal 2010 payment rates. CMS officials have said that the new rule is an attempt to correct an unintentional overpayment to providers in 2011.
"CMS is committed to providing high quality care to those in skilled nursing facilities and to pay those facilities properly for that care,” CMS Administrator Donald Berwick said in a statement. "The adjustments to the payment rates for next year reflect that policy.”
But the country’s skilled nursing sector says the new rule goes too far.
Alan Rosenbloom, president of the national Alliance for Quality Nursing Home Care, said on a conference call Monday that CMS went “well beyond the cautious correction” urged by a bipartisan group of House and Senate members.
“This is clearly an overreach and the consequences could be very significant,” Rosenbloom said. “CMS has crossed the line from correction into real Medicare cuts.”
Rosenbloom said further cuts to Medicare could be disastrous to local economies and caregiver jobs and could negatively impact the quality of care that patients receive in nursing homes.
This latest reduction in payments to the country’s skilled nursing industry comes after another $29.4 billion in payment cuts to providers enacted in the Patient Protection and Affordable Care Act and a $16.8 billion Medicare payment reduction rule, both adopted in 2010. Those reductions would both take place over a 10-year period.
The Avalere analysis projects that 10 states – California, Florida, Texas, New York, Illinois, Ohio, New Jersey, Pennsylvania, Massachusetts and Michigan – will experience the greatest reduction in economic activity followed by the projected loss in Medicare revenue nationwide in 2012.
California would be hit hardest, suffering a loss of $664.1 million in economic activity and $484.3 million in Medicare revenue. Michigan comes in with the 10th greatest loss, with a projected reduction of $234.3 million in economic activity and $185.6 million in Medicare revenue.
Avalere CEO Dan Mendelson said that the rule is particularly troubling because nursing homes are also seeing lower payments from states’ Medicaid programs. This is significant because many nursing home residents are dually eligible for both Medicare and Medicaid.
“We’re seeing more and more states reduce Medicaid payments to skilled nursing facilities,” Mendelson said.
For example, Florida and Ohio have cut Medicaid payments to nursing facilities by 6 to 7 percent in 2011 alone. Currently, Medicaid is the biggest payer for nursing facility care.
“Facilities in Florida are already experiencing a drastic $187.5 million cut to state Medicaid funding that went into effect July 1,” J. Emmett Reed, executive director of the Florida Health Care Association, said in a statement. “The CMS reductions will threaten our facilities’ ability to continue delivering quality care to Florida’s seniors and puts thousands of long term care jobs at risk, particularly since Medicare funding helps to prop up Medicaid, which has historically underfunded nursing home care.”
The skilled nursing home industry is also concerned that the recently created Joint Select Committee on Deficit Reduction, also known as the “Super Committee,” could recommend additional cuts in Medicare or Medicaid payments to nursing facilities in an attempt to slash the nation’s deficit.