August 30, 2013
Medicare Reimbursement Increases Will Help Skilled Nursing Facilities
Medicare Reimbursements To Increase for Skilled Nursing Facilities
A report issued by McKnights,discussed how, in May, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule outlining 2014 Medicare payments to skilled nursing facilities (SNFs). Under the proposed rule, SNFs will see a 1.4% increase in their Medicare reimbursements compared to those of last year. The new rule would increase aggregate Medicare payments to SNFs in fiscal year 2014 by $500 million, or 1.4%, compared to the amount of reimbursements to SNFs in fiscal year 2013. The proposed rule has been codified in the Federal Register.
SNFs rely on state and federal government insurance programs to cover all or part of the costs for most of their residents. In previous years, SNFs have been faced with cuts in Medicare reimbursements and the effects these cuts left on SNFs ability to pay for costs.
On October 1, 2011, CMS cut federal Medicare reimbursement rates to SNFs by 11.1%, double of what was expected. These cuts were due mostly to the global financial crisis, and translated to a loss of $79 billion over a ten year period, putting a great strain on the SNF industry. SNFs have had to work recently to redouble their efforts to curb costs and change their service delivery models to make up for the loss of reimbursement revenue.
Medicare Reimbursement Payments and Skilled Nursing Facilities
In the late 1990’s, Congress enacted new legislation that affected the nursing home industry by changing the reimbursement method that SNFs would receive from the federal programs. Instead of the traditional payment based on the services administered to the patient, the new payment system gave SNFs a per-diem payment for every patient in need of Medicare services. The new prospective payment system was designed to ensure better patient care by making payments relate to the condition of the patient, recognizing that some patients need more services of more expensive care than others, rather than a set amount per patient.
Skilled nursing facilities were required to provide the same services under the federal programs, but also to accept a lower amount of total reimbursement if the facility fell within the area slated for the lower per-diem rate. The basis for the new law was the government’s desire that skilled nursing facilities become more efficient in their provision of services because the per-diem payment would mandate efficiency even if profits were lost. Since Medicaid reimbursement is the least generous of all payment sources, SNFs with a greater proportion of Medicaid residents may need to be more efficient to operate profitably.
Usually SNFs are viewed as entities with strong growth potential due to the rise in the number of people who are currently approaching old age. However, the uncertainty which has surrounded Medicare reimbursements for SNFs has put many investors in the position of being cautious about SNFs and their profit potential. SNFs receive about 20% of their total revenues from post-acute care payments from Medicare and any cut in reimbursements means that SNFs total revenues drop.
The issue of staffing is also connected to the issue of Medicare reimbursements that SNFs receive from the federal government. SNFs have great difficulty being able to pay staff that provides patient care if there is a reduction in Medicaid reimbursements. In general, about 80% of a SNF’s annual budget may be allocated to employee wages and benefits. SNFs that face Medicare reimbursement cuts also have to deal with increases in costs, and may lose staff as employees look for more competitive job opportunities. For a SNF, using Medicare reimbursement payments to help stay competitive with wages and benefits is a very important way of attracting quality staff.
See Related Blog Posts: