In its latest report to Congress, the Medicare Payment Advisory Commission (MedPAC) recommended that Medicare pay skilled nursing facilities (SNFs) and inpatient rehabilitation facilities (IRFs) the same amount for treating certain conditions. This “site-neutral” payment method has been studied by members of Congress and other agencies for a number of years and this latest report from MedPAC adds to the growing number of voices that are calling for it. Switching some parts of Medicare to a site-neutral payment system has its detractors as well, but long-term care facilities are strong advocates of this change and are excited to see that MedPAC has now formally recommended it to Congress.

Long-Term Care Facilities Welcome MedPAC’s Recommendation

The primary reason that long-term care (LTC) facilities, primarily SNFs, would like to see Medicare shift some payments to a site-neutral system is because of the savings that this would generate. Right now, Medicare’s reimbursement rate for certain post-acute services can vary significantly depending on the type of provider that delivers the service. For example, some IRF reimbursements exceed SNF payments by as much as 50% even though the different providers treat similar populations and have similar outcomes. A site-neutral payment system would eliminate this variation and could potentially generate significant cost savings for Medicare as well; up to $100 billion a year by some estimates. These savings could then be used to bolster Medicare’s solvency and would alleviate pressure on lawmakers to cut reimbursement rates for skilled nursing facilities and other LTC providers that receive Medicare payments. In recognition of this, the American Health Care Association (AHCA) has encouraged a shift to site-neutral payments and Mark Parkinson, AHCA’s President and CEO responded to MedPAC’s latest recommendation by stating that “A site-neutral payment system would focus on the patient and their needs, regardless of setting, and encourage all settings to provide efficient, high-quality care.”Furthermore, with respect to savings that site-neutral payments would generate for Medicare, Mr. Parkinson has said that “When Medicare reimburses different providers at different rates for the same post-acute services, that is not beneficial for the patient nor the taxpayer. A site-neutral payment system would encourage providers to offer higher quality services in the most effective manner. Instead of cutting providers across the board, a site-neutral approach promotes efficiency while protecting and empowering patients.”

While SNFs and other long-term care providers would like to see a shift to site-neutral payments, hospitals and inpatient rehabilitation facilities have opposed this change because they believe it could hurt their bottom lines. Advocates of site-neutral payments don’t believe that this is necessarily the case because a switch to a site-neutral system would only affect some of the payments that Medicare makes to hospitals and IRFs, not all of them. However, hospital groups and IRFs are skeptical of this argument and continue to argue against switching to site-neutral payments.

As Congress debates MedPAC’s recommendation, senior living providers should stay abreast of the issue because if it is implemented, it should help Medicare’s finances and alleviate pressure on lawmakers to reduce reimbursement rates to skilled nursing facilities and other long-term care providers that receive Medicare payments. In the meantime, as the nation’s changing demographics continues to drive demand for senior housing services, industry participants should look to the successful financing firm Cambridge Realty Capital to take advantage of this demand and obtain inexpensive capital for growth, acquisitions, or other needs that they have.

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