The Centers for Medicare and Medicaid Services (CMS) recently announced that Medicare reimbursements for skilled nursing facilities (SNFs) would increase by $750 million next year. These funds will help SNFs satisfy the additional demand for their services that’s being generated by the aging of the population. Industry participants who would like to take advantage of this demand by purchasing additional senior housing assets should contactCambridge Realty Capital to learn more about the different financing programs that it offers for senior housing acquisitions and other purposes as well.

Reimbursements Higher Than in Previous Years

Skilled nursing Medicare reimbursements will increase by an average of 2% next year. This is much higher than the 1.3% increase that took place from 2013 to 2014 and is due to an increase in the market basket that is used to calculate reimbursement rates. The market basket reflects the costs of goods and services that are needed to provide skilled nursing care and also takes into account inflation. The market basket that was used to calculate next year’s $750 million rate increase was 2.4% and was then reduced by 4% in accordance with some required adjustments.

The rate increase is included in a rule that was published by CMS which also adopted new statistical area designations that were created by the Office of Management and Budget last year. These designations will be used to classify a facility as urban or rural, which will determine which set of rate tables will apply to the facility. Also, starting next year the Federal Register will no longer publish tables for the Wage Index for Urban Areas Based on CBSA Labor Market Areas and the Wage Index for Rural Areas Based on CBSA Labor Market Areas; they will be available through CMS’ website instead. Facilities that have their classification changed from urban to rural could see a wage index decrease and in recognition of this, CMS has proposed using a blended wage index for the first year for all providers. If this proposal is implemented, each providers’ index would be split evenly between its current designation and its new designation and this should help ease the transition for providers who experience a wage index decrease due to a change in their classification.

Skilled nursing facilities and their advocates immediately welcomed the rate increase news and the American Health Care Association also released a statement expressing its support for the increase. “The 2% market basket increase to providers’ Medicare reimbursement included in this rule is welcome news for skilled nursing providers. Multiple government reductions in recent years have strained long-term and post-acute care providers. A stable, reliable Medicare payment system is one important element in keeping skilled nursing care accessible to our seniors,” said AHCA’s president and CEO, Mark Parkinson. Mr. Parkinson’s statement articulates the feelings held by many skilled nursing facilities and their satisfaction with the rate increase. As the nation’s population gets older, senior housing facilities will need more resources to meet the increased demand caused by these changes and Medicare’s 2015 rate increase is a welcome step towards helping them acquire these resources so that they can continue to deliver quality care to the nation’s seniors.

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