Chart Highlights Virginia Impact of Medicare SNF Payment Cuts

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Based upon new national data published by several organizations, we’ve pulled together recent cuts to Medicare Skilled Nursing Facility Prospective Payment System (SNF PPS) rates for Virginia and developed a chart that may be helpful for our members as they speak with both national and state-level elected officials.  Data analysis by Avalere Health LLC developed for the Alliance for Quality Nursing Home Care and by the American Health Care Association focusing on known cuts from 2010 forward was used to create the chart.

The long-standing reality for providers of nursing facility services, while anything but perfect, centers on moderate margins for Medicare SNF services that allow facilities to serve Medicaid residents typically incurring a payment shortfall.  Virginia’s average statewide Medicaid shortfall amounts over recent years fall generally in the seven to ten dollars per patient day range with wide variation among individual facilities.  Overall profit margins, while comparatively low, have been sufficient to ensure long term financial viability for Virginia’s nursing facilities.     

Now, a series of cuts to SNF rates threatens to disrupt the delicate balance between Medicare and Medicaid payment and potentially jeopardizes the long term care provider community.  It is critical that facilities reach out to their elected representatives and speak up about the need for adequate payment – both for Medicare and Medicaid services.   While Congress struggles to find ways to bring the federal budget under control, it is likely that entitlement spending, including Medicare and Medicaid, will be the focus of greater scrutiny.

Of all the cuts highlighted in the chart, the October 2011 rate cut is the most visible and perhaps open to further discussion. The Centers for Medicare & Medicaid Services (CMS) Final Rule for SNF PPS and consolidated billing for fiscal year (FY) 2012 contained an important provision that reduced Medicare payments in FY 2012 by $3.87 billion, or 11.1% lower than payments for FY 2011. CMS cited a forecast error that occurred with the transition from RUG-III to RUG-IV as the primary basis for the rate reduction. According to a CMS press release, the parity adjustment made in FY 2011, which was intended to ensure that the new RUG-IV system would not change overall spending levels from the prior year, instead resulted in a significant increase in Medicare expenditures. This increase was mainly due to shifts in the utilization of therapy modes under RUG-IV differing significantly from the projections on which the parity adjustment was based.  Even without the October 2011 cut, which has been projected to total $88.1 million for all Virginia providers, skilled nursing facilities across the Commonwealth are operating with Medicare revenues that are nearly $100 million lower than anticipated.

We thank our friends at the Pennsylvania Health Care Association for sharing the format for this informative chart.  A full-size PDF version of the chart is available here for download and printing.