Nursing homes squeezed by Medicare cuts
Expect nursing homes to respond by cutting staff. Some may decline to accept patients with more complex medical needs.
The nation's nursing homes are facing a $4 billion drop in annual payments from Medicare. The cuts affect reimbursement fees for what's known as "post-acute care" for seniors at skilled nursing facilities.
Such services are needed by seniors who have been hospitalized and require rehabilitative services before returning to their own homes. Medicare does not cover long-term nursing home stays.
The extensive wrangling and possible impact of these relatively small cuts provide a preview of the brutal fights that would take place in any efforts to reduce the nation's huge federal deficits. They are projected at more than $1.3 trillion this year and $1.1 trillion for the year beginning this October -- several hundred times the size of the nursing home reimbursement cuts.
The Centers for Medicare & Medicaid Services (CMS) finalized the nursing home action in late July. They take effect Oct. 1. The stock prices of several publicly traded nursing home chains plunged immediately and the industry reacted with strong protests. Some home operators said they would need to cut expenses because of the 11% payment reduction. Post continues after video.
CMS estimates that nursing homes receive about 20% of their total revenues for such post-acute care, meaning their total revenues would drop by a bit more than 2%. While that may not seem to be a large cut, some homes say it will have far-reaching impacts on their business.
Ironically, the prospective cuts were caused by an improvement in payments for skilled nursing services that was introduced last October, explains Larry Minnix, CEO of LeadingAge, a major trade association in Washington representing senior care and housing providers.
In a simplified explanation of a very complex topic, Minnix said nursing homes are paid different reimbursement rates for different types of post-acute care. A simple case, for example, could involve a woman who broke her hip, had a pin placed in it at the hospital, and then spent a few weeks doing rehab in a nursing home before returning to her own residence. At the other end of the care continuum are much more complex cases. Such a case, he explained, might involve a senior with multiple chronic physical problems and dementia. When that person breaks her hip, post-acute care can be more complex and expensive.
Until last October, Minnix said, reimbursement rates for simple cases were attractive but less so for complex cases. A lot of those more expensive cases are handled by nonprofit nursing homes (a big component of LeadingAge's membership) as opposed to for-profit facilities that often focus on more profitable rehabilitation opportunities.
Medicare changed its reimbursement rules to more fairly balance payments for different types of care, Minnix said. "Medicare thought the post-acute care sector was properly compensated overall," he said, "but they wanted to shift costs from less complex to more complex cases. This was a good thing."
However, some providers of care services figured out how to game the new reimbursement system, Minnix said. They took advantage of loopholes that increased their payments for certain group and other therapy situations that did not require corresponding increases in their actual workloads. Reimbursements for these billings were more than $4 billion above CMS expectations, the agency said, and led to the comparable reduction in reimbursements for the coming year.
The problem with the agency's remedy, Minnix said, is that all homes will see their reimbursements cut, not just those that took advantage of the loopholes. "There's not a whole lot of sympathy for people who have been overcharging," he said. But cutting reimbursement rates for homes providing complex post-acute care will inflict real hardship on them. "Some members (of LeadingAge) are finding they will be hugely affected," Minnix said.
CMS was advised in advance by industry and government experts to close the loopholes, but chose not to do so. The Medicare Payment Advisory Commission is the independent congressional agency that provides Medicare advice to Congress. It sent letters to CMS about the loopholes. However, it supports the CMS solution, which is consistent with the types of across-the-board adjustments it favors.
Staffing accounts for more than two-thirds of a typical nursing facility's expenses, so employment cutbacks would be a likely place for expense reductions. Such cutbacks could adversely affect the quality that seniors receive at such homes, Minnix said. Access to facilities themselves could be harder to find when seniors are discharged from hospitals in need of rehabilitative care. That's because some homes may decide not to accept expensive cases on which they could lose money due to the reduced Medicare reimbursement rates.
Further, he explained, the cuts are coming at the same time that many states have been forced to cut Medicaid payments for nursing care. Many of these homes were already losing money on Medicaid patients, Minnix said, but have been compensating with the profits they earn from Medicare reimbursements.
The CMS decision leaves nursing homes "so overregulated and under-reimbursed" that some LeadingAge homes may leave the industry, Minnix said. "CMS believes that's just a lot of rhetoric but we will be trying to quantify that" after the cuts take effect.
"We do not believe that nursing homes will respond to the payment changes by decreasing the quality of care furnished to patients," CMS said in a written reply to U.S. News' questions about the reimbursement reductions. "We plan to monitor Medicare and Medicaid nursing facility activities closely during the upcoming program year (when these payment changes go into effect) so that we can quickly identify and correct any quality problems that may occur."
More on U.S. News & World Report and MSN Money:
How to save money
Congressional Reform Act of 2011
1. Term Limits.
12 years only, one of the options below phased in over 18 years.
a. Two Six-year Senate terms
b. Six Two-year House terms
c. One Six-year Senate term and three Two-Year House terms
Those members with greater than 12 years service are relieved after their next six year, or less term, with the more senior leaving first up to a maximum of one third of each legislative body.
2. No Tenure / No Pension. A Congress Member collects a salary while in office and receives no pay when they are out of office.
3. Congress (past, present & future) participates in Social Security.
All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system. Congress participates with the American people.
4. Congress can purchase their own retirement plan, just as all Americans.
5. Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.
6. Congress loses their current health care system and participates in the same health care system as the American people.
7. Congress must equally abide by all laws they impose on the American people.
8. No employment, directorships, consultancies, lobbyist positions or anything like the aforementioned, with businesses previously regulated by any committees a Congress Member served on/with.
9. All contracts with past and present Congress Members are void effective 1/1/12. The American people did not make this contract with Congress. Congress made all these contracts for themselves.
Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term(s), then go home, try to get a job and get back to honest work.
To do this to our seniors is terrible. These are the americans who helped build this country. They didn't ask for you to change the language for them, they didn't ask for your handouts on welfare, they didn't ask you to give their kids an American Dream. They worked hard, paid taxes and SS for years. Get rid of the illegal's and their Dream Act. Stop paying welfare recipients that have come to think of welfare as a job and generation after generation abuse it. Put a 5 year limit like Michigan did. Just remember that the majority of americans are senior citizens, they will remember when it's time to vote. I'm not retirement age but I will be voting with them!
I'm not sure that I understand why ANY care for our seniors has to be cut. If I'm not mistaken, the country's prisons have MANY programs that could be cut. Perhaps all but but bread and water once a day. I don't see a need for anything more than that. I have no facts or figures, but I would bet that considerably more amounts of money are spent on prisoners than our seniors.
Just my 2 cents, but what do I know, I'm a republican.
I expected most people to thumbs down my original comment. And the reasons other posts have provided as to why they can't take care of their referenced family member are all valid...........for them. In each case I feel it's an excuse.
My grandmother was in a wheelchair for a little over 4 years. For all but the last 7 months she was able to stay in her own home. She moved into my mothers house for that last 7 months. It WAS NOT EASY, but many (unfortunately not all) of her children and grandchildren helped take care of her. Some by staying with her (in shifts), some by helping to pay for the home healthcare nurses, etc. And as a perspective, my mother was 71 when my grandmother died (age of 93). That's why, at the end, my wife was staying there three nights a week...........while working full time. There is nothing special about what we do. It was normal just a generation ago. To us it still is normal. But almost every excuse I've read as to why other people can't take care of their parents, would also apply to taking care of their children. So did you all put your children in homes? I know that comment won't make some people happy. Strikes too close to home. But seriously, how many of you got your parents to sign everything over to you, instead of the social security administration, before putting your parents in nursing homes? And now have everyone else BUT YOU taking care of your parents. Honor thy Father and thy Mother. How much of their lives did they sacrifice for you? MAKE the time to take care of them.................no one else is going to. and if you've been to a nursing home you know how true that is.
There is no need to cut care- nursing homes are a billion dollar industry. They hold people hostage as long as they can to get as much money as possible from Medicare and the supplementary insurance. Then, a patient is miraculously better once the insurances can no longer be billed. The article even talks about "group therapy". These corporations have been ripping off the taxpayers for years. It doesn't really cost $5000 plus per month to house, feed, and rehabilitate an elder in a double room with a curtain in between. Did I mention they often share a bathroom with 3 other people?
How do I know? I was the social worker for two major nursing home corporations- Extendicare and HCR Manorcare. We scared families into keeping their loved ones for as many days as possible to keep the beds full and maximize profit.
Cry me a river, nursing homes...you killed the goose that laid the golden egg...
Working in a nursing home sucks big time. The work is grueling and unrewarding, and the pay is very very low compared to comparable industries. You are expected to be everything to everyone and available at all times, and you are held to ridiculous, unreasonable standards when you consider what you have to work with. The nursing home industry simply cannot attract the most qualified, motivated staff because their simply is no reason most people would want to work that hard for such low wages when they can take their skills elsewhere and earn way more in salary and benefits.
Most nurses will do just about anything else rather than work in a nursing home, and who can blame them? I did my time when I was a new grad nurse, and then I bounced as soon as something opened up in a hospital. My salary almost doubled instantly. That is the typical career trajectory in the skilled health care circles. Doctors won't even come to the nursing home at all. You're lucky if you get a nurse practitioner.
I liked my patients as a rule, but few can or will stay dedicated to such an unrewarding path for long. It just gets too hard to justify. I feel very sorry for any person in a nursing home or transitional rehab center when these cutbacks go into effect because it was so bad before the cutbacks. Now it's gonna be hell. I suspect some elderly people kill themselves because they are terrified of life in a nursing home where they will become trapped and unable to get out FOREVER.
venom your an idiot and the kind of nurse that makes the rest of us look like we dont care. Most nurses care very much about patient thier outcome and wiil without being asked go out of thier way to help a patient. I work in a long term care facility I get paid better than some nurses in the local hospitals and having worked in hospitals, doctors offices, and in long term care its all the same. if your really a nurse please leave the profession your making the rest of us look bad
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
ABOUT SMART SPENDING
LATEST BLOG POSTS
A Fidelity study found that adult kids and their folks aren't on the same page when it comes to discussing finances.
VIDEO ON MSN MONEY
BLOGS WE LIKE
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'