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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.

By MSN Money Partner Aug 8, 2011 1:55PM

This post comes from Philip Moeller at partner site U.S. News & World Report.


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:

Aug 9, 2011 11:12AM
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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.

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Aug 9, 2011 8:46AM

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!

Aug 8, 2011 9:49PM
I like how they said "We don't believe they will respond by cutting quality of care". Very few offer any quality of care now and your cutting more funding! How about we take care of our own in the US! We give aid to over 120 countries in the world and the free ride is on the americans back not congress or the presidents back. Lets keep our money home for our people who are suffering so much. Lets give americans the help they need for once.
Aug 9, 2011 11:28AM
Is it fair that our country can't even take care of the ones that need a place to stay when we are not fortunate to stay home and take care of our loved ones. 'Congress' take care of our country before taking care of every other country. I know this is different to this subject, but how can these people want the president to give them permission to be here when they are illegal. Let us take care of our country first with medicare and other programs,before helping others.
Aug 8, 2011 10:49PM

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.

Aug 9, 2011 8:01AM

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 one else is going to.  and if you've been to a nursing home you know how true that is.

Aug 8, 2011 11:18PM
Here we go, the government is going to start killing off the seniors, which I am one of.  I have not even gotten to 65 yet but in November, I will be there and the Soc Sec Admin is already hounding me on getting my Medicare started.  Why!   So they can take it away from me when I need it most!  I was born and raised here and I never thought I would come to hate this country but it is coming to that as I have no control of the murderers in Washington who are literally going  to slit my throat!  This country is going to hell very fast and Washington is the problem.  I am seriously thinking of leaving this country.  This makes me sick to my stomach but then no one would assist me even if I was sick to my stomach, not here, not in the United States.  Just remember all  of you young people, you too will become a Senior and you will get ill sooner or later. 
Aug 9, 2011 1:22PM
I am continually outraged at the cuts being made at the expense of the old and infirm.  Not once did our legislators offer to cut their lifetime pensions and medical care (no matter how short of time they serve),  or their bloated office staff, limos/ or "faked " business? trips.  I can only hope that come election time the people of the United States will remember these greedy, self-centered  "servants of the people" and kick them to the curb.  Alas, it will be too late as they have already earned their lifetime pensions and medical care.  JUST A THOUGHT:  Why not cut out these lifetime perks.  When they go back to civilian life they have to purchase their pension plans and medical care just as WE THE PEOPLE have to do.  Is there anyone who agrees with me?
Aug 9, 2011 1:44AM
The problem with all of this is that no one is forcing our government to make cuts where they should be made i.e. corporate tax loopholes,a broken welfare system and overpaid politicians and as much as we make all these comments on websites what we need to do is contact our politicians and make a difference by voting all of them out office! The powers that be right now on either side dont care about anyone except the ones that will pay them enough to keep them in office so they can keep living in "I'm wealthy so I don't care land" Everybody make your feelings known to your Congressmen and Senators and then make sure you vote!!! So far this is still somewhat of a democracy and we the people need to step up and stop this!!!
Aug 9, 2011 10:46AM

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 killed the goose that laid the golden egg...

Aug 9, 2011 12:40AM
I don't understand how people complain about cuts in  Federal, State and Local Government services but you don't hear anything about the Federal, State and Local Government spending billions of dollars on professional sports teams and the million dollar salaries for professional athletes.  If you don't think taxpayer money is not spent on professional athletes look how much is spent on stadiums, police overtime, ... We should take care of our seniors by getting our monetary priorities straight.
Southern Home Builder - I am so glad you and your wife were capable of caring for your grandmother, but a lot of us cannot.  My dad is confined to a wheelchair (and has dementia & on set Alzheimer's) - he can only stand long enough to get from the wheelchair into his bed.  We have a two story home - the master is the only bedroom on the first floor...please explain how we can care for him in our home.  Nursing homes do need government assistance - my dad worked his entire life to contribute to Social Security...which he cannot use now that he and my mom can no longer care for him - we are having to have him go onto Medicaid, because we cannot afford $6000+/month for his care.  Glad you have the ability to care for your family - most do not.
Aug 9, 2011 7:08AM
Seniors the backbone of this nation at one time are now being the ones that are thrown from the train so the youth of homos. druggies and plain down laziest can be taken care of===this country doesn't deserve a AAA rating it deserves a FFF rating for failure to take care of its own that got them this far not a bunch of q===== that will destroy everything that was built and what the country stood for.
Aug 9, 2011 1:34PM
I have been a social worker in nursing homes for over 10 years. First, I don't believe that nursing homes should be for profit.  Profits should be rolled back into patient care. Staff should be paid a wage they can live on and have insurance to keep them healthy enough to provide the back breaking labor they perform daily. If you dare to argue that, spend a day watching a nurse's aide work.  Cutting staffing down to state minimums only results in a decrease in resident care levels. Yes, it would be nice if we could all take care of our elderly at home. But in this economy, people have to work. And I'm sorry, but not everyone is cut out to be a caregiver. It is stressful, and a stressful situation can become an abusive situation quickly. This industry needs to be better regulated. The CEO's of most of these health care companies have no clue what is happening on their nursing home floors!
Aug 9, 2011 1:18PM
Do you think that there should be less money being doled out to countries that hate us and more to our own people.,Really whats wrong with us.We sit idely by and let our politicians do what ever they want at the expense of the American people.I think that the people should have the same power as private industry. If the leaders dont produce they should be fired.
Aug 9, 2011 1:47AM

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.

Aug 9, 2011 12:49AM
Squirt, I agree with your response to Southern Home Builder. My brother and I had to put our mother into a nursing home, too, although we were lucky she did not have dementia or Alzheimers. However, she could not walk the stairs in her house, nor could we afford a private care nurse. She had spinal stenosis, a severe arthritis of the spine. She would not let me help her in and out of the car, even though I was shown how to assist her. We tried an assisted living facility (that she loved), which worked fine until she totally stopped walking. It would have run us over $12,000 a month for the nursing care and private help for her to stay. As it was, we paid out of pocket for the nursing home because her insurance would only allow her to be in a terrible nursing home (she needed help in the bathroom, but when she had to go, the nurses and aides were changing shifts. She developed an extremely bad urinary tract infection). In the "good" nursing home, they didn't even buckle her in the wheelchair and she fell out. The aide was at the other end of the hall assisting another patient (one aide and one nurse and about 20 patients). They claimed that she was trying to stand up, which was bull****, as she hadn't walked in 5 months. They were short-staffed then; I pity the patients and their families that will have to deal with even less staffing.
Aug 9, 2011 2:15AM

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

Aug 9, 2011 1:24AM
Southern home builder. I would be willing to take care of my elderly mother or grandmother. The problem is that if they need skilled nursing and other care you cannot get the medical coverage needed and they often times require the nursing home in order to get the medical attention they need. Many services medicare and medicaid will cover in a skilled nursing facility but not in a home health setting. Secondly if you have a family where all the adults need to work to make ends meet you can not be home to care for the elderly parent or grandparent if they need round the clock care and assistance. You end up with a double edged sword. Unless you have the financial backing to cover at home costs you may not have a choice. Please consider that before you judge other people on their decisions. Most of us would rather have their elderly family at home with them, rather then see them in a strange home. 
Aug 9, 2011 1:08PM
I work for a nonprofit skilled nursing facility of medium size that is indpenedent. With the projected Medicare cuts, we are looking at a one million dollar loss the first year alone.  This is more more than 2% to us.  In our case, it will mean cutting out programs for the residents, as well as possibly staffing cuts as well.  When CMS states that they are watching for problems, what they mean is that when a facility has care issues related to staffing, they will be cited under federal guidelines with the potential for further monetary fines.  It is difficult enough to pay nursing aides little more than minimum wage for the work they do, but to have them take care of 20 or more residents by themselves, it is despicable.  There are already facilities in our area that staff 1 aide per 15 residents, and to see their outcomes on the CMS website shows what is going to become the norm for our seniors. 
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