Cumulative negative impact of Medicare, Medicaid payment reductions on nursing facilities

Noting that sufficient levels of skilled nursing staff are essential to providing high quality care and reducing unnecessary, costly hospital readmissions, the new Spring 2012 Care Context health policy paper released today by the Alliance for Quality Nursing Home Care (AQNHC), with analytic support from Avalere Health, examines the cumulative negative impact of Medicare and Medicaid payment reductions on nursing facilities (NFs).

Reports Care Context: "As part of the 'Middle-Class Tax Relief and Job Creation Act of 2012' passed in February, Congress cut Medicare payments to nursing facilities by reducing reimbursement for so-called Medicare 'bad debt' – Medicare co-payments not made by beneficiaries or state Medicaid programs. Facilities have no legal avenue to collect bad debt from state Medicaid agencies."

Alan G. Rosenbloom, President of the Alliance, observed that even prior to passage of the law in February that reduced what he said is actually "uncollectable debt as mandated by federal law," the economic stability of the U.S. NF sector was already compromised by a series of Medicare and Medicaid funding reductions. These include a 3.3 percent case-mix adjustment in the FY 2010 rule; a market-basket productivity adjustment beginning in FY 2012 as part of the Affordable Care Act (ACA); and an August 2011 rule mandating an immediate (as opposed to a phased-in) 11.1 percent reduction to Medicare nursing facility payment rates. Additionally, the Care Context reports, 32 states enacted or proposed NF rate cuts or payment freezes in 2012.

According to an Avalere survey of NFs, the accumulation of cuts is having a negative impact on direct service staff, new hiring, wage rates, benefits, and new facility construction and expansion. "Often, nursing facilities have little more than two to three months to prepare for these cuts, and this unpredictability in funding makes it problematic to plan from year to year," Rosenbloom observed. Still more additional payment reductions are looming, the study says, noting the Budget Control Act of 2011 mandates that the deficit be reduced through either enactment of legislation, or by sequestration. As Congress failed to make recommendations for deficit-cutting measures, NF payment rates may be reduced by an additional 2 percent as of January 1, 2013.

"As the year progresses, we intend to make clear that funding reduction after funding reduction is no substitute for rational policymaking that can help patients and help stabilize a key U.S. health sector already slated to absorb $48 billion in funding cuts between FY 2012-21," Rosenbloom continued. "Rationalizing post-acute payments can save resources without undercutting provider infrastructure, for example."

Dan Mendelson, CEO of Avalere Health, also pointed out that the job loss chronicled in the Avalere survey is particularly troubling in light of the government's interest in care coordination to improve quality and reduce cost. "Federal government policy is appropriately focused on ensuring that there is seamless care between the acute and post-acute care setting as evidenced by new re-admissions penalties that hospitals will incur starting in October 2012 when re-admission rates are too high," he said. "NFs are a critical partner for acute care facilities and integrated healthcare systems in achieving the goal of care coordination."