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Nursing homes are steeling for a $320 million Medicare pay cut they say will make it harder to deliver care during an already challenging time.
The Centers for Medicare and Medicaid Services published a proposed rule Tuesday that would reduce Medicare Part A reimbursements for fiscal 2023 to make up for what the agency characterized as unintentionally high pay rates in fiscal 2020.
“It’s going to put a lot of strain on operations, especially for the smaller, individual skilled nursing facilities,” said Karen Maseli, assistant vice president of operations for ProMedica Senior Care.
CMS proposed a 3.9% pay increase for nursing homes meant to account for inflation and other rising costs. But that hike would be offset by a 4.6% cut to correct the agency’s prior overpayments for care. The net effect would be $320 million less going to nursing homes next fiscal year.
Medicare is projected to spend $35 billion on nursing home care during the current fiscal year. Nursing homes historically have relied on Medicare reimbursements to compensate for the relatively low rates that Medicaid pays.
The proposed Medicare cuts stem from CMS’s transition to the Patient Driven Payment Model for skilled nursing facilities in 2019.
The previous reimbursement model, the Resource Utilization Group system, reimbursed based on the number of therapy minutes provided each week. To discourage providers from responding to that incentive by delivering excess therapy, CMS devised the Patient Driven Payment Model, which instead bases pay on patients’ conditions and care needs. The government also relaxed rules by allowing up to 25% of therapy to be provided in group settings.
The new policy was supposed to be budget neutral. However, CMS found it paid 5%, or $1.7 billion, too much in fiscal 2020.
The proposed rule is the agency’s bid to correct that, but the timing is poor, said Janine Finck-Boyle, vice president of health policy at LeadingAge, which represents not-for-profit aging services providers. Nursing homes have struggled throughout the COVID-19 pandemic and are mired in a staffing crisis.
“At a time when no aging services provider can afford it, the government is cutting. We’re working with the administration to improve our nation’s nursing home system, but lowering reimbursement rates is not the right starting point.”
CMS opted not to recalibrate the payment system in fiscal 2022, given the persistence of COVID-19. The agency attempted to account for pandemic factors when setting rates for fiscal 2023, CMS said in the proposed rule.
Nursing homes view these proposed cuts as a threat to their operations, said Bill Goulding, lead healthcare consultant at Post-Acute Care Solutions Consulting. He’s heard from clients that are focused on merely remaining open after spending the last two years confronting COVID-19. In addition to the health and workforce challenges the pandemic has posed, it has hampered nursing homes’ efforts to adjust to the new payment model, he said.
Still, nursing home operators should’ve seen this coming, Goulding said. “No one should be surprised that CMS is setting as a goal budget neutrality. They’ve been very clear about this from the beginning,” he said.
CMS’s proposed rule is concerning for therapists who work at nursing homes, said Tim Nanof, director of heath care and education policy at the American Speech-Language-Hearing Association. The new payment model undervalues therapy and led thousands of speech and occupational therapists to lose their jobs or see their hours cut, he said.
The agency’s adjustment to nursing home pay also coincides with President Joe Biden pushing a wide-ranging slate of proposals to transform the industry.
Reducing Medicare pay at the same time the Biden administration is seeking policies such as minimum staffing requirements and stronger safety and quality rules creates a “paradox” for the industry, said Shara Siegel, director of government affairs at Premier. “They’re cutting funding for providers, but they also have these expectations in these other areas,” she said.
CMS is accepting comments on the proposed rule until June 10.
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