Medicare to Cut $3.87 Billion of Payments to Skilled Nursing Facilities in 2012

Medicare payments to skilled nursing facilities will be 11.1% lower starting Oct. 1 according to the Centers for Medicare & Medicaid Services.

The change will result in a net reduction of $3.87 billion for fiscal year 2012 was made to correct for an unintended spike in payment levels and to better align Medicare payments with costs.

“CMS is committed to providing high quality care to those in skilled nursing facilities and to pay those facilities properly for that care,” said CMS Administrator Donald M. Berwick, M.D. “The adjustments to the payment rates for next year reflect that policy.”


A report from the Department of Human Services’ Office of the Inspector General (OIG) found that changes to how skilled nursing facilities bill their time led to an unexpected $2.1 billion increase in payments during the first half of 2011.  This increase in spending was primarily due to shifts in the utilization of therapy modes under the new classification system differing significantly from the projections on which the original adjustment was based.

“Additional data analyzed by CMS since publication of the proposed rule confirmed the extent of the overpayments that have occurred since implementation of the RUG-IV system,” said Jonathan Blum, deputy administrator and director of the Center for Medicare. “We are also making several improvements to our payment system to strengthen its integrity.”

LeadingAge, a lobbying group for not-for-profits said it’s appalled by the cuts.  “We believe that any across the board cut is unwarranted and problematic, and one of this magnitude is unprecedented,” said Larry Minnix, chief executive officer of LeadingAge in a statement.


The American Health Care Association (AHCA) said the cuts will threaten its ability to provide quality care to America’s seniors.

“The CMS rule makes reductions beyond what is necessary for budget neutrality,” said Governor Mark Parkinson, President & CEO of AHCA.  “Coupled with changes in group therapy definitions, this drastic reduction will be especially challenging for skilled nursing facilities to manage.”

AHCA added that the immediate change to skilled nursing facilities puts more than 100,000 health care jobs at risk.

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