When the Centers for Medicare and Medicaid services announced it was cutting Medicare rates by 11.1% starting Oct. 1, many in the industry were stunned, reports National Real Estate Investor.
“We were stunned by the announcement,” said John Taylor, president and CEO at Stonegate Senior Living, a Texas-based nursing home developer and operator during an interview with NREI. “We did not expect this.”
The cuts also sent the stock prices of some nursing homes down by as much as 50% the day of the announcement. Nursing homes are expected to bear the worst from the cuts, but the overall impact will have a bigger effect on some locations more than others depending on their resident mix.
According to NREI, operators can’t make up the difference by raising rates since the buildings rely on set government reimbursements, that means expenses must be cut. “Staff will be decreased,” says Taylor.
CMS doesn’t seem to be buying the claim that operators will be forced to cut staff, stating the changes were made simply to eliminate overpayments resulting from a new classification system.
“The rule also improves the integrity of the payment system to prevent the need for future adjustments of this size,” said a spokesperson for CMS last week. “Our survey data is clear that the additional payments did not lead to an uptick in hiring.”