Obama Deficit Reduction Plan Wants More Medicare Cuts for Skilled Nursing

Skilled nursing facilities (SNFs), long term care hospitals (LTCHs), and inpatient rehabilitation facilities (IRFs) could see additional Medicare cuts if Congress adopts a new deficit reduction plan outlined by President Obama.

First reported by Forbes, the plan aims to encourage efficient post acute care, which has seen expenditures rise dramatically over the years and place a drain on Medicare. The Administration says it recognizes the importance of these services and is suggesting a set of policies that will save $42 billion over 10 years and improve the quality of care.

The plan would adjust payment updates for certain post-actue care providers and save an estimated $32 billion over the next ten years. The adjustments would build on recommendations from a MedPAC report that found Medicare payments significantly exceeded the cost of patient care and provided high margins for providers.


“This proposal would gradually realign payments with costs through adjustments to payment rate updates in 2014 through 2021 for these providers,” said the report.

The Administration also wants to equalize payments for certain conditions commonly treated in SNFs and IRFs, which would save approximately $4 billion over 10 years. As an example, the report says a number of conditions are provided in both care settings, but Medicare payments are significantly greater when provided in IRFs.

“This policy would reduce the differences in payment for treatment of specified conditions to encourage care in the most clinically appropriate setting beginning in 2013,” said the report.


The deficit reduction plan also targets payments made to SNFs for hospital re-admissions, which by reducing the overall number would save approximately $2 billion over 10 years. A MedPAC analysis showed that nearly 14% of Medicare patients that are discharged from a hospital to a SNF are readmitted to the hospital for conditions that could have been avoided.

“To promote high quality care in SNFs, this proposal reduces SNF payments by up to three percent beginning in 2015 for facilities with high rates of care-sensitive, preventable hospital readmissions,” said the report.

The cuts would be another blow to skilled nursing facilities, which saw Medicare payments slashed by 11.1% earlier this year by the Centers for Medicare and Medicaid Services. Groups like the American Health Care Association have repeatedly said the cuts will drive nursing home operators to the economic tipping point and will impact the quality of care.

Analysts from Fitch suggest the cuts will significantly increase mergers and acquisitions in the skilled nursing industry as operators struggle to manage the $3.87 billion in payment reductions.

View a copy of the report here.

Written by John Yedinak