Alliance: Sudden Medicare Cuts Reduce Staff and Quality of Skilled Nursing Care

More than a third of skilled nursing facilities are expecting to lay off staff in the wake of Medicare reimbursement rate cuts, affecting the quality of care given, according to a survey conducted by Avalere Health for the Alliance for Quality Nursing Home Care. However, the impact would be less severe if the cuts were phased in rather than implemented at once, says the Alliance.

“A gradual phase-in of the federal regulation—which has been done in the past for other provider sectors – can help alleviate the dislocation and disruption causing many facilities to warn of layoffs and other negative developments,” said Alan Rosenbloom, president of the Alliance, in a statement.

Operators are expecting to tighten their belts after federal regulation for an 11.1% reduction in Medicare reimbursements to SNFs went into effect Oct. 1, 2011, with plans to reduce staff, postpone renovations or facility expansions, and cut staff benefits—all components of quality of care.


“SNF operators are deeply concerned about the implications of this rule,” said Dan Mendelson, CEO of Avalere Health, in a statement. “The facilities we surveyed reported that they plan layoffs, deferrals of facility renovations, and wage and benefit reductions—and anticipate significant financial strain moving forward.”

More than a third of facilities, at 36.8%, said they expect to lay off direct service staff, including registered nurses, licensed practical nurses, and certified nursing assistants, while 37% said they will likely indefinitely postpone or cancel hiring new direct service staff. Approximately 20,000 layoffs could be the result of the regulation, the Alliance estimates.

Nearly a quarter of survey respondents, at 23.5%, said the Medicare cuts will delay or cancel opening new facilities or expanding existing facilities.


Just under 75% of facilities said they will be making changes in wage rates, including wage cuts or freezes, eliminations of bonus plans, or smaller starting salaries for new hires. Almost half of facilities plan to make changes in employee benefits, including reducing or eliminating contributions to 401(k) plans or health insurance premiums.

Shortly after the cuts were announced, Avalere Health released a study that found the new CMS regulation would reduce Medicare funding to the SNF sector by $79 billion in the next 10 years. The reduction comes on top of $29.4 billion in Medicare cuts enacted to fund healthcare reform, and a $16.8 billion Medicare payment reduction in 2010 regulation.

The possibility of further Medicare cuts looms in the near future as the Super Committee seeks to reduce the nation’s debt deficit.

View the survey results here.

Written by Alyssa Gerace