Will This Be the ‘Doc Fix’ That Breaks Skilled Nursing’s Back?

Lawmakers recently voted to extend the payroll tax cut through 2012, which includes a measure to prevent a 27.1% cut in Medicare payments to doctors for the rest of this year through a ‘doc fix’ that would be funded by reducing federal healthcare spending. But while doctors’ reimbursements might be saved, it could come at the expense of skilled nursing facilities.

The ‘doc fix’ will be funded by reducing spending by about $21.1 billion, which includes a $6.9 billion reduction in federal payments to skilled nursing facilities and hospitals that collect “bad debt”—the amount facilities can get reimbursed by Medicare to cover expenses (debt) incurred by those dually eligible for Medicaid and Medicare that’s uncollectable by federal law.

Currently, skilled nursing providers can collect 70% of beneficiary cost-sharing, or “bad debt,” expenses from Medicare, and 100% of bad debt stemming from the treatment of “dual eligibles.”

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Unfortunately for providers, the ‘doc fix’ includes cutting reimbursements for bad debt to 65% beginning in 2013 for those who are currently getting a 70% reimbursement, and phasing those getting complete reimbursements down to 65% in the next three years. President Obama recommends that bad debt reimbursements be reduced to just 25%.

With this turn of events, the already-slim margins in skilled nursing could get dangerously smaller, according to the American Health Care Association.

“It’s unclear how much of that $6.9 billion is ours [as opposed to affecting hospitals],” says Greg Crist, vice president of public affairs at AHCA.  “The [three-year] phase-in helps, but we have a lot of facilities who have Medicaid patients and therefore have a lot of bad debt, and this is going to be another financial strain.”

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He says the cut will impact 20 to 25 states disproportionately to other states, naming Florida, Pennsylvania, and Illinois among those that will be particularly hard-hit.

AHCA had previously offered an alternative to the bad debt proposal, for facilities to absorb all private-pay bad debt with no federal responsibility, and has also introduced other “substantive policy alternatives and solutions” such as penalizing nursing homes with higher-than-average hospital readmissions.

Previous analyses have shown that nursing homes’ profits will flatline or even turn negative with further cuts beyond the average 11.1% Medicare reimbursement reductions to nursing homes that went into effect last October.

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“Many may not want to mention margins when it relates to healthcare providers, but the fact of the matter is without a margin, it’s just not possible to keep operating,” AHCA President and CEO Mark Parkinson has previously stated.

The doc fix was included in the payroll tax extension deal, which passed in the Senate on Friday with a 60-36 vote shortly after clearing the House, 293-132.

Click here for a summary of the health-related provisions contained in the deal.

Written by Alyssa Gerace

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