Avalere Analysis: “Bad Debt” Cuts Will Reduce SNF Payments by $3 Billion

On the heels of the average 11.1% cuts in Medicare payments to skilled nursing facilities that went into effect last October, Congress is also cutting Medicare reimbursements for “bad debt,” leaving facilities in a strapped position that will likely lead to staffing reductions and a lesser quality of care, according to a Spring 2012 report released by the Alliance for Quality Nursing Home Care.

The Alliance commissioned a survey from Avalere Health showing the negative impact of the cuts on skilled nursing facilities. Nationally, the “bad debt” provision will cut SNF payments by at least $3 billion between fiscal years 2012 and 2021, with Florida, Ohio, Illinois, and Pennsylvania among the hardest-hit states.

Top Ten State Impact on Medicare Payments to SNFs from “Bad Debt” Provision

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Source: Avalere Health/The Alliance for Quality Nursing Home Care

Research also shows that nursing facilities are much more reliant on government funding compared to physicians. More than half of nursing facilities’ revenues, at 53.2%, are from Medicare and Medicaid, compared to 30.2% of physicians’ revenues, with the remainder coming from private sources.

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Labor accounts for about 70% of a facilities’ costs, and when Medicare and Medicaid reduce payments, it often forces facilities to reduce staffing, and this can result in a lower quality of care, according to research cited in the Alliance report.

View the Alliance report on the impact of payment reductions to nursing facilities.

Written by Alyssa Gerace

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