SNFs Facing an $800 Million Bludgeoning in Medicare Cuts Under Budget Control Act

Medicare-funded skilled nursing facilities are poised to absorb nearly $800 million in cut funding in fiscal year 2014 through mandated reductions under the Budget Control Act, according to a new Avalere Health Analysis funded by nursing home trade group The Alliance for Quality Nursing Home Care.

The top ten states most affected by sequestration-related budget cuts are projected to lose more than $455 million, combined, while nationally the cuts are expected to total $782.3 million, unless Congress is able to agree on deficit reduction resolutions. 

California tops the list of states impacted by sequestration in the Budget Control Act for Medicare payments to skilled nursing facilities in FY 2014, at nearly $76 million, followed by Florida, Texas, and New York—all states with higher-than-average senior populations. 



Source: Avalere Health, 2012

“Vulnerable nursing home patients, a fragile front line care workforce and economically-stressed facilities across America have been battered by a cascade of Medicare and Medicaid funding cuts over the past several years, and the sequestration threat looms large over a health sector caring for rising numbers of higher acuity patients,” said Alan Rosenbloom, President of the Alliance, in a statement.


Speaking on the nation’s rapidly growing senior demographic and the evolving nature of the patient population, Rosenbloom said the nation needs a more “rational, cost-effective Medicare post-acute payment system,” not what he terms as “irrational” Medicare cuts that “jeopardize ongoing access to quality care.” 

“There are better, smarter ways to finance seniors’ nursing home care, and a thorough discussion about how to do so is a paramount health policy priority,” he said.

Between FY 2012 and FY 2021, SNFs are expected to absorb at least $3 billion in new cuts thanks to “bad debt” provisions contained in the Middle Class Tax Relief and Job Creation Act of 2012, and overall, the industry is already slated to absorb $48 billion in funding cuts in that same window. 

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CMS plans for payment updates to SNF PPS

The Centers for Medicare & Medicaid Services (CMS) expects to publish a payment update notice for the skilled nursing facility prospective payment system for FY 2013 by July 31, 2012, according to LeadingAge.

That means… There won’t be any changes in the rates or MDS procedures that require rule-making; there will just be an announcement of the new rates to begin October 1, 2012.

LeadingAge believes rates will increase on average about 1.6% – 1.8% over last year. Actual payment changes for individual facilities between the current year, which began October 1, 2011 and next year, which begins on October 1, 2012, will vary by geographic area and case mix. In its March 2012 Report to Congress, MedPAC cited then-current projections that skilled nursing facility reimbursement would increase by 1.8% in fiscal 2013, based on an estimated market basket increase of 2.7%, from which an estimated 0.9% productivity factor would be subtracted. The Medicare Trustees, on the other hand, use a 1.1% estimated productivity factor adjustment in their analyses.

However, if the 2% sequestration goes into effect, as detailed by the Avalere study, the payment rate increase will be “wiped out,” says LeadingAge. 

Written by Alyssa Gerace

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