Medicare Reimbursement & Policies - What is Next?

Posted by Jenny Wainwright on Dec 14, 2011 10:46:00 AM

Creative ways to improve the revenue cycle without cutting quality of service or staffing is paramount within skilled nursing facilities.  Discussions among policymakers about alternative reimbursement policies rank high on the list of concerns for nursing facilities already affected by the 11% Medicare cut that went in effect October 1, 2011.  What is next? To stay ahead of Washington’s policies and brace for what is to come, the American Health Care Association (AHCA) has astutely reviewed potential outcomes of the reimbursement policy changes currently under discussion.  The Moran Group was hired by AHCA to investigate possible results of the potential policy changes under discussion. For full details read ‘Assessing the Financial Implications of Alternative Reimbursement Policies for Nursing Facilities’. The key findings are listed below and quoted directly from the report: reimbursement decline

  • We estimate 2009 aggregate overall margins of 0.75%. This estimate is materially different from estimates developed by MedPAC.
  • Because margin analyses can differ markedly due to specific assumptions and the exact methods used by different researchers to cope with imperfections in Medicare cost report data, there is significant uncertainty about the actual margins (positive or negative) that nursing facilities are earning.
  • Subject to these caveats, our baseline suggests that going forward from 2009, nursing facility operating margins would be mildly positive—holding current payment policies constant.
  • Through the projection period, net of the impact of an expected 2% sequestration, we estimate baseline overall margins ranging from 0.64% of revenue in 2012 to 2.11% in 2021.
  • Reimbursement policy changes are, however, under active discussion by policymakers, including
    • A "clawback" of 2011 revenues associated with reimbursement changes exceeding budget neutral expectations;
    • A two-year suspension of market basket adjustments;
    • Limiting bad debt payments to 25%;
    • Imposing 5% coinsurance on days 1-20 of SNF care; and
    • Capping Medicaid provider taxes at 3.5% of total payments.
  • If reimbursement policy changes of the magnitude of those now under discussion are implemented, our point estimate of the outcome suggests that nursing facility overall margins would turn consistently negative.
  • Margin projections of this type are, however, highly sensitive to assumptions about volume growth and productivity factors.
  • While our analysis suggests that there is some prospect that nursing facilities could weather reimbursement reductions of the magnitude contemplated, it also suggests substantial uncertainty about whether they will be able to do so without material reductions in the level of services now provided in nursing facilities.

Tags: Medicare