January 1, 2013 SNF Medicare Cuts Approach $800 Million: Study

A study conducted by Avalere Health, LLC, concluded that skilled nursing facilities (SNF) can expect Medicare reimbursement cuts in the $800 million range effective January 1, 2013.

The Washington, D.C. consulting firm projected the 2% across-the-board sequester cut to Medicare programs mandated under the Budget Control Act of 2011 will reduce reimbursement to SNFs by $782.3 million in 2014. In addition, Avalere estimates that SNFs will be forced to eat $3 billion in “bad debt” costs over the next decade (Prior to the February passage of the “Middle Class Tax Relief and Job Creation Act of 2012,” Medicare reimbursed SNFs for 100% of bad debt for dual-eligible beneficiaries and 70% for other Medicare bad debt. Under the Act, the reimbursement rate for all Medicare bad debt is reduced to 65%).

When these reductions are combined with the substantial Medicare cuts contained in the Affordable Care Act and the 11.1% SNF reimbursement cut imposed October 1, 2011 by CMS, Avalere projects that skilled nursing facilities face $48 billion in funding losses over the next decade.

As part of its analysis, Avalere conducted a survey of SNF providers to get a sense of the impact of these reductions. Those survey responses indicated the Medicare cuts will result in at least 20,000 staff layoffs and the cancellation of approximately 400 nursing facility expansions or renovations and the corresponding loss of the 20,000-25,000 new jobs those projects would have generated.

Among the other survey findings:

· 36.8% of the 234 respondents expect to lay off direct care staff

· 37% of the 227 respondents indicated they expect to indefinitely postpone or cancel the hiring of direct care staff

· 74.2% of the 213 respondents plan to either freeze wages or reduce raises

· 47.8% of the 209 respondents intend to either reduce benefits or require employees to pick up a greater share of the benefit costs

· 23.5% of the 238 respondents plan to significantly delay or cancel the opening of new facilities and/or the expansion of existing facilities.

(LeadingAge Wisconsin E-News, 5-18-12)