Managed Care Payments Continue to Squeeze Skilled Nursing Providers

As the shift to value-based payments and managed care grows, data shows that skilled nursing providers are seeing revenue per patient under these agreements slide as the patient mix increases.

The National Investment Center for Seniors Housing (NIC) found that managed Medicare patient mix at standalone skilled nursing facilities has been growing steadily. In the latest 12-month period ending September 2017, it was up to 6.3%, compared to 5.9% for the previous 12-month period and 5.1% in October 2012.

Revenue per patient day (RPPD) continues to decline and hit a new low of $431 during the third quarter of 2017. The rate fell 2.1% from the year-earlier level of $440 revenue per patient day, according to NIC.


While the rates providers are receiving from these types of contracts varies, most expect to take a 25% hit from what they would have received under traditional fee-for-service models, according to Marc Zimmet, managing director at Greystone and Zimmet Healthcare.

“As managed care increases and gets more important, providers will have to get better managing the population,” said Zimmet. “[Providers need] to focus on case management to get every dollar they are entitled to, and most facilities could do a better job than they are currently doing.”

By partnering with the managed care companies, skilled nursing providers are hoping to see an increase in referrals from partners to help boost occupancy. For an industry whose occupancy levels hit record lows in the third quarter of 2017, they are foolish to turn away the business.


“There isn’t a facility that won’t take that patient in [at the lower rate]. There is a profitable proposition and opportunity,” said Zimmet.

When working with the private insurers, skilled nursing providers don’t have much leverage to negotiate payment terms.

“The managed care companies are often large insurance companies, and they are going to dictate to the skilled provider how much they are going to pay them per day,” said Bill Kauffman, senior principal, research & analytics at NIC. “The reality is that as of the last few years, the skilled nursing provider doesn’t have a lot of negotiating power.”

According to data from the Kaiser Family Foundation, Medicare Advantage enrollment has grown 71% since the Affordable Care Act was passed in 2010, and providers who haven’t signed up to participate are missing out on a market that is showing no signs of slowing down.

“[Managed care] is unavoidable and providers will need these contracts in the future,” said Zimmet.

Written by John Yedinak

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