Providers Push Back Against MedPAC’s ‘Blunt’ Proposed Cuts

The most recent report from the Medicare Payment Advisory commission (MedPAC) claims that skilled nursing reimbursements are too high, but one leading trade group says MedPAC’s own numbers paint a much bleaker picture.

Data in the report showed that the total margins for freestanding skilled nursing facilities were 0.7% in 2016, down from 1.6% in 2015. The American Health Care Association (AHCA) zeroed in on this in a statement released Friday.

“MedPAC’s report that non-Medicare margins are negative 2.3% and total margins have plummeted to 0.7% should sound the alarms for policy makers across the country,” AHCA president and CEO Mark Parkinson said in the statement.


“In recent months, the financial challenges for some of the largest providers in the country reached a boiling point. With providers declaring bankruptcy, and in some cases, closing their doors… providing adequate reimbursement and reasonable regulation must be the priority for our policy makers,” he said.

Medicare Advantage has advantage

Despite these numbers, Medicare’s reimbursement rates are too high in the aggregate, the report concluded. MedPAC cited several factors, including the fact that the Medicare Advantage (MA) payment rates to SNFs are “considerably lower” than Medicare fee-for-service (FFS) payments.


This was borne out by the National Investment Center for Seniors Housing & Care (NIC), which found for 1,433 SNF properties included in its sample, MA daily payments were 15 percent lower than Medicare FFS payments. The MA revenue per day reached a new low in the fourth quarter of 2017, NIC also found.

The difference in payment rates doesn’t necessarily reflect wide disparities between MA beneficiaries and FFS beneficiaries who used SNF services, the commission said.

“We compared the patient characteristics of beneficiaries enrolled in FFS and MA plans in 2016 and found small differences that are unlikely to explain the lower payments typically made by MA plans,” the report reads.

For instance, MA enrollees were typically slightly older, with fewer comorbidities and a higher rate of independence.

“The considerably lower MA payments indicate that some facilities accept much lower payments to treat MA enrollees who are not much different in terms of case mix from FFS beneficiaries,” MedPAC said.

Some publicly traded firms have reported targeting managed care patients as business strategy, which MedPAC suggested shows that MA rates are attractive. But with 33% of seniors enrolled in managed Medicare Advantage plans, and the number only projected to grow, the companies may simply be adjusting to the trend.

Providers react

Though AHCA and other providers — Dan Holdhusen, director of government relations of the Evangelical Lutheran Good Samaritan Society, for one — were pleased to see MedPAC acknowledge the thin margins of SNFs, the proposed elimination of the Medicare market basket rate for fiscal 2019 and 2020 was much less welcome.

“For many years we have pointed out to Congress and other policymakers that the Medicare SNF reimbursement system overcompensates for therapy costs and under-accounts for nursing and other costs of caring for medically complex residents,” Barbara Gay, vice president of public policy communications at LeadingAge, said in a statement to Skilled Nursing News.

“A broad-based denial of market basket updates would be a blunt instrument that would do a lot of damage to many nursing homes that struggle with inadequate resources to cover all of the services they provide to their residents,” Gay said.

The elimination seems to make no sense based on MedPAC’s own numbers, Holdhusen added.

“We understand that MedPAC’s primary focus is on the Medicare portion of SNF, PAC, and Medicare Advantage plans,” he said in an e-mail to SNN. “However, it is somewhat ironic and puzzling that it would recommend elimination of the FY19 and FY20 market basket adjustments based upon their own findings.”

The fact that MedPAC’s report identified shrinking margins is part of what made the recommendation hard for Holdhusen to understand, he told SNN.

SNFs — particularly not-for-profit ones like Good Samaritan, which is the largest not-for-profit senior care provider in the U.S.— are taking in Medicaid and private pay patients as well as Medicare ones, he explained.

“We’ve always encouraged MedPAC to take a look at the overall picture,” he said. “We’re not just facilities that treat Medicare people, even though that’s part of the clientele.”

Nursing facility hospices shine

In one bright spot margin-wise, hospice providers that had a large share of patients in nursing facilities (NF) and assisted living (AL) facilities had higher margins, compared with other hospices, MedPAC found. Hospices in the top quartile for share of patients residing in nursing facilities had an approximately 16% margin, compared with lower margins in the other quartiles.

Though some of the variation in margins in hospices with different concentrations of NL and AL patients comes from differences in length of stay and the diagnosis profile of the patients, caring for patients in facilities could be more profitable due to the centralized locations and because institutions can serve as referral sources for new patients, the report said.

“Nursing facilities may also be a more efficient setting for hospices to provide care because of the overlap in responsibilities between the hospice and the nursing facility,” the report said. “Analyses in our June 2013 report suggest that a reduction to the routine home care payment rate for patients in nursing facilities may be warranted because of the overlap in responsibilities between the hospice and the nursing facility.”

Written by Maggie Flynn

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