Medicare Cuts, Sunsetting PHE Dollars Could Put One-Third of SNFs at Financial Risk

More than one-third of nursing homes in the U.S. could be at financial risk if the Centers for Medicare & Medicaid Services stands by its proposed funding cut and federal Medicaid dollars tied to the public health emergency end in 2022.

That’s according to a report released on Thursday by the American Health Care Association/National Center for Assisted Living, citing data from CMS and the CliftonLarsonAllen (CLA) 2022 State of the Skilled Nursing Industry.

More than 1,000 nursing homes have closed since 2015 – 327 of which occurred during the pandemic, according to the AHCA/NCAL report.

The report projects that more than 400 skilled nursing facilities could close in 2022 – 20 have closed so far.

“With hundreds of nursing home closures looming now and thousands more anticipated if government funding is cut, state and federal policymakers need to step up to support our social safety net,” AHCA/NCAL President and CEO Mark Parkinson said in a news release.

“We need to do better than just keep nursing home doors open — we need to make significant investments to better support our frontline caregivers and transform facilities for a growing elderly population,” he added.

The nursing homes that close tend to be smaller facilities, with fewer than 100 beds, in urban settings where the majority of residents rely on Medicaid, the report noted. Nearly half of the nursing homes that closed during the pandemic received 4- or 5-star ratings from CMS and an increasing proportion were not-for-profit.

Roughly 25% nursing homes that closed between 2015 and 2019 were not-for-profit, compared to 29% during Covid.

The sector’s median operating margin is projected to be -4.8% for 2022, according to the CLA report. Researchers determined occupancy recovery would trend towards 77.3% by year’s end.

If occupancy recovery increased to 81% for the year, the operating margin would increase to -3.3%, whereas if occupancy recovery sat at 76% in 2022 the SNF operating margin would drop to -5.3%.

CMS on April 11 unveiled a 4.6% cut to the Patient-Driven Payment Model (PDPM) and 3.9% increase to Medicare payments for the sector. The PDPM cut amounts to a total loss of $320 million in Medicare funding, according to the agency.

CMS believes it is “imperative” to act in an expedient manner once excess payments are identified, according to the proposed rule as published in the federal register.

CMS Administrator Chiquita Brooks-LaSure told Skilled Nursing News in an exclusive interview that the agency’s hands were effectively tied on the timing of the Medicare funding cuts.

“I would say that we have statutory obligations, and that there are rules within what Congress does for us in terms of how we set rates and this is one that really is required given the trajectory,” Brooks-LaSure told Skilled Nursing News in an exclusive interview.

CMS also announced earlier this month that it would be phasing out some of the temporary waivers linked to COVID-19, including the temporary nurse aide (TNA) program – creating yet another potential hurdle for operators to overcome on the road to recovery after the pandemic.