Devastating and Crippling: CMS Receives Thousands of Comments, Nursing Home Operators Push Back on Medicare Cut

The Centers for Medicare & Medicaid Services (CMS) needs to seriously consider what a reduction in skilled nursing reimbursement could mean for facilities that are already barely hanging on.

At least that’s what providers have indicated in published comments submitted to the agency over the last month and a half. In total, CMS received approximately 4,717 comments.

The close of business on Friday marked the deadline to submit comments directly to CMS on its SNF Prospective Payment System proposed rule – which included a downward adjustment to rates by 4.6%, or $1.7B, to achieve budget neutrality. This amounts to a decrease of approximately $320 million.

The government agency also requested feedback on the implementation of a federal minimum staffing standard.

Some, like Robert Flowers, administrator at Cumberland Village Care, a 182-bed SNF in Tennessee, see cuts to Medicare payments as potentially “devastating” to not only his center but similarly to many others.

“During the pandemic our occupancy has declined, dramatically decreasing our revenue. Coupled with increased labor costs the financial outlook is already alarming,” he wrote in a comment posted to the CMS website on June 6.

Operators from across the country wrote in to voice their concerns, with many stressing that if CMS intends to move forward with its proposed cut related to the Patient-Driven Payment Model (PDPM), it should be at least spread out over a number of years.

“We are facing tremendous challenges and significant pressures on our revenue that an entire 4.6% cut would be devastating,” Michael Perry, CEO of NexCare WellBridge Senior Living, wrote. “We realize and respect that the move from the RUG-based reimbursement system to PDPM requires budget neutrality. I simply would like it to be phased in to allow our industry to get back on our feet.”

He wasn’t the only to make such a request, with some of the industry’s leading trade groups, such as LeadingAge and the American Health Care Association (AHCA), echoing similar messages for their members to share.

Perry remains optimistic that CMS is listening.

“You’d have to be living on a deserted island not to realize that costs are up, inflation is at 40-year highs, gas prices are up, labor costs are up … it just doesn’t make sense,” he told SNN regarding the rule change. “So I’m optimistic in the sense that they will look at this and come up with a way to meet their legislative obligations on the switch and help us to some extent.”

Imminent closures

One growing fear is that such a rate hike is going to lead to more nursing home closures.

General inflation for nursing home goods and services increased by 1.3% between February 2022 and March 2022, according to AHCA, with hourly wages for all nurses increasing by 28% to 34% from 2020 to 2022.

“The financial situation with many skilled nursing centers at this point is very challenging,” Doug Mock, president of Altercare Integrated Health Services, told SNN. “I’ve talked to a number of folks throughout the industry that are very concerned about [a closure] occurring.”

The median operating margin for SNFs by the end of 2022 is projected to be -4.8%, according to a report released by CliftonLarsonAllen, with median occupancy of 77.3% — well below pre-pandemic rates.

Even for a regional operator like Altercare with 25 SNFs in Ohio and Michigan, the proposed parity adjustment would be “crippling” to the organization.

And while Perry indicated that none of NexCare’s 26 facilities in Michigan are in danger of closing, he has had to close wings due to staffing challenges and a number of his facilities are running at 50% occupancy, which he admits isn’t “sustainable” either.

In a letter posted by CMS on April 25, Mock said a three-year phasing in would allow the industry the time it needs to continue to recover from a devastating pandemic and provide quality care to its patients.

Phasing in the cuts buys operators some time

While Perry would prefer no cut at all, he admitted that probably isn’t in the cards.

“Even with a phased-in approach, we are facing a lot of challenges but it would at least be helpful,” he added.

In some states, such as Virginia, operators have seen nursing compensation rates increase by 14.8%, the highest increase ever seen by the state’s nursing home trade group. Virginia Health Care Association President and CEO Keith Hare said the rate change would be a “major blow” to the financial viability of the sector, according to a comment posted on May 18.

Michael Smith, division president of the Mid-Atlantic of Marquis Health Consulting Services, also weighed in and said the last two years have been the most challenging in his 25 years in the industry.

Smith oversees facilities in Florida, Virginia, Maryland, Pennsylvania and New Jersey.

“While, thankfully, the worst of the pandemic appears to be behind us, we are still in the process of recovering,” he wrote in a comment posted on May 22.

He said that in light of the “long, slow recovery” ahead for SNFs, he also hoped to see the Medicare cuts be spread out over a few years.

The rise in acuity seen industry-wide should also give CMS pause when it comes to consider cuts at this time, Perry said.

“I understand the switch from the RUG reimbursement system to the PDPM reimbursement system was supposed to be budget neutral, and it wasn’t, but they have to factor in the fact that the type of patients we started to take care of back in the beginning of the pandmeic are much more clinically complex, which PDPM paid more for, so I don’t know that we’ve had enough time to assess the revenue impact,” he explained.

Perry supported the switch to PDPM when it was announced because it “leveled the playing field” when it came to reimbursement.

“Without Covid, would there have been as big an impact on the budget? I would say, probably not,” he said.

Staffing minimum standards gets some mixed responses

Phasing in the Medicare cuts over a number of years was not the only request from providers in the nearly 5,000 comments submitted to CMS. New regulations regarding nursing home staffing minimums also received some push back.

“I’ve never seen a labor market like this. We want staff and we want to staff properly, but you can’t cite our industry and fine us to do something that’s not feasible or not humanly possible,” Perry explained.

He’s seen everyone from local administrators to a number of directors of nursing leave and retire early at his facilities.

“Just trying to replicate that intellectual capital on a moment’s notice is difficult,” he said.

Altercare currently has 350 open full- and part-time positions across its organization and spent more than $11 million in temporary agency staff in 2021, an increase of 60% from pre-pandemic levels.

“Setting minimum standards makes no sense when we can’t even hire and fill the slots we have currently,” Mock said.

Nonprofit Marion, Va.-based Francis Manor Nursing & Rehabilitation, licensed for 109 dually certified beds, has seen staffing shortages impact every member of its team with workers coming in early and on their days off to ensure residents get the care they need.

In September of last year the facility closed an entire floor, made up of two units totaling nearly 50 beds, in an effort to maintain safe staffing to resident ratios.

Resident days for the facility have dropped from 35,088 resident days – or every 24 hours a resident spends in a facility – in 2017 to a projected 21,273 resident days in 2022.

The facility has also been forced to deny referrals due to bed availability as it is now limited to no more than a census of 60 out of 109 licensed beds. The facility denied 31 referrals in January, 28 in February, 26 in March, 11 in April and 14 in May as of May 24, according to the comment.

Turnover has also increased for the facility with staff turnover at 33.8% in 2019 jumping all the way to 45.5% in 2022 year-to-date.

However, not everybody who wrote in thought a minimum staffing standard was such a bad move for the industry.

Several prominent researchers in the long-term care space, including Charlene Harrington, a professor emeritus at the University of California-San Francisco, and Michael Wasserman, a geriatrician and the former CEO of California nursing home giant Rockport Healthcare Services, submitted a 100-page response to CMS’s request for comments.

Their response, in part, said that the government agency should establish clear regulatory requirements for nursing staffing.

“As a working CNA, I fully support a minimum staffing standard for nursing homes,” Lori Porter, co-founder and CEO of the National Association of Health Care Assistants, wrote in a comment submitted on June 8. “During the pandemic and even before, we often found ourselves caring for 15 to 20 patients during one shift.”

She feels the sector needs a minimum staffing standard to ensure quality care, enable prompt identification of acute condition changes that can lead to hospitalizations or emergency room visits and maximize resident quality of life, among other reasons.