‘Slightly Better Than Expected’: Skilled Nursing Operators, REIT CEOs Pleased with Medicare Bump — but Inflation Still Battering Sector

The net increase of Medicare Part A payments by the Centers for Medicare & Medicaid Services (CMS) was generally welcomed by nursing home providers and analysts, who said the federal agency seems to be empathetic in mitigating the impact of inflationary pressures confronting the nursing home industry.

On Monday, CMS proposed its payment rate update to skilled nursing facility (SNF) reimbursements for fiscal 2024, which includes a net increase of 3.7%, or approximately $1.2 billion, in Medicare Part A payments to SNFs.

“We were pleasantly surprised with the net 3.7% update particularly following some of the other post-acute care rules that had much smaller proposed increases,” Eric Mendelsohn, President and CEO of National Health Investors Inc., said.  

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Although Mendelsohn said he doesn’t think it is enough given the staffing and inflationary pressures that SNF operators are experiencing, he believes the proposal reflects that CMS is acknowledging the unique challenges that nursing home operators have endured relative to other care settings throughout the pandemic.

Other industry stakeholders echoed the sentiment.

Rick Matros, CEO of Sabra Health, said that the increase was slightly better than expected.

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“Certainly doesn’t solve the inflation problem but helps,” he said. “This summer’s Medicaid rate increase should be helpful as well.”

The CMS rate increase reflects a $2 billion increase resulting from the 6.1% net market basket update to the payment rates. This is based on a 2.7% SNF market basket increase plus a 3.6% market basket forecast error adjustment and minus a 0.2% productivity adjustment, as well as a negative 2.3%, or approximately $745 million, decrease in the 2024 SNF Payment Prospective Systems (PPS) rates as a result of the second phase of the Patient Driven Payment Model (PDPM) parity adjustment recalibration, CMS said.

Staffing minimums

The proposal did not include any updates on staffing minimums. Equity research analyst at Stifel, Nicolaus & Company, Tao Qiu, said this might mean many stakeholders will be anxious to hear about what will be implemented and where the nursing hours per resident day would land eventually.

Still, Qiu said the rate increase was better than expected.

“I don’t think the rate alone is sufficient but when you consider the strongest Medicaid rate growth in many states, the blended rate is moving higher when cost inflation is peaking or moderating, so that is definitely positive,” he said.

Other industry stakeholders also expressed concern about the staffing mandate. Tim Fields, CEO of Ignite Medical Resorts, said he appreciated that the efforts from American Health Care Association (ACHA) were substantial in allowing operators’ voices to be heard about the shortfall of necessary reimbursement.

Moreover, ACHA received thousands of comments to support CMS removing the minimum staffing rule from the payment rule.

“Instead of a punitive program to set minimum staffing standards and impose mandates and fines, we could use CMS’s help,” Fields said.

He said the focus should be on creating more education programs to train workers faster to become nurses and nurses aides.

“[We need] de-regulation in certain states that prevent certified nursing aides from getting certified as a medication tech and being able to pass medications to help our nurses who are overworked,” he said.

Managed care programs

CMS also noted that its initial analysis of the Patient Driven Payment Model’s (PDPM) implementation in 2020 showed that an unintended increase in payments of approximately 5% or $1.7 billion occurred per year.

“After considering the stakeholder feedback received on the FY 2023 SNF PPS proposed rule, and to balance mitigating the financial impact on providers of recalibrating the PDPM parity adjustment with ensuring accurate Medicare Part A SNF payments, CMS finalized a PDPM parity adjustment factor,” CMS said.

This parity adjustment amounts to 4.6% in 2023 with a two-year phase-in period, resulting in a 2.3% reduction in 2023 and a 2.3% reduction in 2024 to the SNF PPS payment rates, the agency said.

Moe Freedman, CEO of Illinois-based Accolade Healthcare, said he hopes to see more guidelines from CMS to make sure that the managed care programs are also increasing, and getting more in line with the traditional Medicare rate.

“For traditional Medicare for Medicare stays, you know, it’s 600 to 615 PPD, based on acuity for managed care companies, they can go from 300 to 550 PPD,” he said. “Where’s the discrepancy and why are they so much lower than traditional Medicare?”

He noted that with managed care programs, operators often pay the same drug cost that they would with traditional Medicare.

“Your cost of care is still the same, if not more, depending on the acuity of the resident – yet you’re getting reimbursed significantly less in a lot of cases,” he said.

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