The majority of MedPAC board members voted Thursday to recommend reducing Medicare-based payment rates for skilled nursing spending by 3% for 2025, despite voicing concerns about the federal minimum staffing proposed rule.
MedPAC, which stands for the Medicare Payment Advisory Commission, is made up of health care professionals who make recommendations to Congress in terms of how much should be spent on various care settings.
The group voted in favor of the 3% cut at its latest board meeting after making its initial draft recommendation in December. The payment analysis didn’t take into account the proposed rule announced on Sept. 1, although it was mentioned in a separate chapter sent to board members. Despite this, some members expressed serious concerns on the potential impact of the staffing mandate – even going as far as suggesting that maybe the advisory body could come up with two recommendations for the payment rate.
“[The proposed staffing mandate] would massively change the industry,” said MedPAC board member Dr. Brian Miller. “Knowing that there’s that proposed rule, which would significantly affect the SNF margin because it would totally change their operations, should we have two estimated recommendations, one based upon the current statute and regulatory framework and another based upon if this rule were implemented next year?”
Considering enormous changes, proposed or not
While generally supportive of the 3% rate cut, Miller said members should, nevertheless, consider factoring in ramifications from such an enormous potential change.
Kathryn Linehan, principal policy analyst for the Medicare Payment Advisory Commission, told board members the proposed minimum staffing rule was not taken into account when it came to payment projections because it isn’t current law and likely wouldn’t affect 2025 operations either.
And, there are too many potential rules that various people are proposing, other members said. There’s been uneasiness in trying to forecast the likelihood of whether or not a certain rule will be implemented.
There isn’t a clear timeline either, members said. Federal regulators have said it may take up to 3 years to finalize the staffing rule, with the Fall 2023 Unified Agenda setting September 2026 as a deadline.
“We could sneeze and some rule or regulation can change … probably several have changed while we have been having this meeting,” said Miller. “That aside, though, this rule is so significant. I feel like we’d be a better advisor to the Hill and Congress if we had some sort of estimate of what the impact would be on SNF margins.”
Having more information about fallout from the staffing rule is still possible, he said, while also acknowledging that it is still a proposal, and would also be greatly beneficial to the industry and beneficiaries.
Focus on MA, Medicare days
MedPac’s agreed-upon recommendation would decrease spending by between $2 billion and $5 billion over one year, and between $10 billion and $25 billion over five years, Linehan said of the 3% cut recommendation.
“Given the high level of Medicare’s payments, we do not expect adverse impacts on beneficiaries. Providers should continue to be willing and able to treat fee-for-service Medicare beneficiaries,” she said.
MedPAC board member Dr. Tamara Konetzka added that the group must focus more on Medicare Advantage and its influence on the skilled nursing sector.
“When we talk about length of stay in nursing homes, for example, in SNF stays, it’s increasingly not just that there are more and more MA residents – there are huge spillovers to the way SNFs practice,” said Konetzka. “Length of stay is decreasing because of [MA], even though they’re paid per diem.”
Congress is already somewhat aware of the effect MA is having on the skilled nursing world, with some representatives discussing pitfalls in a press briefing in November.
Linehan presented an overview of skilled nursing use and spending in 2022 for 14,700 facilities, with a median 10% of Medicare share of facility days and 1.8 million SNF stays. Payments for SNF services reached $29 billion in 2022, including swing beds.
“This contrasts with other [post-acute care] settings where fee-for-service Medicare makes up about half of providers volume,” Linehan said of FFS Medicare days.
Other notable SNF payment adequacy indicators included a slight decrease in supply, Linehan said, along with increased volume and occupancy, which Linehan said indicated available capacity.
Employment was unsurprisingly found to be below pre-pandemic levels, and the 2022 Fee-For-Service Medicare marginal profit was 27% with a 2022 FFS Medicare margin of 18.4%. The projected FFS Medicare margin is expected to be 16%.
Still, there was a negative 1.4% margin when considering all payers for 2022, Linehan said.
Other trends – there’s continued investor interest in the sector, she said, and the industry saw record-high price per bed in 2022. There’s also a small decline in facility rate of discharge to the community and a small decline in total nurse and registered nurse (RN) staffing, Linehan reported.
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