MedPAC calls for 5% cuts in skilled nursing care
For an industry where low profit margins are a widely discussed concern, a federal advisory board found that 2020’s robust 25% margin in Medicare payments warranted a suggested reduction in base payment rates during the year. 2023.
The Medicare Payment Advisory Commission (MedPAC) said industry transactions “rebounding” had also informed its recommended 5% cut, thanks to stable government funding throughout the pandemic.
The reduction would bring Medicare’s payment structure closer to a goal of budget neutrality.
MedPAC’s suggestion for Congress is in line with comments from the Centers for Medicare & Medicaid Services (CMS) – the agency faced a backlash when its patient-centered payment model (PDPM) increased payments to homes. nursing care by 5%, or $ 1.7 billion.
MedPAC is an independent congressional agency that advises Congress on Medicare reimbursement policies each year.
The MedPAC analysis took into account four factors before making its recommendation: access to care, quality of care, access to capital and health insurance payments in relation to the costs of health facilities. qualified nurses (SNF).
There are more than three SNFs available for 88% of Medicare beneficiaries, MedPAC reported; approximately 15,000 establishments exist across the country. Quality was difficult to assess during the pandemic, MedPAC said, because risk adjustment models did not take into account diagnostic information from COVID-19.
“Medicare is a small share of the volume for most facilities, but a larger share of revenue,” said Carol Carter, MedPAC policy analyst, adding that the 25% marginal benefit was an incentive to treat patients. beneficiaries of health insurance.
Carter presented the SNF data during Friday’s webinar.
The availability of capital is expected to lead to agreements in 2022, if government funding remains stable, MedPAC said in its report. Although there were fewer mergers and acquisitions (M&A) in 2020 compared to 2019, transactions resumed this year – margins fell from 0.6% in 2019 to 3% in 2020, while financing HUD decreased by 10%.
MedPAC analysis of Medicare payments and SNF costs found that average costs per day increased 2.1%, while headcount decreased 9.6% between February and December 2020. There were fewer costs. associated with therapy due to PDPM.
“The increase in costs would have been smaller, but weekly wages increased over the same period, capturing the greater use of more expensive contract labor over time and the payment of the premium in pandemic, ”Carter noted.
Daily Medicare fee for service (FFS) payments were 27% higher than Medicare Advantage (MA) payments, MedPAC said.
Commission members agreed with the chair on the suggested reduction, but expressed concern that it would affect rural communities more severely than other parts of the country.
“I’m not sure we’re looking at this with a lens that would protect underserved people,” said Lynn Barr, member of the MedPAC commission and founder of Caravan Health.
“I don’t understand why we can’t make different payment recommendations for underserved populations. We have different payments for rural doctors and hospitals, but we don’t have different payments for rural post-acute care, ”Barr said. “The quality of post-acute rural care is terrible – ask CMS, they know it better than anyone. I don’t know what their margins are, I think they are very low. They are of low volume, and obviously of low quality.
MedPAC President Michael Chernew said the data suggests Medicare payment margins at rural facilities are “not significantly worse” than the organization reports overall.
Medicare’s average margin was 16.5%, edged up to 19.2% if the organization included Provider Relief Fund (PRF). MedPAC expects the SNF Medicare margin to decline by 14% in 2022, citing higher costs exceeding payment rate updates between this year and next.
“We can’t set our payment updates so that the most vulnerable places are correct, but that will involve overpaying a wide variety of providers,” Chernew said. “Fairness issues, access issues… there are some really important suppliers that we have to try to support but we don’t want, for lack of a better word, to create 25% margins for everyone. “
Historically, MedPAC has called for SNF payments to be frozen on a consistent basis, according to a note from investment bank Stifel. MedPAC considers SNF Medicare’s margins too high compared to other payers, the company said.
Congress ultimately chose a base payment increase of 1.2% for fiscal 2022.
“Congress has not acted on this. However, we see a moderate risk that the proposed cuts for fiscal 23 will materialize, ”Stifel analysts wrote. “If adopted, the change in reimbursement would have a significant impact on the financial health of the average SNF provider. “
Skilled nursing operators and real estate investment trusts (REITs) with large skilled nursing portfolios would experience financial stress if Congress passes the recommendation, given the industry’s low margins and disruption, Stifel analysts say. persistent pandemics, according to analysts at Stifel.
In a subsequent MedPAC presentation, commission members also suggested a 5% reduction in inpatient rehabilitation (IRF) facilities, citing $ 8 billion paid to 1,113 IRF in 2020.
RFIDs were seen as a significant competitor to SNFs last year, as hospitals sought to place higher acuity COVID-19 cases within this framework – as well as acute long-term care (LTAC) hospitals at most. height of the pandemic. The trend was highlighted in an analysis conducted by healthcare consulting firm ATI Advisory in May.
Interestingly, MedPAC suggested to Congress to increase the basic LTAC Medicare payment rate by 2%.
Members estimated that the SNFs had maintained their financial performance thanks to loans from the Provider Relief Funds and the Paycheck Protection Program (PPP), even though the supply of the IRF fell by 3.4% and the number of beds declined. decreased by 1.8%.
Some IRFs closed in 2020 due to “historically poor financial performance,” Stifel said in another analyst note. IRFs received a payment update of 1.9% for fiscal 2022, according to data from MedPAC.