The Centers for Medicare & Medicaid Services late Friday issued a rule that will cut $360 million in Medicare payments to skilled nursing facilities for fiscal year 2010.

The reduction represents a decrease in Medicare payments of $1.050 billion as part of a case-mix index (CMI) adjustment combined with a $690 million increase in the market-basket.

Nursing home groups fear the case-mix re-balancing will result in a loss of $12 billion to $18 billion over 10 years. They immediately issued statements criticizing the move, and expressed concern that more reductions to the Medicare program are likely.

“The nursing home community rightly fears the $12-$16 billion in cuts are just the tip of the iceberg,” said Alan Rosenbloom, president of the Alliance for Quality Nursing Home Care. “As Congress continues to debate health care reform and searches for ways to fund it, many expect and assume that nursing home care will be targeted again for much deeper cuts.”

A House healthcare reform bill, which has not yet been passed, would trim an addition $33 billion to $44 billion in Medicare payments to nursing homes over the next 10 years, Rosenbloom noted.

The regulation released Friday will lower Medicare payments by 1.1% for FY 2010 compared with FY 2009. CMS is reducing payments to nursing homes by 3.3%, or $1.050 billion, for FY 2010 to recalibrate case-mix indexes (CMIs). The agency is recalibrating CMIs because it underestimated the growth in spending following its expansion of resource utilization group (RUG) categories in 2006. That 3.3% decrease will be offset by a market-basket increase of 2.2%, or $690 million, for FY 2010, CMS said.   

The American Health Care Association, the largest group representing nursing homes, said that the agency is wrong to take money away from nursing homes when it was responsible for underestimating costs.

“CMS' final rule, which will reduce Medicare funding for skilled nursing care by $1.05 billion in FY 2010 alone, seeks to correct for a so-called ‘projection error' that the agency – not long term care providers – made in 2005 and is antithetical to the health system delivery reforms that America needs and seniors deserve,” Bruce Yarwood, president and CEO of AHCA, said in a statement.

He and other long-term care leaders noted that nursing homes often rely on Medicare payments to compensate for insufficient Medicaid payments.

Stated Larry Minnix, president and CEO of the American Association of Homes and Services for the Aging, which represents not-for-profit facilities: “In most nursing homes, if there are margins in Medicare services, they are used to help offset negative margins for Medicaid services. In addition, many not-for-profit nursing homes face negative margins on Medicare to support negative margins on Medicaid. These numbers just don't work for financial viability and sustainability.”