Medicare should reduce payments to SNFs 4% next year, MedPAC says

Medicare payments to skilled nursing facilities should be cut 4% in 2014 and then steadily reduced in subsequent years, the Medicare Payment Advisory Commission said in a March 15 report to Congress. Rates should be decreased to achieve $10 billion in savings by 2018, the group said.

MedPAC issued similar guidance in its report last year, but reiterated its recommendations because no policies have been changed to control what it says are overpayments to SNFs. As evidence that payments are exceeding costs of care, MedPAC cited “high and increasing margins.” In 2011, freestanding SNFs had an estimated 22% to 24% margin on Medicare payments, marking the fourth straight year of margins above 15%, according to the report.

Upcoding related to therapy is driving overpayments, MedPAC said. This should be remedied by basing therapy payments on beneficiary characteristics rather than services provided, the group recommended.

For the first time, MedPAC's annual report included data on rehospitalizations within 30 days of discharge from a SNF. The overall rehospitalization rate was 10%, but a quarter of facilities had rates 7% or lower, while another quarter had rates 12.5% or higher. This shows that significant cost savings can be achieved if SNFs face similar rehospitalization penalties as hospitals, MedPAC said.

In a closed-door meeting on March 14, Senate Republicans pressed President Obama to guarantee Medicare's solvency for 75 years. Rep. Paul Ryan (R-WI)'s budget plan calls for overhauling Medicare by making it into a voucher program.