Potential CMS payment reduction would harm nursing homes, experts say

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Long-term care industry experts are challenging a federal proposal that would cut Medicare funding by as much as 11.3%.

On Thursday, the Centers for Medicare & Medicaid Services announced that it might trim provider payment by close to $4 billion or provide $530 million in increases, derived from applying the 2012 market basket index of 2.7%.

With the former option, CMS claims that after new RUG-IV payment classifications were put into effect in October, providers filed for reimbursement in the highest rehab classifications at more than four times the expected rate.

Still, “I think it's unworkable, implausible to cut $4 billion,” said Dan Mendelson, CEO of the healthcare consulting company Avalere Health. “It is not a cut that could be absorbed by the industry. I think there is going to be a lot of debate over how much they overshot the mark."

If the 11% cut was the agency's opening salvo, Mendelson predicts that the agency and providers will likely find middle ground, and a way to gradually phase in milder reductions.

“It puts the industry in a situation where they will need to be collaborative and conciliatory,” he notes.

The long-term care trade group LeadingAge responded to the proposed CMS rule by saying it presented “opportunities and obstacles for America's nursing homes,” but that it was glad CMS is suggesting options other than the 11% reduction.

“A reduction of that amount would severely harm the ability of many homes to provide the quality of care that their residents deserve. Nursing homes that have not abused the benefit should not be penalized for this increase,” said LeadingAge officials in a statement.

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