Alan Rosenbloom

With $9 billion in Budget Relief Act sequester cuts to the U.S. skilled nursing facility (SNF) sector now just weeks away following the latest cut of at least $600 million in Medicare Part B therapy payments after passage of the American Tax Relief Act of 2012 (ATRA), we are making it a priority this month to ensure Congress carefully reviews the cascade of budget and regulatory changes since 2009 that leaves the nation’s second largest health facility employer facing a staggering $65.6 billion in Medicare funding reductions over the next ten years.

One after another – coinciding with 40 states having either frozen or cut Medicaid-funded SNF care over the past several years – the Medicare funding reductions already mandated, plus those that loom ahead, come at a time of ongoing sector instability. The Wall Street Journal recently reported, for example, that SNFs are having a hard time obtaining funding from lenders because they “fear threatened curtailments to Medicare.” Further, one recent Texas facility closure is illustrative of the cumulative federal and state funding squeeze facing facilities, patients and caregivers as it was noted that 11% Medicare cuts and 3% Medicaid cuts were contributing factors.

As the smoke clears from ATRA’s passage, there is not yet sufficient recognition among policymakers that the legislation inflicted yet another SNF cut. It is therefore critical to spotlight the basic policy point that when beneficiaries receive therapy services in a skilled nursing setting, payments often are made through Part B rather than Part A of the Medicare program. Under Part B, inpatient and outpatient providers are paid under one fee schedule, although the severity of patient illness and the degree to which patients are clinically compromised is much greater in the SNF setting than in outpatient settings.  
Consequently, it is more costly to provide multiple therapy treatments to SNF patients than it is to do so for outpatients. In 2012, Medicare reduced a portion of Part B payments when patients receive multiple therapy procedures on the same day by 20% for outpatient settings and 25% for inpatient settings like SNFs.  ATRA further reduced this payment starting on April 1, 2013.
Details and facts matter, and we are letting Congress know for the record the $65.6 Billion SNF Medicare funding reduction (FY 2012-FY 2021) is comprised of the following budget and regulatory actions: Productivity Adjustment (ACA-mandated): $34 billion; Forecast Error (Case-Mix) Adjustment: $16 billion; Forecast Error (Market Basket) Adjustment in FY 2011 Rule: $3 billion; Bad Debt (Middle Class Tax Relief & Job Creation Act of 2012): $3 Billion; ATRA Medicare Part B Reduction: $600 million (estimated). Sequestration (3/1/13): $9 Billion (Source: Avalere Health)
In the weeks ahead, it has never been more important for our sector as a whole not just to point out the obvious: that still more cuts are untenable as SNFs care for an increasing number of older, higher acuity patients. Yet we must also articulate how systemic post-acute payment reforms can save Medicare resources, and rationalize the system for the collective benefit of patient, provider and taxpayer alike. Now is the time for new policy ideas – not just more SNF Medicare cuts.
Healthcare policy experts Gail Wilensky and Vince Mor said it best when they wrote last year, “If further Medicare reductions are imposed, it will be difficult for facilities to continue using Medicare to help make up for the underpayment of Medicaid… Cuts will have to come from somewhere — forcing facilities to choose between reducing rehabilitation services, skilled nursing and amenities for short-stay Medicare patients, or essential direct care nursing aides for long stay Medicaid patients. Each scenario has negative implications for seniors’ care.”
Alan G. Rosenbloom is President of the Alliance for Quality Nursing Home Care (AQNHC).