Medicare cuts bad for business

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You might have noticed that several nursing home stocks received a boost last Friday off of the latest Medicare regulatory news. While that might be good for the companies’ shareholders, it doesn’t do a lot for the nation’s nursing homes.

The cuts, while not as bad as investors had feared, are still reductions. The Centers for Medicare & Medicaid Services softened the regulatory blow of a 3.3% Medicare decrease (minus $770 million) for fiscal year 2009 with a market-basket increase of 3.1% ($710 million). Still, that results in a $60 million net loss.

Needless to say, nursing home providers weren't too pleased. They viewed the rule in terms of “give with one hand, and take away with another.”

"Our profession is alarmed by the CMS action taken today,” Bruce Yarwood, president and CEO of the American Health Care Association, said late last Thursday, when the regulation was released.

Added Alan Rosenbloom president of the Alliance for Quality Nursing Home Care: The cuts “would inhibit skilled nursing facilities’ ability to continue caring for increased numbers of high-acute patients.”

The American Association of Homes and Services for the Aging, which also opposes the rule, noted that the federal budget or Medicare legislation could erode the suggested market-basket update for next year.

Unlike the surreal world of Wall Street, which feeds off of expectations, nursing homes survive on the day-to-day reality of reimbursements. A cut is a cut is a cut.

While it might not have been as damaging as anticipated, the regulation still means less funding for nursing homes. That ultimately could figure into Wall Street’s numbers game as well.

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Daily Editors' Notes

McKnight's Daily Editors' Notes features commentary on the latest in long-term care news and issues. Entries are written by Editorial Director John O'Connor, Editor James M. Berklan, Senior Editor Elizabeth Newman and Staff Writer Emily Mongan.