The Centers for Medicare & Medicaid Services late Thursday announced a rule that could cut certain Medicare reimbursements to skilled nursing facility operators by as much as 11.3% in fiscal 2012. Provider lobbyists immediately issued a statement warning such a move would create “dramatic impact on the lives of nursing home residents and patients.”

The American Health Care Association called the proposed rule “extremely complicated” and said it would examine it in the weeks ahead. It said it would reach out to its members and lawmakers before issuing final comments to CMS. “Given the fact that CMS presents two options in the proposed rule, we are hopeful that our feedback during this administrative process will be heard,” said AHCA President and CEO Mark Parkinson in a statement.

CMS is reviewing options for a “case-mix adjustment recalibration.” The agency says that after new RUG-IV payment classifications were put into effect Oct. 1, providers filed for reimbursement in the highest rehab classifications at more than four times the expected rate.

“Using initial data that reflect actual RUG-IV claims experience, CMS has now found that patients are being classified into one of the highest paying RUG-IV therapy groups more than 40 percent of the time (as compared to less than 10 percent as originally projected by CMS), thus triggering Medicare payments far in excess of the original projections,” CMS said in announcing the proposed rule. “Pending confirmation of this preliminary assessment, CMS will be reviewing data from actual claims under the RUG-IV system as it becomes available.”

An 11.3% cut in the SNF prospective payment system would amount to about $3.94 billion less going to providers than in the current fiscal year.

Under the other option CMS says it is considering, providers would see an increase of $530 million, or 1.5 percentage points in fiscal 2012. This would be derived from applying the 2012 market basket index of 2.7%, less 1.2 percentage points to recognize “greater efficiencies in the operation of nursing homes.” This provision is called for under the Affordable Care Act, officials noted.

In addition to discussing the Medicare PPS rate, Thursday’s proposed rule would:

* Implement section 6101 of the Affordable Care Act, which requires Medicare SNFs and Medicaid nursing facilities to reveal many more details about ownership and corporate structure.

* Revise the definition of “group therapy” and require allocation of group therapy minutes in assigning RUG-IV payment groups.

* Create a new Medicare-required assessment to be completed by SNFs when changes occur in the intensity of therapy.

Federal officials said the proposal also would modify the required schedule for completing the MDS 3.0 and revise the policy regarding “line-of-sight” supervision of therapy students.

The proposed rule went on display Thursday at the Federal Register’s Public Inspection Desk. It is also available online under “Special Filings” here and here.