A tax credit to help nursing homes retain employees should be treated as a grant and not revenue that would offset costs and possibly affect Medicaid rate rebasing, the nation’s largest skilled nursing advocacy groups said. 

The American Health Care Association/National Center for Assisted Living and LeadingAge said in a letter outlining topics for a Feb. 9 call with Rory Howe, a director in the Center for Medicaid and CHIP Services, that they view the Employee Retention Credit (ERC) similar to other pandemic-related assistance. The agency should apply the same tax rules, therefore, as it did for Provider Relief Funds and the Paycheck Protection Program. 

“If ERC is offset against cost, these one-time funds would lower base rates for all providers, whether they received ERC or not, and would take years for rates to be normalized,” the letter stated. Additionally, not treating the ERC as a grant “severely further exacerbates the funding challenge” of meeting a potential new federal staffing mandate that the associations said could cost up to $11 billion per year. 

Melissa Brown, the chief operating officer of Gravity Healthcare Consulting, called it “ludicrous” for providers to account for ERC when reporting costs. 

“This would artificially lower the actual and ongoing costs for care, causing an inaccurate reduction in reimbursement for everyone, including those who didn’t even take the credit,” Brown told McKnights Long-Term Care News. “Everyone would suffer, not the least of which is the patients whose care could be impacted by the lower rates of reimbursement. The ripple effect of this dangerous policy could be felt for years to come.”

The other topic on which the associations are seeking clarity is the transition to the Patient Driven Payment Model for state Medicaid payments. The letter noted that many states believe they must transition to this new model by October of this year rather than October 2025 and are “rushing payment system transitions” that could cause compliance challenges for providers.

The associations want the agency to clarify the timeline to states and provide more technical support on the Optional State Assessment

Brown said that the current federal guidelines are pushing states toward the new model at a fast pace, which could become problematic. 

“Considering how inaccurate the PDPM projections of CMS were with a decade to study and prepare for PDPM, it is unlikely that individual states with one year or less to study PDPM will arrive at accurate reimbursement rates that don’t negatively impact the industry,” Brown said. “At the very least, CMS should provide support to the individual states with researching and establishing rates based on PDPM.”