MedPAC says nursing home Medicare margins are healthy

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The Medicare Payment Advisory Commission (MedPAC) says that Medicare margins for freestanding skilled nursing facilities was 15.9% in fiscal year 2004, up from 11% the year earlier -- numbers they consider favorable. That is a key reason for the commission's recommendation last week that nursing homes should not get a payment update for fiscal 2005.

Previous commissioners have urged the commission to retain high Medicare margins for nursing homes to counteract much lower Medicaid reimbursement. But the commission reported that Medicaid funding had stabilized despite state budget shortfalls, and skilled nursing facilities' earnings growth was better than expected in 2003.

The commission did, however, recommend the Congress redistribute the overall pool for skilled nursing funding to better serve patients. MedPAC recommended that the 6.7% payment add-on to rehabilitation resource utilization groups (RUGs) under the skilled nursing prospective payment system be transferred to non-rehabilitation RUGs.

The commission's recommendations are not binding. It reported an overall Medicare profit margin of 1.8%, compared with 1.7% in 2002, 4.1% in 2001 and 5.1% in 2000.

To see the report, go to and click on Jan.14-15 meeting.