Misleading data on SNF margins threatens fruitful payment reform, Parkinson warns lawmakers

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Lawmakers may have an inaccurate understanding of skilled nursing facility margins based on outdated and partial information, the leader of the nation's largest nursing home organization is cautioning. American Health Care Association President and CEO Mark Parkinson sent a warning letter Monday to House and Senate leaders.

On June 19, the Senate Finance Committee and the House Committee on Ways & Means sent a letter to stakeholders, asking for input on post-acute payment reform. Parkinson praised this bipartisan outreach in his response to the committee leaders this week. But he expressed concern over information cited in their letter. 

“In Table 1, the letter reflects the skilled nursing facility (SNF) average Medicare margin as 22-24 percent,” Parkinson wrote. “While this is what MedPAC reported for 2011, this figure is such an anomaly and differs so significantly from current margins that we must comment.”

The 2011 numbers from the Medicare Payment Advisory Commission (MedPAC) are dramatically out of date, Parkinson stated. SNFs have since been subject to a 12.6% Medicare reimbursement cut, reductions in bad debt reimbursement and a 2% sequestration payment reduction, all of which have lowered margins significantly. Add in Medicaid cuts at the state level, and the overall operating margin for the skilled sector is less than 1%, Parkinson said, citing a Moran Group analysis. 

Other reports, which Parkinson did not mention in his letter, have come to similar conclusions.

AHCA does support site-neutral payment and other reform efforts, Parkinson wrote. However, he stressed that “combined cuts have produced a new and unprecedented reality for skilled nursing centers,” and any dialogue should stem from a “shared understanding of the status of the profession.” 

The Senate Finance Committee is led by Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT). The House Committee on Ways & Means is led by Chairman Dave Camp (R-MI) and Ranking Member Sander Levin (D-MI).