Provider groups slammed the Centers for Medicare & Medicaid Services on Friday after the agency issued a final rule that would reduce Medicare payments to skilled nursing facilities by $3.87 billion for fiscal year 2012.

“We are appalled that the CMS chose to implement an 11.1% across-the-board rate cut for skilled nursing facilities in one year,” said Larry Minnix, president and CEO of LeadingAge. “We believe that any across the board cut is unwarranted and problematic, and one of this magnitude is unprecedented.”

Starting Oct. 1, Medicare payments to SNFs will be shaved by 11.1% to correct for an unexpected spike in payment levels in fiscal year 2011. Calls to lower the reimbursement rate stem from reports that providers filed for reimbursement in the highest rehab classifications at more than four times the projected rate. The government’s recalibration would drop skilled care payments by $4.47 billion or 12.6%, according to CMS. However, the amount drops 11.1% when offsetting increases are factored in.

Gov. Mark Parkinson, president and CEO of the American Health Care Association, had harsh words on the CMS decision. He said the planned reduction will hurt both providers and residents — particularly when coupled with changes in group therapy definitions. AHCA had recommended a 3% cut that it said would have saved 100,000 jobs.

“At such a critical time, while we already face drastic cuts to Medicaid at the state level and a fragile economic recovery, this was unnecessary,” Parkinson said. “AHCA put forth a more balanced approach that would have met the goal of budget neutrality while protecting the critical role nursing facilities play, which the agency unfortunately disregarded. Their immediate reduction to skilled nursing facilities now puts more than 100,000 healthcare jobs at risk, as well as our ability to provide quality care to our nation’s seniors.”

Jonathan Blum, deputy administrator and director of the Center for Medicare, said CMS is working on changes to improve its payment system, but that the unexpected placement of too many patients into ultra-high rehab groups necessitated the 2012 cut.

“Additional data analyzed by CMS since publication of the proposed rule confirmed the extent of the overpayments that have occurred since implementation of the RUG-IV system,” he said.