Study: Medicare cuts would harm already strained providers

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Potential Medicare cuts could pose serious financial problems for providers because of the industry's reliance on such resources, a new report says.

The report, "Skilled Nursing: The Phoenix Rises Again," says that a cut would overwhelm the industry because "nursing homes are the lowest margin publicly reimbursed health care services segment." The investment bank of Friedman, Billings, Ramsey & Co. prepared the report.

The study comes in the wake of the Medicare Payment Advisory Commission's (MedPAC) statement that it is against the annual "marketbasket" increase. This increase is put in place to cover cost increases on long-term goods and services, such as staff salaries.

The report cites the "havoc and disruptions" caused by the Medicare PPO rates in 1997 and recommends that policy makers consider how dependent skilled nursing facilities are on these provisions.