The 11.1% Medicare Cuts to Skilled Nursing Communities
I confess that this is a politically incorrect article, given that skilled nursing communities are an important part of my reader base and customer base at Vigil Health Solutions.
Ever since the 11% cuts were announced, the headlines streaming from nursing home industry groups make it sound like Armageddon has arrived for the most frail of Americans, skilled nursing residents. I am a skeptic. I think the headlines sound more like Chicken Little crying, “The sky is falling!” or the little boy crying wolf. Here is why:
– A little more than a year ago CMS enacted a rule change that had the net effect of making group rehabilitation therapy less profitable and individual revenue more profitable. For reasons that are incomprehensible, CMS believed this would be a revenue-neutral adjustment (see my rant on this a few weeks ago). In reality it provided facilities an opportunity to increase revenue substantially and, by extension, increase profits. This is how the game has always been played and it is exactly what I would have done.
– After six months, CMS reviewed their payments and discovered this change had resulted in an additional Federal expenditure of $2 billion and was on track to cost $4 billion in the first year. O0ps!
– Now CMS has announced a sort of . . . . across the board cut in reimbursement of 11.1%. Resulting in lots of noise from the nursing home industry.
– The financial community has been equally alarmed, downgrading almost every single publicly traded company that operates skilled nursing communities.
Here is what that $4 billion looks like:
– $13 per year per person or about $52 per year for a family of 4, not really so much. But still the tax payers money.
– There are 16,100 skilled nursing facilities in the US with about 1.7 million beds.
– This means that on average, each nursing home received an extra $248,000 dollars, which works out to be about $2,350 per bed.
– These averages do not paint a very accurate picture because there are facilities that have a lot of Medicare patients and others that have very few. This means the facilities that have a lot of Medicare patients received a windfall that is greater than $248,000 and in some cases much more.
Parsing the Information
This is why I think it is a Chicken Little cry!
– No one has suggested this extra $4 billion dollars has improved patient outcomes. Patients are not getting discharged any earlier, nor are they reporting less pain or a higher quality of life.
– There has been no rush by operators to sell their skilled nursing facilities; to get out of the business.
– Even more telling, there are still dozens or perhaps hundreds of individuals and companies that are looking to purchase skilled nursing facilities.
– In fairness the $4 billion are not bottom line dollars. A significant amount of that money was paid out in additional salaries. That being said, the reason facilities crave Medicare patients is that they are very profitable.
– The cost reduction is not really 11.1% because these facilities will be receiving some cost-of-living increases.
– The analysts have it wrong. This was a one year windfall for astute operators who will continue to make significant profits.
Finally, this does not mean that it will be a bump free road. There is tremendous public/political pressure to reduce the cost of government, including health care. There will be further efforts to reduce costs. If I were in charge, I would suggest starting by reducing the paperwork burden, allowing care givers to give care.
I would also add that this cut has a very real silver lining. As the Super Committee meets to figure out how to cut more from the government, it gives the skilled nursing community the ability to plea that they have already sacrificed enough.
Please note: This represents my opinion and does not necessarily represent the opinion of Vigil Health Solutions.
Steve Moran
This morning I got a chance to look at an analysis of what this will mean over the next year or so. This data shows that for many SNF’s they will actually end up better off than if the overpayment and the subsequent cuts had not happened. The big problem is that it will be an unequal reduction and it appears that the facilities that benefited most from the increases will be the ones that will actually end up being better off. This also means those with low rehab volume will end up being the losers.
Steve Moran
From Linked in Groups:
I must respectively disagree with your basic premise, anytime you LTC, specifically SNF’s suffer a net reduction of $3.87 billion dollars this abruptly there will be consequences for both the operators as well as the residents of these facilities. You cannot look at these cuts in isolation, even if the operator made some money or at least recouped his cost with the earlier adjustments, those dollars were used to fund operations, pay salaries, etc. Approximately 2/3 of every dollar coming in goes right back out in Wage and Salary related cost so when cuts of this type are made the operator has almost no other option they to cut back on salaries, which is detrimental to the care provided, especially as the elderly resident of today SNF were in the hospital not that many years ago. As stated previously you can look at this from the wrong end of the telescope as the facilities suffering federal cuts are also facing cuts of a similar magnitude from the various State Medicaid program, anywhere from 7% to 10% of their reimbursement, for anywhere from 10% to 100% of their residents.
As far as the industry being profitable, that is debatable and almost always is a direct reflection of the financial payer status of the residents, i.e. Medicaid, Medicare or Private, with Private payor status winning hands down. If this was truly a profitable industry you would see new construction keeping pace with the geometric increase in the elderly, which has not come close to happening. So what you see is constant changing of ownership of a stagnant (and aging) set of building with very little new construction (under 4%) to take its place.
My own editorial comment is that if these were the tennis playing PAC contributing seniors feeling the impact of these cuts the end results would be radically different.
We cannot see these type of cuts and next expect some negative ramifications, unfortunately it will take time to manifest itself, probably in some new politicians term and therefore some elses problem, isnt that the way it has gone lately, kick the can down the road.
Posted by Robert Bates
From Linkedin groups:
This is disgusting. Our country has become one of greedy, wealthy politicians who want to take advantage of helpless people. They do not even want to give money to the hurricane disaster to the states. We have become a self-absorbed, selfish group of wealthy people who want to take from the helpless and poor who cannot fight back, and this includes the “Tea Party” politicians who would not give a dime to a hungry person. Our country should take care of the helpless, poor, needy, children, unemployed, people who cannot find jobs, people who have lost homes due to the corruption of the banks and Wall St. Taxes should be expatriated to this country from the greedy corporations who moved overseas for cheap labor. This money will help to try and stabilize the people who need help. Maybe there should be a lesson from the Bible that tells us to help the helpless and needy people instead of being selfish, self, centered, self absorbed and have a lot of food on their tables. Let them learn to walk in the shoes of those in need.
Posted by Ilene Richman
If it were ascribable to only the Tea Party alone that would be wonderful, however it is not. It is the system in Washington on both sides of the aisle that propagates this partisan approach. It is not about what is good for the people but what will get me reelected. In addition the upcoming ACO’s will again throw more bureaucratic burden on providers in the guise of lowering costs and improving care. This is supposed to take effect 1/1/2012……….has anyone seen the final rules? Probably not until after the law goes into effect.
If it were ascribable to only the Tea Party alone that would be wonderful, however it is not. It is the system in Washington on both sides of the aisle that propagates this partisan approach. It is not about what is good for the people but what will get me re-elected.
With the upcoming ACO’s we will again throw more bureaucratic burden on providers in the guise of lowering costs and improving care. This is supposed to take effect 1/1/2012……….has anyone seen the final rules? Probably not until after the law goes into effect.
In addition we keep hearing how the system i.e. Social Security and Medicare is almost bankrupt. That may well be but what is the amount of funds that have been syphoned out of those two programs to fund other entitlements or non-related programs? These were set up so that the people who paid into them would have some security at retirement. Instead of that we have given trillions to people who have never paid a dime into these funds.
There is enough blame to go around to all concerned the question is what our elected officials are going to do to rectify these issues. The answer is nothing until “We the People” focus them on what we need to have them do. Not special interests, not billionaires, not unions and not foreign governments mandating what is good for us.
From Linkedin Groups:
Makes a lot of sense
Posted by Michael Katz
From Linkedin Groups:
It’s likely less about the analytics and more about the perception. Predictability is comforting – especially for seniors and influencing buyers.
Posted by Robert Mann
At the funding level, it is always about legislators and their re-election campaigns. Here in Washington state for example, Democrats have controlled the state LTC payment program for decades. There is not a single “Tea Party” member (as another commenter’s hateful and ill-informed rhetoric would suggest) on the state committee, AND YET the Democrats have specifically targeted the most needy and frail in our communities for funding cutbacks, especially those in LTC settings. Back to the point, I don’t believe there are enough voters in the “needy” category, at present, to cause Democrats to “show that compassionate Democrat face” — if there were painful consequences to be felt in the November voting booth you can be darn sure our state’s Democrats would certainly have not targeted the needy. Continuing this thought, it is therefore easier to cut spending on the needy, since they don’t vote, than cutting costs drastically in state employee wages — a dangerous and vocal group of votes easily whipped into action by the union like a herd of sheep.
John so unfortunate, but so true….
So what happens to the needy that can’t vote?
What happens to those that are able to eat because their job IS to provide care for the frail elderly?? They [the politicians] need to step back and see the entire picture.
From Linkedin Groups:
I have experienced that many nursing homes operate on pretty tight budgets. They often take on people before they are approved for Medicaid and just carry them until they are. I would think that this could create a significant crisis for them. Nursing homes are very labor intensive.
Posted by Diane Keefe
People that don’t work in this industry do not understand what we face. As a LNHA, finding the right balance is difficult. However, we do it because we see people that need help; People that need OUR help. It takes money to do what we do day in and day out we understand that. However, we see the faces of the frail elderly. We see the faces of that distraught daughter, son or husband because we are in the trenches.
The people making these decisions on where cuts need to be made they don’t see what we see…..
Please remember when you write your opinions, or to the readers that are reading, this is one person’s opinion. Those of us who work in the LTC industry can tell you all the actual day to day costs, limit the assumed huge profit. When we admit Medicare recipients, we may get paid a fair amount a day depending on their conditionand services provided, but under Medicare rules, we are required to pay for ALL of their meds, and ALL of their tests and procedures, room/board, etc fromthat one rate. So sometimes we win, and sometimes we lose. In addition to the rate decrease this year, CMS has changed from the previous system of Prospective payment system, to reduce our payment levels weekly if therapy care reduces. So if a patient is too sick medically to participate, even though we may be paying for high cost medications, we will get paid less. This system has caused some companies to turn away the more complicated patients to minimize cost, while some take them out of moral obligation and make significantly less profit. In addition to all of this, we are battling the Medicare PPOs that are refusing to pay for entire benefit period based on non clinical staff feel the patient isnt meeting acceptable goals, and paying less per day than Medicare would. Many of the Elderly dont even know they have enrolled in a Non Medicare program and the have copays, or have to go to a SNF they dont want because it is in network…What a sad way to treat the grandparents and parents of America!!! In summary, yes, the skilled companies will still be fine. The smaller, and often more ethical may have financial contraints unless they have had some great education on how to manage this process.
From Linkedin Groups:
Are we wringing our hands or ringing our bells? Inquiring minds want to know.
Posted by Ilene Schneider
First I want to say that all the cuts being made to medicare and medicaid should not be about the long-term care facilities it shoud be about the elderly and poor. because this is going to futher decrease their access to healthcare. Secondly I believe that long-term care facilities are not the old mom and pop companies any long and these large organizations are just worryed that profit will drop and decrease end of year bonus. If our country stop being so greedy and stop think about having large bonus at end of the year long-term care facilities will be ok. Hear is a solution why not fight the laws that require long-term care facilities to be top heavy and go back to primary care nursing and unit managers that are LPN’s keep your upper management RN for the director of nursing and RNAC. Another suggestion is join an ACO. Last but not least let start worring about who is going to be truley effected the elderly and the poor. They are the ones who are being denied access to healthcare base on them having medicare and medicaid insurance. If you research how many clinics and hospitals and other health care provider that are refusing to take medicare and medicaid patients related to the reimbursement rate it will show how our health care system has become a big corporation instead of a service for our society to stay and live a healthy life.
This is a segment from a recent about.com blog:
The health sector is growing. U.S. Bureau of Labor job-growth statistics showed the “nursing and residential-care facilities” category gained 3,200 jobs overall in July.
It is almost as if the industry is going through its own correction. Certainly nursing home operators saw this coming and that is why they have shifted services into rehabilitation where the Medicare dollars offset the Medicaid expenditures for “residents.” Just when the industry started enjoying a favorable payment mechanism, it is being pulled back. Yet it is still better than Medicaid.
While hospitals certainly have a better payer mix, they too are feeling the strain. One progressive hospital system in my area tasked its managers to operate as if Medicare was your only payer. That scenario helped them become more efficient and profitable and certainly has positioned itself for long-term growth. Perhaps agings services providers need to take a similar approach.
See original blog here.
http://assistedliving.about.com/b/2011/08/10/sp-puts-six-for-profits-on-credit-watch.htm
And the lesson: Manage to the least favorable payer scenario and you will be surprised how efficient you can become.
From Linkedin Groups:
From the perspective of my post-acute clients in 20 states; the 11.1% cuts can be disaterous to the bottome line. Each has deployed a strategy to reduce readmissions (gaining billable days) while improving clinical outcomes. Those outcomes are then marketed to their top referral sources to earn the coveted “skilled referral” which improves overall census and skilled mix, not to mention replacing the cuts plus adding an extra $500,000 to the annual bottome line.
Posted by Rob Bright
What I find most interesting about our industry is that few companies show any indication that they comprehend what the cuts truly represent; the end of an era in senior care. The triple tsunami of increasing patients, decreasing reimbursements, and increasing regulation mean it is imperative for providers of skilled nursing services, home care, and acute care systems to become far more efficient than they have shown themselves to be. The prevalent model in California is for independent management of facilities in mid-sized chains that provide no economies of scale and, in fact, attempt to find refuge from litigation by incorporating separately. These facilities own and host their own servers, purchase items through buying groups (DSSI, etc.) that add five percent to costs, use five to ten disconnected software application to manage their business, and are at the mercy of case managers and discharge planners to acquire new patients. An 11 percent reduction in Medicare reimbursements may actually represent a 40-50 percent reduction in profits, and the scary thing is there is much more to come. The era of the ma and pa is over. Individual facilities, small chains, and even the current “big boys” will only survive if they abandon their current business models and adopt a more efficient approach to providing care.
With all that being said, there has never been a greater opportunity for a company with the vision, resources, and infrastructure to provide the highest quality of care in a fully compliant manner, based on evidence-based medicine and a efficient organizational structure. The question is, who will that company be…
Dan seems to nail it on the head. What are the top five initiatives that you would propose to to industry leaders?
NEWS RELEASE: October 1, 2011…The Restorative Model replaces the Medical Model and Social Model in two skilled nursing homes…an example of innovation that builds the new paradigm for operating within a Deming modeled quality control system (not QI’s or QIS that only count mistakes) that does implement and measure quality of life services…real live models now available…contact Jerry Rhoads at [email protected] or http://www.remedyeldercide.com
Rhoads family has purchased two nursing homes in Iowa to set up Restorative models of care:
According to the proposals in his latest book “Remedy Eldercide” Jerry Rhoads establishes that the improvement in quality of life comes not from the regulators but from the owners. It is our mission to restore the dignity of the elderly (Elderpride) through the programming we provide. We developed and use a comprehensive assessment tool (102 triggers for medical, social, emotional and discharge planning) that is computerized for determining the patients’ physical, emotional, social and spiritual problems which brings corresponding standardized model programs for directing the staff towards outcome goals…we have two case managers, in each facility, who customize the plans of care to that patient’s specific needs than assigns the work to the appropriate staff functions for implementation…this can be done on point of service lap tops so the documentation of performance can be done on the spot.
E-mars, EHR, EMR, E-charting, E-lab, E-point of care, E-therapy, E-outcomes, E-cost accouting, E-survey management, E-staffing patterns and incentives are in the making with our Caregiver Management System internally developed by Jerry and Kip Rhoads over the last 25 years.
We also have the computerized model therapy programs linked to the assessed nursing problems which are integrated with the nursing plan of care. During and after therapy is activated by our 5 therapists our certified Rehabilitation Aides and Restorative Nursing Aides carry out the treatment plans using the assignment of interventions sheets.
Psycho/social aides conduct our classes and clubs designed to deal with emotional, behavior and socialization programs trigged by the comprehensive assessment.
Our SPA aides do the bathing, the Med Techs do the medication passes, the hospitality aides make the beds and clean the facility, Our salon is open 3 days per week and small group activities are planned throughout all 7 days per week.
Our hospitality team is responsible for the environment, infection cotnrol, bed making, floors, exterior grounds, laundry and invetory control. The restaurant team serves the patients nutritional and stimulating meals in a quality of life setting.
Our 6 member physician group employs a Physician Assistant that makes rounds during the week and keeps the physicians who do rounds once per week informed on changes in condition requiring action. Our Medical Director attends a Utilization Review meeting each Friday and helps direct the transition of our patients according to their individualized discharge plan. Medicare is our primary pay-type with Medicaid utilized as a last resort…all insurances are accepted, including HMO, PPO, Long Term Care insurance and VA. To date we have discharged 55% of our admissions back home.
Our facility was visited and toured by the Governor of Iowa (Terry Branstad) who is interested in improving the quality and being more cost effective. We presented to him the facts that in the two years we have operated All-American Care of Muscatine we had saved Medicare (we cut readmissions to the hospital in half) and Medicaid (109 patients were discharged back to the families and kept off Medicaid funding) $1.7 million dollars. Another $350,000 was saved by reducing medications by 33% (inappropriate physician telephone orders were stopped and only active orders honored).
It is this strategy that can save the American Health Care system up to $500 billion per year…all of this is covered in Remedy Eldercide (you don’t know what you don’t know).
From Linkedin Groups:
The 11% cuts may just set the clock back several years, especially in Texas where the transition from TILE to RUGS has taken place and resulted in an increase initially. However the price of everything else has gone up since then. In reality, a cut of more then 10% is significant and you have to start looking at changes. Labor, expenses and contracts.
Posted by Shawn Hancock, LNFA
I don’t work directly in LTC, but I do work around it, and much of my sales is dependent on it. This is a conversation that is replicated in Hospice as well as long term care communities. The politicians will do what they do, and the LTC industry needs to send their lobbyists to Capital Hill to see what can be “bartered”. In the mean time, I feel the need to comment on the lack of, or slow movement toward cost saving technologies in LTC. There is tremendous potential in innovation, technology, and information systems that is waiting on the sidelines for LTC to embrace it. While the barriers and challenges must be considered, one principal must be considered, “Technology and tools have the ability to produce better outcomes at a lower cost”.
It works in other industries and other areas of healthcare, why not LTC. So if this is the spark that ignites the fire, so be it. Mobilize the best of your best and modernize, innovate, and step into the future. I am a nurse with greater than twenty years experience. I am here to say it can and needs to be done.
From Linkedin Groups:
Over the past decade or so, the Long Term Care industry has been inundated with bureaucratic measures that affect revenue. It has often caused us to over react. With PPS, it was proposed to eliminate in-house rehab. As a result, we have been trying to hire them back since then. In Texas, with Medicaid RUGs came the few of RUG audits. Not to mention the ever rebounding Part B caps. We are still trying to get pennies on the dollar from those manage care contracts. Now we have Culture change & QIS s
surveys to look forward to; the list goes on & on. The industry has endured through much of the change. I think, if we stop, take a breath, look at how we can manage the cuts (for example as Glenda stated in looking at clinical RUGs possibly), and managing Rehab productivity, we make find that the sky is not falling. The most important thing to do is not panic or do some knee-jerk reaction. As a well know songtress put it,”We will survive”.
Posted by Ray Baker
From Linkedin Groups:
You need to compare rates from this current year to year beginning10/1/2011 with a metric of your most frequently calibrate RUGs to figure what your true impact will be on a “steady state”
Posted by Robert Meyers, FACHE LLC
From Linkedin Groups:
I will tell you, from the facilities that I have talked with it seems to be a six figure reduction in income. Is it just the start? What will happen when the Medicaid reductions start coming and they will. As a risk manager consultant/insurance broker for many homes, it is a true concern. Scott Mccall
Posted by Scott McCall
I will only say that it is a travesty again that our legislators can not get it together.
Our Seniors DESERVE to be cared for without feeling the burden or concern for their care. As a Senior Advocate, I am heartbroken. As a Senior Executive/In a LTC /Nursing home organization. I am beyond concerned, as a long term veteran through our ever- changing environment , I am speechless – we will survive -but at what cost?
I couldn’t agree more with everyone. We are the only society that treats our elders as if they are a burden. The sad truth is that we are all heading that way so we shouldn’t be surprised when our kids start treating us that way because we are very good teachers to them.
In California, the state Department of Health Care Services is cutting the Medi-Cal (Medicaid) benefit for Adult Day Health Care (ADHC) effective December 1st. Some 35,000 frail, elderly beneficiaries will be displaced, many of them ending up in nursing homes and in need of rehab goals. The state plans on shifting these beneficiaries to managed care for care coordination, but there isn’t much in the way of “ADHC like” resources to support them, or refer them to. The California Association of Health Plans has weighed in on this proposal with a number of questions to the state regarding Health Plan responsibility and who is going to pay the freight. It might be good for California LTC planners in the nursing home business to do the same thing.
Bob:
I living in California and this cut is a serious threat to the residents and the owners. I suspect it will result in litigation which of course will just waste money, but make some attorneys smile.
Steve Moran
Within our industry, the “sky has fallen” numerous times. Everytime CMS decides to make any changes, our industry franticly reacts to the situation. When CMS moved to the PPS model, all organizations trembled due to the unknown. When CMS moved to 3.o, our industry scrambled to the lobbyists in Washington. When the change to 3.0 was announced, our industry pounded their fists like a 5 year old whose toy was stolen. Each time there was a change to our reimbursement system, we have proven that we are up to the challenge to overcome the obsticles which were tossed in front of us. I have been able to achieve a $535 Medicare Rate PPD YTD sincethe change to 3.0. I just try to learn as much about the system as possible in order to drive the revenue. I knew that there would be a drastic change to our rates for a positive variance. The reason for this, in my opinion, is because I am a relatively young Administrator/Executive Director and am not afraid of change. When you have the “Older Generation” who is not comfortable with learning new systems is where the issue truly lies. I thoroughly enjoy the “dance” in learning as many “moves” as I can in order to prove my abilities in managing one of the most, if not the most, important aspect of our position. Needless to say, this was not the first and is not the last change to our reimbursent system so we need to quit acting like a toddler and accept the change. Educate thyself on the changes, educate your staff and you will persevere.
Nathan, even though I am an “Older Generation” I agree with your assessment. It is a huge game and ultimately the operators end up playing it more effectively than the government. It seems to me there has to be a better more rational way to make this whole system work, that provides a fair profit to providers and a fair cost to the system, but I am not holding my breath.
Steve Moran
From Linkedin Groups:
Great comment, Yosef! I agree some organizations are unprepared for the 10/1/11 changes and they will be seriously impacted. Organizations concentrating on increasing days in the high rehab categories while also looking to improve apprppriate coverage in the clinical RUG categories will do best, I believe. Looking closely at current therapy & coverage practices and making modifications based on 2012 rates is the first priority.
Posted by Glenda T. Hynes, R.N. RAC-CT
From LinkedIn Groups:
You are so right, Ray.
Change is a constant for the LTC industry. In looking closely at the FY 2012 rates, it is clear that changes in both therapy practice {less RMs & RHs – } and assessing residents needing clinical & restorative support {and clinical RUG categories} more closely may result in some fiscal stability.
Posted by Glenda T. Hynes, R.N. RAC-CT