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 Nursing Facility Margins Could Go Negative If Further Cuts Happen: Study

 

 

An independent analysis projects nursing home margins will slide into negative territory if Congress makes further reimbursement cuts to the Medicare and Medicaid programs, underpinning the argument of long term care advocates that enough is enough in the way of reductions to providers serving the nation’s frail and elderly.

The American Health Care Association commissioned The Moran Co. to perform an independent analysis of national nursing facility margins to show the most recent performance of the nursing home industry. The analysis is based on the most recent Medicare cost reports for fiscal years ending in 2009 filed by nursing facilities that participate in the Medicare program and includes revenue from all payers for nursing facility services and total expenses.

The data show slight 0.75 percent overall aggregate margins in 2009 for nursing facilities, which is a lower number than those published by the Medicare Payment Advisory Commission (MedPAC), although within MedPAC’s margin of error. The commission has backed a market basket freeze for nursing homes, assuming margins for freestanding facilities for 2009 to be 3.5 percent.

Moran’s analysis projecting into 2012 and beyond shows a bleaker outlook. When factoring in a two-year zero market basket update and a possible new requirement for nursing homes to limit bad debt to 25 percent, among other factors, margins would dip into negative ground in 2012 at minus 0.1 percent and deflate further to a negative 2.9 percent in 2013, the report said.

“Our baseline suggests that going forward from 2009, nursing facility operating margins would be mildly positive, holding current payment policies constant,” the report said. However, if reimbursement policy changes, then the slide to negative margins would be impacted, Moran said. These changes include the aforementioned two-year suspension of market basket adjustments and limiting bad debt to 25 percent, as well as imposing 5 percent coinsurance on days one through 20 of skilled nursing facility care and capping Medicaid provider taxes at 3.5 percent of total payments.

“If reimbursement policy changes of the magnitude of those now under discussion are implemented, our point of estimate of the outcome suggests that nursing facility overall margins would turn consistently negative,” the report said.
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