Nursing Homes Tout 'Site Neutral' Pay In Bid To Avert More Pay Cuts
Nursing homes are touting policies that pay for services more equally among post-acute care facilities, such as payment concepts in the president's budget request, in an effort to avert proposals that would add to the pile of Medicare pay cuts from the past three years, which consulting firm Avalere Health has analyzed. The nursing-home lobby estimates that the "bad debt" pay cuts in this year's "doc fix" agreement hit nursing homes six times harder than hospitals, and the nursing home industry fears bad debt policy will again become a piggy bank for states facing tight budgets and U.S. lawmakers looking to pay for fixing, or continuing to override, the Medicare physician pay formula.
To avert such cuts, the industry is urging policy makers to embrace policies, included in the past two White House budget proposals, that would equalize pay between nursing facilities and inpatient rehabilitation facilities for a number of services, such as knee and hip replacements, said Alan Rosenbloom, president and CEO of the Alliance for Quality Nursing Home Care. Such "site neutral" policies would improve payment for nursing facilities, save Medicare money and lead to a rational payment system that pays for services equally irrespective of the type of facilities in which the services are delivered, he said.
The Affordable Care Act also has many examples of site-neutral type payment systems, Rosenbloom said. To a small degree, accountable care organizations move in that direction, and to a greater degree bundling post-acute care services accomplishes the goal of paying the same rate for services that patients need, instead of paying differently for the same services delivered at different types of facilities. Some of the ACA's policies on Medicare Advantage plans move in this direction, too, he added.
But even though on one hand the new health reform law focuses on incentives based on patients' needs, Congress also continues to use old-fashioned approaches of cutting provider pay to deal with budget problems, he noted.
Nursing facilities care for a disproportionate number of people eligible for both Medicare and Medicaid, called duals, the facilities are not allowed to force duals to pay copays and deductibles, and states are not required to pay that cost sharing on behalf of duals. Thus, Medicare historically has paid for this bad debt, but the congressional agreement on the Sustainable Growth Rate (SGR) that was signed by the president in February phases down Medicare bad debt reimbursements to 65 percent. Congress estimates the policy will save Medicare nearly $7 billion over 10 years.
Hospitals already were receiving only 70 percent of bad debt from duals, but duals make up a smaller portion of bad debt for hospitals. Duals account for 55 percent of hospital bad debt, according to Avalere, and they account for 90 percent of nursing facilities' bad debt. Given that the bad debt percentage has been lowered to 65 percent, hospitals are hit with a 5 percent reduction on a 55 percent base, and nursing facilities are hit with a 35 percent reduction on a 90 percent base, said Avalere founder and CEO Dan Mendelson. That means the new bad-debt policy reduces nursing home pay six fold compared with hospitals.
Avalere compiled a list of pay cuts to nursing home over the past few years. The list, unveiled by the group this week, includes a 3.3 percent case-mix adjustment in CMS' fiscal 2010 payment rule; the health reform law's market-basket productivity adjustment beginning in FY 2012; an August 2011 rule mandating an 11.1 percent reduction to Medicare pay rates. Also, 32 states have enacted or proposed pay cuts or freezes in 2012.
Up next: the 2 percent Medicare sequester that was included in the deficit reduction deal. And the Medicare Payment Advisory Commission recommended freezing the nursing home market basket update next year, which when combined with the health reform law's productivity adjustment comes out to about a 1 percent pay cut. That reduction, were Congress to accept MedPAC's recommendation, would hit industry three months before the sequestration, said Emil Parker, director of Avalere's post-acute care and long term care practice. MedPAC also recommended rebasing Medicare pay in 2014, which would amount to a 4 percent cut.
In reaction to the perpetual pay cuts, nursing facilities plan to lay off 20,000 to 25,000 staff, reduce pay and benefits for existing staff and delay capital improvements, the industry says.
The problem is that nursing homes rely heavily on Medicaid funding, which is so low that facilities lose money, Rosenbloom said. Medicare margins may look healthy, but when Medicaid is factored in, nursing homes have the slimmest profit margins of any health care sector at 3.4 percent, and that's based on 2010 data so industry had sustained more cuts since then.
The health reform law requires MedPAC, starting this year, to consider Medicaid pay in industry profit reports. That's a step in the right direction, but not a solution. MedPAC is still only responsible for Medicare's solvency, Rosenbloom said, and a separate congressional advisory panel, the Medicaid and CHIP Payment Access Commission (MACPAC), is responsible for Medicaid. In fact, March 15 was perhaps one of the best examples of the ridiculously "siloed" approach to nursing home reimbursement, Rosenbloom said. On that day, MedPAC, MACPAC and CMS each issue separate reports with incongruent recommendations -- or no recommendations at all -- on nursing home patient care and policy.