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CMS Proposes $390 Million in Medicare Nursing Home Cuts

John Commins, for HealthLeaders Media, May 4, 2009

CMS has proposed cutting 2010 payment rates for Medicare skilled nursing facilities by $390 million, or 1.2%, to "better reflect" the cost of caring for the Medicare beneficiaries living there. CMS says the reduction is an effort to rebalance an earlier adjustment to the case-mix indexes.

"CMS is once again proposing to make the parity adjustment correction factor to case-mix indices, which works to correct a budget neutrality forecasting error previously made by CMS," says Peter Gruhn, director of research at the American Health Care Association in Washington, D.C.

CMS says the proposed FY 2010 recalibration of the CMIs would result in a reduction in payments to nursing homes of more than $1 billion, or 3.3%.

"Ultimately, it works out to about a $16 reduction per patient day, which could have fairly significant implications for quality of care and could put facilities under significant financial pressure," Gruhn says.

However, this decrease would be largely offset by this fiscal year's proposed update to Medicare payments to skilled nursing facilities. The update?a proposed increase of 2.1% or $660 million for FY 2010?is based on the change in prices of a "market basket" of goods and services included in covered skilled nursing facility stays.

"There is some concern that, as part of the healthcare reform efforts, the administration may take the SNF market basket away for one or more years, potentially eliminating this update," Gruhn says.

The percentage increase in the market basket is used to compute the update factor annually. The combination of the market basket increase and the recalibration of the CMIs explain the 1.2% reduction.

CMS says the cuts are needed to offset Resource Utilization Group classification refinements initiated in 2006 that raised Medicare expenditures, because utilization under the refined case-mix system differed significantly from the projections on which the adjustment was based. CMS found that patients were being classified into one of the newly created higher paying RUG groups more than 30% of the time, as compared to 19% projected by CMS, thus triggering Medicare payments far in excess of the original projections.

The proposed RUG redistribution for FY 2011 means a dramatic decrease in overall reimbursement for SNFs because a very small percentage of residents will fall into the extensive services and extensive plus rehab RUG-IV categories," says Ron Orth, RN, NHA, RAC-CT, CPC, president of Clinical Reimbursement Solutions, LLC, in Milwaukee, WI.

CMS is now proposing to recalibrate the case-mix weights in order to restore overall payments to their intended levels on a prospective basis, starting in FY2010. The proposed rule went on display on Friday at the Office of the Federal Register's Public Inspection Desk and will be available under "Special Filings," at: www.federalregister.gov/inspection. Public comments on the proposal will be accepted until June 30.

MacKenzie Kimball, an associate editor in the long-term care market at HCPro, contributed to this report. She writes PPS Alert for Long-term Care and manages MDSCentral.


John Commins is a senior editor with HealthLeaders Media.

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