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Bureaucratic ‘sleight of hand’ doesn't fool LTC industry

June 1, 2008
by Bob Gatty
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What one hand giveth, the other hand taketh away.


Perhaps those words should be inscribed above the entrance to the Centers for Medicare & Medicaid (CMS) offices in Baltimore, where bureaucrats have settled on proposed payment rates for skilled nursing facilities (SNFs) that they say “more closely reflect differences in patient care needs.”

The upshot of those new rules would be a reduction in payments to nursing homes of $770 million, or 3.3%, for 2009, which industry leaders and congressional allies warn means total cuts of $5 billion over the next five years.

But that's okay, CMS says. Don't worry. It's really not that bad. Because that decrease for next year would mostly be offset by the proposed Medicare payment rate update of 3.1%, yielding $710 million in increased payments to SNFs.

So, says a CMS press release, “Taken together with the proposed recalibration of the CMI, (that's governmentese for “case-mix index”), SNFs could expect to see a slight decrease in payments of $60 million, or 0.3%.”

What's $60 million among friends? Somehow, now, SNF executives should feel better.

“We are confident that with the payment rates we are proposing today, the nation's skilled nursing facilities would be able to continue to provide high-quality services to those who need critical skilled nursing facility care services,” said CMS Acting Administrator Kerry Weems. “CMS is committed to providing high-quality care to those in skilled nursing facilities and to paying those facilities properly for that care. The proposed adjustments to the payment rates for next year reflect that policy.”



To justify its cuts, CMS explained that in 2006 the agency refined its case-mix indices to better account for the resources used in the care of medically complex patients, and SNFs have been paid based on these projections since then. However, with the use of Resource Utilization Groups (RUGs), which reflect a patient's severity of illness and the kind of services required (the case mix), Medicare expenditures have increased.

The agency explained that patients were being classified into RUG groups more than 30% of the time, compared to earlier estimates of 19%, resulting in far higher payments than originally projected. Now, CMS wants to recalibrate the case-mix weights “in order to reestablish budget neutrality on a prospective basis.”

Translation: They want to correct their original projection mistakes and cut payments to save money in the future.

In addition, CMS proposes to recalibrate the second part of the refinement package that accounted for the use of nonancillary services. Thus, future payments “would reflect the intent of the refinements, and payments to providers would more accurately and better reflect the service needs of Medicare beneficiaries.”

CMS said it would then have in place “an accurate and more precise baseline which it could use in anticipation of any additional program enhancements that may be made in future years,” such as payment incentives for quality care and further updates to the case-mix model that would be needed to account for changes in patient needs and industry practice.”

Not so fast, says the American Health Care Association (AHCA) and the Alliance for Quality Nursing Home Care, which have mobilized allies on Capitol Hill to protest the changes and the resulting payment reductions.

Sens. Debbie Stabenow (D-Mich.), Ron Wyden (D-Oreg.), and Pat Roberts (R-Kans.) sent letters to Health and Human Services Secretary Mike Leavitt immediately after the CMS May 1 announcement, warning that the cuts “could have unfortunate and unintended results both for patients and for the Medicare program, including diminished care for seniors and higher costs for taxpayers.” The senators said CMS is failing to recognize other changes in Medicare policy that have resulted in an increased number of high- acuity patients receiving care in SNFs since the RUG rates were revised in 2005 and coincided with a separate policy initiative to shift certain categories of Medicare patients who needed rehabilitation to SNFs.

“Payment policy should support, not undercut, SNFs' ability to care for the growing numbers of high-acuity patients who need intensive rehabilitation,” they said. According to AHCA and the Alliance, these patients would have otherwise been cared for in higher-cost facilities, resulting in estimated savings of $709 million to Medicare in 2006 alone.

The senators cautioned that “reducing payments would shift patients from SNFs to more expensive sites for care, ultimately defeating the goal of reduced payments.”

Bruce Yarwood, AHCA president and CEO, said current policy, as intended by existing law, improves the ability of SNFs to care for a higher-acuity patient population. “The CMS changes,” he warned, “gives with one hand and takes away with another–leaving frail, elderly seniors in greater jeopardy as a result.”

Alan Rosenbloom, Alliance president, said the cuts would “undermine our ongoing efforts to invest in and build the necessary clinical infrastructure to ensure care quality is maximized.” The proposal, he added, “will unquestionably place at risk our long-standing goals of increased efficiency and effectiveness—which benefits nursing home patients, our caregiver workforce, and taxpayers alike. Substantial modification is in order, and we urge Congress to carefully scrutinize this CMS directive.”

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