ECONOMIC IMPACT OF
MEDICARE AND MEDICAID
ON GERIATRIC CARE IN
HOSPITALS AND SKILLED
REHABILITATION AND
LONG TERM FACILITIES
Geriatrics—Why Care?
* Fastest growing portion of the American
population.
* Most Americans rely on Medicare to cover
their medical costs as they are eligible.
* Medicare spending is projected increase
from $555 billion in 2011 to $903 billion in
2020 (CBO, August 2011).
* Over the next 10 years, Medicare spending
is projected to grow more rapidly for
prescription drugs, hospital outpatient
services, and skilled nursing facility services.
(Kaiser Fact Sheet).
What are Skilled Nursing Facilities?
Skilled nursing facilities are attached to nursing homes and will treat post
Hospitalized patients who require skilled care or rehabilitation for up to
100 days of service, if they are Medicare beneficiaries and they have met a
length of stay of three midnights in the hospital prior to admission to the
SNF
Many elderly patients live alone, or have family members that are not
available during the day, secondary to working. Therefore, after hip repairs
or fracture repairs, they require skilled nurisng services and rehabilitation
services to ensure that they heal properly and regain as much functional
capacity as possible. SNF facilities vary in what they specialize in, but most
cover wound treatments, infection treatments, pneumonia recovery, and
surgical recovery and rehabilitation.
Nursing Homes as Businesses
Over the last ten years, nursing homes have been profitable investments.
Many have been purchased by investment groups.
Over 67% of nursing homes are for profit. In Bexar County, there are 57
nursing homes, and only three of them are not for profit.
In 2009 the avg profit margin for a skilled nursing facility was 18.1%. For a
seven year period, MEDPAC reported that aggregate profit margins for free
skilled nursing facilities exceeded 10%.
Interestingly, as profit margins increased over the past ten years, staffing at
skilled nursing facilities has not increased. Therefore, increased profits have
not been used to increase staffing.
MEDICARE CUTS TO SKILLED
NURSING FACILITIES
 October 2011-11.1% cut in Medicare Rugs (Resource Utilization Groups 4)
 “CMS states this action was taken to ‘better align Medicare payments with costs and correct an
unintended spike in payment levels.”
 In the past, more residents were receiving medium levels of care vs higher levels of care. New
RUG-4 regulations were intended to pay skilled nursing homes and encourage them to take the higher
level of care patients that were being refused by facilities, because the facilities were “losing money” on
these patients, since they were actually being underpaid per the national average.
 The agreement with RUG 4 was that Medicare would pay more for upper level patients but would
but it left in loopholes that documentation and providing therapy services could move medium level
care patients up to a higher level of care.
Cause of Recent Medicare Cuts on Skilled Nursing
Facilities
• Skilled Nursing Facilities increased their level of documentation, and
the amount of rehabilitation services delivered to skilled patients,
thus raising many patients to higher levels of care. This increased the
overall costs Medicare was going to have to pay. Therefore, Medicare
decided to cut costs by cutting overall RUG 4 payments by 11.1%.
• New revised system that was put into place on 1 October 2011 saved
Medicare 4.47 Billion in payment to skilled nursing facilities.
Medicare’s Perspective
Even with the 11.1% decrease, the the 2012 skilled nursing
payments rates will be 3.4 % higher than the 2010 rates.
Updating the 2012 RUG 4 system will cause an increase in
payments to skilled nursing faculties of $600 million, to offset
the reduction taken in 2011.
In 2010, Medicare spent 26.4 billion on skilled nursing care
(SNF). Medicare covers as much as 100 days of nursing-home
services for beneficiaries who need skilled care or
rehabilitation services following a hospitalization lasting at
least three midnights.
HOW DOES THIS IMPACT
SKILLED NURSING
FACILITIES?
* Likely consequence from budget cuts for profit skilled nursing rehabilitation
centers was to cut where the facilities saw flexibility-staffing, food and
supplies, Set expenses like mortgage, utilities and taxes had to be paid.
* San Antonio area facilities handled the issues by across the board freezing
any pay raises and cutting pay and staff. One facility, Memorial Medical,
decreased it s$2 an hour pay differential for nurses working on the skilled unit
and then put a 3% across the board pay cut into effect. This was fairly standard
for the market.
How Does This Impact Skilled Nursing Facilities?
• It impacted employee morale loyalty, and patient care, as there were
fewer staff to provide care, and many long-term staff that were
familiar with patients left suddenly secondary to increased work loads
with fewer staff and pay decreased and raise freezes.
• Some estimates were that nursing homes, like in Pennsylvania, were
estimated to lose $200 million in their annual Medicare payments with
the new budgetary restraints. Overall, estimated that nursing homes
will lose 2% of their overall revenue with these cuts.
• The majority of skilled nursing centers are for profit organizations. By
decreasing profit margins, they no longer become desired business
ventures, thus causing several homes to be traded, sold, or to go out of
business.
What Are Possible Compromises?
• Possibility of linking RUG payments to outcomes vs solely treatments and
therapies. This would encourage SNF facilities to provide quality care to
increase their profit margins, versus the current system of solely providing
care, whether it has a positive impact or not. It only had to be documented
that it was delivered.
• It might also be a possibility to decrease the three midnight rule. With the
pressure to decrease LOS in the hospital, many post surgical patients are being
sent home with home health services. These individuals then receive therapy
three times a week vs. twice a day in a SNF facility. They are also under
nursing surveillance and have access to medical evaluation much easier. It
would be interesting to evaluate the efficacy of SNF care on surgical outcomes
vs. home health services in the geriatric population.
Inpatient or Observation Status
Staying overnight in a regular hospital bed does not guarantee a patient is an
inpatient. A patient is an inpatient starting the day you’re formally admitted to
the hospital with a doctor’s order. A patient is an outpatient if he is getting
emergency department services, observation services, outpatient surgery, lab tests,
or X-rays, and the doctor has not written an order to admit the patient to the
hospital as an inpatient. In these cases, the patient is an outpatient even if he
spends the night at the hospital.
Observation Status and Skilled Nursing
•
Hospital status affects how much a patient pays for hospital services and may
also affect whether Medicare will cover care in a skilled nursing facility (SNF).
• Medicare will only cover care a patient receives in a SNF if the patient first has
a “qualifying hospital stay.”
• A qualifying hospital stay means the patient has been a hospital inpatient for
at least 3 consecutive days.
• Observation status does not count toward the 3 day qualifying stay.
Bagnall v. Sebelius filed November 3, 2011
•
The Center for Medicare Advocacy, and co-counsel National Senior Citizens
Law Center, filed suit on behalf of seven individual plaintiffs from
Connecticut, Massachusetts, and Texas who represent a nationwide class of
people harmed by the illegal "observation status" policy and practice.
• Bagnall v. Sebelius states that the use of observation status violates the Medicare
Act, the Freedom of Information Act, the Administrative Procedure Act, and
the Due Process Clause of the Fifth Amendment to the Constitution.
• The plaintiffs are Medicare beneficiaries who received inpatient hospital
services, but were improperly classified as outpatients, often referred to as
“observation status,” and therefore deprived of Medicare Part A coverage for
their hospital stay and after care.
Crossroads Hospital
2011 Payor Mix (Projected)
Commercial
1%
Managed Care
17%
Medicaid
8%
Medicare
28%
BCBS
19%
Other
20%
Self-Pay
7%
Illinois cuts to Medicaid
• 7/1/2011 Medicaid Payment delays-State of Illinois extended
payment for clean claims to 120-150 days
• 4/19/2012 Governor’s Proposed Medicaid Cut Rate
• 8% Inpatient
• 8% Outpatient
• Total Cut for Crossroads $267,159
Sources Cited
Bufford, David W. "Medicare to Cut $3.87 Billion in Skilled Nursing Facility
Pay." July 29, 2011: 1. Print.. Journal Article
Center for Medicare and Medicaid Services. “Are you a Hospital Inpatient or
Outpatient?”. http://www.medicare.gov/Publications/Pubs/pdf/11435.pdfA .
Web. 28 Apr. 2012.
"Interview with Cain Smith." Personal interview. 20 Apr. 2011.
Interview.
Mahar, Maggie. "Health Beat." Health Blog. A Project of the Century
Foundation, 5 July 2011. Web. 21 Apr. 2012.