In its March 2024 policy report, the Medicare Payment Advisory Commission (MedPAC), the independent government agency that advises Congress on Medicare policy, recommends a reduction of 3% in payments to skilled nursing facilities in the traditional Medicare program for fiscal year 2025. While MedPAC has made a similar recommendation in prior years, the following MedPAC findings are particularly interesting; they contradict claims by nursing home owners, operators, and their trade associations that staffing shortages are the cause of nursing home closures and limited admissions, as well as document that facilities receive substantial profits from related parties (ancillary services, below):
- Profit margins were 18.4% in 2022 for freestanding nursing facilities in traditional Medicare and margins of 16% are anticipated in 2024.
- 1% decline in supply of skilled nursing facilities occurredbetween 2002 and 2023, which MedPAC attributes to “states shifting to more home- and community-based long-term care, reportedly low Medicaid payment rates for long-term care, and patient preference for receiving care in non-SNF settings when possible.” MedPAC does not support industry claims that current and projected nursing home closures are caused by lack of staff, which will only be made worse by federal staffing standards.
- Delays in discharges from hospitals to SNFs have occurred because of administrative delays and prior authorization decisions, especially from Medicare Advantage plans, according to a 2023 Massachusetts Hospital Association report cited by MedPAC. The Association also cited staffing shortages at post-acute providers and patients’ lack of guardianship, need for specialized services, and need for long-term (rather than skilled) care. See also study of high denial rates by private insurers. MedPAC does not support industry claims that staffing shortages are the sole cause of limitations on admissions.
- Ancillary services “from staffing agencies to therapy companies to food providers, all add revenue streams to the parent company and provide more opportunities for profit as they add more patients under the operating umbrellas” (quoting Irving Levin Associates LLC). MedPAC supports research findings that nursing facilities have enormous profits from related parties that provide ancillary services. See “Reports: Nursing Facilities’ ‘Financial Shenanigans’ Divert Reimbursement to Private Gain, Jeopardizing Resident Care” and “Nursing Homes Hide Profits.”
March 28, 2024 – T. Edelman