When 11.1% isn't really 11.1%: What will Medicare cuts actually cost SNFs?

Many smart folks in the SNF industry have spent a lot of time analyzing and discussing the pending Medicare SNF reimbursement cuts, including some dire predictions about pushing SNF operators to the "economic brink."

We have talked to many SNF providers that are putting projects on hold and deferring strategic decisions while they sort out the impact of the cuts. These cuts present yet another challenge for providers trying to provide exceptional care in a competitive environment with already thin margins.

But I just ran across a sharp analysis by Luke Fannon on the LTL Magazine blog that SNF providers should consider. The key point here: This is not a uniform 11.1% cut in Medicare reimbursements. With the "panic number" of 11.1% continuously kicked around, folks seem to overlook this important fact.

Fannon's analysis points out that, although the reimbursements for rehab RUGs will take a big hit (north of 18% in some cases), the non-rehab RUGs will actually reimburse at an average of 2.6% higher than before. Because of the way the cuts are distributed, your mileage will vary as to how it affects your facilities. It will depend on current and future case mix.

It seems doubtful, though, that any facility would take an overall reimbursement hit of 11.1%—it would represent a disproportionate existing level of rehab patient and reimbursements. For many facilities, because of the distribution of the case mix, overall Medicare reimbursements actually stand to increase under the new rules.

We also agree completely with Fannon's recommendations for SNFs seeking to offset the Medicare rate cuts:

• Stay focused on increasing your Medicare census--even with the cuts in the rehab RUGs, boosting Medicare census will significantly increase the revenue for your SNFs. (We would add to that: If your payer mix is OK, but your overall ADC is in the 80s or low 90s, then you also need to focus on marketing and increasing your overall admissions.)
• Even with the cuts in rehab RUGs, keep focusing your efforts on brining in those high-therapy, high rehab patients--those RUGs still reimburse at the highest rates. Especiallyyou historically haven't been admitting a lot of those types of patients, you'll still increase overall revenue even with the new reimbursement rates.

 

Comments

[Bill Weeaks]

I would be shocked if the facilities experiencing an overall increase in reimbursement were more than a drop in the bucket. I also would suggest a closer look at clinical versus rehab in the new reimbursement model as the clinical RUGS make a large percentage of your top RUGS now after factoring in the cost of rehab.