MedPAC: Nursing Homes on Solid Financial Ground Despite COVID, Medicare Boost ‘Poor Approach’

Alex Spanko

A member of a federal advisory board on Medicare policy last week recommended against a payment boost for nursing homes, concluding that despite the negative effects of COVID-19, operators have maintained steady access to capital — and generally make too high of a margin on Medicare-covered residents.

“Even with increased costs, Medicare payments are more than adequate,” Medicare Payment Advisory Commission (MedPAC) member Carol Carter noted in a Friday presentation.

MedPAC, a non-partisan group that advises Congress on Medicare issues, has routinely recommended against pay bumps for SNFs, citing generally healthy margins on post-acute services covered by the program: The aggregate Medicare margin has sat above 10% for 20 consecutive years, Carter’s presentation noted, clocking in at 11.3% in 2019.

The Friday presentation was one part of a longer two-day meeting intended to provide recommendations on the adequacy of Medicare payments to a wide swath of providers along the care continuum.

Medicare represents only one part of the typical nursing home’s revenue stream, with Medicaid-covered long-stay residents representing more than 60% of all residents nationwide. When combined with Medicaid and other payer sources such as Medicare Advantage and private insurance, the total aggregate margin for SNF sat at just 0.6% in 2019, Carter’s presentation noted.

Those figures also do not include the impact of COVID-19 on the sector. While nursing homes have received billions in federal aid through multiple channels — including direct CARES Act relief, Paycheck Protection Program loans, and Medicare eligibility waivers — industry leaders have claimed that a wide swath of facilities may not survive into 2021 without additional support.

“Many skilled nursing facilities survived the spring and summer because Congress authorized unprecedented financial aid,” National Investment Center for Seniors Housing & Care (NIC) chief economist Beth Burnham Mace said earlier last week. “But as funds become exhausted and COVID-19 cases rise with little likelihood of immediate government intervention, it will be difficult for many facilities to continue sustainable operations.”

Mace’s comments came as part of a NIC report on persistently low occupancy in skilled nursing facilities since the pandemic. As of the third quarter, the nation’s nursing homes were 74% full, according to the data firm, down from 84.9% in February.

The MedPAC presentation cited the average 85% occupancy in 2019 as evidence that future Medicare rate increases are unwise — along with an increase in Department of Housing and Urban Development (HUD) financing in the space during the pandemic, a relatively stable supply of about 15,000 facilities, and overall utilization declines.

The presentation acknowledged the negative effects of COVID on the financial health of the space, though Carter argued that any future government relief should be considered separately from the Centers for Medicare & Medicaid Services’ (CMS) annual Medicare rate-setting.

A blanket Medicare rate increase for 2022 would not kick in until the start of the federal government’s fiscal year on October 1, 2021, and would also not single out the facilities in most need of help, Carter observed.

“If nursing homes need additional financial support in 2021, the update to Medicare’s payments in 2022 is a poor approach,” Carter noted in the presentation.

Congress and CMS are under no obligation to follow MedPAC’s recommendations, and have in fact routinely increased Medicare payments to nursing homes over the commission’s objections.

CMS, for instance, provided an overall Medicare rate increase of 2.2% for fiscal 2021, which began in October, for an aggregate gain of $750 million.

Alex Spanko

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