HCFA's release last week of proposed prospective payment rates for Medicare skilled-nursing care didn't shake up the nursing home market, but some operators wondered whether the fees may be too low.
Under the HCFA rule, Medicare per diem payment rates for skilled-nursing care will range from $117 to $384 in urban areas and $117 to $408 in rural areas. The payment rates will vary on the type and intensity of care required (See chart).
The rates will take effect with cost-reporting periods beginning on or after July 1, although historical facility-specific, cost-based payments will be blended with the federal per diem rate during a three-year transition to PPS.
On average, Medicare payments will drop 17%, representing about a 1.7% reduction in skilled-nursing facilities' total revenues, HCFA said.
Payments for hospital-based skilled-nursing facilities will drop 19% in urban areas and 18% in rural areas.
Seventy-nine skilled-nursing facilities will receive an increase, HCFA said, compared with 8,958 that will receive lower payments.
Balanced-budget legislation enacted last year required a per diem PPS for skilled-nursing facilities. It replaces a system that caps such routine per diem costs as room, board and nursing, but allows skilled-nursing facilities to bill Medicare for "reasonable" costs related to ancillary services like therapy or laboratory services.
HCFA estimates the new payment policy will save $12.9 billion over the next five years.
Before the balanced-budget law passed, the Congressional Budget Office estimated Medicare would spend $83.3 billion on skilled-nursing care over that time.
The regulation is to be published May 12 in the Federal Register as an interim final rule. Providers will have 60 days to comment.
"It's not too much out of whack with what people were expecting," said Andrew Bhak, a long-term-care analyst with Morgan Stanley in New York.
But the American Association of Homes and Services for the Aging is raising questions about the procedure for updating the rates annually.
For instance, the annual updates through 2002 will lag one percentage point below inflation in nursing homes' costs, which will continue to tighten nursing homes' margins. The balanced-budget measure set that update formula into law.
In addition, the AAHSA said the balanced-budget law needs to allow for adjustments to the baseline for calculating future updates to the PPS rates. The baseline relies on nursing homes' 1995 costs, but future laws and regulations could require nursing homes to provide services that weren't factored into that baseline.