New skilled nursing facility payment scheme boosts Medicare risk

Area of Science:

• Healthcare Economics
• Geriatric Care Policy

Background:

• Skilled nursing facilities (SNFs) previously operated under Medicare's cost-based reimbursement.
• A new prospective payment system (PPS) has been implemented by Medicare for SNF care.

Purpose of the Study:

• To analyze the financial implications of Medicare's transition to a prospective payment system (PPS) for skilled nursing facilities.
• To assess the potential impact of this policy change on SNF operations and financial viability.

Main Methods:

• Analysis of Medicare's reimbursement policy shift from cost-based to PPS.
• Evaluation of the case-mix adjustment mechanism utilizing Resource Utilization Groups (RUGs).

Main Results:

• The transition to PPS is projected to decrease Medicare payments for the majority of SNFs.
• SNFs face increased financial risk if state Medicaid programs adopt similar cost-saving measures.

Conclusions:

• The shift to a PPS with RUGs introduces significant financial challenges for SNFs.
• Potential follow-on effects from state Medicaid reimbursement policies could exacerbate financial risks for nursing facilities.