Economic Impact of Medicare and Medicaid on Geriatric Care IN Hospitals and Skilled rehabilitation and long term Facilit

1. Economic Impact of Medicare and Medicaid on Geriatric Care IN Hospitals and Skilled rehabilitation and long term Facilities

2. Geriatrics—Why Care? * Fastest growing portion of the American population. * Most Americans rely on Medicare to cover their medical costs as they are eligible. * Medicare spending is projected increase from $555 billion in 2011 to $903 billion in 2020 (CBO, August 2011). * Over the next 10 years, Medicare spending is projected to grow more rapidly for prescription drugs, hospital outpatient services, and skilled nursing facility services. (Kaiser Fact Sheet).

3. What are Skilled Nursing Facilities? Skilled nursing facilities are attached to nursing homes and will treat post Hospitalized patients who require skilled care or rehabilitation for up to 100 days of service, if they are Medicare beneficiaries and they have met a length of stay of three midnights in the hospital prior to admission to the SNF Many elderly patients live alone, or have family members that are not available during the day, secondary to working. Therefore, after hip repairs or fracture repairs, they require skilled nurisng services and rehabilitation services to ensure that they heal properly and regain as much functional capacity as possible. SNF facilities vary in what they specialize in, but most cover wound treatments, infection treatments, pneumonia recovery, and surgical recovery and rehabilitation.

5. Nursing Homes as Businesses Over the last ten years, nursing homes have been profitable investments. Many have been purchased by investment groups. Over 67% of nursing homes are for profit. In Bexar County, there are 57 nursing homes, and only three of them are not for profit. In 2009 the avg profit margin for a skilled nursing facility was 18.1%. For a seven year period, MEDPAC reported that aggregate profit margins for free skilled nursing facilities exceeded 10%. Interestingly, as profit margins increased over the past ten years, staffing at skilled nursing facilities has not increased. Therefore, increased profits have not been used to increase staffing.

7. Medicare cuts to Skilled Nursing Facilities • October 2011-11.1% cut in Medicare Rugs (Resource Utilization Groups 4) • “CMS states this action was taken to ‘better align Medicare payments with costs and correct an unintended spike in payment levels.” • In the past, more residents were receiving medium levels of care vs higher levels of care. New RUG-4 regulations were intended to pay skilled nursing homes and encourage them to take the higher level of care patients that were being refused by facilities, because the facilities were “losing money” on these patients, since they were actually being underpaid per the national average. • The agreement with RUG 4 was that Medicare would pay more for upper level patients but would but it left in loopholes that documentation and providing therapy services could move medium level care patients up to a higher level of care.

8. Cause of Recent Medicare Cuts on Skilled Nursing Facilities • Skilled Nursing Facilities increased their level of documentation, and the amount of rehabilitation services delivered to skilled patients, thus raising many patients to higher levels of care. This increased the overall costs Medicare was going to have to pay. Therefore, Medicare decided to cut costs by cutting overall RUG 4 payments by 11.1%. • New revised system that was put into place on 1 October 2011 saved Medicare 4.47 Billion in payment to skilled nursing facilities.

9. Medicare’s Perspective • Even with the 11.1% decrease, the the 2012 skilled nursing payments rates will be 3.4 % higher than the 2010 rates. • Updating the 2012 RUG 4 system will cause an increase in • payments to skilled nursing faculties of $600 million, to offset the reduction taken in 2011. • In 2010, Medicare spent 26.4 billion on skilled nursing care (SNF). Medicare covers as much as 100 days of nursing-home services for beneficiaries who need skilled care or rehabilitation services following a hospitalization lasting at least three midnights.

10. How Does this Impact Skilled Nursing Facilities? * Likely consequence from budget cuts for profit skilled nursing rehabilitation centers was to cut where the facilities saw flexibility-staffing, food and supplies, Set expenses like mortgage, utilities and taxes had to be paid. * San Antonio area facilities handled the issues by across the board freezing any pay raises and cutting pay and staff. One facility, Memorial Medical, decreased it s$2 an hour pay differential for nurses working on the skilled unit and then put a 3% across the board pay cut into effect. This was fairly standard for the market. *

11. How Does This Impact Skilled Nursing Facilities? • It impacted employee morale loyalty, and patient care, as there were fewer staff to provide care, and many long-term staff that were familiar with patients left suddenly secondary to increased work loads with fewer staff and pay decreased and raise freezes. • Some estimates were that nursing homes, like in Pennsylvania, were estimated to lose $200 million in their annual Medicare payments with the new budgetary restraints. Overall, estimated that nursing homes will lose 2% of their overall revenue with these cuts. • The majority of skilled nursing centers are for profit organizations. By decreasing profit margins, they no longer become desired business ventures, thus causing several homes to be traded, sold, or to go out of business.

12. What Are Possible Compromises? • Possibility of linking RUG payments to outcomes vs solely treatments and therapies. This would encourage SNF facilities to provide quality care to increase their profit margins, versus the current system of solely providing care, whether it has a positive impact or not. It only had to be documented that it was delivered. • It might also be a possibility to decrease the three midnight rule. With the pressure to decrease LOS in the hospital, many post surgical patients are being sent home with home health services. These individuals then receive therapy three times a week vs. twice a day in a SNF facility. They are also under nursing surveillance and have access to medical evaluation much easier. It would be interesting to evaluate the efficacy of SNF care on surgical outcomes vs. home health services in the geriatric population.

13. Inpatient or Observation Status • Staying overnight in a regular hospital bed does not guarantee a patient is an inpatient. A patient is an inpatient starting the day you’re formally admitted to the hospital with a doctor’s order. A patient is an outpatient if he is getting emergency department services, observation services, outpatient surgery, lab tests, or X-rays, and the doctor has not written an order to admit the patient to the hospital as an inpatient. In these cases, the patient is an outpatient even if he spends the night at the hospital.

14. Observation Status and Skilled Nursing • Hospital status affects how much a patient pays for hospital services and may also affect whether Medicare will cover care in a skilled nursing facility (SNF). • Medicare will only cover care a patient receives in a SNF if the patient first has a “qualifying hospital stay.” • A qualifying hospital stay means the patient has been a hospital inpatient for at least 3 consecutive days. • Observation status does not count toward the 3 day qualifying stay.

15. Bagnall v. Sebelius filed November 3, 2011 • The Center for Medicare Advocacy, and co-counsel National Senior Citizens Law Center, filed suit on behalf of seven individual plaintiffs from Connecticut, Massachusetts, and Texas who represent a nationwide class of people harmed by the illegal "observation status" policy and practice.  • Bagnallv. Sebelius states that the use of observation status violates the Medicare Act, the Freedom of Information Act, the Administrative Procedure Act, and the Due Process Clause of the Fifth Amendment to the Constitution. • The plaintiffs are Medicare beneficiaries who received inpatient hospital services, but were improperly classified as outpatients, often referred to as “observation status,” and therefore deprived of Medicare Part A coverage for their hospital stay and after care.

16. Crossroads Hospital

17. Illinois cuts to Medicaid • 7/1/2011 Medicaid Payment delays-State of Illinois extended payment for clean claims to 120-150 days • 4/19/2012 Governor’s Proposed Medicaid Cut Rate • 8% Inpatient • 8% Outpatient • Total Cut for Crossroads $267,159

18. Sources Cited Bufford, David W. "Medicare to Cut $3.87 Billion in Skilled Nursing Facility Pay." July 29, 2011: 1. Print.. Journal Article Center for Medicare and Medicaid Services. “Are you a Hospital Inpatient or Outpatient?”. http://www.medicare.gov/Publications/Pubs/pdf/11435.pdfA . Web. 28 Apr. 2012. "Interview with Cain Smith." Personal interview. 20 Apr. 2011. Interview. Mahar, Maggie. "Health Beat." Health Blog. A Project of the Century Foundation, 5 July 2011. Web. 21 Apr. 2012.