For an industry where profit margins are widely discussed, financial transparency is nonexistent. For decades, the industry claims they cannot provide care under the old reimbursement models. However, the new Patient-Driven Payment Model (PDPM) model was not budget neutral. Therefore, the Medicare Payment Advisory Commission (MedPAC) suggested a modification to keep base payment rates budget neutral. This makes sense after all the federal bailouts in 2020 and 2021. MedPAC is an independent congressional agency that advises Congress on Medicare reimbursement policies each year.
MedPAC used profitable industry transactions to show the industry could survive a 5% decrease because of additional government funding throughout the pandemic. Their analysis of Medicare payments and costs found average costs per day increased 2.1%. Meanwhile, staffing decreased 9.6% between February and December of 2020.
The cut would bring the Medicare payment structure closer to a goal of budget neutrality. The suggestion is consistent with commentary from experts and CMS. CMS was criticized when its Patient-Driven Payment Model (PDPM) increased payments to nursing homes by 5%, or $1.7 billion.
The average Medicare margin was 16.5%, bumped up slightly higher to 19.2% when the operators included Provider Relief Funds (PRF). MedPAC expects the SNF Medicare margin to decline 14% in 2022, citing higher costs outpacing payment rate updates between this year and next year. We need to know where all the bailout money went.