New Payment & Reimbursement System Is the #1 Thing Keeping Skilled Nursing Facility Executives Up at Night

When we polled skilled nursing facility (SNF) executives for our 2016 Maryland Skilled Nursing Facility Outlook Survey, more than two out of three of them ranked changes to the payment and reimbursement system as their number one concern.

Concerns about the new payment and reimbursement system are significant among both for-profit and nonprofit SNF executives. Likewise, it is of nearly equal concern to owners, administrators and chief financial offers of Maryland’s facilities.

Why All the Concern?

Under the new system, closely managing your facility’s cost PPD is more important than ever.

Unlike the old system, which reimbursed skilled nursing facilities retrospectively for costs incurred up to a maximum amount, the new system reimburses SNFs according to one single annual rate, except for the case mix piece, which is adjusted quarterly.

The rate at which you are reimbursed under the new system is calculated based on the median cost PPD within your facility’s region. If your facility is located in Baltimore, for example, and your laundry cost PPD in 2014 was $5.25, your cost PPD is $0.89 higher than the median cost ($4.36) in your region. Under the new system, you will only get reimbursed for $4.36 PPD.

You can see – and perhaps you have already felt the crunch – how quickly the deficit will add up if your facility’s costs are higher than average across the board.

Feeling the Squeeze in Year Three of the Implementation

The new payment and reimbursement system is being phased in over three years. During the first year of the phase-in, 2014, SNFs still received the majority of their reimbursement under the rules of the old system. Year two of the phase-in, 2015, saw more influence from the new system, while year three, 2016, has SNFs receiving most of their reimbursement according to the new system’s rules.

Starting January 1, 2017, the Maryland Medicaid reimbursement system will be fully phased in, and the old system will go away.

Skilled nursing facilities with higher-than-average costs PPD are really feeling the squeeze of the new payment and reimbursement system. It is no surprise that the new system is the number one issue on the minds of owners, administrators and CFOs of Maryland’s skilled nursing facilities.

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