The Medicare Payment Advisory Commission (MedPAC) met December 8 to review post-acute provider payment adequacy including skilled nursing facilities (SNFs) as part of their annual responsibilities to make recommendations to Congress. It should be noted that for over a decade they have reported that SNFs are “overpaid” based upon their estimated marginal profit—and each year MedPAC recommends a cut to SNF rates, which Congress has not enacted.

This year’s data shows the average Medicare FFS margin for freestanding SNFs to be 18.4%. In discussion of the SNF payment adequacy report, several commissioners raised concerns and questions, such as the fact that the Medicare FFS margin for non-profit SNFs is 1.1% while the for-profit margin is 22.0%. Staff explained to commissioners that the size of the facility (nonprofits tend to be smaller) and staffing costs (for-profits have lower average staffing) were believed to be factors for this differential. Commissioners also questioned the appropriateness of a cut at a time with a pending staffing mandate with unknown associated cost impacts. Nonetheless, several still supported the recommendation to cut given the reported margin, while some proposed amending the recommendation to allow SNFs to earn back the 3% through quality performance.

MedPAC Chair Michael Chernew explained that the proposed cut accounted for the pending staffing mandate and any revised recommendation related to a value-based payment approach would need to align with previous MedPAC recommendations related to its Value Incentive Program. Disappointingly, Commissioner Robert Cherry suggested perhaps the “savings” from this cut could be used for the increased payment to hospitals.

Several commissioners balked at the commission’s current measure of access to SNF services noting it does not accurately reflect the “reality on the ground” and other ways to evaluate access should be pursued.

The impact of Medicare Advantage (MA) revenues on access was mentioned repeatedly, with Commissioner Scott Sarran noting that small SNFs can’t say no to “big MA” and walk away from contracts when it is more than 50% of their business. MedPAC staff noted the dearth of MA data currently available but also that they were working on a longer-term project to link MDS assessment data to MA claims data to have a better understanding of utilization and spending for Medicare beneficiaries in MA.