Medicare Compliance & Reimbursement

Skilled nursing facilities are in for a significant payment increase in 2004 - but a big chunk of the extra funding is simply payback for years of miserly reimbursement.

In its Aug. 4 final rule on nursing home Medicare payments, the Centers for Medicare & Medicaid Services says it will infuse the industry with an additional $850 million in 2004. The money comes from two sources: $400 million from a 3-percent hike that's essentially a cost-of-living raise for 2004 and another $450 million from a 3.26-percent "forecast error adjustment."

The latter adjustment is designed to make up for years of inaccurate CMS estimates of health care inflation - particularly on the labor front - that were factored into prospective payment system reimbursement rates and ultimately ended up shortchanging nursing homes.

The adjustment "is both necessary and appropriate to correct previously understated projections and marketplace conditions," says Dr. Charles Roadman, head of the American Health Care Association, which represents nursing homes.

Heads up: Senate Finance Committee chair Charles Grassley (R-IA) has been campaigning to require nursing homes to use the 3.26 percent increase, which will amount to $6.9 billion over 10 years, to improve direct patient care. Grassley said July 31 he would try to get a direct-care mandate enacted as part of Medicare legislation or another bill.

CMS also says it plans to stick with current resource utilization groups for at least another year, while it continues the long process of working out case-mix refinements.

To see the rule, go to http://www.access.gpo.gov/su_docs/fedreg/a030804c.html.