Surviving the Triple “Whammy”
Long term budget problems at the national and state levels are creating a state of dread for nursing home providers. The Fiscal Cliff is looming and there are potential cuts to Medicare regardless of whether Washington avoids the Cliff. The NY State Budget Crisis Task Force released a report on December 17, with a somber evaluation of the state’s finances. It particular it highlighted the unsustainable Medicaid budget. Finally, there is the fast approaching outsourcing of nursing home reimbursement by the State to Medicaid Managed Long Term Care plans. These three currents are converging and will have a significant impact on an already battered industry. The question is how to survive this triple “whammy.”
Regardless of Fiscal Cliff negotiations, nursing homes will face significant reductions in Federal funds for both Medicare and Medicaid. MedPAC calls for a four percent (4%) reduction in Medicare rates for nursing homes. The National Association of State Budget Officers and The National Governors Association issued a joint report that reviewed the reduction in the Federal contribution to Medicaid. States will either cut Medicaid or raise taxes. Lastly, the Federal Government is looking to cap the Provider Assessment (Tax) process, used by states to optimize the Federal share of Medicaid. These potential hits will be intensified by the realities of long term budget problems in NY.
The State Budget Crisis Task Force, chaired by Richard Ravitch and Paul Volker reported that the NYS budget is unsustainable since expenditures are growing faster than revenues. Medicaid is a significant problem; its budget is larger than the combined budgets of Florida, Pennsylvania and Texas. The report recognizes that the cap enacted in the first year of the Governor’s tenure has reduced the annual increase in Medicaid spending. I It is not certain that it will reduce this budget item. Under these circumstances, it is likely that the reduction to Medicaid reimbursement to nursing homes will be embraced by Managed Long Term Care plans.
NYS has removed itself from the reimbursement “hot potato,” assigning this responsibility to Managed Care plans. Cost will be an absolute priority for the plans; Plans will reduce reimbursement to nursing homes to absorb cuts from the State. Plans we be driven to maximize their profits. There are currently thirty-six (36) plans, twenty-six (26) in the NY metropolitan area, and many more in the queue waiting for approval to operate. It is likely that many of these plans exist so that their owners can sell them to larger other Plans after they demonstrate significant profits. There will ultimately be fewer plans once consolidation takes place. The impact of this will place extreme pressure on nursing homes to reduce their costs.
This quick description of the triple “whammy” is not an exaggeration of the potential forces that will require nursing homes to examine how they do business. Nursing homes must find ways to become more efficient and effective. Quality is still in the equation, even if it is limited for the data presented on Nursing Home Compare (since more and more consumers are using this site in their selection process). Self-examination is hard, painful and perhaps too time consuming in this volatile environment; nursing homes don’t have to do this alone. With Caretech as a strategic partner, a nursing home can find significant savings necessary to survive the pain coming from this “whammy.”
Caretech offers many approaches to reduce expenses:
- Better pricing on supplies
- Product substitutions that provide the same quality at a lower price
- Utilization management
- Outsourcing the purchasing and accounts payable function
- Pharmacy benefit management (assuring the Part D and managed care plan appropriately pay the pharmacy instead of shifting it to the nursing home)
- Lean thinking.
The impact or all or some of these interventions can be significant and ongoing. In a time when nursing homes may struggle to survive these forces, a strategic partner can help an organization survive and perhaps even thrive. Make Caretech your strategic partner.
On behalf of Caretech, wishing you a happy, healthy and successful 2013!