CMS came out with its final skilled nursing facility payment rates for fiscal year 2024, and the sector will benefit from a 4.0% net increase, or approximately $1.4 billion, in Medicare Part A payments. That is up from the initially proposed 3.7% net increase and reflects a 6.4% net market basket update to the payment rates. There were a couple of negative adjustments that brought the net rate increase down, including a negative 2.3% decrease as a result of the second phase of the PDPM parity adjustment recalibration. That reduction came as no surprise, as PDPM was meant to be budget neutral and has been a net-benefit to many SNFs since the 2019 implementation. But to the SNF advocates that responded to the overall rate increase, like AHCA and Leading Age, the message was the same: good, but not good enough.
The main argument is that labor costs have increased by more than 4.0% in the last year, much more, and a minimum staffing mandate, as threatened by the Biden Administration, would compound those labor cost increases. Price gouging behaviors of temporary staffing agencies, and the little government intervention to stop it, whether warranted or not, also seem to be unaddressed by the rate increase.
Many SNFs have legitimate concerns over being able to stay in business with soaring expenses, especially if they have a mostly, or all, Medicaid census. But at the same time, there are many providers earning plenty in cash flow, hence the persistent strong investor interest in the sector despite the various headwinds. And there are some, as highlighted by different exposes by journalists or attorneys general, that have millions, allegedly, to spare on non-care-related costs. Those stories unfortunately get more of the attention than the smaller SNFs acting in good faith and are still struggling. And the industry would maybe make a stronger argument to government payors if they did a better job of policing and purging its bad actors.
