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Report: One quarter of SNFs stuck with Medicare margins below 4%

Written on Jul 28, 2022

Medicare margins for all freestanding skilled nursing facilities across the United States varied widely in 2020, according to new data from the Medicare Payment Advisory Commission. While 25% reported margins of 28.7% or higher, another quarter were stuck with margins 4% or lower.  

But the most concerning finding was that nonprofit SNFs had a Medicare margin of 0.6% and would have likely been in the negative had federal COVID-19 supplemental funding not been available, several experts told McKnight’s Wednesday. 

The findings were featured in MedPAC’s annual Data Book on health care spending and the Medicare program.  

Data also revealed that SNF admissions per 1,000 fee-for-services beneficiaries continued to decline. They dropped 7.9%, from 59.5% to 54.8%, between 2019 and 2020. During the same period, covered days per admission declined at a slower 1.5% because stays were longer, the report found.  

Although the aggregate Medicare margin for freestanding SNFs in 2020 exceeded 10% for its 21st consecutive year — coming in at 16.5% — for-profit SNFs’ margins were 20%, while non-profits’ were 0.6%.  

The MedPAC report also showed that the total number of SNFs decreased by 0.5% between 2020 and 2021. Since 2017, the total number of SNFs have decreased by less than 1% annually.  

Additionally, home health emerged as the most common type of post-acute care setting used among Medicare beneficiaries after a hospital stay, surpassing skilled nursing facilities.  

In 2019, SNF care was the most common type of post-acute care. It received 18.7% of inpatient discharges. Home health care was the second most frequent type of PAC, with 15.8% of inpatient discharges. 

The positions flip-flopped in 2020, thanks in large part to the onset of the COVID-19 pandemic. The share of inpatient hospital discharges referred to SNFs declined to 16.6%; by October 2020, it was 14.9%. By contrast, the share receiving home health care services increased to 20.9%.  

“The shift to home health care reflected the pandemic-related effects experienced by nursing homes and the reluctance of beneficiaries to use them. The share of inpatient hospital discharges referred to inpatient rehabilitation facilities also increased slightly in April 2020,” report authors wrote.