Avalere Survey: U.S. Nursing Homes Report New CMS Regulation Will Force Layoffs, Postponed Facility Renovations, Wage and Benefit Reductions

At Least 20,000 Potential Layoffs and 20,000 New Jobs Not Realized Represents 'Leading Edge of Job Loss Wave' Resulting From Regulatory Over-Correction, Alliance for Quality Nursing Home Care Says

WASHINGTON, Nov. 7, 2011 /PRNewswire-USNewswire/ -- With a new federal regulation going into effect on October 1, 2011 that made substantial changes in payment methodology for therapy services – and which crossed the line from a correction into new Medicare cuts – a new survey of U.S. skilled nursing facilities (SNFs) conducted for the Alliance for Quality Nursing Home Care finds that in response to the regulation, nursing homes plan to lay off approximately 20,000 workers nationally, and cancel approximately 400 facility expansions or renovations that could have created at least 20,000 new jobs. In addition, nearly 50 percent of the facilities surveyed expect to make cuts in staff benefits – crucial to retaining the key direct care staff needed to optimize quality patient care.

"SNF operators are deeply concerned about the implications of this rule," said Dan Mendelson, CEO of Avalere Health. "The facilities we surveyed reported that they plan layoffs, deferrals of facility renovations, and wage and benefit reductions – and anticipate significant financial strain moving forward."

Alan G. Rosenbloom, President of the Alliance, a coalition of 12 leading post-acute and long term care organizations providing SNF care in approximately 1,400 facilities in 44 states nationwide, stated, "This discretionary regulatory action represents a real cut in Medicare – not just a 'correction.' If allowed to stand, facilities are confirming the result will be real job losses, deferred facility improvements, and a threat to quality. Any reductions in nursing home payments should be phased in gently as they have been for other providers, and any further cuts are untenable." Rosenbloom also noted the Avalere survey accounts only for the consequences associated with the new Medicare rule, and that facility stability in states like Ohio and Florida – with new state Medicaid cuts in place – is significantly more compromised.

Specifically, the new survey of SNFs across the nation reports the following:

Staff Reductions

"In response to the [CMS] rule, do you expect to lay off direct service staff (including staff at any facilities that will be closed)?"

36.8% of facilities replied 'yes'; In addition to the fact 113 Registered Nurses (RNs) and 125 Licensed Practical Nurses (LPNs) were slated for layoffs, facilities plan to lay off 458 Certified Nursing Assistants (CNAs) – the critical front line care workers responsible for 70-80% of direct patient care.

In response to the [CMS] rule, do you expect to indefinitely postpone or cancel hiring of direct service staff? Or corporate/other non-direct service staff?

37% of facilities replied 'yes' regarding direct service staff. 
40% of facilities replied 'yes' regarding corporate or other non-direct service staff.

Postponed or Canceled SNF Expansions and Renovations

In response to the [CMS] rule, do you plan to significantly delay or cancel the opening of new facilities and/or expansion of exiting facilities?

23.5% of facilities replied 'yes' – which represents a delay or cancellation of 80-85 facility expansions or renovation projects that would have generated between 4,502 and 5,002 new jobs.

Changes to Staff Wages

In response to the [CMS] rule, do you plan to make any changes in wage rates (e.g., smaller raises, a wage freeze)?

74.2% of facilities replied 'yes' – including wage freezes, across-the-board percentage cuts to wages, cuts to therapy wages, reductions to starting salaries for new employees, and elimination of bonus plans. 58% of "yes" respondents indicated that they were already under, or were likely to implement a wage freeze or reduction in annual increases.

Changes to Staff Benefits

In response to the [CMS] rule, do you plan to make any changes in benefits (e.g., an increase in cost-sharing and/or a reduction in the employer contribution, restrictions in benefits covered)?

47.8% of facilities replied yes – including reducing or eliminating contributions to 401(k) plans, reducing or freezing contributions to health insurance premiums, increasing cost-sharing for employee health insurance plans, and other changes.

An earlier analysis by Avalere Health LLC found the new CMS regulation will reduce Medicare funding to the nation's SNF sector by $79 billion over 10 years. This new and latest reduction in Medicare payments comes on top of $29.4 billion in Medicare cuts enacted to fund healthcare reform, and a $16.8 billion Medicare payment reduction in 2010 regulation.

Rosenbloom, noting that Standard & Poor warned in August 2011 about increased volatility in the SNF sector as a result of the larger than expected CMS funding reduction, concluded, "Government regulation that results in lost jobs, putting patient care at risk, and further undermining a U.S. economy struggling to regain its footing must be reined in. We are rightly concerned that the staff reductions facilities say they will be forced to make represents the leading edge of a SNF job loss wave. Our critical health sector, the nation's second largest health facility employer, urgently needs help to bring about more certainty, more payment stability, and an end to the economic chaos negatively affecting America's lowest margin health care provider."

Methodology
Avalere Health, LLC fielded this unique national SNF facility survey between October 3 and October 17; there were 292 completed responses representing at least 2,932 facilities, from virtually every state, which represents approximately 1/5th of all SNFs nationwide. Small providers (less than 100 beds) comprised 37% of the respondents; medium providers (100-1000 beds) comprised 44% of respondents; large providers comprised 19% of respondents. To broadly estimate the response of facilities nationwide to the final rule, Avalere Health multiplied layoffs, canceled or delayed projects and the associated lost jobs reported in the survey by a factor of five. It is not clear if the final universe of respondents are a representative sample of all facilities, since they were self-selected and the survey itself distributed via associations representing nursing facility providers. The national estimates could be high or low, thereby making these data approximations of developing negative trends.

SOURCE Alliance for Quality Nursing Home Care