Skilled Nursing Increases Reliance on Medicaid

Two-thirds (67.6%) of all skilled nursing facility patient days are now reimbursed by Medicaid, according to the National Investment Center for Seniors Housing & Care’s (NIC) third quarter 2019 Skilled Nursing Data Report. This represents an increase of 0.6 percent from the previous quarter, and the greatest share of Medicaid paying for skilled nursing since NIC began data reporting in January 2012.

Skilled nursing facilities are inpatient healthcare facilities for patients who need nursing, rehabilitation, or related services, but do not require hospitalization. Medicaid has long been a dominant payer in this market, but never as dominant as the third quarter of 2019, according to NIC’s time-series data. Medicaid’s increased clout in the marketplace poses challenges for skilled nursing facilities and the states that oversee Medicaid budgets, NIC experts say.

“Medicaid is continuing to apply pressure to state budgets, because reimbursement rates are not keeping up with rising labor and other operating costs,” said Beth Mace, NIC’s chief economist. “This is not just a rural state issue. Continued growth in Medicaid may also be contributing to financial and budgetary pressures for bigger states like New York and Massachusetts. NIC will continue to collect and monitor the data to determine whether Medicaid’s even larger presence in skilled nursing will continue, which could impact the sector in profound ways.”

The data report indicates that fee-for-service Medicare, which reimburses skilled nursing facilities at the highest rate, hit a time-series all-time low of 10.9 percent of patient days in the third quarter, while Medicaid, which reimburses facilities at the lowest rate, is at a time-series high.

Additional data from NIC’s 2019 Skilled Nursing Data Report show occupancy for skilled nursing facilities remained stable at 83.6 percent, a 0.1 percent decrease from the second quarter and a 0.2 percent increase from a year ago. Occupancy increased in rural areas and was stable in urban areas.

“After a period of declining and then flat occupancy rates, the data this quarter suggest increased demand for skilled nursing from Medicaid patients is driving continued occupancy stability,” said Bill Kauffman, senior principal at NIC. “It’s too early to know if this trend will continue into the fourth quarter.