Wall Street worries, but CMS offers help. (News Notes).

First, the bad news: A recent Centers for Medicare and Medicaid Services' (CMS) report reflects Wall Street analysts worries about long-term care's financial stability. According to CMS, investment analysts are particularly concerned about the sunset of the Medicare add-ons, threatened state Medicaid budget cuts, and soaring liability insurance costs. In fact, CMS says the full effect of the government's spending reductions might still be yet ahead: At the report's writing, not much time had passed since the Medicare add-ons expired in October 2002, and threatened Medicaid cuts had not yet gone into effect. Facilities that subsidize Medicaid revenue with Medicare payments are at greatest risk. Some investors even foresee a "second wave" of nursing home bankruptcies, although the report says many analysts don't believe current conditions reflect the industry's dire situation during the PPS rollout in the 1990s.

"The CMS report clearly shows that the long-term care component of the U.S. healthcare system is fragile at best, and requires a continued partnership with policymakers at the federal and state level," said Charles H. Roadman II, MD, CNA, president and CEO of the American Health Care Association.

But now for some good news: CMS proposes to provide some relief in the form of a 2.9% increase in Medicare payment rates to SNFs in FY 2004--a $400 million boost to the industry. Nursing homes would also continue to receive about $1 billion in temporary add-on payments in FY 2004 because of CMS's decision to retain the current classification system that establishes daily payment rates--at least for the time being. Congress has encouraged CMS to make case-mix refinements, but CMS says the research is not advanced enough yet to make changes. To adjust for SNF market basket underestimates in the cost of care since 2000, CMS has also proposed to raise Medicare reimbursement an additional 3.26%. CMS was taking comments on these funding proposals as of press time.

Even more good news: The tax cut bill President Bush recently-signed gives states $10 billion in federal funds to increase federal matching rates for Medicaid by 2.95 percentage points until October 1, 2004, a move praised by the major long- term care organizations.