Not Quite BEDPAN worthy, but JAMA Should Read Park Place

The “BEDPAN Awards” refers to two articles from Marc Zimmet in September that can be linked to at Part 2: The BEDPAN Award: Misinformed Research on SNF Policy | Park Place.

I can’t take any study of SNF policy seriously that includes the term “scholars have theorized.” As I’ve long shared, I never let schoolwork get in the way of my education, so, to borrow a line from Forrest Gump, “I’m not a smart man, Jenny, but I know what reimbursement is.”

JAMA Health Forum just published “Original Investigation: Medicaid Lesser-of Rules and Disparities in Skilled Nursing Facility Quality.” This is not BEDPAN-worthy because it is indeed an important issue that does not get the attention it deserves; the authors just miss the point. Or, more precisely, they focus on a possible consequence of the problem without adequately addressing the underlying inequity that creates it.

I reject their definition of a “quality” nursing home, both because of the Standard Set guidelines that correct distortions in SNF data analysis and the inherent problems with the Five-Star rating system, especially the bumpy road from 2018–2022, the period from which the sample was taken. To be fair, the authors use Five-Star as a proxy for quality, which is hardly unusual. But there is a meaningful difference between access to a higher-rated nursing home and access to better care. The former can be measured using CMS ratings. The latter is considerably more complicated, particularly when comparing facilities across states with vastly different reimbursement systems, market conditions, payer mixes, and resident populations.

Limited Knowledge

I don't necessarily dispute the association they found. I dispute what it tells us about the problem and, more importantly, how we should go about fixing it.

The authors claim, “To our knowledge, this study is the first to focus on lesser-of rules in the SNF setting.” Your knowledge is limited.

On Oct. 16, 2022, I published (well, more like posted) a paper titled, “The Inequity of Medicare Copayment,” which took a less “scholarly” approach to the “lesser-of” cost-sharing problem. It quantified the reimbursement damage, examined geographic disparities, and identified the potential consequences for vulnerable beneficiaries. I also independently updated MACPAC's state Medicaid cost-sharing compilation, documenting the different payment policies across the country.

In addition, Data Analysis Brief: Medicare-Medicaid Dual Enrollment 2006 through 2018, prepared by the CMS Medicare-Medicaid Coordination Office in September 2019, touched on similar disparities.

“To our knowledge” provides ample coverage, and I recognize that studying the association between lesser-of policies and admission to higher-rated facilities isn't identical to examining the underlying reimbursement inequity.

But my paper didn't merely acknowledge that lesser-of rules exist. It calculated the financial damage, documented the state-specific differences, and connected the payment inequity to the disproportionate concentration of dual-eligible beneficiaries in underserved communities.

The fact that they ignored my paper is par for the course. Technical issues do not exactly make for sexy headlines, which is why my paper began with this:

But the CMS brief isn't too difficult to find. But I digress. For now.

This is a reimbursement issue, one of many covered by SNFonomic Theory. Access variances may be consequential, but they are not necessary to establish the underlying inequity, and conventional quality ratings cannot reliably quantify the payment damage. It's another state-specific distortion. If the inequity is adjusted because of the quality factor instead of the more relevant relative payment damage, I'll be happy it's fixed, but the “why” matters.

The real problem stems from the fact that SNF coinsurance for days 21–100 is fixed nationally, as opposed to the percentage-based coinsurance applied to most Medicare Part B services. In 2026, the SNF amount is $217 per day, regardless of whether the facility receives a Medicare PDPM payment of $550 or $1,000. That's a very different economic proposition depending on where the facility is located and whether the state pays the full Medicare coinsurance obligation or applies a lesser-of limitation.

The inequity exists whether the beneficiary is admitted to a one-star or five-star facility. It doesn't depend on establishing a disparity in access, proving discrimination, or agreeing on what constitutes quality. Two facilities can provide the same Medicare-covered care under the same federal payment methodology and realize materially different reimbursement because of the state in which the beneficiary receives care. And because the coinsurance amount is fixed nationally, the proportional damage varies with the underlying Medicare rate.

My paper also covers timely payment concerns based on the 65 percent recovery of allowable Medicare bad debt through the Medicare cost reporting process. Even where a shortfall ultimately qualifies for reimbursement, partial recovery after the fact is not the equivalent of receiving full payment when it is due.

I've mentioned once or (twice × 1,000) times that Medicare cost report accuracy has atrophied to dangerous extremes because cost reports are generally not subjected to comprehensive audits. Guess what? Bad debt logs required to support Medicare bad debt claims receive particular scrutiny because they mean immediate dollars payable by the Medicare program. Go figure.

The following excerpts from my 2022 paper describe the problem from the provider's perspective—one that is fully quantifiable and objective.

Relative Distortion

CMS adjusts PDPM rates for local economic variables such as labor and general expenses; “local” is defined by Core-Based Statistical Area (CBSA) wage indexing. CBSAs often include multiple counties across state lines, but beneficiaries generally gravitate to facilities in their “home state.” As a result, a SNF in one state may receive full coinsurance for dual-eligible patients while a peer-group facility realizes $56/day less for identical care “priced” at the same PDPM rate.

Things get surreal at the macro level, as coinsurance was $200/day everywhere at the time of my original analysis. This disproportionately harms providers in low wage-index markets, as illustrated by two CBSAs at opposite ends of the “Area Wage Index” spectrum:

Life is simply more expensive in the Bay Area relative to greater Knoxville, and CMS accounts for the difference through wage indexing. As a percentage of Medicare's “cost of care,” Hamblen patients are responsible for almost 40 percent of the bill (if paying out of pocket), while Solano admissions pay less than half that ratio.

Dual-eligible beneficiaries generally pay nothing out of pocket either way, but providers in lower-wage markets are further disadvantaged in “lesser-of” states. In my original illustration, Hamblen rates were effectively reduced 13.9 percent for each dual-eligible coinsurance day. Comparatively, Solano providers lost “only” 6.5 percent. Meanwhile, SNFs in “full-payment” states received the entire PDPM rate for every Medicare-covered day.

Those figures reflect the payment environment at the time of the original paper, but the structural problem hasn't changed. The same nationally fixed coinsurance obligation represents a substantially greater percentage of reimbursement in lower-rate markets. States then introduce another layer of inconsistency through their respective Medicaid payment policies.

My original paper went a step further:

“Dual-eligible beneficiaries in ‘Lesser of’ states generate $56/day less revenue for providers than ‘Medicare-only’ admissions. At scale, low-income, underserved markets are home to outsized shares of dual-eligible beneficiaries, who ‘continue to be disproportionately… of minority race/ethnicity, compared to other Medicare beneficiaries.’ Lower reimbursement means less money for staffing, amenities, and services. Quality is outside the scope of this analysis, but a $56 rate cut inadvertently targeted to the most vulnerable beneficiary class is not a recipe for success, especially when not all states impose the ‘Lesser of’ penalty.”

That was October 2022. I didn't need to demonstrate a statistically significant difference in admission to four- or five-star facilities to recognize that systematically reducing reimbursement for the most financially vulnerable beneficiaries might have consequences for their care.

Back to JAMA

The researchers found that dual-eligible beneficiaries were less likely than Medicare-only beneficiaries to enter higher-rated facilities, and that the disparity was greater in lesser-of states. That's worth examining. But the Medicare-only population actually had a higher probability of entering a four- or five-star facility in lesser-of states than in full-payment states. The finding is about the relative difference between the two beneficiary groups, not simply that lesser-of states have worse nursing homes or less access to higher-rated facilities.

And that's precisely why the underlying economics matter.

A facility's Medicare share, Medicaid dependence, occupancy, wage index, and relative reimbursement position can influence its operating circumstances long before anyone attempts to explain admission patterns through Five-Star ratings. These are measurable characteristics, and they vary considerably across states and markets. The State-of-the-States analysis was developed in part to address exactly these kinds of distortions.

I have no objection to researchers studying whether reimbursement inequities affect access to highly rated facilities. They probably do. But that is not the same as measuring the underlying inequity, and it shouldn't become the prerequisite for correcting it. A facility shouldn't have to demonstrate that a beneficiary was denied admission to a five-star nursing home to establish that the state failed to pay the full Medicare coinsurance amount.

The payment damage can be calculated. We know the Medicare rate, the coinsurance obligation, the state payment limitation, and the amounts ultimately recoverable through Medicare bad debt. We can measure the difference by facility, geography, and payer mix without using Five-Star as an intermediary.

My full paper is available here.

“To our knowledge, SNF data scholars is a contradiction in terms.” Perhaps it was meant as a joke. In that case, you were spot on.

Unfortunately, for residents and providers on the wrong end of the wage-index ratio, this issue is no laughing matter. A lower-rated nursing home doesn't make the reimbursement inequity more acceptable, and a higher-rated nursing home doesn't make it disappear.

The inequity isn't that some dual-eligible beneficiaries end up in lower-rated nursing homes. That's a possible consequence. The inequity is that Medicaid status and geography can determine how much a SNF receives for the same Medicare-covered care.

You don't need Five-Star ratings, scholarly theories, or an access study to establish that fact. You need a fee schedule and a calculator. Good news for JAMA, z-INTEL offers one at no charge at myzPAX. Just make sure you understand how to use it first because to the best of my knowledge, you don’t. 

One last thing - nothing personal. I get snarky about these issues because they matter. We’re trying to improve a largely arbitrary SNF revenue-model that’s rotting the SNF-economy. I have no idea what you’re doing, but you’re not making it any easier.  

Marc Zimmet is the CEO of Zimmet Healthcare Services Group.