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Nursing Homes Can Use Accounts Receivable Financing for Medicare Billing

Posted on September 19, 2013 in Medicare & Healthcare

Nursing homes are a cost-effective way for people, most often the elderly, to receive extensive care without remaining in a hospital. Generally, nursing homes offer care for injuries, acute illnesses or postoperative treatment. Many also provide custodial care such as assistance with eating, bathing and getting dressed.

People in these facilities are usually eligible for Medicare, which covers the cost of care when they enter nursing homes from the hospital. Under certain limitations, Medicare also pays some of the costs for skilled care for rehabilitation services. These may include respiratory therapists, physical therapy and occupational therapy.

Pricing Model Used by Nursing Homes

Generally, nursing homes are very similar to hospitals. Staff is accessible in nursing stations to attend to residents. Rooms where residents live are functional like hospital rooms, with hospital beds to match, and offer little or no privacy. Staff typically refers to residents as patients.

In addition, the pricing model for hospitals is followed where residents are charged daily flat rates. Whether the rooms are private or semi-private, the assumption is that all residents need the same level of care and supervision.

Some industry experts believe that one way to improve this model is to have friends or family help with resident care. If they did, their portion of service could be deducted from the bill. The cost savings could be passed on to residents and reduce some of the nursing home's reliance on government reimbursement.

In the mean time, state and federal governments pay more than 70 percent of nursing home costs for most residents. Approximately 85 percent of nursing home residents receive some type of government assistance for care. Because the government covers such a huge portion of these costs, nursing homes usually structure the delivery system for patient care in accordance with the government payment system.

Reimbursement from the government is based on nursing care hours per patient. Wrapped in these payments are operational costs including wages, utilities and insurance. Ancillary services such as diagnostics, custodial care and therapeutic treatments must also come out of per patient payments.

This current model is unlikely to change any time soon due to the stationary culture of most government programs. Add to this the pending cuts with Medicare. Nursing homes will need to get more creative in providing quality care with smaller resources.

Problems Created by Medicare Cuts

Based on estimates by the Centers for Medicare and Medicaid Services, nursing homes receive nearly 20 percent of total revenues from post-acute care. Proposed Medicare cuts are for medical services that support ongoing recovery such as dialysis treatment. Revenues are expected to drop by a little more than two percent. That may seem like a small percentage but some nursing homes predict an across-the-board impact on services.

The irony in the problems these cuts will create is that they originated from a plan to improve payments for services. Generally, reimbursement rates differ based on the type of post-acute care a resident needs. On one end of the continuum of care spectrum, a resident has hip surgery in the hospital. He or she must spend a few weeks in a nursing home for rehabilitation.

At the other end, there is a resident with multiple physical problems and dementia who also undergoes hip surgery. Post-acute care in the latter case is much more expensive and complex.

Under the assumption that post-acute care – regardless of the type – was compensated equally, Medicare believed that changes to the reimbursement process created a fair balance of payments. The initial goal was to shift costs for less complex care to care that is more complex.

However, what happens is that all nursing homes will experience cuts to reimbursements even if they do not provide complex care. Nursing home providers that do offer these services can benefit from loopholes that give higher payments for certain treatments. Additionally, they can receive an increase for some therapy situations without increasing workloads that would wipe out the increases.

The agency's remedy creates problems for nursing homes that must adjust to lesser payments with the same level of demand for services. At the same time, cuts in Medicaid payments from states mean more loss in financial support. Before, many nursing homes could rely on Medicare reimbursements to fill gaps.

Accounts Receivable Financing Option

Sweeping Medicare cuts can create real hardships for nursing homes that are obligated to care for residents. The demarcation between policy decisions and resident care may introduce more questions than answers about choices in medical services. Nevertheless, Medicare cuts do not equate to cuts in quality of care. Dedicated staff in many nursing homes will continue to provide quality care services to residents.

With limited influence in decisions to cut payments, nursing homes must look for other options to cover services. CMS plans to monitor how payment changes might interfere with the quality of care. In the meantime, nursing homes can explore other resources.

One possible solution is to use funding through an medical accounts receivable factoring process. Through a receivables funding program, nursing homes can have access to an asset-based credit line. Billings to Medicare and other third-party payors are used to subsidize costs that require immediate attention to continue resident care.

Even without cut to Medicare, nursing homes often experienced long delays between billing the government and receiving payments. Long delays can create cash flow gaps that hinder the ability to pay utilities, vendors and salaries.

Post-acute care is important to maintain the quality of life for residents in nursing homes. Deeper spending cuts may eventually lead to reduced hours in care. Or, the cuts may galvanize nursing home administrators to look for financing alternatives and prevent cutting care to residents.