Nursing Homes:

Aggregate Medicare Payments Are Adequate Despite Bankruptcies

T-HEHS-00-192: Published: Sep 5, 2000. Publicly Released: Sep 5, 2000.

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William J. Scanlon
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Pursuant to a congressional request, GAO discussed the causes of the bankruptcies of large corporations owning nursing homes and the implications for nursing home residents, focusing on: (1) the adequacy of Medicare's payment rates for skilled nursing services furnished in nursing homes; (2) the relationship between the changes wrought by the Balanced Budget Act and recent nursing home bankruptcies; and (3) what exists to protect patients.

GAO noted that: (1) aggregate Medicare payments for covered nursing home services likely cover the cost of care needed by beneficiaries, although some refinements to the payment system are needed; (2) Medicare policy changes have required many nursing homes to adjust their operations; (3) the adjustments have been particularly disruptive for homes that took advantage of Medicare's previous payment policies to finance inefficient and unnecessary care delivery and for those companies that invested heavily in the provision of ancillary services (such as rehabilitation therapies) to nursing homes; (4) the problems experienced by some providers of nursing home and ancillary services are therefore the result of business decisions made during a period when Medicare exercised too little control over its payments; (5) filing for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code allows these providers time to restructure their debts and streamline their operations while continuing to care for their nursing home residents; and (6) should any of these providers not emerge from bankruptcy, however, the nursing homes will be sold or the residents may have to find alternative care arrangements.

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