Medicare cuts will cause pain—but for whom?

October 1, 2011, is the day that an 11.1 percent reduction in Medicare payments to SNFs is implemented. It’s when we really begin feeling the pain. But, are we all going to feel the pain? Is there something you and your team can do to deal with this looming change?

Let me share what I discovered when analyzing the new RUG rates for one of my company’s clients.

Bad news first:

Rehab RUGs (RLA to RUX) are reduced and the reduction is not uniform—it ranges (for this particular client) from -8.1% for RUA to -18.6% for RLX.

The Rehab RUGs with the greatest reductions are the following: RLX, RHX, RHL, RMX, RML and RLB—all with reductions greater than 16%.

Now the good news:

Non-Rehab RUGs are increased by 2.6% across the board.

In consultation with my client’s senior leadership team, we’re expecting that several of the facilities in this multi-facility chain may actually benefit from an increase in revenue due to the Medicare reimbursement changes because the patient population is heavily weighted toward non-Rehab RUGs.

Outside of analyzing the potential impact and hoping for the best, how should you be adjusting your strategic marketing plan to handle this challenge?

1. Compensate for the loss in average daily revenue (ADR) by increasing your Medicare Average Daily Census. One of our clients estimated that the lost revenue from these Medicare cuts would be $250,000 per year. I’ve estimated that this client would have to increase Medicare Average Daily Census by only 1.52 to make up for this lost revenue.

2. Target your marketing to bring in patients with a skilled nursing need and rehab potential. These include patients with wounds, trachs and infectious diseases, which require isolation, for example. The concept is simple; while the RUL RUG falls by $118 for my client, they historically haven’t had any of these patients in the building, so bringing them in would increase the facility’s Medicare ADR.

To accomplish this we’re beefing up our clinical competencies and developing programs and targeting wound care specialists, infectious disease specialists, pulmonologists and letting case managers have programs and services to meet these patients needs.

While these strategies are our initial response to the Medicare changes, I’m expecting that we’ll be adapting and modifying our sales and marketing strategies to take advantage of other opportunities resulting from these cuts.

Luke Fannon is the Founder and Principal at Premier Coaching and Training, Unionville, Pennsylvania. PCT provides long-term and healthcare sales and marketing training, admissions and marketing team coaching and other strategic consulting services. For more information, visit

Topics: Facility management , Medicare/Medicaid