Medicare cuts may force nursing homes to close, analysis says

Nursing homes may not be able to weather the Medicare cuts that Congress is considering, according to a financial report the industry released Wednesday.

Nursing homes have been vocal in protesting possible cuts during Congress’s various deficit-reduction efforts. And the industry could still face cuts as lawmakers look for ways to offset a host of year-end spending measures, including a temporary delay in cuts to doctors' Medicare payments.

But the new report says nursing homes already operate on such slim profit margins that further cuts could drive them into the red.

“While our analysis demonstrates the possibility that the industry might be able to weather reductions of this magnitude, it makes clear the substantial degree of uncertainty surrounding the industry’s ability to actually do so,” said the Moran Company, which conducted the analysis on behalf of the American Health Care Association.

The Moran analysis says nursing homes’ average profit margin in 2009 was 0.75 percent. Margins would likely be “mildly positive” going forward if existing payment policies are left in place, the study said, but deep cuts could push the industry into negative territory.

“Many may not want to mention margins when it relates to health care providers, but the fact of the matter is without a margin, it’s just not possible to keep operating,” American Health Care Association President Mark Parkinson said in a statement.