CMS RFI Requirements for LTC Facilities to Establish Mandatory Minimum Staffing Levels

Centers for Medicare & Medicaid Services
Submitted electronically,

June 9, 2022

Dear CMS Administrator and Brooks-LaSure and CMS Colleagues:

We are writing as a group of geriatric nursing home experts with many years of experience in nursing home research and/or clinical practice and administration. Collectively, we have conducted many research studies on nursing homes and nursing home staffing, written many papers and reports on nursing and nursing home standards, and served on many expert panels and committees for government, foundations, the National Academy of Science, Engineering, and Medicine, and professional organizations. We strongly recommend that CMS make changes to its Medicare nursing home payment system and establish mandatory minimum staffing standards along with specific guidelines for staffing levels based on resident acuity.

Requests for Information: Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities

In general, the prospective payment system (PPS) lacks adequate financial reporting and accountability. The Affordable Care Act (ACA) required detailed Medicare nursing home cost reports, including expenditures for staff wages and benefits and separated costs for direct and indirect care, capital costs, and administrative costs that include owners’ profits. Medicare cost report data are not audited and penalties are not issued for failure to report. In other words, the Medicare prospective payment system allocates funds for expected costs but does not impose audit requirements or ensure that funds are expended as allocated. The Government Accountability Office (GAO) recommended that CMS take steps to ensure that cost data are reliable and made readily accessible to public stakeholders.1 Audits of cost reports are needed and penalties should be instituted for inaccurate nursing home ownership and cost data.

We urge CMS to establish a medical loss ratio to assure that expenditures benefit residents. Under the ACA, insurers must spend a certain percentage of their premium on health care claims or quality improvement. This percentage, known as a medical loss ratio (MLR), is set at 85 percent for the large group market and defines the proportion of revenues to be spent on - services versus administration and profits. The nation’s nursing homes have high administrative costs and profits. California 2018 nursing home cost reports showed a total of 23 percent of net nursing home revenues were spent on administration and profits, not accounting for the hidden profits from third party contracts.2 A medical loss ratio similar to that imposed at the federal level for private health insurance companies by the Affordable Care Act, could be imposed on nursing homes.

Since the vast majority of nursing home revenues are from Medicare and Medicaid, the total amount of administration and profits could be limited to 10-15 percent of net income annually. A medical loss ratio of 85 percent could save payers billions of dollars and ensure that funds are used for direct care services. New Jersey adopted such a law called “direct care ratio” in the fall of 2020.3 In addition, New York and Massachusetts also adopted a direct care ratio and California is considering such legislation. By limiting administrative costs and profit taking, nursing homes can reallocate its revenues to nursing, ancillary, and support services. CMS is well aware that nursing homes are not using funding to provide staffing and other services under the PPS system. CMS should take action to make its nursing home Medicare payment system more accountable.

Download White Paper on Minimum Staffing Levels

  1. U.S. Government Accountability Office (US GAO). Skilled nursing facilities: CMS should improve accessibility and reliability of expenditure data. GAO-16-700. Washington, D.C.: GAO, September, 2016.
  2. Harrington, C., Ross, L., Mukamel, D., and Rosenau, P. Improving the Financial Accountability of Nursing Facilities. Report prepared for the Kaiser Commission on Medicaid and the Uninsured, Washington, DC: Kaiser Commission on Medicaid and the Uninsured, June, 2013. accountability-of-nursing-facilities/
  3. New Jersey. Assembly, No. 4482, 219th Legislature. Establishes minimum wage requirements for certain long- term care facility staff; establishes direct care ratio requirements for nursing homes; requires nursing home care rate study. 2020-09-16, executive: Approved P.L.2020, c.89. search/nj/219/bills/NJB00038520/