It looks like Orange County? nursing home operators escaped a potentially major Medicare reimbursement hit.
Early this month, the Centers for Medicare & Medicaid Services proposed adjustments to Medicare, which covers health costs for the elderly.
Nursing homes are in for a 3.3% reduction in payments due to take effect in October. But nursing home operators also would see a 2.1% reimbursement increase to account for inflation on goods and services they pay for, making the total cuts about $390 million.
That was a relief to investors. Shares of Irvine-based Sun Healthcare Group Inc. and Skilled Healthcare Group Inc. of Foothill Ranch each rose more than 10% early last week, shortly after the regulatory decision came out.
The cut is due to the closing of a four-year payment window where nursing homes were paid more than originally forecast in a 2006 Medicare payment adjustment, according to McKnight?, an industry newsletter.
While the decrease in funds largely is offset, some operators still say the cuts will harm nursing homes?ability to care for seniors, as well as force layoffs, according to McKnight?.
Medicare and Medicaid are key payment sources for nursing homes. Figures from IBISWorld, a research company, show about 75% of the nursing home industry? $99 billion in annual revenue comes from Medicaid and Medicare.
Among local nursing home companies, Sun, the largest, has the lowest exposure to Medicare, making up 28% of its $1.8 billion in revenue last year.
Medicare accounted for 36% of Skilled? $733.3 million in 2008 revenue.
Mission Viejo-based Ensign Group Inc., the county? third nursing home company, gets about a third of its $470 million in annual revenue from Medicare.
Even with the always present threat of cuts, most nursing home operators are interested in boosting their Medicare business because its reimbursement?articularly for some complex services?s higher than it is for Medicaid, a healthcare program for the poor that often covers the medical costs for people near the end of their lives.
Reimbursement is the ?word of Damocles?for nursing homes since the potential for a windfall is alway accompanied by the possibility of not being paid, said Rob Mains, an analyst with Memphis-based investment bank Morgan, Keegan & Co., in a Wall Street Journal article.
?ou don? get to negotiate with the government,?he said in the article.
Regulators are accepting comments on the proposed cuts until June 30.
From Mice to Men
A pair of University of California, Irvine, researchers received a $3.6 million grant to develop a human neural stem cell treatment for Alzheimer? disease.
Frank LaFerla and Mathew Blurton-Jones will use the California Institute of Regenerative Medicine? grant to examine whether human stem cells can reverse dementia caused by Alzheimer?.
The project builds on the pair? previous work showing that neural stem cells from mice can restore memory in mice with brain damage.
Alzheimer? is the leading cause of dementia among seniors. About 5.3 million Americans have the disease.
A recent study from Rush-Presbyterian-St. Luke? Medical Center in Chicago predicts that 16 million Americans will have the disease by 2050.
Device Makers Trade Show
Biocom, a San Diego-based life science trade group, hosted its annual DeviceFest and Exhibition last week in Newport Beach.
The event featured medical device companies that have products on the market or nearing commercialization.
Exhibitors included Lake Forest-based I-Flow Corp., a maker of devices used to ease post-surgical pain; HeartSmart Technologies Inc., an Irvine company that makes software to help doctors identify atherosclerosis, or hardening of the arteries; Irvine-based heart valve repair maker MiCardia Corp.; and OrthAlign Inc., an Irvine maker of medical devices used in orthopedic surgeries.
Venture capitalists, including Versant Venture Management LLC, which has an office in Newport Beach, and Irvine? Crystal Cove Capital LLC, also participated.
Robert Grant, president of Allergan Medical, a unit of Irvine-based Allergan Inc., was the event? featured speaker.
Bits and Pieces:
AltaMed Health Services Inc., a Los Angeles-based nonprofit health clinic network, said it bought four healthcare facilities in OC from Universal Care for an undisclosed price. The clinics are in Anaheim, Garden Grove and Santa Ana. AltaMed, which has annual revenue of $130 million, got started 40 years ago as the East Los Angeles Barrio Free Clinic ?Hoag Memorial Hospital Presbyterian in Newport Beach is sponsoring an appearance by William Thomas, a former congressman who represented California, on healthcare reform that? scheduled for May 22 at the University Club on UC Irvine? campus.
