The Center for Medicare andMedicaid Services (CMS) has announced that it is reducingpayments for skilled nursing facilities by $3.87 billion in fiscalyear 2012 (beginning October 1).

The cut represents an 11.1 percent cut in payments, nearlymeeting the 11.3 percent cut CMS proposed back in April. Thedepartment said the cut would help adjust for unexpected increasesin nursing-home payments this fiscal year. Another option wouldhave increased funding by 1.5 percent.

Several senior living communities have indicated the impact thereduced payments will have on their operations. Brookdale SeniorLiving, for example, expects to see a full year reduction in cashfrom facility operations in the range of $20 million to $25million. Sunrise Senior Living estimates that reported firstquarter 2011 consolidated net income and adjusted EBITDA would haveeach been reduced by approximately $1 million had the reducedpayments already been in place.

CMS also decided to increase payments to hospices by 2.5 percentwhile requiring the facilities to report on the quality of carereceived by Medicare patients.