I came across this article recently.  Credit to investment banking firm Wyatt Matas for this content…

Long-term care providers can expect their currently shrinking margins to disappear completely in the new year, according to a recnet report issued by the American Health Care Association, a trade group. Citing a shortfall in Medicaid funding for senior care that totaled over $6 billion in 2011, the report notes that providers who depend on Medicare cross-subsidization to maintain operations will face a tough year ahead. An expected cut in Medicare reimbursement rates and the predicted negative 14 percent Medicaid margins means that providers relying heavily on these two government payers won’t manage to break even, with average losses of nearly $20 per Medicaid patient day. In the same week that this report appeared, the US Department of Health and Human Services released an initial set of additional quality measures for Medicaid patients. Published as part of the health reform law, HHS notes that the measures will track performance and encourage quality in care coordination and chronic disease management. States that choose to adopt the additional measures will use them to form a strategy to ensure quality care to growing Medicaid populations while funding continues to shrink. This all means high volume, low margins for providers, a situation that will further stimulate M&A activity as providers scramble to scale their businesses to gain efficiencies and offset declining margins.

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