And Medicaide isn't doing too well, either.

A sharp cut in Medicare reimbursements set to go into effect Oct. 1 could hurt the bottom lines of nursing home owners and operators with revenues dependent on government reimbursements.

However, as is so often the case, the largest and most diversified publicly traded owners of long-term and post-acute care real estate could find opportunity in picking up financially weakened operators.

As Congress returns to session this week, nursing home industry groups are mounting a public effort to discourage deeper cuts to Medicare, even as their members look to slash expenses to deal with billions in lost Medicare and Medicaid revenue.

The Centers for Medicare and Medicaid Services (CMS) recently announced an 11.1% reduction in payments to skilled-nursing facilities. The announcement, followed by a report that the cuts could total $79 billion over 10 years, sent a shock wave across the industry last month that caused health-care REIT stocks to plunge.

Last week, the American Health Care Association (AHCA) and the Alliance for Quality Nursing Home Care (AQNHC) rolled out an advertising campaign to urge lawmakers to spare skilled nursing and rehabilitative care facilities from deeper cuts as Congress this fall addresses ways of cutting the federal deficit.

“Our nation’s long term and post-acute care facilities have already been dealt rounds of reductions, and now further cuts to Medicare and Medicaid may be on the way,” said Mark Parkinson, president and CEO of the American Health Care Association. “Additional cuts to skilled nursing and assisted living threaten access to quality care needed by America’s seniors and individuals with disabilities. It will also demonstrate that our sector is part of the solution to both rising health care costs and the need for local job creation.”

A separate report by Avalere Health LLC last month estimates that the CMS payment reduction and other changes will cut the overall industry margin of facilities from 3.8% to zero in fiscal-year 2012. Nursing facilities could begin to post losses beginning in 2013, according to the Avalere study, sponsored by AQNHC.

"All health care institutions, whether non-profit or for-profit, need some profit margin to survive," said Dan Mendelson, CEO of Avalere. "Our analysis shows that further payment reductions in skilled nursing would likely push margins - already the lowest of any type of health care provider - into negative territory."

Executives for publicly traded health-care REIT reacted cautiously to the CMS announcement, with most noting that they are well diversified between Medicare-funded and private-pay business. Debra Cafaro, chairman of Ventas Inc., emphasized that reimbursement changes are cyclical and subject to periods of volatility for operators.

Ventas, one of the larger owners of nursing home space, leases most of its skilled nursing and hospital assets to Kindred Healthcare, the largest post-acute provider in the U.S. with over $6 billion in annual revenues and equity market capitalization of over $500 million.

"As a landlord, we are in a super-senior secured position in tenants’ capital structure. Our earnings are not affected by changes in Medicare reimbursement, and we have well-covered skilled nursing assets, primarily in highly structured master leases," Cafaro said.

James Flaherty, Chairman and Chief Executive Officer, HCP, Inc., said the reimbursement cut will likely translate into opportunities to acquire market share grow through consolidation in the post-acute, the skilled and the senior housing sectors.

"This development comes at an especially opportune time for HCP, given our scalable partnerships with best-in-class operators, HCR ManorCare and Brookdale," Flaherty said. "As was the case during the 2008-2009 investment environment, HCP is poised to capitalize on these developing conditions."