AHA: New Skilled Nursing Facility Payment System Needs Development

The American Hospital Association (AHA) recently urged CMS to flesh out a proposal to implement an alternative Medicare reimbursement model for skilled nursing facilities prior to advancing the changes through official rulemaking processes.

CMS released an Advance Notice of Proposed Rulemaking in April 2017 that sought public comment on changes to the existing case-mix Medicare reimbursement system for skilled nursing facilities. The proposal would eliminate the current clinical groupings model known as Resource Utilization Groups (RUGS) and replace it with the Resident Classification System Version I (RSC-1).

The federal agency and a contracted entity designed the RSC-1 Medicare reimbursement system in response to concerns from the Medicare Payment Advisory Commission (MedPAC) and the Office of the Inspector General (OIG). The groups criticized the RUG system, arguing that it incentivizes overutilization and reimbursements exceed actual care costs.

The RSC-1 Medicare reimbursement structure aims to alleviate utilization and cost concerns by implementing four case-max categories: physical/occupational therapy, speech language pathology, nursing, and non-therapy ancillaries. Each category also contains its own case-mix groups.

The new case-mix categories will impact daily reimbursement rates because the RSC-1 system will pay higher rates at the start of a resident’s stay, instead of the same rate throughout the assessment period. Rates will decrease as skilled nursing facilities provide additional days of therapy.

Consequently, skilled nursing facilities would see higher reimbursement rates if providers furnish 15 or fewer days of Medicare coverage and only one form of therapy. Rates would also be greater if 50 to 75 percent of a skilled nursing facility’s Medicare days are billed as non-rehabilitation, the Center for Medicare Advocacy reported.

Conversely, Medicare reimbursement rates would be lower for facilities treating the oldest patients (90 years or older), residents receiving three types of therapy, and residents undergoing 31 or more days of therapy paid for by Medicare.

The new system would also only require a five-day and “significant change” assessment. If patients do not experience a significant change, their payment classification would remain the same.

While the AHA generally backed the RSC-1 system, the industry group called on CMS to “first address key elements of the model that still require further development prior to proposing implementation of the new model.”

The group expressed concerns about the proposed Medicare reimbursement system’s ability to accurately estimate the resource needs of medically complex patients. Understanding the actual resources needed is key to payment accuracy and care access.

“While the rule indicates that the RCS-1 would improve payment accuracy for cases with higher clinical acuity, it does so only at a high level and falls short of explaining how, in practice, patient access to care would be affected,” the AHA wrote. “Given the importance of ensuring access for this population, it would be helpful if CMS would discuss how beneficiaries’ access to care under the RCS-1 would be protected for each of the key elements of care: nursing, therapy, non-therapy ancillary, and other services.”

CMS should also clarify how “change of status” assessments will impact payment classifications as a patient’s needs change throughout the stay. The current model relies on minutes of therapy to determine payments, which captured some clinical needs changes. But the proposed system does not detail how the reimbursement structure ensures that patients who shift from one case-mix classification to another will be affected.

Leaders at the federal agency should also elaborate on how requiring only the five-day, “significant change,” and discharge assessments would conflict with requirements of other skilled nursing facility programs, such as the Quality Reporting Program and Improving Medicare Post-Acute Care Transformation (IMPACT) Act.

“The various assessments likely would affect the overall minimum data set (MDS) schedule; specifically, it is unclear how the revised schedule would be integrated into the requirements that post-acute care providers collect and report standardized patient assessment data for all Medicare Part A admissions and discharges beginning on Oct. 1, 2018, and how the MDS changes would affect the desired standardization of collected data across post-acute care provider types,” the group explained.

Additionally, the AHA requested that CMS re-evaluate the RSC-1 system using updated data. The federal agency has been working on revamping the skilled nursing facility payment system for several years and initial RSC-1 development used data from 1995 and 2006.

“This raises questions about the ability of the model to accurately and reliably project current costs given that substantial regulatory and marketplace interventions have occurred since that time that have materially changed the cost profile for SNF service delivery,” the organization stated.

CMS contractors argued that the skilled nursing facility patient mix has experienced little change from 2006 to present. However, AHA member data revealed significant changes in post-acute care utilization patterns under value-based purchasing.

For example, many high-acuity post-acute patients received care at less-intensive care settings, such as skilled nursing facilities, rather than more expensive, high-intensity settings under bundled payments and accountable care organization (ACO) arrangements.

Medicare reimbursement rules also shifted post-acute care use. For instance, inpatient rehabilitation facility admission rules from 2010 decreased the number of joint replacement patients in those facilities.

Site-neutral payment rules for long-term care hospitals also impacted utilization by impacting admission practices, the AHA stated.

CMS should also study the practical challenges that providers may encounter while implementing a new Medicare reimbursement system. With the RSC-1 model shifting away from time-based payments, providers must adjust to a cost-centered approach rather than a revenue-centered system.

The proposed Medicare reimbursement system would also create over 300,000 payment groups, far exceeding the number of payment classifications under the RUG model.

Providers would need time to ensure vendor readiness, educate their staff, adjust their workflows, update health IT systems, and implement other processes needed to successfully manage the change.

“Experiences in acute care hospitals highlight the substantial amount of time needed to proactively ensure timely, comprehensive and reliable communication with providers and technology vendors about finalized measurement and reporting protocols,” the AHA stated.