CMS Final Rule Boosts Medicare Payments for Skilled Nursing Facilities

August 01, 2022 - CMS has finalized a 2.7 percent increase in Medicare payments for skilled nursing facilities (SNFs) in its SNF Prospective Payment System (PPS) final rule for fiscal year 2023.

The $904 million payment increase is based on multiple factors.

First, the update reflects the 5.1 percent payment rate increase stemming from a 3.9 percent market basket increase, a 1.5 percentage point market basket forecast error adjustment, and a 0.3 percentage point reduction for productivity.

Second, the payment increase reflects the 2.3 percent or $780 million rate decrease due to the recalibrated parity adjustment.

CMS implemented the Patient-Drive Payment Model (PDPM) in October 2019, intending for the transition to be budget neutral. However, the PDPM implementation caused a 5 percent or $1.7 billion annual increase in payments in FY 2020.

As a result, CMS finalized a 4.6 percent parity adjustment offset with a two-year phase-in period that would reduce SNF spending by 2.3 percent in FY 2023 and 2.3 percent in FY 2024.

The overall payment update for FY 2023 does not include SNF Value-Based Purchasing (VBP) program reductions for certain SNFs, which are expected to total $186 million in FY 2023, CMS noted.

The finalized reimbursement rate differs substantially from the proposed $320 million decrease CMS included in the proposed SNF PPS rule.

The American Hospital Association (AHA) voiced its opposition to the proposed cut, stating that the payment decrease was ill-timed given the financial challenges SNFs and nursing homes have faced during the COVID-19 public health emergency (PHE).

In addition to the finalized increase in Medicare reimbursement, CMS finalized a permanent 5 percent cap on annual wage index decreases to mitigate year-to-year changes in SNF payments.

The final rule included a new quality measure for the FY 2024 SNF Quality Reporting Program (QRP) that tracks influenza vaccination coverage among healthcare professionals in SNFs. Influenza vaccination coverage among staff is typically lower in long-term care settings, according to CMS. Thus, the agency said it hopes the measure will increase influenza vaccination coverage in SNFs.

SNFs must submit data on the measure between October 1, 2022, and March 31, 2023.

The final rule also included a revised compliance date for certain SNF QRP reporting requirements. SNFs must begin collecting Transfer of Health Information data and standardized patient assessment data, such as race, ethnicity, preferred language, and health literacy, starting October 1, 2023.

CMS made changes to the SNF VBP program as well.

The rule finalized a proposal to suppress the SNF 30-Day All-Cause Readmission Measure for FY 2023 performance scoring. Performance scores will be reported publicly but will not affect payment, CMS said.

In addition, CMS will assign a performance score of zero to all participating SNFs to mitigate the effect of PHE-related measures on final scores. The agency will also reduce the federal per diem rate for SNFs by 2 percent and award SNFs 60 percent of that withhold, resulting in a 1.2 percent payback to SNFs.

CMS finalized the addition of three new measures to the SNF VBP program. Beginning in FY 2026, the program will adopt the Skilled Nursing Facility Healthcare Associated Infections Requiring Hospitalization (SNF HAI) and Total Nursing Hours per Resident Day measures. Starting in FY 2027, the program will adopt the Discharge to Community – Post-Acute Care Measure for SNFs (DTC).

The final rule also included updates to the SNF VBP scoring methodology, changes to the PDPM ICD-10 code mappings, and revisions to the requirements for participation for long-term care facilities.