Policy & Regulation News

Skilled Nursing Facility Payments Projected to Rise by $500M

By Jacqueline DiChiara

- New policy changes further promote the Medicare payment transition from volume to value within the healthcare industry.

Skilled Nursing Facilities

The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule totaling 150 pages, CMS-1622-P, in mid-April regarding a series of policy changes for Medicare payment rates for skilled nursing facilities (SNFs).

CMS’ quantifiable goals and the establishment of a quality-based timeline support its vision to improve how the healthcare industry manages its money. Spending healthcare dollars with intelligence, confirms the proposed rule, results in healthier people.

The proposed rule requests the implementation of a value-based pay model for SNFs with quality metrics influencing 2018 reimbursements. Those SNFs that adopt health IT to enable data exchange will be financially rewarded for doing so.

Putting all your financial eggs in one market basket

According to CMS’ proposal, there will be changes in payment rates under the SNF Prospective Payment System (PPS). CMS estimates SNF cumulative payments will increase by $500 million – 1.4 percent – from earlier payments made in 2015.

CMS explains such a projection is based on a possible 2.6 percent market basket increase.

CMS defines a market basket as a fixed-weight index, measuring a “pure” price change. A market basket helps clarify how much more (or how much less) it would cost to purchase an identical mix of goods and services within a given base period at a later time. CMS market baskets update payments and cost limits within various CMS payment systems and reflect input price inflation to better financially inform healthcare providers.

There are three steps involved in the assembly of a market basket, says CMS.

  • A base period is selected. Total base period expenditures are estimated for mutually exclusive and exhaustive spending categories based on expenditure type. Each spending category’s proportion – cost or expenditure weights – for total costs is determined.
  • Each expenditure category is matched to a price proxy, an appropriate price/wage variable.
  • The price level for each spending category price proxy is multiplied by that category’s expenditure weight. The sum of all products yields the composite index level in the market basket for a given annual time period.

The Affordable Care Act requires market basket updates for SNFs be regularly adjusted according to economy-wide productivity changes. The market update of SNF PPS, which went into effect in 1998, has declined from 2.7 in 2012 to 2.3 in 2014.

CMS stresses it is merely taking its very best guess

Where is a crystal ball when you need one? Is a $500 million increase something to tangibly anticipate or is it merely dead-end brouhaha?

The short answer, according to CMS, is a firm maybe. CMS merely estimates the aggregate impact in payments to SNFs will increase by $500 million. However, CMS itself is perhaps a tad conservative within the unfolding of its proposed ruling.

“Certain events may occur to limit the scope or accuracy of our impact analysis, as this analysis is future-oriented and, thus, very susceptible to forecasting errors due to certain events that may occur within the assessed impact time period,” explains CMS.

The possibility of newly-legislated Medicare program funding changes by the Congress or SNF changes is blatantly feasible, confirms CMS. Similarly, it’s possible previously-enacted legislation, or new statutory prevision unconsidered as of yet will affect CMS’ estimate.

“Although these changes may not be specific to the SNF PPS, the nature of the Medicare program is such that the 136 changes may interact and, thus, the complexity of the interaction of these changes could make it difficult to predict accurately the full scope of the impact upon SNFs,” CMS’ proposed ruling confirms, adding that preliminary data that could more accurately predict future financial implications is something “we do not yet have.”

CMS additionally suggests more detailed financial estimates, claiming, “We estimate a total additional burden of $27.47 per Medicare-covered SNF stay, based on the most recent data available, in this case FY 2014, that 15,421 SNFs had a total of 138 2,599,656 Medicare-covered stays for fee-for-service beneficiaries.” CMS states this would equate to 1,012,566.13 total added hours, the equivalent of 66 hours per SNF annually.

Focusing on matters of technology to decrease healthcare costs

A focus on technology to keep costs down is also a primary focus, according to the proposed rule. SNFs are suggested to independently manage health IT initiatives.

“We encourage stakeholders to utilize health information exchange and certified health IT to effectively and efficiently help providers improve internal care delivery practices, support management of care across the continuum, enable the reporting of electronically specified clinical quality measures (eCQMs), and improve efficiencies and reduce unnecessary costs,” states the proposed rule.

CMS accepts public commentary on its proposed rule through mid-June of 2015.