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$900 Million Increase in Medicare Part A Payments One of Many Medicare Changes for SNFs in FY 2023

August 10, 2022

On July 29, 2022, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that updates Medicare payment policies and rates for skilled nursing facilities (SNFs) and enacts changes to the SNF Quality Reporting Program and the SNF Value-Based Purchasing Program beginning in FY 2023.

SNF Payment Rates and PDPM Adjustments

Nursing homes will receive a net increase of 2.7%, or $904 million, in Medicare Part A payments in FY 2023 as compared to FY 2022. Interestingly, this increase stands in direct contrast to the recommendation of the Medicare Payment Advisory Commission to reduce the Medicare base payment rates for SNFs by 5%. Moreover, CMS itself had initially proposed a decrease of $320 million in aggregate Medicare Part A payments to SNFs during FY 2023, although the decrease was partially as a means to offset the unintended increase in payments of approximately $1.7 billion per year that resulted from the implementation of the Patient Driven Payment Model (PDPM).

The PDPM was introduced in late 2019 as a new model by which to classify SNF patients under the SNF Prospective Payment System. The purpose of the PDPM was to eliminate certain incentives associated with classifying patients under the prior case-mix classification model, Resource Utilization Group, Version 4 (RUG-IV), in order to increase reimbursements, as well as to improve the overall accuracy and appropriateness of SNF payments. PDPM classifies patients into payment groups based on specific, data-driven patient characteristics. The implementation of the PDPM was intended to be “budget neutral,” however, as mentioned, ultimately resulted in an unintended increase in payments. In order to offset these unintended payments, CMS plans to recalibrate the PDPM parity adjustment gradually over the next two years.

Permanent Cap on Wage Index Decrease

In efforts to mitigate year-to-year instability in providers’ wage indexes, CMS finalized a permanent 5% cap on annual wage index decreases in future years, the result of which will be that geographic area’s wage index would not be less than 95% of its wage index calculated in the prior FY regardless of the circumstances causing the decline. Notably, in the past, CMS has implemented only temporary policies to offset significant changes to payments due to changes to the wage index. The application of a permanent cap is an important step as year over year changes to the wage index often create instability and negatively impact providers. Moreover, such changes are often unpredictable, and as CMS explained in the proposed rule, the importance to payers of maintaining predictability in Medicare payments is obvious. CMS’ implementation of a permanent 5% cap on annual wage index decreases is intended to not only increase the predictability of SNF PPS payments for providers, but also mitigate negative side effects to providers resulting from reductions to the wage index.

Skilled Nursing Facility Quality Reporting Program 

The final rule also provides for a new process measure for the SNF Quality Reporting Program (QRP)—the Influenza Vaccination Coverage among Healthcare Personnel measure. As the name suggests, the new measure assesses the rate of influenza vaccination coverage among health care personnel in SNFs beginning with the FY 2024 SNF QRP. Notably, influenza vaccination coverage among health care personnel is typically lower in long-term care settings, such as SNFs, when compared to other care settings. As CMS explained, residents of long-term care facilities often have greater susceptibility to influenza due to general frailty and comorbidities, close contact with other residents, interactions with visitors, and exposure to staff who rotate between multiple facilities. Therefore, through this new measure, CMS emphasizes the importance of monitoring and reporting influenza vaccination rates among health care personnel in SNFs.

Suppression of Readmission Measure for Skilled Nursing Facility Value-Based Purchasing Program

The SNF value-based purchasing (VBP) program rewards nursing facilities with incentive payments based on the quality of care they provide to Medicare beneficiaries, as measured by performance on a single measure of hospital readmissions—the Skilled Nursing Facility 30-Day All-Cause Readmission Measure (SNFRM).

In a prior rule, CMS adopted a policy for the duration of the COVID-19 public health emergency that enables it to suppress the use of the SNFRM for purposes of scoring and payment adjustments in the SNF VBP Program if CMS determines that circumstances caused by COVID-19 have affected the measure and the resulting performance scores significantly. And, CMS applied this policy for FY 2023. Citing concerns of the effect of the COVID-19 pandemic on CMS’ ability to accurately assess performance on the SNFRM, the current final rule provides that facility readmission measures will not be included as part of the performance scoring for FY 2023. CMS explained that the pandemic has had “direct, significant, and continuing effects” on its ability to measure the performance of skilled nursing facilities on the SNFRM, and thus on its ability to use the SNFRM to calculate payments for the FY 2023 program year. Specifically, the validity of such data is compromised by the combination of significant variation in COVID-19 case rates across the U.S, changes in hospitalization patterns in FY 2021, and fewer admissions to SNFs. CMS advised that performance on this measure will still be reported publicly, it just will not affect payment, in FY 2023.

In addition to suppressing the SNFRM for the FY 2023 SNF VBP Program for the purpose of scoring and payment adjustments, CMS will implement special scoring procedures for FY 2023 and adopted additional performance measures.

Staffing Levels

Earlier this year, CMS sought public feedback on its proposal to require minimum staffing levels in nursing homes and to potentially tie certain payments to the level of staff turnover, which CMS notes has been linked to patient quality of care. While the final rule does not address this issue, CMS advised that it will propose rulemaking on this issue next year, after further studying “the level and type of staffing needed to ensure safe and quality care.”

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Michelle Chipetine
Associate – New York
Phone: +1.212.895.4221
Email: mchipetine@crowell.com
Stephanie Marcantonio
Partner – New York
Phone: +1.212.895.4305
Email: smarcantonio@crowell.com
Paul Mourning
Partner – New York
Phone: +1.212.895.4307
Email: pmourning@crowell.com