CMS Proposes Overhaul of SNF Reimbursement System, Increases FY 2019 Payments

The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule on April 27, 2018 to overhaul the payment system for skilled nursing facilities (SNFs). Specifically, the rule would “update the payment rates used under the prospective payment system (PPS) for [SNFs] for fiscal year (FY) 2019” and “replace the existing case-mix classification methodology, the Resource Utilization Groups, Version IV (RUG-IV) model, with a revised case-mix methodology called the Patient-Driven Payment Model (PDPM) effective October 1, 2019.” This proposed rule “also proposes revisions to the regulation text that describes a beneficiary’s SNF ‘resident’ status under the consolidated billing provision and the required content of the SNF level of care certification” and “includes proposals for the SNF Quality Reporting Program (QRP) and the Skilled Nursing Facility Value-Based Purchasing (VBP) Program that will affect Medicare payment to SNFs.”

Contemporaneously with its release of the proposed rule, CMS issued a fact sheet that “discusses three major provisions of the proposed rule: the proposed changes to the case-mix classification system used under the SNF [PPS], the SNF [VBP], and the SNF [QRP],” as well as potential changes with respect to sharing of healthcare data. CMS describes the proposed rule as a follow-through on its “commitment to shift Medicare payments from volume to value” by focusing its payment scheme “on the patient’s condition and resulting care needs rather than on the amount of care provided.” CMS anticipates that the proposed rule would reduce paperwork and administrative costs to the tune of approximately $2.0 billion over ten years, and further estimates that FY 2019 SNF Medicare payments will increase by $850 million as a result of the SNF market basket increase required by the Bipartisan Budget Act of 2018 (as compared to a $670 million increase that would have occurred in the absence of this statutory requirement).

The Patient Driven Payment Model (PDPM)

Under the proposed rule, the proposed PDPM would become effective October 1, 2019, and would replace the existing RUG-IV case-mix model used to classify Part A SNF residents into payment groups. CMS had previously proposed replacing the RUG-IV case-mix model with a new model called the Resident Classification System, Version I (RCS-I). The proposed PDPM is the result of significant revisions to the RCS-I model following concerns and questions raised by stakeholders. CMS characterizes the PDPM as significantly less complex than either the existing RUG-IV or the proposed RCS-I case-mix models. CMS expects the PDPM to “improve the incentives to treat the needs of the whole patient” and to shift the focus away from the volume of services, which it expects will reduce paperwork and other administrative burdens for providers. CMS estimates that “PDPM would simplify complicated paperwork requirements for performing patient assessments by significantly reducing reporting burden (approximately $2.0 billion over 10 years), helping to create greater contact between health care professionals and their patients.”

SNF Quality Reporting Program (QRP)

The SNF QRP, authorized by Section 1888(e)(6) of the Social Security Act, requires SNFs to report certain quality data to CMS and punishes a failure to do so with “a 2 percentage point reduction to the otherwise applicable annual market basket percentage update with respect to that fiscal year.” CMS reports that it is seeking to balance the goals of the QRP against the burdens to SNFs by “working to identify how to move the SNF QRP forward in the least burdensome manner possible while continuing to incentivize improvement in the quality of care provided to patients.” Specifically, CMS reports that it is “not proposing to adopt any new measures for the SNF QRP in this proposed rule.” However, the proposed rule would require that the evaluation of measures that CMS intends to remove from the SNF QRP measure set would include a weighing of the costs of the measure against the benefits of continuing to use the measure in the QRP.

SNF Value-Based Purchasing Program (VBP)

Beginning October 1, 2018, in an effort to incentivize SNFs to take steps to reduce hospital readmissions, their hospital readmissions performance will result in positive or negative incentive payments. The proposed rule would update policies related to the VBP Program, “including the performance and baseline periods for the FY 2021 SNF VBP Program year, an adjustment to the SNF VBP scoring methodology, and an Extraordinary Circumstances Exception (ECE) policy.”

Public comments on this proposed rule will be accepted until 5:00 p.m. on June 26, 2018.