On the evening of July 31, 2020, the Centers for Medicare and Medicaid Services (CMS) released three payment rules for the upcoming fiscal year 2021. These rules contain finalized payment policies for skilled nursing facilities (SNFs), hospices, and inpatient psychiatric facilities. Because of the ongoing COVID-19 public health emergency, CMS has limited the annual rulemaking for these facilities to what they deem “essential policies.”

Provisions of these three rules will go into effect on October 1, 2020.

Total Payments to SNFs to Increase by $750 Million in FY 2021

The prospective payment system (PPS) for skilled nursing facilities (SNFs) uses a case-mix classification system called the Patient Driven Payment Model (PDPM) for classifying SNF patients. The PDPM classifies patients into groups based on patient-characteristics instead of using volume of therapy services as the basis for payment classification and, according to CMS, has been implemented in a budget neutral manner.

CMS is finalizing the following unadjusted federal per diem rates, which are largely identical to the proposed rates:

Rate Component	Physical Therapy Case-Mix	Occupational Therapy Case-Mix	Speech-Language Pathology Case-Mix	Nursing Case-Mix	Non-Therapy Ancillaries Case-Mix	Non-Case Mix
FY 2021 Unadjusted Per Diem Amount – Urban	$62.04	$57.75	$23.16	$108.16	$81.60	$96.85
FY 2021 Unadjusted Per Diem Amount – Rural	$70.72	$64.95	$29.18	$103.34	$77.96	$98.64

 

Overall, CMS is estimating that payments to SNFs in FY 2021 will increase by $750 million as compared to FY 2020 payments. This is attributed to a market basket update of 2.2 percent for SNFs in FY 2021. SNFs that fail to submit quality data will have a 2 percent reduction applied to their update. In response to stakeholder feedback, CMS also finalized changes to ICD-10 diagnosis code mappings (used to define patient characteristics for payment purposes), including those related to certain cancers that could require a major procedure.

CMS finalized its proposal to allow SNFs to have 30 days following issuance of their quality report to review underlying claims, measure rate information, and submit correction requests. The rule also codifies an existing data suppression policy for low-volume SNFs that was adopted in last year’s rulemaking and reaffirmed that the website for publicly reporting SNF performance information will change from the Nursing Home Compare Website to a public internet blog in the future.

CMS Adopts Revised Geographic Delineations for SNFs

The Office of Management and Budget (OMB) established revised delineations for Metropolitan Statistical Areas (MSAs), Micropolitan Statistical Areas, and Combined Statistical Areas in a September 2018 bulletin. Medicare uses these areas to geographically adjust Medicare payment rates. Beginning with FY 2021, CMS will use the revised areas to determine payments under the SNF PPS. Approximately 34 counties currently considered urban would now be considered rural; 47 rural counties will now be considered urban. CMS will also use the revised areas to adjust payments under its other Medicare payment systems.

To phase in the new geographically adjusted payment rates, CMS is proposing a 5-percent cap on any decreases in a SNF’s wage index for FY 2021 resulting from the revised delineations. CMS is applying a budget neutrality adjustment to the federal per diem rates to account for the estimated effect of the 5-percent limitation.

In the final rule, CMS notes that OMB released another bulletin in March 2020, but since this was not released in time for development of FY 2021 SNF rulemaking, any updates from this 2020 bulletin will be in the FY 2022 proposed rule.

Hospice Payment Rates to Increase by 2.4% in FY 2021; Transition Policy to Cap Wage Index Reduction to 5% Finalized

CMS is updating the hospice payment rates by 2.4 percent, an increase of $540 million, for FY 2021 and is finalizing a 1-year 5 percent cap on wage index decreases. CMS did not finalize its proposal to sunset the service intensity add-on budget neutrality factor (SBNF).

Per the finalized transition policy, CMS will apply a 5 percent cap to any decrease in a geographic area’s wage index value from the prior fiscal year to help mitigate any significant negative impacts that hospices may experience in the adoption of the Office of Management and Budget (OMB) delineations to update the hospice wage index. The Medicare Payment Advisory Commission (MedPAC) commented that CMS should apply the 5-percent cap to both increases and decreases in the wage index, but the final rule will only apply to reductions in wage index.

CMS is also adopting the OMB revisions to Metropolitan Statistical Areas (MSAs), Micropolitan Statistical Areas, and Combined Statistical Areas in its September 2018 bulletin under its hospice payment system, similar to a finalized policy for SNFs. The changes will be phased in over two years in hospices. The phase-in caps any reduction in the wage index at 5 percent for FY 2021, but there will be no cap in reductions for FY 2022.

The annual hospice aggregate cap limit, which is required by statute, for FY 2021 cap year is $30,683.93.

CMS also updated its website with model examples of the modified hospice election statement and the addendum that were finalized in the FY 2020 Hospice final rule. Beginning in October 2021, hospices, upon request, must furnish an election statement addendum that lists non-covered items, services, and drugs. The hospice election statement addendum is a condition for payment that is only met if the addendum is signed by the requesting beneficiary.

There are no changes to the Hospice Quality Reporting Program for 2021. CMS will not consider any items submitted for Q1 or Q2 (January 1 – June 30, 2020) when determining if a hospice meets the HQRP requirements for FY 2022, due to the coronavirus pandemic.

Inpatient Psychiatric Facility Payment Rates to Increase by 2.2%; Changes to Scope-of-Practice Finalized

The final rule updates the prospective payment rates, outlier thresholds, and wage indices for Medicare inpatient hospital services provided by approximately 1,500 Inpatient Psychiatric Facilities (IPFs) across the country. In the rule, CMS adopts the following changes:

• Update of 2.2 percent;
• Update of statistical delineations from the Office of Management and Budget (OMB); and
• Update of regulatory language to consistently reflect that advanced practice providers are allowed to operate within their scope of practice per state law.

IPFs are paid a daily base rate intended to cover all routine, ancillary, and capital costs. The per-diem payment may be adjusted based on a patient’s Diagnosis-Related Group (DRG) assignment and comorbidities. Payments are also adjusted to reflect higher expenses at the beginning of a patient’s stay and lower expenses towards the later days of the stay. CMS is adopting an increase for both the per-diem base rate as well as per-treatment payments for electroconvulsive therapy in 2021. CMS estimates total IPF payments to increase by 2.3 percent or $95 million in FY 2021.

The IPF market basket increase, which is used to update IPF payment rates, is 2.2 percent. This is further adjusted by a productivity adjustment, which keeps the IPF payment rate update of 2.2 percent since the productivity adjustment for this year was zero. Additionally, total estimated payments to IPFs are estimated to increase 0.1 percentage point due to an update of the outlier threshold amount to maintain estimated outlier payments at 2 percent of total estimated payments.

Inpatient Psychiatric Facility Proposed Payment System (IPF PPS)	FY2020	FY2021 (Adopted)
Per-Diem Base Rate	$798.55	$815.22
Electroconvulsive Therapy Payment (per treatment)	$343.79	$350.97
Fixed Dollar Loss Threshold	$14,960	$14,630
Total Overall Expected Increase in Payments to IPFs in FY2021		$95 million

 

CMS is adopting the revised Office of Management and Budget (OMB) geographic delineations from a September 2018 bulletin, similar to policies adopted in other settings of care. In this rule, CMS is finalizing its proposed policy that any decline in a facility’s wage index value is capped at a 5 percent decrease for FY 2021.

CMS also coordinates regulatory language in this rule to consistently reflect that advanced practice providers, including physician assistants, nurse practitioners, psychologists, and clinical nurse specialists, are allowed to operate within the scope of practice allowed by state law by documenting progress notes in the medical record of patients receiving services in psychiatric hospitals.

CMS did not propose and is not adopting any changes to the IPF quality reporting program for FY 2021.

This Applied Policy® First Night Summary was prepared by Giana Mandel with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact her at gmandel@appliedpolicy.com or at 202-558-5272