On July 29, the Centers for Medicare & Medicaid Services (CMS) issued the fiscal year 2023 final Skilled Nursing Facility (SNF) Prospective Payment System Rate Update and Quality Reporting Requirements rule. See the fact sheet here. Changes include the following:

• Increases the Skilled Nursing Facility (SNF) Part A payments by 2.7 percent;
• Recalibrates the SNF payment system with a phased-in budget-neutrality offset of 2.3 percent in FY 2023 and FY 2024;
• Revises certain case-mix ICD-10 mappings for SNF payment system;
• Adds a measure and changes compliance dates for the SNF Quality Reporting Program; and
• Adds three measures for the SNF Value-Based Payment Program.

This final rule is scheduled to be published in the Federal Register on August 3, 2022.

PAYMENT RATE INCREASE OF $904 MILLION FOR FY2023

For FY 2023, CMS estimates payments to SNFs will increase by 2.7 percent or $904 million compared to FY 2022. This increase reflects a 5.1 percent update to payment rates, based on a 3.9 percent market basket update plus a 1.5 percentage point market basket forecast error adjustment, less a 0.3 percentage point productivity adjustment (required by law) and a negative 2.3 percent recalibrated parity adjustment phased in over two years. This is a significant departure from the proposed rule, which would have resulted in a decrease of approximately $320 million in payments to SNFs.[1]

These financial impacts do not include SNF Value-Based Purchasing reductions, which are estimated to be $186 million. SNFs that fail to report required quality data will continue to have an additional 2-percentage point reduction applied to their payments.

Table 1. CMS is finalizing the following unadjusted federal rate per diems for FY 2023[2]

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
Unadjusted Per Diem – Urban	$66.06	$61.49	$24.66	$115.15	$86.88	$103.12
Unadjusted Per Diem – Rural	$75.30	$69.16	$31.07	$110.02	$83.00	$105.03

Payment System Parity Adjustment Recalibrated

Since October 1, 2019, CMS has been monitoring its implementation of the prospective payment system (PPS) for SNFs that uses a case-mix classification system called the Patient Driven Payment Model (PDPM). This system classifies patients into groups based on patient-characteristics instead of the volume of therapy services and it is required to be budget-neutral. For FY 2020 and FY 2021, CMS observed that the new payment system led to an unintended increase in Medicare Part A SNF spending of approximately 5 percent, even after accounting for the COVID-19 public health emergency.

To address this, CMS is finalizing a significant 4.6 percent budget-neutrality offset ($1.7 billion). The agency will apply an adjustment across all PDPM Case Mix Indexes (CMIs) in equal measure, to ensure consistency with the initial increase applied equally to PDPM CMIs.[3] CMS also finalizes a combined methodology to account for the impacts of COVID-19 on the distribution of patient case-mix, which excludes those patients whose stays utilized a COVID-19 PHE-related waiver, or who were diagnosed with COVID-19, and using a “control period” of data from months with low COVID-19 prevalence in FY 2020 and FY 2021.

As a result of stakeholder feedback and mitigating potential negative impacts to nursing homes amid the PHE, CMS will phase-in the recalibration of the PDPM parity adjustment factor by reducing SNF spending by 2.3 percent (approximately $780 million) in both FY 2023 and FY 2024. In the proposed rule, CMS did not propose a delayed or phase-in period. While CMS still believes it is best to implement the adjustment as soon as possible to maintain budget neutrality in the SNF payment system, CMS recognizes the impact of COVID-19 which they state provides a basis for a more cautious approach. Therefore, CMS finalizes a phased-in approach to recalibrating the PDPM parity adjustment.

Permanent Cap on Wage Index Decreases

Beginning FY 2023 and thereafter, CMS finalizes a permanent 5 percent cap on any wage index decrease from the prior year, regardless of the reason for the decrease. CMS finalized the same permanent cap on wage index changes for other post-acute care providers, including hospices, inpatient rehabilitation facilities, and inpatient psychiatric facilities.

Changes to ICD-10 Mappings for SNF PPS

Like all case-mix classification systems, the PDPM model uses diagnosis codes (ICD-10-CM) to help assign cases to various rate components. In order to improve the alignment of the PDPM system with current ICD-10-CM coding guidelines, the Agency finalizes changes to ICD-10 code mappings for thrombocytosis, hereditary alpha tryptasemia, unspecified depression, unspecified toxic encephalopathy, unspecified low back pain, ulcer of esophagus with bleeding, and other acute ulcer-related codes. PDPM ICD-10 code mapping and lists are available at the CMS Patient Driven Payment Model website here.

CMS FINALIZES NEW MEASURE AND REVISES COMPLIANCE DATES FOR CERTAIN SNF QRP REQUIREMENTS

In this rule, CMS finalizes the following changes to the SNF Quality Reporting Program (SNF QRP):

Influenza Vaccination Coverage among Healthcare Personnel will begin with the FY 2024 SNF-QRP

This measure protects residents of long-term care (LTC) facilities, who are at higher risk for acquiring influenza, by monitoring and reporting influenza vaccination rates among healthcare personnel. The measure is endorsed by the National Quality Forum, and data will be submitted to the Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network. Due to patient safety considerations, CMS has implemented this measure effective FY 2024. The initial data submission period will be open October 1, 2022, through March 31, 2023.

CMS Sets Revised Compliance Date for Two SNF QRP Reporting Requirements

CMS revises the compliance dates for the Transfer of Health information measures and standardized patient assessment data elements (including race, ethnicity, language preference, health literacy, etc.) to October 1, 2023. The agency notes that its decision to modify the compliance date was prompted by the overall advancement of COVID-19 vaccination and treatment information, and the importance of the SNF QRP data. The date also aligns with the collection period for Inpatient Rehabilitation Facilities and Long-Term Care Hospitals data (October 1, 2023) and Home Health Agencies (January 1, 2023).

CMS Revises Regulation Text to Include Data Completion Thresholds

CMS revises regulation text to add a paragraph (§ 413.360) containing the data completion thresholds required for SNFs to meet the compliance threshold for the annual payment update. The required data completion thresholds include:

• 80 percent for completion of required quality measure data and standardized patient assessment data submitted using the Minimum Data Set (MDS) 3.0; and
• 100 percent compliance threshold for measures submitted using CDC and Prevention National Healthcare Safety Network data submission framework.

CMS FINALIZES NEW MEASURES AND SCORING METHODOLOGY CHANGES TO THE SNF VBP PROGRAM

CMS Finalizes Additional Measures to the SNF VBP Program

The SNF Value-Based payment (VBP) program includes all SNFs paid under Medicare’s SNF PPS and incentivizes SNFs with payments based on the quality of care they provide to Medicare beneficiaries. In the past, the SNF VBP has been based on the single measure of hospital readmissions, known as the SNFRM.

The Consolidated Appropriations Act[4] (CAA) authorizes the Secretary to add nine measures determined appropriate to the SNF VBP program starting in FY 2023 including measures of functional status, patient safety, care coordination, or patient experience.

CMS finalizes its proposal to add three new measures to the SNF VBP program beginning in FY 2026 to FY 2027. The three measures include two new claims-based measures and one payroll-based journal staffing measure. Specifically, the new finalized measures are:

• The Skilled Nursing Facility Healthcare Associated Infections Requiring Hospitalization (SNF HAI) Measure: an outcomes-based measure assessing SNF performance on infection prevention and management, beginning in FY 2026.
• The Total Nursing Hours per Resident Day Measure: a structural measure that uses auditable electronic data to calculate total nursing hours per resident day, beginning in FY 2026.
• The Discharge to Community – Post Acute Care Measure (DTC): an outcomes-based measure that assesses the rate of successful discharges to the community from a SNF setting, beginning in FY 2027.

In a Request for Information (RFI), CMS asked for stakeholder feedback on implementation of a Nursing Home Staff Turnover Measure in the SNF VBP program. The measure consists of the percent of total nurse staff that have left the SNF in the past year. The measure was developed using data from CMS’ Payroll-Based Journal System and includes annual turnover for total nurses including RNs, licensed practical/licensed vocational nurses and nurse aides. Some commenters expressed support for the measure, given the impact staffing turnover can have on the quality of care for residents. Other comments expressed concern that the COVID-19 pandemic has caused difficulties in maintaining staff. CMS will take comments under consideration as the FY 2024 SNF PPS proposed rule is developed.

CMS Finalizes Changes to Scoring Methodology

CMS finalizes updates and changes to the SNF VBP scoring methodology. Finalized changes include:

• Updating the measure-level scoring normalization policy by updating the achievement and improvement scoring formulas beginning with the FY 2026 program year;
• Removing the Low-Volume Adjustment (LVA) policy from the SNF VBP Program beginning with the FY 2023 program year;
• Replacing the LVA policy for the SNFRM with a case minimum policy consisting of a minimum of 25 eligible stays during the applicable 1-year performance period beginning with the FY 2023 program year and additional minimum requirements beginning with the FY 2026 program year;
• Updating the scoring methodology so that a SNF that does not meet the case minimum threshold for a given measure during the applicable baseline period, including the new quality measures, would not receive an improvement score for the measure; and
• Requiring a 2-measure minimum for a SNF to receive a performance score for the 2026 program year and a 3-measure minimum for a SNF to receive a performance score for the 2027 program year.

CMS Suppresses Measure Affected by COVID-19

CMS finalizes the proposal to suppress the SNFRM for FY 2023 because of the impact of COVID-19 on CMS’s ability to make fair national comparisons of SNF’s performance scores. As a result, CMS finalizes a proposal to assign a performance score of zero to all participating SNFs. Performance on the measure will still be reported publicly but will not affect payment. CMS also finalizes a proposal to reduce the federal per diem rate for each SNF by 2 percent and award SNFs 60 percent of that, which would result in a 1.2 percent payback to SNFs. Lastly, CMS finalizes a proposal that SNFs that do not meet the proposed case minimum for FY 2023 be excluded from the SNF VBP Program.

CMS Responds to Comments on its Requests for Information on Exchange Function, Validation, and Health Equity

CMS sought stakeholder feedback through an RFI on the following:

• SNF VBP Exchange Function: The exchange function converts performance scores into value-based incentive payments to SNFs and determines whether payments increase or decrease for the highest or lowest performers, respectively. CMS sought input on whether to propose a new functional form or modified logistic exchange function as a result of the new proposed quality measures and updates to the SNF VBP scoring methodology. Commenters suggested that more information should be provided to SNFs on the topic, and that further evaluation of potential exchange functions be completed. CMS will take this feedback into account as future policies are developed.
• Validation: CMS sought input on the design of validation procedures, including the feasibility and need to select SNFs for validation to determine the accuracy of the data the SNF submitted, and a timeline for potential implementation. Commenters had mixed feedback on this topic, with some supporting adopting a chart review process and others stating that additional validation processes are unnecessary. CMS will take this feedback into consideration as future policies are developed.
• Health Equity: CMS sought input on the best way to tie health equity outcomes to SNF payments. This could occur at the measure level or could be incorporated at the scoring and incentive payment level through weights and points adjustments. Many commenters expressed support for CMS’s health equity commitment and provided suggestions on ways to build this into measures. CMS will consider this feedback as the agency develops future rulemaking.

CMS COMMITS TO ESTABLISHING MINIMUM STAFFING REQUIREMENTS

CMS intends to address safety, quality of care, and worker support in nursing homes by establishing minimum staffing requirements for long-term care facilities in future rulemaking within one year. In the proposed rule, CMS solicited comments on how to improve health and safety standards, promote informed staffing plans, and best develop future policy. Overall, comments were generally supportive of a minimum staffing requirement. CMS will take these comments into consideration to inform future rulemaking.

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This Applied Policy® Summary was prepared by April Gutmann with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact him at agutmann@appliedpolicy.com or 202-558-5272.

 

[1] https://www.federalregister.gov/documents/2022/04/15/2022-07906/medicare-program-prospective-payment-system-and-consolidated-billing-for-skilled-nursing-facilities

[2] See Tables 3 and 4 of unpublished rule (page 29).

[3] Tables 5 and 6 in the unpublished rule include proposed PDPM CMIs and case-mix adjusted rates based on an equal application (pages 33 – 34).

[4] See Section 111 of Division CC of the CAA, 2021.