On July 31st, the Centers for Medicare & Medicaid Services (CMS) issued the fiscal year (FY) 2025 Prospective Payment System (PPS) and Consolidated Billing for Skilled Nursing Facilities (SNFs)  final rule. CMS released a fact sheet accompanying the rule.

The rule finalizes proposals to:

• Increase SNF PPS payment rates by 4.2 percent,
• Rebase and revise the SNF market basket using a 2022-based market basket,
• Update Patient Driven Payment Model (PDPM) code mapping,
• Add four new social determinants of health (SDOH) items and modify one item for the SNF Quality reporting program (QRP),
• Require SNFs participating in the SNF QRP be subject to data new validation processes,
• Add a new measure selection, retention, and removal policy to the SNF Value-Based Purchasing Program (VBP), and
• Expand penalties for health and safety deficiencies.

This final rule is scheduled to be published in the Federal Register on August 6, 2024.  

SKILLED NURSING FACILITIES TO RECEIVE A $1.2 BILLION INCREASE IN FY 2024 PAYMENTS

For FY 2025, CMS finalizes an increase to SNF payment rates of 4.2 percent (compared to a 4.0 percent update finalized for FY 2024). Overall, CMS estimates that payments to SNFs will increase by $1.4 billion in FY 2025, relative to FY 2024. This increase is based on a 3.0 percent market basket update plus a 1.7 percent forecast error adjustment that is offset by a 0.5 percent multifactor productivity (MFP) adjustment.[1]

These financial impacts do not include SNF Value-Based Purchasing reductions, which are estimated to be $196.5 million in FY2025. SNFs that fail to report required quality data will continue to have an additional 2-percentage point reduction applied to their payments.

Table 1. Proposed Unadjusted Federal Rate per Diems for FY 2025[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	$73.25	$68.18	$27.35	$127.68	$96.33	$114.34
Unadjusted Per Diem – Rural	$83.50	$76.69	$34.46	$121.99	$92.03	$116.46

 

SNF Market Basket Updated to Reflect Changing Industry

CMS periodically updates the base year of the market basket used to set SNF PPS payments to better reflect the expenses faced by SNFs. Generally, CMS updates the base year every four years. However, in response to recent changes in the industry, CMS finalizes its proposal to update the base year only three years after the last update in the FY 2022 SNF PPS final rule. The market basket will be updated to reflect a 2022 base year, as the agency believes 2022 Medicare cost reports represent the most recent year of complete data available. This will replace the 2018 base year that has been used since the FY 2022 SNF PPS final rule.

CMS PROPOSES TECHNICAL UPDATES TO THE PDPM ICD-10 MAPPINGS

The Patient-Driven Payment Model (PDPM) is a case-mix classification model used for classifying SNF patients in a covered Part A stay, finalized by CMS in the FY 2019 final rule to improve the overall accuracy and appropriateness of SNF payments by classifying patients into payment groups based on specific, data-driven patient characteristics. The PDPM uses the International Classification of Diseases, 10^th Revision, Clinical Modification (ICD-10) codes to assign patients to clinical categories based on the person’s primary diagnosis.

CMS finalizes the following changes to clinical category assignment for four new codes that were effective October 1, 2023:

• Change the mapping of code E88.10 Metabolic Syndrome from Medical Management to the clinical category of Return to Provider because the agency does not believe it would serve appropriately as the primary diagnosis for a Part A-covered SNF stay; and
• Change the mapping of code E88.811 Insulin Resistance Syndrome, Type A, E88.818 Other Insulin Resistance, and E88.819 Insulin Resistance from Medical Management to the clinical category of Return to Provider, because treatment for these diagnoses typically occurs outside of a Part A SNF stay.

Return to Provider means that CMS believes that there are more specific or appropriate diagnoses that would better serve as the primary diagnosis for a Part-A covered SNF stay. CMS believes these changes will provide more accurate, consistent, and appropriate primary diagnoses to meet the criteria for a SNF stay.

CMS also requested feedback on potential future updates to the Non-Therapy Ancillary (NTA) component of the PDPM.[3]

CMS FINALIZES CHANGES TO THE SNF QUALITY REPORTING PROGRAM

SNFs are required to report certain quality data under the SNF Quality Reporting Program (SNF QRP). SNFs that fail to meet SNF QRP requirements are subject to a two-percentage point reduction in their annual update. In this rule, CMS adopts four new social determinants of health (SDOH) items to be reported as standardized patient assessment data elements under the SNF QRP: living situation, utilities, and two food related items. Additionally, the agency modifies the transportation item, a SDOH item currently collected as a standardized patient assessment data element. These items are collected and submitted using the Minimum Data Set (MDS).CMS modifies this provision slightly from its original proposal by exempting SNFs from having to collect these items for residents resided in a nursing facility for at least 366 continuous days preceding their hospitalization that lead to a SNF stay.

These new measures and modification are intended to better standardize the collection of SDOH data across programs, with all of the changes being based on measures currently collected in the Accountable Health Communities (AHC) Health-related social needs (HRSN) Screening Tool. In the FY 2025 Inpatient Rehabilitation Facility (IRF) Final Rule, CMS added the same four measures to the IRF Quality Reporting Program (QRP) and made the same modifications to the transportation measure.

All of these changes would go into effect beginning with the FY 2027 SNF QRP, meaning they would impact admissions taking place October 1, 2025, or later.

CMS Adopts new SNF QRP Items

Living Situation

Housing instability can damage a resident’s health by restricting their access to care and, if left unaddressed, can lead to homelessness, which is associated with increased premature death. CMS believes that SNFs could use information on a resident’s living situation to better inform discharge planning and to help refer the resident to community organizations or other healthcare organizations that could address this SDOH.

This measure will ask residents “What is your living situation today?” and will have the following response options: (0) I have a steady place to live; (1) I have a place to live today, but I am worried about losing it in the future; (2) I do not have a steady place to live; (7) Resident declines to respond; and (8) Resident unable to respond.

Food

Food insecurity is associated with a number of negative health outcomes, including cardiovascular disease. By gathering resident information on food insecurity, CMS hopes that SNFs can better coordinate with providers to address food insecurity during transitions of care. This information could also be used to refer residents to government programs like the Supplemental Nutrition Assistance Program (SNAP).

Accordingly, CMS finalizes two food related measures:

1. “Within the past 12 months, you worried that your food would run out before you got money to buy more.”
2. “Within the past 12 months, the food you bought just didn’t last and you didn’t have money to get more.”

Residents can choose between the following responses for both questions:

(0) Often true; (1) Sometimes true; (2) Never True; (7) Resident to declines to respond; and (8) Resident unable to respond.

Utilities

The inability to cover the cost of utilities places residents at risk of living without adequate heat or air conditioning. This can lead residents to use dangerous strategies to work around a lack of utilities, such as using a stove to stay warm. Utility insecure residents are also more likely to be exposed to mold and dampness, which are associated with negative outcomes such as increased risk of respiratory conditions. Accordingly, CMS believes SNFs should have access to information regarding a resident’s utility insecurity.

This measure will ask residents “In the past 12 months, has the electric, gas, oil, or water company threatened to shut off services in your home?”

Residents can respond with one of the following proposed options: (0) Yes; (1) No; (2) Already shut off; (7) Resident declines to respond; and (8) Resident unable to respond.

Modifications to the Transportation Item

CMS finalizes modifications to the existing transportation item, which has been collected by SNFs since October 1, 2023, to better align this item with the AHC HRSN Screening Tool. The modifications will make the lookback period for the measure clearer and simplify the response options available to residents.

This measure will be modified from reading, “Has lack of transportation kept you from medical appointments, meetings, work, or from getting things needed for daily living?” to “In the past 12 months, has a lack of reliable transportation kept you from medical appointments, meetings, work or from getting things needed for daily living?”

The response options will be modified from: (A) Yes, it has kept me from medical appointments or from getting my medications; (B) Yes, it has kept me from non-medical meetings, appointments, work, or from getting things that I need; (C) No; (X) Resident unable to respond; and (Y) Resident declines to respond

to: (0) Yes; (1) No; (7) Resident declines to respond; and (8) Resident unable to respond.

CMS Requests Information Potential Concepts for SNF QRP

In the proposed rule, CMS sought feedback on four concepts that could be incorporated into the SNF QRP to better align the program with CMS’s “Universal Foundation” of quality measures: a composite vaccination measure similar to the  Adult Immunization Status measure in the Universal Foundation, a depression related measure similar to the Clinical Screening for Depression and Follow-up measure in the Universal Foundation, and the concepts of pain management and patient experience of care/patient satisfaction.

While most commentors supported a composite vaccination measure, several questioned whether a SNF was the best setting in which to collect vaccination rates, and whether including such a measure would incentivize SNFs not to take on residents who are not up to date on the measured vaccinations. The majority of commentors supported the pain management measure concept, noting that pain impacts a resident’s care through areas like their ability to tolerate therapy and their mental health. However, commentors also noted that many SNF residents face cognitive deficits and therefore may struggle to communicate their pain. All commentors supported a patient experience of care/patient satisfaction measure, and most supported a depression-based measure.

CMS Finalizes Data Validation Process

Under the Consolidated Appropriations Act, 2021, CMS is required to create a process to validate data submitted under the SNF QRP. To satisfy this requirement, the agency finalizes two new validation processes beginning with the FY 2027 SNF QRP.

First, SNFs must participate in a data validation process comparing their medical records to data submitted in the MDS. 1,500 SNFs will be selected on an annual basis to submit up to 10 medical records. SNFs would need to submit either digital or paper copies of the records within 45 days of the request. If SNFs failed to submit within the 45-day timeframe, they would be subject to a two percent reduction in their annual market basket percentage update. This penalty would be applied for the fiscal year two years following the fiscal year of the requested records (e.g. if the SNF failed to submit records for FY 2027 they see a reduction in their FY 2029 market basket update.) This validation process will be similar to the process adopted for the SNF VBP in the FY 2024 SNF PPS final rule. CMS plans to propose the process by which they will validate the accuracy of the submitted medical records against the MDS in future rulemaking.

Second, CMS finalizes its proposal to apply the process used by Medicare Administrative Contractors (MACs) to validate the accuracy of Medicare Part A fee-for-service claims to validate claimed based measures under the SNF QRP. This process, which involves pre-payment and post-payment audits of claims, would be employed both randomly and via targeted audits.

CMS FINALIZES KEY UPDATES TO SNF VBP PROGRAM, EMPHASIZING QUALITY, EQUITY, AND STREAMLINED PROCESSES

CMS finalizes provisions for the Skilled Nursing Facility Value-Based Purchasing (SNF VBP) Program including several updates to ensure quality improvements in SNFs. The program will align quality measures across care settings as part of the CMS National Quality Strategy, focusing on a “Universal Foundation” of measures. This alignment aims to streamline measures, reduce provider burden, and enhance the assessment of care quality across the continuum.

The SNF VBP Program also updates its policies for technical corrections, including defining the Skilled Nursing Facility Within-Stay Potentially Preventable Readmission (SNF WS PPR) measure to replace the current readmission measure by October 2027. The policy for measure selection, retention, and removal has been refined, allowing CMS to remove outdated or irrelevant measures through a formal process, ensuring the program’s metrics remain relevant and focused on quality care.

Future considerations include adding new measures related to interoperability, resident experience, and health equity, with a focus on incentivizing high-quality care for underserved populations. The program will incorporate a Health Equity Adjustment (HEA) to reward SNFs serving a high proportion of underserved residents.

The finalized provisions also introduce a streamlined review and correction process, applying to PBJ and MDS-based measures with specific “snapshot dates” for data corrections. An updated Extraordinary Circumstances Exception (ECE) policy now allows SNFs to request exemptions when extraordinary circumstances prevent timely data reporting, aligning with similar policies in other CMS programs. These updates aim to enhance the accuracy of SNF performance evaluations and support quality improvement efforts.

CMS FINALIZES STRONGER NURSING HOME ENFORCEMENT POLICIES, EXPANDS USE OF CIVIL MONEY PENALTIES

To enhance the safety and quality of care in nursing homes under the Medicare and Medicaid programs, CMS finalizes policies for Nursing Home Enforcement. Key updates include expanding the use of civil money penalties (CMPs) to address facility noncompliance more effectively. CMS now allows for multiple per instance (PI) CMPs and the concurrent imposition of per day (PD) and PI CMPs within the same survey, providing flexibility to impose penalties that better reflect the nature and severity of noncompliance. This change aims to ensure consistent enforcement across states and incentivize facilities to achieve and maintain compliance.

Additionally, the policies have revised the timing of enforcement actions, allowing CMPs to be imposed for previously cited noncompliance from the last three standard surveys. This update ensures that enforcement is not limited by the timing of surveys, thereby improving the consistency and fairness of penalties. The rule also clarifies that both PD and PI CMPs can be imposed for the same deficiency, and modifications have been made to ensure clear understanding among stakeholders regarding the application of these penalties.

The new enforcement provisions also address concerns about maintaining the quality of care while implementing minimum staffing requirements. The updates are designed to provide a robust framework for holding facilities accountable, while also considering the financial condition of facilities to avoid exacerbating financial distress that could impact resident care.

These regulations will take effect 60 days after their publication in the Federal Register, with operational implementation beginning March 3, 2025.

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This Applied Policy® Summary was prepared by Will Henkes with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact him at whenkes@appliedpolicy.com or at (608) 722-9413

[1] The MFP adjustment is a 10-year moving average of changes in annual economy-wide private nonfarm business multifactor productivity.

[2] See Tables 3 and 4 at page 26 of the unpublished final rule.

[3] See page 116 of the unpublished proposed rule for more detail.