On April 8^th, 2021, the Centers for Medicare & Medicaid Services (CMS) released a fact sheet and unpublished proposed rule, Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities; Updates to the Quality Reporting Program and Value-Based Purchasing Program for Federal Fiscal Year 2022, which updates payment rates and policies for these facilities:

• Increase Skilled Nursing Facility (SNF) Part A payment rates by 1.3 percent;
• Recalibrate new SNF payment system with 0.8 percent budget-neutrality offset;
• Rebase and revise the SNF market basket using a 2018-based market basket;
• Exclude blood-clotting factors from SNF consolidated billing;
• Revise certain case-mix ICD-10 mappings for SNF payment system;
• Add two measures and update one measure for the SNF Quality Reporting Program;
• Request information on possible policy solutions to improve health equity; and
• Request information on improving digital quality measurement.

Comments on the proposed rule are due on June 7, 2021.

Payment Rate Increase of 1.3 Percent Proposed for FY2022

CMS estimates that aggregate payments to SNFs will increase by $444 million in Medicare Part A due to proposals included in this rule. For FY 2022, CMS proposes to increase SNF payment rates by 1.3 percent, which is based on a 2.3 percent market basket update that is offset by an 0.8 percent forecast error adjustment and 0.2 percent multifactor productivity (MFP) adjustment.[1] SNFs that fail to report required quality data will continue to have a 2-percentage point reduction applied to their payments.

Table 1. CMS is proposing the following unadjusted federal rate per diems for FY 2022[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	$62.84	$58.49	$23.46	$109.55	$82.64	$98.10
Unadjusted Per Diem – Rural	$71.63	$65.79	$29.56	$104.66	$78.96	$99.91

New Forecast Error Adjustment to Recalibrate Payment System

On October 1, 2019, CMS implemented a new prospective payment system (PPS) for skilled nursing facilities (SNFs) that uses a case-mix classification system called the Patient Driven Payment Model (PDPM). The PDPM classifies patients into groups based on patient-characteristics instead of the volume of therapy services and it is required to be budget-neutral. After a year of observation, CMS determined that the new payment system led to an unintended increase of approximately 5 percent ($1.7 billion) in payments compared to what it would have paid if the system was not in place. To address this, CMS proposes to include an 0.8 percent budget-neutrality offset and asks for comments.

Revision and Rebasing of SNF Market Basket

In addition to the recalibration discussed above, CMS also proposes to update the SNF market basket to reflect a set of inputs that are more closely aligned with current practice. The agency proposes to use a 2018-based SNF market basket to update SNF PPS payment rates as opposed to the previously used 2014-market basket and believes this change will improve the fairness and accuracy of payments.

Blood Clotting Factors Excluded from SNF Consolidated Billing

In this rule, CMS proposes changes based on Section 134 of the Consolidated Appropriations Act of 2021 (Pub.L. 116-260), which requires that certain blood clotting factors and other related items used for the treatment of patients with hemophilia be excluded from the consolidated billing requirements under the SNF PPS. To offset this exclusion, CMS is proposing a small reduction in SNF Part A rates to account for these items and services that are now separately billable under Medicare Part B.

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 as shown in Table 1. In order to improve the alignment of the PDPM system with current ICD-10-CM coding guidelines, the Agency proposes to change ICD-10 code mappings for sickle-cell disease, esophageal conditions, multisystem inflammatory syndrome, neonatal cerebral infarction, vaping-related disorder, and anoxic brain damage.

Changes in SNF Quality Reporting Program (SNF QRP)

The SNF payment for reporting program is known as the SNF Quality Reporting Program (SNF QRP). SNFs that do meet the program’s requirements are subject to a two-percentage point reduction in their annual update. In this rule, CMS proposes the following changes to the SNF QRP beginning FY 2023:

• New measure for SNF Healthcare-Associated Infections (SNF-HAI) requiring hospitalization;
• New measure for COVID Vaccination Coverage among Healthcare Personnel (HCP); and
• Update denominator for Transfer of Health (TOH) Information to Post Acute Care (PAC) measure.

Requests for Information

CMS also includes two requests for information on the proposed rule and asks for feedback:

• Possible ways to improve health equity through policy solutions[3] and
• Future plans to define digital quality measures (dQMs) for the SNF QRP and the potential use of Fast Healthcare Interoperability Resources (FHIR) to help align the SNF QRP with other quality programs.

[1] These financial impacts do not include SNF Value-Based Purchasing reductions, which are estimated to be $184.25 million.

[2] Tables 4 and 5 of unpublished rule (page 25)

[3] The RFI on health equity comes in response to Executive Order 13985 and mirrors similar RFIs included in the recently released proposed rules for inpatient rehabilitation facilities, inpatient psychiatric facilities, and hospices.