On July 31, the Centers for Medicare & Medicaid Services (CMS) issued the fiscal year (FY) 2024 Skilled Nursing Facility (SNF) Prospective Payment System (PPS) Rate Update and Quality Reporting Requirementsfinal rule. CMS released a fact sheet accompanying the rule.

The rule finalizes the following:

• increases SNF PPS payment rates by 4.0 percent,
• continues to recalibrate the SNF payment system with a 2.3 percent budget-neutrality offset,
• excludes marriage and family therapist service and mental health counselor services from SNF consolidated billing,
• revises certain case-mix ICD-10 mappings for SNF payment system,
• adopts three new measures, modifies one measure, and removes three measures from the SNF Quality Reporting Program,
• adopts four new quality measures, replaces one quality measure, and makes several policy changes to the SNF Value-Based Purchasing Program, and
• establishes a default process for the waiver of civil money hearings rights.

 

Of note, CMS has a separate proposed rule on Minimum Staffing Standards for Long-Term Care Facilities that is currently under review at the Office of Management and Budget. CMS signaled its intent to propose minimum standards for staffing in SNFs in the FY 2023 proposed rule, consistent with the Biden-Harris Administration’s plans to improve nursing home quality.[1]

This final rule is scheduled to be published in the Federal Register on August 7, 2023. The provisions of the final rule are effective October 1, 2023.

 

SKILLED NURSING FACILITIES WILL RECEIVE A $2.2 BILLION INCREASE IN FY 2024 PAYMENTS

For FY 2024, CMS finalizes a 4.0 percent increase in SNF payment rates (compared to a 2.7 percent finalized increase for FY 2023). Overall, CMS estimates that payments to SNFs will increase by $2.2 billion in FY 2024, relative to FY 2023. This increase is based on a 3.0 percent market basket update plus a 3.6 percent forecast error adjustment that is offset by a 2.3 percent recalibrated parity adjustment and 0.2 percent multifactor productivity (MFP) adjustment.[2]

These financial impacts do not include SNF Value-Based Purchasing reductions, which are estimated to be $184.85 million in FY 2024. 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 2024[3]

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	$70.27	$65.41	$26.23	$122.48	$92.41	$109.69
Unadjusted Per Diem – Rural	$80.10	$73.56	$33.05	$117.03	$88.29	$111.72

Payment System Parity Adjustment Recalibrated

The Patient-Driven Payment Model (PDPM) case-mix classification system classifies patients into groups based on patient-characteristics instead of the volume of therapy services and it is required to be budget-neutral. To address concerns that the PDPM system led to an unintended increase in Medicare Part A SNF spending since its inception in FY 2019, CMS implemented a 4.6 percent budget-neutrality offset ($1.7 billion) in FY 2023, to be phased in over a two-year period.

In furtherance of this policy, CMS will continue to phase-in the recalibration of the PDPM parity adjustment factor by reducing SNF spending by 2.3 percent (approximately $789 million) in FY 2024.

Exclusion of Marriage and Family Therapist and Mental Health Counselor Services from SNF Consolidated Billing

There are five service categories that are currently excluded from SNF consolidated billing: chemotherapy items, chemotherapy administration services, radioisotope services, customized prosthetic devices, and blood clotting factors. As required by the Consolidated Appropriations Act of 2023 (CAA, 2023), CMS will exclude marriage and family therapist service and mental health counselor services from SNF consolidated billing. This means that these services can be billed separately by the performing clinicians and do not have to be included in the Medicare Part A SNF payment. This exclusion is effective for services furnished on or after January 1, 2024.

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. Each year, CMS reviews clinical category ICD-10 diagnosis code assignments with the goal of improving the alignment of the PDPM system with current ICD-10-CM coding guidelines. For FY 2024, CMS finalizes changes to ICD-10 code mappings for certain categories. See Table 2 for finalized ICD-10 mapping changes.[4]

Table 2. ICD-10 Code Mapping Reassignments

Code Description	FY 2023 ICD-10 Mapping	Finalized FY 2024 ICD-10 Mapping
D75.84 Other platelet-activating anti-platelet factor 4 (PF4) disorders	Return to Provider	Medical Management
F43.81 Prolonged grief disorder and F43.89 Other reactions to severe stress	Medical Management	Return to Provider
G90.A Postural orthostatic tachycardia syndrome (POTS)	Acute Neurologic	Medical Management
K76.82 Hepatic encephalopathy	Return to Provider	Medical Management
Substance use disorder codes, including F10.90, F10.91, F11.91, F12.91, F13.91, and F14.91	Medical Management	Return to Provider

CMS also finalizes changes for certain subcategory fracture codes as well as for unacceptable principal diagnosis codes. PDPM ICD-10 code mapping and lists are available at the CMS Patient Driven Payment Model website here: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM.

CMS FINALIZES CHANGES TO THE SNF QUALITY REPORTING PROGRAM

SNFs that fail to meet SNF Quality Reporting Program (SNF QRP) requirements are subject to a two-percentage point reduction in their annual update. In this rule, CMS finalizes the adoption of two new measures, the modification of one measure, and the removal of three measures from the SNF QRP. In addition, CMS finalizes policy changes to the SNF QRP and to initiate the public reporting of new and modified measures.

Two of Three Proposed New SNF QRP Measures Finalized for Adoption

COVID-19 Vaccine: Percent of Patients/Residents Up to Date (Patient/Resident COVID-19 Vaccine) Measure

Beginning with the FY 2026 SNF QRP, this measure will report the percentage of stays in which SNF residents are up to date on recommended COVID-19 vaccinations as determined by current guidance from the Centers for Disease Control and Prevention (CDC). Data will be collected using a new standardized item on the Minimum Data Set (MDS).

Discharge Function Score Measure

Beginning with the FY 2025 SNF QRP, CMS will adopt the Discharge Function Score measure. This measure assesses functional status by identifying the percentage of SNF residents who achieve an expected discharge function score. This measure will replace the Application of Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment/Care Plan That Addresses Function (Application of Functional Assessment/Care Plan) measure (listed in measure removals, below).

CoreQ: Short Stay Discharge (CoreQ: SS DC) Measure

CMS has not finalized its proposal to adopt this measure based on stakeholder feedback. This measure would have focused on patient experience and calculated the percentage of patients discharged from a SNF (within 100 days of admission) who are satisfied with their SNF stay.

Modification to the COVID-19 Vaccination Coverage Among Healthcare Personnel Measure

CMS finalizes its update to the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP COVID-19 Vaccine) measure beginning with the FY 2025 SNF QRP. The prior iteration of this measure reported solely on whether HCP had received the first vaccination series for COVID-19. The finalized modification will require SNFs to report the cumulative number of HCP who are up to date with the CDC’s guidance on recommended COVID-19 vaccinations.

CMS Finalizes the Removal of Three Measures from the SNF QRP

Beginning with the FY 2025 SNF QRP, CMS finalizes its proposal to remove three measures from the SNF QRP whose cost exceed the benefit, do not provide meaningful distinctions in performance improvement, or that will be replaced with available measures with stronger associations to desired outcomes. These measures are as follows:

1. Application of the IRF Functional Assessment: Change in Self-Care Score for Medical Rehabilitation Patients (Change in Self-Care Score) Measure,
2. Change in Mobility Score for Medical Rehabilitation Patients (Change in Mobility Score) Measure, and
3. Application of Percent of Long-Term Care Hospital (LTCH) Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function (Application of Functional Assessment/Care Plan) Measure.

CMS Will Increase the SNF QRP Data Completion Thresholds for the Minimum Data Set

Beginning with the FY 2026 SNF QRP, CMS finalizes its proposal to require SNFs to report 100 percent of the required quality measure data and standardized resident assessment data collected on the MDS on at least 90 percent of assessments submitted to CMS. This is an increase from the previous policy whereby SNFs were required to report on 80% of the MDS submitted.[5] SNFs that fail to meet the proposed requirement will be subject to a reduction of two percentage points to the applicable fiscal year annual payment update. CMS is also codifying this requirement.

CMS Finalizes Public Reporting for Four Measures

CMS finalizes its proposals to begin public reporting of the Transfer of Health Information to the Provider—PAC Measure and the Transfer of Health Information to the Patient—PAC Measure, as soon as technically feasible. These measures report the percentage of patient stays that include a current reconciled medication list in the discharge assessment to provide continuity of care to the subsequent provider (or to patients and caregivers) at the time of discharge or transfer.

CMS also finalizes its proposals to begin public reporting of the Discharge Function measure beginning with the October 2024 Care Compare refresh or sooner, and the COVID-19 Vaccine: Percent of Patient/Residents Who Are Up to Date Measure beginning with the October 2025 Care Compare refresh or sooner.

CMS Provides Update on Health Equity

In the final rule, CMS acknowledges comments received in response to the health equity request for information in the FY2023 SNF PPS proposed rule.^[6] The agency anticipates the development of approaches to advance health equity in the SNF QRP and signals its intent to consider the integration of the social determinants of health (SDOH) into the SNF QRP. Additionally, the Agency is evaluating whether health equity measures that have been adopted in other settings could be applied in post-acute care settings. CMS believes that the alignment of SDOH data items across care settings would support the National Quality Strategy’s Universal Foundation set.^[7]

CMS reiterates its commitment to health equity in response to comments and will continue to take stakeholder feedback into account moving forward.

CMS Receives Feedback on Quality Measure Selection in the QRP

CMS received feedback on the following requests for information in this final rule:

• Principles for Selecting and Prioritizing Measures: CMS sought input on the set of principles for selecting measures for the SNF QRP. Commenters emphasized the importance of prioritizing measures that are meaningful to residents and their caregivers, support shared decision-making, promote continuity across a range of accountability programs, are constructed from clearly defined, validated, and standardized data, and are consensus-based.
• SNF QRP Measurement Gaps: CMS requested input on identified measurement gaps, particularly in the areas of cognitive function, behavioral and mental health, resident experience and satisfaction, chronic conditions, and pain management. Commenters generally agreed with CMS that SNF QRP measurement gaps exist in these domains, but several expressed concerns about the accuracy and reliability MDS.
• Measures and Measure Concepts Recommended for Use in the SNF QRP: CMS sought input on measures that are available for immediate use, or measures that may be adapted for future use in the SNF QRP. Areas identified by commenters include health equity, psychosocial issues, caregiver status, referrals to pulmonary rehabilitation for residents with COPD, and resident vaccination status.

CMS intends to use this input to inform future measure development efforts.

CMS FINALIZES CHANGES TO THE SNF VALUE-BASED PURCHASING PROGRAM

The SNF Value-Based payment (VBP) program includes all SNFs paid under Medicare’s SNF PPS and provides incentive payments to SNFs based on the quality of care they provide to Medicare beneficiaries. CMS is finalizing its proposals to adopt four new quality measures, replace one quality measure, and make several policy changes to the SNF VBP Program.

New Quality Measures Proposed for Adoption

Nursing Staff Turnover Measure

Beginning with the FY 2026 program year (FY 2024 performance year), this structural measure assesses staffing stability within SNFs using nursing staff turnover. This measure is in alignment with the Administration’s focus on ensuring adequate staffing in long-term care settings. SNFs will begin reporting in FY 2024, with payment effects scheduled to begin in FY 2026.

Discharge Function Score Measure

Beginning with the FY 2027 program year (FY 2025 performance year), this measure will assess functional status by identifying the percentage of SNF residents who achieve an expected discharge function score using mobility and self-care items collected on the MDS.

Long Stay Hospitalization Measure per 100 Residents

Beginning with the FY 2027 program year (FY 2025 performance year), this measure will assess the hospitalization rate of long-stay residents.

Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay)

Beginning with the FY 2027 program year (FY 2025 performance year), this measure will assess the rates of falls with major injuries among long-stay residents.

CMS Finalizes the Replacement of Readmission Measure

CMS finalizes its proposal to replace the Skilled Nursing Facility 30-Day All-Cause Readmission Measure (SNFRM) with the Skilled Nursing Facility Within Stay Potentially Preventable Readmissions (SNF WS PPR). This replacement measure will take effect beginning with the FY 2028 program year.

CMS Finalizes Several Policy Updates to the SNF VBP

Adoption of a Health Equity Adjustment in the SNF VBP

In alignment with the agency’s efforts to advance health equity and reduce disparities in health outcomes in SNFs, CMS finalizes its proposal to provide bonus points to high performing SNFs with a resident population of at least 20 percent Medicaid dual eligibility status. This adjustment will begin in the FY 2027 program year and FY 2025 performance year.

Adoption of a Variable Payback Percentage

CMS is concerned that the finalized health equity adjustment may negatively impact the distribution of value-based incentive payments to SNFs that do not earn the Health Equity Adjustment (HEA). To increase SNF quality improvement incentives, CMS finalizes its proposal to increase the payback percentage policy under the SNF VBP from 60 percent to a level sufficient to counter any potential negative impact to SNFs that do not earn the HEA. CMS estimates a 66 percent payback percentage in the FY 2027 program year.

Other SNF VBP Updates

• Beginning with the FY 2027 program year (FY 2025 performance year), CMS finalizes proposals to update the administrative methodology policies such that the quality measures finalized for adoption in this rule can be realized in the SNF VBP scoring methodology.
• In accordance with Section 1888(h)(12) of the Social Security Act, beginning with the FY 2027 program year and FY 2025 performance year, CMS finalizes the addition of the audit portion of the validation process for MDS-based measures.

CMS also solicited comments on a few health equity approaches under SNF VBP, which received positive feedback from some commenters. CMS will consider this feedback in future rulemaking.

CMS FINALIZES DEFAULT PROCESS FOR THE WAIVER OF CIVIL MONETARY PENALTY HEARINGS

Current regulations permit a nursing facility to receive a 35 percent reduction in civil money penalty (CMP) amounts through exercising a written waiver of the facility’s right to a hearing.[8] A CMP is a monetary penalty that CMS may impose against nursing facilities that fail to be in substantial compliance with Medicare and Medicaid conditions of participation.

Over the past several years, only a small minority of facilities (2 percent in calendar year 2022) have exercised their right to a hearing. The vast majority have either waived their hearing rights or did not contest the penalty or its basis.

With the goal to reduce burdensome requirements related to the submission and tracking of written hearing waivers, CMS will eliminate the requirement that a facility must submit a waiver in writing to waive their right to a hearing in order to receive a reduction in CMP payments. Instead, CMS says that a constructive waiver process will kick in by default. CMS will consider a facility to have waived its hearing rights if the facility did not issue a formal request for a hearing within specified regulatory timeframes. This means that a facility would receive a 35 percent CMP penalty reduction by default if the facility did not exercise its right to a hearing.

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

[1] Fact Sheet: Protecting Seniors by Improving Safety and Quality of Care in the Nation’s Nursing Homes. https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/28/fact-sheet-protecting-seniors-and-people-with-disabilities-by-improving-safety-and-quality-of-care-in-the-nations-nursing-homes/.

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

[3] See Tables 3 and 4 at page 32 of unpublished rule.

[4] See pages 60 – 66 of the unpublished rule for a detailed description of CMS’ responses to comments on the finalized ICD-10 mappings.

[5] 80 FR 46458

[6] 87 FR 47553 through 47555

[7] See CMS, What is the CMS National Quality Strategy? Mod. Feb. 8, 2023. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy

[8] See 42 CFR § 488.436

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