On July 31, 2018, CMS released the final skilled nursing facility (SNF) payment rule for payments made between October 1, 2018 and September 30, 2019. The agency estimates that total Medicare payments to SNF providers will increase $820 million over 2018 payments.

The biggest change included in the rule, however, will not take effect until October 1, 2019. Starting then, payments to SNFs will be adjusted using a revised case-mix adjustment formula, known as the Patient-Driven Payment Model (PDPM). The new formula is intended to adjust payments based on the patient’s diagnosis and other characteristics, as well as the required intensity of services to manage other comorbidities, rather than the current methodology which adjusts payments primarily based on the number of minutes of therapy received. Because the methodology will not be used until 2019, an economic analysis was not included in the rule, so it is unclear how it could impact SNF payments.

New Case-Mix Adjustment Starting Next October Emphasizes Patient Diagnosis and Characteristics Over Services Received

CMS is finalizing a proposed overhaul to the existing methodology used to adjust per-diem payments to SNFs based on a patient’s condition. The existing classification system, known as RUG-IV, groups residents based on the type and intensity of therapy services provided, as well as the level of nursing services provided to the patient. The higher the expected therapy and nursing utilization, the higher the per-diem payment for the patient.

Since the introduction of the RUG, concerns had been raised over the increase in patients classified as receiving “Ultra-High” and “Very-High” therapy services. Moreover, the number of therapy minutes provided to those patients clustered around the minimum threshold for those categories, indicating that perhaps services were allocated more based on payment considerations rather than therapeutic need. CMS also noted the lack of medical evidence concerning how much therapy a given resident should receive. Both the Office of the Inspector Generic and the Medicare Payment Advisory Commission have also raised concerns about the RUG classification system and questionable and inappropriate billing in the SNF setting and have encouraged CMS to base payments on patient characteristics and not service provision.

In May 2017, CMS released a notice of proposed rulemaking (NPRM) in which the agency outlined a proposed replacement for the RUG-IV, called the Resident Classification System, Version I (RCS-I). This proposal was modified based on public comments and included in the FY 2019 proposed rule, renamed the Patient-Driven Payment Model (PDPM). While many commenters supported the general idea of transitioning away from the RUG system, many also raised concerns regarding potential impacts on patient care resulting from a change in methodology.

The most impactful change will be using a patient’s ICD-10 diagnosis code, as well as other patient characteristics, when determining Medicare payment, rather than the intensity of services delivered. Another notable change is the use of Non-Therapy Ancillaries (NTAs), or items and services not related to the provision of therapy, that will better address the resources required to manage medically complex patients with comorbidities. Payments will also be adjusted to account for varying costs throughout the stay and to reduce incentives to provide care to patients that is inconsistent with the patient’s care needs or goals.

The new methodology will take effect October 1, 2019 (FY 2020) to allow time for CMS to educate SNF providers. Because of this, CMS did not include an impact analysis of how the new classification system could impact payments. However, CMS touts that the new classification system should reduce administrative burdens on providers by approximately $2 billion (in aggregate) over 10 years.

CMS Finalizes Proposal to Add Additional Factor to SNF QRP For Use in Evaluating Measure Removal

With this rule, CMS is finalizing their proposal to adopt a new factor for use in evaluating potential measures for removal from the SNF Quality Reporting Program (QRP). This Factor, which will be referred to as Factor 8 states the following: “The costs associated with a measure outweigh the benefit of its continued used in the program.” The rule outlines several types of costs that CMS has identified, but does not the types are not limited to those listed:

• Provider and clinician information collection burden and burden associated with the submission-reporting of quality measures to CMS
• The provider and clinicians cost associated with complying with other programmatic requirements
• The provider and clinician cost associated with participating in multiple quality programs, and tracking multiple similar or duplicative measures within or across those programs
• The cost to CMS associated with the program oversight of the measure including measure maintenance and public display
• The provider and clinician cost associated with compliance with other federal and/or state regulations (if applicable).

CMS states that adoption of this factor is in line with their agency-wide Meaningful Measures initiative. A similar factor has been proposed for the quality reporting programs used in other sites of care.

No changes to previously finalized measures or adoption of new measures had been proposed for the SNF QRP. CMS does note, though, that the SNF QRP currently has 12 measures for the FY 2020 program year. The rule also finalizes CMS’ proposal to increase the number from 1 to 2 years of data used to calculate the Medicare Spending Per Beneficiary-PAC/SNF/WRP and Discharge to Community-PAC/SNF/QRP measures for display purposes. Data on these measures would be publicly reported in CY 2019 or as soon as operationally feasible based on discharges from October 1, 2016 through September 30, 2018.

CMS also proposed to begin displaying data publicly in CY 2020, or as soon as operationally feasible on four assessment-based measures:

• Change in Self-Care Score for Medical Rehabilitation Patients (NQF #2633)
• Change in Mobility Score for Medical Rehabilitation Patients (NQF #2634)
• Discharge Self-Care Score for Medical Rehabilitation Patients (NQF #2635)
• Discharge Mobility Score for Medical Rehabilitation Patients (NQF #2636)

Performance and Baseline Periods Established for SNF Value-Based Purchasing Program

CMS will adopt FY 2019 as the performance period and FY 2017 hospital discharges as the baseline period for the FY 2021 SNF Value-based Purchasing (SNF VBP) Program year.

Beginning with the FY 2022 program year, CMS is finalizing a proposal to adopt for each program year a performance period that is the 1-year period following the performance period for the previous program year. The same will apply for baseline periods. Therefore, for FY 2022 payments (October 1, 2021 – September 30, 2022), adjustments will be based on the SNF’s performance in FY 2020 (October 1, 2019 0 September 30, 2020), using the SNF’s performance in FY 2018 (October 1, 2017 – September 30, 2018) as the baseline.

CMS is also finalizing their proposal that a SNF with less than 25 eligible stays during a performance period for a VBP program year would be assigned a performance score. The assigned score would result in a value-based incentive payment amount equal to the adjusted federal per diem rate the SNF would have received for the fiscal year in the absence of the VBP program.

No changes were proposed to the measures included in the SNF value-based purchasing program.

Technical Correction for Consolidated Billing Finalized

For consolidated billing purposes, CMS is finalizing their proposal to revise regulatory text to specify that a beneficiary’s “resident” status ends whenever they are formally discharged from the SNF, unless they are readmitted to that or another SNF “before the following midnight.”

This is a technical correction and does not change the underlying principles of resident status.