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LeadingAge NY Comments on FY 2023 SNF PPS Proposed Rule

Last week, LeadingAge NY submitted detailed written comments to the Centers for Medicare and Medicaid Services (CMS) on the Skilled Nursing Facility (SNF) Prospective Payment System (PPS) Proposed Rule for Fiscal Year (FY) 2023. The comments focused on the proposed recalibration of the Patient-Driven Payment Model (PDPM) parity adjustment, the market basket index (MBI), the value-based purchasing (VBP) give-back, and the SNF wage index reduction cap. In addition, LeadingAge NY responded to CMS's request for information regarding minimum staffing levels and new VBP and Quality Reporting Program (QRP) measures. We emphasized the devastating impacts of the pandemic, inflation, and staffing shortages on not-for-profit and public nursing homes and urged CMS to refrain from reducing reimbursement. LeadingAge National also submitted comments raising similar concerns. The following are some highlights of the LeadingAge NY comments:

PDPM and MBI

After a delay due to the impact of COVID-19, the proposed rule would go forward with PDPM recalibration to address what the agency says is a reimbursement increase of nearly 5 percent driven by the shift from Resource Utilization Group (RUG)-IV to PDPM. The proposal would recalibrate PDPM reimbursement by reducing Medicare Part A payments to SNFs by approximately 4.6 percent (negative $1.7 billion) in FY 2023. This reduction would be mitigated by the proposed FY 2023 net SNF market basket (i.e., inflation) update factor of 3.9 percent, which combines a market basket increase of 2.8 percent, a positive 1.5 percentage point forecast error correction, and a negative 0.4 percentage point productivity adjustment. The result would be a nationwide decrease of $320 million in Part A reimbursement.

LeadingAge NY's comments noted that imposing a $1.7 billion (4.6 percent) parity adjustment at a time when providers are grappling with severe staffing shortages, record inflation, and the ongoing financial impacts of the pandemic, both through increased costs and lost revenue, is troubling. The impact of this reduction is exacerbated by the uniform VBP cut to all providers and is further magnified by the re-imposition of the sequestration payment cut at 1 percent on April 1st and at 2 percent in July. The market basket update does not compensate for these cuts, given cost increases well above the MBI due to inflation and staffing crises. The comments also urged CMS to consider the impact of Medicare managed care penetration on SNF margins.

SNF VBP

The proposed rule would again suspend the SNF VBP program due to data instability and would reduce payments to all providers by a uniform 0.8 percent. LeadingAge NY agreed that risk-adjusted rehospitalization rates, which compare SNFs to each other nationally, are likely to reflect variation in COVID-19 prevalence rather than variation in quality of care at this point in time. However, recognizing the frustration of providers that have invested resources in rehospitalization prevention efforts despite the pandemic and nevertheless face a reimbursement reduction, we urged CMS to maximize the percentage of the cut that is returned to providers.

The proposed rule also seeks to expand the number of measures in the VBP program. It would add SNF Healthcare Associated Infections Requiring Hospitalization and Total Nursing Hours per Resident Day as VBP measures in FY 2026 and Discharge to Community – Post Acute Care in FY 2027. LeadingAge NY supported the addition of the SNF Healthcare Associated Infections measure currently in use in the QRP, but opposed the inclusion of the Total Nursing Hours per Resident Day measure and the staff turnover measure.

Wage Index

CMS proposes applying a permanent 5 percent cap on any decrease to a provider's wage index from its wage index in the prior year, regardless of the circumstances causing the decline. LeadingAge NY agreed that year-to-year payment decreases driven by wage index changes should be limited and supported capping negative changes to the wage index. However, we recommended that the cap on reductions be set at 2 percent. LeadingAge NY further recommended that CMS undertake the data collection necessary to establish a SNF wage index leveraging SNF Payroll-Based Journal (PBJ) data, in lieu of the current wage index based on hospital wage data. In addition, we urged the implementation of wage index updates based on more recent data than the current four-year lag.

Request for Information on Staffing Standards

CMS used the PPS proposed rule as a vehicle for seeking input into the adoption of new SNF staffing measures. LeadingAge NY and LeadingAge National submitted extensive comments in response to this request. In general, we urged CMS to be guided by the following principles in developing any staffing standards:

  • Ensure that staff with appropriate titles and in sufficient numbers are available prior to the imposition of any staffing requirements;
  • Ensure that Medicaid and Medicare rates are sufficient to enable recruitment and retention of needed staff before any staffing requirements are imposed;
  • Ensure flexibility and professional discretion in staffing requirements to address resident needs and support innovative models.

LeadingAge NY's comments pointed to the challenges that facilities are currently experiencing in complying with New York's staffing requirements and the inadequacy of Medicaid rates that pay for the majority of nursing home days in New York. We also noted that arbitrary staffing requirements, without qualified candidates for open positions and appropriate levels of reimbursement to recruit and retain them, will only force facilities to limit admissions and create backups in hospitals.

A CMS fact sheet on the proposed rule is available here, and a link to the rule text is here. CMS is likely to issue the final rule in late July or early August.

Contact: Darius Kirstein, dkirstein@leadingageny.org, 518-867-8383