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CMS Finalizes Nursing Home Medicare Payment Rule

In the 2019-20 Skilled Nursing Facility (SNF) Prospective Payment System (PPS) Final Rule released on July 31st, the Centers for Medicare and Medicaid Services (CMS) reconfirms the agency’s intent to implement the new reimbursement methodology on schedule. The Patient-Driven Payment Model (PDPM) will replace RUG-IV as the basis for Medicare Part A reimbursement effective Oct. 1, 2019. The methodology was finalized in last year’s rule.

This year’s 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 2020 (CMS-1718-F), sets out the base rates and case mix adjustment weights for each component used in PDPM for the coming year. Under the PDPM methodology, the resident-specific daily rate is the sum of five individually case mix adjusted components plus a non-case mix amount, all calibrated to result in the same overall spending as would have occurred under RUG-IV. While the base rates decreased slightly for all components relative to the proposed rule, the case mix weights remain unchanged.

The final market basket (i.e., inflation) increase net of adjustments is 2.4 percent, which is projected to increase payments nationwide by $851 million. While the new methodology makes it more difficult than in prior years to project revenue, it is likely to benefit those homes serving residents with higher clinical needs and reduce revenue for homes where the majority of residents score in the ultra high therapy categories.

Additionally, members should note and budget for the ongoing impact of “sequestration” (2 percent cut to Medicare payments) and be aware of the potential impact that their Value-Based Payment (VBP) score may have on their rate. VBP multipliers are applied to the daily rate that a home would otherwise be paid and range from .9803 to 1.0165 in the current year. VBP multipliers for FY 2020 are likely to be distributed later this month. Homes that fail to meet the required threshold for reporting complete information for SNF Quality Reporting Program (QRP) measure calculation will face a further 2 percent reduction. CMS recently notified homes that will be subject to the QRP penalty in the coming year.

The final rule also adopts the proposal to redefine group therapy from four patients to “two to six patients doing the same or similar activities” and to use a sub-regulatory process (e.g., posting to the CMS website) to make minor updates to ICD-10 codes. While the proposal to collect SNF QRP data on all residents regardless of payer was rejected, proposals to add two QRP measures focused on providing health information at transfer or discharge were included in the final rule as was the suggestion to exclude baseline nursing home residents from the Discharge to Community QRP measure.

We will issue a more detailed analysis of the final rule shortly and invite members to contact us with questions. The full text of the rule (scheduled for publication on Aug. 7th) is available here, a CMS fact sheet is here, and the official PDPM resources web page is here.

Contact: Darius Kirstein, dkirstein@leadingageny.org, 518-867-8841