Lisa Grabert
Lisa Grabert

On an annual basis, the Centers for Medicare & Medicaid Services updates various payment systems within the Traditional (fee-for-service) Medicare program. This regulatory season is more entertaining than most because it offers insight into the first concrete policy positions on Medicare from the new Biden administration.

Of particular interest is how the new administration intends to reconcile statutory data requirements with the compromised 2020 information coming out of the COVID-19 public health emergency. Both Harvard and Yale have questioned the integrity of the 2020 data. In some instances, CMS chose not to use 2020 data, and in some cases, it did — which has created some winners and some losers this regulatory season.

The Winners — America’s hospitals 

On April 27, CMS released 1,914 pages of new proposals for Short-Term Acute Care Hospitals or “STACHs.” In a typical year, CMS proposes the use of data that is two years old for future payment rates. However, in this year’s proposal, CMS opted to use 2019 data in lieu of the 2020 COVID data. CMS concluded that the COVID pandemic caused different utilization patterns in hospitals in 2020, rendering the data unusable. 

CMS observed that STACH admissions fell 14% in 2020, compared to 2019. Hip and knee replacements dropped 40%, and respiratory infections increased 133%. For STACHs, CMS concluded the 2020 data is an anomaly and should be treated as such. It should not be used to adjust any future Medicare payments. But CMS decided COVID data should be used in other payment settings — making STACHs the lucky ones, the winners.

The Losers — Skilled Nursing Facilities

On April 8, CMS released 203 pages of new proposals for Skilled Nursing Facilities or “SNFs.” For SNFs, CMS observed similar gremlins in the COVID data as it did for STACHs. In 2020, SNF admissions fell 25%, and readmissions fell 26%. There were major case-mix across shifts within the readmissions, including an 18% increase in the dually eligible and a 9% increase in the African-American populations. 

By all means, it was not a typical year. CMS considered the use of both 2019 and 2020 data and ultimately decided to use the 2020 data — only after it removed 10% of the patient population that included a COVID-19 code, and 15% of SNF stays that used a COVID waiver. These COVID exclusions plus the drop in total SNF admissions equal 50%. CMS proposed to use only half the data it normally uses in any given year.

These data integrity issues certainly raise several red flags, but the use of 2020 data is particularly bad for SNFs — who arguably have the most at stake. In 2020, CMS began a new payment system for SNFs called the Patient Driven Payment Model or “PDPM.” By law, CMS must maintain annual budget neutrality—which means CMS cannot spend more or less than it is projected to spend in any given year. If CMS misses the mark, it has to recoup an overpayment or spend more money in a future year. Using the 2020 data, CMS concluded that PDPM overpaid by 5% in 2020 and solicited comments on how to best recoup a $1.7 billion overpayment. This is bad news for SNFs, making them losers this regulatory season.

Most researchers, including your author, would conclude that CMS should apply a consistent policy across its payment systems. The data CMS provided in both the STACH and SNF regulations strongly suggest that the 2020 data should not be used for payment purposes. These policy changes reflect CMS’s proposals. Right now, we can all weigh in with CMS and urge it to change its course. We don’t have long, as comments on the SNF proposals are due June 7. Submit your comments and urge CMS to ensure parity across all of its payment systems. SNFs should be treated the same as hospitals when it comes to COVID data adjustments.

Lisa Grabert is a research professor at Marquette University and a former Congressional aide to the House Ways & Means Committee where she had primary authorship over Medicare hospital and skilled nursing facility legislation.