A pile of money

The Centers for Medicare & Medicaid Services on Friday (July 29) announced a finalized 2.7% increase, or approximately $904 million hike, to nursing home Medicare pay rates for fiscal 2023. In a compromise victory for providers, regulators also decided to phase-in recalibrated payments over a two-year period.

In April, regulators first sought a net $320 million funding takeback from providers, causing stakeholders to deluge the agency with thousands of comments. Operators complained that removing so much funding during the costly pandemic era, and at a time of staffing shortages, would crush many providers.

“After considering the stakeholder feedback received in the FY 2022 SNF PPS rulemaking cycle and on the FY 2023 SNF PPS proposed rule, to better account for the effects of the COVID-19 public health emergency (PHE) on SNF spending, CMS is finalizing the adjustment factor of 4.6% to the SNF payment rates,” the agency wrote in releasing the highly anticipated new rule late Friday afternoon.

In another major victory for providers fearing the worst, CMS also said it “recognizes that the ongoing COVID-19 PHE provides a basis for taking a more cautious approach to mitigate the potential negative impacts on the nursing home industry, such as facility closures or disproportionate impacts on rural and smaller facilities.”

The result will be a 2.3% Medicare Part A cutback ($780 million) to fiscal 2023 payment rates, and a 2.3% reduction in fiscal 2024. Providers had lobbied for a three-year phase-in period but undoubtedly will be relieved all will not be taken in one fell swoop, as originally proposed by officials.

The proposed rule also included a Request for Information (RFI) seeking input on establishing minimum staffing requirements for long-term care facilities. President Biden made history in announcing proposed sweeping nursing home reforms, including a first-ever federal staffing minimum in his first State of the Union Address earlier this year. 

“We are continuing our work to focus on staffing and value, making sure that Medicare nursing home residents can receive high-quality care based on the needs of the whole person, rather than focusing on the volume of certain services provided to them,” said CMS Administrator Chiquita Brooks-LaSure in a statement announcing the rule.

In April 2021, CMS first announced that it intended to recalibrate PDPM pay rates. The new Medicare payment system went into effect Oct. 1, 2019. It was the biggest change to the nursing home reimbursement system in at least a generation and was supposed to be budget neutral. 

After its debut, however, providers and regulators alike quickly suspected, that federal payments were more generous than the system’s budget-neutral stipulation called for. But five months into PDPM’s implementation, the full force of the pandemic hit, throwing the U.S. healthcare system into a state of uncertainty it had never before encountered. Any plans to readjust PDPM payments were indefinitely postponed.

Regulators announced in April 2021 that aggregate spending under the new model was unintentionally 5.3%, or $1.7 billion, higher than what it would have been under the old Resource Utilization Groups model. The agency solicited comments for how to correct the situation, including possible takebacks for the unintended high payouts.

In late July 2021, however, CMS held off on adjusting PDPM payment rates for fiscal 2022, saying it needed to get a better picture of COVID-19’s full impact on SNFs. 

Then, in mid-April this year, CMS called for a 4.6% pay reduction when it issued its 2023 SNF PPS proposed rule. An uproar ensued, with providers and some lawmakers ultimately calling on CMS to phase in the cuts over three years to ease the financial pain of the clawback provision.

American Health Care Association President and CEO Mark Parkinson applauded CMS’s decision to increase the market basket and provide a two-year phase-in of the PDPM parity adjustment.

“These are essential for long-term and post-acute care providers during this unprecedented workforce shortage and economic crisis. Thousands of providers, lawmakers, and stakeholders shared how a swift cut to Medicare would be detrimental to our nursing home residents and staff, and we are grateful that CMS listened and made the necessary changes,” Parkinson said in a statement. “We greatly appreciate an overall increase to the Medicare program this coming fiscal year to help stabilize the profession and ensure our vulnerable residents have access to necessary, quality care.”

SNF VPB updates

CMS also finalized a proposal to suppress the SNF 30-day, all-cause readmission measure as part of the peformance scoring in the FY 2023 SNF Value-Based Purchasing Program year. This means the performance on this measure will be reported publicly but it will not affect payment.

“CMS is finalizing this proposal because circumstances caused by the COVID-19 PHE have significantly affected the measure and the ability to make fair, national comparisons of SNFs’ performance scores. As part of the scoring policy for FY 2023, CMS will assign a performance score of zero to all participating SNFs, irrespective of how they perform using the previously finalized scoring methodology, to mitigate the effect that PHE-impacted measure results would otherwise have on SNF performance scores and incentive payment multipliers,” the ageny said.

CMS will also reduce the otherwise applicable federal per diem rate for each SNF by 2% and award 60% of that withhold, resulting in a 1.2% payback to those providers. The agency said any SNFs that does not meet the finalized case minimum for FY 2023 will be excluded from the program for the fiscal year.

Among other provisions in the new rule, CMS has decided to “mitigate instability” in SNF PPS payments due to significant wage index decreases that may affect providers in any given year. The agency is finalizing a permanent 5% cap on annual wage index decreases to smooth year-to-year changes in providers’ wage index payments.

A fact sheet on the new rule can be found on the CMS website.

This is a developing story. Please check back for additional updates.