A recalibration to the Patient Driven Payment Model could have troubling payment implications for skilled nursing providers who are still trying to manage a difficult operating environment caused by the pandemic, experts are warning. 

The Centers for Medicare & Medicaid Services revealed that it wants to recalibrate PDPM’s parity adjustment after finding the agency’s aggregate spending under the new model increased unintentionally by 5.3%, or $1.7 billion, when compared to what it would have paid SNFs under the old Resource Utilization Group model.

“As a result, it would appear that rather than simply achieving parity, the FY 2020 parity adjustment may have inadvertently triggered a significant increase in overall payment levels under the SNF [Protective Payment System],” the agency wrote in a release of the proposed SNF PPS rule on Thursday.  

PDPM’s implementation was supposed to be budget neutral and not result in an increase or decrease to aggregate SNF spending, CMS explained. The agency also acknowledged that the COVID-19 public health emergency, which began less than halfway into PDPM’s first year, also could have also affected the data. 

Based on the data from the initial phase of PDPM, nonetheless, CMS said “a recalibration of the PDPM parity adjustment is warranted to ensure that the adjustment” keeps payments budget neutral.

The agency is seeking comment on its findings. It is especially interested in thoughts on recalibrating the PDPM parity adjustment, and if so, whether this should be delayed or phased in over time.

What’s at stake

Recalibration talk has been expected, “but the implications of whether it is budget neutral, of course, could be troubling, especially with CMS signaling there could be a 5% change,” warned Cynthia Morton, executive vice president of the National Association for the Support of Long Term Care. 

Cynthia Morton

SNFs could face a “major reimbursement change” if CMS does move forward with the recalibration, she added.  

“They’re just considering it right now,” Morton told McKnight’s Long-Term Care News. They’re not proposing it yet. They want to hear from the community, and they said if they decide to do that then they’d do it over a couple of years, which is good.”

A major reimbursement reduction, even if it’s phased in over a couple of years, could be devastating, with so many providers still struggling to restore occupancy and workforce levels

“COVID’s not over yet for the nursing home sector and it’s still a very difficult operating environment. Costs are still high to get [personal protective equipment], labor costs are still high, people are still sick and still getting COVID,” Morton warned. 

“It’s still a very difficult operating environment and that’s not going to go away for a while,” she added.

More potential cuts

Ruth Katz, senior vice president of policy for LeadingAge, said her group is very concerned about a possible PDPM adjustment and intends to submit full comments on the matter to the agency.

Katz also told McKnight’s the association was disappointed to see just a 1.3% Medicare Part A pay hike recommended “after a trying year for providers financially, clinically and emotionally.” Last year, the proposed pay hike was 2.3%.

She also expressed concern that the agency’s approach to the SNF Value-Based Purchasing Program in the proposed rule includes an estimated $184.25 million in reductions for fiscal 2022. 

“As proposed, the VBP results in a cut for providers who, throughout the worst healthcare crisis in our nation’s history, have done their utmost — often with little government support and relief — to protect both vulnerable residents and the staff who care for them, keep the virus at bay and navigate COVID-19 related financial blows of increased expenses and lost revenues. Congress could act to permit CMS to not apply the VBP program this year,” Katz said.