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Providers reacted with cautious optimism Tuesday to a proposed nursing home pay rule that offers operators a 3.7% Medicare Part A raise for fiscal 2024 without yet imposing promised new stringent staffing standards.

The Centers for Medicare & Medicaid Services dropped the 312-page SNF Prospective Payment System proposed rule Tuesday afternoon. It outlines a higher-than-anticipated market basket increase reflecting the impacts of record inflation. Providers in recent months have been vocal about their struggles with overwhelming operating and labor costs and lackluster support from state Medicaid programs.

Tuesday’s proposal also recommends vast changes to CMS’ quality reporting and value-based purchasing programs. Immediate attention, however, gravitated to the payment proposal.

“Funding goes hand in hand with quality care. The proposed payment rule acknowledges this critical reality,” said Ruth Katz, senior vice president of policy for LeadingAge, referring to the pay hike. “We remain cautious knowing that these increases could be offset by the costs of staffing standards expected soon and encourage Congress and HHS to ensure any proposed standards meet the provisions outlined in LeadingAge’s Get Real on Ratios proposal.”

Both LeadingAge and the American Health Care Association had called on CMS to include a funding mechanism in any proposed staffing mandate. The details of that mandate, first pledged by the White House in February 2022, were widely expected to appear in Tuesday’s pay proposal. 

AHCA President and CEO Mark Parkinson praised the 3.7% pay increase on Tuesday but remained wary of the staffing rule to come.

“We appreciate that CMS has considered the soaring costs nursing home providers are grappling with due to the labor crisis and record inflation in recent years,” he said. “It is vital that Medicare reflect the increasing costs — including those imposed by government mandates — nursing homes are facing to ensure our vulnerable residents can access the care they need.”

For its part, CMS said in announcing the pay rule that it “remains committed” to announcing a staffing minimum “later this spring.”

“CMS continues to review the feedback and evidence from both the comment solicitation and mixed-methods study, all of which will be used to inform proposals for minimum direct care staffing requirements in nursing homes in rulemaking this spring,” the agency wrote in a fact sheet.

The proposed rule includes a net increase of 3.7%, or approximately $1.2 billion, in Medicare Part A payments to SNFs for fiscal 2024.

The estimate includes a $2 billion increase resulting from the 6.1% net market basket update to the payment rates, which is based on a 2.7% SNF market basket increase plus a 3.6% market basket forecast error adjustment.

Last year’s final rule included a 2.7% raise, based largely on a 3.9% market basket increase.

The high FY2024 market basket “takes inflation into account and inflation has not been helpful to providers,” said Cynthia Morton, executive vice president of Advion. “The increase in the payment rates can go a long way to helping providers cover the higher staff costs.”

The increase would have been higher if not for a 0.2% productivity adjustment and a $745 million cut, equalling about 2.3%, which represents the second phase of a two-year decrease in rates related to recalibration of the Patient Driven Payment Model.

After the implementation of PDPM in October 2019, a CMS analysis found an unintended increase in payments of approximately 5%, or $1.7 billion annually. CMS last year finalized a PDPM parity adjustment factor of 4.6% in the FY 2023 SNF PPS final rule with a two-year phase-in period, resulting in a 2.3% reduction for FY 2023 and FY 2024.

The proposed SNF pay increase for fiscal 2024 outpaces that proposed for hospice providers and inpatient rehabilitation facilities in recent days.

Formal comments on the rule will be accepted through June 5.

Widespread quality, value-based measures included

While it demurred on the staffing rule, CMS is proposing extensive changes to its quality reporting and value-based purchasing programs.

A new nursing staff turnover measure, already collected and publicly reported on Care Compare, would be reported as part of the value-based purchasing program next fiscal year, with payment effects beginning in fiscal 2026. The agency billed its addition to the VBP plan as  “part of the Administration’s focus to ensure adequate staffing in long-term care settings.”

Other value-based purchasing changes include:

  • Replacement of the 30-Day All-Cause Readmission Measure with a Skilled Nursing Facility Within Stay Potentially Preventable Readmissions measure beginning with the FY 2028 program year and FY 2025 performance year.
  • Proposed adoption of a Discharge Function Score measure beginning with the FY 2027 program year and FY 2025 performance year. It would assesses functional status by assessing the percentage of SNF residents who meet or exceed an expected discharge function score, and use mobility and self-care items already collected on the MDS.
  • Proposed adoption of the Long Stay Hospitalization Measure per 100 residents beginning with the FY 2027 program year and FY 2025 performance year.
  • Proposed adoption of the Percent of Residents Experiencing One or More Falls with Major Injury beginning with the FY 2027 program year and FY 2025 performance year. It would assess falls with major injury rates of long-stay residents.

The PPS rule also proposes three quality reporting measures, modifies another and calls for the elimination of three more from the program. Among them are two changes to COVID-19 vaccine reporting.

CMS is proposing the adoption of the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date (measure beginning with FY 2026. This measure reports the percentage of stays in which residents in a SNF are up to date with recommended COVID vaccinations in accordance with Centers for Disease Control and Prevention’s guidance. Data would be collected using a new standardized item on the MDS.

The agency also proposes modifying the COVID-19 Vaccination Coverage among Healthcare Personnel measure beginning with the FY 2025 SNF QRP. The current measure reports only whether the healthcare worker has received a primary vaccination series for COVID. The modification would require SNFs to report the number of workers who are up to date, as per CDC guidance.

Staffing details delayed

Morton told McKnight’s Long-Term Care News on Tuesday she was “a little surprised” the nurse staffing mandate was not in the proposed rule.

“I suspect the policy is not ready yet,” she said. “The administration has been so committed to developing it and releasing it so I believe it’s a matter of time.”

In the more than 13 months since the White House promised a first-ever staffing minimum, providers have grown increasingly worried about proscriptive staffing increases and pleaded with policymakers to recognize the harsh reality on the ground. Skilled nursing remains the only healthcare sector yet to recover from its pandemic staffing losses. Nursing homes lost 210,000 workers between February 2020 and December 2022, according to federal labor statistics.

At the current pace of modest job growth, nursing homes would not return to pre-pandemic staffing levels until 2027, the American Health Care Association and the American Hospital Association warned CMS Administrator Chiquita Brooks-LaSure in a letter Monday.