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Skilled nursing operators will forgo bonuses for a second straight year for limiting hospital readmissions, a regulatory pause one compliance expert says will lead to losses all around.

The Centers for Medicare & Medicaid Services on Friday announced it would not apply the value based purchasing measure of 30-day all-cause readmission for performance scoring in fiscal 2023. According to the agency’s final pay rule, all skilled nursing facilities will see a 2% reduction in the coming year, with those who still report data as required getting 1.2% back.

Under VBP, providers who have the least readmissions are supposed to receive incentive payments, while those who do poorly are penalized. But the measure was suppressed last year due to what CMS called unfair data discrepancies due to COVID-19. The latest rule continues that practice for another year, with CMS pocketing the unreturned 0.8% for the program’s continuation.

“Really, no one wins but Medicare,” Melissa Brown, chief operating office of Gravity Healthcare Consulting, told McKnight’s Long-Term Care News on Monday. “Providers that have worked hard on readmission rates won’t get any reward. For residents in buildings where readmissions have been largely ignored, there is no incentive this year to target reduced readmissions, so residents lose too.”

Cynthia Morton, executive vice president for the National Association for the Support of Long-Term Care, said she expects CMS to continue suppressing the readmission measure for as long as the public health emergency impacts the data. That, despite the fact that it takes some $185 million out of providers’ pockets at a “crucial time.”

“CMS continues to believe it would not be fair or equitable to assess SNFs’ performance on the measure using FY 2021 data, which has been affected by COVID-19 case rates,” Morton said. “So, CMS is treating all providers the same (if they qualify for the program). … This measure is suppressed but it could be a loss for some facilities if they felt their performance would have warranted earning more than the 1.2% back. It’s hard to know, given the impact of the pandemic.”

But Brown said she has seen clients improve readmission rates throughout the PHE when compared to pre-pandemic levels.

“It can be done. Now they have no compensation for their effort,” she said. “Ultimately, while the PHE has impacted readmission rates, the effect was approximately equal to all providers, and as such not suppressing this data would probably have been the most fair approach.”

Incentives to return eventually

Brown thinks CMS will restore the full measure for fiscal 2024, barring any major spikes in COVID cases or new, more deadly variants.

Kevin Griffith, PhD, an assistant professor at Vanderbilt University who has researched influences on hospital readmission rates, said nursing homes would do well to continue improving their efforts to avoid returns to the hospital.

“The policy will have an effect even without the penalties,” he predicted Monday. “The industry knows VBP is coming [back] sooner or later, and smart SNF leaders will use the extra year to implement their own interventions and work out kinks in their care transitions and processes.”

In his work with hospitals, Griffith has found that many hospitals were motivated to make improvements due to reputational impacts of being labeled as an underperforming facility — even when the magnitude of their financial penalties was very small.

SNFs have been hit hard in the past by the VBP program. In 2018, the first year SNFs could earn incentives for readmission performance,  about 27% received a bonus with 73% penalized.

“There have been a number of studies showing that the penalties are much more likely to hit SNFs that serve vulnerable populations and have lower profit margins,” said Liam Rose, PHD, a Stanford University health economist who has studied whether poor-performing SNFs are able to reduce readmissions enough to earn incentives.

“Readmissions are intended to be a catch-all measure of quality, and I think CMS has shown it is committed to VBP in some capacity going forward, whether measured through readmissions or another metric,” he added. “Facilities that are able to invest will likely continue to do so. But facilities on the margin will likely know that improvements have a low chance of payoff under the current program.”

For those providers, especially, Rose speculated, the interim year is an unlikely time to invest significant resources.

While some have argued that CMS should abandon its current incentive model, Griffith expects the measure to be reinstated eventually. The agency could, however, use the ongoing pause to look at potential distributional impacts of the program, and modify as necessary to improve parity, he said.

Friday’s final rule also moved the sector closer to facing additional performance measures, with a Healthcare Associated Infections Requiring Hospitalization and Total Nursing Hours per Resident Day measures coming in fiscal 2026, and a community discharge measure coming in 2027.