The current value-based purchasing program for skilled nursing facilities would be replaced by an alternative incentive model that rewards providers more evenly under a proposal by the Medicare Payment Advisory Commission. 

MedPAC commission members, who are tasked with evaluating the SNF VBP and making recommendations to improve the program to Congress, discussed the proposed replacement model during a meeting last week. 

The Centers for Medicare & Medicaid Services withholds 2% of SNF fee-for-service Part A Medicare payments in order to fund the SNF VBP. The program rewards SNFs with incentive payments based on the quality of care they provide to Medicare beneficiaries and is based on hospital readmissions. 

Commission staff noted that during the first three years of the program, Medicare payments were lowered for about three-quarters of SNFs, between 21% and 39% didn’t earn back any of the withheld funding and just 2% to 3% of providers earned maximum payment increases. 

“Those increases were relatively small, ranging from 1.6 percent to 3.1 percent net of the withhold. The general consensus is that these incentive payments have not been sufficiently large to motivate improvement,” MedPAC staff member Ledia Tabor reported. 

Incentive payments also tended to be higher for providers who are larger, whose patients have lower risk scores and for those who treated fewer patients at high social risk. 

Alternative model 

The alternative incentive model would instead use rates of hospitalization within the SNF stay, successful discharges to the community and Medicare spending per beneficiary as performance measures for providers as opposed to the single readmission measure. 

The proposed model would use a higher reliability standard to determine the minimum stay count for which providers can be included in the provider, assess provider performance against national distribution and account for social risk factors of beneficiaries. 

It would also distribute all withheld funds back to providers based on their performances and each year the payment adjustments would be calculated to fully spend out the incentive pools, explained Tabor.  

The proposal, however, did not include a minimum performance standard because it would likely disproportionality penalize SNFs that treat a high share of patients at high social risk because they are more likely to have lower performance on quality measures.

What’s next

Commission members mostly expressed support for the draft recommendations but also expressed concerns about not including a minimum performance score, which could possibly wind up rewarding providers for a lower standard of care, Inside Health Policy first reported.

Tabor explained that “a minimum standard would undercut the purpose of peer grouping, which is to counter the disadvantages of these SNFs face in achieving good performance.” 

The proposal is also budget neutral and would affect current program spending. Commission members are expected to vote on the draft recommendations during the April meeting. 

“We expect this recommendation to have positive impacts on providers and beneficiaries. Access may improve for beneficiaries at high social risk or who are medically complex. Beneficiaries may experience an increase in the quality of care they receive from SNFs because the providers would have stronger incentives to improve,” Tabor said. 

“For providers, the SNF VIP will improve equity across SNFs because it will not disadvantage SNFs that treat patients at high social risk or medically complex patients. We do not expect the program to affect provider participation in Medicare,” she added.