Although many skilled nursing providers let out a sigh of relief after the Centers for Medicare & Medicaid Services announced a 2.7% net pay increase for SNFs in 2023 on Friday, others were still expressing plenty of concern.
CMS issued the SNF Prospective Payment System final rule for fiscal 2023 on Friday. Providers’ pay boost includes a 3.9% SNF market basket increase plus a 1.5 percentage point forecast error adjustment, as well as a 0.3% lower productivity adjustment.
However, it also includes a 2.3% (or $780 million) decrease as a result of a Patient Driven Payment Model’s parity adjustment to account for unintentional overpayments. The recalibration of PDPM’s parity adjustment factor of 4.6% includes a two-year phase in period in a win for providers — decreasing SNF spending by 2.3% in fiscal 2023 and 2.3% in fiscal 2024.
Combined, the two adjustments will result in an estimated aggregate increase of about $904 million in Medicare Part A payments to SNFs for fiscal 2023.
“Providers should be happy that CMS has chosen to spread the parity adjustment out over two years and that CMS made a slight (1.1%) increase to the market basket update,” said Brian Ellsworth, vice president of public policy and payment transformation at Health Dimension Group.
“But, overall it is very concerning to have such a small net rate increase during a time period when providers are experiencing significant occupancy pressures, a workforce crisis and double digit wage increases for nurses in many markets across the country,” he told McKnight’s Long-Term Care News on Friday. “Medicare plays such a vital role in skilled nursing facility finances.”
Grateful that CMS listened
In April 2021, CMS first announced that it intended to recalibrate PDPM pay rates. It said in April 2021 that aggregate spending under the new model was unintentionally 5.3%, or $1.7 billion, higher than intended.
In late July 2021, however, the agency held off on adjusting PDPM payment rates for fiscal 2022. Then, in mid-April this year, it proposed a 4.6% pay reduction when it issued the 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.
Sabra Health Care REIT President and CEO Rick Matros, who called CMS’ original pay proposal “heartless,” said the final rule is “very good news” for providers.
“The increase before the reduction was bigger than expected,” Matros told McKnight’s on Friday. “I believe they did listen and I thank CMS for that.”
The American Health Care Association on Friday said the market basket increase and two-year phase-in of the PDPM parity adjustment were “essential” for providers when accounting for the ongoing workforce and economic challenges they’re facing.
“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,” AHCA President and CEO Mark Parkinson said in a statement.
Doesn’t erase ‘financial neglect’
Others, however, were not as conciliatory. LeadingAge leaders doubled down on their disappointment that CMS chose to include the parity adjustment in the final rule.
“We warned CMS that this is not the time to cut payments,” LeadingAge President and CEO Katie Smith Sloan said in a statement Friday. “Spreading the impact of the adjustment over two years (2.3% in FY 2023 and 2.3% in FY 2024) is helpful, but the end result adds to the chronic financial neglect of our nations’ nursing homes — in a time of real crisis.”
She pointed out that care access, inflation-induced increases in operating costs, staffing shortages and “insufficient support” from policy makers are major issues for providers and now they have to have payment reductions to that list.
“Any further cuts bring us to a question of whether skilled nursing care will truly be sustainable in many communities,” added Deb Paauw, executive director of quality and data integration at South Dakota-based health system Avera Health. “South Dakota has had four nursing homes announce this year that they are closing, and it’s highly likely there will be more doing the same.”