Skilled nursing reimbursement has become worse, MedPAC report states

Share this content:
The Medicare payment system for SNFs has become increasingly broken, a report states.
The Medicare payment system for SNFs has become increasingly broken, a report states.

Years of Medicare reforms actually have worsened the way skilled nursing providers are reimbursed, and more sweeping changes are needed urgently, according to a new report from the Medicare Payment Advisory Commission and the Urban Institute.

Between 2006 and 2014, payment accuracy for therapy and non-therapy ancillary (NTA) services such as medications has “steadily eroded,” the report authors determined. That is, changes made by the Centers for Medicare & Medicaid Services meant to more closely align facility costs and Medicare payments actually have had the opposite effect.

One major issue is that through all its attempts at improving the accuracy of therapy payments, CMS has stuck with a fundamentally flawed policy of basing reimbursements on the amount of services provided rather than patient characteristics, the authors wrote. Payments increase more quickly than facility costs for providing more rigorous therapy, so this has incentivized SNFs to categorize patients in the “ultra high” and “very high” case mix groups — the share of days assigned to these groups increased from 24% to 76% between 2000 and 2012.  Government regulators have increasingly targeted improper therapy billing, the report authors note.

Non-therapy ancillary services are paid for under the umbrella of overall nursing services; therapy, room/board and nursing services make up total Medicare SNF reimbursements. CMS has made changes to the nursing services rates, but with rare exceptions, these reforms did not “directly target” patients with high NTA costs, the report states. Currently, there is essentially no correlation between nursing payments and NTA costs, the analysts calculated. This means facilities essentially are fiscally punished if they care for many high-needs patients, such as those requiring expensive antibiotics.

An alternative payment system would be far more accurate and should be adopted “as quickly as possible,” the authors urged. This system would create an independent category for NTA payments and base therapy reimbursements on patient characteristics. The authors also address several objections: For instance, they say that tying payments to quality outcomes — as policy increasingly calls for — would prevent SNFs from skimping on care to boost the profit margins associated with high-need therapy patients.

The findings were based on information from a variety of sources, including SNF Medicare claims, patient assessments, cost reports and payment rates as published in the Federal Register.

The Urban Institute authors were Senior Fellows Bowen Garrett, Ph.D., and Doug Wissoker, Ph.D., and the views expressed were their own and not representative of the organization. The other author was MedPAC Principal Policy Analyst Carol Carter, Ph.D. MedPAC offers nonbinding Medicare policy recommendations to Congress.

Click here for the complete document, released Monday.