The following was written by Reg Hislop for Reg’s Blog. Reposted with permission.
The SNF proposed rule is best characterized as mostly good news. The best news is the proposed market-basket (rate inflation) update of 3%. Subtracting the productivity factor of .5% from the update, SNFs will see a rate increase of 2.5% starting on October 1 (assuming the rate remains as proposed once the Final Rule is issued). How this will exactly map to revenue however, is where the “mostly” qualifier is required.
A rate increase is merely an inflationary adjustment to the payment categories under Medicare. In the case of SNFs, the translation will take place in PDPM. Under RUGs IV, the SNF rates would inflate by the applicable percentage, applied to each of the 66 groups. Under PDPM, the base rate corresponds to one of six case-mix categories (PT, OT, Speech, Nursing, Non-Therapy Ancillary and Non-Case Mix), multiplied by the applicable case-mix value in each category (excluding non-case mix which is a flat per diem). There are 10 clinical categories under PDPM that correspond to the reason that patient is admitted to the SNF (Major Joint Replacement or Spinal Surgery; Cancer; Non‐Surgical Orthopedic/Musculoskeletal; Pulmonary; Orthopedic Surgery (Except Major Joint Replacement or Spinal Surgery); Cardiovascular and Coagulations; Acute Infections; Acute Neurologic; Medical Management; Non‐Orthopedic Surgery). Using the diagnosis code and patient functional status from Section GG on the MDS, a case-mix value is determined for each of the five categories (not non-case mix). In the end, it will be difficult for the SNF to see a direct relationship, as in years past, with a rate adjustment and the current (RUGs) payment model. PDPM, even with the best modeling, is an unknown element for the SNF industry. In short, there is no correlation between this proposed 2.5% increase and what a SNF will see in terms of revenue come October 1. It is quite possible that some will see, even with the rate increase, a decrease in Medicare total revenue compared to current experience.
Another subtle but important element to consider, one that falls outside of this Medicare policy, is Medicare Advantage. This proposed rule only impacts the fee-for-service side of Medicare, not translating to Medicare Advantage rates paid by plans to SNFs. Such is the same concerning PDPM. Medicare Advantage plans do not need to implement rate increases, PDPM, or follow CMS reimbursement protocols for any provider segment. For SNFs that have a high percentage of Medicare Advantage patients as part of their routine census, the impact of this proposed rate increase must be factored against the Medicare Advantage patient volume (e.g., 50% Medicare census that is Med Advantage reduces the rate increase realizable by the SNF, by half). I am not seeing much rate increase activity on the part of the Medicare Advantage plans in any major market. The supply of willing SNFs to take their patients exceeds by a large amount, the demand within these plans, for SNF access. In other words, prices don’t need to increase to gain access, when needed.
Other programmatic updates/changes within the Proposed Rule for SNFs are as follows:
- CMS is proposing to align the “group therapy” definition for SNFs to the one used for IRFs. Presently, the SNF definition for group is four patients exactly. The change will allow “group” to be any number between two and six. One important note of caution: Assuming this definitional change remains, SNFs must not adopt a group therapy practice that immediately accommodates the maximum. Group is an appropriate therapy treatment option when and only when it is clinically warranted by the patients being treated in this setting. I am hearing way too many therapy companies tout cost control, productivity management, etc. under PDPM via a sweeping expansion of group therapy (not readily usable under the current RUGs system). Remember, if the SNF patient needs and clinical requirements prior to October 1 were for individual therapy, those same needs will apply post-October 1. CMS has warned providers against wholesale shifts in therapy treatment methodologies and time/minutes (reductions). Facilities need to be very careful as it is unlikely that their census mix (case-mix, acuity, etc.) will change after October 1 and thus, the provision of therapy should be fundamentally the same under PDPM.
- The Value-Based Purchasing measurement model for readmissions is shifting from “all cause” to “potentially preventable” as the metric. As before, CMS is using a two percent withhold in SNF Medicare payments to build a pool for performance incentives under the program. Sixty percent of the funds withheld will be distributed to high-performing facilities as “a bonus percentage” going forward. In the first realization of incentives/penalties under VBP, 73% of all SNFs failed to perform at the standardized readmission benchmark and are presently having their reimbursement reduced on a penalty basis.
- The SNF QRP (quality reporting program) is gaining two additional measures: Transfer of health information from the SNF to another provider, and; Transfer of health information from the SNF to the patient. Both measures are interoperability related designed to impact the flow of information between providers and patients to encourage enhanced productivity and safety. In addition, CMS proposes to add a number of standardized patient assessment data elements that assess cognitive function and/or mental status, special services, treatments and interventions, medical conditions and comorbidities, impairments, or social determinants of health (race and ethnicity, etc.). Recall, the SNF QRP imputes a two percent reduction in rate inflation to facilities that don’t report data or stay current. This means that for this year, a facility can see the rate increase of 2.5% proposed, reduced to .5% for non-reporting.
The full proposed rule is available at this link: https://www.federalregister.gov/documents/2019/04/25/2019-08108/medicare-program-prospective-payment-system-and-consolidated-billing-for-skilled-nursing-facilities