The Centers for Medicare & Medicaid Services (CMS) announced a significant increase in payments to skilled nursing facilities (SNFs). In what they describe as a “parity adjustment recalibration,” CMS will boost payments by 4% or approximately $1.4 billion, starting in fiscal year 2024. This substantial payment increase is in response to a $2.2 billion underpayment issue that arose due to the implementation of the Patient Driven Payment Model for SNFs, which replaced the previous payment system in 2020.
What Led to the Underpayment Issue?
The underpayment issue can be attributed to several factors. CMS initially overestimated overpayments to nursing homes, resulting in a 2.23% reduction in fiscal year 2023. The Patient Driven Payment Model implementation led to an unintended increase in payments to skilled nursing facilities of about 5% or $1.7 billion.
One of the key reasons for the underpayment was CMS failing to account for the Consolidated Appropriations Act’s requirement to exclude both marriage and family therapist services, as well as mental health counselor services from SNF billing. These services are now billed separately by performing clinicians instead of being included in the Medicare Part A skilled nursing facility payment.
What Does the Final Payment Policy Include?
The final payment policy incorporates a 3% SNF market basket increase, a 3.6% market basket forecast error adjustment, and a productivity adjustment of 0.2%. However, it also includes a negative 2.3% reduction (approximately $789 million) related to the Patient Driven Payment Model parity adjustment recalibration.
Furthermore, the final rule introduces updates to payment policies and rates for SNFs aimed at addressing staff turnover, as outlined in an executive order by President Joe Biden. Beginning in fiscal year 2025, CMS will implement a discharge function score to assess functional status and payments to skilled nursing facilities, considering the percentage of residents who meet or exceed the expected discharge function score. This assessment will utilize mobility and self-care data collected through the Minimum Data Set.
Monitoring COVID-19 Vaccination and Staff Turnover
In light of the ongoing impact of COVID-19 on nursing home operations, the Centers for Medicare & Medicaid Services plans to track the percentage of healthcare personnel in nursing homes who are considered up to date on their COVID vaccinations, starting in fiscal year 2025. Additionally, in fiscal year 2026, CMS will begin monitoring nursing staff turnover to ensure adequate staffing at nursing homes, aligning with the Biden administration’s focus on this critical issue.
This payment adjustment by CMS is a significant development in the healthcare industry, particularly for skilled nursing facilities. It aims to rectify past underpayments and provide support for these vital healthcare providers. The continued focus on staff turnover and COVID-19 preparedness highlights the importance of ensuring high-quality care in nursing homes.