On July 29, 2022, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that updates Medicare payment policies and rates for skilled nursing facilities under the Skilled Nursing Facility Prospective Payment System (SNF PPS) for fiscal year (FY) 2023. In addition, the final rule includes updates for the SNF Quality Reporting Program (QRP) and the SNF Value-Based Purchasing (VBP) Program for FY 2023 and future years.

 FY 2023 Updates to the SNF Payment Rates

CMS estimates that the aggregate impact of the payment policies in this final rule would result in an increase of 2.7%, or approximately $904 million, in Medicare Part A payments to SNFs in FY 2023 compared to FY 2022. This estimate reflects a $1.7 billion increase resulting from the 5.1% update to the payment rates, which is based on a 3.9% SNF market basket increase plus a 1.5 percentage point market basket forecast error adjustment and less a 0.3 percentage point productivity adjustment (as required by law), as well as a negative 2.3% (or $780 million decrease) in the FY 2023 SNF PPS rates as a result of the recalibrated parity adjustment, which is being phased in over two years. These impact figures do not incorporate the SNF VBP reductions for certain SNFs which are estimated to be $186 million in FY 2023.

Recalibration of the Patient Driven Payment Model Parity Adjustment

When the Patient Driven Payment Model (PDPM), was implemented on October 1, 2019 CMS indicated that the intent was to implement this new case-mix classification model in a budget neutral manner.  This means that the transition to PDPM from the prior model, the Resource Utilization Group, Version 4 (RUG-IV), would not result in an increase or decrease in aggregate SNF spending. Since PDPM implementation in FY 2020, CMS’ initial data analysis showed an unintended increase in payments of approximately 5% or $1.7 billion per year. As with past case-mix classification model transitions, CMS conducted the data analysis to recalibrate the parity adjustment in order to achieve budget neutrality under PDPM.

In this final rule, CMS acknowledges that the COVID-19 public health emergency (PHE) could have affected their data analysis.  As a result, based on stakeholder feedback, in this rule CMS finalized recalibration of the PDPM parity adjustment factor of 4.6% using a combined methodology of a subset population that excludes those patients whose stays utilized a COVID-19 PHE-related waiver, or who were diagnosed with COVID-19, and control period data using months with low COVID-19 prevalence from FY 2020 and FY 2021.

In order to mitigate the financial impact of recalibrating the PDPM parity adjustment, CMS has finalized the parity adjustment with a two-year phase-in period that would reduce SNF spending by 2.3%, or approximately $780 million, in FY 2023 and 2.3% in FY 2024.

CAP on Wage Index Decreases

The wage indices for FY 2023 were projected at 70.8% for the labor share of the rate vs. 70.4% for FY 2022. CMS finalized its proposal to cap negative swings in the wage indices permanently at 5% per year, starting with FY 2023.

Changes in PDPM ICD-10 Code Mappings

PDPM utilizes ICD-10 codes in several ways, including to assign patients to clinical categories used for categorization under several PDPM components, specifically the Physical Therapy, Occupational Therapy, Speech Language Pathology and Non-Therapy Ancillary components. To improve consistency between the ICD-10 code mappings and current ICD-10 coding guidelines, CMS finalized their proposed changes to the PDPM ICD-10 code mappings.

SNF Quality Reporting Program (QRP)

CMS finalized three additional QRP measures for FY 2024.  Two of these measures were previously approved but delayed due to the PHE, and the other was new in the proposed rule.  The new measure is the Influenza Vaccination Coverage among Healthcare Personnel. This measure reports on the percentage of HCP who receive an influenza vaccine any time from when it first became available through March 31 of the following year. SNFs will submit the measure data through the CDC National Healthcare Safety Network with an initial data submission period from October 1, 2022 through March 31, 2023. The data thresholds are 80% for MDS and 100% for NHSN. The previously approved but delayed measures are Transfer of Health (TOH) Information to the Provider and TOH Information to the Patient, both dealing with updated medication lists. The data for these measures will be reported on the MDS effective October 1, 2023.

SNF Value-Based Purchasing

CMS finalized their proposal to suppress VBP for payment purposes in FY 2023 as was the case in FY 2022. Most SNFs will receive a 1.2% payback from the 2% VBP rate deduction regardless of their individual re-hospitalization rates. The full VBP will return in FY 2024.

CMS will share with providers their actual performance in FY 2023 via the normal feedback reports. The data also will be publicly available through the Provider Data Catalog.  CMS created a new risk adjustment to the VBP re-hospitalization measure for COVID-19 patients. This adjustment will apply in FY 2023. The methodology includes variables for patients with COVID-19 during their original hospitalization and for those with a history of COVID-19.  CMS finalized their proposal to update the baseline period to FY 2019, instead of 2020, for the FY 2025 VBP.

At this time, SNF VBP is based solely on the hospital readmissions measure. In the final rule, CMS finalized three new measures that will be added to VBP in FY 2026 and 2027.. In the final rule, CMS adopted two new measures for FY 2026, Healthcare-Acquired Infections (HAI) Requiring Hospitalization and Total Nursing Hours per Resident Day. The HAI measure is based on SNF and hospital claims and does not require additional data reporting. The staffing measure is the same as already used for the 5-Star Quality Rating System, taken from Payroll Based Journal and MDS data. For both measures, CMS will use FY 2024 as the performance period and FY 2022 as the baseline period for the FY 2026 program year, then roll forward.  For FY 2027, CMS adopted the Discharge to Community measure. This measure is already in QRP. It is based on 2 years of fee-for-service claims. The baseline period for this measure will be FY 2021-2022, and the performance period will be FY 2024-2025. The new measures will require CMS to change other aspects of VBP that are based on the current single-measure structure, including the scoring methodology.

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Christine Twombly, RN-BC, RAC-MT, RAC-MTA, HCRM, CHC
Clinical Consultant

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