The Centers for Medicare and Medicaid Services (CMS) released the FY 2023 Skilled Nursing Facility (SNF) Prospective Payment System (PPS) Proposed Rule (CMS 1765-P) on April 11. The proposed rule estimates that the Medicare SNF payments will be decreased by $320 million due to a proposed “parity adjustment,” effectively decreasing the net market basket update. The rationale for the parity adjustment is a 5% increase that CMS observed following the implementation of the Patient-Driven Payment Model (PDPM), and CMS is asking for comments regarding the parity adjustment. In addition, the rule proposes a wage index cap, PDPM code mappings updates, and other minor technical updates outlined below. There are updates related to SNF consolidated billing, the SNF Quality Reporting Program (QRP), and the SNF Value-Based Payment (VBP) program. CMS has also issued requests for information to establish mandatory staffing models, infection isolation and resource utilization, and future measures for the quality reporting program. Comments on the rule are due June 10.

PPS Payment Updates

CMS is proposing a 3.9% or $1.4 billion update to nursing homes. The 3.9% market basket update is based on an unadjusted market basket increase of 2.8%, plus a 1.5% percentage point market basket forecast error adjustment and less than a 0.4 percentage point productivity adjustment. This is reduced by a proposed 4.6% PDPM parity adjustment to maintain budget neutrality. These changes in aggregate mean that if all the proposals were finalized, SNFs would be looking at a $320 million overall reduction in Part A payments. Please note these figures do not take into account the SNF value-based payment (VBP) reductions which are estimated at $186 million.

PDPM Parity Adjustment

When PDPM was finalized in 2019, CMS finalized that there would not be an overall change in aggregate SNF spending in the transition from RUGS IV to PDPM. In the proposed rule, CMS outlines its data analysis to justify a recalibration of the parity adjustment in order to achieve this required budget neutrality. CMS’ data analysis showed an unintended increase in payments of approximately 5% or $1.7 billion in FY2020.  CMS acknowledges this data analysis could have been affected by the COVID-19 public health emergency (PHE) and the FY2023 proposed rule outlines CMS’ actions to address stakeholder concerns from the proposed rule to final rule last year and the data challenges associated with COVID-19.  The impacts of the PHE led CMS to not propose a PDPM parity adjustment in FY2022.  However, in FY2023, CMS is proposing an immediate 4.6% parity adjustment. To try to account for the impacts of the pandemic, their proposed methodology excludes those patients that used a COVID-19 PHE waiver, who were diagnosed with COVID -19, and creates control period data using months with low COVID-19 prevalence from FY2020 and FY2021. 

LeadingAge and other provider groups have already raised objections to the parity adjustment, particularly its timing in a year when SNFs are dealing with pandemic fallout and struggling with low occupancy and an unprecedented workforce crisis. LeadingAge and LAI will be submitting comments on that and other issues in the proposed rule.

PDPM ICD-10 Code Mappings

In order to improve consistency between the ICD-10 code mappings and current ICD-10 current guidelines, CMS is proposing several changes to the code mappings.

Wage Index

CMS proposes a permanent 5% cap on annual wage index to mitigate instability in SNF PPS payments. This is to reduce the operational instability that could be caused by changes in providers’ wage index payments. CMS is proposing this cap across Medicare settings.

Mandatory Minimum Staffing Levels Request for Information

The Biden Administration has announced their desire implement a mandatory staffing level for nursing homes after conducting research and presenting a comprehensive study. CMS intends to issue proposed rules on a minimum staffing level requirement for nursing homes within one year. In January, CMS began posting nursing home staff turnover rates (as well as weekend staff levels) on the Medicare.gov Care Compare website, and CMS will be including this information in the star rating system starting in July 2022.

The proposed rule outlines CMS’s request to seek public input on addressing direct care staffing requirements for registered nurses, licensed practical nurses, and certified nursing assistants. CMS also is seeking input beyond the nursing realm on what positions should be considered direct care staff. CMS will use this research and study to inform policy on appropriate staffing levels.

This request for information seeks responses to seventeen questions for stakeholders to give input and respond as an invitation of the aspects of staffing in nursing homes.

SNF VBP

CMS is also requesting stakeholder input on a measure that would examine staff turnover levels in nursing homes for possible inclusion in CMS’ SNF Value-Based Purchasing (VBP) Program.

The proposed rule also proposes the adoption of 3 new measures into the SNF VBP Program:

• The Skilled Nursing Facility Healthcare Associated Infections Requiring Hospitalization (SNF HAI) is an outcome measure that assesses SNF performance on infection prevention and management.
• The Total Nursing Hours per Resident Day is a structural measure that uses auditable electronic data to calculate total nursing hours per resident each day.
• The Adoption of the Discharge to Community – Post Acute Care Measure for SNFs (DTC) is an outcome measure that assesses the rate of successful discharges to community from a SNF setting.

SNF QRP

The SNF QRP proposed the adoption of one new measure beginning with the FY 2025 SNF QRP: the Influenza Vaccination Coverage among Healthcare Personnel (HCP) (NQF #0431) measure. CMS is also proposing to revise the compliance date for the Transfer of Health Information measures and certain standardized patient assessment data elements. In addition, CMS is proposing to revise regulation text that pertains to data submission requirements for the SNF QRP. Finally, CMS is seeking comment on three subjects: future measure concepts for the SNF QRP, overarching principles for measuring equity and healthcare disparities across CMS programs, including the SNF QRP, and the inclusion of the CoreQ: Short Stay Discharge Measure in the SNF QRP.

Coding Infection Isolation

During the COVID-19 PHE, a classification for infected isolation was used to define a patient alone isolated in a separate room due to an active infection. CMS has received stakeholder feedback requesting the change in some criteria to code infection isolation. In addition, there are questions on the resources needed for these patients compared to being treated in a cohorted environment.

The coding infection isolation request for information seeks to determine: 1) whether or not there is an increase in resource utilization; 2) to include cohorted patients, and 3) to ensure the payment rate impact to infection isolation is consistent with the increase in relative costliness associated with these patients.

LeadingAge Response

LeadingAge will be working on comments to include the request for information sections of the proposed rule as well as a template for members to use to send their comments to CMS before the June 10 deadline. Particularly important will be to elevate concerns regarding the net reduction in payment at a volatile time for nursing facilities, as they emerge from the pandemic. LeadingAge will hold their network group meetings for nursing homes and use communications to gather input and discuss advocacy for the proposed rule.

In addition, LAI intends to launch a Regulatory Workgroup this Spring.  Part of the charge of the workgroup will include feedback on portions of the CMS SNF Proposed Rule as well as recommendations related to state laws and regulations that could be amended to better align with federal law.