MedPAC Again Calls for Skilled Nursing Payment Cuts in Mixed PDPM Review

The Medicare Payment Advisory Commission (MedPAC) issued a mostly positive assessment of the new proposed payment rules for skilled nursing facilities, but the organization wants change to come faster than planned.

Citing the similarity between the new Patient-Driven Payment Model (PDPM) and the now-shelved Resident Classification System, Version I (RCS-I), MedPAC asserted that the planned fiscal 2020 rollout is too generous to providers.

“Such a delay seems unnecessary given that the design is similar to the design proposed last year, which was developed with the assistance of numerous technical expert panels and accompanied by extensive supportive documentation,” MedPAC chairman Francis J. Crosson wrote in a Friday letter to Centers for Medicare & Medicaid Services (CMS) administrator Seema Verma. “Providers should already be well aware of the key design features of the proposal. The postponement will delay the much-needed redistribution of payments away from therapy-driven care and toward medically complex care.”


Crosson and MedPAC — a non-partisan federal agency that advises Congress on Medicare issues — also criticized CMS for raising Medicare reimbursements for skilled nursing facilities under the new system. That move, a 2.4% market basket adjustment that will bring SNFs $850 million more in Medicare funding, is unnecessary given the already high margins many buildings make on Medicare patients, according to MedPAC.

“In 2016, the aggregate Medicare margin for freestanding SNFs was 11.4%, the 17th consecutive year that the aggregate Medicare margins exceeded 10%,” Crosson wrote. “This high level of payments relative to the cost to treat beneficiaries indicates that Medicare’s payments are more than adequate to accommodate cost growth.”

MedPAC earlier this year asked CMS to eliminate the market basket increases for fiscal 2019 and 2020 entirely, citing the high Medicare margins and the fact that SNFs frequently accept much lower reimbursements from Medicare Advantage plans.


The letter also proposed an automatic reduction of Medicare funding to SNFs that report fewer than 25 cases per year under the upcoming value-based payment plan set to take effect this October. Facilities will see an across-the-board 2% reduction of their Medicare funding starting this fall, which they can earn back by hitting certain performance benchmarks. Under MedPAC’s plan, however, these small SNFs would not be able to earn that money back until they beefed up their Medicare censuses.

“This policy would encourage low-volume SNFs to increase their Medicare case sizes so that Medicare can adequately measure the quality of their care, hold all SNFs accountable for the care they provide, and drive quality improvement,” Crosson wrote.

Case-mix approval

Crosson praised the changes to the case-mix classification system under the new model, saying it tracked with MedPAC’s own preference for linking reimbursements to the types of care required instead of volume.

“The proposal would also increase the equity of payments across different types of patients so that providers would have less incentive to selectively admit patients with certain conditions and avoid others,” Crosson wrote.

Still, MedPAC warned that providers could still learn how to take advantage of this new system, and called for more stringent punishments than those contained under the new system — specifically, denying claims that exceed thresholds without an initial “warning edit.”

“Past SNF practices — including furnishing just enough therapy to qualify a patient into a case-mix group and furnishing enough therapy to assign the majority of days into the highest case-mix groups — suggest that providers will likely alter their behavior to maximize payments,” Crosson wrote.

MedPAC additionally used its analysis of the new payment model to continue calling on Congress to develop a unified post-acute payment system, one of its key policy goals.

Lawmakers are under no obligation to apply MedPAC’s suggestions to actual Medicare policy.

Written by Alex Spanko

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