Proportion of Skilled Nursing VBP Losers Grows as 77% Receive Medicare Payment Cuts

A greater percentage of skilled nursing facilities will receive Medicare payment cuts under a key value-based payment model in fiscal year 2020, according to a new set of government data.

Of the more than 12,000 nursing homes nationwide that reported sufficient data, 77% — or 9,878 — will receive some kind of reimbursement reduction related to the Skilled Nursing Facility Value-Based Purchasing (SNF VBP) program. Just 23%, or 2,909 properties across the country, will see a bonus payment.

That’s compared to the 73% that saw penalties when the Centers for Medicare & Medicaid Services (CMS) released the first round of data late last November, against 27% with reimbursement boosts.

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Under the SNF VBP model, skilled nursing operators automatically receive a 2% cut to their baseline Medicare reimbursements, which they can then earn back by improving their hospital readmission statistics to meet certain benchmarks. CMS uses the improvement or decline in readmission rates to calculate an “Incentive Payment Multiplier” that determines the bonus or cut: A multiplier greater than 1 will bring an increase, while a figure lower than 1 means a cut.

For instance, a .99 figure represents a payment reduction of 1%; that hypothetical facility earned back 1% of the total 2% cut, according to an explainer from non-profit nursing home trade group LeadingAge. A 1.01 multiplier means a total payment increase of 3%, or the full refund of the 2% withholding plus an additional 1% bonus.

As was the case last year, the actual payment gulf between winners and losers was narrow: The top 281 buildings under VBP received multipliers of 1.031, compared to nearly 5,000 with the lowest possible score of about .98. An additional 2,414 buildings had fewer than 25 eligible Medicare stays over the course of the analysis period, and thus received a neutral score of 1.

The winners’ performance improved over last year, however; the previous top score was 1.016, while the worst performers continued to receive a 2% cut.

The implementation of the SNF VBP model in fiscal 2019 prompted a renewed focus on reducing rehospitalizations as a major financial strategy for the nation’s skilled nursing facilities; in addition to the potential Medicare penalties, poor performance on this metric can also put a given SNF’s position in a preferred provider network at risk, while also affecting a building’s five-star rating on Nursing Home Compare.

That said, some in the industry have questioned the efficacy of the VBP program as a useful motivator of change among providers. Medicare reimbursements generally only account for 20% or less of the average building’s total income, and with constant payment pressure from Medicaid and Medicare Advantage plans, a slight increase in Medicare money may not be worth the effort required to earn it.

“Until the VBP program makes it more punitive or more incentivizing for the facilities, we’re not going to see too many changes in provider behavior. I think everyone can get behind that we need to reduce our hospital readmissions, and I think most of the providers are doing that,” Vincent Fedele, director of analytics at consulting firm Zimmet Healthcare Services Group and chief operating officer of affiliated data provider CORE Analytics, told SNN last year. “[But] if your penalty’s only going to be $25,000, how much are you going to invest in technology or additional staff in order to effectuate change under VBP?”

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