CMS Finalizes $750M Medicare Payment Boost for Nursing Homes in Fiscal 2021

The federal government on Friday finalized a previously proposed rule that will bring a 2.2% Medicare payment bump to the nation’s skilled nursing facilities.

Under the Centers for Medicare & Medicaid Services’ (CMS) 2021 payment rule, facilities will see a total increase of $750 million in Medicare reimbursements over the next fiscal year, which begins this coming October 1.

That’s a slight decline from the 2.3% raise proposed in April, which would have translated to a $784 million increase.


in the final rule, CMS raised the market basket, or the baseline Medicare payment rate that reflects the cost of serving post-acute patients, by 2.2%, with no downward productivity adjustment.

The finalized payment rule will also update the ways that certain ICD-10 codes “map” to reimbursement categories under the Patient-Driven Payment Model (PDPM), the Medicare payment system that replaced the previous Resource Utilization Group (RUG) model last October 1.

Those changes were the direct result of stakeholder input, according to CMS.


“In this final rule, in response to these stakeholder recommendations, we are finalizing changes to the ICD-10 code mappings, effective October 1, 2020,” the agency noted. “We encourage stakeholders to continue to provide this essential feedback on the ICD-10 code mappings so that we may continue to improve and refine our payment methodology.”

The rule also includes minor tweaks to the SNF Value-Based Purchasing (SNF VBP) program, under which providers automatically lose 2% of their Medicare reimbursements which they then can win back — potential with a bonus — by meeting certain hospital readmission benchmarks. The changes do not affect payment terms, quality measures, or scoring.

Finally, there will be a 5% cap on wage index decreases between fiscal 2020 and 2021, as well as an updated classification of which facilities are considered “urban” and “rural” based on definitions provided by the White House Office of Management and Budget (OMB).

“In recognition of the significant impact of the COVID-19 public health emergency, and limited capacity of health care providers to review and provide comment on extensive proposals, CMS has limited annual SNF rulemaking required by statute to essential policies including Medicare payment to SNFs,” CMS noted.

The payment increase is independent of any support provided to skilled nursing operators during the coronavirus pandemic; the Department of Health and Human Services (HHS) has released billions in aid to the sector through industry-specific disbursements from CARES Act relief funds, along with general Medicare- and Medicaid-based tranches that also benefited nursing homes.

CMS typically releases the proposed rule in the spring, with finalization by midsummer.

While most skilled nursing facilities turn a profit on fee-for-service Medicare business, the higher reimbursements through that program are often offset by losses incurred on long-stay Medicaid residents.

Standalone SNFs achieved an average FFS Medicare margin of 10.3% in 2018, the most recent year for which complete data was available, according to a July analysis from the Medicare Payment Advisory Commission (MedPAC). But including all other payment sources, including Medicaid and Medicare Advantage, the nation’s SNFs had an average total margin of -0.3%, the first time since 1999 that MedPAC’s overall average came in underwater.

The 10.3% margin also represented a decline from 14.1% in 2012.

MedPAC is a non-partisan government agency that advises Congress on all aspects of Medicare policy; while MedPAC’s reports have historically argued that SNFs receive too much Medicare funding and should thus be subject to cuts, Congress and CMS are under no obligation to follow its recommendations.

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