CMS Proposes $444M Medicare Boost for Nursing Homes, Calls Out ‘Unintended’ $1.7B PDPM Gain

The federal government on Thursday announced a proposed 1.3% boost to nursing home Medicare reimbursements for fiscal 2022, while also raising the specter of a potential adjustment to the new Patient-Driven Payment Model.

That increase from the Centers for Medicare & Medicaid Services (CMS) works out to a total gain of $444 million, according to the agency. CMS arrived at that number by raising the market basket rate for skilled nursing facilities by 2.3%, then subtracting 0.8 of a percentage point as a forecast error adjustment and a 0.2-percentage-point multifactor productivity adjustment.

CMS additionally observed that PDPM’s first year-plus did not exactly work out as the agency had planned.


“When finalizing PDPM, CMS stated that this new payment model would be implemented in a budget neutral manner, meaning that the transition to this new payment model would not result in an increase or decrease in aggregate SNF spending,” CMS observed in a Thursday fact sheet. “Since PDPM implementation, currently available data suggest an unintended increase in payments of approximately 5%, or $1.7 billion, in FY 2020.”

Due to the impact of the coronavirus pandemic on nursing homes, however, CMS acknowledged that the drivers of the significant gain were not immediately clear.

“In this proposed rule, CMS is soliciting broad public comments on a potential methodology for recalibrating the PDPM parity adjustment that would account for the potential effects of the COVID-19 PHE without compromising the accuracy of the adjustment,” the agency observed. “CMS also seeks comment on whether any necessary adjustment should be delayed or phased in over time to provide payment stability.”


Under the proposed fiscal 2022 payment rule for SNFs, CMS would add new measures to the SNF value-based purchasing (VBP) program over the coming years, while also temporarily suppressing the 30-day all-cause readmission measure for fiscal 2022 due to the COVID-19 pandemic.

“Specifically, to address the possible distortion of performance scores and incentive payment multipliers, CMS is proposing to assign a performance score of zero to all participating SNFs, irrespective of how they perform using the previously finalized scoring methodology,” the agency noted.

Under the VBP, nursing homes automatically lose 2% of their Medicare reimbursements, which they can win back by improving that readmission metric. CMS proposed a workaround in which facilities will receive a 1.2% payback to account for the suspended program.

“The proposed measure suppression does not remove the accountability of SNFs and nursing facilities … to provide high-quality care and ensure patient safety, including protecting the well-being of clinical staff who provide care in these congregated settings,” CMS warned. “LTCFs must continue to adhere to evidence-based infection control practices and CMS’s Requirements for Participation.”

Several new metrics could also be coming to the SNF Quality Reporting Program (QRP), including vaccination rates among staff and hospital-associated infections (HAI).

CMS generally finalizes the proposed rule in July after accepting stakeholder feedback in the spring and summer; the federal government’s fiscal 2022 begins October 1.

Prior to the arrival of the novel coronavirus in the United States, 2020 was supposed to be the year that CMS would take stock of PDPM, given the widespread evidence that there were more winners than losers under the model — which is intended to more closely link reimbursement to resident need. But the payment structure, which took effect in October 2019, only generated a few months of pre-pandemic data before the upheaval of COVID.

The overall $444 million figure is substantially lower than the $750 million awarded to skilled nursing facilities for fiscal 2021, when CMS explicitly cited the pandemic as a reason to make only minimal technical adjustments to PDPM and Medicare payments in general.

Mark Parkinson, president and CEO of the American Health Care Association (AHCA), thanked acting CMS administrator Liz Richter for the increase in a statement.

“Nursing homes across the country continue to dedicate extensive resources to protect their residents and staff from COVID-19. This ongoing work makes government support and robust reimbursement rates more important than ever,” he said. “With the skilled nursing profession grappling with an economic crisis and hundreds of facilities on the brink of closure due to the pandemic, it is critical that Medicare remain a reliable funding source and reflect the increasing costs providers are facing.”

Parkinson also expressed support for the additional proposed quality measures, specifically singling out the vaccination metric.

This is a developing story. Please check back for updates.