The value-based purchasing (VBP) program for skilled nursing facilities was implemented in 2018 as part of the 2014 Protecting Access to Medicare Act – and three years later, the program is showing “fundamental design flaws” so significant that eliminating and replacing it is the only option.
That’s according to the Medicare Payment Advisory Commission’s (MedPAC) mandated evaluation of the SNF VBP program, which uses hospital readmissions to assess the quality of care provided by SNFs to Medicare fee–for-service (FFS) beneficiaries. Under the program, SNFs receive either a reward, a penalty, or no change in payment based on their performance on the measure.
The program is funded by a 2% reduction to FFS payments each year, with Medicare retaining a part of that reduction as savings.
MedPAC’s analysis found that payments dropped for almost three-quarters of SNF providers, but the rewards and penalties were relatively small.
“Our assessment of the SNF VBP program revealed fundamental design flaws that recent legislated changes do not correct,” MedPAC wrote. “Because of the shortcomings of the program, the Commission recommends that the SNF VBP program be eliminated and replaced as soon as possible.”
According to MedPAC, the program’s “fundamental flaws” include:
- Using a single measure – hospital readmissions – to assess performance
- A minimum case count too low to ensure reliable results for low-volume providers
- A scoring approach that potentially does not provide enough incentives to improve
- Failures to address variations across SNF patient populations related to their social risk factors
- An incentive pool used for both program savings and provider rewards
While some of the problems were fixed by the 2021 Consolidated appropriations act, MedPAC concluded that more changes were still necessary, and that the VBP program “should be immediately eliminated and replaced with a more effective design that addresses its flaws.”
The SNF VPB program retains 40% of the amount withheld from payments, a tactic that “effectively lowers the pool of incentive dollars to distribute as incentive payments payments,” MedPAC said. And because the relatively small size of the incentive payments, at 2%, gets further reduced by this, the amounts may not be enough to motivate providers to improve.
MedPAC proposed a design for what it termed a “SNF value incentive program,” one that would counteract the flaws of the existing VBP program. Specifically, this program would:
- Score a small set of performance measures
- Incorporate strategies to ensure reliable measure results
- Set up a system to distribute rewards with “minimal cliff effects,” such as a continuous performance scale
- Account for differences in patient social risk factors via peer-grouping mechanism
- Distribute the entire provider-funded pool of dollars
The measures in MedPAC’s proposed design were all-condition hospitalizations within the SNF stay, successful discharge to the community and Medicare spending per beneficiary, with the share of fully dual-eligible beneficiaries as the measure of social risk in its peer grouping mechanism.
Under the existing VBP program, SNFs treating high shares of patients who have full dual eligibility for both Medicare and Medicaid are more likely to receive penalties, potentially incentivizing providers to avoid admitting those patients, the commission noted.
The formal call to scrap the SNF VBP program came after analysts and researchers with the commission called out its flaws in March meeting.
“In summary, the current program is flawed. The VIP design addresses these flaws,” MedPAC senior analyst Ledia Tabor concluded in March. “Compared to the current program, a replacement VIP design is more likely to motivate providers to improve their quality and would dampen the incentive to avoid beneficiaries with more social risk factors and more medically complex beneficiaries.”
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