The federal government on Monday proposed its payment rate update to nursing home reimbursements for fiscal 2023, which includes a 4.6% cut related to the Patient-Driven Payment Model.
That cut from the Centers for Medicare & Medicaid Services (CMS) amounts to a total loss of $320 million, according to the agency.
CMS – in its SNF Prospective Payment System proposed rule – recommended a 3.9%, or $1.4 billion, payment increase to the industry. The government agency arrived at that number by raising the market basket rate for skilled nursing facilities by 2.8%, a 1.5 percentage point forecast error adjustment and a 0.4-percentage-point multifactor productivity adjustment.
CMS also factored in a proposed downward adjustment to SNF payment rates by 4.6%, or $1.7B, to achieve budget neutrality. This amounts to a decrease of approximately $320 million in Medicare Part A payments to SNFs in FY 23 compared to the prior fiscal year.
Last July, CMS boosted provider pay by 1.2% and delayed an adjustment to PDPM pay rate changes for at least one year. This was a decrease for fiscal 2022 compared to the agency’s proposed 1.3% boost in April.
A 60-day comment period will follow the proposed payment rule announcement after which CMS will issue a final rule with new payments going into effect in October.
The CMS announcement is not much better in comparison with the 5% Medicare cut proposed by MedPAC, which industry leaders such as AHCA/NCAL CEO Mark Parkinson warned might come to pass.
“Any reduction in government resources could deepen the economic crisis currently within the long term and post-acute care sector. Many nursing homes already face imminent closure, and this Medicare cut could force more seniors across the country to relocate and find alternative care farther away from family and loved ones,” Parkinson said in a statement on Monday.
“It is critical that Medicare remain a reliable funding source and reflect the increasing costs providers are facing to ensure our vulnerable residents can access the care they need,” he added.
Janine Finck-Boyle, vice president of health policy at LeadingAge, expressed the nonprofit association’s initial concerns over any reduction of reimbursement rates for nursing homes.
“At a time when no aging services provider can afford it, the government is cutting. We’re working with the Administration to improve our nation’s nursing home system, but lowering reimbursement rates is not the right starting point,” Finck-Boyle said in a statement.
When CMS issued its proposed payment rules for inpatient rehabilitation facilities (IRFs), inpatient psychiatric facilities (IPFs) and hospice providers, some analysts believed that did not “bode well” for the skilled nursing industry.
Stifel analysts on Monday said the rate decision has a “disproportionate impact on revenue and particularly margin,” adding that the PDPM cut could push many operators over the brink.
“We think [the] PDPM cut, if implemented, would weigh on SNF margins for the next 18 months, and is particularly ruinous for operators that are already struggling,” analysts wrote.
Analysts compared the situation to 2011, the last time when a reimbursement model recalibration “wreaked havoc” on the industry.
CMS slashed SNF PPS rates by 12.5% ($4.5B) after the Resource Utilization Group (RUG) system was implemented, resulting in restructurings and bankruptcies.
CMS seeks feedback on staffing minimums
CMS in its proposed rule specifically requested feedback from stakeholders to help the agency establish minimum staffing requirements as part of the Biden administration’s comprehensive set of intended nursing home reforms.
The feedback, CMS said, will be used in conjunction with a research study being conducted to determine the optimal level and type of nursing home staffing needs.
CMS reiterated that it intends to issue proposed rules on a minimum staffing level requirement within one year.
“The COVID-19 pandemic has highlighted serious problems at some of the nation’s nursing homes that have persisted for too long. And we have seen the tragic impact that inadequate staff resources can have on residents and staff,” CMS Administrator Chiquita Brooks-LaSure said in a statement.
Implementing staffing standards for nursing homes is projected to increase operating expenses for 59.1% of nursing homes – at an average cost of $500,000 per facility, according to a report published last month by Oxford University Press on behalf of The Gerontological Society of America.
Calls from lawmakers for the implementation of nursing home staffing minimums is not a new phenomenon.
CMS, in a report issued to Congress in 2001, recommended a daily minimum standard of 4.1 hours of total direct care nursing time per resident: 2.8 hours from certified nursing assistants; 0.75 hours from RNs; and 0.55 hours from licensed practical/vocational nurses.
Despite that report being issued more than two decades ago, there is no minimum number of direct care nurse and nursing assistant hours per resident per day required by the federal government.
Nursing home staffing was also a component in various versions of the Build Back Better Act, which is now effectively stalled in Congress.
Roughly 29% of nursing facilities reported at least one staffing shortage, according to a Kaiser Family Foundation analysis of recent data from the Centers for Disease Control and Prevention’s National Healthcare Safety Network.
Staffing measures to be included in value-based purchasing program
CMS is also requesting input from stakeholders on a measure that would examine staff turnover levels in nursing homes to potentially be included in CMS’ SNF value-based purchasing (VB) program.
CMS already has been authorized to apply nine measures to the program in adherence with the Consolidated Appropriations Act of 2021 and had solicited commentary from stakeholders on potential measures ahead of what the Biden administration issued regarding VBP as part of his reform proposals.
A fact sheet published by the White House outlines staff adequacy, retaining staff and the resident experience as additional measures to quantify SNF performance under the program.
CMS said it is proposing the adoption of three measures specifically into the program: the SNF Healthcare Associated Infections Requiring Hospitalization (SNF HAI); the Total Nursing Hours Per Resident Day; and the Adoption of the Discharge to Community.
Preliminary analysis by CMS, according to the release, shows that as staff turnover decreases, a facility’s overall star rating increases — suggesting the association between lower turnover and higher overall quality.
CMS began posting numbers on staffing turnover and weekend staffing levels for nursing homes on the Medicare website back in January. These numbers will be used in CMS’s five-star rating system beginning in July.
Currently, the program is designed to improve patient outcomes by awarding financial incentives or penalties based on 30-day hospital readmission rates. VBP sets a performance and improvement baseline for SNFs to meet in order to avoid a penalty.
The VBP program was implemented in 2018 as part of the 2014 Protecting Access to Medicare Act.
Back in June 2021, MedPAC’s mandated evaluation of the program found “fundamental design flaws” so significant that eliminating and replacing it was the only option.
“The Biden-Harris Administration has promised that we will work with all stakeholders to do better for nursing home residents, and today’s proposed rule includes important steps toward our goal to promote safety and quality of care for all residents and staff,” Brooks-LaSure said.
Companies featured in this article:
