[UPDATED] CMS Proposes 4.1% Increase to Medicare Payments, While Expanding Monetary Penalties

The Centers for Medicare & Medicaid Services (CMS) issued its proposed rule that updates Medicare payment policies and rates for skilled nursing facilities under the Skilled Nursing Facility Prospective Payment System for fiscal year 2025.

CMS also proposed to expand the penalties that can be imposed through regulatory revision to allow for more per instance and per day – this would mean more civil monetary penalties (CMPs) to be imposed in the coming year.

The federal agency estimates that the aggregate impact of the payment policies in the latest rule would result in a net increase of 4.1% in Medicare Part A payments to SNFs in fiscal year 2025.


This estimate is based on the proposed SNF market basket of 2.8% plus a 1.7% market basket forecast error adjustment, and negative 0.4% productivity adjustment. These figures do not incorporate the SNF VBP reductions for certain SNFs subject to the net reduction in payments under the SNF VBP. Those adjustments are estimated to total $196.5 million in 2025.

In 2024, CMS approved a net increase of 4.0%, or approximately $1.4 billion, in Medicare Part A payments to SNFs. This estimate reflects a $2.2 billion increase resulting from the 6.4% net market basket update to the payment rates.

Advocacy groups for the nursing home sector welcomed the proposed Medicare payment increase, but said that the added funding will not be sufficient to bear the costs of a proposed staffing mandate.


“While we appreciate this proposed increase, this funding will not stem the tide for the billions of dollars that will be required by providers each year to meet the agency’s proposed minimum staffing requirement,” Mark Parkinson, President and CEO of The American Health Care Association (AHCA), said in an emailed statement. “We implore the Administration and CMS to reverse course on this staffing mandate; otherwise, more nursing homes will close, more vulnerable residents will be displaced by these closures, and more seniors won’t be able to access the long term care they need. A modest Medicare payment bump is woefully inadequate when coupled with an unfunded staffing mandate.”

The federal agency also proposed updates to the SNF Quality Reporting Program (QRP) to better account for adverse social conditions that negatively impact individuals’ health or health care. Changes to CMS’ enforcement policies to impose more equitable and consistent civil monetary penalties (CMP) for SNFs for health and safety violations are also part of this proposed rule.

As part of the Biden administration’s bid to improve safety and quality, CMS said it is proposing to expand its ability to impose financial penalties to drive sustained correction of health and safety deficiencies.

“These revisions will allow CMS to expand the mix and number of penalties in response to situations that put residents’ health and safety at risk and, therefore, encourage facilities to promptly correct and maintain lasting compliance with CMS’s health and safety requirements,” a fact sheet on the proposed payment rule noted.

Area wage adjustment could cause ‘greater swings’ in 2025 rates

Moreover, CMS aims to improve the accuracy of wages and wage-related costs incurred by facilities so as to account for regional cost of living variation. To that end, the federal agency is proposing an update to the SNF PPS Area Wage Index (AWI) using the Core-Based Statistical Areas (CBSAs) defined within the new OMB Bulletin 23-01.

“CMS doubles down in 2025 by updating the SNF rates using newly defined CBSAs. This means we’ve got far greater swings next year relative to 2024,” Marc Zimmet, CEO of Zimmet Health Care Services, told Skilled Nursing News.

The reasoning that updates to the Medicare area-based wage index, which CMS said will “improve the accuracy of wages and wage-related costs for the area in which the facility is located,” is flawed, according to Zimmet.

“That statement is absurd.  AWI is based on hospital cost profiles which differ from SNFs. The net result exacerbates irrational payment differences across counties with no discernable difference in cost of living,” Zimmet said. “Alas, AWI is a zero-sum game. For every winner, there’s a loser.”

States like Kentucky are potentially big winners, where SNF rates could jump $40 per day even before the market basket update, Zimmet said, while Alabama “pops” $75 per day. 

“[In Connecticut] every county takes a hit,” Zimmet said. “Adding insult to injury, the state’s hospitals – the same ones that brought down the AWIs – win approval for Geographic Reclassification to higher paying New York counties. SNFs are not afforded the same luxury.” 

Other proposed changes

Other changes being proposed include several changes to the PDPM ICD-10 code mappings to allow providers to provide more accurate, consistent, and appropriate primary diagnoses that meet the criteria for skilled intervention during a Part A SNF stay. These proposed changes are available on the PDPM website. The proposed rule also seeks feedback on potential future updates to the Non-Therapy Ancillary (NTA) component of PDPM.

There are also changes proposed for the Quality Reporting Program (QRP). Here, CMS is seeking to add four new social determinants of health items and modifying one such assessment item for the SNF QRP. Also, CMS proposes that SNFs included in the SNF QRP participate in a process to validate data submitted under the SNF QRP through the Minimum Data Set (MDS) beginning with the fiscal year 2027 SNF QRP. The federal agency is also seeking comments on future measure concepts for the SNF QRP.

Proposed updates to the SNF VBP include adopting a measure retention and removal policy and an update to the case-mix methodology utilized as part of the Total Nurse Staffing measure, among others.

The complete proposed rule is available at the Federal Register.

Amy Stulick contributed to the reporting.

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