CMS has issued its proposed rule to update Medicare skilled nursing facility (SNF) prospective payment system (PPS) rates and policies for FY 2018, while at the same time soliciting comments regarding a forthcoming and potentially ground-breaking proposed rule to replace the SNF PPS RUG-IV case-mix classification methodology, which forms the basis for SNF payment, with the Resident Classification System, Version I (RCS-I), as early as FY 2019.

For nearly ten years, CMS, the Office of Inspector General, and the Medicare Payment Advisory Commission have raised concerns that the current SNF payment system encourages providers to deliver therapy to residents based on financial goals and not patient need.  The RCS-I case-mix model, which was developed during the SNF Payment Models Research initiative, attempts to address those concerns by removing service-based metrics from the SNF PPS and deriving payment, almost exclusively, from objective resident characteristics.  Most notably, the proposed RCS-I case-mix model would:

  • Divorce therapy minutes from payment by no longer using minutes of therapy provided to a resident to classify the resident for payment purposes, and impose a 25% limit on group therapy and a 25% limit on concurrent therapy, thereby ensuring that residents receive at least 50% of their therapy minutes on an individual basis;
  • Establish new case-mix components by classifying each resident into four case-mix adjusted components (PT/OT, SLP, nursing and non-therapy ancillaries (NTA)) based, almost exclusively, on objective resident characteristics, and rely on each component to determine the per-diem payment received by a SNF;
  • Front-load payments to incorporate variable per-diem payment adjustments for the PT/OT and NTA components, which would reduce the payment amount associated with the PT/OT and NTA components over time consistent with research that suggests a SNF’s costs for PT/OT and NTA decrease during a resident’s stay; and
  • Significantly revise the assessment schedule to require only (i) 5-day Scheduled PPS Assessments, (ii) Significant Change in Status Assessments, and (iii) PPS Discharge Assessments.

Comments on the ANPRM will be accepted until June 26, 2017.

In the meantime, for FY 2018, CMS will retain the RUG-IV case-mix methodology. The agency projects that the proposed rule to update the SNF PPS for FY 2018 would increase overall payments to SNFs by $390 million, or 1.0%, compared to FY 2017 levels.  This projected update is controlled by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which established a special rule for FY 2018 that requires the market basket percentage, after application of the productivity adjustment, to be 1.0%.  Notably, in the absence of MACRA, the proposed update would equal 2.3%, or 2.7% (the proposed 2014-based SNF market basket percentage change) less 0.4% (the multifactor productivity adjustment).  Notwithstanding the advance notice of proposed rulemaking discussed above, CMS proposes to adopt the 2014-based SNF market basket to determine the market basket percentage update for the SNF PPS per diem rates in FY 2019.

As mandated by the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act), the annual update is reduced by 2 percentage points for SNFs that fail to submit required quality data to CMS under the SNF Quality Reporting Program (QRP), beginning with FY 2018. In light of the MACRA-established special rule for FY 2018 discussed above, the application of this penalty to those SNFs that do not meet the requirements for the FY 2018 SNF QRP would produce a market basket index percentage change for that FY that is less than zero (specifically, a net update of -1%), and would also result in FY 2018 payment rates that are less than such payment rates for the preceding FY, i.e., an actual cut in payment.

For FY 2020, CMS is also proposing to replace the current pressure ulcer measure with an updated version of that measure and to adopt four new, outcome-based functional measures that align with the Inpatient Rehabilitation Facility (IRF) QRP. Separately, CMS must report standardized patient assessment data beginning with FY 2019 SNF QRP; CMS is proposing to satisfy this requirement using the data submitted on the existing pressure ulcer measure.  For FY 2020, CMS is proposing that SNFs begin reporting standardized patient assessment data in the following five categories, as required by law: (1) functional status; (2) cognitive function; (3) special services, treatments and interventions; (4) medical conditions and co-morbidities; and (5) impairments.

Additionally, the proposed rule addresses continued implementation of the upcoming SNF Value-Based Purchasing Program, which was authorized by the Protecting Access to Medicare Act of 2014 and goes into effect in FY 2019. Under this policy, SNF per diem rates will be reduced by 2% to fund value-based incentive payments, which will be based on achievement and improvement on performance standards (note that the total amount of value-based incentive payments will not exceed 70% of the withhold amount).  In this rule, CMS proposes a payment exchange function approach to implement value-based incentive payment adjustments beginning October 1, 2018 and includes other policies applicable to FY 2020.

Comments on the proposed rule also will be accepted until June 26, 2017.  Both rules are scheduled to be published on May 4, 2017.