August 16, 2022

CMS Issues Final Skilled Nursing Facility Payment Rule for Federal Fiscal Year 2023

By Scott Manson, Managing Director, Advisory Services

CMS Issues Final Skilled Nursing Facility Payment Rule for Federal Fiscal Year 2023 Clinical Services

In the August 3, 2022 Federal Register, the Centers for Medicare and Medicaid Services (CMS) issued its final payment update for skilled nursing facility (SNF) services between October 1, 2022 and September 30, 2023 (FY 2023). The payment update will result in an additional $904 million in aggregate payments to SNFs during FY 2023.

The additional payments are the net result of several changes. First, the FY 2023 SNF market basket increase is forecast at 3.9%, but there is also a prior-year adjustment in the works. Because the FY 2021 market basket was forecast at 2.2% and the final market basket increase came in at 3.7%, the 1.5% variance will be added into the FY 2023 rates. The FY 2023 rates will also be decreased by 0.3% for the productivity adjustment. The current-year market basket adjustment plus the prior-year forecast error adjustment, less the productivity adjustment results in a final FY 2023 market basket update of a 5.1% increase over the FY 2022 rates.

SNF providers should not expect to realize the full 5.1% increase in FY 2023. CMS determined a 4.6% decrease in rates is required as a result of a parity adjustment. The parity adjustment is required because the patient-driven payment model’s actual average case mix index per stay in FY 2019 was higher than expected. The parity adjustment is being implemented over a two-year phase-in period by decreasing all of the case-mix indices evenly by 2.3% in FY 2023 and again in FY 2024. When all of the different updates and adjustments are included, SNF providers can expect to see an overall increase in payments of approximately 2.7%.

In FY 2023 as in FY 2022, SNF providers will once again see an additional 0.8% decrease in reimbursement due to the value-based purchasing (VBP) adjustment. CMS also plans to suppress the readmission factors and reduce facility rates for all SNFs by the same percentage due to the public health emergency. Looking ahead to FY 2024, CMS again intends to make facility-specific VBP payment adjustments using the readmission measures.

With the 2023 final payment rule, CMS also finalized the addition of two VBP quality measures that will begin in FY 2026: the SNF healthcare-associated infections requiring hospitalization measure and the total nursing hours per resident day staffing measure. In FY 2027, VBP will add the discharge to community measure. CMS also finalized additional quality reporting measures to start in FY 2024.

In FY 2023, SNFs will again see Medicare rate increases. As many SNF leaders start to look at next year’s budgets, they might think a 2.7% rate increase is not enough to keep up with cost increases. With the additional measures instituted by CMS, quality- and value-based purchasing may become larger parts of Medicare reimbursement in the future. If you have questions on the final SNF payment rule, please contact your Marcum advisor.