May 1, 2018

Medicare Releases Skilled Nursing Facility Proposed Rule for Fiscal Year 2019

Medicare Releases Skilled Nursing Facility Proposed Rule for Fiscal Year 2019

On April 27, 2018, the Centers for Medicare and Medicaid Services (“CMS”) issued a proposed rule including fiscal year 2019 payment updates and other changes. Significant changes include proposed changes to the case-mix classification system, the Skilled Nursing Facility (“SNF”) Value-Based Purchasing Program (“VBP”), and the SNF Quality Reporting Program (“QRP”).

Fiscal Year 2019 Payment Updates

The Bipartisan Budget Act of 2018 set the SNF market update adjustment factor at a 2.4% increase for fiscal year 2019, which includes service dates occurring between October 1, 2018 and September 30, 2019. Without this requirement, the market basket increase would have only been 1.9%. CMS estimates the 2.4% increase will result in an increase of $850 million in Medicare payments to SNFs.

Case-Mix Classification Changes

In May 2017, CMS released an Advanced Notice of Proposed Rulemaking which included a change from the Resident Utilization Group Version IV (“RUG-IV”) classification system to the Resident Classification System, Version I (“RCS-I”). CMS addressed questions and concerns and made significant changes to the RCS-1 model which resulted in the SNF Patient-Driven Payment Model (“PDPM”). Under the proposed rule the PDPM system will be effective October 1, 2019.

The PDPM is designed to improve the incentives to treat the needs of the whole patient instead of focusing on the volume of services the patient receives. PDPM would adjust payments based on each aspect of a resident’s care including non-therapy ancillaries, which are items such as drugs and medical supplies addressing costs associated with medically complex patients. The PDPM would also adjust the payments throughout the stay to reflect the varying costs that occur and incorporate safeguards against potential financial incentives to ensure patients receive care consistent with their unique needs and goals.

The proposed PDPM would have approximately 80% fewer payment group combinations than the RCS-I. Also, the PDPM simplifies complicated paperwork requirements, including a reduction in the Minimum Data Set reporting, and is expected to save providers approximately $2 billion over ten years.

SNF Value-Based Purchasing Program (“VBP”)

Beginning on October 1, 2018, the SNF VBP will apply either a positive or negative adjustment to payments based on a provider’s hospital readmissions measure. The goal of VBP is to encourage SNFs to take steps to reduce the readmission of patients to a hospital. CMS will determine the readmissions based on existing claims data with no additional reporting required.

SNF Quality Reporting Program (“QRP”)

Currently, SNFs are required to submit quality data to CMS or be subject to a 2% reduction to their Medicare payments. CMS is not proposing to adopt any new quality reporting measures in the proposed rule. CMS is proposing to adopt an additional factor to consider when evaluating measures for removal from the measure set. The factor takes into account the cost and benefit of its continued use in the program. CMS is also proposing to publicly display the four SNF QRP assessment-based quality measures, and increase the number of years of data used to display two claims-based measures.

If you have any questions about this healthcare alert, please contact a member of Marcum’s Healthcare Advisory Group.

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