A proposed replacement payment system for SNFs drew positive initial reactions from an industry advocate.

April 30—Faced with operating headwinds, post-acute care providers stand to garner an unexpected FY19 payment boost from Medicare.

The Centers for Medicare & Medicaid Services (CMS) posted FY19 Medicare proposed payment rules that would increase payments for inpatient rehabilitation facilities (IRFs), skilled nursing facilities (SNFs), and hospices by a total of $1.375 billion.

The biggest boost was a 2.4 percent, or $850 million, SNF payment increase. That proposed increase stemmed from requirements in the Bipartisan Budget Act of 2018.

However, the amount of the increase surprised analysts from market research firm Hedgeye because CMS interpreted the legislation to mean that the multifactor productivity adjustment, which would have cut the rate by 0.8 percentage points, did not apply.

“CMS interpretation is a surprise because the [Congressional Budget Office] considered the rate override to be a pay-for when scoring the bill in February,” Hedgeye analysts wrote in an investor’s note. “As proposed, it appears that SNFs will get paid a little more than what would otherwise have been the case.”

The second largest increase was proposed for hospices, for which both aggregate hospice payments and the statutory annual cap would increase by 1.8 percent, or $340 million. That increase was based on a hospital market-basket update of 2.9 percent minus a statutory 0.8-percentage-point productivity cut and another required cut of 0.3 percentage points.

CMS also proposed a 0.9 percent, or $75 million, increase in IRF net payments. That included a 2.9 percent market-basket update, reduced by a productivity cut of 0.8 percentage points, another statutory cut of 0.75 percentage points, and an outlier-payment cut of 0.4 percentage points.

SNF Provisions

The proposed rule followed up on a 2017 SNF reform model with an overhaul of the SNF payment system for FY19. The new system would replace the current unit of payment, which is based on a combination of resident characteristics and service-intensity metrics, with a "patient-driven payment model" (PDPM). The new approach, which would launch Oct. 1, includes a federal unadjusted base rate that would be updated annually, along with five (instead of the current two) case-mix adjusted components: physical therapy, occupational therapy, speech and language pathology, non-therapy ancillary items, and nursing.

The American Health Care Association (AHCA), which represents more than 13,500 nursing facility, assisted living, developmentally disabled, and subacute care providers, viewed the PDPM as “an important step forward,” although it was still analyzing the proposal’s details.

AHCA “has supported elements of the PDPM model in the past,” Mike Cheek, senior vice president of reimbursement policy for AHCA, said about his group’s previous proposals to replace the SNF payment system. “For example, AHCA has supported splitting the current nursing component into two separate components, a nursing component and a distinct non-therapy ancillary component.”

The new payment system comes as the SNF subsector’s revenues and operating margins face growing pressures from factors that include the growth in Medicare Advantage plans, which push shorter stays and lower rates; Department of Justice investigations into billing practices; and wage inflation, according to a previous analysis by Fitch Ratings.

In the proposed rule, CMS also aimed to improve the accuracy of public quality reporting by increasing from one to two years the length of time that data are used to calculate two measures on Nursing Home Compare.

Changes to the SNF Value-Based Purchasing Program would include tweaks to the scoring methodology for low-volume SNFs and creation of an Extraordinary Circumstances Exception policy. Such changes would cut value-based payments by an aggregate of $211 million, according to CMS.

“Under the new SNF PPS case-mix model, patients will have more opportunity to choose a skilled nursing facility that offers services tailored to their condition and preferences, as the payment to nursing homes will be more based on the patient’s condition rather than the specific services provided by each skilled nursing facility,” a CMS release stated.

CMS also aims to increase patient information sharing through a request for information (RFI) on revising Medicare’s conditions of participation to push interoperability. RFI submissions will be used to create future regulatory proposals or sub-regulatory guidance, the agency said.

IRF Changes

Policy changes for IRFs include removal of the "Functional Independence Measure" instrument and associated Function Modifiers from the IRF Patient Assessment instrument.

CMS also sought comments on removal of the face-to-face requirement for rehabilitation physician visits and on expanding the use of nurse practitioners and physician assistants in efforts to meet IRF coverage requirements. Also, CMS would allow rehabilitation physicians to lead interdisciplinary team meetings remotely without needing to provide additional documentation.

“CMS believes this proposed change will allow time management flexibility and convenience,” CMS said in a fact sheet.

The proposed rule also would remove the admission order documentation requirement.

“CMS believes this requirement will continue to be appropriately addressed through the enforcement of the hospital conditions of participation, as well as the hospital admission order payment requirements, both of which IRFs need to comply with,” the agency wrote.

Two measures would be removed from the IRF Quality Reporting Program: National Healthcare Safety Network MRSA rates and seasonal flu vaccination rates.

Hospice Policies

The proposed rules also would implement the statutory recognition of physician assistants as attending physicians for hospice beneficiaries.

Proposed hospice quality-reporting changes would include an extension of the Consumer Assessment of Healthcare Providers and Systems (CAHPS) Hospice Survey participation requirements, along with exemption criteria and public-reporting policies, to future years.

CMS also would remove routine public reporting of the seven Hospice Item Set measures and the display of public-use file data on the Hospice Compare website.

“CMS would still provide the public the ability to view these component measures in a manner that avoids confusion on Hospice Compare,” a CMS fact sheet stated. “CMS plans to achieve this by reformatting the display of the component measures so that they are only viewable in an expandable/collapsible format under the composite measure itself, thus allowing users the opportunity to view the component measure scores that were used to calculate the main composite measure score.”

IPF Proposals

In a separate rule, CMS estimated that inpatient psychiatric facility (IPF) FY19 Medicare payments would increase by 0.98 percent or $50 million, a fact sheet stated. The amount reflected a 2.8 percent IPF market-basket update, with reductions of 0.8 percentage points for a productivity adjustment and 0.75 percentage points as required by statute. Estimated payments to IPFs would be further cut by 0.27 percentage points through an update in the outlier fixed-dollar loss-threshold amount.

CMS is accepting comments on the various proposed rules through June 26.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Monday, April 30, 2018