News | Medicare Payment and Reimbursement

Medicare Offers $1 Billion Increase, Policy Changes for Post-Acute Providers

News | Medicare Payment and Reimbursement

Medicare Offers $1 Billion Increase, Policy Changes for Post-Acute Providers

Aug. 1—Post-acute care providers will see more than a $1 billion pay boost for FY19—along with a range of policy changes—as described in annual final rules issued by Medicare this week.

The SNF value-based payment shift has raised some concerns about micromanagement of providers and reductions in the number of providers.


Aug. 1—Post-acute care providers will see more than a $1 billion pay boost for FY19—along with a range of policy changes—as described in annual final rules issued by Medicare this week.

The largest pay bump—$820 million, or a 2.4 percent increase—will go to skilled nursing facilities (SNFs) in FY19, according a July 31 final rule from the Centers for Medicare & Medicaid Services (CMS). That more than doubled the FY18 increase of $370 million, or 1 percent.

Another final payment rule issued this week increased hospice payments by $340 million, or 1.8 percent, in FY19.

Inpatient rehabilitation facilities (IRFs) will garner a $105 million, or 1.3 percent, increase for FY19, according to their final rule. Inpatient psychiatric facilities (IPFs) will have a $50 million, or 1.1 percent, increase, according to another final rule.

New Model

Beginning Oct. 1, 2019, Medicare payments to SNFs will be determined by a new case-mix model as part of various policy changes included in the recently issued final rules.

The Patient-Driven Payment Model (PDPM) focuses on the patient’s condition and resulting care needs to determine Medicare payment, rather than on the amount of care provided. The PDPM includes adjustments to SNFs’ per diem payments that reflect varying costs throughout the stay, while incorporating certain “safeguards” to keep from incentivizing unwanted care. 

“The new model 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, which requires substantial paperwork to track over time,” a CMS fact sheet stated.

However, the finalized PDPM drew early criticism from one provider advocate.

“The tone of the rule itself and many of the specific comments related to therapy and the new payment model are cause for concern,” said Mark Parkinson, president and CEO at the American Health Care Association (AHCA), which represents 13,600 post-acute providers. In 2016, about 15,000 SNFs provided 2.3 million Medicare-covered stays to 1.6 million fee-for-service (FFS) beneficiaries, according to a March 2018 report from the Medicare Payment Advisory Commission (MedPAC).

Among Parkinson’s specific concerns was that the rule limits concurrent and group therapy to 25 percent of the patient’s total therapy time.

“Decisions about how much therapy is provided should not be made from a government office,” Parkinson said in a written statement. “Clinicians and patients should make those decisions together.”

The limit on group and concurrent therapy may impact SNF workflows and how facilities provide the therapy, said Clay Richards, president and CEO of naviHealth.

“As far as from a care management and care coordination standpoint, it’s not significant at all,” Richards said in an interview, referring to the new SNF payment model. “And it really wouldn’t change our expectations for [improved] quality outcomes.”

PDPM was meant as a simplified version of a replacement payment model for SNFs that CMS originally proposed in May 2017, known as the Resident Classification System, Version I. The new model aimed to shift Medicare payments away from volume and to incentivize providers to deemphasize therapy hours in favor of group sessions and general quality improvements.

Another concern with the new model was that the value-based requirements could decrease SNF capacity in markets where the facilities already are in short supply, such as in much of California, said Barbara Skier RN, JD, an attorney for Stephenson, Acquisto, and Colman who focuses on hospital payment issues.

“Yes, I want the quality but we also have to address the lack of ability to place” patients discharged from hospitals, Skier said in an interview.

MedPAC, which concluded that Medicare SNF payments nationally were “adequate,” also concluded that because it found 970 SNFs that provided relatively high-quality care at relatively low costs, “opportunities remain for other SNFs to achieve greater efficiencies.” MedPAC recommended no SNF pay increase for either 2019 or 2020, based in part on its finding that those facilities’ marginal profit, a measure of the relative attractiveness of treating Medicare beneficiaries, was at least 19.6 percent.

The new SNF payment method also continues an overall shift of CMS payment systems toward value-based payment.

“At the end of the day, providers are going to be successful based on quality outcomes and how we can evolve to—not fully away from FFS but moving toward—where providers are rewarded for producing value and better clinical outcomes,” Richards said. “I would expect that would make SNF providers, in particular, continue to maintain that focus, recognizing there will be an adjustment in moving away from a therapy-based system to one based on clinical complexity.”

Addressing the Administrative Burden

The PDPM approach aims to reduce paperwork compliance costs related to patient assessments by an estimated $2 billion over 10 years, CMS stated.

Additionally, CMS will remove two measures from the IRF Quality Reporting Program. Those providers can stop reporting data for the NHSN MRSA and seasonal flu vaccination measures after Oct. 1.  

CMS originally proposed removing eight measures from the IPF Quality Reporting Program but ended up removing only five. It retained three measures after public comments underscored their importance.

Starting Oct. 1, 2018, the SNF value-based purchasing (VBP) program will produce payment cuts or bonuses for SNFs based on readmissions-measure performance.

“The single claims-based all cause 30-day hospital readmissions measure in the SNF VBP aims to improve individual outcomes through rewarding providers that take steps to limit the readmission of their patients to a hospital,” the CMS fact sheet noted. However, CMS will assess VBP performance based on existing Medicare claims information instead of requiring additional reporting.

The final rule included changes in the scoring methodology for low-volume SNFs and an extraordinary-circumstances exemption policy. CMS estimated the updates will cut aggregate VBP payments by $211 million.

Another SNF change will increase from one year to two years the data collection period for calculating two measures on the Nursing Home Compare website.


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

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