Takeaway: Payment updates a non-event but Advanced Notice on proposed changes to SNF PPS is news and paves way for PAC PPS

This afternoon, CMS release the annual payment updates for Skilled Nursing Facilities, Inpatient Rehabilitation Facilities and Hospice Agencies. As we noted a few weeks ago, much of the anticipation has been eliminated from the rulemaking season with Congress’ override of the usual update calculations with a 1 percent increase.

Hospice

After accounting for some minor budget neutrality adjustments, the Routine Hospice Care rate for days 1 to 60 is in line with our estimate at $192.80 for FY 2018. The rate for RHC days 61 and over will be $151.41 in FY 2018.

CMS RELEASES PAYMENT UPDATES FOR HOSPICE, IRF AND SNF - NEW PAYMENT SYSTEM FOR SNF? - 4 27 2017 7 15 27 PM

The hospice cap amount also increases by the 1 percent rate set by Congress and will be $28, 404.99 for FY 2018.

Overall, Medicare payments to hospice agencies should increase by about $180 million in FY 2018.

Skilled Nursing Facilities

As anticipated, the SNF payment update did not include a forecast error adjustment for FY 2016. The difference between the forecast and actual market basket index for that year did not exceed the 0.5 percent difference required to trigger a claw back.

CMS RELEASES PAYMENT UPDATES FOR HOSPICE, IRF AND SNF - NEW PAYMENT SYSTEM FOR SNF? - 4 27 2017 7 23 24 PM

CMS estimates that payments to SNFs will increase $390 million in FY 2018.

CMS also released a Notice of Advanced Proposed Rulemaking which is sort of a bureaucratic heads up. The intent of this notice was to solicit feedback on a switch from the RUG IV system of classifying patients to the RCS-I case mix model developed over the last four years.

Like the shift to the home health payment grouper model, the purpose of a change from RUG –IV to the RCS-I system would be to eliminate therapy as a payment factor for SNFs. Almost since the beginning of the SNF PPS, it has been criticized for emphasizing the provision of therapy services.

The proposed shift also eases the way to a single PAC payment system whose arrival is estimated for 2020-2022.

A Notice of Advanced Proposed Rulemaking means the ramp to finalization of a proposal will be a long one. Policy makers have been demanding this change for decades and the industry has effectively resisted. We had thought that nothing would be proposed this year. We may still be right about that as we expect there to be a good bit of blowback from an industry whose overall margins have been stressed by the combined effects of Medicare cuts, a shift in Medicaid policy, technological advances that reduce ALOS and patient preference.

We will dig into the implications of this possible change for REITs and operators and have more soon.

Inpatient Rehabilitation Facilities

CMS is proposing to increase payments to IRFs by about $80 million.

CMS RELEASES PAYMENT UPDATES FOR HOSPICE, IRF AND SNF - NEW PAYMENT SYSTEM FOR SNF? - 4 27 2017 7 16 42 PM

There are some additional policy changes like adjustments to the codes for which there is a presumption of compliance under the 60 day rule. More on that later.

Call with questions. With 600 pages to read, we will be here day and night.

Emily Evans

Managing Director

Health Policy

@HedgeyeEEvans