After a couple of decades of criticism and 10 years of contemplation, CMS finally proposed a revision to the Skilled Nursing Facility Prospective Payment System case-mix methodology. Instead of classifying SNF residents, using a combination of resident characteristics and services intensity metrics (i.e., therapy minutes), into 66 RUGs, CMS would use a “Patient-Driven Payment Model” derived from patient characteristics.
As is the case today, there would be a federal unadjusted base-rate which would be updated annually. However, the base rate would have five case-mix adjusted components - Physical Therapy, Occupational Therapy, Speech & Language Pathology, Non-therapy Ancillary items and Nursing. – instead of two.
CMS provides for illustrative purposes only the re-division of the base rate from two components to five plus the non-case mix portion:
Each component would then be assigned a case-mix weight based on predictive circumstances like the reason for the SNF admission or the presence of a swallowing disorder. Payment would be determined based on the sum of the individual classifications.
The PDPM stands in contrast to the current SNF PPS system which classifies residents into groups, called RUGs, in which there are two case-mix adjusted components - nursing and therapy. Each RUG is assigned a case-mix index for each payment component to reflect relative differences in cost and resource intensity. However, only the higher paying of these groups, which is generally a therapy RUG, is used for reimbursement purposes.
Not surprisingly and the source of much of the criticism of the SNF PPS, over 90 percent of SNF days are paid for using a rehabilitation RUG.
The PDPM is meant to address several concerns of CMS and other policy makers that the SNF PPS does not adequately compensate providers for patients who need non-therapy type services and overcompensates for therapy services.
The PDPM also addresses concerns that the per diem rate does not account for the variability of costs across a SNF stay. CMS is proposing a per diem adjustment factor for the PT and OT components that would diminish the impact of these payment factors as the stay progresses. Days one through 20 would have an adjustment factor of 1.00 declining to 0.76 for days 90-100. The NTA component would also have a per diem adjustment of 3.00 for days one through three and 1.00 for days four through 100. A per diem adjustment factor would not apply to the other payment components.
Critically, the new PDPM would be implemented on a budget neutral basis in FY 2020. It is still a big change, however. CMS’s model of impacts suggest that SNFs that are for profit and/or heavily dependent on therapy services will see a reduction in Medicare payments.
Given the long rollout of this policy change, we expect it to be implemented. As therapy patients like those recovering from major joint replacement will become less lurcrative, expect those lengths of stay to decline as provider focus on more complex patients.
The FY 2019 SNF PPS rule also included the FY 2019 payment update. The Bipartisan Budget Act of 2018 included a market-basket override of 2.4 percent. Much to our surprise, CMS is interpreting the legislation to mean that the Multifactor Productivity Adjustment does not apply. Had Congress not acted the reimbursement rate would have increased 1.90 percent (2.70 percent market basket adjustment, less 0.80 percent MFP). Instead the rate will increase 2.4 percent.
CMS interpretation is a surprise because the CBO considered the rate override to be a pay-for when scoring the bill in February. As proposed, it appears that SNFs will get paid a little more than what would otherwise have been the case.
Note: we failed to include the BBA 2018 override in our preview note. We regret the error and have corrected table below.
Call with questions.
Emily Evans
Managing Director
Health Policy
Twitter
LinkedIn
