The Centers for Medicare and Medicaid Services (CMS) recently released the proposed Rule for the Skilled Nursing Facility Prospective Payment System (SNF PPS) FY2019. As expected, CMS did not finalize Resident Classification System Version 1 (RCS-1) published in an advanced notice of proposed rulemaking last year. Instead, CMS proposed to implement a revised version of RCS-1, now titled the Patient-Driven Payment Model (PDPM), effective October 1, 2019. Similar to RCS-1, PDPM sets daily Medicare Part A payment rates on factors other than therapy days and minutes. Unlike the RUG-IV classification where each resident is only classified into 1 RUG group based on the MDS, PDPM breaks apart therapy and nursing to allow for a separate classification for each. As a result, CMS did not make any changes to downgrade the significance of therapy in the existing PPS. Although CMS did not choose to abandon the notion of a new SNF payment model and to focus instead on developing a unified post-acute payment system (UPAC), they did change PDPM to align it better with UPAC.
The proposed rule for FY 2019 establishes a net market basket increase of 2.4 percent statutorily mandated by Congress. Based on the proposed rule, CMS projects aggregate payments to SNFs will increase in FY 2019 by $850 million from payments in FY 2018. CMS estimates that the overall economic impact of the SNF Value-Based Purchasing Program (VBP) will be an estimated reduction of $211 million in aggregate payment to SNFs during FY19. CMS specifies the method for applying the adjustment factor to SNFs. CMS will first reduce the claims payment by 2% for all SNFs (e.g. the 2% withhold, AKA Sequestration). Second, they will then increase the claims payment by a center’s specific incentive based payment adjustment (up to 2%). These two steps will be done simultaneously so it will not impact cash flow. This financial transaction will happen each time CMS pays a claim. Our understanding is that the 2% cuts will both be applied to the gross amounts paid by CMS and not sequentially.
Finally, beginning October 1, 2018, and each subsequent rate year, the Secretary shall reduce payment rates during such FY by 2% for any provider failing to meet the requirements and the quality reporting measures required for the SNF Quality Reporting Program (QRP) annually. This reduction is only applicable to providers that fail to report their quality data based on QRP rules.