It’s That Time of Year Again: CMS Issues Final Rule for Skilled Nursing Facilities

There’s no doubt that 2020 has been an unprecedented year for the skilled nursing industry amid the COVID-19 pandemic. Providers have been under intense pressure since early March as they try to protect and care for the nation’s most vulnerable population—America’s seniors. Among all the uncertainty, it’s hard to believe we’ve passed the end of July, which means it’s time for the required annual skilled nursing facility (SNF) payment updates. On July 31, CMS issued the final rule for the SNF prospective payment system fiscal year (FY) 2021. As expected, CMS issued very few changes to the Patient-Driven Payment Model (PDPM) policies currently in place. Here are some key highlights of the final rule:

• A 2.2 percent market basket update, with no productivity or forecast error adjustments. This compared to an estimated 2.3 percent market basket update in the proposed rule. CMS estimates this update will result in an economic effect of $750 million of increased payments to SNFs in FY 2021. The wage portion of rates will increase from 70.9 percent to 71.3 percent.
• Revisions were made to the International Classification of Diseases, Version 10 (ICD-10) code mappings used under PDPM to classify patients into case-mix groups. Please stay tuned for an upcoming, in-depth article from BKD clinicians that will dive deeper into the clinical aspects of these modifications.
• No changes were made to the SNF Quality Reporting Program. 
• A minor change was made to the SNF Value-Based Purchasing (VBP) Program, which included finalizing a 30-day phase one review and correction deadline for the baseline period quality measure report. The VBP Program includes a 2 percent withhold from SNF Part A payments that’s redistributed to providers based on a SNF’s performance on rehospitalization measures.
• Following revised delineations by the federal Office of Management and Budget, 47 previously rural counties will become urban. This affects both the base rates applied to providers in those counties and the related wage indexes.

The table below compares the FY 2020 and FY 2021 SNF Part A base rates for urban and rural providers as stated in the final rule:

Despite numerous comments and recommendations from those in the industry, the final rule didn’t address payment or policy changes as a result of the COVID-19 pandemic. CMS stated that these changes were out of the scope of the current rulemaking. While this wasn’t specifically mentioned in the final rule, providers should be aware that the Coronavirus Aid, Relief, and Economic Security Act temporarily suspends the 2 percent sequestration from May 1 through December 31, 2020, which increases payments to providers.     

SNFs have prioritized their rapid response to the COVID-19 pandemic over the last several months, so fine-tuning their implementation and understanding of PDPM was likely put on hold only six short months into the new payment program. SNFs have the opportunity over the next year to continue developing a deeper understanding of the PDPM’s key elements, which focus on aligning payments with patient characteristics. 

If you have questions about the final rule or Medicare reimbursement for SNFs, reach out to your BKD Trusted Advisor™ or use the Contact Us form below. To download the updated rates calculator, click here.