Nurse and patient holding hands

The skilled nursing facility (SNF) Value-Based Purchasing (VBP) program will begin to affect payments starting October 1, 2018, when all SNFs participating in Medicare will have a value-based incentive payment adjustment applied to claims filed in fiscal year (FY) 2019. These payment adjustments will range from a 2 percent cut to a yet-to-be-finalized percentage increase (believed to be no more than 1 percent). Payment adjustments are assigned based on a center’s performance on an all-payor claims-based readmission measure, where lower rehospitalization rates will correspond to higher incentive-based payments. The overall estimated economic effect of the program is a $211 million reduction in payments because of the statutory design to cut 2 percent off the top and return 60 percent of that cut. However, SNFs can earn the entire 2 percent back plus more if they achieve low rehospitalization rates.

The FY 2019 proposed rule proposes updates to policies, including the performance and baseline periods for the FY 2021 SNF VBP program year, an adjustment to the SNF VBP scoring methodology and an Extraordinary Circumstances Exception (ECE) policy.

Application of VBP Incentive-Based Payment Adjustments

The Centers for Medicare & Medicaid Services (CMS) specifies the method for applying the adjustment factor to SNFs. The CMS will first reduce the claims payment by 2 percent for all SNFs, e.g., the 2 percent withhold. Second, it will then increase the claims payment by a center’s specific incentive-based payment adjustment. These two steps will be done simultaneously so as to not impact cash flow. This financial transaction will happen each time the CMS pays a claim. The 2 percent across-the-board cut will happen after sequestration and the market basket increases are applied.

As a result of this approach, each SNF will receive an adjustment factor ranging from 0 to about 3 percent (since top-performing SNFs can earn back the 2 percent plus more if they achieve very low rehospitalization rates). If they have the worst rehospitalization rates, their adjustment factor will be 0 percent, so they’ll then not earn back any of the 2 percent cut. If they have the best rehospitalization rates, they’ll have an adjustment factor of at least 2 percent or more, so they’ll earn back the entire 2 percent or more. All others will have an adjustment factor ranging between 0 and 2 percent based on the exchange function that was part of last year’s final rule.

Achievement Threshold & Benchmark

In the proposed rule, the values for the FY 2020 program year indicate SNFs with rehospitalization rates on the SNF rehospitalization measure (RM) of 19.8 or more will earn 0 points and those under 16.3 will earn 100 points. All others will be based on the formula specified in prior rules. These values aren’t believed to change dramatically for the FY 2021 program year.

Transition of SNFRM to SNFPPR Measure

The CMS hasn’t announced the program year in which the VBP program will transition from the SNFRM (30 day all-cause readmission measure) to the SNFPPR (Potentially Preventable Readmissions measure), but has reiterated it will move over the SNFPPR, which will exclude rehospitalizations believed to be “potentially preventable,” as soon as practicable, as required by statute.

Proposed Corrections to SNF VBP Scores in Case of Errors

The CMS must notify centers of performance standards (achievement threshold and benchmark) for an FY no later than 60 days prior to the performance period for the FY involved. The CMS is proposing that in the event of a calculation error in these performance standards, a correction should be made and new numbers announced via the CMS website, listservs and other available channels. Should a second error be discovered, the CMS wouldn’t update the performance standards, but would continue to use the most recently published numbers. While the CMS considers the likelihood of a calculation error unlikely—and a second error even less likely—it’s seeking comment on the proposal for making corrections in the comment period.

Proposed Performance & Baseline Periods

Beginning in the FY 2022 program year, and for all subsequent program years, a performance period will start one year following the performance period for the previous program year. A baseline period will start one year following the baseline period for the previous program year.

Proposed Insufficient Baseline Period Data Exception

If a center doesn’t have sufficient data for the baseline period (< 25 index stays), which could be due to a center only being in operation for a portion of the baseline period or receiving an ECE, the CMS believes the baseline rate is unreliable and doesn’t accurately represent the quality of the center. In this case, the CMS is proposing to not calculate an improvement-based score and only calculate an achievement score.

Proposed Low-Volume SNF Exception

The CMS’s analysis suggests that when a center has fewer than 25 patient stays used to calculate its rehospitalization measure, that measure may be more the result of random variation of those patients admitted to the SNF, rather than a representation of the center’s quality. By statute, the CMS cannot exclude centers from participating in the SNF VBP program, but to accommodate these low-volume patient stays it’s proposing two options:

  • Option 1 would assign low-volume SNFs a SNF VBP score that would translate to a value-based incentive adjustment of 2 percent. This option would effectively exclude these centers from the SNF VBP program by restoring the full 2 percent withhold for all of these SNFs regardless of their SNF RM rate.
  • Option 2 would assign low-volume SNFs a SNF VBP score that would translate to a value-based incentive adjustment of 1.2 percent. This option would restore 1.2 percent of their 2 percent cut—in other words, it would effectively cut low-volume centers by 0.8 percent. The logic behind a 1.2 percent payment adjustment is that this number is 60 percent of the 2 percent withhold, consistent with last year’s final rule.

Proposed ECE Policy

Finally, the CMS is proposing to address centers that experience natural or man-made disasters that impact quality and result in a lower SNF VBP performance score and a lower value-based payment adjustment. The CMS is proposing an ECE policy that will provide relief to SNFs affected by these disasters. Centers would be required to submit an ECE request to the CMS to qualify and will report dates their center was affected by the disaster. If the CMS approves the request, centers would have the period of time under the ECE excluded from their performance scores. Scores would still be calculated for the period of time that doesn’t fall under the ECE window.

To see how this rule affects the SNF QRP read this article by Carol Smith. Read this article by Suzy Harvey to learn about the proposed rule’s new SNF payment model. Contact Bob or your trusted BKD advisor if you have questions on these proposed changes.

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