Fiscal Year (FY) 2023 Skilled Nursing Facility Prospective Payment System Final Rule (CMS 1765-F)
On July 29, 2022, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that updates Medicare payment policies and rates for skilled nursing facilities under the Skilled Nursing Facility Prospective Payment System (SNF PPS) for fiscal year (FY) 2023. In addition, the final rule includes updates for the SNF Quality Reporting Program (QRP) and the SNF Value-Based Purchasing (VBP) Program for FY 2023 and future years. CMS is publishing this final rule consistent with the legal requirements to update Medicare payment policies for nursing homes on an annual basis. This fact sheet discusses the major provisions of the final rule.
FY 2023 Updates to the SNF Payment Rates
CMS estimates that the aggregate impact of the payment policies in this final rule would result in an increase of 2.7%, or approximately $904 million, in Medicare Part A payments to SNFs in FY 2023 compared to FY 2022. This estimate reflects a $1.7 billion increase resulting from the 5.1% update to the payment rates, which is based on a 3.9% SNF market basket increase plus a 1.5 percentage point market basket forecast error adjustment and less a 0.3 percentage point productivity adjustment (as required by law), as well as a negative 2.3% (or $780 million decrease) in the FY 2023 SNF PPS rates as a result of the recalibrated parity adjustment, which is being phased in over two years. These impact figures do not incorporate the SNF VBP reductions for certain SNFs. These reductions are estimated to be $186 million in FY 2023.
Recalibration of the Patient Driven Payment Model Parity Adjustment
On October 1, 2019, CMS implemented a new case-mix classification model, called the Patient Driven Payment Model (PDPM), under the SNF Prospective Payment System (PPS). When finalizing PDPM, CMS also finalized that this new case-mix classification model would be implemented in a budget neutral manner, meaning that the transition to PDPM from the prior case-mix classification model, the Resource Utilization Group, Version 4 (RUG-IV), would not result in an increase or decrease in aggregate SNF spending. Since PDPM implementation in FY 2020, CMS’ initial data analysis showed an unintended increase in payments of approximately 5% or $1.7 billion per year. As with past case-mix classification model transitions, CMS conducted the data analysis to recalibrate the parity adjustment in order to achieve budget neutrality under PDPM.
However, CMS also acknowledges that the COVID-19 public health emergency (PHE) could have affected the data used to perform these analyses. Therefore, in the FY 2022 SNF PPS proposed rule, CMS did not propose recalibrating the PDPM parity adjustment, but instead solicited comments from stakeholders on the parity adjustment and a potential methodology to account for the effects of the COVID-19 PHE without compromising the accuracy of the adjustment. After considering the stakeholder feedback received in the FY 2022 SNF PPS rulemaking cycle and on the FY 2023 SNF PPS proposed rule to better account for the effects of the COVID-19 PHE, CMS is finalizing recalibration of the PDPM parity adjustment factor of 4.6% using a combined methodology of a subset population that excludes those patients whose stays utilized a COVID-19 PHE-related waiver, or who were diagnosed with COVID-19, and control period data using months with low COVID-19 prevalence from FY 2020 and FY 2021.
CMS also recognizes that the COVID-19 PHE provides a basis for taking a more cautious approach in order to mitigate the potential negative impacts on the nursing home industry, such as facility closures or disproportionate impacts on rural and small facilities. Therefore, after considering the stakeholder feedback received, and to balance mitigating the financial impact on providers of recalibrating the PDPM parity adjustment with ensuring accurate Medicare Part A SNF payments, CMS is finalizing the recalibration of the PDPM parity adjustment factor of 4.6% with a two-year phase-in period that would reduce SNF spending by 2.3%, or approximately $780 million, in FY 2023 and 2.3% in FY 2024.
To mitigate instability in SNF PPS payments due to significant wage index decreases that may affect providers in any given year, CMS is finalizing a permanent 5% cap on annual wage index decreases to smooth year-to-year changes in providers’ wage index payments.
Changes in PDPM ICD-10 Code Mappings
PDPM utilizes International Classification of Diseases, Version 10 (ICD-10) codes in several ways, including to assign patients to clinical categories used for categorization under several PDPM components, specifically the Physical Therapy, Occupational Therapy, Speech Language Pathology and Non-Therapy Ancillary components. In response to stakeholder feedback and to improve consistency between the ICD-10 code mappings and current ICD-10 coding guidelines, CMS is finalizing several changes to the PDPM ICD-10 code mappings. The ICD-10 code mappings and lists used under PDPM are available on the PDPM Website at https://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/SNFPPS/PDPM.
Skilled Nursing Facility Quality Reporting Program (SNF QRP)
Influenza Vaccination Coverage Among Healthcare Personnel Measure
CMS is finalizing the adoption of a new process measure, the Influenza Vaccination Coverage among Healthcare Personnel (HCP) measure for the SNF QRP, beginning with the FY 2024 SNF QRP. Residents of long-term care facilities, who are often of older age, have greater susceptibility for acquiring influenza due to general frailty and comorbidities, close contact with other residents, interactions with visitors, and exposure to staff who rotate between multiple facilities. Therefore, monitoring and reporting influenza vaccination rates among HCP is important as HCP are at risk for acquiring influenza from residents and exposing residents to influenza. Given the fact that influenza vaccination coverage among HCP is typically lower in long-term care settings, such as SNFs, when compared to other care settings, we believe the measure has the potential to increase influenza vaccination coverage in SNFs, promote patient safety, and increase the transparency of quality of care in the SNF setting.
The Influenza Vaccination Coverage among HCP measure is a National Quality Forum-endorsed process measure (NQF#0431) developed by the Centers for Disease Control and Prevention (CDC) to track influenza vaccination coverage among HCP in facilities such as SNFs. The measure reports on the percentage of HCP who receive an influenza vaccine any time from when it first became available through March 31 of the following year. SNFs will submit the measure data through the CDC National Healthcare Safety Network with an initial data submission period from October 1, 2022 through March 31, 2023.
Revised Compliance Date for Certain SNF QRP Requirements
CMS is revising the compliance date for certain SNF QRP reporting requirements, including the Transfer of Health Information measures and certain standardized patient assessment data elements (including race, ethnicity, preferred language, health literacy, social isolation), to October 1, 2023. The interim final rule with comment period that appeared in the May 8, 2020, Federal Register (IFC-2) (85 FR 27550), delayed the compliance date for these items from October 1, 2020 to October 1st of the year that is at least two full fiscal years after the end of the COVID-19 PHE. CMS also delayed the adoption of the updated version of the Minimum Data Set (MDS), which is the assessment instrument providers would have used to collect the data. This delay was intended to provide relief to SNFs during the COVID-19 PHE. However, based upon the advancement of information available about COVID-19 vaccination, treatments available, and the importance of the data in the SNF QRP, CMS believes that it is appropriate to modify the compliance date finalized in IFC-2. It is also important to align the collection of this data with the Inpatient Rehabilitation Facilities and Long-Term Care Hospitals which will begin collecting this information on October 1, 2022, and Home Health Agencies, which will begin collecting this information on January 1, 2023.
Revisions to the Regulation Text (§ 413.360)
CMS is revising regulation text to include a new paragraph to reflect all the data completion thresholds required for SNFs to meet the compliance threshold for the annual payment update.
Requests for Information
In the FY2023 SNF PPS proposed rule, CMS sought feedback on:
- SNF QRP Quality Measures under Consideration for Future Years
- Overarching Principles for Measuring Equity and Healthcare Quality Disparities Across CMS Quality Programs
- Inclusion of the CoreQ: Short Stay Discharge Measure in a Future SNF QRP Program Year
While CMS is not responding to comments in the final rule, CMS will continue to take all comments into consideration as we continue work to address and develop policies on these important topics. With regard to health equity, public input is very valuable to the continuing development of CMS’ health equity quality measurement efforts and broader commitment to health equity, a key pillar of our strategic vision as well as a core agency function. Thus, CMS will use this input for future development and expansion of policies to advance health equity across the SNF QRP, including by supporting SNFs in their efforts to ensure equity for all of their patients, and to identify opportunities for improvements in health outcomes.
Skilled Nursing Facility Value-Based Purchasing (SNF VBP) Program
The SNF VBP Program rewards SNFs with incentive payments based on the quality of care they provide to Medicare beneficiaries, as measured by performance on a single measure of hospital readmissions. All SNFs paid under Medicare’s SNF PPS are included in the SNF VBP Program.
The rule finalizes a proposal to suppress (not apply) the Skilled Nursing Facility 30-Day All-Cause Readmission Measure (SNFRM) as part of the performance scoring for the FY 2023 SNF VBP Program Year. While performance on this measure will be reported publicly, it will not affect payment. CMS is finalizing this proposal because circumstances caused by the COVID-19 PHE have significantly affected the measure and the ability to make fair, national comparisons of SNFs’ performance scores. As part of the scoring policy for FY 2023, CMS will assign a performance score of zero to all participating SNFs, irrespective of how they perform using the previously finalized scoring methodology, to mitigate the effect that PHE-impacted measure results would otherwise have on SNF performance scores and incentive payment multipliers. CMS will reduce the otherwise applicable federal per diem rate for each SNF by 2% and award SNFs 60% of that withhold, resulting in a 1.2% payback to those SNFs. Any SNFs that do not meet the finalized case minimum for FY 2023 will be excluded from the Program for FY 2023.
SNF VBP Program Expansion
Section 111 of Division CC of the Consolidated Appropriations Act, 2021 (CAA) allows the Secretary to expand the SNF VBP Program beyond its current use of a single, all-cause hospital readmission measure and apply up to an additional nine measures with respect to payments beginning in FY 2023, which may include measures of functional status, patient safety, care coordination, or patient experience.
Using this authority granted by the CAA, CMS is finalizing the adoption of three new measures into the SNF VBP Program — two claims-based measures and one payroll-based journal staffing measure.
• FY 2026 program year: Adoption of the Skilled Nursing Facility Healthcare Associated Infections Requiring Hospitalization (SNF HAI) and Total Nursing Hours per Resident Day measures. SNF HAI is an outcome measure that assesses SNF performance on infection prevention and management. The Total Nursing Hours per Resident Day is a structural measure that uses auditable electronic data to calculate total nursing hours per resident day.
• FY 2027 program year: Adoption of the Discharge to Community - Post Acute Care Measure for SNFs (DTC). The DTC is an outcome measure that assesses the rate of successful discharges to community from a SNF setting.
CMS is also finalizing a number of updates to its scoring methodology:
• Updating the SNF VBP Program measure-level scoring normalization policy beginning with the FY 2026 program year. CMS finalized the achievement and improvement scoring formulas such that SNFs could earn up to 10 points per measure for achievement and up to 9 points per measure for improvement to continue to award SNF performance scores that range between 0 and 100 points. Under this finalized policy, all measures in the expanded SNF VBP Program would be weighted equally.
• Adopting a case minimum policy beginning with the FY 2023 SNF VBP program year that replaces the Low-Volume Adjustment policy for the SNF VBP. CMS will use a minimum of 25 eligible stays during the applicable one-year performance period for the SNFRM, beginning with the FY 2023 program year, and a minimum of 25 residents for the SNF HAI measure and a minimum of 25 residents, on average, across all available quarters, beginning with the FY 2026 Program Year, during the applicable one-year performance period for the Total Staff Nursing measure. Beginning with the FY 2027 Program year, CMS will use a minimum of 25 eligible stays during the applicable two-year performance period for the DTC measure.
• Updating the scoring policy for SNFs without sufficient baseline period data beginning with the FY 2026 SNF VBP program year. Under this policy, such that if a SNF does not meet the case minimum threshold for a given measure during the applicable baseline period, the SNF will not receive an improvement score for that measure.
• Adopting a measure minimum policy beginning with the FY 2026 SNF VBP program year. CMS will require a two-measure minimum for a SNF to receive a SNF performance score for FY 2026 and, for the FY 2027 Program, a three-measure minimum for the SNF to receive a SNF performance score.
• Remove the Low-Volume Adjustment (LVA) Policy from the SNF VBP Program beginning with the FY 2023 Program Year. The case minimum and measure minimum policies that CMS is adopting will replace, and achieve the same objective, as the LVA policy.
Requests for Information (RFI) for SNF VBP
CMS sought stakeholder input on other measures under consideration for the SNF VBP Program, including a Staffing Turnover Measure and a National Healthcare Safety Network (NHSN) COVID-19 Vaccination Coverage Among Healthcare Personnel Measure. The Staffing Turnover Measure consists of the percent of total nurse staff that have left the SNF over the last year.
The final rule also acknowledges input that CMS received on the following requests for information that appeared in the proposed rule:
- SNF VBP Exchange Function: CMS sought feedback on whether to propose either a new functional form or a modified logistic exchange function. The exchange function converts performance scores into value-based incentive payments, and each one determines whether payments increase or decrease for the highest or lowest performers, respectively.
- CMS sought input on the design and implementation of the validation process for measures to be included in the SNF VBP Program.
- CMS sought input on whether to incorporate adjustments related to health equity and how to best tie health equity outcomes to SNF payments. Health equity adjustments could occur at the measure level, such as stratification or including measures of social determinants of health, or they could be incorporated at the scoring and incentive payment level, such as weighting and points adjustments.
Request for Information (RFI) for Revising the Requirements for Long-Term Care (LTC) Facilities to Establish Mandatory Minimum Staffing Levels
The proposed rule included an RFI seeking input on establishing minimum staffing requirements for long-term care (LTC) facilities. CMS received a significant response to the RFI from a wide range of interested parties. While CMS is continuing to review the comments, many commenters focused on the overall approach for establishing staffing standards, recommendations for implementing a minimum staffing requirement, factors for consideration (such as payment, cost, barriers, etc.), and input on the forthcoming staffing study. CMS will continue to review the comments — all of which the agency anticipates will be used to help inform future rulemaking within one year on minimum staffing requirements for long-term care facilities.
Updates to Requirements for Participation for Long-Term Care (LTC) Facilities
CMS is finalizing two proposals to revise the requirements for participation for long-term care facilities, which were originally included in the 2019 “Requirements for Long-Term Care Facilities: Provisions to Promote Efficiency and Transparency” Proposed Rule:
Updates to the Physical Environment Requirements
CMS is updating the physical environment requirements to allow facilities to avoid unnecessary renovation expenses and prevent access to care issues associated with the potential closure of LTC facilities. Specifically, CMS is allowing LTC facilities that were participating in Medicare before July 5, 2016 and that previously used the Fire Safety Evaluation System (FSES) to determine equivalent fire protection levels to continue to use the 2001 FSES mandatory values when determining compliance for containment, extinguishment and people movement requirements. This will allow existing LTC facilities that previously met the FSES requirements to continue to do so without incurring great expense to change construction type (essentially undertaking an effort to completely rebuild to maintain compliance), while maintaining resident health and safety.
Changes to the Qualification Requirements for the Director of Food and Nutrition Services in Long-Term Care (LTC) Facilities
CMS is finalizing a proposal, with some modifications, to revise the existing qualification requirements for the Director of Food and Nutrition Services in LTC facilities. Currently, the Director of Food and Nutrition Services must meet specific educational requirements or hold certain certifications. CMS is revising the required qualifications for a Director of Food and Nutrition Services to provide that those with several years of experience performing this specific role in a facility may continue to do so. Specifically, CMS added to the current requirements that individuals with two or more years of experience in the position of a Director of Food and Nutrition Services and who have also completed a minimum course of study in food safety that includes topics integral to managing dietary operations (such as, but not limited to: foodborne illness, sanitation procedures, food purchasing/receiving, etc.) can continue to qualify for this position. We believe that this will help address concerns related to the lack of access to qualified staff as well as the costs associated with training for existing staff.
For more information:
The final rule is scheduled to be published on August 3, 2022, at the Federal Register’s Public Inspection Desk and will be available under “Special Filings,” at https://www.federalregister.gov/public-inspection/2022-16457/medicare-program-prospective-payment-system-and-consolidated-billing-for-skilled-nursing-facilities
Additional information is available at: https://www.cms.gov/newsroom/press-releases/cms-acts-improve-safety-and-quality-care-nations-nursing-homes