Fact Sheets

Medicare proposes fiscal year 2019 payment & policy changes for skilled nursing facilities


On April 27, 2018, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule [CMS-1696-P] outlining proposed Fiscal Year (FY) 2019 Medicare payment updates and proposed quality program changes for skilled nursing facilities (SNFs).

This fact sheet discusses three major provisions of the proposed rule: the proposed changes to the case-mix classification system used under the SNF Prospective Payment System (PPS), the SNF Value-Based Purchasing Program (VBP), and the SNF Quality Reporting Program (QRP). The major FY 2019 proposals and other issues discussed in the proposed rule are summarized below.

The proposed rule includes policies that would continue a commitment to shift Medicare payments from volume to value, with continued implementation of the SNF VBP and SNF QRP.

Additionally, CMS is proposing a new case-mix model that focuses on the patient’s condition and resulting care needs rather than on the amount of care provided in order to determine Medicare payment. The proposed rule also modernizes Medicare through innovation in SNF, meaningful quality measure reporting, reduced paperwork, and reduced administrative costs.

CMS encourages comments, questions, or thoughts on this proposed rule and will accept comments until June 26, 2018. The proposed rule can be downloaded from the Federal Register at:

Advancing My HealthEData: Request for Information from stakeholders

In addition to payment and policy proposals, CMS is releasing a Request for Information (RFI) to obtain feedback on positive solutions to better achieve interoperability or the sharing of healthcare data between providers. Specifically, CMS is requesting stakeholder feedback through a RFI on the possibility of revising Conditions of Participation related to interoperability as a way to increase electronic sharing of data by providers. This will inform next steps to advance this critical initiative.

In responding to the RFI, commenters should provide clear and concise proposals that include data and specific examples. CMS will not respond to RFI comment submissions in the final rule, but rather will actively consider all input in developing future regulatory proposals or future sub-regulatory guidance.

Modernizing the SNF PPS Case-mix Classification System

In May 2017, CMS released an Advanced Notice of Proposed Rulemaking (ANPRM) which outlined a new case-mix model, called the Resident Classification System, Version I (RCS-I), that it was considering to replace the existing Resource Utilization Group, Version IV (RUG-IV) case-mix model, used to classify residents in a covered Part A stay into payment groups under the SNF PPS. Since the ANPRM, CMS continued stakeholder engagement efforts to identify and address the concerns and questions raised by commenters. As a result, we have made significant changes to the RCS-I model, which resulted in renaming this model to the SNF Patient-Driven Payment Model (PDPM).

Promoting Patient Driven Value-based Care: The proposed new model is designed to improve the incentives to treat the needs of the whole patient, instead of focusing on the volume of services the patient receives, which requires substantial paperwork to track over time. CMS also significantly reduced the overall complexity of the proposed PDPM, as compared to RUG-IV or RCS-I, based on stakeholder feedback. The proposed new case-mix classification system (the PDPM) would be effective October 1, 2019. The improved structure of this proposed model would move Medicare towards a more value-based, unified post-acute care payment system that puts the unique care needs of the patient first while also reducing significantly the administrative burden associated with the SNF PPS.

The proposed new case-mix model, PDPM, would focus on clinically relevant factors, rather than volume-based service for determining Medicare payment. PDPM would adjust Medicare payments based on each aspect of a resident’s care, most notably for Non-Therapy Ancillaries (NTAs), which are items and services not related to the provision of therapy such as drugs and medical supplies, thereby more accurately addressing costs associated with medically complex patients. It would further adjust the SNF per diem payments to reflect varying costs throughout the stay and incorporate safeguards against potential financial incentives to ensure that beneficiaries receive care consistent with their unique needs and goals.

Consistent with stakeholder comments encouraging a more simple payment model, the proposed SNF PDPM would reflect an approximately 80 percent reduction in the number of payment group combinations compared to the RCS-I. Additionally, it would reflect updates to the data used as the basis for our analyses, to ensure that the results reflect the current resident population. PDPM, as compared to RCS-I, would also make greater use of certain standardized items for payment calculations, such as in using function items also used for the SNF QRP. Finally, PDPM would simplify complicated paperwork requirements for performing patient assessments by significantly reducing reporting burden (approximately $2.0 billion over 10 years), helping to create greater contact between health care professionals and their patients.

The proposed new case-mix classification system (the PDPM) would be effective October 1, 2019. To support commenters in evaluating the proposed PDPM, CMS also released a Technical Report on the development of the PDPM, along with a number of other helpful materials to support commenters in developing comments on the proposed rule, which are available at

SNF Quality Reporting Program (QRP)

Background: The SNF QRP is authorized by section 1888(e)(6) of the Social Security Act and applies to freestanding SNFs, SNFs affiliated with acute care facilities, and swing-bed rural hospitals except for critical access hospitals. Under the SNF QRP, SNFs that fail to submit the required quality data to CMS will be subject to a 2 percentage point reduction to the otherwise applicable annual market basket percentage update with respect to that fiscal year.

Meaningful Measures: CMS reviewed the SNF QRP’s measure set in accordance with the Meaningful Measures Initiative, and we are working to identify how to move the SNF QRP forward in the least burdensome manner possible while continuing to incentivize improvement in the quality of care provided to patients. Specifically, the goals of the SNF QRP and the measures used in the program cover most of the Meaningful Measures Initiative priorities, including making care safer, strengthening person and family engagement, promoting coordination of care, promoting effective prevention and treatment, and making care affordable.

Currently, all measures adopted in the SNF QRP meet the requirements and are in satisfaction of the Improving Medicare Post-Acute Care Transformation of 2014 (IMPACT) Act. We are not proposing to adopt any new measures for the SNF QRP in this proposed rule.

Proposed Changes: In this proposed rule, we are proposing to adopt an additional factor to consider when evaluating measures for removal from the SNF QRP measure set. This factor takes into account costs that are associated with a measure and weighs them again the benefit of its continued use in the program. We are also proposing to publicly display the four SNF QRP assessment-based quality measures, and increase the number of years of data used to display two claims-based SNF QRP measures, Discharge to the Community and Medicare Spending per Beneficiary, from 1 year to 2 years. We are also proposing to codify policies that have been finalized under the SNF QRP.

SNF Value-Based Purchasing Program (VBP)

Background: Beginning October 1, 2018 services, the SNF VBP Program will apply either positive or negative incentive payments to skilled nursing facilities based on their performance on the program’s readmissions measure. The single claims-based all cause 30-day hospital readmissions measure aims to improve individual outcomes through rewarding providers that take steps to limit the readmission of their patients to a hospital. This single measure does not require SNFs to report information in addition to the information they already submit as part of their claims because CMS uses existing Medicare claims information to calculate the measure.

Proposed Changes: 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.

Payment Rates Changes under SNF Prospective Payment System (PPS)

Based on proposed changes contained within this proposed rule, CMS estimates that the FY 2019 aggregate impact will be an increase of $850 million in Medicare payments to SNFs, resulting from the FY 2019 SNF market basket update required to be 2.4 percent by the Bipartisan Budget Act of 2018. Absent the application of this statutory requirement, the FY 2019 market basket update factor would have been 1.9 percent which reflects the SNF FY 2019 market basket index of 2.7 percent, reduced by the multifactor productivity adjustment of 0.8 percent. This 1.9 percent update would have resulted in an estimated aggregate increase of $670 million in Medicare payments to SNFs.

For more information…

The FY 2019 SNF PPS proposed rule displayed on April 27, 2018, at the Federal Register’s Public Inspection Desk and will be available under “Special Filings,” at Public comments on the proposed rule will be accepted until June 26, 2018.

Additional information is available at: