Fiscal Year 2023 Skilled Nursing Facility Proposed Rule Summary

On April 11, 2022, the Centers for Medicare & Medicaid Services (CMS) released the FY 2023 Medicare Proposed Rule for Skilled Nursing Facilities (SNFs). Key policy changes include a proposed recalibration of the Patient Driven Payment Model parity adjustment, pausing the Skilled Nursing Facility 30-Day-All-Cause Readmission Measure, and a request for information regarding mandatory minimum staffing levels for nursing homes. 

Proposed Updates to SNF Payment Rates

CMS is proposing both payment increases and decreases for 2023, which would reduce Medicare payments to SNFs by an estimated total of $320 million. Specifically, Medicare is proposing a net market basket increase of 3.9%. However, Medicare is also proposing a parity adjustment that would decrease payments by 4.6%.

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). PDPM replaced the prior case-mix classification model, the Resource Utilization Group, Version 4 (RUG-IV). Post PDPM implementation, there was an unintended increase in aggregate SNF spending. CMS has attempted to recalibrate the parity adjustment to achieve budget neutrality under PDPM; however, CMS recognized that COVID-19 could have affected the data used to perform this recalibration. Thus, CMS did not recalibrate the PDPM parity adjustment in FY 2022 and instead solicited stakeholder feedback regarding a methodology to account for COVID-19. As a result, CMS is proposing a FY 2023 parity adjustment that would reduce SNF spending by 4.6% ($1.7 billion).

Skilled Nursing Facility Value-Based Purchasing Program

CMS proposes suppressing Skilled Nursing Facility 30-Day-All-Cause Readmission Measure (SNFRM) rates for another year due to the lingering impact of COVID-19. As background, the Skilled Nursing Facility Value Based Purchasing Program (SNF VBP) was established as part of the Protecting Access to Medicare Act of 2014. The SNF VBP established a 2% withholding to SNF Part A payments that can be partially earned back based on the SNF’s rehospitalization rate and level of improvement. In short, this program rewards SNFs with incentive payments based on the quality of care provided.

However, the lingering effects of COVID-19 significantly affect the ability to accurately measure a SNF’s performance. To mitigate the effect of COVID-19 on performance measures, CMS proposes to assign a performance score of 0 to all participating SNFs. Under this model, SNFs with 25 eligible stays for SNFRM during FY 2021 would receive a net-neutral payment incentive multiplier consistent with the previously established Low-Volume Adjustment Policy and a proposed case measure minimum standard for VBP. For SNFs with 25 or more eligible stays, CMS proposes to reduce the otherwise applicable federal per diem rate by 2%, and award SNFs 60% of that withhold. This would result in a 1.2% payback.

Further, CMS proposed the adoption of three new measures for the SNF VBP program. Two of the measures are claims based and will be effective in FY 2026. These measures include Skilled Nursing Facility Healthcare Associated Infections Requiring Hospitalization (SNF HAI) and Total Nursing Hours per Resident Day. The third measure will be effective in FY 2027 and is based on the Discharge to Community (DTC) – Post Acute Measure for SNFs.

Request for Information Regarding Mandatory Minimum Staffing Levels

CMS is seeking input from stakeholders regarding the implementation of mandatory minimum staffing levels in long-term care facilities. In its request for information, CMS has asked for information regarding direct care staffing requirements, including RNs, licensed practical nurses (LPN), and certified nursing assistants (CNA). Additionally, CMS is seeking input regarding which staff members should be considered direct care staff apart from RNs, LPNs, and CNAs.

Similarly, CMS is seeking stakeholder feedback regarding the implementation of a nursing home staff turnover measure in the SNF VBP program. The measure would consist of the total percentage of nursing staff that have left the SNF over the last year.

For more information, please see the proposed rule.