business man explaining strategy

The Centers for Medicare & Medicaid Services issued the final rule for the FY 2022 Skilled Nursing Facility (SNF) prospective payment system, with updates to payment rates, value-based purchasing, and the quality reporting program.

Navigating health reform

CMS Releases FY 2022 Final Rule for Skilled Nursing Facilities

  • Isabella Hosier
  • Deb Emerson
  • 8/27/2021

Key insights

  • CMS estimates SNFs would experience a payment increase of approximately $411 million from the update to the payment rates of 1.2%.
  • The quality reporting program continues as a pay-for-reporting program. SNFs may be subject to a 2% reduction in their annual update if reporting requirements are not met. In addition, CMS adopted two new measures and updated specifications for another measure.
  • Due to the ongoing public health emergency for COVID-19, CMS will suppress the SNF 30-day all cause readmission measure for the FY 2022 value-based purchasing program year.
  • In the SNF FY 2022 proposed rule, CMS requested comments on a potential methodology for Patient Driven Payment Model (PDPM) recalibration. CMS will not be making any PDPM parity adjustments; however, discussion on the comments received is included in the final rule.

Unsure how the final rule might affect your SNF?

Talk to an Advisor

The Centers for Medicare & Medicaid Services (CMS) issued its final rule updating the payment rates used under the prospective payment system (PPS) for skilled nursing facilities (SNFs) for fiscal year (FY) 2022. For more information, download the final rule from the Federal Register.

Market basket and payment updates

CMS is required to establish a market basket index that reflects changes over time in the prices of an appropriate mix of goods and services included in covered SNF services. Based on forecasting, CMS adjusted the rates based on a 2.7% SNF market basket update. CMS then reduced the market basket update by 0.8 percentage points for the forecast error adjustment and 0.7 percentage points for the multifactor productivity (MFP) adjustment, resulting in a net payment rate increase of 1.2%.

CMS also finalized a reduction of the Medicare Part A SNF rates to account for the exclusion of certain specified blood clotting factors in consolidated billing. Section 134 in Division CC of the Consolidated Appropriations Act, 2021, requires “certain specified blood clotting factors used for the treatment of patients with hemophilia and other bleeding disorders and items and services related to the furnishing of such factors” be excluded from the consolidated billing requirement.

The reduction in the Part A billing is approximately $0.02 to the nursing and non-therapy ancillary per diem rates, with an anticipated increase in Part B spending for these items and services.

Value-based purchasing updates

CMS acknowledges that facilities have been affected by COVID-19 at different times and levels of severity since March 2020 — which has significantly affected the validity and reliability of the readmission measure and resulting performance scores. CMS will continue to suppress the use of SNF readmission measure data for purposes of scoring and payment adjustments in the SNF value-based purchasing (VBP) program.

In general, CMS stated SNF readmission rates will still be calculated but would not be used to score facility performance, rank SNFs, or calculate the incentive payment. Instead, CMS will reduce each eligible SNF’s adjusted federal per diem rate by 2% and return 60% of the withhold as their incentive payment, resulting in a 1.2% payback to the SNFs.

SNFs subject to the low-volume adjustment policy would receive 100% of their 2% withhold per the policy previously finalized in the FY 2020 SNF PPS final rule. CMS would publicly report the FY 2022 SNF readmission measure rates with appropriate caveats noting the limitations of the data due to the public health emergency (PHE) for COVID-19.

Quality reporting program

The SNF quality reporting program (QRP) requires SNFs to meet certain reporting requirements, and SNFs may be subject to a 2% reduction in their annual update rate if the reporting requirements are not met. CMS has adopted two new quality measures and updated the specifications for another measure beginning with FY 2023.

SNF HAI outcome measure

CMS notes that studies have shown that SNFs with high 2019 health care associated infections (HAI) scores are reporting higher COVID-19 rates than SNFs with low 2019 HAI scores. In an effort to identify those facilities that may see higher rates in the event of another pandemic, and to reduce infections that arise as a result of poor processes and structures of care, this risk-standardized measure will be implemented for all SNFs in FY 2023.

CMS believes the peer comparison will encourage SNFs to ensure they are providing quality care. It will be calculated using one year of Medicare fee-for-service claims data:

  • The numerator will be the estimated number of SNF stays predicted to have an HAI that results in hospitalization.
  • The denominator will be the total eligible SNF stays for characteristics excluding the SNF effect.

COVID-19 vaccination process measure

CMS acknowledges that there is a higher chance of COVID-19 causing serious complications in older individuals, racial and ethnic communities, and those with underlying medical conditions. CMS considers it important for facilities to disclose the health care personnel (HCP) vaccination rate to assess whether the SNF is taking steps to reduce transmission. The vaccination rate will not be risk adjusted, as it is a process measure as opposed to an outcome measure.

The measure will be calculated as follows:

  • The numerator will be the number of HCP eligible to work in the facility for at least one day who have received a complete course of vaccinations.
  • The denominator will be the number of HCP eligible to work in the facility for at least one day. SNFs would be required to submit one week of vaccination data, once per month.

Each quarter, the measure will be publicly reported on Care Compare. SNFs must report the vaccination data through the Centers for Disease Control and Prevention National Healthcare Safety Network beginning October 1, 2021.

Finally, for FY 2023, CMS updated the denominator in the Transfer of Health Information to the Patient-Post-Acute Care measure to exclude patients discharged home from an organized home health service or hospice.

Patient Driven Payment Model recalibration

On October 1, 2019, CMS implemented the Patient Driven Payment Model (PDPM). The intention of CMS was to implement PDPM in a budget-neutral manner, similar to prior payment transitions.

However, CMS has determined it paid approximately 5% more in FY 2020 than it would have under the previous payment model, RUG-IV. CMS discussed various methodologies in the FY 2022 proposal rule to recalibrate the PDPM parity adjustment, but will not be implementing any methodology at this time.

CMS discussed the following implementation options and will continue to evaluate these options, including comments received in response to the proposed rule:

  • Delayed implementation — 5% reduction would take place in FY 2023 or FY 2024 to give SNFs time to plan
  • Phased implementation — 1% reduction for five years starting in FY 2022, 2.5% reduction for two years starting in FY 2022
  • Combination — 1% reduction for five years starting in FY 2023 or later, 2.5% reduction for two years starting in FY 2023 or later

CMS will continue to monitor PDPM data for a potential recalibration, taking into consideration the impact of the COVID-19 PHE and various waivers as a result of the PHE.

How we can help

Connect with CLA for further clarification on these final rules and how they impact skilled nursing facilities. Our health care team is on the front lines of regulatory, policy, and payment changes for providers across the continuum and can provide guidance to meet your specific needs.

Contact Us