CMS Calls For 4.6% Cuts to SNFs in FY 2023 PPS Proposed Rule

On Monday, the Centers for Medicare and Medicaid Services (CMS) filed the Fiscal Year 2023 Skilled Nursing Facility (SNF) Prospective Payment System (PPS) Proposed Rule. The reimbursements include a 3.9% increase to industry reimbursements, but in aggregate the impact of payment policies would result in a decrease of $320 million in Medicare Part A payments to SNFs.

According to the CMS proposed rule fact sheet, the agency came to the 3.9% increase based on a 2.8% update for the SNF market with 1.5% forecast error adjustment. The increase is projected to total $1.4 billion in additional reimbursement compared with the FY 2022 rate.

However, the agency included a 4.6% or $1.7 billion decrease in the SNF PPS rates due to the proposed “recalibrated parity adjustment.” This decrease is due to CMS analysis of the Patient Driven Payment Model (PDPM), which was introduced in 2019 and in 2020 experienced an “unintended increase in payments of approximately 5% or $1.7 billion. Due to the budget neutrality requirement of the PDPM, CMS moved to recalibrate the parity adjustment for the model.

SNF industry stakeholders and advocates for seniors expressed immediate alarm at the announcement, alluding to the consequences of the COVID-19 pandemic and the stress put on the entire senior healthcare and housing industry. According to Skilled Nursing News, Janine Finck-Boyle, vice president of health policy at LeadingAge, a senior advocacy organization, expressed concern at the reduction of reimbursement rates for nursing homes:

At a time when no aging services provider can afford it, the government is cutting. We’re working with the Administration to improve our nation’s nursing home system, but lowering reimbursement rates is not the right starting point.

In a CMS press release, the Biden Administration argues that the proposed rule supports the president’s stated goal of achieving health equity under his administration. One of the set goals outlined by President Biden in the State of the Union earlier this year was to improve the quality of nursing homes by addressing SNF staffing levels. From CMS Administrator Chiquita Brooks-LaSure:

The COVID-19 pandemic has highlighted serious problems at some of the nation’s nursing homes that have persisted for far too long. And we have seen the tragic impact that inadequate staff resources can have on residents and staff.

Just this week, a study published in the JAMA Health Forum demonstrated that pandemic-related job recovery has been particularly slow for long-term care, which includes skilled nursing, assisted living and home health care. McKnight’s reports that in the study of 125,717 healthcare workers, long term care workers and physicians saw the greatest levels of turnover throughout the duration of the pandemic.

Skilled Nursing News notes that before COVID, an average of 3.2% of healthcare workers reported turnover, but during the pandemic there was far greater disparity in turnover rates for aids and assistants, as well as jobs associated with lower wages. Women in healthcare were consistently more likely to experience job turnover, with higher rates among the least compensated and those with young children. From University of Washington Professor and study author Bianca Frogner:

I think long-term care is not a well paid industry and because it has a complicated reimbursement system, individuals who are in these aides and assistant positions have long been known to have very low pay.

The American Health Care Association’s (AHCA) CEO Mark Parkinson warned that cuts may be on the horizon following the 5% Medicare cut suggested by MedPAC. In a statement on behalf of AHCA, he expressed grave concern regarding the proposed cuts:

Any reduction in government resources could deepen the economic crisis currently within the long term and post-acute care sector. Many nursing homes already face imminent closure, and this Medicare cut could force more seniors across the country to relocate and find alternative care farther away from families and loved ones.