CMS has published its final rule to update Medicare skilled nursing facility (SNF) PPS rates and policies for FY 2017. CMS projects that the final rule will increase overall payments to SNFs by $920 million, or 2.4%, compared to FY 2016 levels (and compared to the $800 million/2.1% increase forecast in the proposed rule). The final update is based on a 2.7% market basket increase that is reduced by a 0.3 percentage point multifactor productivity adjustment.

The preamble to the final rule discusses the mandatory 2 percentage point reduction to FY 2018 market basket percentages, required by the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act), for SNFs that fail to submit required quality data to CMS under the SNF Quality Reporting Program (QRP). CMS finalized three measures for the 2018 and subsequent SNF QRP payment determination: Discharge to Community – Post Acute Care (PAC) SNF QRP; Medicare Spending Per Beneficiary (MSPB) – PAC SNF QRP; and Potentially Preventable 30 Day Post-Discharge Readmission Measure – SNF QRP. CMS also adopted a measure, Drug Regimen Review Conducted with Follow-Up for Identified Issues, for the FY 2020 and subsequent year payment determinations. The final rule also adopted policies regarding public reporting of SNF QRP quality measure data, including preview, review, and correction periods. To help educate SNFs prior to implementation of payment adjustments, CMS finalized a policy to provide quarterly confidential feedback reports to SNFs detailing their performance on specified quality measures beginning October 1, 2016.

Additionally, the final rule continues implementation of the SNF Value-Based Purchasing (VBP) Program, which was authorized by the Protecting Access to Medicare Act of 2014 (PAMA) and goes into effect in FY 2019. Under this policy, SNF per diem rates will be reduced by 2% to fund value-based incentive payments, which will be based on achievement and improvement on performance standards (note that the total amount of value-based incentive payments will not exceed 70% of the withhold amount). CMS specifies the SNF 30-Day Potentially Preventable Readmission Measure (SNFPPR) as the all-cause, all-condition risk-adjusted potentially preventable hospital readmission measure under the VBP. CMS adopted CY 2015 as the baseline period and CY 2017 as the performance period for the FY 2019 SNF VBP Program. Furthermore, the rule finalizes other requirements related to the SNF VBP, including performance standards, a scoring methodology, and a review and correction process.

Finally, in the preamble discussion, CMS also provides an update regarding the “SNF Payment Models Research project.” The goal of the project is to consider and develop a potential payment model—to replace the current SNF PPS—that focuses on patient characteristics. CMS explains that the agency is “moving as expeditiously as possible,” and is working to develop a model that could be implemented under the existing statutory framework.

The final rule is scheduled to be published on August 5, 2016.