The Centers for Medicare & Medicaid Services (CMS) has issued its annual proposed update to Medicare skilled nursing facility (SNF) PPS rates and policies for fiscal year (FY) 2019. In addition to providing a $850 million boost to Medicare payments for FY 2019, CMS proposes a new case mix classification system to replace the existing Resource Utilization Groups, Version IV (RUG–IV) model beginning in FY 2020. CMS will accept comments on the proposed rule until June 26, 2018.

With regard to the annual payment update, CMS proposes to increase rates by 2.4%, as mandated by the Bipartisan Budget Act of 2018; CMS estimates that in the absence of legislation, the update would have been 1.9%. The annual update is reduced by 2 percentage points for SNFs that fail to submit required quality data to CMS under the SNF Quality Reporting Program (QRP). CMS does not propose adding any new SNF QRP measures at this time; instead, CMS proposes to establish as a factor for removing measures that the costs of a measure outweighs its benefit. CMS also proposes various updates to the SNF Value-Based Purchasing Program (VBP), which adjusts a SNF’s payments up or down based on its performance on a 30-day hospital readmissions measure.

The proposed new Patient-Driven Payment Model (PDPM) case mix classification system builds on the proposed Resident Classification System, Version I (RCS-I), that CMS set forth in a May 2017 Advanced Notice of Proposed Rulemaking. Like the RCS-I, the PDPM seeks to base Medicare payment on resident needs rather than the amount of therapy a resident receives, but CMS believes the PDPM better accounts for verifiable resident characteristics while reducing systemic and administrative complexity. In short, the proposed PDPM would identify and adjust the following five case-mix components to characterize a resident’s care: Physical Therapy (PT), Occupational Therapy (OT), Speech-Language Pathology, Non-Therapy Ancillary (NTA), and Nursing. Within these components, the patient is assigned to one of 10 clinical categories based on their primary diagnosis (determined by ICD-10 codes recorded in MDS item I8000). CMS would apply variable per diem payment adjustments to account for changes in resource use over the course of a stay for the PT, OT, and NTA components. The sum of each of five components would be combined with the non-case-mix component to determine the full SNF PPS per diem rate for that resident. CMS proposes implementing the PDPM effective October 1, 2019.

CMS expresses concerns that its proposed change in how therapy services would be used to classify residents under the PDPM could incentivize the use of group and concurrent therapy rather than individual therapy. CMS therefore proposes to establish a combined 25% limit on concurrent therapy and group therapy for each discipline of therapy provided. CMS also proposes to implement an interrupted stay policy beginning FY 2020, in conjunction with implementation of the PDPM. Under this policy, if a resident is discharged from a SNF and returns to the same SNF by 12:00 a.m. at the end of the third day of the “interruption window,” the treating the resident’s stay as a continuation of the previous stay for purposes of both resident classification and the variable per diem adjustment schedule. If the resident’s absence from the SNF exceeds this 3-day interruption window, or if the resident is readmitted to a different SNF, CMS proposes treating the readmission as a new stay. Also effective October 1, 2019, CMS proposes to revise the current SNF PPS assessment schedule to require only two scheduled assessments (instead of the current five) for each SNF stay: a 5-day scheduled PPS assessment and a discharge assessment. A separate “Interim Payment Assessment” would be used to capture changes in the resident’s condition in certain situations. CMS seeks comments on these proposed policies.