Could SNFs Be Headed Into the Perfect Storm?

When fiscal year (FY) 2023 began on October 1, 2022, it ushered in a handful of changes for skilled nursing facilities (SNFs), including a two-year parity adjustment; new measures for the SNF Quality Reporting Program (QRP); new and modified ICD-10 codes; and the announcement of the new MDS for 2023. Still, many providers and industry experts are wondering if this is the calm before the storm. FY 2024 is expected to slam SNFs with many updates. Come October 1, 2023, SNFs could face reduced quality, efficiency challenges, and risk of decreased revenue.

Quality, Value, and a New MDS

Changes to SNF, QRP, and SNF Value Based Purchasing (VBP) programs have already begun, and more will go into effect in the next few years. Both programs directly link a provider’s Medicare revenue to its performance and reporting. Failure to meet SNF QRP reporting requirements results in a 2% reduction in Medicare Part A reimbursement for an entire fiscal year. Further, 2% of SNF Medicare revenue is withheld to fund the SNF VBP program, with incentive payments distributed.

Influenza vaccination coverage among HCP was added as a new SNF QRP measure for FY 2023. Data is being collected between 10/1/22 and 3/31/23. Providers are expected to submit data for this measure to meet the SNF QRP compliance threshold. The Centers for Medicare and Medicaid Services (CMS) suppression policy will remain in effect for SNF VBP for FY 2023, and all SNFs will receive an identical incentive payment multiplier (0.9920000000).

FY 2024 will also kick off a slew of changes impacting SNF quality outcomes. SNFs will begin using the minimum data set (MDS) 3.0 version 1.18.11 on October 1, 2023, and new MDS items will source data for two SNF QRP measures: transfer of health (TOH) information to the provider and TOH information to the patient, as well as multiple new sections to be completed. Industry experts anticipate new MDS items will be required to meet SNF QRP MDS compliance thresholds, including new standardized patient assessment data elements (SPADE) to analyze how social determinants of health impact outcomes. Additionally, CMS will end its suppression policy on October 1, 2023, and SNFs will receive incentive payments once again based on the SNF 30-day all-cause readmission measure (SNFRM). The performance period for three new SNF VBP measures — SNF healthcare-associated infections requiring hospitalization, total nursing hours-per-resident day staffing, and discharge to community PAC SNF — is also expected to begin on October 1, 2023.

States Transition Medicaid Payment System From RUG to PDPM

CMS announced that starting on October 1, 2023, it will no longer support resource utilization group (RUG) III and RUG IV systems on federally required assessments for SNF residents. States can utilize the RUG items as a stepping stone to gather data and calculate RUGs for an additional two years, but where that data will be stored is still undetermined. After October 1, 2025, all states will need to implement an alternative payment system for their Medicaid program.

Many states are considering transitioning to a patient-driven payment model (PDPM)-based reimbursement system. While this choice is a logical replacement, states and providers need to consider certain factors and prepare accordingly. Many questions arise from this consideration: What services are currently provided to their Medicaid population? What services may be expanded? How will non-therapy service costs, which may not have been included in previous state amendment plans, be tracked?

Providers Hit With a Medicare Parity Adjustment Reduction

CMS implemented a two-year PDPM parity adjustment recalibration, which began on October 1, 2022. For FY 2023, a 2.3% reduction will apply to each PDPM case mix-adjusted component. For FY 2024, another 2.3% reduction will further lower the PDPM parity adjustment.

This reduction applies uniformly to all PDPM components. While there is not much providers can do, they should pay particular attention to PDPM pain points where costs associated with certain classifications have increased significantly. For example, consider the skyrocketing cost of personal protective equipment (PPE). Classifications with isolation as a qualifier, like ES1 Extensive Services, utilize high-cost PPE resources. Reducing PDPM reimbursement for those classifications results in lower margins with this “broad strokes” approach to recalibration.

Fail to Prepare, Prepare to Fail

Providers should not assume current processes will suffice in the future. Celtic Consulting provides end-to-end process assessment of a client’s revenue cycle to identify opportunities for efficiency, compliance, and overall system improvement. Through detailed analysis, Celtic equips partners with solutions to achieve streamlined organization practices. By engaging our clients in multi-pronged action plans, we help providers sustain gains with multiple payment sources.