SNFs Get a Bit of Good News: CMS Final Rule for FY 2024

SNFs got a little early Christmas present yesterday when CMS announced its Final Rule (PPS) for Fiscal Year 2024 (begins October 1, 2023). Instead of a 3.7% increase as proposed in the initial rule, CMS finalized a 4% increase (plus an additional 0.3%). Back in April, I wrote about the proposed rule.  That post is here:

The norm with rule finalization is rate remains the same as initially proposed perhaps, even adjusts LOWER but rarely higher.  While a higher final rate is good news the context is important.  A 4% increase is not sufficient to really help providers with unusually high costs related to rampant inflation over the past 18 months (cumulatively, 13% since 1/1/22 using average for 2022 and average year-to-date 2023).  Labor costs during the period have soared either via increasing wages or via increasing costs for agency staff.  Similarly, capital costs have risen dramatically due to rate increases issued by the Federal Reserve. The final rate calculation is as follows.

  • $2.2 billion as a result of a market basket update of 6.4%, which is based on a 3.0% SNF market basket increase plus a 3.6% market basket forecast error adjustment and less a 0.2% productivity adjustment, as well as a negative 2.3%, or approximately $789 million, decrease in the FY 2024 SNF PPS rates as a result of the second phase of the Patient Driven Payment Model (PDPM) parity adjustment recalibration.
  • The PDPM adjustment is due to CMS over-estimating the savings or rate neutrality of the changeover from RUGS 4 to PDPM (patient driven payment model). The unintended increase in payments (the miss by CMS) was 5% or $1.7 billion annually.  To recalibrate for their error, CMS (in 2023’s Final Rule) incorporated a 4.6% parity adjustment (reduction or offset) of 2.3% in FY 2023 and 2.3% in FY2024.  In theory, the net rate without the parity adjustment for the PDPM miss would be 6.3% (final 4% increase plus/add back, the PDPM adjustment of 2.3%).

As is typical with these rules, programmatic changes to how Medicare pays SNFs along with other rule adjustments under the Medicare program are included.  My April post highlighted these inclusions.  Typically, CMS does not make wholesale changes to these programmatic adjustments or rules.  Sometimes, however, comments to the initial rule do hit home.  Such was the case with this Final Rule.  The overall (important) program/rule changes are noted below.

  • Marriage/Family Counselors and Mental Health Counselors are removed/excluded from consolidated billing.
  • CMS is incorporating the Discharge Function Score (DC Function) measure beginning with the FY 2025 SNF QRP. This measure assesses functional status by defining the percentage of SNF residents who meet or exceed an expected discharge function score using mobility and self-care items already collected on the Minimum Data Set (MDS). This measure replaces the Application of Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment/a Care Plan That Addresses Function (Application of Functional Assessment/Care Plan) measure.  The industry (SNF) lobbied against this new measure as being too vague and likely, inconsistently measured.
  • CMS is dropping its proposal to add a short-stay patient satisfaction measure known as CoreQ.  Concerns were expressed regarding the survey measure, how many residents may not be included, the score’s calculation methods, plus likely burdens to facilities of having to submit patient information on a weekly basis. Some non-industry push back regarding CoreQ came from advocates and consumers because CoreQ was developed by the industry trade group American Health Care Association (primarily, a for-profit industry association).
  • The Final Rule contained no additional information or requirements regarding mandated staffing levels or numbers.  This possibility was foreshadowed in the FY 2023 Final Rule and the preliminary 2024 rule.
  • An element of VBP proposed in the preliminary 2024 rule regarding staff turnover remains in the Final Rule.  The Total Nurse Staffing Turnover measure. Data on staff turnover in 60-day windows will be reported beginning in 2024 with financial implications (payment incentives or reductions) beginning in FY 2026. Other measure changes under VBP are,
    • Discharge Function Score Measure same as the QRP measure for FY 2027.
    • Long Stay Hospitalization Measure (per 1,00 resident days). The measure assesses the hospitalization rate for long-stay (permanent) residents and is applicable for FY 2027.
    • Percent of Residents Experiencing One or More Falls with Major Injury (long-stay) beginning FY 2027.
    • Skilled Nursing Facility Within Stay Potentially Preventable Readmissions (SNF WS PPR) measure beginning in FY 2028.  This measure replaces the 30 day all cause readmission measure presently being used.

Readers can access the CMS FY 2024 SNF PPS Final Rule Fact Sheet here:   When the Final Rule is published in early August, I will provide a download in a separate post.

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