On July 31, 2023, CMS issued its final rule updating the rates and Medicare payment policies under the Skilled Nursing Facility Prospective Payment System (SNF PPS) for FY 2024 (the Final Rule). The Final Rule also includes updates to the SNF Quality Reporting Program (QRP) and the SNF Value-Based Purchasing (VBP) Program starting in FY 2024. Additionally, the Final Rule includes a measure intended to address staff turnover and a constructive waiver process meant to improve administrative burdens associated with CMS’s processing of Civil Monetary Penalty appeals.

Updates to SNF Payment Rates for FY 2024

According to CMS, the aggregate impact of the payment policies in the Final Rule will be a net increase of 4%, approximately $1.4 billion, in Medicare Part A payments to SNFs in FY 2024. The estimated impact is the result of several adjustments: a $2.2 billion increase stemming from the 6.4% net market basket update to payment rates (which is based on a 3% SNF market basket increase plus a 3.6% market basket forecast error adjustment, minus a 0.2% productivity adjustment), along with a decrease of 2.3% (or approximately $789 million) in the FY 2024 SNF PPS rates, which stems from the second phase of the Patient Driven Payment Model (PDPM) parity adjustment recalibration.

CMS implemented the PDPM, which was a new case-mix classification system, on October 1, 2019. The PDPM was supposed to be budget-neutral, such that it would not increase or decrease aggregate SNF spending. Since PDPM was implemented in FY 2020, however, CMS’s data analysis indicated an unintended payment increase of 5%, or $1.7 billion annually. To correct the unintended increase, CMS recalibrated the PDPM parity adjustment by a factor of 4.6% over a two-year phase-in period. The recalibration will result in a reduction to the SNF PPS payment rates of 2.3% in FY 2023 and 2.3% in FY 2024. CMS stated that it considered stakeholder feedback and sought to mitigate the financial impact of the recalibration on providers.

Notably, these impact figures do not include reductions in payments to SNFs subject to the SNF Value-Based Purchasing Program. The impact of those adjustments is estimated to be $184.85 million in FY 2024.

Changes to PDPM ICD-10 Code Mappings

The PDPM uses ICD-10 codes in several ways. CMS announced it is finalizing several changes to the PDPM ICD-10 code mappings to improve consistency between ICD-10 code mappings and ICD-10 coding guidelines. The ICD-10 code mappings and PDPM lists are available on the PDPM website here.

Marriage and Family Therapist and Mental Health Counselor Services Excluded from SNF Consolidated Billing

Under the Consolidated Appropriations Act of 2023, Medicare is required to exclude from SNF consolidated billing both marriage and family therapy (MFT) services and mental health counseling (MHC) services. These exclusions allow performing clinicians to bill separately for these services, rather than including them in the consolidated Medicare Part A SNF payment. CMS announced it is finalizing regulatory text changes to codify these required exclusions from consolidated billing for these services. The new requirement will apply to services furnished on or after January 1, 2024.

Changes to the Skilled Nursing Facility Quality Reporting Program (SNF QRP)

The SNF QRP is a required reporting program. SNFs that fail to meet the SNF QRP reporting requirements are subject to a 2% reduction in their Annual Payment Update (APU). The Final Rule includes changes to the SNF QRP, including the adoption of two measures, removal of three measures, and modification of one measure. The Final Rule also includes policy changes and the public reporting of four measures.

Measures Adopted

• Discharge Function Score (DC Function) – CMS is adopting the DC Function measure beginning with the FY 2025 SNF QRP. The DC Function evaluates residents’ functional status by assessing what percentage of SNF residents meet or exceed an expected discharge function score. It also uses mobility and self-care items collected on the Minimum Data Set. The DC Function will replace the topped-out process measure (discussed below).
• COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date (Patient/Resident COVID-19 Vaccine) – CMS is adopting the Patient/Resident COVID-19 Vaccine measure beginning with the FY 2026 SNF QRP. The measure reports the percentage of stays where SNF residents have been vaccinated for COVID-19 in accordance with CDC guidelines.

Measures Modified

• COVID-19 Vaccination Coverage among Healthcare Personnel (HCP COVID-19 Vaccine) – CMS is modifying the HCP COVID-19 Vaccine measure beginning with the FY 2025 SNF QRP. The measure tracks the percentage of healthcare personnel who have been vaccinated for COVID-19 and are up to date with that vaccination in accordance with CDC guidelines. Previously, SNFs only had to report whether healthcare personnel had received the primary vaccination series for COVID-19. This measure requires reporting of the cumulative number of healthcare personnel who are up to date with COVID-19 vaccinations per CDC guidelines.

Measures Removed

• Application of Percent of Long-Term Care Hospital (LTCH) Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function (Application of Functional Assessment/Care Plan) – CMS is removing the Application of Functional Assessment/Care Plan measure beginning with the FY 2025 SNF QRP. CMS is removing this measure because (1) performance among SNFs is so high and consistent that CMS can no longer distinguish meaningful improvements in performance and (2) the DC Function measure is more strongly associated with desired resident functional outcomes.
• Application of the IRF Functional Outcome Measures: Change in Self-Care Score for Medical Rehabilitation Patients (Change in Self-Care Score) measure; and the Application of the IRF Functional Outcome Measures: Change in Mobility Score for Medical Rehabilitation Patients (Change in Mobility Score) – CMS is removing these measures beginning with FY 2025 SNF QRP because the costs associated with them outweigh the benefits of their use to the program. Also, they are similar to or duplicative of other measures in the SNF QRP.

Other Changes

• Beginning with the FY 2026 SNF QRP, CMS will increase the SNF QRP Data Completion Thresholds for the Minimum Data Set (MDS) Data Items. SNFs are required to report 100% of the required quality measure data and standardized resident assessment data gathered using the MDS for at least 90% of the assessments they submit to CMS. SNFs that fail to meet this requirement will be subject to a 2% reduction on the applicable FY annual payment starting in FY 2026.
• Transfer of Health Information to the Provider PAC Measure and the Transfer of Health Information to the Patient PAC Measure – CMS will begin public reporting of these measures with the October 2025 Care Compare refresh (or as soon as technically feasible). These measures report the percentage of patient stays where the discharge assessment indicates that a current reconciled medication list has been provided to the subsequent provider or caregiver. CMS initially delayed implementing these measures in response to the COVID-19 Public Health Emergency. Data collection will now begin for patients discharged on or after October 1, 2023.
• CoreQ: Short Stay Discharge (CoreQ: SS DC) – CMS is not adopting this measure following consideration of public comments it received.

Changes to the SNF Value-Based Purchasing (SNF VBP) Program

All SNFSs that are paid under the Medicare SNF PPS are included in the SNF VBP Program, which pays SNFs incentive payments for quality of care they provide. The Final Rule includes the following policy changes to the SNF VBP Program.

• Nursing Staff Turnover Measure – CMS is adopting this measure beginning in FY 2026. This measure uses nursing staff turnover to assess the stability of SNF staffing. Facilities must begin reporting in FY 2024; payment effects will begin in FY 2026.
• Discharge Function Score Measure – CMS is adopting this measure beginning in the FY 2027 program year. It assesses functional status by determining the percentage of SNF residents who meet or exceed an expected discharge function score. It also uses self-care and mobility items collected on the MDS.
• Long Stay Hospitalization Measure per 1,000 Resident Days – This measure assesses the hospitalization rate of long-stay residents. CMS is adopting it beginning with the FY 2027 program year.
• Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) – CMS is adopting this measure beginning with the FY 2027 program year. This measure assesses the number of falls from which long-stay residents suffer from major injuries.
• SNF 30-Day All-Cause Readmission Measure – CMS is replacing the SNF 30-Day All-Cause Readmission Measure (SNF RM) with the Skilled Nursing Facility Within Stay Potentially Preventable Readmissions (SNF WS PPR) measure beginning in the FY 2028 program year.
• Health Equity Adjustment – This payment adjustment rewards SNFs whose resident population includes at least 20% of residents with dual eligibility status during the applicable performance period. It will begin in the FY 2027 program year. SNFs that provide care to a higher proportion of dual eligible residents will receive bonus points.
• Audit Portion of Validation Process for MDS-Based Measures – CMS will adopt the audit portion of the validation process for MDS-based measures beginning with the FY 2027 program year.

Changes to Civil Money Penalties (CMP): Waiver of Hearing, Consideration of Reduction of Penalty Amount (§ 488.436)

CMS is adopting a constructive waiver process for facilities that waive their right to a hearing when contesting CMPs imposed following survey findings of noncompliance. Under prior CMS regulations, SNFs who affirmatively waived their right to an administrative hearing when contesting CMPs received a 35% penalty reduction. CMS observed that most facilities on which CMPs were imposed did not request an administrative hearing in connection with their appeals. In the Final Rule, CMS is adopting a constructive waiver process whereby facilities that do not request an administrative hearing within the required 60-day timeframe will be deemed to have waived their right to a hearing. Given this new policy of no longer requiring facilities to actively waive their right to a hearing, CMS stated that it considered modifying the penalty reduction. But it ultimately decided to revisit the penalty reduction in a future rulemaking, if warranted.

A copy of the Final Rule is available here.