On July 31, 2020, CMS issued Final Rule CMS-1737-F for fiscal year 2021, in its yearly update to Medicare payment policies for SNFs (the Final Rule). In addition to updating Medicare payment rates under the SNF prospective payment system (PPS), the Final Rule makes changes to case-mix classification code mappings, adopts Office of Management and Budget (OMB) revisions to statistical area delineations for purposes of classifying facilities as urban or rural, and provides minor updates to the SNF Value-Based Purchasing (VBP) Program which also impacts Medicare payments to SNFs. CMS anticipates that under this payment rule, SNFs will see a total increase of roughly $750 million in Medicare reimbursements over the next fiscal year, which begins October 1, 2020.

The $750 million increase in aggregate payments to SNFs is attributable to an anticipated 2.2% increase to the market basket index, used to establish the base Medicare rate with the intent to reflect the cost of providing covered SNF services, under the Final Rule. The market basket adjustment was not met with any corresponding downward multifactor productivity (MFP) adjustment, equal to the 10-year moving average of changes in annual economy-wide private non-farm business multi-factor productivity, which normally acts to reduce the market basket adjustment.

The Final Rule also adopts the most recent OMB statistical area delineations for purposes of wage index adjustment. In addition, the rule applies 1-year transition for FY 2021 which applies a 5 percent cap on wage index decreases from FY 2020 to FY 2021. CMS’s stated goal is to more accurately determine the appropriate wage index and rate tables to apply under the SNF PPS. The final wage index applicable to FY 2021 is available on the CMS website here.

In addition to rate-setting updates, CMS also finalizes technical updates to ICD-10 code mappings, effective October 1, 2020, updating how certain ICD-10 codes map to reimbursement categories under the Patient-Driven Payment Model (PDPM). The PDPM replaced the previous Resource Utilization Group (RUG)-based model last year in an effort to shift focus to patient characteristics rather than volume to classify SNF patients into case-mix payment groups. CMS cites response to stakeholder feedback and recommendations as the source for these changes.

Lastly, CMS made minor updates to SNF VBP regulations. Under the SNF VBP program, 2% of total Medicare reimbursement is withheld to fund the program, from which providers can be repaid, with a bonus, by meeting certain hospital readmission benchmarks scored on a single claims-based all-cause all-condition hospital readmission measure. The VBP program results in Medicare savings, because the redistributed incentive payment accounts for 50 to 70 percent of the 2% reduction in Medicare fee-for-service payments used to fund the VBP program.

Included in these updates, CMS announced performance standards for FY 2023, confirming that the FY 2023 performance period will be FY 2021 and the baseline period will be FY 2019. CMS also announced that the 30-day Phase One Review and Correction deadline now applies to the baseline period quality measure report in order to align the two. This will allow SNFs 30 days following issuance of those reports to review the underlying claims and measure rate information and submit correction requests within 30 days following issuance. No changes were made to the measures, SNF VBP scoring policies, or payment policies.

CMS issued this rule in conjunction with Medicare payment rules for Inpatient Psychiatric Facilities (IPFs) and hospices, in an effort to better align payments for the three facility types. See Also in the News in today’s edition of Health Headlines.

The CMS fact sheet on CMS-1737F can be found here. The Final Rule is scheduled for publication on August 5, 2020. Once it is published, the official form will be available on federalregister.gov at this link. The unpublished pdf is available for download here.