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Kevin Ware, CPA

2019 SNF PPS and Consolidated Billing Final Rule Overview

2018-10-04

2019 SNF PPS Final Rule: Rates and So Much More

CMS has issued the final rule for the Prospective Payment System (PPS) and Consolidated Billing for Skilled Nursing Facilities (SNFs) for FY 2019 (scheduled to be published in the Federal Register on August 8, 2018). The rule:

  • Updates the PPS payment rates for SNFs for FY 2019 effective October 1, 2018.
  • Finalizes the payment system called the Patient-Driven Payment Model (PDPM) to replace the current Resource Utilization Groups, Version IV (RUG-IV) model beginning on October 1, 2019.
  • Finalizes revisions to the regulation text that describes a beneficiary’s SNF “resident” status under the consolidated billing provision and the required content of the SNF level of care certification.
  • Finalizes several operational aspects of the SNF Quality Reporting Program (QRP), which implements a 2% reduction to the SNF market basket percentage for that fiscal year to SNFs that do not satisfy reporting requirements.
  • Finalizes changes to the SNF Value Based Purchasing Program (VBP), which implements a 2% withhold to SNF Part A payments that can be earned back, based on a SNFs rehospitalization rate and level of improvement, as follows:

    The 2% reductions and the SNF specific value-based incentive payment adjustment to SNF claims will occur simultaneously,
    Continuation of the achievement and benchmark threshold rates as previously finalized in the FY 2018 SNF PPS final rule for FY 2020 and finalized the numerical values for FY 2021 based on the FY 2017 baseline period,
    Adopted FY 2019 as the performance period for the FY 2021 SNF VBP program year and FY 2017 hospital discharges as the baseline period for the FY 2021 SNF VBP program year, 
    Beginning with the FY 2022 program year and for subsequent program years adoption of a performance period and baseline period that is the 1-year period following the performance and baseline period for the previous program year,
    SNFs with insufficient baseline period data will be scored based only on their achievement during the performance period, 
    Low-volume SNFs, with less than 25 eligible stays during a performance period for a program year, will be assigned a performance score based on the average of all SNF performance scores, 
    SNFs with observed readmission rates of zero may receive risk-standardized readmission rates that are greater than zero, and 
    Adopted an Extraordinary Circumstances Exceptions policy that will exclude from the calculation of  the measure rate for the applicable baseline and performance periods the calendar months during which the SNF was affected by the extraordinary circumstance.

FY 2019 PPS Rate Calculations - CORRECTION

CMS issued a correction notice to the 2019 SNF PPS Final Rule on October 3, 2018.

The notice corrects errors in the posting of information to the CMS website and technical issues related to the wage data collected from Medicare cost reports used to calculate the hospital wage index. As a result, the wage indices for CBSA 14454 Boston, MA and CBSA 40484 Rockingham County-Strafford County, NH have changed. If you are located in these two CBSAs, please visit our Interactive Rate Calculator to obtain the corrected rates. All other CBSAs in the region remain unchanged. 

Our senior living experts have calculated the FY 2019 SNF Medicare PPS rates based on the final rule for urban and rural areas of Maine, Massachusetts, New Hampshire, and Vermont. CMS projects that aggregate payments in FY 2019 to SNFs will increase $820 million, a 2.4% increase as required by the Bipartisan Budget Act of 2018. Absent this statutory requirement, the FY 2019 market basket update factor would have been 2%, a market basket index of 2.8% reduced by the multifactor productivity adjustment of 0.8%.

In addition to the estimated increase in Medicare payments to SNF’s of $820 million, CMS projects the overall impact of the SNF VBP as a reduction of $211 million in aggregate payments to SNFs during FY 2019, for an estimated net increase of $609 million.

The projected overall impact to providers in urban and rural areas is an average increase of 2.4% and 2.5%, respectively, in estimated payments compared with FY 2018. Providers in rural New England will experience an estimated increase in payments of approximately 1.6% while urban New England providers will experience an estimated increase in payments of 1.7% – actual impact will vary depending on the provider’s CBSA.

The updated rates reflect:

  • A 2.4% net market basket increase for FY 2019—the maximum market basket update allowed as a result of the Bipartisan Budget Act of 2018 which establishes a special rule for FY 2019 that requires the market basket percentage, after the application of the productivity adjustment, to be 2.4%.
  • A decrease in the labor-related weight from 70.8% for FY 2018 to 70.5% for FY 2019.

The applicable wage index continues to be based on the hospital wage data (from FY 2015) in the absence of SNF specific data.

BerryDunn has provided an interactive rate calculator to assist with the calculation of applicable rates and projected Medicare revenues for FY 2019. To access the interactive rate calculator click here.

Please note errors have been identified in the case-mix adjusted rates of the final rule; we believe our interactive rate calculator has corrected these errors; however, if CMS proposes any corrections to these rates, BerryDunn will update the interactive rate calculator as necessary.

Patient-Driven Payment Model

The final rule establishes a new classification system, the Patient-Driven Payment Model (PDPM), which ties SNF payments to patient conditions and care needs rather than volume of services provided to replace the current RUG-IV model. The new classification system is an updated version of the 2017 Advanced Notice of Proposed Rulemaking Resident Classification System Version 1 (RCS-1).

The implementation date for the final system is October 1, 2019 (FY 2020). The PDPM would completely replace RUGs for Medicare Part A Fee-For-Service payment to SNFs. Payment will be based on patient characteristics associated with care components. CMS finalized several core PDPM elements:

  • Payments will be the sum of five independently-determined, case-mix adjusted payment components plus a non-case-mix component (CMG).
  • Therapy minutes are no longer relevant in determining payment, rather patients are assigned to a CMG for each component using clinical information which differs by component.
  • A variable payment schedule was finalized in which payments will taper for physical therapy, occupational therapy and nontherapy ancillary services and will begin on different days for each component.
  • Elimination of multiple mandatory SNF PPS Assessments. PDPM requires only an admission and a discharge assessment and would permit an optional interim payment assessment which is intended to allow SNFs to reclassify patients into CMGs based on changes in condition.
  • Requirement to use ICD-10 diagnosis codes on the admission MDS and as part of physical therapy, occupational therapy, and nontherapy ancillary services classification into a CMG. ICD-10 coding on claims will now drive payment by assigning a diagnosis at admission and a CMG.
  • Combined limit on group and concurrent therapy of up to 25% of a resident’s treatment time per discipline per stay.

If you have any specific questions about the final rule or how it might impact your facility, please contact Tammy Brunetti or Kevin Ware.