On July 31, 2020, the Centers for Medicare & Medicaid Services (CMS) issued a final rule for fiscal year (FY) 2021 that updates the payment rates and the value-based purchasing program for Medicare payment for skilled nursing facilities (SNFs). The final rule contains routine updates and no major policy changes, but it provides a good opportunity to assess where we are with this new payment system and where we are likely to go. Prior to the COVID-19 pandemic, the Patient-Driven Payment Model (PDPM) was the biggest change to skilled nursing in many years and still promises to have long-lasting impact.
First, the PDPM updates from CMS.
Market Basket Update. For October 1, 2020, the market basket update net of productivity adjustments will be 2.2 percent, slightly below the 2.3 percent proposed in April 2020.
Wage Index Changes. CMS is adopting revised geographic delineations provided by the Office of Management and Budget (OMB) to identify a provider’s status as an urban or rural facility and to calculate the wage index. CMS will be applying a 5 percent cap on any decreases in a provider’s wage index from FY 2020 to FY 2021. About 80 counties are either switching from urban to rural or vice versa, and this could have a significant impact in those regions. The labor share of the rate, to which the wage index is applied, is increasing to 71.3 percent, signaling an increasing role of the wage index in adjusting the rates.
So, before you plug a 2.2 percent Medicare increase into your budget, check the wage index value and make sure it has not appreciably changed from last year. It is important to understand that the 5 percent cap on decreases is for one year only. Therefore, if you are planning for multiple years, further decreases may be in store in those regions at the 5 percent cap.
Updates to PDPM Clinical Diagnosis Mappings. CMS is finalizing some stakeholder recommendations to make changes to the ICD-10 diagnosis code mappings into PDPM payment categories. This is expected to be an ongoing process as PDPM unfolds, and providers should review the ICD-10 mapping on at least an annual basis.
SNF Value-Based Purchasing (VBP) Program. Minor tweaks were made to the regulatory text to reflect updates in policy made in previous years. Providers should be on the lookout for their 30-day readmissions data from CMS, typically provided around the same time as the final rule. This is an important piece of the puzzle in projecting Medicare rates for the coming fiscal year.
Following are the key areas that CMS did not revise in the final rule for 2021 SNF Medicare payment.
Consolidated Billing. CMS did not revise consolidated billing rules despite some suggestions to carve out certain expensive antiviral and antibiotic, or new chemotherapy, medications. CMS continues to insist that they either lack the authority to exclude certain items (and thus could be billed separately) or, in the case of new chemotherapy drugs, that the item must first have its own code and then it can be considered for exclusion.
Commenters remain concerned that access to SNF care for some patients with expensive medications can be limited as long as those medications continue to be bundled into the overall payment rate.
COVID-19 Impact. Commenters made suggestions about explicitly incorporating COVID-19 diagnosis codes and costs into PDPM. For instance, commenters suggested that a comorbidity be added to the Non-Therapy Ancillary (NTA) component based on the ICD-10 code of either lab confirmed or pending/inconclusive COVID-19 to reflect the increased costs of testing and personal protective equipment (PPE), among other things. CMS stated that it did not have enough viable cost data, or in the case of inconclusive COVID-19 tests, that the code is not approved by the Centers for Disease Control and Prevention (CDC) yet. CMS did indicate that they are continuing to look at these issues and may consider them in future rulemaking.
In the meantime, regarding COVID-19, providers should make sure of the following:
PDPM Impact Data. CMS also did not provide any new evaluative data about the impact of PDPM to date, stating it was premature to do so based on data currently available. CMS noted that it will continue to monitor the impact of PDPM implementation on patient outcomes and budget neutrality and will consider recalibrating case-mix weights as appropriate. We expect this will occur at some point in the future.
HDG recently completed an analysis of over 2,000 PDPM stays across 32 SNFs initiated during first quarter 2020 (after implementation but before COVID-19). The results were interesting and include:
Our coding audits have also revealed some systemic weaknesses in coding for certain areas such as cognitive impairment, which can particularly affect speech therapy reimbursement.
Two other observations we would make at this stage:
HDG can assist you in a deep dive on PDPM by conducting a coding audit, benchmarking your claims data, reviewing your operations, and analyzing your market. As SNF occupancy continues to drop under COVID-19 and relief funding is squeezed, it will be important to ensure that you receive all the payment to which you are entitled. HDG can help. For more information, please visit our website and contact us at email@example.com or 763.537.5700.
Authored by: Brian Ellsworth
Vice President, Public Policy and Payment Transformation