In a recently announced proposed rule (CMS-1679-P), CMS proposes to increase aggregate pay by $390 million in fiscal year (FY) 2018 for skilled nursing facilities (SNFs). In a separate notice (CMS-1686-ANPRM), CMS is soliciting comments on revisions to the existing SNF prospective payment system (PPS) payment methodology. Specifically, CMS is considering replacing the SNF PPS’ current case-mix classification model, the Resource Utilization Groups, Version 4 (RUG-IV), with a new model, the Resident Classification System, Version I (RCS-I).

CMS-1679-P to Increase SNF Aggregate Pay by $390 Million

Under Section 1888(e)(4)(E) of the Social Security Act, CMS is required to update the SNF PPS for FY 2018. In addition to this update, CMS-1679-P seeks to update the requirements for the SNF Quality Reporting Program (SNF QRP) and the SNF Value-Based Purchasing Program (SNF VBP Program). Additionally, CMS intends to clarify requirements related to survey teams and complaint investigations.

Major proposals include, but are not limited to:

• Update SNF PPS, reflecting the SNF market basket update of 1.0 percentage point, as required by MACRA;
• Impose “a penalty of a 2.0 percentage point reduction to the SNF market basket percentage change” for SNFs that fail to satisfy the SNF QRP reporting requirements;
• Create a new cost category for Installation, Maintenance, and Repair Services;
• Adopt additional policies, measures and data reporting requirements for SNF QRP, including considering social risk factors as measures in the SNF QRP, standardizing resident assessment data reported, and four new functional outcome measures; and
• Clarify that the requirement that interdisciplinary survey teams must include a registered nurse is applicable to standard, special and extended surveys, and not just investigations based on complaints.

These changes would result in an estimated increase of $390 million in aggregate payments to SNFs during FY 2018.  Public comments to CMS-1679-P, which is available here, are due by June 26, 2017. 

CMS-1686-ANPRM to Revise Existing SNF PPS Payment Methodology

In addition to the FY 2018 proposed payment update discussed above, CMS issued an advanced proposed rule to revise the case-mix formula for determining payment rate categories.  Currently, CMS uses the RUG-IV (Resource Utilization Groups, Version 4) model to classify SNF residents into payment classification groups (RUGs),  which are based on certain resident characteristics and the type and intensity of services the SNF provides to the resident. Each RUG corresponds to a set of case-mix indexes (CMIs) that take into account the relative cost differences for an individual resident’s care and treatment, i.e., a high CMI reflects a high expected resource utilization and costs for the resident’s care.  There are currently two case-mix components: a nursing component and a therapy component. The therapy component is largely based on the amount of services the SNF chooses to provide the resident, regardless of the patient’s individual characteristics or specific needs.

Under the current model, residents are classified into both a rehabilitation group and a nursing group, but are only reimbursed in accordance with the higher paying group. This means that if a resident was classified in a high rehabilitation group and a lower nursing group, CMS would use the rehabilitation group for payment purposes.

CMS is concerned that the current model improperly incentivizes SNFs to provide residents just enough therapies to just meet higher therapy thresholds, but not more. CMS believes this practice, described as  “thresholding,” may suggest that patients are being provided high levels of services based on financial considerations rather than medical need.

Further, because the current model determines the payment amount of both rehabilitation and nursing based only on the resident’s higher classification of one of the components, CMS believes this may improperly account for the costs of the lower classified group. In the current model, a resident that is classified as having ultra-high rehabilitation and high nursing components would have the same intensity multiplier as a resident with ultra-high rehabilitation but low nursing components.

In the proposed rulemaking, CMS proposes to implement the Resident Classification System, Version I (RCS-I) case-mix classification model, and seeks comments on whether this new model would be an adequate and appropriate replacement for the RUG-IV model. CMS notes that “[a] fundamental aspect of the RSC-I case-mix classification model is to use resident characteristics to predict the costs of furnishing similarly situated residents with SNF care.”

CMS also proposes to break apart the therapy component into two groups. Currently, the amount of services provided under physical therapy (PT), occupational therapy (OT), and speech and language therapy (SLP) are combined together. Under the proposed model, OT and PT would be combined, but SLP would be considered separately. CMS believes this will more accurately reflect the costs of services based on the resident’s functional status.

Other proposed changes under the RCS-I model include:

• Scoring Activities of Daily Living (ADL) areas for a total of six points, rather than 4 points under the current model;
• Considering a resident’s cognitive status as a predictor of therapy costs;
• Including the presence of a swallowing disorder as a component in predicting SLP costs;
• Considering resident’s non-rehabilitation RUG-IV classification for purposes of RCS-I payments; and
• Further refinement of nursing indexes.

Public comments on CMS-1686-ANPRM, which is available here, are due by June 26, 2017.