Why Skilled Nursing Medicare Payments Will Be Lower Than Expected

Providers that receive Medicare reimbursements for skilled nursing services will be seeing lower payment levels next year than the government initially proposed, due to updated economic data.

For fiscal year 2016, total SNF payments will increase by an aggregate $430 million from 2015 levels, as opposed to the $500 million increase that the Centers for Medicare & Medicaid Services (CMS) floated in April.

That equates to a 1.2% payment increase for next year, rather than the 1.4% first proposed. The new, final rate was put forward Thursday by CMS.

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There is not a policy-based justification behind the downward revision, but instead it is based on updated economic data crunched by Global Insight Inc., the analysis firm that CMS works with, sources at the American Health Care Association (AHCA) confirmed to SHN.

AHCA is the nation’s largest association representing skilled nursing and other long-term care providers.

Each year, CMS adjusts Medicare payments to skilled nursing facilities through a market basket update; this is meant to take into account how inflation affects the costs that skilled nursing providers face in getting the “market basket” of goods and services needed to offer their services. 

In April, CMS proposed a market basket increase of 2.6%, which would have been reduced by routine calculations such as the “multifactor productivity adjustment.” In the final rule, the market basket update has been reduced to 2.3%, which then has been further reduced through the routine adjustments.

The impact of the rule will differ slightly based on where a provider is located—for instance, what region of the country it is in, and whether it is in a rural or urban area. About 1,420 Medicare skilled nursing providers in the Pacific region will experience a 1.8% payment increase, the agency estimates.

The final rule also sets certain other policies for skilled nursing providers, including the addition of three new quality measures that will take effect in 2018: skin integrity and changes in skin integrity; incidence of major falls; and functional status, cognitive function.

Written by Tim Mullaney

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