Centers for Medicare & Medicaid Services to Cut Payments to Skilled Nursing Facilities

The Protecting Access to Medicare Act of 2014 established a Value-Based Purchasing (VBP) Program for skilled nursing facilities (SNFs). SNFs were required to start reporting hospital readmission rates and other performance data to the Centers for Medicare & Medicaid Services (CMS) in October 2017. CMS is rewarding or penalizing nursing facilities based on this data, which has resulted in payment cuts in a majority of cases.

What Is the Skilled Nursing Facility Value-Based Purchasing Program?

The purpose of the SNF VBP Program is to focus on rewarding nursing facilities that offer better care to patients with Medicare. Here’s how it works:

• SNFs are evaluated for unnecessary hospital readmissions within 30 days of a patient’s discharge
• SNFs receive an individual performance score and a comparison performance score based on how other SNFs in the country perform
• SNFs receive confidential quarterly and annual reports disclosing their performance scores
• SNFs receive reimbursement incentives or penalties according to their performance scores

By focusing on reducing unnecessary readmissions, CMS has moved toward incentivizing the quality, rather than the quantity, of care that SNFs deliver. This is critical when you consider data cited by The Hospitalist. In 2010, 23.5 percent of patients who were discharged from the hospital to a nursing facility were readmitted to the hospital within 30 days, costing over $10,000 per admission or $4.34 billion per year. Astoundingly, 78 percent of these readmissions were considered avoidable.

Results of the VBP Program’s First Year

Since the penalties and rewards of the VBP Program are divvied out once per year, and the program started one year ago, the results are now in.

First, under the VBP Program, SNFs automatically lose 2 percent of their Medicare reimbursements, which they can earn back by reducing their hospital readmission rates. 60 percent of the withheld funds will be redistributed to the top-performing SNFs as bonuses.

According to Skilled Nursing News, 73 percent of SNFs were unable to earn their Medicare reimbursements back by keeping readmissions below a certain threshold. This means that nearly 11,000 of the 15,000 facilities that reported sufficient data are being penalized.

CMS used a formula to rank the nation’s nursing homes and determine each one’s incentive payment multiplier. The 73 percent of NSFs with a multiplier of less than 1.0 will receive reduced Medicare payments. Consider these examples:

• A multiplier of 0.98 or less results in a payment reduction of 2 percent (meaning CMS withholds 2 percent and rewards a 0 percent incentive payback)
• A multiplier of 0.99 results in a payment reduction of 1 percent (meaning CMS withholds 2 percent and rewards a 1 percent incentive payback)

The remaining 27 percent of SNFs with a multiplier of 1.0 or above will not be penalized or will receive a bonus payment from CMS. For instance:

• A multiplier of 1.0 results in a payment reduction of 0 percent (meaning CMS withholds 2 percent and rewards a 2 percent incentive payback)
• A multiplier of 1.01 results in a payment increase of 1 percent (meaning CMS withholds 2 percent and rewards a 3 percent incentive payback)

The highest multipliers awarded by CMS were around 1.016, earned by the 440 top-ranked facilities in the country. The lowest multipliers were about 0.98.

Get Help Figuring Out Your Finances

If your facility is among the 73 percent of SNFs affected by the Medicare payment cuts, LTC can help you figure out your finances and keep your facility running smoothly. We’re accustomed to pivoting and adapting as the healthcare industry changes, and we help our clients do the same.

To learn more about LTC and our financial advisory services, please contact us today.