Proposed Fiscal Year 2015 Prospective Payment System Update for Medicare Skilled Nursing Facilities

May 2014

The Centers for Medicare and Medicaid Services (CMS) released the Medicare Skilled Nursing Facility prospective payment system federal register update for the 2015 federal year on May 1, 2014 as a proposed rule for public input and comment.

While the release contained on the surface favorable reimbursement increases, estimated at over $750 million, there were other major policy changes that could determine whether your skilled nursing facility will see an increase in reimbursement or a decrease in 2015.

The proposed 2015 rule (CMS-1605-P) projects that aggregate payments to the SNFs will increase by about 2%, or the $750 million. The actual payments to SNFs were to be 2.4%; however, federal law requires a multifactor productivity adjustment be applied to gross payments (0.4% this year) resulting in the 2% projection. (However, before we start booking revenue increases, we must also remember that the 2% Sequestration Adjustment is still in play.)

Additionally, and perhaps more importantly, CMS has instituted into SNF reimbursement methodology significant changes in wage index theory that will certainly impact facility specific payments.

In February of 2013 the Office of Management and Budget issued OMB Bulletin No. 13-01, which contained major changes to the delineation of Metropolitan Statistical Areas, Micropolitian Statistical Areas and Combined Statistical Areas (CBSA). In this federal register release CMS proposes to align skilled nursing facility wage index areas with the OMB report. CMS has previously instituted this alignment with other federal programs so there would appear to be very little wiggle room in their thinking and it is likely that this change is coming.

What this means is that each facility must look at the federal register to determine if its CBSA has changed. You must also look at your corresponding wage index, as this number is multiplied by the labor portion of the federal PPS RUGS rate. Just because there is a projected 2% increase to payments does not mean that your facility is going to receive a 2% increase in the SNF PPS rate.

CMS understands that this new alignment may cause some SNFs unanticipated losses. Given the lack of lead time to change operations accordingly, the proposed rule is calling for blended wage index based on federal year 2014 and the OMB Bulletin. CMS is proposing a 50/50 blend during the 2015 federal year to grant providers an opportunity to calculate their SNF PPS rates and change operations accordingly. It should further be noted that CMS had actually fully adopted the OMB alignment in 2006. While they appear to be releasing that adoption slowly, it has been making its way into their thinking and now, finally, into SNF PPS reimbursement.

In this proposed rule, CMS is also providing technical relief related to Change of Therapy (COT) Other Medicare Required Assessment (OMRA) which is typically used to change resident RUG scores when a patient no longer qualifies for the particular assigned category. CMS is now proposing relief, based upon provider complaints, which would now allow for the use of the COT OMRA to reclassify a resident into a therapy RUG from a non-therapy RUG, but only in special circumstances.

Another major notice in the proposed rule is a clarification regarding a state’s use of Civil Monetary Penalties (CMP). Section 6111 of the Affordable Care Act speaks to the statutory requirements of CMPs. CMS now seeks to clarify that states may use federal CMP funds only after obtaining prior approval and may not use these funds if CMS has disapproved their intended use, or use these funds for purposes other than to support activities that benefit residents as specified in the statue. Further, states must now act in a transparent manner and publicly identify projects that have been funded with CMPs.

Public comments on this SNF PPS proposed rule will be accepted through June 30, 2014.

If you have any question about this article, long term care, or national health care reform please contact your BNN advisor at 1.800.244.7444.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.