Volume XXXI, Number 5
May 2016

CMS Issues Proposed Rule for SNF PPS FY 2017 Update

On April 21, 2016, the Centers for Medicare & Medicaid Services (CMS) issued the proposed rule for the skilled nursing facility (SNF) prospective payment system (PPS) fiscal year (FY) 2017 update. According to a recent communication from the American Health Care Association (AHCA), the proposed rule includes a net market basket increase of 2.1percent. Further, CMS is holding off another year on a major overhaul of the payment system for SNF, and instead, proposing a PPS update tied with updates in quality measures. Also, the FY 2017 proposed rule continues to advance the integration of payment policy and quality-related provisions with payment and quality reporting, producing new implications from the proposed rule for SNFs.

Highlights of the rule include the following items:

  • It provides for a net market basket increase for SNFs of 2.1 percent beginning October 1, 2016.
  • The 2.1 percent market basket update reflects a full market basket increase of 2.6 percent reduced by 0.5 percentage points, in accordance with the multifactor productivity adjustment required by Section 3401(b) of the Affordable Care Act (ACA). No forecast error was incurred.
  • The market basket 2.1 percent for FY 2017 for the SNF PPS is based on the IHS Global Insight, Inc. (IGI) first quarter 2016 forecast with historical data through fourth quarter 2015. This figure could change when CMS issues the final rule based on more recent IGI data.
  • CMS estimates that the net market basket update would increase Medicare SNF payments by approximately $800 million in FY 2017.
  • As noted above, a forecast error correction was not needed. Since the difference between the estimated and actual amount of change in the market basket index was below the 0.5 percentage point threshold in FY 2015, the payment rates for FY 2017 are not impacted by the current IGI data.
  • In accordance with the Medicare Modernization Act (MMA), the per diem rate for SNF patients with Acquired Immune Deficiency Syndrome (AIDS) had been increased by 128 percent as of October 1, 2004. Under the CMS proposed rule, this add-on will remain in effect for FY 2017. As noted earlier, the Skilled Nursing Facility VBP Program (SNF VBP) is discussed. Establishment of the program, which implements a 2 percent withhold to SNF Part A payments that can be earned back based on a SNF’s rehospitalization rate and level of improvement, is required by the Protecting Access to Medicare Act of 2014 (PAMA). CMS proposes that the performance period be based on the calendar year starting January 1, 2017.
  • Additionally, CMS proposes four new measures for the Quality Reporting Program (SNF QRP). They are drug regimen review, average cost per Medicare beneficiary, rehospitalization rate, and discharge to community rate.

A more comprehensive analysis by AHCA staff of the proposed rule can be found here. Also, comments, suggestions and questions regarding this issue may be directed to AHCA’s Mike Cheek.

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