CMS Issues Final SNF Rule for FY 2023

August 3, 2022
Policy Snapshot

Last week, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that updates Medicare payment policies and rates for skilled nursing facilities under the Skilled Nursing Facility Prospective Payment System (SNF PPS) for fiscal year (FY) 2023. The final rule includes updates for the SNF Quality Reporting Program (QRP) and the SNF Value-Based Purchasing (VBP) Program for FY 2023 and future years. Some key provisions include:

  • 2.7% net payment rate increase for SNFs
  • Patient Driven Payment Model (PDPM) parity adjustment recalibration (use the FY 2023 proposed rule calculator to learn more) and changes in ICD-10 code mappings
  • Permanent 5% cap on annual wage index decreases
  • SNF QRP: Compliance date revisions for certain requirements, new influenza vaccination coverage for health-care personnel measure, and regulation text revisions
  • SNF VBP: Doesn’t apply the SNF 30-Day All Cause Readmission Measure for the FY 2023 program year and adds 3 new measures for FY 2026 and 2027 program expansion years

The SNF PPS provides Medicare payments to more than 15,000 nursing homes, serving approximately 1.3 million people. Medicare spending to nursing homes is projected to be approximately $33.5 billion in FY 2022.  For FY 2023, CMS is finalizing a net increase of 2.7%, or approximately $904 million, in Medicare payments to SNFs. This estimate reflects a $1.7 billion increase resulting from a 5.1% increase to the payment rates for SNFs, including a 3.9% SNF market basket increase, plus a 1.5 percentage point market basket forecast error adjustment, and less a 0.3 percentage point productivity adjustment (as required by law). The SNF market basket increase of 3.9% is the highest market basket update CMS has implemented in a final rule since the beginning of the SNF PPS.

CMS is also finalizing a two-year phase-in of an adjustment to the SNF payment rates due to the transition to the PDPM, a SNF payment classification model. When PDPM was finalized on October 1, 2019, it was determined that this model would be implemented in a budget-neutral manner, meaning it would not result in an increase or decrease in aggregate SNF spending. Since PDPM implementation, CMS’ initial analysis of FY 2020 and FY 2021 data found an unintended increase of approximately 5%, or $1.7 billion, in Medicare Part A SNF spending per year. After considering the stakeholder feedback received in the FY 2022 SNF PPS rulemaking cycle and on the FY 2023 SNF PPS proposed rule, to better account for the effects of the COVID-19 public health emergency (PHE) on SNF spending, CMS is finalizing the adjustment factor of 4.6% to the SNF payment rates.

The rule finalizes a proposal to suppress (not apply) the Skilled Nursing Facility 30-Day All-Cause Readmission Measure (SNFRM) as part of the performance scoring for the FY 2023 SNF VBP Program Year. While performance on this measure will be reported publicly, it will not affect payment. CMS is finalizing this proposal because circumstances caused by the COVID-19 PHE have significantly affected the measure and the ability to make fair, national comparisons of SNFs’ performance scores. As part of the scoring policy for FY 2023, CMS will assign a performance score of zero to all participating SNFs, irrespective of how they perform using the previously finalized scoring methodology, to mitigate the effect that PHE-impacted measure results would otherwise have on SNF performance scores and incentive payment multipliers. CMS will reduce the otherwise applicable federal per diem rate for each SNF by 2% and award SNFs 60% of that withhold, resulting in a 1.2% payback to those SNFs. Any SNFs that do not meet the finalized case minimum for FY 2023 will be excluded from the program for FY 2023.

CMS also recognizes that the ongoing COVID-19 PHE provides a basis for taking a more cautious approach to mitigate the potential negative impacts on the nursing home industry, such as facility closures or disproportionate impacts on rural and smaller facilities. Therefore, to balance ensuring accurate Medicare Part A SNF payments and mitigating the financial impact on providers, CMS is finalizing a phase in the parity adjustment factor over a two-year period, resulting in a 2.3% or approximately $780 million reduction to FY 2023 payment rates, and a 2.3% reduction in FY 2024. 

The proposed rule included a Request for Information (RFI) seeking input on establishing minimum staffing requirements for long-term care facilities, as outlined in President Joseph Biden’s State of the Union Address. CMS received a significant response to the RFI from a wide range of interested parties. While CMS is continuing to review the comments, many commenters focused on the overall approach for establishing staffing standards, recommendations for implementing a minimum staffing requirement, factors for consideration (such as payment, cost, barriers, etc.), and input on the forthcoming staffing study. The administration has set a goal to improve the quality of nursing homes so that nursing home residents get the reliable, high-quality care they deserve. A key part of reaching this goal is ensuring adequate staffing levels in nursing homes, which have a substantial impact on the quality of care and outcomes residents experience. CMS will continue to review the comments—all of which the agency anticipates will be used to help inform future rulemaking on minimum staffing requirements for long-term care facilities.

Review this fact sheet on the FY 2023 SNF PPS final rule.

View the FY 2023 SNF PPS final rule here.