CMS Proposes Fiscal Year 2017 Payment for Skilled Nursing Facilities and Provisions for FY 2019 Value-Based Purchasing Implementation

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The US Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS) published recently its proposed Fiscal Year (FY) 2017 Medicare payment rates and quality program for skilled nursing facilities (SNFs). The proposal updates payments rates effective October 1, 2016, under the SNF Prospective Payment System (PPS), projecting that aggregate payments to SNFs will increase in FY 2017 by $800 million, or 2.1 percent increase. Addressing Congress’ authorization for a SNF Value-Based Purchasing Program (VBP) which requires various post-acute providers, including SNFs, to report standardized patient assessment data and quality and resource use measures, the proposal specifies a “potentially preventable readmission” measure. The proposed readmission measures responds to the requirement of the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT) that CMS specify quality measures for the SNF Quality Reporting Program beginning with FY 2018. In tandem with Value-Based Purchasing, the rule proposes additional policies and measures in the Skilled Nursing Facility Quality Reporting Program. The proposal also contains an update on the SNF Payment Models Research project. Comments on the proposed rule are due by 5:00 pm on June 20, 2016.

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Overall, the Proposed Rule details CMS’s proposals for SNFs in CMS’s accelerating pace of shifting Medicare payment from volume to value toward the administration’s goals and timeline for moving the Medicare program, and the health care system, toward paying providers based on the quality, rather than the quantity of care. The “payment for value” purchasing concepts that CMS seeks to achieve can be viewed in the context of, among other initiatives, CMS’s site-neutral payment for hospitals, and by way of further example, changes in payments for physicians when, beginning in 2017, most physicians will be required to choose whether to be evaluated based on performance measures and the Merit-Based Incentive Payment System or to participate in an Advanced Alternative Payment Model. The depth of provider professional provider staffing, consulting and IT resources needed to understand and successfully navigate under CMS’s new value based payment models will task even large SNFs as to what needs to be done. Given the complexity of the proposed SNF value-based purchasing measures in concept and implementation, CMS goes to lengths to encourage interested party comments and questions. The Proposed Rule does not contain any text of actual regulations that CMS would adopt to implement its proposal.

SNF Value-Based Purchasing Program (VBP)

The Protecting Access to Medicare Act of 2014 (PAMA) authorized the SNF VBF Program beginning with FY 2019, and applies to freestanding SNFs, SNFs affiliated with acute care facilities, and all non-CAH swing-bed rural hospitals. Beginning with FY 2019, VBF payments are funded by a 2 percent withhold from SNF payments.

  • Proposed 2017 Measure – 30-Day Potentially Preventable Readmission Measure

CMS finalized its proposal to for its first quality measure, the SNF 30-Day All-Cause Readmission Measure (SNFRM) as the SNF all-cause, all-condition hospital readmission measure for the SNF VBF Program in the FY 2016 SNF PPS final rule. SNFRM assesses the risk standardized rate of all-cause, all-condition, unplanned inpatient hospital readmission of Medicare fee-for-service SNF patients within 30 days of discharge from an admission to an inpatient PPS hospital, CAH or psychiatric hospital. CMS states the measure is claims-based, requiring no additional date collection or submission burden for SNFs.

As to the second measure, PAMA requires CMS specify that measure no later than October 1, 2016, and is to apply to payments under SNF VBF for services furnished on or after October 1, 2018 (that is, for FY 2019). To meet the October 1, 2016, deadline, CMS addresses the requirement for the second measure in the Proposed Rule with its proposal for an all-condition risk-adjusted potentially preventable hospital readmission measure. For the 2017 SNF rule, CMS is proposing to specify the SNF 30-Day Potentially Preventable Readmission Measure (SNFPPR) as the SNF all-condition risk-adjusted potentially preventable hospital readmission measure. CMS states that this proposed measure assesses the facility-level risk-standardized rate of unplanned, potentially preventable hospital readmissions for SNF patients within 30 days of discharge from a prior admission to a PPS hospital, CAH or psychiatric hospital. CMS’s list of Potentially Preventable Readmissions conditions in the post-SNF discharge period include: 1) inadequate management of chronic conditions; 2) inadequate management of infections; and 3) inadequate management of other unplanned events. Like the measure in 2016, the measure is claims-based, so CMS states it requires no additional data collection or submission burden for SNFs.

CMS premises this readmission measure on its stated view that hospital readmissions among the Medicare population, including beneficiaries that utilize post-acute care, are common, costly, and often preventable. CMS invites public comment on its SNFPPR proposal and well as on when CMS should propose this change for the SNF VBF Program.

2. 2016 Measure

CMS began development of the SNF VBP Program in FY 2016 SNF PPS final rule with the adoption of an all-cause, all-condition measure, one of the two measures required by PAMA. PAMA requires that the an all-cause, all-condition hospital readmission measure be replaced as soon as practicable by an all-condition risk-adjusted potentially preventable hospital readmission measure—and confidential and public reporting requirements for the SNF VBF Program. CMS will use these measures to assess the rate at which SNF patients are readmitted within 30 days of being discharged from a facility paid under the inpatient hospital PPS, a critical access hospital or a psychiatric hospital.

3. Performance Standards

PAMA requires that CMS establish performance standards under the SNF VBP program. The standards must include levels of achievement and improvement, established and announced no later than 60 days prior to the beginning of the performance period for the Fiscal Year involved. Beginning with the FY 2019 SNF VBP, CMS proposes to define the achievement performance standards (the “achievement threshold”) for quality measures specified under SNF VBP as the 25th percentile of national SNF performance on the quality measure during the applicable baseline period. CMS proposes to adopt calendar year 2015 as the baseline period for the FY 2019 SNF VBP, and to use that as the basis for calculating the performance standard.

CMS believes this achievement threshold definition represents an achievable standard of excellence that will reward SNFs appropriately for their performance on the quality measures specified for SNF VBP and provide strong incentives for SNFs to improve their performance on the measures, and will result in a wide range of SNF measure scores. The SNF measure scores can then be used in public reporting.

CMS seeks comment on whether it should consider adopting either the 50th or 15th percentiles of national SNFs’ performance on the quality measure during the baseline period. CMS also seeks comments regarding the impact of SNFs financial viability and service delivery at either the higher or lower alternative standard, citing in its Proposed Rule the consequences that may follow from the use of a higher or lower achievement threshold. CMS states, for example, that while the 50th percentile would represent a more challenging threshold for care quality improvement, it aligns with the Hospital VBP Program and would likely result in higher value-based incentive payments for top-performing SNFs than other definitions.

4. SNF Performance Scoring

CMS proposes to adopt calendar year 2015 claims as the baseline period for the FY 2019 SNF VBP Program and to use that baseline period as the basis for calculating performance standards. CMS states that it proposes to adopt a scoring model similar conceptually to that used by the Hospital VBP Program and the ESRD Quality Improvement Program, with modifications to allow CMS to better differentiate between SNFs performance on the quality measures under SNF VBP. Under this model, CMS would implement a 0 to 100 point scale for achievement scoring and a 0 to 90 point scale for improvement scoring.

Where CMS will use only one measure (readmission) in SNF VBP to incentivize and assess facility performance and improvement, and to ensure that SNFs and the public are able to understand the scoring measures, CMS proposes a calculation that inverts the score. For example, a SNFRM rate of 0.14159 means that 14.2 percent of qualifying patients discharged from that SNF were readmitted during the risk window. Where the use of a “lower is better” rate could cause confusion to the public, CMS proposes to invert the scores. Thus, in the example, the same SNFRM rates (0.14159) would result in a SNFRM inverted rate of .85841, meaning that about 86 percent of qualifying patients discharged from that SNF were not readmitted. The Proposed Rule describes in detail as to how scoring a SNFs’ Performance Based on Achievement will be calculated using the inverted rate compared to the benchmark. The SNF achievement score would range between 0 and 100.

The Proposed Rule also described the scoring of SNF Performance Based on improvement, which would be done on a score of 0 to 90 points based on how much performance on the specified measure improved from its performance on the measure during the baseline period.

5. Publication of Performance Standards

CMS believes that it must establish and announce performance standards for FY 2019 by November 1, 2016. However, because finalizing numerical values of these performance standards can be logistically difficult, to retain the flexibility CMS says is needed to ensure that numerical values published for the finalized performance standard are accurate, CMS is proposing a process that straddles regulatory processes. That is, CMS proposes to publish the numerical values no later than 60 days prior to the beginning of the performance period, but if necessary because finalizing the values in the published rule is not “practicable,” will publish outside of notice-and-comment rulemaking. Thus, in instances in which CMS cannot complete the necessary analyses in time to include them in the SNF PPS final rule, CMS proposes to publish the numerical values for the performance standards on the QualityNet website used by SNFs to receive VBP information as soon as practicable but not later than the statutorily required 60 days period to the beginning of the performance period for the fiscal year involved. CMS says it would notify SNFs and the public of the standards using a listserv email and posting on the QualityNet news portion of the website.

6. SNF Value-Based Incentive Payments

Under VBF, starting with FY 2019, a SNFs Part A payment adjustment will be based on its rehospitalization score ranking. CMS discusses at some length models to convert rehospitalization ranking into payment adjustments, but does not at this point propose a method to link the rehospitalization score to a SNF’s payment adjustment. For the 2019 SNF VBF, CMS intends to notify SNFs of those payment adjustments via a SNF performance score not later than 60 days prior to October 1, 2018.

7. Confidential Reports to SNF

PAMA added requirements for confidential and public reporting for the VBP Program. CMS is required to provide SNFs with quarterly confidential feedback reports to SNFs on their performance on the measures specified under VBP, along with the opportunity to review and correct information that is to be made public by providing SNFs with an annual confidential feedback report. In order to meet the statutory deadline of October 1, 2016, for CMS to begin providing those reports, CMS states that it is developing the feedback reports, operational systems and implementation guidance related to these reports. CMS intends to provide these reports to SNFs via the Quality Improvement Evaluation (QIES) system Certification and Survey Provider Enhanced Reporting (CASPER) files currently used by SNFs to report quality performance, welcoming comments on the appropriateness of the QIES system and considerations when designing and providing these feedback reports. The Proposed Rule details the regulatory process and timelines to provide confidential feedback reports of providers, prior to public reporting.

8. Public Reporting of Aggregate Information on the VBP Program on the Nursing Home Compare website

CMS is required to make available to the public on the Nursing Home Compare website information regarding the performance of individual SNFs with respect to a Fiscal Year, including the performance score for each SNF for the Fiscal Year, and each SNF’s ranking. The law also requires CMS to periodically post aggregate information on the SNF VBP Program on the Nursing Home Compare website, including the range of SNF performance scores, and the number of SNFs receiving value-based incentive payments and the range and total amount of those payments. CMS intends to address this topic in future rulemaking, welcoming public comments on the best means by which to display the SNF-specific and aggregate performance information for public consumption.

SNF Quality Reporting Program (QRP)

Under the Proposed Rule, CMS continues the work required by IMPACT that CMS implement a quality reporting program (QRP) for SNFs which will affect PPS payment in part beginning with FY 2019 in conjunction with the SNF Value-Based Purchasing Program (VBF). Under these requirements, SNFs will be required to report their data for measures in the quality and resource use domains that CMS specifies to receive their full payment under SNF PPS. CMS states that the SNF quality reporting measures align with the measures proposed for inclusion in the Long Term Care Hospitals QRP and the Inpatient Rehabilitation QRP. SNFs that do not submit required quality data to CMS under SNF QRP will be subject to a 2.0 percentage point reduction to their annual rate updates.

SNF Payment Models Research Project

The Proposed Rule includes CMS’s update on the SNF Payment Models Research (PMR) project. In the expanded scope of the SNF Therapy Payment Research project to examine potential improvements and refinements to the overall SNF PPS payment, CMS is updating the public on the current state of the expanded SNF PMR. The Proposed Rule provides the online reference for the presentation and report given to the Technical Expert Panel, in February 2015, focused on the therapy component of SNF PPS. The Proposed Rule also provides the online reference for the presentation and report given to the second Technical Expert Panel, in November 2015, focused on the nursing component of SNF PPS.

Changes to FY 2017 Payment Rates

Based in the changes in the Proposed Rule, CMS projects that aggregate payments to SNFs will increase in FY 2017 by $800 million, or 2.1 percent, from payments in FY 2016. The increase is attributable to a 2.6 percent market basket increase reduced by 0.5 percentage points, as mandated by the multifactor productivity adjustment required by law. 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 add-on to the per diem rate for SNF patients with AIDS of 128 percent as of October 1, 2004, will remain in effect for FY 2017.


As it did on the FY 2016 SNF proposed rule with VBP provisions, CMS will likely receive extensive feedback on the Proposed Rule given the complexity and significance of CMS’s VBP proposals to Medicare SNF payments. While the tendency may be to say, “I’ll deal with this for 2018,” given CMS’s accelerating pace of implementing significant realignments of payment policies, including from “quantity” to “quality,” stakeholders are encouraged to review the rule the Proposed Rule and consider comment strategy. CMS is accepting comments on the Proposed Rule until 5:00 pm on June 20, 2016.

CMS published the Proposed Rule in the April 25, 2016 Federal Register, which can be found here.