Long Term Care

CMS Proposes More Accurate Payment Rates For Medicare Skilled Nursing Facilities

The Centers for Medicare & Medicaid Services has announced its proposal for new, more accurate fiscal year (FY) 2009 payment rates for Medicare skilled nursing facilities that more closely reflect differences in patient care needs.

Medicare pays skilled nursing facilities on a prospective payment system known as the Skilled Nursing Facility Prospective Payment System (SNF PPS). The SNF PPS uses a resource classification known as Resource Utilization Groups (RUGs) to help determine a daily payment rate. The RUGs reflect a patient’s severity of illness and the kind of services that a person requires — something known as “case-mix.”

In 2006, CMS made refinements to the case-mix indices (CMIs) to better account for the resources used in the care of medically complex patients. CMS is now proposing to recalibrate the case-mix weights in order to reestablish budget neutrality on a prospective basis. CMS is also proposing to recalibrate the second part of the refinement package that accounted for the use of non-therapy ancillary services. Payments going forward would reflect the intent of the refinements, and payments to providers would more accurately and better reflect the service needs of Medicare beneficiaries. CMS would also then have in place an accurate and more precise baseline to use in anticipation of any additional program enhancements that may be made in future years.

The proposed FY 2009 recalibration of these adjustments to better reflect the resources used by beneficiaries would result in a reduction in payments to nursing homes of $770 million, or 3.3 percent. However, this decrease would be largely offset by this fiscal year’s proposed update to Medicare payments to skilled nursing facilities. The update — a proposed increase of 3.1 percent for 2009 — is based on the change in prices of a “market basket” of goods and services included in covered skilled nursing facility stays. The price of the items in the basket is measured every year and Medicare payments are adjusted accordingly.

The proposed 3.1 percent market basket increase for FY 2009 would yield $710 million in increased payments to skilled nursing facilities. Taken together with the proposed recalibration of the CMI, skilled nursing facilities could expect to see a slight decrease in payments of $60 million, or 0.3 percent.

Source: Centers for Medicare & Medicaid Services, May 1, 2008

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