Key insights
- The Centers for Medicare & Medicaid issued its final rule, including an overall increase of 4% in payments to skilled nursing facilities for fiscal year 2024.
- Also included in the rule was a 2.3% decrease for the second phase of the Patient Driven Payment Model parity adjustment.
- CMS also finalized various changes to the Value-Based Purchasing and Quality Reporting programs.
How might the new CMS rules affect your skilled nursing facility?
SNFs continue to struggle with staffing, occupancy
The environment for skilled nursing facilities is still rocky post-pandemic. CLA’s reporting on the skilled nursing facility industry shows occupancy rates are not fully recovered to pre-pandemic levels and will likely not reach those levels until 2024. The slower occupancy recovery and inflationary pressures continue to erode operating margins for SNFs across the country.
Due to workforce shortages, many SNFs are using contract nursing. Staffing agencies are charging 22% to 28% higher rates since the beginning of the pandemic. Facilities are watching for CMS’s release of a staffing mandate as they continue to struggle with labor shortages. According to a CLA study, the SNF industry would need to hire between 58,000 and 191,000 additional full-time equivalents to meet a potential staffing mandate.
If SNFs can’t find staff to meet the mandate, it could result in reduced admissions and reductions in census, negatively impacting residents who need skilled care.
The Centers for Medicare & Medicaid (CMS) issued its final rule updating the payment rates used under the prospective payment system (PPS) for skilled nursing facilities (SNFs) for the fiscal year (FY) 2024. It includes a net increase of 4%, or approximately $1.4 billion, in Medicare Part A payments.
Also included in the final rule are changes to the SNF Quality Reporting Program (QRP) and the SNF Value-Based Purchasing Program (VBP) for 2024 and future years.
Read on for more information or download the final rule from the Federal Register.
Market basket and payment updates
CMS is required to establish a market basket index reflecting changes in the prices of an appropriate mix of goods and services included in covered SNF services.
Based on forecasting, CMS adjusted the rates based on a 3% SNF market basket update. CMS then increased the market basket update by 3.6% for a forecast error adjustment and reduced the market basket update 0.2% for the productivity adjustment. In addition, a 2.3% decrease is included for the second phase of the Patient Driven Payment Model (PDPM) parity adjustment. This results in a net aggregate increase of 4%, which is approximately a $1.4 billion increase in Medicare Part A payments in FY 2024.
Table 3: FY 2024 Unadjusted Federal Return Rate Per Diem — URBAN
| Rate Component | PT | OT | SLP | Nursing | NTA | Non-Case-Mix |
| Per Diem Amount | $70.27 | $65.41 | $26.23 | $122.48 | $92.41 | $109.69 |
Table 4: FY 2024 Unadjusted Federal Return Rate Per Diem — RURAL
| Rate Component | PT | OT | SLP | Nursing | NTA | Non-Case-Mix |
| Per Diem Amount | $80.10 | $73.56 | $33.05 | $117.03 | $88.29 | $111.72 |
Table 7: Labor-Related Share, FY 2023 and FY 2024
| Relative importance, labor-related share, FY 2023 22:2 forecast1 | Proposed Relative importance, labor-related share, FY 2024 22:4 forecast2 | |
| Wages and salaries | 51.9 | 52.5 |
| Employee benefits | 9.5 | 9.3 |
| Professional fees: Labor-related | 3.5 | 3.4 |
| Administrative & facilities support services | 0.6 | 0.6 |
| Installation, maintenance & repair services | 0.4 | 0.4 |
| All other: Labor-related services | 2.0 | 2.0 |
| Capital-related (.391) | 2.9 | 2.9 |
| Total | 70.8 | 71.1 |
1 Published in the Federal Register; Based on the second quarter 2022 IHS Global Inc. forecast of the 2018-based SNF market basket.
2 Based on fourth quarter 2023 IHS Global Inc. forecast of the 2018-based SNF market basket.
Nursing Staff Turnover measure
Studies have indicated a strong association between high nursing staff turnover rates and negative resident outcomes. The Nursing Staff Turnover measure will highlight the potential positive resident outcomes with reductions in nursing turnover. However, the major challenge for the industry is the ability to recruit and retain staff with significant workforce shortages and no additional funding to increase wages for nursing staff.
Value-based purchasing updates
CMS finalized an expansion of the SNF VBP program including the adoption of four new quality measures, a replacement of one quality measure, and several policy changes. The four new measures would begin with FY 2026, FY 2027, and FY 2028 SNF VBP years with data collection beginning in FY 2024.
For FY 2026, CMS is adopting the Nursing Staff Turnover measure, with a FY 2024 performance year and payment impact beginning in FY 2026. For FY 2027, CMS finalized the adoption of the Discharge Function Score measure with a FY 2025 performance year. This measure is also being adopted for the SNF Quality Reporting Program (QRP). Also for FY 2027, CMS finalized the Long Stay Hospitalization measure per 1,000 residents and the Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) measure with a FY 2025 performance year.
Health equity an ongoing focus across Medicare
The Department of Health & Human Services is advancing health equity throughout its programs, such as the health equity adjustment in this final SNF payment rule. There are health equity policies also included in other Medicare payment rules as well as embedded in all new CMS Innovation models, like the REACH ACO, the Making Care Primary and the new Guiding an Improved Dementia Experience model. Understanding your patient’s social drivers of health will be a growing focus in the coming years.
CMS will be replacing the Skilled Nursing Facility 30-Day All-Cause Readmission measure with the Skilled Nursing Facility Within Stay Potentially Preventable Readmissions measures beginning with a FY 2025 performance year.
CMS is also adopting a Health Equity Adjustment to reward SNFs that perform well with a resident population that is at least 20% with dual eligibility status. The Health Equity Adjustment will begin with the FY 2027. The approach is to reward for excellent care for underserved populations. Finally, CMS has finalized an increase of the payback percentage policy under the program from the current 60% level to 66% for FY 2027. The intent is to allow for Health Equity Adjustment bonuses to the high performing, high duals SNFs without impacting other SNFs.
Quality reporting program
The SNF QRP requires SNFs to meet certain reporting requirements, and SNFs may be subject to a 2% reduction in their annual update rate if the reporting requirements are not met. CMS is increasing the threshold for data completion for the Minimum Data Set (MDS) items increase beginning in FY 2026
Minimum Data Set changes coming
Significant changes are coming to the MDS, effective October 1, 2023. Providers should become familiar with these changes, particularly those impacting quality measures and QRP, so they don’t experience an inadvertent 2% reduction in payment. CLA can assist with all things MDS. Reach out today.
The proposal is for SNFs to report 100% of the required quality measure data and standardized resident assessment data collected using the MDS on at least 90% of the assessments submitted to CMS. The current threshold is 80%. Any SNF that does not meet the updated requirement will be subject to a 2% reduction of the applicable fiscal year annual payment update beginning with FY 2026.
There are currently 16 measures for FY 2024.
Table 11: Quality Measures Currently Adopted for the FY 2024 SNF QRP
| Short Name | Measure Name & Data Source |
| Resident Assessment Instrument Minimum Data Set (Assessment-Based) | |
| Pressure Ulcer/Injury | Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/Injury |
| Application of Falls | Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) |
| Application of Functional Assessment/Care Plan | Application of Percent of Long-Term Care Hospital (LTCH) Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function |
| Change in Mobility Score | Application of IRF Functional Outcome Measure: Change in Mobility Score for Medical Rehabilitation Patients |
| Discharge Mobility Score | Application of IRF Functional Outcome Measure: Discharge Mobility Score for Medical Rehabilitation Patients |
| Change in Self-Care Score | Application of the IRF Functional Outcome Measure: Change in Self-Care Score for Medical Rehabilitation Patients |
| Discharge Self-Care Score | Application of IRF Functional Outcome Measure: Discharge Self-Care Score for Medical Rehabilitation Patients |
| DRR | Drug Regimen Review Conducted With Follow-Up for Identified Issues-Post Acute Care (PAC) Skilled Nursing Facility (SNF) Quality Reporting Program (QRP) |
| TOH-Provider* | Transfer of Health (TOH) Information to the Provider Post-Acute Care (PAC) |
| TOH-Patient* | Transfer of Health (TOH) Information to the Patient Post-Acute Care (PAC) |
| Claims-Based | |
| MSPB SNF | Medicare Spending Per Beneficiary (MSPB)-Post Acute Care (PAC) Skilled Nursing Facility (SNF) Quality Reporting Program (QRP) |
| DTC | Discharge to Community (DTC)-Post Acute Care (PAC) Skilled Nursing Facility (SNF) Quality Reporting Program (QRP) |
| PPR | Potentially Preventable 30-Day Post-Discharge Readmission Measure for Skilled Nursing Facility (SNF) Quality Reporting Program (QRP) |
| SNF HAI | SNF Healthcare-Associated Infections (HAI) Requiring Hospitalization |
| NHSN | |
| HCP COVID-19 Vaccine | COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) |
| HCP Influenza Vaccine | Influenza Vaccination Coverage among Healthcare Personnel (HCP) |
* In response to the public health emergency (PHE) for the Coronavirus Disease 2019 (COVID-19), we released an Interim Final Rule (85 FR 27595 through 27597) which delayed the compliance date for collection and reporting of the Transfer of Health (TOH) Information measures for at least 2 full fiscal years after the end of the PHE. The compliance date for the collection and reporting of the Transfer of Health Information measures was revised to October 1, 2023 in the FY 2023 SNF PPS final rule (87 FR 47547 through 47551).
CMS finalized the adoption of two new measures, removed three measures, and modified one measure. The two new measures include the Discharge Function Score measure beginning with FY 2025 SNF QRP; and the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up-To-Date measure, beginning with FY 2026 SNF QRP. CMS is modifying the COVID-19 Vaccination Coverage among Healthcare Personnel measure beginning with FY 2025.
The measures being removed are:
- The Application of Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addressed Function
- The Application of the IRF Functional Outcome Measures: Change in Self-Care Score for Medical Rehabilitation Patients
- The Change in Mobility Score for Medical Rehabilitation Patients
Changes to civil money penalties: waiver of hearing, reduction of penalty amount
Through this rule, CMS has adopted a constructive waiver process that will consider a facility to have waived its hearing when CMS does not receive a request for a hearing within the appropriate timeframe. The purpose is to streamline an administrative procedure for CMS. The current 35% penalty reduction remains unchanged; however, CMS will continue to review this policy and the penalty reduction in the future.
How we can help
Connect with CLA for further clarification on these final rules and how they impact skilled nursing facilities. Our health care team is on the front lines of regulatory, policy, and payment changes for providers across the continuum and can provide guidance to meet your specific needs.