Skilled Nursing Homes Facing Higher Penalties, Payment Changes

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 fiscal year (FY) 2025.

Also included in the final rule are changes to the SNF Quality Reporting Program (QRP) and the SNF Value-Based Program (VBP) for 2025 and future years.

For more information, download the final rule from the Federal Register.

Market basket and payment updates

CMS is required to establish a market basket index reflecting changes over time in prices of an appropriate mix of goods and services included in covered SNF services. The final rule rebases the SNF market basket to the 2022 base year.

Based on forecasting, for 2025 CMS adjusts the rates based on a 3% SNF market basket update. CMS then increased the market basket update by 1.7% due to a forecast adjustment. For FY 2023, the forecasted increase in the SNF market basket was 3.9%, whereas the actual increase for FY 2023 was 5.6% — resulting in the actual increase being 1.7% points higher than the estimated increase.

This 1.7% is added to the final market basket and then reduced by 0.5% for the required productivity adjustment, resulting in the 4.2% update. This is an estimated increase of $1.4 billion in aggregate Medicare Part A payments in FY 2025.

Table 3: FY 2025 Unadjusted Federal Rate Per Diem - URBAN

Table 4: FY 2025 Unadjusted Federal Rate Per Diem - RURAL

Table 7: Labor-Related Share, FY 2024 and FY 2025

Value-based purchasing update

CMS finalized several policy changes in the SNF VBP program. However, no new measures or measure set adjustments were made in the final rule. CMS adopted and updated several administrative policies, including adopting a measure retention and removal policy, a technical measure update policy, and updating the review and corrections policy. The impact of the final changes is an estimated reduction of $187.69 million in aggregate payments to SNFs during FY 2025.

CMS had previously updated (from FY 2024) the measures utilized in the VBP Program to include the Nursing Staff Turnover, SNF Healthcare-Associated Infection (HAI), and Total Nurse Staffing measures, which will be scored beginning in FY 2026.

The other three measures from FY 2024; Falls with Major Injury, Discharge Function Score for SNFs, and Long Stay Hospitalization, along with the FY 2023 Discharge to Community-Post Acute Care (DTC PAC) SNF measure will be scored beginning FY 2027. Beginning in FY 2028 the current 30-Day All Cause Readmission measure will be replaced with the SNF Within-Stay Potentially Preventable Readmissions measure.

Finally, for the VBP program, CMS intends to apply the measure minimum finalized for FY 2027 to FY 2028 and forward. This requires SNFs to report the minimum number of cases for four of the eight measures. SNFs not meeting this requirement would be excluded from the applicable program year and would receive their adjusted federal per-diem rate for that fiscal year.

Quality reporting program validation process

CMS finalized the policy requiring SNFs to participate in a validation process applying to data submitted using the MDS and SNF Medicare fee-for-service claims as a SNF QRP requirement beginning with the FY 2027 SNF QRP. This validation process would align with the SNF VBP process adopted in the FY 2024 final rule.

For standardized patient assessment data, up to 1,500 SNFs submitting at least one MDS record in the calendar year (CY) three years prior to the applicable FY SNF QRP would be selected for validation. Further, CMS indicated the same SNFs randomly selected for VBP validation would also be selected for the QRP validation process.

SNFs would be required to submit up to 10 medical records. If the requested documents aren’t submitted within a specified time frame (45 days), the SNF’s applicable annual market basket would be reduced by 2%. This reduction would be applied to the payment update two fiscal years after the fiscal year for which the records were requested. For claims-based measures, CMS finalized the proposal to apply the Medicare Administrative Contractor’s existing validation process for the SNF QRP claims-based measures beginning with the FY 2027 program year.

Quality reporting program

There are currently 15 adopted measures, and CMS did not adopt any new measures for FY 2025.

Table 28: Quality Measures Currently Adopted for the SNF QRP

For standardized patient assessment data collected, CMS finalized the requirement for SNFs to collect and submit — through the MDS — four new items and to modify one. The four new items proposed as standard assessment data elements are one item for living situation, two items for food, and one item for utilities. The collection of these items would begin with the FY 2027 SNF QRP.

The modified item is the current transportation item in the MDS so it aligns with a transportation item collected on the AHC HRSN Screening Tool. The modification would change item A1250 on the MDS to have a defined 12-month look-back period and to simplify the response options.

The overall impact of this proposal is an estimated cost of $2 million annually to SNFs beginning with the FY 2027 QRP.

Civil monetary penalties

Currently, the state and/or CMS decides whether to select a per day (PD) or per instance (PI) civil monetary penalty (CMP) when considering whether a CMP will be used as a remedy to a noncompliance instance. CMS finalized the change to define ‘‘instance’’ or ‘‘instance of noncompliance’’ as a separate factual and temporal occurrence when a facility fails to meet a participation requirement.

CMS stated each instance of noncompliance would be sufficient to constitute a deficiency and a deficiency may be comprised of multiple instances of noncompliance. Doing so allows CMS and the states to impose multiple PI CMPs for the same type of noncompliance in a survey, thereby incentivizing facilities to take meaningful steps to permanently resolve their deficiencies.

CMS included in the final rule that for each instance of noncompliance, CMS and the state may impose a PD CMP of up to $10,000, a PI CMP of $1,000 to $10,000, or both. CMS updated the language to identify when a survey contains multiple instances of noncompliance, CMS and the state may impose any combination of PI or PD CMP for each instance of noncompliance within the same survey. Additionally, CMS is allowing for each instance of noncompliance, a PD CMP, PI CMP, ‘‘or both’’ may be imposed, regardless of whether the deficiencies constitute immediate jeopardy.

CMS included language specifying when a survey contains multiple instances of noncompliance, a combination of PI and PD CMPs for each instance of noncompliance may be imposed within the same survey. This allows penalties to better align with noncompliance and for more consistency of CMP amounts across the nation. This change is estimated to result in an additional penalty amount of $25 million annually to long-term care facilities and $164,900 annual administrative costs to CMS and states.

Other policies

The final rule includes several changes to ICD-10 code mappings along with summary comments resulting from the request for information (RFI) on potential future updates to the non-therapy ancillary component of the patient-driven payment model.

How we can help

Connect with CLA for further clarification on these proposed 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.

Contact us

Get guidance on how the new CMS changes impact your SNF. Complete the form below to connect with CLA.