CMS Finalizes Payment Increases for SNFs and IRFs Both Seeing a 1% Bump, Advances Move from Volume to Value within SNF VBP Program

On Monday, July 31, 2017 the Centers for Medicare and Medicaid Services (CMS) issued two final rules updating the following payment systems for federal fiscal year (FY) 2018: the Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS), and the PPS and Consolidated Billing for Skilled Nursing Facilities (SNFs). These finalized policies will impact payments to SNFs and IRFs beginning October 1, 2017 and will be in effect through September 30, 2018 (FY 2018). Policies in these final rules build on CMS’ commitment to shift Medicare payments from volume to value, through continued implementation of the SNF Value-based Purchasing (VBP) program, updated quality measures for both the SNF and IRF quality reporting programs, and updates to the IRF patient assessment instrument (PAI).

If you have questions about how these new rules could impact your business or product, please contact us at (202) 588-5272 or

SNF Payments Expected to Increase in $370 Million in 2018, Penalties for Quality Reporting Non-Compliance Take Effect

SNFs are paid under a prospective payment system (PPS), meaning providers are paid a per-diem payment that is intended to cover the costs of furnishing covered services. The SNF market basket index for FY 2018 and subsequent fiscal years will be rebased by updating the base year from 2010 to 2014. Pursuant to requirements in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), CMS finalized a 1% increase in the overall SNF rates, which is estimated to result in an increase of $370 million in payments to SNFs in FY 2018. This is slightly lower than the $390 million increase estimated in the proposed rule.

Rate Component Nursing Case-Mix Therapy Case-Mix Therapy Non-Case Mix Non-Case Mix
FY 2018 Unadjusted Per Diem Amount – Urban $177.26 $133.52 $17.59 $90.47
FY 2018 Unadjusted Per Diem Amount – Rural $169.34 $153.96 $18.79 $92.14


SNFs that do not satisfy the reporting requirements for the FY 2018 SNF Quality Reporting Program (SNF QRP), will have a 2% penalty applied to their SNF payments. This will be the first year that SNFs are subject to such a penalty.

SNF Quality Reporting Program Updated With New Skin Integrity Measure

There are currently seven measures adopted under the SNF QRP. In the proposed rule, CMS proposed to remove an existing measure related to pressure ulcers (Percent of Residents or Patients with Pressure Ulcers That are New or Worsened (Short Stay) (NQF #0678) with a modified version entitled Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/Injury). The modified measure includes new or worsened unstageable pressure ulcers, including deep tissue injuries, which were not included in the older measure. The change was generally supported by commenters and the Technical Advisory Panel. CMS intends to submit the measure to NQF for endorsement as soon as possible. Providers will begin to be measured on the new measure in FY 2018, but will not see their payments adjusted for performance until FY 2020 (October 1, 2019 – September 30, 2020).

Implementation of IMPACT Act Quality Reporting Requirements Continues

CMS is finalizing their proposal to adopt four measures for meeting the functional status, cognitive function, and changes in function and cognitive function domain:

  • Application of IRF Functional Outcome Measure: Change in Self-Care Score for Medical Rehabilitation Patients (NQF #2633);
  • Application of IRF Functional Outcome Measure: Discharge Self-Care Score for Medical Rehabilitation Patients (NQF #2635);
  • Application of IRF Functional Outcome Measure: Change in Mobility Score for Medical Rehabilitation Patients (NQF #2634); and
  • Application of IRF Functional Outcome Measure: Discharge Mobility Score for Medical Rehabilitation Patients (NQF #2636).

These functional outcomes measures were finalized for use in the IRF Quality Reporting Program in the FY 2016 IRF PPS rule, and will be included in the SNF QRP for consistency across programs. The Improving Post-Acute Care Treatment Act (IMPACT Act) of 2014 required CMS to collect standardized quality data across all post-acute care providers. In an effort to increase transparency for quality data, CMS is also finalizing that it will begin publicly reporting six new measures for display by fall 2018.

Post-Discharge Readmission Measure Changes Finalized

The SNF QRP also includes the Potentially Preventable 30-Days Post-Discharge Readmission measure. CMS proposed to increase the measurement period from one to two years of claims data and shift the measure from calendar to fiscal year and in turn sought comment on the importance, relevance, appropriateness, and applicability of four additional quality measures considered for inclusion in future years in the SNF QRP. The agency will finalize these proposals.


Changes to Value-Based Purchasing Program Finalized: Shift to Fiscal Year from Calendar Year Moving Forward

CMS also finalized FY 2018 as the performance period for the FY 2020 SNF VBP program with FY 2016 as the baseline period, meaning FY2020 would be based on the federal fiscal year instead of the calendar year as previously finalized for the FY 2019 program year.

The agency will also begin posting SNF performance in the VBP on Nursing Home Compare October 1, 2017.

Additional operational policies were finalized for the VBP program including:

  • The inclusion of one readmission measure for each year.
  • A 2 percent adjustment to the Federal per diem rate in a fiscal year to fund the value-based incentive payments for that year
  • Capping the total amount of value-based incentive payments that can be made to SNFs’ in a fiscal year at 60 percent of the total amount withheld from SNFs’ Medicare payments for that fiscal year.

Method to Account for Social Risk Factors Still Uncertain, CMS Waiting on NQF Recommendations

In the proposed rule, CMS solicited comments on how to best incorporate social risk factors into quality measurement programs, as required by the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act), as well as the SNF VBP program. For SNFs, CMS sought public comment on whether the agency should account for social risk factors in measures used in the SNF QRP and if so, what methods would be most appropriate for accounting these factors. Noting that a report on socioeconomic adjustment was completed by the Assistant Secretary for Planning and Education (ASPE) in December 2016 and that the National Quality Forum (NQF) has been engaged in a two-year trial under which measures will be assessed to determine whether risk adjustment for selected social risk factors was appropriate.

The agency states that staff are continuing to engage with stakeholders and accept comment on the issue. Any changes made to the SNF QRP in response to these efforts would be made through future rulemaking.

End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP) PY 2020 Changes Finalized in SNF Rule

Statute requires CMS to select measures, establish performance standards, specify a performance period for each payment year (PY), assess the total performance of each facility, apply an appropriate payment reduction to each facility that does not meet a minimum total performance score (TPS), and publicly report the results for the ESRD QIP.  The ESRD QIP changes the way CMS pays for the treatment of ESRD patients by linking a portion of payment directly to facilities’ performance on quality measures and can reduce payments by up to two percent to ESRD facilities that do not meet or exceed a minimum (TPS). CMS added a correction to an erroneously finalized performance period for a PY 2020 ESRD QIP measure, the NHSN Healthcare Personnel Influenza Vaccination Reporting.

As Mandated by MACRA, CMS Proposes a 1% Increase in IRF Payments

CMS simultaneously released the IRF PPS for FY 2018 final rule will be effective on October 1, 2017. The rule finalizes as proposed increasing payments under the IRF PPS by 1%. This increase was mandated by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). An approximate 0.1 percent decrease for outlier thresholds is anticipated, resulting in an overall estimated update of approximately 0.9 percent relative to payment in FY 2017. This is estimated to be an increase in payments of about $75 million dollars. For FY 2018, the Medicare Payment Advisory Commission (MedPAC) recommended that CMS reduce IRF PPS payment rates by 5%, but due to the legislative mandate, CMS had to provide for a 1% increase.

IRFs must meet the conditions of participation for acute-care hospitals; have a medical director of rehabilitation; and meet the compliance threshold (also known as the 60% rule). For this area, the volume and patient mix calculations are extremely sensitive to policy changes. Additionally, patients must both tolerate and benefit from 3 hours of therapy per day AND require at least two types of therapy. Generally, patient assessments lack uniformity across IRFs which has spurred calls from CMS to conduct focused medical record reviews.

CMS Drops 25% Penalty for Late Transmissions of Assessment Instrument

Currently, CMS applies a 25 percent payment penalty to late IRF patient assessment instrument (IFR-PAI) submissions. In this rule, CMS is finalizing the proposal to remove this 25 percent payment penalty. CMS states that they believe the penalty is no longer necessary and places an unnecessary burden on IRFs when they need to apply for a waiver from the penalty. The final rule states that all comments received by CMS about this proposal were supportive. Additionally, CMS is finalizing a proposal to remove Item 27, swallowing status, from IRF-PAI.

CMS Makes Refinements to the 60 Percent Rule Presumptive Methodology

Revises the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) diagnosis codes that are used to determine presumptive compliance under the “60 percent rule,” which helps define IRFs by requiring 60 percent of admissions to have one of 13 qualifying medical conditions. CMS has reviewed the list and are finalizing the following refinements to the ICD-10-CM list:

  • Counting certain ICD-10-CM diagnosis codes for patients with traumatic brain injury and hip fracture conditions
  • Revising the presumptive methodology list for major multiple trauma. IRF cases that contain two or more of the codes from three major multiple trauma lists in the specified combinations will count.

In addition, based on feedback from stakeholders, CMS has decided not to finalize a proposal to remove ICD-10-CM Code G72.89 (Other Specified Myopathies) from the presumptive methodology. CMS states that they will continue to monitor this for future policy development and rulemaking.

In the proposed rule, CMS had solicited comments specifically discussing the 60 percent rule. In the final rule, CMS states that most of the commenters that responded suggesting eliminating the 60 percent rule since it does not allow IRF care to be “patient-centered.” CMS’ response says that the agency will consider these as it explores ways to modernize the Medicare program.

CMS also proposed that the updated list of ICD-10-CM codes for presumptive compliance methodology be available on the IRF PPS website prior to the effective date of the changes to the ICD-10 medical code data set. This proposal has been finalized.

CMS Finalizes Proposals related to IRF Quality Reporting Program

CMS is finalizing their proposal to remove from the IRF Quality Reporting Program (IRF QRP) the current pressure ulcer measures, Percent of Residents or Patients with Pressure Ulcers That are New or Worsened (Short Stay) (NQF #0678), and replace it with a modified version of that measure called Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/Injury. The implementation date will be October 1, 2018. In addition, CMS is finalizing the proposal to remove the All-Cause Unplanned Readmission Measure for 30 Days Post Discharge from IRFs from the IRF QRP beginning with FY 2019.

In the final rule, CMS is finalizing the proposal to define “standardized patient assessment data” as patient assessment questions and response options that are identical in all four PAC assessment instruments.

Thank you to Melissa Andel and Julie Georgi for their analysis and contribution to this post.  

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