CMA Alert | June 16, 2022

Proposed Cuts to Medicare Part A Reimbursement for Skilled Nursing Facilities: “Crippling” – or Tiny?

In its annual proposed rules to update Medicare reimbursement to skilled nursing facilities for fiscal year 2023, the Centers for Medicare & Medicaid Services (CMS) proposes a “parity adjustment” to reduce Part A payments by $1.7 billion (4.6%).  The purpose of the adjustment is to recapture the unintended $1.7 billion increase in Part A payments to skilled nursing facilities when CMS implemented the new reimbursement system in October 2019.[1]  CMS had intended for the new system, Patient Driven Payment Model, to be budget-neutral, but it found that facilities received higher payments, equaling $1.7 billion (5%).  Last year, CMS considered, but did not make, any parity adjustment for fiscal year 2022, citing the coronavirus pandemic.  This year, CMS again proposes making a parity adjustment.  However, the proposed adjustment should not be considered in isolation.  It is largely offset by CMS’s proposal to increase Part A payments by $1.4 billion, reflecting an increase in the market basket (defined as “the most commonly used cost categories for SNF routine services, ancillary services, and capital-related expenses”).[2]  The net result would be an actual reduction of $320 million in Part A reimbursement to skilled nursing facilities for fiscal year 2023.

The Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare policy, recommended in its March 2022 report that Congress reduce the 2022 Medicare base payment rates for skilled nursing facilities by 5%.[3]  MedPAC reported that for all skilled nursing facilities, Medicare margins were 16.5% in 2020, with for-profit facilities reporting Medicare margins of 20% and rural facilities reporting Medicare margins of 18.4%.[4] 

MedPAC reiterated its recommendation to cut Medicare rates in its comment letter on the proposed reimbursement rule, noting that 2020 was “the 21^st consecutive year that this margin has exceeded 10 percent.”[5]  It also noted that “The aggregate Medicare margin for freestanding SNFs in 2020 was 16.5 percent” and that “If we allocate a portion of the reported federal relief funds to Medicare payments, we estimate that the aggregate Medicare margin was 19.2 percent.”[6] 

Although MedPAC supported delaying implementation of the PDPM parity adjustment for fiscal year 2022, it now supports implementation of the adjustment “to ensure budget neutrality,” noting that the reduction “would be largely offset by the 3.9 percent proposed increase in the market basket update, for a combined net reduction to payments of 0.7 percent, or $320 million.”[7]

As reported by Bloomberg Law, “nursing home officials were overwhelmingly critical of CMS’s plan to correct the payments in FY 2023,” citing the comment letters of both national nursing home trade associations and the president of a company with 25 facilities, who wrote that the parity adjust “‘would be crippling to us.’”[8]  Skilled Nursing News repeats the nursing home industry’s exaggerated claims with its headline on Medicare’s proposed rule entitled “Devastating and Crippling: CMS Receives Thousands of Comments, Nursing Home Operators Push Back on Medicare Cut.”[9]

An analysis by the National Consumer Voice for Quality Long-Term Care calculates that a $320 overall reduction in Part A payments to 15,000 nursing facilities would result in an average reduction, to each facility, of $21,333.

What does the proposed 0.7% reduction of Part A payments of $320 million actually represent?  The nursing home industry’s claim that a 0.7 % cut reflects a crippling reduction in payments to facilities does not ring true. The reduction is mostly offset by the market basket increase, and is tiny, compared to the enormous overpayments documented by MedPAC for the past 21 years, including during the pandemic.

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[1] CMS-1765-P, “Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities; Updates to the Quality Reporting Program and Value-Based Purchasing Program for Federal Fiscal Year 2023; Request for Information on Revising the Requirements for Long-Term Care Facilities To Establish Mandatory Minimum Staffing Levels,” 87 Fed. Reg. 22720, 22737 (Apr. 15, 2022), https://www.govinfo.gov/content/pkg/FR-2022-04-15/pdf/2022-07906.pdf 
[2] Id. p. 22723 
[3] MedPAC, Report to the Congress: Medicare Payment Polic , Chapter 7, p. 232 (Mar. 2022), https://www.medpac.gov/wp-content/uploads/2022/03/Mar22_MedPAC_ReportToCongress_SEC.pdf    
[4] Id. p. 253, Table 7-4 
[5] Comment Letter to CMS, submitted by Michael E. Chernew, Chair, MedPAC (Jun. 8, 2022), https://www.medpac.gov/wp-content/uploads/2022/06/06082022_SNF_FY2023_MedPAC_COMMENT_SEC.pdf 
[6] Id. p. 2 
[7] Id. 3. 
[8] Tony Pugh, “Nursing Homes Blast Plans for Medicare Pay Cut, Staffing Mandate,” Bloomberg News (Jun. 14, 2022), https://news.bloomberglaw.com/health-law-and-business/nursing-homes-blast-plans-for-medicare-pay-cut-staffing-mandate 
[9] Article in Zlex Zorn, June 12, 2022, at https://skillednursingnews.com/2022/06/devastating-and-crippling-cms-receives-thousands-of-comments-nursing-home-operators-push-back-on-medicare-cut/?itm_source=parsely-api

OIG Report: Medicare Data Inaccuracies Hamper Assessment of Health Disparities

A new report by the Office of Inspector General (OIG) concluded that there are inaccuracies in Medicare’s enrollment race and ethnicity data.[1] “Race and ethnicity data are foundational to identifying and understanding health disparities among Medicare beneficiaries and to addressing the effectiveness of efforts to reduce such disparities,” according to the report. The data are particularly less accurate for beneficiaries identified as American Indian/Alaska Native, Asian/Pacific Islander, or Hispanic. The inaccurate data limit the ability to precisely assess health disparities. This could critically impact initiatives set forth by the Centers for Medicare & Medicaid Services (CMS).

CMS recently outlined a strategy to advance health equity, which built upon the agency’s commitment to make health equity the first “pillar” of its strategic vision.[2] CMS Administrator Chiquita Brooks-LaSure asserted, “Health equity will be embedded within the DNA of CMS and serve as the lens through which we view all of our work. Our vision is clear and our goal is straightforward – we will not stop until every person has a fair and just opportunity to attain their optimal health.”

The ability of every person to have a “fair and just opportunity” to achieve optimal health, however, depends upon data. The OIG report states, “The ability to assess health disparities hinges on the quality of underlying race and ethnicity data.”[3]

To determine its conclusions, OIG analyzed both race and ethnicity data in Medicare’s enrollment database, derived from source data from the Social Security Administration (SSA), and results of an algorithm that CMS applies to source data. OIG proceeded to assess the accuracy of Medicare’s enrollment race and ethnicity data for various groups by comparing them to self-reported data for a subset of beneficiaries residing in nursing homes. OIG noted that self-reported race and ethnicity data are considered the most accurate. Furthermore, OIG used the Federal standards for collecting race and ethnicity data as a benchmark in assessing the adequacy of Medicare’s data.

OIG further concluded that the lack of accuracy for Medicare’s enrollment race and ethnicity data is impacted by limited race and ethnicity categories and missing information. Additionally, Medicare’s enrollment data on race and ethnicity are inconsistent with Federal data collection standards.

OIG recommended “that CMS:

1. Develop its own data source of race and ethnicity data,
2. Use self-reported race and ethnicity information to improve data for current beneficiaries,
3. Develop a process to ensure that the data are as standardized as possible, and
4. Educate beneficiaries about CMS’s efforts to improve the race and ethnicity information.”

OIG reported that while CMS did not explicitly concur with the first recommendation, the agency did agree with the other three.

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[1] OIG. Inaccuracies in Medicare’s Race and Ethnicity Data Hinder the Ability to Assess Health Disparities. OEI-02-21-00100. (June 15, 2022). Available at: https://oig.hhs.gov/oei/reports/OEI-02-21-00100.asp 
[2] CMS. Press release CMS Outlines Strategy to Advance Health Equity, Challenges Industry Leaders to Address Systemic Inequities. (April 20, 2022). Available at: https://www.cms.gov/newsroom/press-releases/cms-outlines-strategy-advance-health-equity-challenges-industry-leaders-address-systemic-inequities 
[3] OIG. Inaccuracies in Medicare’s Race and Ethnicity Data Hinder the Ability to Assess Health Disparities. OEI-02-21-00100. (June 15, 2022). Available at: https://oig.hhs.gov/oei/reports/OEI-02-21-00100.asp

John A. Hartford Foundation Gives $1.2 Million Grant to LeadingAge to Further Recommendations of National Academies’ Recent Nursing Home Report

The John A. Hartford Foundation announces a 24-month grant of $1.2 million to LeadingAge “to improve nursing home care in America” and to “convene a coalition of organizations representing nursing home residents and family caregivers; providers, including leaders and frontline staff; as well as advocacy groups, researchers, foundations, policymakers and others to advance the NASEM [National Academies of Sciences, Engineering, and Medicine] report  recommendations.”[1]  Work under the grant will be led by Katie Smith Sloan, president and CEO, LeadingAge, and by Alice Bonner, geriatric nurse practitioner, senior advisor for aging at the Institute for Healthcare Improvement (and formerly, director of the nursing home division, Centers for Medicare & Medicaid Services, during the Obama Administration).

Grant activities include:

Identifying the most immediately actionable recommendations from the NASEM report and devising strategies to bring them to fruition through the collective action of stakeholders to influence policy and practice change. The strategies will be informed by an actionability index developed by LeadingAge and the project coalition. LeadingAge will offer direct training and support to nursing homes through virtual education opportunities and activities with local organizations.

The 605-page NASEM report[2] addresses concerns that advocates for residents have been raising for many years – inadequate staffing levels, failure to enforce standards of care, and lack of requirements and accountability for how public reimbursement is spent, among others – and proposes specific solutions that advocates have urged.  Its findings and recommendations mirror President Biden’s nursing home reform agenda, which was described in a February 28, 2022 White House Fact Sheet[3] and announced by the President in his State of the Union address on March 1.

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[1] John A. Hartford Foundation, “Aging Organizations Partner to Advance Nursing Home Improvements and Reform” (News Release, Jun. 14, 2022), https://www.johnahartford.org/newsroom/view/aging-organizations-partner-to-advance-nursing-home-improvements-and-reform 
[2] The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff (2022), discussed in “National Academy of Sciences’ Nursing Home Report Continues the Drumbeat for Reform” (CMA Alert, Apr. 7, 2022), https://medicareadvocacy.org/national-academy-of-sciences-nursing-home-report-continues-the-drumbeat-for-reform/ 
[3] White House, “Protecting Seniors and People with Disabilities by Improving Safety and Quality of Care in the Nation’s Nursing Homes” (Fact Sheet, Feb. 28, 2022), https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/28/fact-sheet-protecting-seniors-and-people-with-disabilities-by-improving-safety-and-quality-of-care-in-the-nations-nursing-homes/.  See “Biden Administration Issues Bold and Comprehensive Nursing Home Reform Agenda” (CMA Alert, Mar. 3, 2022),  https://medicareadvocacy.org/bidens-bold-2022-nursing-home-reform-agenda/