The dreaded day has come. On April 11th, CMS issued a proposed rule to update its Medicare payment policies and rates which would lower Medicare Part A payments to SNFs by approximately $320 million in FY 2023 compared with FY 2022. This is all the result of CMS’ October 1, 2019 rule change called the Patient Driven Payment Model, or PDPM.
In a nutshell, the case mix classification model was supposed to more accurately compensate SNFs for the high-acuity, medically complex patients they already cared for. However, it was also supposed to be budget neutral, which it was not. CMS estimated there was an unintended increase in payments of about 5%, or $1.7 billion in FY 2020. The truth is, the skilled nursing industry was aware that PDPM would likely not be budget-neutral and that a readjustment was expected after the first year of its implementation. COVID delayed that for FY 2022, but now it has come, with a 60-day comment period following the announcement, and a final rule to go into effect in October.
Many knew this was coming, and most SNFs should have made hay while the sun was shining. Not every facility benefitted from PDPM, but this a tough blow for SNFs to absorb right now, considering the intense labor pressures they face. Many facilities rely on whatever Medicare payments they receive to generate a profit, since the relatively low Medicaid rates do little better than to cover overhead expenses.
All in all, it’s a relatively small change, but with margins continuing to shrink, more mom & pops could be forced out altogether, leaving behind a higher portion of those financial buyers the government and the press like to vilify. Is that their desired outcome? We think not.
