Center Comments on Proposed Redesign of Reimbursement for Skilled Nursing Facilities

August 9, 2017

Thomas E. Price
Secretary
Department of Health and Human Services

Seema Verma
Administrator
Centers for Medicare & Medicaid Services
Department of Health and Human Services
Room 445-G, Hubert H. Humphrey Building
200 Independence Ave., S.W.
Washington, D.C.  20201

Re: CMS-1686-ANPRM.  Advance Notice of Proposed Rulemaking with Comment.  Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities; Revisions to Case-Mix Methodology, 82 Fed. Reg. 20980 (May 4, 2017)

Submitted electronically: http://www.regulations.gov

Dear Dr. Price, Ms. Verma, and CMS Colleagues:

The Center for Medicare Advocacy (Center) is a national, private, non-profit law organization, founded in 1986, that provides education, analysis, advocacy, and legal assistance to assist people nationwide, primarily the elderly and people with disabilities, to obtain necessary health care, therapy, and Medicare.  The Center focuses on the needs of Medicare beneficiaries, people with chronic conditions, and those in need of long-term care and provides training regarding Medicare and health care rights throughout the country.  It advocates on behalf of beneficiaries in administrative and legislative forums, and serves as legal counsel in litigation of importance to Medicare beneficiaries and others seeking health coverage.  These comments are based on our experiences talking with and representing hundreds of Medicare beneficiaries and their families who have been caught in observation status.

Overview of Comments

The Center strongly opposes the proposed new Medicare reimbursement system for skilled nursing facilities (SNFs), the Resident Classification System, Version I (RCS-I).  First, RCS-I fails to achieve the goals that the Centers for Medicare & Medicaid Services (CMS) set out in the Advance Notice.  Second, RCS-I fails to correct problems in the current Medicare reimbursement system for SNFs that have been identified for many years.  Third, if implemented, the new system so aggressively reduces financial incentives to provide therapy to residents – providing higher reimbursement to SNFs that provide either fewer types of therapy to residents over a shorter period of time or no therapy at all – that it encourages, and will lead to, facilities’ providing residents with minimal, if any, therapy.  Fourth, the system undermines the mandate of Jimmo v. Sebelius, the nationwide lawsuit that recognizes and confirms Medicare coverage of medically necessary maintenance therapy, provided or supervised by professional therapists to enable nursing home residents to maintain function and to prevent or slow their decline or deterioration.  Fifth, front-loading payments results in reducing the benefit period for beneficiaries.  Sixth, the elimination of the multiple assessments currently used to determine SNF reimbursement rates creates additional opportunities for fraud.  Finally, and perhaps most importantly, RCS-I fails to correct the serious longstanding problem that nursing facilities do not employ sufficient numbers of professional and paraprofessional nursing staff.  Under RCS-I, serious understaffing remains the common practice.

  1. The proposed Resident Classification System, Version I (RCS-I) Does Not Achieve CMS’s Stated Goals

CMS describes three goals for the new reimbursement system: (1) more accurately compensating SNFs; (2) reducing incentives for SNFs to deliver therapy based on financial considerations, rather than resident need; and (3) maintaining simplicity, to the extent possible.[1]

RCS-I does not achieve the first or third goals and over-achieves the second goal.

First, RCS-I does not appear to more accurately pay SNFs for providing care to residents who are in a Medicare Part A-covered stay.  As discussed in more detail later in this letter, RCS-I rearranges payments, but does not necessarily reimburse SNFs appropriately for the care they are required, by law, to provide.  As CMS reports in the Advance Notice of Proposed Rulemaking (ANPRM), the proposed case-mix adjustments for speech language pathology and non-therapy ancillary services have minimal correlation with current facility costs.  RCS-I does nothing to improve critically low nurse staffing levels.

RCS-I does not more accurately pay SNFs for providing the care and services they are required to provide under the federal Nursing Home Reform Law.[2]  The revised Requirements of Participation (RoPs), which were published in October 2016,[3] are not reflected in the proposal at all.

Second, RCS-I’s reduction of financial incentives to provide therapy is so aggressive – providing higher reimbursement to SNFs that provide fewer types of therapy to residents over a shorter period of time or no therapy at all – that it actually encourages facilities not to provide therapy.  Jimmo’s mandate to cover maintenance therapy is completely ignored.

Finally, RCS-I does not maintain simplicity, CMS’s third goal.  RCS-I is a highly complex system.  For example, instead of Resource Utilization Group’s two case-mix categories (nursing and rehabilitation), RCS-I uses four categories and makes multiple case-mix adjustments (six to 43) in each area.  The system is far more complicated than the current reimbursement system.

  1. Criticism of Medicare’s Prospective Payment System Is Longstanding, but RCS-I Does Not Address These Criticisms

Ever since the new prospective payment system for Medicare coverage of SNFs was first implemented in 1998, the system has faced ongoing criticism.  Critics, including the Medicare Payment Advisory Commission[4] and the Department of Health and Human Services’s Office of Inspector General,[5] report that the reimbursement system encourages over-utilization of therapy services, provides insufficient payment for nursing services, and provides inaccurate payment for non-therapy ancillary services (chiefly prescription drugs).

Over the past 20 years, the Government Accountability Office, the HHS Inspector General, and the Medicare Payment Advisory Commission have documented abuses in therapy, such as facilities’ inappropriately classifying large percentages of their residents as needing the highest, most expensive levels of therapy and facilities’ identifying a high number of minutes of therapy during the reference period and then providing fewer actual minutes of therapy to residents.  Numerous multi-state nursing home chains have settled False Claims Act cases with the Federal Government over allegations of false billing of Medicare for inflated therapy claims.

Insufficient nurse staffing levels in SNFs and the poor quality of care that results have also been repeatedly documented in the research literature.  The STRIVE nurse staffing data, which are now more than a decade old, were based, even then, on practices that existed, not on the standard of care required by the 1987 Nursing Home Reform Law.

CMS contracted with Acumen to develop a new reimbursement system to replace the current system.  The Center assumed that the purpose of the four Technical Expert Panels convened by Acumen and CMS, on all of which the undersigned Center attorney was a member, and now, of the ANPRM, would be to develop a new system for reimbursing SNFs under Medicare that would both respond to problems identified since the prospective payment system was first implemented and move the reimbursement system in a new and substantially different direction.

Unfortunately, the ANPRM, which is based on Acumen’s work, does not correct these long-identified problems in the reimbursement system, except for its over-correction of therapy overpayments.

The Center’s second assumption was that the TEPs would seek to incorporate new understandings of the care and services that are currently coverable under Medicare – for example, recognition of Jimmo v. Sebelius, whose Court-approved settlement on January 24, 2013 confirmed that Medicare covers nursing and therapy services that are necessary to maintain a resident’s status and to prevent a resident’s avoidable decline or deterioration when the services must be provided by professional nurses or therapists (as opposed to paraprofessional staff).[6]  Too many providers have believed, and continue to act on the belief, that Medicare pays for skilled nursing and therapy services only if a resident is expected to improve.  Jimmo has obvious implications for Medicare payment policy that the ANPRM fails to implement in the proposed program redesign.

A third assumption was that the TEPs would recognize and implement the statutory directive to pay for the services that SNFs are required to provide.  Last Fall, CMS promulgated final rules establishing revised RoPs for SNFs.[7]  The requirements set out in these revised RoPs should be incorporated into the new reimbursement system.  Again, Acumen did not describe that purpose as within its scope of work and the ANPRM fails to reflect any of the new or revised standards of care that nursing facilities are required to meet in order to be eligible for reimbursement by the Medicare (and Medicaid) programs.

As described at the TEPs, Acumen’s data-driven review was focused on identifying new payment policies and approaches that would able to more accurately predict residents’ current use of nursing, therapy, and non-therapy ancillary services.  The ANPRM reflects this limited vision.

The Center’s final concern was that delivery system reforms and ongoing payment changes – such as bundling demonstrations, Accountable Care Organizations, and other approaches being tested by CMS that require more coordinated care for Medicare beneficiaries as they move within and through the health care system – make the ANPRM’s focus on SNF reimbursement, in isolation, seem backward-looking and obsolete, not forward-looking.  At the very least, it is not apparent how RCS-I accommodates the reimbursement and delivery system changes that are otherwise in progress and rapidly being implemented.

  1. RCS-I Undermines Therapy Services for SNF Residents

As described in detail in the ANPRM (and illustrated in the chart below), RCS-I dramatically changes the financial incentives for SNFs.[8]  Under RCS-I, SNFs receive higher reimbursement if they provide 15 or fewer days of Medicare coverage and only one form of therapy (not three).  Medicare reimbursement is also higher if 50-75% of a SNF’s Medicare days are billed as non-rehabilitationIn contrast, Medicare reimbursement is lower for SNFs providing care to the oldest residents (age 90+), to residents receiving three types of therapy, or to residents having 31 or more days of care paid by Medicare.

Impact Analysis, Resident-Level[9]

Resident characteristics Higher reimbursement Percentage change Lower reimbursement Percentage change
Gender Males   1.2% Females   -0.7%
Age Residents under 65   5.4% Residents 90+ years   -2.8%
Medicare/Medicaid dual status Residents who are dually eligible for Medicare and Medicaid   2.9% Residents are not dually eligible for Medicare and Medicaid   -1.9%
Disability status Residents who are disabled   3.9% Residents who are aged   -1.2%
Length of SNF stay Residents with SNF stays of 1-15 days 15.9% Residents with stays of 31+ days   -2.5%
Use of 100-day SNF benefit Residents not using 100 days   0.3% Residents using 100 days   -2.7%
Length of qualifying acute care stay Residents with 31+ qualifying inpatient days   4.6% Residents with 3 qualifying inpatient days   -2.3%
Admitted with diagnosis of a stroke Residents with a stroke   0.7% Residents without a stroke   -0.1%
Presence of  cognitive impairment Residents who are severely cognitively impaired   6.1% Residents who are moderately cognitively impaired   -1.8%
Admitted with, or has diagnosis of, HIV Residents without HIV   0.2% Residents with HIV -40.0%
Receipt of IV medications during stay Residents with IV medication 22.9% Residents without IV medication   -2.0%
Presence of wound infection Residents with wound infections 17.9% Residents without wound infections   -2.8%
Receipt of therapy services during SNF stay Residents receiving a single therapy 37.3% Residents receiving 3 therapies   -3.9%
Residents not receiving any physical therapy 24.2% Residents receiving physical therapy   -1.0%
Residents not receiving any occupational therapy 24.8% Residents receiving occupational therapy   -1.2%
Residents receiving only occupational therapy 41.8% Residents receiving physical, occupational, and speech therapy   -3.9%
Non-therapy ancillary costs during SNF stay Residents with NTA costs of $150 19.2% Residents with NTA costs of $10-$50   -3.2%
Use of extensive services Residents with tracheostomy 18.1%

The ANPRM identifies the impact of RCS-I on reimbursement rates for facilities.

Impact Analysis, Facility-Level[10]

Provider characteristics Higher reimbursement Percentage change Lower reimbursement Percentage change
Facility size Small facilities, 0-49 beds   6.7% Facilities with 200+ beds   -0.7%
Ownership status Non-profit facilities   3.1% For-profit facilities   -1.1%
Government-owned facilities   7.6%
Institution type Hospital-based and swing-bed facilities 15.8%
% of SNF stays with 100 day utilization SNFs with 1-10% of their stays utilizing 100 days   0.3% SNFs with 25-100% of their stays utilizing 100 days   -3.9%
% of SNF stays with Medicare/Medicaid dual enrollment SNFs with 50-75% of their stays with dual eligible residents   0.8% SNFs with 0-10% of their stays with dual eligible residents   -1.7%
% of SNF utilization days billed as rehabilitation ultra high (RU) SNFs with 1-10% of the utilization days billed as RU 28.4% SNFs with 90-100% of the utilization days billed as RU   -9.9%
% of SNF utilization days billed as non-rehabilitation SNFs with 50-75% of the utilization days billed as non-rehabilitation 45.6% SNFs with 0-10% of the utilization days billed as non-rehabilitation   -2.2%

By paying lower Medicare reimbursement rates for residents receiving more therapy and higher rates for residents who receive one form of therapy or no therapy at all, RCS-I effectively ensures that residents will receive little, if any, therapy in SNFs.  Since SNFs are a major post-acute provider for Medicare beneficiaries who need rehabilitation, RCS-I plays havoc with beneficiaries’ ability to get the rehabilitation they need when they are discharged from the hospital to a SNF.

  1. RCS-I Ignores the Court-Ordered Settlement in Jimmo, Which Confirms Coverage of Maintenance Therapy in SNFs

Although RCS-I undermines all therapy services for SNF residents, it is particularly devastating for maintenance therapy.  On January 24, 2013, Chief Judge Christina Reiss of the federal District Court in Vermont approved a nationwide Settlement, negotiated by a class of Medicare beneficiaries, who challenged Medicare’s “improvement standard,” and the Federal Government.  The Settlement confirms that the Medicare law and regulations provide coverage of maintenance therapy services in SNFs (and also home health and outpatient therapy) if such therapy is needed “to maintain the patient’s current condition or to prevent or slow further deterioration . . . so long as the beneficiary requires skilled care for the safe and effective performance of the program.”[11]  On February 16, 2017, the Court issued an additional order and approved a Corrective Statement that CMS is required to reproduce in full on the dedicated webpage that the Court ordered CMS to establish.  The Corrective Statement says, in part, “The Jimmo Settlement may reflect a change in practice for those providers, adjudicators, and contractors who may have erroneously believed that the Medicare program covers nursing and therapy services under these benefits only when a beneficiary is expected to improve.”[12]

To the extent that SNFs are required to change their practices to provide maintenance therapy to residents for whom it is medically necessary, the Medicare reimbursement system must reflect these therapy services.

At the third TEP, however, Acumen staff indicated that they would incorporate Jimmo only if they had hard data documenting which facilities properly implement the Settlement and how much  implementation costs.  Since that task was impossible to meet, Acumen’s position was that the requirements of Jimmo would not be included in the proposed system, but could be added at a later time when the reimbursement system is further revised.  Accordingly, the ANPRM reflects Acumen’s failure to incorporate Jimmo. 

But Jimmo is in effect now – the federal District Court approved the settlement more than four and a half years ago – and the Settlement needs to be recognized in the Medicare reimbursement system, both now and going forward.  RCS-I ignores the Jimmo mandate and fails to ensure that residents’ needs for maintenance therapy are met, in compliance with the Court mandate.

  1. RCS-I’s Front-Loading Payments Creates Financial Incentives to Reduce the Benefit Period

Based on Acumen’s finding that physical therapy/occupational therapy costs are generally higher and non-therapy ancillary costs are very high at the beginning of a resident’s stay, RCS-I “front loads” payments – that is, it pays higher rates at the beginning of a resident’s stay, rather than a consistent rate for each day in the assessment period.  The proposed system then adjusts rates downward on successive days, under what CMS calls the “variable per diem adjustment schedule.”  Thus, on day 24 of a resident’s Part A stay, for example, the daily rate has a 0.96 adjustment factor, which means that the SNF is paid 96% of the Medicare rate for that person.  For a resident in a Medicare-covered stay on days 99 and 100, the adjustment factor is 0.71 – i.e., 71% of the daily rate that was assessed at the beginning of the resident’s Medicare-covered stay.[13]

As Avalere staff acknowledged at the fourth TEP, front-loading payments creates financial incentives for SNFs to provide fewer days of covered care for Medicare beneficiaries – i.e., shorter lengths of stay.  The result of front-loading is a reduced benefit for beneficiaries.

Even now, few nursing home residents receive the full 100 days that are authorized in the benefit period; the average length of a Medicare-covered stay for a beneficiary is 27.6 days.[14]  Front-loading payments under RCS-I encourages the Medicare benefit to be reduced even further.  Reimbursement policy reduces the Medicare coverage that is authorized by law.

  1. RCS-I’s Elimination of Assessments and Reliance Only on an Initial Assessment and  “Significant Change” Assessments Creates Financial Incentives for Fraud

CMS is considering eliminating the multiple assessments that are currently required for Medicare reimbursement – days 5, 14, 30, 60, and 90 – and using only the 5-day assessment and the “significant change” assessment (which is otherwise required for all residents, regardless of payment source).  This change means that, in the absence of a resident’s significant change, the reimbursement rate remains constant after the initial 5-day assessment and does not reflect changes in the resident’s actual needs, whether these needs increase or decrease.  Downward adjustments in payment during the course of a resident’s stay reflect the variable per diem adjustment schedule, not the resident’s assessed condition.

As repeatedly reported by the Inspector General, Medicare overpays SNFs for therapy services.[15]

Moreover, SNFs already “game” the assessment process by identifying high therapy needs during the assessment reference period and then failing to provide the care that the assessment calls for.  The U.S. Attorney for the District of Massachusetts described the practice in January 2016, announcing the settlement of a False Claims Act case against RehabCare, then a part of Kindred Healthcare, and four skilled nursing facilities:

“Ramping,” i.e., during the period prior to October 1, 2011, boosting the amount of reported therapy during so-called “assessment reference periods,” thereby causing and enabling nursing facilities to bill for the care of their Medicare patients at the highest therapy reimbursement level, while providing materially less therapy to those same patients outside the assessment reference periods when the nursing facilities were not required to report to Medicare the amount of provided therapy;[16]

RCS-I’s elimination of all assessments but the initial 5-day assessment and any “significant change” assessment exacerbates the already significant problem of gaming.  More fraud is inevitable.

  1. RCS-I Continues Inadequate Payments for Nursing, Resulting in Continued Understaffing

The single most critical factor for high quality of care and high quality of life for residents is appropriate nurse staffing, including both professional and paraprofessional nursing staff.  Most nursing facilities are inadequately staffed and the problem has existed for decades.  CMS’s own report in 2001 documented that more than 90% of facilities fail to have sufficient nursing staff either to prevent avoidable harm or to meet some of the standards of the 1987 Reform Law.[17]  RCS-I does not correct the problem to ensure that SNFs employ sufficient numbers of well-trained professional and paraprofessional staff to fully meet residents’ needs.

As Professor Charlene Harrington of the University of California San Francisco wrote in her June 12, 2017 letter to CMS on the ANPRM, using only nurse staffing data from residents who are in a non-rehabilitation Resource Utilization Group category (approximately 8% of residents in a Part A stay) does not accurately predict nursing needs for all residents.  Professor Harrington also rejected using STRIVE data, criticizing flaws in STRIVE’s design and data collection efforts.  The Center endorses Professor Harrington’s comments and recommendations.

The ANPRM shows that reimbursement for nursing services continues to be inadequate under RCS-I.  To calculate the per day rate for a particular resident, RCS-I begins with unadjusted per diem rate for urban and rural facilities.

RCS-1 Unadjusted Federal Rate Per Diem-Urban and Rural[18]

Nursing NTA PT/OT SLP Non-case-mix
Urban Per Diem Amount $100.91 $76.12 $126.76 $24.14 $90.35
Rural Per Diem Amount $  96.40 $72.72 $141.47 $31.06 $92.02

The unadjusted federal per diem rates (urban or rural) are adjusted twice: first, to reflect the four case-mix categories (nursing, non-therapy ancillary services, physical and occupational therapy, and speech language pathology), and second, to account for declining payments under the variable per diem adjusted schedule.  These twice-adjusted case-mix adjusted rates, are added to the non case-mix component to create a single, declining per day rate for each resident.

Although RCS-I includes case-mix adjustments to nursing and three other categories, the unadjusted rates nevertheless show how inadequate reimbursement for nurse staffing remains under RCS-I.  For urban facilities, the $100.91 for nursing reflects just 24% of the $418.28 unadjusted rate total; for rural facilities, the $96.40 for nursing reflects even less, just 22% of the $433.67 unadjusted rate total – still below the unadjusted amount for physical and occupational therapy and only slight more than the unadjusted amount non-therapy ancillaries.

Conclusion

The proposed revision to Medicare reimbursement for SNFs dramatically alters the Medicare benefit, encouraging less (or no) therapy and shorter Medicare-covered stays, ignores the mandate of Jimmo, encourages gaming of therapy and fraud, and does not improve nurse staffing levels.

The Center urges CMS to reject the model of RCS-I and to develop a new reimbursement that pays SNFs to provide the high quality of care that is required by the Nursing Home Reform Law and Jimmo.

Sincerely,

Toby S. Edelman
Senior Policy Attorney


[1] 82 Fed. Reg. 20980, 20984 (May 4, 2017).
[2] 42 U.S.C. §1395 i-3(a)-(h), 1396r(a)-(h), Medicare and Medicaid, respectively.
[3] 81 Fed. Reg. 68688 (Oct. 4, 2016).
[4] MedPAC, Report to the Congress: Medicare Payment Policy, Chapter 8, page 200 (Mar. 2017) (calling for lower rates and a revised reimbursement system.  “Under a revised design, payments would increase for medically complex stays and decrease for stays that include intensive therapy that is unrelated to a patient’s care needs.”), http://medpac.gov/docs/default-source/reports/mar17_entirereport.pdf?sfvrsn=0.
[5] OIG. Questionable Billing by Skilled Nursing Facilities (Dec. 2010), https://oig.hhs.gov/oei/reports/oei-02-09-00202.pdf; OIG, Inappropriate Payments to Skilled Nursing Facilities Cost Medicare More Than a Billion Dollars in 2009 (Nov. 2012), https://oig.hhs.gov/oei/reports/oei-02-09-00200.pdf; OIG, The Medicare Payment System for Skilled Nursing Facilities Needs to be Reevaluated (Sep. 2015), https://oig.hhs.gov/oei/reports/oei-02-13-00610.pdf).
[6] Jimmo Settlement ¶6.a (Jan. 24, 2013).
[7] 81 Fed. Reg. 68688 (Oct. 4, 2016).
[8] 82 Fed. Reg. 20980, 21009-21012 (May 4, 2017).
[9] 82 Fed. Reg. 20980, 20987, Tables 1 and 2 combined.
[10] Taken from 82 Fed. Reg. 20980, 21011-21012, Table 19.
[11] Jimmo Settlement ¶6.a (Jan. 24, 2013).
[12] The Corrective Statement is available at http://www.medicareadvocacy.org/medicare-info/improvement-standard/.
[13] 82 Fed. Reg. 20980, 21002, Table 14.
[14] Medicare Payment Advisory Commission (MedPAC), A Data Book: Health Care Spending and the Medicare Program, 112, Chart 8-4 (June 2016), http://medpac.gov/docs/default-source/data-book/june-2016-data-book-health-care-spending-and-the-medicare-program.pdf?sfvrsn=0.
[15] See, e.g., Office of Inspector General, The Medicare Payment System for Skilled Nursing Facilities Needs to Be Reevaluated, OEI-02-13-00610 (Sep. 30, 2015), https://oig.hhs.gov/oei/reports/oei-02-13-00610.pdf; Office of Inspector General, Questionable Billing by Skilled Nursing Facilities, OEI-02-09-00202 (Dec. 2010). http://www.oig.hhs.gov/oei/reports/oei-02-09-00202.pdf.
[16] U.S. Attorney, District of Massachusetts, “United States Recovers Over $133 Million For Fraudulent Nursing Home Therapy Claims” (News Release, Jan. 12, 2016), https://www.justice.gov/usao-ma/pr/united-states-recovers-over-133-million-fraudulent-nursing-home-therapy-claims.
[17] CMS, Appropriateness of Minimum Nurse Staffing Ratios in Nursing Homes, Phase II Final Report (Dec. 2001), http://theconsumervoice.org/uploads/files/issues/CMS-Staffing-Study-Phase-II.pdf.  Phase II, Volume 1 (Mar. 2002), https://phinational.org/research-reports/report-congress-appropriateness-minimum-nurse-staffing-ratios-nursing-homes-phase-0; Phase II, Volume 2 (Mar. 2002), https://phinational.org/sites/default/files/clearinghouse/PhaseIIVolumeIIofIII.pdf; Phase II, Volume 3 (Mar. 2002), https://phinational.org/sites/default/files/clearinghouse/PhaseIIVolumeIIIofIII.pdf.
[18] 82 Fed. Reg. 20980, 20987, Tables 1 and 2 combined.