Biden Medicare Regulations Favor Hospitals Over Qualified Nursing Facilities – Guest Columns

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Lisa Grabert

Each year, the Centers for Medicare & Medicaid Services update various payment systems under the traditional Medicare program (paid). This regulatory season is more entertaining than most as it offers a glimpse of the first concrete policy positions on Medicare from the new Biden administration.

Of particular interest is how the new administration intends to reconcile regulatory data requirements with compromised 2020 information from the COVID-19 public health emergency. Both Harvard and Yale have questioned the integrity of the 2020 data. In some cases, CMS has chosen not to use the 2020 data, and in some cases it has, which has created winners and losers this regulatory season.

The winners – American hospitals

On April 27, CMS has published 1,914 pages of new proposals for Acute Care Hospitals or “STACH”. In a typical year, CMS proposes to use data two years old for future payout rates. However, in this year’s proposal, CMS opted to use 2019 data instead of COVID 2020 data. CMS concluded that the COVID pandemic caused different usage patterns in hospitals in 2020, making the data unusable.

CMS observed that STACH admissions fell 14% in 2020, compared to 2019. Hip and knee replacements have dropped 40%, and respiratory infections increased 133%. For STACH, CMS concluded that the 2020 data is an anomaly and should be treated as such. It should not be used to adjust future Medicare payments. But CMS has decided that COVID data should be used in other payment settings – making STACH the lucky ones, the winners.

The Losers – Skilled Nursing Facilities

On April 8, CMS has published 203 pages of new proposals for Qualified Nursing Facilities or “SNFs”. For SNFs, CMS observed similar gremlins in COVID data as it did for STACH. In 2020, SNF entries decreased 25%, and readmissions have dropped 26%. There were a large number of cases among shifts within readmissions, including a 18% increase in dual eligibility and a 9% increase in African American populations.

In any case, it was not a typical year. CMS considered using 2019 and 2020 data and ultimately decided to use 2020 data – only after it was deleted ten% the patient population that included a COVID-19 code, and 15% SNF stays that used a COVID exemption. These COVID exclusions plus the drop in total SNF admissions equals 50%. CMS proposed to use only half of the data it normally uses in a given year.

These data integrity issues certainly raise several red flags, but data usage 2020 is particularly bad for SNFs – which arguably have the most at stake. In 2020, CMS launched a new payment system for SNFs called Patient Driven Payment Model or “PDPM”. By law, CMS must maintain annual budget neutrality, which means that CMS cannot spend more or less than it is planned to spend in any given year. If CMS misses the target, it must recover an overpayment or spend more money in a year to come. Using data from 2020, CMS concluded that PDPM overpaid by 5% in 2020 and asked for feedback on how best to retrieve a $ 1.7 billion overpayment. This is bad news for the FNS, which makes them losers this regulatory season.

Most researchers, including your author, would conclude that CMS should have a consistent policy across its payment systems. The CMS data provided in the STACH and SNF regulations strongly suggest that the 2020 data should not be used for payment purposes. These policy changes reflect the proposals. Right now, we can all weigh in on CMS and urge it to change course. We don’t have long, as comments on the SNF’s proposals are due on June 7. Submit your comments and urge CMS to ensure parity in all of its payment systems. SNFs should be treated the same as hospitals when it comes to COVID data adjustments.

Lisa Grabert is a research professor at Marquette University and a former Congressional Assistant to the House Ways & Means Committee, where she was the lead author of Medicare Hospitals and Qualified Nursing Facilities legislation.


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