CMS proposes raising payment rates for hospice, skilled nursing and rehab

(Story updated at 9:30 p.m. ET)

The CMS has dropped three payment rules that propose increased payments to skilled-nursing facilities, inpatient rehabilitation facilities and hospice care, and implemented new quality measures.

The agency Thursday proposed nearly doubling the increase skilled-nursing facilities received last year. This would amount to a $800 million bump. Last year they only received a 1.2% Medicare rate increase, leading to $430 million in higher payments from the previous year.

Medicare would pay out $125 million a year more to rehabilitation facilities while those facilities would face about $5.2 million in costs related to new quality-reporting requirements.

The CMS wants to boost Medicare payment rates to hospices by 2% next fiscal year and introduce two new quality measures.

The agency also finalized the creation of a skilled-nursing value-based program.

The raised rate for hospices would mean another $330 million for the providers compared with 2016. It's a significantly higher increase than the 1.1% bump they got from the CMS this year.

One of the new quality measures would assess hospice staff visits to patients and caregivers in the last week of life. It would measure the percentage of patients receiving at least one visit from a nurse, doctor, nurse practitioner or physicians assistant in the last three days of life. It would also assess the percentage of patients receiving at least two visits from medical social workers, spiritual counselors, licensed practical nurses or hospital aides during the same period.

The National Hospice and Palliative Care Organization applauded the focus on quality measures in a statement Thursday, saying it's supported such measures for years.

Collecting such information “will encourage hospices to visit patients and caregivers and provide services that will address their care needs and improve quality of life during the patients' last days of life,” according to the proposed rule.

The second new measure would assess the percentage of hospice patients who received care consistent with guidelines.

The CMS also said in the proposed rule that it expects to begin publicly reporting quality measures and other hospice data by the middle of 2017.

Nearly 1.4 million Medicare beneficiaries received hospice services at a cost of $15.5 billion to the government program in 2015, according to the proposed rule.

Medicare spending on hospices is projected to continue to grow by about 7% a year because of an increasing number of beneficiaries, growing awareness of the Medicare hospice benefit for end-of-life care, and an increasing preference for care provided in home and community-based settings, according to the proposed rule.

HHS was mandated to establish a program that would pay skilled nursing facilities(SNFs) based on their performance. That value-based purchasing program will begin in 2019.

In Thursday's proposed rule, the agency said it will use measures that assess the rate at which SNF patients are readmitted to a hospital within 30 days of being discharged from a facility paid under the Inpatient Prospective Payment System, a critical access hospital, or a psychiatric hospital.

The proposed rule also presented some policies that industry stakeholders already find troubling.

For instance, the CMS proposes tracking Medicare spending per beneficiary and across post-acute care settings.

Providers are concerned such a proposal doesn't take into account the complexity of care specific to SNFs.

If one type of facility costs less than SNFs, the agency could cut reimbursement to the more expensive facility to save money, according to Dr. David Gifford, senior vice president of quality and regulatory affairs at the American Health Care Association.

Between 2001 and 2013, Medicare post-acute care spending grew at an annual rate of 6.1% and doubled to $59.4 billion, while payments to inpatient hospitals grew at an annual rate of 1.7% over this same period, according to the CMS.

There are more than 16,000 skilled-nursing facilities throughout the country and they admit more than 2 million patients in the traditional Medicare program each year.

While Medicare would pay out $125 million a year more to inpatient rehabilitation facilities in 2017, those facilities would face an estimated $5.2 million in costs related to new quality reporting requirements.

The CMS proposed a payment update of 1.45%, including a 2.7% market basket update, less a 0.5% percentage point adjustment for multifactor productivity and less a 0.75 percentage point legislative adjustment.

The agency said it will adjust that update in the final rule if more recent data become available. Adding a 0.2% hike in aggregate payments due to updating outlier thresholds results in an overall update of 1.6% compared with 2016.

Last year inpatient rehabilitation facilities (IRFs) received a 1.8% increase for a total payment increase of $135 million.

The CMS is proposing four claims-based quality measures for IRFs, under the 2014 Improving Medicare Post-Acute Care Transformation Act. The measures that IRFs will be required to report in coming years will cover discharge to the community, Medicare spending per beneficiary, potentially preventable 30-day post-discharge readmission, potentially preventable within-stay readmission, and drug regimen review.

Medicare spent $7 billion on care in inpatient rehabilitation facilities in 2014, according to the Medicare Payment Advisory Commission. There were 1,180 facilities, 375,000 cases, and an average payment per case of $18,600. Of all IRF facilities, 79% were hospital-based and 21% were freestanding.

For all IRFs, the average Medicare operating margin in 2014 was 12.5%, with freestanding facilities earning an average margin of 25.3% and hospital-based facilities earning 1%. For-profits had a 24.3% average Medicare margin and not-for-profits had a 2.1% margin.