Skip to main content

How Reimbursement Changes for Long-Term Care Will Impact Who and How We Care


 Ann Longterm Care. 2018;26(5):e12-e13. Published online October 10, 2018. doi:10.25270/altc.2018.10.00042


Richard G Stefanacci, DO, MGH, MBA, AGSF, CMD; Column Editor


Dr Stefanacci is the chief medical officer for The Access Group, a managed markets agency for pharmaceutical companies.


 The Access Group, Berkeley Heights, NJ; Thomas Jefferson University, Philadelphia, PA; AtlantiCare/Geisinger, Atlantic City, NJ

On July 31, 2018, the Centers for Medicare & Medicaid Services (CMS) issued a final rule [CMS-1696-F] outlining fiscal year (FY) 2019 Medicare payment updates and quality program changes for skilled nursing facilities (SNFs).1 The final rule includes policies that continue a commitment to shift Medicare payments from volume to value via 3 significant changes to: (1) the case-mix classification system used under the SNF Prospective Payment System (PPS); (2) the Quality Reporting Program (QRP); and (3) the Value-Based Purchasing Program (VBP). 

These changes are in line with CMS’ mission to shift the Medicare payment system for SNFs away from fee-for-service and toward reimbursement based on value, starting in 2019. Understanding these programs and the impact the final rule has on them is important for long-term care (LTC) and SNF providers as it will affect how care is delivered and what outcomes facilities will be held accountable. 

Prospective Payment System

The process to modernize the SNF PPS case-mix classification system began over a year ago when CMS outlined a new case-mix model called the Resident Classification System, Version I (RCS-I) that it was considering as a replacement for the existing Resource Utilization Group, Version IV (RUG-IV) case-mix model, used to classify residents in a covered Part A stay into payment groups under the SNF PPS. Through input from LTC stakeholders, CMS made significant changes to the RCS-I model, resulting in a new model called the SNF Patient-Driven Payment Model (PDPM). 

Effective October 1, 2019, CMS will be using PDPM, which focuses on the patient’s condition and resulting care needs rather than on the amount of care provided in order to determine Medicare payment. This new model aims to increase the incentives to treat the needs of the whole patient instead of focusing on volume of services, which requires substantial paperwork to track over time.2 PDPM is a case-mix reimbursement model that will pay SNFs based on how they meet a patient’s needs using ICD-10 diagnosis codes, patient characteristics, and other clinically relevant factors to classify patients.3 CMS also significantly reduced the overall complexity of the PDPM with the final rule, as compared to the current reimbursement system (RUGs).

Specifically, PDPM adjusts Medicare payments based on each aspect of a resident’s care, most notably for nontherapy ancillary services (NTAS), which are items and services not related to the provision of therapy such as drugs and medical supplies, thereby more accurately addressing costs associated with medically complex patients. The rule also places a 25% limit on group and concurrent therapy, ie, 75% of care needs to be individual to that patient; this is meant to ensure that SNF patients will continue to receive the highest caliber of therapy in line with their individual needs and goals rather than completely within a group session.4

Based on changes contained within this final rule, CMS estimates that the FY 2019 aggregate impact will be an increase of $820 million in Medicare payments to SNFs, resulting from the FY 2019 SNF market basket update required to be 2.4% by the Bipartisan Budget Act of 2018.1 While this may seem like a large number, it represents less than $50,000 per SNF.

Quality Reporting Program

Under the SNF QRP, SNFs that fail to submit the required quality data to CMS will be subject to a 2% reduction in funding.5 CMS states that they reviewed the SNF QRP’s measure set in accordance with the Meaningful Measures Initiative to identify how to move the SNF QRP forward in the least burdensome manner while continuing to incentivize improvement in the quality of care provided to patients. Specifically, the goals of the SNF QRP and the measures used in the program cover most of the Meaningful Measures Initiative priorities, including:

  • Making care safer
  • Strengthening person and family engagement
  • Promoting coordination of care
  • Promoting effective prevention and treatment
  • Making care affordable

Currently, all measures adopted in the SNF QRP meet the requirements and are in satisfaction of the Improving Medicare Post-Acute Care Transformation of 2014 (IMPACT) Act. There were no new measures proposed in the final rule for the SNF QRP. 

However, in the final rule, CMS did adopt an additional factor to consider when evaluating measures for removal from the SNF QRP measure set. This factor considers costs that are associated with a measure and weighs them against the benefit of its continued use in the program. CMS will also publicly display the 4 SNF QRP assessment-based quality measures and increase the number of years of data used to display 2 claims-based SNF QRP measures, Discharge to the Community and Medicare Spending per Beneficiary, from 1 year to 2 years.1

Value-Based Purchasing Program

Beginning October 1, 2018, the SNF VBP Program will apply either positive or negative incentive payments to services furnished by SNFs based on their performance on the program’s readmissions measure. The single claims-based all cause 30-day hospital readmissions measure in the SNF VBP aims to improve individual outcomes through rewarding providers that take steps to limit the readmission of their patients to a hospital. This single measure does not require SNFs to report information in addition to the information they already submit as part of their claims because CMS uses existing Medicare claims information to calculate the measure.

Inpatient Rehabilitation Facilities

There are also some changes specific for inpatient rehabilitation facilities (IRFs)—details which may someday be applied to SNFs as well. These include: 

  • Allowing the post-admission physician evaluation to count as one of the face-to-face physician visits
  • Permitting the rehabilitation physician to lead the interdisciplinary team meeting remotely
  • Eliminating the admission order documentation requirement to reduce duplicative documentation requirements
  • Removing the Functional Independence Measure Instrument and associated function modifiers from the IRF Patient Assessment Instrument


Again, these changes likely will result in a shift in therapy for medically complex patients as well as shift to value as a foundation for reimbursement. This means that the “who” we care for in a SNF will shift from those needing therapy services such as stroke and joint replacement to more medically complex patients such as those with chronic obstructive pulmonary disease (COPD) or congestive heart failure (CHF). The “how” of care delivery will also change as a result of these new types of patients, as they will require less therapy and more nursing and other specialized services like respiratory or cardiac therapy for end-stage management of COPD and CHF. SNF providers will need to think more about how to deliver care to these medically complex patients with these value-based accountability outcomes. The result will be SNFs that are better integrated into the entire care continuum, better equipped to care for medically complex patients, and better at linking patients from the hospital to the community. But this will require unique skill sets and team members that are able to keep SNF patients healthy in the community rather than requiring avoidable hospitalizations, improving both clinical and financial outcomes.

A list of resources on training and education associated with implementing the PDPM can be found online, included with the online version of this article:


1. Centers for Medicare and Medicaid Services (CMS). Medicare issues fiscal year 2019 payment & policy changes for skilled nursing facilities. website.
payment-policy-changes-skilled-nursing-facilities. Published July 31, 2018. Accessed September 21, 2018.

2. LaPointe J. AHA finds flaws with the patient-driven payment model for SNFs. ttps:// Published July 2, 2018. Accessed September 21, 2018.

3. Centers for Medicare and Medicaid Services (CMS). Skilled Nursing Facilities Patient-Driven Payment Model Technical Report. website. Published April 2018. Accessed September 21, 2018.

4. CMS Final Rule on payment changes for skilled nursing facilities - Goodbye RUG. Connell Consulting Solutions. Published August 2, 2018. Accessed September 21, 2018. 

5. Centers for Medicare and Medicaid Services (CMS). SNF Quality Reporting Reconsideration and Exception & Extension. website. Updated June 6, 2018. Accessed September 21, 2018.

Back to Top