CMS finalizes rule to boost nursing home pay rates by $904M in fiscal 2023

The Biden administration finalized a new payment rule late Friday that aims to boost payments to nursing homes by $904 million in the next fiscal year that starts this fall. 

The Centers for Medicare & Medicaid Services (CMS) released Friday the Skilled Nursing Facility Prospective System rule for the federal fiscal year 2023 that starts Oct. 1. The agency decided to phase in over two years a 5% pay cut to recoup a $1.7 billion error in payment rates in 2020 and 2021.

“Today’s action is an important step in fulfilling our goal to protect people living in nursing homes and staff,” CMS Administrator Chiquita Brooks-LaSure said in a statement.

CMS will install for fiscal 2023 a net increase of 2.7% in Medicare payments to nursing homes, including a 3.9% market basket increase. Overall Medicare spending to nursing homes is projected to be $33.5 billion in federal fiscal year 2022 which ends Sept. 30.

The proposed rule had called for a 5% decrease to nursing home payments to compensate for overpayments in 2020 and 2021. However, in light of the lingering financial impact from the pandemic, CMS will phase in that cut over two years. 

In fiscal 2023, the agency will phase in a 2.3%, or $780 million, cut to payments and a 2.3% cut in fiscal year 2024.

But nursing home groups were livid that CMS decided to keep the 5% cut at all in light of the financial hit they have taken due to the pandemic. 

“Spreading the impact of the adjustment over two years … is helpful, but the end result adds to the chronic financial neglect of our nations’ nursing homes—in a time of real crisis,” said Katie Smith Sloan, president and CEO of LeadingAge, a collection of nonprofit aging services providers, in a statement. 

Another point of industry contention is whether CMS should establish minimum staffing requirements at homes. The agency asked for comments on the staffing quotas in the proposed rule. 

While CMS said it is still reviewing the comments, it did say in a release that ensuring adequate staffing at nursing homes can “have a substantial impact on the quality of care and outcomes residents experience,” a release on the final rule said. 

Minimum staffing levels have garnered significant pushback from the nursing home industry, which says the requirement will cripple homes financially. 

A report from the American Health Care Association (AHCA), which represents more than 14,000 nursing homes and long-term care facilities, released last month found it would cost the industry $10 billion a year to hire enough staff to meet any minimums. 

“The unintended consequences of this sort of unfunded mandate would be devastating to hundreds of thousands of vulnerable residents who could be forced out of their nursing home,” said Mark Parkinson, president and CEO of AHCA, in a statement when the report was released.