United States

Senior Living Health Care Connection: PPS and consolidated billing


Centers for Medicare and Medicaid Services (CMS) is proposing changes to these areas in their fiscal year 2019 rule:

  • Payment rates
  • Change to the case-mix payment methodology
  • Skilled nursing facility (SNF) resident status under consolidated billing
  • SNF quality reporting program
  • SNF value based purchasing (VBP) program

Payment rates

In the proposed rule there will be an increase of $850 million in aggregate payments to SNFs in 2019. There will also be an overall economic impact of the SNF VBP program with an estimated reduction of $211 million in aggregate payments to SNFs during fiscal year 2019. Additionally, some SNFs face the 2-percentage-point rate reduction applied to the market basket update for those SNFs that fail to submit measures data required for sections of the minimum data set (MDS).

Change to the case-mix payment methodology

CMS proposes to change the payment methodology from the SNF resource utilization group IV prospective payment system (PPS) to a patient driven payment model (PDPM). CMS will not be implementing the originally proposed resident classification system, Version I. CMS has proposed the new PDPM payment methodology to be effective for payments in fiscal year 2020 (beginning Oct. 1, 2019). This methodology is believed to better account for resident characteristics and care needs while reducing both systemic and administrative complexity. The revised case-mix adjustment contains five separate case-mix related components, one corresponding to each therapy discipline: physical therapy, occupational therapy and speech-language pathology, nursing, and non-therapy ancillaries. There are also clinical categories to further account for resident care items including the ICD-10-CM (clinical modification) coding system and the ICD-10-PCS (procedure coding system) hospital coding system. Activities of daily living scores account for another classification detail based on a revised Section GG of the MDS. Other components will be discussed in a future Senior Living Health Care Connection when the proposed rule becomes final.

SNF resident status under consolidated billing

CMS uses the health care common procedure coding system (HCPCS) to identify those items that are excluded from consolidated billing. CMS asks for comments regarding the excluded HCPCS items to ensure that some codes that should fall into current coding restrictions are classified into the excluded items to reflect services that should be excluded from SNF payments. These items include chemotherapy and chemotherapy administration, radioisotope services, and customized prosthetic devices. Additionally, CMS clarified the “status” of an SNF resident for consolidated billing purposes, indicating: “A beneficiary’s ‘resident’ status ends whenever he or she is formally discharged (or otherwise departs) from the SNF, unless he or she is readmitted (or returns) to that or another SNF before the following midnight.”

SNF quality reporting program

In fiscal year 2018, those SNFs that did not submit their quality reporting data required on the MDS received a 2-percentage-point reduction to their market basket update for the fiscal year. CMS is proposing to apply this 2-percentage-point reduction to the SNF market basket percentage change update after adjusting for the money follows the person change for fiscal year 2019.

SNF VBP program

Beginning with services furnished on Oct. 1, 2018, the per diem SNF rate will be reduced by 2 percent. The rate will then be adjusted based on the resulting rate for an SNF using the value-based incentive payment amount earned by the SNF. The SNF 30-day all-cause readmission measure (SNFRM) is used in the SNF VBP program. The SNFRM estimates the risk-standardized rate of unplanned readmissions back to an acute setting for any cause or condition within 30 days for Medicare fee for service inpatients. This rate is based on the SNF’s performance score for the fiscal year under the SNF VBP program. The baseline period affecting payment determination in fiscal year 2019 is calendar year 2015 (Jan. 1, 2015 through Dec. 31, 2015). The performance period affecting payment determination in fiscal year 2019 is calendar year 2017 (Jan. 1, 2017 through Dec. 31, 2017). CMS is proposing to adjust the payment for SNFs with fewer than 25 eligible stays during a performance period to an “assigned” rate to be reported not later than 60 days prior to the fiscal year start.

Questions? Contact Joan McCarthy at +1 312 634 3479.

How can we help you?

To discuss how our team can help your business, contact us by phone 800.274.3978 or

Subscribe to Health Care Leader Insights

Events / Webcasts


HHS Provider Relief Fund and compliance update

  • January 29, 2021


HITRUST for health care: The path to streamlining risk and compliance

  • December 10, 2020


HHS Provider Relief Fund and AICPA health care expert panel

  • November 20, 2020