Fiscal Year 2025 Skilled Nursing Facility Prospective Payment System Final Rule (CMS 1802-F)

On July 31, 2024, the Centers for Medicare & Medicaid Services (CMS) issued afinal rule updating Medicare payment policies and rates for skilled nursing facilities under the Skilled Nursing Facility Prospective Payment System (SNF PPS) for fiscal year (FY) 2025. CMS is publishing this final rule that is consistent with the legal requirement to update Medicare payment policies for SNFs annually. This fact sheet discusses the major provisions of the final rule.

To view the final rule, visit the Federal Register at www.federalregister.gov/public-inspection/current.

FY 2025 Updates to the SNF Payment Rates

CMS is updating SNF payment policies, which would result in a net increase of 4.2%, or approximately $1.4 billion, in Medicare Part A payments to SNFs in FY 2025. The 4.2% increase is calculated based on the SNF market basket percentage increase of 3.0%, plus a 1.7 percentage point forecast error adjustment, less a 0.5 percentage point productivity adjustment. These impact figures do not incorporate the SNF Value-Based Purchasing (VBP) reductions for certain SNFs subject to the net reduction in payments under the SNF VBP; those adjustments are estimated to total $196.5 million in FY 2025.

In addition to the SNF PPS rate update, CMS is rebasing and revising the SNF market basket to reflect a 2022 base year. The rule also finalizes the proposal to update the SNF PPS wage index using the Core-Based Statistical Areas (CBSAs) defined within the new Office of Management and Budget (OMB) Bulletin 23-01^[1] to improve the accuracy of wages and wage-related costs for the area in which the facility is located.

Changes in Patient-Driven Payment Model (PDPM) ICD-10 Code Mappings

The PDPM utilizes the International Classification of Diseases, 10^th Revision, Clinical Modification (ICD-10) codes in several ways, including using the person's primary diagnosis to assign patients to clinical categories. CMS is finalizing several changes to the PDPM ICD-10 code mappings to allow providers to provide more accurate, consistent, and appropriate primary diagnoses that meet the criteria for skilled intervention during a Part A SNF stay. The changes to the ICD-10 code mappings and lists used under PDPM are available on the PDPM website at https://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/SNFPPS/PDPM.CMS also summarizes comments received on the Request for Information (RFI) that solicited comment on potential future updates to the Non-Therapy Ancillary (NTA) component of PDPM.

Nursing Home Enforcement

This final rule changes CMS' enforcement policies to impose more equitable and consistent civil monetary penalties (CMPs) for health and safety violations as part of CMS' ongoing work to increase the safety and care provided in the nation's nursing homes. In February 2022, the Biden-Harris Administration announced its commitment to ensure all residents living in Medicare- and Medicaid-certified nursing homes receive safe, quality care.[2]This included reexamining how CMPs were applied and robustly using existing nursing home enforcement authority. Given this commitment and the following analysis, CMS is expanding its ability to impose financial penalties to drive sustained correction of health and safety deficiencies. These revisions will provide CMS flexibility in determining the mix and number of penalties in response to situations that put residents' health and safety at risk and, therefore, encourage facilities to promptly correct and maintain lasting compliance with CMS' health and safety requirements.

CMS' enforcement authority allows for the imposition of CMPs for noncompliance with federal requirements. Penalties can be imposed per day or per instance of non-compliance depending on the health and safety deficiencies identified, with per day CMPs applied until the noncompliance is corrected and per instance CMPs for isolated instances. However, per-day and per-instance penalties could not be imposed for deficiencies identified during the same survey, and per-instance penalties could not be imposed concurrently for the same deficiency. The severity of enforcement sanctions is based on the harm or potential harm to residents caused by non-compliance. This regulatory limitation prevented CMS and the state from imposing CMPs that were more commensurate with the identified noncompliance by restricting the use of multiple penalties for one deficiency, which prevents full use of CMPs to encourage faster correction and sustained compliance with health and safety requirements.

In this final rule, CMS revises the regulation to expand the type of CMPs that can be imposed to allow for more per instance and per day CMPs to be imposed, as appropriate. The revisions in this rule will permit both types of penalties to be imposed, providing CMS with greater flexibility to impose penalties in a manner that more directly reflects the health and safety impact on residents and incentivizes permanent correction. It is important to note, however, that these CMPs are still subject to statutory daily limits, and CMS can exercise discretion with regard to a nursing home's financial condition in determining the appropriate CMP. CMS remains focused on improving the health and safety of nursing home residents by ensuring quality care and ensuring access to care with these policies.

Skilled Nursing Facility Quality Reporting Program

CMS is finalizing updates to the SNF Quality Reporting Program (QRP) to better account for adverse social conditions that negatively impact individuals' health or health care. CMS is adding four new social determinants of health (SDOH) items and modifying one SDOH assessment item for the SNF QRP. Additionally, CMS is finalizing a policy requiring SNFs included in the SNF QRP to participate in a process to validate data submitted under the SNF QRP beginning with the FY 2027 SNF QRP.

The SNF QRP is a pay-for-reporting program. SNFs that do not meet reporting requirements are subject to a 2-percentage points reduction in their Annual Payment Update (APU) in accordance with section 1886(e)(6)(A) of the Act. Additionally, CMS publicly reports each SNF's performance on measures adopted into the SNF QRP on the Care Compare website.

Updates to the SNF QRP:

• Beginning with the FY 2027 SNF QRP (beginning with residents admitted on October 1, 2025), CMS is finalizing the adoption of four new items in the minimum data set (MDS) under the SDOH category: (1) Living Situation (1 item), (2) Food (2 items), and (3) Utilities (1 item). Among other reasons, screening for SDOH via collecting these items may assist SNFs in better addressing those identified needs with the residents, their caregivers, and community partners during the discharge planning process, if indicated.
• Beginning with the FY 2027 SNF QRP (beginning with residents admitted on and after October 1, 2025), CMS is finalizing modification of the Transportation item in the MDS, collected under the SDOH category. As part of CMS' routine item and measure monitoring work, CMS has identified an opportunity to improve the data collection for this item. Specifically, the finalized modifications of the Transportation item will improve and align data collection in three ways: (1) specify the look-back period for identifying if and when a patient experienced a lack of reliable transportation, (2) simplify the response options for the resident, and (3) require collection at admission only, which will decrease provider burden since the current assessment item is collected at both admission and discharge.
• Beginning with the FY 2027 SNF QRP, CMS is finalizing a policy requiring that SNFs participating in the SNF QRP participate in a validation process. Specifically, CMS is finalizing the adoption of a validation process for the SNF QRP that is similar to the process CMS has adopted for the SNF Value-Based Purchasing Program in the FY 2024 SNF PPS final rule (88 FR 53323 through 53325). Approximately 1,500 SNFs will be randomly selected to share a very limited set of medical records for validation. CMS is required by section 1888(h)(12)(A) of the Act (as added by section 111(a)(4) of Division CC of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260)) to apply a process to validate data submitted under the SNF QRP.

Skilled Nursing Facility Value-Based Purchasing (VBP) Program

For the SNF VBP program, CMS is finalizing several operational and administrative proposals as part of this year's rule. Operationally, this includes adopting a measure selection, retention, and removal policy for the SNF VBP program, as well as a technical measure update policy and a review and correction policy update.

The SNF VBP program is a pay-for-performance program. As required by statute, CMS withholds 2% of SNFs' Medicare fee-for-service Part A payments to fund the SNF VBP Program. This 2% is referred to as the "withhold." CMS is then required to redistribute between 50% and 70% of this withhold to SNFs as incentive payments depending on their performance in the program.

Updates to the SNF VBP:

• CMS is adopting a measure retention and removal policy to help ensure that the SNF VBP Program's measure set remains focused on the best and most appropriate metrics for assessing care quality in the SNF setting. CMS is also adopting a measure selection, retention, and removal policy that aligns with a similar policy currently in place in the SNF QRP program.
• CMS is also adopting a technical measure update policy allowing the agency to update previously finalized SNF VBP measure specifications using a sub-regulatory process.
• CMS is finalizing administrative policy updates, including an update to the review and corrections policy that CMS previously finalized for the program, to ensure that SNFs can review and correct data used to calculate their measure rates.

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