Most Skilled Nursing Facilities Still Face Medicare VBP Cuts as Proportion of Winners Drops

| January 7, 2021

The proportion of skilled nursing facilities that earned incentive bonuses under an alternative Medicare payment model dropped in fiscal 2020, with the vast majority of properties either losing money or breaking even.

Sixty-five percent of SNFs saw negative adjustments under the SNF Value-Based Purchasing (VBP) program, according to a new analysis published this week in the journal Health Affairs, compared with 19% that earned performance-based bonuses; the remaining 16% received a “neutral” adjustment of no gain or loss.

That’s compared to the 72% of properties that saw cuts in 2019 against 26% logging gains.

The Centers for Medicare & Medicaid Services (CMS) designed the SNF VBP program to reduce the hospitalization rate of skilled nursing facility patients. Operators automatically lose 2% of their Medicare reimbursement, which they can then earn back by hitting certain readmission-reduction targets; top-performing facilities can end up with more than the 2% as a reward, while the bottom properties sacrifice the 2%.

The “winners” in 2020 had a higher ceiling, topping out at a boost of 3.1%, compared to 1.6% the year before.

The 16% of “neutral” facilities consisted of properties that had fewer than the 25 qualifying stays required to participate in the program over the performance period, the researchers observed.

The analysis, performed by researchers from Insight Policy Research and RTI International, identified several factors that correlate with positive SNF VBP performance.

“Larger, rural, and not-for-profit facilities were more likely to earn positive incentives, as were those with the highest registered nurse staffing levels,” the team observed.

The pattern isn’t necessarily straightforward: While RN staffing was correlated with being a VBP “winner,” having better licensed practical nurse (LPN) staffing was associated with worse performance, and overall staff ratios had no impact on the results.

“Finally, total staff hours per resident day were not significantly associated with SNF VBP payment incentives in either year, after adjustment for other facility characteristics and geographic region,” the researchers noted.

Even with the wide variation, the direct impact of a 2% loss on a given facility’s operations is relatively small, raising questions about the efficacy of the program as a way to change provider behavior; the fiscal year 2019 gainers saw an average boost of about $21,000 per facility, according to the researchers.

“Until the VBP program makes it more punitive or more incentivizing for the facilities, we’re not going to see too many changes in provider behavior. I think everyone can get behind that we need to reduce our hospital readmissions, and I think most of the providers are doing that,” Vincent Fedele, director of analytics at consulting firm Zimmet Healthcare Services Group and chief operating officer of affiliated data provider CORE Analytics, told SNN in 2018. “[But] if your penalty’s only going to be $25,000, how much are you going to invest in technology or additional staff in order to effectuate change under VBP?”

The researchers acknowledged that the results also do not necessarily provide clear guidance on how providers should adjust their operations in order to improve care and pull down the bonus.

“Substituting lower-skilled clinical staff for RNs, although cost-effective to SNFs, may lead to poorer performance in the SNF VBP Program and potentially worse outcomes for residents,” they noted. “It is unlikely that SNF VBP incentive payments alone would fully offset the increased costs associated with adjusting the staff mix.”

The analysis also did not include the impact of COVID-19.

“Understanding the impacts of this new program on SNF quality, and on Medicare beneficiaries’ access to care, will be important in both the short and long terms,” they concluded. “Intended and unintended program outcomes should be monitored closely as indicators of success and potential opportunities for program refinements, particularly in light of COVID-19’s disproportionate impacts on skilled nursing facilities.”

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