Medicare Compliance & Reimbursement

But a new CMS SNF payment policy cut both ways.

Skilled nursing facilities would get a payment boost in 2004 under a reimbursement proposal offered up June 10 by the Centers for Medicare & Medicaid Services.

But the policy change could have negative consequences in future years, depending on how well CMS estimates health care inflation.

In the proposal, which appears in the Federal Register, CMS would add a "forecast error adjustment" to the SNF prospective payment system. Currently, SNF PPS payment rates are based on CMS' forecasted percent change in the market basket, a measure of health care inflation, for the upcoming fiscal year. If that estimate is too low, SNFs end up getting an effective payment cut; if it's too high, they get a little extra cash.

In the past it's been too low, in part because CMS didn't accurately predict wage increases for nursing home workers. Under its proposal, fiscal year 2004 payments would be updated to account for that - adding an additional 3.26 percent forecast error adjustment (which covers forecast errors since the beginning of the SNF PPS) to the 2.9 percent market basket increase currently proposed.

However, the change could result in reduced payments if CMS overestimates the market basket in future years. And the agency is adamant that "it is absolutely essential that the adjustment be applied uniformly - not just in those instances where the forecasted percent change is lower than the actual percent change."

Comments on the proposal are due July 7. To see the rule, go to www.access.gpo.gov/su_docs/fedreg/a030610c.html.

Lesson Learned: If CMS follows through on the forecast error policy, SNFs will have to pay close attention to the accuracy of the agency's market basket estimates - big discrepancies will mean a big difference on SNFs' future bottom lines.