(UPDATED) 2024 SNF Medicare Rates: Beware the October Surprise!
Marc Zimmet
NOTE: Figures within this document were based on data from the 2024 Proposed Rule; AWIs were updated in the Final Rule. See ZHSG’s 2024 AWI Brief, county-by-county AWI trends from 2022 – 2024, and ZHSG’s 2024 PDPM Rate Simulator for more information.
The big news last week in SNF-land was the release of CMS’ 2024 Medicare SNF Proposed Rule. While the industry awaits guidance on (arbitrary and poorly targeted) staffing mandates, providers cheered a 3.7% reimbursement increase that adds about $24/day to the average facility’s Medicare Part A rate (we should be outraged, but I’ll cover that in August). That sentence was difficult for me to write, not only because every facility and county is different, but because the Market Basket adjustment is only one part of the annual equation; Area Wage Index (“AWI”) is the other.
Broad strokes: AWI is a federal market-specific adjustment that reflects relative labor cost differences across the nation. Some markets become relatively more expensive, some less. In other words, inflation is not evenly distributed. SNF stakeholders expecting a 3.7% rate increase may be caught off guard when the first check comes higher/lower than budgeted. This happens every year; I call it the “October Surprise” because new rates are effective for Service Dates on/after October 1st.
AWI is a “zero-sum game” – there are winners & losers. Most designated Core-Based Statistical Areas (CBSAs) remain relatively stable, but many change by more than 5% every year, and swings can be severe. This year’s big winners add $158/day to Medicare revenue literally overnight, while unlucky operators see $56/day disappear (even after the 3.7% increase is applied). After years of “Rate Shock”, CMS finally instituted a 5% stop-loss on annual decreases, so large reductions don’t hit all at once. Still, they sting.
New AWIs are introduced and finalized in concert with the SNF Proposed/Final Rules. Here’s how 2024’s AWI adjustment impacts CMS’ 410 Urban Core-Based Statistical Area and 47 states with officially designated Rural areas:
The 10 largest net rate changes proposed by CMS for October 1, 2023 are listed below. Figures reflect proposed rates after the 3.7% increase is applied. Please remember: Losses are capped at 5% per year specific to AWI, $PPD are estimates only, and these adjustments are not yet final.
Incidentally, the entire SNF rate construction model is a farce. Medicare uses hospital cost report data as a proxy for SNF economics because CMS never got around to calculating a SNF-specific index, despite a Congressional mandate to do so twenty years ago. Adding insult to injury, hospitals can “reclassify” their AWI designation if their labor pool is drawn from higher-paying counties. Lastly, don’t expect SNF Medicare Advantage rates to change pro rata to Medicare’s 2024 updates, unless of course your facility is on the “Loser” side of the ledger. But those are stories for another time…
NOTE: Figures within this document were based on data from the 2024 Proposed Rule; AWIs were updated in the Final Rule. See ZHSG’s 2024 AWI Brief, county-by-county AWI trends from 2022 – 2024, and ZHSG’s 2024 PDPM Rate Simulator for more information.
(UPDATED) 2024 SNF Medicare Rates: Beware the October Surprise!
Marc Zimmet
NOTE: Figures within this document were based on data from the 2024 Proposed Rule; AWIs were updated in the Final Rule. See ZHSG’s 2024 AWI Brief, county-by-county AWI trends from 2022 – 2024, and ZHSG’s 2024 PDPM Rate Simulator for more information.
The big news last week in SNF-land was the release of CMS’ 2024 Medicare SNF Proposed Rule. While the industry awaits guidance on (arbitrary and poorly targeted) staffing mandates, providers cheered a 3.7% reimbursement increase that adds about $24/day to the average facility’s Medicare Part A rate (we should be outraged, but I’ll cover that in August). That sentence was difficult for me to write, not only because every facility and county is different, but because the Market Basket adjustment is only one part of the annual equation; Area Wage Index (“AWI”) is the other.
Broad strokes: AWI is a federal market-specific adjustment that reflects relative labor cost differences across the nation. Some markets become relatively more expensive, some less. In other words, inflation is not evenly distributed. SNF stakeholders expecting a 3.7% rate increase may be caught off guard when the first check comes higher/lower than budgeted. This happens every year; I call it the “October Surprise” because new rates are effective for Service Dates on/after October 1st.
AWI is a “zero-sum game” – there are winners & losers. Most designated Core-Based Statistical Areas (CBSAs) remain relatively stable, but many change by more than 5% every year, and swings can be severe. This year’s big winners add $158/day to Medicare revenue literally overnight, while unlucky operators see $56/day disappear (even after the 3.7% increase is applied). After years of “Rate Shock”, CMS finally instituted a 5% stop-loss on annual decreases, so large reductions don’t hit all at once. Still, they sting.
New AWIs are introduced and finalized in concert with the SNF Proposed/Final Rules. Here’s how 2024’s AWI adjustment impacts CMS’ 410 Urban Core-Based Statistical Area and 47 states with officially designated Rural areas:
The 10 largest net rate changes proposed by CMS for October 1, 2023 are listed below. Figures reflect proposed rates after the 3.7% increase is applied. Please remember: Losses are capped at 5% per year specific to AWI, $PPD are estimates only, and these adjustments are not yet final.
You can model your county’s 2024 PDPM rate at z-INTEL. As always, feel free to reach out to us at info@zhealthcare.com or info@z-intel.com.
Incidentally, the entire SNF rate construction model is a farce. Medicare uses hospital cost report data as a proxy for SNF economics because CMS never got around to calculating a SNF-specific index, despite a Congressional mandate to do so twenty years ago. Adding insult to injury, hospitals can “reclassify” their AWI designation if their labor pool is drawn from higher-paying counties. Lastly, don’t expect SNF Medicare Advantage rates to change pro rata to Medicare’s 2024 updates, unless of course your facility is on the “Loser” side of the ledger. But those are stories for another time…
NOTE: Figures within this document were based on data from the 2024 Proposed Rule; AWIs were updated in the Final Rule. See ZHSG’s 2024 AWI Brief, county-by-county AWI trends from 2022 – 2024, and ZHSG’s 2024 PDPM Rate Simulator for more information.