Streamlining Regulations: Three Big Points for SNFs

Jay Gormley has some ideas on what last week’s news from CMS and its regulation streamlining proposed rule means for SNFs.

Called the “Medicare and Medicaid Programs; Cutting Administrative Requirements for Excellence in Patient Care (CARE) (CMS-3484-P)” proposal, the agency said the rule proposes regulatory revisions to the Conditions of Participation, Conditions for Coverage, and Requirements for Participation for Medicare- and Medicaid-participating providers and suppliers.

Collectively, CMS estimates the proposals would save $320 million, returning more than 3.26 million hours of staff time to providers.

For SNFs, it boils down to three main points, Gormley said:

-          Eliminating recurring respiratory illness reporting, vaccine documentation requirements, and certain facility assessment obligations would provide tangible administrative relief.

-          Proposing changes to physical plant requirements could have implications for SNF acquisitions, reopenings, and the valuation of older facilities that might otherwise face substantial renovation costs following a CHOW.

-          Rescinding Medicaid direct care spending transparency reporting would remove one of the remaining components of the 2024 staffing rule and reduce the federal infrastructure available to support future Medicaid workforce spending mandate.

Some Complications

Gormley, chief investment officer and COO, Advisory, Zimmet Healthcare Services Group, said on its face the CMS draft rule offers welcome regulatory relief, but noted there could be some sticking points with the third item.

“There is a potentially important catch buried in the relief offered by the rule. CMS acknowledges that requiring states and providers to calculate these expenditures directly would be extraordinarily complicated. It then suggests that the federal government may not actually need providers to report this information at all,” he said.

CMS in the proposed rule says: "We also now believe we may be able to approximate the percentage of Medicaid payments spent on direct care worker compensation." CMS identifies PBJ staffing data, the Minimum Data Set, Bureau of Labor Statistics wage information, Medicare Cost Reports, and Medicaid claims and encounter data as potential sources for developing those estimates.

The problem with CMS saying the sector no longer has to navigate the bureaucratic obstacle course of Medicaid spending reports is that CMS is also suggesting that it can construct its own estimates of direct care spending.

“We're potentially helping the government build a giant, algorithmically guided Blue Shell that some future administration could launch at us whenever it wants. There is a potentially enormous difference between requiring SNFs to report their actual Medicaid-related spending and having CMS estimate that spending through an algorithm assembled from existing administrative datasets,” Gormley said.

At least under a facility-reported system, operators have some opportunity to explain their costs, account for their staffing arrangements, and demonstrate how they allocate expenses among Medicare, Medicaid, and private-pay residents.

Implications Are There

But he said under a federally developed estimation model, the numbers could be determined using assumptions about Medicaid census, PBJ hours, prevailing wages, and Medicare cost report expenses that do not necessarily reflect how a particular facility actually operates.

Consider the implications, Gormley said:

PBJ tells CMS how many nursing hours were worked, but not necessarily the total cost of employing those workers. Bureau of Labor Statistics’ data provide market-level wage estimates, not facility-specific salaries, overtime, agency premiums, benefits, or other employment costs. MDS information can help estimate payer mix, but it does not tell CMS precisely how nursing resources are distributed among residents of different acuity or payer classifications. And Medicare cost reports, while useful, introduce their own limitations involving timing, cost allocations, and differences between Medicare reporting categories and Medicaid reimbursement methodologies.

Accuracy at Risk?

Combine those datasets without context and comment and CMS might produce an estimate of what it believes a facility is spending on Medicaid direct care. That estimate might be perfectly reasonable at the aggregate level and still materially inaccurate for an individual nursing home.

“But it also might be wildly inaccurate due to the fact that these data sources just do not translate and relate well to one another. The real concern is what happens next. Today, CMS is presenting this as an alternative to a burdensome reporting requirement, not as a new federal minimum spending standard,” he said.

“But once the federal government has developed a facility-level methodology for estimating the percentage of Medicaid revenue devoted to direct care, the analytical infrastructure exists for future policymakers to compare facilities, publish rankings, identify alleged outliers, or potentially support new minimum spending requirements.”

Gormley said to be clear, CMS has not proposed a new federal 70/40-style spending mandate, nor has it committed to publishing or enforcing facility-level spending estimates.

“Far, far from it. The administration's immediate objective is to reduce regulatory burdens, and it is difficult to imagine this White House championing such requirements. Nevertheless, datasets and analytical methodologies tend to outlive the administrations that develop them. A future administration could view those same estimates as a useful starting point for a substantially more aggressive regulatory framework,” he noted.

Comments or questions? Contact Patrick Connole at pconnole@parkplacelive.com.