In the 2014 SNF PPS Proposed Rule, CMS provided an update on the SNF Therapy Research Project, and noted that it has contracted with Acumen, LLC, and the Brookings Institution. The purpose was to identify potential alternatives to the existing methodology used to pay for therapy services received under the SNF PPS.  In Phase One of the project, past research studies and policy issues related to SNF PPS therapy payment were reviewed, and options for improving or replacing the current system of paying for SNF therapy services were outlined.

Four general concepts for determining reimbursement for therapy services in the SNF setting were evaluated: the resident characteristics model, the hybrid model, the fee schedule, and competitive bidding.

The first payment concept, the resident characteristics model, uses resident information, such as medical, functional, or cognitive status, to group residents with similar clinical characteristics and expected cost of care for the purpose of determining reimbursement. In general, this approach uses existing practice patterns to develop an empirical model of the relationship between resident characteristics and expected costs of therapy care.

The second payment concept, the hybrid model, pairs a case-mix classification system with a resource-based pricing adjustment. This conceptual approach is similar to the current SNF PPS, in that it directly incorporates some measure of resource use into its determination of payment. The specific resource pricing adjustment could take a variety of forms, including a fee schedule add-on, block pricing, or an outlier payment adjustment for costly residents.

The third payment concept reimburses for therapy using a fee schedule. In this system, payments are based on the resident’s actual therapy use rather than the expected resource use.

The fourth payment system is competitive bidding, which would allow market-based pricing of therapy services through a bidding mechanism

The project team evaluated each concept according to six groups of criteria. The criteria, illustrating the features of an optimal payment approach, included the ability to improve payment accuracy and the feasibility of implementation in the short to medium term. The project team then used the evaluations of each payment concept to recommend that the resident characteristics model and the hybrid model proceed to the next stage of the project.

In the next phase of this project, the two recommended payment model concepts would be developed and analyzed. Building on the work conducted over the past year, the project team will develop each concept into a fully specified model suitable for implementation. The work will progress through four distinct stages: developing an analysis plan, conducting empirical analyses, soliciting and incorporating feedback from a technical expert panel, and summarizing findings. Finally, the project team will submit a recommendation for which model tested should be implemented as part of the SNF PPS.