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Skilled nursing facilities: Prepare for Medicare sequestration and payment reductions in 2022

Jul 24, 2022
By: Terri Lee

Payments received from Medicare should match your facility’s outstanding AR balance within a few cents. But sometimes, manual adjustments are needed.

Why? Your EMR software may not be updated for annual and off-cycle Medicare updates. When that happens, staff have to manually adjust AR balances, which takes time and energy away from other tasks — and can hide actual payment variances that need to be addressed.

Avoid pesky, time-consuming AR balances by updating your EMR. Plan for expected changes now and watch for common sources of discrepancy.   

Medicare sequestration

After the COVID-19 pandemic, sequestration was put on hold by the CARES Act. But in December 2021, CMS announced plans to gradually reinstate sequestration payment reductions. On April 1, 2022, sequestration payment reductions start at 1%, and increase to the full 2% reduction on July 1, 2022.

Like before, sequestration is applied to claim payment amounts after coinsurance, deductibles, other payment reductions and Medicare Secondary Payment adjustments are applied.

Update your EMR software to accurately reflect these dates and changes as follows: 

Medicare sequestration is back

Therapy assistant reduction

Starting January 1, 2022, services performed by physical therapy assistants (PTAs) and occupational therapy assistants (OTAs) will be reimbursed at 85% of the otherwise applicable Part B payment amount. (Facilities have been tracking PTA and OTA services with CO and CQ modifiers since 2020.) 

The 15% reduction is calculated based on the Medicare reimbursable amount after coinsurance or deductible amounts are applied. Here’s an example of the corresponding update in EMR software: 

Medicare sequestration is back

The Skilled Nursing Facility Value-Based Purchasing (SNF VBP) Program

The SNF VBP program awards incentive payments to SNFs based on their performance, as measured by hospital readmissions. It began impacting payments on October 1, 2018, so it’s not new, but the reimbursement percentages update annually in October.

To find the current percentages, look in the SNFVBP folder in the CASPER/QUIES Reporting application. The percentages apply to all Part A and Part B payers that reimburse like Medicare, including contracts that pay a percentage of Medicare allowable. Remember to calculate and update the SNF VBP percentage in your EMR.

Patient Driven Payment Model (PDPM)

Rates for PDPM (a case-mix classification model) also change each October. PDPM rates apply to all Part A payers that reimburse like Medicare.

Variable per diem (VPD) adjustment factor

VPD is part of PDPM, and also applies to all Part A payers that reimburse like Medicare. It’s also a common source of discrepancy. With VPD, if sequenced Medicare A claims are released too soon, they can be paid incorrectly and cause credit balances.

How to keep track of reimbursement changes

The key to capturing accurate and timely reimbursements is to maintain and update your EMR software. Use this checklist to help you remember what needs updated in 2022.

Medicare sequestration is back

How Wipfli can help

Still not sure where your variance is coming from? Contact Wipfli for help troubleshooting and calculating variances. Our experienced professionals can save you valuable time — and help you hold onto more money. Contact us today.

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Terri Lee
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