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Healthcare Perspectives


Medicare sequestration is back: Payment reductions for skilled nursing facilities in 2022

Jul 24, 2022
By: Terri Lee

Have you found that your Medicare claim payments do not match your outstanding accounts receivable (AR) balances and you think they should? Well, you’re right!

Payments received from Medicare should match your outstanding AR balance within a few cents. The same goes for those Medicare replacement plans that pay like Medicare, or a percentage of the Medicare allowable amount negotiated through contracts. If your payments match to within a few cents, great job and keep up the good work.

If they don’t, you might ask yourself, “Why do I have all these balances that I need to adjust?” Manual adjustments take time and energy, valuable resources in our busy work life and can often hide actual payment variances that need to be addressed.

Let’s look at the reinstatement of sequestration — yes, it’s back — along with some other reimbursement reductions for 2022 and a list of those annual changes we expect. The key to success in not having to deal with that pesky AR balance after full payment is to accurately maintain and update your EMR software to coincide with these annual and off-cycle updates.

Medicare sequestration

Sequestration is applied to claim payment amounts after coinsurance, deductible, other payment reductions and Medicare Secondary Payment adjustments (if applicable) are applied. While it has been around since April 1, 2013, when the COVID-19 pandemic hit, a moratorium on the sequestration payment reduction was applied as part of the CARES Act.

In December 2021, CMS announced plans to reinstate, gradually, the 2% sequestration payment reductions starting at 1% on April 1, 2022, and increasing back to the full 2% reduction effective July 1, 2022.

Has your EMR software been updated to accurately reflect these changes?

Medicare sequestration is back

Below are some links to the history of the sequestration amounts listed above:

My sequestration amounts are set up in my EMR correctly. What else could be causing my AR discrepancies?

There are several reasons why you could be experiencing AR discrepancies. We cover four reasons below:

1. Therapy Assistant Reduction

Therapy assistant reductions of 15% are applied to therapy services performed by OTAs and PTAs effective with dates of service January 1, 2022.

The CO and CQ modifiers to indicate services performed by OTAs and PTAs, respectively, have been required on claims since January 1, 2020. Starting January 1, 2022, these services performed by therapy assistants (PTAs and OTAs) are now reimbursed at 85% of the otherwise applicable Part B payment amount.

In basic terms, the 15% reduction is calculated on the Medicare reimbursable amount after coinsurance or deductible amounts are applied (see example below). Has your EMR software been updated to accurately reflect these changes?

Medicare sequestration is back

2. SNF Value Based Purchasing (SNF VBP) Program

  • SNF VBP has been in place since October 1, 2018.
  • SNF VBP reimbursement percentage is updated each year in October.
  • SNF VBP percentage amounts are available on the CMS QIES CASPER Reporting System - located in the CASPER Folders labeled SNFVBP.
  • This percentage applies to all Part A and Part B payers that reimburse like Medicare, including contracts that pay a percentage of Medicare allowable (remember to calculate the percentage of the SNF VBP percentage).

More information on SNF VBP can be found here.

3. Annual PDPM rate updates

  • PDPM rates update each year in October.
  • These rates apply to all Part A payers that reimburse like Medicare.

4. Variable per diem (VPD) adjustment factor

  • VPD is part of the PDPM reimbursement.
  • It applies to all Part A payers that reimburse like Medicare.
  • With VPD, sequenced Medicare A claims released too soon can pay incorrect VBP amounts, resulting in true credit balances.

More information on the VPD adjustment factor can be found here.

Your key to success

As mentioned above, the key to success is to maintain and update your EMR software. Below you’ll find an EMR software update checklist to help you keep track of what needs to get updated and when.

Medicare sequestration is back

Please reach out for assistance if you have any questions. Our Wipfli team is happy to help trouble shoot any calculation variances and help save you valuable time. Learn more

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Terri Lee
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