Get ready for a major update: CMS proposes a significant 4.1% pay increase for nursing homes!

The Centers for Medicare & Medicaid Services (CMS) has proposed a 4.1% pay increase for nursing homes in fiscal year 2025, but declined to issue an update on its staffing minimum proposal as part of its annual payment rule proposal. The proposed increase includes a 2.8% market basket update and a 1.7% market basket forecast error adjustment, which is considered modest by industry leaders.

American Health Care Association President and CEO Mark Parkinson expressed disappointment with the proposed increase, stating that it will not be enough to offset the costs of meeting CMS's proposed staffing minimum requirement. Parkinson urged the Administration and CMS to reconsider the staffing mandate, warning that it could lead to nursing home closures and reduced access to long-term care for seniors.

The proposed rule also includes changes to the Patient-Driven Payment Model ICD-10 Code Mappings and Value-Based Purchasing updates. Additionally, CMS has proposed an expanded Civil Monetary Penalty process that would allow for more penalties to be imposed on nursing homes for health and safety violations. The agency is seeking comments on potential future updates to the non-therapy ancillary component of PDPM.

Industry leaders are cautiously optimistic about the proposed pay increase, which they believe will help offset increased labor costs associated with staffing shortages. ADVION Executive Vice President Cynthia Morton stated that the payment update reflects the increased costs experienced by providers over the past couple of years and will greatly help with recruiting and retaining staff.

The 211-page proposed rule is set to be officially published in the Federal Register, followed by a 60-day comment period. A final rule is expected to be announced by the end of July.