In comments to the Centers for Medicare and Medicaid Services (CMS) on the agency’s Fiscal Year (FY) 2027 Skilled Nursing Facility (SNF) Prospective Payment System (PPS) Proposed Rule (CMS 1843-P), the American Health Care Association/National Center for Assisted Living (AHCA/NCAL) laid down some markers on issues like Medicare keeping pace with wages and benefits and the association’s opposition to case-mix creep adjustment, while pledging to work with CMS to improve the final rule for providers.

John Kane, senior vice president of reimbursement policy, AHCA/NCAL, said the trade group appreciates CMS proposing a 2.4 percent Medicare increase, with a caveat.

“We are also again encouraging the agency to acknowledge the need for Medicare to keep up with increasing wage and benefit demands, so we can better compete for qualified caregivers,” he said.

“Additionally, AHCA does not support a case-mix creep adjustment, something of which the agency requested more information. Given the limited methodology provided and corrections CMS already made a few years ago, we do not believe this is an issue that requires changes at this time,” Kane said.

AHCA/NCAL said its comments also encourage CMS to take a measured approach on reporting changes to the Quality Reporting Program.

“Aggressive timelines and massive expansions are not realistic or supportive of improving quality care. Federal officials must balance reporting requirements and ensure that we’re putting patients over paperwork. We are grateful to CMS for considering our comments and working collaboratively with stakeholders as it develops the final rule,” Kane said.

Taking A Closer Look

In analyzing the comments, Martin Allen, the former senior vice president of reimbursement policy at AHCA/NCAL, told Park Place it is important to note that Kane as the leader of the AHCA reimbursement team on SNF PPS comments is powerful.

“As the architect of PDPM, he knows what CMS intended and where they fell short on design and implementation. He drove the parity adjustment and spread it over FY2023 and FY2024 to make it easier for providers to swallow,” he said.

As for the comments, Allen said AHCA expresses its concern (on Page 4) that the Market Basket Index (MBI) is not keeping up with actual cost increases and asks the agency to consider a prospective percentage add-on to reflect the impact of wage and benefit costs.

“They feel that there isn’t enough money in the system. This is important because CMS is proposing adjustments to ‘case-mix creep,’ which would reduce Medicare payments to SNF by up to $1 billion,” he said.

In regard to AHCA’s comments, which are on page 9, Allen said:

• AHCA does not believe there is sufficient detail provided on the analytic framework to provide substantive feedback. (They are challenging the Acumen study for lack of detail to comment on.)

• AHCA does not support a case-mix creep adjustment that compares pre-PDPM data to PDPM data just after implementation, given that these coding changes were already captured by the PDPM Parity Adjustment Recalibration. (The dollars have already been taken out by this adjustment, so another adjustment is not justified.)

He said the association continues to make comments on the SNF Wage Index since it is punitive to SNFs as they do not enjoy the same appeal rights as hospitals.

“The 5 percent change floor is important, but different wage indexes being used for hospitals and SNFs in the same community is unfair,” Allen noted.

Outline of the SNF POV

AHCA/NCAL’s comments totaled 37 pages. Some of the key recommended changes are included in the following abbreviated highlights, and touch on points established above.

Read the full comments here:

On the market basket update - CMS proposes a FY 2027 SNF market basket percentage increase of 3.2 percent based on IHS Global Inc.’s (IGI's) fourth-quarter 2025 forecast of the 2022-based SNF market basket (before application of the forecast error adjustment and productivity adjustment). CMS also proposes that if more recent data subsequently become available (for example, a more recent estimate of the market basket, the productivity adjustment, and/or the forecast error adjustment), CMS would use such data, if appropriate, to determine the FY 2027 SNF market basket percentage increase, labor-related share relative importance, forecast error adjustment, or productivity adjustment in the SNF PPS final rule.

AHCA Comment - AHCA appreciates the positive update for our providers but remains concerned regarding the ability of the MBI to keep up with actual cost increases. AHCA urges CMS to consider a prospective percentage add-on to reflect the impact of wage and benefit costs.

On “Case-Mix Creep” - CMS requested information regarding a statistical framework to quantify and adjust for “case-mix creep” under PDPM. In addition to the framework discussed in the proposed rule, CMS also posted a memorandum prepared by their contractor that outlines this framework in greater detail. CMS defines case-mix creep as increases in reported patient acuity that are attributable to coding or documentation behavior rather than actual increases in patient complexity or resource utilization. CMS begins by stating their concern that PDPM case-mix indices (CMIs) have continued to rise since PDPM implementation in FY 2020 even though measures of resource utilization have generally declined.

AHCA Comment - AHCA appreciates the opportunity to comment on this conceptual framework for case-mix creep under the SNF PPS. AHCA does not believe there is sufficient detail provided on the analytic framework to provide substantive feedback. AHCA does not support a case-mix creep adjustment, which compares pre-PDPM data to PDPM data just after implementation, given that these coding changes were already captured by the PDPM Parity Adjustment Recalibration.

Further, AHCA believes that CMS must consider the downstream effects of any case-mix creep adjustment on other payers, particularly considering rate cuts derived from the Working Families Tax Cut. . . First and foremost, given that the adjustment factor discussed in the proposed rule amounts to over $1 billion that would be cut from current nursing home Medicare Part A fee-for-service payments, understanding the current financial situation for our providers is paramount. As discussed by MedPAC in their latest report to Congress, FFS Medicare payments make up a diminishing, but still outsized proportion of a facility’s payments (approximately 13 percent). Most SNF facility payments derive from Medicaid, which represents almost two-thirds of facility paid days. As has been widely reported, the Working Families Tax Cut, passed in 2025, is expected to reduce Medicaid spending by nearly $1 trillion. Compounding the impacts expected on nursing homes from these forthcoming payment cuts and loss of Federal financial participation with an ill-conceived case-mix creep adjustment could threaten the ability of many nursing homes to continue delivering high quality care to our beneficiaries.

SNF Wage Values - AHCA supports CMS in identifying an alternative methodology or data source for SNF wage values, insomuch as any alternative accounts for existing inequities. LTC workforce issues persist and could be exacerbated if revisions to the SNF wage index are not done in a measured and careful manner.

AHCA does not support implementing revisions to the SNF wage index that could create additional financial instability or rate reductions. . . While significant progress has been made to rebuild and stabilize the LTC workforce, challenges remain as competition for skilled caregivers and other support staff continues to be stiff in today’s labor market.

One reason LTC facilities struggle to compete for workers is due to limited government resources. More than 60 percent of nursing home residents and the vast majority of ICF residents rely on Medicaid to pay for their daily care, a program that is notoriously underfunded.

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