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Hospital readmissions not only have the potential for negative physical, emotional, and psychological impacts on individuals in skilled nursing care, but also cost the Medicare program billions of dollars.

Preventing these events whenever possible is beneficial to patients and has been identified as an opportunity to reduce overall health care system costs by improving quality. The issue has become a top priority for the Centers for Medicare & Medicaid Services (CMS) and managed care programs. 


The Protecting Access to Medicare Act of 2014 (PAMA) required CMS to implement the Skilled Nursing Facility (SNF) Value Based Purchasing (VBP) Program, an effort that links financial outcomes to quality performance.

Starting October 1, 2018, all SNF Medicare Part A rates will be cut by 2 percent to fund an incentive payment pool.  At that time, CMS will adjust payments and return some amount to providers based on how well they do in managing hospital readmissions by meeting or exceeding those performance standards.

The program works by:

  • Cutting up to 2 percent in SNF Medicare Part A payments that can be earned back based on a center’s rehospitalization rate in calendar year (CY) 2017 OR its improvement rate between CY 2015 and 2017.
  • Giving back only 60 percent of the assessed Medicare cuts as incentive payments using an all-cause measure to identify rehospitalizations within 30 days of admission to a SNF.

For more information about the program, visit the CMS website. And download AHCA's fact sheet and Frequently Asked Questions.


Providers may think they don't have to focus on the SNF VBP program yet as it does not affect payment until 2018. But program data collection has already begun! 

CMS is currently collecting the following:

  • Readmission performance rates for stays between January 1, 2017, through December 31, 2017;
  • Improvement in readmission rates between CY 2015 and 2017;and
  • Readmissions from October 2017 through December 2017 will help determine Medicare cuts accessed for both Fiscal Years 2019 and 2020 due to a shift in using fiscal years from calendar years starting in October 2017. 

Providers should know how they are trending and put plans in place to improve their scores by:

  • Tracking quality metrics to understand their performance.
  • Comparing rates to state and national benchmarks to have a better understanding of performance relative to others.
  • Improving performance through implementation of quality improvement programs (e.g., INTERACT).
  • Reviewing confidential feedback quarterly reports using the CMS QIES System.

AHCA encourages member centers to access the following free resources and tools to get started.