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/ Wednesday, May 07, 2008
[Federal Register: May 7, 2008 (Volume 73, Number 89)]
[Proposed Rules]
[Page 25917-25960]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07my08-35]
[[Page 25917]]
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Part III
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Part 413
Medicare Program; Prospective Payment System and Consolidated Billing
for Skilled Nursing Facilities for FY 2009; Proposed Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 413
[CMS-1534-P]
RIN 0938-AP11
Medicare Program; Prospective Payment System and Consolidated
Billing for Skilled Nursing Facilities for FY 2009
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would update the payment rates used under
the prospective payment system (PPS) for skilled nursing facilities
(SNFs), for fiscal year (FY) 2009. In addition, it would recalibrate
the case-mix indexes so that they more accurately reflect parity in
expenditures related to the implementation of case-mix refinements in
January 2006. It also discusses our ongoing analysis of nursing home
staff time measurement data collected in the Staff Time and Resource
Intensity Verification (STRIVE) project. Finally, the proposed rule
would make technical corrections in the regulations text with respect
to Medicare bad debt payments to SNFs and the reference to the
definition of urban and rural as applied to SNFs.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on June 30, 2008.
ADDRESSES: In commenting, please refer to file code CMS-1534-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on specific
issues in this regulation to http://www.regulations.gov. Follow the
instructions for ``Comment or Submission'' and enter the file code to
find the document accepting comments.
2. By regular mail. You may mail written comments (one original and
two copies) to the following address ONLY: Centers for Medicare &
Medicaid Services, Department of Health and Human Services, Attention:
CMS-1534-P, P.O. Box 8016, Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1534-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses.
a. Room 445-G, Hubert H. Humphrey Building, 200 Independence
Avenue, SW., Washington, DC 20201
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-9994 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the address indicated as appropriate for hand or
courier delivery may be delayed and received after the comment period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Ellen Berry, (410) 786-4528 (for
information related to clinical issues). Jeanette Kranacs, (410) 786-
9385 (for information related to the development of the payment rates
and case-mix indexes). Bill Ullman, (410) 786-5667 (for information
related to level of care determinations, consolidated billing, and
general information).
SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule to assist us in fully considering issues
and developing policies. You can assist us by referencing the file code
CMS-1534-P and the specific ``issue identifier'' that precedes the
section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://
www.cms.hhs.gov/eRulemaking. Click on the link ``Electronic Comments on
CMS Regulations'' on that Web site to view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.
To assist readers in referencing sections contained in this
document, we are providing the following Table of Contents.
Table of Contents
I. Background
A. Current System for Payment of SNF Services Under Part A of
the Medicare Program
B. Requirements of the Balanced Budget Act of 1997 (BBA) for
Updating the Prospective Payment System for Skilled Nursing
Facilities
C. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement
Act of 1999 (BBRA)
D. The Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA)
E. The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA)
F. Skilled Nursing Facility Prospective Payment--General
Overview
1. Payment Provisions--Federal Rate
2. Rate Updates Using the Skilled Nursing Facility Market Basket
Index
II. Annual Update of Payment Rates Under the Prospective Payment
System for Skilled Nursing Facilities
A. Federal Prospective Payment System
1. Costs and Services Covered by the Federal Rates
2. Methodology Used for the Calculation of the Federal Rates
B. Case-Mix Adjustments
1. Background
2. Development of the Case-Mix Indexes
C. Wage Index Adjustment to Federal Rates
1. Clarification of New England Deemed Counties
2. Multi-Campus Hospital Wage Index Data
D. Updates to Federal Rates
E. Relationship of RUG-III Classification System to Existing
Skilled Nursing Facility Level-of-Care Criteria
F. Example of Computation of Adjusted PPS Rates and SNF Payment
[[Page 25919]]
G. Other Issues
1. Staff Time and Resource Intensity Verification (STRIVE)
Project
2. Minimum Data Set (MDS) 3.0
3. Integrated Post Acute Care Payment
H. Miscellaneous Technical Corrections and Clarifications
1. Bad Debt Payments
2. Additional Clarifications
III. The Skilled Nursing Facility Market Basket Index
A. Use of the Skilled Nursing Facility Market Basket Percentage
B. Market Basket Forecast Error Adjustment
C. Federal Rate Update Factor
IV. Consolidated Billing
V. Application of the SNF PPS to SNF Services Furnished by Swing-Bed
Hospitals
VI. Provisions of the Proposed Rule
VII. Collection of Information Requirements
VIII. Regulatory Impact Analysis
A. Overall Impact
B. Anticipated Effects
C. Alternatives Considered
D. Accounting Statement
E. Conclusion
Regulation Text
Addendum: FY 2009 CBSA-Based Wage Index Tables (Tables 8 & 9)
Abbreviations
In addition, because of the many terms to which we refer by
abbreviation in this proposed rule, we are listing these abbreviations
and their corresponding terms in alphabetical order below:
AIDS Acquired Immune Deficiency Syndrome
ARD Assessment Reference Date
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999, Pub. L. 106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000, Pub. L. 106-554
CAH Critical Access Hospital
CARE Continuity Assessment Record and Evaluation
CBSA Core-Based Statistical Area
CFR Code of Federal Regulations
CMI Case-Mix Index
CMS Centers for Medicare & Medicaid Services
DRA Deficit Reduction Act of 2005, Pub. L. 109-171
FQHC Federally Qualified Health Center
FR Federal Register
FY Fiscal Year
GAO Government Accountability Office
HAC Hospital-Acquired Condition
HCPCS Healthcare Common Procedure Coding System
HIPPS Health Insurance Prospective Payment System
HIT Health Information Technology
IFC Interim Final Rule with Comment Period
IPPS Hospital Inpatient Prospective Payment System
MDS Minimum Data Set
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Pub.L. 108-173
MSA Metropolitan Statistical Area
MS-DRG Medicare Severity Diagnosis-Related Group
NRST Non-Resident Specific Time
NTA Non-Therapy Ancillary
OIG Office of the Inspector General
OMB Office of Management and Budget
OMRA Other Medicare Required Assessment
PAC-PRD Post-Acute Care Payment Reform Demonstration
PPS Prospective Payment System
RAI Resident Assessment Instrument
RAP Resident Assessment Protocol
RAVEN Resident Assessment Validation Entry
RFA Regulatory Flexibility Act, Pub. L. 96-354
RHC Rural Health Clinic
RIA Regulatory Impact Analysis
RUG-III Resource Utilization Groups, Version III
RUG-53 Refined 53-Group RUG-III Case-Mix Classification System
RST Resident Specific Time
SCHIP State Children's Health Insurance Program
SNF Skilled Nursing Facility
STM Staff Time Measurement
STRIVE Staff Time and Resource Intensity Verification
UMRA Unfunded Mandates Reform Act, Pub. L. 104-4
VBP Value-Based Purchasing
I. Background
[If you choose to comment on issues in this section, please include
the caption ``BACKGROUND'' at the beginning of your comments.]
Annual updates to the prospective payment system (PPS) rates for
skilled nursing facilities (SNFs) are required by section 1888(e) of
the Social Security Act (the Act), as added by section 4432 of the
Balanced Budget Act of 1997 (BBA), and amended by the Medicare,
Medicaid, and State Children's Health Insurance Program (SCHIP)
Balanced Budget Refinement Act of 1999 (BBRA), the Medicare, Medicaid,
and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), and
the Medicare Prescription Drug, Improvement, and Modernization Act of
2003 (MMA). Our most recent annual update occurred in a final rule (72
FR 43412, August 3, 2007) that set forth updates to the SNF PPS payment
rates for fiscal year (FY) 2008. We subsequently published two
correction notices (72 FR 55085, September 28, 2007, and 72 FR 67652,
November 30, 2007) with respect to those payment rate updates.
A. Current System for Payment of Skilled Nursing Facility Services
Under Part A of the Medicare Program
Section 4432 of the BBA amended section 1888 of the Act to provide
for the implementation of a per diem PPS for SNFs, covering all costs
(routine, ancillary, and capital-related) of covered SNF services
furnished to beneficiaries under Part A of the Medicare program,
effective for cost reporting periods beginning on or after July 1,
1998. In this proposed rule, we propose to update the per diem payment
rates for SNFs for FY 2009. Major elements of the SNF PPS include:
Rates. As discussed in section I.F.1. of this proposed
rule, we established per diem Federal rates for urban and rural areas
using allowable costs from FY 1995 cost reports. These rates also
included an estimate of the cost of services that, before July 1, 1998,
had been paid under Part B but were furnished to Medicare beneficiaries
in a SNF during a Part A covered stay. We adjust the rates annually
using a SNF market basket index, and we adjust them by the hospital
inpatient wage index to account for geographic variation in wages. We
also apply a case-mix adjustment to account for the relative resource
utilization of different patient types. This adjustment utilizes a
refined, 53-group version of the Resource Utilization Groups, version
III (RUG-III) case-mix classification system, based on information
obtained from the required resident assessments using the Minimum Data
Set (MDS) 2.0. Additionally, as noted in the August 4, 2005 final rule
(70 FR 45028), the payment rates at various times have also reflected
specific legislative provisions, including section 101 of the BBRA,
sections 311, 312, and 314 of the BIPA, and section 511 of the MMA.
Transition. Under sections 1888(e)(1)(A) and (e)(11) of
the Act, the SNF PPS included an initial, three-phase transition that
blended a facility-specific rate (reflecting the individual facility's
historical cost experience) with the Federal case-mix adjusted rate.
The transition extended through the facility's first three cost
reporting periods under the PPS, up to and including the one that began
in FY 2001. Thus, the SNF PPS is no longer operating under the
transition, as all facilities have been paid at the full Federal rate
effective with cost reporting periods beginning in FY 2002. As we now
base payments entirely on the adjusted Federal per diem rates, we no
longer include adjustment factors related to facility-specific rates
for the coming FY.
Coverage. The establishment of the SNF PPS did not change
Medicare's fundamental requirements for SNF coverage. However, because
the RUG-III classification is based, in part, on the beneficiary's need
for skilled nursing
[[Page 25920]]
care and therapy, we have attempted, where possible, to coordinate
claims review procedures with the output of beneficiary assessment and
RUG-III classifying activities. This approach includes an
administrative presumption that utilizes a beneficiary's initial
classification in one of the upper 35 RUGs of the refined 53-group
system to assist in making certain SNF level of care determinations, as
discussed in greater detail in section II.E. of this proposed rule.
Consolidated Billing. The SNF PPS includes a consolidated
billing provision that requires a SNF to submit consolidated Medicare
bills to its fiscal intermediary or Medicare Administrative Contractor
for almost all of the services that its residents receive during the
course of a covered Part A stay. In addition, this provision places
with the SNF the Medicare billing responsibility for physical,
occupational, and speech-language therapy that the resident receives
during a noncovered stay. The statute excludes a small list of services
from the consolidated billing provision (primarily those of physicians
and certain other types of practitioners), which remain separately
billable under Part B when furnished to a SNF's Part A resident. A more
detailed discussion of this provision appears in section IV. of this
proposed rule.
Application of the SNF PPS to SNF services furnished by
swing-bed hospitals. Section 1883 of the Act permits certain small,
rural hospitals to enter into a Medicare swing-bed agreement, under
which the hospital can use its beds to provide either acute or SNF
care, as needed. For critical access hospitals (CAHs), Part A pays on a
reasonable cost basis for SNF services furnished under a swing-bed
agreement. However, in accordance with section 1888(e)(7) of the Act,
these services furnished by non-CAH rural hospitals are paid under the
SNF PPS, effective with cost reporting periods beginning on or after
July 1, 2002. A more detailed discussion of this provision appears in
section V. of this proposed rule.
B. Requirements of the Balanced Budget Act of 1997 (BBA) for Updating
the Prospective Payment System for Skilled Nursing Facilities
Section 1888(e)(4)(H) of the Act requires that we publish annually
in the Federal Register:
1. The unadjusted Federal per diem rates to be applied to days of
covered SNF services furnished during the FY.
2. The case-mix classification system to be applied with respect to
these services during the FY.
3. The factors to be applied in making the area wage adjustment
with respect to these services.
In the July 30, 1999 final rule (64 FR 41670), we indicated that we
would announce any changes to the guidelines for Medicare level of care
determinations related to modifications in the RUG-III classification
structure (see section II.E. of this proposed rule for a discussion of
the relationship between the case-mix classification system and SNF
level of care determinations).
Along with other revisions proposed later in this preamble, this
proposed rule provides the annual updates to the Federal rates as
mandated by the Act.
C. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 (BBRA)
There were several provisions in the BBRA that resulted in
adjustments to the SNF PPS. We described these provisions in detail in
the final rule that we published in the Federal Register on July 31,
2000 (65 FR 46770). In particular, section 101(a) of the BBRA provided
for a temporary 20 percent increase in the per diem adjusted payment
rates for 15 specified RUG-III groups. In accordance with section
101(c)(2) of the BBRA, this temporary payment adjustment expired on
January 1, 2006, upon the implementation of case-mix refinements (see
section I.F.1. of this proposed rule). We included further information
on BBRA provisions that affected the SNF PPS in Program Memorandums A-
99-53 and A-99-61 (December 1999).
Also, section 103 of the BBRA designated certain additional
services for exclusion from the consolidated billing requirement, as
discussed in section IV. of this proposed rule. Further, for swing-bed
hospitals with more than 49 (but less than 100) beds, section 408 of
the BBRA provided for the repeal of certain statutory restrictions on
length of stay and aggregate payment for patient days, effective with
the end of the SNF PPS transition period described in section
1888(e)(2)(E) of the Act. In the July 31, 2001 final rule (66 FR
39562), we made conforming changes to the regulations at Sec.
413.114(d), effective for services furnished in cost reporting periods
beginning on or after July 1, 2002, to reflect section 408 of the BBRA.
D. The Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA)
The BIPA also included several provisions that resulted in
adjustments to the SNF PPS. We described these provisions in detail in
the final rule that we published in the Federal Register on July 31,
2001 (66 FR 39562). In particular:
Section 203 of the BIPA exempted CAH swing-beds from the
SNF PPS. We included further information on this provision in Program
Memorandum A-01-09 (Change Request 1509), issued January 16,
2001, which is available online at http://www.cms.hhs.gov/transmittals/
downloads/a0109.pdf.
Section 311 of the BIPA revised the statutory update
formula for the SNF market basket, and also directed us to conduct a
study of alternative case-mix classification systems for the SNF PPS.
In 2006, we submitted a report to the Congress on this study, which is
available online at http://www.cms.hhs.gov/SNFPPS/Downloads/RC__
2006_PC__PPSSNF.pdf.
Section 312 of the BIPA provided for a temporary increase
of 16.66 percent in the nursing component of the case-mix adjusted
Federal rate for services furnished on or after April 1, 2001, and
before October 1, 2002. The add-on is no longer in effect. This section
also directed the Government Accountability Office (GAO) to conduct an
audit of SNF nursing staff ratios and submit a report to the Congress
on whether the temporary increase in the nursing component should be
continued. The report (GAO-03-176), which GAO issued in November 2002,
is available online at http://www.gao.gov/new.items/d03176.pdf.
Section 313 of the BIPA repealed the consolidated billing
requirement for services (other than physical, occupational, and
speech-language therapy) furnished to SNF residents during noncovered
stays, effective January 1, 2001. (A more detailed discussion of this
provision appears in section IV. of this proposed rule.)
Section 314 of the BIPA corrected an anomaly involving
three of the RUGs that the BBRA had designated to receive the temporary
payment adjustment discussed above in section I.C. of this proposed
rule. (As noted previously, in accordance with section 101(c)(2) of the
BBRA, this temporary payment adjustment expired upon the implementation
of case-mix refinements on January 1, 2006.)
Section 315 of the BIPA authorized us to establish a
geographic reclassification procedure that is specific to SNFs, but
only after collecting the data necessary to establish a SNF wage index
that is based on wage data from nursing homes. To date, this has proven
to be infeasible due to the volatility of existing SNF wage data and
the significant amount of resources that
[[Page 25921]]
would be required to improve the quality of that data.
We included further information on several of the BIPA provisions
in Program Memorandum A-01-08 (Change Request 1510), issued
January 16, 2001, which is available online at www.cms.hhs.gov/
transmittals/downloads/a0108.pdf.
E. The Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (MMA)
The MMA included a provision that results in a further adjustment
to the SNF PPS. Specifically, section 511 of the MMA amended section
1888(e)(12) of the Act, to provide for a temporary increase of 128
percent in the PPS per diem payment for any SNF resident with Acquired
Immune Deficiency Syndrome (AIDS), effective with services furnished on
or after October 1, 2004. This special AIDS add-on was to remain in
effect until ``* * * such date as the Secretary certifies that there is
an appropriate adjustment in the case mix. * * *'' The AIDS add-on is
also discussed in Program Transmittal 160 (Change Request
3291), issued on April 30, 2004, which is available online at
http://www.cms.hhs.gov/transmittals/downloads/r160cp.pdf. As discussed
in the SNF PPS final rule for FY 2006 (70 FR 45028, August 4, 2005), we
did not address the certification of the AIDS add-on with the
implementation of the case-mix refinements, thus allowing the temporary
add-on payment created by section 511 of the MMA to continue in effect.
For the limited number of SNF residents that qualify for the AIDS
add-on, implementation of this provision results in a significant
increase in payment. For example, using FY 2006 data, we identified
less than 2,700 SNF residents with a diagnosis code of 042 (Human
Immunodeficiency Virus (HIV) Infection). For FY 2009, an urban facility
with a resident with AIDS in RUG group ``SSA'' would have a case-mix
adjusted payment of almost $246.55 (see Table 4) before the application
of the MMA adjustment. After an increase of 128 percent, this urban
facility would receive a case-mix adjusted payment of approximately
$562.13.
In addition, section 410 of the MMA contained a provision that
excluded from consolidated billing certain practitioner and other
services furnished to SNF residents by rural health clinics (RHCs) and
Federally Qualified Health Centers (FQHCs). (Further information on
this provision appears in section IV. of this proposed rule.)
F. Skilled Nursing Facility Prospective Payment--General Overview
We implemented the Medicare SNF PPS effective with cost reporting
periods beginning on or after July 1, 1998. This PPS pays SNFs through
prospective, case-mix adjusted per diem payment rates applicable to all
covered SNF services. These payment rates cover all costs of furnishing
covered skilled nursing services (routine, ancillary, and capital-
related costs) other than costs associated with approved educational
activities. Covered SNF services include post-hospital services for
which benefits are provided under Part A and all items and services
that, before July 1, 1998 had been paid under Part B (other than
physician and certain other services specifically excluded under the
BBA) but furnished to Medicare beneficiaries in a SNF during a covered
Part A stay. A comprehensive discussion of these provisions appears in
the May 12, 1998 interim final rule (63 FR 26252).
1. Payment Provisions--Federal Rate
The PPS uses per diem Federal payment rates based on mean SNF costs
in a base year updated for inflation to the first effective period of
the PPS. We developed the Federal payment rates using allowable costs
from hospital-based and freestanding SNF cost reports for reporting
periods beginning in FY 1995. The data used in developing the Federal
rates also incorporated an estimate of the amounts that would be
payable under Part B for covered SNF services furnished to individuals
during the course of a covered Part A stay in a SNF.
In developing the rates for the initial period, we updated costs to
the first effective year of the PPS (the 15-month period beginning July
1, 1998) using a SNF market basket index, and then standardized for the
costs of facility differences in case-mix and for geographic variations
in wages. In compiling the database used to compute the Federal payment
rates, we excluded those providers that received new provider
exemptions from the routine cost limits, as well as costs related to
payments for exceptions to the routine cost limits. Using the formula
that the BBA prescribed, we set the Federal rates at a level equal to
the weighted mean of freestanding costs plus 50 percent of the
difference between the freestanding mean and weighted mean of all SNF
costs (hospital-based and freestanding) combined. We computed and
applied separately the payment rates for facilities located in urban
and rural areas. In addition, we adjusted the portion of the Federal
rate attributable to wage-related costs by a wage index.
The Federal rate also incorporates adjustments to account for
facility case-mix, using a classification system that accounts for the
relative resource utilization of different patient types. The RUG-III
classification system uses beneficiary assessment data from the Minimum
Data Set (MDS) completed by SNFs to assign beneficiaries to one of 53
RUG-III groups. The original RUG-III case-mix classification system
included 44 groups. However, under refinements that became effective on
January 1, 2006, we added nine new groups--comprising a new
Rehabilitation plus Extensive Services category--at the top of the RUG
hierarchy. The May 12, 1998 interim final rule (63 FR 26252) included a
detailed description of the original 44-group RUG-III case-mix
classification system. A comprehensive description of the refined 53-
group RUG-III case-mix classification system (RUG-53) appeared in the
proposed and final rules for FY 2006 (70 FR 29070, May 19, 2005, and 70
FR 45026, August 4, 2005).
Further, in accordance with section 1888(e)(4)(E)(ii)(IV) of the
Act, the Federal rates in this proposed rule reflect an update to the
rates that we published in the August 3, 2007 final rule for FY 2008
(72 FR 43412) and the associated correction notices (on September 28,
2007, 72 FR 55085, and November 30, 2007, 72 FR 67652), equal to the
full change in the SNF market basket index. A more detailed discussion
of the SNF market basket index and related issues appears in sections
I.F.2. and III. of this proposed rule.
2. Rate Updates Using the Skilled Nursing Facility Market Basket
Index
Section 1888(e)(5) of the Act requires us to establish a SNF market
basket index that reflects changes over time in the prices of an
appropriate mix of goods and services included in covered SNF services.
We use the SNF market basket index to update the Federal rates on an
annual basis. In the August 3, 2007, FY 2008 SNF PPS final rule (72 FR
43425 through 43430), we revised and rebased the market basket, which
included updating the base year from FY 1997 to FY 2004. The proposed
FY 2009 market basket increase is 3.1 percent.
In addition, as explained in the August 4, 2003, final rule for FY
2004 (66 FR 46058) and in section III.B. of this proposed rule, the
annual update of the payment rates includes, as appropriate, an
adjustment to account for market basket forecast error. As described in
the final rule for FY 2008,
[[Page 25922]]
the threshold percentage that serves to trigger an adjustment to
account for market basket forecast error is 0.5 percentage point
effective for FY 2008 and subsequent years. This adjustment takes into
account the forecast error from the most recently available FY for
which there is final data, and applies whenever the difference between
the forecasted and actual change in the market basket exceeds a 0.5
percentage point threshold. For FY 2007 (the most recently available FY
for which there is final data), the estimated increase in the market
basket index was 3.1 percentage points, while the actual increase was
3.1 percentage points, resulting in no difference. Accordingly, as the
difference between the estimated and actual amount of change does not
exceed the 0.5 percentage point threshold, the payment rates for FY
2009 do not include a forecast error adjustment. Table 1 below shows
the forecasted and actual market basket amounts for FY 2007.
Table 1.--Difference Between the Forecasted and Actual Market Basket Increases for FY 2007
----------------------------------------------------------------------------------------------------------------
Forecasted FY Actual FY 2007 FY 2007
Index 2007 Increase* Increase** Difference***
----------------------------------------------------------------------------------------------------------------
SNF.......................................................... 3.1 3.1 0.0
----------------------------------------------------------------------------------------------------------------
*Published in Federal Register; based on second quarter 2006 Global Insight Inc. forecast (97 index).
**Based on the first quarter 2008 Global Insight Inc.forecast (97 index).
***The FY 2007 forecast error correction for the PPS Operating portion will be applied to the FY 2009 PPS update
recommendations. Any forecast error less than 0.5 percentage points will not be reflected in the update
recommendation.
II. Annual Update of Payment Rates Under the Prospective Payment System
for Skilled Nursing Facilities
[If you choose to comment on issues in this section, please include
the caption ``Annual Update'' at the beginning of your comments.]
A. Federal Prospective Payment System
This proposed rule sets forth a schedule of Federal prospective
payment rates applicable to Medicare Part A SNF services beginning
October 1, 2008. The schedule incorporates per diem Federal rates that
provide Part A payment for all costs of services furnished to a
beneficiary in a SNF during a Medicare-covered stay.
1. Costs and Services Covered by the Federal Rates
In accordance with section 1888(e)(2)(B) of the Act, the Federal
rates apply to all costs (routine, ancillary, and capital-related) of
covered SNF services other than costs associated with approved
educational activities as defined in Sec. 413.85. Under section
1888(e)(2)(A)(i) of the Act, covered SNF services include post-hospital
SNF services for which benefits are provided under Part A (the hospital
insurance program), as well as all items and services (other than those
services excluded by statute) that, before July 1, 1998, were paid
under Part B (the supplementary medical insurance program) but
furnished to Medicare beneficiaries in a SNF during a Part A covered
stay. (These excluded service categories are discussed in greater
detail in section V.B.2. of the May 12, 1998 interim final rule (63 FR
26295 through 26297)).
2. Methodology Used for the Calculation of the Federal Rates
The proposed FY 2009 rates would reflect an update using the full
amount of the latest market basket index. The proposed FY 2009 market
basket increase factor is 3.1 percent. A complete description of the
multi-step process used to calculate Federal rates initially appeared
in the May 12, 1998 interim final rule (63 FR 26252), as further
revised in subsequent rules. We note that in accordance with section
101(c)(2) of the BBRA, the previous temporary increases in the per diem
adjusted payment rates for certain designated RUGs, as specified in
section 101(a) of the BBRA and section 314 of the BIPA, are no longer
in effect due to the implementation of case-mix refinements as of
January 1, 2006. However, the temporary increase of 128 percent in the
per diem adjusted payment rates for SNF residents with AIDS, enacted by
section 511 of the MMA, remains in effect.
We used the SNF market basket to adjust each per diem component of
the Federal rates forward to reflect cost increases occurring between
the midpoint of the Federal FY beginning October 1, 2007, and ending
September 30, 2008, and the midpoint of the Federal FY beginning
October 1, 2008, and ending September 30, 2009, to which the payment
rates apply. In accordance with section 1888(e)(4)(E)(ii)(IV) of the
Act, we update the payment rates for FY 2009 by a factor equal to the
full market basket index percentage increase. (We note, however, that
the President's budget currently includes a provision that would
establish a zero percent market basket update for FYs 2009 through
2011, and that the provisions outlined in this proposed rule would need
to reflect any legislation that the Congress may enact to adopt that
proposal.) We further adjust the rates by a wage index budget
neutrality factor, described later in this section. Tables 2 and 3
reflect the updated components of the unadjusted Federal rates for FY
2009.
Table 2.--FY 2009 Unadjusted Federal Rate Per Diem--Urban
----------------------------------------------------------------------------------------------------------------
Nursing-- Case- Therapy-- Case- Therapy-- Non-
Rate component mix mix case-mix Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount................................. $151.30 $113.97 $15.00 $77.22
----------------------------------------------------------------------------------------------------------------
Table 3.--FY 2009 Unadjusted Federal Rate Per Diem--Rural
----------------------------------------------------------------------------------------------------------------
Nursing-- Case- Therapy-- Case- Therapy-- Non-
Rate component mix mix case-mix Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount................................. $144.55 $131.42 $16.04 $78.64
----------------------------------------------------------------------------------------------------------------
[[Page 25923]]
B. Case-Mix Adjustments
1. Background
Section 1888(e)(4)(G)(i) of the Act requires the Secretary to make
an adjustment to account for case-mix. The statute specifies that the
adjustment is to reflect both a resident classification system that the
Secretary establishes to account for the relative resource use of
different patient types, as well as resident assessment and other data
that the Secretary considers appropriate. In first implementing the SNF
PPS (63 FR 26252, May 12, 1998), we developed the Resource Utilization
Groups, version III (RUG-III) case-mix classification system, which
tied the amount of payment to resident resource use in combination with
resident characteristic information. Staff time measurement (STM)
studies conducted in 1990, 1995, and 1997 provided information on
resource use (time spent by staff members on residents) and resident
characteristics that enabled us not only to establish RUG-III, but also
to create case-mix indexes.
Under the BBA, each update of the SNF PPS payment rates must
include the case-mix classification methodology applicable for the
coming Federal FY. As indicated in section I.F.1 of this proposed rule,
the payment rates set forth herein reflect the use of the refined RUG-
53 system that we discussed in detail in the proposed and final rules
for FY 2006.
When we developed the refined RUG-53 system, we constructed new
case-mix indexes, using the Staff Time Measurement (STM) study data
that was collected during the 1990s and originally used in creating the
SNF PPS case-mix classification system and case-mix indexes. In section
II.B.2 of this proposed rule, we discuss further adjustments to those
new case-mix indexes.
2. Development of the Case-Mix Indexes
In the SNF PPS final rule for FY 2006 (70 FR 45032, August 4,
2005), we introduced two refinements to the SNF PPS: nine new case-mix
groups to account for the care needs of beneficiaries requiring both
extensive medical and rehabilitation services, and an adjustment to
reflect the variability in the use of non-therapy ancillaries (NTAs).
We made these refinements by using the resource minute data from the
original 44-group RUG-III model to create a new set of relative
weights, or case-mix indexes (CMIs), for the 53-group RUG-III model. We
then compared the CMIs for the two models to ensure that estimated
total payments under the 53-group model would maintain parity to those
that would have been made under the 44-group model.
In conducting this analysis, we used FY 2001 claims data (the most
current data available at the time) to compare the distribution of
payment days by RUG category in the original, 44-group model with
anticipated payments by RUG category in the refined 53-group model.
Based on the results of this analysis, we adjusted the new CMIs upward
by applying a parity adjustment factor, in order to ensure that the
RUG-III model was expanded in a budget-neutral manner. We then applied
a second adjustment to the CMIs to account for the variability in the
use of NTA services. These two adjustments resulted in a combined 17.9
percent increase in the CMIs that went into effect on January 1, 2006,
as part of the case-mix refinement implementation. A detailed
description of the methods used to make these two adjustments to the
CMIs appears in the SNF PPS proposed rule for FY 2006 (70 FR 29077
through 29078, May 19, 2005). However, we recognized that utilization
patterns change over time, and in the FY 2006 final rule (70 FR 45031,
August 4, 2005), we committed to monitoring the accuracy and
effectiveness of the CMIs used in the 53-group model.
In monitoring recent claims data, we observed that actual
utilization patterns differed significantly from those we had projected
using the 2001 data. In particular, the proportion of patients grouped
in the highest paying RUG categories--combining high therapy with
extensive services--greatly exceeded our projections. We have,
therefore, used actual claims data to recalibrate both of the
adjustments to the CMIs: the parity adjustment designed to make the
change from the 44-group model to the 53-group model in a budget-
neutral manner, and the factor used to recognize the variability in NTA
utilization.
To determine the parity adjustment factor needed to re-establish
budget neutrality, we compared simulated CY 2006 payments (using the
most recent data available) for the 44-group and 53-group RUG-III
models using the same methodology that we described in the SNF PPS
proposed rule for FY 2006 (70 FR 29077 through 29078, May 19, 2005).
Once we had identified the recalibrated parity adjustment factor
necessary to re-establish budget neutrality, we then determined the
recalibrated percentage adjustment that would be needed to reset the
NTA component of the CMIs at the appropriate level specified in the SNF
PPS final rule for FY 2006 (70 FR 45031, August 4, 2005). Under our
proposed recalibration, these two adjustments, which had initially
produced a combined increase of 17.9 percent in the FY 2006 refinement,
would instead result in an overall 9.68 percent increase for FY 2009.
Thus, for FY 2009, the aggregate impact of this proposed recalibration
would be the difference between the original, FY 2006 total increase of
17.9 percent and the recalibrated total increase of 9.68 percent, or a
negative $770 million.
It is extremely important to note that this adjustment, as
proposed, would be made prospectively. However, we are responsible for
maintaining the fiscal integrity of the SNF PPS, and by using the
actual claims data, the SNF PPS would better reflect the resources
used, resulting in more accurate payment. To that end, we have
developed our proposed recalibration of the parity and NTA adjustments
to the CMIs using actual claims distribution data. Although the 2001
data were the best source available at the time the FY 2006 refinements
were introduced, the 2006 data provide the most recent and a more
accurate source of RUG-53 utilization. (We also note that pursuant to
our ongoing commitment to monitoring the accuracy and effectiveness of
the CMIs under the refined case-mix system, there may be further
revisions to the recalibration as we develop the FY 2009 final rule,
based on the data available at that time.)
We note that the negative $770 million adjustment described above
would be largely offset by the FY 2009 market basket adjustment factor
of 3.1 percent, or $710 million, with a net result of a negative annual
update of approximately $60 million. We are, nevertheless, confident
that this proposed recalibration would achieve the goals of the
refinement provision implemented in January 2006, and that, as a
result, payments would better reflect those policies. We also wish to
note that after it conducted a thorough review of SNF profit margins,
MedPAC concluded that, in the aggregate, SNFs are operating on a sound
financial basis. As evidenced by MedPAC's recent recommendation for a
zero percent update for SNFs in FY 2009, we believe that this
recalibration could be made without creating undue hardship on
providers.
We list the case-mix adjusted payment rates separately for urban
and rural SNFs in Tables 4 and 5, with the corresponding case-mix
values. These tables do not reflect the AIDS add-on enacted by section
511 of the MMA, which we apply only after making all other adjustments
(wage and case-mix).
[[Page 25924]]
Table 4.--RUG-53 Case-Mix Adjusted Federal Rates and Associated Indexes--Urban
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-case Non-case
RUG-III category Nursing Therapy Nursing Therapy mix therapy mix Total rate
index index component component comp component
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUX.......................................................... 1.77 2.25 267.80 256.43 ........... 77.22 601.45
RUL.......................................................... 1.31 2.25 198.20 256.43 ........... 77.22 531.85
RVX.......................................................... 1.44 1.41 217.87 160.70 ........... 77.22 455.79
RVL.......................................................... 1.24 1.41 187.61 160.70 ........... 77.22 425.53
RHX.......................................................... 1.33 0.94 201.23 107.13 ........... 77.22 385.58
RHL.......................................................... 1.27 0.94 192.15 107.13 ........... 77.22 376.50
RMX.......................................................... 1.80 0.77 272.34 87.76 ........... 77.22 437.32
RML.......................................................... 1.57 0.77 237.54 87.76 ........... 77.22 402.52
RLX.......................................................... 1.22 0.43 184.59 49.01 ........... 77.22 310.82
RUC.......................................................... 1.20 2.25 181.56 256.43 ........... 77.22 515.21
RUB.......................................................... 0.92 2.25 139.20 256.43 ........... 77.22 472.85
RUA.......................................................... 0.78 2.25 118.01 256.43 ........... 77.22 451.66
RVC.......................................................... 1.14 1.41 172.48 160.70 ........... 77.22 410.40
RVB.......................................................... 1.01 1.41 152.81 160.70 ........... 77.22 390.73
RVA.......................................................... 0.77 1.41 116.50 160.70 ........... 77.22 354.42
RHC.......................................................... 1.13 0.94 170.97 107.13 ........... 77.22 355.32
RHB.......................................................... 1.03 0.94 155.84 107.13 ........... 77.22 340.19
RHA.......................................................... 0.88 0.94 133.14 107.13 ........... 77.22 317.49
RMC.......................................................... 1.07 0.77 161.89 87.76 ........... 77.22 326.87
RMB.......................................................... 1.01 0.77 152.81 87.76 ........... 77.22 317.79
RMA.......................................................... 0.97 0.77 146.76 87.76 ........... 77.22 311.74
RLB.......................................................... 1.06 0.43 160.38 49.01 ........... 77.22 286.61
RLA.......................................................... 0.79 0.43 119.53 49.01 ........... 77.22 245.76
SE3.......................................................... 1.72 ........... 260.24 ........... 15.00 77.22 352.46
SE2.......................................................... 1.38 ........... 208.79 ........... 15.00 77.22 301.01
SE1.......................................................... 1.17 ........... 177.02 ........... 15.00 77.22 269.24
SSC.......................................................... 1.14 ........... 172.48 ........... 15.00 77.22 264.70
SSB.......................................................... 1.05 ........... 158.87 ........... 15.00 77.22 251.09
SSA.......................................................... 1.02 ........... 154.33 ........... 15.00 77.22 246.55
CC2.......................................................... 1.13 ........... 170.97 ........... 15.00 77.22 263.19
CC1.......................................................... 0.99 ........... 149.79 ........... 15.00 77.22 242.01
CB2.......................................................... 0.91 ........... 137.68 ........... 15.00 77.22 229.90
CB1.......................................................... 0.84 ........... 127.09 ........... 15.00 77.22 219.31
CA2.......................................................... 0.83 ........... 125.58 ........... 15.00 77.22 217.80
CA1.......................................................... 0.75 ........... 113.48 ........... 15.00 77.22 205.70
IB2.......................................................... 0.69 ........... 104.40 ........... 15.00 77.22 196.62
IB1.......................................................... 0.67 ........... 101.37 ........... 15.00 77.22 193.59
IA2.......................................................... 0.57 ........... 86.24 ........... 15.00 77.22 178.46
IA1.......................................................... 0.53 ........... 80.19 ........... 15.00 77.22 172.41
BB2.......................................................... 0.68 ........... 102.88 ........... 15.00 77.22 195.10
BB1.......................................................... 0.65 ........... 98.35 ........... 15.00 77.22 190.57
BA2.......................................................... 0.56 ........... 84.73 ........... 15.00 77.22 176.95
BA1.......................................................... 0.48 ........... 72.62 ........... 15.00 77.22 164.84
PE2.......................................................... 0.79 ........... 119.53 ........... 15.00 77.22 211.75
PE1.......................................................... 0.77 ........... 116.50 ........... 15.00 77.22 208.72
PD2.......................................................... 0.72 ........... 108.94 ........... 15.00 77.22 201.16
PD1.......................................................... 0.70 ........... 105.91 ........... 15.00 77.22 198.13
PC2.......................................................... 0.66 ........... 99.86 ........... 15.00 77.22 192.08
PC1.......................................................... 0.65 ........... 98.35 ........... 15.00 77.22 190.57
PB2.......................................................... 0.52 ........... 78.68 ........... 15.00 77.22 170.90
PB1.......................................................... 0.50 ........... 75.65 ........... 15.00 77.22 167.87
PA2.......................................................... 0.49 ........... 74.14 ........... 15.00 77.22 166.36
PA1.......................................................... 0.46 ........... 69.60 ........... 15.00 77.22 161.82
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 5.--RUG-53 Case-mix Adjusted Federal Rates and Associated Indexes--Rural
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-case Non-case
RUG-III category Nursing Therapy Nursing Therapy mix therapy mix Total rate
Index index component component comp component
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUX.......................................................... 1.77 2.25 255.85 295.70 ........... 78.64 630.19
RUL.......................................................... 1.31 2.25 189.36 295.70 ........... 78.64 563.70
RVX.......................................................... 1.44 1.41 208.15 185.30 ........... 78.64 472.09
RVL.......................................................... 1.24 1.41 179.24 185.30 ........... 78.64 443.18
RHX.......................................................... 1.33 0.94 192.25 123.53 ........... 78.64 394.42
RHL.......................................................... 1.27 0.94 183.58 123.53 ........... 78.64 385.75
RMX.......................................................... 1.80 0.77 260.19 101.19 ........... 78.64 440.02
RML.......................................................... 1.57 0.77 226.94 101.19 ........... 78.64 406.77
RLX.......................................................... 1.22 0.43 176.35 56.51 ........... 78.64 311.50
[[Page 25925]]
RUC.......................................................... 1.20 2.25 173.46 295.70 ........... 78.64 547.80
RUB.......................................................... 0.92 2.25 132.99 295.70 ........... 78.64 507.33
RUA.......................................................... 0.78 2.25 112.75 295.70 ........... 78.64 487.09
RVC.......................................................... 1.14 1.41 164.79 185.30 ........... 78.64 428.73
RVB.......................................................... 1.01 1.41 146.00 185.30 ........... 78.64 409.94
RVA.......................................................... 0.77 1.41 111.30 185.30 ........... 78.64 375.24
RHC.......................................................... 1.13 0.94 163.34 123.53 ........... 78.64 365.51
RHB.......................................................... 1.03 0.94 148.89 123.53 ........... 78.64 351.06
RHA.......................................................... 0.88 0.94 127.20 123.53 ........... 78.64 329.37
RMC.......................................................... 1.07 0.77 154.67 101.19 ........... 78.64 334.50
RMB.......................................................... 1.01 0.77 146.00 101.19 ........... 78.64 325.83
RMA.......................................................... 0.97 0.77 140.21 101.19 ........... 78.64 320.04
RLB.......................................................... 1.06 0.43 153.22 56.51 ........... 78.64 288.37
RLA.......................................................... 0.79 0.43 114.19 56.51 ........... 78.64 249.34
SE3.......................................................... 1.72 ........... 248.63 ........... 16.04 78.64 343.31
SE2.......................................................... 1.38 ........... 199.48 ........... 16.04 78.64 294.16
SE1.......................................................... 1.17 ........... 169.12 ........... 16.04 78.64 263.80
SSC.......................................................... 1.14 ........... 164.79 ........... 16.04 78.64 259.47
SSB.......................................................... 1.05 ........... 151.78 ........... 16.04 78.64 246.46
SSA.......................................................... 1.02 ........... 147.44 ........... 16.04 78.64 242.12
CC2.......................................................... 1.13 ........... 163.34 ........... 16.04 78.64 258.02
CC1.......................................................... 0.99 ........... 143.10 ........... 16.04 78.64 237.78
CB2.......................................................... 0.91 ........... 131.54 ........... 16.04 78.64 226.22
CB1.......................................................... 0.84 ........... 121.42 ........... 16.04 78.64 216.10
CA2.......................................................... 0.83 ........... 119.98 ........... 16.04 78.64 214.66
CA1.......................................................... 0.75 ........... 108.41 ........... 16.04 78.64 203.09
IB2.......................................................... 0.69 ........... 99.74 ........... 16.04 78.64 194.42
IB1.......................................................... 0.67 ........... 96.85 ........... 16.04 78.64 191.53
IA2.......................................................... 0.57 ........... 82.39 ........... 16.04 78.64 177.07
IA1.......................................................... 0.53 ........... 76.61 ........... 16.04 78.64 171.29
BB2.......................................................... 0.68 ........... 98.29 ........... 16.04 78.64 192.97
BB1.......................................................... 0.65 ........... 93.96 ........... 16.04 78.64 188.64
BA2.......................................................... 0.56 ........... 80.95 ........... 16.04 78.64 175.63
BA1.......................................................... 0.48 ........... 69.38 ........... 16.04 78.64 164.06
PE2.......................................................... 0.79 ........... 114.19 ........... 16.04 78.64 208.87
PE1.......................................................... 0.77 ........... 111.30 ........... 16.04 78.64 205.98
PD2.......................................................... 0.72 ........... 104.08 ........... 16.04 78.64 198.76
PD1.......................................................... 0.70 ........... 101.19 ........... 16.04 78.64 195.87
PC2.......................................................... 0.66 ........... 95.40 ........... 16.04 78.64 190.08
PC1.......................................................... 0.65 ........... 93.96 ........... 16.04 78.64 188.64
PB2.......................................................... 0.52 ........... 75.17 ........... 16.04 78.64 169.85
PB1.......................................................... 0.50 ........... 72.28 ........... 16.04 78.64 166.96
PA2.......................................................... 0.49 ........... 70.83 ........... 16.04 78.64 165.51
PA1.......................................................... 0.46 ........... 66.49 ........... 16.04 78.64 161.17
--------------------------------------------------------------------------------------------------------------------------------------------------------
C. Wage Index Adjustment to Federal Rates
Section 1888(e)(4)(G)(ii) of the Act requires that we adjust the
Federal rates to account for differences in area wage levels, using a
wage index that we find appropriate. Since the inception of a PPS for
SNFs, we have used hospital wage data in developing a wage index to be
applied to SNFs. We propose to continue that practice for FY 2009, as
we continue to believe that in the absence of SNF-specific wage data,
using the hospital inpatient wage index is appropriate and reasonable
for the SNF PPS. As explained in the update notice for FY 2005 (69 FR
45786, July 30, 2004), the SNF PPS does not use the hospital area wage
index's occupational mix adjustment, as this adjustment serves
specifically to define the occupational categories more clearly in a
hospital setting; moreover, the collection of the occupational wage
data also excludes any wage data related to SNFs. Therefore, we believe
that using the updated wage data exclusive of the occupational mix
adjustment continues to be appropriate for SNF payments.
Since the implementation of the SNF PPS, as set forth in Sec.
413.337(a)(1)(ii), a SNF's wage index is determined based on the
location of the SNF in an urban or rural area as defined in Sec.
413.333 and further defined in Sec. 412.62(f)(1)(ii) and Sec.
412.62(f)(1)(iii) as urban and rural areas, respectively. In the FY
2006 SNF PPS final rule (70 FR 45041, August 4, 2005), we adopted
revised labor market area definitions based on CBSAs. At the time, we
noted that these were the same labor market area definitions (based on
OMB's new CBSA designations) implemented under the Hospital Inpatient
Prospective Payment System (IPPS) at Sec. 412.64(b), which were
effective for those hospitals beginning October 1, 2004, as discussed
in the IPPS final rule for FY 2005 (69 FR at 49026 through 49034,
August 11, 2004). In the FY 2006 SNF PPS final rule, we inadvertently
omitted making a conforming regulation text change for Sec. 413.333.
However, no change was made to our decision to follow the IPPS
definition of urban and rural. We are proposing to make that conforming
regulation text change to revise the definitions for rural and urban
areas
[[Page 25926]]
effective for services provided on or after October 1, 2005, to
reference the regulations at Sec. 412.64(b)(1)(ii)(A) through (C),
consistent with the revision under the IPPS.
1. Clarification of New England Deemed Counties
We are taking this opportunity to address the change in the
treatment of ``New England deemed counties'' (that is, those counties
in New England listed in Sec. 412.64(b)(1)(ii)(B) that were deemed to
be part of urban areas under section 601(g) of the Social Security
Amendments of 1983) that was made in the FY 2008 IPPS final rule with
comment period (72 FR 47337 through 47338, August 22, 2007). These
counties include the following: Litchfield County, Connecticut; York
County, Maine; Sagadahoc County, Maine; Merrimack County, New
Hampshire; and Newport County, Rhode Island. Of these five ``New
England deemed counties,'' three (York County, Sagadahoc County, and
Newport County) are also included in metropolitan statistical areas
defined by OMB and are considered urban under both the current IPPS and
SNF PPS labor market area definitions in Sec. 412.64(b)(1)(ii)(A). The
remaining two, Litchfield County and Merrimack County, are
geographically located in areas that are considered rural under the
current IPPS (and SNF PPS) labor market area definitions, but have been
previously deemed urban under the IPPS in certain circumstances, as
discussed below.
In the FY 2008 IPPS final rule with comment period, Sec.
412.64(b)(1)(ii)(B) was revised such that the two ``New England deemed
counties'' that are still considered rural under the OMB definitions
(Litchfield County, CT and Merrimack County, NH), are no longer
considered urban effective for discharges occurring on or after October
1, 2007, and therefore, are considered rural in accordance with Sec.
412.64(b)(1)(ii)(C). However, for purposes of payment under the IPPS,
acute-care hospitals located within those areas are treated as being
reclassified to their deemed urban area effective for discharges
occurring on or after October 1, 2007 (see 72 FR 47337 through 47338).
We note that the SNF PPS does not provide for such geographic
reclassification. Also, in the FY 2008 IPPS final rule with comment
period (72 FR 47338), we explained that we have limited this policy
change for the ``New England deemed counties'' only to IPPS hospitals,
and any change to non-IPPS provider wage indexes would be addressed in
the respective payment system rules. Accordingly, we are taking this
opportunity to clarify the treatment of ``New England deemed counties''
under the SNF PPS in this proposed rule.
As discussed above, the SNF PPS has consistently used the IPPS
definition of ``urban'' and ``rural'' with regard to the wage index
used in the SNF PPS. Historical changes to the labor market area/
geographic classifications and annual updates to the wage index values
under the SNF PPS are made effective October 1 each year. When we
established the most recent SNF PPS payment rate update, effective for
SNF services provided on or after October 1, 2007 through September 30,
2008, we considered the ``New England deemed counties'' (including
Litchfield County, CT and Merrimack County, NH) as urban for FY 2008,
as evidenced by the inclusion of Litchfield County as one of the
constituent counties of urban CBSA 25540 (Hartford-West Hartford-East
Hartford, CT), and the inclusion of Merrimack County as one of the
constituent counties of urban CBSA 31700 (Manchester-Nashua, NH)).
As noted above, Sec. 413.333 indicates that the terms ``rural''
and ``urban'' are defined according to the definitions of those terms
as used in the IPPS. Applying the IPPS definitions, Litchfield County,
CT and Merrimack County, NH are not considered ``urban'' under Sec.
412.64(b)(1)(ii)(A) through (B) as revised under the FY 2008 IPPS final
rule and, therefore, are considered ``rural'' under Sec.
412.64(b)(1)(ii)(C). Accordingly, reflecting our policy to use the IPPS
definitions of ``urban'' and ``rural,'' these two counties will be
considered ``rural'' under the SNF PPS effective with the next update
of the SNF PPS payment rates on October 1, 2008, and will no longer be
included in urban CBSA 25540 (Hartford-West Hartford-East Hartford, CT)
and urban CBSA 31700 (Manchester-Nashua, NH), respectively. We note
that this policy is consistent with our policy of not taking into
account IPPS geographic reclassifications in determining payments under
the SNF PPS. As indicated above, we are proposing to make a technical
change to the regulations at Sec. 413.333 to reflect the updated IPPS
regulation reference.
2. Multi-Campus Hospital Wage Index Data
In the FY 2008 SNF PPS final rule (72 FR 43412, August 3, 2007), we
established SNF PPS wage index values for FY 2008 calculated from the
same data (collected from cost reports submitted by hospitals for cost
reporting periods beginning during FY 2004) used to compute the FY 2008
acute care hospital inpatient wage index, without taking into account
geographic reclassification under sections 1886(d)(8) and (d)(10) of
the Act. However, the IPPS policy that apportions the wage data for
multi-campus hospitals was not finalized before the SNF PPS final rule.
The SNF PPS wage index values applicable for services provided on or
after October 1, 2007 through September 30, 2008 are shown in Table 8
(for urban areas) and Table 9 (for rural areas) and in the Addendum to
the FY 2008 SNF PPS final rule (72 FR 43437 through 43463).
We are continuing to use IPPS wage data for FY 2009 because we
believe that in the absence of SNF-specific wage data, using the
hospital inpatient wage data is appropriate and reasonable for the SNF
PPS. We note that the IPPS wage data used to determine the proposed FY
2009 SNF wage index values reflect our policy that was adopted under
the IPPS beginning in FY 2008, which apportions the wage data for
multi-campus hospitals located in different labor market areas, or
Core-Based Statistical Areas (CBSAs), to each CBSA where the campuses
are located (see the FY 2008 IPPS final rule with comment period (72 FR
47317 through 47320)). Specifically, for the proposed FY 2009 SNF PPS,
the wage index was computed using IPPS wage data (published by
hospitals for cost reporting periods beginning in 2005, as with the FY
2009 IPPS wage index), which allocated salaries and hours to the
campuses of two multi-campus hospitals with campuses that are located
in different labor areas; one is Massachusetts and the other is
Illinois. The wage index values for the proposed FY 2009 SNF PPS in the
following CBSAs are affected by this policy: Boston-Quincy, MA (CBSA
14484), Providence-New Bedford-Falls River, RI-MA (CBSA 39300),
Chicago-Naperville-Joliet, IL (CBSA 16974) and Lake County-Kenosha
County, IL-WI (CBSA 29404) (please refer to Table 8 in the Addendum of
this proposed rule).
In summary, for FY 2009, we propose to use the FY 2009 wage index
data (collected from cost reports submitted by hospitals for cost
reporting periods beginning during FY 2005) to adjust SNF PPS payments
beginning October 1, 2008. These data reflect the multi-campus and New
England deemed counties policies discussed above.
Finally, we propose to continue using the same methodology
discussed in the SNF PPS final rule for FY 2008 (72 FR 43423) to
address those geographic areas in which there are no hospitals and,
thus, no hospital wage index data on
[[Page 25927]]
which to base the calculation of the FY 2009 SNF PPS wage index. For
rural geographic areas that do not have hospitals and, therefore, lack
hospital wage data on which to base an area wage adjustment, we would
use the average wage index from all contiguous CBSAs as a reasonable
proxy. This methodology is used to construct the wage index for rural
Massachusetts. However, we would not apply this methodology to rural
Puerto Rico due to the distinct economic circumstances that exist
there, but instead would continue using the most recent wage index
previously available for that area. For urban areas without specific
hospital wage index data, we would use the average wage indexes of all
of the urban areas within the State to serve as a reasonable proxy for
the wage index of that urban CBSA. The only urban area without wage
index data available is CBSA (25980) Hinesville-Fort Stewart, GA.
To calculate the SNF PPS wage index adjustment, we would apply the
wage index adjustment to the labor-related portion of the Federal rate,
which is 69.994 percent of the total rate. This percentage reflects the
labor-related relative importance for FY 2009, using the revised and
rebased FY 2004-based market basket. The labor-related relative
importance for FY 2008 was 70.249, as shown in Table 11. We calculate
the labor-related relative importance from the SNF market basket, and
it approximates the labor-related portion of the total costs after
taking into account historical and projected price changes between the
base year and FY 2009. The price proxies that move the different cost
categories in the market basket do not necessarily change at the same
rate, and the relative importance captures these changes. Accordingly,
the relative importance figure more closely reflects the cost share
weights for FY 2009 than the base year weights from the SNF market
basket.
We calculate the labor-related relative importance for FY 2009 in
four steps. First, we compute the FY 2009 price index level for the
total market basket and each cost category of the market basket.
Second, we calculate a ratio for each cost category by dividing the FY
2009 price index level for that cost category by the total market
basket price index level. Third, we determine the FY 2009 relative
importance for each cost category by multiplying this ratio by the base
year (FY 2004) weight. Finally, we add the FY 2009 relative importance
for each of the labor-related cost categories (wages and salaries,
employee benefits, non-medical professional fees, labor-intensive
services, and a portion of capital-related expenses) to produce the FY
2009 labor-related relative importance. Tables 6 and 7 below show the
Federal rates by labor-related and non-labor-related components.
Table 6.--RUG-53 Case-Mix Adjusted Federal Rates for Urban SNFs by Labor
and Non-Labor Component
------------------------------------------------------------------------
Labor Non-labor
RUG-III category Total rate portion portion
------------------------------------------------------------------------
RUX.............................. 601.45 420.98 180.47
RUL.............................. 531.85 372.26 159.59
RVX.............................. 455.79 319.03 136.76
RVL.............................. 425.53 297.85 127.68
RHX.............................. 385.58 269.88 115.70
RHL.............................. 376.50 263.53 112.97
RMX.............................. 437.32 306.10 131.22
RML.............................. 402.52 281.74 120.78
RLX.............................. 310.82 217.56 93.26
RUC.............................. 515.21 360.62 154.59
RUB.............................. 472.85 330.97 141.88
RUA.............................. 451.66 316.13 135.53
RVC.............................. 410.40 287.26 123.14
RVB.............................. 390.73 273.49 117.24
RVA.............................. 354.42 248.07 106.35
RHC.............................. 355.32 248.70 106.62
RHB.............................. 340.19 238.11 102.08
RHA.............................. 317.49 222.22 95.27
RMC.............................. 326.87 228.79 98.08
RMB.............................. 317.79 222.43 95.36
RMA.............................. 311.74 218.20 93.54
RLB.............................. 286.61 200.61 86.00
RLA.............................. 245.76 172.02 73.74
SE3.............................. 352.46 246.70 105.76
SE2.............................. 301.01 210.69 90.32
SE1.............................. 269.24 188.45 80.79
SSC.............................. 264.70 185.27 79.43
SSB.............................. 251.09 175.75 75.34
SSA.............................. 246.55 172.57 73.98
CC2.............................. 263.19 184.22 78.97
CC1.............................. 242.01 169.39 72.62
CB2.............................. 229.90 160.92 68.98
CB1.............................. 219.31 153.50 65.81
CA2.............................. 217.80 152.45 65.35
CA1.............................. 205.70 143.98 61.72
IB2.............................. 196.62 137.62 59.00
IB1.............................. 193.59 135.50 58.09
IA2.............................. 178.46 124.91 53.55
IA1.............................. 172.41 120.68 51.73
BB2.............................. 195.10 136.56 58.54
BB1.............................. 190.57 133.39 57.18
BA2.............................. 176.95 123.85 53.10
BA1.............................. 164.84 115.38 49.46
[[Page 25928]]
PE2.............................. 211.75 148.21 63.54
PE1.............................. 208.72 146.09 62.63
PD2.............................. 201.16 140.80 60.36
PD1.............................. 198.13 138.68 59.45
PC2.............................. 192.08 134.44 57.64
PC1.............................. 190.57 133.39 57.18
PB2.............................. 170.90 119.62 51.28
PB1.............................. 167.87 117.50 50.37
PA2.............................. 166.36 116.44 49.92
PA1.............................. 161.82 113.26 48.56
------------------------------------------------------------------------
Table 7.--RUG-53 Case-Mix Adjusted Federal Rates for Rural SNFs by Labor
and Non-Labor Component
------------------------------------------------------------------------
Labor Non-labor
RUG-III category Total rate portion portion
------------------------------------------------------------------------
RUX.............................. 630.19 441.10 189.09
RUL.............................. 563.70 394.56 169.14
RVX.............................. 472.09 330.43 141.66
RVL.............................. 443.18 310.20 132.98
RHX.............................. 394.42 276.07 118.35
RHL.............................. 385.75 270.00 115.75
RMX.............................. 440.02 307.99 132.03
RML.............................. 406.77 284.71 122.06
RLX.............................. 311.50 218.03 93.47
RUC.............................. 547.80 383.43 164.37
RUB.............................. 507.33 355.10 152.23
RUA.............................. 487.09 340.93 146.16
RVC.............................. 428.73 300.09 128.64
RVB.............................. 409.94 286.93 123.01
RVA.............................. 375.24 262.65 112.59
RHC.............................. 365.51 255.84 109.67
RHB.............................. 351.06 245.72 105.34
RHA.............................. 329.37 230.54 98.83
RMC.............................. 334.50 234.13 100.37
RMB.............................. 325.83 228.06 97.77
RMA.............................. 320.04 224.01 96.03
RLB.............................. 288.37 201.84 86.53
RLA.............................. 249.34 174.52 74.82
SE3.............................. 343.31 240.30 103.01
SE2.............................. 294.16 205.89 88.27
SE1.............................. 263.80 184.64 79.16
SSC.............................. 259.47 181.61 77.86
SSB.............................. 246.46 172.51 73.95
SSA.............................. 242.12 169.47 72.65
CC2.............................. 258.02 180.60 77.42
CC1.............................. 237.78 166.43 71.35
CB2.............................. 226.22 158.34 67.88
CB1.............................. 216.10 151.26 64.84
CA2.............................. 214.66 150.25 64.41
CA1.............................. 203.09 142.15 60.94
IB2.............................. 194.42 136.08 58.34
IB1.............................. 191.53 134.06 57.47
IA2.............................. 177.07 123.94 53.13
IA1.............................. 171.29 119.89 51.40
BB2.............................. 192.97 135.07 57.90
BB1.............................. 188.64 132.04 56.60
BA2.............................. 175.63 122.93 52.70
BA1.............................. 164.06 114.83 49.23
PE2.............................. 208.87 146.20 62.67
PE1.............................. 205.98 144.17 61.81
PD2.............................. 198.76 139.12 59.64
PD1.............................. 195.87 137.10 58.77
PC2.............................. 190.08 133.04 57.04
PC1.............................. 188.64 132.04 56.60
PB2.............................. 169.85 118.88 50.97
PB1.............................. 166.96 116.86 50.10
PA2.............................. 165.51 115.85 49.66
PA1.............................. 161.17 112.81 48.36
------------------------------------------------------------------------
[[Page 25929]]
Section 1888(e)(4)(G)(ii) of the Act also requires that we apply
this wage index in a manner that does not result in aggregate payments
that are greater or less than would otherwise be made in the absence of
the wage adjustment. For FY 2009 (Federal rates effective October 1,
2008), we would apply an adjustment to fulfill the budget neutrality
requirement. We would meet this requirement by multiplying each of the
components of the unadjusted Federal rates by a budget neutrality
factor equal to the ratio of the weighted average wage adjustment
factor for FY 2008 to the weighted average wage adjustment factor for
FY 2009. For this calculation, we use the same 2006 claims utilization
data for both the numerator and denominator of this ratio. We define
the wage adjustment factor used in this calculation as the labor share
of the rate component multiplied by the wage index plus the non-labor
share of the rate component. The proposed budget neutrality factor for
this year is 1.0009. The wage index applicable to FY 2009 is set forth
in Tables 8 and 9, which appear in the Addendum of this proposed rule.
In the SNF PPS final rule for FY 2006 (70 FR 45026, August 4,
2005), we adopted the changes discussed in the Office of Management and
Budget (OMB) Bulletin No. 03-04 (June 6, 2003), available online at
www.whitehouse.gov/omb/bulletins/b03-04.html, which announced revised
definitions for Metropolitan Statistical Areas (MSAs), and the creation
of Micropolitan Statistical Areas and Combined Statistical Areas. In
addition, OMB published subsequent bulletins regarding CBSA changes,
including changes in CBSA numbers and titles. As indicated in the FY
2008 SNF PPS final rule (72 FR 43423, August 3, 2007), this and all
subsequent SNF PPS rules and notices are considered to incorporate the
CBSA changes published in the most recent OMB bulletin that applies to
the hospital wage data used to determine the current SNF PPS wage
index. The OMB bulletins may be accessed online at http://
www.whitehouse.gov/omb/bulletins/index.html.
In adopting the OMB Core-Based Statistical Area (CBSA) geographic
designations, we provided for a 1-year transition with a blended wage
index for all providers. For FY 2006, the wage index for each provider
consisted of a blend of 50 percent of the FY 2006 MSA-based wage index
and 50 percent of the FY 2006 CBSA-based wage index (both using FY 2002
hospital data). We referred to the blended wage index as the FY 2006
SNF PPS transition wage index. As discussed in the SNF PPS final rule
for FY 2006 (70 FR 45041), subsequent to the expiration of this 1-year
transition on September 30, 2006, we used the full CBSA-based wage
index values, as now presented in Tables 8 and 9 of this proposed rule.
D. Updates to the Federal Rates
In accordance with section 1888(e)(4)(E) of the Act, as amended by
section 311 of the BIPA, the proposed payment rates in this proposed
rule reflect an update equal to the full SNF market basket, estimated
at 3.1 percentage points. We would continue to disseminate the rates,
wage index, and case-mix classification methodology through the Federal
Register before the August 1 that precedes the start of each succeeding
FY.
E. Relationship of RUG-III Classification System to Existing Skilled
Nursing Facility Level-of-Care Criteria
As discussed in Sec. 413.345, we include in each update of the
Federal payment rates in the Federal Register the designation of those
specific RUGs under the classification system that represent the
required SNF level of care, as provided in Sec. 409.30. This
designation reflects an administrative presumption under the refined
RUG-53 that beneficiaries who are correctly assigned to one of the
upper 35 of the RUG-53 groups on the initial 5-day, Medicare-required
assessment are automatically classified as meeting the SNF level of
care definition up to and including the assessment reference date on
the 5-day Medicare required assessment.
A beneficiary assigned to any of the lower 18 groups is not
automatically classified as either meeting or not meeting the
definition, but instead receives an individual level of care
determination using the existing administrative criteria. This
presumption recognizes the strong likelihood that beneficiaries
assigned to one of the upper 35 groups during the immediate post-
hospital period require a covered level of care, which would be
significantly less likely for those beneficiaries assigned to one of
the lower 18 groups.
In this proposed rule, we are continuing the designation of the
upper 35 groups for purposes of this administrative presumption,
consisting of the following RUG-53 classifications: All groups within
the Rehabilitation plus Extensive Services category; All groups within
the Ultra High Rehabilitation category; all groups within the Very High
Rehabilitation category; all groups within the High Rehabilitation
category; all groups within the Medium Rehabilitation category; all
groups within the Low Rehabilitation category; all groups within the
Extensive Services category; all groups within the Special Care
category; and, all groups within the Clinically Complex category.
F. Example of Computation of Adjusted PPS Rates and SNF Payment
Using the hypothetical SNF XYZ described in Table 10 below, the
following shows the adjustments made to the Federal per diem rate to
compute the provider's actual per diem PPS payment. SNF XYZ's 12-month
cost reporting period begins October 1, 2008. SNF XYZ's total PPS
payment would equal $29,719. We derive the Labor and Non-labor columns
from Table 6 of this proposed rule.
Table 10.--RUG-53 SNF XYZ: Located in Cedar Rapids, IA (Urban CBSA 16300)
[Wage Index: 0.8924]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Medicare
RUG Group Labor Wage index Adj. labor Non-labor Adj. rate Percent adj days payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
RVX............................................. $319.03 0.8924 $284.70 $136.76 $421.46 $421.46 14 $5,900.00
RLX............................................. 217.56 0.8924 194.15 93.26 287.41 287.41 30 8,622.00
RHA............................................. 222.22 0.8924 198.31 95.27 293.58 293.58 16 4,697.00
CC2............................................. 184.22 0.8924 164.40 78.97 243.37 554.88* 10 5,549.00
IA2............................................. 124.91 0.8924 111.47 53.55 165.02 165.02 30 4,951.00
-------------------------
Total....................................... ........... ........... ........... ........... ........... ........... 100 29,719.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Reflects a 128 percent adjustment from section 511 of the MMA.
[[Page 25930]]
G. Other Issues
1. Staff Time and Resource Intensity Verification (STRIVE) Project
[If you choose to comment on issues in this section, please include
the caption ``STRIVE Project'' at the beginning of your comments.]
As noted previously in section II.B.1 of this proposed rule,
section 1888(e)(4)(G)(i) of the Act requires the Secretary to make an
adjustment to account for case-mix. The statute specifies that the
adjustment is to reflect both a resident classification system that the
Secretary establishes to account for the relative resource use of
different patient types, as well as resident assessment and other data
that the Secretary considers appropriate. In first implementing the SNF
PPS (63 FR 26252, May 12, 1998), we developed the RUG-III case-mix
classification system, which tied the amount of payment to resident
resource use in combination with resident characteristic information.
Staff time measurement (STM) studies conducted in 1990, 1995, and 1997
provided information on resource use (time spent by staff members on
residents) and resident characteristics that enabled us not only to
establish RUG-III, but also to create case-mix indexes.
Since that time, we have become concerned that incentives of the
SNF PPS and the public reporting of nursing home quality measures
likely have altered industry practices, and have affected the nursing
resources required to treat different types of patients. Changes to
technology might also have affected care methods, while more choices in
housing alternatives (such as assisted living and community housing)
may have altered the population mix served by nursing homes.
To help ensure that the SNF PPS payment rates reflect current
practices and resource needs, CMS sponsored a national nursing home
time study, STRIVE, which began in the Fall of 2005. Information
collected in STRIVE includes the amount of time that staff members
spend on residents and information on residents'' physical and clinical
status derived from MDS assessment data.
Two hundred and five nursing homes from the following fifteen
States and jurisdictions volunteered to participate in STRIVE: The
District of Columbia, Nevada, Florida, Illinois, Iowa, Kentucky,
Louisiana, Michigan, Montana, New York, Ohio, South Dakota, Texas,
Virginia, and Washington. We are currently analyzing staff time and MDS
assessment data for approximately 9,700 residents.
Nursing homes with poor survey histories or pending enforcement
actions were excluded from the sample. In addition, nursing homes with
poor quality measure (QM) scores, low occupancy rates, or large
proportions of private pay or pediatric patients were also excluded.
Nursing homes were randomly recruited within five strata. The five
strata follow: Hospital-based facilities; facilities with high
concentrations of residents on ventilators; facilities with high
concentrations of residents with Human Immunodeficiency Virus (HIV);
facilities with high concentrations of residents on Medicare Part A
stays; and all other facilities. Facilities with large concentrations
of residents on ventilators, residents with HIV, or residents on Part A
stays were over-sampled in order to assure sufficient numbers of
residents in those populations. Nursing homes were voluntarily
recruited in random order until enough facilities in each targeted
category agreed to participate.
Participating facilities included both not-for-profit entities and
corporations; chains and independent operators; nursing homes with
populations small to large in size; and facilities situated in urban
and rural locations.
STRIVE began on-site data collection at both SNFs and Medicaid
Nursing Facilities (NFs) in the Spring of 2006. STRIVE collected data
from both types of facilities because almost half of the States use a
version of the RUG-III system for their Medicaid reimbursement systems.
Participating facilities submitted both time and MDS assessment
data. Nursing staff recorded their time over 48 hours. Nursing staff
included registered nurses, licensed practical nurses, and nursing
aides. Therapy staff recorded their time over 7 consecutive days.
Therapy staff included physical therapists and aides; occupational
therapists and aides; and speech-language pathologists. Each nursing
home staff member recorded his or her time at the facility in different
categories (for example, resident-specific time (RST), non-resident-
specific time (NRST), unpaid time, and non-study time).
As our analysis continues, we expect to introduce changes to the
RUG-III grouper methodology and clinical assessment instrument. Further
exploration of STRIVE data and possible refinements to the SNF PPS may
ultimately culminate in a new RUG model, version IV.
To date, STRIVE has benefited from stakeholder input, starting with
the December 2005 Open Door Forum to which the public was invited. The
educators, researchers, beneficiary advocates, clinicians, consultants,
government experts, and representatives from health care, nursing home,
and other related industry associations serving on the STRIVE technical
expert panel (TEP) have provided valuable insights on topics such as
sample populations. Beginning in 2005 until its most recent February
2008 meeting, the TEP has met twice and held two teleconferences.
Additionally, our contractor recently established a smaller Analytic
Panel consisting of various stakeholders who meet regularly with our
researchers to discuss the analysis of the STRIVE data.
Our preliminary analyses of RUG III-related resource times and
payment rates indicated that, as mentioned previously, SNF care
patterns have changed significantly over the decade since we last
conducted STMs. We note that calculating CMIs based upon STRIVE data
for use within a RUG-III model constructed over a decade ago would
create methodological challenges and, therefore, could only be
considered an interim step, as we would have to reexamine the CMIs
after changes to the structural model are finalized. We will continue
to analyze STRIVE data and intend to create an updated RUG
classification structure that would more accurately reflect current
care practices and resource use. Our contractors also plan to receive
input from the TEP and the Analytic Panel to guide the STRIVE analysis.
We may also use the results of the contractors' analyses to make
changes to the RUG classification structure. It is our intention to
introduce new case-mix weights in FY 2010 that reflect the results of
the STRIVE analysis and any changes to the RUG classification
structure.
More information on STRIVE appears at the following Web site:
https://www.qtso.com/strive.html. Items posted there include:
Assessment forms distributed by STRIVE; ``train the trainer'' materials
used to teach the data monitors who, in turn, instructed nursing home
staff members on how to record their time; materials from State
teleconferences; and slides presented at STRIVE TEPs. We plan to post
preliminary results of the STRIVE analyses, when available, on the
following Web site: http://www.cms.hhs.gov/SNFPPS/10_TimeStudy.asp.
2. Minimum Data Set (MDS) 3.0
[If you choose to comment on issues in this section, please include
the caption ``MDS 3.0'' at the beginning of your comments.]
Sections 1819(f)(6)(A)-(B) and 1919(f)(6)(A)-(B) of the Social
Security
[[Page 25931]]
Act, as amended by the Omnibus Budget Reconciliation Act of 1987 (OBRA
1987), require the Secretary of the Department of Health and Human
Services (the Secretary) to specify a minimum data set of core elements
for use in conducting comprehensive assessments. As stated in Sec.
483.20, Medicare- and Medicaid-participating nursing homes must conduct
``a comprehensive, accurate, standardized, reproducible assessment'' of
each nursing home resident's functional capacity.
CMS is developing a new version of the MDS, MDS 3.0, to reflect
more accurately each resident's clinical, cognitive, and functional
status as well as the care that nursing homes provide residents. The
regulations at Sec. 483.20(b)(1)(i) through (xviii) list the clinical
domains that must be included in the Resident Assessment Instrument
(RAI). These domains have been incorporated into the MDS 2.0 and would
also be included in MDS 3.0. We anticipate that in FY 2010, MDS 3.0
would become the current version of the MDS. MDS 3.0, like MDS 2.0,
would focus on the clinical assessment of each nursing home resident to
screen for common, often unrecognized or unevaluated, conditions and
syndromes. We made clinical revisions to the instrument based on input
from subject-area experts, feedback from MDS users, resident advocates
and families, and new knowledge and evidence about resident assessment.
With the implementation of MDS 3.0, we aim to increase the clinical
relevance, accuracy, and efficiency of assessments; require assessors
to record direct resident responses on some items; include assessment
items used in other care settings; and move items toward future
electronic health record formats. On January 24, 2008, CMS hosted a
special Open Door Forum to provide details about MDS 3.0.
We now plan to evaluate the impact of the MDS 3.0 changes on the
RUG-III resident classification system used in the Medicare payment
structure. We intend to develop ways to adapt the RUG system to the MDS
3.0 assessment instrument as part of the STRIVE study. We would then
finalize changes to the MDS 3.0 and any necessary adaptations to the
RUG classification system. Our intent would be to implement the updated
system nationally in FY 2010.
We are very much aware that the transition to a new MDS instrument
in conjunction with the possible release of a new RUG grouper requires
careful planning and extensive provider training. CMS staff are already
working on training plans that would include a new MDS 3.0 manual,
documentation explaining the updated RUG grouper methodology, data
specifications for providers and vendors, training videos, a help desk
call and e-mail center, and a train-the-trainer conference tentatively
scheduled for Spring 2009. However, we realize that the most effective
training would require coordination between CMS and its key
stakeholders, including provider and professional associations, Fiscal
Intermediaries and Part A and Part B Medicare Administrative
Contractors (MACs), and State agencies. We want to encourage
stakeholders to work with CMS staff to provide additional training
opportunities on the local level to ensure a smooth transition. We plan
to publish a transition plan in 2008 that should highlight
opportunities for joint action. In 2009, we intend to make draft MDS
3.0 specifications available to providers and vendors. We also
tentatively plan to include in the update to the FY 2010 SNF PPS rates
(which we intend to introduce in Spring 2009 and finalize by the end of
July, 2009) definitive information on the final MDS 3.0 and RUG grouper
specifications. Additional information is available online at http://
www.cms.hhs.gov via the following links:
MDS 3.0 information: http://www.cms.hhs.gov/
NursingHomeQualityInits/25_NHQIMDS30.asp.
January 15, 2008 version of the MDS 3.0 instrument: http:/
/www.cms.hhs.gov/NursingHomeQualityInits/Downloads/
MDS30DraftVersion.pdf.
MDS 3.0 timeline: http://www.cms.hhs.gov/
NursingHomeQualityInits/Downloads/MDS30Timeline.pdf.
3. Integrated Post Acute Care Payment
[If you choose to comment on issues in this section, please include
the caption ``Integrated Post Acute Care Payment'' at the beginning of
your comments.]
Under current law, Medicare covers post-acute care (PAC) services
in various care settings, including SNFs, home health agencies (HHAs),
long-term care hospitals (LTCHs), and inpatient rehabilitation
facilities (IRFs). Each of the PAC sites has a separate payment system
that relies on different patient assessment instruments, although there
is no mandated assessment instrument for LTCHs. The current model is
based on provider-oriented ``silos'' with significant payment
differentials existing between provider types that treat similar
patients and provide similar services.
In the SNF PPS update notice for FY 2007 (71 FR 43172 through
43173, July 31, 2006), we described our plans to explore refinements to
the existing PAC payment methodologies to create a more seamless system
for payment and delivery of PAC under Medicare. The new model will
focus on beneficiary needs rather than provider type and will be
characterized by more consistent payments for the same type of care
across different sites of service, quality-driven pay-for-performance
incentives, and collection of uniform clinical assessment information
to support quality and discharge planning functions.
We also noted in the FY 2007 SNF PPS update notice (71 FR 43172)
that section 5008 of the Deficit Reduction Act (DRA) of 2005 mandates a
PAC payment reform demonstration for purposes of understanding costs
and outcomes across different PAC sites. To meet this mandate, CMS
implemented the PAC Payment Reform Demonstration (PAC-PRD) to examine
differences in costs and outcomes for PAC patients of similar case-mix
who use different types of PAC providers and to develop a standardized
patient assessment tool for use at hospital discharge and at PAC
admission and discharge. This tool, the Continuity Assessment Record
and Evaluation (CARE) tool, will measure the health and functional
status of Medicare acute discharges. During the demonstration, CARE
will be used at hospital discharge and upon admission and discharge
from PAC settings. The CARE instrument consists of a core set of
assessment items that are common to all patients and care settings and
are organized under several major domains: Medical, Functional,
Cognitive, Social, and Continuity of Care, in addition to supplemental
items for specific conditions and care settings. Additional information
on the PAC-PRD is available at: http://www.cms.hhs.gov/
DemoProjectsEvalRpts/MD/
itemdetail.asp?filterType=dual,%20keyword&filterValue=post%20acute%20car
e&filterByDID=0&sortByDID=3&sortOrder=descending&itemID=CMS1201325&intNu
mPerPage=10.
We are interested in receiving public comments on the CARE
instrument, and specifically invite comments on how CARE might advance
the use of Health Information Technology (HIT) in automating the
process for collecting and submitting quality data. The CARE tool is
available at http://www.cms.hhs.gov/paperworkreductionactof1995/pral/
list.asp. Viewers should scroll down to the entry for CMS-10243, ``Data
[[Page 25932]]
Collection for Administering the Medicare Continuity Assessment Record
and Evaluation (CARE) Instrument.'' Viewers can then click on the link
to CMS-10243, click on the link to ``Downloads,'' and open Appendix A
(``CARE Tool Item Matrix,'' a .pdf file) and Appendix B (``CARE Tool
Master Document,'' in Microsoft Word).
In addition, we wish to take this opportunity to discuss recent
developments in the related area of value-based purchasing (VBP). VBP
ties payment to performance through the use of incentives based on
measures of quality and cost of care. The implementation of VBP is
rapidly transforming CMS from being a passive payer of claims to an
active purchaser of higher quality, more efficient health care for
Medicare beneficiaries. Our VBP initiatives include hospital pay for
reporting (the Reporting Hospital Quality Data for the Annual Payment
Update Program), physician pay for reporting (the Physician Quality
Reporting Initiative), home health pay for reporting, the Hospital VBP
Plan Report to Congress, and various VBP demonstration programs across
payment settings, including the Premier Hospital Quality Incentive
Demonstration and the Physician Group Practice Demonstration.
The preventable hospital-acquired conditions (HAC) payment
provision for IPPS hospitals is another of CMS'' value-based purchasing
initiatives. The principal behind the HAC payment provision (Medicare
not paying more for healthcare-associated conditions) could be applied
to the Medicare payment systems for other settings of care. Section
1886(d)(4)(D) of the Act required the Secretary to select for the HAC
IPPS payment provision conditions that: (a) are high cost, high volume,
or both; (b) are assigned to a higher-paying Medicare severity
diagnosis-related group (MS-DRG) when present as a secondary diagnosis;
and (c) could reasonably have been prevented through the application of
evidence-based guidelines. Beginning October 1, 2008, Medicare can no
longer assign an inpatient hospital discharge to a higher-paying MS-DRG
if a selected HAC condition was not present on admission. That is, the
case will be paid as though the secondary diagnosis were not present.
(Medicare will continue to assign a discharge to a higher-paying MS-DRG
in those instances where the selected condition was, in fact, present
on admission).
The broad principle articulated in the HAC payment provision for
IPPS hospitals--of Medicare not paying for these types of preventable
conditions--could potentially be applied to other Medicare payment
systems for similar conditions that occur in settings other than IPPS
hospitals. Other possible settings of care might include hospital
outpatient departments, SNFs, HHAs, end-stage renal disease facilities,
and physician practices. The implementation would be different for each
setting, as each payment system is different and the reasonable
preventability through the application of evidence-based guidelines
could vary for candidate conditions over the different settings.
However, alignment of incentives across settings of care is an
important goal for all of CMS'' VBP initiatives, including the HAC
provision.
A related application of the broad principle behind the HAC payment
provision for IPPS hospitals could be considered through Medicare
secondary payer policy by requiring the provider that failed to prevent
the occurrence of a preventable condition in one setting to pay for all
or part of the necessary follow-up care in a second setting. This would
help shield the Medicare program from inappropriately paying for the
downstream effects of a preventable condition acquired in the first
setting but treated in the second setting.
We note that we are not proposing new Medicare policy in this
discussion of the possible application of HACs payment policy for IPPS
hospitals to other settings, as some of these approaches may require
new statutory authority. Rather, we are seeking public comment on the
application of the preventable HACs payment provision for IPPS
hospitals to other Medicare payment systems and settings. We look
forward to working with stakeholders in the fight against these
preventable conditions.
H. Miscellaneous Technical Corrections and Clarifications
We are also taking the opportunity to set forth certain technical
corrections and clarifications in this proposed rule, as discussed
below.
1. Bad Debt Payments
We are proposing to make a technical revision in the SNF PPS
regulations at Sec. 413.335(b) to reflect Medicare bad debt payments
to SNFs. Under section 1861(v)(1) of the Act and Sec. 413.89 of the
regulations, Medicare may pay some or all of the uncollectible
deductible and coinsurance amounts to those entities paid under a
reasonable cost payment methodology that are eligible to receive
payment for ``bad debt'' as defined in Sec. 413.89(b)(1). Under the
original reasonable cost SNF payment methodology that preceded the
introduction of the SNF PPS, SNFs did, in fact, receive bad debt
payments for uncollectible SNF coinsurance amounts (the SNF benefit has
no deductible). As we noted in the preamble to the July 30, 1999 SNF
PPS final rule (64 FR 41656), while the SNF PPS has maintained this
longstanding practice of recognizing SNF bad debt payments ever since
its inception, these payments are not included within the SNF PPS per
diem itself, but rather, are claimed on the SNF's Medicare cost report.
However, in drafting the regulations text in Sec. 413.335(b) on the
scope of the SNF PPS per diem payment, we inadvertently omitted a
reference to this practice.
Accordingly, in this proposed rule, we now propose to rectify that
inadvertent omission by adding a new clause to Sec. 413.335(b), to
clarify that in addition to the Federal per diem payment amounts, SNFs
receive payment for bad debts of Medicare beneficiaries, as specified
in the provisions of the regulations at Sec. 413.89. We note that
those provisions include the 30 percent reduction in applicable SNF bad
debt payments made in accordance with section 5004 of the DRA, as
specified in Sec. 413.89(h)(2). Further, we note that the President's
budget currently includes a provision that would eliminate Medicare bad
debt payments altogether, and that the provisions outlined in this
proposed rule would need to reflect any legislation that the Congress
may enact to adopt that proposal. Finally, we note that our proposed
revision is similar to language that already appears in the regulations
text for the inpatient psychiatric facility PPS, at Sec.
412.422(b)(2).
2. Additional Clarifications
We are also proposing to make clarifications in two other areas:
When a SNF may bill at the default payment rate, and the role of
rehabilitation services evaluations in SNFs.
A recent analysis of claims data has confirmed confusion among
providers as to when it is permissible to submit a claim using the
Health Insurance Prospective Payment System (HIPPS) rate code of AAA00,
which is the default code. Under the SNF PPS, SNFs are required to
submit resident assessment data according to an assessment schedule.
When the resident assessment is prepared timely, the provider should
bill the RUG payment group that is assigned to the assessment. When the
SNF fails to comply with the assessment schedule, it must file a late
assessment in order to be paid. In this
[[Page 25933]]
situation, CMS pays a ``default rate''--a reduced payment made in lieu
of the full SNF PPS rate that would have been paid had the resident
been assessed in a timely manner. Noncompliance with the schedule is
determined by the assessment reference date (ARD) on the resident
assessment.
Program instructions also allow for payment at the default rate in
the following limited circumstances where the SNF has failed to assess
the beneficiary: When the stay is less than 8 days within a spell of
illness; the SNF is notified on an untimely basis or is unaware of a
Medicare Secondary Payer denial; the SNF is notified on an untimely
basis of the revocation of a payment ban; the beneficiary requests a
demand bill; or, the SNF is notified on an untimely basis or is unaware
of a beneficiary's disenrollment from a Medicare Advantage plan.
Further information regarding these limited circumstances can be found
in the Provider Reimbursement Manual, Part I (CMS Pub. 15-1), Chapter
28.
In circumstances other than those described above, no payment is
available to the SNF where the SNF fails to assess the resident.
However, even when no payment will be made, we wish to clarify that the
SNF must nonetheless submit a claim using the HIPPS default rate code
and an occurrence code 77 indicating provider liability in order to
ensure that the beneficiary's spell of illness (benefit period) is
updated.
We have also recently received questions concerning Change Request
(CR) 5532 (Transmittal no. 73, dated June 29, 2007), regarding coverage
of rehabilitation services in a SNF (see CMS Pub. 100-2, Chapter 8,
Sec. 30.4.1.1). As a result, we wish to clarify the requirement that
an initial evaluation must be completed and the plan of treatment
developed before recording the number of minutes of rehabilitation
services provided or estimated for each discipline on the Resident
Assessment Instrument (RAI).
For Medicare to cover rehabilitation services in a SNF, the
services must be directly and specifically related to an active written
treatment plan that is developed before the start of rehabilitation
services. The plan must be based upon an initial evaluation performed
by a qualified therapist (after SNF admission and before the start of
rehabilitation services in the SNF) and must be approved by the
physician after any needed consultation with the qualified therapist.
This means that the evaluation must have been performed for each
discipline and the plan of treatment developed in order to include
minutes for each discipline under Section P (``Special Treatments and
Procedures'') of the Resident Assessment Instrument, and also to
project minutes under Section T (``Therapy Supplement for Medicare
PPS'') of the Resident Assessment Instrument. Section T of the MDS is
completed for Medicare 5-day assessments and in certain cases, when a
beneficiary is readmitted to the SNF, whereas Section P is completed
for each Medicare-required assessment. In those cases where a
beneficiary is discharged during the SNF stay and later readmitted, an
initial evaluation must be performed upon readmission to the SNF, prior
to the start of rehabilitation services in the SNF.
III. The Skilled Nursing Facility Market Basket Index
[If you choose to comment on issues in this section, please include
the caption ``Market Basket Index'' at the beginning of your comments.]
Section 1888(e)(5)(A) of the Act requires us to establish a SNF
market basket index (input price index), that reflects changes over
time in the prices of an appropriate mix of goods and services included
in the SNF PPS. This proposed rule incorporates the latest available
projections of the SNF market basket index. We will incorporate updated
projections based on the latest available projections when we publish
the SNF final rule. Accordingly, we have developed a SNF market basket
index that encompasses the most commonly used cost categories for SNF
routine services, ancillary services, and capital-related expenses.
Each year, we calculate a revised labor-related share based on the
relative importance of labor-related cost categories in the input price
index. Table 11 below summarizes the proposed updated labor-related
share for FY 2009.
Table 11.--Labor-related Relative Importance, FY 2008 and FY 2009
------------------------------------------------------------------------
Relative Relative
importance, importance,
labor-related, labor-related,
FY 2008 07:2 FY 2009 08:1
forecast forecast
------------------------------------------------------------------------
Wages and salaries................. 51.218 51.139
Employee benefits.................. 11.720 11.595
Nonmedical professional fees....... 1.333 1.331
Labor-intensive services........... 3.456 3.454
Capital-related (.391)............. 2.522 2.475
-----------------------------------
Total.......................... 70.249 69.994
------------------------------------------------------------------------
Source: Global Insight, Inc., formerly DRI-WEFA.
A. Use of the Skilled Nursing Facility Market Basket Percentage
Section 1888(e)(5)(B) of the Act defines the SNF market basket
percentage as the percentage change in the SNF market basket index from
the average of the previous FY to the average of the current FY. For
the Federal rates established in this proposed rule, we use the
percentage increase in the SNF market basket index to compute the
update factor for FY 2009. We use the Global Insight, Inc. (formerly
DRI-WEFA), first quarter 2008 forecasted percentage increase in the FY
2004-based SNF market basket index for routine, ancillary, and capital-
related expenses, described in the previous section, to compute the
update factor in this proposed rule. Finally, as discussed in section
I.A. of this proposed rule, we no longer compute update factors to
adjust a facility-specific portion of the SNF PPS rates because the
initial three-phase transition period from facility-specific to full
Federal rates that started with cost reporting periods beginning in
July 1998 has expired.
B. Market Basket Forecast Error Adjustment
As discussed in the June 10, 2003, supplemental proposed rule (68
FR 34768) and finalized in the August 4,
[[Page 25934]]
2003, final rule (68 FR 46067), the regulations at Sec. 413.337(d)(2)
provide for an adjustment to account for market basket forecast error.
The initial adjustment applied to the update of the FY 2003 rate for FY
2004, and took into account the cumulative forecast error for the
period from FY 2000 through FY 2002. Subsequent adjustments in
succeeding FYs take into account the forecast error from the most
recently available FY for which there is final data, and apply whenever
the difference between the forecasted and actual change in the market
basket exceeds a specified threshold. We originally used a 0.25
percentage point threshold for this purpose; however, for the reasons
specified in the FY 2008 SNF PPS final rule (72 FR 43425, August 3,
2007), we adopted a 0.5 percentage point threshold effective with FY
2008. As discussed previously in section I.F.2. of this proposed rule,
as the difference between the estimated and actual amounts of increase
in the market basket index for FY 2007 (the most recently available FY
for which there is final data) does not exceed the 0.5 percentage point
threshold, the proposed payment rates for FY 2009 do not include a
forecast error adjustment.
C. Federal Rate Update Factor
Section 1888(e)(4)(E)(ii)(IV) of the Act requires that the update
factor used to establish the FY 2009 Federal rates be at a level equal
to the full market basket percentage change. Accordingly, to establish
the update factor, we determined the total growth from the average
market basket level for the period of October 1, 2007 through September
30, 2008 to the average market basket level for the period of October
1, 2008 through September 30, 2009. Using this process, the proposed
market basket update factor for FY 2009 SNF Federal rates is 3.1
percent. We used this revised proposed update factor to compute the
Federal portion of the SNF PPS rate shown in Tables 2 and 3.
IV. Consolidated Billing
[If you choose to comment on issues in this section, please include
the caption ``Consolidated Billing'' at the beginning of your
comments.]
Section 4432(b) of the BBA established a consolidated billing
requirement that places the Medicare billing responsibility for
virtually all of the services that the SNF's residents receive on the
SNF, except for a small number of services that the statute
specifically identifies as being excluded from this provision. As noted
previously in section I. of this proposed rule, subsequent legislation
enacted a number of modifications in the consolidated billing
provision.
Specifically, section 103 of the BBRA amended this provision by
further excluding a number of individual ``high-cost, low-probability''
services, identified by the Healthcare Common Procedure Coding System
(HCPCS) codes, within several broader categories (chemotherapy and its
administration, radioisotope services, and customized prosthetic
devices) that otherwise remained subject to the provision. We discuss
this BBRA amendment in greater detail in the proposed and final rules
for FY 2001 (65 FR 19231 through 19232, April 10, 2000, |
