[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 914 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 914

 To establish a prospective payment system under the medicare program 
                 for skilled nursing facility services.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 16, 1997

   Mr. Hatch introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To establish a prospective payment system under the medicare program 
                 for skilled nursing facility services.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SEC. 10401. PROSPECTIVE PAYMENT FOR SKILLED NURSING FACILITY SERVICES.

    (a) In General.--Section 1888 (42 U.S.C. 1395yy) is amended by 
adding at the end the following new subsection:
    ``(e) Prospective Payment.--
            ``(1) Payment provision.--Notwithstanding any other 
        provision of this title, subject to paragraph (7), the amount 
        of the payment for all costs (as defined in paragraph (2)(B)) 
        of covered skilled nursing facility services (as defined in 
        paragraph (2)(A)) for each day of such services furnished--
                    ``(A) in a cost reporting period during the 
                transition period (as defined in paragraph (2)(E)), is 
                equal to the sum of--
                            ``(i) the facility-specific percentage of 
                        the facility-specific per diem rate (computed 
                        under paragraph (3)), and
                            ``(ii) the Federal per diem percentage of 
                        the Federal per diem rate (determined under 
                        paragraph (4)) applicable to the facility; and
                    ``(B) after the transition period is equal to the 
                Federal per diem rate applicable to the facility.
            ``(2) Definitions.--For purposes of this subsection:
                    ``(A) Covered skilled nursing facility services.--
                            ``(i) In general.--The term `covered 
                        skilled nursing facility services'--
                                    ``(I) means post-hospital extended 
                                care services as defined in section 
                                1861(i) for which benefits are provided 
                                under part A; and
                                    ``(II) includes all items and 
                                services (other than services described 
                                in clause (ii)) for which payment may 
                                be made under part B and which are 
                                furnished to an individual who is a 
                                resident of a skilled nursing facility 
                                during the period in which the 
                                individual is provided covered post-
                                hospital extended care services.
                            ``(ii) Services excluded.--Services 
                        described in this clause are physicians' 
                        services, services described by clauses (i) 
                        through (iii) of section 1861(s)(2)(K), 
                        diagnostic services described by section 
                        1861(s)(3), certified nurse-midwife services, 
                        qualified psychologist services, services of a 
                        certified registered nurse anesthetist, and 
                        items and services described in subparagraphs 
                        in (F) and (O) of section 1861(s)(2). Services 
                        described in this clause do not include any 
                        physical, occupational, or speech-language 
                        therapy services regardless of whether or not 
                        the services are furnished by, or under the 
                        supervision of, a physician or other health 
                        care professional.
                    ``(B) All costs.--The term `all costs' means 
                routine service costs, ancillary costs, and capital-
                related costs of covered skilled nursing facility 
                services, but does not include costs associated with 
                approved educational activities.
                    ``(C) Facility specific percentage; federal per 
                diem percentage.--For--
                            ``(i) the first cost reporting period (as 
                        defined in subparagraph (D) of a facility, the 
                        `facility specific percentage' is 100 percent 
                        and the `Federal per diem percentage' is 0 
                        percent;
                            ``(ii) the next cost reporting period (as 
                        defined in subparagraph (D)) of a facility, the 
                        `facility specific percentage' is 75 percent 
                        and the `Federal per diem percentage' is 25 
                        percent;
                            ``(iii) the next cost reporting period of 
                        such facility, the `facility specific 
                        percentage' is 50 percent and the `Federal per 
                        diem percentage' is 50 percent; and
                            ``(iv) the subsequent cost reporting period 
                        of such facility, the `facility specific 
                        percentage' is 25 percent and the `Federal per 
                        diem percentage' is 75 percent.
                    ``(D) First cost reporting period.--The term `first 
                cost reporting period' means, with respect to a skilled 
                nursing facility, the first cost reporting period of 
                the facility beginning on or after July 1, 1998.
                    ``(E) Transition period.--
                            ``(i) In general.--The term `transition 
                        period' means, with respect to a skilled 
                        nursing facility, the 4 cost reporting periods 
                        of the facility beginning with the first cost 
                        reporting period.
                            ``(ii) Treatment of new skilled nursing 
                        facilities.--In the case of a skilled nursing 
                        facility that does not have a settled cost 
                        report for a cost reporting period before July 
                        1, 1998, payment for such services shall be 
                        made under this subsection as if all services 
                        were furnished after the transition period.
            ``(3) Determination of facility specific per diem rates.--
        The Secretary shall determine a facility-specific per diem rate 
        for each skilled nursing facility for a cost reporting period 
        as follows:
                    ``(A) Determining base payments.--The Secretary 
                shall determine, on a per diem basis, the total of--
                            ``(i) the allowable costs of extended care 
                        services for the facility for the 
latest settled cost reporting period (ending before the date of the 
enactment of this subsection) for which data are available, and
                            ``(ii) an estimate of the amounts that 
                        would be payable under part B (disregarding any 
                        applicable deductibles, coinsurance and 
                        copayments) for covered skilled nursing 
                        facility services described in paragraph 
                        (2)(A)(i)(II) furnished during such period to 
                        an individual who is a resident of the 
                        facility, regardless of whether or not the 
                        payment was made to the facility or to another 
                        entity.
                    ``(B) Update to cost reporting period before first 
                cost reporting period.--The Secretary shall update the 
                amount determined under subparagraph (A), for each cost 
                reporting period after the cost reporting period 
                described in subparagraph (A)(i) and up to the cost 
                reporting period immediately preceding the first cost 
                reporting period, by the skilled nursing facility 
                historical trend factor.
                    ``(C) Updating to applicable cost reporting 
                period.--The Secretary shall further update such amount 
                for each cost reporting period beginning with the first 
                cost reporting period and up to and including the cost 
                reporting period involved by a factor equal to the 
                skilled nursing facility market basket percentage 
                increase.
            ``(4) Federal per diem rate.--
                    ``(A) Determination of historical per diem for 
                facilities.--For each skilled nursing facility that 
                received payments for post-hospital extended care 
                services during a cost reporting period beginning in 
                fiscal year 1995 and that was subject to (and not 
                exempted from) the per diem limits referred to in 
                paragraph (1) or (2) of subsection (a), the Secretary 
                shall estimate, on a per diem basis for such cost 
                reporting period, the total of--
                            ``(i) the allowable costs of extended care 
                        services for the facility for the latest 
                        settled cost reporting period (ending before 
                        the date of the enactment of this subsection) 
                        for which data are available, and
                            ``(ii) an estimate of the amounts that 
                        would be payable under part B (disregarding any 
                        applicable deductibles, coinsurance and 
                        copayments) for covered skilled nursing 
                        facility services described in paragraph 
                        (2)(A)(i)(II) furnished during such period to 
                        an individual who is a resident of the 
                        facility, regardless of whether or not the 
                        payment was made to the facility or to another 
                        entity.
                    ``(B) Update to fiscal year 1998.--The Secretary 
                shall update the amount determined under subparagraph 
                (A), for each cost reporting period after the cost 
                reporting period described in subparagraph (A)(i) and 
                up to the cost reporting period immediately preceding 
                the first cost reporting period, by the skilled nursing 
                facility historical trend factor for such period.
                    ``(C) Computation of standardized per diem rate.--
                The Secretary shall standardize the amount updated 
                under subparagraph (B) for each facility by--
                            ``(i) adjusting for variations among 
                        facility by area in the average facility wage 
                        level per diem, and
                            ``(ii) adjusting for variations in case mix 
                        per diem among facilities.
                    ``(D) Computation of weighted average per diem 
                rate.--The Secretary shall compute a weighted average 
                per diem rate by computing an average of the 
                standardized amounts computed under subparagraph (C), 
                weighted for each facility by number of days of 
                extended care services furnished during the cost 
                reporting period referred to in subparagraph (A). The 
                Secretary may compute and apply such average separately 
                for facilities located in urban and rural areas (as 
                defined in section 1886(d)(2)(D)) according to national 
                or regional classification as determined by the 
                Secretary.
                    ``(E) Updating.--
                            ``(i) Fiscal year 1998.--For fiscal year 
                        1998, the Secretary shall compute for each 
                        skilled nursing facility an unadjusted Federal 
                        per diem rate equal to the weighted average per 
                        diem rate computed under subparagraph (D) and 
                        applicable to the facility increased by skilled 
                        nursing facility market basket percentage 
                        change for the fiscal year involved.
                            ``(ii) Subsequent fiscal years.--For each 
                        subsequent fiscal year the Secretary shall 
                        compute for each skilled nursing facility an 
                        unadjusted Federal per diem rate equal to the 
                        Federal per diem rate computed under this 
                        subparagraph for the previous fiscal year and 
                        applicable to the facility increased by the 
                        skilled nursing facility market basket 
                        percentage change for the fiscal year involved.
                    ``(F) Application to specific facilities.--The 
                Secretary shall compute for each skilled nursing 
                facility for each fiscal year (beginning with fiscal 
                year 1998) an adjusted Federal per diem rate equal to 
                the unadjusted Federal per diem rate determined under 
                subparagraph (E)) adjusted as follows:
                            ``(i) Adjustment for case mix.--
                                    ``(I) In general.--The Secretary 
                                shall promulgate regulations, with 
                                public notice and an opportunity for 
                                comment, to provide for an appropriate 
                                adjustment to account for case mix. 
                                Such adjustment shall be based on a 
                                resident classification system, 
                                established by the Secretary, that 
                                accounts for the relative resource 
                                utilization of different patient types. 
                                The case mix adjustment shall be based 
                                on resident assessment data and other 
                                data that the Secretary considers 
                                appropriate and shall reflect higher-
                                acuity patient classification systems 
                                that include all medical services 
                                provided within the skilled nursing 
                                facility.
                                    ``(II) Adjustment.--Insofar as the 
                                Secretary determines that such 
                                adjustments for a previous fiscal year 
                                (or estimates that such adjustments for 
                                a future fiscal year) did (or are 
                                likely to) result in a change in 
                                aggregate payments under this 
                                subsection during the fiscal year that 
                                are a result of changes in the coding 
                                or classification of residents that do 
                                not reflect real changes in case mix, 
                                the Secretary may adjust the per 
                                payment unit payment rate for 
                                subsequent years so as to discount the 
                                effect of such coding or classification 
                                changes.
                            ``(ii) Adjustment for geographic variations 
                        in labor costs.--The Secretary shall adjust the 
                        portion of such per diem rate attributable to 
                        wages and wage-related costs for the area in 
                        which the facility is located compared to the 
                        national average of such costs using an 
                        appropriate wage index as determined by the 
                        Secretary. Such adjustment shall be done in a 
                        manner that does not result in aggregate 
                        payments under this subsection that are greater 
                        or less than those that would otherwise be made 
                        if such adjustment had not been made.
                    ``(G) Publication of information on per diem 
                rates.--The Secretary shall provide for publication in 
                the Federal Register, before the July 1 preceding each 
                fiscal year (beginning with fiscal year 1999), of--
                            ``(i) the unadjusted Federal per diem rates 
                        to be applied to days of covered skilled 
                        nursing facility services furnished during the 
                        fiscal year,
                            ``(ii) the case mix classification system 
                        to be applied under subparagraph (F)(i) with 
                        respect to such services during the fiscal 
                        year, and
                            ``(iii) the factors to be applied in making 
                        the area wage adjustment under subparagraph 
                        (F)(ii) with respect to such services.
            ``(5) Skilled nursing facility market basket index, 
        percentage, and historical trend factor.--For purposes of this 
        subsection:
                    ``(A) Skilled nursing facility market basket 
                index.--The Secretary shall establish a skilled nursing 
                facility market basket index that reflects changes over 
                time in the prices of an appropriate mix of goods and 
                services included in covered skilled nursing facility 
                services.
                    ``(B) Skilled nursing facility market basket 
                percentage.--The term `skilled nursing facility market 
                basket percentage' means, for a fiscal year or other 
                annual period and as calculated by the Secretary, the 
                percentage change in the skilled nursing facility 
                market basket index (established under subparagraph 
                (A)) from the midpoint of the prior fiscal year (or 
                period) to the midpoint of the fiscal year (or other 
                period) involved.
                    ``(C) Skilled nursing facility historical trend 
                factor.--The term `skilled nursing facility historical 
                trend factor' means, for a fiscal year or other annual 
                period and as calculated by the Secretary, the 
                percentage change in the skilled nursing facility 
                routine cost index (used in applying per diem routine 
                cost limits under subsection (a)) from the midpoint of 
                the prior fiscal year (or period) to the midpoint of 
                the fiscal year (or other period) involved, reduced (on 
                an annualized basis) by 1 percentage point.
            ``(6) Submission of resident assessment data.--A skilled 
        nursing facility shall provide the Secretary, in a manner and 
        within the timeframes prescribed by the Secretary, the resident 
        assessment data necessary to develop and implement the rates 
        under this subsection. For purposes of meeting such 
        requirement, a skilled nursing facility may submit the resident 
        assessment data required under section 1819(b)(3), using the 
        standard instrument designated by the State under section 
        1819(e)(5).
            ``(7) Transition for medicare low volume skilled nursing 
        facilities and swing bed hospitals.--
                    ``(A) In general.--The Secretary shall determine an 
                appropriate manner in which to apply this subsection to 
                the facilities described in subparagraph (B), taking 
                into account the purposes of this subsection, and shall 
                provide that at the end of the transition period (as 
                defined in paragraph (2)(E)) such facilities shall be 
                paid only under this subsection. Payment shall not be 
                made under this subsection to such facilities for cost 
                reporting periods beginning before such date (not 
                earlier than July 1, 1999) as the Secretary specifies.
                    ``(B) Facilities described.--The facilities 
                described in this subparagraph are--
                            ``(i) skilled nursing facilities for which 
                        payment is made for routine service costs 
                        during a cost reporting period on the basis of 
                        prospective payments under section 1888(d), or
                            ``(ii) facilities that have in effect an 
                        agreement described in section 1883, for which 
                        payment is made for the furnishing of extended 
                        care services on a reasonable cost basis under 
                        section 1814(l) (as in effect on and after such 
                        date).''.
    (b) Consolidated Billing.--
            (1) For snf services.--Section 1862(a) (42 U.S.C. 1395y(a)) 
        is amended--
                    (A) by striking ``or'' at the end of paragraph 
                (15),
                    (B) by striking the period at the end of paragraph 
                (16) and inserting ``; or'', and
                    (C) by inserting after paragraph (16) the following 
                new paragraph:
            ``(17) which are covered skilled nursing facility services 
        described in section 1888(e)(2)(A)(i)(II) and which are 
        furnished to an individual who is a resident of a skilled 
        nursing facility by an entity other than the skilled nursing 
        facility, unless the services are furnished under arrangements 
        (as defined in section 1861(w)(1)) with the entity made by the 
        skilled nursing facility.''.
            (2) Requiring payment for all part b items and services to 
        be made to facility.--The first sentence of section 1842(b)(6) 
        (42 U.S.C. 1395u(b)(6)) is amended--
                    (A) by striking ``and (D)'' and inserting ``(D)''; 
                and
                    (B) by striking the period at the end and inserting 
                the following: ``, and (E) in the case of an item or 
                service (other than a portable x-ray or 
                electrocardiogram treated as a physician's service for 
                purposes of section 1848(j)(3) and services described 
                in section 1888(e)(2)(A)(ii)) furnished to an 
                individual who (at the time the item or service is 
                furnished) is a resident of a skilled nursing facility, 
                payment shall be made to the facility (without regard 
                to whether or not the item or service was furnished by 
                the facility, by others under arrangement with them 
                made by the facility, under any other contracting or 
                consulting arrangement, or otherwise).''.
            (3) Payment rules.--Section 1888(e) (42 U.S.C. 1395yy(e)), 
        as added by subsection (a), is amended by adding at the end the 
        following:
            ``(9) Payment for certain services.--
                    ``(A) In general.--In the case of an item or 
                service furnished by a skilled nursing facility (or by 
                others under arrangement with them made by a skilled 
                nursing facility or under any other contracting or 
                consulting arrangement or otherwise) for which payment 
                would otherwise (but for this paragraph) be made under 
                part B in an amount determined in accordance with 
                section 1833(a)(2)(B), the amount of the payment under 
                such part shall be based on the part B payment 
                methodology applicable to the item or service, except 
                that for items and services that would be included in a 
                facility's cost report if not for the enactment of this 
                paragraph, the facility may continue to use a cost 
                report for reimbursement purposes until the prospective 
                payment system established by this subsection is 
                implemented.
                    ``(B) Therapy services.--Payment for physical 
                therapy, occupational therapy, respiratory therapy, and 
                speech language pathology services shall reflect new 
                salary equivalency guidelines calculated pursuant to 
                section 1861(v)(5) after such guidelines are finalized 
                through the regulatory process.
                    ``(C) Reassignment of payments.--A skilled nursing 
                facility may reassign payments for items and services 
                that are subject to this paragraph directly to the 
                entity which furnished such item or service.
            ``(10) Required coding.--No payment may be made under part 
        B for items and services (other than services described in 
        paragraph (2)(A)(ii)) furnished to an individual who is a 
        resident of a skilled nursing facility unless the claim for 
        such payment includes a code (or codes) under a uniform coding 
        system specified by the Secretary that identifies the items or 
        services delivered.''.
            (4) Conforming amendments.--
                    (A) Section 1819(b)(3)(C)(i) (42 U.S.C. 1395i-
                3(b)(3)(C)(i)) is amended by striking ``Such'' and 
                inserting ``Subject to the timeframes prescribed by the 
                Secretary under section 1888(t)(6), such''.
                    (B) Section 1832(a)(1) (42 U.S.C. 1395k(a)(1)) is 
                amended by striking ``(2);'' and inserting ``(2) and 
                section 1842(b)(6)(E);''.
                    (C) Section 1833(a)(2)(B) (42 U.S.C. 
                1395l(a)(2)(B)) is amended by inserting ``or section 
                1888(e)(9)'' after ``section 1886''.
                    (D) Section 1861(h) (42 U.S.C 1395x(h)) is 
                amended--
                            (i) in the matter preceding paragraph (1), 
                        by striking ``paragraphs (3) and (6)'' and 
                        inserting ``paragraphs (3), (6), and (7)'', and
                            (ii) in paragraph (6), by striking ``, and 
                        other diagnostic'' and all that follows through 
                        ``agreement in effect'';
                            (iii) by striking paragraph (7) and 
                        inserting the following:
            ``(7) such other services (including diagnostic and 
        therapeutic services) necessary to the health of the patients 
        as are generally provided by skilled nursing facilities and by 
        others under arrangements with the facility;'';
                    (E) Section 1866(a)(1)(H) (42 U.S.C. 
                1395cc(a)(1)(H)) is amended--
                            (i) by redesignating clauses (i) and (ii) 
                        as subclauses (I) and (II) respectively,
                            (ii) by inserting ``(i)'' after ``(H)'', 
                        and
                            (iii) by adding after clause (i), as so 
                        redesignated, the following new clause:
            ``(ii) in the case of skilled nursing facilities which 
        provide covered skilled nursing facility services--
                    ``(I) that are furnished to an individual who is a 
                resident of the skilled nursing facility, and
                    ``(II) for which the individual is entitled to have 
                payment made under this title,
        furnished by the skilled nursing facility or otherwise under 
        arrangements (as defined in section 1861(w)(1)) made by the 
        skilled nursing facility,''.
    (c) Medical Review Process.--In order to ensure that medicare 
beneficiaries are furnished appropriate services in skilled nursing 
facilities, the Secretary of Health and Human Services shall establish 
and implement a thorough medical review process to examine the effects 
of the amendments made by this section on the quality of covered 
skilled nursing facility services furnished to medicare beneficiaries. 
In developing such a medical review process, the Secretary shall place 
a particular emphasis on the quality of non-routine covered services 
and physicians' services for which payment is made under title XVIII of 
the Social Security Act for which payment is made under section 1848 of 
such Act.
    (d) Effective Date.--The amendments made by this section are 
effective for cost reporting periods beginning on or after July 1, 
1998; except that the amendments made by subsection (b) shall apply to 
items and services furnished on or after July 1, 1998.
                                 <all>