[Congressional Record Volume 143, Number 89 (Monday, June 23, 1997)]
[Senate]
[Pages S6094-S6095]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       SKILLED NURSING FACILITIES PROSPECTIVE PAYMENT ACT OF 1997

  Mr. HATCH. Mr. President, on June 16, 1997, I introduced legislation, 
S. 914, proposing to revise the present system in which the Medicare 
Program pays for services provided by skilled nursing facilities 
[SNF's]. This legislation builds on my work in the Finance Committee in 
1995 when the committee included a proposal I authored to implement a 
prospective payment system for nursing home payments.
  As currently structured under Medicare, seniors receive up to 100 
days of skilled nursing facility services following a 3-day 
hospitalization stay. Currently, those services are reimbursed on a 
cost-plus basis. As Medicare has evolved, however, so have systems of 
cost-plus reimbursement.
  For many years, I have worked with my colleagues in the Senate to 
provide seniors with the services they need in a skilled nursing 
facility setting. I have worked to modify the Medicare reimbursement 
methodology in order to provide economic incentives to SNF providers to 
provide the highest quality of care at a reasonable and affordable 
price to the Medicare Program.
  My legislation will accomplish that goal.
  Congress initially began requiring prospective payments for skilled 
nursing facilities in the early 1980's. However, the Health Care 
Financing Administration [HCFA] has not been able to identify an 
appropriate payment methodology, and how best to define the services 
provided to seniors in a comprehensive way. Nevertheless, we have come 
a long way since the mid 1980's in understanding the proper

[[Page S6095]]

structure of prospective payment systems. We are now on the verge of 
fundamentally revamping the current cost-plus payment system for these 
important services.
  Let me briefly describe the key parts of my legislation.
  First, during fiscal year 1998, the Health Care Financing 
Administration will begin phase one of a per diem, prospective payment 
system [PPS] for skilled nursing facilities. Such payment would be 
based on historical data regarding a particular facility's costs and 
services provided. While it is expected that the new rate is an all-
inclusive rate, encompassing routine costs, ancillary services, and 
capital-related expenses, during the first year, HCFA is likely to 
adjust both the inclusion of ancillary services and capital costs only 
when they have sufficient data to adequately measure and quantify the 
level of those services.
  It would be unfortunate for HCFA to put into effect a system that did 
not adequately account for the medical services offered to residents 
within a skilled nursing home. I urge HCFA to implement and include all 
ancillaries only when the data and the information are adequate.
  Second, during the 4 four years the prospective payment system will 
evolve into a full PPS system where the services for an individual in a 
skilled nursing facility bed will be adjusted for their medical and 
nursing needs. This legislation calls on HCFA to develop a case-mix 
methodology that adequately reflects the medical needs of each patient. 
I have heard from many experts that the current case mix methodology 
does not adequately reflect certain medical needs of many skilled 
nursing home patients. It is my intention that the case-mix methodology 
be current and reflect all services provided.
  And third, once this system is in place, it will provide the right 
kind of economic incentives so that providers will seek all services 
medically necessary. The Medicare Program will not be in a situation of 
overpaying for such services; it will provide a competitive balance so 
that all skilled nursing services, regardless of whether they are 
hospital SNF beds or freestanding SNF beds, will have comparable 
incentives to provide high quality services to beneficiaries.

  It is extremely important that we change the existing and limited 
incentives in the Medicare system so that providers will offer services 
in the most cost-effective way. Hospitals are already under a PPS 
system; physicians are reimbursed on a predetermined rate as well. This 
approach is now the next important step in our continuing effort to 
ensure appropriate fiscal responsibility by the Federal Government 
while also ensuring that seniors have access to the important health 
benefits offered under the Medicare Program.
  Mr. President, for the benefit of my colleagues, I have prepared a 
section-by-section summary of my bill and I ask unanimous consent that 
it be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:


                      Section-by-Section Analysis

       Establishes a prospective payment system for skilled 
     nursing facility (SNF) services and provides for consolidated 
     billing of Part B services provided to residents of such 
     facilities.
       Subsection (a): Provides for the establishment of a 
     prospective payment system for services covered by the 
     Medicare skilled nursing facility benefit, including routine 
     service, ancillary services (except diagnostic services), and 
     related capital costs, beginning with cost reporting periods 
     starting on or after July 1, 1998. Payment would be based 
     on per diem rates established by the Secretary of Health 
     and Human Services.
       Provides a four-year transition period for shifting the 
     calculation of payments rates from facility-specific historic 
     cost data to average national or regional costs. During the 
     first year of the new system, payments would be based on 
     facility-specific per diem rates. For the second through 
     fourth years, payments would be based on a blend of facility-
     specific and federal rates. In the fifth year and thereafter, 
     payments would be based exclusively on federal per diem 
     rates.
       Payments to new facilities would be based on federal per 
     diem rates.
       Federal per diem rates would be determined by the Secretary 
     on the basis of 1995 cost data for all SNF settings and would 
     include an estimate of amounts that would be payable under 
     Part B for services furnished to SNF residents. Rates would 
     be adjusted by variations in wage levels and case mix and 
     could be computed separately for urban and rural areas based 
     on national or regional classification. Rates would be 
     updated annually by the skilled nursing facility market 
     basket index.
       Federal payment rates would be applied to individual 
     facilities subject to adjustments for case mix and geographic 
     variations in labor costs. A method of making adjustments 
     based on case mix variations would be required to be 
     developed by the Secretary in the form of a regulation 
     subject to public notice and comment.
       SNFs would be required to provide to the Secretary with 
     resident assessment data as may be necessary to develop and 
     implement per diem rates.
       The Secretary would be required to develop an appropriate 
     method of applying a prospective payment system to Medicare 
     low volume SNFs and swing bed hospitals.
       Subsection (b): Provides for consolidated billing of most 
     Part B services furnished to residents of a skilled nursing 
     facility, including services provided by other entities under 
     arrangement. Claims for such services would be required to be 
     submitted directly by the SNF and include a code or codes 
     identifying the items or services delivered. Payment would be 
     made to the SNF based on the Part B payment methodology (such 
     as fee schedules) applicable to the particular item or 
     service. Facilities would be permitted to reassign such 
     payments when the item or service was furnished by another 
     entity. Payments for therapy services would be required to 
     reflect the new salary equivalency guidelines for physical, 
     occupational, and respiratory therapy and speech-language 
     pathology after such guidelines are finalized through the 
     regulatory process.
       The Secretary would be required to establish a medical 
     review process to examine the effects of the changes made by 
     the Act on the quality of skilled nursing facility furnished 
     to Medicare beneficiaries.

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