[Federal Register Volume 61, Number 78 (Monday, April 22, 1996)]
[Proposed Rules]
[Pages 17677-17682]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9347]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 413

[BPD-805-P]
RIN 0938-AG68


Medicare and Medicaid Programs; New Payment Methodology for 
Routine Extended Care Services Provided in a Swing-Bed Hospital

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Proposed Rule.

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SUMMARY: This proposed rule would revise the regulations governing the 
methodology for payment of routine extended care services furnished in 
a swing-bed hospital. Medicare payment for these services is determined 
based on the average rate per patient day paid by Medicare for these 
same services provided in freestanding skilled nursing facilities 
(SNFs) in the region in which the hospital is located. The reasonable 
cost for these services is the higher of the reasonable cost rates in 
effect for the current calendar year or for the previous calendar year. 
In addition, this proposed rule would revise the regulations concerning 
the method used to allocate hospital general routine inpatient service 
costs for purposes of determining payments to swing-bed hospitals. 
These changes are necessary to conform the regulations to section 1883 
of the Social Security Act (the Act), and section 4008(j) of the 
Omnibus Budget Reconciliation Act of 1990.

DATES: Comments will be considered if we receive them at the 
appropriate address, as provided below, no later than 5 p.m. on June 
21, 1996.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: BPD-805-P, P.O. Box 7517, 
Baltimore, MD 21207.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW, 
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code BPD-805-P. Comments received timely will be available for 
public inspection as they are received, generally beginning 
approximately 3 weeks after publication of a document, in Room 309-G of 
the Department's offices at 200 Independence Avenue, SW, Washington, 
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. 
(phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Katie Walker (410) 786-7278.

SUPPLEMENTARY INFORMATION:

I. Background

    Frequently, hospitals participating in Medicare and Medicaid, 
particularly those located in rural areas, have provided both inpatient 
acute and long-term care in the same facility. However, Medicaid 
regulations at 42 CFR 440.40 require that long-term care be provided in 
a separately identifiable ``distinct-part'' unit.
    Before the enactment of the Omnibus Budget Reconciliation Act of 
1980 (Public Law 96-499), small rural hospitals had difficulty in 
establishing separately identifiable units for Medicare and Medicaid 
long-term care because of limitations in their physical plant and 
accounting capabilities. These hospitals often had an excess of 
hospital beds, while their communities had a scarcity of long-term care 
beds in Medicare and Medicaid participating facilities. To alleviate 
this problem, Congress enacted section 904 of Public Law 96-499, known 
as the ``swing-bed provision,'' which authorized a cost-efficient means 
of providing nursing home care in rural communities. This provision 
added sections 1883 and 1913 of the Social Security Act (the Act), 
under which certain rural hospitals with fewer than 50 beds could use 
their inpatient facilities to furnish long-term care services to 
Medicare and Medicaid patients. These hospitals are thus permitted to 
vary the level of care they provide in response to changing patient 
needs by using the same bed to furnish hospital services at one time 
and SNF services at another.
    Hospitals with approved swing-bed programs that furnished long-term 
care services were paid at rates that were deemed appropriate for those 
services and were generally lower than hospital rates. Medicare payment 
for routine SNF services was made at the average Statewide Medicaid 
rate for the previous calendar year. Payment for ancillary services was 
made based on reasonable cost.
    On December 22, 1987, the Omnibus Budget Reconciliation Act of 1987 
(OBRA 1987) (Public Law 100-203) was enacted. Section 4005(b) of OBRA 
1987 amended section 1883(b)(1) of the Act to provide for an expansion 
of the existing Medicare swing-bed program to include rural hospitals 
with more than 49 but fewer than 100 beds, effective for swing-bed 
agreements entered into after March 31, 1988. Although rural hospitals 
having more than 49 beds but fewer than 100 beds can be swing-bed 
hospitals, they are subject to additional payment limitations that do 
not apply to the smaller swing-bed hospitals.
    Specifically, section 1883(d) of the Act states that Medicare 
payment for SNF services furnished by hospitals with more than 49 beds 
but fewer than 100 beds may not be made either for: (1) extended care 
services that are furnished to a swing-bed hospital SNF patient more 
than 5 days (excluding weekends and holidays) after a bed in a SNF 
becomes available in the geographic region, unless the patient's 
physician certifies within the 5-day period that the transfer of the 
patient is not medically appropriate; or (2) days of SNF care in a cost 
reporting period once Medicare covered days of SNF care exceed 15 
percent of the product of the number of days in the period and the 
average number of licensed beds in the hospital during that period. 
Payment will, however, continue to be made for patients who are 
receiving SNF care at the time the limit is reached.
    Also, sections 4201(a)(3), 4204, 4211(h)(9), and 4214 of OBRA 1987 
provide that effective with services furnished on or after October 1, 
1990, the terms ``skilled nursing facilities'' (SNFs) and 
``intermediate care facilities'' (ICFs) would no longer be used for the 
purpose of certifying a facility for the Medicaid program. Instead, 
they would be replaced by the term ``nursing facility'' (NF). Before 
that date, under the Medicaid program, a swing-bed hospital could 
furnish SNF-type, as well as ICF-type, services to non-Medicare 
patients. Now, the NF level of care encompasses services that were 
previously known as SNF-type and ICF-type services. Thus, for purposes 
of the Medicaid program, facilities are no longer certified as ICFs but 
instead are certified only as NFs, and can provide services as defined 
in section 1919(a)(1) of the Act. Effective October 1, 1990, these 
long-term care services furnished by swing-bed hospitals to Medicaid 
and

[[Page 17678]]

to other non-Medicare patients have been referred to as NF-type 
services.
    On November 5, 1990, the Omnibus Budget Reconciliation Act of 1990 
(OBRA 1990) (Public Law 101-508) was enacted. Section 4008(j) of OBRA 
1990 amended section 1883(a)(2)(B)(ii)(II) of the Act to provide for a 
new methodology to pay for routine SNF services provided in a swing-bed 
hospital. Effective for services furnished on or after October 1, 1990, 
Medicare payment for routine SNF services in a swing-bed hospital is 
based on the average rate per patient day paid by Medicare for routine 
services provided in freestanding SNFs in the region in which the 
hospital is located. The rates are calculated using the regions as 
defined in section 1886(d)(2)(D) of the Act.
    Section 4008(j)(2) of OBRA 1990 also provides for a ``hold 
harmless'' provision. Under this provision, if the reasonable cost of 
routine SNF services furnished by a hospital during a calendar year is 
less than the reasonable cost of these services determined for the 
prior calendar year, payment is to be based on the reasonable cost 
determination for the prior calendar year.

II. Provisions of This Proposed Rule

A. New Payment Rate Methodology

    In accordance with section 1883 of the Act, as amended by section 
4008(j) of OBRA 1990, this proposed rule would implement in regulations 
a revised methodology for Medicare payment of routine SNF services 
provided in a swing-bed hospital. Presently, under Sec. 413.114(c)(1), 
the reasonable cost of routine SNF services is based on the average 
Statewide rate per patient day paid under the State Medicaid plan for 
routine services furnished by SNFs in that State during the previous 
calendar year. Under this proposed rule, Medicare payment to a swing-
bed hospital for routine services would be based on the average rate 
per patient day paid by Medicare for routine SNF services provided in a 
freestanding SNF in the region in which the hospital is located. These 
rates would be determined prospectively based on the most current SNF 
settled cost reporting data available (increased in a compounded 
manner, using the increase applicable to the SNF routine cost limits, 
up to and including the calendar year for which the rates are in 
effect). Rates would be calculated using the regions as defined in 
section 1886(d)(2)(D) of the Act (that is, one of the nine census 
divisions established by the Bureau of the Census). Payment for 
ancillary services furnished as SNF services in swing-bed hospitals 
would continue to be paid on a reasonable cost basis.
    The rates applicable to calendar years 1990 through 1994, listed 
below, have been published in section 2231 of the Provider 
Reimbursement Manual (HCFA Pub. 15-1). We will continue to publish 
annual updates in that manual.
    Section B below describes the methodology for calculating the 
Medicare swing-bed rates. Tables A through E provide the Medicare 
swing-bed rates for services furnished on or after October 1, 1990, and 
before December 31, 1990, as well as for services furnished in calendar 
years 1991, 1992, 1993, 1994, and 1995. (These rates were applied 
beginning October 1, 1990. Implementation of the rates was accomplished 
by means of HCFA administrative issuances, as addressed above.) If 
there are additional changes in the methodology, these revisions would 
be published through notice and comment rulemaking in the Federal 
Register.
    In accordance with section 4008(j)(2) of OBRA 1990, this proposed 
rule also includes a hold harmless provision for Medicare swing-bed 
payments. As noted above, this provision would allow for payment of the 
higher of the payment rate in effect for the current calendar year or 
the payment rate received by the swing-bed hospital for the prior 
calendar year.

B. Development of Medicare Swing-Bed Rates Effective for Services 
Furnished on or after October 1, 1990 and before January 1, 1995

    1. Data--In developing the Medicare payment rates for swing-bed 
care, we use the actual freestanding SNF inpatient routine service 
payments obtained from settled Medicare cost reports. For fiscal years 
1990-1993, cost reports used were for periods ending on or after June 
30, 1989 and through May 31, 1990; for 1994, cost reports used were for 
periods ending on or after September 30, 1990 through August 31, 1991; 
and for 1995, cost reports used were for periods ending on or after 
October 31, 1992 through September 30, 1993. The data consist of 
routine service payments that were adjusted for utilization review, 
primary payor amounts, and application of lower of cost or charges. For 
proprietary providers, the return on equity portion of the swing-bed 
rate was adjusted to include only the routine portion (that is, the 
return on equity component related to ancillary services costs was 
removed).
    HCFA adjusts these data, using the SNF market basket index (the 
annual percent increase in SNF expenditures, considering inflation plus 
an allowance for new technology) to inflate costs from the cost 
reporting periods in the data base to the midpoint of the applicable 
year to which the rates apply.
    2. Group Means--HCFA calculated the means of adjusted routine 
service payments and the routine portion of return on equity for each 
census region as shown in Tables A through D.
    (We note that effective October 1, 1993, section 13503(c) of the 
Omnibus Budget Reconciliation Act of 1993 amended sections 
1861(v)(1)(B) and 1878(f)(2) of the Act to eliminate return on equity 
capital for SNF services furnished in a proprietary hospital. The 
return on equity capital component was not added to the routine payment 
rate for the months of October, November, and December of 1993 (Table 
D) nor for any subsequent years.)

 Table A.--Medicare Swing Bed Rates--For Services Furnished on or After 
              October 1, 1990 and Before December 31, 1990              
------------------------------------------------------------------------
                                                  Routine     Return on 
                    Region                        payment      equity 1 
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).......       $86.51        $1.42
2. Middle Atlantic (PA, NJ, NY)...............        86.39         1.27
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC,                          
 VA, WV)......................................        75.28         1.48
4. East North Central (IL, IN, MI, OH, WI)....        75.03         1.18
5. East South Central (AL, KY, MS, TN)........        65.79         1.21
6. West North Central (IA, KS, MN, MO, NB, ND,                          
 SD)..........................................        74.09        $1.34
7. West South Central (AR, LA, OK, TX)........        67.85         1.87
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)..        81.32         1.47

[[Page 17679]]

                                                                        
9. Pacific (AK, CA, HI, OR, WA)...............        86.73        1.07 
------------------------------------------------------------------------
1 The return of equity component is included only in the rate paid to   
  proprietary hospitals.                                                



 Table B.--Medicare Swing Bed Rates--For Services Furnished On or After 
              January 1, 1991 and Before December 31, 1991              
------------------------------------------------------------------------
                                                  Routine     Return on 
                    Region                        payment     equity \2\
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).......       $90.92        $1.42
2. Middle Atlantic (PA, NJ, NY)...............        90.73         1.27
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC,                          
 VA, WV)......................................        79.03         1.28
4. East North Central (IL, IN, MI, OH, WI)....        78.78         1.18
5. East South Central (AL, KY, MS, TN)........        69.14         1.21
6. West North Central (IA, KS, MN, MO, NB, ND,                          
 SD)..........................................        77.83         1.34
7. West South Central (AR, LA, OK, TX)........        71.22         1.87
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)..        85.34         1.47
9. Pacific (AK, CA, HI, OR, WA)...............        91.10        1.07 
------------------------------------------------------------------------
\2\ The return on equity component is included only in the rate paid to 
  proprietary hospitals.                                                


 Table C.--Medicare Swing Bed Rates--For Services Furnished On or After 
              January 1, 1992 and Before December 31, 1992              
------------------------------------------------------------------------
                                                  Routine     Return on 
                    Region                        payment     equity \3\
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).......       $95.10        $1.42
2. Middle Atlantic (PA, NJ, NY)...............        94.91         1.27
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC,                          
 VA, WV)......................................        82.67         1.48
4. East North Central (IL, IN, MI, OH, WI)....        82.40         1.18
5. East South Central (AL, KY, MS, TN)........        72.32         1.21
6. West North Central (IA, KS, MN, MO, NB, ND,                          
 SD)..........................................        81.41         1.34
7. West South Central (AR, LA, OK, TX)........        74.50         1.87
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)..        89.27         1.47
9. Pacific (AK, CA, HI, OR, WA)...............        95.29        1.07 
------------------------------------------------------------------------
3 The return on equity component is included only in the rate paid to   
  proprietary hospitals.                                                


 Table D.--Medicare Swing Bed Rates--For Services Furnished On or After 
              January 1, 1993 and Before December 31, 1993              
------------------------------------------------------------------------
                                                  Routine     Return on 
                    Region                        payment      equity 4 
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).......      $100.05        $1.42
2. Middle Atlantic (PA, NJ, NY)...............        99.84         1.27
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC,                          
 VA, WV)......................................        86.97         1.48
4. East North Central (IL, IN, MI, OH, WI)....        86.69         1.18
5. East South Central (AL, KY, MS, TN)........        76.08         1.21
6. West North Central (IA, KS, MN, MO, NB, ND,                          
 SD)..........................................        85.64         1.34
7. West South Central (AR, LA, OK, TX)........        78.37         1.87
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)..        93.91         1.47
9. Pacific (AK, CA, HI, OR, WA)...............       100.24        1.07 
------------------------------------------------------------------------
4 The return on equity component should be included in the rate paid to 
  proprietary hospitals only for the months of January through September
  of this calendar year.                                                


 Table E.--Medicare Swing Bed Rates--For Services Furnished On or After 
              January 1, 1994 and Before December 31, 1994              
------------------------------------------------------------------------
                                                                Routine 
                            Region                              payment 
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)......................    $108.48
2. Middle Atlantic (PA, NJ, NY)..............................     104.33
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).......      89.47
4. East North Central (IL, IN, MI, OH, WI)...................      88.76
5. East South Central (AL, KY, MS, TN).......................      79.44

[[Page 17680]]

                                                                        
6. West North Central (IA, KS, MN, MO, NB, ND, SD)...........      83.84
7. West South Central (AR, LA, OK, TX).......................      84.97
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY).................     100.11
9. Pacific (AK, CA, HI, OR, WA)..............................     104.58
------------------------------------------------------------------------



 Table F.--Medicare Swing Bed Rates--For Services Furnished On or After 
              January 1, 1995 and Before December 31, 1995              
------------------------------------------------------------------------
                                                                Routine 
                            Region                              payment 
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)......................    $121.71
2. Middle Atlantic (PA, NJ, NY)..............................     117.28
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).......     105.22
4. East North Central (IL, IN, MI, OH, WI)...................     105.73
5. East South Central (AL, KY, MS, TN).......................      94.61
6. West North Central (IA, KS, MN, MO, NB, ND, SD)...........      99.75
7. West South Central (AR, LA, OK, TX).......................      99.63
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY).................     117.21
9. Pacific (AK, CA, HI, OR, WA)..............................     125.80
------------------------------------------------------------------------

C. The Carve Out Method

    In a swing-bed hospital, acute care services and long-term care 
services are furnished interchangeably. To determine payment for 
inpatient hospital services in a swing-bed hospital, section 1883(e) of 
the Act provides that the costs attributable to routine long-term care 
(SNF-type and ICF-type) services for all classes of patients are to be 
subtracted (``carved out'') from the total allowable inpatient cost for 
general inpatient routine services. The resulting amount represents the 
general inpatient routine costs applicable to hospital routine care. 
Once amounts attributable to SNF-type and ICF-type services have been 
carved out, the average per diem cost of general routine hospital 
services for swing-bed hospitals not subject to the prospective payment 
system is then determined by dividing the remaining amount by the total 
number of inpatient general routine hospital days (excluding SNF days 
and ICF days). This method was chosen to avoid imposing a burdensome 
cost finding process to allocate general routine service costs between 
hospital and long-term care.
    Swing-bed hospitals subject to the prospective payment system (PPS) 
are paid for SNF-type services in the same manner as any other swing-
bed hospital. The carve out method would be used primarily to determine 
proper payment of pass-through costs. The prospective payment rates 
based on diagnosis related groups (DRGs) for inpatient hospital 
services under PPS are unaffected by the carve out method.
    As stated above, with the enactment of OBRA 1987, effective October 
1, 1990, the distinction between SNFs and ICFs was eliminated under the 
Medicaid program and the two types of facility were combined under the 
term ``nursing facility'' (NF). This presented a problem in attempting 
to determine the amount of the carve out. Since Medicaid payment is now 
determined based on a NF rate, the carve out method could not be used 
as previously defined.
    This proposed rule would revise Sec. 413.53(a)(2) to set forth our 
current policy regarding the carve out method (presently explained in 
section 2230.5B of the Provider Reimbursement Manual) for SNF and NF 
services furnished on or after October 1, 1990. Under the revised carve 
out method, the reasonable cost of hospital routine services would be 
determined by subtracting the reasonable costs attributable to routine 
SNF-type and NF-type services from total inpatient routine service 
costs. For swing-bed SNF days covered by Medicare, the amount 
subtracted, or carved out, would be based on the regional Medicare 
swing-bed SNF rate. If, under the hold harmless provision explained 
above, a swing-bed hospital is paid based on the swing-bed SNF rate 
that was in effect during the prior calendar year, that higher rate 
would also be used for purposes of calculating the reasonable cost of 
routine Medicare SNF days, to be subtracted from total routine costs 
under the carve out method. For all non-Medicare swing-bed days, the 
amount subtracted would be based on the average statewide rate paid for 
routine services in NFs under the State Medicaid plan during the prior 
calendar year, adjusted to approximate the average NF rate for the 
current calendar year. (The NF rate would be used for non-Medicare 
covered swing-bed days because such services may encompass services 
that were formerly known as ICF and SNF-type services.)

D. Definitions

    As discussed above, effective for services furnished on or after 
October 1, 1990, the terms SNFs and ICFs were no longer to be used for 
the purpose of certifying a facility for the Medicaid program, in 
accordance with the provisions of OBRA 1987. Instead, they were 
replaced by the term ``nursing facility'' (NF). Effective October 1, 
1990, extended care services furnished by swing-bed hospitals to 
Medicaid and to other non-Medicare patients have been referred to as 
NF-type services.
    To reflect the above provisions, we are making changes to the 
definitions in Sec. 413.53(b) by (1) revising the definition of 
``average cost per diem for general routine services''; (2) removing 
the definition of ``ICF-type services;'' (3) adding a definition of 
``nursing facility (NF)-type services;'' and (4) revising the 
definition of ``SNF-type services.''

III. Impact Statement

    For proposed rules such as this, we generally prepare a regulatory 
flexibility analysis that is consistent with the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601 through 612). For purposes of a RFA, States and 
individuals are not considered small entities. However,

[[Page 17681]]

providers are considered to be small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory flexibility analysis for any proposed rule that may have a 
significant impact on the operations of a substantial number of small 
rural hospitals. Such an analysis must conform to the provisions of 
section 604 of the RFA. With the exception of hospitals located in 
certain rural counties adjacent to urban ares, for purposes of section 
1102(b) of the Act, we define a small rural hospital as a hospital that 
is located outside of a Metropolitan Statistical Area and has fewer 
than 50 beds.
    In accordance with the provisions of section 1883 of the Act, as 
amended by section 4008(j) of OBRA 1990, this proposed rule would 
revise the regulations to incorporate a new methodology for payment of 
routine extended care services provided in a swing-bed hospital. As the 
statute specifies, we are proposing that Medicare payment for these 
services be determined based on the average rate per patient day paid 
by Medicare for these same services provided in freestanding skilled 
nursing facilities (SNFs) in the region in which the hospital is 
located, during the most recent year for which cost reporting data are 
available. This proposed rule would also provide that the reasonable 
cost for these services is the higher of the reasonable cost rates in 
effect for the current calendar year or for the previous calendar year.
    In addition to the changes mandated by section 4008(j) of OBRA 1990 
regarding payment for routine extended care services, we are proposing 
a change to the carve out method of determining routine inpatient 
hospital costs of swing-bed hospitals. As discussed above, with the 
enactment of OBRA 1987, the distinction between SNFs and ICFs was 
eliminated under the Medicaid program. Thus, the carve out method as 
described in Sec. 413.53(a)(2) for computing costs associated with 
routine SNF and ICF-type services cannot be used. This proposed rule 
would codify in regulations existing policy concerning the carve out 
method as set forth in section 2230.5B of the Provider Reimbursement 
Manual.
    As noted above, the major provisions of this proposed rule are 
required by section 1883 of the Act, as amended by section 4008(j) of 
OBRA 1990. Thus, a majority of the costs associated with these proposed 
regulations are the result of legislation, and this rule, in and of 
itself, has little or no independent effect or burden. Although we are 
unable to provide a quantifiable estimate of impact, we note that the 
only discretionary aspect of this rule is to set forth in regulations 
our current policy concerning the carve out method. Codifying this 
existing policy would have no economic impact.
    Thus, we have determined, and we certify, that this proposed rule 
would not have a significant impact on the operations of a substantial 
number of small entities or on small rural hospitals. Therefore, we 
have not prepared a regulatory flexibility analysis or an analysis of 
the effects of this rule on small rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was not reviewed by the Office of Management and Budget.

IV. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.).

V. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comment, we are not 
able to acknowledge or respond to them individually. We will consider 
all comments we receive by the date and time specified in the ``DATES'' 
section of this preamble, and, if we proceed with a subsequent 
document, we will respond to the comments in the preamble to that 
document.

List of Subjects in 42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Puerto Rico, 
Reporting and recordkeeping requirements.

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES

    1. The authority citation for part 413 continues to read as 
follows:

    Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social 
Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).

Subpart D--Apportionment

    2. Section 413.53 is amended by revising paragraph (a)(1)(ii)(C) 
and (a)(2); under paragraph (b), definition of ``average cost per diem 
for general routine services'', paragraph (2) is revised; the 
definition of ``ICF-type services'' is removed; a new definition of 
``nursing facility (NF) type services'' is added; and the definition of 
``SNF-type services'' is revised, to read as follows:


Sec. 413.53   Determination of cost of services to beneficiaries.

    (a) Principle. * * *
    (1) Departmental method * * *
    (ii) Exception: Indirect cost of private rooms. * * *
    (C) Effective October 1, 1990, do not include private rooms 
furnished for SNF-type and NF-type services under the swing-bed 
provision in the number of days in paragraphs (a)(1)(ii)(A) and (B) of 
this section.
    (2) Carve out method--(i) The carve out method is used to allocate 
hospital inpatient general routine service costs in a participating 
swing-bed hospital, as defined in Sec. 413.114(b). Under this method, 
effective for services furnished on or after October 1, 1990, the 
reasonable costs attributable to the inpatient routine SNF-type and NF-
type services furnished to all classes of patients are subtracted from 
total inpatient routine service costs before computing the average cost 
per diem for inpatient routine hospital care.
    (ii) The cost per diem attributable to the routine SNF-type 
services covered by Medicare is based on the regional Medicare swing-
bed SNF rate in effect for a given calendar year, as described in 
Sec. 413.114(c). The Medicare SNF rate applies only to days covered and 
paid as Medicare days. When Medicare coverage runs out, the Medicare 
rate no longer applies.
    (iii) The cost per diem attributable to all non-Medicare swing-bed 
days is based on the average statewide Medicaid NF rate for the prior 
calendar year, adjusted to approximate the average NF rate for the 
current calendar year.
    (iv) The sum of total Medicare SNF-type days multiplied by the cost 
per diem attributable to Medicare SNF-type services and the total NF-
type days multiplied by the cost per diem attributable to all non-
Medicare days is subtracted from total inpatient general routine 
service costs. The cost per diem for inpatient routine hospital care is 
computed based on the remaining inpatient routine service costs.
* * * * *
    (b) Definitions. * * *
    Average cost per diem for general routine services * * *
    (2) For swing-bed hospitals, the amount computed by--(i) 
Subtracting the routine costs associated with Medicare SNF-type days 
and non-Medicare NF-type days from the total

[[Page 17682]]

allowable inpatient cost for routine services (excluding the cost of 
services provided in intensive care units, coronary care units, and 
other intensive care type inpatient hospital units and nursery costs); 
and
    (ii) Dividing the remainder (excluding the total private room cost 
differential) by the total number of inpatient hospital days of care 
(excluding Medicare SNF-type days and non-Medicare NF-type days of 
care; days of care in intensive care units, coronary care units, and 
other intensive care type inpatient hospital units; and newborn days; 
but including total private room days).
* * * * *
    Nursing facility (NF)-type services, formerly known as ICF and SNF-
type services, are routine services furnished by a swing-bed hospital 
to Medicaid and other non-Medicare patients. Under the Medicaid 
program, effective October 1, 1990, facilities are no longer certified 
as SNFs or ICFs but instead are certified only as NFs and can provide 
services as defined in section 1919(a)(1) of the Act.
* * * * *
    Skilled nursing facility (SNF)-type services are routine services 
furnished by a swing-bed hospital that would constitute extended care 
services if furnished by an SNF. SNF-type services include routine SNF 
services furnished in the distinct part SNF of a hospital complex that 
is combined with the hospital general routine service area cost center 
under Sec. 413.24(d)(5). Effective October 1, 1990, only Medicare 
covered services are included in the definition of SNF-type services.
* * * * *

Subpart F--Specific Categories of Costs

    3. In Sec. 413.114, paragraphs (c)(1) and (2) are removed, 
paragraph (c)(3) is redesignated as paragraph (c)(2), and a new 
paragraph (c)(1) is added to read as follows:


Sec. 413.114   Payment for posthospital SNF care furnished by a swing-
bed hospital.

* * * * *
    (c) Principle. * * *
    (1) The reasonable cost of routine SNF services is based on the 
average Medicare rate per patient day for routine services provided in 
freestanding SNFs in the region where the swing-bed hospital is 
located. The rates are calculated using the regions as defined in 
section 1886(d)(2)(D) of the Social Security Act. The rates are based 
on the most recent year for which settled cost reporting period data 
are available, increased in a compounded manner, using the increase 
applicable to the SNF routine cost limits, up to and including the 
calendar year for which the rates are in effect. If the current 
Medicare swing-bed rate for routine extended care services furnished by 
a swing-bed hospital during a calendar year is less than the rate for 
the prior calendar year, payment is made based on the prior calendar 
year's rate.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance;) Catalog of Federal Domestic 
Assistance Program No. 93.778, Medical Assistance Program)

    Note: This document received at the Office of the Federal 
Register on April 11, 1996.

    Dated: September 29, 1995.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 96-9347 Filed 4-19-96; 8:45 am]
BILLING CODE 4120-01-P