[Federal Register Volume 63, Number 91 (Tuesday, May 12, 1998)]
[Rules and Regulations]
[Pages 26252-26316]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12208]
[[Page 26251]]
_______________________________________________________________________
Part II
Department of Health and Human Services
_______________________________________________________________________
Health Care Financing Administration
_______________________________________________________________________
42 CFR Parts 409, et al.
Medicare Program: Prospective Payment System and Consolidated Billing
for Skilled Nursing Facilities; Final Rule
Federal Register / Vol. 63, No. 91 / Tuesday, May 12, 1998 / Rules
and Regulations
[[Page 26252]]
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 409, 410, 411, 413, 424, 483, and 489
[HCFA-1913-IFC]
RIN 0938-AI47
Medicare Program; Prospective Payment System and Consolidated
Billing for Skilled Nursing Facilities
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Interim final rule with comment period.
-----------------------------------------------------------------------
SUMMARY: This interim final rule implements provisions in section 4432
of the Balanced Budget Act of 1997 related to Medicare payment for
skilled nursing facility services. These include the implementation of
a Medicare prospective payment system for skilled nursing facilities,
consolidated billing, and a number of related changes. The prospective
payment system described in this rule replaces the retrospective
reasonable cost-based system currently utilized by Medicare for payment
of skilled nursing facility services under Part A of the program.
DATES: These regulations are effective July 1, 1998.
Comments will be considered if we receive them at the appropriate
address, as provided below, no later than 5 p.m. on July 13, 1998.
ADDRESSES: Mail an original and 3 copies of written comments to the
following address:
Health Care Financing Administration, Department of Health and Human
Services, Attention: HCFA-1913-IFC, P.O. Box 26688, Baltimore, MD
21207-0488
If you prefer, you may deliver an original and 3 copies of your
written comments to one of the following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, D.C. 20201,
or
Room C5-09-26, 7500 Security Boulevard, Baltimore, Maryland 21244-1850.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code HCFA-1913-IFC. 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,
D.C., on Monday through Friday of each week from 8:30 a.m. to 5 p.m.
(phone: (202) 690-7890).
Copies: To order copies of the Federal Register containing this
document, send your request to: New Orders, Superintendent of
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This Federal Register document is also available from the Federal
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Area Information Server (WAIS) through the Internet and via
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the World Wide Web; the Superintendent of Documents home page address
is http://www.access.gpo.gov/su__docs/, by using local WAIS client
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password required). Dial-in users should use communications software
and modem to call (202) 512-1661; type swais, then login as guest (no
password required).
FOR FURTHER INFORMATION CONTACT:
Laurence Wilson, (410) 786-4603 (for general information). John Davis,
(410) 786-0008 (for information related to the Federal rates).
Dana Burley, (410) 786-4547 (for information related to the case-mix
classification methodology).
Steve Raitzyk, (410) 786-4599 (for information related to the facility-
specific transition payment rates).
Bill Ullman, (410) 786-5667 (for information related to consolidated
billing and related provisions).
SUPPLEMENTARY INFORMATION: 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 Skilled Nursing Facility Services
Under Part A of the Medicare Program
B. Requirement of the Balanced Budget Act of 1997 for a Prospective
Payment System for Skilled Nursing Facilities
C. Summary of the Development of the Medicare Prospective Payment
System for Skilled Nursing Facilities
D. Skilled Nursing Facility Prospective Payment System--General
Overview
1. Payment Provisions--Federal Rate
2. Payment Provisions--Transition Period
3. Payment Provisions--Facility-Specific Rate
4. Implementation of the Prospective Payment System (PPS)
E. Consolidated Billing for Skilled Nursing Facilities
II. Prospective Payment System for Skilled Nursing Facilities
A. Federal Payment Rates
1. Cost and Services Covered by the Federal Rates
2. Data Sources Utilized for the Development of the Federal
Rates
a. Cost Report Data
b. Estimate of Part B Payments
c. Hospital Wage Index
d. Case-Mix Indices
e. MEDPAR Case-Mix Analog
(1) Rehabilitation Category
(2) Non-Rehabilitation Categories
(3) Case-Mix Using the Analog
f. Skilled Nursing Facility Market Basket Index
3. Methodology Used for the Calculation of the Federal Rates
a. Per Diem Costs
b. Updating the Data
c. Standardization of Cost Data
d. Computation of National Standardized Payment Rates
B. Design and Methodology for Case-Mix Adjustment of Federal Rates
1. Background on the Resource Utilization Groups (RUGs) Patient
Classification System
2. The RUG-III Classification System
3. Use of RUG-III ``Grouper'' Software
4. Determining the Case-Mix Indices
5. Application of the RUG-III System
6. Use of the Resident Assessment Instrument--Minimum Data Set
(MDS 2.0)
7. Required Schedule for Completing the MDS
8. The Relationship Between Payment and the MDS
9. Assessments and the Transition to the Prospective Payment
System
a. Medicare Beneficiaries Receiving Part A Benefits Admitted
Within the Past 30 Days
b. Medicare Beneficiaries Receiving Part A Benefits Admitted
Over 30 Days Prior
c. Medicare Part A Beneficiaries With Less Than 14 Days of
Medicare Eligibility Remaining
10. Late Assessments
11. The Default Rate
[[Page 26253]]
12. Case-Mix Adjusted Federal Payment Rates
C. Wage Index Adjustment to Federal Rates
D. Updates to the Federal Rates
E. Relationship of RUG-III Classification System to Existing Skilled
Nursing Facility Level of Care Criteria
III. Three-Year Transition Period
A. Determination of Facility-Specific Per Diem Rates
1. Part A Cost Determination
a. Freestanding Skilled Nursing Facilities
(1) Skilled Nursing Facilities Without an Exception for Medical
and Paramedical Education (Sec. 413.30(f)(4)) or a New Provider
Exemption in the Base Year
(2) Skilled Nursing Facilities With an Exception for Medical and
Paramedical Education in the Base Year
(3) Skilled Nursing Facilities With New Provider Exemptions From
the Cost Limits in the Base Year
b. Hospital-Based Skilled Nursing Facilities
(1) Skilled Nursing Facilities Without an Exception for Medical
and Paramedical Education or a New Provider Exemption
(2) Skilled Nursing Facilities With an Exception for Medical and
Paramedical Education in the Base Year
(3) Skilled Nursing Facilities With Exemptions From the Cost
Limits in the Base Year
c. Medicare Low Volume Skilled Nursing Facilities Electing
Prospectively Determined Payment Rate (Fewer Than 1500 Medicare
Days)
(1) Providers Filing HCFA-2540-S-87
(2) Providers Filing HCFA-2540 or HCFA-2552
d. Providers Participating in the Multistate Nursing Home Case-
Mix and Quality Demonstration--Calculation of the Prospective
Payment System Rate
e. Base Period Cost Reports That Are Adjusted for Exception
Amounts or Other Post Settlement Adjustments
B. Determination of the Part B Estimate
C. Calculation of the Facility-Specific Per Diem Rate
D. Computation of the Skilled Nursing Facility Prospective Payment
System Rate During the Transition
IV. The Skilled Nursing Facility Market Basket Index
A. Rebasing and Revising of the Skilled Nursing Facility Market
Basket
1. Background
2. Rebasing and Revising of the Skilled Nursing Facility Market
Basket
B. Use of the Skilled Nursing Facility Market Basket Percentage
1. Facility-Specific Rate Update Factor
a. Short Period in Base Year
b. Short Period in Initial Period
c. Short Period Between Base Year and Initial Period
2. Federal Rate Update Factor
V. Consolidated Billing
A. Background of the Skilled Nursing Facility Consolidated Billing
Provision
B. Skilled Nursing Facility Consolidated Billing Legislation
1. Specific Provisions of the Legislation
2. Types of Services That Are Subject to the Provision
3. Facilities That Are Subject to the Provision
4. Skilled Nursing Facility ``Resident'' Status for Purposes of
This Provision
5. Effects of This Provision
C. Effective Date for Consolidated Billing
VI. Changes in the Regulations
VII. Response to Comments
VIII. Waiver of Proposed Rulemaking
IX. Regulatory Impact Statement
A. Background
B. Impact of This Interim Final Rule
1. Budgetary Impact
2. Impact on Providers and Suppliers
C. Rural Hospital Impact Statement
X. Collection of Information Requirements
Regulations Text
Appendix A--Technical Features of the 1992 Skilled Nursing Facility
Total Cost Market Basket Index
I. Synopsis of Structural Changes Adopted in the Revised and Rebased
1992 Skilled Nursing Facility Total Cost Market Basket
II. Methodology for Developing the Cost Category Weights
III. Price Proxies Used To Measure Cost Category Growth
In addition, because of the many terms to which we refer by
acronym in this rule, we are listing these acronyms and their
corresponding terms in alphabetical order below:
ADLs Activities of daily living
AHEs Average Hourly Earnings
BBA 1997 Balanced Budget Act of 1997
BEA [U.S.] Bureau of Economic Analysis
BLS [U.S.] Bureau of Labor Statistics
CAH Critical access hospital
CFR Code of Federal Regulations
CPI Consumer Price Index
CPI-U Consumer Price Index for All Urban Consumers
CPT [Physicians'] Current Procedural Terminology
ECI Employment Cost Index
FI Fiscal intermediary
HCFA Health Care Financing Administration
HCPCS HCFA Common Procedure Coding System
ICD-9-CM International Classification of Diseases, Ninth Edition,
Clinical Modification
MDS Minimum Data Set
MEDPAR Medicare provider analysis and review file
MSA Metropolitan Statistical Area
NECMA New England County Metropolitan Area
PCE Personal Care Expenditures
PPI Producer Price Index
PPS Prospective payment system
RAI Resident Assessment Instrument
RAPs Resident Assessment Protocol Guidelines
RUG Resource Utilization Group
SNF Skilled nursing facility
STM Staff time measure
I. Background
A. Current System for Payment of Skilled Nursing Facility Services
Under Part A of the Medicare Program
Under the present payment system, Medicare skilled nursing facility
(SNF) services are paid according to a retrospective, reasonable cost-
based system. Under Medicare payment principles set forth in section
1861 of the Social Security Act (the Act) and part 413 of the Code of
Federal Regulations (CFR), SNFs receive payment for three major
categories of costs: routine costs, ancillary costs, and capital-
related costs.
In general, routine costs are the costs of those services included
by the provider in a daily service charge. Routine service costs
include regular room, dietary, nursing services, minor medical
supplies, medical social services, psychiatric social services, and the
use of certain facilities and equipment for which a separate charge is
not made. Ancillary costs are costs for specialized services, such as
therapy, drugs, and laboratory services, that are directly identifiable
to individual patients. Capital-related costs include the costs of
land, building, equipment, and the interest incurred in financing the
acquisition of such items.
Under Medicare rules, the reasonable costs of ancillary services
and capital-related expenses are paid in full. Routine operating costs
are also paid on a reasonable cost basis, subject to per diem limits.
Sections 1861(v)(1) and 1888 of the Act authorize the Secretary to set
limits on the allowable routine costs incurred by an SNF.
In addition, section 1888(d) of the Act gives low Medicare volume
SNFs the option of receiving a single prospectively determined payment
rate for routine operating and capital-related costs in lieu of the
normal reasonable cost reimbursement method. A SNF may elect this
payment method only if it had fewer than 1,500 Medicare covered
inpatient days in its immediately preceding cost reporting period. An
SNF's prospective payment rate under section 1888(d) of the Act,
excluding capital-related costs, cannot exceed its routine service cost
limits. Under this payment method, ancillary costs are still a pass-
through cost.
B. Requirement of the Balanced Budget Act of 1997 for a Prospective
Payment System for Skilled Nursing Facilities
Section 4432(a) of the Balanced Budget Act of 1997 (BBA 1997)
(Public Law 105-33), enacted on August 5, 1997, amended section 1888 of
the Act by adding subsection (e). This
[[Page 26254]]
subsection requires implementation of a Medicare SNF prospective
payment system (PPS) for all SNFs for cost reporting periods beginning
on or after July 1, 1998. Under the PPS, SNFs will be paid under a PPS
applicable to all covered SNF services. These payment rates will
encompass all costs of furnishing covered skilled nursing services
(that is, routine, ancillary, and capital-related costs) other than
costs associated with operating approved educational activities.
Covered SNF services include posthospital SNF services for which
benefits are provided under Part A (the hospital insurance program) and
all items and services (other than services excluded by statute) for
which, prior to July 1, 1998, payment may be made under Part B (the
supplementary medical insurance program) and which are furnished to SNF
residents during a Part A covered stay.
Section 1888(e)(4) of the Act provides the basis for the
establishment of the per diem Federal payment rates applied under the
PPS. It sets forth the formula for establishing the rates as well as
the data on which they are based. In addition, this section requires
adjustments to such rates based on geographic variation and case-mix
and prescribes the methodology for updating the rates in future years.
Section 1888(e)(2) sets forth a requirement applicable to most
providers for a transition phase covering the first three cost
reporting periods under the PPS. During this transition phase, SNFs
will receive a payment rate comprised of a blend between the Federal
rate and a facility-specific rate based on historical costs. Section
1888(e)(3) prescribes the methodology for computing the facility-
specific rates.
In addition to the payment methodology, section 4432(a) of the BBA
1997 added several other provisions to the Act related to the
implementation and administration of the PPS.
Section 1888(e)(8) prohibits judicial or administrative review on
matters relating to the establishment of the Federal rates. This
includes the methodology used in the computation of the Federal rates,
the case-mix methodology, and the development and application of the
wage index. This limitation on judicial and administrative review also
extends to the establishment of the facility-specific rates, except the
determinations of reasonable cost in the fiscal year 1995 cost
reporting period used as the basis for these rates.
In addition, section 1888(e)(7) requires the application of the PPS
to extended care services furnished in hospital swing bed units.
However, this requirement is to be implemented no earlier than cost
reporting periods beginning on July 1, 1999 and no later than for cost
reporting periods beginning in the 12-month period starting on July 1,
2001. Accordingly, we are not revising the payment regulations for
swing-bed hospitals (42 CFR 413.114) at this time, but will do so at a
later date.
Finally, section 4432(c) of the BBA 1997 requires the Secretary to
establish a medical review process to examine the impact of the PPS,
consolidated billing, and other related changes set forth in this rule
on the quality of SNF services provided to Medicare beneficiaries. This
medical review process will place a particular emphasis on the quality
of non-routine covered ancillary and physician services.
C. Summary of the Development of the Medicare Prospective Payment
System for Skilled Nursing Facilities
The prospective payment system described in the following sections
is the culmination of substantial research efforts beginning as early
as the 1970s, focusing on the areas of nursing home payment and
quality. In addition, it is based on a foundation of knowledge and work
by a number of States that have developed and implemented similar
payment methodologies for their Medicaid nursing home payment systems.
Over the last 20 years, approximately 25 nursing home case-mix payment
systems have been implemented by such States as New York, Ohio, West
Virginia, and Texas.
Building on earlier research, the Health Care Financing
Administration (HCFA) funded the development of the Multistate Nursing
Home Case-Mix and Quality Demonstration in 1989. The purpose of this
project was to design, implement, and evaluate a Medicare nursing home
prospective payment and quality monitoring system across several
States. These States were Kansas, Maine, Mississippi, New York, South
Dakota, and Texas. The 3-year demonstration was implemented in 1995.
The current focus in the development of State and Federal payment
systems for nursing home care rests on explicit recognition of the
differences among residents, particularly in the utilization of
resources. Recognition of these differences ensures that payment levels
are adequate to support quality and access to care, especially for more
costly resource intensive patients. In a case-mix adjusted payment
system, the amount of payment given to the nursing home for care of a
resident is tied to the intensity of resource use (for example, hours
of nursing or therapy time needed per day) and/or other relevant
factors (for example, requirement for a ventilator). The focus of the
demonstration was on the development and testing of such a case-mix
PPS.
A case-mix system measures the intensity of care and services
required for each resident and then translates it into a payment level.
As discussed above, a number of States do have case-mix prospective
payment systems for their Medicaid nursing home benefits. However, most
of these payment systems were not readily transferrable to Medicare due
to the relative differences in the resident populations served by each
program. While naturally there is overlap, Medicare generally serves a
more postacute resident population while Medicaid generally serves a
longer-term custodial care population.
As a result of these differences, the development phase of the
Multistate demonstration was devoted to developing a case-mix
classification system appropriate for the Medicare population. The
demonstration, like the national PPS set forth in this rule, utilized
information from the Minimum Data Set (MDS) resident assessment
instrument to classify residents into resource utilization groups
(RUGs), which account for the relative resource use of different
patient types. This classification system and its relationship to the
MDS and the PPS are described in detail elsewhere in this rule.
D. Skilled Nursing Facility Prospective Payment--General Overview
As described above, the BBA 1997 requires implementation of a
Medicare SNF PPS for cost reporting periods beginning on or after July
1, 1998. Under the PPS, SNFs are no longer paid in accordance with the
present reasonable cost-based system but rather through per diem
prospective case-mix adjusted payment rates applicable to all covered
SNF services. These payment rates cover all the costs of furnishing
covered skilled nursing services (that is, routine, ancillary, and
capital-related costs) other than costs associated with operating
approved educational activities. Covered SNF services include
posthospital SNF services for which benefits are provided under Part A
and all items and services for which, prior to July 1, 1998, payment
had been made under Part B (other than physician and certain other
services specifically excluded under the BBA 1997) but furnished to SNF
residents during a Part A covered stay.
[[Page 26255]]
1. Payment Provisions--Federal Rate
The PPS utilizes per diem Federal payment rates based on mean SNF
costs in a base year updated for inflation to the first effective
period of the system. We develop the Federal payment rates using
allowable costs from hospital-based and freestanding SNF cost reports
for reporting periods beginning in fiscal year 1995. The data used in
developing the Federal rates also incorporate an estimate of the
amounts payable under Part B for covered SNF services furnished during
fiscal year 1995 to individuals who were residents of a facility and
receiving Part A covered services. In developing the rates, we update
costs to the first effective year of the PPS (15-month period beginning
July 1, 1998) using a SNF market basket index, and standardize for
facility differences in case-mix and for geographic variations in
wages. Providers that received ``new provider'' exemptions from the
routine cost limits are excluded from the data base used to compute the
Federal payment rates. In addition, costs related to payments for
exceptions to the routine cost limits are excluded from the data base
used to compute the Federal payment rates. In accordance with the
formula prescribed in the BBA 1997, we set the Federal rates at a level
equal to a weighted mean of freestanding costs plus 50 percent of the
difference between the freestanding mean and a weighted mean of all SNF
costs (hospital-based and freestanding) combined. We compute and apply
separately payment rates for facilities located in urban and rural
areas.
The Federal rate also incorporates adjustments to account for
facility case-mix using a resident classification system that accounts
for the relative resource utilization of different patient types. This
classification system, Version III of the Resource Utilization Groups
(RUGs-III), utilizes resident assessment data (from the Minimum Data
Set or MDS) completed by SNFs to assign residents into one of 44
groups. SNFs complete these assessments according to an assessment
schedule specifically designed for Medicare payment (that is, on the
5th, 14th, 30th, 60th, and 90th days after admission to the SNF). For
Medicare billing purposes, there are revenue codes associated with each
of the 44 RUG-III groups, and each assessment applies to specific days
within a resident's SNF stay. SNFs that fail to perform assessments
timely are paid a default payment for the days of a patient's care for
which they are not in compliance with this schedule. In addition, we
adjust the portion of the Federal rate attributable to wage-related
costs by a wage index.
For the initial period of the PPS, beginning on July 1, 1998 and
ending on September 30, 1999, the payment rates are contained in this
interim final rule. For each succeeding fiscal year, we will publish
the rates in the Federal Register before August 1 of the year preceding
the affected Federal fiscal year. For fiscal years 2000 through 2002,
we will increase the rates by a factor equal to the SNF market basket
index amount minus 1 percentage point. For subsequent fiscal years, we
will increase the rates by the applicable SNF market basket index
amount.
2. Payment Provisions--Transition Period
Beginning with a provider's first cost reporting period beginning
on or after July 1, 1998, there is a transition period covering three
cost reporting periods. During this transition phase, SNFs receive a
payment rate comprised of a blend between the Federal rate and a
facility-specific rate based on each facility's fiscal year 1995 cost
report. We exclude SNFs that received their first payment from Medicare
on or after October 1, 1995, from the transition period, and we make
payment according to the Federal rates only.
For SNFs that qualify for the transition, the composition of the
blended rate varies depending on the year of the transition. For the
first cost reporting period beginning on or after July 1, 1998, we make
payment based on 75 percent of the facility-specific rate and 25
percent of the Federal rate. In the next cost reporting period, the
rate consists of 50 percent of the facility-specific rate and 50
percent of the Federal rate. In the following cost reporting period,
the rate consists of 25 percent of the facility-specific rate and 75
percent of the Federal rate. For all subsequent cost reporting periods,
we base payment entirely on the Federal rate.
3. Payment Provisions--Facility-Specific Rate
We compute the facility-specific payment rate utilized for the
transition using the allowable costs of SNF services for cost reporting
periods beginning in fiscal year 1995 (cost reporting periods beginning
on or after October 1, 1994 and before October 1, 1995). Included in
the facility-specific per diem rate is an estimate of the amount
payable under Part B for covered SNF services furnished during fiscal
year 1995 to individuals who were residents of the facility and
receiving Part A covered services. In contrast to the Federal rates,
the facility-specific rate includes amounts paid to SNFs for exceptions
to the routine cost limits. In addition, we also take into account
``new provider'' exemptions from the routine cost limits but only to
the extent that routine costs do not exceed 150 percent of the routine
cost limit.
We update the facility-specific rate for each cost reporting period
after fiscal year 1995 to the first cost reporting period beginning on
or after July 1, 1998 (the initial period of the PPS) by a factor equal
to the SNF market basket percentage increase minus 1 percentage point.
For the fiscal years 1998 and 1999, we update this rate by a factor
equal to the SNF market basket index amount minus 1 percentage point,
and, for each subsequent year, we update it by the applicable SNF
market basket index amount.
4. Implementation of the Prospective Payment System (PPS)
As discussed above, the PPS is effective for cost reporting periods
beginning on or after July 1, 1998. This is in contrast to the
consolidated billing provision, which is effective for items and
services furnished on or after July 1, 1998. Accordingly, we will
require a number of SNFs to implement consolidated billing prior to
migrating to the PPS.
E. Consolidated Billing for Skilled Nursing Facilities
Section 4432(b) of the BBA 1997 sets forth a consolidated billing
requirement applicable to all SNFs providing Medicare services. SNF
Consolidated Billing is a comprehensive billing requirement (similar to
the one that has been in effect for inpatient hospital services for
well over a decade), under which the SNF itself is responsible for
billing Medicare for virtually all of the services that its residents
receive. As with hospital bundling, the SNF consolidated billing
requirement does not apply to the services of physicians and certain
other types of medical practitioners. In a related provision, section
4432(b)(3) of the BBA 1997 requires the use of fee schedules and
uniform coding specified by the Secretary for SNF Part B bills. These
provisions are effective for services furnished on or after July 1,
1998.
II. Prospective Payment System for Skilled Nursing Facilities
A. Federal Payment Rates
This interim final rule with comment period sets forth a schedule
of Federal prospective payment rates applicable to Medicare Part A SNF
services for cost
[[Page 26256]]
reporting periods beginning on or after July 1, 1998. This schedule
incorporates per diem Federal rates designed to provide payment for all
the costs of services furnished to a Medicare resident of an SNF. This
section describes the components of the Federal rates and the
methodology and data used to compute them.
1. Cost and Services Covered by the Federal Rates
The Federal rates apply to all costs (that is, routine, ancillary,
and capital-related costs) of covered skilled nursing services other
than costs associated with operating approved educational activities as
defined in 42 CFR 413.85. Under section 1888(e)(2) of the Act, covered
SNF services include posthospital SNF services for which benefits are
provided under Part A (the hospital insurance program) and all items
and services (other than services excluded by statute) for which, prior
to July 1, 1998, payment may be made under Part B (the supplementary
medical insurance program) and which are furnished to SNF residents
during a Part A covered stay. (These excluded service categories are
discussed in greater detail in section V.B.2., in the context of the
SNF Consolidated Billing provision.)
2. Data Sources Utilized for the Development of the Federal Rates
The methodology utilized by HCFA in developing the Federal rates
combines a number of data sources. These sources include cost report
data, claims data, case-mix indices, a wage index, and a market basket
inflation index. This section describes each of these data sources
while the following section describes the methodology that combines
them to produce the Federal rates.
a. Cost report data. In accordance with sections 1888(e)(3)(A)(i)
and (e)(4) of the Act, the primary data source for developing the cost
basis of the Federal rates was the cost reports for hospital-based and
freestanding SNFs for reporting periods beginning in fiscal year 1995
(that is, beginning on or after October 1, 1994 through September 30,
1995). Only those cost reports for periods of at least 10 months but
not more than 13 months were included in the data base. We excluded
shorter and longer periods on the basis that such data may not be
reflective of a normal cost reporting period and, therefore, may
distort the rate computation.
In accordance with section 1888(e)(4)(A) of the Act, providers that
were exempted from the limits in the base year under Sec. 413.30(e)(2)
were excluded from the data base to compute the Federal rates; in
addition, allowable costs related to exceptions payments were excluded.
Finally, costs related to approved educational activities were excluded
from the data base.
In calculating the Federal rates, we utilized fiscal year 1995 cost
report data, including both settled and as-submitted cost reports. In
accordance with section 1888(e)(4)(A) of the Act, adjustment factors
were applied separately to routine and ancillary costs from as-
submitted cost reports to make the data reflect the average adjustments
that would result from the cost report settlement process. Routine
costs were adjusted downward by 1.31 percent, and ancillary costs were
adjusted downward by 3.26 percent.
These adjustment factors were developed through comparisons of cost
data from as-submitted and settled cost reports for providers contained
in the data base from 1995. The factors represent the percent change of
cost elements used in the PPS rate setting methodology between
submission and settlement of the cost reports. These factors were
validated by examining the relationship between as-submitted and
settled cost reports for SNF cost reports beginning in the three
preceding Federal fiscal years (that is, 1992, 1993, and 1994) as well.
This comparison showed an overall consistency in the relationship
between as-submitted and settled cost reports for the SNF cost elements
utilized in the PPS rate development methodology.
b. Estimate of Part B payments. Section 1888(e)(4)(A)(ii) of the
Act, as added by the BBA 1997, requires that in developing the Federal
rates, the Secretary estimate the amounts that would be payable under
Part B for covered SNF services furnished to SNF residents.
Accordingly, it was necessary to examine the Part B allowable charges
(including coinsurance) associated with the SNFs contained in the cost
report data base. To estimate the Part B allowable charges, we matched
100 percent of the Medicare Part B SNF claims associated with Part A
covered SNF stays to the SNF cost reports described above. The matched
Part B allowable charges were incorporated at a facility level by the
appropriate cost report cost center (for example, laboratory services,
medical supplies) with the cost report data.
c. Hospital wage index. Section 1888(e)(4) requires that we both
standardize the Federal rates and provide for appropriate adjustments
to account for area wage differences ``using an appropriate wage index
as determined by the Secretary.'' We cannot use a wage index based on
SNF wage data because the industry-specific data necessary to compute a
wage index for SNFs are not yet available. However, under section 106
of the Social Security Act Amendments of 1994 (Public Law 103-432),
HCFA was required to begin collecting data no later than October 31,
1995, on employee compensation and paid hours of employment in SNFs for
the purpose of constructing an SNF wage index adjustment. Until this
data collection effort is completed and the data are analyzed, we
believe that the hospital wage data provide the best available measure
of comparable wages that would also be paid by SNFs. We believe that
the use of the hospital wage data results in an appropriate adjustment
to the labor portion of the costs based on an appropriate wage index as
required under section 1888(e) of the Act.
For the rates effective with this rule, we are using wage index
values that are based on hospital wage data from cost reporting periods
beginning in fiscal year 1994--the most recent hospital wage data in
effect before the effective date of this rule (see Table 2.I).
Accordingly, the wage index values used in this rule are based on the
same wage data as used to compute the FY 1998 wage index values for the
hospital PPS.
d. Case-mix indices. As discussed in section I, section 1888(e)(4)
of the Act requires us to make adjustments to the Federal rates to
account for the relative resource use of different patient types (that
is, case-mix). In addition, the law requires us to standardize the cost
data used in developing the Federal rates for case-mix.
The goal of a case-mix payment system is to measure the intensity
of care and services required for each patient and translate it into an
appropriate payment level. Accordingly, in making this adjustment, the
Federal rates will incorporate a patient classification system based on
intensity of resource use with corresponding payment weights.
As discussed previously, the patient classification system utilized
under this PPS is RUG-III. RUG-III, a 44-group patient classification
system, provides the basis for the case-mix payment indices used both
for standardization of the Federal rates and subsequently to establish
the case-mix adjustments to the rates for patients with different
service use. These indices reflect the weight or value of each of the
44 RUG-III groups relative to all the groups. A full discussion of the
design and structure of RUG-III is presented later in this section.
These payment indices are
[[Page 26257]]
based on staff time measure (STM) studies conducted in 1995 and 1997
that measured the nursing and therapy staff time required to care for
groups of residents. The STM is based on a 24-hour period for nursing
and therapy services. Accordingly, there are separate case-mix payment
indices for nursing and related services and for therapy services.
The STM studies were conducted in 12 States across 154 SNFs and
2,900 residents. These States were Kansas, Maine, Mississippi, South
Dakota, Texas, California, Colorado, Maryland, Florida, Ohio,
Washington, and New York. The study utilized a stratified sample of
SNFs, including both freestanding and hospital-based SNFs and those
with different care delivery models. The resulting indices were
adjusted to account for the relative salary differences between
different types of nursing staff (registered nurses, licensed practical
nurses, and aides) and the different therapy disciplines (occupational
therapy, physical therapy, and speech pathology). The adjustment to the
nursing index for relative salary differences in nursing staff was
based on data from the American Health Care Association's 1995 study of
national nursing home salaries. The adjustment to the therapy index for
relative salary differences among disciplines was based on data from
several different sources. These sources were surveys from the American
Health Care Association, the National Association for the Support of
Long-Term Care, the Bureau of Labor Statistics, the American
Rehabilitation Association, the University of Texas, Mutual of Omaha,
and the Maryland Health Cost Review Commission. They were used in
HCFA's ``best estimate'' approach in the development of rehabilitation
therapy salary equivalency guidelines. The schedule detailing the
national case-mix payment indices is presented later in this section
(see Tables 2.E and 2.F).
e. MEDPAR case-mix analog. Section 1888(e)(4)(C) requires that the
data used in developing the Federal payment rates be standardized to
remove the effects of geographic variation in case-mix. Standardization
ensures that the aggregate impact of the case-mix adjustments on the
Federal rates does not alter the aggregate payments that would occur in
the absence of such an adjustment. In order to fulfill this
requirement, it is necessary to have data on the average case-mix of
each SNF in our data base for its cost reporting period beginning in
fiscal year 1995. Because a national source of MDS derived case-mix
data does not exist for this period, it was necessary to utilize
existing data sources. Accordingly, to provide national case-mix data
on SNFs in our data base, we constructed a crosswalk between the RUG-
III categories and the data from all Medicare claims in our Medicare
Provider Analysis and Review file (MEDPAR).
The MEDPAR file is an analytical file created from Part A Medicare
hospital and SNF claims and maintained by HCFA. These claims are the
basis of the interim payments made by fiscal intermediaries and contain
information on SNF stays paid for by Medicare Part A nationwide.
Although Medicare claims information does not include all the data
elements necessary to classify SNF patients exactly as they are in RUG-
III, it does contain sufficient information to assign Medicare SNF
patients to RUG-III categories at a general level. Classification into
a RUG-III category is based on detailed clinical information from the
patient assessment performed in the SNF. The claims in the MEDPAR file
do not have the level of clinical detail required for classification
into the RUG-III categories but do have basic clinical information that
has been required on the claim for payment in the cost-based Medicare
payment system. By using the clinical information in the MEDPAR file to
crosswalk to the RUG-III grouping specifications, we were able to model
how the national Medicare SNF population will classify into RUG-III
categories. The model is referred to as the ``MEDPAR analog.'' The
value of the MEDPAR analog is that it provides a means to use available
data to examine the case-mix of Medicare SNF patients nationally.
In order to examine case-mix based on the MEDPAR file data, it was
necessary to recognize certain limitations of this file, identify where
crosswalks could be made between the data contained in the MEDPAR file
and that needed to assign an SNF patient to a RUG-III group, and
establish proxy criteria where feasible to make more case
classifications possible.
One limitation of the analog results from the Medicare coverage
rules for physical, occupational, and speech rehabilitation therapy
services. Rehabilitation therapy provided in the SNF is covered under
Part A (and thereby will have claims data in MEDPAR), unless the
services are provided by an independent agency, in which case they may
be billed under Part B (although our analysis of Part B supplier bills
indicated relatively few rehabilitation therapy services being billed
in this way). In addition, a small number of facilities do not detail
rehabilitation therapy charges in their claims. For these reasons, the
MEDPAR proxy may not be a complete record of all the services a patient
in the SNF may receive during the course of a beneficiary's stay.
In spite of these limitations, MEDPAR is a reasonable tool to use
in approximating the RUG-III categories related to Medicare SNF claims
and appropriate for use in rate standardization. The file contains ICD-
9-CM (International Classification of Diseases, Ninth Edition, Clinical
Modification) diagnosis and procedure codes that provide a partial
clinical profile of the patient supplemented by lengths of stay,
revenue codes that represent types of services provided during each
nursing home stay, and limited admission and discharge information. In
addition, some of the facilities report rehabilitation charge
information, making it possible for us to approximate frequency and
duration of rehabilitation therapies, as well as to directly reproduce
which discipline provided services.
The analog was first created in 1993, using the 1990 MEDPAR SNF
file and an earlier version of the Minimum Data Set (MDS), the MDS+. We
updated that work for the national implementation analyses, using
instead the 1997 MEDPAR SNF file and the MDS 2.0. As stated above, the
MDS 2.0 collects extensive patient information that includes
demographic information, diagnoses, medication use, nursing
rehabilitation services, activities of daily living (ADL) capabilities,
and minutes per day of rehabilitative services provided. This
information is the basis for assignment to a particular RUG-III group.
Thus, in the creation of the MEDPAR analog, MDS+ (and now, MDS 2.0)
definitions formed the key against which MEDPAR diagnosis and revenue
service codes were matched.
The RUG-III classification system is a hierarchy of major patient
types, organized into seven major categories. The categories are
Rehabilitation, Extensive Services, Special Care, Clinically Complex,
Impaired Cognition, Behavior Problems, and Reduced Physical Function.
Each of these categories is further differentiated to yield the 44
specific patient groups used for payment.
The categories and groups within them are based on the research
findings of staff time measurement studies performed in 1990, 1995, and
1997, described in detail below. Through analyses of the patient
characteristics recorded on the MDS and the staff time associated with
caring for patients in nursing homes, clinical criteria were identified
that were predictive of resource use, and categories were
[[Page 26258]]
formed that would group patients according to resource use. The
criteria for each category were derived from the actual staff time
measurement study data.
The information contained in the MEDPAR file is not adequate to
enable differentiation to the 44 groups, however. Therefore, the analog
classifies patients only to the category level.
There are seven RUG-III categories: Rehabilitation, Extensive
Services, Special Services, Clinically Complex, Impaired Cognition,
Behavior, and Physical. The Rehabilitation category has five sub-
categories, based on the number of minutes therapy is provided and the
number of disciplines providing service. The sub-categories are: Ultra
High, Very High, High, Medium, and Low. Using the crosswalk model, we
were able to classify the claims in the MEDPAR file into the five
rehabilitation therapy sub-categories and four of the remaining six
categories: Extensive Services, Special Services, Clinically Complex,
and Impaired Cognition. There were no available data elements in the
MEDPAR to crosswalk for classification into the Behavior or Physical
categories.
(1) Rehabilitation category. This is the most complex RUG-III
category to crosswalk using the MEDPAR data base. A patient classifies
into the Rehabilitation category based on the minutes per week of
rehabilitation therapy services received. We also considered whether
more than one of the rehabilitation disciplines provided services.
MEDPAR data do not include minutes of service, but do reflect types of
service provided. We, therefore, used charges as a proxy for minutes in
approximating the amounts of service each beneficiary received. Since
service patterns had to be approximated using ranges of rehabilitation
therapy charges, great attention was paid to developing decision rules
that would yield the most accurate description possible using Medicare
claims. In addition, there are five levels of intensity within the
Rehabilitation category. Using research study findings (Marsteller,
Jill A. and Korbin Liu, ``High End Therapy Patients: How Many and How
Much?'' Washington, DC, The Urban Institute, May 1994) and consultation
with rehabilitation professionals, upper and lower charge limits were
set to create groupings like each of the five RUG-III Rehabilitation
categories.
As previously mentioned, nursing home case-mix is not a direct
function of diagnosis. Diagnosis obviously has a role in determining
what services a patient receives, but it is the services themselves,
with the staff time required to provide them, that determine case-mix
in nursing homes. Thus, for the Rehabilitation categories, the RUG-III
system uses measures of staff time and service frequency, variety, and
duration to classify patients. The criteria are in the form of minimum
numbers of minutes of therapy per day or per week, minimum frequencies
of therapy sessions over a week, and minimum numbers of therapy
disciplines used per patient. While the MEDPAR analog can directly
reproduce the variety of therapy given, frequency and duration can only
be approximated using Part A covered charges for skilled therapy
thought to be commensurate with certain patterns of service.
The five Rehabilitation sub-categories for the MEDPAR analog were
determined using ranges of covered charges per day to approximate the
RUG-III criteria. The ranges of covered charges used to classify the
MEDPAR cases were based on an average charge of $300 per day for
rehabilitation services. This amount is based on the covered charges
for rehabilitation therapy in the MEDPAR file. To group cases using the
MEDPAR file, the following ranges of covered charges were used: the Low
Rehabilitation sub-category ranges from $150 per day and below in any
combination of types of skilled therapy; the Medium Rehabilitation sub-
category ranges from $150 to $199 per day in any combination of
therapies; the High Rehabilitation sub-category ranges from $200 to
$299 per day in any combination of therapies; the Very High
Rehabilitation sub-category ranges from $300 to $399 per day in any
combination of therapies (or $400 per day and above if only one
therapy); and the Ultra High Rehabilitation sub-category range
encompasses any case with covered charges higher than $400 per day in
at least two of the three therapies. Refer to Table 2.C for comparison
of these charge ranges to the number of minutes per day and per week
required by the RUG-III system.
We set a threshold at $1,000 of covered charges for rehabilitation
therapy services as a minimum for classification into any of the
rehabilitation sub-categories. We based this on our finding, based on
claims in the National Claims History file, that $400 is a common
charge for an initial evaluation and $250 is a common charge for
treatment by licensed therapists. Thus, we determined this threshold
amount as representative of patients who received an evaluation by a
professional rehabilitative therapist but no substantial course of
rehabilitative therapy. That is, claims for patients with total therapy
charges less than $1,000 were identified as having received an initial
evaluation to determine the need for therapy but generally received no
more than 1 week of rehabilitative therapy services.
Using the MEDPAR file, there was no way to approximate the nursing
rehabilitation component of the RUG-III Low Rehabilitation sub-
category. It was possible, however, to model rehabilitative therapy (of
less than 5 days per week) using therapy charges that parallel such a
pattern of treatment.
The Ultra High Rehabilitation sub-category is intended to apply
only to the most complex cases requiring rehabilitative therapy well
above the average amount of service time. This translates into higher
charges for therapy services, both because treatment is more frequent
and complex, and because length of stay is longer than for other
skilled rehabilitation groups. In line with the intended complexity of
this classification group, the lowest charge that the Ultra High sub-
category includes is $400 per day in at least two of the three
therapies.
The RUG-III criteria for Ultra High Rehabilitation are:
Two of the three rehabilitation therapy disciplines are
represented.
At least 720 minutes of treatment per week across the
three disciplines.
One discipline providing services at least 5 days per
week.
The remaining three sub-categories, Very High, High, and Medium
Rehabilitation are not driven by a specific number of disciplines
represented. All three require at least 5 days per week of skilled
rehabilitative therapy, but they are split according to weekly
treatment time. The Very High cases must be receiving 500 minutes per
week and must be receiving at least one of the disciplines all 5 days;
any additional disciplines will count toward the total time, but no
other disciplines are required for assignment to this sub-category.
Similarly, those in the High sub-category must be receiving a minimum
of 325 minutes per week and this time must include one of the
rehabilitation disciplines being provided daily (at least 5 days per
week). Cases in the Medium sub-category must be receiving at least 150
minutes of skilled rehabilitation in any combination of disciplines
over the minimum 5 days (or five 30-minute sessions).
(2) Non-rehabilitation categories. As stated above, MEDPAR contains
ICD-9-CM codes as the variables describing patient diagnoses and
procedures. This numerical coding system is used by hospitals to report
patient information,
[[Page 26259]]
and nursing homes use these codes on a more limited basis for
reporting. The MDS 2.0 has many of the most prevalent diagnoses found
in this patient population listed for check-off by the nurse performing
the assessment, with a section elsewhere on the form available to write
in any relevant additional ICD-9-CM codes. The analog for the non-
rehabilitation categories was created by matching the ICD-9-CM codes in
the MEDPAR file to as much of the specific clinical criteria on the MDS
2.0 used to classify residents into the Extensive Services, Special
Care, Clinically Complex, and Impaired Cognition categories.
Certain RUG-III criteria could not be satisfactorily coded by an
ICD-9-CM code. Although we could capture the clinical characteristics
of the patients, many of the items used to assign patients to specific
RUG-III groups are not included in the ICD-9-CM coding scheme. In the
Clinically Complex category, for example, the number of physician
visits or order changes is a qualifying factor that cannot be captured
by an ICD-9-CM code, and will not be reported in the MEDPAR file.
Similarly, we could not capture the patient's ADL capabilities.
For the lower categories, Impaired Cognition, Behavior Only, and
Physical Function Reduced, our ability to match the MDS 2.0 items to
those likely to be reported on the MEDPAR was greatly diminished. We
were able to identify a few codes with which to group some of the cases
that would fall into the Cognitively Impaired category, but there were
no ICD-9-CM codes that describe the patients who meet the criteria for
the remaining two categories. Therefore, the analog only groups
patients into the top five categories, leaving all other cases as
unclassified.
(3) Case-mix using the analog. As explained above, in the RUG-III
system, the case-mix index is a function of the distribution of
residents in each of the categories, further detailed across the ADL
index, and then by service counts, depression, or nursing
rehabilitation services. ADLs, nursing rehabilitation, depression, and
service counts could not be modeled using MEDPAR. For the analog, the
nursing and nursing/therapy weights could not be applied to the second
and third levels of the RUG-III system. In the Rehabilitation category,
weights for the five sub-categories were combined.
f. Skilled Nursing Facility market basket index. Section 1888(e)(4)
of the Act requires the Secretary to establish an 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. The SNF
market basket index is used to develop the Federal rates and also to
update the Federal rates on an annual basis beginning in fiscal year
2000. We have developed an SNF market basket index that consists of the
most commonly used cost categories for SNF routine services, ancillary
services, and capital-related expenses. A complete discussion
concerning the design and application of the SNF market basket index
and the factors used in developing the payment rates is presented in
section IV of this rule.
3. Methodology Used for the Calculation of the Federal Rates
The methodology used to compute the per diem standardized Federal
rates was a multi-step process combining each of the data sources
described above. This section details each of these steps. The schedule
of Federal rates (Tables 2.G and 2.H) that results from this
methodology is presented later in this section.
a. Per diem costs. In developing the per diem costs of SNFs, the
cost data (including the estimate of Part B costs) for each facility
are separated in components based on their relationship to the case-mix
indices described above. This facilitates both the standardization of
costs for case-mix and, similarly, the application of appropriate case-
mix adjustment to the Federal rates. Costs related to nursing
(excluding nurse management) and social services salaries (including
benefits) and total costs (after allocation) of non-therapy ancillary
services are grouped in the component related to the nursing index. Our
analysis of patient level charges for these non-therapy ancillary
services indicates a correlation between the RUG-III classification
system and these services.
Occupational, physical, and speech therapy costs (after allocation)
are grouped in the component related to the therapy index. The majority
of SNF therapy costs are included in this therapy component of the per
diem rate. As can be seen in the schedule of rates presented in Tables
2.E and 2.F, the therapy component of the per diem rates is only
applicable to the 14 RUG-III therapy groups. However, through our
analysis of Medicare claims and other data, we observed a low level of
therapy services being utilized by patients that would not be
classified into a RUG-III therapy group. These therapy services would
include evaluations for rehabilitation in one or more of the therapy
disciplines. Therefore, in order to provide more appropriate payment
levels in the non-therapy RUG-III groups, we estimated therapy costs in
our data base associated with non-therapy RUG-III groups. These costs
were grouped into the non-case-mix component of costs but, as can be
seen in the rate schedule, are only applicable to the non-therapy RUG
III groups.
This estimate was determined using the percentage of therapy
charges by discipline for each facility in our data base associated
with the non-therapy RUG-III RUG categories as determined by the MEDPAR
Analog. This percentage was applied by discipline to the therapy costs
in each facility's cost report data. The results of this calculation
are presented in Tables 2.A and 2.B. All other costs are grouped in the
non-case-mix related component.
For each facility in the data base, components are converted to a
per diem by dividing the costs by Medicare days. For the therapy
component, costs are divided by the number of Medicare days related to
patients receiving therapy. For the remaining components, costs are
divided by total Medicare days. For each component of cost, an outlier
elimination process is performed to eliminate aberrant values.
Facilities with per diem amounts greater than three standard deviations
from the geometric mean are determined to be outliers and are
eliminated from the calculation of the per diem cost for that
component.
As required by section 1888(e)(4)(E)(i) of the Act, all costs are
updated from the base year to the initial period of the PPS (that is,
the 15-month period beginning July 1, 1998 and ending September 30,
1999) using the SNF market basket index described in section IV of this
rule (see Tables 4.D. and 4.E). As required by the statute, this update
is determined using the annual SNF market basket percentage minus 1
percentage point.
b. Updating the data. The SNF market basket index is used to adjust
each per diem amount forward to reflect cost increases occurring
between the midpoint of the cost reporting period represented in the
data and the midpoint of the initial period (beginning July 1, 1998 and
ending September 30, 1999) to which the payment rates apply. In
accordance with section 1888(e)(4)(B) of the Act, the cost data are
updated for each year between the cost reporting period and the initial
period by a factor equivalent to the annual market basket index
percentage minus 1 percentage point.
c. Standardization of cost data. Section 1888(e)(4)(C) of the Act
requires that the Secretary standardize the updated cost data for each
facility for the effects of case-mix and geographic
[[Page 26260]]
differences in wage levels. In order to standardize for wage
differences, the proportion of labor related and non-labor related
components of SNF costs must be identified. These proportions are based
on the relative importance of the different components of the SNF
market basket index (see Table 4.C). Accordingly, the labor-related
portion of costs is 75.888 percent of costs while the non-labor portion
is 24.112 percent. Costs are standardized for geographic differences in
wage levels using the hospital wage index (described earlier in this
section).
To standardize the cost data for the effects of case-mix, we used
the MEDPAR Analog on claims data applicable to the fiscal year 1995
cost reporting periods in the data base. This allowed us to classify
each SNF's residents into one of 10 RUG-III categories produced by the
analog. By applying the case mix indices applicable to the RUG-III
categories assigned by the analog, we were able to develop average
case-mix index values (nursing and therapy) for each facility. As
described below, these index values were used in standardizing SNF
costs for case-mix.
As discussed earlier in this rule, a MEDPAR Analog is used to
standardize for case-mix because actual MDS data are not available on a
national level. However, in order to correct for systematic differences
between the case-mix estimates produced by the analog method and the
method that will be used under this PPS (that is, based on MDS data), a
sensitivity analysis of the analog was performed. This analysis
involved a comparison of case-mix values (based on the application of
the case-mix indices) generated by the analog and corresponding values
generated from actual MDS resident assessments for a sample of SNFs and
patients. While the availability of such comparative data is limited,
we were able to draw a sample from the States participating in the
Multistate Nursing Home Demonstration that included patients from
approximately 100 SNFs in five States. The sample contained 13,354
Medicare claims covering 139,766 days of care. On average, case-mix
values based on MDS data are 3 percent higher than analog-based values
for the nursing index and 28 percent higher for the therapy index. This
variance produced by the analog in the assignment of case-mix values is
factored into the standardization methodology to ensure the rates are
set at the appropriate level.
Each urban and rural component of per diem cost is standardized for
differences in wage levels and case-mix by dividing total
unstandardized cost by a standardization factor that reflects each
facility's wage level and case-mix. This factor is based in part on
each facility's wage adjustment (.7588 times its wage index plus .2412)
multiplied by the appropriate case-mix value and number of days of
care. These facility values are summed to obtain the standardization
factor. The standardized cost is divided by the appropriate total days
to obtain the standardized per diem cost.
This process equates per diem standardized cost (per diem cost
adjusted for individual facility wage and case-mix differences) to per
diem unstandardized cost. In this manner, standardization accounts for
the application of individual facility wage index and case-mix
adjustments to the per diem payment rates without altering the
aggregates of the per diem cost data used to construct the per diem
payment rates.
d. Computation of national standardized payment rates. Section
1888(e)(4)(D)(iii) of the Act authorizes the Secretary to compute
separate payment rates for SNFs in urban and rural areas as defined in
section 1886(d)(2)(D). Under the statute, urban areas are those defined
by the Office of Management and Budget as metropolitan statistical
areas (MSAs) or New England County Metropolitan Areas (NECMAs). All
other areas are considered rural areas. Table 2.I showing the wage
index indicates all areas considered urban for purposes of establishing
these rates.
Using the data described above and the formula prescribed in
section 1888(e)(4)(E) of the Act, we calculated the national average
per diem standardized payment rates separately for urban and rural SNFs
using the following steps. The unadjusted Federal rates resulting from
this calculation are presented in Tables 2.A and 2.B below.
(1) As required by section 1888(e)(4)(D)(ii) of the Act, for each
of the four components of cost, we computed the mean based on data from
freestanding SNFs only. This mean was weighted by the total number of
Medicare days of the facility.
(2) As required by section 1888(e)(4)(D)(i) of the Act, for each of
the four components of cost, we computed the mean based on data from
both hospital-based and freestanding SNFs. Again, this mean was
weighted by the total number of Medicare days of the facility.
(3) As required by section 1888(e)(4)(E)(i) of the Act, for each of
the four components of cost, we calculated arithmetic mean of the
amounts determined under steps (1) and (2) above.
(4) The unadjusted Federal rate for the initial period is
calculated differently depending on the RUG-III case-mix grouping. For
the 14 RUG-III therapy groups, the unadjusted Federal rate is the sum
of the nursing case-mix, non-case-mix and therapy case-mix components.
For other RUG-III groups, the unadjusted Federal rate is the sum of the
nursing case-mix, non-case-mix and therapy non-case-mix components.
Table 2.A.--Unadjusted Federal Rate Per Diem
[Urban]
----------------------------------------------------------------------------------------------------------------
Nursing-- Therapy-- Therapy--
Rate component case mix case mix non-case mix Non-case mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount......................................... $109.48 $82.67 $10.91 $55.88
----------------------------------------------------------------------------------------------------------------
Table 2.B.--Unadjusted Federal Rate Per Diem
[Rural]
----------------------------------------------------------------------------------------------------------------
Nursing-- Therapy-- Therapy--
Rate Component case mix case mix non-case mix Non-case mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount......................................... $104.88 $95.51 $11.66 $56.95
----------------------------------------------------------------------------------------------------------------
[[Page 26261]]
B. Design and Methodology for Case-Mix Adjustment of Federal Rates
As indicated earlier, section 1888(e)(4)(G) of the Act requires
that the Federal rates be adjusted for case-mix (the relative resource
utilization of patients). The RUG-III classification is a patient
classification system that accounts for the relative resource
utilization of different patient types. To adjust for case-mix, care
provided directly to, or for, a patient is represented by an index
score (case-mix index) that is based on the amount of staff time,
weighted by salary levels, associated with each group. That is, each
RUG-III group is assigned an index score that represents the amount of
nursing time and rehabilitation treatment time associated with caring
for the patients who qualify for the group. The nursing weight includes
both patient-specific time spent daily on behalf of each patient type
by registered nurses, licensed practical nurses, and aides, as well as
patient non-specific time spent by these staff members on other
necessary functions such as staff education, administrative duties, and
other tasks associated with maintenance of the care giving environment.
The case-mix indices are applied to the unadjusted rates presented
above resulting in 44 separate rates, each corresponding with one of
the 44 RUG-III classification groups. To determine the appropriate
payment rate, SNFs are required to classify patients into a RUG-III
group based on assessment data from the MDS 2.0. The design and
structure of RUG-III and the methodology and Federal policy associated
with the classification of patients into RUG-III groups, including the
completion of assessments (MDS 2.0) for Medicare patients, under this
PPS, are described in the following pages.
1. Background on the Resource Utilization Groups (RUGs) Patient
Classification System
As part of the Nursing Home Case-Mix and Quality demonstration
project, Version III of the Resource Utilization Groups (RUG-III) case-
mix classification system was developed to capture resource use of
nursing home patients and to provide an improved method of tracking the
quality of their care.
RUG-III is a 44-group model for classifying nursing home patients
into homogeneous groups according to the amount and type of resources
they use. The RUG-III groups are the basis for the payment indices used
to establish equitable prospective payment levels for patients with
different service use. Care provided directly to, or for, a patient is
represented by an index score that is based on the amount of staff
time, weighted by salary levels, associated with each group. That is,
each RUG-III group is assigned an index score that represents the
amount of nursing time and rehabilitation treatment time associated
with caring for the patients who qualify for the group. The nursing
weight includes both patient-specific time spent daily on behalf of
each patient type by registered nurses, licensed practical nurses, and
aides, as well as patient non-specific time spent by these staff
members on other necessary functions such as staff education,
administrative duties, and other tasks associated with maintenance of
the care giving environment.
The principal goal of case-mix measurement is to identify patient
characteristics associated with measured resource use. In nursing
homes, no adequate models have been found for using length of stay or
episode cost to explain resource use. Thus, the RUG-III nursing home
case-mix system explains patient resource use on a daily basis.
The classification system was designed using resident
characteristic information and measures of wage-weighted staff time.
Information regarding a patient's characteristics and care needs is
derived from the MDS, a set of core screening and assessment items and
item definitions. The MDS is part of a standardized, comprehensive
patient assessment instrument (the Resident Assessment Instrument or
RAI) that all long term care facilities that are certified to
participate in Medicare or Medicaid are required to use to develop
individualized plans of care for each individual in the facility. The
staff time measure (STM) study captured the amount of nursing staff
time required to care for groups of residents over a 24-hour period and
over the span of a week for therapy services.
Patient assessment and staff time data used to develop the initial
version of the RUG-III classification system were collected from March
to December 1990 for 7,648 patients in 202 nursing facilities in
Kansas, Maine, Mississippi, South Dakota, Nebraska, Texas, and New
York. Since then, two more staff time data collections have been
performed on 154 Medicare certified units of hospital and freestanding
facilities in 12 States (California, Colorado, Florida, Kansas, Maine,
Maryland, Mississippi, New York, Ohio, South Dakota, Texas, and
Washington). Only units that were judged to be providing adequate care
were considered for participation in the study. Of these, States were
asked to select facilities that included 35 percent Medicare certified
units, 25 percent hospital units, and two Alzheimer's units. ``Unit''
was defined as a nursing center such as a corridor or a floor,
controlled from one nursing station. The remainder of the sample was
selected by the State's demonstration project staff to represent the
characteristics of the State's nursing homes.
The sample was purposefully targeted toward residents needing
complex care and/or with cognitive impairments. This assured that
sufficient numbers of patients with rare types of complex care needs
were included in the sample. Facilities with special care units (for
example, Alzheimer's or Rehabilitation units) that participated in the
study were also asked to provide data from a non-specialized unit.
During the data collection, personnel on the study units
electronically recorded all of the time in their work days: time
providing services directly to patients; in activities related to
specific patients, such as charting or consultation with family members
or other members of the patient care team; as well as time that is not
attributable to any particular patient, like that spent in meetings, in
training, on breaks, etc. The time was allocated according to whether
or not it was directly related to a particular patient, and was
categorized as either patient specific time or non-patient specific
time.
Those data have been used to modify the classification system to
create the current RUG-III and establish updated average staff times to
be salary-weighted. Analyses of the staff time data in conjunction with
the patient MDS information identified three main predictors of a
patient's resource utilization: (1) clinical characteristics; (2)
limitations in the activities of daily living (ADLs); and (3) skilled
services received. The RUG-III classification system uses these three
types of variables to describe SNF patients for the purposes of
determining the relative cost of caring for different types of patients
(case-mix).
Analysis of the data indicated that patients with serious clinical
conditions such as dehydration and respiratory infections, as well as
patients who were very dependent in ADLs, require more nursing time
than patients without complicating conditions. The RUG-III
classification system resulting from the analyses is hierarchical. The
clinical characteristics of patients, as identified by the MDS, that
were associated with the greatest utilization of nursing time and
rehabilitative therapy time, were used to categorize patients into the
highest case-mix classification groups.
[[Page 26262]]
Similarly, the clinical characteristics associated with the lowest
utilization of nursing time were used to categorize patients into the
lowest case-mix classification group. Not all clinical characteristics
are recognized separately by the classification system. Only those
characteristics that were predictive of resource use and that would not
introduce incentives that are considered to be negative, or not
compatible with high quality patient care, are used to classify
patients into RUG-III groups.
Table 2.C shows the mutually exclusive, layered categories of the
RUG-III classification system. The table describes which patient
clinical characteristics, levels of assistance used in performing ADLs,
and services are used to assign the patient to a RUGs group. Clinical
characteristics include the patient diagnoses, conditions, and
comorbidities. ADLs include bed mobility, toilet use, transfer from bed
to chair, and eating. Patients receive a single RUG-III ADL score that
measures the patient's ability to perform these activities (scores
range from 4-18; higher scores represent greater functional dependence
and a need for more assistance). Finally, treatments and services
include respiratory therapy, amount of rehabilitation received, and
treatments such as suctioning and intravenous medication
administration.
Table 2.C.--Crosswalk of MDS 2.0 Items and RUG III Groups
----------------------------------------------------------------------------------------------------------------
Category ADL index End splits MDS RUG III codes
----------------------------------------------------------------------------------------------------------------
REHABILITATION
----------------------------------------------------------------------------------------------------------------
ULTRA HIGH............................ 16-18 Not Used................ RUC
Rx 720 minutes/week minimum........... 9-15 Not Used................ RUB
At least 2 disciplines, one at least 5 4-8 Not Used................ RUA
days/week.
VERY HIGH............................. 16-18 Not Used................ RVC
Rx 500 mins. a wk. minimum............ 9-15 Not Used................ RVB
At least 1 discipline--5 days......... 4-8 Not Used................ RVA
HIGH.................................. 13-18 Not Used................ RHC
Rx 325 mins. a wk. minimum............ 8-12 Not Used................ RHB
1 discipline 5 days a week............ 4-7 Not Used................ RHA
MEDIUM................................ 15-18 Not Used................ RMC
Rx 150 mins. a wk. minimum............ 8-14 Not Used................ RMB
5 days across 3 disciplines........... 4-7 Not Used................ RMA
LOW--Rx 45 minutes/week over at least 14-18 Not Used................ RLB
3 days.
Nursing rehabilitation 6 days/week, 2 4-13 Not Used................ RLA
activities.
EXTENSIVE SERVICES--(Adlsum <7
Special)
IV Feeding in last 7 days......... 7-18 count of other SE3
categories code.
In last 14 days, IV medications, 7-18 into plus IV............ SE2
suctioning.
Tracheostomy care, ventilator/ 7-18 Meds +Feed.............. SE1
respirator.
SPECIAL CARE--(ADLSUM <7 Clin.
Complex)
MS, Quad, or CP with ADLsum >=10, 17-18 Not Used................ SSC
Resp. Ther.=7 days.
Tube fed and aphasic; Radiation 15-16 Not Used................ SSB
tx; Rec'g tx for surgical wnds/
lesions or ulcers (2=sites, any
stg; 1 site stg 3 or 4).
Fever with Dehy., Pneu., Vomit., 7-14 Not Used................ SSA
Weight Loss, or Tube Fed. (Extensive <7 ADL)......
CLINICALLY COMPLEX--Burns, Coma, 17-18D Signs of depression..... CC2
Septicemia, Pneumonia, Footwnds,
Internal Bld, Dehyd, Tube fed
(minimum.
501 ml. fl, 26% cals), Oxygen, 17-18 ........................ CC1
Transfusions.
Hemiplegia with ADL sum >=10, 12-16D Signs of depression..... CB2
Chemotherapy, Dialysis.
No. of Days in last 14--Phys. Visits/ 12-16 ........................ CB1
makes order changes:.
visits>=1 and chng.>=4; or 4-11D Signs of depression..... CA2
visits>=2 and chng.>=2.
Diabetes with injection 7 days/wk and 4-11 (Special <7 ADL)........ CA1
order chng.>=2 days.
IMPAIRED COGNITION:
Score on MDS2.0 Cognitive......... 6-10 Nursing rehabilitation IB2
not receiving.
Performance Scale >=3............. 6-10 ........................ IB1
(Score of ``6'' will be Clin. 4-5 Nursing rehabilitation IA2
Comp. or PE2-PD1). not receiving. IA1
BEHAVIOR ONLY:
Code on MDS 2.0 items............. 6-10 Nursing rehabilitation BB2
not receiving.
4+ days a week.................... 6-10 ........................ BB1
wandering, physical or verbal 4-5 ........................ BB2
abuse.
inappropriate behavior or resists 4-5 ........................ BA1
care.
or hallucinations, or delusions... 4-5 ........................ BA1
PHYSICAL FUNCTION REDUCED:
No clinical variables used........ 16-18 Nursing rehabilitation PE2
16-18 not receiving. PE1
11-15
Nursing Rehab. Activities >=2, at 11-15 Nursing rehabilitation PD2
least 6 days a wk. not receiving. PD1
Passive or Active ROM, amputation 9-10 Nursing rehabilitation.. PC2
care, splint care.
Training in dressing or grooming, 9-10 not receiving........... PC1
eating or swallowing.
transfer, bed mobility or walking, 6-8 Nursing rehabilitation PB2
communication, scheduled 6-8 not receiving. PB1
toileting program or bladder 4-5 Nursing rehabilitation PA2
retraining. 4-5 not receiving. PA1
[[Page 26263]]
Default
----------------------------------------------------------------------------------------------------------------
Source: Analysis of the 1995 Medicare Units Staff Time.
Study: Update of RUG III Classification MDS.
2. The RUG-III Classification System
In the RUG-III classification system, patient characteristic and
health status information from the MDS, such as ``diagnoses,''
``ability to perform ADLs,'' and ``treatments received,'' will be used
to assign the patient to a resource group for payment. The RUG-III
system is a hierarchy of major patient types. RUG-III consists of seven
major categories that are the first level of patient classification.
The major categories, in hierarchical order, are Rehabilitation,
Extensive Services, Special Care, Clinically Complex, Impaired
Cognition, Behavior Problems, and Reduced Physical Function. These
major categories are further differentiated into 44 more specific
patient groupings. Except for Rehabilitation and Extensive Services,
these categories are first subdivided into groups based on the
patient's ADL score. The next level of subdivision is based on nursing
rehabilitation services and signs of depression.
The initial subdivision of the Rehabilitation category is based on
minutes per week of rehabilitative therapy services. The second level
of subdivision uses ADL score. The Extensive Services category does not
use ADL limitations except as a threshold for assignment into the
category. Rather, services that require more technical clinical
knowledge and skill are the variables used for assignment of patients
into this category. Examples of these services are intravenous feeding
or medications and tracheostomy care.
For example, the Special Care category includes patients with
quadriplegia, multiple sclerosis, surgical wound(s), open lesions,
fever with vomiting, dehydration, pneumonia, tube feedings, or weight
loss, those who are aphasic and need to be tube fed, those receiving
treatment for 2 or more skin ulcers, and patients who are receiving
radiation therapy. Any patient with one or more of these conditions,
who is not receiving rehabilitation services, will be assigned to this
category. The patient's assignment to one of the three groups within
this category is dependent on the patient's ADL score.
The Rehabilitation category is organized differently than the
clinical categories that follow in the hierarchy. Within this category,
there are five sub-categories (Ultra High, Very High, High, Medium, and
Low) that are then further split into the individual groups for
payment. The sub-categories are defined by minutes per week of
rehabilitation received by the patient, number of rehabilitation
disciplines providing service, and the number of days per week on which
rehabilitation services were provided. Assignment into a specific
payment group is based on the patient's ability to perform certain of
the activities of daily living as represented by his ADL score. As
stated elsewhere, the patient is assessed on his ability to perform
independently all of the activities of daily living and is assigned an
ADL sum score that represents performance of the four ``late loss''
ADLs. The ``late loss'' ADLs used in the MDS ADL sum score are: eating;
toileting; bed mobility; and transferring.
A brief description of the respective RUG-III categories follows.
Rehabilitation: This category includes patients who, if they were
not receiving rehabilitation therapy, would qualify for one of the
other RUG-III skilled care categories. This category is divided into
subcategories based on the number of minutes of rehabilitative services
received in a week, combinations of rehabilitation disciplines
providing services, receipt of nursing rehabilitative services, and the
patient ADL scores. The range of rehabilitation therapy minutes per day
represented in the Rehabilitation category varies from a low of 45
minutes per week to a high of more than 720 minutes per week. Patients
who qualify for assignment to the Ultra High Rehabilitation sub-
category receive at least 720 minutes per week of rehabilitation
therapies. At least two disciplines must be providing services: one of
the disciplines must provide services 5 days each week, and the other
must provide services at least 3 days each week. In contrast, patients
assigned to the lowest rehabilitation sub-category, Low Rehabilitation,
must receive at least 45 minutes of rehabilitative therapy services
across at least 3 days each week, in addition to 6 days per week of
nursing rehabilitation in two activities.
Extensive Services: To qualify for this category, patients must
have, in the past 14 days, received intravenous medications,
tracheostomy care, required a ventilator/respirator, required
suctioning, or must have, in the past 7 days, received intravenous
feeding. In addition, the patients assigned to this category will have
an ADL score that is at least 7.
Each patient in the extensive services category is assigned a score
of 0-5 based on five criteria. The score is used to classify the
patient to one of the three RUG-III groups in this category--0 or 1
will classify into the SE1 group, those with scores of 2 or 3 will go
to SE2, and those with 4 or 5 will group to SE3.
For the following five criteria, the patient receives one point for
each criterion that applies to him or her. The first three criteria are
presence of a clinical condition that qualifies the patient for
classification to the Special Care category, Clinically Complex
category, or the Cognitively Impaired category. The fourth and fifth
criteria are whether the patient is receiving intravenous feeding or
whether the patient is receiving intravenous medication.
For example, a person who qualifies for both the Cognitively
Impaired and Special Care categories will be assigned a score of 2 and
will be classified into the SE2 group. Similarly, a patient who is
ventilator dependent and requires suctioning will be assigned a score
of 0 and will be classified into SE1.
Special Care: Patients who are assigned to this category have at
least one of the following: multiple sclerosis, cerebral palsy,
quadriplegia with an ADL score of 10 or more, or receive respiratory
therapy 7 days per week; have, and receive treatment for, pressure or
stasis ulcers on 2 or more body sites; have a surgical wound(s) or open
lesions; be tube fed with at least 26 percent of daily calorie
requirements and at least 501 ml of fluid through the tube per day, and
aphasic; receive radiation therapy; or have a fever in combination with
dehydration, pneumonia, vomiting, weight loss, or tube feedings.
Clinically Complex: Patients qualify for this category if they are
comatose, have burns, septicemia, pneumonia, internal bleeding,
dehydration, dialysis, hemiplegia in combination with an ADL
[[Page 26264]]
score of 10 or more, receive chemotherapy, tube feedings that comprise
at least 26 percent of daily calorie requirements and at least 501 ml
of fluid through the tube per day, treatments for foot wounds, or
transfusions. Also included in this category are diabetics who receive
injections 7 days per week and who have two or more physician order
changes in the past 14 days as well as patients who have received
oxygen therapy in the past 14 days. In order to assure inclusion of
patients with unstable conditions, we also use a combination of
physician visits and order changes as qualifying criteria for this
category. This is a proxy measure for the amounts of skilled nursing
observation, care planning, and monitoring usually required by this
type of patient. The qualifying combinations of physician visit/order
changes that must occur within the 14-day observation period to qualify
for this category are: one or more visits with at least four order
changes, or two or more visits with two or more order changes.
Impaired Cognition: Patients in this category and the following two
categories frequently will not qualify for Medicare coverage although
some may, due to specific circumstances. The patients in this category
will have scores on the MDS 2.0 Cognition Performance Scale of 3, 4, or
5, and for two of the groups in this category will be receiving nursing
rehabilitation services 6 days per week. Some patients with Alzheimer's
disease or other types of dementia who have been acutely ill will
classify to this category for Medicare. Under the SNF coverage
guidelines, these patients could qualify based on the need for skilled
nursing rehabilitation.
Behavior Only: These are patients who, in 4 of the last 7 days,
exhibited behaviors that include resisting care, being combative, being
physically and/or verbally abusive, wandering, and who have
hallucinations or delusions.
Physical Function Reduced: The patients in this category are those
who do not have any of the conditions or characteristics identified
above. However, some have been documented as receiving ``skilled
nursing'' and have been covered by Medicare in the past. With proper
documentation and justification regarding the need for skilled care,
Medicare may continue to cover SNF services.
3. Use of RUG-III ``Grouper'' Software
As discussed at the beginning of this section, all data necessary
to classify a patient to one of the RUG-III categories is contained on
the MDS 2.0. Under this PPS, SNFs are required to use the MDS 2.0 as
the data source for classification of patients for case-mix. The
software programs that use the MDS 2.0 to assign patients to the
appropriate groups, called groupers, are available from many software
vendors. The version we use is available at no cost from our web site
at: http://www.hcfa.gov/medicare/ hsqb/mds20.
The logic used in the groupers is based on the hierarchical nature
of the RUG-III system. This means that the patient is first assigned to
the highest category for which the patient qualifies, and then, using
relevant additional criteria, as explained above (ADL score, nursing
rehabilitation, etc.), the patient is assigned to one of the groups
within that category.
The grouper assigns patients to the highest-weighted group rather
than to the highest group in the hierarchy. This is important because
there may be rare instances in which a case would qualify for a group
that, although higher in the hierarchy, has a lower payment index than
a group that is lower in the hierarchy.
4. Determining the Case-Mix Indices
Care provided directly to, or for, a patient is represented by an
index score that is based on the amount of staff time, weighted by
salary levels, associated with each group. That is, each RUG-III group
is assigned an index score that represents the amount of nursing time
and rehabilitation treatment time associated with caring for the
patients who qualify for the group. The nursing weight includes both
patient-specific time spent daily on behalf of each patient type by
registered nurses, licensed practical nurses, and aides, as well as
patient non-specific time spent by these staff members on other
necessary functions such as staff education, administrative duties, and
other tasks associated with maintenance of the care giving environment.
As explained above (in section II.B.1), measures of the staff time
required to care for nursing home patients were collected and used to
identify specific clinical characteristics that are predictive of
patient resource use. In order to do this, characteristics of the
patients in the STM study and the time it took to care for them were
combined and analyzed. In addition, the ratio of salaries for nursing
staff and rehabilitative therapy staff were computed in order to
calculate nursing and therapy weights for each RUG-III category. These
analyses were then used to identify the patient characteristics that
best explain weighted patient specific time. From this, the 44 groups
and an index for each was calculated. The basic calculation performed
for each group was to take the minutes spent providing patient care and
multiply them by the weight that represents the staff person's salary.
Thus, the registered nurse's minutes were multiplied by 1.41, whereas
those of the aide were multiplied by 0.59. The therapy weights include
physical therapist (1.32), occupational therapist (1.23), and speech
pathologist (1.16) time plus licensed physical therapy assistant
(0.87), licensed occupational therapy assistant (0.81), and therapy
aide (0.61) time, on a weekly basis. The nursing and therapy weights
are multiplied by the number of patients in each group to yield an
array of 44 nursing case-mix index scores and 5 therapy case-mix index
scores. These indices are shown later in this section (see Tables 2.E
and 2.F).
5. Application of the RUG-III System
Following are some illustrative case studies to illustrate how the
RUG-III classification system would compare patients with similar
descriptions but disparate classifications.
Example 1. Ms. A was recently hospitalized with a stroke. She has
several comorbidities that include cardiac dysrhythmia, hypertension,
and diabetes mellitus, and experienced a urinary tract infection within
the last 30 days. In addition, she has lost voluntary movement in her
left arm and leg, and has an unsteady gait, pain almost daily, and some
localized edema, but is continent when toileted at regular intervals.
She can see, hear, understand, and make herself understood. She tires
easily and carries out ADLs slowly. Her mood is frequently tearful, and
she expresses sadness about the loss of past life roles. She is
concerned about her health and views herself, and is viewed by staff,
as having potential for rehabilitation.
Her memory is good, although she does have some difficulty making
decisions in new situations. She is involved in the daily life of the
nursing home, interacts well with others, and is able to set her own
goals. She spends some time in her own room in self-initiated
activities.
Ms. A requires the assistance of one person to accomplish her
personal hygiene, dressing, toileting (RUG-III ADL index score=4), bed
mobility and transferring (ADL scores=4 each), and locomotion and
eating (ADL score=2). She uses pressure-relieving chair and bed pads
and receives special attention for her skin. She undergoes physical
therapy and occupational therapy for 1 hour each, 5 days per week. Ms.
A
[[Page 26265]]
receives daily restorative/rehabilitative follow-up nursing care and
skill training for eating, active and passive range of motion,
transferring, dressing, grooming, and locomotion, and participates in a
bowel and bladder retraining program. Discharge from the facility is
planned within the next 3 months.
As a stroke patient receiving two therapies five times a week, Ms.
A is classified in the Very High Rehabilitation category. She has an
ADL index score of 14 (4+4+4+2) and will therefore be classified into
the RVB group. In case-mix calculations, her case receives a nursing
weight of 1.04 and a therapy weight of 1.41.
Example 2, a non-rehabilitation patient. Ms. B has multiple
sclerosis. At the present time she is recovering from a bout of
pneumonia. She also had a urinary tract infection within the last 30
days. She has lost some voluntary movement in her extremities and
cannot balance herself well in a standing position. She is not bedfast,
however, and is in a wheelchair during the day. She has a history of
pressure sores, but none are present at this time. There is stiffness
in her hips, hands, feet, and shoulders. She complains of constipation
and is sometimes incontinent of the bladder. She is able to see, hear,
fully understand what is said, and is understood.
Her memory is good, and she is independent in her decision making.
Her mood, however, is tearful, and she expresses distress. She grieves
for her past life as a professional musician, and she is often
withdrawn and has been verbally abusive to her roommate during the past
week.
Ms. B uses extensive assistance with transferring (RUG-III ADL
index score=4), locomotion, and toileting (ADL score=4), and limited
assistance with bed mobility (ADL score=3), personal hygiene, and
dressing. As she has had a history of pressure sores, she uses bed and
chair pressure prevention pads and receives special skin care,
positioning, and turning regularly over the day. Her intake and output
are monitored, and the nursing staff provides passive and active range
of motion and skill training for transferring with a trapeze while
encouraging active range of motion where possible. She also began a
bowel and bladder retraining program last week. Any discharge plan for
Ms. B is uncertain at this time.
With multiple sclerosis and a high level of ADL dependency, Ms. B
is classified into the Special Care category. Her ADL score is at least
12 (4+3+4+1). Service counts and mental state are not used in the
Special Care category, so her depressed mood does not factor into her
assignment into a RUG group, although it influences her plan of care.
She will be classified to the SSA group in the Special Care category.
In RUG-III case-mix calculations, Ms. B is assigned a nursing weight of
1.01 and a therapy weight of 0 since she did not receive occupational,
physical, or speech therapy in the last 7 days. Note that these weights
are lower than those assigned to Ms. A in example 1, despite the
similarities in their clinical descriptions.
6. Use of the Resident Assessment Instrument--Minimum Data Set (MDS
2.0)
The requirements for patient assessment found at Sec. 483.20 apply
to all patients in a Medicare or Medicaid certified long term care
facility, regardless of the patient's age, diagnoses, length of stay,
or payer source. Certified facilities are required to use the RAI
specified by the State to assess patients. Each State's RAI consists of
HCFA's MDS at a minimum. The RUG-III classification system and,
subsequently, the Medicare SNF prospective payment, are based on the
Minimum Data Set (MDS). The MDS contains a core set of screening,
clinical, and functional status elements, including common definitions
and coding categories, that form the basis of a comprehensive
assessment.
In order to receive Medicare payment under PPS, in addition to
completion of the uniform MDS as set forth at Sec. 483.20, the facility
will be required to complete two additional sections of the MDS:
Sections T and U. Section U is currently an optional section of the MDS
used to collect information on medication. However, completion of this
section is required for States participating in HCFA's Nursing Home
Case-Mix and Quality (NHCMQ) demonstration and several other States as
well. Although collection of medication information on Section U will
be required for Medicare patients under this PPS, we will not require
completion and transmission of this information until October 1, 1999.
In the interim, we will examine the potential for refining Section U in
a way that would streamline data collection, reduce opportunities for
error, and thereby maximize the accuracy and usefulness of the data.
Section T provides information on special treatments and therapies
not reported elsewhere in the patient assessment. In section T, the
facility must record the rehabilitative therapy services (physical
therapy, occupational therapy, and speech therapy) that have been
ordered and are scheduled to occur during the early days of the
patient's SNF stay. As rehabilitation services often are not initiated
until after the first MDS assessment's observation period ends, we
believe that allowing the patient time for transition is appropriate.
Section T provides an overall picture of the amount of rehabilitation
that a patient will likely receive through the 15th day from admission.
This information on the MDS will make possible an accurate
classification of the patient for whom rehabilitation is planned into
the appropriate RUG-III group. SNFs must complete this section for
services furnished on or after July 1, 1998.
Section T also provides information needed to evaluate a patient's
response to therapy. For example, by assessing a patient's ability to
walk at his most self-sufficient level, small increments of improvement
can be measured. This level of detail is not contained in other areas
of the MDS in contrast with the information recorded elsewhere in the
MDS, regarding the patient's walking ability most of the time.
Assessment of the patient's ``most self sufficient'' can be used to
evaluate the effectiveness of physical therapy and nursing
rehabilitation, the continued need for therapy and nursing
rehabilitation, and maintenance of walking ability immediately after
therapy is discontinued.
7. Required Schedule for Completing the MDS
Under section 1888(e)(6) of the Act, SNFs must ``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.'' We are requiring that SNFs
perform patient assessments by the 5th day (although there is a grace
period that allows performance by the 8th day) of the SNF stay, again
by the 14th day, by the 30th day, and every 30 days thereafter as long
as the patient is in a Medicare Part A stay. A full MDS must be
submitted by facilities at each of these timeframes during a patient's
Medicare Part A stay. Each Medicare patient is classified in a RUG-III
group for each assessment period for which he is in a Part A SNF stay.
The group to which the patient classifies is based on the information
about his clinical resource needs as recorded on the MDS assessment.
Facilities will send each patient's MDS assessments to the State
and claims for Medicare payment to the fiscal intermediary on a 30-day
cycle.
[[Page 26266]]
Payment will be made according to the RUG-III group(s) recorded on the
claim sent to the fiscal intermediary. For the first 30 days in an SNF,
a Medicare patient will be assessed three times (at 5 days, 14 days,
and 30 days) and perhaps more often, if the patient's needs change
requiring additional MDS assessments and care plan modifications. Any
of the assessments performed may result in a RUG-III classification
change.
Each patient is to be assessed using full or comprehensive
assessments according to the stated schedule. The State's RAI
constitutes a ``comprehensive'' assessment, which is required at
various timeframes according to Federal regulations found at
Sec. 483.20. In the following schedule, ``full'' assessment refers to
completion of the entire MDS, and ``comprehensive'' refers to
completion of the Resident Assessment Protocols (RAPs) in addition to
the entire MDS. The SNF provider should adhere to the following
assessment schedule for newly admitted and readmitted beneficiaries
whose stays are expected to be covered by Medicare during the first 30
days of admission/readmission to the SNF.
Day 0 Represents the period prior to admission
Day 1 Patient admission day and notification of ``Non-coverage''
Day 5 Last day for Assessment Reference Date for the Medicare 5 Day
Assessment
Day 14 Last day for Assessment Reference Date for the Medicare 14
day Assessment (In accordance with Federal requirements at
Sec. 483.20, RAPS must be completed with the 5 day or the 14 day
assessment)
Day 29 Last day for Assessment Reference Date for the Medicare 30
day assessment (RAPs not required for Medicare unless a Significant
Change in Status has occurred)
Day 59 Last day for Assessment Reference Date for the Medicare 60
day assessment (RAPs not required for Medicare unless a Significant
Change in Status has occurred)
Day 89 Last day for Assessment Reference Date for Medicare 90 day
assessment (RAPs not required for Medicare unless a Significant
Change in Status has occurred)
Day 100 Last possible day of Medicare coverage. Staff should return
to the State-required MDS assessment schedule.
This schedule applies to Medicare beneficiaries during Part A Medicare
nursing home stays.
Note that historically, instructions for completing the RAI, as in
the Long Term Care Resident Assessment Instrument User's Manual, state
that ``when calculating when the Resident Assessment Instrument (RAI)
is due, the day of admission is counted as day zero.'' Counting the day
of admission as day zero has allowed the maximum flexibility in terms
of time to complete the RAI. For case-mix reimbursement purposes,
however, States that participated in HCFA's Nursing Home Case-Mix and
Quality Demonstration (NHCMQ) project have required that the day of
admission be counted as day one. The use of the day of admission as day
one is continued under the PPS rules for reimbursement scheduling. In
support of this scheduling, in the future, HCFA will provide
instructions for RAI completion counting the day of admission as day
one.
In order to be in compliance with the requirements of Medicare and
Medicaid certification, facilities must complete an Initial Admission
assessment, including RAPs, within 14 days of a patient's admission to
the facility. Within approximately the same time, the requirements for
PPS specify that facilities must complete two assessments for each
patient in a Medicare-covered Part A stay. These include a Medicare 5-
day and a Medicare 14-day assessment. According to the rules for PPS,
the RAPs must be completed with either the 5-day or the 14-day
assessment, and the facility may choose with which of these assessments
to complete the RAPs.
In order to minimize burden on facility staff, in some instances,
the same assessment that is completed and electronically submitted to
the State to meet the clinical requirements at Sec. 483.20 may also be
used to meet the PPS requirements. For example, the facility may use
either the Medicare 5-day or the Medicare 14-day assessment (whichever
one included the RAPs) to meet both the requirements for PPS, as well
as the clinical requirements for completing and transmitting an Initial
Admission assessment. In this case, the ``Reason for Assessment'' item
on the MDS would be coded both as an Initial Admission assessment and
as a Medicare 5-day or 14-day assessment. There is no grace period for
the Initial Admission assessment to correspond with the grace period
that the PPS rules allow for the Medicare 14-day assessment. Therefore,
if a facility is using the Medicare 14-day assessment to also meet the
requirement for the Initial Admission assessment, the assessment must
be completed by day 14, and the grace period does not apply.
In order to be in compliance with the requirements for Medicare and
Medicaid certification, facilities must perform the HCFA Standard
Quarterly Review assessment for each resident in the facility at least
every 92 days. The requirements for PPS specify that a Medicare 90-day
assessment be completed for each patient whose stay is still covered
under Medicare. To minimize burden on facility staff, the Medicare 90-
day assessment that is completed to meet PPS requirements may also be
used to meet the clinical requirements at Sec. 483.20 for completion of
a Quarterly Review assessment. In this case, the ``Reason for
Assessment'' item on the assessment would be coded both as a
``Quarterly Review'' assessment, and as a Medicare 90-day assessment.
Although the PPS rules allow a 5-day grace period in completing the
Medicare 90-day assessment, the Quarterly Review assessment must be
completed within 92 days of completion of the last assessment.
Therefore, if a facility is using the Medicare 90-day assessment to
also meet the requirement for the Quarterly Review assessment, the
assessment must be completed within 92 days of completion of the prior
assessment, and only 2 days of the 5-day grace period could apply.
Facilities must also adhere to Federal regulations that require a
comprehensive reassessment if the patient experiences a significant
change in status. A significant change is a major change in a patient's
status that is not self-limiting, affects more than one area of his
health status, and requires interdisciplinary review. Accordingly, a
patient must be reassessed whenever significant improvement or decline
is consistently noted by facility staff. The current guidelines for
determining a significant change in the patient's status are listed in
the Long Term Care Resident Assessment Instrument User's Manual. These
include, for example, a change in the patient's decision-making
abilities from 0 or 1 to 2 or 3 on item B4 of the MDS 2.0. As a
complement to these standard guidelines, we are requiring under PPS,
that a comprehensive assessment be performed when a patient's
rehabilitation service is discontinued unless the patient is physically
discharged from the facility. For those rare instances in which a
Significant Change in Status assessment is not clinically warranted,
but rehabilitative services are discontinued, we are requiring a
comprehensive assessment to be coded as ``Other Medicare Required
Assessment.''
The assessment reference date for this assessment may be no earlier
than 8 days after the conclusion of all rehabilitative therapies and no
later than 10 days after the conclusion of such services. If the
patient expires or is discharged from the facility, no
[[Page 26267]]
assessment is required. This assessment will result in a new case-mix
classification for the patient and a new rate of payment. The new
classification and payment rate will be effective as of the assessment
reference date of this comprehensive assessment. If the resulting new
classification is below those groups deemed covered by Medicare in the
RUG-III hierarchy and the patient would not be covered by the existing
administrative criteria for making SNF level of care determinations, a
``continued stay'' denial notice should be issued.
A Significant Change in Status assessment or Other Medicare
Required Assessment that falls during the assessment window of a
Medicare mandated assessment may take the place of one of the regularly
scheduled assessments. If the assessment reference date of an Other
Medicare Required Assessment or a Significant Change in Status
assessment coincides with the range of days allowable for use as the
assessment reference date for a regularly scheduled Medicare
assessment, a single assessment may be coded as both a Significant
Change in Status or Other Medicare Required Assessment and as a
regularly scheduled Medicare assessment. For example, a Significant
Change in Status assessment completed on day 28 of the patient's
nursing home stay would replace the 30-day scheduled assessment.
However, a significant change that occurs on day 40 would not replace
any scheduled assessment. Table 2.D below presents the schedule for MDS
completion related to days covered and payment.
Table 2.D.--Medicare Assessment Schedule
----------------------------------------------------------------------------------------------------------------
Number of days
Reason for Assessment reference authorized for Applicable medicare
Medicare MDS assessment type assessment date coverage and payment days
(AA8b code) payment
----------------------------------------------------------------------------------------------------------------
5 day.......................... 1 Days 1-8*.............. 14 1 through 14.
14 day......................... 7 Days 11-14**........... 16 15 through 30.
30 day......................... 2 Days 21-29............. 30 31 through 60.
60 day......................... 3 Days 50-59............. 30 61 through 90.
90 day......................... 4 Days 80-89............. 10 91 through 100.
----------------------------------------------------------------------------------------------------------------
* If a patient expires or transfers to another facility before day 8, the facility will still need to prepare an
MDS as completely as possible for the RUG-III classification and Medicare payment purposes. Otherwise the days
will be paid at the default rate.
**-RAPs follow Federal rules; RAPs must be performed with either the 5-day or 14-day assessment.
SNFs must submit the RAPs with either the 5-day or 14-day
assessment. As noted above, RAPs must be completed as part of any
Significant Change in Status assessments and Other Medicare Required
Assessments that are appropriate. SNFs should consult the current
version of the Long Term Care Resident Assessment Instrument User's
Manual for more specific information regarding the RAPs.
The first MDS assessment for Medicare eligible beneficiaries should
be completed by day 5 of the patient's SNF stay. The admission day
counts as day 1. The Assessment Reference Date for the 5-day assessment
may be any day between days 1 and 5 (although there is a 3-day grace
period to day 8).
As stated in the note following Table 2.D, if a patient expires or
transfers to another facility before day 8, the facility will still
need to prepare an MDS as completely as possible for RUG-III
classification and Medicare payment purposes. Otherwise, the days will
be paid at the default group rate.
Subsequent to the 5-day assessment, the SNF must complete
assessments for each coverage period in accordance with the Medicare
assessment schedule. The staff must use the time periods as specified
in the current Long Term Care Resident Assessment Instrument User's
Manual and must include the assessment reference date/last day of the
observation period to judge the patient's condition except for the
change items found at the end of particular MDS sections. The change
items in Sections B, C, E, G, and H are assessed by referring back to
the reference day of the last MDS completed.
The nurse coordinating the care of a Medicare Part A covered
patient has considerable leeway in determining the reference date for
all assessments after the initial MDS. This should be helpful in making
the assessment schedule required for Medicare coincide with Significant
Change in Status, and Other Medicare Required Assessments that may be
necessary, or in avoiding scheduling or service delivery problems
during holiday periods. The following is an example: Ms. Smith was
admitted on March 21, 1997. The assessment reference date for Ms.
Smith's 14-day assessment was April 2, 1997. The nurse coordinator has
selected April 16, 1997 as the assessment reference date for her 30-day
assessment. In this case, the instructions for the change items should
be interpreted as the period between the assessment reference date of
April 2, 1997 (the 14-day assessment) and the assessment reference date
of April 16, 1997 (the 30-day assessment).
8. The Relationship Between Payment and the MDS
As explained above, each Medicare patient is classified in a RUG-
III group for each assessment period for which he is in a Part A SNF
stay. The group to which the patient classifies is based on the
information about his clinical resource needs as recorded on the MDS
assessment.
Facilities will send each patient's MDS assessments to the State
and claims for Medicare payment to the fiscal intermediary on a 30-day
cycle. Payment will be made according to the RUG-III group(s) recorded
on the claim sent to the fiscal intermediary. For the first 30 days in
an SNF, a Medicare patient will be assessed three times (at 5 days, 14
days, and 30 days) and perhaps more often, if the patient's needs
change requiring additional MDS assessments and care plan
modifications. Any of the assessments performed may result in a RUG-III
classification change.
For example, a facility may have a patient whose first (5-day) MDS
results in assignment to a Special Care group, but whose second
assessment (14-day) indicates an assignment to a High Rehabilitation
group. The facility must record these groups on its claim and will
receive payment at the Special Care group rate for 14 days and then at
the High Rehabilitation group rate for the
[[Page 26268]]
15th through 30th days. If a third MDS is performed during that 30 days
indicating a change in the patient's condition that results in
assignment to yet a third RUG-III group, the facility must record three
groups on its claim to the fiscal intermediary and will receive payment
accordingly for the days in the third RUG-III group. Table 2.D shows
the relationship of the billing cycle to the MDS submissions.
9. Assessments and the Transition to the Prospective Payment System
For Medicare patients already in the nursing home during the
facility's transition into the PPS, we are providing several
alternative assessment schedule options from which to choose.
a. Medicare beneficiaries receiving Part A benefits admitted within
the past 30 days. For a Medicare patient in a Part A covered stay,
admitted in the 30 days before the SNF became subject to PPS, who has
had an MDS completed during those 30 days, facility staff may choose to
use the most recent full MDS assessment completed (within the past 30
days) for RUG-III classification. This classification would be
effective on the first day the SNF joins PPS and determines the payment
the SNF receives for the patient for the first 14 days the facility is
in the new system. The next assessment must be completed by the 14th
calendar day of the month the facility entered the PPS.
Another option is for the facility staff to choose to treat the
beneficiary as a ``new'' admission on the first day of the facility's
billing period. In this instance, a Medicare 5-day assessment must be
performed as if the day the facility enters the PPS is day 1 of the
patient's Part A nursing home stay, and then the assessment schedule
followed as it would be for a new admission, as detailed above. There
is no change in the patient's Medicare eligibility or coverage.
Further, no additional days are added to Medicare's 100-day limit.
b. Medicare beneficiaries receiving Part A benefits admitted over
30 days prior. If a Medicare beneficiary was receiving Medicare Part A
benefits for the past 30 days and has not had a full MDS assessment
completed within the past 30 days, the beneficiary is considered a new
admission to the PPS and follows the assessment schedule presented
above (paragraph (a)). The new admission status is only for Medicare
MDS assessment scheduling. There is no change in the patient's Medicare
eligibility or coverage. Further, no additional days are added to
Medicare's 100-day limit.
c. Medicare Part A beneficiaries with less than 14 days of Medicare
eligibility remaining. If the patient has less than 14 days of Medicare
eligibility remaining when the SNF becomes subject to PPS, the facility
has the option of completing an Other Medicare Required assessment or
using the most recent assessment to classify the resident.
These guidelines are intended to maximize the beneficiary's
opportunity to receive Medicare Part A benefits during the facility's
transition from one payment system to another, provided that the
Medicare Part A eligibility rules and coverage guidelines are met.
Facility staff are able to utilize the RUG-III clinical categories to
determine coverage for this group of beneficiaries.
10. Late Assessments
We recognize that the effect on revenue for missing an assessment
can be great. To allow facilities flexibility and to minimize their
revenue loss, we will permit an assessment to be completed as quickly
as possible. Once a late assessment is conducted, the facility should
return to the regular Medicare assessment schedule.
Frequent late assessments may result in an on-site review of
assessment scheduling practices for the facility. Also, facilities need
to be aware that assessments not completed within Federal timeframes
established at Sec. 483.20 may be cited as evidence of regulatory
noncompliance.
Late 5-day assessments. As discussed above, the assessment
reference date for a 5-day assessment may be set as early as day 1 or
as late as day 5 of the patient's stay. However, in the event of a late
5-day assessment, a facility will be allowed to use up to and including
day 8 as the assessment reference date with no financial penalty. This
means that the facility may set an assessment reference date that is up
to 3 days beyond the regular schedule and still receive the RUG-III
rate calculated from the late assessment for the entire 14-day period
of service covered by the 5-day assessment.
A 5-day assessment with an assessment reference date of day 9 or
later will be paid at the RUG-III default rate for all 8 or more days
of service provided before the assessment reference date of the late or
missed assessment. The RUG-III rate calculated from the late assessment
will be paid starting on the assessment reference date entered on the
late assessment through day 14.
Late 14-day assessments. In order for an SNF to be in compliance
with the requirements for Medicare or Medicaid certification, a
comprehensive assessment must be performed for each patient in the
facility by day 14. Therefore, unless the 5-day assessment included the
RAPs, the 14-day assessment must include RAPs and must be completed by
day 14. If the RAPs were completed with the 5-day assessment, then this
assessment counts as the admission assessment and should be coded as
both a Medicare 5-day assessment and as the admission assessment. When
the 5-day assessment is the admission assessment (that is, it includes
the RAPs), then no RAPs are required with the 14-day assessment, and
the 14-day assessment may have an assessment reference date through day
19, and a 5-day grace period like that allowed for the 30- and 60-day
assessments.
Late 30-day, 60-day, or 90-day assessments. A 5-day grace period is
permitted for late 30- or 60-day assessments with no financial penalty.
This means that the facility may set an assessment reference date that
is up to 5 days beyond the regular schedule and still receive the RUG-
III rate calculated from the late assessment for the entire period of
service covered by the assessment.
To be in compliance with the requirements for Medicare and Medicaid
certification, facilities must perform assessments quarterly. For this
reason, the 90-day assessment grace period is only 2 days, in agreement
with that allowed by the certification requirement. The latest that the
first quarterly assessment may be completed is on day 92. The 90-day
assessment should be coded both as a Medicare 90-day assessment and a
quarterly review assessment.
Assessments that have an assessment reference date that is 6 or
more days beyond the regular schedule will result in a payment at the
RUG-III default rate for those 5 or more days of service without a
current assessment. The RUG-III rate calculated from the late
assessment will be paid starting on the day of the assessment reference
date entered on the late assessment.
In the case of an error on an MDS that has been locked (in
accordance with the requirements set forth at Sec. 483.20(f)), the
facility must follow the normal MDS correction procedures. These
procedures may require that the facility perform a Significant Change
in Status assessment or a ``significant correction'' assessment. If
appropriate, the facility must perform a new assessment with a new
assessment reference period and then submit this new assessment.
Payment will be based on the new assessment reference date if
appropriate.
[[Page 26269]]
11. The Default Rate
As described above, assessments are completed by SNFs according to
an assessment schedule specifically designed for Medicare payment, and
each assessment applies to specific days within a resident's SNF stay
for purposes of making that payment. Compliance with this assessment
schedule is critical to ensure that the appropriate level of payment is
made by Medicare and the quality of Medicare SNF services is maintained
under the PPS. Accordingly, SNFs that fail to perform assessments
timely are to be paid a RUG-III default rate for the days of a
patient's care for which they are not in compliance with this schedule
(assuming that they submit sufficient documentation in lieu of a
completed assessment to enable the fiscal intermediary to establish
coverage under the existing administrative criteria used for this
purpose, as discussed in section II.D of this rule). The RUG-III
default rate takes the place of the otherwise applicable Federal rate
(it does not supersede the facility-specific portion of the blended
rate used for the transition period--see section III of this rule).
The RUG-III default rate may be lower than the Federal rate that
would have been paid for a patient had an SNF submitted an assessment
in accordance with the prescribed assessment schedule. For the initial
period of the PPS, the RUG-III default rate is $117.15 per day for
urban SNFs and $116.85 per day for rural SNFs. This rate equals the
lowest Federal rate category (PA1) listed in Tables 2.G and 2.H. and is
subject to the wage index adjustment.
12. Case-Mix Adjusted Federal Payment Rates
Application of the case-mix indices to the per diem Federal rates
presented in Tables 2.A and 2.B result in 44 separate case-mix adjusted
payment rates corresponding to the 44 separate RUG-III classification
groups described above (see Tables 2.E and 2.F). The case-mix adjusted
payment rates are listed separately for urban and rural SNFs (44 each)
in Tables 2.E and 2.F below along with the corresponding case-mix index
values. The rates are listed in total and by component. The application
of the wage index, described later in this section, is the final
adjustment applied to the Federal rates.
BILLING CODE 4120-01-P
[[Page 26270]]
[GRAPHIC] [TIFF OMITTED] TR12MY98.000
[[Page 26271]]
[GRAPHIC] [TIFF OMITTED] TR12MY98.001
[[Page 26272]]
[GRAPHIC] [TIFF OMITTED] TR12MY98.002
[[Page 26273]]
[GRAPHIC] [TIFF OMITTED] TR12MY98.003
BILLING CODE 4120-01-C
[[Page 26274]]
C. Wage Index Adjustment to Federal Rates
Section 1888(e)(4)(G)(ii) of the Act requires that we provide for
adjustments to the Federal rates to account for differences in area
wage levels using ``an appropriate wage index as determined by the
Secretary.'' As discussed elsewhere in this rule, for the rates
effective with this rule, we are using wage index values that are based
on hospital wage data from cost reporting periods beginning in fiscal
year 1994--the most recent hospital wage data in effect before the
effective date of this rule. Accordingly, the wage values used in this
rule are based on the same wage data as used to compute the wage index
values for the hospital prospective payment system for discharges
occurring in fiscal year 1998. To compute the SNF wage index values,
HCFA groups wage data from all hospitals by urban (MSA) and rural area.
Total wages and hours are summed for all hospitals in each area. An
average hourly wage is computed for each area by dividing the total
wages by the total hours. Wage index values are computed for each area
by comparing the area specific average hourly wage to the national
average hourly wage (computed in a similar manner). (A detailed
description of the methodology used to compute the hospital prospective
payment wage index is set forth in the final rule published in the
Federal Register on August 29, 1997 (62 FR 45966).)
The SNF wage index values are based on the Metropolitan Statistical
Area (MSA) designations in effect prior to publication of this rule.
For purposes of computing SNF wage index values, we are not taking into
account changes in geographic classification for certain rural
hospitals required under section 1886(d)(8)(B) of the Act or geographic
reclassifications based on decisions of the Medicare Geographic
Classification Review Board or the Secretary under section 1886(d)(10)
of the Act. For SNF routine cost limits established under section
1888(a) of the Act and in effect for cost reporting periods beginning
prior to July 1, 1998, HCFA has always applied a hospital wage index
that does not reflect geographic reclassifications. Changing the basis
of the wage index now would likely have a distributional impact on
payments. In consideration of this and the fact that HCFA may be
changing to a SNF wage index in the near future (which could also have
distributional effects), we find it appropriate to employ a hospital
wage index that does not reflect these reclassifications. Accordingly,
we continue to believe that the MSA (or non-MSA) designation provides
the best method for determining the wage index values used for SNF
payments and the physical location of hospitals is the appropriate
basis upon which to construct the wage index.
Table 2.I at the end of this section presents the wage indices
applicable to urban and rural areas for use in making geographic
adjustments to the Federal rates. Similar to the methodology described
earlier relating to the standardization of the cost data for geographic
differences in wage levels, the wage index adjustment is applied to the
labor-related portion of the Federal rate, which is 75.888 percent of
the total rate. The schedule of Federal rates below shows the Federal
rates by labor-related and non-labor related components. Instructions
and an example related to the application of the wage index to the
case-mix adjusted rates are provided following the table.
In addition, section 1888(e)(4)(G) of the Act requires that the
wage index adjustment to the Federal rates be made in a manner that
does not result in aggregate payments that are greater or less than
those that would otherwise be made if the rates were not adjusted by
the wage index. In the initial year of the PPS, this requirement is
addressed through the standardization methodology, described earlier,
which ensures that the application of the wage index has no effect on
the level of aggregate payments (that is, any effects are purely
distributional). In future years, HCFA must make wage index budget
neutrality adjustment in updating the payment rates.
Table 2.G.--Case Mix Adjusted Federal Rates for Urban SNFs by Labor and Non-Labor Component
----------------------------------------------------------------------------------------------------------------
Total
RUGs III category Labor- Non-labor Federal
related related rate
----------------------------------------------------------------------------------------------------------------
RUC...................................................................... $291.57 $92.64 $384.21
RUB...................................................................... 262.50 83.40 345.90
RUA...................................................................... 248.37 78.91 327.28
RVC...................................................................... 224.74 71.41 296.15
RVB...................................................................... 217.27 69.03 286.30
RVA...................................................................... 198.16 62.96 261.12
RHC...................................................................... 206.06 65.47 271.53
RHB...................................................................... 189.45 60.19 249.64
RHA...................................................................... 173.66 55.18 228.84
RMC...................................................................... 202.88 64.46 267.34
RMB...................................................................... 181.27 57.60 238.87
RMA...................................................................... 170.47 54.17 224.64
RLB...................................................................... 161.60 51.35 212.95
RLA...................................................................... 135.85 43.16 179.01
SE3...................................................................... 191.93 60.98 252.91
SE2...................................................................... 166.17 52.80 218.97
SE1...................................................................... 147.89 46.99 194.88
SSC...................................................................... 144.57 45.93 190.50
SSB...................................................................... 137.92 43.82 181.74
SSA...................................................................... 134.59 42.77 177.36
CC2...................................................................... 143.74 45.67 189.41
CC1...................................................................... 132.94 42.24 175.18
CB2...................................................................... 126.29 40.13 166.42
CB1...................................................................... 120.47 38.28 158.75
CA2...................................................................... 119.65 38.01 157.66
CA1...................................................................... 113.00 35.90 148.90
IB2...................................................................... 108.01 34.32 142.33
[[Page 26275]]
IB1...................................................................... 106.35 33.79 140.14
IA2...................................................................... 98.04 31.15 129.19
IA1...................................................................... 94.72 30.09 124.81
BB2...................................................................... 107.18 34.06 141.24
BB1...................................................................... 104.69 33.26 137.95
BA2...................................................................... 97.21 30.89 128.10
BA1...................................................................... 90.56 28.78 119.34
PE2...................................................................... 116.32 36.96 153.28
PE1...................................................................... 114.66 36.43 151.09
PD2...................................................................... 110.51 35.11 145.62
PD1...................................................................... 108.85 34.58 143.43
PC2...................................................................... 104.69 33.26 137.95
PC1...................................................................... 103.86 33.00 136.86
PB2...................................................................... 93.05 29.57 122.62
PB1...................................................................... 92.23 29.30 121.53
PA2...................................................................... 91.40 29.04 120.44
PA1...................................................................... 88.90 28.25 117.15
----------------------------------------------------------------------------------------------------------------
Table 2.H.--Case Mix Adjusted Federal Rates for Rural SNFs by Labor and Non-Labor Component
----------------------------------------------------------------------------------------------------------------
Total
RUGs III category Labor- Non-labor Federal
related related rate
----------------------------------------------------------------------------------------------------------------
RUC...................................................................... $309.77 $98.42 $408.19
RUB...................................................................... 281.92 89.57 371.49
RUA...................................................................... 268.39 85.27 353.66
RVC...................................................................... 235.35 74.78 310.13
RVB...................................................................... 228.20 72.50 300.70
RVA...................................................................... 209.88 66.69 276.57
RHC...................................................................... 211.64 67.24 278.88
RHB...................................................................... 195.72 62.18 257.90
RHA...................................................................... 180.60 57.38 237.98
RMC...................................................................... 206.48 65.60 272.08
RMB...................................................................... 186.78 59.03 244.81
RMA...................................................................... 175.43 55.74 231.17
RLB...................................................................... 162.73 51.71 214.44
RLA...................................................................... 138.06 43.86 181.92
SE3...................................................................... 187.38 59.53 246.91
SE2...................................................................... 162.70 51.69 214.39
SE1...................................................................... 145.19 46.13 191.32
SSC...................................................................... 142.00 45.12 187.12
SSB...................................................................... 135.63 43.10 178.73
SSA...................................................................... 132.45 42.09 174.54
CC2...................................................................... 141.21 44.87 186.08
CC1...................................................................... 130.86 41.58 172.44
CB2...................................................................... 124.49 39.56 164.05
CB1...................................................................... 118.92 37.79 156.71
CA2...................................................................... 118.13 37.53 155.66
CA1...................................................................... 111.76 35.51 147.27
IB2...................................................................... 106.99 33.99 140.98
IB1...................................................................... 105.39 33.49 138.88
IA2...................................................................... 97.43 30.96 128.39
IA1...................................................................... 94.25 29.95 124.20
BB2...................................................................... 106.19 33.74 139.93
BB1...................................................................... 103.80 32.98 136.78
BA2...................................................................... 96.64 30.70 127.34
BA1...................................................................... 90.27 28.68 118.95
PE2...................................................................... 114.95 36.52 151.47
PE1...................................................................... 113.35 36.02 149.37
PD2...................................................................... 109.37 34.75 144.12
PD1...................................................................... 107.78 34.25 142.03
PC2...................................................................... 103.80 32.98 136.78
PC1...................................................................... 103.00 32.73 135.73
PB2...................................................................... 92.66 29.44 122.10
PB1...................................................................... 91.86 29.19 121.05
PA2...................................................................... 91.07 28.93 120.00
PA1...................................................................... 88.68 28.17 116.85
----------------------------------------------------------------------------------------------------------------
[[Page 26276]]
For any RUG-III group, to compute a wage adjusted Federal payment
rate applicable to the initial period of the PPS, the labor related
portion of the payment rate is multiplied by the SNF's appropriate wage
index factor listed in Table 2.I. The product of that calculation is
added to the corresponding non-labor related component. The resulting
amount is the Federal rate applicable to a patient in that RUG-III
group for that SNF. See the example below.
ABC SNF is located in State College, Pennsylvania. The per diem
Federal rate applicable to an Ultra High Rehabilitation `A' patient
(RUA) is calculated using the rates listed in Table 2.G and the wage
index factor found in Table 2.I. Accordingly, the computation of the
adjusted per diem rate is made as follows:
(248.37 x .9635)+78.91=$318.21 per diem.
This Federal rate will be applicable to all patients in the RUA
category for Happy Valley SNF for the initial period of the PPS (July
1, 1998 through September 30, 1999).
D. Updates to the Federal Rates
For the initial period of the PPS beginning on July 1, 1998 and
ending on September 30, 1999, the payment rates are those contained in
this interim final rule. In accordance with section 1888(e)(4)(H) of
the Act, for each succeeding fiscal year, we will publish the rates in
the Federal Register before August 1 of the year preceding the affected
Federal fiscal year.
For fiscal years 2000 through 2002, section 1888(e)(4)(E)(ii) of
the Act requires that the rates be increased by a factor equal to the
SNF market basket index change minus 1 percentage point. In addition,
for subsequent fiscal years, this section requires the rates to be
increased by the applicable SNF market basket index change.
Section 1888(e)(4)(F) of the Act provides that the Secretary
``may'' adjust the unadjusted Federal per diem rates if the Secretary
``determines that the adjustments under subparagraph (G)(i) 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'' during the fiscal year because of changes in the aggregate
case-mix of the Medicare patient population that are not related to
actual patient condition (that is, ``case-mix creep''). HCFA is
currently developing a methodology to implement this adjustment.
In addition, since enactment of the BBA 1997, various suggestions
have been made relating to adjustments to the rates promulgated in this
interim final regulation. Some have suggested that the rates should be
increased to reflect such factors as additional nursing care, the
future growth of subacute care practices, specific services, and other
items that may not be accurately reflected in the rates, etc. Other
suggestions have related to downward adjustments to the rates to
reflect the presence of inappropriate care or payments in the 1995 cost
data used to establish the rates promulgated in this rule. For example,
concerns have been raised regarding whether these data are inflated,
reflecting medically unnecessary care and/or improper payments related
to therapies and other ancillary services and that the inclusion of
such costs results in inappropriately high payments to SNFs under the
PPS. Studies by the Office of the Inspector General (OIG) and HCFA
program integrity activities have found that incorrect payments have
been made to SNFs in the past. One way to remove such costs from the
data is the application of adjustments to the 1995 data base and
recomputing the payment rates. However, the magnitude of these
incorrect payments is not definitively known at this time. Therefore,
the OIG, in conjunction with HCFA, is proposing to examine the extent
to which the base period costs reflect costs that were inappropriately
allowed. If this examination reveals excessive inappropriate costs, we
would address this issue in a future proposed rule, or perhaps seek
legislation to adjust future payment rates downward.
Table 2.I.--Wage Index for Urban Areas
------------------------------------------------------------------------
Wage
Urban Area (Constituent counties or county equivalents) index
------------------------------------------------------------------------
0040 Abilene, TX............................................. 0.8287
Taylor, TX
0060 Aguadilla, PR........................................... 0.4188
Aguada, PR
Aguadilla, PR
Moca, PR
0080 Akron, OH............................................... 0.9772
Portage, OH
Summit, OH
0120 Albany, GA.............................................. 0.7914
Dougherty, GA
Lee, GA
0160 Albany-Schenectady-Troy, NY............................. 0.8480
Albany, NY
Montgomery, NY
Rensselaer, NY
Saratoga, NY
Schenectady, NY
Schoharie, NY
0200 Albuquerque, NM......................................... 0.9309
Bernalillo, NM
Sandoval, NM
Valencia, NM
0220 Alexandria, LA.......................................... 0.8162
Rapides, LA
0240 Allentown-Bethlehem-Easton, PA.......................... 1.0086
Carbon, PA
Lehigh, PA
Northampton, PA
0280 Altoona, PA............................................. 0.9137
Blair, PA
0320 Amarillo, TX............................................ 0.9425
Potter, TX
Randall, TX
0380 Anchorage, AK........................................... 1.2842
Anchorage, AK
0440 Ann Arbor, MI........................................... 1.1785
Lenawee, MI
Livingston, MI
Washtenaw, MI
0450 Anniston, AL............................................ 0.8266
Calhoun, AL
0460 Appleton-Oshkosh-Neenah, WI............................. 0.8996
Calumet, WI
Outagamie, WI
Winnebago, WI
0470 Arecibo, PR............................................. 0.4218
Arecibo, PR
Camuy, PR
Hatillo, PR
0480 Asheville, NC........................................... 0.9072
Buncombe, NC
Madison, NC
0500 Athens, GA.............................................. 0.9087
Clarke, GA
Madison, GA
Oconee, GA
0520 Atlanta, GA............................................. 0.9823
Barrow, GA
Bartow, GA
Carroll, GA
Cherokee, GA
Clayton, GA
Cobb, GA
Coweta, GA
De Kalb, GA
Douglas, GA
Fayette, GA
Forsyth, GA
Fulton, GA
Gwinnett, GA
Henry, GA
Newton, GA
Paulding, GA
Pickens, GA
Rockdale, GA
Spalding, GA
Walton, GA
0560 Atlantic City-Cape May, NJ.............................. 1.1155
Atlantic City, NJ
Cape May, NJ
0600 Augusta-Aiken, GA-SC.................................... 0.9333
Columbia, GA
McDuffie, GA
Richmond, GA
Aiken, SC
Edgefield, SC
0640 Austin-San Marcos, TX................................... 0.9133
[[Page 26277]]
Bastrop, TX
Caldwell, TX
Hays, TX
Travis, TX
Williamson, TX
0680 Bakersfield, CA......................................... 1.0014
Kern, CA
0720 Baltimore, MD........................................... 0.9689
Anne Arundel, MD
Baltimore, MD
Baltimore City, MD
Carroll, MD
Harford, MD
Howard, MD
Queen Annes, MD
0733 Bangor, ME.............................................. 0.9478
Penobscot, ME
0743 Barnstable-Yarmouth, MA................................. 1.4291
Barnstable, MA
0760 Baton Rouge, LA......................................... 0.8382
Ascension, LA
East Baton Rouge, LA
Livingston, LA
West Baton Rouge, LA
0840 Beaumont-Port Arthur, TX................................ 0.8593
Hardin, TX
Jefferson, TX
Orange, TX
0860 Bellingham, WA.......................................... 1.1221
Whatcom, WA
0870 Benton Harbor, MI....................................... 0.8634
Berrien, MI
0875 Bergen-Passaic, NJ...................................... 1.2156
Bergen, NJ
Passaic, NJ
0880 Billings, MT............................................ 0.9783
Yellowstone, MT
0920 Biloxi-Gulfport-Pascagoula, MS.......................... 0.8415
Hancock, MS
Harrison, MS
Jackson, MS
0960 Binghamton, NY.......................................... 0.8914
Broome, NY
Tioga, NY
1000 Birmingham, AL.......................................... 0.9005
Blount, AL
Jefferson, AL
St Clair, AL
Shelby, AL
1010 Bismarck, ND............................................ 0.7695
Burleigh, ND
Morton, ND
1020 Bloomington, IN......................................... 0.9128
Monroe, IN
1040 Bloomington-Normal, IL.................................. 0.8733
McLean, IL
1080 Boise City, ID.......................................... 0.8856
Ada, ID
Canyon, ID
1123 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH........ 1.1506
Bristol, MA
Essex, MA
Middlesex, MA
Norfolk, MA
Plymouth, MA
Suffolk, MA
Worcester, MA
Hillsborough, NH
Merrimack, NH
Rockingham, NH
Strafford, NH
1125 Boulder-Longmont, CO.................................... 1.0015
Boulder, CO
1145 Brazoria, TX............................................ 0.9341
Brazoria, TX
1150 Bremerton, WA........................................... 1.0999
Kitsap, WA
1240 Brownsville-Harlingen-San Benito, TX.................... 0.8740
Cameron, TX
1260 Bryan-College Station, TX............................... 0.8571
Brazos, TX
1280 Buffalo-Niagara Falls, NY............................... 0.9272
Erie, NY
Niagara, NY
1303 Burlington, VT.......................................... 1.0142
Chittenden, VT
Franklin, VT
Grand Isle, VT
1310 Caguas, PR.............................................. 0.4459
Caguas, PR
Cayey, PR
Cidra, PR
Gurabo, PR
San Lorenzo, PR
1320 Canton-Massillon, OH.................................... 0.8961
Carroll, OH
Stark, OH
1350 Casper, WY.............................................. 0.9013
Natrona, WY
1360 Cedar Rapids, IA........................................ 0.8529
Linn, IA
1400 Champaign-Urbana, IL.................................... 0.8824
Champaign, IL
1440 Charleston-North Charleston, SC......................... 0.8807
Berkeley, SC
Charleston, SC
Dorchester, SC
1480 Charleston, WV.......................................... 0.9142
Kanawha, WV
Putnam, WV
1520 Charlotte-Gastonia-Rock Hill, NC-SC..................... 0.9710
Cabarrus, NC
Gaston, NC
Lincoln, NC
Mecklenburg, NC
Rowan, NC
Stanly, NC
Union, NC
York, SC
1540 Charlottesville, VA..................................... 0.9051
Albemarle, VA
Charlottesville City, VA
Fluvanna, VA
Greene, VA
1560 Chattanooga, TN-GA...................................... 0.8658
Catoosa, GA
Dade, GA
Walker, GA
Hamilton, TN
Marion, TN
1580 Cheyenne, WY............................................ 0.7555
Laramie, WY
1600 Chicago, IL............................................. 1.0860
Cook, IL
De Kalb, IL
Du Page, IL
Grundy, IL
Kane, IL
Kendall, IL
Lake, IL
McHenry, IL
Will, IL
1620 Chico-Paradise, CA...................................... 1.0429
Butte, CA
1640 Cincinnati, OH-KY-IN.................................... 0.9474
Dearborn, IN
Ohio, IN
Boone, KY
Campbell, KY
Gallatin, KY
Grant, KY
Kenton, KY
Pendleton, KY
Brown, OH
Clermont, OH
Hamilton, OH
Warren, OH
1660 Clarksville-Hopkinsville, TN-KY......................... 0.7852
Christian, KY
Montgomery, TN
1680 Cleveland-Lorain-Elyria, OH............................. 0.9804
Ashtabula, OH
Cuyahoga, OH
Geauga, OH
Lake, OH
Lorain, OH
Medina, OH
1720 Colorado Springs, CO.................................... 0.9316
El Paso, CO
1740 Columbia, MO............................................ 0.9001
Boone, MO
1760 Columbia, SC............................................ 0.9192
Lexington, SC
Richland, SC
1800 Columbus, GA-AL......................................... 0.8288
Russell, AL
Chattanoochee, GA
Harris, GA
Muscogee, GA
1840 Columbus, OH............................................ 0.9793
Delaware, OH
Fairfield, OH
Franklin, OH
Licking, OH
Madison, OH
Pickaway, OH
1880 Corpus Christi, TX...................................... 0.8945
Nueces, TX
San Patricio, TX
1900 Cumberland, MD-WV....................................... 0.8822
Allegany, MD
Mineral, WV
1920 Dallas, TX.............................................. 0.9703
Collin, TX
Dallas, TX
Denton, TX
Ellis, TX
Henderson, TX
Hunt, TX
Kaufman, TX
Rockwall, TX
[[Page 26278]]
1950 Danville, VA............................................ 0.8146
Danville City, VA
Pittsylvania, VA
1960 Davenport-Moline-Rock Island, IA-IL..................... 0.8405
Scott, IA
Henry, IL
Rock Island, IL
2000 Dayton-Springfield, OH.................................. 0.9584
Clark, OH
Greene, OH
Miami, OH
Montgomery, OH
2020 Daytona Beach, FL....................................... 0.8375
Flagler, FL
Volusia, FL
2030 Decatur, AL............................................. 0.8286
Lawrence, AL
Morgan, AL
2040 Decatur, IL............................................. 0.7915
Macon, IL
2080 Denver, CO.............................................. 1.0386
Adams, CO
Arapahoe, CO
Denver, CO
Douglas, CO
Jefferson, CO
2120 Des Moines, IA.......................................... 0.8837
Dallas, IA
Polk, IA
Warren, IA
2160 Detroit, MI............................................. 1.0825
Lapeer, MI
Macomb, MI
Monroe, MI
Oakland, MI
St Clair, MI
Wayne, MI
2180 Dothan, AL.............................................. 0.8070
Dale, AL
Houston, AL
2190 Dover, DE............................................... 0.9303
Kent, DE
2200 Dubuque, IA............................................. 0.8088
Dubuque, IA
2240 Duluth-Superior, MN-WI.................................. 0.9779
St Louis, MN
Douglas, WI
2281 Dutchess County, NY..................................... 1.0632
Dutchess, NY
2290 Eau Claire, WI.......................................... 0.8764
Chippewa, WI
Eau Claire, WI
2320 El Paso, TX............................................. 1.0123
El Paso, TX
2330 Elkhart-Goshen, IN...................................... 0.9081
Elkhart, IN
2335 Elmira, NY.............................................. 0.8247
Chemung, NY
2340 Enid, OK................................................ 0.7962
Garfield, OK
2360 Erie, PA................................................ 0.8862
Erie, PA
2400 Eugene-Springfield, OR.................................. 1.1435
Lane, OR
2440 Evansville-Henderson, IN-KY............................. 0.8641
Posey, IN
Vanderburgh, IN
Warrick, IN
Henderson, KY
2520 Fargo-Moorhead, ND-MN................................... 0.8837
Clay, MN
Cass, ND
2560 Fayetteville, NC........................................ 0.8734
Cumberland, NC
2580 Fayetteville-Springdale-Rogers, AR...................... 0.7461
Benton, AR
Washington, AR
2620 Flagstaff, AZ-UT........................................ 0.9115
Coconino, AZ
Kane, UT
2640 Flint, MI............................................... 1.1171
Genesee, MI
2650 Florence, AL............................................ 0.7551
Colbert, AL
Lauderdale, AL
2655 Florence, SC............................................ 0.8711
Florence, SC
2670 Fort Collins-Loveland, CO............................... 1.0248
Larimer, CO
2680 Ft Lauderdale, FL....................................... 1.0448
Broward, FL
2700 Fort Myers-Cape Coral, FL............................... 0.8788
Lee, FL
2710 Fort Pierce-Port St. Lucie, FL.......................... 1.0257
Martin, FL
St. Lucie, FL
2720 Fort Smith, AR-OK....................................... 0.7769
Crawford, AR
Sebastian, AR
Sequoyah, OK
2750 Fort Walton Beach, FL................................... 0.8765
Okaloosa, FL
2760 Fort Wayne, IN.......................................... 0.8901
Adams, IN
Allen, IN
De Kalb, IN
Huntington, IN
Wells, IN
Whitley, IN
2800 Forth Worth-Arlington, TX............................... 0.9979
Hood, TX
Johnson, TX
Parker, TX
Tarrant, TX
2840 Fresno, CA.............................................. 1.0607
Fresno, CA
Madera, CA
2880 Gadsden, AL............................................. 0.8815
Etowah, AL
2900 Gainesville, FL......................................... 0.9616
Alachua, FL
2920 Galveston-Texas City, TX................................ 1.0564
Galveston, TX
2960 Gary, IN................................................ 0.9633
Lake, IN
Porter, IN
2975 Glens Falls, NY......................................... 0.8386
Warren, NY
Washington, NY
2980 Goldsboro, NC........................................... 0.8443
Wayne, NC
2985 Grand Forks, ND-MN...................................... 0.8745
Polk, MN
Grand Forks, ND
2995 Grand Junction, CO....................................... 0.9090
Mesa, CO
3000 Grand Rapids-Muskegon-Holland, MI....................... 1.0147
Allegan, MI
Kent, MI
Muskegon, MI
Ottawa, MI
3040 Great Falls, MT......................................... 0.8803
Cascade, MT
3060 Greeley, CO............................................. 1.0097
Weld, CO
3080 Green Bay, WI........................................... 0.9097
Brown, WI
3120 Greensboro-Winston-Salem-High Point, NC................. 0.9351
Alamance, NC
Davidson, NC
Davie, NC
Forsyth, NC
Guilford, NC
Randolph, NC
Stokes, NC
Yadkin, NC
3150 Greenville, NC.......................................... 0.9064
Pitt, NC
3160 Greenville-Spartanburg-Anderson, SC..................... 0.9059
Anderson, SC
Cherokee, SC
Greenville, SC
Pickens, SC
Spartanburg, SC
3180 Hagerstown, MD.......................................... 0.9681
Washington, MD
3200 Hamilton-Middletown, OH................................. 0.8767
Butler, OH
3240 Harrisburg-Lebanon-Carlisle, PA......................... 1.0187
Cumberland, PA
Dauphin, PA
Lebanon, PA
Perry, PA
3283 Hartford, CT............................................ 1.2562
Hartford, CT
Litchfield, CT
Middlesex, CT
Tolland, CT
3285 Hattiesburg, MS......................................... 0.7192
Forrest, MS
Lamar, MS
3290 Hickory-Morganton-Lenoir, NC............................ 0.8686
Alexander, NC
Burke, NC
Caldwell, NC
Catawba, NC
3320 Honolulu, HI............................................ 1.1816
Honolulu, HI
3350 Houma, LA............................................... 0.7854
Lafourche, LA
Terrebonne, LA
3360 Houston, TX............................................. 0.9855
Chambers, TX
Fort Bend, TX
Harris, TX
Liberty, TX
Montgomery, TX
Waller, TX
[[Page 26279]]
3400 Huntington-Ashland, WV-KY-OH............................ 0.9160
Boyd, KY
Carter, KY
Greenup, KY
Lawrence, OH
Cabell, WV
Wayne, WV
3440 Huntsville, AL.......................................... 0.8485
Limestone, AL
Madison, AL
3480 Indianapolis, IN........................................ 0.9848
Boone, IN
Hamilton, IN
Hancock, IN
Hendricks, IN
Johnson, IN
Madison, IN
Marion, IN
Morgan, IN
Shelby, IN
3500 Iowa City, IA........................................... 0.9413
Johnson, IA
3520 Jackson, MI............................................. 0.9052
Jackson, MI
3560 Jackson, MS............................................. 0.7760
Hinds, MS
Madison, MS
Rankin, MS
3580 Jackson, TN............................................. 0.8522
Chester, TN
Madison, TN
3600 Jacksonville, FL........................................ 0.8969
Clay, FL
Duval, FL
Nassau, FL
St Johns, FL
3605 Jacksonville, NC........................................ 0.6973
Onslow, NC
3610 Jamestown, NY........................................... 0.7552
Chautaqua, NY
3620 Janesville-Beloit, WI................................... 0.8824
Rock, WI
3640 Jersey City, NJ......................................... 1.1412
Hudson, NJ
3660 Johnson City-Kingsport-Bristol, TN-VA................... 0.9114
Carter, TN
Hawkins, TN
Sullivan, TN
Unicoi, TN
Washington, TN
Bristol City, VA
Scott, VA
Washington, VA
3680 Johnstown, PA........................................... 0.8378
Cambria, PA
Somerset, PA
3700 Jonesboro, AR............................................ 0.7443
Craighead, AR
3710 Joplin, MO.............................................. 0.7510
Jasper, MO
Newton, MO
3720 Kalamazoo-Battlecreek, MI............................... 1.0668
Calhoun, MI
Kalamazoo, MI
Van Buren, MI
3740 Kankakee, IL............................................ 0.8653
Kankakee, IL
3760 Kansas City, KS-MO...................................... 0.9564
Johnson, KS
Leavenworth, KS
Miami, KS
Wyandotte, KS
Cass, MO
Clay, MO
Clinton, MO
Jackson, MO
Lafayette, MO
Platte, MO
Ray, MO
3800 Kenosha, WI............................................. 0.9196
Kenosha, WI
3810 Killeen-Temple, TX...................................... 1.0252
Bell, TX
Coryell, TX
3840 Knoxville, TN........................................... 0.8831
Anderson, TN
Blount, TN
Knox, TN
Loudon, TN
Sevier, TN
Union, TN
3850 Kokomo, IN.............................................. 0.8416
Howard, IN
Tipton, IN
3870 La Crosse, WI-MN........................................ 0.8749
Houston, MN
La Crosse, WI
3880 Lafayette, LA........................................... 0.8206
Acadia, LA
Lafayette, LA
St. Landry, LA
St. Martin, LA
3920 Lafayette, IN........................................... 0.9174
Clinton, IN
Tippecanoe, IN
3960 Lake Charles, LA........................................ 0.7776
Calcasieu, LA
3980 Lakeland-Winter Haven, FL............................... 0.8806
Polk, FL
4000 Lancaster, PA........................................... 0.9481
Lancaster, PA
4040 Lansing-East Lansing, MI................................ 1.0088
Clinton, MI
Eaton, MI
Ingham, MI
4080 Laredo, TX.............................................. 0.7325
Webb, TX
4100 Las Cruces, NM.......................................... 0.8646
Dona Ana, NM
4120 Las Vegas, NV-AZ........................................ 1.0592
Mohave, AZ
Clark, NV
Nye, NV
4150 Lawrence, KS............................................ 0.8608
Douglas, KS
4200 Lawton, OK.............................................. 0.9045
Comanche, OK
4243 Lewiston-Auburn, ME..................................... 0.9536
Androscoggin, ME
4280 Lexington, KY........................................... 0.8390
Bourbon, KY
Clark, KY
Fayette, KY
Jessamine, KY
Madison, KY
Scott, KY
Woodford, KY
4320 Lima, OH................................................ 0.9185
Allen, OH
Auglaize, OH
4360 Lincoln, NE............................................. 0.9231
Lancaster, NE
4400 Little Rock-North Little Rock, AR....................... 0.8490
Faulkner, AR
Lonoke, AR
Pulaski, AR
Saline, AR
4420 Longview-Marshall, TX................................... 0.8613
Gregg, TX
Harrison, TX
Upshur, TX
4480 Los Angeles-Long Beach, CA.............................. 1.2232
Los Angeles, CA
4520 Louisville, KY-IN....................................... 0.9507
Clark, IN
Floyd, IN
Harrison, IN
Scott, IN
Bullitt, KY
Jefferson, KY
Oldham, KY
4600 Lubbock, TX............................................. 0.8400
Lubbock, TX
4640 Lynchburg, VA........................................... 0.8228
Amherst, VA
Bedford City, VA
Bedford, VA
Campbell, VA
Lynchburg City, VA
4680 Macon, GA............................................... 0.9227
Bibb, GA
Houston, GA
Jones, GA
Peach, GA
Twiggs, GA
4720 Madison, WI............................................. 1.0055
Dane, WI
4800 Mansfield, OH........................................... 0.8639
Crawford, OH
Richland, OH
4840 Mayaguez, PR............................................ 0.4475
Anasco, PR
Cabo Rojo, PR
Hormigueros, PR
Mayaguez, PR
Sabana Grande, PR
San German, PR
4880 McAllen-Edinburg-Mission, TX............................ 0.8371
Hidalgo, TX
4890 Medford-Ashland, OR...................................... 1.0354
Jackson, OR
4900 Melbourne-Titusville-Palm Bay, FL....................... 0.8819
Brevard, FL
4920 Memphis, TN-AR-MS....................................... 0.8589
Crittenden, AR
De Soto, MS
Fayette, TN
Shelby, TN
Tipton, TN
4940 Merced, CA.............................................. 1.0947
Merced, CA
[[Page 26280]]
5000 Miami, FL............................................... 0.9859
Dade, FL
5015 Middlesex-Somerset-Hunterdon, NJ........................ 1.1059
Hunterdon, NJ
Middlesex, NJ
Somerset, NJ
5080 Milwaukee-Waukesha, WI.................................. 0.9819
Milwaukee, WI
Ozaukee, WI
Washington, WI
Waukesha, WI
5120 Minneapolis-St Paul, MN-WI.............................. 1.0733
Anoka, MN
Carver, MN
Chisago, MN
Dakota, MN
Hennepin, MN
Isanti, MN
Ramsey, MN
Scott, MN
Sherburne, MN
Washington, MN
Wright, MN
Pierce, WI
St Croix, WI
5160 Mobile, AL.............................................. 0.8455
Baldwin, AL
Mobile, AL
5170 Modesto, CA............................................. 1.0794
Stanislaus, CA
5190 Monmouth-Ocean, NJ...................................... 1.0934
Monmouth, NJ
Ocean, NJ
5200 Monroe, LA.............................................. 0.8414
Ouachita, LA
5240 Montgomery, AL.......................................... 0.7671
Autauga, AL
Elmore, AL
Montgomery, AL
5280 Muncie, IN.............................................. 0.9173
Delaware, IN
5330 Myrtle Beach, SC........................................ 0.8072
Horry, SC
5345 Naples, FL.............................................. 1.0109
Collier, FL
5360 Nashville, TN........................................... 0.9182
Cheatham, TN
Davidson, TN
Dickson, TN
Robertson, TN
Rutherford TN
Sumner, TN
Williamson, TN
Wilson, TN
5380 Nassau-Suffolk, NY...................................... 1.3807
Nassau, NY
Suffolk, NY
5483 New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT..... 1.2618
Fairfield, CT
New Haven, CT
5523 New London-Norwich, CT.................................. 1.2013
New London, CT
5560 New Orleans, LA......................................... 0.9566
Jefferson, LA
Orleans, LA
Plaquemines, LA
St Bernard, LA
St Charles, LA
St James, LA
St John The Baptist, LA
St Tammany, LA
5600 New York, NY............................................ 1.4449
Bronx, NY
Kings, NY
New York, NY
Putnam, NY
Queens, NY
Richmond, NY
Rockland, NY
Westchester, NY
5640 Newark, NJ.............................................. 1.1980
Essex, NJ
Morris, NJ
Sussex, NJ
Union, NJ
Warren, NJ
5660 Newburgh, NY-PA......................................... 1.1283
Orange, NY
Pike, PA
5720 Norfolk-Virginia Beach-Newport News, VA-NC.............. 0.8316
Currituck, NC
Chesapeake City, VA
Gloucester, VA
Hampton City, VA
Isle of Wight, VA
James City, VA
Mathews, VA
Newport News City, VA
Norfolk City, VA
Poquoson City, VA
Portsmouth City, VA
Suffolk City, VA
Virginia Beach City VA
Williamsburg City, VA
York, VA
5775 Oakland, CA............................................. 1.5068
Alameda, CA
Contra Costa, CA
5790 Ocala, FL............................................... 0.9032
Marion, FL
5800 Odessa-Midland, TX...................................... 0.8660
Ector, TX
Midland, TX
5880 Oklahoma City, OK....................................... 0.8481
Canadian, OK
Cleveland, OK
Logan, OK
McClain, OK
Oklahoma, OK
Pottawatomie, OK
5910 Olympia, WA............................................. 1.0901
Thurston, WA
5920 Omaha, NE-IA............................................ 0.9421
Pottawattamie, IA
Cass, NE
Douglas, NE
Sarpy, NE
Washington, NE
5945 Orange County, CA....................................... 1.1605
Orange, CA
5960 Orlando, FL............................................. 0.9397
Lake, FL
Orange, FL
Osceola, FL
Seminole, FL
5990 Owensboro, KY........................................... 0.7480
Daviess, KY
6015 Panama City, FL......................................... 0.8337
Bay, FL
6020 Parkersburg-Marietta, WV-OH............................. 0.8046
Washington, OH
Wood, WV
6080 Pensacola, FL........................................... 0.8193
Escambia, FL
Santa Rosa, FL
6120 Peoria-Pekin, IL........................................ 0.8571
Peoria, IL
Tazewell, IL
Woodford, IL
6160 Philadelphia, PA-NJ..................................... 1.1398
Burlington, NJ
Camden, NJ
Gloucester, NJ
Salem, NJ
Bucks, PA
Chester, PA
Delaware, PA
Montgomery, PA
Philadelphia, PA
6200 Phoenix-Mesa, AZ........................................ 0.9606
Maricopa, AZ
Pinal, AZ
6240 Pine Bluff, AR.......................................... 0.7826
Jefferson, AR
6280 Pittsburgh, PA.......................................... 0.9725
Allegheny, PA
Beaver, PA
Butler, PA
Fayette, PA
Washington, PA
Westmoreland, PA
6323 Pittsfield, MA.......................................... 1.0960
Berkshire, MA
6340 Pocatello, ID............................................ 0.9586
Bannock, ID
6360 Ponce, PR............................................... 0.4589
Guayanilla, PR
Juana Diaz, PR
Penuelas, PR
Ponce, PR
Villalba, PR
Yauco, PR
6403 Portland, ME............................................ 0.9627
Cumberland, ME
Sagadahoc, ME
York, ME
6440 Portland-Vancouver, OR-WA............................... 1.1344
Clackamas, OR
Columbia, OR
Multnomah, OR
Washington, OR
Yamhill, OR
Clark, WA
6483 Providence-Warwick-Pawtucket, RI........................ 1.1049
Bristol, RI
Kent, RI
Newport, RI
Providence, RI
Washington, RI
[[Page 26281]]
6520 Provo-Orem, UT.......................................... 1.0073
Utah, UT
6560 Pueblo, CO.............................................. 0.8450
Pueblo, CO
6580 Punta Gorda, FL......................................... 0.8725
Charlotte, FL
6600 Racine, WI.............................................. 0.8934
Racine, WI
6640 Raleigh-Durham-Chapel Hill, NC.......................... 0.9818
Chatham, NC
Durham, NC
Franklin, NC
Johnston, NC
Orange, NC
Wake, NC
6660 Rapid City, SD.......................................... 0.8345
Pennington, SD
6680 Reading, PA............................................. 0.9516
Berks, PA
6690 Redding, CA............................................. 1.1790
Shasta, CA
6720 Reno, NV................................................ 1.0768
Washoe, NV
6740 Richland-Kennewick-Pasco, WA............................ 0.9918
Benton, WA
Franklin, WA
6760 Richmond-Petersburg, VA................................. 0.9152
Charles City County, VA
Chesterfield, VA
Colonial Heights City, VA
Dinwiddie, VA
Goochland, VA
Hanover, VA
Henrico, VA
Hopewell City, VA
New Kent, VA
Petersburg City, VA
Powhatan, VA
Prince George, VA
Richmond City, VA
6780 Riverside-San Bernardino, CA............................ 1.1307
Riverside, CA
San Bernardino, CA
6800 Roanoke, VA............................................. 0.8402
Botetourt, VA
Roanoke, VA
Roanoke City, VA
Salem City, VA
6820 Rochester, MN........................................... 1.0502
Olmsted, MN
6840 Rochester, NY........................................... 0.9524
Genesee, NY
Livingston, NY
Monroe, NY
Ontario, NY
Orleans, NY
Wayne, NY
6880 Rockford, IL............................................ 0.9081
Boone, IL
Ogle, IL
Winnebago, IL
6895 Rocky Mount, NC......................................... 0.9029
Edgecombe, NC
Nash, NC
6920 Sacramento, CA.......................................... 1.2202
El Dorado, CA
Placer, CA
Sacramento, CA
6960 Saginaw-Bay City-Midland, MI............................ 0.9564
Bay, MI
Midland, MI
Saginaw, MI
6980 St Cloud, MN............................................ 0.9544
Benton, MN
Stearns, MN
7000 St Joseph, MO........................................... 0.8366
Andrews, MO
Buchanan, MO
7040 St Louis, MO-IL......................................... 0.9130
Clinton, IL
Jersey, IL
Madison, IL
Monroe, IL
St Clair, IL
Franklin, MO
Jefferson, MO
Lincoln, MO
St Charles, MO
St Louis, MO
St Louis City, MO
Warren, MO
Sullivan City, MO
7080 Salem, OR............................................... 0.9935
Marion, OR
Polk, OR
7120 Salinas, CA............................................. 1.4513
Monterey, CA
7160 Salt Lake City-Ogden, UT................................ 0.9857
Davis, UT
Salt Lake, UT
Weber, UT
7200 San Angelo, TX.......................................... 0.7780
Tom Green, TX
7240 San Antonio, TX......................................... 0.8499
Bexar, TX
Comal, TX
Guadalupe, TX
Wilson, TX
7320 San Diego, CA........................................... 1.2193
San Diego, CA
7360 San Francisco, CA....................................... 1.4180
Marin, CA
San Francisco, CA
San Mateo, CA
7400 San Jose, CA............................................ 1.4332
Santa Clara, CA
7440 San Juan-Bayamon, PR.................................... 0.4625
Aguas Buenas, PR
Barceloneta, PR
Bayamon, PR
Canovanas, PR
Carolina, PR
Catano, PR
Ceiba, PR
Comerio, PR
Corozal, PR
Dorado, PR
Fajardo, PR
Florida, PR
Guaynabo, PR
Humacao, PR
Juncos, PR
Los Piedras, PR
Loiza, PR
Luguillo, PR
Manati, PR
Morovis, PR
Naguabo, PR
Naranjito, PR
Rio Grande, PR
San Juan, PR
Toa Alta, PR
Toa Baja, PR
Trujillo Alto, PR
Vega Alta, PR
Vega Baja, PR
Yabucoa, PR
7460 San Luis Obispo-Atascadero-Paso Robles, CA.............. 1.1374
San Luis Obispo, CA
7480 Santa Barbara-Santa Maria-Lompoc, CA.................... 1.0688
Santa Barbara, CA
7485 Santa Cruz-Watsonville, CA.............................. 1.4187
Santa Cruz, CA
7490 Santa Fe, NM............................................ 1.0332
Los Alamos, NM
Santa Fe, NM
7500 Santa Rosa, CA.......................................... 1.2815
Sonoma, CA
7510 Sarasota-Bradenton, FL.................................. 0.9757
Manatee, FL
Sarasota, FL
7520 Savannah, GA............................................ 0.8638
Bryan, GA
Chatham, GA
Effingham, GA
7560 Scranton--Wilkes-Barre--Hazleton, PA.................... 0.8539
Columbia, PA
Lackawanna, PA
Luzerne, PA
Wyoming, PA
7600 Seattle-Bellevue-Everett, WA............................ 1.1339
Island, WA
King, WA
Snohomish, WA
7610 Sharon, PA.............................................. 0.8783
Mercer, PA
7620 Sheboygan, WI........................................... 0.7862
Sheboygan, WI
7640 Sherman-Denison, TX..................................... 0.8499
Grayson, TX
7680 Shreveport-Bossier City, LA............................. 0.9381
Bossier, LA
Caddo, LA
Webster, LA
7720 Sioux City, IA-NE....................................... 0.8031
Woodbury, IA
Dakota, NE
7760 Sioux Falls, SD......................................... 0.8712
Lincoln, SD
Minnehaha, SD
7800 South Bend, IN.......................................... 0.9868
St Joseph, IN
7840 Spokane, WA............................................. 1.0486
Spokane, WA
7880 Springfield, IL......................................... 0.8713
Menard, IL
Sangamon, IL
7920 Springfield, MO......................................... 0.7989
Christian, MO
[[Page 26282]]
Greene, MO
Webster, MO
8003 Springfield, MA......................................... 1.0740
Hampden, MA
Hampshire, MA
8050 State College, PA....................................... 0.9635
Centre, PA
8080 Steubenville-Weirton, OH-WV............................. 0.8645
Jefferson, OH
Brooke, WV
Hancock, WV
8120 Stockton-Lodi, CA....................................... 1.1496
San Joaquin, CA
8140 Sumter, SC.............................................. 0.7842
Sumter, SC
8160 Syracuse, NY............................................ 0.9464
Cayuga, NY
Madison, NY
Onondaga, NY
Oswego, NY
8200 Tacoma, WA.............................................. 1.1016
Pierce, WA
8240 Tallahassee, FL......................................... 0.8332
Gadsden, FL
Leon, FL
8280 Tampa-St Petersburg-Clearwater, FL....................... 0.9103
Hernando, FL
Hillsborough, FL
Pasco, FL
Pinellas, FL
8320 Terre Haute, IN......................................... 0.8614
Clay, IN
Vermillion, IN
Vigo, IN
8360 Texarkana, AR-Texarkana, TX............................. 0.8664
Miller, AR
Bowie, TX
8400 Toledo, OH.............................................. 1.0390
Fulton, OH
Lucas, OH
Wood, OH
8440 Topeka, KS.............................................. 0.9438
Shawnee, KS
8480 Trenton, NJ............................................. 1.0380
Mercer, NJ
8520 Tucson, AZ.............................................. 0.9180
Pima, AZ
8560 Tulsa, OK............................................... 0.8074
Creek, OK
Osage, OK
Rogers, OK
Tulsa, OK
Wagoner, OK
8600 Tuscaloosa, AL.......................................... 0.8187
Tuscaloosa, AL
8640 Tyler, TX............................................... 0.9567
Smith, TX
8680 Utica-Rome, NY.......................................... 0.8398
Herkimer, NY
Oneida, NY
8720 Vallejo-Fairfield-Napa, CA.............................. 1.3754
Napa, CA
Solano, CA
8735 Ventura, CA............................................. 1.0946
Ventura, CA
8750 Victoria, TX............................................ 0.8474
Victoria, TX
8760 Vineland-Millville-Bridgeton, NJ........................ 1.0110
Cumberland, NJ
8780 Visalia-Tulare-Porterville, CA.......................... 0.9924
Tulare, CA
8800 Waco, TX................................................ 0.7696
McLennan, TX
8840 Washington, DC-MD-VA-WV................................. 1.0911
District of Columbia, DC
Calvert, MD
Charles, MD
Frederick, MD
Montgomery, MD
Prince Georges, MD
Alexandria City, VA
Arlington, VA
Clarke, VA
Culpepper, VA
Fairfax, VA
Fairfax City, VA
Falls Church City, VA
Fauquier, VA
Fredericksburg City, VA
King George, VA
Loudoun, VA
Manassas City, VA
Manassas Park City, VA
Prince William, VA
Spotsylvania, VA
Stafford, VA
Warren, VA
Berkeley, WV
Jefferson, WV
8920 Waterloo-Cedar Falls, IA................................ 0.8640
Black Hawk, IA
8940 Wausau, WI.............................................. 1.0545
Marathon, WI
8960 West Palm Beach-Boca Raton, FL.......................... 1.0372
Palm Beach, FL
9000 Wheeling, OH-WV......................................... 0.7707
Belmont, OH
Marshall, WV
Ohio, WV
9040 Wichita, KS............................................. 0.9403
Butler, KS
Harvey, KS
Sedgwick, KS
9080 Wichita Falls, TX....................................... 0.7646
Archer, TX
Wichita, TX
9140 Williamsport, PA........................................ 0.8548
Lycoming, PA
9160 Wilmington-Newark, DE-MD................................ 1.1538
New Castle, DE
Cecil, MD
9200 Wilmington, NC.......................................... 0.9322
New Hanover, NC
Brunswick, NC
9260 Yakima, WA.............................................. 1.0102
Yakima, WA
9270 Yolo, CA................................................ 1.1431
Yolo, CA
9280 York, PA................................................ 0.9415
York, PA
9320 Youngstown-Warren, OH................................... 0.9937
Columbiana, OH
Mahoning, OH
Trumbull, OH
9340 Yuba City, CA........................................... 1.0324
Sutter, CA
Yuba, CA
9360 Yuma, AZ................................................ 0.9732
Yuma, AZ
------------------------------------------------------------------------
Table 2.I.--Wage Index for Rural Areas
------------------------------------------------------------------------
Wage
Nonurban area index
------------------------------------------------------------------------
Alabama....................................................... 0.7260
Alaska........................................................ 1.2302
Arizona....................................................... 0.7989
Arkansas...................................................... 0.6995
California.................................................... 0.9977
Colorado...................................................... 0.8129
Connecticut................................................... 1.2617
Delaware...................................................... 0.8925
Florida....................................................... 0.8838
Georgia....................................................... 0.7761
Hawaii........................................................ 1.0229
Idaho......................................................... 0.8221
Illinois...................................................... 0.7644
Indiana....................................................... 0.8161
Iowa.......................................................... 0.7391
Kansas........................................................ 0.7203
Kentucky...................................................... 0.7772
Louisiana..................................................... 0.7383
Maine......................................................... 0.8468
Maryland...................................................... 0.8617
Massachusetts................................................. 1.0718
Michigan...................................................... 0.8923
Minnesota..................................................... 0.8179
Mississippi................................................... 0.6911
Missouri...................................................... 0.7205
Montana....................................................... 0.8302
Nebraska...................................................... 0.7401
Nevada........................................................ 0.8914
New Hampshire................................................. 0.9717
New Jersey \1\................................................ ........
New Mexico.................................................... 0.8070
New York...................................................... 0.8401
North Carolina................................................ 0.7937
North Dakota.................................................. 0.7360
Ohio.......................................................... 0.8434
Oklahoma...................................................... 0.7072
Oregon........................................................ 0.9975
Pennsylvania.................................................. 0.8421
Puerto Rico................................................... 0.3939
Rhode Island \1\.............................................. ........
South Carolina................................................ 0.7921
South Dakota.................................................. 0.6983
Tennessee..................................................... 0.7353
Texas......................................................... 0.7404
Utah.......................................................... 0.8926
Vermont....................................................... 0.9314
Virginia...................................................... 0.7782
Washington.................................................... 1.0221
West Virginia................................................. 0.7938
Wisconsin..................................................... 0.8471
Wyoming....................................................... 0.8247
------------------------------------------------------------------------
\1\ All counties within the State are classified urban.
[[Page 26283]]
E. Relationship of RUG-III Classification System to Existing Skilled
Nursing Facility Level of Care Criteria
Section 1814(a)(2)(B) of the Act provides that, in order for Part A
to make payment under the extended care benefit, a physician, nurse
practitioner, or clinical nurse specialist must initially certify (and
periodically recertify) that the beneficiary needs a specific level of
care, specifically, skilled nursing or rehabilitation services on a
daily basis which, as a practical matter, can only be provided in an
SNF on an inpatient basis. Longstanding administrative criteria for
determining whether a beneficiary meets this statutory SNF level of
care definition appear in regulations at Secs. 409.31 through 409.35
and manual instructions in the Medicare Intermediary Manual, Part 3
(MIM-3), Secs. 3132ff and the Skilled Nursing Facility Manual
Secs. 214ff. These criteria entail a retrospective review that focuses
primarily on a beneficiary's need for and receipt of specific,
individual skilled services as indicators of the need for a covered SNF
level of care. (The certification/recertification procedure itself is
implemented in regulations at Sec. 424.20.)
In this context, the RUG-III system serves three distinct but
related purposes:
Streamlining and simplifying the process for determining
that a beneficiary meets the statutory criteria for an SNF level of
care (which is a prerequisite for making program payment under the
extended care benefit), by automatically classifying those
beneficiaries assigned to any of the highest 26 of the 44 RUG-III
groups as meeting the definition. (For those beneficiaries assigned to
the lowest 18 groups, level of care determinations are performed on an
individual basis, using the existing administrative criteria
established for this purpose.)
Determining the level of the Part A per diem payment under
the SNF PPS, which varies with the resource intensity of the particular
RUG-III group to which an individual beneficiary is assigned. In
addition to developing a per diem payment rate for each of the RUG-III
groups, we are also creating a default payment rate (as discussed
previously in section II.B.11.) to address situations such as those in
which the facility's failure to submit a completed assessment in a
timely manner prevents the beneficiary from being assigned to a
particular RUG-III group. In order to receive payment at the default
rate in the absence of completing an assessment timely, the SNF would
have to submit sufficient information to its Medicare fiscal
intermediary (FI) to enable the FI to establish coverage under the
existing administrative criteria.
Providing an additional basis for making an administrative
presumption (under regulations at Sec. 409.60(c)(2)) that an SNF
resident who has exhausted Part A benefits continues to meet the
skilled level of care definition in the SNF, since a resident assigned
to any of the upper 26 RUG-III groups is automatically classified as
meeting this definition. Such a resident continues to be considered an
``inpatient'' of the SNF for purposes of prolonging his or her current
benefit period under section 1861(a)(2) of the Act and
Sec. 409.60(b)(2) of the regulations.
As discussed below, we believe that certain specific modifications
are appropriate in the existing administrative criteria that are used
for making SNF level of care determinations, in order to achieve
greater consistency between them and the RUG-III classification system.
Under the demonstration, those beneficiaries assigned to any of the
highest 26 of the 44 RUG-III groups have been defined as meeting the
SNF level of care specified in the statute. Thus, the RUG-III
classification system used under the demonstration and the existing
administrative level of care criteria essentially represent two
different approaches toward achieving the same objective--identifying
those beneficiaries who meet the SNF level of care definition in
section 1814(a)(2)(B) of the Act. Under the demonstration, RUG-III has
been used as a means of qualifying beneficiaries for coverage, not
disqualifying them. That is, those beneficiaries assigned to any of the
upper 26 groups are automatically classified as meeting the SNF level
of care definition while those beneficiaries assigned to any of the
lower 18 groups are not automatically classified as either meeting or
not meeting the definition, but instead receive an individual level of
care determination using the existing administrative criteria. This
procedure will continue under the new SNF PPS. Thus, a beneficiary who
is assigned to one of the upper 26 RUG-III groups is automatically
designated as meeting the SNF level of care definition, and the
required initial certification under Sec. 424.20(a) regarding such a
beneficiary's general need for an SNF level of care would, in effect,
simply serve to confirm the correctness of this designation.
Accordingly, we are amending the regulations at Sec. 424.20(a) to
provide that, at the option of the individual completing it, the
initial certification for a beneficiary who is assigned to one of the
upper 26 RUG-III groups can either consist of the existing content
described in that provision or, alternatively, can state simply that
the beneficiary's assignment to that particular RUG-III group is
correct.
Under this type of framework, it is not essential for the RUG-III
system to conform exactly to the existing administrative criteria,
since any beneficiary who does not initially meet the criteria for
coverage under the former will then receive an individual level of care
determination under the latter. Nevertheless, it is desirable from a
programmatic standpoint to reconcile, whenever possible, any specific
inconsistencies that may exist between these two approaches in their
treatment of particular conditions and circumstances. Further, for the
reasons discussed below, we believe that resolving these
inconsistencies in favor of the approach taken under RUG-III would also
help bring the existing administrative criteria more into line with the
current state of clinical practice. We note that these changes in the
existing administrative criteria will become effective with the
introduction of the Part A SNF PPS and its RUG-III classification
system (that is, for cost reporting periods beginning on or after July
1, 1998), and will be implemented on a prospective basis only.
Accordingly, we will advise Medicare contractors that any beneficiary
who, upon the effective date of these changes, is currently in a
covered SNF stay will not have his or her coverage terminated on the
basis of these revisions for the duration of that covered stay.
The existing administrative criteria for making SNF level of care
determinations focus primarily on the use of specific, individual
skilled services as indicators of a beneficiary's need for a covered
level of care. The particular services identified in these criteria
date back to the Senate Finance Committee Report language (S. Rep. No.
92-1230, pp. 282-285) that accompanied the Social Security Amendments
of 1972 (Public Law 92-603). However, in the 25 years since that
legislation was enacted, the state of clinical practice for the nursing
home population has advanced dramatically, to the point where some of
the specific types of services cited in the Committee Report either
have fallen largely into disuse or have now become routinely available
in less intensive settings. Accordingly, with the passage of time, some
of the individual services identified as skilled in the existing
administrative criteria no longer, in themselves, represent valid
indicators of
[[Page 26284]]
the need for a covered SNF level of care. Consequently, while such
services might still be considered ``skilled'' in a technical sense (in
that they may arguably require rendition by skilled personnel in order
to be furnished safely and effectively), we believe that they are no
longer appropriate for inclusion in the SNF level of care criteria.
For example, we believe that from a clinical as well as
programmatic standpoint, it is no longer necessary or appropriate to
include ``hypodermoclysis'' (injection of fluids into the subcutaneous
tissues to supply the body with liquids quickly) in the list of
examples of skilled nursing services at Sec. 409.33(b). Medically, this
service is equivalent to giving fluids in an intravenous infusion. As
more SNFs have become proficient in the administration of intravenous
medications and fluids, the number of cases in which this service would
be appropriate becomes extremely small. Although there may be a very
small number of beneficiaries who cannot be hydrated with intravenous
fluids, it is likely that they would be sufficiently medically complex
as to be classified into one of the top 26 RUG-III categories,
regardless of the use of hypodermoclysis.
We also believe that the ordering of subcutaneous injections can no
longer be considered sufficient in itself to justify the designation of
a covered SNF level of care. We note that the most frequently
administered type of subcutaneous medication is insulin, which has long
been defined as a nonskilled service with respect to any beneficiary
who is capable of self-administration. Further, with the evolving state
of clinical practice over time, the administration of a subcutaneous
injection has now become commonly accepted as a nonskilled service even
in less intensive settings such as physician offices and home health
agencies, making its continued categorization as a skilled service in
the SNF context increasingly anomalous. In the RUG-III classifications,
an insulin-dependent diabetic beneficiary who is clinically unstable
enough to have had two physician order changes within the preceding 7
days would be assigned to one of the top 26 groups and, thus, would
automatically be classified as meeting the standard for a covered level
of care. By contrast, a beneficiary who has stabilized and continues to
receive subcutaneous injections on a chronic basis will, in all
likelihood, have already exhausted the 100 days of available SNF
coverage per benefit period at that point. In this situation,
categorizing the injections as a nonskilled service would actually work
to the beneficiary's advantage, as it would enable such a beneficiary
to end that benefit period in the SNF under regulations at
Sec. 409.60(b)(2).
The vast majority of urinary catheters are placed in the urethra,
but a few are suprapubic. The current administrative criteria also
identify the insertion into the urethra and sterile irrigation of
urinary catheters as a skilled nursing service. However, RUG-III does
not consider any of these catheters in assigning patients to a RUG-III
category. Further, we believe that it may well be inherently
undesirable to specify the use of urinary catheters as a criterion that
effectively governs SNF coverage determinations, because of the risk
that this creates of providing an unwarranted incentive for the
inappropriate use of urinary catheters. It is widely recognized that
there is a significant amount of unnecessary use of catheters for the
convenience of care givers, with the potential to place beneficiaries
at increased risk of infection. Nevertheless, we also recognize that a
catheter can be medically necessary, especially in those particular
situations where obstruction is present. Accordingly, we are not
deleting this particular procedure from the administrative criteria at
this time. We invite comments on whether the care of suprapubic
catheters should be considered skilled.
The RUG-III groups recognize enteral feeding as a criterion for
patient classification only if it is providing the patient with more 26
percent of his or her calories and at least 501 milliliters of
hydration daily. Historically, the administrative criteria have only
required the mere presence of a ``Levin tube'' (now referred to as a
nasogastric tube) or a gastrostomy tube for enteral feeding. We note
that, in recent years, gastrostomy tube feedings have become the more
commonly used procedure, as the chronic use of nasogastric tubes has
been replaced because of the increased risk of pneumonia from
aspirating fluid into the lungs. The demonstration took a more
specifically defined approach because a few beneficiaries in all the
demonstration states were found to have had feeding tubes retained even
though they were no longer used (or even usable), with the only
apparent purpose being to maintain the beneficiary's ``skilled''
status. Because we believe that it is clearly inappropriate for such a
practice to serve as an indicator of the need for a covered level of
care, we are revising the administrative criteria to adopt the RUG-III
system's more specific approach. That approach incorporates specific
criteria (that is, comprising at least 26 per cent of daily calorie
requirements and providing at least 501 milliliters of fluid per day)
that effectively limit the recognition of enteral feeding as a skilled
service (regardless of whether administered by nasogastric,
gastrostomy, or gastro-jejunostomy tube) to those instances in which it
currently is clinically relevant to the beneficiary. We note that this
particular change would not result in removing enteral feeding
altogether from the list of skilled nursing services in Sec. 409.33(b),
but merely would provide more specific, objective criteria for ensuring
that coverage determinations take this particular procedure into
account only in those instances where its use is, in fact, reasonable
and necessary in accordance with section 1862(a)(1) of the Act.
Under the existing administrative criteria, ``management and
evaluation of a care plan,'' ``observation and assessment,'' and
``patient education'' needed to teach a patient self-maintenance during
the initial stages of treatment would be sufficient in themselves to
justify the need for skilled nursing services. The RUG-III system uses
nursing rehabilitation frequency of physician visits and number of days
on which physician orders change as criteria to assign patients.
``Nursing rehabilitation'' is defined in the Long Term Care Resident
Assessment Manual. The services considered to be nursing rehabilitation
in the PPS system include, but are not limited to, teaching self-care
for diabetic management, self-administration of medications, and ostomy
care.
It is our experience in the demonstration that these criteria
effectively serve as proxies to the existing categories of ``management
and evaluation of a care plan,'' ``observation and assessment,'' and
``patient education'' (see the preceding discussion on the RUG-III
Clinically Complex category). Observation and assessment
(Sec. 409.33(a)(2)) involves a medically fragile beneficiary who
(although not presently receiving any specific skilled services) could
potentially undergo a sudden and rapid decline at any time and,
consequently, may require skilled expertise on the part of facility
staff in order to recognize and respond quickly to the earliest signs
of an impending change in condition.
Because the category of observation and assessment is, by
definition, limited to a beneficiary whose condition is potentially
unstable, the RUG-III criteria for frequency of physician visits and
number of order changes clearly represent appropriate proxies in this
situation. They similarly serve as appropriate proxies for the category
of
[[Page 26285]]
skilled management and evaluation (Sec. 403.33(a)(1)) of an aggregate
of nonskilled services (which is generally invoked only during the
first few days of a beneficiary's SNF stay, until more specific skilled
care needs can be identified through the completion of the resident
assessment) and of patient education (Sec. 409.33(a)(3), which involves
teaching self-maintenance during the initial stages of treatment),
since these categories are generally confined to the initial portion of
the SNF stay, typically before the beneficiary's condition has
stabilized. Accordingly, because we anticipate that essentially all
patients falling into these categories will be assigned to one of the
highest 26 RUG-III groups, we believe that it is no longer necessary to
retain these particular categories in the administrative criteria.
As noted above, the dramatic advances in the state of medical and
nursing practice that have occurred over the past 25 years have
necessitated a reevaluation of some of the specific elements in the
existing SNF level of care criteria. These advances in clinical
practice have also been accompanied by a significant improvement in the
ability to collect and utilize clinical data for program purposes, as
exemplified by the MDS and RUG-III. Therefore, we believe it may be
appropriate to consider the feasibility of ultimately moving beyond the
limited, incremental adjustments in the existing SNF level of care
criteria discussed above, in favor of a more fundamental change in the
overall process of performing SNF level of care determinations
themselves. Specifically, it may be possible to eliminate the use of
the existing administrative criteria altogether, by utilizing RUG-III
as the exclusive means for making these determinations rather than as a
mere adjunct to the administrative criteria.
We believe that the RUG-III system's basic approach, which provides
for an ongoing evaluation of an entire cluster of patient indicators,
may well represent a more predictable and reliable way of making
accurate SNF level of care determinations than the existing
administrative criteria's primary focus on reviewing claims information
retrospectively for the presence or absence of individual skilled
services. Besides being a far simpler procedure from an administrative
standpoint, we believe that basing SNF level of care determinations
exclusively on the RUG-III system would represent a significant
improvement over certain aspects of the existing criteria:
Greater reliability in predicting in advance whether a
particular beneficiary will qualify for coverage. Under the current
process of determining Medicare coverage with the existing
administrative criteria based on a retrospective claims review, it can
be difficult to predict with certainty whether a particular
beneficiary's SNF care will be covered. One early attempt to address
the resulting problem of retroactive coverage denials was the enactment
of the ``presumed coverage'' provision in section 228(a) of Public Law
92-603, which was designed to grant periods of SNF coverage
prospectively on the basis of a beneficiary's diagnosis. However, in
section 941 of the Omnibus Reconciliation Act of 1980 (Public Law 96-
499), the Congress ultimately repealed this provision as unworkable.
Thus, while the subsequently-enacted hospital PPS was able to use
diagnosis successfully as a predictor of resource intensity for acute
care, the long-term care setting required the development of indicators
that were more sensitive to the particular characteristics of patients
in this setting. We believe that in the RUG-III classification system,
we have now developed such an instrument, with the potential to bring
greater reliability and predictability to the SNF coverage
determination process.
Increased consistency and uniformity among different
contractors in making level of care determinations. The process of
retrospective claims review conducted under the existing administrative
criteria inherently relies upon the medical judgment of the individual
reviewer. Thus, it would be possible for two claims with essentially
identical sets of facts to be adjudicated differently by different
contractors. By contrast, RUG-III utilizes a unified set of specific
clinical criteria that is more coherent and objective, thus diminishing
the potential for variation based on differences in individual
judgment.
It is worth noting that even the existing criteria implicitly
acknowledge the limitations of an approach that looks solely at the
presence or absence of individual skilled services. As mentioned
previously, the existing criteria have historically recognized
situations that may require skilled overall management and evaluation
of the care plan of a beneficiary who receives only an aggregate of
unskilled services, or that may require skilled observation and
assessment of changes in the condition of an extremely unstable and
medically fragile beneficiary, even though the beneficiary does not
presently receive any specific skilled services. Further, RUG-III's
approach of evaluating a broad cluster of services and other patient
indicators is consistent with the recent Medicare trend of grouping
individual services into increasingly larger bundles for program
purposes, as exemplified by the SNF PPS and Consolidated Billing
provisions.
Another reason that it may now be feasible to rely exclusively on
the RUG-III system in making level of care determinations is that the
upper 26 RUG-III categories and the existing administrative criteria
(as now modified) should serve to identify increasingly similar sets of
patients as meeting the SNF level of care definition. We also note a
steady decline over the course of the demonstration in the proportion
of covered days for those beneficiaries assigned to any of the lower 18
RUG-III groups (which initially represented approximately 15 percent of
total covered days), to the point where such beneficiaries ultimately
accounted for only about 5 to 8 percent of total covered days. Thus,
one possible approach might be simply to establish that beneficiaries
assigned to the highest 26 groups meet the SNF level of care
definition, while those assigned to the lowest 18 groups do not, and we
specifically solicit comments on the feasibility of this approach.
However, we also solicit comments on the possible extent and specific
nature of situations in which beneficiaries who are assigned to one of
the lower 18 RUG-III groups might nonetheless meet the statutory
standard for an SNF level of care, including information on their
clinical profiles as well as the specific basis on which they would
qualify for Medicare SNF coverage.
We are also creating a new, rebuttable presumption of an SNF
resident's continued ``inpatient'' status for benefit period purposes,
based on his or her assignment to one of the upper 26 RUG-III groups.
We are adding this new administrative presumption to paragraph (c)(2)
of Sec. 409.60 rather than to paragraph (c)(1) since, unlike the
presumptions included in paragraph (c)(1), it is not limited to
instances in which a claim for Medicare SNF benefits is actually filed.
Thus, a benefit period determination under this presumption could be
rebutted by presenting evidence establishing that the beneficiary
should have been assigned to one of the lower 18 RUG-III groups which,
in turn, would permit a determination that the beneficiary was not
actually receiving a covered level of care.
III. Three-Year Transition Period
Under sections 1888(e) (1) and (2) of the Act, during a facility's
first three
[[Page 26286]]
cost reporting periods that begin on or after July 1, 1998 (transition
period), the facility's PPS rate will be equal to the sum of a
percentage of an adjusted facility-specific per diem rate and a
percentage of the adjusted Federal per diem rate. After the transition
period, the PPS rate will equal the adjusted Federal per diem rate. The
transition period payment method will not apply to SNFs that first
received Medicare payments (interim or otherwise) on or after October
1, 1995 under present or previous ownership; these facilities will be
paid based on 100 percent of the Federal rate.
The facility-specific per diem rate is the sum of the facility's
total allowable Part A Medicare costs and an estimate of the amounts
that would be payable under Part B for covered SNF services for cost
reporting periods beginning in fiscal year 1995 (base year). The base
year cost report used to compute the facility-specific per diem rate in
the transition period must be the latest available cost report. It may
be settled (either tentative or final) or as-submitted for Medicare
payment purposes. Under section 1888(e)(3) of the Act, any adjustments
to the base year cost report made as a result of settlement or other
action by the fiscal intermediary, including cost limit exceptions/
exemptions, results of an appeal, etc., will result in a retroactive
adjustment to the facility-specific per diem rate. The instructions
below should be used to calculate the facility-specific per diem rate.
A. Determination of Facility-Specific Per Diem Rates
1. Part A Cost Determination
The facility-specific per diem rate reflects the total allowable
Part A Medicare cost (routine, ancillary, and capital-related) incurred
during a facility's cost reporting period beginning in Federal fiscal
year 1995 (base year). The facility-specific per diem rate will be
adjusted to account for the amounts of (1) exceptions granted to the
inpatient routine services cost limits under Sec. 413.30(f), and (2)
new provider exemptions from the cost limits under Sec. 413.30(e), only
to the extent that routine service costs do not exceed 150 percent of
applicable unadjusted cost limits.
Part A Medicare costs associated with approved educational
activities, as defined in Sec. 413.85, are not included in the
facility-specific per diem rate. A facility's actual reasonable costs
of approved educational activities will be separately identified and
apportioned to the Medicare program for payment purposes on the
Medicare cost report effective for cost reporting periods beginning on
or after July 1, 1998.
Under section 1888(e)(3)(B)(ii) of the Act, for facilities
participating in the Nursing Home Case-Mix and Quality Demonstration
(RUG-III), the Part A Medicare costs used to compute the facility-
specific per diem rate will be the aggregate RUG-III payment received
for services furnished in the cost reporting period beginning calendar
year 1997 plus the routine capital costs and ancillary costs (other
than occupational therapy, physical therapy, and speech pathology
costs) as reported on the facility's Medicare cost report that begins
in calendar year 1997.
For those low volume SNFs that received a prospectively determined
payment rate for SNF routine services, under section 1888(d) of the Act
and part 413, subpart I, the facility-specific per diem rate will be
the applicable prospectively determined payment rate plus Medicare
ancillary cost per diem.
Calculations to determine Medicare Part A costs are to be made as
follows:
a. Freestanding Skilled Nursing Facilities. (1) Skilled Nursing
Facilities Without an Exception for Medical and Paramedical Education
(Sec. 413.30(f)(4)) or a New Provider Exemption in the Base Year.
i. Routine Costs
Step 1. Determine total program routine service costs for
comparison to the cost limitation (HCFA-2540-92, worksheet D-1, line 23
or HCFA-2540-96, worksheet D-1, line 25).
Step 2. Determine Medicare Routine medical education costs--
worksheet B, part I, line 16, column 14 divided by total patient days
(Worksheet S-3, line 1, column 7) then multiplied by total Medicare
days (Worksheet S-3, line 1, column 4).
Step 3. Subtract amount in Step 2. from amount in Step 1. above.
Step 4. Compare amount in Step 3. above to the inpatient routine
service cost limitation, including exception amounts other than Medical
and Paramedical Education: see (2) below (HCFA-2540-92, worksheet D-1,
line 24 or HCFA-2540-96, worksheet D-1, line 27) and take the lesser of
the two amounts.
Step 5. Add the amount in Step 4. to the program capital related
cost (HCFA-2540-92, worksheet D-1, line 20 or HCFA-2540-96, worksheet
D-1, line 22).
ii. Part A Ancillary Costs
Step 1. Determine total program inpatient ancillary services (HCFA-
2540-92 or HCFA-2540-96, Worksheet E, part I, line 1).
Step 2. Determine Medicare Ancillary medical education costs--
worksheet B, part I, calculate separately each line 21-33, dividing
column 14 by column 18. Multiply the resulting percentage by the
corresponding line (lines 21-33) on worksheet D, column 4. Total the
resulting amounts calculated for lines 21-33.
Step 3. Subtract amount in Step 2. from the amount in Step 1.
above.
iii. Part A cost Equals the Amount in i.Step 5. Plus the Amount in
ii.Step 3. Above
(2) Skilled Nursing Facilities With an Exception for Medical and
Paramedical Education in the Base Year.
i. Routine Costs
Step 1. Determine total program routine service costs for
comparison to the cost limitation (HCFA-2540-92, worksheet D-1, line 23
or HCFA-2540-96, worksheet D-1, line 25).
Step 2. Determine Medicare Routine medical education costs--
worksheet B, part I, line 16, column 14 divided by total patient days
(Worksheet S-3, line 1, column 7) then multiplied by total Medicare
days (Worksheet S-3, line 1, column 4).
Step 3. Subtract the amount in Step 2. from the amount in Step 1.
above
Step 4. From the inpatient routine service cost limitation,
including all exception amounts granted, (HCFA-2540-92, worksheet D-1,
line 24 or HCFA-2540-96, worksheet D-1, line 27) subtract the exception
amount granted for medical and paramedical education costs.
Step 5. Compare amount in Step 3. above with the amount in Step 4.
above and take the lesser of the two amounts.
Step 6. Add amount in Step 5. to the program capital related cost
(HCFA-2540-92, worksheet D-1, line 20 or HCFA-2540-96, worksheet D-1,
line 22).
ii. Part A Ancillary Costs
Step 1. Determine total program inpatient ancillary services (HCFA-
2540-92 or HCFA-2540-96, Worksheet E, part I, line 1).
Step 2. Determine Medicare Ancillary medical education costs--
worksheet B, part I, calculate separately each line 21-33, dividing
column 14 by column 18. Multiply the resulting percentage by the
corresponding line (lines 21-33) on worksheet D, column 4. Total the
amounts calculated for lines 21-33.
Step 3. Subtract amount in Step 2. from the amount in Step 1.
above.
[[Page 26287]]
iii. Part A cost Equals the Amount in i.Step 6. Plus the Amount in
ii.Step 3. Above
(3) Skilled Nursing Facilities With New Provider Exemptions From
the Cost Limits in the Base Year.
i. Routine Costs
Step 1. Determine total program routine service costs for
comparison to the cost limitation (HCFA-2540-92, worksheet D-1, line 23
or HCFA-2540-96, worksheet D-1, line 25).
Step 2. Determine Medicare Routine medical education costs--
worksheet B, part I, line 16, column 14 divided by total patient days
(Worksheet S-3, line 1, column 7) then multiplied by total Medicare
days (Worksheet S-3, line 1, column 4).
Step 3. Subtract amount in Step 2. from the amount in Step 1.
above.
Step 4. Multiply the unadjusted inpatient routine service cost
limitation (the cost limit amount had the SNF not received an
exemption, which is normally reported on HCFA-2540-92, worksheet D-1,
line 24 or HCFA-2540-96, worksheet D-1, line 27) by 1.5.
Step 5. Compare amount in Step 3. above with the amount in Step 4.
above and take the lesser of the two amounts.
Step 6. Add to the amount in Step 5. the program capital related
cost (HCFA-2540-92, worksheet D-1, line 20 or HCFA-2540-96, worksheet
D-1, line 22).
ii. Part A Ancillary Costs
Step 1. Determine total program inpatient ancillary services (HCFA-
2540-92 or HCFA-2540-96, Worksheet E, part I, line 1).
Step 2. Determine Medicare Ancillary medical education costs--
worksheet B, part I, calculate separately each line 21-33, dividing
column 14 by column 18. Multiply the resulting percentage by the
corresponding line (lines 21-33) on worksheet D, column 4. Total the
amounts calculated for lines 21-33.
Step 3. Subtract amount in Step 2. from the amount in Step 1.
above.
iii. Part A Cost Equals the Amount in i. Step 6. Plus the Amount in
ii.Step 3. Above
b. Hospital-based skilled nursing facilities. (1) Skilled Nursing
Facilities Without an Exception for Medical and Paramedical Education
or a New Provider Exemption.
i. Routine Costs
Step 1. Determine total program routine service costs for
comparison to the cost limitation (HCFA-2552-92 or HCFA-2552-96,
worksheet D-1, part III, line 76).
Step 2. Determine Medicare Routine medical education costs--
worksheet B part I, line 34, sum of columns 21 and 24 (only amounts
that are for approved education programs), divided by total patient
days (worksheet S-3, part I, line 11 (HCFA-2552-92) or part I, line 15
(HCFA-2552-96) column 6) then multiplied by total Medicare days
(worksheet S-3, part I, line 11 (HCFA-2552-92) or part I, line 15
(HCFA-2552-96), column 4).
Step 3. Subtract amount in Step 2. from the amount in Step 1.
above.
Step 4. Compare amount in Step 3. above to the inpatient routine
service cost limitation, including exception amounts other than Medical
and Paramedical education; see (2) below, (HCFA-2552-92 or HCFA-2552-
96, worksheet D-1, part III, line 78) and take the lesser of the two
amounts.
Step 5. Add to amount in Step 4. The program capital related cost
(HCFA-2552-92 or HCFA-2552-96, worksheet D-1, part III, line 73).
ii. Part A Ancillary Costs
Step 1. Determine total program inpatient ancillary services (HCFA-
2552-92 or HCFA-2552-96, worksheet D-1, part III, line 80).
Step 2. Determine Medicare Ancillary medical education costs--
worksheet B, part I, (calculate separately each line 37-59 ), dividing
the sum of columns 21 and 24 (approved programs only) by column 27.
Multiply the resulting percentage by the corresponding line (lines 37-
59) on worksheet D-4 (SNF), column 3. Total the amounts calculated for
lines 37-59.
Step 3. Subtract amount in Step 2. from the amount in Step 1.
above.
iii. Part A Cost Equals the Amount in i.Step 5. Plus the Amount in
ii.Step 3. Above
(2) Skilled Nursing Facilities With an Exception for Medical and
Paramedical Education in the Base Year.
i. Routine Costs
Step 1. Determine total program routine service costs for
comparison to the cost limitation (HCFA-2552-92 or HCFA-2552-96,
worksheet D-1, part III, line 76).
Step 2. Determine Medicare Routine medical education costs--
worksheet B part I, line 34, sum of columns 21 and 24 (only amounts
that are for approved education programs), divided by total patient
days (worksheet S-3, part I, line 11 (HCFA-2552-92) or part I, line 15
(HCFA-2552-96) column 6) then multiplied by total Medicare days
(worksheet S-3, part I, line 11 (HCFA-2552-92) or part I, line 15
(HCFA-2552-96), column 4).
Step 3. Subtract amount in Step 2. from the amount in Step 1.
above.
Step 4. From the inpatient routine service cost limitation,
including all exception amounts granted, (HCFA-2552-92 or HCFA-2552-96,
worksheet D-1, part III, line 78) subtract the exception amount granted
for medical and paramedical education costs.
Step 5. Compare amount in Step 3. above with the amount in Step 4.
above and take the lesser of the two amounts.
Step 6. Add to the amount in Step 5. the program capital related
cost (HCFA-2552-92 or HCFA-2552-96, worksheet D-1, part III, line 73).
ii. Part A Ancillary Costs
Step 1. Determine total program inpatient ancillary services (HCFA-
2552-92 or HCFA-2552-96, worksheet D-1, part III, line 80).
Step 2. Determine Medicare Ancillary medical education costs--
worksheet B, part I (calculate separately each line 37-59), dividing
the sum of columns 21 and 24 (approved programs only) by column 27.
Multiply the resulting percentage by the corresponding line (lines 37-
59) on worksheet D-4 (SNF), column 3. Total the amounts calculated for
lines 37-59.
Step 3. Subtract amount in Step 2. from the amount in Step 1.
above.
iii. Part A Cost Equals the Amount in i.Step 6. plus the amount in
ii.Step 3. Above
(3) Skilled Nursing Facilities with exemptions from the cost limits
in the base year.
i. Routine Costs
Step 1. Determine total program routine service costs for
comparison to the cost limitation (HCFA-2552-92 or HCFA-2552-96,
worksheet D-1, part III, line 76).
Step 2. Determine Medicare Routine medical education costs--
worksheet B, part I, line 34, sum of columns 21 and 24 (only amounts
that are for approved education programs), divided by total patient
days (worksheet S-3, part I, line 11 (HCFA-2552-92) or part I, line 15
(HCFA-2552-96), column 6) then multiplied by total Medicare days
(worksheet S-3, part I, line 11 (HCFA-2552-92) or part I, line 15
(HCFA-2552-96), column 4).
Step 3. Subtract amount in Step 2. from the amount in Step 1.
above.
Step 4. Multiply the unadjusted inpatient routine service cost
limitation (the cost limit amount had the SNF not received an
exemption, which is normally reported on HCFA-2552-92 or HCFA-2552-96,
worksheet D-1, part III, line 78) by 1.5.
[[Page 26288]]
Step 5. Compare amount in Step 3. above with the amount in Step 4.
above and take the lesser of the two amounts.
Step 6. Add to the amount in Step 4. the program capital related
cost (HCFA-2552-92 or HCFA-2552-96, worksheet D-1, part III, line 73).
ii. Part A Ancillary Costs
Step 1. Determine total program inpatient ancillary services (HCFA-
2552-92 or HCFA-2552-96, worksheet D-1, part III, line 80).
Step 2. Determine Medicare Ancillary medical education costs--
worksheet B, part I (calculate separately each line 37-59), dividing
the sum of columns 21 and 24 (approved programs only) by column 27.
Multiply the resulting percentage by the corresponding line (lines 37-
59) on worksheet D-4 (SNF), column 3. Total the amounts calculated for
lines 37-59.
Step 3. Subtract the amount in Step 2. from the amount in Step 1.
above.
iii. Part A Cost Equals the Amount in i.Step 6. Plus the Amount in
ii.Step 3. Above
c. Medicare low volume Skilled Nursing Facilities electing
prospectively determined payment rate (fewer than 1500 Medicare days).
(1) Providers Filing HCFA-2540-S-87.
Step 1. Determine inpatient ancillary services Part A (HCFA-2540-S-
87, worksheet E, part A, line 1).
Step 2. Determine inpatient routine PPS amount (HCFA-2540-S-87,
worksheet E, part A, line 6).
Step 3. Part A cost equals the amount in Step 1. plus the amount in
Step 2. above.
(2) Providers Filing HCFA-2540 or HCFA-2552.
Step 1. Determine the prospective payment amount is used as the
routine cost.
Step 2. Follow the steps under a.(1)(ii) if you are a freestanding
SNF or b.(1)(ii) if you are a hospital-based SNF to calculate the
ancillary costs.
Step 3. Part A cost equals the amount in Step 1. plus the amount in
Step 2. above.
d. Providers participating in the multistate nursing home case-mix
and quality demonstration--calculation of the prospective payment
system rate. For providers that received payment under the RUGs-III
demonstration during a cost reporting period that began in calendar
year 1997, we will determine their facility-specific per diem rate
using the methodology described below. It is possible that some
providers participated in the demonstration but did not have a cost
reporting period that began in calendar year 1997. For those providers,
we will determine their facility-specific per diem rate by using the
calculations in (a), (b), or (c) above. As with the facility-specific
per diem applicable to other providers, the allowable costs will be
subject to change based on the settlement of the cost report used to
determine the total payment under the demonstration. In addition, we
derive a special market basket inflation factor to adjust the 1997
costs to the midpoint of the rate setting period (July 1, 1998 to
September 30, 1999).
Step 1. Determine the aggregate payment during the cost reporting
period that began in calendar year 1997--RUGs-III payment plus routine
capital costs plus ancillary costs (other than Occupational Therapy,
Physical Therapy, and Speech Pathology).
Step 2. Divide the amount in Step 1. by the applicable total
inpatient days for the cost reporting period.
Step 3. Adjust the amount in Step 2. by 1.031532 (inflation
factor)--Do not use Table 4.F.
The amount in Step 3 is the facility-specific rate that is
applicable for the facility's first cost reporting period beginning
after July 1, 1998. A separate calculation for Part B services is not
required.
e. Base period cost reports that are adjusted for exception amounts
or other post settlement adjustments. Intermediaries will calculate a
provider's Medicare Part A costs, as described above, using the latest
available version of the cost report in the settlement process.
Adjustments made in subsequent cost report versions, through the
settlement or reopening process, will result in a revision to the
facility-specific rate. Examples of these adjustments include exception
amounts or other post-settlement adjustments.
B. Determination of the Part B Estimate
HCFA will supply each intermediary with the estimated Part B
charges for each provider that it serves. As explained above, the BBA
1997 requires that the facility-specific per diem rates reflect items
and services (other than those specifically excluded) for which, prior
to July 1, 1998, payment had been made under Part B but furnished to
SNF residents during a Part A covered stay. Accordingly, it was
necessary to determine the Part B allowable charges (including
coinsurance) associated with the SNFs contained in the cost report data
base. This was accomplished by matching 100 percent of the Medicare
Part B SNF claims associated with Part A covered SNF stays related to
the SNF cost reporting periods beginning in the 1995 base year. The
matched Part B allowable charges were computed at a facility level by
the appropriate cost report cost center (for example, laboratory
services, supplies) with the cost report data.
C. Calculation of the Facility-Specific Per Diem Rate
The facility-specific per diem rate is equal to the sum of Medicare
Part A costs as determined in section III.A above and the Medicare Part
B estimate described in section III.B above.
Example: The rules as shown under b.(2) above will be used in this
example.
ABC SNF is a hospital-based SNF which received an exception of
$10,000 of which $5,000 was for Medical and Paramedical Education costs
in accordance with the rules at Sec. 413.30(f)(4) in its base year. ABC
SNF filed its cost report using HCFA-2552-96. ABC's facility-specific
per diem rate for its first cost reporting period beginning in the
transition period is calculated as follows:
Step 1. ABC SNF reported program routine service costs for
comparison to the cost limits on worksheet D-1, part III, line 76 of
$200,000.
Step 2. Total (all patients) routine medical education costs
(approved programs) from worksheet B, part I, line 34, the sum of
columns 21 and 24 totaled $25,000. Total patient days from worksheet S-
3, part I, line 15, column 6 were 5,000 and total Medicare days
(worksheet S-3, part I, line 15, column 4) were 1,000. Dividing the
total costs of $25,000 by the total days of 5,000 gives you a cost per
day of $5.00. Multiply the cost per day by the Medicare days of 1,000,
which results in the total Medicare routine medical education cost of
$5,000.
Step 3. Subtract the amount in Step 2. ($5,000) from the amount in
Step 1. ($200,000) or $195,000 ($195.00 per Medicare day).
Step 4. ABC SNF's inpatient routine service cost limitation amount
without any exception amounts is $180,000, the amount with all
exception amounts including the $5,000 exception amount for medical and
paramedical education costs from worksheet D-1, part III, line 78 is
$190,000 ($180,000 plus $10,000). Subtract the exception amount for
medical and paramedical education of $5,000 to equal $185,000.
Step 5. Determine the lesser amount in Step 3. and Step 4. above--
$185,000.
Step 6. Add the program capital-related cost of $20,000 from
worksheet D-1, part III, line 73 to the amount in Step 5 above to equal
$205,000.
Step 7. ABC SNF has total program inpatient ancillary services
costs on
[[Page 26289]]
worksheet D-1, part III, line 80 of $350,000.
Step 8. Determine Medicare ancillary medical education costs
(approved programs) from worksheet B, part I, lines 37-59. Calculating
each line (separately calculate each line) by taking the sum of columns
21 and 24 and dividing by column 27 (approved programs only). Multiply
this percentage by the corresponding line (lines 37-59) on worksheet D-
4 (SNF), column 3. Totaling the amounts calculated for lines 37-59 ABC
SNF had Medicare ancillary medical education costs of $35,000.
Step 9. Subtract amount in Step 8 ($35,000) from line 7 ($350,000)
or $315,000.
Step 10. Determine the estimated Part B amount supplied by HCFA for
ABC. Assume, for this example, that this amount is $50,000.
Step 11. Add amounts in Step 6 ($205,000), Step 9 ($315,000), and
Step 10 ($50,000) to determine the facility-specific per diem rate of
$570.00 ($570,000 divided by 1,000 Medicare days).
D. Computation of the Skilled Nursing Facility Prospective Payment
System Rate During the Transition
For the first three cost reporting periods beginning on or after
July 1, 1998 (transition period), an SNF's payment under the PPS is the
sum of a percentage of the facility-specific per diem rate and a
percentage of the Federal per diem rate. Under section 1888(e)(2)(C) of
the Act, for the first cost reporting period in the transition period,
the SNF payment will be the sum of 75 percent of the facility-specific
per diem rate and 25 percent of the Federal per diem rate. For the
second cost reporting period, the SNF payment will be the sum of 50
percent of the facility-specific per diem rate and 50 percent of the
Federal per diem rate. For the third cost reporting period, the SNF
payment will be the sum of 25 percent of the facility-specific per diem
rate and 75 percent of the Federal per diem rate. For all subsequent
cost reporting periods beginning after the transition period, the SNF
payment will be equal to 100 percent of the Federal per diem rate. See
the example below.
Example of computation of adjusted PPS rates and SNF payment:
Using the ABC SNF described in this section, the following shows
the adjustments made to the facility-specific per diem rate and the
Federal per diem rate to compute the provider's actual per diem PPS
payment in the transition period. ABC's 12-month cost reporting period
begins July 1, 1998.
Step 1.
Compute:
Facility-specific per diem rate.......................... $570.00
Market Basket Adjustment (Table 4.F)..................... x
1.05149
--------------
Adjusted facility-specific rate.......................... .. $599.35
Step 2.
Compute Federal per diem rate:
SNF ABC from above is located in State College, PA with a wage
index of 0.9635.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Labor Adjusted Nonlabor Adjusted Medicare
RUG group portion* Wage index labor portion* rate days Payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
RVC.......................................................... $224.74 0.9635 $216.54 $71.41 $287.95 50 $14,398
RHC.......................................................... 206.06 .9635 198.54 65.47 264.01 100 26,401
------------------------------------------------------------------------------------------
Total.................................................. ........... ........... ........... ........... ........... 150 40,799
--------------------------------------------------------------------------------------------------------------------------------------------------------
*From Table 2.G.
Step 3.
Apply transition period percentages:
Facility-specific per diem rate $599.35 x 150 days= $89,903
Times transition percentage (75 percent)..................... x .75
Actual facility-specific PPS payment......................... $67,427
Federal PPS payment.......................................... $40,799
Times transition percentage (25 percent)..................... x .25
----------
Actual Federal PPS payment................................... $10,200
Step 4.
Compute total PPS payment
ABC's total PPS payment ($67,427+$10,200).................... $77,627
IV. The Skilled Nursing Facility Market Basket Index
Section 1888(e)(5)(A) of the Act requires the Secretary to
establish an SNF market basket index that reflects changes over time in
the prices of an appropriate mix of goods and services included in the
SNF PPS. Accordingly, as described below, we have developed an SNF
market basket index that encompasses the most commonly used cost
categories for SNF routine services, ancillary services, and capital-
related expenses.
A. Rebasing and Revising of the Skilled Nursing Facility Market Basket
1. Background
Effective for cost reporting periods beginning on or after October
1, 1979, we developed and adopted a routine SNF input price index, that
is, the SNF market basket using data from 1977 as the base year.
Although ``market basket'' technically describes the mix of goods
and services needed to produce SNF care, this term is also commonly
used to denote the input price index that includes both weights (mix of
goods and services) and price factors. Accordingly, the term ``market
basket'' used in this rule refers to the SNF input price index.
The 1977-based routine SNF market basket was for routine costs
(ancillary services and capital-related costs were excluded). The
percentage change in the 1977-based routine market basket reflects the
average change in the price of a fixed set of goods and services
purchased by SNFs to furnish routine services. We first used the market
basket to adjust SNF cost limits to reflect the average increase in the
prices of the goods and services used to furnish routine reasonable
costs for SNF care. This approach linked the increase in the cost
limits to the efficient utilization of resources. For background
information, see the August 31, 1979 Federal Register (44 FR 51542).
For purposes of SNF PPS, the total cost SNF market basket is a
fixed-weight (Laspeyres type) price index constructed in three steps.
First, a base period is selected and total base period expenditure for
cost shares is estimated for mutually exclusive and exhaustive spending
categories. Total costs for routine services, ancillary costs, and
capital-related costs are used. These proportions are called ``cost''
or ``expenditure'' weights. The second step essential for developing an
input price index is to match each expenditure category to a price/wage
variable, called a price proxy. These price proxy variables are drawn
from publicly
[[Page 26290]]
available statistical series published on a consistent schedule,
preferably at least quarterly. In the final step, the price level for
each spending category is multiplied by the expenditure weight for that
category. The sum of these products (that is, weights multiplied by
proxy index levels) for all cost categories yields the composite index
level in the market basket for a given quarter or year. Repeating the
third step for other quarters and years produces a time series of
market basket index levels. Dividing one index level by an earlier
index level produces rates of growth in the input price index.
The market basket is described as a fixed-weight index because it
answers the question of how much more or less it would cost, at a later
time, to purchase the same mix of goods and services that was purchased
in the base period. The effects on total expenditures resulting from
changes in the quantity or mix of goods and services purchased
subsequent or prior to the base period are, by design, not considered.
To implement section 1888(e)(5)(A) of the Act, it is necessary to
revise and rebase the routine cost market basket so the cost weights
and price proxies reflect the mix of goods and services that SNFs
purchase for all costs (routine, ancillary, and capital-related)
encompassed by SNF PPS. The current SNF routine cost weights (excluding
ancillary costs and capital-related costs) are from calendar year 1977.
To the extent feasible, the data used to revise and rebase the SNF
market basket are from fiscal year 1992. If data from an earlier period
supplement fiscal year 1992 data, they have been aged forward for price
changes.
2. Rebasing and Revising the Skilled Nursing Facility Market Basket
The terms ``rebasing'' and ``revising,'' while often used
interchangeably, actually denote different activities. Rebasing means
moving the base year for the structure of costs of an input price index
(for example, for this rule, we have moved the base year cost structure
from calendar year 1977 to fiscal year 1992). Revising means changing
data sources, cost categories, and/or price proxies used in the input
price index.
To implement section 1888(e)(5)(A) of the Act, we are rebasing and
revising the routine SNF market basket (excluding ancillary and
capital-related costs) to reflect 1992 total cost data (routine,
ancillary, and capital-related), the latest available relatively
complete data on the structure of SNF costs; and to modify certain
variables used as the price proxies for some of the cost categories.
In developing the revised market basket, we reviewed SNF
expenditure data for the market basket cost categories. We reviewed
Medicare Cost Reports for PPS-9 for each freestanding SNF that had
Medicare expenses greater than 1 percent of total expenses. PPS-9 cost
reports are those with cost reporting periods beginning after September
30, 1991 and before October 1, 1992. Data on SNF expenditures for six
major expense categories (wages and salaries, employee benefits,
contract labor, pharmaceuticals, capital-related, and a residual ``all
other'') were edited and tabulated. After totals for these main cost
categories were calculated, we then determined the proportion of total
costs that each category represented. The proportions represent the
revised and rebased major market basket weights for total costs
including routine, ancillary, and capital-related costs.
Relative weights within the six categories were derived using U.S.
Department of Commerce data for the nursing home industry. Relative
cost shares from the Bureau of the Census' 1992 Asset and Expenditure
Survey and the Bureau of Economic Analysis' (BEA) 1992 Input-Output
Tables were used to disaggregate and allocate costs within the six
categories from the 1992 SNF Medicare Cost Reports. The BEA Input-
Output database, which is updated at 5-year intervals, was most
recently described in the Survey of Current Business, ``Benchmark
Input-Output Accounts for the U.S. Economy, 1992'' (November 1997).
We developed the capital-related portion of the rebased and revised
SNF PPS market basket using the same overall methodology used to
develop the hospital PPS capital input price index. The methodology for
hospitals is described in full detail in the May 31, 1996 (61 FR 27466)
and the August 30, 1996 (61 FR 46196) Federal Register publications.
The strength of this HCFA methodology is that it reflects the vintage
nature of capital, which is the acquisition and use of capital over
time. Price levels are determined for capital acquired in current and
prior years and vintage-weighted based on historical capital
acquisition patterns. These vintage-weighted price changes reflect the
price changes associated with the capital acquisition process.
Because there are fewer data on capital-related costs for the SNF
industry than for the hospital industry, we developed a methodology
that makes the maximum use of the existing SNF data. We have developed
a framework that integrates existing SNF capital data with related data
sources and assumptions. We determined that reasonable changes in the
capital-related assumptions have little impact on the overall SNF
market basket (routine costs, capital-related costs, and ancillary
costs). We also compared the price changes from the capital-related
component of the SNF market basket to the price changes in the hospital
PPS capital input price index and other price indexes. The comparison
showed that the changes in the different indexes were reasonable in
relation to changes with the SNF capital-related component. A detailed
explanation of how both the cost category weights and the vintage
weights were determined, which price proxies were chosen, the effect of
using different assumptions, and a comparison of capital-related
components of the rebased SNF PPS market basket to other price indexes
is given in the Appendix.
Our work resulted in 21 separate categories for the rebased and
revised total market basket. The 1977-based routine cost SNF market
basket had 12 separate cost categories. Detailed descriptions of each
cost category and respective price proxy in the 1992-based market
basket are provided in the Appendix to this rule. The six major
categories for the revised and rebased cost categories and weights
derived from SNF Medicare Cost Reports are summarized in Table 4.A
below.
Table 4.A--1992 Skilled Nursing Facility Market Basket Major Cost
Categories and Weights From Medicare Cost Reports
------------------------------------------------------------------------
1992-based
skilled
nursing
Cost categories facility
market basket
weights
(percent)
------------------------------------------------------------------------
Wages and Salaries...................................... 47.805
Employee Benefits....................................... 10.023
Contract Labor.......................................... 12.852
Pharmaceuticals......................................... 2.531
Capital-related Costs................................... 9.777
All Other Costs......................................... 17.012
---------------
Total Costs............................................. 100.000
------------------------------------------------------------------------
After the 21 cost weights for the revised and rebased SNF market
basket were developed, we selected the most appropriate wage and price
proxies currently available to monitor the rate of increase for each
expenditure category. With three exceptions (all for the Capital-
Related Expenses cost category), the wage and price proxies are based
on Bureau of Labor Statistics (BLS) data and are grouped into one of
the following BLS categories:
Employment Cost Indexes--Employment Cost Indexes (ECIs)
[[Page 26291]]
measure the rate of change in employee wage rates and employer costs
for employee benefits per hour worked. These indexes are fixed-weight
indexes and strictly measure the change in wage rates and employee
benefits per hour. They are not affected by shifts in occupation or
industry mix. ECIs were not available when we developed the calendar
year 1977-based routine SNF market basket. ECIs are superior to Average
Hourly Earnings (AHEs) as price proxies for input price indexes for two
reasons: (1) they measure pure price change, and (2) they are available
by occupational groups, not just by industry.
Consumer Price Indexes--Consumer Price Indexes (CPIs)
measure change in the prices of final goods and services bought by
consumers. CPIs were only used when the purchases were similar to those
of retail consumers rather than purchases at the wholesale level, or if
no appropriate Producer Price Index (PPI) were available.
Producer Price Indexes--PPIs are used to measure price
changes for goods sold in other than retail markets. For example, a PPI
for movable equipment was used, rather than a CPI for equipment.
The contract labor weight of 12.852 was reallocated to (1) wages
and salaries, (2) employee benefits, and (3) the all other expenses
cost category so that the same price proxies that were used for direct
labor and nonlabor costs could be applied to contract costs. The
rebased and revised cost categories, weights, and price proxies for the
1992-based SNF market basket are listed in Table 4.B below.
Table 4.B--1992-Based Cost Categories, Weights, and Price Proxies
------------------------------------------------------------------------
1992-based
Cost category market basket Price proxy
weight
------------------------------------------------------------------------
Operating Expenses............. 90.223
Compensation................... 67.059
Wages and Salaries............. 54.262 ECI for Wages and
Salaries for Private
Nursing Homes
Employee benefits.............. 12.797 ECI for Benefits for
Private Nursing Homes
Nonmedical professional fees... 1.916 ECI for Compensation
for Private
Professional,
Technical and
Specialty workers
Utilities...................... 2.500
Electricity................ 1.626 PPI for Commercial
Electric Power
Fuels, nonhighway.......... 0.332 PPI for Commercial
Natural Gas
Water and sewerage......... 0.542 CPI-U for Water and
Sewerage
Other Expenses................. 18.747
Other Products................. 10.964
Pharmaceuticals............ 2.531 PPI for Prescription
Drugs
Food....................... 3.353
Food, wholesale 2.577 PPI for Processed Foods
purchase.
Food, retail purchase.. 0.776 CPI-U for Food Away
From Home
Chemicals.................. 0.720 PPI for Industrial
Chemicals
Rubber and plastics........ 1.529 PPI for Rubber and
Plastic Products
Paper products............. 1.005 PPI for Converted Paper
and Paperboard
Miscellaneous products..... 1.826 PPI for Finished Goods
Other Services................. 7.783
Telephone Services......... 0.385 CPI-U for Telephone
Services
Labor-intensive Services... 3.686 ECI for Compensation
for Private Service
Occupations
Non labor-intensive 3.713 CPI-U for All Items
services.
Capital-related Expenses....... 9.777
Total Depreciation............. 5.915
Building & Fixed Equipment. 4.118 Boeckh Institutional
Construction Index
Movable Equipment.......... 1.797 PPI for Machinery &
Equipment
Total Interest................. 3.189
Government & Nonprofit SNFs 1.658 Average Yield Municipal
Bonds (Bond Buyer
Index-20 bonds)
For-Profit SNFs............ 1.531 Average Yield Moody's
AAA Bonds
Other Capital-related Expenses. 0.674 CPI-U for Residential
Rent
Total.................. * 100.000
------------------------------------------------------------------------
* may not add due to rounding
In the 1992-based total costs market basket, the labor-related
share is 75.888 percent, while the non-labor-related share is 24.112
percent. The labor-related share for the 1977-based routine cost market
basket (81.2 percent) included wages and salaries, employee benefits,
health services, business services, and miscellaneous costs, while the
labor-related share of the 1992 total cost market basket (75.888
percent) includes wages and salaries, employee benefits, professional
fees, labor-intensive services, and a 33 percent share of capital-
related expenses as shown on Table 4.C below. The share of labor-
related costs in 1992 reflects the change from only routine costs to
total costs (routine, ancillary, and capital-related) and the changing
mix of SNF services between 1977 and 1992.
The labor-related share for capital-related expenses was determined
to be 33 percent of capital-related expenses, or 3.227 percent of the
total PPS SNF market basket. This share was estimated from a
statistical analysis of individual SNF Medicare Cost Reports for 1993
since nearly all reports from this year were settled. The statistical
analysis was necessary because the proportion of capital-related
expenses related to local area wage costs cannot be directly determined
from the SNF capital-related market basket as it can for operating and
ancillary costs.
We performed regression analysis with capital-related costs per day
in SNFs as the dependent variable and relevant explanatory variables
for size, complexity, efficiency, age of capital, and local wage
variation. To account for
[[Page 26292]]
these factors, we used number of beds, case-mix indexes, occupancy
rate, ownership, age of assets, length of stay, FTEs per bed, and the
wage index values based on hospital wage index (wages and employee
benefits) as independent variables. The regression statistics showed
each variable was statistically significant and an adjusted r-square
that was acceptable given the large number of observations. The
independent variable most relevant for our purpose is the wage index
values based on hospital wage data, since this index is being used to
adjust payments under SNF PPS for geographic variation in local labor
costs. The regressions use log transformations for the dependent and
independent variables, hence the coefficients can be interpreted as
elasticities. The coefficient for the wage index value was 0.33 with a
t-value of 4.3. The interpretation of this coefficient as an elasticity
is that a 10 percent increase in the wage index value leads to a 3.3
percent increase in capital-related costs per day. This coefficient is
equivalent to the portion of capital-related expenses in the SNF market
basket that are considered to be labor-related. Multiplying the 0.33 by
the capital-related share of 9.777 yields a labor-related share for
capital of 3.227 percent of the total SNF market basket.
Conceptually it seems appropriate that capital-related expenses
would vary less with local wages than would operating expenses for
SNFs. Operating expenses for SNFs are determined in large part from the
labor inputs for relatively low-skilled employees that are tightly
linked to local wage levels in local labor markets. Wages, salaries,
and benefits constitute a majority of the operating costs of providing
SNF services; the labor-related share of operating expenses is 80.6
percent. For capital-related expenses, however, annual costs in the
current year are for capital purchased over time. Capital-related
expenses are determined in some proportion by local area costs (such as
construction worker wages and building materials costs) that are
reflected in the price of the capital asset. However, many other inputs
that determine capital costs are not related to local area wage costs,
such as equipment prices and interest rates. We found a similar lower
share for capital-related expenses in hospitals.
We also conducted regression analyses with operating and total
costs per day for SNFs as the dependent variable. The findings of our
analysis of SNF operating and total costs per day are consistent with
the PPS SNF market basket weights and structure. For operating costs
per day, the regression analysis yielded a coefficient nearly the same
as the operating labor-related share from the SNF market basket. The
regression of total costs per day yielded a coefficient of 0.74
percent, nearly the same as the total labor-related share (operating
and capital-related) from the SNF market basket. We also conducted a
similar regression analysis on hospital costs per case and determined
the results to be consistent with the PPS hospital market basket.
Approaching the labor-related share several different ways
validated the appropriateness of using regression analysis. Therefore,
we are using this analysis in determining the labor-related share for
PPS SNF capital-related expenses.
Table 4.C--1992-Based Labor-Related Share
------------------------------------------------------------------------
1992-based
market
Cost category basket
weight
------------------------------------------------------------------------
Wages and Salaries......................................... 54.262
Employee Benefits.......................................... 12.797
Nonmedical Professional Fees............................... 1.916
Labor-intensive Services................................... 3.686
Capital-related............................................ 3.227
------------
Total.................................................. 75.888
------------------------------------------------------------------------
All price proxies for the rebased SNF market basket are listed in
Table 4.B and summarized in the Appendix to this rule. A comparison of
the yearly historical percent changes from 1994 through 1996 for the
current 1977-based routine costs market basket and the 1992-based total
cost market basket is shown below in Table 4.D.
Table 4.D--Comparison of the 1977-Based Skilled Nursing Facility Routine
Costs Market Basket and the 1992-Based Skilled Nursing Facility Total
Costs Market Basket, Percent Changes, 1994-1996*
------------------------------------------------------------------------
Skilled Skilled
Nursing nursing
Facility facility
Fiscal years beginning October 1 Routine total cost
Market market
Basket, CY basket, FY
1977 base 1992 base
------------------------------------------------------------------------
Historical:
October 1993, FY 1994..................... 3.6 3.2
October 1994, FY 1995..................... 2.8 3.0
October 1995, FY 1996..................... 2.6 2.7
Historical Average: 1994-1996................. 3.0 3.0
------------------------------------------------------------------------
* Note: The 1992 total cost market basket is measuring a different cost
concept than the 1977 routine cost market basket. Differences between
the two indexes are expected.
Source: Standard & Poor's DRI HCC, 4th QTR, 1997; @USSIM/TREND25YR1197
@CISSIM/CONTROL974.
Released by HCFA, OACT, National Health Statistics Group.
Note that the historical average rate of growth for 1994 through 1996
for the SNF 1992-based total cost market basket is equal to that of the
1977-based routine market basket. We believe that the 1992-based SNF
total cost market basket provides a more current measure of the annual
increases in total cost care than the 1977-based SNF market basket
because: (1) the cost structure includes routine, ancillary, and
capital-related costs, not just routine cost, (2) the cost structure
reflects the structure of costs for the most recent year for which
there are relatively complete data, and (3) superior new wage-price
variables have been incorporated into the 1992-based index. The
forecasted rates of growth used to compute the projected SNF market
basket percentages, described in the next section, are shown below in
Table 4.E.
Table 4.E--Skilled Nursing Facility Total Cost Market Basket, Forecasted
Change, 1997-2000
------------------------------------------------------------------------
Skilled
Nursing
facility
Fiscal years beginning October 1 total cost
market
basket
------------------------------------------------------------------------
October 1996, FY 1997...................................... 2.4
October 1997, FY 1998...................................... 2.8
October 1998, FY 1999...................................... 3.0
October 1999, FY 2000...................................... 3.1
Forecasted Average: 1997-2000.............................. 2.8
------------------------------------------------------------------------
Source: Standard & Poor's DRI HCC, 4th QTR, 1997; @USSIM/TREND25YR1197
@CISSIM/CONTROL974.
Released by HCFA, OACT, National Health Statistics Group.
[[Page 26293]]
We are considering a mechanism to adjust future SNF PPS rates for
forecast errors. The forecasted SNF total cost market basket changes
shown in Table 4.E are based on historical trends and relationships
ascertainable at the time the update factor is established for the
upcoming rate setting period. In any given year, there may be
unanticipated price fluctuations that may result in differences between
the actual increases in prices faced by SNFs and the forecast used in
calculating the update factors. We are reviewing the analytical
framework for updating the standard Federal rate under the hospital PPS
to account for forecast errors. If this framework is chosen to update
the SNF PPS rate, an adjustment would be made only if the forecasted
market basket percentage change for any year differs from the actual
percentage change by 0.25 percentage points or more. There would be a
2-year lag between the forecast and the measurement of the forecast
error. Thus, for example, we would adjust for an error in forecasting
the 1997 market basket percentage used to compute the PPS rates
effective with this interim final rule through an adjustment to the
fiscal year 1999 update to the SNF PPS rates.
B. 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,
described in the previous section, from the midpoint of the prior
fiscal year (or period) to the midpoint of the fiscal year (or other
period) involved. The facility-specific portion and Federal portion of
the SNF PPS rates effective with this rule are based on cost reporting
periods beginning in Federal fiscal year 1995 (base year). The
percentage increases in the SNF market basket index will be used to
compute the update factors to reflect cost increases occurring between
the cost reporting periods represented in the base year and the
midpoint of the fiscal year (or other period). We used the Standard &
Poor's DRI CC, 4th quarter 1997 historical and forecasted percentage
increases of the revised and rebased SNF market basket index for
routine, ancillary, and capital-related expenses, described in the
previous section, to compute the update factors. The update factors, as
described below, will be used to adjust the base year costs for
computing the facility-specific portion and Federal portion of the SNF
PPS rates.
1. Facility-Specific Rate Update Factor
Under section 1888(e)(3)(D)(i) of the Act, for the facility-
specific portion of the SNF PPS rate, we will update a facility's base
year costs up to the facility's first cost reporting period beginning
on or after July 1, 1998 and before October 1, 1999 (initial period) by
the SNF market basket percentage, reduced by one percentage point. We
took the following steps to develop the 12-month cost reporting period
facility-specific rate update factors shown in Table 4.F.
Step 1. Determine the cumulative growth from the average market
basket level for each 12-month cost report period to the average market
basket level for its corresponding 12-month period beginning on or
after July 1, 1998.
Step 2. From the cumulative growth in Step 1, determine the average
annual rate of growth for the period from each beginning 12-month
period's average market basket index level to its corresponding 12-
month period beginning on or after July 1, 1998.
Step 3. Subtract 1.0 percentage point from each average annual rate
of growth calculated in Step 2.
Step 4. Determine what the revised cumulative growth for each 12-
month's period average index level would have been, using the revised
average annual rates of growth from Step 3. The resulting update
factors are shown in Table 4.F.
TAble 4.F--Update Factors \1\ for Facility-Specific Portion of the SNF
PPS Rates--Adjust to 12-Month Cost Reporting Periods Beginning on or
After July 1, 1998 and Before October 1, 1999 [(Initial Period) from
Cost Reporting Periods Beginning in FY 1995 (Base Year)]
------------------------------------------------------------------------
Adjust from 12-month
If 12-month cost reporting period cost reporting Using update
in initial period begins period in base year factor of
that begins
------------------------------------------------------------------------
July 1, 1998...................... July 1, 1995........ 1.05149
August 1, 1998.................... August 1, 1995...... 1.05197
September 1, 1998................. September 1, 1995... 1.05253
October 1, 1998................... October 1, 1994..... 1.07116
November 1, 1998.................. November 1, 1994.... 1.07125
December 1, 1998.................. December 1, 1994.... 1.07126
January 1, 1999................... January 1, 1995..... 1.07143
February 1, 1999.................. February 1, 1995.... 1.07176
March 1, 1999..................... March 1, 1995....... 1.07226
April 1, 1999..................... April 1,1995........ 1.07270
May 1, 1999....................... May 1, 1995......... 1.07308
June 1, 1999...................... June 1, 1995........ 1.07340
July 1, 1999...................... July 1, 1995........ 1.07381
August 1, 1999.................... August 1, 1995...... 1.07428
September 1, 1999................. September 1, 1995... 1.07484
------------------------------------------------------------------------
\1\ Source: Standard & Poor's DRI, 4th Qtr 1997;
@USSIM/TREND25YR1197@CISSIM/CONTROL974
A 12-month cost reporting period that begins on July 1, August 1,
or September 1 will have two cost reporting periods within the initial
period. Table 4.F provides update factors for these three beginning
dates for 1998 and 1999. The 1998 cost reporting period is considered
the first cost reporting period for the purposes of applying the
facility-specific percentage in the transition period. The 1999 cost
reporting period, for the same provider, is considered the second cost
reporting period for the purposes of applying the facility-specific
percentage in the transition period. The transition period percentages
are presented elsewhere in this rule.
[[Page 26294]]
SNFs may have cost reporting periods that are fewer than 12 months
in duration (short period). This may occur, for example, when a
provider enters the Medicare program after its selected fiscal year has
already begun, or when a provider experiences a change of ownership
before the end of the cost reporting period. Since short periods affect
a small number of providers, relative to the total number of SNFs, and
the facility-specific portion of the SNF PPS rate is subject to a
transition period, we do not believe consideration of computing a
``short period specific'' update factor is warranted. Accordingly, we
will apply the following rules to short periods.
a. Short period in base year. First, select the later short period
in the base year for the affected provider. Second, if necessary,
adjust the beginning or end of the short period as follows. Short
periods may not necessarily begin on the first of the month or end on
the last day of the month. In order to simplify the process of
determining the short period update factor, if the short period begins
before the 16th of the month, it will be adjusted to a beginning date
of the 1st of that month. If the short period begins on or after the
16th of the month, it will be adjusted to the beginning of the next
month. Also, if the short period ends before the 16th of the month, it
will be adjusted to the end of the preceding month, or, if the short
period ends on or after the 16th of the month, it will be adjusted to
the end of that month. Third, determine the midpoint of the short
period. Fourth, use the following midpoint guidelines to determine
which 12-month update factor to use from Table 4.F.
------------------------------------------------------------------------
If the midpoint of short period falls Use factor for this 12-month
between period
------------------------------------------------------------------------
March 16, 1995-April 15, 1995.......... October 1994-September 1995
April 16, 1995-May 15, 1995............ November 1994-October 1995
May 16, 1995-June 15, 1995............. December 1994-November 1995
June 16, 1995-July 15, 1995............ January 1995-December 1995
July 16, 1995-August 15, 1995.......... February 1995-January 1996
August 16, 1995-September 15, 1995..... March 1995-February 1996
September 16, 1995-October 15, 1995.... April 1995-March 1996
October 16, 1995-November 15, 1995..... May 1995-April 1996
November 16, 1995-December 15, 1995.... June 1995-May 1996
December 16, 1995-January 15, 1996..... July 1995-June 1996
January 16, 1996-February 15, 1996..... August 1995-July 1996
February 16, 1996-March 15, 1996....... September 1995-August 1996
------------------------------------------------------------------------
b. Short period in initial period. Providers with short periods
that begin on or after July 1, 1998 and before October 1, 1999 (initial
period) should use the instructions above to adjust the beginning date
of the short period and then use the 12-month factor that corresponds
to the beginning date of the ``adjusted to period'' in Table 4.F. The
first short period in the initial period is considered the first cost
reporting period for the purposes of applying the facility-specific
percentage in the transition period. Each subsequent short period, for
the same provider, of any duration is considered the second or third
cost reporting period for the purposes of applying the facility-
specific percentage in the transition period. The transition period
percentages are presented elsewhere in this rule.
c. Short period between base year and initial period. A provider
may experience a change of ownership or may receive proper approval to
change its cost reporting period between the base year cost reporting
period and the initial period. If this occurs, the base year cost
reporting period may begin on a date that is different than that of the
initial period. In these instances, use the beginning date of the
initial period to determine the 12-month factor that corresponds to the
beginning date of the ``adjusted to period'' in Table 4.F.
2. Federal Rate Update Factor
To develop the Federal rates, we updated each facility's base year
costs up to the midpoint of the initial period by the SNF market basket
percentages, reduced by one percentage point. We developed the Federal
rate adjustment factors using the following methodology:
Step 1. Determine the cumulative growth from the average market
basket level for each 12-month cost reporting period to the average
market basket level for the 15-month common period.
Step 2. From the cumulative growth in Step 1., determine the
average annual rate of growth for the period from each beginning 12-
month period's average market basket index level to the average market
basket index level of the ending 15-month common period.
Step 3. Subtract 1.0 percentage point from each average annual rate
of growth calculated in Step 2.
Step 4. Determine what the revised cumulative growth for each
period's average index level would have been, using the revised average
annual rates of growth from Step 3.
Step 5. Apply the revised cumulative percentage growth to the
average market basket index level for the beginning cost reporting
period, which yields revised 15-month average index levels for the
common ending period.
Step 6. Using the revised 15-month average index levels determined
in Step 5, calculate the ratio of each revised average index level to
the original average common period index level.
Step 7. To determine the revised factors to apply to SNF cost
reporting periods beginning between October 1, 1994 and September 30,
1995, multiply each factor for adjusting cost reports to the common
period by the ratios determined in Step 6. This yields revised factors
that reflect an average annual rate equal to the SNF market basket
percentage minus 1 percentage point.
These revised update factors were used to compute the Federal
portion of the SNF PPS rate shown in Tables 2.A and 2.B.
V. Consolidated Billing
A. Background of the Skilled Nursing Facility Consolidated Billing
Provision
Section 4432(b) of the BBA 1997 amended the Social Security Act to
establish a requirement for SNF Consolidated Billing, effective for
items and services furnished on or after July 1, 1998. SNF Consolidated
Billing is a comprehensive billing requirement (similar to the one that
has been in effect for inpatient hospital services for well over a
decade), under which the SNF itself is responsible for billing Medicare
for virtually all of the services that its residents receive. SNF
Consolidated Billing is necessary for a number of reasons.
[[Page 26295]]
Historically, an SNF could choose to furnish services to its
residents either directly with its own resources, or under an
``arrangement'' with an outside source; in either instance, the SNF
itself was responsible for submitting the bill for the service to its
Medicare fiscal intermediary (FI). However, the SNF has also had the
additional option of ``unbundling'' a service altogether; that is,
permitting an outside supplier to furnish the service directly to an
SNF resident and to submit a bill independently to the carrier under
Part B, in lieu of any actual involvement by the SNF itself. The
ability on the part of suppliers to submit separate bills directly to
the carrier for these unbundled services has been extremely problematic
in several ways.
First, it has created a potential for duplicate billing. For
example, an SNF might include a particular service in its bill to the
FI under Part A at the same time that an outside supplier is improperly
submitting a Part B claim to the carrier for the identical service.
Unless the Medicare contractors detect this inappropriate duplication
in billing, the program ultimately pays twice for the same service.
Further, even in instances where only the supplier bills for the
service, the practice of unbundling has resulted in additional out-of-
pocket liability for the beneficiary. Under Part A, an SNF resident's
only financial liability during a covered stay is for the SNF
coinsurance that begins after the 20th day of the stay. The SNF
coinsurance amount is set at a flat rate per day (which, by law,
represents \1/8\ of the current inpatient hospital deductible amount),
and this amount does not vary with the number of services that the
resident actually receives from one day to the next. This means that
even if the SNF furnishes some additional services on a given day, the
resident's daily coinsurance amount under Part A does not increase.
However, if the SNF decides instead to unbundle those services to an
outside supplier which then bills the carrier under Part B, this causes
the resident to incur an additional out-of-pocket liability for any
unmet deductible under Part B, as well as for Part B's 20 percent
coinsurance.
Finally, along with the potential for duplicate billing and for
subjecting the beneficiary to needless expense, unbundling has raised
quality of care and program integrity concerns for SNF residents--
including those who are not in a covered Part A stay--by dispersing the
responsibility for providing resident care among a myriad of outside
suppliers. This fragmentation in the provision and billing of services
has diminished the SNF's own capacity to oversee, coordinate, and
account for the total package of care that its residents receive, and
has rendered the SNF less able to guard against inappropriate billing
practices and utilization.
For years, HCFA pursued legislative proposals to prohibit the
practice of unbundling in SNFs, but without success. As with inpatient
hospital services, the event that finally brought about a comprehensive
billing requirement for SNF services was the creation of a PPS for
SNFs. In order to have a prospective payment that includes all of the
medically necessary services that an SNF resident receives, it is
essential to tie all of those services into a single facility package,
by prohibiting unbundling. Otherwise, the Medicare program would once
again be faced with potentially paying twice for the same service--once
to the SNF under the Part A prospective payment, and again to an
outside supplier under Part B.
B. Skilled Nursing Facility Consolidated Billing Legislation
Under the SNF Consolidated Billing requirement established by
section 4432(b) of the BBA 1997, the SNF itself has the Medicare
billing responsibility for virtually all of the Medicare-covered
services that its residents receive. The following is a discussion of
the specific provisions of the legislation.
1. Specific Provisions of the Legislation
Section 4432(b)(1) of the BBA 1997 adds a new paragraph
(18) to section 1862(a) of the Act, which prohibits Medicare coverage
of services furnished to an SNF resident (other than those services
that are specifically excluded from the SNF Consolidated Billing
requirement) unless they are furnished or arranged for by the SNF
itself.
Section 4432(b)(2) of the BBA 1997 adds a new paragraph
(E) to section 1842(b)(6) of the Act, which specifies that, for any
such services that are covered under Part B, Medicare makes payment to
the SNF rather than to the beneficiary.
Section 4432(b)(3) of the BBA 1997 adds to section 1888(e)
of the Act a new paragraph (9), which requires that the payment amount
for Part B services furnished to an SNF resident shall be the amount
prescribed in the otherwise applicable fee schedule, and a new
paragraph (10), which requires the SNF's Part B bills to identify all
items and services through a uniform coding system to be specified by
the Secretary. Under this authority, we are specifying the HCFA Common
Procedure Coding System (HCPCS) as the coding system to be used. The
HCPCS coding requirement is intended to enable the Medicare contractor
to identify individual items and services more readily on the claim;
this, in turn, will help enable the contractor to limit the amounts it
pays the SNF to any applicable Part B fee schedule amounts in
accordance with section 1888(e)(9) of the Act.
Section 4432(b)(4) of the BBA 1997 adds a new paragraph
(t) to section 1842 of the Act, which requires physicians to include
the SNF's Medicare provider number on bills for physician services
furnished to SNF residents that are separately billable to the Part B
carrier (see discussion in section V.B.2. below).
Section 4432(b)(5) of the BBA 1997 includes a series of
conforming amendments. The SNF Consolidated Billing provision requires
an SNF to furnish virtually all services to its residents, either
directly or under ``arrangements'' with an outside source in which the
SNF itself bills Medicare. Accordingly, section 4432(b)(5)(D) amends
section 1861(h) of the Act to expand the scope of SNF services that
Part A can cover under the extended care benefit to include services
furnished under arrangements between the SNF and an outside source, as
discussed in section VI. below. Section 4432(b)(5)(F) adds a new clause
(ii) to section 1866(a)(1)(H) of the Act to make compliance with the
SNF Consolidated Billing provision a specific requirement under the
terms of an SNF's Medicare provider agreement.
2. Types of Services That Are Subject to the Provision
Like the SNF PPS itself, SNF Consolidated Billing applies
comprehensively to the ``covered skilled nursing facility services''
described in section 1888(e)(2)(A)(i) of the Act when furnished to SNF
residents, except for those services that appear on a short list of
exclusions described in section 1888(e)(2)(A)(ii) of the Act. However,
in practical terms, the SNF Consolidated Billing and PPS provisions
encompass slightly different sets of services, since the SNF PPS
includes a few individual services that are not subject to the
Consolidated Billing provision. This is because the SNF PPS encompasses
the entire range of Part A extended care services that are coverable
under section 1861(h) of the Act when furnished or arranged for by the
SNF itself, including an extremely small number of such services (for
example, dialysis services) that section 1888(e)(2)(A)(ii) of the Act
specifically identifies as alternatively being billable separately
under Part B.
[[Page 26296]]
Similarly, the Consolidated Billing provision encompasses a small
number of services that are not coverable under Part A or includable in
the PPS payment, even though furnished or arranged for by the SNF
itself during a covered Part A stay. This is because the services
included in the SNF PPS payment are, by definition, limited to the
range of diagnostic and therapeutic services that are coverable under
the Part A extended care benefit, while the Consolidated Billing
provision encompasses not only those types of services, but also
certain preventive and screening services that are not considered
diagnostic or therapeutic in nature and, thus, are coverable only under
Part B. (See the portion of section 1861(h) of the Act following
paragraph (7), which limits the scope of coverage under the Part A
extended care benefit to those ``diagnostic and therapeutic'' services
that are coverable under the inpatient hospital benefit, and section
1862(a)(1) of the Act, which describes preventive services to avoid the
occurrence of a medical condition altogether (paragraph (B)) and
screening services to detect the presence of a medical condition while
it is still in an asymptomatic state (paragraph (F)) as being separate
and distinct categories from services to diagnose or treat a condition
that has already manifested itself (paragraph (A)). Thus, for example,
if an SNF resident receives a vaccination for pneumococcal pneumonia or
hepatitis B in the course of a covered Part A stay, this would not
represent a diagnostic or therapeutic service that could be covered
under the Part A extended care benefit, but a preventive service that
is coverable only as one of the ``medical and other health services''
included under Part B (see section 1861(s)(10) of the Act).
Accordingly, while the SNF's Part A PPS payment would not include this
service, the Consolidated Billing provision would still require the SNF
itself to submit the bill for the service to Part B.
The statutory list of excluded services in section
1888(e)(2)(A)(ii) of the Act consists of a number of specific service
categories. These include several types of practitioner services that
are exempt from the Consolidated Billing requirement and, thus, are
still to be billed separately to the Part B carrier. These exempt
practitioner services include the following:
Physicians' services furnished to individual SNF residents
(section 4432(b)(4) of the BBA 1997 requires such bills to include the
SNF's Medicare provider number).
Physician assistants working under a physician's
supervision.
Nurse practitioners and clinical nurse specialists working
in collaboration with a physician.
Certified nurse-midwives.
Qualified psychologists.
Certified registered nurse anesthetists.
In addition to these exempt categories of practitioner services,
section 1888(e)(2)(A)(ii) of the Act also excludes the following types
of services:
Home dialysis supplies and equipment, self-care home
dialysis support services, and institutional dialysis services and
supplies as described in section 1861(s)(2)(F) of the Act;
Erythropoietin (EPO) for certain dialysis patients as
described in section 1861(s)(2)(O) of the Act, subject to methods and
standards established by the Secretary in regulations for its safe and
effective use (see Secs. 405.2163(g) and (h)); and
For services furnished during 1998 only: The
transportation costs of electrocardiogram equipment for
electrocardiogram test services (HCPCS Code R0076) furnished during
1998. This reflects section 4559 of the BBA 1997, which temporarily
restores separate Part B payment for the transportation of portable
electrocardiogram equipment used in furnishing tests during 1998.
Further, we note that hospice care (as defined in section 1861(dd)
of the Act) is not subject to Consolidated Billing when an SNF resident
elects to receive care under the Medicare hospice benefit, since the
hospice (rather than the SNF) assumes the overall responsibility for
those care needs relating to the beneficiary's terminal condition,
while the SNF itself retains responsibility only for those aspects of
the beneficiary's care needs that are not related to the terminal
condition (see further discussion in section V.B.4. below). In
addition, as discussed in section V.B.4. below, we are clarifying that
in terms of ambulance services, the Consolidated Billing provision
applies only to ambulance transportation furnished during the SNF stay,
and not to an ambulance trip that occurs at either the beginning or end
of the stay.
With regard to the services of physicians and other practitioners,
even though the SNF Consolidated Billing requirement generally does not
apply to the specific types of practitioners listed above, it does
apply to certain particular subcategories of their services, which must
be billed by and paid to the SNF. Section 1888(e)(2)(A)(ii) of the Act
specifies that physical, occupational, and speech-language therapy
services furnished to SNF residents are subject to Consolidated Billing
and, therefore, must be billed by the SNF itself, regardless of whether
these services are furnished by (or under the supervision of) a
physician or other health care professional. In effect, this statutory
provision converts the coverage of what would otherwise be practitioner
services into provider (that is, SNF) services. Thus, those
practitioner services that fall within the categories of physical,
occupational, or speech language therapy services must be billed by the
SNF to its FI, and the practitioner cannot submit a separate bill to
the Part B carrier. (We note that the Physicians' Current Procedural
Terminology (CPT) coding used on physician and other practitioner bills
enables the Part B carrier to identify those services that are
physical, occupational, and speech-language therapy services.)
Further, with respect to physicians' services, we are providing--
consistent with the longstanding policy under the bundling requirement
for inpatient hospital services--that the SNF Consolidated Billing
provision excludes only those particular physicians' services that meet
the criteria described in Sec. 415.102(a) for payment on a fee schedule
basis. Essentially, these are services (ordinarily requiring
performance by a physician) that the physician personally furnishes to
an individual beneficiary, which contribute directly to that
beneficiary's diagnosis or treatment and, in the case of radiology or
laboratory services, meet the additional requirements specified in
Secs. 415.120 and 415.130, respectively. By contrast, this exclusion of
the types of physicians' services described in Sec. 415.102(a) does not
extend to more generalized physician functions that typically occur in
the provider setting (such as quality control activities), which are
performed not for an individual beneficiary but for the overall benefit
of the provider's entire patient population, and are considered a
provider cost under Secs. 415.55 and 415.60.
In addition, the Consolidated Billing requirement does not exempt
those types of nonphysician services that would otherwise be billed to
the Part B carrier in conjunction with related physician services and
paid under a single, global fee. For example, payment for diagnostic
radiology services is sometimes made through a global fee that includes
both a technical component (for the diagnostic test itself) and a
professional component (for the physician's interpretation of the
test). However, under Consolidated Billing,
[[Page 26297]]
when such services are furnished to an SNF resident, only the
professional (physician) component is billed separately as a
physician's service, while the technical (nonphysician) component must
be billed by the SNF itself.
Also, while the SNF Consolidated Billing provision does not apply
to the professional services that a physician or other exempt
practitioner performs personally, it does apply to those services that
are furnished to an SNF resident by someone other than the
practitioner, as an incident to the practitioner's professional
service. This position is consistent with the approach that has long
been taken under the hospital bundling requirement, as well as with
section 1888(e)(2)(A)(ii) of the Act, which specifically identifies
``physicians'' services'' themselves as the service category that is
excluded from SNF Consolidated Billing. Physicians' services, in turn,
are covered by Part B under section 1861(s)(1) of the Act and are
defined in section 1861(q) as being performed by a physician, while
``incident to'' services are covered under a separate statutory
authority (section 1861(s)(2)(A) of the Act) and are, by definition,
not performed by a physician. Similarly, for the other types of
practitioner services that are exempt from the SNF Consolidated Billing
requirement, we are specifying that this exemption applies only to the
professional services that the practitioner performs personally, and
that services furnished by others as an incident to the practitioner's
professional service are themselves subject to the Consolidated Billing
requirement.
We believe that to do otherwise with regard to these ``incident
to'' services would effectively create a loophole through which a
potentially broad and diverse array of services could be unbundled,
merely by virtue of being furnished under the general auspices of such
practitioners. This, in turn, would ultimately defeat the very purpose
of the SNF Consolidated Billing provision--that is, to make the SNF
itself responsible for billing Medicare for essentially all of its
residents' services, other than those identified in a small number of
narrow and specifically delimited exclusions. Further, as noted above,
both the Consolidated Billing and SNF PPS provisions employ the same
statutory list of excluded services. Thus, the approach we are adopting
with regard to the limited range of services that qualify for exclusion
is essential not only to safeguard the integrity of the Consolidated
Billing requirement, but also that of the SNF PPS itself.
Finally, we note that laboratory services are subject to the SNF
Consolidated Billing requirement. Thus, when an outside laboratory
performs tests for SNF residents, the Medicare billing must be done by
the SNF itself rather than by the outside laboratory. However, it will
be necessary for the Congress to make a conforming change in section
1833(h)(5)(A) of the Act, in order to resolve a technical inconsistency
in the text of that provision. The current wording of that section of
the Act generally allows Part B to make payment for clinical diagnostic
laboratory tests only to the person or entity that actually performs
(or supervises the performance of) the test. This provision already
contains a specific exception at section 1833(h)(5)(A)(iii) of the Act
that permits a hospital to receive Part B payment for laboratory
services that the hospital obtains under arrangements made with an
outside laboratory. As mentioned previously, hospitals have long had a
comprehensive Medicare billing requirement, which served as a model for
the one now being established for SNFs. Accordingly, we believe that
the BBA 1997's lack of a conforming change that explicitly extends the
payment provision's existing hospital exception to SNFs is merely an
inadvertent oversight, and we plan to pursue a technical amendment to
make an appropriate conforming change in the text of section
1833(h)(5)(A) of the Act.
3. Facilities That Are Subject to the Provision
In terms of facilities (as explained in the following discussion of
SNF ``resident'' status), the Consolidated Billing requirement applies
to Medicare-participating SNFs, including distinct part SNFs.
Consolidated Billing does not apply to a nursing home that has no
Medicare certification whatsoever, such as a nursing home that does not
participate at all in either the Medicare or Medicaid programs, or a
nursing home that exclusively participates only in the Medicaid program
as a nursing facility (NF). However, Consolidated Billing does apply to
services furnished to residents in any nursing home of which a distinct
part is a Medicare-participating SNF. This means that if any portion of
a nursing home has Medicare SNF certification, Consolidated Billing
applies to the entire nursing home. (This avoids creating a perverse
incentive for SNFs to set aside a nonparticipating section in which
they could otherwise circumvent the Consolidated Billing requirement
for those residents who are not in a covered Part A stay.)
Thus, when a nursing home limits its Medicare participation as an
SNF to only a distinct part of the overall institution--
In terms of program payment, Part A coverage under the
extended care benefit is limited to the portion of the nursing home
that actually participates in Medicare as an SNF; and
In terms of Medicare billing responsibility, the
Consolidated Billing requirement applies to the entire nursing home.
We note that if the surrounding institution that houses a Medicare
distinct part SNF includes an entity other than a nursing home (that
is, a hospital, or a domiciliary or ``board and care'' home), then the
Consolidated Billing requirement would not apply to that entity, but
would apply only to the nursing home itself (including the nursing
home's participating distinct part SNF along with any nonparticipating
remainder).
4. Skilled Nursing Facility ``Resident'' Status for Purposes of This
Provision
For purposes of determining program payment in the specific context
of the Part A extended care benefit, section 1861(h) of the Act limits
coverage to those beneficiaries who reside in an SNF, which section
1819(a) of the Act defines as an institution (or a distinct part of an
institution) that is actually certified as meeting the SNF requirements
for participation. However, in excluding Medicare coverage for
unbundled services furnished to SNF residents, section 4432(b)(1) of
the BBA 1997 further specifies that this provision applies to services
furnished to any beneficiary who ``* * * is a resident of a skilled
nursing facility or of a part of a facility that includes a skilled
nursing facility (as determined under regulations) * * * .'' This
statutory language establishes that, for purposes of the SNF
Consolidated Billing provision, the Congress intended:
That the definition of an SNF resident should include not
only those beneficiaries who reside in the certified area of a nursing
home, but also (as discussed in the preceding section) those who reside
in the nonparticipating portion of any nursing home that also includes
a Medicare-certified distinct part SNF; and
To grant the Secretary the specific authority to define
the concept of ``services furnished to SNF residents'' further in
regulations.
Accordingly, for purposes of the SNF Consolidated Billing
provision, we are
[[Page 26298]]
defining an SNF ``resident'' in the regulations as including
beneficiaries who reside in Medicare-certified SNFs, as well as those
beneficiaries who reside anywhere within a nursing home if that nursing
home includes a distinct part that is a Medicare-certified SNF.
We note that the SNF Consolidated Billing legislation defines the
scope of this provision in terms of a comprehensive package of services
furnished to an SNF resident. For example, in terms of ambulance
services, the initial ambulance trip that first brings a beneficiary to
the SNF would not be subject to the Consolidated Billing provision
(since the beneficiary, at that point, has not yet been admitted to the
SNF as a resident). Similarly, an ambulance trip that occurs at the end
of an SNF stay, in connection with one of the events that (as discussed
below) ends a beneficiary's status as an SNF resident for Consolidated
Billing purposes, would not be subject to the Consolidated Billing
provision. By contrast, ambulance transportation furnished during an
SNF stay is subject to the SNF Consolidated Billing provision.
As noted above, the Consolidated Billing requirement is intended to
encompass a comprehensive package of services furnished to an SNF
resident. Accordingly, we believe that it is necessary to prevent a
facility from being able to circumvent this requirement and unbundle
particular services that would otherwise be an integral part of the
package, merely by temporarily discontinuing a beneficiary's status as
a ``resident'' of the SNF just long enough to receive the services (for
example, by briefly sending the beneficiary offsite to receive them as
a hospital or clinic outpatient), and immediately thereafter
reinstating the beneficiary's status as an SNF ``resident.'' Therefore,
we are providing that a beneficiary's departure from the facility does
not automatically end his or her status as an SNF ``resident'' for
Consolidated Billing purposes. Rather, the beneficiary's status as an
SNF resident in this context would end when one of the following events
occurs--
The beneficiary is admitted as an inpatient to a Medicare-
participating hospital or critical access hospital (CAH, formerly
referred to as a rural primary care hospital (RPCH)) or as a resident
to another SNF;
The beneficiary receives services, under a plan of care,
from a Medicare-participating home health agency;
The beneficiary receives outpatient services from a
Medicare-participating hospital or CAH (but only with respect to those
services that are not furnished pursuant to the resident assessment or
the comprehensive care plan required under Sec. 483.20); or
The beneficiary is formally discharged or otherwise
departs from the SNF (for example, on a leave of absence), unless
readmitted to that or another SNF within 24 consecutive hours. This
means that the facility's responsibilities under the Consolidated
Billing provision (including its responsibility to furnish or make
arrangements for needed care and services) remain in effect until the
beneficiary's status as an SNF ``resident'' ends due to the occurrence
of one of the events described above.
We are providing that, for purposes of determining the
applicability of the SNF Consolidated Billing requirement, a
beneficiary's status as an SNF resident ends at the point when the
beneficiary is admitted as an inpatient to a participating hospital or
CAH, or as a resident to another SNF, even if the beneficiary
subsequently returns to the original SNF within 24 hours of departure.
This is because these settings all represent situations in which
another provider has assumed the ongoing responsibility for the
beneficiary's comprehensive care needs. For the same reason, we are
including the receipt of services from a participating home health
agency under a plan of care as another event that would end a
beneficiary's status as an SNF ``resident'' for Consolidated Billing
purposes. We note that these situations are distinct, however, from one
in which a terminally ill SNF resident elects to receive care under the
Medicare hospice benefit, since a hospice assumes responsibility only
for those care needs that relate to the beneficiary's terminal
condition, while the SNF itself remains responsible for any care needs
that are unrelated to the terminal condition. This is equally true
whether an SNF resident receives the hospice care while still in the
SNF or during a temporary absence from the facility. Accordingly, an
SNF resident's election to receive care under the Medicare hospice
benefit would not result in a blanket exclusion of all services
furnished to that resident from the Consolidated Billing requirement;
rather, as discussed previously in section V.B.2., only the specific
aspects of such a resident's care that are actually provided under the
hospice benefit are excluded from the Consolidated Billing provision,
while care that is unrelated to the resident's terminal condition
remains subject to the provision.
Similarly, when an SNF resident receives outpatient services at a
hospital, the hospital does not necessarily assume any ongoing
responsibility for the resident's comprehensive care needs beyond the
outpatient visit itself, which often may represent nothing more than a
single, isolated encounter. We do not believe that such an event, when
followed shortly thereafter by the resident's return to the SNF, should
serve to relieve the SNF categorically of any Medicare billing
responsibility for services furnished during the outpatient visit,
especially with respect to those types of services that SNFs would
ordinarily include within the comprehensive package of care furnished
to a resident (such as physical, occupational, and speech-language
therapy, or types of medical supplies and diagnostic tests that are
routinely furnished or arranged for by SNFs).
At the same time, however, we recognize that there are certain
types of intensive diagnostic or invasive procedures that are specific
to the hospital setting and that are well beyond the normal scope of
SNF services. Further, we note that Medicare's longstanding
comprehensive billing or ``bundling'' requirement for inpatient
hospital services under section 1862(a)(14) of the Act was subsequently
expanded to apply to outpatient hospital services as well, and that
section 4523 of the BBA 1997 provides for the establishment of a PPS
for these outpatient hospital services. Thus, when an SNF resident is
sent to a hospital to receive outpatient services, it is necessary to
delineate the respective areas of responsibility for the SNF under the
Consolidated Billing provision, and for the hospital under the
outpatient bundling provision, with regard to these services.
Accordingly, we are providing that in situations where a
beneficiary receives outpatient services from a Medicare-participating
hospital or CAH while temporarily absent from the SNF, the beneficiary
continues to be considered an SNF resident specifically with regard to
those services that are furnished pursuant to the comprehensive care
plan required under the regulations at Sec. 483.20(d), which is
developed to address the resident's care needs identified in the
comprehensive assessment under Sec. 483.20(b). Such services are,
therefore, subject to the SNF Consolidated Billing provision, while
those other services that, under commonly accepted standards of medical
practice, lie exclusively within the purview of hospitals rather than
SNFs, are not subject to SNF Consolidated Billing, but are instead
bundled to the hospital (for example,
[[Page 26299]]
cardiac catheterization, CT scans, magnetic resonance imaging,
ambulatory surgery involving the use of an operating room). We believe
that it is appropriate to specify the resident's comprehensive care
plan as the basis for defining the extent of the SNF's responsibility
in this situation, since it is this same resident assessment and care
planning process that provides the basis for establishing SNF coverage
and determining the actual level of Part A payment under the SNF PPS.
In effect, this defines the SNF's responsibility in terms of the scope
of services included under the extended care benefit, as explained
below. This same scope of services would effectively define the extent
of the SNF's responsibility with regard to a beneficiary who has
resided exclusively in the institution's nonparticipating portion
which, under the law, is subject to the SNF Consolidated Billing
provision but not to the SNF requirements for participation regarding
resident assessment and care planning.
As indicated in Sec. 483.20(d)(1), the resident assessment must
thoroughly identify the resident's medical, nursing, and mental and
psychosocial needs, and the plan of care must describe in a
comprehensive manner the services that the SNF itself assumes the
responsibility to furnish, or make arrangements for, in order to
address these needs. However,the comprehensive care plan does not
typically address emergency services (which, by their nature, cannot be
anticipated and planned in advance) or those types of intensive
diagnostic or invasive procedures that, as discussed previously,
appropriately lie within the purview of hospitals rather than SNFs. By
contrast, the care plan must address the beneficiary's need for the
broad categories of services that section 1861(h) of the Act identifies
as being included within the scope of the extended care benefit, such
as nursing care and associated room and board (sections 1861(h)(1) and
(2) of the Act); physical, occupational, and speech-language therapy
(section 1861(h)(3) of the Act); medical social services (section
1861(h)(4) of the Act); drugs, biologicals, supplies, appliances, and
equipment that represent an ordinary part of the facility's inpatient
care and treatment (section 1861(h)(5) of the Act); and services that
an SNF furnishes through its transfer agreement hospital (section
1861(h)(6) of the Act).
As amended by the BBA 1997, section 1861(h)(7) of the Act also
includes coverage of other types of services that SNFs generally
provide, either directly or under arrangements with outside sources. As
discussed in section VI. below with regard to the conforming revisions
in regulations at Sec. 409.27, longstanding administrative policy has
also included within this category most of the medical and other health
services described in section 1861(s) of the Act, with certain
exceptions. For example, physician services (section 1861(s)(1) of the
Act) cannot be regarded as services that are ``generally provided'' by
SNFs, since they are not within the scope of the inpatient hospital
benefit (see section 1861(b)(4) of the Act) and, accordingly, are also
not within the scope of the extended care benefit (see section 1861(h)
of the Act following paragraph (7)). In addition, as discussed
previously in section V.B.2., preventive services such as vaccines for
pneumococcal pneumonia or hepatitis B (section 1861(s)(10) of the Act)
and screening services such as screening mammographies or pap smears
(sections 1861(s)(13) and (14) of the Act, respectively) are not within
the scope of the extended care benefit, since they are not considered
reasonable and necessary for the diagnosis or treatment of a condition
that has already manifested itself. Finally, the extended care benefit
does not include the types of acute or emergent services discussed
above as being exclusively within the purview of hospitals rather than
SNFs, since these are types of services that SNFs themselves do not
generally provide, either directly or under arrangements.
We specifically invite comments on the treatment of outpatient
hospital services furnished to SNF residents under the SNF Consolidated
Billing provision, including other possible ways to exempt those
particular outpatient hospital procedures that are clearly beyond the
scope of SNF services while preserving the integrity of the SNF service
package itself. We also note that further refinements in this policy
may eventually become necessary, in order to ensure consistency with
the new outpatient hospital PPS as its specific characteristics are
developed.
In addition, effective January 1, 1999, section 4541 of the BBA
1997 imposes an annual per beneficiary limit of $1,500 on all
outpatient physical therapy services (including speech-language therapy
services), and imposes a similar limit on all outpatient occupational
therapy services, but specifically excludes services furnished by a
hospital's outpatient department from each of these annual limits. We
note that this exclusion of hospital outpatient department services
does not apply to services furnished to a beneficiary who is an SNF
resident for Consolidated Billing purposes. For an SNF resident who is
not in a covered stay and has reached the annual $1,500 limit, this
avoids creating a perverse incentive to have a hospital outpatient
department furnish therapy services that the resident could
appropriately receive from the SNF itself. We will specifically address
this point in the regulations that we are currently developing to
implement section 4541 of the BBA 1997.
Another event that would generally end a beneficiary's ``resident''
status for SNF Consolidated Billing purposes would be the beneficiary's
formal discharge from the SNF, or a departure from the SNF without a
formal discharge (for example, for a trial visit home on a leave of
absence), unless followed within 24 consecutive hours by a readmission
to that or another SNF. We are using a 24-hour timeframe for
readmission following any discharge or other departure from the SNF
because we believe that this duration should generally be sufficient to
preclude situations in which the beneficiary is temporarily sent
outside the SNF for only a brief period to receive a service offsite
(for example, through an outpatient visit to a hospital or clinic),
merely to circumvent the SNF Consolidated Billing requirement. Further,
as indicated above, we believe that in most situations where a
beneficiary with comprehensive care needs is absent from the SNF for 24
consecutive hours, another provider will have already assumed the
ongoing responsibility for those comprehensive care needs by that point
in time.
In addition, we note that section 1886(a)(4) of the Act includes a
preadmission ``payment window'' provision for hospitals, under which
certain Part B services furnished by a hospital or by an entity wholly
owned or operated by the hospital within 3 days (or, for non-PPS
hospitals, within 1 day) before an inpatient admission to that hospital
are included in the Medicare Part A payment for the hospital admission
itself (see Secs. 412.2(c)(5) (for PPS hospitals) and 413.40(c)(2) (for
non-PPS hospitals)). Further, section 1833(d) of the Act prohibits
payment under Part B for any services for which Part A can make
payment. Thus, if a hospital inpatient has spent a portion of the
preadmission period as a resident of an SNF that is wholly owned or
operated by the admitting hospital, this would preclude coverage (and
SNF billing) under Part B for diagnostic services and other admission-
related services received as an SNF resident during the
[[Page 26300]]
preadmission period, since those services would be included in the
hospital's Part A payment for the subsequent inpatient admission.
5. Effects of This Provision
For those services that are subject to the SNF Consolidated Billing
requirement, Medicare will no longer permit ``unbundling'' (that is,
Medicare billing by any entity other than the SNF itself). Rather, the
SNF itself will have to furnish the services--either directly, or under
arrangements with an outside supplier in which the SNF itself (rather
than the supplier) bills Medicare. Section 1861(w)(1) of the Act
defines ``arrangements'' as those in which the SNF's receipt of
Medicare payment for a beneficiary's covered service discharges the
liability of the beneficiary or any other person to pay for the
service. Further, longstanding manual instructions at MIM-3, Sec. 3007
and Sec. 206 of the Medicare SNF Manual provide that in making such
arrangements, an SNF should not act merely as a billing conduit, but
should also exercise professional responsibility over the arranged-for
services. However, the requirement for the SNF to furnish under
``arrangements'' any services that it obtains from an outside supplier
does not mandate the SNF itself to meet the applicable supplier
standards for that service, but merely to select an outside supplier
that meets them. For example, when an SNF bills for ambulance services
furnished to its residents under arrangements with an outside supplier,
this does not make the SNF itself responsible for meeting the ambulance
regulations' standards regarding vehicles and vehicle staffing (see
Sec. 410.40(a)), but merely for selecting an outside supplier that
itself meets these standards. Similarly, under the requirements for
participation at Sec. 483.75(k)(1)(ii), if an SNF elects to provide
portable x-ray services under arrangements with an outside supplier,
the SNF is responsible only for selecting a portable x-ray supplier
that itself meets the applicable Medicare conditions for coverage (see
subpart C of part 486); under Sec. 483.75(k)(1)(i), an SNF must itself
meet the applicable provider standards for diagnostic radiology
services (at Sec. 482.26) only if the SNF elects to provide such
services directly with its own resources.
When the SNF furnishes services under an arrangement with an
outside supplier, the outside supplier must look to the SNF instead of
to Medicare Part B for payment, and the terms of the supplier's payment
by the SNF are established exclusively through contractual agreements
negotiated between the two parties themselves, rather than being
prescribed for them by the Medicare program. For a resident in a
covered Part A stay, all services furnished by the SNF (either
directly, or under arrangements with an outside supplier) are included
in the SNF's Part A bill. For a resident who is not in a covered Part A
stay (Part A benefits exhausted, posthospital or level of care
requirements not met, etc.), the SNF itself submits all bills to Part
B.
We note that while new section 1888(e)(9) of the Act provides that
the amount of Part B payment shall be the amount provided under the
applicable fee schedule for an SNF's services--including those services
provided under arrangements with an outside supplier--the law is silent
with regard to how much (if any) of this fee schedule amount the SNF
itself can retain when it pays the supplier. If an outside supplier
agrees to furnish services to the SNF for less than the applicable fee
schedule amount, we are concerned that allowing the SNF to retain the
difference for each service billed to Part B is likely to create a
financial incentive for the SNF to provide unnecessary services. The
approach that we favor as a means of solving this problem would be to
request legislation to limit the SNF's Part B payment to the lower of
the applicable fee schedule amount or the amount that the supplier
actually charges the SNF. Another option--which we did not select--
would be to require that the SNF pay to the supplier the entire fee
schedule payment amount, less a reasonable charge for administration.
We specifically invite comments on the extent to which this problem may
arise and on the advisability of pursuing our suggested legislative
approach or other approaches.
While the SNF Consolidated Billing requirement prohibits Medicare
billing by any entity other than the SNF, we note that this does not
preclude an SNF from engaging the services of an outside entity to
assist the SNF in performing the specific tasks involved in actually
completing and sending in the bill itself. This practice, known as
``contract billing,'' is permissible as long as the billing takes place
under the SNF's Medicare provider number, and the SNF itself remains
the legally responsible billing party. However, an SNF is precluded
from relinquishing or reassigning to any other party the actual legal
responsibility for and control over a claim. This reflects the Medicare
law's general prohibitions with regard to the reassignment of claims at
sections 1815(c) and 1842(b)(6) of the Act and regulations at subpart F
of part 424, as well as the specific prohibitions on reassignment of
provider claims discussed in the manual instructions at MIM-3,
Secs. 3488ff.
The changes introduced by the Consolidated Billing provision will
bring about a number of significant program improvements. First, this
requirement provides an essential foundation for the new Part A SNF
PPS, by bundling into a single facility package those services that the
PPS payment is intended to capture. Second, it spares beneficiaries who
are in covered Part A stays from incurring out-of-pocket liability for
Part B deductibles and coinsurance. Third, it eliminates the potential
for duplicative billings for the same service to the FI by the SNF and
to the carrier by an outside supplier. Fourth, this requirement will
help promote greater quality of care, by enhancing the SNF's capacity
to meet its existing responsibility to oversee and coordinate the
entire package of care that each of its residents receives. Finally, by
making the SNF itself more directly accountable for this overall
package of care and services, the Consolidated Billing requirement may
help restrain certain inappropriate billing practices, while at the
same time helping to ensure that each resident actually receives those
services for which there is a legitimate medical need.
C. Effective Date for Consolidated Billing
Unlike the SNF PPS itself, the effective date of the Consolidated
Billing requirement is not tied to the start of the individual SNF's
first cost reporting period that begins on or after July 1, 1998.
Rather, the Consolidated Billing provision is effective for services
furnished on or after July 1, 1998. We note that in April 1998, HCFA
issued Program Memorandum (PM) No. AB-98-18, which contains operational
instructions for Medicare contractors on the implementation of
consolidated billing. The PM provides that, for individual facilities
that lack the capability to perform consolidated billing as of the July
1 effective date, the SNF must begin consolidated billing with respect
to items and services furnished on or after the earlier of (1) January
1, 1999 or (2) the date the facility comes under the PPS.
VI. Changes in the Regulations
As discussed below, we are making a number of revisions in the
regulations in order to implement both the prospective payment system
and the SNF Consolidated Billing provision and
[[Page 26301]]
its conforming statutory changes. First, we are revising the
regulations in 42 CFR part 410, subpart I, which deal with payment of
benefits under Part B, in order to implement section 1842(b)(6)(E) of
the Act, as amended by section 4432(b)(2) of the BBA 1997.
Specifically, we are adding a new paragraph (b)(14) to Sec. 410.150,
which specifies that for those services subject to the SNF Consolidated
Billing requirement, Medicare makes Part B payment to the SNF rather
than to the beneficiary. We are also making certain conforming changes
to provisions in part 410, subpart B, which describe Part B coverage of
individual medical and other health services, such as outpatient
hospital services (Sec. 410.27(a)(1)(i)), hospital or CAH diagnostic
tests (Sec. 410.28(a)(1)), diagnostic tests (Sec. 410.32(e)), and
ambulance services (Sec. 410.40(b)).
In addition, we are revising the regulations in part 411, subpart
A, which deal with exclusions from Medicare coverage, in order to
implement section 1862(a)(18) of the Act, as amended by section
4432(b)(1) of the BBA 1997. Specifically, we are adding a new paragraph
(p)(1) to Sec. 411.15, which excludes from coverage any service
furnished to an SNF resident (other than those individual services
listed in new paragraph (p)(2) of this section) by an entity other than
the SNF itself. In addition, a new paragraph (p)(3) will set out the
definition of an SNF ``resident'' for purposes of this provision, as
discussed previously in section V.B.4.
We are revising the regulations in part 413, which deal with
Medicare payment to providers of services. Section 413.1 establishes
that providers are generally paid on the basis of reasonable cost, and
then sets out several specific exceptions to this general principle.
Currently, the only exception for SNFs is at Sec. 413.1(g), with regard
to the existing Part A PPS under section 1888(d) of the Act, which
applies exclusively to low volume SNFs. However, under sections 4432(a)
and (b)(5)(H) of the BBA 1997, the existing SNF Part A payment
methodologies (that is, on a reasonable cost basis, or under a PPS
established specifically for low volume SNFs) will be superseded by the
new PPS for SNFs generally, effective with cost reporting periods
beginning on or after July 1, 1998. Accordingly, we are revising
Sec. 413.1(g) as follows, to reflect the BBA 1997 provisions for a
general SNF PPS, as well as its related conforming changes. In
paragraph (g)(1), we clarify that the previous SNF payment methodology
(that is, either on a reasonable cost basis or under the low volume SNF
PPS) is effective only for those cost reporting periods beginning
before July 1, 1998. In paragraph (g)(2)(i), we provide that effective
with cost reporting periods beginning on or after July 1, 1998, payment
for services furnished during a covered Part A stay will be made in
accordance with the new SNF PPS under section 1888(e) of the Act, as
implemented by regulations in the new subpart J of part 413. This new
subpart will set forth the regulatory framework of the new PPS. It
specifically discusses the scope and basis of the PPS rates as well as
the methodology for computing them. It also describes the transition
phase of the PPS and related rules.
In paragraph (g)(2)(ii), we implement section 1888(e)(9) of the Act
(as amended by section 4432(b)(3) of the BBA 1997), which provides that
the payment amount for services that are not furnished during a covered
Part A stay shall be the amount provided under the otherwise applicable
Part B fee schedule. Unlike the new Part A PPS for SNFs, the effective
date for the Part B fee schedule provision is not tied to the beginning
of an individual SNF's cost reporting period, but rather, is effective
for all services furnished on or after July 1, 1998. Consequently, we
note that there is a potential overlap between this provision and the
reasonable cost provision described in paragraph (g)(1), during the
period of time running from July 1, 1998, until the conclusion of an
individual SNF's last cost reporting period beginning prior to that
date. Accordingly, we are revising the beginning of paragraph (g)(1),
to clarify that Part B payment during that period of time is made
according to the new fee schedule provision rather than the previous
payment methodology. Finally, we are implementing a conforming change
in section 4432(b)(5)(A) of the BBA 1997 by revising paragraph (b)(4)
of Sec. 483.20, to indicate that the frequency of resident assessments
specified in that section of the regulations is subject to the
timeframes prescribed under the SNF PPS in new subpart J of part 413.
We are revising the portion of part 424 dealing with the prescribed
certification and recertification (Sec. 424.20) that the requirements
for a covered SNF level of care are met, along with that portion of
part 409 that sets out the level of care requirements themselves (at
Sec. 409.30), to reflect the use of the RUG-III groups, as discussed
previously in section II.D. of this preamble. We are also revising
certain portions of part 424 that deal with claims for payment.
Specifically, we are revising Sec. 424.32(a)(2) to require the
inclusion of an SNF's Medicare provider number on claims for physician
services furnished to an SNF resident. We are also adding to
Sec. 424.32(a) the requirement for an SNF to include HCPCS coding on
its Part B claims.
We are also revising the regulations in part 489, subpart B (which
deal with the basic requirements of Medicare provider agreements), in
order to implement section 1866(a)(1)(H)(ii) of the Act, as amended by
section 4432(b)(5)(F) of the BBA 1997. Specifically, we are adding a
new paragraph (s) to Sec. 489.20, which will require a participating
SNF, under the terms of its provider agreement, to furnish all services
that are subject to the Consolidated Billing provision, either directly
or under an arrangement with an outside source in which the SNF itself
bills Medicare.
In addition, we are making a number of conforming changes in part
409, subpart C of the regulations, as discussed below. Section 1861(h)
of the Act describes coverage of ``extended care'' (that is, Part A
SNF) services. In addition to the specific service categories set out
in paragraphs (1) through (6) of section 1861(h), paragraph (7)
provides for coverage of other services that are generally provided in
this setting. Prior to the BBA 1997, coverage of services ``generally
provided by'' SNFs under this statutory authority required not only for
a particular service to be ``generally provided'' (that is, for the
provision of that type of service to be the prevailing practice among
SNFs nationwide), but also for the service to be provided directly
``by'' the SNF itself. However, section 4432(b)(5)(D) of the BBA 1997
has now expanded section 1861(h)(7) of the Act to include coverage of
services that are generally provided ``under arrangements . . . made
by'' SNFs with outside sources. As a result, the extended care benefit
now covers the full range of services that SNFs generally provide,
either directly or under arrangements with outside sources. For
example, the services of respiratory therapists have until now been
specifically coverable as extended care services only when provided
directly by those therapists who are employees of the SNF's transfer
agreement hospital under section 1861(h)(6) of the Act. Since these are
services that SNFs historically have ``generally provided'' (albeit in
the limited context of the transfer agreement hospital provision), we
are now revising the regulations at Sec. 409.27 to permit coverage of
respiratory therapy services under amended section 1861(h)(7) of the
Act when provided under an arrangement between the SNF and a
[[Page 26302]]
respiratory therapist, regardless of whether the therapist is employed
by the SNF's transfer agreement hospital.
We are also revising this section of the regulations to incorporate
longstanding manual instructions in MIM-3, Sec. 3133.9.A and in
Sec. 230.10.A. of the SNF Manual, which specify that the medical and
other health services identified in section 1861(s) of the Act are
considered to be generally furnished by SNFs and, therefore, coverable
under the Part A extended care benefit. We specify that such coverage
would be subject to any applicable limitations or exclusions. For
example, the Part A extended care benefit cannot include coverage of
those services (such as physician services) that are not within the
scope of the inpatient hospital benefit. As discussed previously in
section V.B.2., the preventive and screening procedures specified in
section 1861(s) of the Act are not coverable as extended care services,
since they are not considered to be reasonable and necessary for
diagnosing or treating a condition that has already manifested itself.
Finally, coverage under this provision does not include specific types
of services (such as the intensive or emergency types of hospital
services discussed previously in section V.B.4.) that SNFs themselves
do not generally provide, either directly or under arrangements.
In addition to specifically revising the regulations at Sec. 409.27
to reflect the recent BBA 1997 amendment of section 1861(h)(7) of the
Act, we are also taking this opportunity to revise the overall
organization of subpart C of part 409 so that it more accurately
reflects the format of its statutory authority, section 1861(h) of the
Act. As a result, we are making the following revisions in this
subpart:
We are renumbering the provisions in Sec. 409.20(a) to
conform more closely to the numbering used in the corresponding
statutory authority at section 1861(h) of the Act.
A new Sec. 409.21, entitled ``Nursing care,'' corresponds
to section 1861(h)(1) of the Act, which authorizes coverage under the
extended care benefit of nursing care provided by or under the
supervision of a registered professional nurse. This new section also
includes a more direct statement of the policy with regard to coverage
of private duty nurses in SNFs, which until now has been reflected in
Sec. 409.20(b)(1) when read in combination with Sec. 409.12(b).
A new Sec. 409.24, entitled ``Medical social services,''
corresponds to section 1861(h)(4) of the Act, which authorizes coverage
under the extended care benefit of medical social services. This new
section incorporates the services described in longstanding manual
instructions at Sec. 3133.4 of MIM-3 and Sec. 230.4 of the Medicare SNF
Manual, and which also appear (in the context of Comprehensive
Outpatient Rehabilitation Facility (CORF) services) in existing
regulations at Sec. 410.100(h) of this chapter.
The material previously contained in Secs. 409.24 (``Drugs
and biologicals'') and 409.25 (``Supplies, appliances, and equipment'')
is combined into a new Sec. 409.25, entitled ``Drugs, biologicals,
supplies, appliances, and equipment,'' which corresponds to section
1861(h)(5) of the Act.
The material previously contained in Secs. 409.26
(``Services furnished by an intern or a resident-in-training'') and
409.27 (``Other diagnostic or therapeutic services'') is combined into
a new Sec. 409.26, entitled ``Transfer agreement hospital services,''
which corresponds to section 1861(h)(6) of the Act. We are also
clarifying that the references in this context to an institution that
has a swing-bed approval apply specifically to those services that the
institution furnishes to its own SNF-level inpatients under its swing
bed approval.
A new Sec. 409.27, entitled ``Other services generally
provided by (or under arrangements made by) SNFs,'' corresponds to
section 1861(h)(7) of the Act, as amended by section 4432(b)(5)(D) of
the BBA 1997. We are also including a conforming change in the section
heading and text of Sec. 409.20(b)(2).
Further, in view of the previously discussed statutory change to
allow Part A coverage of the full range of services that SNFs generally
provide, either directly or under arrangements with outside sources, we
are making a conforming change to the long-term care facility
requirements for participation at Sec. 483.75(h) of this chapter.
Previously, Sec. 483.75(h) provided for the furnishing of any services
by outside sources under either an ``arrangement'' (which, by
definition, makes the facility itself responsible for billing the
program) or an ``agreement'' (which does not necessarily mandate this
result). We are now revising this provision so that it more accurately
reflects the statutory authority at section 1819(b)(4)(A) of the Act,
as well as revised section 1861(h)(7). Section 1819(b)(4)(A) of the
Act, which specifies the range of services that a nursing home must
furnish in order to participate in the Medicare program as an SNF,
allows for ``agreements'' only with respect to dental services (for
which virtually no coverage exists under the Medicare program), and
provides that all other required services must be furnished either
directly by the SNF itself or under ``arrangements'' with an outside
source in which the SNF itself bills Medicare.
Finally, as discussed in section II.D., we are making certain
specific modifications in the existing SNF level of care criteria
contained in part 409, subpart D. Further, we are also adding to
subpart F of part 409 a new administrative presumption with regard to
the ending of a benefit period in an SNF, at Sec. 409.60(c)(2).
VII. 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, when we proceed with a subsequent
document, we will respond to the comments in the preamble to that
document.
VIII. Waiver of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite public comment on the proposed rule. The
notice of proposed rulemaking includes a reference to the legal
authority under which the rule is proposed, and the terms and substance
of the proposed rule or a description of the subjects and issues
involved. This procedure can be waived, however, if an agency finds
good cause that a notice-and-comment procedure is impracticable,
unnecessary, or contrary to the public interest, and incorporates a
statement of the finding and its reasons in the rule. We find that the
circumstances surrounding this rule make it impracticable to pursue a
process of notice-and-comment rulemaking before the provisions of this
rule take effect.
The BBA 1997 was enacted on August 5, 1997. As discussed earlier in
this rule, the effective date for the SNF PPS is for cost reporting
periods beginning on or after July 1, 1998. In addition, section
4432(a) of the BBA 1997 requires publication of the prospective payment
rates prior to May 1, 1998. The resulting timeframe allowed HCFA 9
months to complete the process of development and review of the
regulations to implement the PPS and related changes. The immense scope
of SNF PPS development combined with this limited time period made it
impracticable to conduct notice-and-comment rulemaking before the
statutory effective date of the PPS. In addition to the normal length
of time needed to develop and review a
[[Page 26303]]
regulation of this magnitude, the time schedule associated with the
completion of development of a number of critical components of the PPS
made it impossible to complete the calculation of the payment rates in
time to promulgate a notice of proposed rulemaking. For example, the
national case-mix indices and SNF market basket index, set forth
earlier in this rule, had to be developed. As discussed earlier, these
indices are an essential element of the case-mix payment and rate
setting methodology. In addition, these indices are essential for
standardizing and updating the Federal payment rates as required by the
BBA 1997. Also, the redesign and validation of the MEDPAR analog,
development of the Part B estimate included in the PPS rates, and
research related to application of the case-mix adjustment to certain
ancillary services (for example, drugs, laboratory services, medical
supplies) were important components of the rate setting methodology,
which required much time to develop.
We believe it evident that HCFA could not compute payment rates and
complete the numerous components of the PPS and Consolidated Billing
requirements that are described in this rule until immediately prior to
the publication date required by statute and, therefore, it was
impracticable to complete notice-and-comment rule making before May 1.
Therefore, we find good cause to waive the notice of proposed
rulemaking and to issue this final rule on an interim final basis. We
are providing a 60-day comment period for public comment.
Effect of the Contract with America Advancement Act, Pub. L. 104-121
This rule has been determined to be a major rule as defined in
Title 5, United States Code, section 804(2). Ordinarily, under 5 U.S.C.
801, as added by section 251 of Pub. L. 104-121, major rule shall take
effect 60 days after the later of (1) the date a report on the rule is
submitted to the Congress or (2) the date the rule is published in the
Federal Register. However, section 808(2) of Title 5, United States
Code, provides that, notwithstanding 5 U.S.C. 801, a major rule shall
take effect at such time as the Federal agency promulgating the rule
determines if for good cause the agency finds that notice and public
procedure are impracticable, unnecessary, or contrary to the public
interest. As indicated above, for good cause we find that it was
impracticable to complete notice and comment procedures before
publication of this rule. Accordingly, pursuant to 5 U.S.C. 808(2),
these regulations are effective on July 1, 1998.
IX. Regulatory Impact Statement
We have examined the impacts of this interim final rule as required
by Executive Order 12866, the Unfunded Mandates Reform Act of 1995, and
the Regulatory Flexibility Act (RFA) (Public Law 96-354). Executive
Order 12866 directs agencies to assess all costs and benefits of
available regulatory alternatives and, when regulation is necessary, to
select regulatory approaches that maximize net benefits (including
potential economic, environmental, public health and safety effects,
distributive impacts, and equity). A regulatory impact analysis (RIA)
must be prepared for major rules with economically significant effects
($100 million or more annually). The payment changes set forth in this
interim final rule due to the BBA 1997 will result in projected savings
for fiscal years 1999 through 2002 in excess of $100 million per year.
Because the projected savings resulting from this interim final rule
are expected to exceed $100 million, it is considered a major rule.
The Unfunded Mandates Reform Act of 1995 also requires (in section
202) that agencies prepare an assessment of anticipated costs and
benefits for any rule that may result in an annual expenditure by
State, local, or tribal governments, in the aggregate, or by the
private sector, of $100 million. This interim final rule does not
mandate any requirements for State, local, or tribal governments. We
believe the private sector costs of this rule fall below these
thresholds, as well.
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations and governmental agencies.
Most SNFs and suppliers are considered small entities, either by
nonprofit status or by having revenues of $5 million or less annually.
Intermediaries and carriers are not considered to be small entities.
A. Background
This interim final rule sets forth a schedule of prospectively
determined per diem rates to be used for payments under the Medicare
program as well as a Consolidated Billing requirement. Section
1888(e)(4)(H) of the Act requires that the Secretary establish and
publish prospectively determined per diem rates at least 60 days prior
to the beginning of the period to which such rates are to be applied.
As required under section 1888(e)(4)(H), this interim final rule
sets forth the first schedule of unadjusted Federal per diem rates, to
be used for payment beginning July 1, 1998.
While section 1888(e) specifies the base year and certain other
components of computing the payment rates, the statute does allow us
broad authority in the establishment of several key elements of the
system, and HCFA had some opportunity to consider alternatives for
these elements. These include the case-mix methodology (including the
assessment schedule), market basket index, wage index, and urban/rural
distinction used in the development and/or adjustment of the Federal
rates. In addition, the incorporation of the case mix methodology into
the coverage requirements involved discretion on HCFA's part. Most of
these elements, and the alternatives that were considered, were
discussed in detail earlier in the preamble of this rule. Several that
may warrant some additional discussion include the case mix system and
associated assessment schedule.
Regarding the case mix system, as we have noted in the background
portion of the preamble, we are aware of a variety of case-mix systems
used by various States in the administration of their Medicaid payment
systems for nursing homes. However, due to the different range of
covered services furnished by Medicaid nursing homes and differences in
approaches taken by the unique State systems, none of these case-mix
systems met our needs. As a classification and weighting system, the
only case-mix system that was suited for the Medicare patient
population is the RUG-III methodology we are implementing as part of
this PPS.
With regard to the assessment schedule, the schedule adopted in
this rule was the result of analysis of information from our Multistate
Nursing Home Case-Mix and Quality Demonstration. In developing this
schedule, we weighed the need for the payment system to capture changes
in patient condition against the burden on SNFs and their staffs. The
resulting schedule is designed to balance these competing
considerations.
B. Impact of This Interim Final Rule
Below, the impact of this rule is discussed in terms of its fiscal
impact on the budget and in terms of its impact on providers and
suppliers. The estimated fiscal impact of this rule is discussed first.
[[Page 26304]]
1. Budgetary Impact
The effect of this rule is that the rates will result in estimated
5-year annual savings ranging from $30 million to $4.28 billion, as
shown in Table IX.1 below. (It should also be noted that Table IX.1
shows the impact for FYs 2000 through 2002 even though an update to
this rule will go out effective October 1, 1999 (and every subsequent
fiscal year) that will set forth a new schedule of rates to be used for
FY 2000. These numbers are shown to provide a full picture of the
impact of this new payment system once it is fully phased in to 100
percent of the Federal rate.) These savings include both the savings to
Medicare fee-for-service and managed care payments. The managed care
savings make up approximately 25 percent of the total savings.
This table takes into account the behaviors that we believe SNFs
will engage in order to minimize any perceived adverse effects of
section 4432 of the BBA 1997 on their payments. We believe these
behavioral offsets might include an increase in the number of covered
days and an increase in the average case-mix for each facility. We
believe that, on average, these behavioral offsets will result in a 45
percent reduction in the effects these rates might otherwise have on an
individual SNF.
Table IX.1--Savings to the Medicare Program
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F)
----------------------------------------------------------------------------------------------------------------
FY Transition Inflation Other Part A Part B Total
----------------------------------------------------------------------------------------------------------------
1998.............................. 0 30 -20 10 20 30
1999.............................. 90 1500 -70 1520 60 1580
2000.............................. 240 2880 -80 3040 60 3100
2001.............................. 410 3480 -80 3810 70 3880
2002.............................. 610 3690 -90 4210 70 4280
----------------------------------------------------------------------------------------------------------------
Column (A) shows the savings from the transition to the Federal
rate. This reflects the effect of eliminating exceptions and limiting
exemptions as required by the Act and discussed earlier in this rule.
This was estimated by calculating the effect for a sample of SNFs which
had exceptions and exemptions and extrapolating the results to the
entire SNF industry. It also reflects the effect of applying a lower
weight to the higher per diem costs of hospital-based SNFs in computing
the Federal rates as required by the Act as amended by the BBA 1997 and
described earlier in this rule. Column (B) shows the savings from using
the statutorily determined update factor, which will result in lower
payment increases than allowed under the current cost-based system.
These payment increases under the cost-based system were computed using
historical trends of these increases and projecting a continuation of
those trends into the future. As can be seen from the table, most of
the savings are the result of this provision. As noted, this component
of the rate setting methodology is required by statute and does not
allow for our consideration of any alternatives. Column (C) shows the
cost of shifting the Consolidated Billing piece into Part A of
Medicare. Column (D) shows the total savings to Part A of Medicare. It
is column (A) plus column (B) plus column (C). Column (E) shows the
total savings to Part B of Medicare resulting from the Consolidated
Billing provisions. The sum of column (E) and Column (C) represents the
impact of the Consolidated Billing provision on the Part B coinsurance.
Column (F) is the total savings from this rule and is column (D) plus
column (E).
2. Impact on Providers and Suppliers
Table IX.2 below shows the number of facilities projected to
experience a decrease in Medicare SNF payments under the new
prospective payment rates and the percentage change for the type of
facility.
Table IX.2--Impact on SNFs by Type
----------------------------------------------------------------------------------------------------------------
(C) Estimated
(B) Number of average
Type of SNF (A) Total SNFs with percentage
number of SNFs lower payment reduction in
payments
----------------------------------------------------------------------------------------------------------------
MSA Freestanding................................................ 5617 5568 17
MSA Hospital Based.............................................. 683 676 19
Non-MSA Freestanding............................................ 2204 2185 17
Non-MSA Hospital Based.......................................... 533 529 18
Total................................................... 9037 8958 17
----------------------------------------------------------------------------------------------------------------
Specifically, column (A) of the table shows the total number of SNFs in
the data base for FY 1995 cost reporting periods. Column (B) shows the
number of SNFs whose payment rate for cost reporting periods beginning
July 1, 1998 would be lower than the payment they would have received
under the former cost-based methodology for cost reporting periods
beginning July 1, 1998. We estimated the payments received under the
new system based on a facility level case-mix score developed using the
case-mix indices and the MEDPAR analog described earlier in this rule.
We estimated the payments received under the former system by using the
same average inflation factor from the 1995 data for each facility.
Column (C) shows the expected reduction in payments between the two
payment methodologies on a percentage basis.
The results listed in Table IX.2 should be viewed with caution and
as illustrative of broad groupings of SNFs. The effects of these
provisions on
[[Page 26305]]
individual SNFs are unknown. As stated previously, in developing these
estimates, we assumed each facility would increase costs at the
national average rate. This national average increase includes the
higher costs of new facilities entering the program. Therefore this
increase is slightly higher than the true amount for existing
facilities. We do, however, expect total payments to SNFs to decrease
compared to payments that would have occurred under the former cost-
based methodology. The effects of this decrease in payments to any
individual SNF will depend on that SNF's ability to operate under the
new payment methodology and on the proportion of its revenues that
comes from the Medicare program.
Under the RFA, an economic impact is significant if the annual
total costs or revenues of a substantial number of entities will
increase or decrease by at least 3 percent. Medicare payments generally
do not account for a high proportion of SNF revenue (about 10 percent
on average) and this rule reduces those payments by approximately 17
percent on average. Therefore, total revenues for SNFs will be reduced
by about 1.7 percent. As stated above we are unable to determine the
effects on individual SNFs and therefore are unable to determine if the
new SNF per diem rates will result in a substantial number of SNFs
experiencing significant decreases in their total revenues.
We do not expect suppliers of items and services to SNFs to be
significantly affected economically by the Consolidated Billing
provisions. Total Medicare reimbursement to suppliers is about $4
billion each year. As shown in Table IX.1, column (E), the
reimbursement for these items and services is about $60 million each
year. Therefore, Consolidated Billing related to the services provided
to patients in Part A SNF stays should have a minimal impact on
suppliers, generally. The majority of ancillary services are provided
directly by SNFs or under arrangements with suppliers and are,
therefore, already billed to Medicare by the SNFs. While there is a
possibility that, for those services now being consolidated, a sizeable
number of these suppliers would likely be reimbursed at rates lower
than the rates at which they were reimbursed under the previous system,
this is highly dependent on the reaction each individual supplier has
to the new payment system.
In addition, with regard to Consolidated Billing related to
services provided to SNF patients who are not in a covered Part A stay,
to the extent that these services have been necessary in the past, they
will still be required and provided to these patients by suppliers.
Accordingly, it is anticipated that the total impact on suppliers will
be minimal. However, determining the effect on individual suppliers is
not possible due to a lack of data. Therefore we are not able to
determine if these new SNF per diem rates will result in a substantial
number of suppliers experiencing significant decreases in their total
revenues.
Our experience with the inpatient hospital PPS has been that
providers will now have incentives to provide the most cost efficient
care possible while still providing the level of care necessary for the
patient. The SNF PPS system provides some of the same incentives as
does the hospital DRG/PPS system, and many of the changes that have
taken place in the inpatient hospital system can be expected for these
providers.
C. Rural Hospital Impact Statement
Section 1102(b) of the Act requires us to prepare a regulatory
impact analysis if a rule may have a significant impact on the
operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. 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.
We have not prepared a rural impact statement since we have
determined, and the Secretary certifies, that this rule will not have a
significant economic impact on the operations of a substantial number
of small rural hospitals.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
X. Collection of Information Requirements
Emergency Clearance: Public Information Collection Requirements
Submitted to the Office of Management and Budget
Pursuant to sections 3506(c)(2)(A) and 3507(j) of the Paperwork
Reduction Act of 1995 (PRA), the Health Care Financing Administration
(HCFA), Department of Health and Human Services (DHHS), has submitted
to the Office of Management and Budget (OMB) a request for emergency
review. We are requesting an emergency review because the collection of
information described below is needed prior to the expiration of the
time limits under OMB's regulations at 5 CFR, Part 1320. The Agency
cannot reasonably comply with the normal clearance procedures because
of the statutory requirement, as set forth in section 4432 of the BBA
1997, to implement these requirements on July 1, 1998.
HCFA is requesting OMB review and approval of this collection
within 11 working days, with a 180-day approval period. Written
comments from the public will be accepted and considered if received by
the individuals designated below, within 10 working days of publication
of this regulation in the Federal Register. During this 180-day period,
HCFA will pursue OMB clearance of this collection under 5 CFR 1320.5.
In order to fairly evaluate whether an information collection
should be approved by OMB, section 3506(c)(2)(A) of the PRA requires
that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Therefore, we are soliciting public comment on each of these issues
for the information collection requirements discussed below.
Section 413.343 Resident Assessment Data
SNFs are required to submit the resident assessment data as
described at Sec. 483.20 of this chapter in the manner necessary to
administer the payment rate methodology described in Sec. 413.337.
Pursuant to sections 4204(b) and 4214(d) of OBRA 1987, the current
requirements related to the submission and retention of resident
assessment data are not subject to the PRA, but it has been determined
that the new requirement to maintain performance of patient assessment
data for the 5th, 30th, and 60th days following admission, necessary to
administer the payment rate methodology described in Sec. 413.337, is
subject to the PRA. The burden associated with this requirement is the
time required to maintain MDS data submitted electronically to a State
agency or an agent of the State. We do not believe there is any
additional burden associated with the transmission of the data itself,
since the supplemental data will be submitted as part of the routine
monthly transfer of provider MDS data.
[[Page 26306]]
There are an estimated 17,000 facilities that will be required to
maintain the minimum data set. It is estimated that it will require 5
minutes per facility, per month, to electronically store the additional
MDS data for a total annual burden of 1 hour per facility.
Section 424.32 Basic Requirements For All Claims
The requirements of this section, currently approved under OMB
number 0938-0008, are being modified to require that a claim for
services furnished to an SNF resident under Sec. 411.15(p)(2)(i) of
this chapter must also include the SNF's Medicare provider number and a
Part B claim filed by an SNF must include appropriate HCPCS coding.
The burden associated with these requirements is the time required
to include the two data elements, as necessary, on a Medicare claim.
Given that the burden is minimal and is captured during the completion
of a HCFA-1500 common claim form, approved under OMB number 0938-0008,
we are assigning 1 token-hour for the annual burden per facility
associated with these new requirements. We will include these
requirements as part of the supporting requirements for the HCFA-1500,
when we resubmit the HCFA-1500 to OMB for reapproval.
We have submitted a copy of this rule to OMB for its review of the
information collection requirements above. To obtain copies of the
supporting statement and any related forms for the proposed paperwork
collections referenced above, e-mail your request, including your
address, phone number, and HCFA regulation identifier HCFA-1913, to
P[email protected], or call the Reports Clearance Office on (410) 786-
1326.
As noted above, comments on these information collection and record
keeping requirements must be mailed and/or faxed to the designee
referenced below, within 10 working days of publication of this
collection in the Federal Register:
Health Care Financing Administration, Office of Information Services,
Information Technology Investment Management Group, Division of HCFA
Enterprise Standards, Room C2-26-17, 7500 Security Boulevard,
Baltimore, MD 21244-1850; Attn: John Burke HCFA-1913; Fax Number: (410)
786-1415
And,
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, New Executive Office Building, Washington, DC
20503, Attn: Allison Herron Eydt, HCFA Desk Officer; Fax Number: (202)
395-6974 or (202) 395-5167.
List of Subjects
42 CFR Part 409
Health facilities, Medicare.
42 CFR Part 410
Health facilities, Health professions, Kidney diseases,
Laboratories, Medicare, Rural areas, X-rays.
42 CFR Part 411
Kidney diseases, Medicare, Reporting and recordkeeping
requirements.
42 CFR Part 413
Health facilities, Kidney diseases, Medicare, Puerto Rico,
Reporting and recordkeeping requirements.
42 CFR Part 424
Emergency medical services, Health facilities, Health professions,
Medicare.
42 CFR Part 483
Grant programs-health, Health facilities, Health professions,
Health records, Medicaid, Medicare, Nursing homes, Nutrition, Reporting
and recordkeeping requirements, Safety.
42 CFR Part 489
Health facilities, Medicare, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, 42 CFR chapter IV is
amended as follows:
PART 409--HOSPITAL INSURANCE BENEFITS
A. Part 409 is amended as set forth below:
1. The authority citation for part 409 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act
(U.S.C. 1302 and 1895hh).
Subpart C--Posthospital SNF Care
2. In Sec. 409.20, the introductory text to paragraph (a) is
revised, paragraphs (a)(6) and (a)(7) are revised, paragraph (a)(8) is
removed, and paragraph (b)(2) is revised to read as follows:
Sec. 409.20 Coverage of services.
(a) Included services. Subject to the conditions and limitations
set forth in this subpart and subpart D of this part, ``posthospital
SNF care'' means the following services furnished to an inpatient of a
participating SNF, or of a participating hospital or critical access
hospital (CAH) that has a swing-bed approval.
* * * * *
(6) Services furnished by a hospital with which the SNF has a
transfer agreement in effect under Sec. 483.75(n) of this chapter; and
(7) Other services that are generally provided by (or under
arrangements made by) SNFs.
(b) Excluded services--
* * * * *
(2) Services not generally provided by (or under arrangements made
by) SNFs. Except as specifically listed in Secs. 409.21 through 409.27,
only those services generally provided by (or under arrangements made
by) SNFs are considered as posthospital SNF care. For example, a type
of medical or surgical procedure that is ordinarily performed only on
an inpatient basis in a hospital is not included as ``posthospital SNF
care,'' because such procedures are not generally provided by (or under
arrangements made by) SNFs.
* * * * *
3. A new Sec. 409.21 is added to read as follows:
Sec. 409.21 Nursing care.
(a) Basic rule. Medicare pays for nursing care as posthospital SNF
care when provided by or under the supervision of a registered
professional nurse.
(b) Exception. Medicare does not pay for the services of a private
duty nurse or attendant. An individual is not considered to be a
private duty nurse or attendant if he or she is an SNF employee at the
time the services are furnished.
4. Section 409.24 is revised to read as follows:
Sec. 409.24 Medical social services.
Medicare pays for medical social services as posthospital SNF care,
including--
(a) Assessment of the social and emotional factors related to the
beneficiary's illness, need for care, response to treatment, and
adjustment to care in the facility;
(b) Case work services to assist in resolving social or emotional
problems that may have an adverse effect on the beneficiary's ability
to respond to treatment; and
(c) Assessment of the relationship of the beneficiary's medical and
nursing requirements to his or her home situation, financial resources,
and the community resources available upon discharge from facility
care.
5. Section 409.25 is revised to read as follows:
[[Page 26307]]
Sec. 409.25 Drugs, biologicals, supplies, appliances, and equipment.
(a) Drugs and biologicals. Except as specified in paragraph (b) of
this section, Medicare pays for drugs and biologicals as posthospital
SNF care only if--
(1) They represent a cost to the facility;
(2) They are ordinarily furnished by the facility for the care and
treatment of inpatients; and
(3) They are furnished to an inpatient for use in the facility.
(b) Exception. Medicare pays for a limited supply of drugs for use
outside the facility if it is medically necessary to facilitate the
beneficiary's departure from the facility and required until he or she
can obtain a continuing supply.
(c) Supplies, appliances, and equipment. Except as specified in
paragraph (d) of this section, Medicare pays for supplies, appliances,
and equipment as posthospital SNF care only if they are--
(1) Ordinarily furnished by the facility to inpatients; and
(2) Furnished to inpatients for use in the facility.
(d) Exception. Medicare pays for items to be used after the
individual leaves the facility if--
(1) The item is one that the beneficiary must continue to use after
leaving, such as a leg brace; or
(2) The item is necessary to permit or facilitate the beneficiary's
departure from the facility and is required until he or she can obtain
a continuing supply, for example, sterile dressings.
6. Section 409.26 is revised to read as follows:
Sec. 409.26 Transfer agreement hospital services.
(a) Services furnished by an intern or a resident-in-training.
Medicare pays for medical services that are furnished by an intern or a
resident-in-training (under a hospital teaching program approved in
accordance with the provisions of Sec. 409.15) as posthospital SNF
care, if the intern or resident is in--
(1) A participating hospital with which the SNF has in effect an
agreement under Sec. 483.75(n) of this chapter for the transfer of
patients and exchange of medical records; or
(2) A hospital that has a swing-bed approval, and is furnishing
services to an SNF-level inpatient of that hospital.
(b) Other diagnostic or therapeutic services. Medicare pays for
other diagnostic or therapeutic services as posthospital SNF care if
they are provided--
(1) By a participating hospital with which the SNF has in effect a
transfer agreement as described in paragraph (a)(1) of this section; or
(2) By a hospital or a CAH that has a swing-bed approval, to its
own SNF-level inpatient.
7. Section 409.27 is revised to read as follows:
Sec. 409.27 Other services generally provided by (or under
arrangements made by) SNFs.
In addition to those services specified in Secs. 409.21 through
409.26, Medicare pays as posthospital SNF care for such other
diagnostic and therapeutic services as are generally provided by (or
under arrangements made by) SNFs, including--
(a) Medical and other health services as described in subpart B of
part 410 of this chapter, subject to any applicable limitations or
exclusions contained in that subpart or in Sec. 409.20(b); and
(b) Respiratory therapy services prescribed by a physician for the
assessment, diagnostic evaluation, treatment, management, and
monitoring of patients with deficiencies and abnormalities of
cardiopulmonary function.
Subpart D--Requirements for Coverage of Posthospital SNF Care
8. In Sec. 409.30, the introductory text is revised to read as
follows:
Sec. 409.30 Basic requirements.
Posthospital SNF care, including SNF-type care furnished in a
hospital or CAH that has a swing-bed approval, is covered only if the
beneficiary meets the requirements of this section and only for days
when he or she needs and receives care of the level described in
Sec. 409.31. A beneficiary in an SNF is also considered to meet the
requirements of this section and of Sec. 409.31 when assigned to one of
the Resource Utilization Groups that is designated (in the annual
publication of Federal prospective payment rates described in
Sec. 413.345 of this chapter) as representing the required level of
care.
9. In Sec. 409.33, paragraph (a) is removed, and paragraphs (b),
(c), and (d) are redesignated as paragraphs (a), (b), and (c),
respectively; and newly redesignated paragraphs (a)(1) and (a)(2) are
revised to read as follows:
Sec. 409.33 Examples of skilled nursing and rehabilitation services.
(a) Services that qualify as skilled nursing services. (1)
Intravenous or intramuscular injections and intravenous feeding.
(2) Enteral feeding that comprises at least 26 per cent of daily
calorie requirements and provides at least 501 milliliters of fluid per
day.
* * * * *
Subpart F--Scope of Hospital Insurance Benefits
10. In Sec. 409.60, the heading of paragraph (c) is republished,
paragraphs (c)(2)(i) through (c)(2)(iii) are redesignated as paragraphs
(c)(2)(ii) through (c)(2)(iv), respectively, and a new paragraph
(c)(2)(i) is added to read as follows:
Sec. 409.60 Benefit periods.
* * * * *
(c) Presumptions.
* * * * *
(2) * * *
(i) To have met the skilled level of care requirements during any
period for which the beneficiary was assigned to one of the Resource
Utilization Groups designated as representing the required level of
care, as provided in Sec. 409.30.
* * * * *
Part 410--Supplementary Medical Insurance (SMI) Benefits
B. Part 410 is amended as set forth below:
1. The authority citation for part 410 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395(hh)), unless otherwise indicated.
Subpart B--Medical and Other Health Services
2. In Sec. 410.27, paragraph (a)(1)(i) is revised to read as
follows:
Sec. 410.27 Outpatient hospital services and supplies incident to
physicians' services: Conditions.
(a) * * *
(1) * * *
(i) By or under arrangements made by a participating hospital,
except in the case of an SNF resident as provided in Sec. 411.15(p) of
this chapter; and
* * * * *
3. In Sec. 410.28, paragraph (a)(1) is revised to read as follows:
Sec. 410.28 Hospital or CAH diagnostic services furnished to
outpatients: Conditions.
(a) * * *
(1) They are furnished by or under arrangements made by a
participating hospital or participating CAH, except in the case of an
SNF resident as provided in Sec. 411.15(p) of this chapter.
* * * * *
4. In Sec. 410.32, the introductory text to paragraph (e) is
republished, and a new
[[Page 26308]]
paragraph (e)(7) is added to read as follows:
Sec. 410.32 Diagnostic X-ray texts, diagnostic laboratory tests, and
other diagnostic tests: Conditions.
* * * * *
(e) Diagnostic laboratory tests. Medicare Part B pays for covered
diagnostic laboratory tests that are furnished by any of the following:
* * * * *
(7) An SNF to its resident under Sec. 411.15(p) of this chapter,
either directly (in accordance with Sec. 483.75(k)(1)(i) of this
chapter) or under an arrangement (as defined in Sec. 409.3 of this
chapter) with another entity described in this paragraph.
5. In Sec. 410.40, the introductory text to paragraph (b) is
republished, paragraphs (b)(2) and (b)(3)(ii) are revised, and a new
paragraph (b)(4) is added to read as follows:
Sec. 410.40 Ambulance services: Limitations.
* * * * *
(b) Limits on coverage of ambulance transportation. Medicare Part B
pays for ambulance transportation only if--
* * * * *
(2) Medicare Part A payment is not available for the service;
(3) * * *
(ii) The transportation is furnished by an ambulance service with
which the hospital does not have an arrangement (as defined in
Sec. 409.3 of this chapter), and the hospital has a waiver (in
accordance with Sec. 489.23 of this chapter) under which Medicare Part
B payment may be made to the ambulance service; and
(4) In the case of an SNF resident (as defined in Sec. 411.15(p)(3)
of this chapter), the transportation is furnished by, or under
arrangements made by, the SNF.
* * * * *
Subpart I--Payment of SMI Benefits
6. In Sec. 410.150, the heading of paragraph (a) is republished,
paragraph (a)(2) is revised, the introductory text to paragraph (b) is
republished, and a new paragraph (b)(14) is added to read as follows:
Sec. 410.150 To whom payment is made.
(a) General rules.
* * * * *
(2) The services specified in paragraphs (b)(5) through (b)(14) of
this section must be furnished by a facility that has in effect a
provider agreement or other appropriate agreement to participate in
Medicare.
(b) Specific rules. Subject to the conditions set forth in
paragraph (a) of this section, Medicare Part B pays as follows:
* * * * *
(14) To an SNF for services (other than those described in
Sec. 411.15(p)(2) of this chapter) that are furnished to a resident (as
defined in Sec. 411.15(p)(3) of this chapter) of the SNF.
PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE
PAYMENT
C. Part 411 is amended as set forth below:
1. The authority citation for part 411 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart A--General Exclusions and Exclusion of Particular Services
2. In Sec. 411.15, the introductory text is republished; in the
heading to paragraph (m) of this section, the word ``furnished'' is
added before the word ``to''; and a new paragraph (p) is added to read
as follows:
Sec. 411.15 Particular services excluded from coverage.
The following services are excluded from coverage.
* * * * *
(p) Services furnished to SNF residents. (1) Basic rule. Except as
provided in paragraph (p)(2) of this section, any service furnished to
a resident of an SNF by an entity other than the SNF, unless the SNF
has an arrangement (as defined in Sec. 409.3 of this chapter) with that
entity to furnish that particular service to the SNF's residents.
Services subject to exclusion under this paragraph include, but are not
limited to--
(i) 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; and
(ii) Services furnished as an incident to the professional services
of a physician or other health care professional specified in paragraph
(p)(2) of this section.
(2) Exceptions. The following services are not excluded from
coverage:
(i) Physicians' services that meet the criteria of Sec. 415.102(a)
of this chapter for payment on a fee schedule basis, provided that the
claim for payment includes the SNF's Medicare provider number in
accordance with Sec. 424.32(a)(2) of this chapter.
(ii) Services performed under a physician's supervision by a
physician assistant who meets the applicable definition in section
1861(aa)(5) of the Act.
(iii) Services performed by a nurse practitioner or clinical nurse
specialist who meets the applicable definition in section 1861(aa)(5)
of the Act and is working in collaboration (as defined in section
1861(aa)(6) of the Act) with a physician.
(iv) Services performed by a certified nurse-midwife, as defined in
section 1861(gg) of the Act.
(v) Services performed by a qualified psychologist, as defined in
section 1861(ii) of the Act.
(vi) Services performed by a certified registered nurse
anesthetist, as defined in section 1861(bb) of the Act.
(vii) Dialysis services and supplies, as defined in section
1861(s)(2)(F) of the Act.
(viii) Erythropoietin (EPO) for dialysis patients, as defined in
section 1861(s)(2)(O) of the Act.
(ix) Hospice care, as defined in section 1861(dd) of the Act.
(x) An ambulance trip that initially conveys an individual to the
SNF to be admitted as a resident, or that conveys an individual from
the SNF in connection with one of the circumstances specified in
paragraphs (p)(3)(i) through (p)(3)(iv) of this section as ending the
individual's status as an SNF resident.
(xi) For services furnished during 1998 only. The transportation
costs of electrocardiogram equipment for electrocardiogram test
services (HCPCS code R0076).
(3) SNF resident defined. For purposes of this paragraph, a
beneficiary who is admitted to a Medicare-participating SNF (or to the
nonparticipating portion of a nursing home of which a distinct part is
a Medicare-participating SNF) is considered to be a resident of the
SNF, regardless of whether Part A covers the stay. Whenever such a
beneficiary leaves the facility, the beneficiary's status as an SNF
resident for purposes of this paragraph (along with the SNF's
responsibility to furnish or make arrangements for the services
described in paragraph (p)(1) of this section) ends when one of the
following events occurs--
(i) The beneficiary is admitted as an inpatient to a Medicare-
participating hospital or CAH, or as a resident to another SNF;
(ii) The beneficiary receives services from a Medicare-
participating home health agency under a plan of care;
(iii) The beneficiary receives outpatient services from a Medicare-
participating hospital or CAH (but only
[[Page 26309]]
with respect to those services that are not furnished pursuant to the
comprehensive care plan required under Sec. 483.20 of this chapter); or
(iv) The beneficiary is formally discharged (or otherwise departs)
from the SNF, unless the beneficiary is readmitted (or returns) to that
or another SNF within 24 consecutive hours.
PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED
PAYMENT RATES FOR SKILLED NURSING FACILITIES
D. Part 413 is amended as set forth below:
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 A--Introduction and General Rules
2. In Sec. 413.1, paragraph (g) is revised to read as follows:
Sec. 413.1 Introduction.
* * * * *
(g) Payment for services furnished in SNFs. (1) Except as specified
in paragraph (g)(2)(ii) of this section, the amount paid for services
furnished in cost reporting periods beginning before July 1, 1998, is
determined on a reasonable cost basis or, where applicable, in
accordance with the prospectively determined payment rates for low-
volume SNFs established under section 1888(d) of the Act, as set forth
in subpart I of this part.
(2) The amount paid for services (other than those described in
Sec. 411.15(p)(2) of this chapter)--
(i) That are furnished in cost reporting periods beginning on or
after July 1, 1998, to a resident who is in a covered Part A stay, is
determined in accordance with the prospectively determined payment
rates for SNFs established under section 1888(e) of the Act, as set
forth in subpart J of this part.
(ii) That are furnished on or after July 1, 1998, to a resident who
is not in a covered Part A stay, is determined in accordance with any
applicable Part B fee schedule or, for a particular item or service to
which no fee schedule applies, by using the existing payment
methodology utilized under Part B for such item or service.
3. The heading for subpart I of part 413 is revised to read as
follows:
Subpart I--Prospectively Determined Payment Rates for Low-Volume
Skilled Nursing Facilities, for Cost Reporting Periods Beginning
Prior to July 1, 1998
4. A new subpart J, consisting of Secs. 413.330, 413.333, 413.335,
413.337, 413.340, 413.343, 413.345, and 413.348, is added to part 413
to read as follows:
Subpart J--Prospective Payment for Skilled Nursing Facilities
Sec.
413.330 Basis and scope.
413.333 Definitions.
413.335 Basis of payment.
413.337 Methodology for calculating the prospective payment rates.
413.340 Transition period.
413.343 Resident assessment data.
413.345 Publication of Federal prospective payment rates.
413.348 Limitation on review.
Subpart J--Prospective Payment for Skilled Nursing Facilities
Sec. 413.330 Basis and scope.
(a) Basis. This subpart implements section 1888(e) of the Act,
which provides for the implementation of a prospective payment system
for SNFs for cost reporting periods beginning on or after July 1, 1998.
(b) Scope. This subpart sets forth the framework for the
prospective payment system for SNFs, including the methodology used for
the development of payment rates and associated adjustments, the
application of a transition phase, and related rules.
Sec. 413.333 Definitions.
As used in this subpart--
Case-mix index means a scale that measures the relative difference
in resource intensity among different groups in the resident
classification system.
Market basket index means an index that reflects changes over time
in the prices of an appropriate mix of goods and services included in
covered skilled nursing services.
Resident classification system means a system for classifying SNF
residents into mutually exclusive groups based on clinical, functional,
and resource-based criteria. For purposes of this subpart, this term
refers to the current version of the Resource Utilization Groups, as
set out in the annual publication of Federal prospective payment rates
described in Sec. 413.345.
Rural area means any area outside of an urban area.
Urban area means a metropolitan statistical area (MSA) or New
England County Metropolitan Area (NECMA), as defined by the Office of
Management and Budget, or a New England county deemed to be an urban
area, as listed in Sec. 412.62(f)(1)(ii)(B) of this chapter.
Sec. 413.335 Basis of payment.
(a) Method of payment. Under the prospective payment system, SNFs
receive a per diem payment of a predetermined rate for inpatient
services furnished to Medicare beneficiaries. The per diem payments are
made on the basis of the Federal payment rate described in Sec. 413.337
and, during a transition period, on the basis of a blend of the Federal
rate and the facility-specific rate described in Sec. 413.340. These
per diem payment rates are determined according to the methodology
described in Sec. 413.337 and Sec. 413.340.
(b) Payment in full. The payment rates represent payment in full
(subject to applicable coinsurance as described in subpart G of part
409 of this chapter) for all costs (routine, ancillary, and capital-
related) associated with furnishing inpatient SNF services to Medicare
beneficiaries other than costs associated with operating approved
educational activities as described in Sec. 413.85.
Sec. 413.337 Methodology for calculating the prospective payment
rates.
(a) Data used. (1) To calculate the prospective payment rates, HCFA
uses--
(i) Medicare data on allowable costs from freestanding and
hospital-based SNFs for cost reporting periods beginning in fiscal year
1995. SNFs that received ``new provider'' exemptions under
Sec. 413.30(e)(2) are excluded from the data base used to compute the
Federal payment rates. In addition, allowable costs related to
exceptions payments under Sec. 413.30(f) are excluded from the data
base used to compute the Federal payment rates;
(ii) An appropriate wage index to adjust for area wage differences;
(iii) The most recent projections of increases in the costs from
the SNF market basket index;
(iv) Resident assessment and other data that account for the
relative resource utilization of different resident types; and
(v) Medicare Part B SNF claims data reflecting amounts payable
under Part B for covered SNF services (other than those services
described in Sec. 411.15(p)(2) of this chapter) furnished during SNF
cost reporting periods beginning in fiscal year 1995 to individuals who
were residents of SNFs and receiving Part A covered services.
(b) Methodology for calculating the per diem Federal payment rates.
(1) Determining SNF costs. In calculating the initial unadjusted
Federal rates
[[Page 26310]]
applicable for services provided during the period beginning July 1,
1998 through September 30, 1999, HCFA determines each SNF's costs by
summing its allowable costs for the cost reporting period beginning in
fiscal year 1995 and its estimate of Part B payments (described in
paragraphs (a)(1)(i) and (a)(1)(v) of this section).
(2) Use of market basket index. The SNF market basket index is used
to adjust the SNF cost data to reflect cost increases occurring between
cost reporting periods represented in the data and the initial period
(beginning July 1, 1998 and ending September 30, 1999) to which the
payment rates apply. For each year, the cost data are updated by a
factor equivalent to the annual market basket index percentage minus 1
percentage point.
(3) Calculation of the per diem cost. For each SNF, the per diem
cost is computed by dividing the cost data for each SNF by the
corresponding number of Medicare days.
(4) Standardization of data for variation in area wage levels and
case-mix. The cost data described in paragraph (b)(2) of this section
are standardized to remove the effects of geographic variation in wage
levels and facility variation in case-mix. The cost data are
standardized for geographic variation in wage levels using the wage
index. The cost data are standardized for facility variation in case-
mix using the case-mix indices and other data that indicate facility
case-mix.
(5) Calculation of unadjusted Federal payment rates. HCFA
calculates the national per diem unadjusted payment rates by urban and
rural classification in the following manner:
(i) By computing the average per diem standardized cost of
freestanding SNFs weighted by Medicare days.
(ii) By computing the average per diem standardized cost of
freestanding and hospital-based SNFs combined weighted by Medicare
days.
(iii) By computing the average of the amounts determined under
paragraphs (b)(5)(i) and (b)(5)(ii) of this section.
(c) Calculation of adjusted Federal payment rates for case-mix and
area wage levels. The Federal rate is adjusted to account for facility
case-mix using a resident classification system and associated case-mix
indices that account for the relative resource utilization of different
patient types. This classification system utilizes the resident
assessment instrument completed by SNFs as described at Sec. 483.20 of
this chapter, according to the assessment schedule described in
Sec. 413.343(b). The Federal rate is also adjusted to account for
geographic differences in area wage levels using an appropriate wage
index.
(d) Annual updates of Federal unadjusted payment rates. HCFA
updates the unadjusted Federal payment rates on a fiscal year basis.
(1) For fiscal years 2000 through 2002, the unadjusted Federal rate
is equal to the rate for the previous period or fiscal year increased
by a factor equal to the SNF market basket index percentage minus 1
percentage point.
(2) For subsequent fiscal years, the unadjusted Federal rate is
equal to the rate for the previous fiscal year increased by the
applicable SNF market basket index amount.
Sec. 413.340 Transition period.
(a) Duration of transition period and proportions for the blended
transition rate. Beginning with an SNF's first cost reporting period
beginning on or after July 1, 1998, there is a transition period
covering three cost reporting periods. During this transition phase,
SNFs receive a payment rate comprising a blend of the adjusted Federal
rate and a facility-specific rate. For the first cost reporting period
beginning on or after July 1, 1998, payment is based on 75 percent of
the facility-specific rate and 25 percent of the Federal rate. For the
subsequent cost reporting period, the rate is comprised of 50 percent
of the facility-specific rate and 50 percent of the Federal rate. In
the final cost reporting period of the transition, the rate is
comprised of 25 percent of the facility-specific rate and 75 percent of
the Federal rate. For all subsequent cost reporting periods, payment is
based entirely on the Federal rate.
(b) Calculation of facility-specific rate for the first cost
reporting period. The facility-specific rate is computed based on the
SNF's Medicare allowable costs from its fiscal year 1995 cost report
plus an estimate of the amounts payable under Part B for covered SNF
services (other than those services described in Sec. 411.15(p)(2) of
this chapter) furnished during fiscal year 1995 to individuals who were
residents of SNFs and receiving Part A covered services. Allowable
costs associated with exceptions, as described in Sec. 413.30(f), are
included in the calculation of the facility-specific rate. Allowable
costs associated with exemptions, as described in Sec. 413.30(e)(2),
are included in the calculation of the facility-specific rate but only
to the extent that they do not exceed 150 percent of the routine cost
limit. Low Medicare volume SNFs that were paid a prospectively
determined rate under Sec. 413.300 for their cost reporting period
beginning in fiscal year 1995 will utilize that rate as the basis for
the allowable costs of routine (operating and capital-related) expenses
in determining the facility-specific rate. Each SNF's allowable costs
are updated to the first cost reporting period to which the payment
rates apply using annual factors equal to the SNF market basket
percentage minus 1 percentage point.
(c) SNFs participating in the Multistate Nursing Home Case-Mix and
Quality Demonstration. SNFs that participated in the Multistate Nursing
Home Case-Mix and Quality Demonstration in a cost reporting period that
began in calendar year 1997 will utilize their allowable costs from
that cost reporting period, including prospective payment amounts
determined under the demonstration payment methodology.
(d) Update of facility-specific rates for subsequent cost reporting
periods. The facility-specific rate for a cost reporting period that is
subsequent to the first cost reporting period is equal to the facility-
specific rate for the first cost reporting period (described in
paragraph (a) of this section) updated by the market basket index.
(1) For a subsequent cost reporting period beginning in fiscal
years 1998 and 1999, the facility-specific rate is equal to the
facility-specific rate for the previous cost reporting period updated
by the applicable market basket index percentage minus one percentage
point.
(2) For a subsequent cost reporting period beginning in fiscal year
2000, the facility-specific rate is equal to the facility-specific rate
for the previous cost reporting period updated by the applicable market
basket index percentage.
(e) SNFs excluded from the transition period. SNFs that received
their first payment from Medicare, under present or previous ownership,
on or after October 1, 1995, are excluded from the transition period,
and payment is made according to the Federal rates only.
Sec. 413.343 Resident assessment data.
(a) Submission of resident assessment data. SNFs are required to
submit the resident assessment data described at Sec. 483.20 of this
chapter in the manner necessary to administer the payment rate
methodology described in Sec. 413.337. This provision includes the
frequency, scope, and number of assessments required.
(b) Assessment schedule. In accordance with the methodology
described in Sec. 413.337(c) related to the adjustment of the Federal
rates for case-mix, SNFs must submit assessments according to an
assessment schedule. This schedule must include
[[Page 26311]]
performance of patient assessments on the 5th, 14th, 30th, 60th, and
90th days following admission and such other assessments that are
necessary to account for changes in patient care needs.
(c) Noncompliance with assessment schedule. HCFA pays a default
rate for the Federal rate when a SNF fails to comply with the
assessment schedule in paragraph (b) of this section. The default rate
is paid for the days of a patient's care for which the SNF is not in
compliance with the assessment schedule.
Sec. 413.345 Publication of Federal prospective payment rates.
HCFA publishes information pertaining to each update of the Federal
payment rates in the Federal Register. This information includes the
standardized Federal rates, the resident classification system that
provides the basis for case-mix adjustment (including the designation
of those specific Resource Utilization Groups under the resident
classification system that represent the required SNF level of care, as
provided in Sec. 409.30 of this chapter), and the wage index. This
information is published before May 1 for the fiscal year 1998 and
before August 1 for the fiscal years 1999 and after.
Sec. 413.348 Limitation on review.
Judicial or administrative review under sections 1869 or 1878 of
the Act or otherwise is prohibited with regard to the establishment of
the Federal rates. This prohibition includes the methodology used in
the computation of the Federal standardized payment rates, the case-mix
methodology, and the development and application of the wage index.
This prohibition on judicial and administrative review also extends to
the methodology used to establish the facility-specific rates but not
to determinations related to reasonable cost in the fiscal year 1995
cost reporting period used as the basis for these rates.
PART 424--CONDITIONS FOR MEDICARE PAYMENT
E. Part 424 is amended as set forth below:
1. The authority citation for part 424 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act
(U.S.C. 1302 and 1895hh).
Subpart A--General Provisions
2. In Sec. 424.3, the following definition is added, in
alphabetical order, to read as follows:
Sec. 424.3 Definitions.
* * * * *
HCPCS means HCFA Common Procedure Coding System.
* * * * *
Subpart B--Certification and Plan of Treatment Requirements
3. In Sec. 424.20, the introductory text and paragraph (a) are
revised to read as follows:
Sec. 424.20 Requirements for posthospital SNF care.
Medicare Part A pays for posthospital SNF care furnished by an SNF,
or a hospital or CAH with a swing-bed approval, only if the
certification and recertification for services are consistent with the
content of paragraph (a) or (c) of this section, as appropriate.
(a) Content of certification--(1) General requirements.
Posthospital SNF care is or was required because--
(i) The individual needs or needed on a daily basis skilled nursing
care (furnished directly by or requiring the supervision of skilled
nursing personnel) or other skilled rehabilitation services that, as a
practical matter, can only be provided in an SNF or a swing-bed
hospital on an inpatient basis, and the SNF care is or was needed for a
condition for which the individual received inpatient care in a
participating hospital or a qualified hospital, as defined in
Sec. 409.3 of this chapter; or
(ii) The individual has been correctly assigned to one of the
Resource Utilization Groups designated as representing the required
level of care, as provided in Sec. 409.30 of this chapter.
* * * * *
4. In Sec. 424.32, the introductory text to paragraph (a) is
republished, paragraph (a)(2) is revised, and a new paragraph (a)(5) is
added, to read as follows:
Sec. 424.32 Basic requirements for all claims.
(a) A claim must meet the following requirements:
* * * * *
(2) A claim for physician services must include appropriate
diagnostic coding using ICD-9-CM and, for services furnished to an SNF
resident under Sec. 411.15(p)(2)(i) of this chapter, must also include
the SNF's Medicare provider number.
* * * * *
(5) A Part B claim filed by an SNF must include appropriate HCPCS
coding.
* * * * *
PART 483--REQUIREMENTS FOR STATES AND LONG TERM CARE FACILITIES
F. Part 483 is amended as set forth below:
1. The authority citation for part 483 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart B--Requirements for Long Term Care Facilities
2. In Sec. 483.20, paragraph (b)(4) is revised to read as follows:
Sec. 483.20 Resident assessment.
* * * * *
(b) Comprehensive assessments.
* * * * *
(4) Frequency. Subject to the timeframes prescribed in
Sec. 413.343(b) of this chapter, assessments must be conducted--
(i) No later than 14 days after the date of admission;
(ii) Promptly after a significant change in the resident's physical
or mental condition; and
(iii) In no case, less often than once every 12 months.
* * * * *
3. In Sec. 483.75, paragraph (h)(1) is revised to read as follows:
Sec. 483.75 Administration.
* * * * *
(h) Use of outside resources. (1) If the facility does not employ a
qualified professional person to furnish a specific service to be
provided by the facility, the facility must have that service furnished
to residents by a person or agency outside the facility under an
arrangement described in section 1861(w) of the Act or (with respect to
services furnished to NF residents and dental services furnished to SNF
residents) an agreement described in paragraph (h)(2) of this section.
* * * * *
PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL
G. Part 489 is amended to read as follows:
1. The authority citation for part 489 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart B--Essentials of Provider Agreements
2. In Sec. 489.20, the introductory text is republished, and a new
paragraph (s) is added to read as follows:
[[Page 26312]]
Sec. 489.20 Basic commitments.
The provider agrees to the following:
* * * * *
(s) In the case of an SNF, either to furnish directly or make
arrangements (as defined in Sec. 409.3 of this chapter) for all
Medicare-covered services furnished to a resident (as defined in
Sec. 411.15(p)(3) of this chapter) of the SNF, except the following:
(1) Physicians' services that meet the criteria of Sec. 415.102(a)
of this chapter for payment on a fee schedule basis.
(2) Services performed under a physician's supervision by a
physician assistant who meets the applicable definition in section
1861(aa)(5) of the Act.
(3) Services performed by a nurse practitioner or clinical nurse
specialist who meets the applicable definition in section 1861(aa)(5)
of the Act and is working in collaboration (as defined in section
1861(aa)(6) of the Act) with a physician.
(4) Services performed by a certified nurse-midwife, as defined in
section 1861(gg) of the Act.
(5) Services performed by a qualified psychologist, as defined in
section 1861(ii) of the Act.
(6) Services performed by a certified registered nurse anesthetist,
as defined in section 1861(bb) of the Act.
(7) Dialysis services and supplies, as defined in section
1861(s)(2)(F) of the Act.
(8) Erythropoietin (EPO) for dialysis patients, as defined in
section 1861(s)(2)(O) of the Act.
(9) Hospice care, as defined in section 1861(dd) of the Act.
(10) An ambulance trip that initially conveys an individual to the
SNF to be admitted as a resident, or that conveys an individual from
the SNF in connection with one of the circumstances specified in
Sec. 411.15(p)(3)(i) through (p)(3)(iv) of this chapter as ending the
individual's status as an SNF resident.
(11) For services furnished during 1998 only. The transportation
costs of electrocardiogram equipment for electrocardiogram test
services (HCPCS code R0076).
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: April 22, 1998.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
Approved: April 28, 1998.
Donna E. Shalala,
Secretary.
Note: The following Appendix will not appear in the Code of
Federal Regulations.
Appendix A--Technical Features of the 1992 Skilled Nursing Facility
Total Cost Market Basket Index
As discussed in the preamble of this rule, we are revising and
rebasing the SNF market basket. This appendix describes the
technical aspects of the 1992-based index that we are implementing
in this rule. We present this description of the market basket in
three steps:
A synopsis of the structural differences between the
1977- and the 1992-based market baskets.
A description of the methodology used to develop the
cost category weights in the 1992-based market basket.
A description of the data sources used to measure price
change for each component of the 1992-based market basket, making
note of the differences from the price proxies used in the 1977-
based market basket.
I. Synopsis of Structural Changes Adopted in the Revised and Rebased
1992 Skilled Nursing Facility Total Cost Market Basket
Four major structural differences exist between the current
1977-based and the 1992-based SNF market baskets.
The 1992-based market basket has total costs (routine,
ancillary, and capital-related) whereas the 1977-based market basket
had only routine costs.
More recent SNF cost data are used in the revised and
rebased SNF market basket.
The 1977-based market basket contained cost shares that were
derived from 1977 National Center for Health Statistics data. The
1992-based market basket uses data from the PPS-9 Medicare Cost
Reports for freestanding SNFs with Medicare expenses greater than 1
percent of total expenses for five major categories of cost. PPS-9
cost reports have cost reporting periods beginning after September
30, 1991 and before October 1, 1992. Cost allocations with the six
major cost categories use two Department of Commerce data sources,
the 1992 Asset and Expenditure Survey, Bureau of the Census,
Economics and Statistics Administration, and the 1992 Bureau of
Economic Analysis Input-Output Tables.
Some cost categories have been disaggregated and some
cost categories have been combined. These category changes reflect
the availability of data in the cost reports, the Asset and
Expenditure Survey, and the Input-Output Tables. The cost categories
for Fuel Oil, Coal, etc. and Natural Gas have been combined into
Fuels, Nonhighway. The Supplies category has been disaggregated into
several subcategories: Paper, Rubber and Plastics, and Chemicals.
The 1977-based Miscellaneous Costs cost category was disaggregated
into Miscellaneous Products and Other Services, which was then
further disaggregated into Telephone, Labor-intensive Services, and
Non Labor-intensive Services. The Capital-related Expenses major
cost category was added, and then disaggregated into five
subcategories, including Depreciation expenses for Building and
Fixed Equipment and for Movable Equipment, Interest expenses for
Government and Nonprofit SNFs and for For-profit SNFs, and Other
Capital-related expenses.
Some new price proxies have been incorporated in the
revised and rebased market basket.
II. Methodology for Developing the Cost Category Weights
Cost category weights for the 1992-based market basket were
developed in two stages. First, base weights for six main categories
(wages and salaries, employee benefits, contract labor,
pharmaceuticals, capital-related expenses, and a residual all other)
were derived from the SNF Medicare Cost Reports described above. The
residual ``all other'' cost category was divided into subcategories,
using U.S. Department of Commerce data sources for the nursing home
industry. Relationships from the 1992 Input-Output Tables were used
to allocate the ``all other'' cost category.
Below we describe the source of the six main category weights
and their subcategories in the 1992-based market basket.
Wages and Salaries: The wages and salaries cost
category is one of the six base weights derived from using 1992 SNF
Medicare Cost Reports.
Employee Benefits: The ratio used in the employee
benefits cost category is derived from 1993 SNF Medicare cost
reports. The 1993 cost reports contained information from which to
derive the ratio of employee benefits to wages and salaries that was
not available in the 1992 SNF cost reports.
Pharmaceuticals: The ratio used in the pharmaceuticals
cost category was derived from 1993 SNF Medicare cost reports. The
1993 cost reports contained information from which to derive the
ratio of pharmaceuticals costs to that cost that was not available
in the 1992 cost reports.
Capital-related: The weight for the overall capital-
related expenses cost category was derived using 1992 SNF Medicare
Cost Reports. The subcategory and vintage weights within the overall
capital-related expenses were derived using additional data sources.
The methodology for deriving these weights is described below.
In determining the subcategory weights, we used a combination of
information from the 1992 and 1993 SNF Medicare Cost Reports, the
1992 Census Asset and Expenditure Survey, and the 1992 hospital
Medicare Cost Reports. We estimated the depreciation expense share
of capital-related expenses, including the distribution between
building and fixed equipment and movable equipment, from the 1992
Asset and Expenditure Survey. Depreciation expenses cannot be
disaggregated from the Medicare Cost Reports due to multiple
reporting methods. From these calculations, depreciation expenses,
not including
[[Page 26313]]
depreciation expenses implicit from leases, were estimated to be
50.7 percent of total capital-related expenditures in 1992.
The interest expense share of capital-related expenses was
derived from a special file of the 1993 SNF Medicare Cost Reports.
Interest expenses are not identifiable in the 1992 SNF Medicare Cost
Reports and not reported in the 1992 Asset and Expenditure Survey.
We determined the split between for-profit interest expense and not-
for profit interest expense based on the distribution of long-term
debt outstanding by type of SNF (for-profit or not-for-profit) from
the 1992 SNF Medicare Cost Reports. Interest expense, not including
interest expenses from leases, was estimated to be 27.3 percent of
total capital-related expenditures in 1992.
A small category, other capital-related expenses (insurance,
taxes, other), was calculated using a ratio from the 1992 hospital
Medicare Cost Reports. We determined the ratio of other capital-
related expenses to book values for hospital depreciable assets by
type of hospital control (for-profit, not-for-profit, and
government) from the 1992 hospital Medicare Cost Reports. We then
applied this ratio by type of SNF control to the book values of SNF
depreciable assets from the 1992 SNF Medicare Cost Reports to
determine other capital-related expenses for SNFs. This methodology
assumes that by type of control, hospitals and SNFs have the same
proportion of other capital-related expenses to depreciable assets.
This assumption was necessary since other capital-related expenses
not including leases were not directly available from the SNF
Medicare Cost Reports. Other capital-related expenses, not including
other capital-related expenses implicit from leases, were estimated
to be 4.5 percent of total capital-related expenditures in 1992.
Consistent with the methodology from the hospital PPS capital
input price index, we calculated lease expenses as a residual by
subtracting depreciation, interest, and other capital-related
expenses from total capital-related expenses. We then assumed that
roughly 10 percent of lease expenses were overhead, the same
assumption used in the hospital PPS capital input price index, and
included them in the other capital-related expense category. The
remaining 90 percent of lease expenses were distributed across the
depreciation (61.5 percent = 50.7/82.5), interest (33.1 percent =
27.3/82.5), and other capital-related expenses (5.4 percent = 4.5/
82.5) categories using the shares determined by the methodology
described above. The amount of lease expenses applied to the
depreciation subcategories, building and fixed equipment (93.9
percent) and movable equipment (6.1 percent), were determined using
the 1992 Asset and Expenditure Survey distribution of lease
expenses. The table below shows the final capital-related expense
distribution, including expenses from leases, in the SNF PPS market
basket:
------------------------------------------------------------------------
SNF capital- SNF capital-
related related
expenses* expenses**
------------------------------------------------------------------------
Total................................... 100.0 9.8
Depreciation........................ 60.5 5.9
Building and Fixed.............. 42.1 4.1
Equipment...............................
Movable Equipment............... 18.4 1.8
Interest............................ 32.6 3.2
Other capital-related expense....... 6.9 0.7
------------------------------------------------------------------------
* As a percent of total capital-related expenses.
** As percent of total SNF expenses.
As explained in the Rebasing and Revising the SNF market basket
section of the preamble, the HCFA methodology for determining the
price change of capital-related expenses accounts for the vintage
nature of capital, which is the acquisition and use of capital over
time. In order to capture this vintage nature, the price proxies
must be vintage-weighted. The determination of these vintage weights
occurs in two steps. First, we must determine the expected life of
capital and debt instruments in SNFs. Second, we must identify the
proportion of expenditures within a cost category that are
attributable to each year over the life of capital assets in that
category, or the vintage weights. Each of these steps is explained
in detail below.
The expected life of capital must be determined for both
building and fixed equipment and movable equipment. The expected
life for each of these cost categories is determined by dividing end
of year book value amounts by annual depreciation expenses for SNFs
from the 1992 Asset and Expenditure Survey. This calculation
produced an expected life of 23 years for building and fixed
equipment and 10 years for movable equipment. Implicit in this
calculation is the assumption that all book values are currently
depreciable. In the absence of data on capital debt instruments held
by SNFs, the expected life of capital debt instruments is assumed to
be 22 years for both for-profit and not-for-profit debt instruments,
the same as for the hospital PPS capital input price index.
Given the expected life of capital and debt instruments as
determined from the methodology above, we must determine the
proportion of capital expenditures attributable to each year of the
expected life by cost category. These proportions represent the
vintage weights. We were not able to find historical time-series of
capital expenditures by SNFs. Therefore, we approximated the capital
expenditure patterns of SNFs over time using alternative SNF data
sources. For building and fixed equipment, we used the stock of beds
in nursing homes from the HCFA's National Health Accounts for 1962
through 1991. We then used the change in the stock of beds each year
to approximate building and fixed equipment purchases for that year.
This procedure assumes that bed growth reflects the growth in
capital-related costs in SNFs for building and fixed equipment. We
believe this assumption is reasonable since the number of beds
reflects the size of the SNF, and as the SNF adds beds, it also adds
fixed capital.
For movable equipment, we used available SNF data to capture the
changes in intensity of SNF services that would cause SNFs to
purchase movable equipment. We estimated the change in intensity as
the trend in the ratio of non-therapy ancillary costs to routine
costs from the 1989 through 1993 SNF Medicare Cost Reports. We
estimated this ratio for 1962 through 1988 using regression
analysis. The time series of non-therapy ancillary costs to routine
costs for SNFs measures changes in intensity in SNF services, which
are assumed to be associated with movable equipment purchase
patterns. The assumption here is that as non-therapy ancillary costs
increase compared with routine costs, the SNF caseload is more
complex and would require more movable equipment. Again, the lack of
direct movable equipment purchase data for SNFs over time required
us to use alternative SNF data sources. The resulting two time
series, determined from beds and the ratio of non-therapy ancillary
to routine costs, reflect real capital purchases of building and
fixed equipment and movable equipment over time, respectively.
To obtain nominal purchases, which are used to determine the
vintage weights for interest, we converted the two real capital
purchase series from 1963 through 1991 determined above to nominal
capital purchase series using their respective price proxies (Boeckh
institutional construction index and PPI for machinery and
equipment). We then combined the two nominal series into one nominal
capital purchase series for 1963 through 1991. Nominal capital
purchases are needed for interest vintage weights to capture the
value of the debt instrument.
Once these capital purchase time series were created for 1963
through 1991, we averaged different periods to obtain an average
capital purchase pattern over time. For building and fixed equipment
we
[[Page 26314]]
averaged seven 23-year periods, for movable equipment we averaged
twenty 10-year periods, and for interest we averaged eight 22-year
periods. The vintage weight for a given year is calculated by
dividing the capital purchase amount in any given year by the total
amount of purchases during the expected life of the equipment or
debt instrument. For example, for the 23-year period of 1963 through
1985 for building and fixed equipment, the vintage weight for year 1
is calculated by dividing the real annual capital purchase amount of
building and fixed equipment in 1963 into the total amount of real
annual capital purchases of building and fixed equipment over the
entire 1963 through 1985 period. We performed this calculation for
each year in the 23-year period, and for each of the seven 23-year
periods. We then calculated an average of the seven 23-year periods.
The resulting vintage weights for each of these cost categories are
shown in Table A-1 below:
Appendix Table A-1--Vintage Weights for SNF PPS Capital-Related Price Proxies
----------------------------------------------------------------------------------------------------------------
Building and
Year fixed Movable Interest
equipment equipment
----------------------------------------------------------------------------------------------------------------
1............................................................... 0.059 0.089 0.038
2............................................................... 0.078 0.093 0.046
3............................................................... 0.086 0.096 0.046
4............................................................... 0.079 0.101 0.047
5............................................................... 0.074 0.104 0.051
6............................................................... 0.071 0.104 0.054
7............................................................... 0.073 0.104 0.060
8............................................................... 0.075 0.114 0.064
9............................................................... 0.064 0.101 0.062
10.............................................................. 0.056 0.097 0.055
11.............................................................. 0.052 .............. 0.056
12.............................................................. 0.048 .............. 0.056
13.............................................................. 0.041 .............. 0.055
14.............................................................. 0.034 .............. 0.050
15.............................................................. 0.026 .............. 0.042
16.............................................................. 0.019 .............. 0.044
17.............................................................. 0.017 .............. 0.039
18.............................................................. 0.016 .............. 0.036
19.............................................................. 0.013 .............. 0.025
20.............................................................. 0.004 .............. 0.027
21.............................................................. 0.003 .............. 0.023
22.............................................................. 0.005 .............. 0.026
23.............................................................. 0.009 .............. ..............
-----------------------------------------------
Total................................................... 1.000 1.000 1.000
----------------------------------------------------------------------------------------------------------------
Sources: 1992 SNF Medicare Cost Reports; HCFA, National Health Accounts.
---------------------------------------------------------------------------
Note: Totals may not sum to 1.000 due to rounding.
In developing the capital-related expenses portion of the SNF
input price index, we considered numerous alternatives for
developing the cost category and vintage weights. Our analysis
showed that using any of these alternatives would have a minimal
impact on the capital-related expense portion of the SNF index.
Since the capital-related expense share of the total SNF market
basket is just 9.777 percent, these minimal differences have no
effect on the total SNF market basket percent change.
We compared the price change in the capital-related expense
component to changes in other relevant price indexes to evaluate our
methodology. The table below shows the four-quarter moving-average
percent change in the SNF PPS capital-related expense component, the
hospital PPS capital input price index, the Boeckh institutional
construction index, and the CPI-all items for FY 1992 to FY 1997.
Since the two HCFA capital indexes include an adjustment for
interest rates that have been declining in recent years, the
capital-related expense component of the SNF PPS market basket
appears to be within a reasonable range of the other price indexes.
Appendix Table A-2--Percent Change in HCFA Capital-Related Expense Share of SNF PPS Input Price Index Compared
to Other Price Indexes
----------------------------------------------------------------------------------------------------------------
HCFA capital-
related expense HCFA hospital Boeckh
share of SNF PPS PPS capital institutional CPI-- all items
input price input price construction
index index index
----------------------------------------------------------------------------------------------------------------
FY92.................................... 2.4 1.5 2.6 3.0
FY93.................................... 2.0 1.1 2.4 3.0
FY94.................................... 1.8 1.1 2.8 2.6
FY95.................................... 1.8 1.3 3.1 2.8
FY96.................................... 1.6 1.0 2.3 2.8
FY97.................................... 1.4 0.9 2.4 2.7
----------------------------------------------------------------------------------------------------------------
Contract labor: The weight for the contract labor cost
category was derived using 1992 Medicare Cost Reports. It was then
distributed among the wages and salaries, employee benefits, and
``all other'' cost categories, so that contract costs will have the
same price proxies as direct cost categories.
All Other: Subcategory weights for the All Other
category were derived using information from a U.S. Department of
Commerce data source. The 1992 Input-
[[Page 26315]]
Output Tables were used to apportion all other costs within the SNF
Medicare Cost Reports.
III. Price Proxies Used To Measure Cost Category Growth
Wages and Salaries: For measuring price growth in the
wages and salaries cost component of the 1992-based market basket,
the percentage change in the ECI for wages and salaries for private
nursing homes is used. This is a revision from the 1977-based market
basket, in which the AHE for Nursing and Personal Care Facilities
was used to measure the percentage change in wages and salaries. The
ECI for wages and salaries for private nursing homes is a fixed-
weight index that measures the rate of change in employee wage rates
per hour worked. It measures pure price change and is not affected
by shifts among occupations. The previous measure, AHE, confounds
changes in the proportion of different occupations with changes in
earnings levels for a given occupation.
Employee Benefits: For measuring price growth in the
1992-based market basket, the percentage change in the ECI for
benefits for private nursing homes is used. This is a revision from
the 1977-based market basket, in which the BEA Supplement to Wages
and Salaries per employee (BLS) was used to measure this component.
The ECI for benefits for private nursing homes is also a fixed-
weight index that measures pure price change and is not affected by
shifts in occupation. In contrast to the ECI, the BEA Supplement to
Wages and Salaries per employee (BLS) is not specific to the nursing
home industry and is not as conceptually sound for our purpose.
All Other Expenses:
+ Nonmedical professional fees: The ECI for compensation for
Private Industry Professional, Technical, and Specialty Workers is
used to measure price changes in nonmedical professional fees. This
is a revision from the 1977-based index in which the cost of
nonmedical professional fees was not specifically measured.
+ Electricity: For measuring price change in the Electricity
cost category, the PPI for Commercial Electric Power is used. This
is a revision from the 1977-based index in which the Implicit Price
Deflator-Electricity (PCE) was used.
+ Fuels, nonhighway: For measuring price change in the Fuels,
Nonhighway cost category, the PPI for Commercial Natural Gas is
used. This is a revision from the 1977-based market basket, in which
the Implicit Price Deflator-Fuel Oil (PCE) and the Implicit Price
Deflator-Natural Gas (PCE) were used for separate cost categories.
+ Water and Sewerage: For measuring price change in the Water
and Sewerage cost category, the CPI-U (Consumer Price Index for All
Urban Consumers) for Water and Sewerage is used. The same price
proxy was used in the 1977-based index.
+ Food-wholesale purchases: For measuring price change in the
Food-wholesale purchases cost category, the PPI for Processed Foods
is used. The same price proxy was used in the 1977-based index.
+ Food-retail purchases: For measuring price change in the Food-
retail purchases cost category, the CPI-U for Food Away From Home is
used. This is a change from the 1977-based index, when the CPI-U for
Food and Beverages was used, and reflects the use of contract food
service by some SNFs.
+ Pharmaceuticals: For measuring price change in the
Pharmaceuticals cost category, the PPI for Prescription Drugs is
used. The same price proxy was used for this cost category in the
1977-based index.
+ Chemicals: For measuring price change in the Chemicals cost
category, the PPI for Industrial Chemicals is used. This is a
revision from the 1977-based index, in which the cost of chemicals
was not specifically measured.
+ Rubber and Plastics: For measuring price change in the Rubber
and Plastics cost category, the PPI for Rubber and Plastic Products
is used. This too is a revision from the 1977-based index, in which
the cost of rubber and plastic products was not specifically
measured.
+ Paper Products: For measuring price change in the Paper
Products cost category, the PPI for Converted Paper and Paperboard
is used. The cost of paper products was not specifically measured in
the 1977-based index.
+ Miscellaneous Products: For measuring price change in the
Miscellaneous Products cost category, the PPI for Finished Goods is
used. The cost of miscellaneous products was not specifically
measured in the 1977-based index.
+ Telephone Services: The percentage change in the price of
Telephone service as measured by the CPI-U is applied to this
component. This is a revision from the 1977-based index, in which
the cost of telephone services was not specifically measured.
+ Labor-intensive Services: For measuring price change in the
Labor-intensive Services cost category, the ECI for Compensation for
Private Service Occupations is used. The cost of Labor-intensive
Services was not specifically measured in the 1977-based index.
+Non Labor-intensive Services: For measuring price change in the
Non Labor-intensive Services cost category, the CPI-U for All Items
is used. The 1977-based index did not specifically measure the cost
of Non Labor-intensive Services.
Capital-related: All capital-related expense categories
are new cost categories in the revised SNF market basket. The price
proxies chosen are the same as those used for the hospital PPS
capital input price index described in the August 30, 1996 Federal
Register (61 FR 46326). The price proxies for the SNF capital-
related expenses are described below:
+ Depreciation--Building and Fixed Equipment: The Boeckh
Institutional Construction Index for unit prices of fixed assets.
+ Depreciation--Movable Equipment: The PPI for Machinery and
Equipment.
+ Interest--Government and Nonprofit SNFs: The Average Yield for
Municipal Bonds from the Bond Buyer Index of 20 bonds. HCFA input
price indexes, including this rebased SNF index, are concerned with
the rate of change in the price proxy and not the level of the price
proxy. While SNFs may face different interest rate levels than
hospitals, the rate of change in most interest rates is not
significantly different. Our research on this issue regarding
hospitals has been presented in the August 30, 1996 Federal Register
(61 FR 46201).
+ Interest--For-profit SNFs: The Average Yield for Moody's AAA
Corporate Bonds. Again, the rebased SNF index focuses on the rate of
change in this interest rate and not the level of the interest rate.
+ Other Capital-related Expenses: The CPI-U for Residential
Rent.
Appendix Table A-3--A Comparison of Price Proxies Used in the 1992-Based
and 1977-Based Skilled Nursing Facility Market Baskets
------------------------------------------------------------------------
1992-based price 1977-based price
Cost category proxy proxy
------------------------------------------------------------------------
Wages and Salaries.............. ECI for Wages and AHE--Private
Salaries for Nursing and
Private Nursing Personal Care
Homes. Facilities
Employee Benefits............... ECI for Benefits BEA Supplement to
for Private Wages and
Nursing Homes. Salaries per
worker (BLS)
Nonmedical professional fees.... ECI for n/a
Compensation for
Private
Professional and
Technical Workers.
Electricity..................... PPI for Commercial Implicit Price
Electric Power. Deflator--Electri
city (PCE)
Fuels........................... PPI for Commercial Implicit Price
Natural Gas. Deflator--Fuel
Oil (PCE) and
Implicit Price
Deflator--Natural
Gas (PCE)
Water and sewerage.............. CPI-U for Water CPI-U for Water
and Sewerage. and Sewerage
Food--Wholesale purchases....... PPI--Processed PPI--Processed
Foods. Foods
Food--Retail purchases.......... CPI-U--Food Away CPI-U--Food and
From Home. Beverages
Pharmaceuticals................. PPI for PPI--Prescription
Prescription Drugs
Drugs.
[[Page 26316]]
Chemicals....................... PPI for Industrial n/a
Chemicals.
Rubber and plastics............. PPI for Rubber and n/a
Plastic Products.
Paper products.................. PPI for Converted n/a
Paper and
Paperboard.
Miscellaneous products.......... PPI for Finished n/a
Goods.
Telephone services.............. CPI-U for n/a
Telephone
Services.
Labor-intensive services........ ECI for n/a
Compensation for
Private Service
Occupations.
Non labor-intensive services.... CPI-U for All n/a
Items.
Depreciation: Building and Fixed Boeckh n/a
Equipment. Institutional
Construction
Index.
Depreciation: Movable Equipment. PPI for Machinery n/a
and Equipment.
Interest: Government and Average Yield n/a
Nonprofit SNFs. Municipal Bonds
(Bond Buyer Index-
20 bonds).
Interest: For-profit SNFs....... Average Yield n/a
Moody's AAA Bonds.
Other Capital-related Expenses.. CPI-U for n/a
Residential Rent.
------------------------------------------------------------------------
[FR Doc. 98-12208 Filed 5-5-98; 12:57 pm]
BILLING CODE 4120-01-P