[Federal Register Volume 66, Number 147 (Tuesday, July 31, 2001)]
[Rules and Regulations]
[Pages 39562-39607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-18869]
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Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 410, et al.
Medicare Program; Prospective Payment System and Consolidated Billing
for Skilled Nursing Facilities-Update; Final Rule
Federal Register / Vol. 66, No. 147 / Tuesday, July 31, 2001 / Rules
and Regulations
[[Page 39562]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 410, 411, 413, 424, and 489
[CMS-1163-F]
RIN 0938-AK47
Medicare Program; Prospective Payment System and Consolidated
Billing for Skilled Nursing Facilities-Update; Final Rule
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: This final rule updates the payment rates used under the
prospective payment system (PPS) for skilled nursing facilities (SNFs)
for fiscal year (FY) 2002, as required by statute. Annual updates to
the PPS rates are required by section 1888(e) of the Social Security
Act (the Act), as amended by the Medicare, Medicaid, and SCHIP Balanced
Budget Refinement Act of 1999 (BBRA), and the Medicare, Medicaid, and
SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), relating
to Medicare payments and consolidated billing for SNFs. As part of this
annual update, we are rebasing and revising the routine SNF market
basket to reflect 1997 total cost data (the latest available complete
data on the structure of SNF costs), and modifying certain variables
for some of the cost categories. Finally, we are implementing the
transition of swing-bed facilities to the SNF PPS, effective with cost
reporting periods beginning on and after July 1, 2002.
EFFECTIVE DATE: These regulations are effective on October 1, 2001 for
payment rates, and, for cost reporting periods beginning on or after
July 1, 2002, for transition of swing-bed facilities to the SNF PPS.
FOR FURTHER INFORMATION CONTACT:
Dana Burley, (410) 786-4547 or Sheila Lambowitz, (410) 786-7605 (for
information related to the case-mix classification methodology).
John Davis, (410) 786-0008 (for information related to the Wage Index).
Bill Ullman, (410) 786-5667 (for information related to consolidated
billing and payment).
Sheila Lambowitz, (410) 786-7605 (for information related to swing-bed
providers).
Bill Ullman, (410) 786-5667 (for general information).
SUPPLEMENTARY INFORMATION: Copies: To order copies of the Federal
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document is also available from the Federal Register online database
through GPO Access, a service of the U.S. Government Printing Office.
The web site address is http://www.access.gpo.gov/nara/index.html.
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. Requirements of the Balanced Budget Act of 1997 for Updating
the Prospective Payment System for Skilled Nursing Facilities
C. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement
Act of 1999 (BBRA)
D. The Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA)
E. Skilled Nursing Facility Prospective Payment--General
Overview
1. Payment Provisions--Federal Rate
2. Payment Provisions--Transition Period
F. Skilled Nursing Facility Market Basket Index
II. Provisions of the Proposed Rule
III. Analysis and Response to Public Comments
A. Research on Case-Mix Refinements
B. Clinical Issues
1. Minimum Data Set
2. Therapy
C. Update of Payment Rates Under the Prospective Payment System
for Skilled Nursing Facilities
1. Federal Prospective Payment System
2. Case-Mix Adjustment
D. Wage Index Adjustment to Federal Rate
E. Updates to the Federal Rate
F. Relationship of the RUG-III Classification System to Existing
Skilled Nursing Facility Level-of-Care Criteria
G. Example of Computation of Adjusted PPS Rates and SNF Payment
H. The Skilled Nursing Facility Market Basket Index
1. Background
2. Rebasing and Revising the SNF Market Basket
I. Update Framework
J. Consolidated Billing
K. Application of SNF PPS to Services Furnished by Swing-bed
Hospitals
IV. Provisions of the Final Rule
V. Collection of Information Requirements
VI. Regulatory Impact Analysis
A. Background
B. Impact of the Final Rule
VII. Federalism
Regulation Text
Appendix A--Technical Features of the 1997-based Skilled Nursing
Facility Market Basket Index
I. Synopsis of Structural Changes Adopted in the Revised and Rebased
1997 Skilled Nursing Facility Market Basket
II. Methodology for Developing the Cost Category Weights
III. Price Proxies Used to Measure Cost Category Growth
A. Wages and Salaries
B. Employee Benefits
C. All Other Operating Expenses
D. Capital-Related Expenses
Appendix B--Swing-Bed Data Elements
In addition, because of the many terms to which we refer by
abbreviation in this final rule, we are listing these abbreviations and
their corresponding terms in alphabetical order below:
ADL Activity of Daily Living
AHE Average Hourly Earnings
ARD Assessment Reference Date
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of
1999, Pub. L. 106-113
BEA (U.S.) Bureau of Economic Analysis
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection
Act of 2000, Pub. L. 106-554
BES (U.S.) Business Expenditures Survey
BLS (U.S.) Bureau of Labor Statistics
CAH Critical Access Hospital
CFR Code of Federal Regulations
CMS Centers for Medicare & Medicaid Services
CPI Consumer Price Index
CPI-U Consumer Price Index-All Urban Consumers
CPT (Physicians') Current Procedural Terminology
DRG Diagnosis Related Group
ECI Employment Cost Index
FI Fiscal Intermediary
FR Federal Register
FY Fiscal Year
GAO General Accounting Office
HCPCS Healthcare Common Procedure Coding System
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification
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IFC Interim Final Rule with Comment Period
MDS Minimum Data Set
MEDPAR Medicare Provider Analysis and Review File
MIP Medicare Integrity Program
MSA Metropolitan Statistical Area
NECMA New England County Metropolitan Area
OIG Office of the Inspector General
OMRA Other Medicare Required Assessment
PCE Personal Care Expenditures
PPI Producer Price Index
PPS Prospective Payment System
PRM Provider Reimbursement Manual
RAI Resident Assessment Instrument
RAP Resident Assessment Protocol
RAVEN Resident Assessment Validation Entry
RUG-III Resource Utilization Groups, Version III
SCHIP State Children's Health Insurance Program
SNF Skilled Nursing Facility
STM Staff Time Measure
I. Background
On May 10, 2001, we published in the Federal Register (66 FR
23984), a proposed rule that set forth proposed updates to the payment
rates used under the prospective payment system (PPS) for skilled
nursing facilities (SNFs), for fiscal year (FY) 2002. Annual updates to
the PPS rates are required by section 1888(e) of the Social Security
Act (the Act), as amended by the Medicare, Medicaid, and SCHIP Balanced
Budget Refinement Act of 1999 (BBRA) and the Medicare, Medicaid, and
SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), relating
to the Medicare prospective payment system and consolidated billing for
SNFs.
A. Current System for Payment of Skilled Nursing Facility Services
Under Part A of the Medicare Program
Section 4432 of the Balanced Budget Act of 1997 (BBA) amended
section 1888 of the Act to provide for the implementation of a per diem
PPS for SNFs, covering all costs (routine, ancillary, and capital) of
covered SNF services furnished to beneficiaries under Part A of the
Medicare program, effective for cost reporting periods beginning on or
after July 1, 1998. We are updating the per diem payment rates for
SNFs, for FY 2002. Major elements of the SNF PPS include:
Rates. Per diem Federal rates were established for urban
and rural areas using allowable costs from FY 1995 cost reports. These
rates also included an estimate of the cost of services that, before
July 1, 1998, had been paid under Part B but furnished to Medicare
beneficiaries in a SNF during a Part A covered stay. The rates are
adjusted annually using a SNF market basket index. Rates are case-mix
adjusted using a classification system (Resource Utilization Groups,
version III (RUG-III)) based on beneficiary assessments (using the
Minimum Data Set (MDS) 2.0). The rates are also adjusted by the
hospital wage index to account for geographic variation in wages.
Additionally, as noted in the July 31, 2000 final rule (65 FR 46770),
section 101 of BBRA also affects the payment rate. Finally, sections
311, 312, and 314 of the BIPA affect the Part A PPS payment rates for
SNFs. These new provisions are discussed in detail in section I.D of
this preamble.
Transition. The SNF PPS included an initial 3-year, phased
transition that blended a facility-specific payment rate with the
Federal case-mix adjusted rate. For each cost reporting period after a
facility migrated to the new system, the facility-specific portion of
the blend decreased and the Federal portion increased in 25 percentage
point increments. For facilities that received payment under the
transition, the facility-specific rate was based on allowable costs
from FY 1995; however, since the last year of the transition is FY
2001, all facilities will be paid at the full Federal rate by the
coming fiscal year (FY 2002), for which we have now finalized rates.
Therefore, unlike previous years, this final rule does not include
adjustment factors related to facility-specific rates for the coming
fiscal year.
Coverage. Medicare's fundamental requirements for SNF
coverage were not changed by BBA; however, because RUG-III
classification is based, in part, on the beneficiary's need for skilled
nursing care and therapy, we have attempted, where possible, to
coordinate claims review procedures with the outputs of beneficiary
assessment and RUG-III classifying activities, as discussed in section
III.F of this preamble.
Consolidated Billing. The BBA included a billing provision
that required a SNF to submit consolidated Medicare bills for its
residents for almost all services that are covered under either Part A
or Part B (the statute excluded a small list of services, primarily
those of physicians and certain other types of practitioners). With the
exception of physical therapy, occupational therapy, and speech-
language therapy, section 313 of BIPA has now limited the scope of this
provision to apply only to those services that are furnished during the
course of a resident's covered Part A stay in the SNF, as discussed in
section III.J of this preamble.
Application of the SNF PPS to SNF services furnished by
swing-bed hospitals. Section 1883 of the Act permits certain small,
rural hospitals to enter into a Medicare swing-bed agreement, under
which the hospital can use its beds to provide either acute or SNF
care, as needed. Part A currently pays for SNF services furnished by
swing-bed hospitals on a cost-related basis. Section 1888(e)(7) of the
Act requires the SNF PPS to encompass these services no earlier than
cost reporting periods beginning on July 1, 1999, and no later than the
end of the SNF PPS transition period described in section 1888(e)(2)(E)
of the Act. In the proposed rule published in the Federal Register on
May 10, 2001 (66 FR 23984), we proposed to implement the SNF PPS for
swing-bed hospitals effective with cost reporting periods beginning on
and after October 1, 2001. However, as discussed in section III.K of
this preamble, based on concerns raised during the comment period, we
are instead implementing the SNF PPS for swing-bed hospitals effective
with cost reporting periods beginning on and after July 1, 2002.
B. Requirements of the Balanced Budget Act of 1997 for Updating the
Prospective Payment System for Skilled Nursing Facilities
Section 1888(e)(4)(H) of the Act requires that we publish in the
Federal Register:
1. The unadjusted Federal per diem rates to be applied to days of
covered SNF services furnished during the FY.
2. The case-mix classification system to be applied with respect to
these services during the FY.
3. The factors to be applied in making the area wage adjustment
with respect to these services.
In the July 30, 1999 final rule (64 FR 41670), we indicated that we
would announce any changes to the guidelines for Medicare level of care
determinations related to modifications in the RUG-III classification
structure.
Along with a number of other revisions discussed later in this
preamble, this final rule provides the annual updates to the Federal
rates as mandated by the Act.
C. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 (BBRA)
There were several provisions in the BBRA that resulted in various
adjustments, within specified timeframes, to the PPS for SNFs. The
provisions were described in the final
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rule that we published in the Federal Register on July 31, 2000 (65 FR
46770). In particular, section 101 provided for a temporary, 20 percent
increase in the per diem adjusted payment rates for 15 specified RUG-
III groups (SE3, SE2, SE1, SSC, SSB, SSA, CC2, CC1, CB2, CB1, CA2, CA1,
RHC, RMC, and RMB). Section 101 also included a 4 percent across-the-
board increase in the adjusted Federal per diem payment rates each year
for FYs 2001 and 2002, exclusive of the 20 percent increase. In
addition, for certain SNFs located in Baldwin or Mobile County,
Alabama, section 155 provided for a special 100 percent facility-
specific payment rate for cost reporting periods beginning in FY 2000
and FY 2001. Finally, section 105 provided for payment at a 50 percent
Federal, 50 percent facility-specific payment rate for SNFs serving
certain specialized patient populations, which became effective on
November 29, 1999, and expires on September 30, 2001.
We included further information on all of the provisions of the
BBRA in Program Memorandums A-99-53 and A-99-61 (December 1999), and
Program Memorandum AB-00-18 (March 2000).
D. The Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA)
As a result of enactment of the BIPA, there are several new
provisions that result in adjustments to the PPS for SNFs. The
following provisions were described in the proposed rule that we
published on May 10, 2001 (66 FR 23984), and are discussed further in
section III of this preamble, to the extent that we received public
comments concerning them.
Section 203--Exemption of Critical Access Hospital (CAH)
Swing-beds from SNF PPS. This provision exempts swing-beds in CAHs from
section 1888(e)(7) of the Act (as enacted by section 4432(a) of the
BBA) which applies the SNF PPS to SNF services furnished by swing-bed
hospitals. Accordingly, this provision enables CAHs to be paid for
their swing-bed SNF services on a reasonable cost basis. This provision
is effective with cost reporting periods beginning on or after December
21, 2000, the date of the enactment of the BIPA. We included further
information on this provision in Program Memorandum A-01-09 (January
16, 2001).
Section 311--Elimination of Reduction in SNF Market Basket
Update in 2001. This provision eliminates the one percent reduction
reflected in the update formula for the Federal rates for FY 2001 that
was required by the BBA. In implementing this change, this provision
also modifies the schedule and rates according to which Federal per
diem payments are updated to FY 2002. For FY 2002 and FY 2003, the
updates would be the market basket index increase minus 0.5 percentage
points. This provision also provides a special rule that, for purposes
of making payments under the SNF PPS for FY 2001, for the first half of
FY 2001 (the period beginning October 1, 2000, and ending March 31,
2001), the market basket update remains at market basket minus 1, and
for the second half of the fiscal year (the period beginning on April
1, 2001, and ending on September 30, 2001), the market basket update
changes from market basket minus 1 to market basket plus 1.
In addition, this provision requires the General Accounting Office
(GAO) to submit a report to Congress by July 1, 2002, on the adequacy
of SNF payment rates. It also requires the Secretary to conduct a study
of the different systems for categorizing patients in SNFs in a manner
that accounts for the relative resource utilization of different
patient types, and to submit a report to Congress not later than
January 1, 2005.
Section 312--Increase in Nursing Component of PPS Federal
Rate. This provision requires the Secretary to increase by 16.66
percent the nursing component of the case-mix adjusted Federal rate
specified in the July 31, 2000 final rule (65 FR 46770), as
subsequently updated, for services furnished on or after April 1, 2001,
and before October 1, 2002. This provision also requires the GAO to
conduct an audit of SNF nursing staff ratios, and to submit a report to
Congress by August 1, 2002, including a recommendation on whether the
temporary 16.66 percent increase in the nursing component should be
continued.
Section 313--Application of SNF Consolidated Billing
Requirement Limited to Part A Covered Stays. This provision repeals the
consolidated billing requirement for services (other than physical
therapy, occupational therapy, and speech-language therapy) furnished
to those SNF residents who are in noncovered stays, effective January
1, 2001. It also directs the Secretary to monitor Part B payments for
those services, in order to guard against duplicate billing and the
excessive provision of services.
Section 314--Adjustment of Rehabilitation RUGs to Correct
Anomaly in Payment Rates. For services furnished from April 1, 2001,
until the date that RUG refinements are implemented, this provision
requires the Secretary to increase by 6.7 percent the adjusted Federal
per diem rate for all of the following RUG-III rehabilitation groups:
RUC, RUB, RUA, RVC, RVB, RVA, RHC, RHB, RHA, RMC, RMB, RMA, RLB, and
RLA. This provision supersedes the 20 percent increase that section
101(b) of the BBRA had previously established for the RHC, RMC, and RMB
rehabilitation groups, thereby correcting the resulting anomaly under
which the payment rates for these particular groups were actually
higher than the rates for some other, more intensive rehabilitation
RUGs. This provision also requires the Office of Inspector General
(OIG) to review whether the RUG payment structure in effect under the
BBRA included incentives for the delivery of inadequate care and report
to the Congress by October 1, 2001.
Section 315--Establishment of Process for Geographic
Reclassification. This provision explicitly permits the Secretary to
establish a geographic reclassification procedure that is specific to
SNFs, for purposes of payment for covered SNF services under the PPS.
However, this cannot occur until the Secretary has collected data
necessary to establish a SNF wage index that is based on wage data from
nursing homes.
We included further information on several of these provisions in
Program Memorandum A-01-08 (January 16, 2001).
E. Skilled Nursing Facility Prospective Payment--General Overview
The Medicare SNF PPS was implemented for cost reporting periods
beginning on or after July 1, 1998. Under the PPS, SNFs are paid
through prospective, case-mix adjusted per diem payment rates
applicable to all covered SNF services. These payment rates cover all
the costs of furnishing covered skilled nursing services (routine,
ancillary, and capital-related costs) other than costs associated with
approved educational activities. Covered SNF services include post-
hospital services for which benefits are provided under Part A and all
items and services that, before July 1, 1998, had been paid under Part
B (other than physician and certain other services specifically
excluded under the BBA) but furnished to Medicare beneficiaries in a
SNF during a Part A covered stay. A complete discussion of these
provisions appears in the May 12, 1998 interim final rule (63 FR
26252).
1. Payment Provisions--Federal Rate
The PPS uses per diem Federal payment rates based on mean SNF costs
in a base year updated for inflation to the first effective period of
the PPS. We
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developed the Federal payment rates using allowable costs from
hospital-based and freestanding SNF cost reports for reporting periods
beginning in FY 1995. The data used in developing the Federal rates
also incorporated an estimate of the amounts that would be payable
under Part B for covered SNF services furnished to individuals who were
receiving Part A covered services in a SNF.
In developing the rates for the initial period, we updated costs to
the first effective year of PPS (15-month period beginning July 1,
1998) using a SNF market basket index, and then standardized for the
costs of facility differences in case-mix and for geographic variations
in wages. Providers that received new provider exemptions from the
routine cost limits were excluded from the database used to compute the
Federal payment rates, as well as costs related to payments for
exceptions to the routine cost limits. In accordance with the formula
prescribed in the BBA, we set the Federal rates at a level equal to the
weighted mean of freestanding costs plus 50 percent of the difference
between the freestanding mean and weighted mean of all SNF costs
(hospital-based and freestanding) combined. We computed and applied
separately the payment rates for facilities located in urban and rural
areas. In addition, we adjusted the portion of the Federal rate
attributable to wage-related costs by a wage index.
The Federal rate also incorporates adjustments to account for
facility case-mix, using a classification system that accounts for the
relative resource utilization of different patient types. This
classification system, RUG-III, utilizes beneficiary assessment data
from the Minimum Data Set (MDS) completed by SNFs to assign
beneficiaries to one of 44 groups. The May 12, 1998 interim final rule
(63 FR 26252) included a complete and detailed description of the RUG-
III classification system.
The Federal rates in this rule reflect an update to the rates in
the July 31, 2000 update notice (65 FR 46770) equal to the SNF market
basket index minus 0.5 percent, as well as the elimination of the 1
percent reduction reflected in the update formula for the FY 2001
payment rates under section 311 of the BIPA. According to section 311
of the BIPA, for FY 2002, we will update the rate by adjusting the
current rates by the SNF market basket change minus 0.5 percent.
2. Payment Provisions--Transition Period
The SNF PPS includes an initial, phased transition from a facility-
specific rate (which reflects the individual facility's historical cost
experience) to the Federal case-mix adjusted rate. The transition
extends through the facility's first three cost reporting periods under
the PPS, up to and including the one that begins in FY 2001.
Accordingly, starting with cost reporting periods that begin in FY
2002, we will base payments entirely on the Federal rates.
F. Skilled Nursing Facility Market Basket Index
Section 1888(e)(5) of the Act requires the Secretary to establish a
SNF market basket index that reflects changes over time in the prices
of an appropriate mix of goods and services included in the covered SNF
services. The SNF market basket index is used to update the Federal
rates on an annual basis. We have developed a revised and rebased 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 is presented in section
III.H of this preamble.
II. Provisions of the Proposed Rule
The proposed rule that we published in the Federal Register on May
10, 2001 (66 FR 23984) included proposed FY 2002 updates to the Federal
payment rates used under the SNF PPS. In accordance with section
1888(e)(4)(E)(ii)(II) of the Act, the updates reflect the SNF market
basket percentage change for the fiscal year minus 0.5 percent, as well
as the elimination of the 1 percent reduction reflected in the update
formula for the FY 2001 payment rates under section 311 of the BIPA.
The proposed rule described our process for revising and rebasing the
market basket and included a discussion of a conceptual update
framework. In addition, the proposed rule included a discussion of the
feasibility of establishing a SNF-specific wage index. Further, the
proposed rule described our methodology for adjusting the Federal rates
in accordance with sections 311 and 312 of the BIPA, in order to
reflect the elimination of the reduction in the market basket and the
16.66 percent increase in the nursing component. In accordance with
section 314 of the BIPA, we also provided for an adjustment of
rehabilitation RUGs to correct an existing anomaly in the payment
rates. We also included a discussion of our commitment to monitor the
RUG-III classification system and to pursue RUG refinements.
Additionally, we discussed our ongoing efforts to ensure accurate
payment for appropriate care in areas such as concurrent therapy, MDS
accuracy, and program safeguards.
In addition to discussing these general issues in the proposed
rule, we also proposed to make the following specific revisions to the
existing text of the regulations:
In Sec. 410.150, paragraph (b)(14) would be revised to
reflect that Part B makes payment to the SNF for its resident's
services only in those situations where the SNF itself furnishes the
services, either directly or under an arrangement with an outside
source.
In Sec. 411.15, paragraph (p)(1) would be revised to
indicate that except for physical, occupational, and speech-language
therapy, consolidated billing applies only to those services that a SNF
resident receives during the course of a covered Part A stay.
Conforming revisions would also be made in Secs. 489.20(s) and
489.21(h), in the context of the requirements of the SNF provider
agreement. Section 411.15(p)(2) would be revised to indicate that, for
Part B services furnished to a SNF resident, the requirement to enter
the SNF's Medicare provider number on the Part B claim (which
previously applied only to claims for physician services) would apply
to all types of Part B claims. Conforming revisions would also be made
in the requirements regarding claims for payment, at Secs. 424.32(a)(2)
and (a)(5). The existing requirement in Sec. 424.32(a)(5), that a SNF
include appropriate HCPCS coding and its Medicare provider number on
the claims that it files for its residents' services, would be revised
by adding that these requirements also apply to these claims when they
are filed by an outside entity. In addition, Sec. 411.15(p)(3) would be
revised to exclude from the definition of a SNF resident, for
consolidated billing purposes, those individuals who reside in the
noncertified portion of an institution that also contains a
participating distinct part SNF.
In accordance with section 1888(e)(2)(E) of the Act,
Sec. 413.114 would be revised to reimburse swing-bed services of rural
hospitals (other than CAHs, which would be paid on a reasonable cost
basis) under the SNF PPS described in regulations at subpart J of that
part. This conversion to the SNF PPS was proposed to become effective
for services furnished during
[[Page 39566]]
cost reporting periods beginning on or after October 1, 2001. (However,
as discussed in section III.K of this preamble, the conversion will
instead become effective for services furnished during cost reporting
periods beginning on or after July 1, 2002.) In addition, paragraph
(d)(1) of this section would be revised to reflect modifications to the
special requirements for swing-bed facilities with more than 49 but
fewer than 100 beds (as enacted by section 408 of the BBRA), and a
conforming revision would be made in Sec. 424.20(a)(2).
In Sec. 413.337, a new paragraph (e) would be added to
clarify that the temporary increases in payment for certain RUGs under
section 101 of the BBRA (as modified by section 314 of the BIPA) will
no longer be applicable upon issuance of a new regulation that sets
forth a refined case-mix classification system.
More detailed information on each of these issues, to the extent
that we received public comments on them, appears in the discussion
contained in the following section of this preamble.
III. Analysis and Responses to Public Comments
In response to the publication of the proposed rule on May 10, 2001
(66 FR 23984), we received over 200 comments. Many consisted of form
letters, in which we received multiple copies of an identically worded
letter that had been signed and submitted by different individuals.
Further, we received numerous comments from various trade associations
and major organizations. Comments originated from nursing homes,
hospitals, and other providers, suppliers, and practitioners, nursing
home resident advocacy groups, health care consulting firms and private
citizens. The following discussion, arranged by subject area, includes
a description of the comments that we received, along with our
responses.
A. Research on Case-Mix Refinements
In the proposed rule, we indicated that we would not be modifying
the existing case-mix classification system during the current
rulemaking cycle. Consequently, the add-ons to the Federal rates for
specified RUG-III groups, as required by section 101 of the BBRA and
modified by section 314 of the BIPA, will remain in effect during FY
2002.
Comment: We received a number of comments related to the proposed
rule's discussion of efforts to refine the case-mix system. In that
rule, we specifically invited comments on possible approaches to
refining the current case-mix classification system, as well as on
identifying and studying alternatives to the current system. Many
commenters desired more information regarding our plans for refining
the system. A number of commenters were supportive of efforts to refine
the system but urged us to pursue approaches that were easy to
administer and did not introduce a new burden for providers. A few
commenters offered specific approaches to refining the system. These
included the use of total cost per day and per Medicare covered episode
(as the dependent variable in the analysis) to estimate the explanatory
power of potential refinement approaches, and development of a medical
complexity index that focuses on diagnoses, comorbidities, or other
elements critical to describing the post acute care population. One
commenter requested that we articulate in this final rule the
principles we use to guide our approach to the SNF PPS and the case-mix
refinement, and several others suggested principles they believe we
should use in our case-mix refinement work. The suggested principles
for our case-mix refinements included administrative feasibility,
recognition of clinical complexity of the SNF population, and
recognition of extraordinarily high-cost items and services. Several
commenters recommended that we never implement refinements so that the
additional payment add-ons associated with section 101 of the BBRA
would be maintained.
Response: We believe that payments must continue to be adequate in
order to support quality care and access to needed services for
Medicare beneficiaries. In doing so, the PPS should avoid imposing
undue burden on providers. With regard to our efforts to develop case-
mix refinements, we intend to develop models that improve upon the
statistical performance of the present case-mix system, and thus
support accurate pricing of services, while minimizing complexity and
controlling for any adverse incentives related to quality of care and
program integrity. Achieving a result that reflects goals that are
sometimes competing may require that we strike an appropriate balance.
We believe the potential exists to find this balance and look forward
to pursuing development of case-mix refinements. We believe that our
approach to developing refinements will be both responsive to the
provider community's concerns and support continued access to quality
care for Medicare beneficiaries. As stated in the proposed rule, we are
not implementing case-mix refinements for FY 2002. As a result, the 20
percent payment add-ons required by the BBRA (and subsequently modified
by the BIPA) will be maintained for FY 2002. However, the Congress
intended these payment add-ons to be a temporary measure, to remain in
effect only until we provide for refinements to the classification
system. Under provisions of the BBRA, implementation of the refinements
will result in the expiration of these temporary increases in the
payment rates. (In the proposed rule, we proposed to add a new
paragraph (e) to Sec. 413.337 to clarify this point.)
Accordingly, it is our intention to develop and implement
refinements to the case-mix classification system as soon as feasible.
To that end, we have awarded a contract to the Urban Institute for a
research project that will, in the initial stages, address the
feasibility of developing and implementing such refinements. We plan to
review various approaches to determine the most appropriate methodology
for the refinements. As we discussed in the proposed rule, this may
include further analysis to develop a non-therapy ancillary index,
similar to that proposed in the FY 2001 proposed rule. We are also
interested in evaluating approaches that take into account proven
indicators of resource use in other post acute settings, such as
functional status, diagnosis, and comorbidities. We found the comments
very helpful in this area and we will consider the specific suggestions
of commenters as we continue this effort. Any specific refinement
proposal resulting from this research will be included in a future
Federal Register notice for public comment.
B. Clinical Issues
In the proposed rule published on May 10, 2001 (66 FR 23984), we
included a description of our ongoing efforts to support accurate
completion of the Minimum Data Set (MDS) 2.0, along with a discussion
of our concerns about the provision of concurrent therapy--a practice
in which an individual therapist simultaneously treats a number of
beneficiaries who (unlike in group therapy) are not working on any
common skill development.
1. Minimum Data Set
Comment: We received a few comments commending our efforts to
provide more clear definitions of MDS elements, provide more explicit
MDS coding instructions, and expand provider training on the MDS. In
addition, we received a few comments regarding the complexity of the
MDS and the continuing confusion regarding some of the scheduling and
completion
[[Page 39567]]
requirements. They requested that we consider simplification of the MDS
process and that we also make a special effort to make additional
training available to professional therapists and other SNF staff in
addition to the MDS coordinators.
Response: We appreciate the support of our efforts to clarify MDS
elements and scheduling requirements, and to identify ways to simplify
the requirements, and we intend to continue these efforts. We recently
posted two sets of MDS 2.0 Questions and Answers on our web site at:
www.hcfa.gov/medicaid/mds20/default.htm. The most recent set was posted
in July 2001. As part of our ongoing effort to provide clarification in
this area, we are also taking this opportunity to address a Medicare
MDS scheduling issue that has come to our attention recently. We have
become aware that there are instances in which providers have performed
the Medicare-required 14-day assessment prior to the specified
assessment window, days 11 through 14. In our discussion of the default
rate in the preamble of the May 12, 1998, interim final rule (42 FR
26265) that implemented the SNF PPS, we focused on the default rate as
a consequence of late assessments, since we expected late assessments
to be the most likely reason for triggering a default payment.
In that discussion, we explained that when the assessment reference
date of a Medicare-required assessment is set after the assessment
window (including the grace days), the provider will be paid at the
default rate for all of the days of the payment window, up until the
assessment reference date of the late assessment. We did not include
any explanation for the more unusual situation of an assessment
reference date that is set prior to the assessment window. However,
there have been instances in which assessments have been performed
prior to the specified assessment window and questions have been raised
about whether, and for how long, the default rate applies. It has been
unclear whether the default rate was to be applied to the entire
payment window, for the number of days between the assessment reference
date and the due date for the assessment, or for the number of days by
which the assessment is outside of the assessment window.
Although we did not discuss early assessments in the preamble of
the interim final rule, the regulations in Sec. 413.343(c) state that
we pay a default rate for the Federal rate when a SNF fails to comply
with the assessment schedule. A Medicare-required 14-day assessment
with an assessment reference date on either day 9 or 10 is not in
compliance with the assessment schedule and is, therefore, subject to
payment at the default rate.
If the assessment was performed outside of the specified assessment
window due to a scheduling or clerical error and there was no effect on
payment as a result of performing the assessment too early, the default
rate will be assessed only for the number of days the assessment is out
of compliance. For example, a Medicare-required 14-day assessment
performed on day 10 would be paid at the default rate for the first day
of the payment period that begins on day 15. These claims may be
subject to medical review, and the provider may be asked to explain the
reason for early assessment and demonstrate that there was no impact on
payment.
However, SNFs that systematically use early assessment reference
dates will be handled in the same way as SNFs performing frequent late
assessments. These facilities may be subject to an onsite review of
assessment scheduling practices for the facility, in addition to the
imposition of the default rate.
We understand that setting the assessment reference dates outside
of the assessment window has usually occurred as a result of
misunderstanding of the assessment schedule requirements by facility
staff, and we will make every effort to work with providers and the
contractor to resolve these issues.
We will expand the scope of our facility monitoring practices in
order to detect patterns of assessment reference dates that are outside
of, and prior to, the assessment windows. We believe that after three
years of participation in the PPS, providers should be aware of, and
comply with the required assessment schedule.
Comment: Some commenters noted requests for MDS repository data
that had been denied, and asked why we are so restrictive with these
data.
Response: MDS repository data contain beneficiary-level clinical
information. The Privacy Act of 1974 allows us to disclose information
without an individual's consent only if the information is to be used
for a purpose that is compatible with the purpose(s) for which the
information was collected. The Health Insurance Portability and
Accountability Act of 1996 (HIPAA, Pub. L. 104-191) has only reinforced
the need to safeguard beneficiary privacy. While we are committed to
providing the public with appropriate access to our administrative
data, we take beneficiary privacy concerns very seriously. It is our
responsibility to protect the privacy of Medicare beneficiaries, and to
comply with the related laws and regulations that safeguard their
privacy.
A full description of the criteria that are used to determine who
may obtain MDS Repository data and for what purposes is provided in the
Notice of New System of Records that was published in the Federal
Register on May 22, 1998 (63 FR 28396). The notice also is available on
our web site at: www.hcfa.gov/medicaid/mds20/mdssor.htm. The notice
makes clear that requests for the data are evaluated individually to
determine whether the user qualifies for use of the data. We do provide
technical assistance for those with a legitimate need for the data.
2. Therapy
Comment: A few commenters indicated that they were unfamiliar with
the term concurrent therapy until encountering the concept in the
discussion in the proposed rule. They asked whether it is the same as
the practice referred to as dovetailing, and questioned whether it is a
significant problem. We received a large number of comments encouraging
us to continue to recognize concurrent therapy as skilled therapy.
These commenters contended that therapists are treating more than one
beneficiary concurrently only when appropriate. All of these commenters
opposed any development of new guidance or regulation regarding the
delivery of concurrent therapy services. However, some other comments
indicated that our concerns regarding concurrent therapy were
warranted. Several commenters reported that since the implementation of
the SNF PPS, professional therapists are encountering increased
pressure to be more productive than they have in the past, including
the need to see more than one patient at a time, and performing
documentation and collaboration with other members of the care team as
non-reimbursed time.
Response: Concurrent therapy and dovetailing are synonymous terms.
While the practice of providing concurrent therapy is by no means
universal, we perceived a need to discuss this practice in the proposed
rule, in order to alert providers to the inappropriate uses of this
practice in certain areas of the country. We addressed the practice of
concurrent therapy in the proposed rule (66 FR 23991) in order to
reiterate Medicare policy and to solicit public comment. Our concern
was two-fold: that therapists' professional judgment was
[[Page 39568]]
being overridden by pressures to be more productive by treating
multiple beneficiaries concurrently; and that the Medicare policy
(reiterated below) that allows for the treatment of multiple
beneficiaries was being used inappropriately and could lead to
diminished quality of care. Apparently, this may not be a problem in
the particular localities of most of the commenters. However, we expect
that our discussion in the proposed rule may raise awareness and help
prevent the inappropriate use of this practice from becoming more
widespread.
The proposed rule's discussion also provided an opportunity for us
to reiterate Medicare coverage policy regarding skilled rehabilitation
therapy. The Medicare SNF benefit provides coverage of skilled,
individualized rehabilitation services that are of such a level of
complexity and sophistication that the services can be safely and
effectively performed only by or under the supervision of a qualified
professional therapist. Accordingly, we wished to make clear that it is
inappropriate to require, as a condition of employment, that a
therapist agree to treat more than one beneficiary at a time in
situations where providing treatment in such a manner would compromise
the therapist's professional judgment. However, we continue to believe,
as do many of the commenters, that concurrent therapy has a legitimate
place in the spectrum of care options available to therapists treating
Medicare beneficiaries. Our goals are to safeguard the health and
safety of beneficiaries and assure that they are provided the most
effective, skilled care available. We agree that, at times, such care
can be provided concurrently with another therapy patient, as long as
the decision to do so is driven by valid clinical considerations. At
this time, we will not change our approach, but recognize that we may
need to revisit this issue should the need to do so arise.
Comment: One commenter characterized the PPS methodology as
creating a perception that the SNF is not paid for anything that is not
counted as therapy minutes on the MDS.
Response: We would like to take this opportunity to clarify that
this perception is inaccurate. The PPS rates were developed using all
of the therapists' time, including both direct and indirect care time.
The majority of comments on the proposed rule's discussion of
concurrent therapy state that most therapy delivered to Medicare
beneficiaries is performed on a one-to-one basis, as has always been
the practice. We hope that this discussion will increase awareness
among those who mistakenly believe that only the minutes on the MDS are
covered by the rates.
Comment: We received many comments regarding language in the
proposed rule about the increased financial incentives that BIPA
creates for the rehabilitation categories and the potential for
upcoding under the SNF PPS to gain higher payments (66 FR 23991). The
commenters regarded this language as implying that providers are
intentionally manipulating the payment system, and they viewed this to
be unwarranted and unfair. They cited a recent report by the Office of
the Inspector General that found no evidence of provider upcoding.
Response: The statement in the proposed rule was not intended to
imply that large numbers of SNFs are behaving in an abusive manner.
Since the implementation of the SNF PPS, the General Accounting Office
and MedPAC have been critical of the payment system's method for
classification into the rehabilitation groups. Specifically, they have
questioned our methodology that assigns a beneficiary into the
rehabilitation groups based on the amount of service provided. Thus, a
beneficiary who is provided more services is assigned to a higher-paid
RUG-III group.
Our purpose in making this observation in the proposed rule was to
recognize the systemic potential for inappropriate upcoding in any PPS
that uses clinical information as the basis for payment. We have not
encountered evidence of a significant amount of upcoding under the SNF
PPS. In the proposed rule, we were simply making the observation that
the BIPA provisions tended to magnify existing adverse incentives, and
reinforcing our policy regarding medical review.
C. Update of Payment Rates Under the Prospective Payment System for
Skilled Nursing Facilities
1. Federal Prospective Payment System
This final rule sets forth a schedule of Federal prospective
payment rates applicable to Medicare Part A SNF services beginning
October 1, 2001. The schedule establishes per diem Federal rates that
provide Part A payment for all costs of services furnished to a
beneficiary in a SNF during a Medicare-covered stay. Tables 1 and 2
reflect the updated components of the unadjusted Federal rates.
The FY 2002 rates reflect an update using the latest market basket
index minus 0.5 percentage point. The final FY 2002 market basket
increase factor is 3.3 percent, and subtracting 0.5 percentage points
yields an update of 2.8 percent. This final update factor reflects the
latest available forecast of the SNF market basket, and is 0.4 percent
higher than the factor reflected in the proposed rule. In accordance
with section 101 of the BBRA and section 314 of the BIPA, we have
provided for a temporary increase in the per diem adjusted payment
rates of 20 percent for certain specified RUGs, and 6.7 percent for
certain others. These temporary increases of 20 percent and 6.7 percent
for certain specified RUGs will continue until implementation of case-
mix refinements, as described in section 101 of the BBRA and section
314 of the BIPA. Also, in accordance with section 101 of the BBRA, we
are providing a 4 percent increase in the adjusted Federal rate for FY
2002. These temporary adjustments (that is, 20 percent, 6.7 percent, or
4 percent) are not reflected in the rate tables (Tables 1, 2, 3, 4, 5,
and 6 of this final rule). Rather, in accordance with the statute, they
are applied only after all other adjustments (wage and case-mix) have
been made (see Table 9). However, the 16.6 percent increase to the
nursing component of the Federal rate, established under section 312 of
the BIPA, is reflected in the rate tables (Tables 1 through 6).
Table 1.--Unadjusted Federal Rate Per Diem--Urban
----------------------------------------------------------------------------------------------------------------
Nursing-- case- Therapy-- case- Therapy-- non-
Rate component mix mix case-mix Non- case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount................................. $138.29 $89.29 $11.76 $60.50
----------------------------------------------------------------------------------------------------------------
[[Page 39569]]
Table 2.--Unadjusted Federal Rate Per Diem--Rural
----------------------------------------------------------------------------------------------------------------
Nursing-- case- Therapy-- case- Therapy-- non-
Rate component mix mix case-mix Non- case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount................................. $132.13 $102.96 $12.56 $61.62
----------------------------------------------------------------------------------------------------------------
2. Case-Mix Adjustment
The payment rates set forth in this final rule reflect the
continued use of the 44-group RUG-III classification system discussed
in the May 12, 1998 interim final rule (63 FR 26252). Consequently, we
will also maintain the add-ons to the Federal rates for specified RUG-
III groups, as required by section 101 of the BBRA and subsequently
modified by section 314 of the BIPA. The case-mix adjusted payment
rates are listed separately for urban and rural SNFs in Tables 3 and 4,
with the corresponding case-mix values. These tables do not reflect the
add-ons (that is, 20 percent, 6.7 percent, or 4 percent) provided for
in the BBRA and the BIPA, which are applied only after all other
adjustments (wage and case-mix) have been made, but do reflect the
16.66 percent increase in the nursing component of the rate required in
section 312 of the BIPA.
Table 3.--Case-Mix Adjusted Federal Rates and Associated Indexes--Urban
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-case Non-case
RUG-III category Nursing Therapy Nursing Therapy mix therapy mix Total rate
index index component component component component
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUC.......................................................... 1.30 2.25 179.78 200.90 ........... 60.50 441.18
RUB.......................................................... 0.95 2.25 131.38 200.90 ........... 60.50 392.78
RUA.......................................................... 0.78 2.25 107.87 200.90 ........... 60.50 369.27
RVC.......................................................... 1.13 1.41 156.27 125.90 ........... 60.50 342.67
RVB.......................................................... 1.04 1.41 143.82 125.90 ........... 60.50 330.22
RVA.......................................................... 0.81 1.41 112.01 125.90 ........... 60.50 298.41
RHC.......................................................... 1.26 0.94 174.25 83.93 ........... 60.50 318.68
RHB.......................................................... 1.06 0.94 146.59 83.93 ........... 60.50 291.02
RHA.......................................................... 0.87 0.94 120.31 83.93 ........... 60.50 264.74
RMC.......................................................... 1.35 0.77 186.69 68.75 ........... 60.50 315.94
RMB.......................................................... 1.09 0.77 150.74 68.75 ........... 60.50 279.99
RMA.......................................................... 0.96 0.77 132.76 68.75 ........... 60.50 262.01
RLB.......................................................... 1.11 0.43 153.50 38.39 ........... 60.50 252.39
RLA.......................................................... 0.80 0.43 110.63 38.39 ........... 60.50 209.52
SE3.......................................................... 1.70 ........... 235.09 ........... 11.76 60.50 307.35
SE2.......................................................... 1.39 ........... 192.22 ........... 11.76 60.50 264.48
SE1.......................................................... 1.17 ........... 161.80 ........... 11.76 60.50 234.06
SSC.......................................................... 1.13 ........... 156.27 ........... 11.76 60.50 228.53
SSB.......................................................... 1.05 ........... 145.20 ........... 11.76 60.50 217.46
SSA.......................................................... 1.01 ........... 139.67 ........... 11.76 60.50 211.93
CC2.......................................................... 1.12 ........... 154.88 ........... 11.76 60.50 227.14
CC1.......................................................... 0.99 ........... 136.91 ........... 11.76 60.50 209.17
CB2.......................................................... 0.91 ........... 125.84 ........... 11.76 60.50 198.10
CB1.......................................................... 0.84 ........... 116.16 ........... 11.76 60.50 188.42
CA2.......................................................... 0.83 ........... 114.78 ........... 11.76 60.50 187.04
CA1.......................................................... 0.75 ........... 103.72 ........... 11.76 60.50 175.98
IB2.......................................................... 0.69 ........... 95.42 ........... 11.76 60.50 167.68
IB1.......................................................... 0.67 ........... 92.65 ........... 11.76 60.50 164.91
IA2.......................................................... 0.57 ........... 78.83 ........... 11.76 60.50 151.09
IA1.......................................................... 0.53 ........... 73.29 ........... 11.76 60.50 145.55
BB2.......................................................... 0.68 ........... 94.04 ........... 11.76 60.50 166.30
BB1.......................................................... 0.65 ........... 89.89 ........... 11.76 60.50 162.15
BA2.......................................................... 0.56 ........... 77.44 ........... 11.76 60.50 149.70
BA1.......................................................... 0.48 ........... 66.38 ........... 11.76 60.50 138.64
PE2.......................................................... 0.79 ........... 109.25 ........... 11.76 60.50 181.51
PE1.......................................................... 0.77 ........... 106.48 ........... 11.76 60.50 178.74
PD2.......................................................... 0.72 ........... 99.57 ........... 11.76 60.50 171.83
PD1.......................................................... 0.70 ........... 96.80 ........... 11.76 60.50 169.06
PC2.......................................................... 0.65 ........... 89.89 ........... 11.76 60.50 162.15
PC1.......................................................... 0.64 ........... 88.51 ........... 11.76 60.50 160.77
PB2.......................................................... 0.51 ........... 70.53 ........... 11.76 60.50 142.79
PB1.......................................................... 0.50 ........... 69.15 ........... 11.76 60.50 141.41
PA2.......................................................... 0.49 ........... 67.76 ........... 11.76 60.50 140.02
PA1.......................................................... 0.46 ........... 63.61 ........... 11.76 60.50 135.87
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 39570]]
Table 4.--Case-Mix Adjusted Federal Rates and Associated Indexes--Rural
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-case Non-case
RUG-III category Nursing Therapy Nursing Therapy mix therapy mix Total rate
index index component component component component
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUC.......................................................... 1.30 2.25 171.77 231.66 ........... 61.62 465.05
RUB.......................................................... 0.95 2.25 125.52 231.66 ........... 61.62 418.80
RUA.......................................................... 0.78 2.25 103.06 231.66 ........... 61.62 396.34
RVC.......................................................... 1.13 1.41 149.31 145.17 ........... 61.62 356.10
RVB.......................................................... 1.04 1.41 137.42 145.17 ........... 61.62 344.21
RVA.......................................................... 0.81 1.41 107.03 145.17 ........... 61.62 313.82
RHC.......................................................... 1.26 0.94 166.48 96.78 ........... 61.62 324.88
RHB.......................................................... 1.06 0.94 140.06 96.78 ........... 61.62 298.46
RHA.......................................................... 0.87 0.94 114.95 96.78 ........... 61.62 273.35
RMC.......................................................... 1.35 0.77 178.38 79.28 ........... 61.62 319.28
RMB.......................................................... 1.09 0.77 144.02 79.28 ........... 61.62 284.92
RMA.......................................................... 0.96 0.77 126.84 79.28 ........... 61.62 267.74
RLB.......................................................... 1.11 0.43 146.66 44.27 ........... 61.62 252.55
RLA.......................................................... 0.80 0.43 105.70 44.27 ........... 61.62 211.59
SE3.......................................................... 1.70 ........... 224.62 ........... 12.56 61.62 298.80
SE2.......................................................... 1.39 ........... 183.66 ........... 12.56 61.62 257.84
SE1.......................................................... 1.17 ........... 154.59 ........... 12.56 61.62 228.77
SSC.......................................................... 1.13 ........... 149.31 ........... 12.56 61.62 223.49
SSB.......................................................... 1.05 ........... 138.74 ........... 12.56 61.62 212.92
SSA.......................................................... 1.01 ........... 133.45 ........... 12.56 61.62 207.63
CC2.......................................................... 1.12 ........... 147.99 ........... 12.56 61.62 222.17
CC1.......................................................... 0.99 ........... 130.81 ........... 12.56 61.62 204.99
CB2.......................................................... 0.91 ........... 120.24 ........... 12.56 61.62 194.42
CB1.......................................................... 0.84 ........... 110.99 ........... 12.56 61.62 185.17
CA2.......................................................... 0.83 ........... 109.67 ........... 12.56 61.62 183.85
CA1.......................................................... 0.75 ........... 99.10 ........... 12.56 61.62 173.28
IB2.......................................................... 0.69 ........... 91.17 ........... 12.56 61.62 165.35
IB1.......................................................... 0.67 ........... 88.53 ........... 12.56 61.62 162.71
IA2.......................................................... 0.57 ........... 75.31 ........... 12.56 61.62 149.49
IA1.......................................................... 0.53 ........... 70.03 ........... 12.56 61.62 144.21
BB2.......................................................... 0.68 ........... 89.85 ........... 12.56 61.62 164.03
BB1.......................................................... 0.65 ........... 85.88 ........... 12.56 61.62 160.06
BA2.......................................................... 0.56 ........... 73.99 ........... 12.56 61.62 148.17
BA1.......................................................... 0.48 ........... 63.42 ........... 12.56 61.62 137.60
PE2.......................................................... 0.79 ........... 104.38 ........... 12.56 61.62 178.56
PE1.......................................................... 0.77 ........... 101.74 ........... 12.56 61.62 175.92
PD2.......................................................... 0.72 ........... 95.13 ........... 12.56 61.62 169.31
PD1.......................................................... 0.70 ........... 92.49 ........... 12.56 61.62 166.67
PC2.......................................................... 0.65 ........... 85.88 ........... 12.56 61.62 160.06
PC1.......................................................... 0.64 ........... 84.56 ........... 12.56 61.62 158.74
PB2.......................................................... 0.51 ........... 67.39 ........... 12.56 61.62 141.57
PB1.......................................................... 0.50 ........... 66.07 ........... 12.56 61.62 140.25
PA2.......................................................... 0.49 ........... 64.74 ........... 12.56 61.62 138.92
PA1.......................................................... 0.46 ........... 60.78 ........... 12.56 61.62 134.96
--------------------------------------------------------------------------------------------------------------------------------------------------------
D. Wage Index Adjustment to Federal Rates
Section 1888(e)(4)(G)(ii) of the Act requires that we adjust the
Federal rates to account for differences in area wage levels, using an
appropriate wage index, as determined by the Secretary. Section 315 of
the BIPA authorizes the Secretary to establish a reclassification
system specifically for SNFs, similar to the hospital methodology.
However, this reclassification system cannot be implemented until the
Secretary has collected data necessary to establish an area wage index
for SNFs based on wage data from such facilities. Pursuant to section
106(a) of the Social Security Act Amendments of 1994 (Pub.L. 103-432),
the Secretary was directed to begin collecting data on employee
compensation and paid hours of employment in SNFs for the purpose of
constructing a SNF wage index. Since the inception of a PPS for SNFs,
we have utilized hospital wage data in developing a wage index to be
applied to SNFs.
The computation of the wage index is similar to past years because
we incorporate the latest data and methodology used to construct the
hospital wage index (for a discussion, see the May 12, 1998 interim
final rule (63 FR 26274)). We apply the wage index adjustment to the
labor-related portion of the Federal rate, which is 75.379 percent of
the total rate. This percentage reflects the labor-related relative
importance for FY 2002. The labor-related relative importance, which we
calculate from the SNF market basket, approximates the labor-related
portion of the total costs after taking into account historical and
projected price changes between the base year and FY 2002. The price
proxies that move the different cost categories in the market basket do
not necessarily change at the same rate, and the relative importance
captures these changes. Accordingly, the relative importance figure
more closely reflects the cost share weights for FY 2002 than the base
year weights from the SNF market basket.
We calculate the labor-related relative importance for FY 2002 in
four steps. First, we compute the FY 2002 price index level for the
total market basket and each cost category of the market basket.
Second, we calculate a ratio for each cost category by dividing the FY
[[Page 39571]]
2002 price index level for that cost category by the total market
basket price index level. Third, we determine the FY 2002 relative
importance for each cost category by multiplying this ratio by the base
year (FY 1997) weight. Finally, we sum the FY 2002 relative importance
for each of the labor-related cost categories (that is, wages and
salaries, employee benefits, nonmedical professional fees, labor-
intensive services, and capital-related) to produce the FY 2002 labor-
related relative importance.
Tables 5 and 6 show the Federal rates by labor-related and non-
labor-related components. In addition, the wage index budget neutrality
factor for FY 2002 is .99835.
Section 1888(e)(4)(G)(ii) of the Act also requires that the
application of this wage index be made in a manner that does not result
in aggregate payments that are greater or lesser than would otherwise
be made in the absence of the wage adjustment. As noted in the proposed
rule (66 FR 23993), we are updating the wage index applicable to SNF
payments using the most recent hospital wage data and applying the
adjustment to fulfill the budget neutrality requirement. (For a
discussion of how we calculate the adjustment, see our discussion in
the proposed rule at 66 FR 23993.)
Table 5.--Case-Mix Adjusted Federal Rates for Urban SNFs by Labor and
Non-Labor Component
------------------------------------------------------------------------
Labor Non-labor
RUG-III category Total rate portion portion
------------------------------------------------------------------------
RUC.............................. 441.18 332.56 108.62
RUB.............................. 392.78 296.07 96.71
RUA.............................. 369.27 278.35 90.92
RVC.............................. 342.67 258.30 84.37
RVB.............................. 330.22 248.92 81.30
RVA.............................. 298.41 224.94 73.47
RHC.............................. 318.68 240.22 78.46
RHB.............................. 291.02 219.37 71.65
RHA.............................. 264.74 199.56 65.18
RMC.............................. 315.94 238.15 77.79
RMB.............................. 279.99 211.05 68.94
RMA.............................. 262.01 197.50 64.51
RLB.............................. 252.39 190.25 62.14
RLA.............................. 209.52 157.93 51.59
SE3.............................. 307.35 231.68 75.67
SE2.............................. 264.48 199.36 65.12
SE1.............................. 234.06 176.43 57.63
SSC.............................. 228.53 172.26 56.27
SSB.............................. 217.46 163.92 53.54
SSA.............................. 211.93 159.75 52.18
CC2.............................. 227.14 171.22 55.92
CC1.............................. 209.17 157.67 51.50
CB2.............................. 198.10 149.33 48.77
CB1.............................. 188.42 142.03 46.39
CA2.............................. 187.04 140.99 46.05
CA1.............................. 175.98 132.65 43.33
IB2.............................. 167.68 126.40 41.28
IB1.............................. 164.91 124.31 40.60
IA2.............................. 151.09 113.89 37.20
IA1.............................. 145.55 109.71 35.84
BB2.............................. 166.30 125.36 40.94
BB1.............................. 162.15 122.23 39.92
BA2.............................. 149.70 112.84 36.86
BA1.............................. 138.64 104.51 34.13
PE2.............................. 181.51 136.82 44.69
PE1.............................. 178.74 134.73 44.01
PD2.............................. 171.83 129.52 42.31
PD1.............................. 169.06 127.44 41.62
PC2.............................. 162.15 122.23 39.92
PC1.............................. 160.77 121.19 39.58
PB2.............................. 142.79 107.63 35.16
PB1.............................. 141.41 106.59 34.82
PA2.............................. 140.02 105.55 34.47
PA1.............................. 135.87 102.42 33.45
------------------------------------------------------------------------
Table 6.--Case-Mix Adjusted Federal Rates for Rural SNFs by Labor and
Non-Labor Component
------------------------------------------------------------------------
Labor Non-labor
RUG-III category Total rate portion portion
------------------------------------------------------------------------
RUC.............................. 465.05 350.55 114.50
RUB.............................. 418.80 315.69 103.11
RUA.............................. 396.34 298.76 97.58
RVC.............................. 356.10 268.42 87.68
RVB.............................. 344.21 259.46 84.75
RVA.............................. 313.82 236.55 77.27
[[Page 39572]]
RHC.............................. 324.88 244.89 79.99
RHB.............................. 298.46 224.98 73.48
RHA.............................. 273.35 206.05 67.30
RMC.............................. 319.28 240.67 78.61
RMB.............................. 284.92 214.77 70.15
RMA.............................. 267.74 201.82 65.92
RLB.............................. 252.55 190.37 62.18
RLA.............................. 211.59 159.49 52.10
SE3.............................. 298.80 225.23 73.57
SE2.............................. 257.84 194.36 63.48
SE1.............................. 228.77 172.44 56.33
SSC.............................. 223.49 168.46 55.03
SSB.............................. 212.92 160.50 52.42
SSA.............................. 207.63 156.51 51.12
CC2.............................. 222.17 167.47 54.70
CC1.............................. 204.99 154.52 50.47
CB2.............................. 194.42 146.55 47.87
CB1.............................. 185.17 139.58 45.59
CA2.............................. 183.85 138.58 45.27
CA1.............................. 173.28 130.62 42.66
IB2.............................. 165.35 124.64 40.71
IB1.............................. 162.71 122.65 40.06
IA2.............................. 149.49 112.68 36.81
IA1.............................. 144.21 108.70 35.51
BB2.............................. 164.03 123.64 40.39
BB1.............................. 160.06 120.65 39.41
BA2.............................. 148.17 111.69 36.48
BA1.............................. 137.60 103.72 33.88
PE2.............................. 178.56 134.60 43.96
PE1.............................. 175.92 132.61 43.31
PD2.............................. 169.31 127.62 41.69
PD1.............................. 166.67 125.63 41.04
PC2.............................. 160.06 120.65 39.41
PC1.............................. 158.74 119.66 39.08
PB2.............................. 141.57 106.71 34.86
PB1.............................. 140.25 105.72 34.53
PA2.............................. 138.92 104.72 34.20
PA1.............................. 134.96 101.73 33.23
------------------------------------------------------------------------
As we noted in the proposed rule, we have received many comments
over the past few years, asking that we evaluate a SNF-specific wage
index, which would be based solely on wage and hourly data from SNFs.
Further, the collection of nursing home wage data necessary to develop
a SNF-specific wage index is a prerequisite for establishing a SNF-
specific geographic reclassification procedure, as authorized by
section 315 of the BIPA. To develop this analysis, we have added a
schedule to the cost report to gather wage and hourly data from each
SNF. In the proposed rule, we published a wage index prototype based on
SNF data, along with the wage index based on the hospital wage data
that was used in the FY 2001 final rule published July 31, 2000 in the
Federal Register (65 FR 46770). In addition, we discussed in the
proposed rule the wage index computations for the SNF prototype. We
also indicated our concern about the reliability of the existing data
used in establishing a SNF wage index, in view of the significant
variations in the SNF-specific wage data and the large number of SNFs
that are unable to provide adequate wage and hourly data. Accordingly,
we expressed the belief that a wage index based on hospital wage data
remains the best and most appropriate to use in adjusting payments to
SNFs, since both hospitals and SNFs compete in the same labor markets.
Table 7 shows the hospital wage index for urban areas and Table 8 shows
the hospital wage index for rural areas.
Table 7.--Wage Index for Urban Areas
------------------------------------------------------------------------
Wage
Urban area (Constituent counties or county equivalents) index
------------------------------------------------------------------------
0040 Abilene, TX............................................. 0.7965
Taylor, TX
0060 Aguadilla, PR........................................... 0.4683
Aguada, PR
Aguadilla, PR
Moca, PR
0080 Akron, OH............................................... 0.9876
Portage, OH
Summit, OH
0120 Albany, GA.............................................. 1.0640
Dougherty, GA
Lee, GA
0160 Albany-Schenectady-Troy, NY............................. 0.8500
Albany, NY
Montgomery, NY
Rensselaer, NY
Saratoga, NY
Schenectady, NY
Schoharie, NY
0200 Albuquerque, NM......................................... 0.9750
Bernalillo, NM
Sandoval, NM
Valencia, NM
0220 Alexandria, LA.......................................... 0.8029
Rapides, LA
[[Page 39573]]
0240 Allentown-Bethlehem-Easton, PA.......................... 1.0077
Carbon, PA
Lehigh, PA
Northampton, PA
0280 Altoona, PA............................................. 0.9126
Blair, PA
0320 Amarillo, TX............................................ 0.8711
Potter, TX
Randall, TX
0380 Anchorage, AK........................................... 1.2570
Anchorage, AK
0440 Ann Arbor, MI........................................... 1.1098
Lenawee, MI
Livingston, MI
Washtenaw, MI
0450 Anniston, AL............................................ 0.8276
Calhoun, AL
0460 Appleton-Oshkosh-Neenah, WI............................. 0.9241
Calumet, WI
Outagamie, WI
Winnebago, WI
0470 Arecibo, PR............................................. 0.4630
Arecibo, PR
Camuy, PR
Hatillo, PR
0480 Asheville, NC........................................... 0.9200
Buncombe, NC
Madison, NC
0500 Athens, GA.............................................. 0.9842
Clarke, GA
Madison, GA
Oconee, GA
0520 Atlanta, GA............................................. 1.0058
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.............................. 1.1293
Atlantic City, NJ
Cape May, NJ
0580 Auburn-Opelika, AL .................................... 0.8230
Lee, AL
0600 Augusta-Aiken, GA-SC.................................... 0.9970
Columbia, GA
McDuffie, GA
Richmond, GA
Aiken, SC
Edgefield, SC
0640 Austin-San Marcos, TX................................... 0.9597
Bastrop, TX
Caldwell, TX
Hays, TX
Travis, TX
Williamson, TX
0680 Bakersfield, CA......................................... 0.9470
Kern, CA
0720 Baltimore, MD........................................... 0.9856
Anne Arundel, MD
Baltimore, MD
Baltimore City, MD
Carroll, MD
Harford, MD
Howard, MD
Queen Annes, MD
0733 Bangor, ME.............................................. 0.9593
Penobscot, ME
0743 Barnstable-Yarmouth, MA................................. 1.3626
Barnstable, MA
0760 Baton Rouge, LA......................................... 0.8149
Ascension, LA
East Baton Rouge, LA
Livingston, LA
West Baton Rouge, LA
0840 Beaumont-Port Arthur, TX................................ 0.8442
Hardin, TX
Jefferson, TX
Orange, TX
0860 Bellingham, WA.......................................... 1.1826
Whatcom, WA
0870 Benton Harbor, MI....................................... 0.8810
Berrien, MI
0875 Bergen-Passaic, NJ...................................... 1.1689
Bergen, NJ
Passaic, NJ
0880 Billings, MT............................................ 0.9352
Yellowstone, MT
0920 Biloxi-Gulfport-Pascagoula, MS.......................... 0.8440
Hancock, MS
Harrison, MS
Jackson, MS
0960 Binghamton, NY.......................................... 0.8446
Broome, NY
Tioga, NY
1000 Birmingham, AL.......................................... 0.8808
Blount, AL
Jefferson, AL
St. Clair, AL
Shelby, AL
1010 Bismarck, ND............................................ 0.7984
Burleigh, ND
Morton, ND
1020 Bloomington, IN......................................... 0.8842
Monroe, IN
1040 Bloomington-Normal, IL.................................. 0.9038
McLean, IL
1080 Boise City, ID.......................................... 0.9050
Ada, ID
Canyon, ID
1123 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH........ 1.1289
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.................................... 0.9799
Boulder, CO
1145 Brazoria, TX............................................ 0.8209
Brazoria, TX
1150 Bremerton, WA........................................... 1.0758
Kitsap, WA
1240 Brownsville-Harlingen-San Benito, TX.................... 0.9012
Cameron, TX
1260 Bryan-College Station, TX............................... 0.9328
Brazos, TX
1280 Buffalo-Niagara Falls, NY............................... 0.9459
Erie, NY
Niagara, NY
1303 Burlington, VT.......................................... 0.9883
Chittenden, VT
Franklin, VT
Grand Isle, VT
1310 Caguas, PR.............................................. 0.4699
Caguas, PR
Cayey, PR
Cidra, PR
Gurabo, PR
San Lorenzo, PR
1320 Canton-Massillon, OH.................................... 0.8956
Carroll, OH
Stark, OH
1350 Casper, WY.............................................. 0.9496
Natrona, WY
1360 Cedar Rapids, IA........................................ 0.8699
Linn, IA
1400 Champaign-Urbana, IL.................................... 0.9306
Champaign, IL
1440 Charleston-North Charleston, SC......................... 0.9206
Berkeley, SC
Charleston, SC
Dorchester, SC
1480 Charleston, WV.......................................... 0.9264
Kanawha, WV
Putnam, WV
1520 Charlotte-Gastonia-Rock Hill, NC-SC..................... 0.9348
Cabarrus, NC
Gaston, NC
Lincoln, NC
Mecklenburg, NC
Rowan, NC
Stanly, NC
Union, NC
York, SC
1540 Charlottesville, VA..................................... 1.0566
Albemarle, VA
Charlottesville City, VA
Fluvanna, VA
Greene, VA
1560 Chattanooga, TN-GA...................................... 0.9369
Catoosa, GA
Dade, GA
Walker, GA
Hamilton, TN
Marion, TN
1580 Cheyenne, WY............................................ 0.8288
Laramie, WY
1600 Chicago, IL............................................. 1.1046
Cook, IL
De Kalb, IL
[[Page 39574]]
Du Page, IL
Grundy, IL
Kane, IL
Kendall, IL
Lake, IL
McHenry, IL
Will, IL
1620 Chico-Paradise, CA...................................... 0.9856
Butte, CA
1640 Cincinnati, OH-KY-IN.................................... 0.9473
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......................... 0.8337
Christian, KY
Montgomery, TN
1680 Cleveland-Lorain-Elyria, OH............................. 0.9457
Ashtabula, OH
Geauga, OH
Cuyahoga, OH
Lake, OH
Lorain, OH
Medina, OH
1720 Colorado Springs, CO.................................... 0.9744
El Paso, CO
1740 Columbia, MO............................................ 0.8686
Boone, MO
1760 Columbia, SC............................................ 0.9492
Lexington, SC
Richland, SC
1800 Columbus, GA-AL......................................... 0.8440
Russell, AL
Chattanoochee, GA
Harris, GA
Muscogee, GA
1840 ColumbusOH............................................... 0.9565
Delaware, OH
Fairfield, OH
Franklin, OH
Licking, OH
Madison, OH
Pickaway, OH
1880 Corpus Christi, TX...................................... 0.8341
Nueces, TX
San Patricio, TX
1890 Corvallis, OR........................................... 1.1646
Benton, OR
1900 Cumberland, MD-WV....................................... 0.8306
Allegany, MD
Mineral, WV
1920 Dallas, TX.............................................. 0.9936
Collin, TX
Dallas, TX
Denton, TX
Ellis, TX
Henderson, TX
Hunt, TX
Kaufman, TX
Rockwall, TX
1950 Danville, VA............................................ 0.8613
Danville City, VA
Pittsylvania, VA
1960 Davenport-Moline-Rock Island, IA-IL..................... 0.8638
Scott, IA
Henry, IL
Rock Island, IL
2000 Dayton-Springfield, OH.................................. 0.9225
Clark, OH
Greene, OH
Miami, OH
Montgomery, OH
2020 Daytona Beach, FL....................................... 0.8982
Flagler, FL
Volusia, FL
2030 Decatur, AL............................................. 0.8775
Lawrence, AL
Morgan, AL
2040 Decatur, IL............................................. 0.7987
Macon, IL
2080 Denver, CO.............................................. 1.0328
Adams, CO
Arapahoe, CO
Denver, CO
Douglas, CO
Jefferson, CO
2120 Des Moines, IA.......................................... 0.8779
Dallas, IA
Polk, IA
Warren, IA
2160 Detroit, MI............................................. 1.0487
Lapeer, MI
Macomb, MI
Monroe, MI
Oakland, MI
St. Clair, MI
Wayne, MI
2180 Dothan, AL.............................................. 0.7948
Dale, AL
Houston, AL
2190 Dover, DE............................................... 1.0296
Kent, DE
2200 Dubuque, IA............................................. 0.8519
Dubuque, IA
2240 Duluth-Superior, MN-WI.................................. 1.0284
St. Louis, MN
Douglas, WI
2281 Dutchess County, NY..................................... 1.0532
Dutchess, NY
2290 Eau Claire, WI.......................................... 0.8832
Chippewa, WI
Eau Claire, WI
2320 El Paso, TX............................................. 0.9215
El Paso, TX
2330 Elkhart-Goshen, IN...................................... 0.9638
Elkhart, IN
2335 Elmira, NY.............................................. 0.8415
Chemung, NY
2340 Enid, OK................................................ 0.8357
Garfield, OK
2360 Erie, PA................................................ 0.8716
Erie, PA
2400 Eugene-Springfield, OR.................................. 1.1471
Lane, OR
2440 Evansville-Henderson, IN-KY............................. 0.8514
Posey, IN
Vanderburgh, IN
Warrick, IN
Henderson, KY
2520 Fargo-Moorhead, ND-MN................................... 0.9267
Clay, MN
Cass, ND
2560 Fayetteville, NC........................................ 0.9027
Cumberland, NC
2580 Fayetteville-Springdale-Rogers, AR...................... 0.8445
Benton, AR
Washington, AR
2620 Flagstaff, AZ-UT........................................ 1.0556
Coconino, AZ
Kane, UT
2640 Flint, MI............................................... 1.0913
Genesee, MI
2650 Florence, AL............................................ 0.7845
Colbert, AL
Lauderdale, AL
2655 Florence, SC............................................ 0.8722
Florence, SC
2670 Fort Collins-Loveland, CO............................... 1.0045
Larimer, CO
2680 Ft. Lauderdale, FL...................................... 1.0293
Broward, FL
2700 Fort Myers-Cape Coral, FL............................... 0.9374
Lee, FL
2710 Fort Pierce-Port StLucie, FL............................ 1.0214
Martin, FL
St. Lucie, FL
2720 Fort Smith, AR-OK....................................... 0.8053
Crawford, AR
Sebastian, AR
Sequoyah, OK
2750 Fort Walton Beach, FL................................... 0.9002
Okaloosa, FL
2760 Fort Wayne, IN.......................................... 0.9203
Adams, IN
Allen, IN
De Kalb, IN
Huntington, IN
Wells, IN
Whitley, IN
2800 Fort Worth-Arlington, TX................................ 0.9394
Hood, TX
Johnson, TX
Parker, TX
Tarrant, TX
2840 Fresno, CA.............................................. 0.9887
Fresno, CA
Madera, CA
2880 Gadsden, AL............................................. 0.8792
Etowah, AL
2900 Gainesville, FL......................................... 0.9481
Alachua, FL
2920 Galveston-Texas City, TX................................ 1.0313
Galveston, TX
2960 Gary, IN................................................ 0.9530
Lake, IN
Porter, IN
2975 Glens Falls, NY......................................... 0.8336
Warren, NY
Washington, NY
2980 Goldsboro, NC........................................... 0.8709
Wayne, NC
2985 Grand Forks, ND-MN...................................... 0.9069
Polk, MN
Grand Forks, ND
2995 Grand Junction, CO...................................... 0.9569
[[Page 39575]]
Mesa, CO
3000 Grand Rapids-Muskegon-Holland, MI....................... 1.0048
Allegan, MI
Kent, MI
Muskegon, MI
Ottawa, MI
3040 Great Falls, MT......................................... 0.8870
Cascade, MT
3060 Greeley, CO............................................. 0.9495
Weld, CO
3080 Green Bay, WI........................................... 0.9208
Brown, WI
3120 Greensboro-Winston-Salem- High Point, NC................ 0.9539
Alamance, NC
Davidson, NC
Davie, NC
Forsyth, NC
Guilford, NC
Randolph, NC
Stokes, NC
Yadkin, NC
3150 Greenville, NC.......................................... 0.9289
Pitt, NC
3160 Greenville-Spartanburg-Anderson, SC..................... 0.9217
Anderson, SC
Cherokee, SC
Greenville, SC
Pickens, SC
Spartanburg, SC
3180 Hagerstown, MD.......................................... 0.8365
Washington, MD
3200 Hamilton-Middletown, OH................................. 0.9287
Butler, OH
3240 Harrisburg-Lebanon-Carlisle, PA......................... 0.9425
Cumberland, PA
Dauphin, PA
Lebanon, PA
Perry, PA
3283 Hartford, CT............................................ 1.1533
Hartford, CT
Litchfield, CT
Middlesex, CT
Tolland, CT
3285 Hattiesburg, MS......................................... 0.7476
Forrest, MS
Lamar, MS
3290 Hickory-Morganton-Lenoir, NC............................ 0.9367
Alexander, NC
Burke, NC
Caldwell, NC
Catawba, NC
3320 Honolulu, HI............................................ 1.1539
Honolulu, HI
3350 Houma, LA............................................... 0.7951
Lafourche, LA
Terrebonne, LA
3360 Houston, TX............................................. 0.9631
Chambers, TX
Fort Bend, TX
Harris, TX
Liberty, TX
Montgomery, TX
Waller, TX
3400 Huntington-Ashland, WV-KY-OH............................ 0.9616
Boyd, KY
Carter, KY
Greenup, KY
Lawrence, OH
Cabell, WV
Wayne, WV
3440 Huntsville, AL.......................................... 0.8883
Limestone, AL
Madison, AL
3480 Indianapolis, IN........................................ 0.9698
Boone, IN
Hamilton, IN
Hancock, IN
Hendricks, IN
Johnson, IN
Madison, IN
Marion, IN
Morgan, IN
Shelby, IN
3500 Iowa City, IA........................................... 0.9859
Johnson, IA
3520 Jackson, MI............................................. 0.9257
Jackson, MI
3560 Jackson, MS............................................. 0.8491
Hinds, MS
Madison, MS
Rankin, MS
3580 Jackson, TN............................................. 0.9013
Chester, TN
Madison, TN
3600 Jacksonville, FL......................................... 0.9223
Clay, FL
Duval, FL
Nassau, FL
St. Johns, FL
3605 Jacksonville, NC........................................ 0.7622
Onslow, NC
3610 Jamestown, NY........................................... 0.8050
Chautaqua, NY
3620 Janesville-Beloit, WI................................... 0.9739
Rock, WI
3640 Jersey City, NJ......................................... 1.1178
Hudson, NJ
3660 Johnson City-Kingsport-Bristol, TN-VA................... 0.8617
Carter, TN
Hawkins, TN
Sullivan, TN
Unicoi, TN
Washington, TN
Bristol City, VA
Scott, VA
Washington, VA
3680 Johnstown, PA........................................... 0.8723
Cambria, PA
Somerset, PA
3700 Jonesboro, AR........................................... 0.8425
Craighead, AR
3710 Joplin, MO.............................................. 0.8727
Jasper, MO
Newton, MO
3720 Kalamazoo-Battle Creek, MI.............................. 1.0639
Calhoun, MI
Kalamazoo, MI
Van Buren, MI
3740 Kankakee, IL............................................ 0.9889
Kankakee, IL
3760 Kansas City, KS-MO...................................... 0.9536
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............................................. 0.9568
Kenosha, WI
3810 Killeen-Temple, TX...................................... 0.7292
Bell, TX
Coryell, TX
3840 Knoxville, TN........................................... 0.8890
Anderson, TN
Blount, TN
Knox, TN
Loudon, TN
Sevier, TN
Union, TN
3850 Kokomo, IN.............................................. 0.9126
Howard, IN
Tipton, IN
3870 La Crosse, WI-MN........................................ 0.9250
Houston, MN
La Crosse, WI
3880 Lafayette, LA........................................... 0.8526
Acadia, LA
Lafayette, LA
St. Landry, LA
St. Martin, LA
3920 Lafayette, IN........................................... 0.9121
Clinton, IN
Tippecanoe, IN
3960 Lake Charles, LA........................................ 0.7765
Calcasieu, LA
3980 Lakeland-Winter Haven, FL............................... 0.9067
Polk, FL
4000 Lancaster, PA........................................... 0.9296
Lancaster, PA
4040 Lansing-East Lansing, MI................................ 0.9653
Clinton, MI
Eaton, MI
Ingham, MI
4080 Laredo, TX.............................................. 0.7849
Webb, TX
4100 Las Cruces, NM.......................................... 0.8621
Dona Ana, NM
4120 Las Vegas, NV-AZ........................................ 1.1182
Mohave, AZ
Clark, NV
Nye, NV
4150 Lawrence, KS............................................ 0.8656
Douglas, KS
4200 Lawton, OK.............................................. 0.8682
Comanche, OK
4243 Lewiston-Auburn, ME..................................... 0.9287
Androscoggin, ME
4280 Lexington, KY........................................... 0.8791
Bourbon, KY
Clark, KY
Fayette, KY
Jessamine, KY
Madison, KY
Scott, KY
[[Page 39576]]
Woodford, KY
4320 Lima, OH................................................ 0.9470
Allen, OH
Auglaize, OH
4360 Lincoln, NE............................................. 1.0173
Lancaster, NE
4400 Little Rock-North Little Rock, AR....................... 0.8955
Faulkner, AR
Lonoke, AR
Pulaski, AR
Saline, AR
4420 Longview-Marshall, TX................................... 0.8571
Gregg, TX
Harrison, TX
Upshur, TX
4480 Los Angeles-Long Beach, CA.............................. 1.1948
Los Angeles, CA
4520 Louisville, KY-IN....................................... 0.9529
Clark, IN
Floyd, IN
Harrison, IN
Scott, IN
Bullitt, KY
Jefferson, KY
Oldham, KY
4600 Lubbock, TX............................................. 0.8449
Lubbock, TX
4640 Lynchburg, VA........................................... 0.9103
Amherst, VA
Bedford City, VA
Bedford, VA
Campbell, VA
Lynchburg City, VA
4680 Macon, GA............................................... 0.8957
Bibb, GA
Houston, GA
Jones, GA
Peach, GA
Twiggs, GA
4720 Madison, WI............................................. 1.0337
Dane, WI
4800 Mansfield, OH........................................... 0.8708
Crawford, OH
Richland, OH
4840 Mayaguez, PR............................................ 0.4860
Anasco, PR
Cabo Rojo, PR
Hormigueros, PR
Mayaguez, PR
Sabana Grande, PR
San German, PR
4880 McAllen-Edinburg-Mission, TX............................ 0.8378
Hidalgo, TX
4890 Medford-Ashland, OR..................................... 1.0314
Jackson, OR
4900 Melbourne-Titusville-Palm Bay, FL....................... 0.9913
Brevard, Fl
4920 Memphis, TN-AR-MS....................................... 0.8978
Crittenden, AR
De Soto, MS
Fayette, TN
Shelby, TN
Tipton, TN
4940 Merced, CA.............................................. 0.9757
Merced, CA
5000 Miami, FL............................................... 0.9950
Dade, FL
5015 Middlesex-Somerset-Hunterdon, NJ........................ 1.1469
Hunterdon, NJ
Middlesex, NJ
Somerset, NJ
5080 Milwaukee-Waukesha, WI.................................. 0.9971
Milwaukee, WI
Ozaukee, WI
Washington, WI
Waukesha, WI
5120 Minneapolis-St Paul, MN-WI.............................. 1.0930
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
5140 Missoula, MT............................................ 0.9364
Missoula, MT
5160 Mobile, AL.............................................. 0.8082
Baldwin, AL
Mobile, AL
5170 Modesto, CA............................................. 1.0820
Stanislaus, CA
5190 Monmouth-Ocean, NJ...................................... 1.0870
Monmouth, NJ
Ocean, NJ
5200 Monroe, LA.............................................. 0.8201
Ouachita, LA
5240 Montgomery, AL.......................................... 0.7359
Autauga, AL
Elmore, AL
Montgomery, AL
5280 Muncie, IN.............................................. 0.9939
Delaware, IN
5330 Myrtle Beach, SC........................................ 0.8771
Horry, SC
5345 Naples, FL.............................................. 0.9699
Collier, FL
5360 Nashville, TN........................................... 0.9754
Cheatham, TN
Davidson, TN
Dickson, TN
Robertson, TN
Rutherford TN
Sumner, TN
Williamson, TN
Wilson, TN
5380 Nassau-Suffolk, NY...................................... 1.3643
Nassau, NY
Suffolk, NY
5483 New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT..... 1.2238
Fairfield, CT
New Haven, CT
5523 New London-Norwich, CT.................................. 1.1526
New London, CT
5560 New Orleans, LA......................................... 0.9036
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............................................ 1.4427
Bronx, NY
Kings, NY
New York, NY
Putnam, NY
Queens, NY
Richmond, NY
Rockland, NY
Westchester, NY
5640 Newark, NJ.............................................. 1.1622
Essex, NJ
Morris, NJ
Sussex, NJ
Union, NJ
Warren, NJ
5660 Newburgh, NY-PA......................................... 1.1113
Orange, NY
Pike, PA
5720 Norfolk-Virginia Beach-Newport News, VA-NC.............. 0.8579
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............................................. 1.5319
Alameda, CA
Contra Costa, CA
5790 Ocala, FL............................................... 0.9556
Marion, FL
5800 Odessa-Midland, TX...................................... 1.0104
Ector, TX
Midland, TX
5880 Oklahoma City, OK....................................... 0.8694
Canadian, OK
Cleveland, OK
Logan, OK
McClain, OK
Oklahoma, OK
Pottawatomie, OK
5910 Olympia, WA............................................. 1.1350
Thurston, WA
5920 Omaha, NE-IA............................................ 0.9712
Pottawattamie, IA
Cass, NE
Douglas, NE
Sarpy, NE
Washington, NE
5945 Orange County, CA....................................... 1.1123
Orange, CA
5960 Orlando, FL............................................. 0.9642
Lake, FL
[[Page 39577]]
Orange, FL
Osceola, FL
Seminole, FL
5990 Owensboro, KY............................................ 0.8334
Daviess, KY
6015 Panama City, FL......................................... 0.9061
Bay, FL
6020 Parkersburg-Marietta, WV-OH............................. 0.8133
Washington, OH
Wood, WV
6080 Pensacola, FL........................................... 0.8329
Escambia, FL
Santa Rosa, FL
6120 Peoria-Pekin, IL........................................ 0.8773
Peoria, IL
Tazewell, IL
Woodford, IL
6160 Philadelphia, PA-NJ..................................... 1.0947
Burlington, NJ
Camden, NJ
Gloucester, NJ
Salem, NJ
Bucks, PA
Chester, PA
Delaware, PA
Montgomery, PA
Philadelphia, PA
6200 Phoenix-Mesa, AZ........................................ 0.9638
Maricopa, AZ
Pinal, AZ
6240 Pine Bluff, AR.......................................... 0.7895
Jefferson, AR
6280 Pittsburgh, PA.......................................... 0.9560
Allegheny, PA
Beaver, PA
Butler, PA
Fayette, PA
Washington, PA
Westmoreland, PA
6323 Pittsfield, MA.......................................... 1.0278
Berkshire, MA
6340 Pocatello, ID........................................... 0.9448
Bannock, ID
6360 Ponce, PR............................................... 0.5218
Guayanilla, PR
Juana Diaz, PR
Penuelas, PR
Ponce, PR
Villalba, PR
Yauco, PR
6403 Portland, ME............................................ 0.9427
Cumberland, ME
Sagadahoc, ME
York, ME
6440 Portland-Vancouver, OR-WA............................... 1.1111
Clackamas, OR.
Columbia, OR
Multnomah, OR
Washington, OR
Yamhill, OR
Clark, WA
6483 Providence-Warwick-Pawtucket, RI........................ 1.0805
Bristol, RI
Kent, RI
Newport, RI
Providence, RI
Washington, RI
6520 Provo-Orem, UT.......................................... 0.9843
Utah, UT
6560 Pueblo, CO.............................................. 0.8604
Pueblo, CO
6580 Punta Gorda, FL......................................... 0.9015
Charlotte, FL
6600 Racine, WI.............................................. 0.9333
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.......................................... 0.8869
Pennington, SD
6680 Reading, PA............................................. 0.9583
Berks, PA
6690 Redding, CA............................................. 1.1155
Shasta, CA
6720 Reno, NV................................................ 1.0440
Washoe, NV
6740 Richland-Kennewick-Pasco, WA............................ 1.0960
Benton, WA
Franklin, WA
6760 Richmond-Petersburg, VA................................. 0.9678
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............................ 1.1111
Riverside, CA
San Bernardino, CA
6800 Roanoke, VA............................................. 0.8371
Botetourt, VA
Roanoke, VA
Roanoke City, VA
Salem City, VA
6820 Rochester, MN........................................... 1.1462
Olmsted, MN
6840 Rochester, NY........................................... 0.9347
Genesee, NY
Livingston, NY
Monroe, NY
Ontario, NY
Orleans, NY
Wayne, NY
6880 Rockford, IL............................................ 0.9204
Boone, IL
Ogle, IL
Winnebago, IL
6895 Rocky Mount, NC......................................... 0.9109
Edgecombe, NC
Nash, NC
6920 Sacramento, CA.......................................... 1.1831
El Dorado, CA
Placer, CA
Sacramento, CA
A6960 Saginaw-Bay City-Midland, MI........................... 0.9590
Bay, MI
Midland, MI
Saginaw, MI
6980 StCloud, MN............................................. 0.9851
Benton, MN
Stearns, MN
7000 StJoseph, MO............................................ 0.9009
Andrews, MO
Buchanan, MO
7040 StLouis, MO-IL.......................................... 0.8931
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............................................... 1.0011
Marion, OR
Polk, OR
7120 Salinas, CA............................................. 1.4684
Monterey, CA
7160 Salt Lake City-Ogden, UT................................ 0.9863
Davis, UT
Salt Lake, UT
Weber, UT
7200 San Angelo, TX.......................................... 0.8193
Tom Green, TX
7240 San Antonio, TX......................................... 0.8584
Bexar, TX
Comal, TX
Guadalupe, TX
Wilson, TX
7320 San Diego, CA........................................... 1.1265
San Diego, CA
7360 San Francisco, CA....................................... 1.4140
Marin, CA
San Francisco, CA
San Mateo, CA
7400 San Jose, CA............................................ 1.4193
Santa Clara, CA
7440 San Juan-Bayamon, PR.................................... 0.4762
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
[[Page 39578]]
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............. 1.0990
San Luis Obispo, CA
7480 Santa Barbara-Santa Maria-Lompoc, CA.................... 1.0802
Santa Barbara, CA
7485 Santa Cruz-Watsonville, CA.............................. 1.3970
Santa Cruz, CA
7490 Santa Fe, NM............................................ 1.0194
Los Alamos, NM
Santa Fe, NM
7500 Santa Rosa, CA.......................................... 1.3034
Sonoma, CA
7510 Sarasota-Bradenton, FL.................................. 1.0090
Manatee, FL
Sarasota, FL
7520 Savannah, GA............................................ 0.9243
Bryan, GA
Chatham, GA
Effingham, GA
7560 Scranton--Wilkes-Barre--Hazleton, PA.................... 0.8683
Columbia, PA
Lackawanna, PA
Luzerne, PA
Wyoming, PA
7600 Seattle-Bellevue-Everett, WA............................ 1.1361
Island, WA
King, WA
Snohomish, WA
7610 Sharon, PA.............................................. 0.7926
Mercer, PA
7620 Sheboygan, WI........................................... 0.8427
Sheboygan, WI
7640 Sherman-Denison, TX..................................... 0.9373
Grayson, TX
7680 Shreveport-Bossier City, LA............................. 0.9050
Bossier, LA
Caddo, LA
Webster, LA
7720 Sioux City, IA-NE....................................... 0.8767
Woodbury, IA
Dakota, NE
7760 Sioux Falls, SD......................................... 0.9139
Lincoln, SD
Minnehaha, SD
7800 South Bend, IN.......................................... 0.9993
St. Joseph, IN
7840 Spokane, WA............................................. 1.0668
Spokane, WA
7880 Springfield, IL......................................... 0.8676
Menard, IL
Sangamon, IL
7920 Springfield, MO......................................... 0.8567
Christian, MO
Greene, MO
Webster, MO
8003 Springfield, MA......................................... 1.0881
Hampden, MA
Hampshire, MA
8050 State College, PA....................................... 0.9133
Centre, PA
8080 Steubenville-Weirton, OH-WV............................. 0.8637
Jefferson, OH
Brooke, WV
Hancock, WV
8120 Stockton-Lodi, CA....................................... 1.0815
San Joaquin, CA
8140 Sumter, SC.............................................. 0.7794
Sumter, SC
8160 Syracuse, NY............................................ 0.9621
Cayuga, NY
Madison, NY
Onondaga, NY
Oswego, NY
8200 Tacoma, WA.............................................. 1.1616
Pierce, WA
8240 Tallahassee, FL......................................... 0.8527
Gadsden, FL
Leon, FL
8280 Tampa-St. Petersburg-Clearwater, FL..................... 0.8925
Hernando, FL
Hillsborough, FL
Pasco, FL
Pinellas, FL
8320 Terre Haute, IN......................................... 0.8532
Clay, IN
Vermillion, IN
Vigo, IN
8360 Texarkana,AR-Texarkana, TX.............................. 0.8327
Miller, AR
Bowie, TX
8400 Toledo, OH.............................................. 0.9809
Fulton, OH
Lucas, OH
Wood, OH
8440 Topeka, KS.............................................. 0.8912
Shawnee, KS
8480 Trenton, NJ............................................. 1.0416
Mercer, NJ
8520 Tucson, AZ.............................................. 0.8967
Pima, AZ
8560 Tulsa, OK............................................... 0.8902
Creek, OK
Osage, OK
Rogers, OK
Tulsa, OK
Wagoner, OK
8600 Tuscaloosa, AL.......................................... 0.8171
Tuscaloosa, AL
8640 Tyler, TX............................................... 0.9641
Smith, TX
8680 Utica-Rome, NY.......................................... 0.8329
Herkimer, NY
Oneida, NY
8720 Vallejo-Fairfield-Napa, CA.............................. 1.3562
Napa, CA
Solano, CA
8735 Ventura, CA............................................. 1.0994
Ventura, CA
8750 Victoria, TX............................................ 0.8328
Victoria, TX
8760 Vineland-Millville-Bridgeton, NJ........................ 1.0441
Cumberland, NJ
8780 Visalia-Tulare-Porterville, CA.......................... 0.9610
Tulare, CA
8800 Waco, TX................................................ 0.8129
McLennan, TX
8840 Washington, DC-MD-VA-WV................................. 1.0962
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................................ 0.8041
Black Hawk, IA
8940 Wausau, WI.............................................. 0.9696
Marathon, WI
8960 West Palm Beach-Boca Raton, FL.......................... 0.9777
Palm Beach, FL
9000 Wheeling, OH-WV......................................... 0.7985
Belmont, OH
Marshall, WV
Ohio, WV
9040 Wichita, KS............................................. 0.9606
Butler, KS
Harvey, KS
Sedgwick, KS
9080 Wichita Falls, TX....................................... 0.7867
Archer, TX
Wichita, TX
9140 Williamsport, PA........................................ 0.8521
Lycoming, PA
9160 Wilmington-Newark, DE-MD................................ 1.0877
New Castle, DE
Cecil, MD
9200 Wilmington, NC.......................................... 0.9409
New Hanover, NC
Brunswick, NC
9260 Yakima, WA.............................................. 1.0567
Yakima, WA
9270 Yolo, CA................................................ 0.9701
Yolo, CA
9280 York, PA................................................ 0.9441
York, PA
[[Page 39579]]
9320 Youngstown-Warren, OH................................... 0.9563
Columbiana, OH
Mahoning, OH
Trumbull, OH
9340 Yuba City, CA........................................... 1.0359
Sutter, CA
Yuba, CA
9360 Yuma, AZ................................................ 0.8989
Yuma, AZ
------------------------------------------------------------------------
Table 8.--Wage Index for Rural Areas
------------------------------------------------------------------------
Wage
Rural area index
------------------------------------------------------------------------
Alabama....................................................... 0.7339
Alaska........................................................ 1.1862
Arizona....................................................... 0.8681
Arkansas...................................................... 0.7489
California.................................................... 0.9772
Colorado...................................................... 0.8811
Connecticut................................................... 1.2077
Delaware...................................................... 0.9589
Florida....................................................... 0.8812
Georgia....................................................... 0.8295
Guam.......................................................... 0.9611
Hawaii........................................................ 1.1112
Idaho......................................................... 0.8718
Illinois...................................................... 0.8053
Indiana....................................................... 0.8721
Iowa.......................................................... 0.8147
Kansas........................................................ 0.7769
Kentucky...................................................... 0.7963
Louisiana..................................................... 0.7601
Maine......................................................... 0.8721
Maryland...................................................... 0.8859
Massachusetts................................................. 1.1454
Michigan...................................................... 0.9010
Minnesota..................................................... 0.9035
Mississippi................................................... 0.7528
Missouri...................................................... 0.7778
Montana....................................................... 0.8655
Nebraska...................................................... 0.8142
Nevada........................................................ 0.9673
New Hampshire................................................. 0.9803
New Jersey \1\................................................ ........
New Mexico.................................................... 0.8676
New York...................................................... 0.8547
North Carolina................................................ 0.8539
North Dakota.................................................. 0.7879
Ohio.......................................................... 0.8668
Oklahoma...................................................... 0.7566
Oregon........................................................ 1.0027
Pennsylvania.................................................. 0.8617
Puerto Rico................................................... 0.4800
Rhode Island \1\.............................................. ........
South Carolina................................................ 0.8512
South Dakota.................................................. 0.7861
Tennessee..................................................... 0.7928
Texas......................................................... 0.7712
Utah.......................................................... 0.9051
Vermont....................................................... 0.9466
Virginia...................................................... 0.8241
Virgin Islands................................................ 0.6747
Washington.................................................... 1.0209
West Virginia................................................. 0.8067
Wisconsin..................................................... 0.9079
Wyoming....................................................... 0.8747
------------------------------------------------------------------------
\1\ All counties within the State are classified urban.
Comment: Several commenters expressed concern that we may discard
the SNF-specific wage index without further work or development to
ensure its accuracy. Many commenters suggested that we work with the
industry to improve the cost reporting forms used in collecting the
data, thus improving the editing and auditing that would lead to an
improved SNF-specific wage index. Virtually all commenters agreed that
the proposed SNF wage index prototype is not appropriate and should not
be implemented with the current data shortcomings. We also received
many comments suggesting that the SNF-specific wage index is not valid,
and that there is no evidence to indicate it would be any better than
the hospital wage index currently in use. These commenters maintained
that imposing a SNF-specific wage index before improving the data
quality would not be justified.
Response: As discussed in the proposed rule, there is a great deal
of volatility in the SNF-specific wage index prototype--not only
between the hospital wage data, but also between the two years of data
that we utilized in developing the SNF-specific wage index prototype.
As many commenters suggested, the data could be improved if we were to
establish better controls, edits, and screens of the data, and insist
that more of the provider's data be audited to ensure its accuracy. We
are committed to a process to ensure the accuracy of the data that is
required by law. We are considering initiation of a process to develop
and make appropriate changes to the cost report to improve the quality
of the wage data reported, and intend to work with the industry
representatives and others in this effort. We agree that auditing all
SNFs would provide more accurate and reliable data; however, this
approach involves a significant commitment of resources by us and our
contractors and places a burden on providers in terms of recordkeeping
and completion of the cost report worksheet. Developing a desk review
and audit program similar to what is required in the hospital setting
would require significant resources. The fiscal intermediaries (FIs)
that are involved in preparing the hospital wage data currently spend
considerable resources to ensure the accuracy of the wage data
submitted by approximately 6,000 hospitals. This process involves
editing, reviewing, auditing, and performing desk reviews of the data.
Requiring FIs to do the same for the approximately 14,000 SNFs would
nearly triple the FIs' workload and budgets in this area.
We are committed to using a wage index under the SNF PPS that
results in enhancing our current payment methodology. In fact, we are
continuing to look at ways to improve the processing and accuracy of
the current hospital wage data to improve its accuracy and reliability
further, especially since these data are currently being used for
payment purposes for hospitals and a variety of other providers. While
we are committed to improving the accuracy of payments for SNFs, we do
not expect to propose a SNF-specific wage index until its impact both
on payments and resources is more clearly understood. This will include
evidence demonstrating that a SNF-specific wage index would
significantly improve our ability to determine payments for facilities,
justifying the resources required to collect the data and the burden on
providers.
We realize, as a number of commenters suggested, that the impact of
any new wage index would vary from one area to another. However,
because of the problems associated with the current data, and our
inability to demonstrate that the SNF-specific wage index is more
reflective of the wages and salaries paid in a specific area, we
continue to believe that hospital wage data are the most appropriate
data for adjusting payments made to SNFs.
Comment: Two commenters suggested that even though we cannot now
implement a SNF-specific wage index, we should encourage legislation
that would implement a geographic reclassification system for SNFs
using the hospital wage index.
Response: We believe that this is a matter for the Congress to
address, as it did in the BIPA. Under section 315 of the BIPA,
providers would be allowed to seek geographic reclassification to an
adjacent area. However, the statute specifically noted that such
reclassification could not be implemented until we have collected the
data necessary to establish a SNF-specific wage index. Accordingly,
under the current legislative authority, we are prohibited from
implementing a SNF reclassification system until such an index becomes
available.
Comment: Two commenters suggested that a blend between a hospital
wage
[[Page 39580]]
index and a SNF-specific wage index might be an appropriate adjustment
or phase-in of a SNF-specific wage index, while the data quality is
being improved.
Response: If, in the future, we propose to move to a SNF-specific
wage index, this approach may be appropriate. However, we do not
believe that a blend between a hospital wage index and SNF-specific
wage index is currently warranted, nor do we believe that a blend
should be implemented until the SNF data is reliable. Calculating a
wage index on a blend of hospital data and inaccurate SNF-data is not
likely to improve the accuracy of our payments. As we have already
indicated, we have concerns about establishing a wage index based on
SNF-specific wage data that is unreliable and unaudited, since this
could have an arbitrary impact on providers. Accordingly, we do not
believe that it would be appropriate to use a blend that, at the
present time, includes unreliable and unaudited SNF data.
Comment: Some commenters pointed out two typographical errors in
Table 5 of the proposed rule (66 FR 23992), which showed the labor
portion of the adjusted Federal rate for RUG-III group BA1 as $704.20,
and the total rate for RUG-III group PE2 as $780.99.
Response: The correct dollar amounts for these two items are
$104.20 and $180.99, respectively.
Comment: One commenter reported discovering an error in the
hospital wage data that was used in computing the current (FY 2001)
wage index for the Baltimore MSA. The error was corrected in a timely
fashion for the wage index data published in this final rule; however,
the commenter indicated that because the hospital(s) did not accurately
report their costs on prior year cost reports, the current wage index
is incorrect and an adjustment should be made to account for this
error.
Response: For the reasons discussed previously, we are continuing
to use the hospital wage index under the SNF PPS. Thus, corrections in
the underlying data would be made in accordance with the existing
process for developing the hospital wage index. We note that this
process already includes numerous review and editing procedures, and
also provides numerous opportunities for hospitals and other interested
parties to detect and question any discrepancies in the data and seek
revisions to that data.
E. Updates to the Federal Rate
In accordance with section 1888(e)(4)(E) of the Act and section 311
of the BIPA, the payment rates listed here reflect an update equal to
the SNF market basket minus 0.5 percentage point, which equals 2.8
percent. For each succeeding FY, we will publish the rates in the
Federal Register before August 1 of the year preceding the next Federal
FY.
F. Relationship of the RUG-III Classification System to Existing
Skilled Nursing Facility Level-of-Care Criteria
We include in each update of the Federal payment rates in the
Federal Register the designation of those specific RUGs under the
classification system that represent the required SNF level of care, as
provided in Sec. 409.30. This designation reflects an administrative
presumption that beneficiaries who are correctly assigned to one of the
upper 26 RUG-III groups in the initial 5-day, Medicare-required
assessment are automatically classified as meeting the SNF level of
care definition up to that point. (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.)
In the proposed rule published in the Federal Register on May 10,
2001 (66 FR 24011), we proposed to continue the existing designation of
the upper 26 RUG-III groups for purposes of this administrative
presumption, consisting of the following RUG-III classifications: All
groups within the Ultra High Rehabilitation category; all groups within
the Very High Rehabilitation category; all groups within the High
Rehabilitation category; all groups within the Medium Rehabilitation
category; all groups within the Low Rehabilitation category; all groups
within the Extensive Services category; all groups within the Special
Care category; and, all groups within the Clinically Complex category.
Comment: Commenters expressed support for our proposal to continue
the existing designation of the upper 26 RUG-III groups for purposes of
the administrative presumption regarding level of care. They noted that
since we are not introducing case-mix refinements in the current
rulemaking cycle, the existing designation should also remain
unchanged.
Response: Consistent with the comments, we are continuing the
existing designation of the upper 26 RUG-III groups for purposes of
this administrative presumption, consisting of the following RUG-III
classifications: All groups within the Ultra High Rehabilitation
category; all groups within the Very High Rehabilitation category; all
groups within the High Rehabilitation category; all groups within the
Medium Rehabilitation category; all groups within the Low
Rehabilitation category; all groups within the Extensive Services
category; all groups within the Special Care category; and, all groups
within the Clinically Complex category.
G. Example of Computation of Adjusted PPS Rates and SNF Payment
Using the example of the XYZ SNF described in Table 9, the
following shows the adjustments made to the Federal per diem rate to
compute the provider's actual per diem PPS payment. XYZ's 12-month cost
reporting period begins October 1, 2001. Table 10 displays the 44 RUG-
III categories and their respective add-ons, as provided in the BBRA
and the BIPA.
Table 9.--SNF XYZ Is Located in State College, PA With a Wage Index of 0.9133
--------------------------------------------------------------------------------------------------------------------------------------------------------
Labor Wage Adjusted Nonlabor Adjusted Percent Medicare
RUG Group portion index labor portion rate adjustment days Payment
-------------------------------------------------------------------\1\-------------------------------\1\------------------------------------------------
RVC.......................................................... $258.30 0.9133 $235.91 $84.37 $320.28 \2\ 354.55 50 $17,728
SSC.......................................................... 172.26 0.9133 157.33 56.27 213.60 \3\ 264.86 25 6,622
IA2.......................................................... 113.89 0.9133 104.02 37.20 141.22 \4\146.87 25 3,672
------------------------------------------------------------------------------------------
Total.................................................... .......... ......... ......... .......... ......... .......... 100 27,022
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ From Table 5.
\2\ Reflects a 10.7 percent adjustment (the 4 percent adjustment from section 101(d) of the BBRA and the 6.7 percent adjustment from section 314 of the
BIPA).
\3\ Reflects a 24 percent adjustment (the 4 percent and 20 percent adjustments from sections 101(a) and (d) of the BBRA).
\4\ Reflects the 4 percent adjustment from section 101(d) of the BBRA.
[[Page 39581]]
Table 10.--BBRA 1999 & BIPA 2000 Add-Ons, By RUG-III Category
------------------------------------------------------------------------
RUG-III category 4% \1\ 10.7% \2\ 24% \3\
------------------------------------------------------------------------
RUC................................. .......... X ..........
RUB................................. .......... X ..........
RUA................................. .......... X ..........
RVC................................. .......... X ..........
RVB................................. .......... X ..........
RVA................................. .......... X ..........
RHC................................. .......... X ..........
RHB................................. .......... X ..........
RHA................................. .......... X ..........
RMC................................. .......... X ..........
RMB................................. .......... X ..........
RMA................................. .......... X ..........
RLB................................. .......... X ..........
RLA................................. .......... X ..........
SE3................................. .......... .......... X
SE2................................. .......... .......... X
SE1................................. .......... .......... X
SSC................................. .......... .......... X
SSB................................. .......... .......... X
SSA................................. .......... .......... X
CC2................................. .......... .......... X
CC1................................. .......... .......... X
CB2................................. .......... .......... X
CB1................................. .......... .......... X
CA2................................. .......... .......... X
CA1................................. .......... .......... X
IB2................................. X .......... ..........
IB1................................. X .......... ..........
IA2................................. X .......... ..........
IA1................................. X .......... ..........
BB2................................. X .......... ..........
BB1................................. X .......... ..........
BA2................................. X .......... ..........
BA1................................. X .......... ..........
PE2................................. X .......... ..........
PE1................................. X .......... ..........
PD2................................. X .......... ..........
PD1................................. X .......... ..........
PC2................................. X .......... ..........
PC1................................. X .......... ..........
PB2................................. X .......... ..........
PB1................................. X .......... ..........
PA2................................. X .......... ..........
PA1................................. X .......... ..........
------------------------------------------------------------------------
\1\ Represents the 4% increase from the BBRA.
\2\ Includes the 4% increase from the BBRA and the 6.7% increase from
the BIPA.
\3\ Includes the 4% and 20% increases from the BBRA.
For rates addressed in this final rule, we are using wage index
values that are based on hospital wage data from cost reporting periods
beginning in FY 1997.
H. The Skilled Nursing Facility Market Basket Index
1. Background
Section 1888(e)(5)(A) of the Act requires the Secretary to
establish a market basket index that reflects changes over time in the
prices of an appropriate mix of goods and services included in the SNF
PPS. Effective for cost reporting periods beginning on or after July 1,
1998, we revised and rebased our 1977 routine costs input price index
and adopted a total expenses SNF input price index using data from 1992
as the base year.
The term ``market basket'' technically describes the mix of goods
and services needed to produce SNF care, and is also commonly used to
denote the input price index that includes both weights (mix of goods
and services) and price factors. The term ``market basket'' used in
this rule refers to the SNF input price index.
The 1992-based SNF market basket represents routine costs, costs of
ancillary services and capital-related costs. The percentage change in
the market basket reflects the average change in the price of a fixed
set of goods and services purchased by SNFs to furnish all services.
For further background information, see the May 12, 1998 Federal
Register (63 FR 26289).
For purposes of SNF PPS, the SNF market basket is a fixed-weight
(Laspeyres type) price index. (A Laspeyres type index compares the cost
of purchasing a specified group of commodities in a selected base
period to the cost of purchasing that same group at current prices.)
The SNF market basket is constructed in three steps. First, a base
period is selected and total base period expenditure shares are
estimated for mutually exclusive and exhaustive spending categories.
Total costs for routine services, ancillary services, and capital are
used. These proportions are called cost or
[[Page 39582]]
expenditure weights. The second step is to match each expenditure
category to a price/wage variable, called a price proxy. These price
proxy variables are drawn from publicly 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, from which rates of growth can be calculated.
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.
As discussed in the May 12, 1998 Federal Register (63 FR 26252), to
implement section 1888(e)(5)(A) of the Act, we revised and rebased the
market basket so the cost weights and price proxies reflected the mix
of goods and services that SNFs purchase for all costs (routine,
ancillary, and capital-related) encompassed by SNF PPS in fiscal year
1992.
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
shifting the base year for the structure of costs of the input price
index (for example, for this rule, we shift the base year cost
structure from fiscal year 1992 to fiscal year 1997). Revising means
changing data sources, cost categories, and/or price proxies used in
the input price index.
We have rebased and revised the SNF market basket to reflect 1997
total cost data (routine, ancillary, and capital-related). Fiscal year
1997 was selected as the new base year because 1997 is the most recent
year for which relatively complete data are available. These data
include settled 1997 Medicare Cost Reports as well as 1997 data from
two U. S. Department of Commerce surveys: The Bureau of the Census'
Business Expenditures Survey, and the Bureau of Economic Analysis'
Annual Input-Output tables. Preliminary analysis of 1998 data from
Medicare Cost Reports showed little change in cost shares from those in
the 1997 Medicare Cost Reports.
In developing the market basket, we reviewed SNF expenditure data
from Medicare Cost Reports for FY 1997 for each freestanding SNF that
had Medicare expenses. FY 1997 Cost Reports are those with cost
reporting periods beginning after September 30, 1996 and before October
1, 1997.
Comment: Some commenters believe that the weights derived for use
in the revised and rebased market basket are not valid, because only
freestanding facility data were used.
Response: As described in the proposed rule, we used SNF
expenditure data from Medicare Cost Reports for FY 1997 for each
freestanding SNF that had Medicare expenses. We maintained our policy
of using data from freestanding SNFs because they reflect the actual
cost structure faced by the SNF. Expense data for a hospital-based SNF
are affected by the allocation of overhead costs over the entire
institution (hospital, hospital-based SNF, hospital-based home health
agency, etc). Due to the method of allocation, total expenses will be
correct, but the individual components' expenses may be skewed.
Therefore, if data from hospital-based SNFs were included, the
resultant cost structure could be unrepresentative of the costs facing
an average SNF.
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. Using these data, we then determined the proportion of total
costs that each category represented. The six major categories for the
revised and rebased cost categories and weights derived from SNF
Medicare Cost Reports are summarized in Table 10.A.
Table 10.A--1992 and 1997 Skilled Nursing Facility Major Cost Categories
and Weights From Medicate Cost Reports
------------------------------------------------------------------------
1992-based skilled 1997-based skilled
Cost categories nursing facility nursing facility
weights weights
------------------------------------------------------------------------
Wages and Salaries............ 47.805% 46.889%
Employee Benefits............. 10.023 9.631
Contract Labor................ 12.852 6.478
Pharmaceuticals............... 2.531 3.006
Capital-related Costs......... 9.778 9.877
All Other Costs............... 17.012 24.119
Total Costs................... 100.000 100.000
------------------------------------------------------------------------
We fully discuss the methodology for developing these weights in
Appendix A. The main methodological difference between the 1992-based
SNF market basket and the 1997-based market basket is in the
calculation of the contract labor weight. For the 1992-based market
basket, we estimated this share using non-salary costs for therapy cost
centers. For the 1997-based index, we used the contract labor amounts
for a subset of edited reports from Worksheet S-3 in the Medicare Cost
Reports. We believe this new methodology provides a more accurate
reflection of the share of total costs that are attributable to
contract labor. The data from this worksheet were not available in the
1992 Medicare Cost Reports.
Relative weights within the six major categories were derived using
relative cost shares from the Bureau of the Census' 1997 Business
Expenditures Survey (BES), 1997 Medicare Cost Reports, and the Bureau
of Economic Analysis' (BEA) 1997 Annual Input-Output tables. They were
used to disaggregate and allocate costs within the six major categories
determined from the 1997 SNF Medicare Cost Reports. The BEA Input-
Output database is benchmarked at 5-year intervals and updated annually
between benchmarks. We are using the annual update for 1997. The BES is
updated every five years.
[[Page 39583]]
The capital-related portion of the rebased and revised SNF PPS
market basket employs the same overall methodology used to develop the
capital-related portion of the 1992-based SNF market basket, described
in the May 12, 1998 Federal Register (63 FR 26289). It is also the same
methodology used for the inpatient hospital PPS capital input price
index described in the Federal Register May 31, 1996 (61 FR 27466) and
August 30, 1996 (61 FR 46196). The strength of this methodology is that
it reflects the vintage nature of capital, which represents the
acquisition and use of capital over time.
Our work resulted in 21 separate categories for the rebased and
revised SNF market basket. The 1992-based total cost SNF market basket
also had 21 separate cost categories. Detailed descriptions of each
cost category and respective price proxy in the 1997-based SNF market
basket are provided in Appendix A to this final rule.
Comment: Several commenters felt that the methodology and data
sources used by CMS in the development of the market basket raise
questions about the transparency and consistency of the index. The
commenters were particularly concerned with the use of a fixed-weight
(Laspeyres type) index that was only updated periodically and thus did
not capture the changing dynamics of the SNF industry.
Response: The methodology and data sources used by CMS for the SNF
market basket are consistent with those used in the development of the
hospital, home health, and physician market baskets, and prior versions
of the SNF market basket. These market baskets have been used over the
past two decades to update payments to providers of Medicare services,
and the theory and methodology behind these market baskets have been
continually revised and refined. We feel the current SNF market basket
is based on a sound methodology that is completely consistent with
price index theory as used in the development of other official
government price indexes, such as those developed by the Bureau of
Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA). While
the data sources available to develop the SNF market basket are
limited, we feel our methodology ensures that these data sources are
appropriately used and consistently combined, with great care taken to
account for definitional and methodological differences in the data.
As we stated in the proposed rule, our primary data source for
developing the SNF market basket is the actual data submitted by SNFs
in the Medicare cost reports. Using these data to develop the major
cost category weights, we have used actual SNF data that reflect the
actual cost experience faced by SNFs in providing care. We use as much
detail as is available and accurately reported in the cost reports, and
then supplement this information with data reported by nursing homes,
of which SNFs represent a significant proportion, as part of official
government statistics published by the Bureau of the Census and Bureau
of Economic Analysis. These official government statistics are publicly
available and also reflect the actual cost experience faced by SNFs and
nursing homes. We use the distribution of costs reported in these
official statistics, not actual cost levels, to further refine the
distribution of the major cost categories measured by the Medicare cost
reports. Thus our methodology makes the maximum use of Medicare cost
report data submitted by SNFs and uses official government statistics
based on data provided by nursing homes and SNFs to develop an index
that fully reflects a mutually exclusive and exhaustive set of input
costs facing SNFs. In the proposed rule, we specifically identified the
data source (even providing the specific worksheets for the Medicare
cost report data) from which each index weight was determined.
The SNF market basket is a fixed-weight (Laspeyres type) index that
measures how much more or less it would cost, at a later time, to
purchase the same mix of goods and services (inputs) that was purchased
in the base period. Thus it reflects the pure price change between the
current and base period of a fixed set of inputs. Over time, SNFs may
alter their mix of inputs, generally from higher cost inputs to lower
cost inputs, although this change may reflect a number of different
factors. In order to reflect the change in mix over time, we
periodically rebase the SNF market basket to a more recent base year.
The rebased SNF market basket reflects the mix of inputs for 1997.
However, like any fixed-weight index, the SNF market basket does
reflect the current prices facing the SNF. So, while the base weights
may be from a prior year, the price changes reflected in the index are
reflective of the current trends in the SNF industry.
We do not share the commenters' concerns that using a fixed-weight
(Laspeyres type) index biases the index or makes it less representative
of the changing dynamics of the SNF industry. Unlike the official BLS
and BEA price indexes, which generally measure consumption patterns of
consumers and producers that can change drastically over a short period
of time and for which many interchangeable products exist, the cost
distribution of inputs for the SNF in providing services does not vary
much over time. As such, the substitution bias that can exist with a
fixed-weight price index is not evidenced in our SNF market basket.
Thus, while the commenters feel that using a chain-weight or another
type of alternative index formulation would make the SNF market basket
more reflective of the changing dynamics in the SNF industry, in
actuality these alternative index formulas would have no noticeable
effect on the annual percent change in the market basket. As shown in
Table 10.A., the weights of the major cost categories did not change
significantly between 1992 and 1997, other than a methodological change
we made in calculating the contract labor weight. The impact of
rebasing the index is presented in Table 10.D., and shows that between
FYs 1995 and 2000 the impact was always less than 0.1 percentage
points, and on average, the 1992-based and 1997-based indexes grew at
exactly the same rate during that time. In addition, when we looked at
1998 Medicare cost report data (the most recent year of complete data)
we found very little difference in the major cost weights.
We have explored in the past the idea of using alternative index
formulations, such as a Paasche, Fisher, Tornqvist, and chained-
versions of these indexes, that do not rely on a fixed-weight
(Laspeyres type) index formula. In doing this research we found very
little variation in the change in the index over time, mostly the
result of weights that were relatively stable, as explained above. In
addition, developing these alternative index formulations was affected
by significant lags in data availability; the Medicare cost report data
are at least three years old due to processing time, and the Census and
BEA data are available only every five years. Given these outcomes, we
did not feel it would be beneficial to switch from the current fixed-
weight methodology. We again note that the current methodology is both
accurate and conceptually sound in measuring the change in input prices
for SNFs, hospitals, HHAs, and physicians.
As in the 1992-based SNF market basket, the 1997-based SNF market
basket does not include a separate cost category for professional
liability insurance. Our analysis of the BEA 1997 Annual Input-Output
survey indicated that the general category for insurance carriers
(which includes professional liability insurance as a subset) was, at
[[Page 39584]]
just 0.2 percent, a small share of the total costs in 1997. It has been
our policy in the past not to provide detailed breakouts of cost
categories unless they represent a significant portion of the
providers' costs. We also reviewed data available on professional
liability insurance from Worksheet S-2 of the SNF Medicare Cost
Reports, but found that nearly all SNFs did not report data for
malpractice premiums, paid losses, or self-insurance in 1997.
Comment: Several commenters recommended that CMS quickly develop an
appropriate weight and price measure to capture professional liability
insurance costs.
Response: As we stated in the proposed rule, we have been
investigating sources of professional liability insurance costs for
SNFs but have been unable to find an existing data source with this
information. We are encouraged that the commenters are also interested
in CMS acquiring this information, and would appreciate their input on
any currently available data or possible approaches to obtaining the
data. One possible data source for this information would be the
Medicare cost reports. We note, however, that the Medicare cost reports
for 1997 did not contain complete information for these costs. We
encourage all providers to fully fill out the categories for
malpractice premiums, paid losses, or self insurance on the Medicare
cost reports. This would likely be the quickest and most efficient way
to collect the data. In addition, we will continue to research possible
data sources and may pursue data collection efforts if we cannot find
the necessary data from publicly available, timely, unbiased sources.
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 change 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)
measure the rate of change in employment 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 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 both occupational
group and by industry.
Producer Price Indexes. Producer Price Indexes (PPIs)
measure price changes for goods sold in other than retail markets. PPIs
were used when the purchases of goods or services were made at the
wholesale level.
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 PPI was available.
The contract labor weight of 6.478 was reallocated to (1) wages and
salaries, and (2) employee benefits, so that the same price proxies
that we use for direct labor costs are applied to contract costs.
The rebased and revised cost categories, weights, and price proxies
for the 1997-based SNF market basket are listed in Table 10.B.
Table 10.B.--1997-Based SNF Market Basket Cost Categories, Weights, and
Price Proxies
------------------------------------------------------------------------
1997-based
skilled nursing
Cost category facility market Price proxy
basket weight
------------------------------------------------------------------------
Operating Expenses............ 90.123
Compensation................ 62.998
Wages and Salaries........ 52.263 ECI for Wages and
Salaries for Private
Nursing Homes.
Employee benefits......... 10.734 ECI for Benefits for
Private Nursing
Homes.
Nonmedical professional 2.634 ECI for Compensation
fees. for Private
Professional,
Technical and
Specialty workers.
Utilities................... 2.368
Electricity............... 1.420 PPI for Commercial
Electric Power.
Fuels, nonhighway......... 0.426 PPI for Commercial
Natural Gas.
Water and sewerage........ 0.522 CPI-U for Water and
Sewerage.
All Other Expenses............ 22.123
Other Products.............. 13.522
Pharmaceuticals............. 3.006 PPI for Prescription
Drugs.
Food........................ 4.136
Food, wholesale purchase.. 3.198 PPI for Processed
Foods.
Food, retail purchase..... 0.937 CPI-U for Food Away
From Home.
Chemicals................... 0.891 PPI for Industrial
Chemicals.
Rubber and plastics......... 1.611 PPI for Rubber and
Plastic Products.
Paper products.............. 1.289 PPI for Converted
Paper and
Paperboard.
Miscellaneous products...... 2.589 PPI for Finished
Goods less Food and
Energy.
Other Services.............. 8.602
Telephone Services........ 0.448 CPI-U for Telephone
Services.
Labor-intensive Services.. 4.094 ECI for Compensation
for Private Service
Occupations
Non labor-intensive 4.059 CPI-U for All Items
services.
Capital-related Expenses...... 9.877
Total Depreciation.......... 5.266
Building & Fixed Equipment 3.609 Boeckh Institutional
Construction Index
(vintage-weighted
over 23 years).
Movable Equipment......... 1.657 PPI for Machinery &
Equipment (vintage-
weighted over 10
years).
Total Interest.............. 3.852
[[Page 39585]]
Government & Nonprofit 1.890 Average Yield
SNFs. Municipal Bonds
(Bond Buyer Index-20
bonds) (vintage-
weighted over 22
years).
For-Profit SNFs........... 1.962 Average Yield Moody's
AAA Bonds (vintage-
weighted over 22
years).
Other Capital-related 0.760 CPI-U for Residential
Expenses. Rent.
-------------------
Total..................... * 100.000
------------------------------------------------------------------------
* Total may not equal 100 due to rounding
In the 1997-based SNF market basket, the labor-related share for FY
1997 is 73.588 percent, while the non-labor-related share is 26.412
percent. The labor-related share reflects the proportion of the average
SNF's costs that vary with local area wages. This share includes wages
and salaries, employee benefits, professional fees, labor-intensive
services, and a 39.1 percent share of capital-related expenses, as
shown in Table 10.C. By comparison, the labor-related share of the
1992-based SNF market basket was 75.888 percent. The labor-related
share of the market basket is the sum of the weights for those cost
categories that are influenced by the local labor market. The labor-
related share is calculated from the base year, which for the revised
and rebased SNF market basket is FY 1997.
The labor-related share for capital-related expenses was estimated
using a statistical analysis of individual SNF Medicare Cost Reports
for 1997, similar to the analysis done on the 1992 SNF Medicare Cost
Reports and explained in the May 12, 1998 Federal Register (63 FR
26289). 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 portion of the market
basket. We used regression analysis with total 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 these factors, we used number of beds, case-mix indexes,
occupancy rate, ownership, age of assets, length of stay, FTEs per bed,
and wage index values based on the hospital wage index (wages and
employee benefits) as independent variables. Our regression analysis
indicated that the coefficient on the area wage index was 73.588, which
represents the proportion of total costs that vary with local labor
markets, holding constant other factors. From the operating portion of
the market basket, we can specifically identify cost categories that
reflect local labor markets and include them in the labor-related
share. These cost categories equal 69.727, and reflect approximately 77
percent of operating costs. Thus, the labor-related share for capital-
related costs is 3.861 (73.588 minus 69.727), and reflects
approximately 39 percent of capital-related costs.
Capital-related expenses are determined in some proportion by local
area labor 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.
Thus, it is appropriate that capital-related expenses would vary less
with local wages than would operating expenses for SNFs. Therefore, we
use this analysis in determining the labor-related share for SNF PPS.
All price proxies for the revised and rebased SNF market basket are
listed in Table 10.B and summarized in Appendix A to this final rule. A
comparison of the yearly historical percent changes from FY 1995
through FY 2000 for the current 1992-based market basket and the 1997-
based market basket is shown in Table 10.D.
Table 10.C.--1992- and 1997-Based Labor-Related Share
------------------------------------------------------------------------
1992- 1997-
based based
skilled skilled
nursing nursing
Cost category facility facility
market market
basket basket
weight weight
------------------------------------------------------------------------
Wages and Salaries................................ 54.262 52.263
Employee Benefits................................. 12.797 10.734
Nonmedical Professional Fees...................... 1.916 2.634
Labor-intensive Services.......................... 3.686 4.094
Capital-related................................... 3.227 3.861
---------------------
Total......................................... 75.888 73.588
------------------------------------------------------------------------
Table 10.D.--Comparison of the 1992-Based Skilled Nursing Facility
Market Basket and the 1997-Based Skilled Nursing Facility Market Basket,
Percent Changes, 1995-2000
------------------------------------------------------------------------
1992- 1997-
based based
skilled skilled
Fiscal years beginning October 1 nursing nursing
facility facility
market market
basket basket
------------------------------------------------------------------------
Historical:
October 1994, FY 1995........................... 2.9 3.0
October 1995, FY 1996........................... 2.7 2.7
October 1996, FY 1997........................... 2.4 2.4
October 1997, FY 1998........................... 2.8 2.8
October 1998, FY 1999........................... 3.1 3.0
October 1999, FY 2000........................... 4.1 4.0
---------------------
Historical average 1995-2000.................. 3.0 3.0
------------------------------------------------------------------------
Released by CMS, OACT, National Health Statistics Group.
The historical average rate of growth for 1995 through 2000 for the
SNF 1997-based market basket is similar to that of the 1992-based
market basket. The 1997-based SNF market basket provides a more current
measure of the annual
[[Page 39586]]
price increases for total care than the 1992-based SNF market basket
because the cost weights reflect the structure of costs for the most
recent year for which there are relatively complete data. The
forecasted rates of growth for FY 2002 for the 1997-based and 1992-
based SNF market basket are shown in Table 10.E.
Table 10.E.--Comparison of Forecasted Change for the 1992-Based Skilled
Nursing Facility Market Basket, and the 1997-Based Skilled Nursing
Facility Market Basket Percent Change for FY 2002
------------------------------------------------------------------------
1992-based skilled 1997-based skilled
Fiscal year beginning October 1 nursing facility nursing facility
market basket market basket
------------------------------------------------------------------------
October 2001, FY 2002........... 3.5 3.3
------------------------------------------------------------------------
Source: Global Insights, Inc., DRI-WEFA, 2nd QTR, 2001; @USMACRO/
MODTREND @CISSIM/TRENDLONG0501. Released by CMS, OACT, National Health
Statistics Group.
Comment: One commenter indicated that there should be a mechanism
to account for forecast error since forecasts of the market basket are
used to determine the following year payment update.
Response: Research is currently under way in developing an update
framework for the SNF PPS. A conceptual discussion of this framework
was presented in the proposed rule. The SNF PPS framework discussed in
the proposed rule is similar to the one currently used by us and MedPAC
to recommend annual updates to inpatient hospital payments. This
framework would account for all non-price factors needed in an update,
such as a forecast error correction. Although this would not impact the
legislated payment update, the framework would give us the ability to
factor in a forecast error adjustment in our recommendation for an
update to SNF payments. In addition, our policy has been to use the
most recent forecast of the market basket available to update the
payment rates. These updated forecasts reflect expectations based on
the most up-to-date price data. We note, however, that by definition,
the forecasts may differ from later projections or the final number
recorded for a given year.
Comment: One comment noted that the base year used to establish the
PPS rates was nonrepresentative and, thus, did not reflect the full
cost of care. This comment also requested us to explain an apparent
discrepancy between the rise in SNF costs between 1995 and 1998 and the
market basket increase used to establish the initial rates under the
PPS. The commenter noted a disparity of 19.2 percent over this period.
Response: While we agree that certain costs were removed from the
1995 base year data used to establish the initial SNF PPS rates in
1998, the BBA specifically required that these costs not be included in
the calculation of the rates. In addition, the removal of these costs
from the 1995 base year data does not indicate that the rates are in
any way inadequate. In direct contrast to the commenters' statement,
the Office of Inspector General (OIG) issued a report shortly after the
implementation of SNF PPS entitled ``Review of the Health Care
Financing Administration's Development of a Prospective Payment System
for Skilled Nursing Facilities'' (Number A-14-98-00350), which asserted
that the cost base used to establish the PPS rates was inflated with
unnecessary and improperly billed services. In addition, the General
Accounting Office (GAO) and MedPAC have both recently stated in reports
and testimony before the Congress that the payment rates are adequate.
In addition, while we were unable to confirm the percentage
difference referred to in the comment, we would note that the market
basket and measures of reported costs represent two entirely different
concepts. Accordingly, we do not believe there is a discrepancy, as the
concepts cannot be compared to each other.
The market baskets used by Medicare for SNF PPS and other payment
systems are, by design, intended to recognize changes from year to year
in the price of goods and services purchased by SNFs in providing
covered Medicare services. Reported costs, on the other hand, reflect
amounts billed by providers and paid for by Medicare. As such, they
reflect an array of factors not reflected in the market basket. For
example, measures of reported costs would reflect changes in the
intensity of services billed for, and the amounts charged to, Medicare.
In this case, an examination of the period between 1995 and 1998 shows
substantial increases in the price and number of ancillary services
billed to Medicare. This certainly appears to be a primary cause of the
large increases in reported costs. However, it is unclear from the
comment why the payment rates (or the market basket) should be expected
to capture such non-price related changes. MedPAC has noted in
testimony before the Congress and in recent reports that these cost
increases between 1995 and 1998 were not related to changes in the
overall case-mix or acuity of the patients served in SNFs or changes in
input prices. As an illustrative example, the GAO and OIG have
published numerous reports related to this period detailing instances
of unnecessary services improperly billed by SNFs. In this context, it
would not seem appropriate to capture changes in reported costs
associated with improper or unnecessary service delivery in
establishing the initial PPS rates.
We believe the SNF market basket, as a measure of input prices, was
established consistent with the statute and the methods used to develop
such indexes under SNF cost limits and other Medicare payment systems
in 1998 and at the present time. Congress mandated that, in
establishing the rates, the base year costs from 1995 be updated to
1998 by the market basket. Differences between that update and the
increases in reported costs over that period relate to the fundamental
differences between the two measurement concepts and are to be
expected.
Comment: We received several comments recommending that we
undertake a thorough review of the SNF market basket. These comments
suggested that we examine the full range of market basket components,
including the weights and price proxies used in the current SNF market
(with particular attention to wages, benefits, professional liability,
and pharmaceuticals), and the appropriateness of using a Laspeyres
fixed weight input price index for updating PPS payments. The comments
also suggested that we initiate a collaborative process with the
nursing home industry and other entities aimed at redesigning the SNF
market basket. Several comments suggested that we initiate formal
regulations negotiations on the issue of the SNF market basket.
Response: We are committed to ensuring the continued adequacy of
our payments to SNFs under the Medicare
[[Page 39587]]
program. Our ongoing efforts to refine the case-mix methodology and
revise and rebase the market basket offer evidence of our efforts to
keep the SNF PPS current in a continually evolving health care
environment.
As in the past, we are interested in maintaining a dialogue with
the industry, beneficiaries, and other interested parties on this
important issue. We will continue to be receptive to new ideas on this
and other issues. In the proposed rule, we specifically requested
comments on the market basket for the purpose of eliciting ideas and
recommendations on refining the market basket components and
methodology used for the SNF PPS. While we received few concrete
recommendations or suggestions on this subject, a number of important
issues and questions were raised which we have and will continue to
examine closely. While formal regulations negotiations may offer a good
opportunity for us to collaborate with the industry and other
interested parties on important regulatory policy initiatives, we
believe that without an understanding of the scope and direction of any
potential regulatory effort in this area, it is premature for us to
comment on whether this issue would be a good candidate for future
formal negotiations. We will consider the potential for this in the
future and we appreciate the continued interest and thinking of
commenters in this area.
I. Update Framework
Medicare payments to SNFs are based on a predetermined national
payment amount per day. Annual updates to these payments are required
by section 1888(e) of the Act. These updates are usually based on the
increase in the SNF market basket. For FY 2002, the update is set at
market basket minus 0.5 percent. Our goal is to develop a method for
analyzing and comparing expected trends in the underlying cost per day
to use in establishing these updates. For a complete discussion of the
conceptual framework, see the May 10, 2001 proposed rule (66 FR 23984).
The SNF market basket, or input price index, developed by our
Office of the Actuary (OACT), is just one component in the SNF cost per
day amount. It captures only the pure price change of inputs (labor,
materials, and capital) used by the SNF to produce a constant quantity
and quality of care. Other factors also contribute to the change in
costs per day, which include changes in case-mix, intensity, and
productivity.
In the proposed rule, we outlined a conceptual approach for a SNF-
specific update framework, and invited comments on the utility and
feasibility of that approach for SNFs, as well as whether certain
factors should be accounted for in the framework. We also invited
suggestions for potential data sources and analysis to support the
model.
Comment: We received numerous comments on the update framework
discussed in the proposed rule. These commenters focused on a range of
issues related to the framework, including its purpose, structural
design, and the data required to operate such a tool effectively. Some
commenters recommended that the annual update to payment rates continue
to be based solely on the market basket due to concerns that the
framework may be too subjective and unpredictable and the data sources
potentially unreliable. Others offered technical suggestions related to
the data sources and methodology used to develop the different
components of the update framework.
Response: As discussed in the proposed rule, an update framework,
used in combination with the market basket, seeks to enhance the system
for updating payments by addressing factors beyond changes in pure
input price. These factors are not reflected in the market basket used
for establishing SNF payments, but often have an effect on changes in
cost per day. Other factors that result in changes in the cost of SNF
services from year to year include such things as patient acuity,
intensity of services, and productivity.
Like the update framework used for Medicare's inpatient hospital
PPS, an update framework in the context of the SNF PPS would provide a
comprehensive and objective tool for measuring and understanding
changes in cost per day. These factors are not reflected in the market
basket but often have an effect on cost per day from year to year. It
can provide information that policy officials in the executive branch
and the Congress can use in making decisions about the magnitude of
updates each year. This will support the continued accuracy of SNF
payments and ensure that the SNF PPS keeps pace with changing economic
and health care market trends. We believe the potential value of the
framework justifies continued research and development in this area.
We appreciate the comments and technical suggestions offered by
commenters concerning potential data sources and methodological
approaches for the development of an update framework. While we are not
addressing each technical comment individually in this final rule, we
wish to assure the commenters that we will take them into consideration
as we continue to pursue development efforts in this area. As stated in
the proposed rule, we are not proposing to apply an update framework in
a recommendation to the Congress at this time. After considerable
research and analysis, our intention is to include a specific proposal
for an update framework in a future Federal Register notice for public
comment. This proposal would clearly detail the methodology, data
sources, and potential impact of applying an analytical update
framework under the SNF PPS.
J. Consolidated Billing
As enacted in section 4432(b) of the BBA, the consolidated billing
requirement places with the SNF itself the Medicare billing
responsibility for virtually all of the services that a SNF resident
receives. In defining the scope of this provision, the original
legislation made no distinction between services furnished during the
course of a covered Part A SNF stay and those furnished during a SNF
stay that Medicare does not cover. However, as we noted in the proposed
rule, we did not initially implement the Part B aspect of this
provision (in connection with those services furnished during a
noncovered SNF stay), because doing so would require making significant
systems modifications, which were delayed by systems constraints that
arose in connection with achieving Y2K compliance. Accordingly, in the
July 30, 1999 final rule (64 FR 41671), we announced an indefinite
postponement in the implementation of Part B consolidated billing,
along with our intention to publish a notice of the anticipated
implementation date for this aspect of consolidated billing in the
Federal Register at least 90 days in advance.
Subsequently, effective January 1, 2001, section 313 of the BIPA
repealed the Part B aspect of SNF consolidated billing, except for
physical, occupational, and speech-language therapy, which remain
subject to consolidated billing whenever furnished to a SNF resident,
regardless of whether Medicare covers that resident's stay in the SNF.
In the proposed rule, we set forth several conforming revisions in the
regulations to implement these statutory changes in the consolidated
billing requirement.
We note that section 313 of the BIPA does not delay the
implementation of Part B consolidated billing, but repeals it (except
for physical, occupational, and speech-language therapy) completely.
Therefore, we hereby
[[Page 39588]]
withdraw our previously announced plan to provide 90 days advance
notice in the Federal Register of an implementation date for Part B
consolidated billing with regard to nontherapy services, since this
aspect of the provision has now been eliminated and, thus, does not
need to be implemented. Further, with regard to physical, occupational,
and speech-language therapy furnished during noncovered SNF stays, the
Part B billing and tracking responsibilities for SNFs have already been
effectively implemented, as SNFs already have specific responsibility
for these services, pursuant to the separate Part B therapy payment cap
provision enacted by section 4541 of the BBA (see our discussion in the
proposed rule, at 66 FR 24020). Accordingly, there is no need to
announce a separate implementation date specifically for these three
services.
Notwithstanding the repeal of Part B consolidated billing by
section 313 of the BIPA, the consolidated billing requirements for
services furnished to a SNF resident during the course of a covered
Part A stay remain in effect. Further, as we noted in the proposed
rule, to the extent that SNFs continue to submit Part B bills, the
repeal of Part B consolidated billing would not affect the applicable
requirements for fee schedule payment and appropriate HCPCS coding,
which remain in the law (at sections 1888(e)(9) and (10) of the Act,
respectively).
Comment: Although the BIPA legislation affected only those aspects
of consolidated billing relating to the Part B repeal, a number of
commenters took this opportunity to reiterate concerns about other
aspects of consolidated billing that originally had been expressed
during the public comment periods in prior years. For example, we
received a number of comments concerning the possible exclusion of
additional services from SNF consolidated billing. While the BIPA made
no revisions to the statutory list of services that are excluded from
consolidated billing, the preceding year's legislation (the BBRA) had
created several new categories of excluded services. These exclusions
encompassed certain individual services (identified in the statute by
HCPCS code) within the categories of chemotherapy and its
administration, radioisotope services, and customized prosthetic
devices, as well as ambulance services that are furnished in connection
with Part B dialysis services. During the public comment period for
last year's SNF PPS rule (which implemented these statutory
exclusions), a number of commenters recommended designating a broader
set of services for exclusion. The commenters identified services such
as modified barium swallows, stress tests, hyperbaric oxygen
treatments, doppler studies, and nuclear medicine scans as appropriate
candidates for exclusion. They also advocated expanding the existing
exclusion for certain high-intensity outpatient hospital services to
encompass services furnished in other, nonhospital, settings. Many of
the comments on this year's SNF PPS proposed rule reiterated these
previous recommendations. In addition, a number of commenters now
recommended a further set of services for temporary exclusion from the
requirement, with possible reinstatement upon implementation of case-
mix refinements that might, in their view, better account for these
services. These additional services are blood transfusions, total
parenteral nutrition, liquid oxygen, specialty beds for patients with
severe skin breakdown, and certain I.V. medications. Some commenters
also suggested that our evaluation of any case-mix refinements should
include consideration of the ability to account accurately for these
types of services. One commenter reiterated concerns that many
commenters had expressed in previous years about ensuring that a SNF
makes timely payment to its suppliers, while another commenter
requested that the final rule contain detailed billing instructions
concerning the requirement to include the SNF's Medicare provider
number on all Part B claims.
Response: When we declined last year to adopt the recommendations
to exclude additional services from consolidated billing, we noted that
we do not view making additions to the list of excluded services as a
part of a process of continual expansion to encompass an ever-
broadening array of excluded services. Further, we indicated that an
ongoing expansion of the existing exclusions (in the absence of
significant changes in the current state of medical practice) would be
contrary to the fundamental purpose of the consolidated billing
provision, which is to make the SNF responsible for billing Medicare
for essentially all of its residents' services, other than those
identified in a small number of narrow and specifically delimited
statutory exclusions. We do not find in the current public comments any
additional evidence, beyond what was advanced previously, to support
the recommendations for further exclusions. Therefore, for the reasons
set forth in the final rule for FY 2001, we once again decline to adopt
these recommendations. Further, we do not share the view of those
commenters who suggested that the creation of additional exclusions
from consolidated billing could serve, in effect, as an interim
substitute for implementing case-mix refinements. We believe that
payment adjustments relating to case-mix would best be accomplished
directly through refinements in the case-mix classification system.
Further, we note that the Congress has already provided an interim
adjustment until the refinements can be implemented, in the form of the
temporary rate increases for certain specified RUG-III groups. As
indicated in our discussion of research on case-mix refinements in
section III.A of this preamble, we agree with the recommendation to
evaluate the ability of any case-mix refinements to support accurate
pricing of services, and we plan to do so as the research in this area
proceeds.
In connection with the commenter's concern about ensuring that a
SNF pays its suppliers in a timely manner, we noted in the July 30,
1999 final rule (64 FR 41677) that under consolidated billing, a SNF's
relationship with its suppliers is a contractual one, in which the
terms of the suppliers' payment by the SNF are agreed upon through
negotiation between the parties. Accordingly, a supplier can best
resolve any concerns that it may have about the adequacy or timeliness
of the SNF's payment by ensuring that these concerns are addressed to
its satisfaction in its contract with the SNF. Finally, regarding the
comment about specific billing procedures for including the SNF's
Medicare provider number on Part B claims, we noted in last year's SNF
PPS final rule (65 FR 46791, July 31, 2000) that specific operational
instructions (such as those describing the details of particular
billing procedures) are beyond the scope of the SNF PPS final rule, and
are addressed instead through program issuances.
K. Application of the SNF PPS to SNF Services Furnished by Swing-Bed
Hospitals
In the proposed rule, we outlined our plans for converting rural
swing-bed hospitals to the SNF PPS. We proposed to make the conversion
effective with cost reporting periods beginning on and after October 1,
2001, a timeframe consistent with the implementation time limits
prescribed in the law. We received a number of comments on this swing
bed proposal, nearly all of which expressed concern about the impact
that introducing the MDS would have on
[[Page 39589]]
facility costs, staffing levels, and patient care. We have carefully
considered these comments, and agree that, since our mutual objective
is the efficient provision of high quality care, our requirements
should be framed in a way that both protects the integrity of the
Medicare program and supports provider efforts in this direction. As a
result, we have revised our initial proposal in several ways that
minimize burden and support swing-bed hospitals in providing quality
care while still maintaining the accuracy of our payments.
Comment: Several commenters expressed concern about the long-term
adequacy of the SNF PPS rate structure, and urged us to continue our
work to develop SNF PPS refinements. Comments received from swing-bed
providers generally described their beneficiary populations as
medically complex patients who are often difficult to place following
discharge from an acute care hospital stay. They stressed the
importance of accurate payment for non-therapy ancillaries in
maintaining access for this segment of the Medicare population and for
maintaining the financial viability of the swing-bed hospitals.
Response: During the past year, OIG, GAO and MedPAC have reviewed
the adequacy of the SNF PPS rates. They have each determined that the
current rate structure, including the increases mandated under the BBRA
and BIPA, is adequate to maintain access and provide aggregate payments
at a level sufficient to provide quality care to Medicare
beneficiaries. As stated in our May 10, 2001 proposed rule (66 FR
23984), the need to reflect differences in ancillary usage accurately
and the resulting impact on facility costs is a major focus of our
research to refine the SNF PPS. Since this research will include
analyses of patients currently classified in the Extensive Care and
Rehabilitation groups (the two most common types of swing-bed
patients), we believe that the needs of swing-bed providers will be
addressed. A more detailed discussion of our research plans is provided
in section III.A.
Comment: A number of commenters focused on issues related to
reimbursement of non-therapy ancillaries, and concluded that a
transition to the SNF PPS (which would eliminate cost reimbursement for
swing bed ancillary services) would not fully cover the costs of at
least some of the beneficiaries currently served. These commenters were
concerned about their continued ability to care for medically complex
beneficiaries by providing them with the costly services they need, or
even to stay in operation. Other commenters pointed out that the
anticipated 9 percent increase in overall swing-bed reimbursement,
combined with the elimination of restrictions on swing-bed utilization,
are likely to increase swing-bed participation rather than reduce the
number of swing-bed programs.
Response: In a prospective payment system, costs may exceed
payments for an individual patient or group of patients. It is equally
possible for payments to exceed costs. However, as stated above, OIG,
GAO and MedPAC have concluded that aggregate payments under the SNF PPS
are sufficient to maintain access for beneficiaries and to provide
needed patient care. In fact, in section V, we have projected an
aggregate increase in swing-bed reimbursement using calendar year 1999
actual claims data that includes all therapy and non-therapy ancillary
services provided to Medicare beneficiaries. Moreover, the claims data
included all ancillary services, including some high-cost services that
have been excluded from the SNF PPS under the consolidated billing
regulations. As discussed below, swing-bed hospitals will be separately
reimbursed for these excluded services, which encompass such high-cost
items as MRIs, CAT scans, and intensive chemotherapy. While utilization
patterns may change over time, we are not anticipating any sudden,
immediate changes in either the type of beneficiaries served or the
type of services needed. Therefore, we believe that the providers can
continue to provide high quality services to all types of Medicare
beneficiaries, even those with complex medical needs who may require a
high level of ancillary services, under the current SNF PPS rate
structure.
Comment: A small number of commenters suggested that rural swing-
bed hospitals with less than 50 beds or those providers designated as
sole community hospitals (SCHs) should be exempted from the SNF PPS and
reimbursed on a cost basis like swing-beds in critical access hospitals
(CAHs). A few commenters recommended that these types of rural
hospitals be given a choice between the SNF PPS and the current payment
methodology.
Response: Section 203 of the BIPA specifically exempted swing-bed
services furnished in CAHs from the SNF PPS. The requirements for
swing-beds in rural hospitals were not changed. The statute requires
payment to all swing-beds in rural hospitals, including those
designated as sole community hospitals, under the SNF PPS after June
30, 2002, the end of the SNF PPS transition period. The statute does
not provide any authority for payment to swing-bed hospitals under any
other payment system.
Comment: A large number of comments proposed the possibility of an
alternative payment mechanism that would assign payment rates solely on
the basis of UB-92 information. (The Uniform Bill (UB)-92 also known as
the HCFA-1450) form and instructions are used by institutional and
other selected providers to complete a Medicare, Part A paper claim for
submission to Medicare FIs.) They asked us to consider offering this
model to swing-bed hospitals as a voluntary alternative to the SNF PPS.
Response: The statute requires that resident assessment data be
used as necessary to develop and implement the SNF PPS rates.
Currently, the claims form data do not contain the information
necessary to develop the SNF PPS rates. Moreover, as noted previously,
the statute is very clear that payment to swing-bed hospitals must be
made under the SNF PPS and does not provide for an alternative method
of payment after the SNF PPS transition period. However, we acknowledge
the considerable amount of time and effort that went into developing
the proposal, and the degree of interest generated. Accordingly, we
will discuss the proposal in greater detail later in this section, and
will ask our contractor to include an analysis of a claims-based
classification system in its analysis of program refinements.
Comment: We received a number of comments questioning the use of
the full MDS for a new provider group at a time when we are committed
to restructuring and streamlining the MDS instrument. These commenters
pointed out the inefficiency of training clinical staff on an
instrument that will only remain in use for a limited time. Several of
these commenters suggested that the conversion to the SNF PPS be
postponed until the introduction of the revised MDS.
Response: The statute does not provide any authority to postpone
the conversion of swing bed hospitals to the SNF PPS beyond the last
day of the SNF PPS transition period; i.e., July 1, 2002. While we are
working on a reexamination of our post-acute care data needs consistent
with the provisions of section 545 of the BIPA, any new assessment
tools will not be available in time for the swing-bed conversion to SNF
PPS.
Comment: We also received a few comments supporting our original
MDS proposal. These commenters believe
[[Page 39590]]
that swing-bed hospitals providing SNF-level services should be subject
to the same requirements as SNFs. These commenters pointed out that
uniformity is not just a question of fairness, but the only way we
could truly compare SNFs and swing-beds in terms of quality, skilled
care utilization, and costs.
Response: It is necessary to distinguish between the short-term and
long-term effects of our policies. We are certainly committed to
reviewing the purposes of collecting data and specifying comparable and
compatible data elements across Medicare providers, including post-
acute care services and swing-bed hospitals, when such common data
elements will allow us to achieve our objectives. Our reevaluation of
our patient assessment data needs will start by first examining what we
need the data for and whether comparable and compatible data across
Medicare providers are appropriate. However, since this review is not
yet complete, we must also be sensitive to the short-term impact of
imposing a policy that cannot be clearly justified in terms of patient
care and program integrity.
Comment: Comments from swing-bed hospitals consistently focused on
the burden of using the full MDS, and stressed that they already use a
variety of functional screening tools to implement care plans upon
admission, and have mechanisms in place to monitor quality. Commenters
concluded that requiring the care planning and quality monitoring
components of the MDS would be time-consuming and labor intensive
without contributing to improved beneficiary outcomes. However, a few
commenters questioned the prevailing assumption that swing-bed
hospitals were better able to manage care planning and quality
monitoring functions than SNFs, and believed the MDS care planning and
quality monitoring components would have value for swing-bed hospitals.
Response: In considering the applicability of the full MDS 2.0 for
swing-bed hospitals, we considered the usefulness of the MDS instrument
for both payment and patient care purposes. In this analysis, we looked
at similarities and differences between swing-bed and other SNF service
delivery systems. At the time of SNF PPS national implementation, the
MDS had already been in use in SNFs for 7 years and was the standard
for care planning and quality monitoring. By contrast, although swing-
bed hospitals use care planning and quality tools, these are not
standard across providers. Further, these tools will continue to be
required for the acute care patients in the swing-bed hospital. The
introduction of the MDS into the swing-bed setting poses an additional
burden to the clinical staff since they will be required to master the
MDS as well as maintain their mastery of the tools that the hospital
uses for its acute care patients.
As mentioned above, an additional consideration at this time is the
impending revision of the MDS 2.0 by CMS. This work is underway, but
the revised instrument will not be ready for use before 2003, at the
earliest. Intensive training will be required for the swing-bed
clinical staff to be able to use the full MDS 2.0 and an additional
burden may be imposed as it is expected that more training will be
required when the new assessment tool is introduced.
Further, the length of stay for Medicare Part A beneficiaries in
swing-beds is much shorter than for similar beneficiaries in SNFs. This
shorter length of stay minimizes the usefulness of the MDS-based
Quality Indicator system in identifying poor patient outcomes. Finally,
by requiring the full MDS at this time, we would be mandating not one
but two major changes in swing-bed clinical operations, the current MDS
and the next generation of streamlined data assessment tools that are
already in the planning stages.
Therefore, we will not require swing-bed facilities to perform the
care planning and quality monitoring components included in the full
MDS at this time. We will include an analysis of swing-bed requirements
in our comprehensive reevaluation of all post-acute data needs, and in
the design of any future assessment and data collection tools. In
addition, we reserve the right to modify the swing-bed hospital
conditions of participation in response to the identification of
significant quality concerns.
As specified in section 1888(e)(7) of the Act, we have now
determined that an appropriate manner in which to apply the SNF PPS to
swing-beds is to establish a unique MDS for swing-bed hospitals. This
new 2-page MDS for Swing-Bed Hospitals will use a subset of the MDS
information, and will include only those items needed for payment and
ongoing analysis of the SNF PPS. This 2-page MDS for Swing-Bed
Hospitals may be viewed on our web site at http://www.hcfa.gov/medicare/SNFPPS.gov. Appendix B contains a comparison between the full,
six-page MDS and this new, 2-page MDS for Swing-Bed Hospitals.
Comment: Almost every comment on swing-beds that we received raised
the issue of the MDS. Most commenters were extremely concerned that the
proposed MDS requirements were likely to divert nursing resources from
patient care to MDS preparation, increase facility costs by requiring
additional nursing staff (if staff were even available in this period
of nursing shortages) and possibly reduce the quality of care that the
swing-bed hospital is able to provide. Other commenters asserted that
swing-bed hospitals providing SNF-level services should be subject to
the same requirements as SNFs, in order to maintain a level playing
field. They pointed out that there is no data to support a conclusion
that rural hospitals are better able to provide care than SNFs, and
that data are needed to monitor and evaluate swing-bed services. They
also pointed out that SNFs (particularly small rural SNFs) provide the
same types of services, but have to respond to the same issues and
pressures.
Response: The comments described a wide range of potential
outcomes, from minor adjustments in staff assignments to staffing
increases of 0.1 to 2.0 FTEs, restrictions on access, negative patient
outcomes, and swing-bed closures. Generally, providers commenting on
costs estimated that one-third to one-half of the proposed rate
increases would be required to comply with the MDS requirements. Even
though this information is anecdotal (and still assumes an overall
increase in rates), it did raise concerns about the benefits of using
the full MDS. By using the customized 2-page MDS for Swing-Bed
Hospitals, we will focus our data collection efforts on those items
needed for payment and ongoing analyses of the characteristics and
service utilization patterns of swing-bed hospital patients. Most of
these items are typically part of the routine physical assessment
performed by nursing staff and documented in the medical record, and
will require little or no extra work by clinical staff.
Comment: A number of commenters questioned the cost estimates
provided in our proposed rule. They expressed concern that we had
underestimated both the number of staff needing training and the time
it would take to prepare, review, encode, and transmit data. Several
providers also expressed concern about the cost of computer software
needed to support the MDS function. There was also some concern related
to the level of effort needed to implement the changes so quickly.
Response: These comments applied to use of the full MDS form, not
the customized 2-page MDS for Swing-Bed Hospitals that will actually be
used. We have taken these comments into
[[Page 39591]]
consideration in updating the cost estimates for this final rule. See
sections V and VI.B of this preamble for a more detailed discussion.
We note that we have attempted to address concerns and support the
swing-bed hospital conversion effort as much as possible. First, in
response to comments, we have revised the implementation date to cost
report periods starting on and after July 1, 2002, the latest date
permitted by the statute. Second, we have reduced the burden associated
with MDS completion by creating a separate 2-page Swing-bed Hospitals
MDS. This new instrument will use a subset of the MDS information and
will include only those items needed for payment and ongoing analyses
of the characteristics and service utilization patterns of care of
swing-bed hospital patients. Third, we will develop and distribute a
Swing-Bed Manual that will include instructions for MDS coding and
related issues. Fourth, we have committed to the development of
customized swing-bed MDS software that will be available without charge
to each swing-bed provider. Fifth, we have committed to an extensive
provider training and support program. Help Desks will be established
to respond to clinical and technical questions from swing-bed staff. We
are also planning a series of training programs on MDS completion and
electronic transmission procedures. We are confident that these
initiatives will minimize the disruption to swing-bed operations and
provide needed support during the transition period.
Comment: Several commenters indicated that the SNF PPS assessment
frequency (5, 14, 30, 60, and 90 days from the start of the Part A
stay) was unnecessary in the swing-bed hospital setting. They
recommended various alternatives, including eliminating one or more of
the current assessments, or requiring only a single MDS to be completed
at the end of the stay.
Response: Based on the most recent available data, the average
length of stay in a hospital swing-bed is under 9 days. Since the 5-day
MDS is used to determine payment for the first 14 days of the stay,
hospital staff will generally complete only one MDS for each
beneficiary. Furthermore, we note that eliminating some or all of the
remaining SNF PPS assessments (14, 30, 60, and 90 days from the start
of the Part A stay) would affect only a very limited number of swing-
bed providers.
We also note that the type and intensity of care typically changes
during the course of a stay. For beneficiaries with short stays,
reliance on the 5-day assessment is appropriate, since the intensity
level is likely to remain relatively constant over a short time period.
However, for longer-stay patients, the intensity of care generally
changes over the course of the stay. We recently compared the RUG-III
classifications reported on the Medicare 5-day and 14-day assessments,
and we found that the data showed an increased acuity level on the 14
day assessment. Thus, collecting MDS data at different points in the
stay enables our payments to reflect the actual intensity of care more
accurately. Reliance on a single MDS, either the initial 5-day
assessment or an MDS completed at the time of discharge, would not as
accurately reflect beneficiary resource use. In addition, the data on
longer stays will be used to monitor changes in swing-bed utilization
patterns and care practices, and to evaluate the need for adjustments
to the current swing-bed conditions of participation and care planning
requirements.
For these reasons, we have concluded that swing-bed providers must
comply with the SNF PPS assessment schedule. Since the MDS for Swing-
Bed Hospitals will contain only a small subset of the full MDS items,
MDS completion times will be greatly reduced.
Comment: We received a few comments from swing-bed providers
concerned that the SNF PPS requirements would have a disproportionate
impact on their facilities. For example, one facility mentioned the
large number of MDSs that would be required in a facility with short
lengths of stay and rapid patient turnover. Another commenter was
concerned that time would be wasted by complying with the assessment
window for the 14-day assessments (days 11-14) for beneficiaries
expected to be discharged before the start of the next SNF PPS payment
period.
Response: We agree that individual facility characteristics are a
factor in determining the impact of any policy. It is true that a
swing-bed hospital serving a high-volume, short stay population may do
more than the average number of MDS assessments. We believe that the
new 2-page Swing-Bed Hospitals will reduce the burden on clinical
staff. We also suggest that, prior to coming under the SNF PPS system,
staff evaluate their admission, care planning, and documentation
processes, and make changes to integrate the MDS requirements into
their daily routines. This will help avoid the documentation burden
associated with a new assessment tool caused by putting the new
requirements on top of the old and duplicating efforts.
A solid understanding of the assessment schedule will also help
staff to maximize their resources and avoid unnecessary work. For
example, some flexibility has been built into the assessment schedule
through the designation of grace days. In the example described above,
the assessment reference date for the 14-day assessment can be
performed at any time during the assessment window, from day 11 to as
late as day 19. These grace days should be utilized when scheduling
assessments for beneficiaries likely to be discharged by day 14.
Comment: A few commenters questioned why swing-bed hospitals need
to complete the discharge and reentry tracking forms.
Response: Completion of the discharge and reentry tracking forms
will provide us a clear picture of the interaction between acute and
post-acute care that may be unique to patients in hospital swing-beds.
This data needs to be incorporated into our payment design efforts so
that our analyses of the methodologies used accurately reflect swing-
bed as well as SNF utilization patterns. Second, the discharge and
reentry information is needed to monitor the appropriateness of
transfers between acute and post-acute levels of care in swing-bed
hospitals.
Comment: A few commenters opposed the development of a swing-bed-
specific reason for assessment that would allow swing-bed providers to
report changes in patient status that result in a change in RUG-III
group but do not require the completion of a Significant Change in
Status Assessment (SCSA). These commenters recommended that swing-bed
providers subject to the SNF PPS be required to use the same criteria
for reporting status changes as SNFs.
Response: The swing-bed conditions of participation do not
currently require swing-bed hospitals to perform and transmit SCSAs. As
explained below, we have determined that a change in these conditions
of participation at this time is not warranted. We also believe that
the inability to report clinical changes would decrease the accuracy of
SNF PPS payment to swing-bed hospitals. For this reason, we will
establish a swing bed-specific reason for assessment that will allow
swing-bed providers to complete and transmit MDS data reflecting
significant clinical changes in patient status.
Comment: Several commenters recommended the creation of a unique
payment mechanism for swing-beds that would eliminate the use of the
MDS entirely. The commenters suggested that
[[Page 39592]]
a system similar to the MEDPAR analog should be designed to determine
payment groups based on the UB-92 claim form. The MEDPAR analog was a
tool that we used for estimating SNF case-mix in the development of the
initial PPS rates (see 63 FR 26289, May 12, 1998). These commenters
suggested that we allow swing-bed hospitals to choose between the
regular SNF PPS and this alternative payment model.
Response: Before considering the specifics of this proposal, it is
important to state that, while we do have some flexibility in
transitioning into the SNF PPS, the statute does limit the options that
can be considered. The statute, in section 1888(e)(7) of the Act, does
provide us with the authority to determine an appropriate manner in
which to apply the provisions of the SNF PPS (as described throughout
section 1888(e)) to swing-bed hospital units. We have determined that
the framework of SNF PPS and the general requirements of that
subsection are appropriate in transitioning these providers to SNF PPS.
Specifically, the statute requires, in section 1888(e)(6), that a SNF,
or a hospital swing-bed unit must provide the us, in a manner and
within the time frames prescribed by the us, the resident assessment
data necessary to develop and implement the rates. The statute does not
provide authority to develop an entirely new or optional payment system
for this class of providers. Similarly, the statute does not provide
any authority to replace the existing case-mix system (the RUG-III
classification) with the MEDPAR analog, an entirely different modeling
system that we had developed to approximate acuity levels on a per stay
basis.
We realize that the suggestion of developing a voluntary
alternative to the SNF PPS (that would use neither the MDS nor the RUG-
III system) stems from concerns over the time requirements for training
and MDS preparation. We understand that some commenters were willing to
accept a lower degree of rate-setting accuracy by using the approximate
acuity level determined from the UB-92, in exchange for eliminating the
MDS requirement. However, it is unclear whether the majority of those
submitting comments understood that reduced accuracy is likely to
result in reduced payment for their medically complex patients, since
we would have to establish some type of average payment rate for each
of the levels in the payment hierarchy. Beneficiaries who would group
into the highest levels of the Extensive Care or Special Care
categories would also likely receive lower payments under this option.
In addition, the MEDPAR analog was designed as an analytical tool for
estimating case-mix in the aggregate for the purpose of standardizing
the initial payment rates under the PPS (see 63 FR 26259, May 12,
1998). It was not developed for determining claims level payments to
providers, nor do we believe it is appropriate for such an application.
The proposed 9-group charge-based system that these commenters
advocated is also vulnerable in its heavy reliance on charges to
establish classification criteria or break points. Under this proposal,
historical claims data would be used to establish the break points
between the different levels of the hierarchy, a method similar to the
one used for DRG development. However, in the DRG system, billed
charges do not affect the assignment to a specific group. Under the
commenters' proposal, the classification breakpoints would be applied
to current charges. Any facility could change its payment level by
simply modifying its charge structure for specified ancillary services;
such as therapy and medical supplies.
In addition, the burden associated with reporting items needed to
calculate payment rates is not eliminated under this proposal; it is
merely shifted from the clinical staff to medical records and billing
staff. Since this proposal assumes that the necessary payment
information is present in the medical record, it actually increases the
burden on the billing/coding staff without any real reduction in
workload for the clinicians. The creation of the new 2-page Swing-Bed
Hospital MDS will permit easy recording of the data necessary for RUG-
III calculation and billing without requiring major changes to UB-92
preparation requirements.
While we understand the attraction to providers of an option that
completely eliminates the MDS documentation and reporting process, the
statute does not provide for the establishment of this type of option.
Further, we do not believe that this proposal, as presently drafted, is
an appropriate way to provide SNF PPS payment to swing-bed hospitals.
Moreover, as discussed above, contrary to the commenters' perception,
it may not effectively address the burden associated with the MDS, is
susceptible to manipulation and abuse, and most seriously, might not
provide sufficient payment to a critical and vulnerable sector of our
national health care system. For these reasons, we cannot support this
proposal, and will instead implement the SNF PPS for swing-bed
hospitals, as described in this final rule.
Comment: A few commenters expressed concern about the lack of lead
time to prepare for the transition to the SNF PPS. They cited a number
of recent changes, such as Outcome and Assessment Information Set
(OASIS) and hospital outpatient Ambulatory Payment Classifications
(APCs), that have strained hospital resources. They believed that the
short timeframes would be disruptive to rural hospitals and detract
from patient care.
Response: We agree that ensuring a smooth transition should be a
high priority. After considering the concerns raised by the commenters
in this regard, we have determined that providing increased lead time
would be appropriate. Therefore, in this final rule, we are revising
the effective date for swing-bed conversion to the SNF PPS to the start
of the provider's first cost reporting period that begins on or after
July 1, 2002, the latest possible implementation time frame authorized
in the law.
Comment: In the proposed rule, we solicited comments on the
possibility of modifying the swing-bed conditions of participation. A
number of commenters stated that swing-beds are already subject to the
overall hospital certification requirements in addition to the
specialized swing-bed conditions of participation. They do not believe
that a change in the swing-bed conditions of participation is
warranted. Others recommended that all providers that furnish SNF-level
services should be subject to the same requirements, and that we should
revise the swing-bed conditions of participation to reflect the new SNF
PPS requirements.
Response: The Medicare conditions of participation establish
standards for patient care, and reflect the needs of different provider
types. The fact that two types of providers are reimbursed in the same
way is not, in and of itself, a reason to change these requirements.
However, we realize that, by eliminating restrictions on swing-bed
length of stay and by changing the way services are reimbursed, we may
see changes in the type, intensity, and duration of care furnished in
swing-bed hospitals. We plan to monitor swing-bed utilization to
identify changes that could affect patient care, and to address these
issues quickly and appropriately. Accordingly, we believe that it would
be premature to revise the existing conditions of participation at this
time.
We also considered the current conditions of participation in light
of the provisions in section 408 of the BBRA that remove restrictions
on swing-bed length of stay. It is possible that these legislative
changes, especially
[[Page 39593]]
when combined with a new set of payment incentives and disincentives
associated with the SNF PPS, will result in longer lengths of stay and
changes in the type of beneficiaries treated in swing beds. In other
words, swing-bed hospitals could start to resemble SNFs more closely.
In that case, the full MDS may be needed to address issues applicable
to beneficiaries with longer lengths of stay and different care needs.
We plan to monitor swing-bed activity to identify changes in practice
patterns.
Comment: In addition to comments on swing-bed requirements, we also
received a number of comments questioning the effectiveness of the MDS
requirements that are currently in effect for swing beds in critical
access hospitals (CAHs). Generally, the comments focused on the time/
staff requirements and the effectiveness of completing an assessment
instrument that is not collected or used for program monitoring.
Response: CAH swing beds are required to use the MDS for care
planning and quality monitoring as part of the CAH conditions of
participation. We agree that MDS requirements for swing beds in CAHs
should be considered within the scope of our comprehensive reevaluation
of post-acute data needs. Therefore, we have chosen not to address CAHs
in this regulation.
Comment: In the proposed rule, we noted that swing-bed services are
not subject to the SNF consolidated billing requirement at section
1862(a)(18) of the Act (since that provision applies to services that
are furnished to residents of SNFs), but are instead subject to the
hospital bundling requirement at section 1862(a)(14) of the Act (which
applies to services furnished to inpatients of hospitals). Several
commenters expressed concern about reconciling hospital bundling
requirements and the services excluded from Part A consolidated billing
under the SNF PPS. They observed that the hospital bundling requirement
is slightly broader in scope than the SNF consolidated billing
provision, in that the former provision does not exclude certain types
of services that the latter provision specifically excludes (such as
Part B dialysis, erythropoietin (EPO), certain services involving
chemotherapy and its administration, certain customized prosthetics,
and radioisotope services, as described in sections 1888(e)(2)(A)(ii)
and (iii) of the Act). The commenters requested clarification on how
such services are to be billed when furnished to SNF-level inpatients
of those swing-bed hospitals that come under the SNF PPS.
Response: The swing-bed provision is unique in that it represents a
hybrid benefit. Although the services that a swing-bed provider
furnishes under its swing-bed agreement are SNF services, the provider
itself is a hospital (and, as such, is subject to the requirements that
pertain to hospitals, including hospital bundling). Accordingly, under
the SNF PPS, we must consider both the SNF Part A consolidated billing
requirements and the hospital bundling requirements. The costs of the
high-cost ancillary services (such as MRIs and radioisotope services)
that are excluded from the SNF consolidated billing requirement are not
included in the SNF PPS per diem. Accordingly, a swing-bed hospital
will be permitted to submit a separate bill to its FI for these
excluded services, and will receive payment for these high-cost
ancillary services over and above the SNF PPS per diem.
Based on our analysis of swing-bed claims data, we have estimated
that the conversion to the SNF PPS will increase payments to swing-bed
hospitals by over $18 million. These projections are based on claims
filed in compliance with the hospital bundling requirements. As such,
the claims include charges for ancillary services that will, under the
SNF PPS, be separately payable. As a result, actual payment increases
should exceed the estimates for swing-bed hospitals serving high-acuity
beneficiaries who would be more likely to require these high-cost non-
therapy ancillary services.
Comment: In response to our request for comments in the proposed
rule on the applicability of the post-acute transfer policy enacted in
section 4407 of the BBA to swing-bed hospitals, we received a mixed
response. SNF providers advocated inclusion of swing-bed hospitals as a
matter of equity. Comments from hospital providers questioned the value
of applying this provision to transfers between acute care and swing-
bed extended care services. One commenter pointed out that the policy
would have limited impact, since beneficiaries in the DRG categories
covered by the transfer policy are usually transferred to larger,
tertiary care facilities rather than to a rural hospital swing-bed.
Response: As noted by several commenters, swing-bed providers were
specifically excluded from this transfer provision of the BBA. However,
we plan to monitor swing-bed utilization, and, if inappropriate
transfer patterns develop, to recommend legislative action to extend
the transfer policy to swing-beds.
Comment: We received a few comments on implementation issues,
including the way SNF PPS billing and medical review policies will be
applied to swing beds. These commenters urged that SNF and swing-bed
bills be reviewed under the same protocols and by the same contractors.
For example, a SNF that files more than 2 percent of claims for
services in the lower 18 RUG-III categories may be subject to focused
medical review. As one commenter pointed out, approximately 9 percent
of the swing-bed claims used in our projections grouped in the lower 18
RUG-III groups. If this pattern continues under the SNF PPS, these
swing-bed claims should be subject to the same scrutiny as SNF bills.
Response: We agree that all providers reimbursed under the SNF PPS
must comply with program requirements. We are also in full agreement
that operating policies and procedures should be applied consistently.
Over the next few months, we will be finalizing our operating
instructions, and will incorporate these comments into our program
design efforts. We also welcome additional ideas and suggestions
related to billing, medical review, or other program operation
functions.
IV. Provisions of the Final Regulations
The provisions of this final rule are as follows:
In Sec. 410.150, we are revising paragraph (b)(14) to
reflect that Part B makes payment to the SNF for its resident's
services only in those situations where the SNF itself furnishes the
services, either directly or under an arrangement with an outside
source.
In Sec. 411.15, we are revising paragraph (p)(1) to
indicate that, except for physical, occupational, and speech-language
therapy (to which consolidated billing applies regardless of whether
the resident who receives them is in a covered Part A stay),
consolidated billing applies only to those services that a SNF resident
receives during the course of a covered Part A stay. We are also making
conforming revisions in Secs. 489.20(s) and 489.21(h), in the context
of the requirements of the SNF provider agreement. We are revising
paragraph (p)(2) of Sec. 411.15 to indicate that, for Part B services
furnished to a SNF resident, the requirement to enter the SNF's
Medicare provider number on the Part B claim (which previously applied
only to claims for physician services) applies to all types of Part B
claims. We are also making conforming revisions in the requirements
regarding claims for payment, at Secs. 424.32(a)(2) and (a)(5). We are
revising the wording of the existing requirement in Sec. 424.32(a)(5)
for a SNF to include
[[Page 39594]]
appropriate HCPCS coding and its Medicare provider number on the Part B
claims that it files for its residents' services, by adding that these
requirements also apply to such claims when they are filed by an
outside entity. In addition, we are revising Sec. 411.15(p)(3) to
exclude from the definition of a SNF resident, for consolidated billing
purposes, those individuals who reside in the noncertified portion of
an institution that also contains a participating distinct part SNF. We
are also clarifying that, for services other than physical,
occupational, and speech-language therapy, a beneficiary's resident
status ends along with Part A coverage of his or her SNF stay (or, if
earlier, when one of the events described in Secs. 411.15(p)(3)(i)-(iv)
occurs).
In accordance with section 1888(e)(2)(E) of the Act, we
are revising Sec. 413.114 to reimburse swing-bed services of rural
hospitals (other than CAHs, which will be paid on a reasonable cost
basis) under the SNF PPS described in regulations at subpart J of that
part. This conversion to the SNF PPS would be effective for services
furnished during cost reporting periods beginning on or after July 1,
2002. We are also revising paragraph (d)(1) of this section to reflect
modifications to the special requirements for swing-bed facilities with
more than 49 but fewer than 100 beds (as enacted by section 408 of the
BBRA), and are making a conforming revision in Sec. 424.20(a)(2).
In Sec. 413.337, we are adding a new paragraph (e) to
clarify that the temporary increases in payment for certain RUGs under
section 101 of the BBRA (as modified by section 314 of the BIPA) will
expire upon the issuance of a new regulation with the newly refined
case-mix classification system.
V. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA), agencies are
required to provide a 60-day notice in the Federal Register and solicit
public comment when a collection of information requirement is
submitted to the Office of Management and Budget (OMB) for review and
approval. To evaluate fairly whether an information collection should
be approved by OMB, section 3506(c)(2)(A) of the PRA requires that we
solicit comments on the following issues:
Whether the information collection is necessary and useful
to carry out the proper functions of the agency;
The accuracy of the agency's estimate of the information
collection burden;
The quality, utility, and clarity of the information to be
collected; and
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Sec. 413.114(a)(2)--In the May 10, 2001 proposed rule (66 FR
23984), we estimated swing-bed hospital start-up costs and the ongoing
costs associated with the use of the MDS for calculating the SNF PPS
per diem payment. Those estimates were based on the use of the full
MDS, a 6-page paper assessment tool containing more than 400 data
items. After careful consideration of the comments received, we have
eliminated the requirement for the full MDS and created a 2-page MDS
for swing-bed hospitals that reduces the number of data items by
approximately 75 percent. We have also carefully considered comments
related to our initial time and cost estimates in updating this impact
analysis.
As stated in the proposed rule, we used the best available 1999
claims data, and identified 1,250 swing-bed facilities and 97,576
swing-bed stays. The average number of admissions is 78 per swing-bed
hospital. Using the same 1999 claims data, the average length of stay
is 8.79 days. On average, a typical swing-bed facility would need to
complete only one MDS per admission, since the PPS 5-day assessment
governs payment for the first 14 days of the stay.
Data Entry: In our proposed rule, we based our projections upon our
experience with SNF providers, and adjusted those estimates to reflect
the smaller scale of swing bed operations. We received a number of
comments expressing concerns that we may have underestimated staffing
needs and completion times for the MDS and data entry functions. For
example, we estimated that swing beds would generally need to train at
least one staff person to handle the MDS data entry and transmission
system. The commenters generally recommended training 2 individuals to
ensure adequate back-up. We agree that additional training would be
appropriate, and have adjusted our estimates.
State agencies currently train SNF staff on these functions, and
the training is generally completed in one 4-hour session. Additional
training materials and updates to program requirements are generally
posted on the MDS web sites, and are available to staff at no cost. By
distributing information electronically, and providing Help Desks for
software and transmission problems, we minimize the need for staff
travel, and reduce the ongoing costs associated with encoding and
transmitting MDS data. We have used the original estimate of 4 hours of
training time (as published in the proposed rule (66 FR 23984)), since
the reduction in MDS requirements has no impact on data entry staff
training time. We did not increase the estimates to reflect the cost of
replacement staff, since short absences can usually be handled by
adjusting work schedules. We did, however, add 2 hours per trainee to
reflect travel time.
We also received a number of comments that the estimated data entry
time was too low, particularly for staff unfamiliar with the MDS. The
substitution of the 2-page Swing-Bed Hospitals MDS for the full MDS
should simplify the data entry effort. We expect that the data entry
time for the 2-page form will average less than the 15 minutes per
assessment we had estimated for the full form. However, in view of the
concerns raised in the comments and our unfamiliarity with this new
form, we have not reduced our data entry projections. We are also
maintaining our projections for approximately 2 hours per month to
perform system-related functions, such as processing corrections,
retrieving assessment information, printing copies, verifying the
accuracy of the data entered into the system, and reviewing program
updates and training materials.
These data entry estimates assume that facilities may choose among
a variety of approaches to encode the MDS data in electronic format. In
many SNFs, the nurses conducting the assessments input their responses
directly into the computer, and the data entry time is incorporated
into the MDS preparation time. In others, a data entry operator is used
to input the MDS data and maintain the MDS processing system. In some
facilities, data may be extracted and/or compiled and data-entered by a
combination of clinical and technical staff under the overall
supervision of an RN. We estimated the hourly rate for data entry at
$15, which reflects the salary differentials between the two types of
staff typically performing this function: RNs and data operators.
Electronic Transmission: Swing-bed staff will also need training on
data transmission procedures. Again, State agencies have already
developed training programs in this area, and this training will be
available to swing-bed personnel. In response to the comments, we have
increased our estimates to include sending two staff employees to a 4-
hour training program. We estimated the training time at 4 hours per
person plus 2 hours per person travel time.
[[Page 39595]]
These employees would be responsible for handling data transmission
functions, and would be expected to train other facility staff on a
time-available basis. Once the assigned employees have been trained, we
estimate that the MDS transmission will take approximately one hour per
month.
We projected the hourly rate of data transmission at $15, which
reflects the salary differentials between the two types of staff
typically performing this function: RNs and data operators. Again,
training costs are not affected by the reduction in the MDS
requirements, and the cost estimates are the same as those presented in
the proposed rule.
MDS Coding: As stated in the proposed rule, we advise each swing-
bed hospital to designate an RN to assume lead responsibility, and
ensure that this RN is fully trained. Based on the comments, we have
increased our training estimates from one to two RNs to reflect the
need for backup on the MDS function. We have also adjusted our
projections for training time. Our preliminary estimates were for two
full days of formal training in MDS clinical coding and SNF PPS
assessment scheduling. In view of the reduced MDS coding required using
the 2-page Swing-Bed Hospital MDS, we have revised our formal training
estimate to 12 hours, plus 4 hours travel time for each RN attending
the training.
In addition, we have also reduced our estimates for MDS completion
time to reflect the major reduction in the number of MDS items to be
completed. In making this adjustment, we recognized that different MDS
items may take different amounts of time to complete, and did not
assume a direct relationship between the number of items and the total
completion time, a methodology that would have resulted in an estimated
completion time of approximately 15 minutes.
Instead, we have used an estimated completion time of 30 minutes
per swing-bed MDS, or 67 percent of the time originally estimated to
complete the full 6-page MDS. Again, as stated in the proposed rule, we
believe that swing-bed hospital staff have some advantages when they
complete the initial MDS, since they are more familiar with each
beneficiary's condition and have full access to the hospital record.
However, we have not reduced the time estimate to take these factors
into account. Instead, we are using the higher number to reflect the
expected learning curve over the first year as staff become more
familiar with and proficient in completing the MDS.
As stated above, swing-bed providers averaged 78 stays per year
with an average swing-bed length of stay of slightly under 9 days.
Therefore, swing-bed providers would generally complete just one SNF
PPS assessment for most patients, the 5-day assessment that governs
payment for the first 14 days of a stay. To calculate the costs of
preparing the MDS, we used 1998 Bureau of Labor Statistics nursing wage
data, including fringe benefits, updated to FY 2002 levels using the
SNF market basket factor. The average hourly rate of $24.70 is used in
the calculations shown in Table 11. In reviewing the cost data in Table
11, we found that the aggregate MDS preparation cost had been
transcribed incorrectly in the proposed rule, resulting in an
understatement of approximately $1.6 million. This error has been
corrected in Table 11, and the adjustments discussed in this section
have been incorporated into Table 11 of this final rule, rounded to the
nearest dollar.
As shown in Table 11, swing-bed start up costs are expected to
average between $2,650 and $4,550 per facility. This estimate includes
the cost of hardware and software costs as well as the total start up
burden associated of 56 staff hours for staff training on the MDS
function. Although the range seems fairly broad, the variations are
based on choices that individual facilities will make in setting up
their MDS processing and staff support functions. The biggest factor in
the cost variation is the selection of MDS software. Facilities
choosing to purchase proprietary software (estimated at an initial cost
of $1,200) will incur higher start up costs. For each succeeding year,
these facilities will incur additional costs for software maintenance
and support services (data for second year costs are not shown).
The CMS software is being customized specifically for use with the
2-page Swing-Bed MDS, and will provide all of the basic services needed
to store and transmit MDS data used for SNF PPS payment. A Help Desk
will also be available to assist swing-bed hospital staff with data
transmission problems and support in learning how to use the software
efficiently. We have estimated a total burden of 72.5 hours per
facility of staff time annually for ongoing administration the MDS
function. As indicated in Table 11, we also included the costs for
supplies and computer maintenance in our estimates, and projected
average facility operating costs of $1,766 for swing-bed hospitals
performing one assessment per beneficiary. Although almost all swing-
bed facilities submitting comments indicated that their lengths of stay
were under 10 days, there were a few swing-bed hospitals with longer
lengths of stay. In considering the impact on these facilities, we do
recognize a slight additional burden. We have estimated that a facility
performing two MDS assessments on 30 percent of its Medicare
beneficiaries would require approximately 18 additional hours per year
(data not shown). However, the cost of performing these additional
assessments would only increase a facility's MDS-related costs from
$1.40 to $1.83 per day per patient.
We received a significant number of comments claiming that the
operating cost estimates are understated because they do not reflect
increased clinical staffing needs associated with MDS preparation and
overall coordination of the MDS process within the facility. The impact
on swing-bed facility staffing was one of the issues that we considered
in our decision to reduce the MDS requirements to the two-page Swing-
Bed MDS. We also considered the impact of a new payment system on staff
operations, and the need to integrate the MDS process into day-to-day
operations. We were concerned that the October 1, 2001 implementation
set forth in the proposed rule would not give facility staff enough
time to assess their existing operations and make the modifications
needed to implement the MDS function smoothly. We believe that, by
establishing the 2-page Swing-Bed MDS and by revising the
implementation schedule to provide additional time for staff to adjust
facility procedures and operating protocols, the MDS function can be
integrated into swing-bed operations with existing staff.
[[Page 39596]]
Table 11.--Swing-Bed Rural Hospital Cost of Completing MDS
----------------------------------------------------------------------------------------------------------------
Aggregate
Basic option-- Small business Aggregate cost--small
Category cost/facility option--cost/ cost--basic business
facility option option
----------------------------------------------------------------------------------------------------------------
Start Up Costs
----------------------------------------------------------------------------------------------------------------
Hardware........................................ $1,400 $2,100 $1,750,000 $2,625,000
Comm. Software.................................. 100 100 125,000 125,000
MDS Sftwre-CMS.................................. 0 0 0 0
MDS Sftwre--Purchased........................... 1,200 1,200 1,500,000 1,500,000
Staff Training--MDS Coding...................... 790 790 988,000 988,000
Staff Training--Other........................... 360 360 450,000 450,000
----------------------------------------------------------------------------------------------------------------
Start-Up Subtotal
----------------------------------------------------------------------------------------------------------------
With CMS Sftwre................................. $2,650 $3,350 $3,313,000 $4,188,000
With Purchased Software......................... $3,850 $4,550 $4,813,000 $5,688,000
----------------------------------------------------------------------------------------------------------------
Operating Cost
----------------------------------------------------------------------------------------------------------------
MDS Preparation................................. 963 963 1,204,125 1,204,125
MDS Entry....................................... 323 323 403,125 403,125
MDS Transmission................................ 180 180 225,000 225,000
Supplies........................................ 200 200 250,000 250,000
Maintenance..................................... 100 100 125,000 125,000
Operating Cost.................................. $1,766 $1,766 $2,207,250 $2,207,250
----------------------------------------------------------------------------------------------------------------
First Year Costs
----------------------------------------------------------------------------------------------------------------
With CMS Sftwre................................. $4,416 $5,116 $5,520,250 $6,395,250
With Purchased Software......................... $5,616 $6,316 $7,020,250 $7,895,250
----------------------------------------------------------------------------------------------------------------
Sec. 424.32(a)(5)--In the proposed rule (66 FR 34984), we proposed
to revise Sec. 424.32(a)(5) to reflect the new statutory requirement
that all Part B claims for services furnished to SNF residents must
include the SNF's Medicare provider number. Because the burden
associated with this additional requirement is incidental to the
completion of a claim, we were unable to estimate the burden associated
with this new requirement, and explicitly solicited comment on this
point. As a result of this new requirement, we will be revising the OMB
clearance package for the CMS-1500 (Common Claim Form), OMB number
0938-0008, which we will submit to OMB for review.
We have submitted a copy of this final rule to OMB for its review
of the information collection requirements in Secs. 413.411(a)(2) and
424.32(a)(5). These requirements are not effective until they have been
approved by OMB.
VI. Regulatory Impact Analysis
We have examined the impact of this rule as required by Executive
Order (EO) 12866, the Unfunded Mandate Reform Act (UMRA, Pub. L. 104-
4), the Regulatory Flexibility Act (RFA, Pub. L. 96-354), and the
Federalism Executive Order (EO) 13132.
Executive Order 12866 directs agencies to assess 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). This final rule is a major rule as
defined in Title 5, United States Code, section 804(2), because we
estimate its impact will be to increase the payments to SNFs by
approximately $1.5 billion in FY 2002, or 10.3 percent. The update set
forth in this final rule applies to payments in FY 2002. Accordingly,
the analysis that follows describes the impact of this one year only.
In accordance with the requirements of the Act, we will publish a
notice for each subsequent FY that will provide for an update to the
payment rates and include an associated impact analysis.
The UMRA also requires (in section 202) that agencies prepare an
assessment of anticipated costs and benefits before developing any rule
that may result in an expenditure in any year by State, local, or
tribal governments, in the aggregate, or by the private sector, of $100
million or more. This rule will have no consequential effect on State,
local, or tribal governments. We believe the private sector cost of
this rule falls below these thresholds as well.
Executive Order 13132 (effective November 2, 1999) establishes
certain requirements that an agency must meet when it promulgates
regulations that impose substantial direct compliance costs on State
and local governments, preempt State law, or otherwise have Federalism
implications. As stated above, this rule will have no consequential
effect on State and local governments.
The RFA requires agencies to analyze options for regulatory relief
of small entities. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and small governmental
jurisdictions. Most SNFs and most other providers and suppliers are
small entities, either by virtue of their nonprofit status or by having
revenues of $10 million or less annually. For purposes of the RFA, all
States and tribal governments are not considered to be small entities,
nor are intermediaries or carriers. Individuals and States are not
included in the definition of a small entity.
The policies contained in this final rule would update the SNF PPS
rates by increasing the payment rates published in the July 31, 2000
notice (65 FR 46770). While we do not believe that this will have a
significant effect upon small entities overall, some individual
[[Page 39597]]
providers may experience significant increases in payments, while
others (those that are concluding their final year under the transition
from facility-specific to full Federal rates) may experience decreases,
as discussed later in this section.
In addition, section 1102(b) of the Act requires us to prepare an
RIA 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 100 beds. Although we are delaying implementation for the 1,250
swing-bed facilities that would start receiving payment under the SNF
PPS until July 1, 2002, we do find that the payments to these
facilities will increase overall. Some swing-bed facilities may receive
significant increases in Medicare related payments, as described later
in this section. Accordingly, the following analysis includes a
specific examination of the projected impact of these provisions on
small rural hospitals.
A. Background
Section 1888(e) of the Act establishes the SNF PPS for the payment
of Medicare SNF services for periods beginning on or after July 1,
1998. This section specifies that the base year cost data to be used
for computing the RUG-III payment rates must be from cost reporting
periods beginning in FY 1995 (that is, October 1, 1994, through
September 30, 1995.) In accordance with the statute, we also
incorporated a number of elements into the SNF PPS, such as case-mix
classification methodology, the MDS assessment schedule, a market
basket index, a wage index, and the urban and rural distinction used in
the development or adjustment of the Federal rates.
This final rule sets forth updates of the SNF PPS rates contained
in the July 31, 2000 final rule (65 FR 46770). Table 12 presents the
projected effects of the policy changes in the SNF PPS from FY 2001 to
FY 2002, as well as statutory changes effective for FY 2001 and FY
2002. In so doing, we estimate the effects of each policy change by
estimating payments while holding all other payment variables constant.
We use the best data available, but we do not attempt to predict
behavioral responses to our policy changes, and we do not make
adjustments for future changes in such variables as days or case-mix.
This analysis incorporates the latest estimates of growth in
service use and payments under the Medicare SNF benefit based on the
latest available Medicare claims data and MDS 2.0 assessment data from
2000. We note that certain events may combine to limit the scope or
accuracy of our impact analysis, because such an analysis is future-
oriented and, thus, susceptible to forecasting errors due to other
changes in the forecasted impact time period. Some examples of such
possible events are newly legislated general Medicare program funding
changes by the Congress, or changes specifically related to SNFs. In
addition, changes to the Medicare program may continue to be made as a
result of the BBA, the BBRA, the BIPA, or new statutory provisions.
Although these changes may not be specific to SNF PPS, the nature of
the Medicare program is such that the changes may interact, and the
complexity of the interaction of these changes could make it difficult
to predict accurately the full scope of the impact upon SNFs.
B. Impact of the Final Rule
The purpose of this final rule is not to initiate significant
policy changes with regard to the SNF PPS; rather, it is to provide an
update to the rates for FY 2002. We believe that the revisions and
clarifications mentioned elsewhere in the preamble (for example, the
update to the wage index used for adjusting the Federal rates) will
have, at most, only a negligible overall effect upon the regulatory
impact estimate specified in the rule. As such, these revisions will
not represent an additional burden to the industry.
The aggregate increase in payments associated with this final rule
is estimated to be $1.5 billion, or 10.3 percent. The current estimate
varies substantially from that computed for the proposed rule, which
forecast an increase in payment of only $300 million, or 2.1 percent.
In reviewing the estimate used for the proposed rule, an error was
discovered in the component of the calculations associated with
determining the impact of the expiration of the transition. This error
caused the downward effect on payments associated with the transition's
expiration to be magnified. This error has now been corrected and a
more accurate estimate of this effect now appears in Table 12.
The effect of the 20 percent add-on from the BBRA (as subsequently
revised by the BIPA) is $1.0 billion; however, since this add-on became
effective in FY 2001, it has already been reflected in the impact
analysis for last year's final rule (65 FR 46770) and, thus, does not
represent a new, additional impact for the FY 2002 payment rates. There
are three areas of change that produce this increase for facilities:
1. The effect of facilities being paid the full Federal rate.
2. The implementation of provisions in the BIPA, such as the 16.6
percent increase in the nursing component of the Federal rate and the
elimination of the one percent reduction in the SNF market basket
update for FY 2001.
3. The total change in payments from FY 2001 levels to FY 2002
levels. This includes all of the previously noted changes in addition
to the effect of the annual update to the rates.
As seen in Table 12, some of these areas are expected to result in
increased aggregate payments and others are expected to tend to lower
them. The breakdown of the various categories of data in the table is
as follows:
The first row of figures in the table describes the estimated
effects of the various policies on all facilities. The next six rows
show the effects on facilities split by hospital-based, freestanding,
urban and rural categories. The remainder of the table shows the
effects on urban versus rural status by census region.
The second column in the table shows the number of facilities in
the impact database. The third column shows the effect of the
expiration of the transition and movement to the full Federal rates for
all SNFs. This change has an overall effect of lowering payments by an
estimated 1.6 percent, affecting hospital-based facilities more than
freestanding facilities. The main reason for such a large decrease is
the BBRA provision that allowed facilities to choose the full Federal
rate. When given the option to do so, an estimated 74 percent of the
facilities elected to go to the full Federal rate. This meant that the
only facilities left to transition to the full Federal rate are ones
for which the expiration of the transition will cause a decrease in
reimbursement. In contrast, those facilities receiving the full Federal
rate will experience a 12.1 percent increase in payments. The overall
effect of the expiration of the transition was to reduce reimbursement,
but the effects across regions are quite variable.
The fourth column shows the projected effect of the 16.66 percent
add-on to the nursing portion of the Federal rate mandated by BIPA
2000. As expected, this results in an increase in payments for all
facilities; however, as seen in the table, the varying effect of the
SNF PPS transition results in a distributional impact. In addition,
since this increase only applies to the nursing
[[Page 39598]]
portion of the payment rate, the effect on total expenditures is less
than 16.66 percent.
The fifth column of the table shows the effect of the change in the
add-on for the rehabilitation RUGs. The total impact of this change is
zero percent; however, there are distributional effects of this change,
as seen in the table.
The sixth column of the table shows the effect of the annual update
to the wage index. The total impact of this change is zero percent;
however, there are distributional effects of the change.
The seventh column of the table shows the effect of all of the
changes on the FY 2002 payments. This includes all of the previous
changes, including the update to this year's payment rates by the
market basket. Rebasing of the market basket index from 1992 to 1997
had little impact on the overall changes displayed in this column. It
is projected that payments will increase by 10.3 percent in total,
assuming facilities do not change their care delivery and billing
practices in response. As can be seen from this table, the combined
effects of all the changes vary widely by specific types of providers
and by location. For example, freestanding facilities experience
payment increases, while the effects of the transition cause decreases
in payments for hospital-based providers.
Table 12.--Projected Impact of FY 2002 Update to the SNF PPS
----------------------------------------------------------------------------------------------------------------
Transition Add-on to
Number of to Federal nursing Add-on to Wage index Total FY
facilities rates rates rehab RUGs change 2002 change
----------------------------------------------------------------------------------------------------------------
Total............................. 9037 -1.6% 8.0% 0.0% 0.0% 10.3%
Urban............................. 6300 -1.7% 8.1% 0.1% 0.1% 10.5%
Rural............................. 2737 -1.1% 7.8% -0.7% -0.3% 9.6%
Hospital based urban.............. 683 -4.1% 8.6% -0.8% -1.0% 6.2%
Freestanding urban................ 5617 -1.3% 8.0% 0.3% 0.2% 11.2%
Hospital based rural.............. 533 -2.3% 8.5% -2.0% -1.7% 6.0%
Freestanding rural................ 2204 -0.9% 7.7% -0.4% 0.0% 10.3%
Urban by Region
New England....................... 630 -0.3% 8.4% 0.0% 0.2% 12.4%
Middle Atlantic................... 877 -0.4% 8.4% -1.4% -2.2% 8.1%
South Atlantic.................... 959 -2.5% 7.8% 0.9% 1.3% 11.5%
East North Central................ 1232 -0.8% 8.2% 0.6% 0.3% 12.4%
East South Central................ 212 -1.8% 8.0% 0.0% 1.3% 11.5%
West North Central................ 469 -1.5% 8.0% -0.2% -0.4% 9.8%
West South Central................ 519 -4.7% 8.4% 0.3% -0.5% 7.0%
Mountain.......................... 303 -3.4% 7.6% 1.1% 1.2% 10.4%
Pacific........................... 1070 -2.9% 7.9% 0.6% 0.6% 10.1%
Rural by Region
New England....................... 88 -0.3% 8.0% -0.3% 0.3% 11.8%
Middle Atlantic................... 144 -0.3% 8.0% -1.8% -1.6% 8.0%
South Atlantic.................... 373 -1.0% 7.8% 0.2% 0.4% 11.4%
East North Central................ 561 -0.5% 7.8% -0.3% 0.0% 11.0%
East South Central................ 255 -1.5% 7.9% -2.3% -2.0% 5.6%
West North Central................ 581 -1.5% 7.9% -1.5% -0.4% 8.2%
West South Central................ 354 -2.5% 8.0% -0.1% 1.0% 10.3%
Mountain.......................... 204 -1.0% 7.3% -0.4% -0.2% 9.6%
Pacific........................... 151 -0.9% 7.4% 0.3% -0.8% 9.9%
----------------------------------------------------------------------------------------------------------------
As noted earlier, in accordance with section 1888(e)(7) of the Act,
we are providing in this final rule to pay rural hospitals for SNF-
level swing-bed services under the SNF PPS, effective with cost
reporting periods beginning on and after July 1, 2002. In doing so, we
have examined the anticipated impact of this payment change on swing-
bed facilities.
We analyzed data from swing-bed claims for calendar years 1996
through 1998 to determine Medicare payments made under the current
swing-bed payment system. The claims data reflect the predetermined
routine cost payments and the interim payment for ancillary services.
While the interim payment rate for ancillary services is subject to
final cost settlement, it represents a reasonable proxy for actual
swing-bed payments.
We then adjusted the historical data on swing-bed payments to 2002
levels. For calendar years 1999 through 2001, we projected the average
payment per day, using the 6.5 percent growth rate calculated from the
most recent available data from calendar years 1997 and 1998. For 2002,
we used a blended growth rate that reflects a projected increase in
payment for routine services equal to the market basket of 2.4 percent,
but retains the historical growth factor of 6.5 percent for ancillary
payments. In 1998, the average payment per day was $205.41. The
estimated swing-bed payment per day for 2002 under the existing method
of reimbursement is $258.41.
We then estimated the amount that would have been paid for the same
services under the SNF PPS. This estimate reflected both adjustments
for geographic variation and case-mix. For the geographic adjustment,
we used the average rural wage index for FY 2001 (that is, 0.8700). In
preparing this final rule, we found a minor error in the calculation of
the estimate published in the proposed rule that slightly overstated
anticipated payments for swing-bed hospitals under the SNF PPS. We
corrected the error and recalculated this impact analysis. The revised
data are presented in this final rule.
As described in the proposed rule, we used the MEDPAR case-mix
analog (described in detail in the SNF PPS interim final rule published
on May 12, 1998 (63 FR 26252)) to estimate how the national swing-bed
population would classify into RUG-III categories. We found that 69
percent of the covered days would be assigned to just two RUG-III
categories (or six groups):
[[Page 39599]]
Medium Rehabilitation and Extensive Services.
We also noted that 9 percent of the covered days were assigned to
categories that are not typically associated with a Medicare level of
care (Impaired Cognition and lower groups). We have not assumed that
these claims were paid in error. Rather, we are assuming that these
patients had skilled care needs other than ones that could be captured
using the MEDPAR case-mix analog, and we have included these stays in
our analysis.
Table 13.--RUG-III Frequency Distribution Using Calendar Year 1999
Claims
------------------------------------------------------------------------
Number of Percent of
RUG-III category level days paid total days
------------------------------------------------------------------------
Ultra High Rehab.............................. 30,618 3%
Very High Rehab............................... 33,687 4%
High Rehab.................................... 76,596 9%
Medium Rehab.................................. 264,614 30%
Low Rehab..................................... 58,016 7%
Extensive Services............................ 288,131 33%
Special Care.................................. 11,540 1%
Clinically Complex............................ 35,304 4%
Impaired Cognition............................ 4,737 1%
Other......................................... 72,293 8%
-------------------------
Total..................................... 875,536 100%
------------------------------------------------------------------------
Our next step was to project the SNF PPS payments for these swing-
bed services. For the purposes of this analysis, we used the calendar
year frequency distribution and number of covered swing-bed days shown
in Table 13. Unique nursing case-mix weights have already been
developed for each level of the MEDPAR case-mix analog. These weights
were used to adjust the FY 2002 rural SNF PPS rates set forth in this
final rule to determine the SNF PPS rates used in this estimate. We
adjusted these rates for all the BBRA and the BIPA add-ons applicable
for FY 2002.
Based on our analysis, the FY 2002 SNF PPS payment amount exceeds
the projected payments under the current swing-bed payment system for
that year in 5 of the 10 case-mix analog categories that included 79
percent of the swing-bed days. In fact, for the two most common RUG-III
categories, medium rehabilitation and extensive services, the projected
increases are substantial: 10 percent for medium rehabilitation and 12
percent for extensive services. In addition, in two categories,
Impaired Cognition and Other, where the projected SNF PPS rate is lower
than the projected swing-bed payment amount, the MDS records are likely
to group into much higher categories when using the full RUG-III
algorithm.
In terms of aggregate Medicare expenditures, we estimate that the
transition to SNF PPS will increase payments for SNF-level swing-bed
services by 8 percent, or approximately $18.3 million. Aggregate start-
up costs are estimated to be between $3.3 and $5.7 million, and first
year operating costs, including estimated costs associated with the MDS
completion, are estimated to be $2.2 million.
Based on these estimates, we believe the financial impact on swing-
bed providers will be positive, with the anticipated 8 percent payment
increase serving to offset the estimated start-up costs associated with
MDS completion and transmission. Although the aggregate percentage
increase has been adjusted downward from 9 percent to 8 percent, the
reduction in MDS requirements has been even more significant. Swing-bed
hospitals had expressed strong concerns that the expected increases
would be eroded by their MDS costs. With the reduction in the MDS
requirements, the impact of the projected 8 percent increase may
represent an addition of dollars available to support swing-bed
operations.
Finally, in accordance with the provisions of Executive Order
12866, this final rule was reviewed by the Office of Management and
Budget.
VII. Federalism
We have reviewed this final rule under the threshold criteria of
Executive Order 13132, Federalism, and we have determined that it does
not significantly affect the rights, roles, and responsibilities of
States.
List of Subjects
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 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 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS
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 1395hh).
* * * * *
Subpart I--Payment of SMI Benefits
2. In Sec. 410.150, the introductory text of paragraph (b) is
republished, and paragraph (b)(14) is revised to read as follows:
Sec. 410.150 To whom payment is made.
* * * * *
(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 it furnishes to a resident (as
defined in Sec. 411.15(p)(3) of
[[Page 39600]]
this chapter) of the SNF who is not in a covered Part A stay.
* * * * *
PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE
PAYMENT
3. 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
4. In Sec. 411.15, paragraph (p)(1) is revised, and paragraph
(p)(2) introductory text, paragraph (p)(2)(i), and paragraph (p)(3)
introductory text are revised to read as follows:
Sec. 411.15 Particular services 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 during a covered Part A stay 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 the services are furnished by (or under
the supervision of) a physician or other health care professional, and
regardless of whether the resident who receives the services is in a
covered Part A stay; 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, provided that the claim for payment includes the SNF's
Medicare provider number in accordance with Sec. 424.32(a)(5) of this
chapter:
(i) Physicians' services that meet the criteria of Sec. 415.102(a)
of this chapter for payment on a fee schedule basis.
(3) SNF resident defined. For purposes of this paragraph, a
beneficiary who is admitted to a Medicare-participating SNF is
considered to be a resident of the SNF for the duration of the
beneficiary's covered Part A stay. In addition, for purposes of the
services described in paragraph (p)(1)(i) of this section, a
beneficiary who is admitted to a Medicare-participating SNF is
considered to be a resident of the SNF regardless of whether the
beneficiary is in a covered Part A stay. Whenever the 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--
* * * * *
PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT
RATES FOR SKILLED NURSING FACILITIES
5. The authority citation for part 413 is amended to read as
follows:
Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and
(n), 1871, 1881, 1883, 1886, and 1888 of the Social Security Act (42
U.S.C. 1302, 1395d(d), 1395(f)b, 1395g, 1395l(a), (i), and (n),
1395hh, 1395rr, 1395tt, 1395ww, and 1395yy).
Subpart F--Specific Categories of Costs
6. In Sec. 413.114:
a. Paragraph (a) is revised.
b. In paragraph (c), the heading is revised.
c. In paragraph (d)(1), the introductory text is revised.
Sec. 413.114 Payment for posthospital SNF care furnished by a swing-
bed hospital.
(a) Purpose and basis. This section implements section 1883 of the
Act, which provides for payment for posthospital SNF care furnished by
rural hospitals and CAHs having a swing-bed approval.
(1) Services furnished in cost reporting periods beginning prior to
July 1, 2002. Posthospital SNF care furnished in general routine
inpatient beds in rural hospitals and CAHs is paid in accordance with
the special rules in paragraph (c) of this section for determining the
reasonable cost of this care. When furnished by rural and CAH swing-bed
hospitals approved after March 31, 1988 with more than 49 beds (but
fewer than 100), these services must also meet the additional payment
requirements set forth in paragraph (d) of this section.
(2) Services furnished in cost reporting periods beginning on and
after July 1, 2002. Posthospital SNF care furnished in general routine
inpatient beds in rural hospitals (other than CAHs) is paid in
accordance with the provisions of the prospective payment system for
SNFs described in subpart J of this part, except that for purposes of
this paragraph, the requirements of Sec. 413.343(a) must be met using
the specific assessment instrument and data designated by CMS for this
purpose. Posthospital SNF care furnished in general routine inpatient
beds in CAHs is paid based on reasonable cost, in accordance with the
provisions of subparts A through G of this part (other than paragraphs
(c) and (d) of this section).
* * * * *
(c) Special rules for determining the reasonable cost of
posthospital SNF care furnished in cost reporting periods beginning
prior to July 1, 2002.
* * * * *
(d) Additional requirements--(1) General rule. For services
furnished in cost reporting periods beginning prior to July 1, 2002, in
order for Medicare payment to be made to a swing-bed hospital with more
than 49 beds (but fewer than 100), the following payment requirements
must be met:
* * * * *
7. In Sec. 413.337, paragraph (e) is added to read as follows:
Sec. 413.337 Methodology for calculating the prospective payment
rates.
* * * * *
(e) Pursuant to section 101 of the Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of 1999 (BBRA) as revised by section 314
of the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA), using the best available data, the
Secretary will issue a new regulation with a newly refined case-mix
classification system to better account for medically complex patients.
Upon issuance of the new regulation, the temporary increases in payment
for certain high cost patients will no longer be applicable.
PART 424--CONDITIONS FOR MEDICARE PAYMENT
8. The authority citation for part 424 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
9. In Sec. 424.20(a)(2), the heading is revised to read as follows:
Sec. 424.20 Requirements for posthospital SNF care.
(a) * * *
(2) Special requirement for certifications performed prior to July
1, 2002: A swing-bed hospital with more than 49 beds (but fewer than
100) that
[[Page 39601]]
does not transfer a swing-bed patient to a SNF within 5 days of the
availability date.
* * *
* * * * *
Subpart C--Claims for Payment
10. In Sec. 424.32, the introductory text of paragraph (a) is
republished, and paragraphs (a)(2) and (a)(5) are revised.
Sec. 424.32 Basic requirements for all claims.
(a) A claim must meet the following requirements:
* * * * *
(2) A claim for physician services, clinical psychologist services,
or clinical social worker services must include appropriate diagnostic
coding for those services using ICD-9-CM.
* * * * *
(5) All Part B claims for services furnished to SNF residents
(whether filed by the SNF or by another entity) must include the SNF's
Medicare provider number and appropriate HCPCS coding.
* * * * *
PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL
11. 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
12. In Sec. 489.20, the introductory text is republished, and the
introductory text of paragraph (s) is revised.
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 any
physical, occupational, or speech-language therapy services furnished
to a resident of the SNF under Sec. 411.15(p) of this chapter
(regardless of whether the resident is in a covered Part A stay), and
also either to furnish directly or make arrangements for all other
Medicare-covered services furnished to a resident during a covered Part
A stay, except the following:
* * * * *
13. In Sec. 489.21, the introductory text is republished, and
paragraph (h) is revised to read as follows:
Sec. 489.21 Specific limitations on charges.
Except as specified in subpart C of this part, the provider agrees
not to charge a beneficiary for any of the following:
* * * * *
(h) Items and services (other than those described in
Secs. 489.20(s)(1) through (15)) required to be furnished under
Sec. 489.20(s) to a resident of an SNF (defined in Sec. 411.15(p) of
this chapter), for which Medicare payment would be made if furnished by
the SNF or by other providers or suppliers under arrangements made with
them by the SNF. For this purpose, a charge by another provider or
supplier for such an item or service is treated as a charge by the SNF
for the item or service, and is also prohibited.
Note:
These appendices will not appear in the Code of Federal
Regulations.
Appendix A
Technical Features of the 1997 Skilled Nursing Facility Market Basket
Index
As discussed in the preamble of this final rule, we have revised
and rebased the SNF market basket. This appendix describes the
technical aspects of the 1997-based index made final in this rule.
We present this description of the market basket in three steps:
A synopsis of the structural differences between the
1992-and the 1997-based market baskets.
A description of the methodology used to develop the
cost category weights in the 1997-based market basket.
A description of the data sources used to measure price
change for each component of the 1997-based market basket, making
note of the differences, if any, from the price proxies used in the
1992-based market basket.
I. Synopsis of Structural Changes Adopted in the Revised and Rebased
1997 Skilled Nursing Facility Market Basket
We have made just one major structural change between the
current 1992-based and the 1997-based SNF market baskets, which is
that more recent SNF cost data were used in the revised and rebased
SNF market basket.
The 1997-based market basket contains cost shares for six major
cost categories that were derived from an edited set of FY 1997
Medicare Cost Reports for freestanding SNFs that had Medicare
expenses. FY 1997 cost reports have cost reporting periods beginning
after September 30, 1996 and before October 1, 1997. The 1992-based
market basket used data from the PPS-9 Medicare Cost Reports for
freestanding SNFs with Medicare expenses greater than 1 percent of
total expenses. PPS-9 cost reports have cost reporting periods
beginning after September 30, 1991 and before October 1, 1992. Cost
allocations for the 1997-based SNF market basket within the six
major cost categories use Medicare Cost Reports and two Department
of Commerce data sources: the 1997 Business Expenditures Survey,
Bureau of the Census, Economics and Statistics Administration, and
the 1997 Bureau of Economic Analysis' Annual Input-Output tables.
II. Methodology for Developing the Cost Category Weights
Cost category weights for the 1997-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 1997 Business
Expenditures Survey and data from the 1997 Annual Input-Output
tables were used to allocate the all other cost category.
Below we describe the source of the main category weights and
their subcategories in the 1997-based market basket.
Wages and Salaries: The wages and salaries cost
category is derived using 1997 SNF Medicare Cost Reports. The share
was determined using wages and salaries from Worksheet S-3, part II
and total expenses from Worksheet B. This share represents the wage
and salary share of costs for employees of the nursing home, and
does not include the wages and salaries from contract labor, which
is allocated to wages and salaries at a later step.
We improved the methodology for calculating the weight of
contract labor, as well as that for the calculation of the fringe
benefits share. Both changes result in more accurate but, in each
case, lower weights in the revised market basket. The weight for
wages only, as determined from the Medicare Cost Reports and
excluding contract labor, increased between 1992 and 1997 (from
45.805 to 46.889). This is consistent with the rate of change of the
price of wages and salaries, as represented by the ECI for wages and
salaries in nursing homes, which increased at a pace faster than
that of the overall market basket during the 1992-1997 period.
However, when the 1997 wage share of contract labor was added to the
1997 weight for wages, the resultant weight for wages was lower than
in the 1992-based index.
Employee Benefits: The weight for employee benefits was
determined using 1997 Medicare Cost Reports. The share was derived
using wage-related costs from Worksheet S-3, part II.
Contract Labor: The weight for the contract labor cost
category was derived using 1997 Medicare Cost Reports. For the 1997-
based SNF market basket, we used a group of cost reports edited for
data entered for contract labor on Worksheet S-3, part II. This
methodology differed from that of the 1992 SNF market basket (where
we estimated contract labor costs using data from Worksheet A) since
Worksheet S-3, part II, was not available in the 1992 Cost Reports.
This methodology produces results that are similar to the contract
labor share in the 1997 Business Expenditures Survey. Contract labor
was not available in the 1992 Asset and Expenditure Survey. As
explained in the preamble, contract labor costs were distributed
between the wages and salaries and employee benefits cost
categories, under the assumption that contract costs should
[[Page 39602]]
move at the same rate as direct labor costs even though unit labor
cost levels may be different.
Pharmaceuticals: The pharmaceuticals cost weight was
derived from 1997 SNF Medicare Cost Reports. This share was
calculated using non-salary costs from the pharmacy and drugs
charged to patients' cost centers from Worksheet A.
Capital-Related: The weight for the overall capital-
related expenses cost category was derived using 1997 SNF Medicare
Cost Report data from Worksheet B. The subcategory and vintage
weights within the overall capital-related expenses were derived
using additional data sources.
In determining the subcategory weights for capital, we used a
combination of information from the 1997 SNF Medicare Cost Reports
and the 1997 Census Business Expenditures Survey.
We estimated the depreciation expense share of capital-related
expenses from the SNF Medicare Cost Reports using data from edited
cost reports with data completed on Worksheet G. For the 1992-based
SNF market basket, we had depreciation expenses from the 1992 Asset
and Expenditure Survey. When we calculated the ratio of depreciation
to wages from the 1997 SNF Medicare Cost Reports, the result was
consistent with the ratio from the 1997 Business Expenditures
Survey. The distribution between building and fixed equipment and
movable equipment was determined from the 1997 Business Expenditures
Survey. From these calculations, depreciation expenses (not
including depreciation expenses implicit from leases) were estimated
to be 33.2 percent of total capital-related expenditures in 1997.
The interest expense share of capital-related expenses was also
derived from the same edited 1997 SNF Medicare Cost Reports.
Interest expenses are not identifiable in the 1997 Business
Expenditures Survey. We determined the split of interest expense
between for-profit and not-for-profit facilities based on the
distribution of long-term debt outstanding by type of SNF (for-
profit or not-for-profit) from the 1997 SNF Medicare Cost Reports.
Interest expense (not including interest expenses implicit from
leases) was estimated to be 24.3 percent of total capital-related
expenditures in 1997.
We used the 1997 Business Expenditures Survey to estimate the
proportion of capital-related expenses attributable to leasing
building and fixed and movable equipment. This share was estimated
to be 34.9 percent of capital-related expenses in 1997. The split
between fixed and movable lease expenses was directly available from
the 1997 Business Expenditures Survey. We used this split, and the
distribution of depreciation and interest calculated above to
distribute leases among these cost categories.
The remaining residual after depreciation, interest, and
leasing, is considered to be other capital-related expenses
(insurance, taxes, other). Other capital-related expenses were
estimated to be 7.7 percent of total capital-related expenditures in
1997.
Table A-1 shows the capital-related expense distribution
(including expenses from leases) in the 1997 SNF PPS market basket
and the 1992 SNF market basket.
Table A-1.--Capital-Related Expense Distribution
----------------------------------------------------------------------------------------------------------------
1992-based SNF 1997-based SNF
capital-related capital-related
expenses as a expenses as a
percent of total percent of total
capital--related capital--related
expenses expenses
----------------------------------------------------------------------------------------------------------------
Total....................................................................... 100.0 100.0
Depreciation................................................................ 60.5 53.3
Building and Fixed Equipment................................................ 42.1 36.5
Movable Equipment........................................................... 18.4 16.8
Interest.................................................................... 32.6 39.0
Other capital-related expense............................................... 6.9 7.7
----------------------------------------------------------------------------------------------------------------
As explained in section I.F of the preamble, our 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 useful 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 individual year over the
useful life of the relevant capital assets, or the vintage weights.
The derivation of useful life of capital is explained in detail
in the May 12, 1998 interim final rule (63 FR 26252). The useful
lives for the 1997-based SNF market basket are the same as the 1992-
based SNF market basket. The data source that was previously used to
develop the useful lives of capital is no longer available and a
suitable replacement has not been identified. We asked for comments
on any data sources that would provide the necessary information for
determining useful lives of capital and debt instruments, but did
not receive any suitable alternatives.
Given the expected useful life of capital and debt instruments,
we must determine the proportion of capital expenditures
attributable to each year of the expected useful life by cost
category. These proportions represent the vintage weights. We were
not able to find an 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 CMS National Health Accounts for 1962 through 1997. 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.
Comment: Several commenters expressed concern over the use of
the net changes in the number of SNF beds as an approximation of
capital acquisitions over time. Commenters felt that the market
basket was only reflecting changes in the number of beds and not
increases in other components that are inflation sensitive.
Response: As pointed out in the proposed rule, we use the net
change in the stock of beds each year to reflect the growth in real
purchases of buildings and fixed capital equipment each year. This
is done for use in determining the proportion of capital
expenditures attributable to each year of the expected useful life
of an asset or 'vintage weight'. This measure is not used to measure
the inflationary increases in costs from year to year facing SNFs
nor is it used to determine the actual weight of depreciation in the
index. Again, the net change in the number of beds is used to
establish `vintage weights and, as such, should reflect real capital
purchases as opposed to nominal purchases. Therefore, we feel that
the use of the change in the number of SNF beds, while not an exact
measure of purchases since it would include beds taken out of
service, approximates SNF capital purchases because if the SNF is
adding beds, it is most likely also adding fixed capital. We were
unable to find another suitable time series of capital purchases
that met our proxy selection criteria, and therefore will continue
to use the stock of beds to approximate capital purchases.
[[Page 39603]]
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 1997 SNF Medicare Cost Reports. For 1962
through 1988 we estimated these values using regression analysis.
The time series of the ratio 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 becomes 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 1997 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 1997. 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 1997, we averaged different periods to obtain an average
capital purchase pattern over time. For building and fixed equipment
we averaged thirteen 23-year periods, for movable equipment we
averaged twenty-six 10-year periods, and for interest we averaged
fourteen 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 useful life of
the equipment or debt instrument. This methodology was described in
full in the May 12, 1998 Federal Register (63 FR 26252). The
resulting vintage weights for each of these cost categories are
shown in Table A-2.
Table A-2.--Vintage Weights for 1997-Based SNF PPS Capital-Related Price
Proxies
------------------------------------------------------------------------
Building
Year and fixed Movable Interest
equipment equipment
------------------------------------------------------------------------
1................................ 0.082 0.083 0.025
2................................ 0.086 0.088 0.028
3................................ 0.085 0.089 0.031
4................................ 0.083 0.090 0.034
5................................ 0.077 0.091 0.038
6................................ 0.069 0.097 0.042
7................................ 0.063 0.106 0.046
8................................ 0.060 0.111 0.049
9................................ 0.050 0.116 0.051
10............................... 0.040 0.128 0.051
11............................... 0.040 ........... 0.052
12............................... 0.036 ........... 0.053
13............................... 0.030 ........... 0.051
14............................... 0.020 ........... 0.050
15............................... 0.016 ........... 0.049
16............................... 0.014 ........... 0.048
17............................... 0.012 ........... 0.049
18............................... 0.017 ........... 0.050
19............................... 0.018 ........... 0.051
20............................... 0.023 ........... 0.051
21............................... 0.025 ........... 0.049
22............................... 0.027 ........... 0.051
23............................... 0.029 ........... ...........
--------------------------------------
Total........................ 1.000 1.000 1.000
------------------------------------------------------------------------
Sources: 1997 SNF Medicare Cost Reports; CMS, National Health Accounts.
Note: Totals may not sum to 1.000 due to rounding.
All Other: Subcategory weights for the All Other
category were derived using information from two U.S. Department of
Commerce data sources. Weights for the three utilities cost
categories, as well as that for telephone services, were derived
from the 1997 Business Expenditure Survey. Weights for other cost
categories were derived from the 1997 Annual Input-Output tables.
III. Price Proxies Used To Measure Cost Category Growth
A. Wages and Salaries
For measuring price growth in the wages and salaries cost
component of the 1997-based SNF market basket, we use the percentage
change in the ECI for wages and salaries for private nursing homes.
Comment: Commenters questioned the ability of the ECI for
nursing home wages and salaries to capture trends in wages in SNFs.
The commenters were specifically concerned that the ECI was not
capturing the wage increases shown by other data sources, that the
difference in skill mix between SNFs and nursing homes was not being
reflected, and that the fixed weights in the ECI was not
representative of the current SNF skill mix.
Response: We believe that the ECI for wages and salaries in
nursing homes is the best price proxy for measuring wage changes
facing SNFs. This wage series reflects actual wage data reported by
nursing homes to BLS. This proxy meets our criteria of relevance,
reliability, timeliness, and time-series length. The commenters
expressed concern that the ECI for nursing homes was not capturing
the wage increases shown by other data sources, including other BLS
surveys. Two BLS surveys, other than the ECI, that measure wages for
nursing homes, the Average Hourly Earnings (AHE) and the Employer
Cost for Employee Compensation (ECEC), reflect both changes in
hourly wage and changes in skill mix. As we stated in the proposed
rule, change in occupational mix does not represent a price change
and, as such, should not be included in an input price index.
Otherwise, changes in prices are confounded with shifts among
occupations. In addition, the AHE includes only earnings for
nonsupervisory workers, and the ECEC is only published annually for
March of each year. Thus neither of these wage measures meet our
criteria for use in the SNF market basket. Although referenced in
the comments we received, we have not been provided other data
sources measuring wages for SNF
[[Page 39604]]
employees and, as such, cannot make a determination of the
relevance, reliability, timeliness, or time-series length of the
data.
For our purposes, the ECI appropriately keeps the occupational
mix constant. Currently, the ECI reflects the 1990 distribution of
occupations as measured by the BLS Occupational Employment Survey.
The BLS periodically updates this distribution to reflect a more
recent occupational mix. When the BLS updates the occupational
distribution it will be reflected in the ECI for wages and salaries
in nursing homes and, therefore, will be reflected in the SNF market
basket. However, it is appropriate that the SNF market basket
currently reflect the wage increases associated with a fixed
occupational mix rather than confound changes in wages with changes
in skill mix.
The commenters were concerned that the ECI reflected wages in
nursing homes and not just for SNFs, which they feel have a
different skill mix. The ECI for nursing homes captures wages for
SNFs and other types of nursing and personal care facilities as
defined by the Standard Industrial Classification (SIC). Employment
in skilled nursing care facilities, as measured by the Current
Employment Survey, includes skilled nursing homes, convalescent
homes, extended care facilities, and mental retardation hospitals.
Skilled nursing care facilities, as defined by SIC, represent a
significant portion (at least 70 percent) of total nursing home
employment. The BLS does not publish data, nor are we aware of any
available data that meet our criteria, at a more detailed level than
total nursing homes. As such, we feel that while the ECI for nursing
homes does include more than SNFs, the wage trends and skill mix in
SNFs are adequately represented by this proxy.
B. Employee Benefits
For measuring employee benefits price growth in the 1997-based
market basket, the percentage change in the ECI for benefits for
private nursing homes is used. 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. Again, we
believe that the ECI for nursing homes is the most acceptable and
appropriate benefit series available from reliable, timely, and
relevant statistical sources.
C. 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.
Electricity: For measuring price change in the
electricity cost category, the PPI for Commercial Electric Power is
used.
Fuels, nonhighway: For measuring price change in the
Fuels, Nonhighway cost category, the PPI for Commercial Natural Gas
is used.
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.
Food-wholesale purchases: For measuring price change in
the Food-wholesale purchases cost category, the PPI for Processed
Foods is used.
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 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.
Comment: Some commenters were concerned that the price proxy
used for pharmaceuticals is inappropriate, since the PPI for
prescription drugs may have a different distribution of drugs
included than SNFs use.
Response: The PPI commodity grouping for ethical preparations
(prescription drugs) is a combined index. The weights for each
product included in this PPI are based on the gross value of
shipments (domestic products only) across all industries engaged in
the production of ethical preparations. The weights include all
prescription drugs that are made in the U.S. and do not include
proprietary or biological preparations. The weighting of all ethical
preparations according to the value of shipments means that
pharmaceuticals used by SNFs are included. While there may not be
quite the same proportions of pharmaceuticals used in SNFs as in the
PPI, there is no evidence provided by the commenters or that we have
found suggesting a different price change than reported by the PPI.
There does not exist an alternative proxy for SNF pharmaceuticals
that meets our criteria for inclusion in the index. Based on this,
we feel the PPI for prescription drugs does provide an accurate
representation of the pure price change of pharmaceuticals faced by
SNFs, and thus is an appropriate price proxy.
Chemicals: For measuring price change in the Chemicals
cost category, the PPI for Industrial Chemicals is used.
Rubber and Plastics: For measuring price change in the
Rubber and Plastics cost category, the PPI for Rubber and Plastic
Products is used.
Paper Products: For measuring price change in the Paper
Products cost category, the PPI for Converted Paper and Paperboard
is used.
Miscellaneous Products: For measuring price change in
the Miscellaneous Products cost category, the PPI for Finished Goods
less Food and Energy is used. This represents a change from the 1992
SNF market basket, in which the PPI for Finished Goods is used. Both
food and energy are already adequately represented in separate cost
categories and should not also be reflected in this cost category.
Telephone Services: The percentage change in the price
of Telephone Services as measured by the CPI-U is applied to this
component.
Labor-Intensive Services: For measuring price change in
the Labor-Intensive Services cost category, the ECI for Compensation
for Private Service Occupations is used.
Non Labor-Intensive Services: For measuring price
change in the Non Labor-Intensive Services cost category, the CPI-U
for All Items is used.
D. Capital-Related Expenses
All capital-related expense categories have the same price
proxies as those used in the 1992-based SNF PPS market basket
described in the May 12, 1998 Federal Register (63 FR 26252). 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. CMS
input price indexes, including this rebased SNF index, appropriately
reflect 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 those included in the Bond Buyer Index, the rate of change
between the two is not significantly different. ]
Interest--For-profit SNFs: The Average Yield for
Moody's AAA Corporate Bonds. Again, the final rebased SNF index
focuses on the rate of change in this interest rate and not the
level of the interest rate.
Comment: One commenter indicated that the AAA corporate bond
proxy is not appropriate for SNFs.
Response: We feel that the yield on Moody's AAA corporate bond
rating is an appropriate proxy to use to measure the interest costs
faced by SNFs. While the interest rate levels may not be equal for
differently rated bonds, over the long term on which vintage
weighting is based, the growth rates of the bond yields move
similarly.
Other Capital-related Expenses: The CPI-U for
Residential Rent.
Table A-3.--A Comparison of Price Proxies Used in the 1992-Based and
1997-Based Skilled Nursing Facility Market Baskets
------------------------------------------------------------------------
1992-based price 1997-based price
Cost category proxy proxy
------------------------------------------------------------------------
Wages and Salaries.......... ECI for Wages and Same
Salaries for
Private Nursing
Homes.
Employee Benefits........... ECI for Benefits for Same
Private Nursing
Homes.
[[Page 39605]]
Nonmedical professional fees ECI for Compensation Same
for Private
Professional and
Technical Workers.
Electricity................. PPI for Commercial Same
Electric Power.
Fuels....................... PPI for Commercial Same
Natural Gas.
Water and sewerage.......... CPI-U for Water and Same
Sewerage.
Food--Wholesale purchases... PPI--Processed Foods Same
Food--Retail purchases...... CPI-U--Food Away Same
From Home.
Pharmaceuticals............. PPI for Prescription Same
Drugs.
Chemicals................... PPI for Industrial Same
Chemicals.
Rubber and plastics......... PPI for Rubber and Same
Plastic Products.
Paper products.............. PPI for Converted Same
Paper and
Paperboard.
Miscellaneous products...... PPI for Finished PPI for Finished
Goods. Goods less Food And
Energy
Telephone services.......... CPI-U for Telephone Same
Services.
Labor-intensive services.... ECI for Compensation Same
for private service
occupations.
Non labor-intensive services CPI-U for All Items. Same
Depreciation: Building and Boeckh Institutional Same
Fixed Equipment. Construction Index.
Depreciation: Movable PPI for Machinery Same
Equipment. and Equipment.
Interest: Government and Average Yield Same
Nonprofit SNFs. Municipal Bonds
(Bond Buyer Index--
20 bonds).
Interest: For-profit SNFs... Average Yield Same
Moody's AAA Bonds.
Other Capital-related CPI-U for Same
Expenses. Residential Rent.
------------------------------------------------------------------------
Appendix B.--Swing-Bed Data Elements
------------------------------------------------------------------------
MDS item description MDS2.0 item
------------------------------------------------------------------------
First Name, Middle Initial, Last Name. AA1a, 1b, 1c
Gender................................ AA2
Birth Date............................ AA3
Marital Status........................ A5
Ethnicity/Race........................ AA4
Zip Code.............................. AB4
Resident SSN.......................... AA5a
Resident Medicare Number.............. AA5b
Resident Medicaid Number.............. AA7
Secondary Payer Source................ A7
Facility Medicare Provider Number..... AA6b
Facility Medicaid Provider Number..... AA6a
Admitted From at Entry to Swing-Bed Similar to AB2
Extended Care Services.
Prior Acute Care Admission Date....... New Item
Admission Date........................ AB1
Readmission Date...................... A4
Assessment Reference Date............. A3
Reason for Assessment................. Similar to AA8
Discharge Status...................... R3
Discharge Date........................ R4
Comatose.............................. B1
Short Term Memory..................... B2a
Cognitive skills/Daily Decision-Making B4
Making Self Understood................ C4
Negative Statements................... E1a
Repetitive Statements................. E1b
Repetitive Verbalizations............. E1c
Persistent Anger with Others.......... E1d
Self Deprecation...................... E1e
Expression of Unrealistic Fears....... E1f
Recurrent Statements of Fears for the E1g
Future.
Repetitive Health Complaints.......... E1h
Repetitive Anxious Complaints/Concerns E1i
Unpleasant mood in morning............ E1j
Insomniac/Change in Sleeping Patterns. E1k
Sad/Pained/Worried Facial Expression.. E1l
Crying/tearfulness.................... E1m
Repetitive physical movements......... E1n
Withdrawal from activities of interest E1o
Reduced Social Interaction............ E1p
Behavior symptom--Wandering frequency. E4aa
Behavior symptom--Verbally Abusive E4ba
frequency.
[[Page 39606]]
Behavior symptom--Physically Abusive E4ca
frequency.
Behavior symptom--Socially E4da
Inappropriate/disruption frequency.
Behavior symptom--Resists care E4ea
frequency.
ADL-Self Performance--Bed Mobility.... G1aa
ADL Support--Bed Mobility............. G1ab
ADL--Self Performance--Transfer....... G1ba
ADL Support--Transfer................. G1bb
ADL--Self Performance--Eating......... G1ha
ADL--Support--Eating.................. G1hb
ADL Self-Performance--Toileting....... G1ia
ADL Support--Toileting................ G1ib
Any scheduled toileting plan.......... H3a
Bladder retraining plan............... H3b
Diabetes mellitus..................... I1a
Aphasia............................... I1r
Cerebral Palsy........................ I1s
Hemiplegia/hemiparesis................ I1v
Multiple Sclerosis.................... I1w
Quadriplegia.......................... I1z
Pneumonia............................. I2e
Septicemia............................ I2g
Dehydrated--output exceeds input...... J1c
Delusions............................. J1e
Fever................................. J1h
Hallucinations........................ J1i
Internal bleeding..................... J1j
Vomiting.............................. J1o
Weight loss........................... K3a
Parenteral IV......................... K5a
Feeding Tube.......................... K5b
Total calories by IV.................. K6a
Average fluid intake by IV............ K6b
Ulcers--Stage 1....................... M1a
Ulcers--Stage 2....................... M1b
Ulcers--Stage 3....................... M1c
Ulcers--Stage 4....................... M1d
Pressure Ulcer........................ M2a
Burns................................. M4b
Open lesions.......................... M4c
Surgical Wounds....................... M4g
Pressure relieving device for chair... M5a
Pressure relieving device for bed..... M5b
Turning/Repositioning program......... M5c
Nutrition/hydration program........... M5d
Ulcer Care............................ M5e
Surgical wound care................... M5f
Application of dressings.............. M5g
Application of ointments/medications.. M5h
Infection of foot..................... M6b
Open lesions on foot.................. M6c
Application of dressings.............. M6f
Time Awake--Morning................... N1a
Time Awake Afternoon.................. N1b
Time Awake--Evening................... N1c
Time Awake--None of the Above......... N1d
Injections............................ O3
Chemotherapy.......................... P1aa
Dialysis.............................. P1ab
IV Meds............................... P1ac
Oxygen Therapy........................ P1ag
Radiation............................. P1ah
Suctioning............................ P1ai
Trach Care............................ P1aj
Transfusions.......................... P1ak
Ventilator/respirator................. P1al
Therapy Days--Speech.................. P1baa
Therapy Minutes--Speech............... P1bab
Therapy Days OT....................... P1bba
Therapy Minutes--OT................... P1bbb
Therapy Days--PT...................... P1bca
Therapy Minutes--PT................... P1bcb
Therapy Days Respiratory.............. P1bda
[[Page 39607]]
Therapy Minutes--Respiratory.......... P1bdb
Range of Motion--Passive.............. P3a
Range of Motion--Active............... P3b
Splint or brace assistance............ P3c
Bed Mobility.......................... P3d
Transfer.............................. P3e
Walking............................... P3f
Dressing or grooming.................. P3g
Eating or swallowing.................. P3h
Amputation/prosthesis care............ P3i
Communication......................... P3j
Physician Visits...................... P7
Physician Orders...................... P8
Ordered Therapies..................... T1b
Estimated Therapy days................ T1c
Estimated Therapy Minutes............. T1d
Medicare Case-Mix Group............... T3a
Medicaid Case-Mix Group, if Applicable T3b
HIPPS Assessment Indicator............ New Item (software generated)
RN Signature.......................... R2a
Date of RN Signature.................. R2b
------------------------------------------------------------------------
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare-Hospital Insurance Program; and No. 93.774, Medicare-
Supplementary Medical Insurance Program)
Dated: July 23, 2001.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
Dated: July 24, 2001.
Tommy G. Thompson,
Secretary.
[FR Doc. 01-18869 Filed 7-26-01; 8:45 am]
BILLING CODE 4120-01-P