[Federal Register Volume 81, Number 79 (Monday, April 25, 2016)]
[Proposed Rules]
[Pages 24230-24280]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09399]



[[Page 24229]]

Vol. 81

Monday,

No. 79

April 25, 2016

Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Part 412





Medicare Program; Prospective Payment System and Consolidated Billing 
for Skilled Nursing Facilities Proposed Rule for FY 2017, SNF Value-
Based Purchasing Program, SNF Quality Reporting Program, and SNF 
Payment Models Research; Proposed Rule

  Federal Register / Vol. 81 , No. 79 / Monday, April 25, 2016 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1645-P]
RIN 0938-AS75


Medicare Program; Prospective Payment System and Consolidated 
Billing for Skilled Nursing Facilities Proposed Rule for FY 2017, SNF 
Value-Based Purchasing Program, SNF Quality Reporting Program, and SNF 
Payment Models Research

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update the payment rates used under 
the prospective payment system (PPS) for skilled nursing facilities 
(SNFs) for fiscal year (FY) 2017. In addition, it includes a proposal 
to specify a potentially preventable readmission measure for the 
Skilled Nursing Facility Value-Based Purchasing Program (SNF VBP), and 
other proposals for that program aimed at implementing value-based 
purchasing for SNFs. Additionally, this proposed rule proposes 
additional polices and measures in the Skilled Nursing Facility Quality 
Reporting Program (SNF QRP). This proposed rule also includes an update 
on the SNF Payment Models Research (PMR) project.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 20, 2016.

ADDRESSES: In commenting, please refer to file code CMS-1645-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Within the search bar, enter 
the Regulation Identifier Number associated with this regulation, 0938-
AS44, and then click on the ``Comment Now'' box.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1645-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1645-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:

a. Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue SW., Washington, DC 20201

    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal Government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)

b. Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850

    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
    Penny Gershman, (410) 786-6643, for information related to SNF PPS 
clinical issues.
    John Kane, (410) 786-0557, for information related to the 
development of the payment rates and case-mix indexes.
    Kia Sidbury, (410) 786-7816, for information related to the wage 
index.
    Bill Ullman, (410) 786-5667, for information related to level of 
care determinations, consolidated billing, and general information.
    Stephanie Frilling, (410) 786-4507, for information related to 
skilled nursing facility value-based purchasing.
    Charlayne Van, (410) 786-8659, for information related to skilled 
nursing facility quality reporting.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following Web site as soon as possible after they have been 
received: http://www.regulations.gov. Follow the search instructions on 
that Web site to view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Availability of Certain Tables Exclusively Through the Internet on the 
CMS Web Site

    As discussed in the FY 2016 SNF PPS final rule (80 FR 46390), 
tables setting forth the Wage Index for Urban Areas Based on CBSA Labor 
Market Areas and the Wage Index Based on CBSA Labor Market Areas for 
Rural Areas are no longer published in the Federal Register. Instead, 
these tables are available exclusively through the Internet on the CMS 
Web site. The wage index tables for this proposed rule can be accessed 
on the SNF PPS Wage Index home page, at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.
    Readers who experience any problems accessing any of these online 
SNF PPS wage index tables should contact Kia Sidbury at (410) 786-7816.
    To assist readers in referencing sections contained in this 
document, we are providing the following Table of Contents.

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of Major Provisions
    C. Summary of Cost and Benefits
II. Background on SNF PPS
    A. Statutory Basis and Scope
    B. Initial Transition for the SNF PPS
    C. Required Annual Rate Updates
III. SNF PPS Rate Setting Methodology and FY 2017 Update
    A. Federal Base Rates

[[Page 24231]]

    B. SNF Market Basket Update
    C. Case-Mix Adjustment
    D. Wage Index Adjustment
    E. Adjusted Rate Computation Example
IV. Additional Aspects of the SNF PPS
    A. SNF Level of Care--Administrative Presumption
    B. Consolidated Billing
    C. Payment for SNF-Level Swing-Bed Services
V. Other Issues
    A. Skilled Nursing Facility Value-Based Purchasing Program (SNF 
VBP)
    B. Skilled Nursing Facility (SNF) Quality Reporting Program 
(QRP)
    C. SNF Payment Models Research
VI. Collection of Information Requirements
VII. Response to Comments
VIII. Economic Analyses
Regulation Text

Acronyms

    In addition, because of the many terms to which we refer by acronym 
in this proposed rule, we are listing these abbreviations and their 
corresponding terms in alphabetical order below:

AIDS Acquired Immune Deficiency Syndrome
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
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Pub. L. 106-554
CAH Critical access hospital
CASPER Certification and Survey Provider Enhanced Reporting
CBSA Core-based statistical area
CCN CMS Certification Number
CFR Code of Federal Regulations
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
FFS Fee-for-service
FR Federal Register
FY Fiscal year
HCPCS Healthcare Common Procedure Coding System
HIQR Hospital Inpatient Quality Reporting
HOQR Hospital Outpatient Quality Reporting
HRRP Hospital Readmissions Reduction Program
HVBP Hospital Value-Based Purchasing
IGI IHS (Information Handling Services) Global Insight, Inc.
IMPACT Improving Medicare Post-Acute Care Transformation Act of 
2014, Pub. L. 113-185
IPPS Inpatient prospective payment system
IRF Inpatient Rehabilitation Facility
LTC Long-term care
LTCH Long-term care hospital
MAP Measures Application Partnership
MDS Minimum data set
MFP Multifactor productivity
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Pub. L. 108-173
MSA Metropolitan statistical area
NF Nursing facility
NQF National Quality Forum
OMB Office of Management and Budget
PAC Post-acute care
PAMA Protecting Access to Medicare Act of 2014, Pub. L 113-93
PMR Payment Models Research
PPS Prospective Payment System
PQRS Physician Quality Reporting System
QIES Quality Improvement Evaluation System
QIES ASAP Quality Improvement and Evaluation System Assessment 
Submission and Processing
QRP Quality Reporting Program
RAI Resident assessment instrument
RAVEN Resident assessment validation entry
RFA Regulatory Flexibility Act, Pub. L. 96-354
RIA Regulatory impact analysis
RUG-III Resource Utilization Groups, Version 3
RUG-IV Resource Utilization Groups, Version 4
RUG-53 Refined 53-Group RUG-III Case-Mix Classification System
SCHIP State Children's Health Insurance Program
sDTI Suspected deep tissue injuries
SNF Skilled nursing facility
SNF QRP Skill nursing facility quality reporting program
SNFRM Skilled Nursing Facility 30-Day All-Cause Readmission Measure
STM Staff time measurement
STRIVE Staff time and resource intensity verification
TEP Technical expert panel
UMRA Unfunded Mandates Reform Act, Pub. L. 104-4
VBP Value-based purchasing

I. Executive Summary

A. Purpose

    This proposed rule would update the SNF prospective payment rates 
for FY 2017 as required under section 1888(e)(4)(E) of the Social 
Security Act (the Act). It would also respond to section 1888(e)(4)(H) 
of the Act, which requires the Secretary to provide for publication in 
the Federal Register before the August 1 that precedes the start of 
each fiscal year (FY), certain specified information relating to the 
payment update (see section II.C.). This proposed rule also includes an 
update on the SNF PMR project. In addition, it proposes to specify a 
potentially preventable readmission measure for the Skilled Nursing 
Facility (SNF) Value-Based Purchasing (VBP) Program, and makes other 
proposals related to that Program's implementation for FY 2019. We are 
also proposing four new quality and resource use measures for the SNF 
QRP and are proposing new SNF review and correction procedures for 
performance data that is to be publicly reported.

B. Summary of Major Provisions

    In accordance with sections 1888(e)(4)(E)(ii)(IV) and 1888(e)(5) of 
the Act, the federal rates in this proposed rule would reflect an 
update to the rates that we published in the SNF PPS final rule for FY 
2016 (80 FR 46390) which reflects the SNF market basket index, as 
adjusted by the multifactor productivity (MFP) adjustment for FY 2017. 
We also propose for the SNF VBP Program to specify a potentially 
preventable readmission measure, define performance standards, and 
adopt a scoring methodology, among other policies. We are also 
proposing to adopt and implement four new quality and resource use 
measures for the SNF QRP and are proposing new SNF review and 
correction procedures for performance data that is to be publicly 
reported as we continue to implement this program and meet the 
requirements of the IMPACT Act.

C. Summary of Cost and Benefits

------------------------------------------------------------------------
       Provision description                   Total transfers
------------------------------------------------------------------------
Proposed FY 2017 SNF PPS payment    The overall economic impact of this
 rate update.                        proposed rule would be an estimated
                                     increase of $800 million in
                                     aggregate payments to SNFs during
                                     FY 2017.
------------------------------------------------------------------------

II. Background on SNF PPS

A. Statutory Basis and Scope

    As amended by section 4432 of the Balanced Budget Act of 1997 (BBA, 
Pub. L. 105-33, enacted on August 5, 1997), section 1888(e) of the Act 
provides for the implementation of a PPS for SNFs. This methodology 
uses prospective, case-mix adjusted per diem payment rates applicable 
to all covered SNF services defined in section 1888(e)(2)(A) of the 
Act. The SNF PPS is effective for cost reporting periods beginning on 
or after July 1, 1998, and covers all costs of furnishing covered SNF 
services (routine, ancillary, and capital-related costs) other than 
costs associated with approved educational activities and bad

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debts. Under section 1888(e)(2)(A)(i) of the Act, covered SNF services 
include post-hospital extended care services for which benefits are 
provided under Part A, as well as those items and services (other than 
a small number of excluded services, such as physician services) for 
which payment may otherwise be made under Part B and which are 
furnished to Medicare beneficiaries who are residents in a SNF during a 
covered Part A stay. A comprehensive discussion of these provisions 
appears in the May 12, 1998 interim final rule (63 FR 26252). In 
addition, a detailed discussion of the legislative history of the SNF 
PPS is available online at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_07302013.pdf.
    Section 215(a) of PAMA added section 1888(g) to the Act requiring 
the Secretary to specify an all-cause all-condition hospital 
readmission measure and a resource use measure, an all-condition risk-
adjusted potentially preventable hospital readmission measure, for the 
SNF setting. Additionally, section 215(b) of PAMA added section 1888(h) 
to the Act requiring the Secretary to implement a VBP program for SNFs. 
Finally, section 2(a) of the IMPACT Act added section 1899B to the Act 
that, among other things, requires SNFs to report standardized data for 
measures in specified quality and resource use domains. In addition, 
the IMPACT Act added section 1888(e)(6) to the Act, which requires the 
Secretary to implement a quality reporting program for SNFs, which 
includes a requirement that SNFs report certain data to receive their 
full payment under the SNF PPS.

B. Initial Transition for the SNF PPS

    Under sections 1888(e)(1)(A) and 1888(e)(11) of the Act, the SNF 
PPS included an initial, three-phase transition that blended a 
facility-specific rate (reflecting the individual facility's historical 
cost experience) with the federal case-mix adjusted rate. The 
transition extended through the facility's first 3 cost reporting 
periods under the PPS, up to and including the one that began in FY 
2001. Thus, the SNF PPS is no longer operating under the transition, as 
all facilities have been paid at the full federal rate effective with 
cost reporting periods beginning in FY 2002. As we now base payments 
for SNFs entirely on the adjusted federal per diem rates, we no longer 
include adjustment factors under the transition related to facility-
specific rates for the upcoming FY.

C. Required Annual Rate Updates

    Section 1888(e)(4)(E) of the Act requires the SNF PPS payment rates 
to be updated annually. The most recent annual update occurred in a 
final rule that set forth updates to the SNF PPS payment rates for FY 
2016 (80 FR 46390, August 4, 2015).
    Section 1888(e)(4)(H) of the Act specifies that we provide for 
publication annually in the Federal Register of the following:
     The unadjusted federal per diem rates to be applied to 
days of covered SNF services furnished during the upcoming FY.
     The case-mix classification system to be applied for these 
services during the upcoming FY.
     The factors to be applied in making the area wage 
adjustment for these services.
    Along with other revisions discussed later in this preamble, this 
proposed rule would provide the required annual updates to the per diem 
payment rates for SNFs for FY 2017.

III. SNF PPS Rate Setting Methodology and FY 2017 Update

A. Federal Base Rates

    Under section 1888(e)(4) of the Act, the SNF PPS uses per diem 
federal payment rates based on mean SNF costs in a base year (FY 1995) 
updated for inflation to the first effective period of the PPS. We 
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 a Part B add-on, which is an estimate of the amounts 
that, prior to the SNF PPS, would have been payable under Part B for 
covered SNF services furnished to individuals during the course of a 
covered Part A stay in a SNF.
    In developing the rates for the initial period, we updated costs to 
the first effective year of the PPS (the 15-month period beginning July 
1, 1998) using a SNF market basket index, and then standardized for 
geographic variations in wages and for the costs of facility 
differences in case mix. In compiling the database used to compute the 
federal payment rates, we excluded those providers that received new 
provider exemptions from the routine cost limits, as well as costs 
related to payments for exceptions to the routine cost limits. Using 
the formula that the BBA prescribed, 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, and adjusted the portion of the federal rate 
attributable to wage-related costs by a wage index to reflect 
geographic variations in wages.

B. SNF Market Basket Update

1. SNF Market Basket Index
    Section 1888(e)(5)(A) of the Act requires us 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 covered SNF services. 
Accordingly, we have developed a SNF market basket index that 
encompasses the most commonly used cost categories for SNF routine 
services, ancillary services, and capital-related expenses. We use the 
SNF market basket index, adjusted in the manner described below, to 
update the federal rates on an annual basis. In the SNF PPS final rule 
for FY 2014 (78 FR 47939 through 47946), we revised and rebased the 
market basket, which included updating the base year from FY 2004 to FY 
2010.
    For the FY 2017 proposed rule, the FY 2010-based SNF market basket 
growth rate is estimated to be 2.6 percent, which is based on the IHS 
Global Insight, Inc. (IGI) first quarter 2016 forecast with historical 
data through fourth quarter 2015. In section III.B.5. of this proposed 
rule, we discuss the specific application of this adjustment to the 
forthcoming annual update of the SNF PPS payment rates.
2. Use of the SNF Market Basket Percentage
    Section 1888(e)(5)(B) of the Act defines the SNF market basket 
percentage as the percentage change in the SNF market basket index from 
the midpoint of the previous FY to the midpoint of the current FY. For 
the federal rates set forth in this proposed rule, we use the 
percentage change in the SNF market basket index to compute the update 
factor for FY 2017. This is based on the IGI first quarter 2016 
forecast (with historical data through the fourth quarter 2015) of the 
FY 2017 percentage increase in the FY 2010-based SNF market basket 
index for routine, ancillary, and capital-related expenses, which is 
used to compute the update factor in this proposed rule. As discussed 
in sections III.B.3. and III.B.4. of this proposed rule, this market 
basket percentage change would be reduced by the applicable forecast 
error correction (as described in Sec.  413.337(d)(2)) and by the MFP 
adjustment as required by

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section 1888(e)(5)(B)(ii) of the Act. Finally, as discussed in section 
II.B. of this proposed rule, we no longer compute update factors to 
adjust a facility-specific portion of the SNF PPS rates, because the 
initial three-phase transition period from facility-specific to full 
federal rates that started with cost reporting periods beginning in 
July 1998 has expired.
3. Forecast Error Adjustment
    As discussed in the June 10, 2003 supplemental proposed rule (68 FR 
34768) and finalized in the August 4, 2003, final rule (68 FR 46057 
through 46059), Sec.  413.337(d)(2) provides for an adjustment to 
account for market basket forecast error. The initial adjustment for 
market basket forecast error applied to the update of the FY 2003 rate 
for FY 2004, and took into account the cumulative forecast error for 
the period from FY 2000 through FY 2002, resulting in an increase of 
3.26 percent to the FY 2004 update. Subsequent adjustments in 
succeeding FYs take into account the forecast error from the most 
recently available FY for which there is final data, and apply the 
difference between the forecasted and actual change in the market 
basket when the difference exceeds a specified threshold. We originally 
used a 0.25 percentage point threshold for this purpose; however, for 
the reasons specified in the FY 2008 SNF PPS final rule (72 FR 43425, 
August 3, 2007), we adopted a 0.5 percentage point threshold effective 
for FY 2008 and subsequent FYs. As we stated in the final rule for FY 
2004 that first issued the market basket forecast error adjustment (68 
FR 46058, August 4, 2003), the adjustment will reflect both upward and 
downward adjustments, as appropriate.
    For FY 2015 (the most recently available FY for which there is 
final data), the estimated increase in the market basket index was 2.5 
percentage points, while the actual increase for FY 2015 was 2.3 
percentage points, resulting in the actual increase being 0.2 
percentage point lower than the estimated increase. Accordingly, as the 
difference between the estimated and actual amount of change in the 
market basket index does not exceed the 0.5 percentage point threshold, 
the FY 2017 market basket percentage change of 2.6 percent would be not 
adjusted to account for the forecast error correction. Table 1 shows 
the forecasted and actual market basket amounts for FY 2015.

            Table 1--Difference Between the Forecasted and Actual Market Basket Increases for FY 2015
----------------------------------------------------------------------------------------------------------------
                                                                Forecasted FY    Actual FY 2015      FY 2015
                            Index                              2015 increase *    increase **       difference
----------------------------------------------------------------------------------------------------------------
SNF..........................................................             2.5              2.3              0.2
----------------------------------------------------------------------------------------------------------------
* Published in Federal Register; based on second quarter 2014 IGI forecast (2010-based index).
** Based on the first quarter 2016 IGI forecast, with historical data through the fourth quarter 2015 (2010-
  based index).

4. Multifactor Productivity Adjustment
    Section 3401(b) of the Affordable Care Act requires that, in FY 
2012 (and in subsequent FYs), the market basket percentage under the 
SNF payment system as described in section 1888(e)(5)(B)(i) of the Act 
is to be reduced annually by the productivity adjustment described in 
section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) 
of the Act, added by section 3401(a) of the Affordable Care Act, sets 
forth the definition of this productivity adjustment. The statute 
defines the productivity adjustment to be equal to the 10-year moving 
average of changes in annual economy-wide private nonfarm business 
multi-factor productivity (as projected by the Secretary for the 10-
year period ending with the applicable FY, year, cost-reporting period, 
or other annual period) (the MFP adjustment). The Bureau of Labor 
Statistics (BLS) is the agency that publishes the official measure of 
private nonfarm business MFP. We refer readers to the BLS Web site at 
http://www.bls.gov/mfp for the BLS historical published MFP data.
    MFP is derived by subtracting the contribution of labor and capital 
inputs growth from output growth. The projections of the components of 
MFP are currently produced by IGI, a nationally recognized economic 
forecasting firm with which CMS contracts to forecast the components of 
the market baskets and MFP. To generate a forecast of MFP, IGI 
replicates the MFP measure calculated by the BLS, using a series of 
proxy variables derived from IGI's U.S. macroeconomic models. For a 
discussion of the MFP projection methodology, we refer readers to the 
FY 2012 SNF PPS final rule (76 FR 48527 through 48529) and the FY 2016 
SNF PPS final rule (80 FR 46395). A complete description of the MFP 
projection methodology is available on our Web site at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html.
a. Incorporating the MFP Adjustment Into the Market Basket Update
    Per section 1888(e)(5)(A) of the Act, the Secretary shall establish 
a SNF market basket index that reflects changes over time in the prices 
of an appropriate mix of goods and services included in covered SNF 
services. Section 1888(e)(5)(B)(ii) of the Act, added by section 
3401(b) of the Affordable Care Act, requires that for FY 2012 and each 
subsequent FY, after determining the market basket percentage described 
in section 1888(e)(5)(B)(i) of the Act, the Secretary shall reduce such 
percentage by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) (which we refer to as the MFP adjustment). 
Section 1888(e)(5)(B)(ii) of the Act further states that the reduction 
of the market basket percentage by the MFP adjustment may result in the 
market basket percentage being less than zero for a FY, and may result 
in payment rates under section 1888(e) of the Act for a FY being less 
than such payment rates for the preceding FY. Thus, if the application 
of the MFP adjustment to the market basket percentage calculated under 
section 1888(e)(5)(B)(i) of the Act results in an MFP-adjusted market 
basket percentage that is less than zero, then the annual update to the 
unadjusted federal per diem rates under section 1888(e)(4)(E)(ii) of 
the Act would be negative, and such rates would decrease relative to 
the prior FY.
    For the FY 2017 update, the MFP adjustment is calculated as the 10-
year moving average of changes in MFP for the period ending September 
30, 2017, which is 0.5 percent. Consistent with section 
1888(e)(5)(B)(i) of the Act and Sec.  413.337(d)(2) of the regulations, 
the market basket percentage for FY 2017 for the SNF PPS is based on 
IGI's first quarter 2016 forecast of the SNF market basket update, 
which is estimated to be 2.6 percent. In accordance with section

[[Page 24234]]

1888(e)(5)(B)(ii) of the Act (as added by section 3401(b) of the 
Affordable Care Act) and Sec.  413.337(d)(3), this market basket 
percentage is then reduced by the MFP adjustment (the 10-year moving 
average of changes in MFP for the period ending September 30, 2017) of 
0.5 percent, which is calculated as described above and based on IGI's 
first quarter 2016 forecast. The resulting MFP-adjusted SNF market 
basket update is equal to 2.1 percent, or 2.6 percent less 0.5 
percentage point.
5. Market Basket Update Factor for FY 2017
    Sections 1888(e)(4)(E)(ii)(IV) and 1888(e)(5)(i) of the Act require 
that the update factor used to establish the FY 2017 unadjusted federal 
rates be at a level equal to the market basket index percentage change. 
Accordingly, we determined the total growth from the average market 
basket level for the period of October 1, 2015 through September 30, 
2016 to the average market basket level for the period of October 1, 
2016 through September 30, 2017. This process yields a percentage 
change in the market basket of 2.6 percent.
    As further explained in section III.B.3. of this proposed rule, as 
applicable, we adjust the market basket percentage change by the 
forecast error from the most recently available FY for which there is 
final data and apply this adjustment whenever the difference between 
the forecasted and actual percentage change in the market basket 
exceeds a 0.5 percentage point threshold. Since the difference between 
the forecasted FY 2015 SNF market basket percentage change and the 
actual FY 2015 SNF market basket percentage change (FY 2015 is the most 
recently available FY for which there is historical data) did not 
exceed the 0.5 percentage point threshold, the FY 2017 market basket 
percentage change of 2.6 percent would not be adjusted by the forecast 
error correction.
    For FY 2017, section 1888(e)(5)(B)(ii) of the Act requires us to 
reduce the market basket percentage change by the MFP adjustment (the 
10-year moving average of changes in MFP for the period ending 
September 30, 2017) of 0.5 percent, as described in section III.B.4. of 
this proposed rule. The resulting net SNF market basket update would 
equal 2.1 percent, or 2.6 percent less the 0.5 percentage point MFP 
adjustment. We propose that if more recent data become available (for 
example, a more recent estimate of the FY 2010-based SNF market basket 
and/or MFP adjustment), we would use such data, if appropriate, to 
determine the FY 2017 SNF market basket percentage change, labor-
related share relative importance, forecast error adjustment, and MFP 
adjustment in the FY 2017 SNF PPS final rule.
    We used the SNF market basket, adjusted as described above, to 
adjust each per diem component of the federal rates forward to reflect 
the change in the average prices for FY 2017 from average prices for FY 
2016. We would further adjust the rates by a wage index budget 
neutrality factor, described later in this section. Tables 2 and 3 
reflect the updated components of the unadjusted federal rates for FY 
2017, prior to adjustment for case-mix.

                             Table 2--FY 2017 Unadjusted Federal Rate per Diem Urban
----------------------------------------------------------------------------------------------------------------
                                               Nursing--Case-   Therapy--Case-   Therapy--Non-
               Rate component                       mix              mix            case-mix       Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount.............................         $174.71          $131.61           $17.33           $89.16
----------------------------------------------------------------------------------------------------------------


                             Table 3--FY 2017 Unadjusted Federal Rate per Diem Rural
----------------------------------------------------------------------------------------------------------------
                                               Nursing--Case-   Therapy--Case-   Therapy--Non-
               Rate component                       mix              mix            case-mix       Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount.............................         $166.91          $151.74           $18.52           $90.82
----------------------------------------------------------------------------------------------------------------

C. Case-Mix Adjustment

    Under section 1888(e)(4)(G)(i) of the Act, the federal rate also 
incorporates an adjustment to account for facility case-mix, using a 
classification system that accounts for the relative resource 
utilization of different patient types. The statute specifies that the 
adjustment is to reflect both a resident classification system that the 
Secretary establishes to account for the relative resource use of 
different patient types, as well as resident assessment data and other 
data that the Secretary considers appropriate. In the interim final 
rule with comment period that initially implemented the SNF PPS (63 FR 
26252, May 12, 1998), we developed the RUG-III case-mix classification 
system, which tied the amount of payment to resident resource use in 
combination with resident characteristic information. Staff time 
measurement (STM) studies conducted in 1990, 1995, and 1997 provided 
information on resource use (time spent by staff members on residents) 
and resident characteristics that enabled us not only to establish RUG-
III, but also to create case-mix indexes (CMIs). The original RUG-III 
grouper logic was based on clinical data collected in 1990, 1995, and 
1997. As discussed in the SNF PPS proposed rule for FY 2010 (74 FR 
22208), we subsequently conducted a multi-year data collection and 
analysis under the Staff Time and Resource Intensity Verification 
(STRIVE) project to update the case-mix classification system for FY 
2011. The resulting Resource Utilization Groups, Version 4 (RUG-IV) 
case-mix classification system reflected the data collected in 2006-
2007 during the STRIVE project, and was finalized in the FY 2010 SNF 
PPS final rule (74 FR 40288) to take effect in FY 2011 concurrently 
with an updated new resident assessment instrument, version 3.0 of the 
Minimum Data Set (MDS 3.0), which collects the clinical data used for 
case-mix classification under RUG-IV.
    We note that case-mix classification is based, in part, on the 
beneficiary's need for skilled nursing care and therapy services. The 
case-mix classification system uses clinical data from the MDS to 
assign a case-mix group to each patient that is then used to calculate 
a per diem payment under the SNF PPS. As discussed in section IV.A. of 
this proposed rule, the clinical orientation of the case-mix 
classification system supports the SNF PPS's use of an administrative 
presumption that considers a beneficiary's initial case-mix 
classification to assist in making certain SNF level of care 
determinations. Further, because the MDS is used as a basis for 
payment, as well as a clinical assessment, we have provided extensive 
training on proper coding and the time

[[Page 24235]]

frames for MDS completion in our Resident Assessment Instrument (RAI) 
Manual. For an MDS to be considered valid for use in determining 
payment, the MDS assessment must be completed in compliance with the 
instructions in the RAI Manual in effect at the time the assessment is 
completed. For payment and quality monitoring purposes, the RAI Manual 
consists of both the Manual instructions and the interpretive guidance 
and policy clarifications posted on the appropriate MDS Web site at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/MDS30RAIManual.html.
    In addition, we note that section 511 of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (MMA, Pub. L. 108-173) 
amended section 1888(e)(12) of the Act to provide for a temporary 
increase of 128 percent in the PPS per diem payment for any SNF 
residents with Acquired Immune Deficiency Syndrome (AIDS), effective 
with services furnished on or after October 1, 2004. This special add-
on for SNF residents with AIDS was to remain in effect until the 
Secretary certifies that there is an appropriate adjustment in the case 
mix to compensate for the increased costs associated with such 
residents. The add-on for SNF residents with AIDS is also discussed in 
Program Transmittal #160 (Change Request #3291), issued on April 30, 
2004, which is available online at www.cms.gov/transmittals/downloads/r160cp.pdf. In the SNF PPS final rule for FY 2010 (74 FR 40288), we did 
not address this certification in that final rule's implementation of 
the case-mix refinements for RUG-IV, thus allowing the add-on payment 
required by section 511 of the MMA to remain in effect. For the limited 
number of SNF residents that qualify for this add-on, there is a 
significant increase in payments. For example, using FY 2014 data 
(which still used ICD-9-CM coding), we identified fewer than 4,800 SNF 
residents with a diagnosis code of 042 (Human Immunodeficiency Virus 
(HIV) Infection). As explained in the FY 2016 SNF PPS final rule (80 FR 
46397 through 46398), on October 1, 2015 (consistent with section 212 
of PAMA), we converted to using ICD-10-CM code B20 to identify those 
residents for whom it is appropriate to apply the AIDS add-on 
established by section 511 of the MMA. For FY 2017, an urban facility 
with a resident with AIDS in RUG-IV group ``HC2'' would have a case-mix 
adjusted per diem payment of $436.69 (see Table 4) before the 
application of the MMA adjustment. After an increase of 128 percent, 
this urban facility would receive a case-mix adjusted per diem payment 
of approximately $995.65.
    Under section 1888(e)(4)(H), each update of the payment rates must 
include the case-mix classification methodology applicable for the 
upcoming FY. The payment rates set forth in this proposed rule reflect 
the use of the RUG-IV case-mix classification system from October 1, 
2016, through September 30, 2017. We list the proposed case-mix 
adjusted RUG-IV payment rates, provided separately for urban and rural 
SNFs, in Tables 4 and 5 with corresponding case-mix values. We use the 
revised OMB delineations adopted in the FY 2015 SNF PPS final rule (79 
FR 45632, 45634) to identify a facility's urban or rural status for the 
purpose of determining which set of rate tables would apply to the 
facility. Tables 4 and 5 do not reflect the add-on for SNF residents 
with AIDS enacted by section 511 of the MMA, which we apply only after 
making all other adjustments (such as wage index and case-mix).

                                      Table 4--RUG-IV Case-Mix Adjusted Federal Rates and Associated Indexes URBAN
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Nursing         Therapy      Non-case mix    Non-case mix
             RUG-IV category               Nursing index   Therapy index     component       component     therapy comp      component      Total rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUX.....................................            2.67            1.87         $466.48         $246.11  ..............          $89.16         $801.75
RUL.....................................            2.57            1.87          449.00          246.11  ..............           89.16          784.27
RVX.....................................            2.61            1.28          455.99          168.46  ..............           89.16          713.61
RVL.....................................            2.19            1.28          382.61          168.46  ..............           89.16          640.23
RHX.....................................            2.55            0.85          445.51          111.87  ..............           89.16          646.54
RHL.....................................            2.15            0.85          375.63          111.87  ..............           89.16          576.66
RMX.....................................            2.47            0.55          431.53           72.39  ..............           89.16          593.08
RML.....................................            2.19            0.55          382.61           72.39  ..............           89.16          544.16
RLX.....................................            2.26            0.28          394.84           36.85  ..............           89.16          520.85
RUC.....................................            1.56            1.87          272.55          246.11  ..............           89.16          607.82
RUB.....................................            1.56            1.87          272.55          246.11  ..............           89.16          607.82
RUA.....................................            0.99            1.87          172.96          246.11  ..............           89.16          508.23
RVC.....................................            1.51            1.28          263.81          168.46  ..............           89.16          521.43
RVB.....................................            1.11            1.28          193.93          168.46  ..............           89.16          451.55
RVA.....................................            1.10            1.28          192.18          168.46  ..............           89.16          449.80
RHC.....................................            1.45            0.85          253.33          111.87  ..............           89.16          454.36
RHB.....................................            1.19            0.85          207.90          111.87  ..............           89.16          408.93
RHA.....................................            0.91            0.85          158.99          111.87  ..............           89.16          360.02
RMC.....................................            1.36            0.55          237.61           72.39  ..............           89.16          399.16
RMB.....................................            1.22            0.55          213.15           72.39  ..............           89.16          374.70
RMA.....................................            0.84            0.55          146.76           72.39  ..............           89.16          308.31
RLB.....................................            1.50            0.28          262.07           36.85  ..............           89.16          388.08
RLA.....................................            0.71            0.28          124.04           36.85  ..............           89.16          250.05
ES3.....................................            3.58  ..............          625.46  ..............          $17.33           89.16          731.95
ES2.....................................            2.67  ..............          466.48  ..............           17.33           89.16          572.97
ES1.....................................            2.32  ..............          405.33  ..............           17.33           89.16          511.82
HE2.....................................            2.22  ..............          387.86  ..............           17.33           89.16          494.35
HE1.....................................            1.74  ..............          304.00  ..............           17.33           89.16          410.49
HD2.....................................            2.04  ..............          356.41  ..............           17.33           89.16          462.90
HD1.....................................            1.60  ..............          279.54  ..............           17.33           89.16          386.03
HC2.....................................            1.89  ..............          330.20  ..............           17.33           89.16          436.69
HC1.....................................            1.48  ..............          258.57  ..............           17.33           89.16          365.06
HB2.....................................            1.86  ..............          324.96  ..............           17.33           89.16          431.45
HB1.....................................            1.46  ..............          255.08  ..............           17.33           89.16          361.57

[[Page 24236]]

 
LE2.....................................            1.96  ..............          342.43  ..............           17.33           89.16          448.92
LE1.....................................            1.54  ..............          269.05  ..............           17.33           89.16          375.54
LD2.....................................            1.86  ..............          324.96  ..............           17.33           89.16          431.45
LD1.....................................            1.46  ..............          255.08  ..............           17.33           89.16          361.57
LC2.....................................            1.56  ..............          272.55  ..............           17.33           89.16          379.04
LC1.....................................            1.22  ..............          213.15  ..............           17.33           89.16          319.64
LB2.....................................            1.45  ..............          253.33  ..............           17.33           89.16          359.82
LB1.....................................            1.14  ..............          199.17  ..............           17.33           89.16          305.66
CE2.....................................            1.68  ..............          293.51  ..............           17.33           89.16          400.00
CE1.....................................            1.50  ..............          262.07  ..............           17.33           89.16          368.56
CD2.....................................            1.56  ..............          272.55  ..............           17.33           89.16          379.04
CD1.....................................            1.38  ..............          241.10  ..............           17.33           89.16          347.59
CC2.....................................            1.29  ..............          225.38  ..............           17.33           89.16          331.87
CC1.....................................            1.15  ..............          200.92  ..............           17.33           89.16          307.41
CB2.....................................            1.15  ..............          200.92  ..............           17.33           89.16          307.41
CB1.....................................            1.02  ..............          178.20  ..............           17.33           89.16          284.69
CA2.....................................            0.88  ..............          153.74  ..............           17.33           89.16          260.23
CA1.....................................            0.78  ..............          136.27  ..............           17.33           89.16          242.76
BB2.....................................            0.97  ..............          169.47  ..............           17.33           89.16          275.96
BB1.....................................            0.90  ..............          157.24  ..............           17.33           89.16          263.73
BA2.....................................            0.70  ..............          122.30  ..............           17.33           89.16          228.79
BA1.....................................            0.64  ..............          111.81  ..............           17.33           89.16          218.30
PE2.....................................            1.50  ..............          262.07  ..............           17.33           89.16          368.56
PE1.....................................            1.40  ..............          244.59  ..............           17.33           89.16          351.08
PD2.....................................            1.38  ..............          241.10  ..............           17.33           89.16          347.59
PD1.....................................            1.28  ..............          223.63  ..............           17.33           89.16          330.12
PC2.....................................            1.10  ..............          192.18  ..............           17.33           89.16          298.67
PC1.....................................            1.02  ..............          178.20  ..............           17.33           89.16          284.69
PB2.....................................            0.84  ..............          146.76  ..............           17.33           89.16          253.25
PB1.....................................            0.78  ..............          136.27  ..............           17.33           89.16          242.76
PA2.....................................            0.59  ..............          103.08  ..............           17.33           89.16          209.57
PA1.....................................            0.54  ..............           94.34  ..............           17.33           89.16          200.83
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                      Table 5--RUG-IV Case-Mix Adjusted Federal Rates and Associated Indexes RURAL
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Nursing         Therapy      Non-case mix    Non-case mix
             RUG-IV category               Nursing index   Therapy index     component       component     therapy comp      component      Total rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUX.....................................            2.67            1.87         $445.65         $283.75  ..............          $90.82         $820.22
RUL.....................................            2.57            1.87          428.96          283.75  ..............           90.82          803.53
RVX.....................................            2.61            1.28          435.64          194.23  ..............           90.82          720.69
RVL.....................................            2.19            1.28          365.53          194.23  ..............           90.82          650.58
RHX.....................................            2.55            0.85          425.62          128.98  ..............           90.82          645.42
RHL.....................................            2.15            0.85          358.86          128.98  ..............           90.82          578.66
RMX.....................................            2.47            0.55          412.27           83.46  ..............           90.82          586.55
RML.....................................            2.19            0.55          365.53           83.46  ..............           90.82          539.81
RLX.....................................            2.26            0.28          377.22           42.49  ..............           90.82          510.53
RUC.....................................            1.56            1.87          260.38          283.75  ..............           90.82          634.95
RUB.....................................            1.56            1.87          260.38          283.75  ..............           90.82          634.95
RUA.....................................            0.99            1.87          165.24          283.75  ..............           90.82          539.81
RVC.....................................            1.51            1.28          252.03          194.23  ..............           90.82          537.08
RVB.....................................            1.11            1.28          185.27          194.23  ..............           90.82          470.32
RVA.....................................            1.10            1.28          183.60          194.23  ..............           90.82          468.65
RHC.....................................            1.45            0.85          242.02          128.98  ..............           90.82          461.82
RHB.....................................            1.19            0.85          198.62          128.98  ..............           90.82          418.42
RHA.....................................            0.91            0.85          151.89          128.98  ..............           90.82          371.69
RMC.....................................            1.36            0.55          227.00           83.46  ..............           90.82          401.28
RMB.....................................            1.22            0.55          203.63           83.46  ..............           90.82          377.91
RMA.....................................            0.84            0.55          140.20           83.46  ..............           90.82          314.48
RLB.....................................            1.50            0.28          250.37           42.49  ..............           90.82          383.68
RLA.....................................            0.71            0.28          118.51           42.49  ..............           90.82          251.82
ES3.....................................            3.58  ..............          597.54  ..............          $18.52           90.82          706.88
ES2.....................................            2.67  ..............          445.65  ..............           18.52           90.82          554.99
ES1.....................................            2.32  ..............          387.23  ..............           18.52           90.82          496.57
HE2.....................................            2.22  ..............          370.54  ..............           18.52           90.82          479.88
HE1.....................................            1.74  ..............          290.42  ..............           18.52           90.82          399.76
HD2.....................................            2.04  ..............          340.50  ..............           18.52           90.82          449.84
HD1.....................................            1.60  ..............          267.06  ..............           18.52           90.82          376.40
HC2.....................................            1.89  ..............          315.46  ..............           18.52           90.82          424.80
HC1.....................................            1.48  ..............          247.03  ..............           18.52           90.82          356.37

[[Page 24237]]

 
HB2.....................................            1.86  ..............          310.45  ..............           18.52           90.82          419.79
HB1.....................................            1.46  ..............          243.69  ..............           18.52           90.82          353.03
LE2.....................................            1.96  ..............          327.14  ..............           18.52           90.82          436.48
LE1.....................................            1.54  ..............          257.04  ..............           18.52           90.82          366.38
LD2.....................................            1.86  ..............          310.45  ..............           18.52           90.82          419.79
LD1.....................................            1.46  ..............          243.69  ..............           18.52           90.82          353.03
LC2.....................................            1.56  ..............          260.38  ..............           18.52           90.82          369.72
LC1.....................................            1.22  ..............          203.63  ..............           18.52           90.82          312.97
LB2.....................................            1.45  ..............          242.02  ..............           18.52           90.82          351.36
LB1.....................................            1.14  ..............          190.28  ..............           18.52           90.82          299.62
CE2.....................................            1.68  ..............          280.41  ..............           18.52           90.82          389.75
CE1.....................................            1.50  ..............          250.37  ..............           18.52           90.82          359.71
CD2.....................................            1.56  ..............          260.38  ..............           18.52           90.82          369.72
CD1.....................................            1.38  ..............          230.34  ..............           18.52           90.82          339.68
CC2.....................................            1.29  ..............          215.31  ..............           18.52           90.82          324.65
CC1.....................................            1.15  ..............          191.95  ..............           18.52           90.82          301.29
CB2.....................................            1.15  ..............          191.95  ..............           18.52           90.82          301.29
CB1.....................................            1.02  ..............          170.25  ..............           18.52           90.82          279.59
CA2.....................................            0.88  ..............          146.88  ..............           18.52           90.82          256.22
CA1.....................................            0.78  ..............          130.19  ..............           18.52           90.82          239.53
BB2.....................................            0.97  ..............          161.90  ..............           18.52           90.82          271.24
BB1.....................................            0.90  ..............          150.22  ..............           18.52           90.82          259.56
BA2.....................................            0.70  ..............          116.84  ..............           18.52           90.82          226.18
BA1.....................................            0.64  ..............          106.82  ..............           18.52           90.82          216.16
PE2.....................................            1.50  ..............          250.37  ..............           18.52           90.82          359.71
PE1.....................................            1.40  ..............          233.67  ..............           18.52           90.82          343.01
PD2.....................................            1.38  ..............          230.34  ..............           18.52           90.82          339.68
PD1.....................................            1.28  ..............          213.64  ..............           18.52           90.82          322.98
PC2.....................................            1.10  ..............          183.60  ..............           18.52           90.82          292.94
PC1.....................................            1.02  ..............          170.25  ..............           18.52           90.82          279.59
PB2.....................................            0.84  ..............          140.20  ..............           18.52           90.82          249.54
PB1.....................................            0.78  ..............          130.19  ..............           18.52           90.82          239.53
PA2.....................................            0.59  ..............           98.48  ..............           18.52           90.82          207.82
PA1.....................................            0.54  ..............           90.13  ..............           18.52           90.82          199.47
--------------------------------------------------------------------------------------------------------------------------------------------------------

D. Wage Index Adjustment

    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 a 
wage index that the Secretary determines appropriate. Since the 
inception of the SNF PPS, we have used hospital inpatient wage data in 
developing a wage index to be applied to SNFs. We propose to continue 
this practice for FY 2017, as we continue to believe that in the 
absence of SNF-specific wage data, using the hospital inpatient wage 
index data is appropriate and reasonable for the SNF PPS. As explained 
in the update notice for FY 2005 (69 FR 45786), the SNF PPS does not 
use the hospital area wage index's occupational mix adjustment, as this 
adjustment serves specifically to define the occupational categories 
more clearly in a hospital setting; moreover, the collection of the 
occupational wage data also excludes any wage data related to SNFs. 
Therefore, we believe that using the updated wage data exclusive of the 
occupational mix adjustment continues to be appropriate for SNF 
payments. For FY 2017, the updated wage data are for hospital cost 
reporting periods beginning on or after October 1, 2012 and before 
October 1, 2013 (FY 2013 cost report data).
    We note that section 315 of the Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106-554, 
enacted on December 21, 2000) authorized us to establish a geographic 
reclassification procedure that is specific to SNFs, but only after 
collecting the data necessary to establish a SNF wage index that is 
based on wage data from nursing homes. However, to date, this has 
proven to be unfeasible due to the volatility of existing SNF wage data 
and the significant amount of resources that would be required to 
improve the quality of that data.
    In addition, we propose to continue to use the same methodology 
discussed in the SNF PPS final rule for FY 2008 (72 FR 43423) to 
address those geographic areas in which there are no hospitals, and 
thus, no hospital wage index data on which to base the calculation of 
the FY 2017 SNF PPS wage index. For rural geographic areas that do not 
have hospitals, and therefore, lack hospital wage data on which to base 
an area wage adjustment, we would use the average wage index from all 
contiguous Core-Based Statistical Areas (CBSAs) as a reasonable proxy. 
For FY 2017, there are no rural geographic areas that do not have 
hospitals, and thus, this methodology would not be applied. For rural 
Puerto Rico, we would not apply this methodology due to the distinct 
economic circumstances that exist there (for example, due to the close 
proximity to one another of almost all of Puerto Rico's various urban 
and non-urban areas, this methodology would produce a wage index for 
rural Puerto Rico that is higher than that in half of its urban areas); 
instead, we would continue to use the most recent wage index previously 
available for that area. For urban areas without specific hospital wage 
index data, we would use the average wage indexes of all of the urban 
areas within the state to serve as a reasonable proxy for the wage 
index of that urban CBSA. For FY 2017, the only urban area without wage 
index data available is CBSA 25980, Hinesville-Fort Stewart, GA. The 
proposed wage index applicable to FY 2017 is set forth in Tables A and 
B available on the CMS Web site at http://www.cms.gov/

[[Page 24238]]

Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.
    Once calculated, we would apply the wage index adjustment to the 
labor-related portion of the federal rate. Each year, we calculate a 
revised labor-related share, based on the relative importance of labor-
related cost categories (that is, those cost categories that are labor-
intensive and vary with the local labor market) in the input price 
index. In the SNF PPS final rule for FY 2014 (78 FR 47944 through 
47946), we finalized a proposal to revise the labor-related share to 
reflect the relative importance of the FY 2010-based SNF market basket 
cost weights for the following cost categories: Wages and salaries; 
employee benefits; the labor-related portion of nonmedical professional 
fees; administrative and facilities support services; all other--labor-
related services; and a proportion of capital-related expenses.
    We calculate the labor-related relative importance from the SNF 
market basket, and it approximates the labor-related portion of the 
total costs after taking into account historical and projected price 
changes between the base year and FY 2017. 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 2017 than the base year weights 
from the SNF market basket.
    We calculate the labor-related relative importance for FY 2017 in 
four steps. First, we compute the FY 2017 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 
2017 price index level for that cost category by the total market 
basket price index level. Third, we determine the FY 2017 relative 
importance for each cost category by multiplying this ratio by the base 
year (FY 2010) weight. Finally, we add the FY 2017 relative importance 
for each of the labor-related cost categories (wages and salaries, 
employee benefits, the labor-related portion of non-medical 
professional fees, administrative and facilities support services, all 
other: Labor-related services, and a portion of capital-related 
expenses) to produce the FY 2017 labor-related relative importance. 
Table 6 summarizes the proposed updated labor-related share for FY 
2017, compared to the labor-related share that was used for the FY 2016 
SNF PPS final rule.

                         Table 6--Labor-Related Relative Importance, FY 2016 and FY 2017
----------------------------------------------------------------------------------------------------------------
                                                                     Relative importance,   Relative importance,
                                                                      labor-related, FY      labor-related, FY
                                                                      2016 15:2 forecast     2017 16:1 forecast
                                                                             \1\                    \2\
----------------------------------------------------------------------------------------------------------------
Wages and salaries................................................                   48.8                   48.8
Employee benefits.................................................                   11.3                   11.2
Nonmedical Professional fees: Labor-related.......................                    3.5                    3.4
Administrative and facilities support services....................                    0.5                    0.5
All Other: Labor-related services.................................                    2.3                    2.3
Capital-related (.391)............................................                    2.7                    2.7
                                                                   ---------------------------------------------
    Total.........................................................                   69.1                   68.9
----------------------------------------------------------------------------------------------------------------
\1\ Published in the Federal Register; based on second quarter 2015 IGI forecast.
\2\ Based on first quarter 2016 IGI forecast, with historical data through fourth quarter 2015.

    Tables 7 and 8 show the RUG-IV case-mix adjusted federal rates by 
labor-related and non-labor-related components.

         Table 7--RUG-IV Case-Mix Adjusted Federal Rates for Urban SNFs by Labor and Non-Labor Component
----------------------------------------------------------------------------------------------------------------
                    RUG-IV category                       Total rate       Labor portion      Non-labor portion
----------------------------------------------------------------------------------------------------------------
RUX...................................................          801.75              $552.41              $249.34
RUL...................................................          784.27               540.36               243.91
RVX...................................................          713.61               491.68               221.93
RVL...................................................          640.23               441.12               199.11
RHX...................................................          646.54               445.47               201.07
RHL...................................................          576.66               397.32               179.34
RMX...................................................          593.08               408.63               184.45
RML...................................................          544.16               374.93               169.23
RLX...................................................          520.85               358.87               161.98
RUC...................................................          607.82               418.79               189.03
RUB...................................................          607.82               418.79               189.03
RUA...................................................          508.23               350.17               158.06
RVC...................................................          521.43               359.27               162.16
RVB...................................................          451.55               311.12               140.43
RVA...................................................          449.80               309.91               139.89
RHC...................................................          454.36               313.05               141.31
RHB...................................................          408.93               281.75               127.18
RHA...................................................          360.02               248.05               111.97
RMC...................................................          399.16               275.02               124.14
RMB...................................................          374.70               258.17               116.53
RMA...................................................          308.31               212.43                95.88
RLB...................................................          388.08               267.39               120.69
RLA...................................................          250.05               172.28                77.77

[[Page 24239]]

 
ES3...................................................          731.95               504.31               227.64
ES2...................................................          572.97               394.78               178.19
ES1...................................................          511.82               352.64               159.18
HE2...................................................          494.35               340.61               153.74
HE1...................................................          410.49               282.83               127.66
HD2...................................................          462.90               318.94               143.96
HD1...................................................          386.03               265.97               120.06
HC2...................................................          436.69               300.88               135.81
HC1...................................................          365.06               251.53               113.53
HB2...................................................          431.45               297.27               134.18
HB1...................................................          361.57               249.12               112.45
LE2...................................................          448.92               309.31               139.61
LE1...................................................          375.54               258.75               116.79
LD2...................................................          431.45               297.27               134.18
LD1...................................................          361.57               249.12               112.45
LC2...................................................          379.04               261.16               117.88
LC1...................................................          319.64               220.23                99.41
LB2...................................................          359.82               247.92               111.90
LB1...................................................          305.66               210.60                95.06
CE2...................................................          400.00               275.60               124.40
CE1...................................................          368.56               253.94               114.62
CD2...................................................          379.04               261.16               117.88
CD1...................................................          347.59               239.49               108.10
CC2...................................................          331.87               228.66               103.21
CC1...................................................          307.41               211.81                95.60
CB2...................................................          307.41               211.81                95.60
CB1...................................................          284.69               196.15                88.54
CA2...................................................          260.23               179.30                80.93
CA1...................................................          242.76               167.26                75.50
BB2...................................................          275.96               190.14                85.82
BB1...................................................          263.73               181.71                82.02
BA2...................................................          228.79               157.64                71.15
BA1...................................................          218.30               150.41                67.89
PE2...................................................          368.56               253.94               114.62
PE1...................................................          351.08               241.89               109.19
PD2...................................................          347.59               239.49               108.10
PD1...................................................          330.12               227.45               102.67
PC2...................................................          298.67               205.78                92.89
PC1...................................................          284.69               196.15                88.54
PB2...................................................          253.25               174.49                78.76
PB1...................................................          242.76               167.26                75.50
PA2...................................................          209.57               144.39                65.18
PA1...................................................          200.83               138.37                62.46
----------------------------------------------------------------------------------------------------------------


         Table 8--RUG-IV Case-Mix Adjusted Federal Rates for Rural SNFs by Labor and Non-Labor Component
----------------------------------------------------------------------------------------------------------------
                    RUG-IV category                       Total rate       Labor portion      Non-Labor portion
----------------------------------------------------------------------------------------------------------------
RUX...................................................          820.22              $565.13              $255.09
RUL...................................................          803.53               553.63               249.90
RVX...................................................          720.69               496.56               224.13
RVL...................................................          650.58               448.25               202.33
RHX...................................................          645.42               444.69               200.73
RHL...................................................          578.66               398.70               179.96
RMX...................................................          586.55               404.13               182.42
RML...................................................          539.81               371.93               167.88
RLX...................................................          510.53               351.76               158.77
RUC...................................................          634.95               437.48               197.47
RUB...................................................          634.95               437.48               197.47
RUA...................................................          539.81               371.93               167.88
RVC...................................................          537.08               370.05               167.03
RVB...................................................          470.32               324.05               146.27
RVA...................................................          468.65               322.90               145.75
RHC...................................................          461.82               318.19               143.63
RHB...................................................          418.42               288.29               130.13
RHA...................................................          371.69               256.09               115.60
RMC...................................................          401.28               276.48               124.80
RMB...................................................          377.91               260.38               117.53
RMA...................................................          314.48               216.68                97.80
RLB...................................................          383.68               264.36               119.32

[[Page 24240]]

 
RLA...................................................          251.82               173.50                78.32
ES3...................................................          706.88               487.04               219.84
ES2...................................................          554.99               382.39               172.60
ES1...................................................          496.57               342.14               154.43
HE2...................................................          479.88               330.64               149.24
HE1...................................................          399.76               275.43               124.33
HD2...................................................          449.84               309.94               139.90
HD1...................................................          376.40               259.34               117.06
HC2...................................................          424.80               292.69               132.11
HC1...................................................          356.37               245.54               110.83
HB2...................................................          419.79               289.24               130.55
HB1...................................................          353.03               243.24               109.79
LE2...................................................          436.48               300.73               135.75
LE1...................................................          366.38               252.44               113.94
LD2...................................................          419.79               289.24               130.55
LD1...................................................          353.03               243.24               109.79
LC2...................................................          369.72               254.74               114.98
LC1...................................................          312.97               215.64                97.33
LB2...................................................          351.36               242.09               109.27
LB1...................................................          299.62               206.44                93.18
CE2...................................................          389.75               268.54               121.21
CE1...................................................          359.71               247.84               111.87
CD2...................................................          369.72               254.74               114.98
CD1...................................................          339.68               234.04               105.64
CC2...................................................          324.65               223.68               100.97
CC1...................................................          301.29               207.59                93.70
CB2...................................................          301.29               207.59                93.70
CB1...................................................          279.59               192.64                86.95
CA2...................................................          256.22               176.54                79.68
CA1...................................................          239.53               165.04                74.49
BB2...................................................          271.24               186.88                84.36
BB1...................................................          259.56               178.84                80.72
BA2...................................................          226.18               155.84                70.34
BA1...................................................          216.16               148.93                67.23
PE2...................................................          359.71               247.84               111.87
PE1...................................................          343.01               236.33               106.68
PD2...................................................          339.68               234.04               105.64
PD1...................................................          322.98               222.53               100.45
PC2...................................................          292.94               201.84                91.10
PC1...................................................          279.59               192.64                86.95
PB2...................................................          249.54               171.93                77.61
PB1...................................................          239.53               165.04                74.49
PA2...................................................          207.82               143.19                64.63
PA1...................................................          199.47               137.43                62.04
----------------------------------------------------------------------------------------------------------------

    Section 1888(e)(4)(G)(ii) of the Act also requires that we apply 
this wage index in a manner that does not result in aggregate payments 
under the SNF PPS that are greater or less than would otherwise be made 
if the wage adjustment had not been made. For FY 2017 (federal rates 
effective October 1, 2016), we would apply an adjustment to fulfill the 
budget neutrality requirement. We would meet this requirement by 
multiplying each of the components of the unadjusted federal rates by a 
budget neutrality factor equal to the ratio of the weighted average 
wage adjustment factor for FY 2016 to the weighted average wage 
adjustment factor for FY 2017. For this calculation, we would use the 
same FY 2015 claims utilization data for both the numerator and 
denominator of this ratio. We define the wage adjustment factor used in 
this calculation as the labor share of the rate component multiplied by 
the wage index plus the non-labor share of the rate component. The 
budget neutrality factor for FY 2017 would be 1.0000.
    In the SNF PPS final rule for FY 2006 (70 FR 45026, August 4, 
2005), we adopted the changes discussed in the OMB Bulletin No. 03-04 
(June 6, 2003), available online at www.whitehouse.gov/omb/bulletins/b03-04.html, which announced revised definitions for MSAs and the 
creation of micropolitan statistical areas and combined statistical 
areas.
    In adopting the CBSA geographic designations, we provided for a 
one-year transition in FY 2006 with a blended wage index for all 
providers. For FY 2006, the wage index for each provider consisted of a 
blend of 50 percent of the FY 2006 MSA-based wage index and 50 percent 
of the FY 2006 CBSA-based wage index (both using FY 2002 hospital 
data). We referred to the blended wage index as the FY 2006 SNF PPS 
transition wage index. As discussed in the SNF PPS final rule for FY 
2006 (70 FR 45041), since the expiration of this one-year transition on 
September 30, 2006, we have used the full CBSA-based wage index values.
    Generally, OMB issues major revisions to statistical areas every 10 
years, based on the results of the decennial census. In the FY 2015 SNF 
PPS final rule (79 FR 45644 through 45646), we finalized changes to the 
SNF PPS wage index based on the newest OMB delineations, as described 
in OMB Bulletin No. 13-01, beginning in FY

[[Page 24241]]

2015, including a 1-year transition with a blended wage index for FY 
2015. OMB Bulletin No. 13-01 established revised delineations for 
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and 
Combined Statistical Areas in the United States and Puerto Rico based 
on the 2010 Census, and provided guidance on the use of the 
delineations of these statistical areas using standards published on 
June 28, 2010 in the Federal Register (75 FR 37246 through 37252). In 
addition, OMB occasionally issues minor updates and revisions to 
statistical areas in the years between the decennial censuses. On July 
15, 2015, OMB issued OMB Bulletin No. 15-01, which provides minor 
updates to and supersedes OMB Bulletin No. 13-01 that was issued on 
February 28, 2013. The attachment to OMB Bulletin No. 15-01 provides 
detailed information on the update to statistical areas since February 
28, 2013. The updates provided in OMB Bulletin No. 15-01 are based on 
the application of the 2010 Standards for Delineating Metropolitan and 
Micropolitan Statistical Areas to Census Bureau population estimates 
for July 1, 2012 and July 1, 2013. A copy of this bulletin may be 
obtained on the Web site at https://www.whitehouse.gov/sites/default/files/omb/bulletins/2015/15-01.pdf. As we previously stated in the FY 
2008 SNF PPS proposed and final rules (72 FR 25538 through 25539, and 
72 FR 43423), we again wish to clarify that this and all subsequent SNF 
PPS rules and notices are considered to incorporate any such updates 
and revisions set forth in the most recent OMB bulletin that applies to 
the hospital wage data used to determine the current SNF PPS wage 
index. As noted above, the proposed wage index applicable to FY 2017 is 
set forth in Tables A and B available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.

E. Adjusted Rate Computation Example

    Using the hypothetical SNF XYZ described below, Table 9 shows the 
adjustments made to the federal per diem rates to compute the 
provider's actual per diem PPS payment. We derive the Labor and Non-
labor columns from Table 7. The wage index used in this example is 
based on the proposed wage index, which may be found in Table A as 
referenced above. As illustrated in Table 9, SNF XYZ's total PPS 
payment would equal $46,782.60.

                                       Table 9--Adjusted Rate Computation Example SNF XYZ: Located in Frederick, MD (Urban CBSA 43524) Wage Index: 0.9820
                                                                            [See Proposed Wage Index in Table A] \1\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                      Percent
                          RUG-IV group                                 Labor        Wage index    Adjusted labor     Non-labor     Adjusted rate    adjustment     Medicare days      Payment
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
RVX.............................................................         $491.68           0.982         $482.83         $221.93         $704.76         $704.76              14       $9,866.64
ES2.............................................................          394.78           0.982          387.67          178.19          565.86          565.86              30       16,975.80
RHA.............................................................          248.05           0.982          243.59          111.97          355.56          355.56              16        5,688.96
CC2 *...........................................................          228.66           0.982          224.54          103.21          327.75          747.27              10        7,472.70
BA2.............................................................          157.64           0.982          154.80           71.15          225.95          225.95              30        6,778.50
                                                                                                                                                                             100       46,782.60
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Reflects a 128 percent adjustment from section 511 of the MMA.
\1\ Available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.

IV. Additional Aspects of the SNF PPS

A. SNF Level of Care--Administrative Presumption

    The establishment of the SNF PPS did not change Medicare's 
fundamental requirements for SNF coverage. However, because the case-
mix 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 existing resident 
assessment process and case-mix classification system discussed in 
section III.C. of this proposed rule. This approach includes an 
administrative presumption that utilizes a beneficiary's initial 
classification in one of the upper 52 RUGs of the 66-group RUG-IV case-
mix classification system to assist in making certain SNF level of care 
determinations.
    In accordance with section 1888(e)(4)(H)(ii) of the Act and the 
regulations at Sec.  413.345, 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. As set forth in the FY 2011 
SNF PPS update notice (75 FR 42910), this designation reflects an 
administrative presumption under the 66-group RUG-IV system that 
beneficiaries who are correctly assigned to one of the upper 52 RUG-IV 
groups on the initial five-day, Medicare-required assessment are 
automatically classified as meeting the SNF level of care definition up 
to and including the assessment reference date (ARD) on the 5-day 
Medicare-required assessment.
    A beneficiary assigned to any of the lower 14 RUG-IV groups is not 
automatically classified as either meeting or not meeting the 
definition, but instead receives an individual level of care 
determination using the existing administrative criteria. This 
presumption recognizes the strong likelihood that beneficiaries 
assigned to one of the upper 52 RUG-IV groups during the immediate 
post-hospital period require a covered level of care, which would be 
less likely for those beneficiaries assigned to one of the lower 14 
RUG-IV groups.
    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 case-mix classification 
structure. In this proposed rule, we would continue to designate the 
upper 52 RUG-IV groups for purposes of this administrative presumption, 
consisting of all groups encompassed by the following RUG-IV 
categories:
     Rehabilitation plus Extensive Services.
     Ultra High Rehabilitation.
     Very High Rehabilitation.
     High Rehabilitation.
     Medium Rehabilitation.
     Low Rehabilitation.
     Extensive Services.
     Special Care High.
     Special Care Low.
     Clinically Complex.
    However, we note that this administrative presumption policy does 
not supersede the SNF's responsibility to ensure that its decisions 
relating to level of care are appropriate and timely, including a 
review to confirm that the services prompting the beneficiary's 
assignment to one of the upper 52 RUG-IV groups (which, in turn, serves 
to trigger the administrative presumption) are themselves medically 
necessary. As

[[Page 24242]]

we explained in the FY 2000 SNF PPS final rule (64 FR 41667), the 
administrative presumption:

. . . is itself rebuttable in those individual cases in which the 
services actually received by the resident do not meet the basic 
statutory criterion of being reasonable and necessary to diagnose or 
treat a beneficiary's condition (according to section 1862(a)(1) of 
the Act). Accordingly, the presumption would not apply, for example, 
in those situations in which a resident's assignment to one of the 
upper . . . groups is itself based on the receipt of services that 
are subsequently determined to be not reasonable and necessary.

Moreover, we want to stress the importance of careful monitoring for 
changes in each patient's condition to determine the continuing need 
for Part A SNF benefits after the ARD of the 5-day assessment.

B. Consolidated Billing

    Sections 1842(b)(6)(E) and 1862(a)(18) of the Act (as added by 
section 4432(b) of the BBA) require a SNF to submit consolidated 
Medicare bills to its Medicare Administrative Contractor for almost all 
of the services that its residents receive during the course of a 
covered Part A stay. In addition, section 1862(a)(18) of the Act places 
the responsibility with the SNF for billing Medicare for physical 
therapy, occupational therapy, and speech-language pathology services 
that the resident receives during a noncovered stay. Section 
1888(e)(2)(A) of the Act excludes a small list of services from the 
consolidated billing provision (primarily those services furnished by 
physicians and certain other types of practitioners), which remain 
separately billable under Part B when furnished to a SNF's Part A 
resident. These excluded service categories are discussed in greater 
detail in section V.B.2. of the May 12, 1998 interim final rule (63 FR 
26295 through 26297).
    A detailed discussion of the legislative history of the 
consolidated billing provision is available on the SNF PPS Web site at 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_07302013.pdf. In particular, section 103 
of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999 (BBRA) (Pub. L. 106-113, enacted on November 29, 1999) amended 
section 1888(e)(2)(A) of the Act by further excluding a number of 
individual high-cost, low probability services, identified by 
Healthcare Common Procedure Coding System (HCPCS) codes, within several 
broader categories (chemotherapy items, chemotherapy administration 
services, radioisotope services, and customized prosthetic devices) 
that otherwise remained subject to the provision. We discuss this BBRA 
amendment in greater detail in the SNF PPS proposed and final rules for 
FY 2001 (65 FR 19231 through 19232, April 10, 2000, and 65 FR 46790 
through 46795, July 31, 2000), as well as in Program Memorandum AB-00-
18 (Change Request #1070), issued March 2000, which is available online 
at www.cms.gov/transmittals/downloads/ab001860.pdf.
    As explained in the FY 2001 proposed rule (65 FR 19232), the 
amendments enacted in section 103 of the BBRA not only identified for 
exclusion from this provision a number of particular service codes 
within four specified categories (that is, chemotherapy items, 
chemotherapy administration services, radioisotope services, and 
customized prosthetic devices), but also gave the Secretary the 
authority to designate additional, individual services for exclusion 
within each of the specified service categories. In the proposed rule 
for FY 2001, we also noted that the BBRA Conference report (H.R. Rep. 
No. 106-479 at 854 (1999) (Conf. Rep.)) characterizes the individual 
services that this legislation targets for exclusion as high-cost, low 
probability events that could have devastating financial impacts 
because their costs far exceed the payment SNFs receive under the PPS. 
According to the conferees, section 103(a) of the BBRA is an attempt to 
exclude from the PPS certain services and costly items that are 
provided infrequently in SNFs. By contrast, we noted that the Congress 
declined to designate for exclusion any of the remaining services 
within those four categories (thus, leaving all of those services 
subject to SNF consolidated billing), because they are relatively 
inexpensive and are furnished routinely in SNFs.
    As we further explained in the final rule for FY 2001 (65 FR 
46790), and as our longstanding policy, any additional service codes 
that we might designate for exclusion under our discretionary authority 
must meet the same statutory criteria used in identifying the original 
codes excluded from consolidated billing under section 103(a) of the 
BBRA: They must fall within one of the four service categories 
specified in the BBRA; and they also must meet the same standards of 
high cost and low probability in the SNF setting, as discussed in the 
BBRA Conference report. Accordingly, we characterized this statutory 
authority to identify additional service codes for exclusion as 
essentially affording the flexibility to revise the list of excluded 
codes in response to changes of major significance that may occur over 
time (for example, the development of new medical technologies or other 
advances in the state of medical practice) (65 FR 46791). In this 
proposed rule, we specifically invite public comments identifying HCPCS 
codes in any of these four service categories (chemotherapy items, 
chemotherapy administration services, radioisotope services, and 
customized prosthetic devices) representing recent medical advances 
that might meet our criteria for exclusion from SNF consolidated 
billing. We may consider excluding a particular service if it meets our 
criteria for exclusion as specified above. Commenters should identify 
in their comments the specific HCPCS code that is associated with the 
service in question, as well as their rationale for requesting that the 
identified HCPCS code(s) be excluded.
    We note that the original BBRA amendment (as well as the 
implementing regulations) identified a set of excluded services by 
means of specifying HCPCS codes that were in effect as of a particular 
date (in that case, as of July 1, 1999). Identifying the excluded 
services in this manner made it possible for us to utilize program 
issuances as the vehicle for accomplishing routine updates of the 
excluded codes, to reflect any minor revisions that might subsequently 
occur in the coding system itself (for example, the assignment of a 
different code number to the same service). Accordingly, in the event 
that we identify through the current rulemaking cycle any new services 
that would actually represent a substantive change in the scope of the 
exclusions from SNF consolidated billing, we would identify these 
additional excluded services by means of the HCPCS codes that are in 
effect as of a specific date (in this case, as of October 1, 2016). By 
making any new exclusions in this manner, we could similarly accomplish 
routine future updates of these additional codes through the issuance 
of program instructions.

C. Payment for SNF-Level Swing-Bed Services

    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-level care, as needed. For 
critical access hospitals (CAHs), Part A pays on a reasonable cost 
basis for SNF-level services furnished under a swing-bed agreement. 
However, in accordance with section 1888(e)(7) of the Act, these

[[Page 24243]]

services furnished by non-CAH rural hospitals are paid under the SNF 
PPS, effective with cost reporting periods beginning on or after July 
1, 2002. As explained in the FY 2002 final rule (66 FR 39562), this 
effective date is consistent with the statutory provision to integrate 
swing-bed rural hospitals into the SNF PPS by the end of the transition 
period, June 30, 2002.
    Accordingly, all non-CAH swing-bed rural hospitals have now come 
under the SNF PPS. Therefore, all rates and wage indexes outlined in 
earlier sections of this proposed rule for the SNF PPS also apply to 
all non-CAH swing-bed rural hospitals. A complete discussion of 
assessment schedules, the MDS, and the transmission software (RAVEN-SB 
for Swing Beds) appears in the FY 2002 final rule (66 FR 39562) and in 
the FY 2010 final rule (74 FR 40288). As finalized in the FY 2010 SNF 
PPS final rule (74 FR 40356 through 40357), effective October 1, 2010, 
non-CAH swing-bed rural hospitals are required to complete an MDS 3.0 
swing-bed assessment which is limited to the required demographic, 
payment, and quality items. The latest changes in the MDS for swing-bed 
rural hospitals appear on the SNF PPS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html.

V. Other Issues

A. Skilled Nursing Facility Value-Based Purchasing Program (SNF VBP)

1. Background
    Section 215 of the Protecting Access to Medicare Act of 2014 (PAMA) 
authorizes the SNF VBP Program by adding sections 1888(g) and (h) to 
the Act. These sections provide structure for the development of the 
SNF VBP Program, including, among other things, the requirements of 
only two measures--an all-cause, all-condition hospital readmission 
measure, which is to be replaced as soon as practicable by an all-
condition risk-adjusted potentially preventable hospital readmission 
measure--and confidential and public reporting requirements for the SNF 
VBP Program. We began development of the SNF VBP Program in the FY 2016 
SNF PPS final rule with, among other things, the adoption of an all-
cause, all-condition hospital readmission measure, as required under 
section 1888(g)(1) of the Act. We will continue the process in this 
proposed rule with our proposal for an all-condition risk-adjusted 
potentially preventable hospital readmission measure for SNFs, which 
the Secretary is required to specify no later than October 1, 2016 
under section 1888(g)(2) of the Act. The Act requires that the SNF VBP 
apply to payments for services furnished on or after October 1, 2018. 
The SNF VBP Program applies to freestanding SNFs, SNFs affiliated with 
acute care facilities, and all non-CAH swing-bed rural hospitals. We 
believe the implementation of the SNF VBP Program is an important step 
toward transforming how care is paid for, moving increasingly toward 
rewarding better value, outcomes, and innovations instead of merely 
volume.
    For additional background information on the SNF VBP Program, 
including an overview of the SNF VBP Report to Congress and a summary 
of the Program's statutory requirements, we refer readers to the FY 
2016 SNF PPS final rule (80 FR 46409 through 46410).
2. Measures
a. SNF 30-Day All-Cause Readmission Measure (SNFRM) (NQF #2510)
    Per the requirement at section 1888(g)(1) of the Act, in the FY 
2016 SNF PPS final rule (80 FR 46419), we finalized our proposal to 
specify the SNF 30-Day All-Cause Readmission Measure (SNFRM) (NQF 
#2510) as the SNF all-cause, all-condition hospital readmission measure 
for the SNF VBP Program. The SNFRM assesses the risk-standardized rate 
of all-cause, all-condition, unplanned inpatient hospital readmissions 
of Medicare fee-for-service (FFS) SNF patients within 30 days of 
discharge from an admission to an inpatient prospective payment system 
(IPPS) hospital, CAH, or psychiatric hospital. The measure is claims-
based, requiring no additional data collection or submission burden for 
SNFs. For additional details on the SNFRM, including our responses to 
public comments, we refer readers to the FY 2016 SNF PPS final rule (80 
FR 46411 through 46419).
b. Skilled Nursing Facility 30-Day Potentially Preventable Readmission 
Measure (SNFPPR)
    We are proposing to specify the SNF 30-Day Potentially Preventable 
Readmission Measure (SNFPPR) as the SNF all-condition risk-adjusted 
potentially preventable hospital readmission measure to meet the 
requirements of section 1888(g)(2) of the Act. This proposed measure 
assesses the facility-level risk-standardized rate of unplanned, 
potentially preventable hospital readmissions for SNF patients within 
30 days of discharge from a prior admission to an IPPS hospital, CAH, 
or psychiatric hospital. Hospital readmissions include readmissions to 
a short-stay acute-care hospital or CAH, with a diagnosis considered to 
be unplanned and potentially preventable. This proposed measure is 
claims-based, requiring no additional data collection or submission 
burden for SNFs.
    Hospital readmissions among the Medicare population, including 
beneficiaries that utilize post-acute care, are common, costly, and 
often preventable.1 2 The Medicare Payment Advisory 
Commission (MedPAC) and a study by Jencks et al. estimated that 17 to 
20 percent of Medicare beneficiaries discharged from the hospital were 
readmitted within 30 days. MedPAC found that more than 75 percent of 
30-day and 15-day readmissions and 84 percent of 7-day readmissions 
were considered potentially preventable.\3\ In addition, MedPAC 
calculated that annual Medicare spending on potentially preventable 
readmissions would be $12B for 30-day, $8B for 15-day, and $5B for 7-
day readmissions.\4\ For hospital readmissions from SNFs, MedPAC deemed 
76 percent of readmissions as potentially avoidable--associated with 
$12B in Medicare expenditures.\5\ Mor et al. analyzed 2006 Medicare 
claims and SNF assessment data (Minimum Data Set), and reported a 23.5 
percent readmission rate from SNFs, associated with $4.3B in 
expenditures.\6\
---------------------------------------------------------------------------

    \1\ Friedman, B., and Basu, J.: The rate and cost of hospital 
readmissions for preventable conditions. Med. Care Res. Rev. 
61(2):225-240, 2004. doi:10.1177/1077558704263799.
    \2\ Jencks, S.F., Williams, M.V., and Coleman, E.A.: 
Rehospitalizations among patients in the Medicare Fee-for-Service 
Program. N. Engl. J. Med. 360(14):1418-1428, 2009. doi:10.1016/
j.jvs.2009.05.045.
    \3\ MedPAC: Payment policy for inpatient readmissions, in Report 
to the Congress: Promoting Greater Efficiency in Medicare. 
Washington, DC, pp. 103-120, 2007. Available from http://www.medpac.gov/documents/reports/Jun07_EntireReport.pdf.
    \4\ Ibid.
    \5\ Ibid.
    \6\ Mor, V., Intrator, O., Feng, Z., et al.: The revolving door 
of rehospitalization from SNFs. Health Aff. 29(1):57-64, 2010. 
doi:10.1377/hlthaff.2009.0629.
---------------------------------------------------------------------------

    We have addressed the high rates of hospital readmissions in the 
acute care setting, as well as in PAC by developing the SNF 30-Day All-
Cause Readmission Measure (NQF #2510), as well as similar measures for 
other PAC providers (NQF #2502 for IRFs and NQF #2512 for LTCHs).\7\ 
These measures are endorsed by the National Quality Forum (NQF), and 
the NQF-endorsed measure (NQF

[[Page 24244]]

#2510) was adopted for the SNF VBP program in the FY 2016 SNF PPS final 
rule (80 FR 46411 through 46419). These NQF-endorsed measures assess 
all-cause unplanned readmissions.
---------------------------------------------------------------------------

    \7\ National Quality Forum: All-Cause Admissions and 
Readmissions Measures. pp. 1-319, April 2015. Available from http://www.qualityforum.org/Publications/2015/04/All-Cause_Admissions_and_Readmissions_Measures_-_Final_Report.aspx.
---------------------------------------------------------------------------

    Several general methods and algorithms have been developed to 
assess potentially avoidable or preventable hospitalizations and 
readmissions for the Medicare population. These include the Agency for 
Healthcare Research and Quality's (AHRQ) Prevention Quality Indicators, 
approaches developed by MedPAC, and proprietary approaches, such as the 
3M\TM\ algorithm for Potentially Preventable Readmissions 
(PPR).8 9 10 Recent work led by Kramer et al. for MedPAC 
identified 13 conditions for which readmissions were deemed as 
potentially preventable among SNF and IRF populations; 11 12 
however, these conditions did not differ by PAC setting or readmission 
window (that is, readmissions during the PAC stay or post-PAC 
discharge). Although much of the existing literature addresses hospital 
readmissions more broadly and potentially avoidable hospitalizations 
for specific settings like skilled nursing facilities, these findings 
are relevant to the development of potentially preventable readmission 
measures for PAC.13 14 15
---------------------------------------------------------------------------

    \8\ Goldfield, N.I., McCullough, E.C., Hughes, J.S., et al.: 
Identifying potentially preventable readmissions. Health Care Finan. 
Rev. 30(1):75-91, 2008. Available from http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4195042/.
    \9\ National Quality Forum: Prevention Quality Indicators 
Overview. 2008.
    \10\ MedPAC: Online Appendix C: Medicare Ambulatory Care 
Indicators for the Elderly. pp. 1-12, prepared for Chapter 4, 2011. 
Available from http://www.medpac.gov/documents/reports/Mar11_Ch04_APPENDIX.pdf?sfvrsn=0.
    \11\ Kramer, A., Lin, M., Fish, R., et al.: Development of 
Inpatient Rehabilitation Facility Quality Measures: Potentially 
Avoidable Readmissions, Community Discharge, and Functional 
Improvement. pp. 1-42, 2015. Available from http://www.medpac.gov/documents/contractor-reports/development-of-inpatient-rehabilitation-facility-quality-measures-potentially-avoidable-readmissions-community-discharge-and-functional-improvement.pdf?sfvrsn=0.
    \12\ Kramer, A., Lin, M., Fish, R., et al.: Development of 
Potentially Avoidable Readmission and Functional Outcome SNF Quality 
Measures. pp. 1-75, 2014. Available from http://www.medpac.gov/documents/contractor-reports/mar14_snfqualitymeasures_contractor.pdf?sfvrsn=0.
    \13\ Allaudeen, N., Vidyarthi, A., Maselli, J., et al.: 
Redefining readmission risk factors for general medicine patients. 
J. Hosp. Med. 6(2):54-60, 2011. doi:10.1002/jhm.805.
    \14\ \4\ Gao, J., Moran, E., Li, Y.-F., et al.: Predicting 
potentially avoidable hospitalizations. Med. Care 52(2):164-171, 
2014. doi:10.1097/MLR.0000000000000041.
    \15\ Walsh, E.G., Wiener, J.M., Haber, S., et al.: Potentially 
avoidable hospitalizations of dually eligible Medicare and Medicaid 
beneficiaries from nursing facility and home-and community-based 
services waiver programs. J. Am. Geriatr. Soc. 60(5):821-829, 2012. 
doi:10.1111/j.1532-5415.2012.03920.x.
---------------------------------------------------------------------------

    Based on the evidence discussed above and to meet PAMA 
requirements, we are proposing to specify this measure, entitled, SNF 
30-Day Potentially Preventable Readmission Measure (SNFPPR), for the 
SNF VBP Program. The SNFPPR measure was developed by CMS to harmonize 
with the NQF-endorsed SNF 30-Day All-Cause Readmission Measure (NQF 
#2510) \16\ adopted in the FY 2016 SNF final rule (80 FR 46411 through 
46419) and the Hospital-Wide Risk-Adjusted All-Cause Unplanned 
Readmission Measure (NQF #1789) (Hospital-Wide Readmission or HWR 
measure \17\), finalized for the Hospital IQR Program in the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53521 through 53528). Although these 
existing measures focus on all-cause unplanned readmissions and the 
proposed SNFPPR measure assesses potentially preventable hospital 
readmissions, the SNFPPR will use the same statistical approach, the 
same time window as NQF measure #2510 (that is, 30 days post-hospital 
discharge), and a similar set of patient characteristics for risk 
adjustment. As appropriate, the proposed potentially preventable 
hospital readmission measure for SNFs is being harmonized with similar 
measures being proposed for LTCHs, IRFs, and HHAs to meet the 
requirements of the Improving Medicare Post-Acute Care Transformation 
Act of 2014 (IMPACT Act) (Pub. L. 113-185).
---------------------------------------------------------------------------

    \16\ National Quality Forum: All-Cause Admissions and 
Readmissions Measures. pp. 1-319, April 2015. National Quality 
Forum: All-Cause Admissions and Readmissions Measures. pp. 1-319, 
April 2015. Available from http://www.qualityforum.org/Publications/2015/04/All-Cause_Admissions_and_Readmissions_Measures_-_Final_Report.aspx.
    \17\ Available by searching for ``1789'' at http://www.qualityforum.org/QPS/QPSTool.aspx.
---------------------------------------------------------------------------

    The SNFPPR measure estimates the risk-standardized rate of 
unplanned, potentially preventable hospital readmissions for Medicare 
FFS beneficiaries that occur within 30 days of discharge from the prior 
proximal hospitalization. This is a departure from readmission measures 
in other PAC settings, such as the two measures proposed in the 
Inpatient Rehabilitation Facility (IRF) Quality Reporting Program, one 
of which assesses readmissions that take place during the IRF stay and 
the other that assesses readmissions within 30 days following discharge 
from the IRF. The proposed measure here is distinct because section 
1888(h)(2) of the Act requires that only a single quality measure be 
implemented in the SNF VBP program at one time. A purely within-stay 
measure (that is, a measure that assesses readmission rates only when 
those readmissions occurred during a SNF stay) would perversely 
incentivize the premature discharge of residents from SNFs to avoid 
penalty. Conversely, limiting the measure to readmissions that occur 
within 30-days post-discharge from the SNF would not capture 
readmissions that occur during the SNF stay. In order to qualify for 
this proposed measure, the SNF admission must take place within 1 day 
of discharge from a prior proximal hospital stay. The prior proximal 
hospital stay is defined as an inpatient admission to an acute care 
hospital (including IPPS, CAH, or a psychiatric hospital). Because the 
measure denominator is based on SNF admissions, a single Medicare 
beneficiary could be included in the measure multiple times within a 
given year. Readmissions counted in this measure are identified by 
examining Medicare FFS claims data for readmissions to either acute 
care hospitals (IPPS or CAH) that occur within 30 days of discharge 
from the prior proximal hospitalization, regardless of whether the 
readmission occurs during the SNF stay or takes place after the patient 
is discharged from the SNF. Because patients differ in complexity and 
morbidity, the measure is risk-adjusted for case-mix. Our approach for 
defining potentially preventable readmissions is described below.
    Potentially Preventable Readmission Measure Definition: We 
conducted a comprehensive environmental scan, analyzed claims data, and 
obtained input from a technical expert panel (TEP) to develop a working 
conceptual definition and list of conditions for which hospital 
readmissions may be considered potentially preventable. The Ambulatory 
Care Sensitive Conditions (ACSC)/Prevention Quality Indicators (PQI), 
developed by AHRQ, served as the starting point in this work. For the 
purposes of the SNFPPR measure, the definition of potentially 
preventable readmissions differs based on whether the resident is 
admitted to the SNF (referred to as ``within-stay'') or in the post-SNF 
discharge period; however, there is considerable overlap of the 
definitions. For patients readmitted to a hospital during within the 
SNF stay, potentially preventable readmissions (PPR) should be 
avoidable with sufficient medical monitoring and appropriate treatment. 
The within-stay list of PPR conditions includes the following, which 
are categorized by 4 clinical rationale groupings: (1) Inadequate 
management of chronic

[[Page 24245]]

conditions; (2) Inadequate management of infections; (3) Inadequate 
management of other unplanned events; and (4) Inadequate injury 
prevention. For individuals in the post the post-SNF discharge period, 
a potentially preventable readmission refers to a readmission in which 
the probability of occurrence could be minimized with adequately 
planned, explained, and implemented post discharge instructions, 
including the establishment of appropriate follow-up ambulatory care. 
Our list of PPR conditions in the post-SNF discharge period includes 
the following, categorized by 3 clinical rationale groupings: (1) 
Inadequate management of chronic conditions; (2) Inadequate management 
of infections; and (3) Inadequate management of other unplanned events. 
Additional details regarding the definitions of potentially preventable 
readmissions are available in our Measure Specification (available at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNF-VBP.html).
    This proposed measure focuses on readmissions that are potentially 
preventable and also unplanned. Similar to the SNF 30-Day All-Cause 
Readmission Measure (SNFRM) (NQF #2510), this measure uses the CMS 
Planned Readmission Algorithm to define planned readmissions. In 
addition to the CMS Planned Readmission Algorithm, this measure 
incorporates procedures that are considered planned in post-acute care 
settings, as identified in consultation with TEPs. Full details on the 
planned readmissions criteria used, including the additional procedures 
considered planned for post-acute care, can be found in the Measure 
Specifications (available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNF-VBP.html).
    This proposed measure assesses potentially preventable readmission 
rates while accounting for patient or resident demographics, principal 
diagnosis in the prior hospital stay, comorbidities, and other patient 
factors. The model also estimates a facility-specific effect, common to 
patients or residents treated in each facility. This proposed measure 
is calculated for each SNF based on the ratio of the predicted number 
of risk-adjusted, unplanned, potentially preventable hospital 
readmissions that occurred within 30 days of discharge from the prior 
proximal hospitalization, including the estimated facility effect, to 
the estimated predicted number of risk-adjusted, unplanned hospital 
readmissions for the same individuals receiving care at the average 
SNF. A ratio above 1.0 indicates a higher than expected readmission 
rate (worse), while a ratio below 1.0 indicates a lower than expected 
readmission rate (better). This ratio is referred to as the 
standardized risk ratio or SRR. The SRR is then multiplied by the 
overall national raw rate of potentially preventable readmissions for 
all SNF stays. The resulting rate is the risk-standardized readmission 
rate (RSRR) of potentially preventable readmissions. The full 
methodology is detailed in the Measure Specifications (available at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNF-VBP.html).\18\
---------------------------------------------------------------------------

    \18\ Note to reviewers: The specifications will be posted at 
this link by the time the proposed rule is displayed.
---------------------------------------------------------------------------

    Eligible SNF stays in the measure are assessed until: (1) The 30-
day period ends; or (2) the patient is readmitted to an acute care 
hospital (IPPS or CAH). If the readmission is classified as unplanned 
and potentially preventable, it is counted as a readmission in the 
measure calculation. If the readmission is planned or not preventable, 
the readmission is not counted in the measure rate.
    Readmission rates are risk-adjusted for case-mix characteristics. 
The risk adjustment modeling estimates the effects of patient/resident 
characteristics, comorbidities, and select health care variables on the 
probability of readmission. More specifically, the risk-adjustment 
model for SNFs accounts for sociodemographic characteristics (age, sex, 
original reason for entitlement), principal diagnosis during the prior 
proximal hospital stay, body system specific surgical indicators, 
comorbidities, length of stay during the resident's prior proximal 
hospital stay, intensive care utilization, end-stage renal disease 
status, and number of prior acute care hospitalizations in the 
preceding 365 days. This measure is calculated using one full calendar 
year of data. The full measure specifications and results of the 
reliability testing can be found in the Measure Specifications 
(available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNF-VBP.html).\19\
---------------------------------------------------------------------------

    \19\ Note to reviewers: The specifications will be posted at 
this link by the time the proposed rule is displayed.
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    Our measure development contractor convened a TEP, which provided 
input on the technical specifications of this measure, including the 
development of an approach to define potentially preventable hospital 
readmissions for a number of PAC settings, including SNFs. Details from 
the TEP meetings, including TEP members' ratings of conditions proposed 
as being potentially preventable, are available in the TEP Summary 
Report available on the CMS Web site (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html). We also solicited stakeholder feedback on the development 
of this measure through a public comment period held from November 2 
through December 1, 2015. A summary of the public comments we received 
is also available on the CMS Web site (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html).
    In addition to our TEP and public comment feedback, we also 
considered input from the Measures Application Partnership (MAP) on the 
SNFPPR. The MAP is composed of multi-stakeholder groups convened by the 
NQF. The MAP provides input on the measures we are considering for 
implementation in certain quality reporting and pay-for-performance 
programs. In general, the MAP has noted the need for care transition 
measures in PAC/LTC performance measurement programs and stated that 
setting-specific admission and readmission measures would address this 
need.\20\ We included the SNFPPR measure being proposed for the SNF VBP 
Program in this proposed rule in the List of Measures under 
Consideration (MUC List) for December 1, 2015.\21\
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    \20\ National Quality Forum: Measure Applications Partnership 
Pre-Rulemaking Report: 2013 Recommendations of Measures Under 
Consideration by HHS. pp. 1-394, February 2013. Available from 
https://www.qualityforum.org/Publications/2013/02/MAP_Pre-Rulemaking_Report_-_February_2013.aspx.
---------------------------------------------------------------------------

    The MAP encouraged continued development of the proposed measure in 
the SNF VBP Program to meet the mandate of PAMA. Specifically, the MAP 
stressed the need to promote shared accountability and ensure effective 
care transitions. More information about the MAP's recommendations for 
this measure is available at http://www.qualityforum.org/Publications/
2016/02/MAP_2016_Considerations_for_Implementing_Measures_

[[Page 24246]]

in_Federal_Programs_-_PAC-LTC.aspx. At the time, the risk-adjustment 
model was still under development. Following completion of that 
development work, we were able to test for measure validity and 
reliability as available in the measure specifications document 
provided above. Testing results are within range for similar outcome 
measures finalized in public reporting and value-based purchasing 
programs, including the SNFRM finalized for this this program.
    We invite public comment on our proposal to adopt this measure, the 
SNF 30-Day Potentially Preventable Readmission Measure (SNFPPR).
    Section 1888(h)(2)(B) of the Act requires the Secretary to apply 
the all-condition risk-adjusted potentially preventable hospital 
readmission measure specified under paragraph (g)(2) instead of the 
measure specified under paragraph (g)(1) as soon as practicable. We 
intend to propose the timing for the change to the paragraph (g)(2) 
measure in future rulemaking. We seek comment on when we should propose 
this change for the SNF VBP Program.
3. Performance Standards
a. Background
    Sections 1888(h)(3)(A) of the Act requires the Secretary to 
establish performance standards for the SNF VBP Program. Under 
paragraph (h)(3)(B), the performance standards must include levels of 
achievement and improvement, and under paragraph (h)(3)(C), must be 
established and announced not later than 60 days prior to the beginning 
of the performance period for the FY involved.
    In the FY 2016 SNF PPS final rule (80 FR 46419 through 46422), we 
summarized public comments we received on possible approaches to 
calculating performance standards under the SNF VBP Program. We 
specifically sought comment on the approaches that we have adopted for 
other Medicare VBP programs such as the Hospital VBP Program (Hospital 
VBP Program), the Hospital-Acquired Conditions Reduction Program (HAC 
Reduction Program), the Hospital Readmissions Reduction Program (HRRP), 
and the End-Stage Renal Disease Quality Incentive Program (ESRD QIP). 
We also sought comment on the best possible approach to measuring 
improvement, particularly given the SNF VBP Program's limitation to one 
measure for each program year.
b. Proposed Performance Standards Calculation Methodology
    We believe that an essential goal of the SNF VBP program is to 
provide incentives for all SNFs to improve the quality of care that 
they furnish to their residents. In determining what level of SNF 
performance would be appropriate to select as the performance standard 
for the quality measures specified under the SNF VBP program, we 
focused on selecting levels that would challenge SNFs to improve 
continuously or to maintain high levels of performance. To achieve this 
aim, we analyzed SNFRM data and examined how different achievement 
performance standards would impact SNFs' scores under the proposed 
scoring methodology described further below. As more data becomes 
available, we will continue to assess the appropriateness of these 
performance standards for the SNF VBP program and, if necessary, 
propose to refine these standards' definitions and calculation 
methodologies to better incentivize the provision of high-quality care.
(1) Proposed Achievement Performance Standard and Benchmark
    Beginning with the FY 2019 SNF VBP program, we propose to define 
the achievement performance standard (which we will refer to as the 
``achievement threshold'') for quality measures specified under the SNF 
VBP program as the 25th percentile of national SNF performance on the 
quality measure during the applicable baseline period. We believe this 
achievement threshold definition represents an achievable standard of 
excellence and will reward SNFs appropriately for their performance on 
the quality measures specified for the SNF VBP program. We further 
believe this achievement threshold definition will provide strong 
incentives for SNFs to improve their performance on the measures 
specified for the SNF VBP Program continuously, and will result in a 
wide range of SNF measure scores that can be used in public reporting. 
We also seek comment on whether we should consider adopting either the 
50th or 15th percentiles of national SNFs' performance on the quality 
measure during the applicable baseline period. We seek comment on data 
or other analysis that we should consider regarding the impact on SNFs' 
financial viability and service delivery to beneficiaries at either the 
higher or lower alternative standard. For example, while the 50th 
percentile would represent a more challenging threshold for care 
quality improvement, that standard would align with the Hospital VBP 
Program and would likely result in higher value-based incentive 
payments to top-performing SNFs than other definitions, though the 
actual distribution of value-based incentive payments would depend on 
all SNFs' performance and on the statutory rules governing their 
distribution. Such a standard would likely result in lower value-based 
incentive payments to lower-performing SNFs, which could create 
substantial payment disparities among participating SNFs. Conversely, 
the 15th percentile would likely result in higher value-based incentive 
payments for lower-performing SNFs than other thresholds, with the 
corresponding result of lower value-based incentive-payments for top-
performing SNFs compared to other thresholds.
    We further propose to define the ``benchmark'' for quality measures 
specified under the SNF VBP program as the mean of the top decile of 
SNF performance on the quality measure during the applicable baseline 
period. We believe this definition represents demonstrably high but 
achievable standards of excellence; in other words, the benchmark will 
reflect observed scores for the group of highest-performing SNFs on a 
given measure. This proposed benchmark policy aligns with that used by 
the Hospital VBP Program. As stated in the FY 2016 SNF PPS final rule 
(80 FR 46419 through 46420), we believe the Hospital VBP Program's 
performance standards methodology is a well-understood methodology 
under which health care providers and suppliers can be rewarded both 
for providing high-quality care and for improving their performance 
over time. We therefore believe it is appropriate to align with the 
Hospital VBP Program in setting benchmarks for the SNF VBP Program.
    We also propose that SNFs would receive points along an achievement 
range, which is the scale between the achievement threshold and the 
benchmark. Under this proposal, SNFs would receive achievement points 
if they meet or exceed the achievement threshold for the specified 
measure, and could increase their achievement score based on higher 
levels of performance. (We describe the proposed scoring methodology, 
including how we propose to award points for both achievement and 
improvement, in the scoring methodology section of this proposed rule). 
This proposed achievement range policy aligns with that used by the 
Hospital VBP Program. We refer readers to the FY 2016 SNF PPS final 
rule (80 FR 46419 through

[[Page 24247]]

46420) for a discussion of the rationale behind aligning SNF VBP 
Program policies with the Hospital VBP Program. As stated in that rule, 
we believe that the Hospital VBP Program's performance standards 
methodology is well-understood and would allow us to reward SNFs both 
for providing high-quality care and for improving their performance 
over time. We therefore believe it is appropriate to align with the 
Hospital VBP Program in setting benchmarks for the SNF VBP Program.
    At this time, we do not have the complete CY 2015 data set 
necessary to calculate a numerical value for the proposed achievement 
threshold for the SNFRM. However, we are able to estimate this 
numerical value based on the most recent four quarters of SNFRM data 
available and have provided this estimate in Table 10. We intend to 
publish the final performance standards using complete data from CY 
2015 in the FY 2017 SNF PPS final rule. For clarity, and as discussed 
further below, we have inverted the SNFRM rate so that a higher rate 
represents better performance.

                         Table 10--Interim FY 2019 SNF VBP Program Performance Standards
----------------------------------------------------------------------------------------------------------------
                                                                                  Achievement
                  Measure ID                         Measure description           threshold        Benchmark
----------------------------------------------------------------------------------------------------------------
SNFRM........................................  SNF 30-Day All-Cause                    0.79551          0.83915
                                                Readmission Measure (NQF
                                                #2510).
----------------------------------------------------------------------------------------------------------------

    We welcome public comment on the proposed definitions for 
achievement performance standards, as well as our intention to publish 
the final achievement threshold and benchmark for the FY 2019 Program 
year in the FY 2017 SNF PPS final rule.
(2) Proposed Improvement Performance Standard
    Beginning with the FY 2019 SNF VBP program, we propose to define 
the improvement performance standard (which we will refer to as the 
``improvement threshold'') for quality measures specified under the SNF 
VBP program as each specific SNF's performance on the specified measure 
during the applicable baseline period. As discussed further below, we 
will measure SNFs' performance during both the proposed performance and 
baseline periods, and will award improvement points by comparing SNFs' 
performance to the improvement threshold. We believe this improvement 
performance standard ensures that SNFs will be adequately incentivized 
to improve continuously their performance on the quality measures 
specified under the SNF VBP Program, and appropriately balances our 
view that we should both reward SNFs for high performance and encourage 
improved performance over time.
    We welcome public comment on this proposal.
(3) Publication of Performance Standard Values
    Section 1888(h)(3)(C) of the Act requires the Secretary to 
establish and announce the performance standards for a given SNF VBP 
program year not later than 60 days prior to the beginning of the 
performance period for the FY involved. Based on the proposed 
performance period of CY 2017 for the FY 2019 SNF VBP Program, we 
believe that we must establish and announce performance standards for 
the FY 2019 Program not later than November 1, 2016. We intend to 
establish and announce performance standards for the Program in the 
annual SNF PPS rule, which is effective on October 1 of each year.
    However, finalizing numerical values of these performance standards 
is often logistically difficult because it requires the collection and 
analysis of large amounts of quality measure data in a short period of 
time. For example, the data file for a full year of SNF claims data is 
typically completed around May of the following year. To calculate a 
numerical value for a performance standard, we must perform multiple 
levels of analyses on the data to ensure that all appropriate SNFs and 
patients are included in measure calculations; perform the measure 
calculations themselves; and then use those calculations to determine 
the numerical value for the performance standards. If any individual 
step of this process is delayed, it may preclude us from publishing 
finalized numerical values for the finalized performance standards in 
the applicable SNF PPS final rule, which is typically displayed 
publicly by August 1 of each year.
    To retain the flexibility needed to ensure that numerical values 
published for the finalized performance standards are accurate, we are 
proposing to publish these numerical values no later than 60 days prior 
to the beginning of the performance period but, if necessary, outside 
of notice-and-comment rulemaking. As noted, we intend to publish 
numerical values for those performance standards in the final rule when 
practicable. However, in instances in which we cannot complete the 
necessary analyses in time to include them in the SNF PPS final rule, 
we propose to publish the numerical values for the performance 
standards on the QualityNet Web site used by SNFs to receive VBP 
information as soon as practicable but in no event later than the 
statutorily required 60 days prior to the beginning of the performance 
period for the fiscal year involved. In this instance, we would notify 
SNFs and the public of the publication of the performance standards 
using a listserv email and posting on the QualityNet News portion of 
the Web site.
    We welcome public comment on this proposal.
4. FY 2019 Performance Period and Baseline Period
a. Background
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46422) 
for discussion of the considerations that we intended to take into 
account when specifying a performance period under the SNF VBP Program. 
We also explained our view that the SNF VBP Program necessitates 
adoption of a baseline period, similar to those adopted under the 
Hospital VBP Program and ESRD QIP, which we would use to establish 
performance standards and measure improvement.
    We received public comments on this topic, and we refer readers to 
the FY 2016 SNF PPS final rule for a summary of those comments and our 
responses. We considered those comments when developing our performance 
and baseline period proposals for this proposed rule.
b. Proposed FY 2019 Performance Period
    In considering various performance periods that could apply for the 
FY 2019 SNF VBP Program, we recognized that we must balance the length 
of the performance period used to collect quality measure data and the 
amount of data needed to calculate reliable, valid measure rates with 
the need to finalize a performance period through notice and comment 
rulemaking. We are

[[Page 24248]]

therefore proposing to adopt CY 2017 (January 1, 2017 through December 
31, 2017) as the performance period for the FY 2019 SNF VBP Program, 
with a 90-day run out period immediately thereafter for claims 
processing, based on the following considerations.
    We strive to link performance furnished by SNFs as closely as 
possible to the payment year to ensure clear connections between 
quality measurement and value-based payment. We also strive to measure 
performance using a sufficiently reliable population of patients that 
broadly represent the total care provided by SNFs. As such, we 
anticipate that our annual performance period end date must provide 
sufficient time for SNFs to submit claims for the patients included in 
our measure population. Based on past experience with claims processing 
in other quality reporting and value-based purchasing programs, this 
time lag between care delivered to patients who are included in 
readmission measures and application of a payment consequence linked to 
reporting or performance on those measures has historically been close 
to one year. We also recognize that other factors contribute to the 
delay between data collection and payment impacts, including: The 
processing time needed to calculate measure rates using multiple 
sources of claims needed for statistical modeling; time for determining 
achievement and improvement scores; time for providers to review their 
measure rates and included patients; and processing time needed to 
determine whether a payment adjustment needs to be made to a provider's 
reimbursement rate under the applicable PPS based on its performance. 
Further, our preference is to adopt at least a 12-month period as the 
performance period, consistent with our view that using a full year's 
performance period provides sufficient levels of data accuracy and 
reliability for scoring SNF performance on the SNFRM and SNFPPR. We 
also believe that adopting a 12-month period for the performance period 
supports the direction provided of section 1888(g)(3) of the Act that 
the quality measures specified under the SNF VBP Program shall be 
designed to achieve a high level of reliability and validity. 
Specifically, we believe using a full year of claims data better 
ensures that the variation found among SNF performance on the measures 
is due to real differences between SNFs, and not within-facility 
variation due to issues such as seasonality. Additionally, we believe 
that adopting 12-month performance and baseline periods enables us to 
measure SNFs' performance on the specified measures in sequence, which 
we believe is necessary in order to measure SNFs on both achievement 
and improvement, as required by section 1888(h)(3)(B) of the Act.
    Finally, we also considered the time necessary to calculate SNF-
specific performance on the SNFRM after the conclusion of the 
performance period and to develop and provide SNF VBP scoring reports, 
including the requirement under section 1888(h)(7) of the Act that we 
inform each SNF of the adjustments to the SNF's payments as a result of 
the program not later than 60 days prior to the FY involved. Based on 
the requirements and concerns discussed above, we believe a 12-month 
time period is the only operationally feasible performance period for 
the SNF VBP Program.
    We welcome public comment on this proposal.
c. Proposed FY 2019 Baseline Period
    As we have done in the Hospital VBP Program and the ESRD QIP, we 
are proposing to adopt a baseline period for use in the SNF VBP 
Program.
    We propose to adopt calendar year 2015 claims (January 1, 2015 
through December 31, 2015) as the baseline period for the FY 2019 SNF 
VBP Program and to use that baseline period as the basis for 
calculating performance standards. We will allow for a 90-day claims 
run out following the last date of discharge (December 31, 2015) before 
incorporating the 2015 claims in our database into the measure 
calculation.
    We welcome public comment on this proposal.
5. Proposed SNF VBP Performance Scoring
a. Background
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46422 
through 46425) for a discussion of other Medicare VBP scoring 
methodologies, including the methodologies used by the Hospital VBP 
Program and HAC Reduction Program. We also discussed policy 
considerations related to the Hospital Readmission Reduction Program 
and the ESRD QIP in the performance standards section of that final 
rule (80 FR 46420 through 46421). We also discussed the potential 
application of an exchange function (80 FR 46424 through 46425) to 
translate SNF performance scores into value-based incentive payments 
under the SNF VBP Program.
    We considered those issues, as well as comments we received on 
these issues, when developing our performance scoring policy below.
b. Proposed SNF VBP Program Scoring Methodology
    Section 1888(h)(4)(A) of the Act requires the Secretary develop a 
methodology for assessing the total performance of each SNF based on 
the performance standards established under section 1888(h)(3) of the 
Act for the measure applied under section 1888(h)(2) of the Act. 
Section 1888(h)(3)(B) of the Act further requires that these 
performance standards include levels of achievement and improvement and 
that, in calculating a facility's SNF performance score, the Secretary 
use the higher of either improvement or achievement.
    After carefully reviewing and evaluating a number of scoring 
methodologies for the SNF VBP Program, we propose to adopt a scoring 
model for the SNF VBP Program similar conceptually to that used by the 
Hospital VBP Program and the ESRD QIP, with certain modifications to 
allow us to better differentiate between SNFs' performance on the 
quality measures specified under the SNF VBP Program.\22\ We believe 
this hybrid appropriately accounts for the SNF VBP Program's statutory 
limitation to a single measure, will maintain consistency and alignment 
with other VBP programs already in place, and in doing so, better 
enable SNFs to understand the SNF VBP Program. Specifically, we propose 
to implement a 0 to 100 point scale for achievement scoring and a 0 to 
90 point scale for improvement scoring. In addition, as discussed 
above, we are proposing to set the achievement threshold for the SNF 
VBP Program at the 25th percentile of SNF national performance on the 
quality measure during the baseline period rather than the 50th 
percentile achievement threshold used in the Hospital VBP Program, 
though as noted above, we are also seeking comment on whether or not we 
should consider adopting the 50th percentile or the 15th percentile.
---------------------------------------------------------------------------

    \22\ We refer readers to the FY 2013 IPPS final rule for a 
discussion of the Hospital VBP Program scoring methodology (76 FR 
2466 through 2470).
---------------------------------------------------------------------------

    We believe using wider scales of 0 to 100 points and 0 to 90 points 
instead of the 0 to 10 and 0 to 9 scales used in the Hospital VBP 
Program and ESRD QIP will allow us to calculate more granular 
performance scores for individual SNFs and provide greater 
differentiation between facilities' performance. We further believe 
that setting the achievement threshold for the SNF VBP Program at the 
25th percentile of

[[Page 24249]]

national SNF performance on the quality measure during the baseline 
period is preferable to the Hospital VBP Program's achievement 
threshold of the 50th percentile of national facility performance for 
this Program because it accounts for the statutory requirement that the 
SNF VBP Program include only one quality measure at a time. Unlike the 
Hospital VBP Program, which contains many measures across multiple 
domains, the SNF VBP Program is limited by statute to a single quality 
measure at a time. As a result, a hospital participating in the 
Hospital VBP Program could perform below the 50th percentile of 
national performance on one or more measures without experiencing a 
dramatic drop in its Total Performance Score because the hospital's 
performance on other measures would contribute to its total performance 
score. By contrast, if the SNF VBP Program used an achievement 
threshold of the 50th percentile of national SNF performance, 
approximately one-half of all SNFs nationwide would automatically 
receive 0 achievement points assuming no national improvement trends 
between baseline and performance periods. While these SNFs could still 
receive improvement points, we believe it is preferable to set a lower 
achievement threshold that would award the majority of SNFs at least 
some achievement points, thereby enabling us to differentiate 
performance among the lower-performing half of SNFs, and enabling SNFs 
to continually increase their achievement score based on higher levels 
of performance. As stated above, as more data becomes available, we 
will continue to assess the appropriateness of this achievement 
threshold for the SNF VBP program and, if necessary, propose to refine 
these standards' definitions and calculation methodologies to better 
incentivize the provision of high-quality care.
    For these reasons, we propose to adopt the following scoring 
methodology beginning with the FY 2019 SNF VBP Program.
(1) Proposed Scoring of SNF Performance on the SNFRM
    Because the SNF VBP Program uses only one measure to incentivize 
and assess facility performance and improvement, we believe it is 
important to ensure that SNFs and the public are able to understand 
these measure scores easily. SNFRM rates represent the percentage of 
qualifying patients at a facility that were readmitted within the risk 
window for the measure. As a result, lower SNFRM rates indicate lower 
rates of readmission, and are therefore an indicator of higher quality 
care. For example, a SNFRM rate of 0.14159 means that approximately 
14.2 percent of qualifying patients discharged from that SNF were 
readmitted during the risk window.
    We understand that the use of a ``lower is better'' rate could 
cause confusion among SNFs and the public. Therefore, we propose to 
calculate scores under the Program by first inverting SNFRM rates using 
the following calculation:

SNFRM Inverted Rate = 1 - Facility's SNFRM Rate

    This calculation inverts SNFs' SNFRM rates such that higher SNFRM 
performance reflects better performance on the SNFRM. As a result, the 
same SNFRM rate presented above (0.14159) would result in a SNFRM 
inverted rate of 0.85841, which means that approximately 86 percent of 
qualifying patients discharged from that SNF were not readmitted during 
the risk window. We believe this inversion is important to incentivize 
improvement in a clear and understandable manner, and will also 
simplify public reporting of SNF performance for use in consumer, 
family, and caregiver decision-making. Further, under this proposal, 
all SNFRM inverted rates would be rounded to the fifth significant 
digit.
    We welcome public comment on this proposal.
(2) Scoring SNFs' Performance Based on Achievement
    We propose that a SNF would earn an achievement score of 0 to 100 
points based on where its performance on the specified measure fell 
relative to the achievement threshold (which we propose above to define 
for the quality measures specified under the SNF VBP program as the 
25th percentile of SNF performance on the quality measure during the 
applicable baseline period) and the benchmark (which we propose to 
define as the mean of the top decile of SNF performance on the measure 
during the baseline period). As with the Hospital VBP Program, we 
propose to award points to SNFs based on their performance as follows:
     If a SNF's SNFRM inverted rate was equal to or greater 
than the benchmark, the SNF would receive 100 points for achievement;
     If a SNF's SNFRM inverted rate was less than the 
achievement threshold (that is, the lower bound of the achievement 
range), the SNF would receive 0 points for achievement.
     If a SNF's SNFRM inverted rate was equal to or greater 
than the achievement threshold, but less than the benchmark, we would 
award between 0 and 100 points to the SNF according to the following 
formula:
[GRAPHIC] [TIFF OMITTED] TP25AP16.001

    The results of this formula would be rounded to the nearest whole 
number.
    The SNF achievement score would therefore range between 0 and 100 
points, with a higher achievement score indicating higher performance.
    We welcome public comment on this proposal.
(3) Scoring SNF Performance Based on Improvement
    We propose that a SNF would earn an improvement score of 0 to 90 
points based on how much its performance on the specified measure 
during the performance period improved from its performance on the 
measure during the baseline period. Under this proposal, a unique 
improvement range would be established for each SNF that defines the 
distance between the SNF's baseline period score and the national 
benchmark for the measure (which we propose to define as the mean of 
the top decile of SNF performance on the measure during the baseline 
period). We would then calculate a SNF improvement score for each SNF 
depending on its performance period score:
     If the SNF's performance period score was equal to or 
lower than its improvement threshold, the SNF would receive 0 points 
for improvement.
     If the SNF's performance period score was equal to or 
higher than the benchmark, the SNF would receive 90 points for 
improvement.
     If the SNF's performance period score was greater than its 
improvement threshold, but less than the benchmark, we would award 
between 0 and 90 points for improvement according to the following 
formula:

[[Page 24250]]

[GRAPHIC] [TIFF OMITTED] TP25AP16.002

    The results of this formula would be rounded to the nearest whole 
number.
    We welcome public comment on this proposal.
(4) Establishing SNF Performance Scores
    Consistent with sections 1888(h)(3)(B) and 1888(h)(4)(A) of the 
Act, we propose to use the higher of a SNF's achievement and 
improvement scores to serve as the SNF's performance score for a given 
year of the SNF VBP Program. The resulting SNF performance score would 
be used as the basis for ranking SNF performance on the quality 
measures specified under the SNF VBP Program and establishing the 
value-based incentive payment percentage for each SNF for a given FY.
(5) Examples of the Proposed FY 2019 SNF VBP Program Scoring 
Methodology
    In this section, we provide two examples to illustrate the proposed 
scoring methodology for the FY 2019 SNF VBP Program using hypothetical 
SNFs A, B, and C. The benchmark calculated for the SNFRM for all of 
these hypotheticals is 0.83915 (the mean of the top decile of SNF 
performance on the SNFRM in 2014), and the achievement threshold is 
0.79551 (the 25th percentile of national SNF performance on the SNFRM 
in 2014). We note that, as discussed previously, our proposal for 
scoring SNF performance on the SNFRM inverts the measure rates so that 
a higher rate represents better performance.
    Figure AA shows the scoring for SNF A. SNF A's SNFRM rate of 
0.15025 means that approximately 15 percent of qualifying patients 
discharged from SNF A were readmitted during the 30-day risk window. 
Under the proposed SNFRM scoring methodology, SNF A's SNFRM inverted 
rate would be calculated as follows:

Facility A SNFRM Inverted Rate = 1 - 0.15025

    As a result of this calculation, Facility A's SNFRM inverted rate 
would be 0.84975 on the SNFRM for the performance period. This result 
indicates that approximately 85 percent of SNF A's qualifying patients 
were not readmitted during the 30-day risk window. Because SNF A's 
SNFRM inverted rate of 0.84975 exceeds the benchmark (that is, the mean 
of the top decile of facility performance, or 0.83915), SNF A would 
receive 100 points for achievement. Because SNF A has earned the 
maximum number of points possible for the SNFRM, its improvement score 
would not be calculated.
[GRAPHIC] [TIFF OMITTED] TP25AP16.003

    Figure BB shows the scoring for SNF B. As can be seen below, SNF 
B's performance on the SNFRM went from 0.21244, for a SNFRM inverted 
rate of 0.78756 (below the achievement threshold) in the baseline 
period to 0.18322, for a SNFRM inverted rate of 0.81668 (above the 
achievement threshold) in the performance period. Applying the 
achievement scoring methodology proposed above, SNF B would earn [49] 
achievement points for this measure, calculated as follows:

[[Page 24251]]

[GRAPHIC] [TIFF OMITTED] TP25AP16.004

    However, because SNF B's performance during the performance period 
is greater than its performance during the baseline period, but below 
the benchmark, we would calculate an improvement score as well. 
According to the improvement scale, based on SNF B's improved SNFRM 
inverted rate from 0.78756 to 0.81668, SNF B would receive 51 
improvement points, calculated as follows:
[GRAPHIC] [TIFF OMITTED] TP25AP16.005


[[Page 24252]]


[GRAPHIC] [TIFF OMITTED] TP25AP16.006

    In Figure CC, SNF C's performance on the SNFRM drops from 0.19487, 
for a SNFRM inverted rate of 0.80513, in the baseline period to 
0.21148, for a SNFRM inverted rate 0.78852, in the performance period 
(a decline of 0.01661). Because this SNF's performance during the 
performance period is lower than the achievement threshold of 0.79551, 
it receives 0 points based on achievement. It would also receive 0 
points for improvement, because its performance during the performance 
period is lower than its performance period during the baseline period. 
In this example, SNF C would receive 0 points for its SNF performance 
score.

[[Page 24253]]

[GRAPHIC] [TIFF OMITTED] TP25AP16.007

6. SNF Value-Based Incentive Payments
a. Background
    Paragraphs (5), (6), (7), and (8) of section 1888(h) outline 
several requirements for value-based incentive payments under the SNF 
VBP Program. Section 1888(h)(5)(A) of the Act requires that the 
Secretary increase the adjusted Federal per diem rate for skilled 
nursing facilities by the value-based incentive payment amount 
determined under subsection (h)(5)(B). That amount is to be determined 
by the product of the adjusted Federal per diem rate and the value-
based incentive payment percentage specified under subsection (h)(5)(C) 
of such section for each SNF for a FY.
    Section 1888(h)(5)(C) requires that the value-based incentive 
payment percentage be based on the SNF performance score and must be 
appropriately distributed so that the highest-ranked SNFs receive the 
highest payments, the lowest-ranked SNFs receive the lowest payments, 
and that the payment rate for services furnished by SNFs in the lowest 
40 percent of the rankings be less than would otherwise apply. Finally, 
the total amount of value-based incentive payments must be greater than 
or equal to 50 percent, but not greater than 70 percent, of the total 
amount of the reductions to payments for the FY specified under section 
1888(h)(6) of the Act, as estimated by the Secretary. As discussed 
further below, we will propose to adopt in future rulemaking an 
exchange function to ensure that the total amount of value-based 
incentive payments made under the program each year meets those 
criteria.
    Section 1888(h)(7) of the Act requires the Secretary, not later 
than 60 days prior to the fiscal year involved, to inform each SNF of 
the adjustments to its Medicare payments for services furnished by the 
SNF during the FY. Section 1888(h)(8) of the Act requires that the 
value-based incentive payment and payment reduction only apply for the 
FY involved, and not be taken into account in making payments to a SNF 
in a subsequent year.

[[Page 24254]]

b. Request for Comment on Exchange Function
    As we discussed in the FY 2016 SNF PPS final rule (80 FR 46424 
through 46425), we use a linear exchange function to translate a 
hospital's Total Performance Score under the Hospital VBP Program into 
the percentage multiplier to be applied to each Medicare discharge 
claim submitted by the hospital during the applicable FY. We intend to 
adopt a similar methodology to translate SNF performance scores into 
value-based incentive payment percentages under the SNF VBP Program. 
When considering that methodology, we sought public comments on the 
appropriate form and slope of the exchange function to determine how 
best to reward high performance and encourage SNFs to improve the 
quality of care provided to Medicare beneficiaries. As illustrated in 
Figure DD, we considered the following four mathematical exchange 
function options: Straight line (linear); concave curve (cube root 
function); convex curve (cube function); and S-shape (logistic 
function).
[GRAPHIC] [TIFF OMITTED] TP25AP16.008

    We received numerous public comments on the FY 2016 SNF PPS 
proposed rule, and we seek further public comments to inform our 
policies on this topic. For example, one commenter suggested that a 
linear exchange function would be the most transparent option for SNFs, 
which would assist in their quality improvement efforts. We request 
additional public comments on the specific form of the exchange 
function that we should propose in the future, including any additional 
forms beyond the four examples that we have illustrated above, and any 
considerations we should take into account when selecting an exchange 
function form that would best support quality improvement in SNFs.
    Additionally, we will determine the precise slope of the exchange 
function after the performance period has concluded, because the 
distribution of SNFs' performance scores will form the basis for value-
based incentive payments under the program. However, two additional 
considerations will affect the exchange function's slope. As required 
in section 1888(h)(5)(C)(ii)(II)(cc) of the Act, SNFs in the lowest 40 
percent of the ranking determined under paragraph (4)(B) must receive a 
payment that is less than the payment rate for such services that would 
otherwise apply. Additionally, as described in this section, section 
1888(h)(5)(C)(ii)(III) of the Act requires that the total amount of 
value-based incentive payments under the Program be greater than or 
equal to 50 percent, but not greater than 70 percent, of the total 
amount of reductions to SNFs' payments for the FY, as estimated by the 
Secretary. We intend to ensure that both of these requirements, as well 
as all other statutory requirements under the Program, are fulfilled 
when we specify the exchange function's slope.
    We welcome public comments on this topic.
7. SNF VBP Reporting
a. Confidential Feedback Reports
    Section 1888(g)(5) of the Act requires that we provide quarterly 
confidential feedback reports to SNFs on their performance on the 
measures specified under sections 1888(g)(1) and (2) of the Act. 
Section 1888(g)(5) of the Act also

[[Page 24255]]

requires that we begin providing those reports on October 1, 2016.
    In order to meet the statutory deadline, we are developing the 
feedback reports, operational systems, and implementation guidance 
related to those reports. We intend to provide these reports to SNFs 
via the QIES system CASPER files currently used by SNFs to report 
quality performance. We welcome public comments on the appropriateness 
of the QIES system, and any considerations we should take into account 
when designing and providing these feedback reports.
b. Proposed Two-Phase SNF VBP Data Review and Correction Process
(1) Background
    Section 1888(g)(6) of the Act requires the Secretary to establish 
procedures to make public performance information on the measures 
specified under paragraphs (1) and (2) of such section. The procedures 
must ensure that a SNF has the opportunity to review and submit 
corrections to the information that will be made public for the 
facility prior to its being made public. This public reporting is also 
required by statute to begin no later than October 1, 2017. 
Additionally, section 1888(h)(9) of the Act requires the Secretary to 
make available to the public information regarding SNFs' performance 
under the SNF VBP Program, specifically including each SNF's 
performance score and the ranking of SNFs for each fiscal year.
    Accordingly, we are proposing to adopt a two-phase review and 
correction process for (1) SNFs' measure data that will be made public 
under section 1888(g)(6) of the Act, which will consist of each SNFs' 
performance on the measures specified under sections 1888(g)(1) and (2) 
of the Act, and (2) SNFs' performance information that will be made 
public under section 1888(h)(9).
(2) Phase One: Review and Correction of SNFs' Quality Measure 
Information
    We view the quarterly confidential feedback reports described above 
as one possible means to provide SNFs an opportunity to review and 
provide corrections to their performance information. However, 
collecting SNF measure data and calculating measure performance scores 
takes a number of months following the end of a measurement period. 
Because it is not feasible to provide SNFs with an updated measure rate 
for each quarterly report or engage in review and corrections on a 
quarterly basis, we propose to use one of the four reports each year to 
provide SNFs an opportunity to review their data slated for public 
reporting. In this specific quarterly report, we intend to provide 
SNFs: (1) A count of readmissions; (2) the number of eligible stays at 
the SNF; (3) the SNF's risk-standardized readmissions ratio; and (4) 
the national SNF measure performance rate. In addition, we intend to 
provide the patient-level information used in calculating the measure 
rate. However, we seek comment on what patient-level information would 
be most useful to SNFs, and how we should make this information 
available if requested. We intend to address the topic of what specific 
information will be provided if requested in this specific quarterly 
report in future rulemaking, where we intend to propose a process for 
SNFs' requests for patient-level data. We intend to notify SNFs of this 
report's release via listserv email and posting on the QualityNet News 
portion of the Web site.
    Therefore, we propose to fulfill the statutory requirement that 
SNFs have an opportunity to review and correct information that is to 
be made public under section 1888(g)(6) of the Act by providing SNFs 
with an annual confidential feedback report that we intend to provide 
via the QIES system CASPER files. We further propose that SNFs must, if 
they believe the report's contents to be in error, submit a correction 
request to [email protected] with the following information:
     SNF's CMS Certification Number (CCN).
     SNF Name.
     The correction requested and the SNF's basis for 
requesting the correction. More specifically, the SNF must identify the 
error for which it is requesting correction, and explain its reason for 
requesting the correction. The SNF must also submit documentation or 
other evidence, if available, supporting the request. Additionally, any 
requests made during phase one of the proposed process will be limited 
to the quality measure information at issue.
    We further propose that SNFs must make any correction requests 
within 30 days of posting the feedback report via the QIES system 
CASPER files, not counting the posting date itself. For example, if we 
provide reports on October 1, 2017, SNFs must review those reports and 
submit any correction requests by October 31, 2017. We will not 
consider any requests for correction to quality measure data that are 
received after the close of the first phase of the proposed review and 
correction process. As discussed further below, any corrections sought 
during phase two of the proposed process will be limited to the SNF 
performance score calculation and the ranking.
    We will review all timely phase one correction requests that we 
receive and will provide responses to SNFs that have requested 
corrections as soon as practicable.
(3) Phase Two: Review and Correction of SNF Performance Scores and 
Ranking
    As required by section 1888(h)(7) of the Act, we intend to inform 
each SNF of its payment adjustments as a result of the SNF VBP Program 
not later than 60 days prior to the fiscal year involved. For the FY 
2019 SNF VBP Program, we intend to notify SNFs of those payment 
adjustments via a SNF performance score report not later than 60 days 
prior to October 1, 2018. We intend to address the specific contents of 
that report in future rulemaking.
    In that report, however, we also intend to provide SNFs with their 
SNF performance scores and ranking. By doing so, we intend to use the 
performance score report's provision to SNFs as the beginning of the 
second phase of the proposed review and correction process. By 
completing phase one, SNFs will have an opportunity to verify that 
their quality measure data are fully accurate and complete, and as a 
result, phase two will be limited only to corrections to the SNF 
performance score's calculation and the SNF's ranking. Any requests to 
correct quality measure data that are received during phase two will be 
denied.
    We intend to set out specific requirements for phase two of the 
proposed review and correction process in future rulemaking. To inform 
those proposals, we seek comments on what information would be most 
useful for us to provide to SNFs to facilitate their review of their 
SNF performance scores and ranking. As with the phase one process, we 
intend to adopt a 30-day time period for phase two review and 
corrections, beginning with the date on which we provide SNF 
performance score reports.
    We welcome public comments on this proposed two-phase review and 
correction process.
c. SNF VBP Public Reporting
    Section 1888(h)(9)(A) of the Act requires that we make available to 
the public on the Nursing Home Compare Web site or its successor 
information regarding the performance of individual SNFs with respect 
to a FY, including the performance score for each SNF for the FY, and 
each SNF's ranking, as determined under paragraph (4)(B) of

[[Page 24256]]

such section. Additionally, section 1888(h)(9)(B) of the Act requires 
that we periodically post aggregate information on the SNF VBP Program 
on the Nursing Home Compare Web site or its successor, including the 
range of SNF performance scores, and the number of SNFs receiving 
value-based incentive payments and the range and total amount of those 
payments.
    We intend to address this topic in future rulemaking. However, we 
welcome public comments on the best means by which to display the SNF-
specific and aggregate performance information for public consumption.
d. Ranking SNF Performance
    Section 1888(h)(4)(B) of the Act requires ranking the SNF 
performance scores determined under paragraph (A) of such section from 
low to high. Additionally, and as discussed in this section, we are 
required to publish the ranking of SNF performance scores for a FY on 
Nursing Home Compare or a successor Web site.
    To meet these requirements, we propose to order SNF performance 
scores from low to high and publish those rankings on both the Nursing 
Home Compare and QualityNet Web sites. However, because SNF performance 
scores will not be calculated until after the performance period 
concludes after CY 2017 (that is, during CY 2018), and because SNFs 
must be provided their value-based incentive payment adjustments not 
later than 60 days prior to the FY involved, we intend to publish the 
ranking for FY 2019 SNF VBP payment implications after August 1, 2018.
    We welcome public comments on the most appropriate format and Web 
site for the ranking's publication.

B. Skilled Nursing Facility (SNF) Quality Reporting Program (QRP)

1. Background and Statutory Authority
    We seek to promote higher quality and more efficient health care 
for Medicare beneficiaries, and our efforts are furthered by QRPs 
coupled with public reporting of that information.
    The Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act) added section 1899B to the Act that imposed new data 
reporting requirements for certain PAC providers, including SNFs, and 
required that the Secretary implement a SNF quality reporting program 
(SNF QRP). Section 1888(e)(6)(B)(i)(II) of the Act requires that each 
SNF submit, for FYs beginning on or after the specified application 
date (as defined in section 1899B(a)(2)(E) of the Act), data on quality 
measures specified under section 1899B(c)(1) of the Act and data on 
resource use and other measures specified under section 1899B(d)(1) of 
the Act in a manner and within the time frames specified by the 
Secretary. In addition, section 1888(e)(6)(B)(i)(III) of the Act 
requires, for FYs beginning on or after October 1, 2018, that each SNF 
submit standardized patient assessment data required under section 
1899B(b)(1) of the Act in a manner and within the time frames specified 
by the Secretary. Section 1888(e)(6)(A)(i) of the Act requires that, 
for FYs beginning with FY 2018, if a SNF does not submit data, as 
applicable, on quality and resource use and other measures in 
accordance with section 1888(e)(6)(B)(i)(II) of the Act and on 
standardized patient assessment in accordance with section 
1888(e)(6)(B)(i)(III) of the Act for such FY, the Secretary must reduce 
the market basket percentage described in section 1888(e)(5)(B)(ii) of 
the Act by 2 percentage points. The SNF QRP applies to freestanding 
SNFs, SNFs affiliated with acute care facilities, and all non-CAH 
swing-bed rural hospitals.
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46427 
through 46429) for information on the and requirements of the IMPACT 
Act
    In the FY 2016 SNF PPS final rule, we finalized the general 
timeline and sequencing of activities under the SNF QRP. Please refer 
to the FY 2016 SNF PPS final rule (80 FR 46427 through 46429) for more 
information on these topics.
    In addition, in implementing the SNF QRP and IMPACT Act 
requirements in the FY 2016 SNF PPS final rule, we established our 
approach for identifying cross-setting measures and processes for the 
adoption of measures including the application and purpose of the 
Measures Application Partnership (MAP) and the notice and comment 
rulemaking process. For more information on these topics, please refer 
to the FY 2016 SNF PPS final rule (80 FR 46427 through 46429).
2. General Considerations Used for Selection of Measures for the SNF 
QRP
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46429 
through 46431) for a detailed discussion of the considerations we apply 
in measure selection for the SNF QRP, such as alignment with the CMS 
Quality Strategy,\23\ which incorporates the three broad aims of the 
National Quality Strategy: \24\ Overall, we strive to promote high 
quality and efficiency in the delivery of health care to the 
beneficiaries we serve. Performance improvement leading to the highest 
quality health care requires continuous evaluation to identify and 
address performance gaps and reduce the unintended consequences that 
may arise in treating a large, vulnerable, and aging population. QRPs, 
coupled with public reporting of quality information, are critical to 
the advancement of health care quality improvement efforts. Valid, 
reliable, and relevant quality measures are fundamental to the 
effectiveness of our QRPs. Therefore, selection of quality measures is 
a priority for CMS in all of its QRPs.
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    \23\ http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html.
    \24\ http://www.ahrq.gov/workingforquality/nqs/nqs2011annlrpt.htm.
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    In this proposed rule, we propose to adopt for the SNF QRP one 
measure that we are specifying under section 1899B(c)(1)(C) of the Act 
to meet the Medication Reconciliation domain: (1) Drug Regimen Review 
Conducted with Follow-Up for Identified Issues-Post-Acute Care Skilled 
Nursing Facility Quality Reporting Program. Further, we are proposing 
to adopt for the SNF QRP three measures to meet the resource use and 
other measure domains identified in section 1899B(d)(1) of the Act: (1) 
Medicare Spending per Beneficiary--Post-Acute Care Skilled Nursing 
Facility Quality Reporting Program; (2) Discharge to Community--Post 
Acute Care Skilled Nursing Facility Quality Reporting Program; and (3) 
Potentially Preventable 30-Day Post-Discharge Readmission Measure for 
Skilled Nursing Facility Quality Reporting Program.
    In our selection and specification of measures, we employ a 
transparent process in which we seek input from stakeholders and 
national experts and engage in a process that allows for pre-rulemaking 
input on each measure, as required by section 1890A of the Act.
    To meet this requirement, we provided the following opportunities 
for stakeholder input. Our measure development contractor convened 
technical expert panels (TEPs) that included stakeholder experts and 
patient representatives on July 29, 2015 for the Drug Regimen Review 
Conducted with Follow-Up for Identified Issues--PAC SNF QRP, on August 
25, 2015, September 25, 2015, and October 5, 2015 for the Discharge to 
Community--PAC SNF QRP, on August 12 and 13, 2015 and October 14, 2015 
for the Potentially Preventable 30-Day Post-Discharge Readmission 
Measure for SNF QRP, and on October 29 and 30,

[[Page 24257]]

2015 for the Medicare Spending per Beneficiary measures. In addition, 
we released draft quality measure specifications for public comment on 
the Drug Regimen Review Conducted with Follow-Up for Identified 
Issues--PAC SNF QRP from September 18, 2015 to October 6, 2015, for the 
Discharge to Community--PAC SNF QRP from November 9, 2015 to December 
8, 2015, for the Potentially Preventable 30-Day Post-Discharge 
Readmission Measure for SNF QRP from November 2, 2015 to December 1, 
2015, and for the Medicare Spending per Beneficiary measures from 
January 13, 2016 to February 5, 2016. Further, we implemented a public 
mailbox, [email protected], for the submission of public 
comments. This PAC mailbox is accessible on our post-acute care quality 
initiatives Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-of-2014-Data-Standardization-and-Cross-Setting-MeasuresMeasures.html.
    Additionally, we sought public input from the MAP PAC, Long-Term 
Care Workgroup during the annual in-person meeting held December 14 and 
15, 2015. The final map report is available at http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx. The MAP is composed of multi-stakeholder groups convened 
by the NQF, our current contractor under section 1890(a) of the Act, 
tasked to provide input on the selection of quality and efficiency 
measures described in section 1890(b)(7)(B) of the Act.
    The MAP reviewed each measure proposed in this rule for use in the 
SNF QRP. For more information on the MAP, we refer readers to the FY 
2016 SNF PPS final rule (80 FR 46430 through 46431). Further, for more 
information on the MAP's recommendations, we refer readers to the MAP 
2015-2016 Considerations for Implementing Measures in Federal Programs 
public report at http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx.
3. Policy for Retaining SNF QRP Measures Adopted for Future Payment 
Determinations
    In the FY 2016 SNF PPS final rule (80 FR 46431 through 46432), we 
finalized our policy for measure removal and also finalized that when 
we adopt a measure for the SNF QRP for a payment determination, this 
measure will be automatically retained in the SNF QRP for all 
subsequent payment determinations unless we propose to remove, suspend, 
or replace the measure. We are not proposing any new policies related 
to measure retention or removal. For further information on how 
measures are considered for removal, suspension, or replacement, please 
refer to the FY 2016 SNF PPS Final Rule (80 FR 46431 through 46432).
4. Process for Adoption of Changes to SNF QRP Measures
    In the FY 2016 SNF PPS final rule (80 FR 46432), we finalized our 
policy pertaining to the process for adoption of non-substantive and 
substantive changes to SNF QRP measures. We are not proposing in this 
proposed rule to make any changes to this policy.
5. Quality Measures Previously Finalized for Use in the SNF QRP
    The SNF QRP quality measures for the FY 2018 payment determinations 
and subsequent years are presented in Table 12. Measure specifications 
for the previously adopted measures adapted from non-SNF settings are 
available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html under the downloads 
section at the bottom of the page.

                     Table 12--Quality Measures Previously Finalized for Use in the SNF QRP
----------------------------------------------------------------------------------------------------------------
                                                                                              Annual payment
                                                                 Data collection start    determination: Initial
       Measure title and NQF #            SNF PPS Final rule              date              and subsequent APU
                                                                                                  years
----------------------------------------------------------------------------------------------------------------
Percent of Residents or Patients with  Adopted in the FY 2016   October 1, 2016........  FY 2018 and subsequent
 Pressure Ulcers That Are New or        SNF PPS Final Rule (80                            years.
 Worsened (Short Stay) (NQF #0678).     FR 46433 through
                                        46440).
Application of the NQF-endorsed        Adopted in the FY 2016   October 1, 2016........  FY 2018 and subsequent
 Percent of Residents Experiencing      SNF PPS Final Rule (80                            years.
 One or More Falls with Major Injury    FR 46440 through
 (Long Stay) (NQF #0674).               46444).
Application of Percent of Long-Term    Adopted in the FY 2016   October 1, 2016........  FY 2018 and subsequent
 Care Hospital Patients with an         SNF PPS Final Rule (80                            years.
 Admission and Discharge Functional     FR 46444 through
 Assessment and a Care Plan That        46453).
 Addresses Function (NQF #2631).
----------------------------------------------------------------------------------------------------------------

6. SNF QRP Quality, Resource Use and Other Measures for FY 2018 Payment 
Determinations and Subsequent Years
    For the FY 2018 payment determination and subsequent years, in 
addition to the quality measures identified in Table 12 that we are 
retaining under our policy described in section V.B.3., we are 
proposing three new measures for the SNF QRP. These three proposed 
measures were developed to meet the requirements of the IMPACT Act. 
They are: (1) Medicare Spending per Beneficiary-PAC SNF QRP; (2) 
Discharge to Community--PAC SNF QRP; and (3) Potentially Preventable 
30-Day Post-Discharge Readmission Measure for SNF QRP. The measures are 
described in more detail below.
    For the risk adjustment of the resource use and other measures, we 
understand the important role that sociodemographic status plays in the 
care of patients. However, we continue to have concerns about holding 
providers to different standards for the outcomes of their patients of 
diverse sociodemographic status because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes of 
disadvantaged populations. We routinely monitor the impact of

[[Page 24258]]

sociodemographic status on providers' results on our measures.
    The NQF is currently undertaking a 2-year trial period in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is 
appropriate. For 2 years, NQF will conduct a trial of temporarily 
allowing inclusion of sociodemographic factors in the risk-adjustment 
approach for some performance measures. At the conclusion of the trial, 
NQF will issue recommendations on future permanent inclusion of 
sociodemographic factors. During the trial, measure developers are 
expected to submit information such as analyses and interpretations as 
well as performance scores with and without sociodemographic factors in 
the risk adjustment model.
    Furthermore, the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) is conducting research to examine the impact of 
sociodemographic status on quality measures, resource use, and other 
measures under the Medicare program as directed by the IMPACT Act. We 
will closely examine the findings of the ASPE reports and related 
Secretarial recommendations and consider how they apply to our quality 
programs at such time as they are available.
    We are inviting public comment on how socioeconomic and demographic 
factors should be used in risk adjustment for the resource use and 
other measures.
a. Proposal To Address the IMPACT Act Domain of Resource Use and Other 
Measures: Total Estimated MSPB-PAC SNF QRP
    We are proposing an MSPB-PAC SNF QRP measure for inclusion in the 
SNF QRP for the FY 2018 payment determination and subsequent years. 
Section 1899B(d)(1)(A) of the Act requires the Secretary to specify 
resource use measures, including total estimated Medicare spending per 
beneficiary, on which PAC providers consisting of SNFs, Inpatient 
Rehabilitation Facilities (IRFs), Long-Term Care Hospitals (LTCHs), and 
Home Health Agencies (HHAs) are required to submit necessary data 
specified by the Secretary.
    Rising Medicare expenditures for post-acute care as well as wide 
variation in spending for these services underlines the importance of 
measuring resource use for providers rendering these services. Between 
2001 and 2013, Medicare PAC spending grew at an annual rate of 6.1 
percent and doubled to $59.4 billion, while payments to inpatient 
hospitals grew at an annual rate of 1.7 percent over this same 
period.\25\ A study commissioned by the Institute of Medicine found 
that variation in PAC spending explains 73 percent of variation in 
total Medicare spending across the United States.\26\
---------------------------------------------------------------------------

    \25\ MedPAC, ``A Data Book: Health Care Spending and the 
Medicare Program,'' (2015). 114.
    \26\ Institute of Medicine, ``Variation in Health Care Spending: 
Target Decision Making, Not Geography,'' (Washington, DC: National 
Academies 2013). 2.
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    We reviewed the NQF's consensus-endorsed measures and were unable 
to identify any NQF-endorsed resource use measures for PAC settings. As 
such, we are proposing this MSPB-PAC SNF measure under the Secretary's 
authority to specify non-NQF-endorsed measures under section 
1899B(e)(2)(B) of the Act. Given the current lack of resource use 
measures for PAC settings, our proposed MSPB-PAC SNF measure has the 
potential to provide valuable information to SNF providers on their 
relative Medicare spending in delivering services to approximately 1.7 
million Medicare beneficiaries.\27\
---------------------------------------------------------------------------

    \27\ 2013 figures. MedPAC, ``Medicare Payment Policy,'' Report 
to the Congress (2015). xvii-xviii.
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    The proposed MSPB-PAC SNF episode-based measure will provide 
actionable and transparent information to support SNF providers' 
efforts to promote care coordination and deliver high quality care at a 
lower cost to Medicare. The MSPB-PAC SNF measure holds SNF providers 
accountable for the Medicare payments within an ``episode of care'' 
(episode), which includes the period during which a patient is directly 
under the SNF's care, as well as a defined period after the end of the 
SNF treatment, which may be reflective of and influenced by the 
services furnished by the SNF. MSPB-PAC SNF episodes, constructed 
according to the methodology described below, have high levels of 
Medicare spending with substantial variation. In FY 2014, Medicare FFS 
beneficiaries experienced 1,534,773 MSPB-PAC episodes triggered by 
admission to a SNF. The mean payment-standardized, risk-adjusted 
episode spending for these episodes is $26,279. There is substantial 
variation in the Medicare payments for these MSPB-PAC SNF episodes--
ranging from approximately $6,090 at the 5th percentile to 
approximately $60,050 at the 95th percentile. This variation is 
partially driven by variation in payments occurring following SNF 
treatment.
    Evaluating Medicare payments during an episode creates a continuum 
of accountability between providers and has the potential to improve 
post-treatment care planning and coordination. While some stakeholders 
throughout the measure development process supported the measures and 
felt that measuring Medicare spending was critical for improving 
efficiency, others believed that resource use measures did not reflect 
quality of care in that they do not take into account patient outcomes 
or experience beyond those observable in claims data. However, SNFs 
involved in the provision of high-quality PAC care as well as 
appropriate discharge planning and post-discharge care coordination 
would be expected to perform well on this measure since beneficiaries 
would likely experience fewer costly adverse events (for example, 
avoidable hospitalizations, infections, and emergency room usage). 
Further, it is important that the cost of care be explicitly measured 
so that, in conjunction with other quality measures, we can recognize 
providers that are involved in the provision of high quality care at 
lower cost.
    We have undertaken development of MSPB-PAC measures for each of the 
four PAC settings. We are proposing an LTCH-specific MSPB-PAC measure 
in the FY 2017 IPPS/LTCH proposed rule published elsewhere in this 
issue of the Federal Register and an IRF-specific MSBP-PAC measure in 
the FY 2017 IRF PPS proposed rule published elsewhere in this issue of 
the Federal Register. We intend to propose a HHA-specific MSBP-PAC 
measure through future notice-and-comment rulemaking. The four setting-
specific MSPB-PAC measures are closely aligned in terms of episode 
construction and measure calculation. Each of the MSPB-PAC measures 
assess Medicare Part A and Part B spending within an episode, and the 
numerator and denominator are defined similarly for each of the MSPB-
PAC measures. However, developing setting-specific measures allows us 
to account for differences between settings in payment policy, the 
types of data available, and the underlying health characteristics of 
beneficiaries.
    The MSPB-PAC measures mirror the general construction of the 
inpatient prospective payment system (IPPS) hospital MSPB measure that 
was finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51618 
through 51627). It was endorsed by the NQF on December 6, 2013 and has 
been used in the Hospital Value-Based Purchasing (VBP) Program (NQF 
#2158) since FY 2015.\28\ The hospital MSPB measure was

[[Page 24259]]

originally established under the authority of section 1886(o)(2)(B)(ii) 
of the Act. The hospital MSPB measure evaluates hospitals' Medicare 
spending relative to the Medicare spending for the national median 
hospital within a hospital MSPB episode. It assesses Medicare Part A 
and Part B payments for services performed by hospitals and other 
healthcare providers within a hospital MSPB episode, which is comprised 
of the periods immediately prior to, during, and following a patient's 
hospital stay.29 30 Similarly, the MSPB-PAC measures assess 
all Medicare Part A and Part B payments for fee-for-service (FFS) 
claims with a start date during the episode window (which, as discussed 
in this section, is the time period during which Medicare FFS Part A 
and Part B services are counted towards the MSPB-PAC SNF episode). 
There are however differences between the MSPB-PAC measures, as 
proposed, and the hospital MSPB measure to reflect differences in 
payment policies and the nature of care provided in each PAC setting. 
For example, the MSPB-PAC measures exclude a limited set of services 
(for example, for clinically unrelated services) provided to a 
beneficiary during the episode window while the hospital MSPB measure 
does not exclude any services.
---------------------------------------------------------------------------

    \28\ QualityNet, ``Measure Methodology Reports: Medicare 
Spending Per Beneficiary (MSPB) Measure,'' (2015). http://www.qualitynet.org/dcs/ContentServer?pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772053996.
    \29\ QualityNet, ``Measure Methodology Reports: Medicare 
Spending Per Beneficiary (MSPB) Measure,'' (2015). http://www.qualitynet.org/dcs/ContentServer?pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772053996.
    \30\ FY 2012 IPPS/LTCH PPS Final Rule (76 FR 51619).
---------------------------------------------------------------------------

    MSPB-PAC episodes may begin within 30 days of discharge from an 
inpatient hospital as part of a patient's trajectory from an acute to a 
PAC setting. A SNF stay beginning within 30 days of discharge from an 
inpatient hospital will therefore be included once in the hospital's 
MSPB measure, and once in the SNF provider's MSPB-PAC measure. Aligning 
the hospital MSPB and MSPB-PAC measures in this way creates continuous 
accountability and aligns incentives to improve care planning and 
coordination across inpatient and PAC settings.
    We have sought and considered the input of stakeholders throughout 
the measure development process for the MSPB-PAC measures. We convened 
a TEP consisting of 12 panelists with combined expertise in all of the 
PAC settings on October 29 and 30, 2015 in Baltimore, Maryland. A 
follow-up email survey was sent to TEP members on November 18, 2015 to 
which seven responses were received by December 8, 2015. The MSPB-PAC 
TEP Summary Report is available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html. The measures were also presented to the MAP Post-Acute 
Care/Long-Term Care (PAC/LTC) Workgroup on December 15, 2015. As the 
MSPB-PAC measures were under development, there were three voting 
options for members: Encourage continued development, do not encourage 
further consideration, and insufficient information.\31\ The MAP PAC/
LTC workgroup voted to ``encourage continued development'' for each of 
the MSPB-PAC measures.\32\ The MAP PAC/LTC workgroup's vote of 
``encourage continued development'' was affirmed by the MAP 
Coordinating Committee on January 26, 2016.\33\ The MAP's concerns 
about the MSPB-PAC measures, as outlined in their final report ``MAP 
2016 Considerations for Implementing Measures in Federal Programs: 
Post-Acute Care and Long-Term Care'' and Spreadsheet of Final 
Recommendations, were taken into consideration during the measure 
development process and are discussed as part of our responses to 
public comments, described below.34 35
---------------------------------------------------------------------------

    \31\ National Quality Forum, Measure Applications Partnership, 
``Process and Approach for MAP Pre-Rulemaking Deliberations, 2015-
2016'' (February 2016) http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81693.
    \32\ National Quality Forum, Measure Applications Partnership 
Post-Acute Care/Long-Term Care Workgroup, ``Meeting Transcript--Day 
2 of 2'' (December 15, 2015) 104-106 http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81470.
    \33\ National Quality Forum, Measure Applications Partnership, 
``Meeting Transcript--Day 1 of 2'' (January 26, 2016) 231-232 http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81637.
    \34\ National Quality Forum, Measure Applications Partnership, 
``MAP 2016 Considerations for Implementing Measures in Federal 
Programs: Post-Acute Care and Long-Term Care'' Final Report, 
(February 2016) http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx.
    \35\ National Quality Forum, Measure Applications Partnership, 
``Spreadsheet of MAP 2016 Final Recommendations'' (February 1, 2016) 
http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
---------------------------------------------------------------------------

    Since the MAP's review and recommendation of continued development, 
CMS has continued to refine risk adjustment models and conduct measure 
testing for the IMPACT Act measures in compliance with the MAP's 
recommendations. The proposed IMPACT Act measures are both consistent 
with the information submitted to the MAP and support the scientific 
acceptability of these measures for use in quality reporting programs.
    In addition, a public comment period, accompanied by draft measures 
specifications, was originally open from January 13 to 27, 2016 and 
twice extended to January 29 and February 5. A total of 45 comments on 
the MSPB-PAC measures were received during this 3.5 week period. The 
comments received also covered each of the MAP's concerns as outlined 
in their Final Recommendations.\36\ The MSPB-PAC Public Comment Summary 
Report is available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html and 
contains the public comments (summarized and verbatim), along with our 
responses including statistical analyses. If finalized, the MSPB-PAC 
SNF measure, along with the other MSPB-PAC measures, as applicable, 
would be submitted for NQF endorsement.
---------------------------------------------------------------------------

    \36\ National Quality Forum, Measure Applications Partnership, 
``Spreadsheet of MAP 2016 Final Recommendations'' (February 1, 2016) 
http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
---------------------------------------------------------------------------

    To calculate the MSPB-PAC SNF measure for each SNF provider, we 
first define the construction of the MSPB-PAC SNF episode, including 
the length of the episode window as well as the services included in 
the episode. Next, we apply the methodology for the measure 
calculation. The specifications are discussed further in this section. 
More detailed specifications for the proposed MSPB-PAC measures, 
including the MSPB-PAC SNF measure that we are proposing in this 
proposed rule, is available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
(1) Episode Construction
    An MSPB-PAC SNF episode begins at the episode trigger, which is 
defined as the patient's admission to a SNF. This admitting facility is 
the attributed provider, for whom the MSPB-PAC SNF measure is 
calculated. The episode window is the time period during which Medicare 
FFS Part A and Part B services are counted towards the MSPB-PAC SNF 
episode. Because Medicare FFS claims are already reported to the 
Medicare program for payment purposes, SNF providers will not be 
required to report any additional data to

[[Page 24260]]

CMS for calculation of this measure. Thus, there will be no additional 
data collection burden from the implementation of this measure.
    The episode window is comprised of a treatment period and an 
associated services period. The treatment period begins at the trigger 
(that is, on the day of admission to the SNF) and ends on the day of 
discharge from that SNF. Readmissions to the same facility occurring 
within 7 or fewer days do not trigger a new episode, and instead are 
included in the treatment period of the original episode. When two 
sequential stays at the same SNF occur within 7 or fewer days of one 
another, the treatment period ends on the day of discharge for the 
latest SNF stay. The treatment period includes those services that are 
provided directly or reasonably managed by the SNF provider that are 
directly related to the beneficiary's care plan. The associated 
services period is the time during which Medicare Part A and Part B 
services (with certain exclusions) are counted towards the episode. The 
associated services period begins at the episode trigger and ends 30 
days after the end of the treatment period. The distinction between the 
treatment period and the associated services period is important 
because clinical exclusions of services may differ for each period. 
Certain services are excluded from the MSPB-PAC SNF episodes because 
they are clinically unrelated to SNF care, and/or because SNF providers 
may have limited influence over certain Medicare services delivered by 
other providers during the episode window. These limited service-level 
exclusions are not counted towards a given SNF provider's Medicare 
spending to ensure that beneficiaries with certain conditions and 
complex care needs receive the necessary care. Certain services that 
have been determined by clinicians to be outside of the control of a 
SNF provider include planned hospital admissions, management of certain 
preexisting chronic conditions (for example, dialysis for end-stage 
renal disease (ESRD), and enzyme treatments for genetic conditions), 
treatment for preexisting cancers, organ transplants, and preventive 
screenings (for example, colonoscopy and mammograms). Exclusion of such 
services from the MSPB-PAC SNF episode ensures that facilities do not 
have disincentives to treat patients with certain conditions or complex 
care needs.
    An MSPB-PAC episode may begin during the associated services period 
of an MSPB-PAC SNF episode in the 30 days post-treatment. One possible 
scenario occurs where a SNF provider discharges a beneficiary who is 
then admitted to a HHA within 30 days. The HHA claim would be included 
once as an associated service for the attributed provider of the first 
MSPB-PAC SNF episode and once as a treatment service for the attributed 
provider of the second MSPB-PAC HHA episode. As in the case of overlap 
between hospital and PAC episodes discussed earlier, this overlap is 
necessary to ensure continuous accountability between providers 
throughout a beneficiary's trajectory of care, as both providers share 
incentives to deliver high quality care at a lower cost to Medicare. 
Even within the SNF setting, one MSPB-PAC SNF episode may begin in the 
associated services period of another MSPB-PAC SNF episode in the 30 
days post-treatment. The second SNF claim would be included once as an 
associated service for the attributed SNF provider of the first MSPB-
PAC SNF episode and once as a treatment service for the attributed SNF 
provider of the second MSPB-PAC SNF episode. Again, this ensures that 
SNF providers have the same incentives throughout both MSPB-PAC SNF 
episodes to deliver quality care and engage in patient-focused care 
planning and coordination. If the second MSPB-PAC SNF episode were 
excluded from the second SNF provider's MSPB-PAC SNF measure, that 
provider would not share the same incentives as the first SNF provider 
of first MSPB-PAC SNF episode. The MSPB-PAC SNF measure is designed to 
benchmark the resource use of each attributed provider against what 
their spending is expected to be as predicted through risk adjustment. 
As discussed further in this section, the measure takes the ratio of 
observed spending to expected spending for each episode and then takes 
the average of those ratios across all of the attributed provider's 
episodes. The measure is not a simple sum of all costs across a 
provider's episodes, thus mitigating concerns about double counting.
(2) Measure Calculation
    Medicare payments for Part A and Part B claims for services 
included in MSPB-PAC SNF episodes, defined according to the methodology 
above, are used to calculate the MSPB-PAC SNF measure. Measure 
calculation involves determination of the episode exclusions, the 
approach for standardizing payments for geographic payment differences, 
the methodology for risk adjustment of episode spending to account for 
differences in patient case mix, and the specifications for the measure 
numerator and denominator.
(a) Exclusion Criteria
    In addition to service-level exclusions that remove some payments 
from individual episodes, we exclude certain episodes in their entirety 
from the MSPB-PAC SNF measure to ensure that the MSPB-PAC SNF measure 
accurately reflects resource use and facilitates fair and meaningful 
comparisons between SNF providers. The proposed episode-level 
exclusions are as follows:
     Any episode that is triggered by a SNF claim outside the 
50 states, DC, Puerto Rico, and U.S. Territories.
     Any episode where the claim(s) constituting the attributed 
SNF provider's treatment have a standard allowed amount of zero or 
where the standard allowed amount cannot be calculated.
     Any episode in which a beneficiary is not enrolled in 
Medicare FFS for the entirety of a 90-day lookback period (that is, a 
90-day period prior to the episode trigger) plus episode window 
(including where the beneficiary dies), or is enrolled in Part C for 
any part of the lookback period plus episode window.
     Any episode in which a beneficiary has a primary payer 
other than Medicare for any part of the 90-day lookback period plus 
episode window.
     Any episode where the claim(s) constituting the attributed 
SNF provider's treatment include at least one related condition code 
indicating that it is not a prospective payment system bill.
(b) Standardization and Risk Adjustment
    Section 1899B(d)(2)(C) of the Act requires that the MSPB-PAC 
measures are adjusted for the factors described under section 
1886(o)(2)(B)(ii) of the Act, which include adjustment for factors such 
as age, sex, race, severity of illness, and other factors that the 
Secretary determines appropriate. Medicare payments included in the 
MSPB-PAC SNF QRP measure are payment standardized and risk-adjusted. 
Payment standardization removes sources of payment variation not 
directly related to clinical decisions and facilitates comparisons of 
resource use across geographic areas. We propose to use the same 
payment standardization methodology as that used in the NQF-endorsed 
hospital MSPB measure. This methodology removes geographic payment 
differences, such as wage index and geographic practice cost index 
(GPCI), incentive payment adjustments, and other add-on payments that 
support broader Medicare program goals

[[Page 24261]]

including indirect graduate medical education (IME) and hospitals 
serving a disproportionate share of uninsured patients (DSH).\37\
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    \37\ QualityNet, ``CMS Price (Payment) Standardization--Detailed 
Methods'' (Revised May 2015) https://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772057350.
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    Risk adjustment uses patient claims history to account for case-mix 
variation and other factors that affect resource use but are beyond the 
influence of the attributed SNF provider. To assist with risk 
adjustment, we create mutually exclusive and exhaustive clinical case 
mix categories using the most recent institutional claim in the 60 days 
prior to the start of the MSPB-PAC SNF episode. The beneficiaries in 
these clinical case mix categories have a greater degree of clinical 
similarity than the overall SNF patient population, and allow us to 
more accurately estimate Medicare spending. Our proposed MSPB-PAC SNF 
model, adapted for the SNF setting from the NQF-endorsed hospital MSPB 
measure uses a regression framework with a 90-day hierarchical 
condition category (HCC) lookback period and covariates including the 
clinical case mix categories, HCC indicators, age brackets, indicators 
for originally disabled, ESRD enrollment, and long-term care status, 
and selected interactions of these covariates where sample size and 
predictive ability make them appropriate. We sought and considered 
public comment regarding the treatment of hospice services occurring 
within the MSPB-PAC SNF episode window. Given the comments received, we 
propose to include the Medicare spending for hospice services but risk 
adjust for them, such that MSPB-PAC SNF episodes with hospice are 
compared to a benchmark reflecting other MSPB-PAC SNF episodes with 
hospice. We believe that this strikes a balance between the measure's 
intent of evaluating Medicare spending and ensuring that providers do 
not have incentives against the appropriate use of hospice services in 
a patient-centered continuum of care.
    We understand the important role that sociodemographic factors, 
beyond age, play in the care of patients. However, we continue to have 
concerns about holding providers to different standards for the 
outcomes of their patients of diverse sociodemographic status because 
we do not want to mask potential disparities or minimize incentives to 
improve the outcomes of disadvantaged populations. We routinely monitor 
the impact of sociodemographic status on providers' results on our 
measures.
    The NQF is currently undertaking a 2-year trial period in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is 
appropriate. For 2 years, NQF will conduct a trial of temporarily 
allowing inclusion of sociodemographic factors in the risk-adjustment 
approach for some performance measures. At the conclusion of the trial, 
NQF will issue recommendations on future permanent inclusion of 
sociodemographic factors. During the trial, measure developers are 
expected to submit information such as analyses and interpretations as 
well as performance scores with and without sociodemographic factors in 
the risk adjustment model.
    Furthermore, the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) is conducting research to examine the impact of 
sociodemographic status on quality measures, resource use, and other 
measures under the Medicare program as required by the IMPACT Act. We 
will closely examine the findings of the ASPE reports and related 
Secretarial recommendations and consider how they apply to our quality 
programs at such time as they are available.
    While we conducted analyses on the impact of age by sex on the 
performance of the MSPB-PAC SNF risk-adjustment model, we are not 
proposing to adjust the MSPB-PAC SNF measure for socioeconomic and 
demographic factors at this time. As this MSPB-PAC SNF measure will be 
submitted for NQF endorsement, we prefer to await the results of this 
trial and study before deciding whether to risk adjust for 
socioeconomic and demographic factors. We will monitor the results of 
the trial, studies, and recommendations. We are inviting public comment 
on how socioeconomic and demographic factors should be used in risk 
adjustment for the MSPB-PAC SNF measure.
(c) Measure Numerator and Denominator
    The MPSB-PAC SNF measure is a payment-standardized, risk-adjusted 
ratio that compares a given SNF provider's Medicare spending against 
the Medicare spending of other SNF providers within a performance 
period. Similar to the hospital MSPB measure, the ratio allows for ease 
of comparison over time as it obviates the need to adjust for inflation 
or policy changes.
    The MSPB-PAC SNF measure is calculated as the ratio of the MSPB-PAC 
Amount for each SNF provider divided by the episode-weighted median 
MSPB-PAC Amount across all SNF providers. To calculate the MSPB-PAC 
Amount for each SNF provider, one calculates the average of the ratio 
of the standardized episode spending over the expected episode spending 
(as predicted in risk adjustment), and then multiplies this quantity by 
the average episode spending level across all SNF providers nationally. 
The denominator for a SNF provider's MSPB-PAC SNF measure is the 
episode-weighted national median of the MSPB-PAC Amounts across all SNF 
providers. An MSPB-PAC SNF measure of less than 1 indicates that a 
given SNF provider's resource use is less than that of the national 
median SNF provider during a performance period. Mathematically, this 
is represented in equation (A) below:
[GRAPHIC] [TIFF OMITTED] TP25AP16.009

Where:

 Yij = attributed standardized spending for episode i and 
provider j
 [Ycirc]ij = expected standardized spending for episode i 
and provider j, as predicted from risk adjustment
 nj = number of episodes for provider j
 n = total number of episodes nationally
 i [egr] {Ij{time}  = all episodes i in the set of episodes 
attributed to provider j.

[[Page 24262]]

(3) Data Sources
    The MSPB-PAC SNF resource use measure is an administrative claims-
based measure. It uses Medicare Part A and Part B claims from FFS 
beneficiaries and Medicare eligibility files.
(4) Cohort
    The measure cohort includes Medicare FFS beneficiaries with a SNF 
treatment period ending during the data collection period.
(5) Reporting
    If this proposed measure is finalized, we intend to provide initial 
confidential feedback to providers, prior to public reporting of this 
measure, based on Medicare FFS claims data from discharges in CY 2016. 
We intend to publicly report this measure using claims data from 
discharges in CY 2017.
    We propose a minimum of 20 episodes for reporting and inclusion in 
the SNF QRP. For the reliability calculation, as described in the 
measure specifications identified at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html, we used data from FY 2014. The reliability results support 
the 20 episode case minimum, and 100.00 percent of SNF providers had 
moderate or high reliability (above 0.4).
    We invite public comment on our proposal to adopt the measure, 
MSPB-PAC SNF Measure for the SNF QRP.
b. Proposal To Address the IMPACT Act Domain of Resource Use and Other 
Measures: Discharge to Community-Post Acute Care (PAC) Skilled Nursing 
Facility Quality Reporting Program
    Sections 1899B(d)(1)(B) and 1899B(a)(2)(E)(ii) of the Act require 
the Secretary to specify a measure to address the domain of discharge 
to community by SNFs, LTCHs, and IRFs by October 1, 2016, and HHAs by 
January 1, 2017. We are proposing to adopt the measure, Discharge to 
Community--PAC SNF QRP, for the SNF QRP for the FY 2018 payment 
determination and subsequent years as a Medicare FFS claims-based 
measure to meet this requirement.
    This proposed measure assesses successful discharge to the 
community from a SNF setting, with successful discharge to the 
community including no unplanned rehospitalizations and no death in the 
31 days following discharge from the SNF. Specifically, this proposed 
measure reports a SNF's risk-standardized rate of Medicare FFS 
residents who are discharged to the community following a SNF stay, and 
do not have an unplanned readmission to an acute care hospital or LTCH 
in the 31 days following discharge to community, and who remain alive 
during the 31 days following discharge to community. The term 
``community'', for this measure, is defined as home/self-care, with or 
without home health services, based on Patient Discharge Status Codes 
01, 06, 81, and 86 on the Medicare FFS claim.38 39 This 
measure is conceptualized uniformly across the PAC settings, in terms 
of the definition of the discharge to community outcome, the approach 
to risk adjustment, and the measure calculation.
---------------------------------------------------------------------------

    \38\ Further description of patient discharge status codes can 
be found, for example, at the following Web page: https://med.noridianmedicare.com/web/jea/topics/claim-submission/patient-status-codes.
    \39\ This definition is not intended to suggest that board and 
care homes, assisted living facilities, or other settings included 
in the definition of ``community'' for the purpose of this measure 
are the most integrated setting for any particular individual or 
group of individuals under the Americans with Disabilities Act (ADA) 
and Section 504.
---------------------------------------------------------------------------

    Discharge to a community setting is an important health care 
outcome for many residents for whom the overall goals of post-acute 
care include optimizing functional improvement, returning to a previous 
level of independence, and avoiding institutionalization. Returning to 
the community is also an important outcome for many residents who are 
not expected to make functional improvement during their SNF stay, and 
for residents who may be expected to decline functionally due to their 
medical condition. The discharge to community outcome offers a multi-
dimensional view of preparation for community life, including the 
cognitive, physical, and psychosocial elements involved in a discharge 
to the community.40 41
---------------------------------------------------------------------------

    \40\ El-Solh A.A., Saltzman S.K., Ramadan F.H., Naughton B.J. 
Validity of an artificial neural network in predicting discharge 
destination from a postacute geriatric rehabilitation unit. Archives 
of physical medicine and rehabilitation. 2000;81(10):1388-1393.
    \41\ Tanwir S, Montgomery K, Chari V, Nesathurai S. Stroke 
rehabilitation: Availability of a family member as caregiver and 
discharge destination. European journal of physical and 
rehabilitation medicine. 2014;50(3):355-362.
---------------------------------------------------------------------------

    In addition to being an important outcome from a resident and 
family perspective, patients and residents discharged to community 
settings, on average, incur lower costs over the recovery episode, 
compared with those discharged to institutional 
settings.42 43 Given the high costs of care in institutional 
settings, encouraging SNFs to prepare residents for discharge to 
community, when clinically appropriate, may have cost-saving 
implications for the Medicare program.\44\ Also, providers have 
discovered that successful discharge to community was a major driver of 
their ability to achieve savings, where capitated payments for post-
acute care were in place.\45\ For residents who require long-term care 
due to persistent disability, discharge to community could result in 
lower long-term care costs for Medicaid and for residents' out-of-
pocket expenditures.\46\
---------------------------------------------------------------------------

    \42\ Dobrez D, Heinemann A.W., Deutsch A, Manheim L, Mallinson 
T. Impact of Medicare's prospective payment system for inpatient 
rehabilitation facilities on stroke patient outcomes. American 
journal of physical medicine & rehabilitation/Association of 
Academic Physiatrists. 2010;89(3):198-204.
    \43\ Gage B., Morley M., Spain P., Ingber M. Examining Post 
Acute Care Relationships in an Integrated Hospital System. Final 
Report. RTI International;2009.
    \44\ Ibid.
    \45\ Doran J.P., Zabinski S.J. Bundled payment initiatives for 
Medicare and non-Medicare total joint arthroplasty patients at a 
community hospital: Bundles in the real world. The journal of 
arthroplasty. 2015;30(3):353-355.
    \46\ Newcomer R.J., Ko M., Kang T., Harrington C., Hulett D., 
Bindman A.B. Health Care Expenditures After Initiating Long-term 
Services and Supports in the Community Versus in a Nursing Facility. 
Medical Care. 2016;54(3):221-228.
---------------------------------------------------------------------------

    Analyses conducted for ASPE on PAC episodes, using a 5 percent 
sample of 2006 Medicare claims, revealed that relatively high average, 
unadjusted Medicare payments are associated with discharge to 
institutional settings from IRFs, SNFs, LTCHs or HHAs, as compared with 
payments associated with discharge to community settings.\47\ Average, 
unadjusted Medicare payments associated with discharge to community 
settings ranged from $0 to $4,017 for IRF discharges, $0 to $3,544 for 
SNF discharges, $0 to $4,706 for LTCH discharges, and $0 to $992 for 
HHA discharges. In contrast, payments associated with discharge to non-
community settings were considerably higher, ranging from $11,847 to 
$25,364 for IRF discharges, $9,305 to $29,118 for SNF discharges, 
$12,465 to $18,205 for LTCH discharges, and $7,981 to $35,192 for HHA 
discharges.\48\
---------------------------------------------------------------------------

    \47\ Gage B., Morley M., Spain P., Ingber M. Examining Post 
Acute Care Relationships in an Integrated Hospital System. Final 
Report. RTI International; 2009.
    \48\ Ibid.
---------------------------------------------------------------------------

    Measuring and comparing facility-level discharge to community rates 
is expected to help differentiate among facilities with varying 
performance in this important domain, and to help avoid disparities in 
care across resident groups. Variation in discharge to community rates 
has been reported

[[Page 24263]]

within and across post-acute settings; across a variety of facility-
level characteristics, such as geographic location (for example, 
regional location, urban or rural location), ownership (for example, 
for-profit or nonprofit), and freestanding or hospital-based units; and 
across patient-level characteristics, such as race and 
gender.49 50 51 52 53 54 Discharge to community rates in the 
IRF setting have been reported to range from about 60 to 80 
percent.55 56 57 58 59 60 Longer-term studies show that 
rates of discharge to community from IRFs have decreased over time as 
IRF length of stay has decreased.61 62 Greater variation in 
discharge to community rates is seen in the SNF setting, with rates 
ranging from 31 to 65 percent.63 64 65 66 In the SNF 
Medicare FFS population, using CY 2013 national claims data, we found 
that approximately 44 percent of residents were discharged to the 
community. A multi-center study of 23 LTCHs demonstrated that 28.8 
percent of 1,061 patients who were ventilator-dependent on admission 
were discharged to home.\67\ A single-center study revealed that 31 
percent of LTCH hemodialysis patients were discharged to home.\68\ One 
study noted that 64 percent of beneficiaries who were discharged from 
the home health episode did not use any other acute or post-acute 
services paid by Medicare in the 30 days after discharge.\69\ However, 
significant numbers of patients were admitted to hospitals (29 percent) 
and lesser numbers to SNFs (7.6 percent), IRFs (1.5 percent), home 
health (7.2 percent) or hospice (3.3 percent).\70\
---------------------------------------------------------------------------

    \49\ Reistetter T.A., Karmarkar A.M., Graham J.E., et al. 
Regional variation in stroke rehabilitation outcomes. Archives of 
physical medicine and rehabilitation. 2014;95(1):29-38.
    \50\ El-Solh A.A., Saltzman S.K., Ramadan F.H., Naughton B.J. 
Validity of an artificial neural network in predicting discharge 
destination from a postacute geriatric rehabilitation unit. Archives 
of physical medicine and rehabilitation. 2000;81(10):1388-1393.
    \51\ March 2015 Report to the Congress: Medicare Payment Policy. 
Medicare Payment Advisory Commission;2015.
    \52\ Bhandari V.K., Kushel M., Price L., Schillinger D. Racial 
disparities in outcomes of inpatient stroke rehabilitation. Archives 
of physical medicine and rehabilitation. 2005;86(11):2081-2086.
    \53\ Chang P.F., Ostir G.V., Kuo Y.F., Granger C.V., Ottenbacher 
K.J. Ethnic differences in discharge destination among older 
patients with traumatic brain injury. Archives of physical medicine 
and rehabilitation. 2008;89(2):231-236.
    \54\ Berges I.M., Kuo Y.F., Ostir G.V., Granger C.V., Graham 
J.E., Ottenbacher K.J. Gender and ethnic differences in 
rehabilitation outcomes after hip-replacement surgery. American 
journal of physical medicine & rehabilitation/Association of 
Academic Physiatrists. 2008;87(7):567-572.
    \55\ Galloway R.V., Granger C.V., Karmarkar A.M., et al. The 
Uniform Data System for Medical Rehabilitation: Report of patients 
with debility discharged from inpatient rehabilitation programs in 
2000-2010. American journal of physical medicine & rehabilitation/
Association of Academic Physiatrists. 2013;92(1):14-27.
    \56\ Morley M.A., Coots L.A., Forgues A.L., Gage B.J. Inpatient 
rehabilitation utilization for Medicare beneficiaries with multiple 
sclerosis. Archives of physical medicine and rehabilitation. 
2012;93(8):1377-1383.
    \57\ Reistetter T.A., Graham J.E., Deutsch A., Granger C.V., 
Markello S., Ottenbacher K.J. Utility of functional status for 
classifying community versus institutional discharges after 
inpatient rehabilitation for stroke. Archives of physical medicine 
and rehabilitation. 2010;91(3):345-350.
    \58\ Gagnon D., Nadeau S., Tam V. Clinical and administrative 
outcomes during publicly-funded inpatient stroke rehabilitation 
based on a case-mix group classification model. Journal of 
rehabilitation medicine. 2005;37(1):45-52.
    \59\ DaVanzo J., El-Gamil A., Li J., Shimer M., Manolov N., 
Dobson A. Assessment of patient outcomes of rehabilitative care 
provided in inpatient rehabilitation facilities (IRFs) and after 
discharge. Vienna, VA: Dobson DaVanzo & Associates, LLC;2014.
    \60\ Kushner D.S., Peters K.M., Johnson-Greene D. Evaluating 
Siebens Domain Management Model for Inpatient Rehabilitation to 
Increase Functional Independence and Discharge Rate to Home in 
Geriatric Patients. Archives of physical medicine and 
rehabilitation. 2015;96(7):1310-1318.
    \61\ Galloway R.V., Granger C.V., Karmarkar A.M., et al. The 
Uniform Data System for Medical Rehabilitation: Report of patients 
with debility discharged from inpatient rehabilitation programs in 
2000-2010. American journal of physical medicine & rehabilitation/
Association of Academic Physiatrists. 2013;92(1):14-27.
    \62\ Mallinson T., Deutsch A., Bateman J., et al. Comparison of 
discharge functional status after rehabilitation in skilled nursing, 
home health, and medical rehabilitation settings for patients after 
hip fracture repair. Archives of physical medicine and 
rehabilitation. 2014;95(2):209-217.
    \63\ El-Solh A.A., Saltzman S.K., Ramadan F.H., Naughton B.J. 
Validity of an artificial neural network in predicting discharge 
destination from a postacute geriatric rehabilitation unit. Archives 
of physical medicine and rehabilitation. 2000;81(10):1388-1393.
    \64\ Hall R.K., Toles M., Massing M., et al. Utilization of 
acute care among patients with ESRD discharged home from skilled 
nursing facilities. Clinical journal of the American Society of 
Nephrology: CJASN. 2015;10(3):428-434.
    \65\ Stearns S.C., Dalton K., Holmes G.M., Seagrave S.M. Using 
propensity stratification to compare patient outcomes in hospital-
based versus freestanding skilled-nursing facilities. Medical care 
research and review: MCRR. 2006;63(5):599-622.
    \66\ Wodchis W.P., Teare G.F., Naglie G., et al. Skilled nursing 
facility rehabilitation and discharge to home after stroke. Archives 
of physical medicine and rehabilitation. 2005;86(3):442-448.
    \67\ Scheinhorn D.J., Hassenpflug M.S., Votto J.J., et al. Post-
ICU mechanical ventilation at 23 long-term care hospitals: A 
multicenter outcomes study. Chest. 2007;131(1):85-93.
    \68\ Thakar C.V., Quate-Operacz M., Leonard A.C., Eckman M.H. 
Outcomes of hemodialysis patients in a long-term care hospital 
setting: A single-center study. American journal of kidney diseases: 
The official journal of the National Kidney Foundation. 
2010;55(2):300-306.
    \69\ Wolff J.L., Meadow A., Weiss C.O., Boyd C.M., Leff B. 
Medicare home health patients' transitions through acute and post-
acute care settings. Medical care. 2008;46(11):1188-1193.
    \70\ Ibid.
---------------------------------------------------------------------------

    Discharge to community is an actionable health care outcome, as 
targeted interventions have been shown to successfully increase 
discharge to community rates in a variety of post-acute 
settings.71 72 73 74 Many of these interventions involve 
discharge planning or specific rehabilitation strategies, such as 
addressing discharge barriers and improving medical and functional 
status.75 76 77 78 The effectiveness of these interventions 
suggests that improvement in discharge to community rates among post-
acute care residents is possible through modifying provider-led 
processes and interventions.
---------------------------------------------------------------------------

    \71\ Kushner D.S., Peters K.M., Johnson-Greene D. Evaluating 
Siebens Domain Management Model for Inpatient Rehabilitation to 
Increase Functional Independence and Discharge Rate to Home in 
Geriatric Patients. Archives of physical medicine and 
rehabilitation. 2015;96(7):1310-1318.
    \72\ Wodchis W.P., Teare G.F., Naglie G., et al. Skilled nursing 
facility rehabilitation and discharge to home after stroke. Archives 
of physical medicine and rehabilitation. 2005;86(3):442-448.
    \73\ Berkowitz R.E., Jones R.N., Rieder R., et al. Improving 
disposition outcomes for patients in a geriatric skilled nursing 
facility. Journal of the American Geriatrics Society. 
2011;59(6):1130-1136.
    \74\ Kushner D.S., Peters K.M., Johnson-Greene D. Evaluating use 
of the Siebens Domain Management Model during inpatient 
rehabilitation to increase functional independence and discharge 
rate to home in stroke patients. PM & R: The journal of injury, 
function, and rehabilitation. 2015;7(4):354-364.
    \75\ Kushner D.S., Peters K.M., Johnson-Greene D. Evaluating 
Siebens Domain Management Model for Inpatient Rehabilitation to 
Increase Functional Independence and Discharge Rate to Home in 
Geriatric Patients. Archives of physical medicine and 
rehabilitation. 2015;96(7):1310-1318.
    \76\ Wodchis W.P., Teare G.F., Naglie G., et al. Skilled nursing 
facility rehabilitation and discharge to home after stroke. Archives 
of physical medicine and rehabilitation. 2005;86(3):442-448.
    \77\ Berkowitz R..E, Jones R.N., Rieder R., et al. Improving 
disposition outcomes for patients in a geriatric skilled nursing 
facility. Journal of the American Geriatrics Society. 
2011;59(6):1130-1136.
    \78\ Kushner D.S., Peters K.M., Johnson-Greene D. Evaluating use 
of the Siebens Domain Management Model during inpatient 
rehabilitation to increase functional independence and discharge 
rate to home in stroke patients. PM & R: The journal of injury, 
function, and rehabilitation. 2015;7(4):354-364.
---------------------------------------------------------------------------

    A TEP convened by our measure development contractor was strongly 
supportive of the importance of measuring discharge to community 
outcomes, and implementing the proposed measure, Discharge to 
Community--PAC SNF QRP in the SNF QRP. The panel provided input on the 
technical specifications of this proposed measure, including the 
feasibility of implementing the measure, as well as the overall measure 
reliability and validity. A summary of the TEP proceedings is available 
on the PAC Quality Initiatives Downloads and Videos Web site at https:/
/www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-

[[Page 24264]]

Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/
IMPACT-Act-Downloads-and-Videos.html.
    We also solicited stakeholder feedback on the development of this 
measure through a public comment period held from November 9, 2015, 
through December 8, 2015. Several stakeholders and organizations, 
including the MedPAC, among others, supported this measure for 
implementation. The public comment summary report for the proposed 
measure is available on the CMS Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    The NQF-convened MAP met on December 14 and 15, 2015, and provided 
input on the use of this proposed Discharge to Community--PAC SNF QRP 
measure in the SNF QRP. The MAP encouraged continued development of the 
proposed measure to meet the mandate of the IMPACT Act. The MAP 
supported the alignment of this proposed measure across PAC settings, 
using standardized claims data. More information about the MAP's 
recommendations for this measure is available at http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx.
    Since the MAP's review and recommendation of continued development, 
we have continued to refine risk-adjustment models and conduct measure 
testing for this measure, as recommended by the MAP. This proposed 
measure is consistent with the information submitted to the MAP and is 
scientifically acceptable for current specification in the SNF QRP. As 
discussed with the MAP, we fully anticipate that additional analyses 
will continue as we submit this measure to the ongoing measure 
maintenance process.
    We reviewed the NQF's consensus-endorsed measures and were unable 
to identify any NQF-endorsed resource use or other measures for post-
acute care focused on discharge to community. In addition, we are 
unaware of any other post-acute care measures for discharge to 
community that have been endorsed or adopted by other consensus 
organizations. Therefore, we are proposing the measure, Discharge to 
Community--PAC SNF QRP, under the Secretary's authority to specify non-
NQF-endorsed measures under section 1899B(e)(2)(B) of the Act.
    We are proposing to use data from the Medicare FFS claims and 
Medicare eligibility files to calculate this proposed measure. We are 
proposing to use data from the ``Patient Discharge Status Code'' on 
Medicare FFS claims to determine whether a resident was discharged to a 
community setting for calculation of this proposed measure. In all PAC 
settings, we tested the accuracy of determining discharge to a 
community setting using the ``Patient Discharge Status Code'' on the 
PAC claim by examining whether discharge to community coding based on 
PAC claim data agreed with discharge to community coding based on PAC 
assessment data. We found excellent agreement between the two data 
sources in all PAC settings, ranging from 94.6 percent to 98.8 percent. 
Specifically, in the SNF setting, using 2013 data, we found 94.6 
percent agreement in discharge to community codes when comparing 
discharge status codes on claims and the Discharge Status (A2100) on 
the Minimum Data Set (MDS) 3.0 discharge assessment, when the claims 
and MDS assessment had the same discharge date. We further examined the 
accuracy of the ``Patient Discharge Status Code'' on the PAC claim by 
assessing how frequently discharges to an acute care hospital were 
confirmed by follow-up acute care claims. We discovered that 88 percent 
to 91 percent of IRF, LTCH, and SNF claims with acute care discharge 
status codes were followed by an acute care claim on the day of, or day 
after, PAC discharge. We believe these data support the use of the 
claims ``Patient Discharge Status Code'' for determining discharge to a 
community setting for this measure. In addition, this measure can 
feasibly be implemented in the SNF QRP because all data used for 
measure calculation are derived from Medicare FFS claims and 
eligibility files, which are already available to CMS.
    Based on the evidence discussed above, we are proposing to adopt 
the measure, Discharge to Community--PAC SNF QRP, for the SNF QRP for 
FY 2018 payment determination and subsequent years. This proposed 
measure is calculated using one year of data. We are proposing a 
minimum of 25 eligible stays in a given SNF for public reporting of the 
proposed measure for that SNF. Since Medicare FFS claims data are 
already reported to the Medicare program for payment purposes, and 
Medicare eligibility files are also available, SNFs will not be 
required to report any additional data to CMS for calculation of this 
measure. The proposed measure denominator is the risk-adjusted expected 
number of discharges to community. The proposed measure numerator is 
the risk-adjusted estimate of the number of residents who are 
discharged to the community, do not have an unplanned readmission to an 
acute care hospital or LTCH in the 31-day post-discharge observation 
window, and who remain alive during the post-discharge observation 
window. The measure is risk-adjusted for variables such as age and sex, 
principal diagnosis, comorbidities, ventilator status, ESRD status, and 
dialysis, among other variables. For technical information about this 
proposed measure, including information about the measure calculation, 
risk adjustment, and denominator exclusions, refer to the document 
titled, Proposed Measure Specifications for Measures Proposed in the FY 
2017 SNF QRP NPRM available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    If this proposed measure is finalized, we intend to provide initial 
confidential feedback to SNFs, prior to public reporting of this 
measure, based on Medicare FFS claims data from discharges in CY 2016. 
We intend to publicly report this measure using claims data from 
discharges in CY 2017. We plan to submit this proposed measure to the 
NQF for consideration for endorsement.
    We are inviting public comment on our proposal to adopt the 
measure, Discharge to Community--PAC SNF QRP, for the SNF QRP.
c. Proposal To Address the IMPACT Act Domain of Resource Use and Other 
Measures: Potentially Preventable 30-Day Post-Discharge Readmission 
Measure for Skilled Nursing Facility Quality Reporting Program
    Sections 1899B(a)(2)(E)(ii) and 1899B(d)(1)(C) of the Act require 
the Secretary to specify measures to address the domain of all-
condition risk-adjusted potentially preventable hospital readmission 
rates by SNFs, LTCHs, and IRFs by October 1, 2016, and HHAs by January 
1, 2017. We are proposing the measure Potentially Preventable 30-Day 
Post-Discharge Readmission Measure for SNF QRP as a Medicare FFS 
claims-based measure to meet this requirement for the FY 2018 payment 
determination and subsequent years.
    The proposed measure assesses the facility-level risk-standardized 
rate of unplanned, potentially preventable hospital readmissions for 
Medicare FFS

[[Page 24265]]

beneficiaries in the 30 days post-SNF discharge. The SNF admission must 
have occurred within up to 30 days of discharge from a prior proximal 
hospital stay which is defined as an inpatient admission to an acute 
care hospital (including IPPS, CAH, or a psychiatric hospital). 
Hospital readmissions include readmissions to a short-stay acute care 
hospitals or an LTCH, with a diagnosis considered to be unplanned and 
potentially preventable. This proposed measure is claims-based, 
requiring no additional data collection or submission burden for SNFs. 
Because the measure denominator is based on SNF admissions, each 
Medicare beneficiary may be included in the measure multiple times 
within the measurement period. Readmissions counted in this measure are 
identified by examining Medicare FFS claims data for readmissions to 
either acute care hospitals (IPPS or CAH) or LTCHs that occur during a 
30-day window beginning two days after SNF discharge. This measure is 
conceptualized uniformly across the PAC settings, in terms of the 
measure definition, the approach to risk adjustment, and the measure 
calculation. Our approach for defining potentially preventable hospital 
readmissions is described in more detail below.
    Hospital readmissions among the Medicare population, including 
beneficiaries that utilize PAC, are common, costly, and often 
preventable.79 80 MedPAC and a study by Jencks et al. 
estimated that 17 to 20 percent of Medicare beneficiaries discharged 
from the hospital were readmitted within 30 days. MedPAC found that 
more than 75 percent of 30-day and 15-day readmissions and 84 percent 
of 7-day readmissions were considered ``potentially preventable.'' \81\ 
In addition, MedPAC calculated that annual Medicare spending on 
potentially preventable readmissions would be $12 billion for 30-day, 
$8 billion for 15-day, and $5 billion for 7-day readmissions.\82\ For 
hospital readmissions from SNFs, MedPAC deemed 76 percent of 
readmissions as ``potentially avoidable''--associated with $12 billion 
in Medicare expenditures.\83\ Mor et al. analyzed 2006 Medicare claims 
and SNF assessment data (Minimum Data Set), and reported a 23.5 percent 
readmission rate from SNFs, associated with $4.3 billion in 
expenditures.\84\ Fewer studies have investigated potentially 
preventable readmission rates from the remaining post-acute care 
settings.
---------------------------------------------------------------------------

    \79\ Friedman, B., and Basu, J.: The rate and cost of hospital 
readmissions for preventable conditions. Med. Care Res. Rev. 
61(2):225-240, 2004. doi:10.1177/1077558704263799.
    \80\ Jencks, S.F., Williams, M.V., and Coleman, E.A.: 
Rehospitalizations among patients in the Medicare Fee-for-Service 
Program. N. Engl. J. Med. 360(14):1418-1428, 2009. doi:10.1016/
j.jvs.2009.05.045.
    \81\ MedPAC: Payment policy for inpatient readmissions, in 
Report to the Congress: Promoting Greater Efficiency in Medicare. 
Washington, DC, pp. 103-120, 2007. Available from http://www.medpac.gov/documents/reports/Jun07_EntireReport.pdf.
    \82\ Ibid.
    \83\ Ibid.
    \84\ Mor, V., Intrator, O., Feng, Z., et al.: The revolving door 
of rehospitalization from skilled nursing facilities. Health Aff. 
29(1):57-64, 2010. doi:10.1377/hlthaff.2009.0629.
---------------------------------------------------------------------------

    We have addressed the high rates of hospital readmissions in the 
acute care setting, as well as in PAC. For example, we developed the 
following measure: Skilled Nursing Facility 30-Day All-Cause 
Readmission Measure (SNFRM) (NQF #2510), as well as similar measures 
for other PAC providers (NQF #2502 for IRFs and NQF #2512 for 
LTCHs).\85\ These measures are endorsed by the NQF, and the NQF-
endorsed SNF measure (NQF #2510) was adopted into the SNF VBP Program 
in the FY 2016 SNF final rule (80 FR 46411 through 46419). Note that 
these NQF-endorsed measures assess all-cause unplanned readmissions.
---------------------------------------------------------------------------

    \85\ National Quality Forum: All-Cause Admissions and 
Readmissions Measures. pp. 1-319, April 2015. Available from http://www.qualityforum.org/Publications/2015/04/All-Cause_Admissions_and_Readmissions_Measures_-_Final_Report.aspx.
---------------------------------------------------------------------------

    Several general methods and algorithms have been developed to 
assess potentially avoidable or preventable hospitalizations and 
readmissions for the Medicare population. These include the Agency for 
Healthcare Research and Quality's (AHRQ's) Prevention Quality 
Indicators, approaches developed by MedPAC, and proprietary approaches, 
such as the 3M\TM\ algorithm for Potentially Preventable 
Readmissions.86 87 88 Recent work led by Kramer et al. for 
MedPAC identified 13 conditions for which readmissions were deemed as 
potentially preventable among SNF and IRF populations.89 90 
Although much of the existing literature addresses hospital 
readmissions more broadly and potentially avoidable hospitalizations 
for specific settings like long-term care, these findings are relevant 
to the development of potentially preventable readmission measures for 
PAC.91 92 93
---------------------------------------------------------------------------

    \86\ Goldfield, N.I., McCullough, E.C., Hughes, J.S., et al.: 
Identifying potentially preventable readmissions. Health Care Finan. 
Rev. 30(1):75-91, 2008. Available from http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4195042/.
    \87\ National Quality Forum: Prevention Quality Indicators 
Overview. 2008.
    \88\ MedPAC: Online Appendix C: Medicare Ambulatory Care 
Indicators for the Elderly. pp. 1-12, prepared for Chapter 4, 2011. 
Available from http://www.medpac.gov/documents/reports/Mar11_Ch04_APPENDIX.pdf?sfvrsn=0.
    \89\ Kramer, A., Lin, M., Fish, R., et al.: Development of 
Inpatient Rehabilitation Facility Quality Measures: Potentially 
Avoidable Readmissions, Community Discharge, and Functional 
Improvement. pp. 1-42, 2015. Available from http://www.medpac.gov/documents/contractor-reports/development-of-inpatient-rehabilitation-facility-quality-measures-potentially-avoidable-readmissions-community-discharge-and-functional-improvement.pdf?sfvrsn=0.
    \90\ Kramer, A., Lin, M., Fish, R., et al.: Development of 
Potentially Avoidable Readmission and Functional Outcome SNF Quality 
Measures. pp. 1-75, 2014. Available from http://www.medpac.gov/documents/contractor-reports/mar14_snfqualitymeasures_contractor.pdf?sfvrsn=0.
    \91\ Allaudeen, N., Vidyarthi, A., Maselli, J., et al.: 
Redefining readmission risk factors for general medicine patients. 
J. Hosp. Med. 6(2):54-60, 2011. doi:10.1002/jhm.805.
    \92\ Gao, J., Moran, E., Li, Y.-F., et al.: Predicting 
potentially avoidable hospitalizations. Med. Care 52(2):164-171, 
2014. doi:10.1097/MLR.0000000000000041.
    \93\ Walsh, E.G., Wiener, J.M., Haber, S., et al.: Potentially 
avoidable hospitalizations of dually eligible Medicare and Medicaid 
beneficiaries from nursing facility and home- and community-based 
services waiver programs. J. Am. Geriatr. Soc. 60(5):821-829, 2012. 
doi:10.1111/j.1532-5415.2012.03920.x.
---------------------------------------------------------------------------

    Potentially Preventable Readmission Measure Definition: We 
conducted a comprehensive environmental scan, analyzed claims data, and 
obtained input from a TEP to develop a definition and list of 
conditions for which hospital readmissions are potentially preventable. 
The Ambulatory Care Sensitive Conditions and Prevention Quality 
Indicators, developed by AHRQ, served as the starting point in this 
work. For patients in the 30-day post-PAC discharge period, a 
potentially preventable readmission (PRR) refers to a readmission for 
which the probability of occurrence could be minimized with adequately 
planned, explained, and implemented post discharge instructions, 
including the establishment of appropriate follow-up ambulatory care. 
Our list of PPR conditions is categorized by 3 clinical rationale 
groupings:
     Inadequate management of chronic conditions;
     Inadequate management of infections; and
     Inadequate management of other unplanned events.
    Additional details regarding the definition for potentially 
preventable readmissions are available in the document titled, Proposed 
Measure Specifications for Measures Proposed in the FY 2017 SNF QRP 
NPRM, available at https://www.cms.gov/Medicare/Quality-Initiatives-
Patient-Assessment-Instruments/NursingHomeQualityInits/

[[Page 24266]]

SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    This proposed measure focuses on readmissions that are potentially 
preventable and also unplanned. Similar to the SNF 30-Day All-Cause 
Readmission Measure (NQF #2510), this proposed measure uses the current 
version of the CMS Planned Readmission Algorithm as the main component 
for identifying planned readmissions. A complete description of the CMS 
Planned Readmission Algorithm, which includes lists of planned 
diagnoses and procedures, can be found on the CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. In addition 
to the CMS Planned Readmission Algorithm, this proposed measure 
incorporates procedures that are considered planned in post-acute care 
settings, as identified in consultation with TEPs. Full details on the 
planned readmissions criteria used, including the CMS Planned 
Readmission Algorithm and additional procedures considered planned for 
post-acute care, can be found in the document titled, Proposed Measure 
Specifications for Measures Proposed in the FY 2017 SNF QRP NPRM at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    The proposed measure, Potentially Preventable 30-Day Post-Discharge 
Readmission Measure for Skilled Nursing Facility Quality Reporting 
Program, assesses potentially preventable readmission rates while 
accounting for patient demographics, principal diagnosis in the prior 
hospital stay, comorbidities, and other patient factors. While 
estimating the predictive power of patient characteristics, the model 
also estimates a facility-specific effect, common to patients treated 
in each facility. This proposed measure is calculated for each SNF 
based on the ratio of the predicted number of risk-adjusted, unplanned, 
potentially preventable hospital readmissions that occur within 30 days 
after a SNF discharge, including the estimated facility effect, to the 
estimated predicted number of risk-adjusted, unplanned inpatient 
hospital readmissions for the same patients treated at the average SNF. 
A ratio above 1.0 indicates a higher than expected readmission rate 
(worse) while a ratio below 1.0 indicates a lower than expected 
readmission rate (better). This ratio is referred to as the 
standardized risk ratio (SRR). The SRR is then multiplied by the 
overall national raw rate of potentially preventable readmissions for 
all SNF stays. The resulting rate is the risk-standardized readmission 
rate (RSRR) of potentially preventable readmissions. The full 
methodology of this proposed measure is detailed in the document 
titled, Proposed Measure Specifications for Measures Proposed in the FY 
2017 SNF QRP NPRM at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    An eligible SNF stay is followed until: (1) The 30-day post-
discharge period ends; or (2) the patient is readmitted to an acute 
care hospital (IPPS or CAH) or LTCH. If the readmission is unplanned 
and potentially preventable, it is counted as a readmission in the 
measure calculation. If the readmission is planned, the readmission is 
not counted in the measure rate. This measure is risk adjusted. The 
risk adjustment modeling estimates the effects of patient 
characteristics, comorbidities, and select health care variables on the 
probability of readmission. More specifically, the risk-adjustment 
model for SNFs accounts for demographic characteristics (age, sex, 
original reason for Medicare entitlement), principal diagnosis during 
the prior proximal hospital stay, body system specific surgical 
indicators, comorbidities, length of stay during the patient's prior 
proximal hospital stay, intensive care unit (ICU) utilization, end-
stage renal disease status, and number of acute care hospitalizations 
in the preceding 365 days.
    The proposed measure is calculated using 1 calendar year of FFS 
claims data, to ensure the statistical reliability of this measure for 
facilities. In addition, we are proposing a minimum of 25 eligible 
stays for public reporting of the proposed measure. For technical 
information about this proposed measure including information about the 
measure calculation, risk adjustment, and exclusions, refer to the 
document titled, Proposed Measure Specifications for Measures Proposed 
in the FY 2017 SNF QRP NPRM at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    A TEP convened by our measure development contractor provided 
recommendations on the technical specifications of this proposed 
measure, including the development of an approach to define potentially 
preventable hospital readmission for PAC. Details from the TEP 
meetings, including TEP members' ratings of conditions proposed as 
being potentially preventable, are available in the TEP Summary Report 
available on the CMS Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html. We 
also solicited stakeholder feedback on the development of this measure 
through a public comment period held from November 2 through December 
1, 2015. Comments on the measure varied, with some commenters 
supportive of the proposed measure, while others either were not in 
favor of the measure, or suggested potential modifications to the 
measure specifications, such as including standardized function data. A 
summary of the public comments is also available on the CMS Web site at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    The MAP encouraged continued development of the proposed measure. 
Specifically, the MAP stressed the need to promote shared 
accountability and ensure effective care transitions. More information 
about the MAP's recommendations for this measure is available at http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx. At the time, the risk-adjustment model was still under 
development. Following completion of that development work, we were 
able to test for measure validity and reliability as identified in the 
measure specifications document provided above. Testing results are 
within range for similar outcome measures finalized in public reporting 
and value-based purchasing programs, including the SNFRM (NQF #2510) 
adopted into the SNF VBP Program in the FY 2016 SNF final rule (80 FR 
46411 through 46419).
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed measures focused on potentially 
preventable hospital readmissions. We are unaware of any other measures 
for this IMPACT Act domain that have been endorsed or adopted by other 
consensus

[[Page 24267]]

organizations. Therefore, we are proposing the Potentially Preventable 
30-Day Post-Discharge Readmission Measure for SNF QRP, under the 
Secretary's authority to specify non-NQF-endorsed measures under 
section 1899B(e)(2)(B) of the Act, for the SNF QRP for the FY 2018 
payment determination and subsequent years given the evidence 
previously discussed above.
    We plan to submit the proposed measure to the NQF for consideration 
of endorsement. If this proposed measure is finalized, we intend to 
provide initial confidential feedback to SNFs, prior to public 
reporting of this proposed measure, based on 1 calendar year of claims 
data from discharges in CY 2016. We intend to publicly report this 
proposed measure using claims data from CY 2017.
    We are inviting public comment on our proposal to adopt the 
measure, Potentially Preventable 30-Day Post-Discharge Readmission 
Measure for the SNF QRP.
7. Skilled Nursing Facility Quality Measure Proposed for the FY 2020 
Payment Determination and Subsequent Years
    In addition to the measures we are retaining as described in 
section V.B.5. of this proposed rule under our policy described in 
section V.B.3. of this proposed rule and the new quality measures 
proposed in section V.B.6. of this proposed rule for the FY 2018 
payment determinations and subsequent years, we are also proposing one 
new quality measure to meet the requirements of the IMPACT Act for the 
FY 2020 payment determination and subsequent years. The proposed 
measure, Drug Regimen Review Conducted with Follow-Up for Identified 
Issues--PAC SNF QRP, addresses the IMPACT Act quality domain of 
Medication Reconciliation.
a. Quality Measure Addressing the IMPACT Act Domain of Medication 
Reconciliation: Drug Regimen Review Conducted With Follow-Up for 
Identified Issues-Post Acute Care (PAC) Skilled Nursing Facility 
Quality Reporting Program
    Sections 1899B (a)(2)(E)(i)(III) and 1899B(c)(1)(C) of the Act 
require the Secretary to specify a quality measure to address the 
domain of medication reconciliation by October 1, 2018 for IRFs, LTCHs 
and SNFs; and by January 1, 2017 for HHAs. We are proposing to adopt 
the quality measure, Drug Regimen Review Conducted with Follow-Up for 
Identified Issues--PPAC SNF QRP, for the SNF QRP as a resident-
assessment based, cross-setting quality measure to meet the IMPACT Act 
requirements with data collection beginning October 1, 2018 for the FY 
2020 payment determinations and subsequent years.
    This proposed measure assesses whether PAC providers were 
responsive to potential or actual clinically significant medication 
issue(s) when such issues were identified. Specifically, the proposed 
quality measure reports the percentage of resident stays in which a 
drug regimen review was conducted at the time of admission and timely 
follow-up with a physician occurred each time potential clinically 
significant medication issues were identified throughout that stay. For 
this proposed quality measure, a drug regimen review is defined as the 
review of all medications or drugs the patient is taking to identify 
any potential clinically significant medication issues. This proposed 
quality measure utilizes both the processes of medication 
reconciliation and a drug regimen review, in the event an actual or 
potential medication issue occurred. The proposed measure informs 
whether the PAC facility identified and addressed each clinically 
significant medication issue and if the facility responded or addressed 
the medication issue in a timely manner. Of note, drug regimen review 
in PAC settings is generally considered to include medication 
reconciliation and review of the patient's drug regimen to identify 
potential clinically significant medication issues.\94\ This measure is 
applied uniformly across the PAC settings.
---------------------------------------------------------------------------

    \94\ Ibid.
---------------------------------------------------------------------------

    Medication reconciliation is a process of reviewing an individual's 
complete and current medication list. Medication reconciliation is a 
recognized process for reducing the occurrence of medication 
discrepancies that may lead to Adverse Drug Events (ADEs).\95\ 
Medication discrepancies occur when there is conflicting information 
documented in the medical records. The World Health Organization 
regards medication reconciliation as a standard operating protocol 
necessary to reduce the potential for ADEs that cause harm to patients. 
Medication reconciliation is an important patient safety process that 
addresses medication accuracy during transitions in resident care and 
in identifying preventable ADEs.\96\ The Joint Commission added 
medication reconciliation to its list of National Patient Safety Goals 
(2005), suggesting that medication reconciliation is an integral 
component of medication safety.\97\ The Society of Hospital Medicine 
published a statement in agreement of the Joint Commission's emphasis 
and value of medication reconciliation as a patient safety goal.\98\ 
There is universal agreement that medication reconciliation directly 
addresses resident safety issues that can result from medication 
miscommunication and unavailable or incorrect 
information.99 100 101
---------------------------------------------------------------------------

    \95\ Ibid.
    \96\ Leotsakos A., et al. Standardization in patient safety: The 
WHO High 5s project. Int J Qual Health Care. 2014:26(2):109-116.
    \97\ The Joint Commission. 2016 Long Term Care: National Patient 
Safety Goals Medicare/Medicaid Certification-based Option. 
(NPSG.03.06.01).
    \98\ Greenwald, J.L., Halasyamani, L., Greene, J., LaCivita, C., 
et al. (2010). Making inpatient medication reconciliation patient 
centered, clinically relevant and implementable: A consensus 
statement on key principles and necessary first steps. Journal of 
Hospital Medicine, 5(8), 477-485.
    \99\ Leotsakos A., et al. Standardization in patient safety: The 
WHO High 5s project. Int J Qual Health Care. 2014:26(2):109-116.
    \100\ The Joint Commission. 2016 Long Term Care: National 
Patient Safety Goals Medicare/Medicaid Certification-based Option. 
(NPSG.03.06.01).
    \101\ IHI. Medication Reconciliation to Prevent Adverse Drug 
Events [Internet]. Cambridge, MA: Institute for Healthcare 
Improvement; [cited 2016 Jan 11]. Available from: http://www.ihi.org/topics/adesmedicationreconciliation/Pages/default.aspx.
---------------------------------------------------------------------------

    The performance of timely medication reconciliation is valuable to 
the process of drug regimen review. Preventing and responding to ADEs 
is of critical importance as ADEs account for significant increases in 
health services utilization and costs 102 103 104 including 
subsequent emergency room visits and re-hospitalizations.\105\ Annual 
health care costs in the United States are estimated at $3.5 billion, 
resulting in 7,000 deaths annually.\106\
---------------------------------------------------------------------------

    \102\ Institute of Medicine. Preventing Medication Errors. 
Washington DC: National Academies Press; 2006.
    \103\ Jha A.K., Kuperman G.J., Rittenberg E., et al. Identifying 
hospital admissions due to adverse drug events using a computer-
based monitor. Pharmacoepidemiol Drug Saf. 2001;10(2):113-119.
    \104\ Hohl C.M., Nosyk B., Kuramoto L., et al. Outcomes of 
emergency department patients presenting with adverse drug events. 
Ann Emerg Med. 2011;58:270-279.
    \105\ Kohn L.T., Corrigan J.M., Donaldson M.S. To Err Is Human: 
Building a Safer Health System Washington, DC: National Academies 
Press; 1999.
    \106\ Greenwald, J.L., Halasyamani, L., Greene, J., LaCivita, 
C., et al. (2010). Making inpatient medication reconciliation 
patient centered, clinically relevant and implementable: A consensus 
statement on key principles and necessary first steps. Journal of 
Hospital Medicine, 5(8), 477-485.
---------------------------------------------------------------------------

    Medication errors include the duplication of medications, delivery 
of an incorrect drug, inappropriate drug omissions, or errors in the 
dosage, route, frequency, and duration of medications. Medication 
errors are one of the most common types of medical error and can occur 
at any point in the process of

[[Page 24268]]

ordering and delivering a medication. Medication errors have the 
potential to result in an ADE.107 108 109 110 111 112 
Inappropriately prescribed medications are also considered a major 
healthcare concern in the United States for the elderly population, 
with costs of roughly $7.2 billion annually.\113\
---------------------------------------------------------------------------

    \107\ Institute of Medicine. To err is human: Building a safer 
health system. Washington, DC: National Academies Press; 2000.
    \108\ Lesar T.S., Briceland L., Stein D.S. Factors related to 
errors in medication prescribing. JAMA. 1997:277(4): 312-317.
    \109\ Bond C.A., Raehl C.L., & Franke T. Clinical pharmacy 
services, hospital pharmacy staffing, and medication errors in 
United States hospitals. Pharmacotherapy. 2002:22(2): 134-147.
    \110\ Bates D.W., Cullen D.J., Laird N., Petersen L.A., Small 
S.D., et al. Incidence of adverse drug events and potential adverse 
drug events. Implications for prevention. JAMA. 1995:274(1): 29-34.
    \111\ Barker K.N., Flynn E.A., Pepper G.A., Bates D.W., & Mikeal 
R.L. Medication errors observed in 36 health care facilities. JAMA. 
2002: 162(16):1897-1903.
    \112\ Bates D.W., Boyle D.L., Vander Vliet M.B., Schneider J., & 
Leape L. Relationship between medication errors and adverse drug 
events. J Gen Intern Med. 1995:10(4): 199-205.
    \113\ Fu, Alex Z., et al. ``Potentially inappropriate medication 
use and healthcare expenditures in the U.S. community-dwelling 
elderly.'' Medical care 45.5 (2007): 472-476.
---------------------------------------------------------------------------

    There is strong evidence that medication discrepancies occur during 
transfers from acute care facilities to post-acute care facilities. 
Discrepancies occur when there is conflicting information documented in 
the medical records. Almost one-third of medication discrepancies have 
the potential to cause patient harm.\114\ Medication discrepancies upon 
admission to SNFs have been reported as occurring at a rate of over 21 
percent. It has been found that at least one medication discrepancy 
occurred in over 71 percent of all the SNF admissions.\115\ An 
estimated fifty percent of patients experienced a clinically important 
medication error after hospital discharge in an analysis of two 
tertiary care academic hospitals.\116\
---------------------------------------------------------------------------

    \114\ Wong, Jacqueline D., et al. ``Medication reconciliation at 
hospital discharge: Evaluating discrepancies.'' Annals of 
Pharmacotherapy 42.10 (2008): 1373-1379.
    \115\ Tjia, J., Bonner, A., Briesacher, B.A., McGee, S., 
Terrill, E., & Miller, K. (2009). Medication discrepancies upon 
hospital to skilled nursing facility transitions. Journal of general 
internal medicine, 24(5), 630-635.
    \116\ Kripalani S., Roumie C.L., Dalal A.K., et al. Effect of a 
pharmacist intervention on clinically important medication errors 
after hospital discharge: A randomized controlled trial. Ann Intern 
Med. 2012:157(1):1-10.
---------------------------------------------------------------------------

    Medication reconciliation has been identified as an area for 
improvement during transfer from the acute care facility to the 
receiving post-acute care facility. Post-acute care facilities report 
gaps in medication information between the acute care hospital and the 
receiving post-acute care setting when performing medication 
reconciliation.117 118 Hospital discharge has been 
identified as a particularly high risk point in time, with evidence 
that medication reconciliation identifies high levels of 
discrepancy.119 120 121 122 123 124 Also, there is evidence 
that medication reconciliation discrepancies occur throughout the 
patient stay.125 126 For older patients who may have 
multiple comorbid conditions and thus multiple medications, transitions 
between acute and post-acute care settings can be further 
complicated,\127\ and medication reconciliation and patient knowledge 
(medication literacy) can be inadequate post-discharge.\128\ The 
proposed quality measure, Drug Regimen Review Conducted with Follow-Up 
for Identified Issues--PAC SNF QRP, provides an important component of 
care coordination for PAC settings and would affect a large proportion 
of the Medicare population who transfer from hospitals into PAC 
services each year. For example, in 2013, 1.7 million Medicare FFS 
beneficiaries had SNF stays, 338,000 beneficiaries had IRF stays, and 
122,000 beneficiaries had LTCH stays.\129\
---------------------------------------------------------------------------

    \117\ Gandara, Esteban, et al. ``Communication and information 
deficits in patients discharged to rehabilitation facilities: An 
evaluation of five acute care hospitals.'' Journal of Hospital 
Medicine 4.8 (2009): E28-E33.
    \118\ Gandara, Esteban, et al. ``Deficits in discharge 
documentation in patients transferred to rehabilitation facilities 
on anticoagulation: Results of a system wide evaluation.'' Joint 
Commission Journal on Quality and Patient Safety 34.8 (2008): 460-
463.
    \119\ Coleman E.A., Smith J.D., Raha D., Min S.J. Post hospital 
medication discrepancies: Prevalence and contributing factors. Arch 
Intern Med. 2005 165(16):1842-1847.
    \120\ Wong J.D., Bajcar J.M., Wong G.G., et al. Medication 
reconciliation at hospital discharge: Evaluating discrepancies. Ann 
Pharmacother. 2008 42(10):1373-1379.
    \121\ Hawes E.M., Maxwell W.D., White S.F., Mangun J., Lin F.C. 
Impact of an outpatient pharmacist intervention on medication 
discrepancies and health care resource utilization in post 
hospitalization care transitions. Journal of Primary Care & 
Community Health. 2014; 5(1):14-18.
    \122\ Foust J.B., Naylor M.D., Bixby M.B., Ratcliffe S.J. 
Medication problems occurring at hospital discharge among older 
adults with heart failure. Research in Gerontological Nursing. 2012, 
5(1): 25-33.
    \123\ Pherson E.C., Shermock K.M., Efird L.E., et al. 
Development and implementation of a post discharge home-based 
medication management service. Am J Health Syst Pharm. 2014; 71(18): 
1576-1583.
    \124\ Pronovosta P., Weasta B., Scwarza M., et al. Medication 
reconciliation: A practical tool to reduce the risk of medication 
errors. J Crit Care. 2003; 18(4): 201-205.
    \125\ Bates D.W., Cullen D.J., Laird N., Petersen L.A., Small 
S.D., et al. Incidence of adverse drug events and potential adverse 
drug events. Implications for prevention. JAMA. 1995:274(1): 29-34.
    \126\ Himmel, W., M. Tabache, and M.M. Kochen. ``What happens to 
long-term medication when general practice patients are referred to 
hospital?.'' European Journal of Clinical Pharmacology 50.4 (1996): 
253-257.
    \127\ Chhabra, P.T., et al. (2012). ``Medication reconciliation 
during the transition to and from LTC settings: A systematic 
review.'' Res Social Adm Pharm 8(1): 60-75.
    \128\ Kripalani S., Roumie C.L., Dalal A.K., et al. Effect of a 
pharmacist intervention on clinically important medication errors 
after hospital discharge: A randomized controlled trial. Ann Intern 
Med. 2012:157(1):1-10.
    \129\ March 2015 Report to the Congress: Medicare Payment 
Policy. Medicare Payment Advisory Commission; 2015.
---------------------------------------------------------------------------

    A TEP convened by our measure development contractor provided input 
on the technical specifications of this proposed quality measure, Drug 
Regimen Review Conducted with Follow-Up for Identified Issues--PAC SNF 
QRP, including components of reliability, validity and the feasibility 
of implementing the measure across PAC settings. The TEP supported the 
measure's implementation across PAC settings and was supportive of our 
plans to standardize this measure for cross-setting development. A 
summary of the TEP proceedings is available on the PAC Quality 
Initiatives Downloads and Video Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    We solicited stakeholder feedback on the development of this 
measure by means of a public comment period held from September 18 
through October 6, 2015. Through public comments submitted by several 
stakeholders and organizations, we received support for implementation 
of this proposed measure. The public comment summary report for the 
proposed measure is available on the CMS Public Comment Web site at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    The NQF-convened MAP met on December 14 and 15, 2015 and provided 
input on the use of this proposed quality measure, Drug Regimen Review 
Conducted with Follow-Up for Identified Issues--PAC SNF QRP. The MAP 
encouraged continued development of the proposed quality measure to 
meet the mandate added by the IMPACT Act. The MAP agreed with the 
measure gaps identified by CMS including medication reconciliation, and 
stressed that medication reconciliation be present as an ongoing

[[Page 24269]]

process. More information about the MAPs recommendations for this 
measure is available at http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx.
    Since the MAP's review and recommendation of continued development, 
we have continued to refine this proposed measure in compliance with 
the MAP's recommendations. The proposed measure is both consistent with 
the information submitted to the MAP and support its scientific 
acceptability for use in quality reporting programs. Therefore, we are 
proposing this measure for implementation in the SNF QRP as required by 
the IMPACT Act.
    We reviewed the NQF's endorsed measures and identified one NQF-
endorsed cross-setting quality measure related to medication 
reconciliation, which applies to the SNF, LTCH, IRF, and HHA settings 
of care: Care for Older Adults (COA) (NQF #0553). The quality measure, 
Care for Older Adults (COA) (NQF #0553) assesses the percentage of 
adults 66 years and older who had a medication review. The Care for 
Older Adults (COA) (NQF #0553) measure requires at least one medication 
review conducted by a prescribing practitioner or clinical pharmacist 
during the measurement year and the presence of a medication list in 
the medical record. This is in contrast to the proposed quality 
measure, Drug Regimen Review Conducted with Follow-Up for Identified 
Issues--PAC SNF QRP, which reports the percentage of resident stays in 
which a drug regimen review was conducted at the time of admission and 
that timely follow-up with a physician occurred each time one or more 
potential clinically significant medication issues were identified 
throughout that stay.
    After careful review of both quality measures, we have decided to 
propose the quality measure, Drug Regimen Review Conducted with Follow-
Up for Identified Issues--PAC SNF QRP for the following reasons:
     The IMPACT Act requires the implementation of quality 
measures, using patient assessment data that are standardized and 
interoperable across PAC settings. The proposed quality measure, Drug 
Regimen Review Conducted with Follow-Up for Identified Issues--PAC SNF 
QRP, employs three standardized resident-assessment data elements for 
each of the four PAC settings so that data are standardized, 
interoperable, and comparable; whereas, the Care for Older Adults 
(COA), (NQF #0553) quality measure does not contain data elements that 
are standardized across all four PAC settings.
     The proposed quality measure, Drug Regimen Review 
Conducted with Follow-Up for Identified Issues--PAC SNF QRP, requires 
the identification of potential clinically significant medication 
issues at the beginning, during and at the end of the resident's stay 
to capture data on each resident's complete PAC stay; whereas, the Care 
for Older Adults (COA), (NQF #0553) quality measure only requires 
annual documentation in the form of a medication list in the medical 
record of the target population.
     The proposed quality measure, Drug Regimen Review 
Conducted with Follow-Up for Identified Issues--PAC SNF QRP, includes 
identification of the potential clinically significant medication 
issues and communication with the physician (or physician designee), as 
well as resolution of the issue(s) within a rapid timeframe (by 
midnight of the next calendar day); whereas, the Care for Older Adults 
(COA), (NQF #0553) quality measure does not include any follow-up or 
timeframe in which the follow-up would need to occur.
     The proposed quality measure, Drug Regimen Review 
Conducted with Follow-Up for Identified Issues--PAC SNF QRP, does not 
have age exclusions; whereas, the Care for Older Adults (COA), (NQF 
#0553) quality measure limits the measure's population to patients aged 
66 and older.
     The proposed quality measure, Drug Regimen Review 
Conducted with Follow-Up for Identified Issues--PAC SNF QRP, will be 
reported to SNFs quarterly to facilitate internal quality monitoring 
and quality improvement in areas such as resident safety, care 
coordination and resident satisfaction; whereas, the Care for Older 
Adults (COA), (NQF #0553) quality measure would not enable quarterly 
quality updates, and thus data comparisons within and across PAC 
providers would be difficult due to the limited data and scope of the 
data collected.
    Therefore, based on the evidence discussed above, we are proposing 
to adopt the quality measure entitled, Drug Regimen Review Conducted 
with Follow-Up for Identified Issues--PAC SNF QRP, for the SNF QRP for 
FY 2020 payment determination and subsequent years. We plan to submit 
the quality measure to the NQF for consideration for endorsement.
    The calculation of the proposed quality measure would be based on 
the data collection of three standardized items to be included in the 
MDS. The collection of data by means of the standardized items would be 
obtained at admission and discharge. For more information about the 
data submission required for this proposed measure, please see section 
V.B.9. of this proposed rule.
    The standardized items used to calculate this proposed quality 
measure do not duplicate existing items currently used for data 
collection within the MDS. The proposed measure denominator is the 
number of resident stays with a discharge or expired assessment during 
the reporting period. The proposed measure numerator is the number of 
stays in the denominator where the medical record contains 
documentation of a drug regimen review conducted at: (1) Admission; and 
(2) discharge with a look back through the entire resident stay, with 
all potential clinically significant medication issues identified 
during the course of care and followed-up with a physician or physician 
designee by midnight of the next calendar day. This measure is not risk 
adjusted. For technical information about this proposed measure 
including information about the measure calculation and discussion 
pertaining to the standardized items used to calculate this measure, 
refer to the document titled, Proposed Measure Specifications for 
Measures Proposed in the FY 2017 SNF QRP NPRM available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    Data for the proposed quality measure, Drug Regimen Review 
Conducted with Follow-Up for Identified Issues--PAC SNF QRP, would be 
collected using the MDS with submission through the Quality Improvement 
Evaluation System (QIES) Assessment Submission and Processing (ASAP) 
system.
    We invite public comment on our proposal to adopt the quality 
measure, Drug Regimen Review Conducted with Follow-Up for Identified 
Issues--PAC SNF QRP, for the SNF QRP.
8. SNF QRP Quality Measures and Measure Concepts Under Consideration 
for Future Years
    We are inviting comment on the importance, relevance, 
appropriateness, and applicability for each of the quality measures in 
Table 13 for future years in the SNF QRP. We are developing a measure 
related to the IMPACT Act domain, accurately communicating the 
existence of and providing for the transfer of health information and 
care

[[Page 24270]]

preferences of an individual to the individual, family caregiver of the 
individual, and providers of services furnishing items and services to 
the individual, when the individual transitions. We are considering the 
possibility of adding quality measures that rely on the patient's 
perspective; that is, measures that include patient-reported experience 
of care and health status data. For this purpose, we are considering a 
measure focused on pain and four measures focused on function that rely 
on the collection of patient-reported data. Finally, we are considering 
a measure related to health and well-being, Percent of Residents or 
Patients Who Were Assessed and Appropriately Given the Seasonal 
Influenza Vaccine, and a measure related to patient safety, Percent of 
SNF Residents Who Newly Received an Antipsychotic Medication.

 Table 13--SNF QRP Quality Measures Under Consideration for Future Years
------------------------------------------------------------------------
 
------------------------------------------------------------------------
IMPACT Act Domain............................  Accurately communicating
                                                the existence of and
                                                providing for the
                                                transfer of health
                                                information and care
                                                preferences of an
                                                individual to the
                                                individual, family
                                                caregiver of the
                                                individual, and
                                                providers of services
                                                furnishing items and
                                                services to the
                                                individual, when the
                                                individual transitions.
IMPACT Act Measure...........................      Transfer of
                                                   health information
                                                   and care preferences
                                                   when an individual
                                                   transitions.
NQS Priority.................................  Patient- and Caregiver-
                                                Centered Care.
Measures.....................................      Percent of
                                                   Residents Who Self-
                                                   Report Moderate to
                                                   Severe Pain.
                                                   Application
                                                   of the Change in Self-
                                                   Care Score for
                                                   Medical
                                                   Rehabilitation
                                                   Patients (NQF #2633).
                                                   Application
                                                   of the Change in
                                                   Mobility Score for
                                                   Medical
                                                   Rehabilitation
                                                   Patients (NQF #2634).
                                                   Application
                                                   of the Discharge Self-
                                                   Care Score for
                                                   Medical
                                                   Rehabilitation
                                                   Patients (NQF #2635).
                                                   Application
                                                   of the Discharge
                                                   Mobility Score for
                                                   Medical
                                                   Rehabilitation
                                                   Patients (NQF #2636).
NQS Priority.................................  Health and Well-Being.
Measure......................................      Percent of
                                                   Residents or Patients
                                                   Who Were Assessed and
                                                   Appropriately Given
                                                   the Seasonal
                                                   Influenza Vaccine.
NQS Priority.................................  Patient Safety.
Measure......................................      Percent of
                                                   SNF Residents Who
                                                   Newly Received an
                                                   Antipsychotic
                                                   Medication.
------------------------------------------------------------------------

9. Form, Manner, and Timing of Quality Data Submission
a. Participation/Timing for New SNFs
    In the FY 2016 SNF PPS final rule (80 FR 46455), we established the 
requirements associated with the timing of data submission, beginning 
with the submission of data required for the FY 2018 payment 
determination, for new SNFs. We finalized that a new SNF would be 
required to begin reporting data on any quality measures finalized for 
that program year by no later than the first day of the calendar 
quarter subsequent to 30 days after the date on its CMS Certification 
Number (CCN) notification letter. For example, for FY 2018 payment 
determinations, if a SNF received its CCN on August 28, 2016, and 30 
days are added (August 28 + 30 days = September 27), the SNF would be 
required to submit data for residents who are admitted beginning on 
October 1, 2016. We are not proposing any new policies related to the 
participation and timing for new SNFs.
b. Finalized Data Collection Timelines and Requirements for the FY 2018 
Payment Determination and Subsequent Years
    In the FY 2016 SNF PPS final rule (80 FR 46457) for the FY 2018 
payment determination, we finalized that SNFs submit data on the three 
finalized quality measures for residents who are admitted to the SNF on 
and after October 1, 2016, and discharged from the SNF up to and 
including December 31, 2016, using the data submission method and 
schedule that we proposed in this section. We also finalized that we 
would collect that single quarter of data for FY 2018 to remain 
consistent with the usual October release schedule for the MDS, to give 
SNFs a sufficient amount of time to update their systems so that they 
can comply with the new data reporting requirements, and to give CMS a 
sufficient amount of time to determine compliance for the FY 2018 
program. The proposed use of one quarter of data for the initial year 
of quality reporting is consistent with the approach we used to 
implement a number of other QRPs, including the LTCH, IRF, and Hospice 
QRPs.
    We also finalized that, following the close of the reporting 
quarter, October 1, 2016, through December 31, 2016, for the FY 2018 
payment determination, SNFs would have an additional 5.5 months to 
correct and/or submit their quality data and we finalized that the 
final deadline for submitting data for the FY 2018 payment 
determination would be May 15, 2017. (80 FR 46457). The statement that 
SNFs would have an additional 5.5 months was incorrect in that the time 
between the close of the quarter on December 31, 2016 and May 15, 2017 
is 4.5 months, not 5.5 months. Therefore, we propose that SNFs will 
have 4.5 months, from January 1, 2017 through May 15, 2017, following 
the data submission period of October 1, 2016 through December 31, 
2016, in which to complete their data submissions and make corrections 
to their data where necessary.

   Table 14--Finalized Measures, Data Collection Source, Data Collection Period and Data Submission Deadlines
                                   Affecting the FY 2018 Payment Determination
----------------------------------------------------------------------------------------------------------------
                                                                                               Data submission
                                    Data  collection                                          deadline for  FY
         Quality measure                 source               Data collection  period           2018 payment
                                                                                                determination
----------------------------------------------------------------------------------------------------------------
NQF #0678: Percent of Patients    MDS                                    10/01/16-12/31/16  May 15, 2017.
 or Residents with Pressure
 Ulcers that are New or Worsened.
NQF #0674: Application of         MDS                                    10/01/16-12/31/16  May 15, 2017.
 Percent of Residents
 Experiencing One or More Falls
 with Major Injury (Long Stay).

[[Page 24271]]

 
NQF #2631: Application of         MDS                                    10/01/16-12/31/16  May 15, 2017.
 Percent of Long-Term Care
 Hospital Patients with an
 Admission and Discharge
 Functional Assessment and a
 Care Plan that Addresses
 Function.
----------------------------------------------------------------------------------------------------------------

c. Data Collection Timelines and Requirements for the FY 2019 Payment 
Determinations and Subsequent Years
    In the FY 2016 SNF PPS final rule (80 FR 46457), we finalized that, 
for the FY 2019 payment determination, we would collect data from the 
2nd through 4th quarters of FY 2017 (that is, data for residents who 
are admitted from January 1st and discharged up to and including 
September 30th) to determine whether a SNF has met its quality 
reporting requirements for that FY. In the FY 2016 SNF PPS final rule 
we also finalized that beginning with the FY 2020 payment 
determination, we would move to a full year of fiscal year (FY) data 
collection. We intended to propose the FY 2019 payment determination 
quality reporting data submission deadlines in future rulemaking.
    In the FY 2016 SNF PPS final rule (80 FR 46457), we also finalized 
that we would collect FY 2018 data in a manner that would remain 
consistent with the usual October release schedule for the MDS. 
However, to align with the data reporting cycles in other quality 
reporting programs, in contrast to fiscal year data collection that we 
finalized last year, we are now proposing to move to calendar year (CY) 
reporting following the initial reporting of data from October 1, 2016, 
through December 31, 2016, as finalized in the FY 2016 SNF PPS final 
rule (80 FR 46457), for the FY 2018 payment determination.
    More specifically, we are proposing to follow a CY schedule for 
measure and data submission requirements that includes quarterly 
deadlines following each quarter of data submission, beginning with 
data reporting for the FY 2019 payment determinations. Each quarterly 
deadline will occur approximately 4.5 months after the end of a given 
calendar quarter as outlined below in Table 15. This timeframe will 
give SNFs enough time to submit corrections to the assessment data, as 
discussed below. Thus, if finalized, the FY 2019 payment determination 
would be based on 12 calendar months of data reporting beginning on 
January 1, 2017, and ending on December 31, 2017 (that is, data from 
January 1, 2017, up to and including December 31, 2017.) This approach 
would enable CMS to move to a full 12 months of data reporting 
immediately following the first 3 months of reporting (October 1, 2016 
through December 31, 2016 for the FY 2018 payment determination) rather 
than an interim year which uses only 9 months of data, and a subsequent 
12 months of FY data reporting following the initial reporting for the 
FY 2018 payment determination.
    We invite public comments on our proposal to adopt calendar year 
data collection time frames, following the initial 3-month reporting 
period from October 1, 2016, to December 31, 2016, for all measures 
finalized for adoption into the SNF QRP.
    Our proposal to implement, for the FY 2019 payment determination 
and all subsequent years for assessment-based data submitted via the 
MDS, calendar year, quarterly data collection periods followed by data 
submission deadlines is consistent with the approach taken by the LTCH 
QRP and the IRF QRP, which are based on CY data and for which each data 
collection quarterly period is followed by a 4.5 month time frame that 
allows for the continued submission and correction of data until a 
deadline has been reached for that quarter of data. At that point, the 
data submitted becomes a frozen ``snapshot'' of data for both public 
reporting purposes and for the purposes of determining compliance in 
meeting the data reporting thresholds.

      Table 15--Proposed Data Collection Period and Data Submission Deadlines Affecting the FY 2019 Payment
                                       Determination and Subsequent Years
----------------------------------------------------------------------------------------------------------------
                                                                                            Proposed quarterly
                                                                                          review and correction
                                                                     Proposed data           periods and data
           Quality measure            Data  collection  source  collection/  submission    submission quarterly
                                                                  quarterly  reporting    deadlines for FY 2019
                                                                        period *          payment  determination
                                                                                                    **
----------------------------------------------------------------------------------------------------------------
NQF #0678: Percent of Patients or     MDS                       CY 17 Q1--1/1/2017-3/31/ CY 2017 Q1 Deadline:
 Residents with Pressure Ulcers that                             2017.                    August 15, 2017.
 are New or Worsened.                                           CY 17 Q2--4/1/2017-6/30/ CY 2017 Q2 Deadline:
NQF #0674: Application of Percent of                             17.                      November 15, 2017.
 Residents Experiencing One or More                             CY 17 Q3--7/1/2017-9/30/ CY 2017 Q3 Deadline:
 Falls with Major Injury (Long Stay).                            2017.                    February 15, 2018.
NQF #2631: Application of Percent of                            CY 17 Q4--10/1/2017-12/  CY 2017 Q4 Deadline:
 Long-Term Care Hospital Patients                                31/2017.                 May 15, 2018.
 with an Admission and Discharge
 Functional Assessment and a Care
 Plan that Addresses Function.
----------------------------------------------------------------------------------------------------------------
* Data collection/submission will follow a similar quarterly reporting period schedule for subsequent CYs.
** Data review and correction periods and data submission deadlines will follow a similar quarterly schedule for
  subsequent CYs.

    Further, we propose that beginning with FY 2019 payment 
determination, assessment-based measures finalized for adoption into 
the SNF QRP will follow a CY schedule of data reporting and quarterly 
review and correction periods

[[Page 24272]]

and data submission deadlines as provided in Table 16 for all 
subsequent payment determination years unless otherwise specified:

 Table 16--Proposed Data Collection Period and Data Submission Deadlines
     Affecting the FY 19 Payment Determination and Subsequent Years
------------------------------------------------------------------------
                                                     Proposed quarterly
                                  Proposed data    review and correction
  Proposed CY data collection      collection/        periods and data
            quarter                 submission      submission deadlines
                                    quarterly           for payment
                                 reporting period      determination
------------------------------------------------------------------------
Quarter 1.....................  January 1-March    April 1-August 15.
                                 31.
Quarter 2.....................  April 1-June 30..  July 1-November 15.
Quarter 3.....................  July 1-September   October 1-February
                                 30.                15.
Quarter 4.....................  October 1-         January 1-May 15.
                                 December 31.
------------------------------------------------------------------------

    We invite public comment on the proposed data collection period and 
data submission deadlines affecting the FY 2019 payment determination 
and subsequent years and on our use of CY reporting with quarterly 
deadlines following a period of approximately 4.5 months of time to 
enable the correction of such data.
d. Proposed Timeline and Data Submission Mechanisms for Claims-Based 
Measures Proposed for the FY 2018 Payment Determination and Subsequent 
Years
    The Medicare Spending per Beneficiary--PAC SNF QRP, Discharge to 
Community--PAC SNF QRP, and Potentially Preventable Potentially 
Preventable 30-Day Post-Discharge Readmission Measure for SNF QRP 
measures, which we have proposed in this proposed rule, are Medicare 
FFS claims-based measures. Because claims-based measures can be 
calculated based on data that are already reported to the Medicare 
program for payment purposes, no additional information collection will 
be required from SNFs. As previously discussed in V.B.6., for the 
Medicare Spending per Beneficiary--PAC SNF QRP Measure, the Discharge 
to Community--PAC SNF QRP measure and the Potentially Preventable 30-
Day Post-Discharge Readmission Measure for SNF QRP, we propose to use 1 
year of claims data beginning with CY 2016 claims data to inform 
confidential feedback reports for SNFs, and CY 2017 claims data for 
public reporting.
    We invite public comments on this proposal.
e. Proposed Timeline and Data Submission Mechanisms for the FY 2020 
Payment Determination and Subsequent Years for New SNF QRP Assessment-
Based Quality Measure
    As discussed in section V.B.7. of this proposed rule, for the 
proposed measure, Drug Regimen Review Conducted with Follow-Up for 
Identified Issues--PAC SNF QRP, affecting FY 2020 payment determination 
and subsequent years, we are proposing that SNFs would submit data by 
completing data elements to be included in the MDS and then submitting 
the MDS to CMS through the Quality Improvement and Evaluation System 
(QIES), Assessment Submission and Processing System (ASAP) system 
beginning October 1, 2018. For more information on SNF QRP reporting 
through the QIES ASAP system, refer to the ``Related Links'' section at 
the bottom of: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/index.html?redirect=/NursingHomeQualityInits/30_NHQIMDS30TechnicalInformation.asp#TopOfPage.
    We invite public comments on our proposed SNF QRP data collection 
requirements for the proposed measure affecting the FY 2020 payment 
determination and subsequent years.
    For the FY 2020 payment determination, we propose that SNFs submit 
data on the proposed assessment-based quality measure for residents who 
are admitted to the SNF on and after October 1, 2018, and discharged 
from SNF Part A covered stays (that is, both residents discharged from 
Part A covered stays and physically discharged) up to and including 
December 31, 2018, using the data submission schedule that we propose 
in this section.
    We propose to collect a single quarter of data for the FY 2020 
payment determination to remain consistent with the usual October 
release schedule for the MDS, to give SNFs a sufficient amount of time 
to update their systems so that they can comply with the new data 
reporting requirements, and to give CMS a sufficient amount of time to 
determine compliance for the FY 2020 program. The proposed use of one 
quarter of data for the initial year of assessment data reporting in 
the SNF QRP is consistent with the approach we used previously for the 
SNF QRP and in other QRPs, including the LTCH, IRF, and Hospice QRPs in 
which we have finalized the use of fewer than 12 months of data.
    We also propose that following the close of the reporting quarter, 
October 1, 2018, through December 31, 2018, for the FY 2020 payment 
determination, SNFs would have an additional 4.5 months to correct and/
or submit their quality data and that the final deadline for submitting 
data for the FY 2020 payment determination would be May 15, 2019. We 
further propose that for the FY 2021 payment determination and 
subsequent years, we will collect data using the CY reporting cycle as 
previously proposed in section V.B.9.c of this proposed rule.

  Table 17--Proposed New SNF QRP Assessment-Based Quality Measures--Data Collection Period and Data Submission
                              Deadlines Affecting the FY 2020 Payment Determination
----------------------------------------------------------------------------------------------------------------
                                                                      Proposed data           Proposed data
                                                                       collection/      submission  deadline for
            Quality measure              Data  collection  source       submission           FY 2020 payment
                                                                     reporting period         determination
----------------------------------------------------------------------------------------------------------------
Drug Regimen Review Conducted with      MDS                          10/01/18-12/31/18  May 15, 2019.
 Follow-Up for Identified Issues--PAC
 SNF QRP.
----------------------------------------------------------------------------------------------------------------


[[Page 24273]]

    We invite public comment on the proposed new SNF QRP assessment-
based quality measure data collection period and data submission 
deadline affecting the FY 2020 payment determination.
    For this measure, we also propose to follow a CY schedule for 
measure and data submission requirements that includes quarterly 
deadlines following each quarter of data submission, beginning with 
data reporting for the FY 2021 payment determinations. As previously 
discussed, each quarterly deadline will occur approximately 4.5 months 
after the end of a given calendar quarter as outlined in Table 18. 
Thus, if finalized, the FY 2021 payment determination would be based on 
12 calendar months of data reporting beginning January 1, 2019, and 
ending December 31, 2019. Table 18 provides the data submission and 
collection method, data collection period and data submission timelines 
for the assessment-based quality measure affecting the FY 2021 payment 
determination and subsequent years.

   Table 18--New SNF QRP Assessment-Based Quality Measure Data Collection Period and Data Submission Deadline
                          Affecting FY 2021 Payment Determination and Subsequent Years
----------------------------------------------------------------------------------------------------------------
                                                                                              Proposed data
                                                                     Proposed data         submission quarterly
           Quality measure            Data  collection  source  collection/  submission   deadlines for FY 2021
                                                                  quarterly  reporting    payment determination
                                                                        period *                    **
----------------------------------------------------------------------------------------------------------------
Drug Regimen Review Conducted with    MDS                       CY 19 Q1--1/1/2019-3/31/ CY 2019 Q1 Deadline:
 Follow-Up for Identified Issues--                               2019.                    August 15, 2019.
 PAC SNF QRP.                                                   CY 19 Q2--4/1/2019-6/30/ CY 2019 Q2 Deadline:
                                                                 19.                      November 15, 2019.
                                                                CY 19 Q3--7/1/2019-9/30/ CY 2019 Q3 Deadline:
                                                                 2019.                    February 15, 2020.
                                                                CY 19 Q4--10/1/2019-12/  CY 2019 Q4 Deadline May
                                                                 31/2019.                 15, 2020.
----------------------------------------------------------------------------------------------------------------
* Data collection/submission will follow a similar quarterly reporting period schedule for subsequent CYs.
** Data review and correction periods and data submission deadlines will follow a similar quarterly schedule for
  subsequent CYs.

    We invite public comment on the SNF QRP assessment-based quality 
measure data collection period and data submission deadline affecting 
the FY 2021 payment determination and subsequent years for the new 
assessment-based measure.
10. SNF QRP Data Completion Thresholds for the FY 2018 Payment 
Determination and Subsequent Years
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46458) 
for our finalized policies regarding data completion thresholds for the 
FY 2018 payment determination and subsequent years. We finalized that, 
beginning with the FY 2018 payment determination, SNFs must report all 
of the data necessary to calculate the proposed quality measures on at 
least 80 percent of the MDS assessments that they submit. We also 
finalized that, for the FY 2018 SNF QRP, any SNF that does not meet the 
proposed requirement that 80 percent of all MDS assessments submitted 
contain 100 percent of all data items necessary to calculate the SNF 
QRP measures would be subject to a reduction of 2 percentage points to 
its FY 2018 market basket percentage. We finalized that a SNF has 
reported all of the data necessary to calculate the measures if the 
data actually can be used for purposes of calculating the quality 
measures, as opposed to, for example, the use of a dash [-], to 
indicate that the SNF was unable to perform a pressure ulcer 
assessment. We wish to clarify that the provision we finalized will 
affect FY 2018 payment determinations and subsequent years and is 
dependent upon the successful achievement of the completion threshold 
of the data used to calculate the measures we finalize. At this time, 
we are not proposing any changes to these policies.
11. SNF QRP Data Validation Requirements for the FY 2018 Payment 
Determination and Subsequent Years
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46458 
through 46459) for a summary of our approach to the development of data 
validation process for the SNF QRP. At this time, we are continuing to 
explore data validation methodology that will limit the amount of 
burden and cost to SNFs, while allowing us to establish estimations of 
the accuracy of SNF QRP data. Hence, we are not proposing any further 
details pertaining to the data validation process for the SNF QRP, but 
we plan to do so in future rulemaking cycles.
12. SNF QRP Submission Exception and Extension Requirements for the FY 
2018 Payment Determination and Subsequent Years
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46459 
through 46460) for our finalized policies regarding submission 
exception and extension requirements for the FY 2018 payment 
determination and subsequent years. At this time, we are not proposing 
any changes to these policies.
13. SNF QRP Reconsideration and Appeals Procedures for the FY 2018 
Payment Determination and Subsequent Years
    We refer the reader to the FY 2016 SNF PPS final rule (80 FR 46460 
through 46461) for a summary of our finalized reconsideration and 
appeals procedures for the SNF QRP for FY 2018 payment determination 
and subsequent years. At this time, we are not proposing any changes to 
these procedures.
14. Public Display of Quality Measure Data for the SNF QRP & Procedures 
for the Opportunity To Review and Correct Data and Information
    Section 1899B(g) of the Act requires the Secretary to establish 
procedures for public reporting of SNFs' performance, including the 
performance of individual SNFs, on quality measures specified under 
paragraph (c)(1) and resource use and other measures specified under 
paragraph (d)(1) of the Act (collectively, IMPACT Act measures) 
beginning not later than 2 years after the applicable specified 
application date under section 1899B(a)(2)(E) of the Act. Under section 
1899B(g)(2) of the Act, the procedures must ensure, including through a 
process consistent with the process applied under section 
1886(b)(3)(B)(viii)(VII) of the Act, which refers to public display and 
review requirements in the Hospital Inpatient Quality Reporting Program 
(HIQR), that each SNF has the opportunity to review and submit 
corrections to its data and information that are to be made public

[[Page 24274]]

prior to the information being made public. In future rulemaking, we 
intend to propose a policy to publicly display performance information 
for individual SNFs on IMPACT Act measures, as required under the Act.
    In this proposed rule, we are proposing procedures that would allow 
individual SNFs to review and correct their data and information on 
IMPACT Act measures that are to be made public before those measure 
data are made public.
    For assessment-based measures, we propose a process by which we 
would provide each SNF with a confidential feedback report that would 
allow the SNF to review its performance on such measures and, during a 
review and correction period, to review and correct the data the SNF 
submitted to CMS via the CMS Quality Improvement and Evaluation System 
(QIES) Assessment Submission and Processing (ASAP) system for each such 
measure. In addition, during the review and correction period, the SNF 
would be able to request correction of any errors in the assessment-
based measure rate calculations.
    We propose that these confidential feedback reports would be 
available to each SNF using the Certification and Survey Provider 
Enhanced Reporting (CASPER) System. We refer to these reports as the 
SNF Quality Measure (QM) Reports. We propose to provide monthly updates 
to the data contained in these reports that pertain to assessment-based 
data, as the data become available. We propose to provide the reports 
so that providers would be able to view their data and information at 
both the facility- and resident-level for quality measures. The CASPER 
facility-level QM Reports may contain information such as the 
numerator, denominator, facility rate, and national rate. The CASPER 
patient-level QM Reports may contain individual patient information 
which will provide information related to which patients were included 
in the quality measures to identify any potential errors. In addition, 
we would make other reports available in the CASPER System, such as MDS 
data submission reports and provider validation reports, which would 
disclose SNFs' data submission status, providing details on all items 
submitted for a selected assessment and the status of records 
submitted. Additional information regarding the content and 
availability of these confidential feedback reports would be provided 
on an ongoing basis at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting.html.
    As previously proposed in section V.B.9.b, SNFs would have 
approximately 4.5 months after the reporting quarter to correct any 
errors that appear on the CASPER-generated QM reports pertaining to 
their assessment-based data used to calculate the assessment-based 
measures. During the time of data submission for a given quarterly 
reporting period and up until the quarterly submission deadline, SNFs 
could review and perform corrections to errors in the assessment data 
used to calculate the measures and could request correction of measure 
calculations. However, once the quarterly submission deadline occurs, 
the data is ``frozen'' and calculated for public reporting and 
providers can no longer submit any corrections. We would encourage SNFs 
to submit timely assessment data during a given quarterly reporting 
period and review their data and information early during the review 
and correction period so that they can identify errors and resubmit 
data before the data submission deadline.
    As noted in this section, the data would be populated into the 
confidential feedback reports and we intend to update the reports 
monthly with all data that have been submitted and are available. We 
believe that a proposed data submission and review period consisting of 
the reporting quarter plus approximately 4.5 months, is sufficient time 
for SNFs to submit, review and, where necessary, correct their data and 
information. These proposed time frames and deadlines for review and 
correction of assessment-based measures and data satisfy the statutory 
requirement that SNFs be provided the opportunity to review and correct 
their data and information that is to be made public and are consistent 
with the informal process hospitals follow in the HIQR Program.
    We propose that, in addition to the data collection/submission 
quarterly reporting periods that are followed by data review and 
correction periods and submission deadlines, we afford SNFs a 30-day 
preview period prior to public display during which SNFs may preview 
the performance information on their measures that will be made public. 
We propose to provide a preview report also using the CASPER System 
with which SNFs are familiar. The CASPER preview reports would inform 
providers of their performance on each measure which will be publicly 
reported. The CASPER preview reports for the reporting quarter will be 
available after the 4.5-month review and correction period and its data 
submission deadline, and are refreshed on a quarterly basis for those 
measures publicly reported quarterly, and annually for those measures 
publicly reported annually. We propose to give SNFs 30 days to review 
this information, beginning from the date on which they can access the 
preview report. Corrections to the underlying data would not be 
permitted during this time; however, SNFs may contest incorrect measure 
calculations during the 30-day preview period. We propose that if CMS 
determines that the measure, as it is displayed in the preview report, 
contains a calculation error, CMS could suppress the data on the public 
reporting Web site, recalculate the measure and publish it at the time 
of the next scheduled public display date. This process would be 
consistent with that followed in the HIQR Program. If finalized, we 
intend to utilize a subregulatory mechanism, such as our SNF QRP Web 
site, to explain the process for how and when providers may ask for a 
correction to their measure calculations.
    We invite public comment on these proposals.
    In addition to assessment-based measures, we have also proposed 
claims-based measures for the SNF QRP. As noted in this section, 
section 1899B(g)(2) of the Act requires prepublication provider review 
and correction procedures that are consistent with those followed in 
the HIQR Program. For claims-based measures used in the HIQR Program, 
we provide hospitals 30 days to preview their claims-based measures and 
data in a preview report containing aggregate hospital-level data. We 
propose to adopt a similar process for the SNF QRP.
    Prior to the public display of our claims-based measures, in 
alignment with the HIQR, HAC and HVBP Programs, we propose to make 
available through the CASPER system a confidential preview report that 
will contain information pertaining to claims-based measure rate 
calculations, for example, facility and national rates. Such data and 
information would be for feedback purposes only and could not be 
corrected. This information would be accompanied by additional 
confidential information based on the most recent administrative data 
available at the time we extract the claims data for purposes of 
calculating the rates. Because the claims-based measures are calculated 
on an annual basis, these confidential CASPER QM reports for claims-
based measures will be refreshed annually. SNFs would have 30 days from 
the date the preview report is made available in which to review this 
information. The 30-day preview period is the only time

[[Page 24275]]

when SNFs would be able to see claims-based measures before they are 
publicly displayed. SNFs will not be able to make corrections to 
underlying claims data during this preview period, nor will they be 
able to add new claims to the data extract. However, SNFs may request 
that we correct our measure calculation if the SNF believes it is 
incorrect during the 30 day preview period. We propose that if we agree 
that the measure, as it is displayed in the preview report, contains a 
calculation error, we would suppress the data on the public reporting 
Web site, recalculate the measure, and publish it at the time of the 
next scheduled public display date. This process would be consistent 
with that followed in the HIQR Program. If finalized, we intend to 
utilize a subregulatory mechanism, such as our SNF QRP Web site, to 
explain the process for how and when providers may contest their 
measure calculations.
    The proposed claims-based measures--Medicare Spending per 
Beneficiary--PAC SNF QRP Measure; Discharge to Community--PAC SNF QRP 
and Potentially Preventable 30 Day Post-Discharge Readmission Measure 
for SNF QRP--use Medicare administrative data from hospitalizations for 
Medicare FFS beneficiaries. Public reporting of data will be based on 
one CY of data. We propose to create data extracts using claims data 
for these claims based measures, at least 90 days after the last 
discharge date in the applicable period (12 calendar months preceding), 
which we will use for the calculations. For example, if the last 
discharge date in the applicable period for a measure is December 31, 
2017, for data collection January 1, 2017, through December 31, 2017, 
we would create the data extract on approximately March 31, 2018, at 
the earliest, and use that data to calculate the claims-based measures 
for that applicable period. Since SNFs would not be able to submit 
corrections to the underlying claims snapshot nor add claims (for those 
measures that use SNF claims) to this data set at the conclusion of the 
at least 90-day period following the last date of discharge used in the 
applicable period, at that time we would consider SNF claims data to be 
complete for purposes of calculating the claims-based measures.
    We propose that beginning with data that will be publicly displayed 
in 2018, claims-based measures will be calculated using claims data 
with at least a 90 day run off period after the last discharge date in 
the applicable period, at which time we would create a data extract or 
snapshot of the available claims data to use for the measure 
calculations. This timeframe allows us to balance the need to provide 
timely program information to SNFs with the need to calculate the 
claims-based measures using as complete a data set as possible. As 
noted, under this proposed procedure, during the 30-day preview period, 
SNFs would not be able to submit corrections to the underlying claims 
data or add new claims to the data extract. This is for two reasons. 
First, for certain measures, the claims data used to calculate the 
measure is derived not from the SNF's claims, but from the claims of 
another provider. For example, the proposed measure Potentially 
Preventable 30-Day Post-Discharge Readmission Measure for SNF QRP uses 
claims data submitted by the hospital to which the patient was 
readmitted. The claims are not those of the SNF, and therefore, the SNF 
could not make corrections to them. Second, even where the claims used 
to calculate the measures are those of the SNF, it would not be 
possible to correct the data after it is extracted for the measures 
calculation. This is because it is necessary to take a static 
``snapshot'' of the claims to perform the necessary measure 
calculations.
    We seek to have as complete a data set as possible. We recognize 
that the proposed at least 90-day ``run-out'' period when we would take 
the data extract to calculate the claims-based measures is less than 
the Medicare program's current timely claims filing policy under which 
providers have up to one year from the date of discharge to submit 
claims. We considered a number of factors in determining that the 
proposed at least 90-day run-out period is appropriate to calculate the 
claims-based measures. After the data extract is created, it takes 
several months to incorporate other data needed for the calculations 
(particularly in the case of risk-adjusted or episode-based measures). 
We then need to generate and check the calculations. Because several 
months lead time is necessary after acquiring the data to generate the 
claims-based calculations, if we were to delay our data extraction 
point to 12 months after the last date of the last discharge in the 
applicable period, we would not be able to deliver the calculations to 
SNFs sooner than 18 to 24 months after the last discharge. We believe 
this would create an unacceptably long delay, both for SNFs and for us 
to deliver timely calculations to SNFs for quality improvement.
    We invite public comment on these proposals.
15. Mechanism for Providing Feedback Reports to SNFs
    Section 1899B(f) of the Act requires the Secretary to provide 
confidential feedback reports to post-acute care providers on their 
performance for the measures specified under paragraphs (c)(1) and 
(d)(1), beginning 1 year after the specified application date that 
applies to such measures and PAC providers. As discussed earlier, the 
reports we propose to provide to SNFs to review their data and 
information would be confidential feedback reports that would enable 
SNFs to review their performance on the measures required under the SNF 
QRP. We propose that these confidential feedback reports would be 
available to each SNF using the CASPER System. Data contained within 
these CASPER reports would be updated, as previously described, on a 
monthly basis as the data become available except for claims-based 
measures which can only be previewed on an annual basis.
    We intend to provide detailed procedures to SNFs on how to obtain 
their confidential feedback CASPER reports on the SNF QRP Web site at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting.html. We 
propose to use the CMS Quality Improvement and Evaluation System (QIES) 
Assessment Submission and Processing (ASAP) system to provide quality 
measure reports in a manner consistent with how providers obtain such 
reports to date. The QIES ASAP system is a confidential and secure 
system with access granted to providers, or their designees.
    We seek public comment on this proposal to satisfy the requirement 
to provide confidential feedback reports to SNFs.

C. SNF Payment Models Research

    As discussed in the FY 2015 SNF PPS proposed rule (79 FR 25786, May 
6, 2014), we contracted with Acumen, LLC to identify potential 
alternatives to the existing methodology used to pay for therapy 
services received under the SNF PPS. Since that time, in an effort to 
establish a comprehensive approach to Medicare Part A SNF payment 
reform, we subsequently expanded the scope of the SNF Therapy Payment 
Research project to examine potential improvements and refinements to 
the overall SNF PPS payment system. In this proposed rule, we are 
taking the opportunity to update the public on the current state of the 
expanded SNF PMR project.

[[Page 24276]]

    As has been stated previously, in September 2013, we completed the 
first phase of the SNF PMR, which included a literature review, 
stakeholder outreach, supplementary analyses, and a comprehensive 
review of options for a viable alternative to the current therapy 
payment model. CMS produced a report outlining the most promising and 
viable options that we plan to pursue in the second phase of the 
project. The report is available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html.
    During the second, and current, phase of the SNF PMR, which began 
in September 2013, our team has focused on developing the options 
outlined in the aforementioned report and has performed more 
comprehensive data analyses to begin outlining a new SNF payment model 
which could serve as a potential replacement for the current SNF PPS. 
To utilize the expertise of the stakeholder community in identifying 
the most viable alternative to the current SNF payment model, Acumen 
has hosted two TEPs. These TEPs brought together experts from across 
the SNF and post-acute care continuums to examine Acumen's research 
around a given topic and provide their comments and direction on where 
Acumen's research should continue.
    The first TEP, which occurred in February 2015, was focused on the 
therapy component of SNF PPS. The objectives of this TEP were to 
discuss potential criteria for evaluating therapy payment approaches, 
review and discuss the key features of SNF therapy payment approaches, 
and solicit recommendations for the further exploration and development 
of SNF therapy payment approaches. The presentation given by Acumen 
during this TEP, as well as a report which provides a summary of the 
discussion and recommendations from the TEP panelists, is available 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html.
    The second TEP, which occurred in November 2015, was focused on the 
nursing component of the SNF PPS. This TEP included discussion of both 
the adequacy of nursing payments, as well as discussion of non-therapy 
ancillaries (NTAs), such as drugs. The overall objectives of this TEP 
were to review and discuss implications of research on the nursing 
component of SNF payments, evaluate alternative approaches to payment 
for SNF nursing and NTA services, and solicit recommendations for the 
further exploration and development of SNF nursing payment approaches. 
The presentation given by Acumen during this TEP, as well as a report 
which provides a summary of the discussion and recommendations from the 
TEP panelists, is available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html.
    We expect that Acumen will host a third TEP which will bring 
together the recommendations from stakeholders on the individual SNF 
payment elements, as well as the extensive analytic work conducted by 
Acumen, to outline what could serve as a potential revised SNF PPS 
payment model. As we have done with the two previous TEPs, we expect to 
post the presentation given by Acumen during this TEP, as well as a 
report which will provide a summary of the discussion and 
recommendations from the TEP panelists, after the TEP is completed.
    As before, comments may be included as part of comments on this 
proposed rule. We are also soliciting comments outside the rulemaking 
process and these comments should be sent via email to 
[email protected]. Information regarding the SNF PMR is 
available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html.

VI. Collection of Information Requirements

    Section V.B.6. of this preamble proposes the following three claims 
based measures for the FY 2018 payment determination and subsequent 
years: (1) Medicare Spending per Beneficiary--PAC SNF QRP; (2) 
Discharge to Community--PAC SNF QRP; and (3) Potentially Preventable 
30-Day Post-Discharge Readmission Measure for SNF QRP. These three 
measures are Medicare claims-based measures; because claims-based 
measures can be calculated based on data that are already reported to 
the Medicare program for payment purposes, we believe there will be no 
additional burden.
    For the FY 2020 payment determination and subsequent years, in 
section V.B.6. we are also proposing one measure: Drug Regimen Review 
Conducted with Follow-Up for Identified Issues--PAC SNF QRP. 
Additionally, we propose that data for this measure will be collected 
and reported using the MDS (version effective October 1, 2018). While 
the reporting of data on quality measures is an information collection, 
we believe that the burden associated with modifications to the MDS 
discussed in this proposed rule fall under the PRA exceptions provided 
in section 1899B(m) of the Act because they are required to achieve the 
standardization of patient assessment data. Section 1899B(m) of the Act 
also provides that the PRA does not apply to section 1899B and the 
sections referenced in section 1899B(a)(2)(B) of the Act that require 
modification to achieve the standardization of patient assessment data. 
The requirement and burden will, however, be submitted to OMB for 
review and approval when the modifications to the MDS or other 
applicable PAC assessment instruments have achieved standardization and 
are no longer exempt from the burden submission requirements under 
section 1899B(m) of the Act.
    We estimate the additional elements for the four newly proposed 
measures will take 7.5 minutes of nursing/clinical staff time to report 
data on admission and 2.5 minutes of nursing/clinical staff time to 
report data on discharge, for a total of 10 minutes. We estimate that 
the additional MDS-RAI items we are proposing will be completed by 
Registered Nurses (RN) for approximately 75 percent of the time 
required and Pharmacists for approximately 25 percent of the time 
required. Individual providers determine the staffing resources 
necessary. We estimate 2,101,370 discharges from 16,484 SNFs annually, 
with an additional burden of 10 minutes. This would equate to 350,228 
total hours or 21.25 hours per SNF. We believe this work will be 
completed by RNs (75 percent) and Pharmacists (25 percent). We obtained 
mean hourly wages for these staff from the U.S. Bureau of Labor 
Statistics' May 2014 National Occupational Employment and Wage 
Estimates (http://www.bls.gov/oes/current/oes_nat.htm), to account for 
overhead and fringe benefits, we have doubled the mean hourly wage. Per 
the National Occupational Employment and Wage Estimates, the mean 
hourly wage for a RN (BLS occupation code: 29-1141) is $33.55. However, 
to account for overhead and fringe benefits, we have double the mean 
hourly wage, making it $67.10 for an RN. The mean hourly wage for a 
pharmacist (BLS occupation code: 29-1051) is $56.96. To account for 
overhead and fringe benefits, we have double the mean hourly wage, 
making it $113.92 for a pharmacist. Given these wages and time 
estimates, the total cost related to the four newly proposed measures 
is estimated at $1,674.34 per SNF annually, or $27,599,743.81 for all 
SNFs annually. While we are setting out burden, the requirements and 
associated

[[Page 24277]]

estimates will not be submitted to OMB for approval under Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501 et seq.) since the burden 
estimates are either claims-based or associated with the exemption 
under section 1899B(m) of the IMPACT Act of 2014. We are setting out 
the burden as a courtesy to advise interested parties of the proposed 
actions' time and costs.
    As described in further detail in section V.A.2.b. of this proposed 
rule, we are proposing to specify the SNFPPR measure for the SNF VBP 
Program. Like the SNFRM (NQF #2510), which was adopted for the SNF VBP 
Program in the FY 2016 SNF PPS final rule (80 FR 46419), the proposed 
SNFPPR measure is also claims-based. Because claims-based measures are 
calculated based on claims that are already submitted to the Medicare 
program for payment purposes, there is no additional burden associated 
with data collection or submission for these measures. Thus there is no 
additional reporting burden associated with the SNFPPR measure.
    If you wish to comment on any of the aforementioned claims, please 
submit your comments as specified under the DATES and ADDRESSES 
captions of this proposed rule.

VII. Response to Comments

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

VIII. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA, 
September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA, March 
22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 
4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated an economically significant 
rule, under section 3(f)(1) of Executive Order 12866. Accordingly, we 
have prepared a regulatory impact analysis (RIA) as further discussed 
below. Also, the rule has been reviewed by OMB.
2. Statement of Need
    This proposed rule would update the FY 2016 SNF prospective payment 
rates as required under section 1888(e)(4)(E) of the Act. It also 
responds to section 1888(e)(4)(H) of the Act, which requires the 
Secretary to provide for publication in the Federal Register before the 
August 1 that precedes the start of each FY, the unadjusted federal per 
diem rates, the case-mix classification system, and the factors to be 
applied in making the area wage adjustment. As these statutory 
provisions prescribe a detailed methodology for calculating and 
disseminating payment rates under the SNF PPS, we do not have the 
discretion to adopt an alternative approach.
3. Overall Impacts
    This proposed rule sets forth proposed updates of the SNF PPS rates 
contained in the SNF PPS final rule for FY 2016 (80 FR 46390). Based on 
the above, we estimate that the aggregate impact would be an increase 
of $800 million in payments to SNFs, resulting from the SNF market 
basket update to the payment rates, as adjusted by the MFP adjustment. 
The impact analysis of this proposed rule represents the projected 
effects of the changes in the SNF PPS from FY 2016 to FY 2017. Although 
the best data available are utilized, there is no attempt to predict 
behavioral responses to these changes, or to make adjustments for 
future changes in such variables as days or case-mix.
    Certain events may occur to limit the scope or accuracy of our 
impact analysis, as this analysis is future-oriented, and thus, very 
susceptible to forecasting errors due to certain events that may occur 
within the assessed impact time period. Some examples of possible 
events may include 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 previously-enacted legislation, or new statutory provisions. 
Although these changes may not be specific to the SNF PPS, the nature 
of the Medicare program is such that the changes may interact and, 
thus, the complexity of the interaction of these changes could make it 
difficult to predict accurately the full scope of the impact upon SNFs.
    In accordance with sections 1888(e)(4)(E) and 1888(e)(5) of the 
Act, we would update the FY 2016 payment rates by a factor equal to the 
market basket index percentage change adjusted by the MFP adjustment to 
determine the payment rates for FY 2017. As discussed previously, for 
FY 2012 and each subsequent FY, as required by section 1888(e)(5)(B) of 
the Act, as amended by section 3401(b) of the Affordable Care Act, the 
market basket percentage is reduced by the MFP adjustment. The special 
AIDS add-on established by section 511 of the MMA remains in effect 
until such date as the Secretary certifies that there is an appropriate 
adjustment in the case mix. We have not provided a separate impact 
analysis for the MMA provision. Our latest estimates indicate that 
there are fewer than 4,800 beneficiaries who qualify for the add-on 
payment for residents with AIDS. The impact to Medicare is included in 
the total column of Table 19. In updating the SNF PPS rates for FY 
2017, we made a number of standard annual revisions and clarifications 
mentioned elsewhere in this proposed rule (for example, the update to 
the wage and market basket indexes used for adjusting the federal 
rates).
    The annual update set forth in this proposed rule applies to SNF 
PPS payments in FY 2017. Accordingly, the analysis that follows only 
describes the impact of this single year. In accordance with the 
requirements of the Act, we will publish a notice or rule for each 
subsequent FY that will provide for an update to the SNF PPS payment 
rates and include an associated impact analysis.
4. Detailed Economic Analysis
    The FY 2017 SNF PPS payment impacts appear in Table 19. Using the 
most recently available data, in this case FY 2015, we apply the 
current FY 2016 wage index and labor-related share value to the number 
of payment days to simulate FY 2016 payments. Then, using the same FY 
2015 data, we apply the proposed FY 2017 wage index and labor-related 
share value to simulate FY 2017 payments. We tabulate the resulting 
payments according to the classifications in Table 19 (for example, 
facility type, geographic region, facility

[[Page 24278]]

ownership), and compare the simulated FY 2016 payments to the simulated 
FY 2017 payments to determine the overall impact. The breakdown of the 
various categories of data in the table follows:
     The first column shows the breakdown of all SNFs by urban 
or rural status, hospital-based or freestanding status, census region, 
and ownership.
     The first row of figures describes the estimated effects 
of the various changes on all facilities. The next six rows show the 
effects on facilities split by hospital-based, freestanding, urban, and 
rural categories. The next nineteen rows show the effects on facilities 
by urban versus rural status by census region. The last three rows show 
the effects on facilities by ownership (that is, government, profit, 
and non-profit status).
     The second column shows the number of facilities in the 
impact database.
     The third column shows the effect of the annual update to 
the wage index. This represents the effect of using the most recent 
wage data available. The total impact of this change is zero percent; 
however, there are distributional effects of the change.
     The fourth column shows the effect of all of the changes 
on the FY 2017 payments. The update of 2.1 percent (consisting of the 
market basket increase of 2.6 percentage points, reduced by the 0.5 
percentage point MFP adjustment) is constant for all providers and, 
though not shown individually, is included in the total column. It is 
projected that aggregate payments will increase by 2.1 percent, 
assuming facilities do not change their care delivery and billing 
practices in response.
    As illustrated in Table 19, the combined effects of all of the 
changes vary by specific types of providers and by location. For 
example, due to changes proposed in this rule, providers in the urban 
Outlying region would experience a 2.3 percent increase in FY 2017 
total payments.

                              Table 19--Projected Impact to the SNF PPS for FY 2017
----------------------------------------------------------------------------------------------------------------
                                                                     Number of
                                                                   facilities FY    Update wage    Total change
                                                                       2017          data (%)           (%)
----------------------------------------------------------------------------------------------------------------
Group:
    Total.......................................................          15,427             0.0             2.1
    Urban.......................................................          10,935             0.0             2.1
    Rural.......................................................           4,492             0.0             2.1
    Hospital based urban........................................             524             0.0             2.1
    Freestanding urban..........................................          10,411             0.0             2.1
    Hospital based rural........................................             606             0.0             2.1
    Freestanding rural..........................................           3,886             0.0             2.1
Urban by region:
    New England.................................................             797             0.0             2.1
    Middle Atlantic.............................................           1,481             0.0             2.1
    South Atlantic..............................................           1,861             0.0             2.1
    East North Central..........................................           2,092             0.0             2.1
    East South Central..........................................             547             0.0             2.1
    West North Central..........................................             905             0.0             2.1
    West South Central..........................................           1,321             0.0             2.1
    Mountain....................................................             507             0.0             2.1
    Pacific.....................................................           1,419            -0.1             2.0
    Outlying....................................................               5             0.2             2.3
Rural by region:
    New England.................................................             139             0.0             2.1
    Middle Atlantic.............................................             221             0.0             2.1
    South Atlantic..............................................             505             0.1             2.2
    East North Central..........................................             933             0.0             2.1
    East South Central..........................................             529             0.1             2.2
    West North Central..........................................           1,087             0.0             2.1
    West South Central..........................................             743             0.1             2.2
    Mountain....................................................             231             0.0             2.1
    Pacific.....................................................             104             0.0             2.1
Ownership:
    Government..................................................           1,022             0.0             2.1
    Profit......................................................          10,773             0.0             2.1
    Non-profit..................................................           3,632             0.0             2.1
----------------------------------------------------------------------------------------------------------------
Note: The Total column includes the 2.6 percent market basket increase, reduced by the 0.5 percentage point MFP
  adjustment. Additionally, we found no SNFs in rural outlying areas.

5. Alternatives Considered
    As described in this section, we estimate that the aggregate impact 
for FY 2017 under the SNF PPS would be an increase of $800 million in 
payments to SNFs, resulting from the SNF market basket update to the 
payment rates, as adjusted by the MFP adjustment.
    Section 1888(e) of the Act establishes the SNF PPS for the payment 
of Medicare SNF services for cost reporting periods beginning on or 
after July 1, 1998. This section of the statute prescribes a detailed 
formula for calculating payment rates under the SNF PPS, and does not 
provide for the use of any alternative methodology. It specifies that 
the base year cost data to be used for computing the SNF PPS payment 
rates must be from FY 1995 (October 1, 1994, through September 30, 
1995). In accordance with the statute, we also incorporated a number of 
elements into the SNF PPS (for example, case-mix classification 
methodology, a market basket index, a wage index, and the urban and 
rural distinction used in the development or adjustment of the federal 
rates). Further, section 1888(e)(4)(H) of the Act specifically

[[Page 24279]]

requires us to disseminate the payment rates for each new FY through 
the Federal Register, and to do so before the August 1 that precedes 
the start of the new FY. Accordingly, we are not pursuing alternatives 
for the payment methodology as discussed previously.
6. Accounting Statement
    As required by OMB Circular A-4 (available online at 
www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf), in Table 20, we have prepared an 
accounting statement showing the classification of the expenditures 
associated with the provisions of this proposed rule. Table 20 provides 
our best estimate of the possible changes in Medicare payments under 
the SNF PPS as a result of the policies in this proposed rule, based on 
the data for 15,421 SNFs in our database. All expenditures are 
classified as transfers to Medicare providers (that is, SNFs).

       Table 20--Accounting Statement: Classification of Estimated
   Expenditures, From the 2016 SNF PPS Fiscal Year to the 2017 SNF PPS
                               Fiscal Year
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $800 million.*
From Whom To Whom?                          Federal Government to SNF
                                             Medicare Providers.
------------------------------------------------------------------------
* The net increase of $800 million in transfer payments is a result of
  the MFP adjusted market basket increase of $800 million.

7. Conclusion
    This proposed rule sets forth updates of the SNF PPS rates 
contained in the SNF PPS final rule for FY 2016 (80 FR 46390). Based on 
the above, we estimate the overall estimated payments for SNFs in FY 
2017 are projected to increase by $800 million, or 2.1 percent, 
compared with those in FY 2016. We estimate that in FY 2017 under RUG-
IV, SNFs in urban and rural areas would experience, on average, a 2.1 
and 2.1 percent increase, respectively, in estimated payments compared 
with FY 2016. Providers in the urban Outlying region would experience 
the largest estimated increase in payments of approximately 2.3 
percent. Providers in the urban Pacific region would experience the 
smallest estimated increase in payments of 2.0 percent.
8. Effects of the Proposed Requirements for the SNF VBP and SNF QRP 
Program
    The proposed requirements set forth for the SNF VBP and SNF QRP 
Program in this proposed rule would not impact SNFs in FY 2017; 
therefore, we are not including a regulatory impact analysis for the 
SNF VBP and SNF QRP Program in this proposed rule.

B. Regulatory Flexibility Act Analysis

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, non-profit organizations, and small 
governmental jurisdictions. Most SNFs and most other providers and 
suppliers are small entities, either by reason of their non-profit 
status or by having revenues of $27.5 million or less in any 1 year. We 
utilized the revenues of individual SNF providers (from recent Medicare 
Cost Reports) to classify a small business, and not the revenue of a 
larger firm with which they may be affiliated. As a result, we estimate 
approximately 91 percent of SNFs are considered small businesses 
according to the Small Business Administration's latest size standards 
(NAICS 623110), with total revenues of $27.5 million or less in any 1 
year. (For details, see the Small Business Administration's Web site at 
http://www.sba.gov/category/navigation-structure/contracting/contracting-officials/eligibility-size-standards). In addition, 
approximately 25 percent of SNFs classified as small entities are non-
profit organizations. Finally, individuals and states are not included 
in the definition of a small entity.
    This proposed rule sets forth updates of the SNF PPS rates 
contained in the SNF PPS final rule for FY 2016 (80 FR 46390). Based on 
the above, we estimate that the aggregate impact would be an increase 
of $800 million in payments to SNFs, resulting from the SNF market 
basket update to the payment rates, as adjusted by the MFP adjustment. 
While it is projected in Table 19 that most providers would experience 
a net increase in payments, we note that some individual providers 
within the same region or group may experience different impacts on 
payments than others due to the distributional impact of the FY 2017 
wage indexes and the degree of Medicare utilization.
    Guidance issued by the Department of Health and Human Services on 
the proper assessment of the impact on small entities in rulemakings, 
utilizes a cost or revenue impact of 3 to 5 percent as a significance 
threshold under the RFA. According to MedPAC, Medicare covers 
approximately 12 percent of total patient days in freestanding 
facilities and 21 percent of facility revenue (Report to the Congress: 
Medicare Payment Policy, March 2016, available at http://medpac.gov/documents/reports/chapter-7-skilled-nursing-facility-services-(march-
2016-report).pdf). As a result, for most facilities, when all payers 
are included in the revenue stream, the overall impact on total 
revenues should be substantially less than those impacts presented in 
Table 19. As indicated in Table 19, the effect on facilities is 
projected to be an aggregate positive impact of 2.1 percent. As the 
overall impact on the industry as a whole, and thus on small entities 
specifically, is less than the 3 to 5 percent threshold discussed 
previously, the Secretary has determined that this proposed rule would 
not have a significant impact on a substantial number of small 
entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 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 an MSA and has fewer 
than 100 beds. This proposed rule would affect small rural hospitals 
that (1) furnish SNF services under a swing-bed agreement or (2) have a 
hospital-based SNF. We anticipate that the impact on small rural 
hospitals would be similar to the impact on SNF providers overall. 
Moreover, as noted in previous SNF PPS final rules (most recently the 
one for FY 2016 (80 FR 46476)), the category of small rural hospitals 
would be included within the analysis of the impact of this proposed 
rule on small entities in general. As indicated in Table 19, the effect 
on facilities is projected to be an aggregate positive impact of 2.1 
percent. As the overall impact on the industry as a whole is less than 
the 3 to 5 percent threshold discussed above, the Secretary has 
determined that this proposed rule would not have a significant impact 
on a substantial number of small rural hospitals.

C. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100

[[Page 24280]]

million in 1995 dollars, updated annually for inflation. In 2016, that 
threshold is approximately $146 million. This proposed rule does not 
include any mandate on state, local, or tribal governments in the 
aggregate, or by the private sector, of $146 million.

D. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a proposed rule (and subsequent final 
rule) that imposes substantial direct requirement costs on state and 
local governments, preempts state law, or otherwise has federalism 
implications. This proposed rule would have no substantial direct 
effect on state and local governments, preempt state law, or otherwise 
have federalism implications.

E. Congressional Review Act

    This proposed regulation is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and has been transmitted to the Congress 
and the Comptroller General for review. In accordance with the 
provisions of Executive Order 12866, this proposed rule was reviewed by 
the Office of Management and Budget.

    Dated: April 6, 2016.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: April 14, 2016.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2016-09399 Filed 4-21-16; 4:15 pm]
BILLING CODE 4120-01-P