[Federal Register Volume 82, Number 149 (Friday, August 4, 2017)]
[Rules and Regulations]
[Pages 36530-36636]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-16256]



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Vol. 82

Friday,

No. 149

August 4, 2017

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 409, 411, 413, 424, and 488





Medicare Program; Prospective Payment System and Consolidated Billing 
for Skilled Nursing Facilities for FY 2018, SNF Value-Based Purchasing 
Program, SNF Quality Reporting Program, Survey Team Composition, and 
Correction of the Performance Period for the NHSN HCP Influenza 
Vaccination Immunization Reporting Measure in the ESRD QIP for PY 2020; 
Final Rule

  Federal Register / Vol. 82 , No. 149 / Friday, August 4, 2017 / Rules 
and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409, 411, 413, 424, and 488

[CMS-1679-F]
RIN 0938-AS96


Medicare Program; Prospective Payment System and Consolidated 
Billing for Skilled Nursing Facilities for FY 2018, SNF Value-Based 
Purchasing Program, SNF Quality Reporting Program, Survey Team 
Composition, and Correction of the Performance Period for the NHSN HCP 
Influenza Vaccination Immunization Reporting Measure in the ESRD QIP 
for PY 2020

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

ACTION: Final rule.

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SUMMARY: This final rule updates the payment rates used under the 
prospective payment system (PPS) for skilled nursing facilities (SNFs) 
for fiscal year (FY) 2018. It also revises and rebases the market 
basket index by updating the base year from 2010 to 2014, and by adding 
a new cost category for Installation, Maintenance, and Repair Services. 
The rule also finalizes revisions to the SNF Quality Reporting Program 
(QRP), including measure and standardized resident assessment data 
policies and policies related to public display. In addition, it 
finalizes policies for the Skilled Nursing Facility Value-Based 
Purchasing Program that will affect Medicare payment to SNFs beginning 
in FY 2019. The final rule also clarifies the regulatory requirements 
for team composition for surveys conducted for investigating a 
complaint and aligns regulatory provisions for investigation of 
complaints with the statutory requirements. The final rule also 
finalizes the performance period for the National Healthcare Safety 
Network (NHSN) Healthcare Personnel (HCP) Influenza Vaccination 
Reporting Measure included in the End-Stage Renal Disease (ESRD) 
Quality Incentive Program (QIP) for Payment Year 2020.

DATES: These regulations are effective on October 1, 2017.

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.
    Michelle King, (410) 786-3667, for information related to skilled 
nursing facility quality reporting program.
    James Poyer, (410) 786-2261, for information related to the skilled 
nursing facility value-based purchasing program.
    Delia Houseal, (410) 786-2724, for information related to the end-
stage renal disease quality incentive program.
    Rebecca Ward, (410) 786-1732 and Caecilia Blondiaux, (410) 786-
2190, for survey type definitions.

SUPPLEMENTARY INFORMATION: 

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

    As discussed in the FY 2014 SNF PPS final rule (78 FR 47936), 
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 final 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
II. Background on SNF PPS
    A. Statutory Basis and Scope
    B. Initial Transition for the SNF PPS
    C. Required Annual Rate Updates
III. Analysis and Responses to Public Comments on the FY 2018 SNF 
PPS Proposed Rule
    A. General Comments on the FY 2018 SNF PPS Proposed Rule
    B. SNF PPS Rate Setting Methodology and FY 2018 Update
    1. Federal Base Rates
    2. SNF Market Basket Update
    3. Case-Mix Adjustment
    4. Wage Index Adjustment
    5. Adjusted Rate Computation Example
    C. Additional Aspects of the SNF PPS
    1. SNF Level of Care--Administrative Presumption
    2. Consolidated Billing
    3. Payment for SNF-Level Swing-Bed Services
    D. Other Issues
    1. Revising and Rebasing the SNF Market Basket Index
    2. Skilled Nursing Facility (SNF) Quality Reporting Program 
(QRP)
    3. Skilled Nursing Facility Value-Based Purchasing Program (SNF 
VBP)
    4. Survey Team Composition
    5. Correction of the Performance Period for the National 
Healthcare Safety Network (NHSN) Healthcare Personnel (HCP) 
Influenza Vaccination Immunization Reporting Measure in the End-
Stage Renal Disease (ESRD) Quality Incentive Program (QIP) for 
Payment Year (PY) 2020
IV. Collection of Information Requirements
V. Economic Analyses
Regulation Text

Acronyms

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

AIDS Acquired Immune Deficiency Syndrome
ALJ Administrative Law Judge
ARD Assessment reference date
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999, Public Law 106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Public Law 106-554
CAH Critical access hospital
CARE Continuity Assessment Record and Evaluation
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
DTI Deep tissue injuries
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
ICD-10-CM International Classification of Diseases, 10th Revision, 
Clinical Modification
IGI IHS Global Inc.
IMPACT Improving Medicare Post-Acute Care Transformation Act of 
2014, Public Law 113-185
IPPS Inpatient prospective payment system
IRF Inpatient Rehabilitation Facility

[[Page 36531]]

IRF-PAI Inpatient Rehabilitation Facility Patient Assessment 
Instrument
LTC Long-term care
LTCH Long-term care hospital
MACRA Medicare Access and CHIP Reauthorization Act of 2015, Public 
Law 114-10
MAP Measures Application Partnership
MDS Minimum data set
MFP Multifactor productivity
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Public Law 108-173
MSA Metropolitan statistical area
NF Nursing facility
NQF National Quality Forum
OASIS Outcome and Assessment Information Set
OBRA 87 Omnibus Budget Reconciliation Act of 1987, Public Law 100-
203
OMB Office of Management and Budget
PAC Post-acute care
PAMA Protecting Access to Medicare Act of 2014, Public Law 113-93
PPS Prospective Payment System
PQRS Physician Quality Reporting System
QIES Quality Improvement and 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, Public Law 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
SNF Skilled nursing facility
SNF PMR Skilled Nursing Facility Payment Models Research
SNF QRP Skilled Nursing Facility Quality Reporting Program
SNF VBP Skilled Nursing Facility Value-Based Purchasing Program
SNFPPR Skilled Nursing Facility Potentially Preventable Readmission 
Measure
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, Public Law 104-4
VBP Value-based purchasing

I. Executive Summary

A. Purpose

    This final rule updates the SNF prospective payment rates for FY 
2018 as required under section 1888(e)(4)(E) of the Social Security Act 
(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 fiscal 
year (FY), certain specified information relating to the payment update 
(see section II.C. of this final rule). This final rule also finalizes 
updates to the requirements for the Skilled Nursing Facility Quality 
Reporting Program (SNF QRP), additional policies for the Skilled 
Nursing Facility Value-Based Purchasing Program (SNF VBP), and 
clarification of requirements related to survey team composition and 
investigation of complaints under Sec. Sec.  488.30, 488.301, 488.308, 
and 488.314. The final rule also finalizes one proposal related to the 
performance period for the National Healthcare Safety Network (NHSN) 
Healthcare Personnel (HCP) Influenza Vaccination Reporting Measure 
included in the End-Stage Renal Disease (ESRD) Quality Incentive 
Program (QIP).

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 final rule reflect an update to the 
rates that we published in the SNF PPS final rule for FY 2017 (81 FR 
51970), which reflects the SNF market basket update, as required by 
section 1888(e)(5)(B)(iii) of the Act for FY 2018. Additionally, in 
section III.B.1. of this final rule, we are finalizing our proposal to 
revise and rebase the market basket index for FY 2018 and subsequent 
FYs by updating the base year from 2010 to 2014, and by adding a new 
cost category for Installation, Maintenance, and Repair Services. We 
are also finalizing additional polices, measures and data reporting 
requirements for the Skilled Nursing Facility Quality Reporting Program 
(SNF QRP) and requirements for the SNF VBP Program, including an 
exchange function to translate SNF performance scores calculated using 
the program's scoring methodology into value-based incentive payments.
    We are also clarifying the regulatory requirements for team 
composition for surveys conducted for the purposes of investigating a 
complaint and on-site monitoring of compliance, and to align the 
regulatory provisions for special surveys and investigation of 
complaints with the statute. The changes clarify that the requirement 
for an interdisciplinary team that must include a registered nurse is 
applicable to surveys conducted under sections 1819(g)(2) and 
1919(g)(2) of the Act, and not to those surveys conducted to 
investigate complaints or to monitor compliance on-site under sections 
1819(g)(4) and 1919(g)(4) of the Act. Revising the regulatory language 
under Sec. Sec.  488.30, 488.301, 488.308, and 488.314 to correspond to 
the statutory requirements found in sections 1819(g) and 1919(g) of the 
Act will add clarity to these requirements by making them more 
explicit. We are also revising the performance period for the National 
Healthcare Safety Network (NHSN) Healthcare Personnel (HCP) Influenza 
Vaccination Reporting Measure included in the End-Stage Renal Disease 
(ESRD) Quality Incentive Program (QIP) for PY 2020.

C. Summary of Cost and Benefits

------------------------------------------------------------------------
         Provision  Description                  Total transfers
------------------------------------------------------------------------
FY 2018 SNF PPS payment rate update....  The overall economic impact of
                                          this final rule is an
                                          estimated increase of $370
                                          million in aggregate.
FY 2018 Cost to Updating the SNF         The overall cost for SNFs to
 Quality Reporting Program.               submit data for the SNF
                                          Quality Reporting Program for
                                          the provisions in this final
                                          rule is ($29 million).
------------------------------------------------------------------------

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 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 physicians' 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_04152015.pdf.

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    Section 215(a) of the Protecting Access to Medicare Act of 2014 
(PAMA, Pub. L. 113-93, enacted on April 1, 2014) added a new section 
1888(g) to the Act, which requires the Secretary to specify an all-
cause all-condition hospital readmission measure and an all-condition 
risk-adjusted potentially preventable hospital readmission measure for 
the SNF setting. Additionally, section 215(b) of PAMA added a new 
section 1888(h) to the Act, which requires the Secretary to implement a 
VBP program for SNFs. Finally, section 2(a) of the Improving Medicare 
Post-Acute Care Transformation Act of 2014 (IMPACT Act, Pub. L. 113-
185, enacted on October 6, 2014) added a new section 1899B to the Act 
that, among other things, requires SNFs to report standardized resident 
assessment data, data on quality measures, and data on resource use and 
other measures. In addition, section 2(c)(4) of the IMPACT Act added a 
new section 1888(e)(6) to the Act, which requires the Secretary to 
implement a quality reporting program for SNFs.

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 
2017 (81 FR 51970, August 5, 2016). 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 
final rule provides the required annual updates to the per diem payment 
rates for SNFs for FY 2018.

III. Analysis and Responses to Public Comments on the FY 2018 SNF PPS 
Proposed Rule

    In response to the publication of the FY 2018 SNF PPS proposed 
rule, we received 247 public comments from individuals, providers, 
corporations, government agencies, private citizens, trade 
associations, and major organizations. The following are brief 
summaries of each proposed provision, a summary of the public comments 
that we received related to that proposal, and our responses to the 
comments.

A. General Comments on the FY 2018 SNF PPS Proposed Rule

    In addition to the comments we received on specific proposals 
contained within the proposed rule (which we address later in this 
final rule), commenters also submitted the following, more general, 
observations on the SNF PPS and SNF care generally. A discussion of 
these comments, along with our responses, appears below.
    Comment: One commenter requested that we instruct the Medicare 
Administrative Contractors to refrain from denying coverage and payment 
for SNF Part B claims for physiatrists visiting residents in SNFs. The 
commenter goes on to state their concerns regarding the potential for 
variability in coverage across contractors.
    Response: With regard to our instructing the contractors to refrain 
from denying coverage or payment for SNF claims related to physiatrists 
visits under Part B, this comment is outside the scope of this final 
rule. However, we will forward these comments to the appropriate 
division within CMS for consideration. With regard to the potential for 
variability among contractors, we will continue to educate the 
contractors to ensure compliance with all federal guidance and 
regulations.
    Comment: One commenter requested that we consider including 
recreational therapy time provided to SNF residents by recreational 
therapists as part of the calculation of the resident's RUG-IV therapy 
classification or as part of determining the number of restorative 
nursing services provided to the resident.
    Response: We appreciate the commenter raising this issue, but we do 
not believe there is sufficient evidence at this time regarding the 
efficacy of recreational therapy interventions or, more notably, data 
which would substantiate a determination of the effect on payment of 
such interventions, as such services were not considered separately, as 
were physical, occupational and speech-language pathology services, 
when RUG-IV was being developed. That being said, we would note that 
Medicare Part A originally paid for institutional care in various 
provider settings, including SNF, on a reasonable cost basis, but now 
makes payment using PPS methodologies, such as the SNF PPS. To the 
extent that one of these SNFs furnished recreational therapy to its 
inpatients under the previous, reasonable cost methodology, the cost of 
the services would have been included in the base payments when SNF PPS 
payment rates were derived. Under the PPS methodology, Part A makes a 
comprehensive payment for the bundled package of items and services 
that the facility furnishes during the course of a Medicare-covered 
stay. This package encompasses nearly all services that the beneficiary 
receives during the course of the stay--including any medically 
necessary recreational therapy--and payment for such services is 
included within the facility's comprehensive SNF PPS payment for the 
covered Part A stay itself.

B. SNF PPS Rate Setting Methodology and FY 2018 Update

1. 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

[[Page 36533]]

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.
2. SNF Market Basket Update
a. 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. In the SNF 
PPS final rule for FY 2014 (78 FR 47939 through 47946), we revised and 
rebased the market basket index, which included updating the base year 
from FY 2004 to FY 2010. For FY 2018, as discussed in section III.D.1. 
of this final rule, we are rebasing and revising the SNF market basket, 
updating the base year from FY 2010 to 2014.
    The SNF market basket index is used to compute the market basket 
percentage change that is used to update the SNF federal rates on an 
annual basis, as required by section 1888(e)(4)(E)(ii)(IV) of the Act. 
This market basket percentage update is adjusted by a forecast error 
correction, if applicable, and then further adjusted by the application 
of a productivity adjustment as required by section 1888(e)(5)(B)(ii) 
of the Act and described in section III.B.2.d. of this final rule. For 
FY 2018, the growth rate of the 2014-based SNF market basket is 
estimated to be 2.6 percent, which is based on the IHS Global Inc. 
(IGI) second quarter 2017 forecast with historical data through first 
quarter 2017.
    However, we note that section 411(a) of the Medicare Access and 
CHIP Reauthorization Act of 2015 (MACRA, Pub. L. 114-10, enacted on 
April 16, 2015) amended section 1888(e) of the Act to add section 
1888(e)(5)(B)(iii) of the Act. Section 1888(e)(5)(B)(iii) of the Act 
establishes a special rule for FY 2018 that requires the market basket 
percentage, after the application of the productivity adjustment, to be 
1.0 percent. In accordance with section 1888(e)(5)(B)(iii) of the Act, 
we will use a market basket percentage of 1.0 percent to update the 
federal rates set forth in this final rule. In section III.B.2.e. of 
this final rule, we discuss the specific application of the MACRA-
specified market basket adjustment to the forthcoming annual update of 
the SNF PPS payment rates. In addition, in section III.D.2. of this 
final rule, we discuss the 2 percent reduction applied to the market 
basket update for those SNFs that fail to submit measures data as 
required by section 1888(e)(6)(A) of the Act.
b. 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. 
Absent the addition of section 1888(e)(5)(B)(iii) of the Act, added by 
section 411(a) of MACRA, we would have used the percentage change in 
the SNF market basket index to compute the update factor for FY 2018. 
Based on the revision and rebasing of the SNF market basket discussed 
in section III.D.1. of this final rule, this factor is based on the IGI 
second quarter 2017 forecast (with historical data through the first 
quarter 2017) of the FY 2018 percentage increase in the 2014-based SNF 
market basket index reflecting routine, ancillary, and capital-related 
expenses. As discussed in sections III.B.2.c. and III.B.2.d. of this 
final rule, this market basket percentage change would have been 
reduced by the applicable forecast error correction (as described in 
Sec.  413.337(d)(2)) and by the MFP adjustment as required by section 
1888(e)(5)(B)(ii) of the Act. As noted previously, section 
1888(e)(5)(B)(iii) of the Act, added by section 411(a) of the MACRA, 
requires us to use a 1.0 percent market basket percentage instead of 
the estimated 2.6 percent market basket percentage, adjusted as 
described below, to adjust the SNF PPS federal rates for FY 2018. 
Additionally, as discussed in section II.B. of this final 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.
c. 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 2016 (the most recently available FY for which there is 
final data), the estimated increase in the market basket index was 2.3 
percentage points, while the actual increase for FY 2016 was 2.3 
percentage points, resulting in the actual increase being the same as 
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 2018 market 
basket percentage change of 2.6 percent would not have been adjusted to 
account for the forecast error correction. Table 1 shows the forecasted 
and actual market basket amounts for FY 2016.

[[Page 36534]]



            Table 1--Difference Between the Forecasted and Actual Market Basket Increases for FY 2016
----------------------------------------------------------------------------------------------------------------
                                                                Forecasted FY
                            Index                               2016  Increase   Actual FY 2016      FY 2016
                                                                      *           Increase **       difference
----------------------------------------------------------------------------------------------------------------
SNF..........................................................             2.3              2.3              0.0
----------------------------------------------------------------------------------------------------------------
* Published in Federal Register; based on second quarter 2015 IGI forecast (2010-based index).
** Based on the second quarter 2017 IGI forecast, with historical data through the first quarter 2017 (2010-
  based index).

d. Multifactor Productivity Adjustment
    Section 1888(e)(5)(B)(ii) of the Act, as added by section 3401(b) 
of the Patient Protection and Affordable Care Act (Affordable Care Act, 
Pub. L. 111-148, enacted on March 23, 2010) requires that, in FY 2012 
and in subsequent FYs, the market basket percentage under the SNF PPS 
(as described in section 1888(e)(5)(B)(i) of the Act) is to be reduced 
annually by the multifactor productivity (MFP) adjustment described in 
section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) 
of the Act, in turn, defines the MFP 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 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.
(1) 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) of the Act (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 being 
less than such payment rates for the preceding fiscal year.
    If not for the enactment of section 411(a) of the MACRA, the FY 
2018 update would include a calculation of the MFP adjustment as the 
10-year moving average of changes in MFP for the period ending 
September 30, 2018, which is estimated to be 0.6 percent. Also, if not 
for the enactment of section 411(a) of the MACRA, consistent with 
section 1888(e)(5)(B)(i) of the Act and Sec.  413.337(d)(2), the market 
basket percentage for FY 2018 for the SNF PPS would be based on IGI's 
second quarter 2017 forecast of the SNF market basket update, which is 
estimated to be 2.6 percent. In accordance with section 
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 would then be reduced by the MFP adjustment (the 10-year 
moving average of changes in MFP for the period ending September 30, 
2018) of 0.6 percent, which would be calculated as described above and 
based on IGI's second quarter 2017 forecast. Absent the enactment of 
section 411(a) of MACRA, the resulting MFP-adjusted SNF market basket 
update would have been equal to 2.0 percent, or 2.6 percent less 0.6 
percentage point. However, as discussed above, section 
1888(e)(5)(B)(iii) of the Act, added by section 411(a) of the MACRA, 
requires us to apply a 1.0 percent positive market basket adjustment in 
determining the FY 2018 SNF payment rates set forth in this final rule, 
without regard to the market basket update as adjusted by the MFP 
adjustment described above.
e. Market Basket Update Factor for FY 2018
    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 2018 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, 2016, through September 30, 
2017 to the average market basket level for the period of October 1, 
2017, through September 30, 2018. This process yields a percentage 
change in the 2014-based SNF market basket of 2.6 percent.
    As further explained in section III.B.2.c. of this final 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 2016 SNF market basket percentage change and the 
actual FY 2016 SNF market basket percentage change (FY 2016 is the most 
recently available FY for which there is historical data) did not 
exceed the 0.5 percentage point threshold, the FY 2018 market basket 
percentage change of 2.6 percent would not have been adjusted by the 
forecast error correction.
    If not for the enactment of section 411(a) of the MACRA, the SNF 
market basket for FY 2018 would be determined in accordance with 
section 1888(e)(5)(B)(ii) of the Act, which 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

[[Page 36535]]

September 30, 2018) of 0.6 percent, as described in section III.B.2.d. 
of this final rule. Thus, absent the enactment of MACRA, the resulting 
net SNF market basket update would equal 2.0 percent, or 2.6 percent 
less the 0.6 percentage point MFP adjustment. We note that our policy 
has been that, if more recent data become available (for example, a 
more recent estimate of the SNF market basket and/or MFP adjustment), 
we would use such data, if appropriate, to determine the SNF market 
basket percentage change, labor-related share relative importance, 
forecast error adjustment, and MFP adjustment in the SNF PPS final 
rule.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the market basket update factor for FY 2018. A 
discussion of these comments, along with our responses, appears below.
    Comment: We received a number of comments in relation to applying 
the FY 2018 market basket update factor in the determination of the FY 
2018 unadjusted federal per diem rates, with some commenters supporting 
its application in determining the FY 2018 unadjusted per diem rates, 
while others opposed its application. In their March 2017 report 
(available at http://medpac.gov/docs/default-source/reports/mar17_medpac_ch8.pdf) and in their comment on the FY 2018 SNF PPS 
proposed rule, MedPAC recommended that we eliminate the market basket 
update for SNFs altogether for FY 2018 and FY 2019 and implement 
revisions to the SNF PPS. A few commenters also encouraged us to 
consider the ``gap'' between the customary market basket update, as 
reflected in the MFP-adjusted market basket update factor described 
above and the MACRA-required 1.0 percentage point market basket update.
    Response: We appreciate all of the comments received on the 
proposed market basket update for FY 2018. In response to those 
comments opposing the application of the FY 2018 market basket update 
factor in determining the FY 2018 unadjusted federal per diem rates 
(specifically, MedPAC's proposal to eliminate the market basket update 
for SNFs), we note that under sections 1888(e)(4)(E)(ii)(IV) and 
(e)(5)(B) of the Act, we are required to update the unadjusted federal 
per diem rates each fiscal year by the SNF market basket percentage 
change, as reduced by the MFP adjustment, and that, under section 
1888(e)(5)(B)(iii) of the Act (as added by section 411(a) of MACRA), 
for FY 2018, that update must be 1.0 percentage point.
    With regard to those comments on the ``gap'' between the standard 
market basket update and the MACRA-required update, we appreciate these 
commenters' concerns, but we are required in section 1888(e)(5)(B)(iii) 
of the Act, as added by section 411(a) of MACRA, to apply the 1.0 
percentage point update factor for FY 2018.
    Comment: One commenter requested that we engage in an ongoing 
dialogue with the commenter's association on their market basket 
research, which would serve to inform us and support any analogous CMS 
reform efforts.
    Response: We appreciate the commenter's review of the market basket 
and interest in continued dialogue regarding their research. The 
commenter is encouraged to submit any research to [email protected].
    Comment: One commenter stated that we have the statutory authority 
to implement geographically-specific updates associated with state and/
or regional minimum wage laws. The commenter requested that such 
updates be made at the Core-Based Statistical Area (CBSA) levels.
    Response: We would note that any increases in wages resulting from 
state and/or regional minimum wage laws are likely to be reflected in 
data used to create the SNF PPS wage index. Therefore, we believe such 
standards are already taken into account in the calculation of the SNF 
PPS wage index to the extent that these laws have an impact on wages.
    Accordingly, after considering the comments received, for the 
reasons specified in this final rule and in the FY 2018 SNF PPS 
proposed rule (82 FR 21017 through 21019), we are finalizing the FY 
2018 market basket factor of 1.0 percent, as required by section 411(a) 
of MACRA. Historically, we have 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 from one year to 
the next. However, section 1888(e)(5)(B)(iii) of the Act, as added by 
section 411(a) of the MACRA, requires us to use a market basket 
percentage of 1.0 percent, after application of the MFP adjustment to 
adjust the federal rates for FY 2018. Under section 1888(e)(5)(B)(iii) 
of the Act, the market basket percentage increase used to determine the 
federal rates set forth in this final rule will be 1.0 percent for FY 
2018. Tables 2 and 3 reflect the updated components of the unadjusted 
federal rates for FY 2018, prior to adjustment for case-mix.

                             Table 2--FY 2018 Unadjusted Federal Rate Per Diem Urban
----------------------------------------------------------------------------------------------------------------
                                               Nursing--case-   Therapy--case-   Therapy--non-
               Rate component                       mix              mix            case-mix       Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount.............................         $177.26          $133.52           $17.59           $90.47
----------------------------------------------------------------------------------------------------------------


                             Table 3--FY 2018 Unadjusted Federal Rate Per Diem Rural
----------------------------------------------------------------------------------------------------------------
                                               Nursing--case-   Therapy--case-   Therapy-- non-
               Rate component                       mix              mix            case-mix       Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount.............................         $169.34          $153.96           $18.79           $92.14
----------------------------------------------------------------------------------------------------------------

    In addition, we note that section 1888(e)(6)(A)(i) of the Act 
provides that, beginning in FY 2018, SNFs that fail to submit data, as 
applicable, in accordance with sections 1888(e)(6)(B)(i)(II) and (III) 
of the Act for a fiscal year will receive a 2.0 percentage point 
reduction to their market basket update for the fiscal year involved, 
after application of section 1888(e)(5)(B)(ii) of the Act (the MFP 
adjustment) and section 1888(e)(5)(B)(iii) of the Act (the 1 percent 
market basket increase for FY 2018) (for additional information on the 
SNF QRP, including the statutory authority and the selected measures, 
we refer readers to section III.D.2. of this final rule). In addition, 
section 1888(e)(6)(A)(ii) of the Act states that application of the 2.0 
percentage point reduction (after application of section 
1888(e)(5)(B)(ii) and (iii) of the Act) may result in the market basket 
index

[[Page 36536]]

percentage change being less than 0.0 for a fiscal year, and may result 
in payment rates for a fiscal year being less than such payment rates 
for the preceding fiscal year. Section 1888(e)(6)(A)(iii) of the Act 
further specifies that the 2.0 percentage point reduction is applied in 
a noncumulative manner, so that any reduction made under section 
1888(e)(6)(A)(i) of the Act shall apply only for the fiscal year 
involved, and the Secretary shall not take into account such reduction 
in computing the payment amount for a subsequent fiscal year. We did 
not receive any comments specifically on the market basket reduction 
under the SNF QRP and any comments on the SNF QRP more broadly are 
discussed in section III.D.2 of this final rule.
3. 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 
through 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 III.C.1. 
of this final 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 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, 
enacted December 8, 2003) 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 
only 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 time being.
    For the limited number of SNF residents that qualify for this add-
on, there is a significant increase in payments. For example, using FY 
2015 data (which still used ICD-9-CM coding), we identified fewer than 
5085 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 2018, an urban 
facility with a resident with AIDS in RUG-IV group ``HC2'' would have a 
case-mix adjusted per diem payment of $443.08 (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 $1,010.22.
    Under section 1888(e)(4)(H) of the Act, each update of the payment 
rates must include the case-mix classification methodology applicable 
for the upcoming FY. The FY 2018 payment rates set forth in this final 
rule reflect the use of the RUG-IV case-mix classification system from 
October 1, 2017, through September 30, 2018. We list the case-mix 
adjusted RUG-IV payment rates for FY 2018, 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 
applies 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).

[[Page 36537]]



                                      Table 4--RUG-IV Case-Mix Adjusted Federal Rates and Associated Indexes--Urban
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Nursing         Therapy      Non-case mix    Non-case mix
             RUG-IVcategory                Nursing index   Therapy index     component       component     therapy comp      component      Total rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUX.....................................           $2.67           $1.87         $473.28         $249.68  ..............          $90.47         $813.43
RUL.....................................            2.57            1.87          455.56          249.68  ..............           90.47          795.71
RVX.....................................            2.61            1.28          462.65          170.91  ..............           90.47          724.03
RVL.....................................            2.19            1.28          388.20          170.91  ..............           90.47          649.58
RHX.....................................            2.55            0.85          452.01          113.49  ..............           90.47          655.97
RHL.....................................            2.15            0.85          381.11          113.49  ..............           90.47          585.07
RMX.....................................            2.47            0.55          437.83           73.44  ..............           90.47          601.74
RML.....................................            2.19            0.55          388.20           73.44  ..............           90.47          552.11
RLX.....................................            2.26            0.28          400.61           37.39  ..............           90.47          528.47
RUC.....................................            1.56            1.87          276.53          249.68  ..............           90.47          616.68
RUB.....................................            1.56            1.87          276.53          249.68  ..............           90.47          616.68
RUA.....................................            0.99            1.87          175.49          249.68  ..............           90.47          515.64
RVC.....................................            1.51            1.28          267.66          170.91  ..............           90.47          529.04
RVB.....................................            1.11            1.28          196.76          170.91  ..............           90.47          458.14
RVA.....................................            1.10            1.28          194.99          170.91  ..............           90.47          456.37
RHC.....................................            1.45            0.85          257.03          113.49  ..............           90.47          460.99
RHB.....................................            1.19            0.85          210.94          113.49  ..............           90.47          414.90
RHA.....................................            0.91            0.85          161.31          113.49  ..............           90.47          365.27
RMC.....................................            1.36            0.55          241.07           73.44  ..............           90.47          404.98
RMB.....................................            1.22            0.55          216.26           73.44  ..............           90.47          380.17
RMA.....................................            0.84            0.55          148.90           73.44  ..............           90.47          312.81
RLB.....................................            1.50            0.28          265.89           37.39  ..............           90.47          393.75
RLA.....................................            0.71            0.28          125.85           37.39  ..............           90.47          253.71
ES3.....................................            3.58  ..............          634.59  ..............          $17.59           90.47          742.65
ES2.....................................            2.67  ..............          473.28  ..............           17.59           90.47          581.34
ES1.....................................            2.32  ..............          411.24  ..............           17.59           90.47          519.30
HE2.....................................            2.22  ..............          393.52  ..............           17.59           90.47          501.58
HE1.....................................            1.74  ..............          308.43  ..............           17.59           90.47          416.49
HD2.....................................            2.04  ..............          361.61  ..............           17.59           90.47          469.67
HD1.....................................            1.60  ..............          283.62  ..............           17.59           90.47          391.68
HC2.....................................            1.89  ..............          335.02  ..............           17.59           90.47          443.08
HC1.....................................            1.48  ..............          262.34  ..............           17.59           90.47          370.40
HB2.....................................            1.86  ..............          329.70  ..............           17.59           90.47          437.76
HB1.....................................            1.46  ..............          258.80  ..............           17.59           90.47          366.86
LE2.....................................            1.96  ..............          347.43  ..............           17.59           90.47          455.49
LE1.....................................            1.54  ..............          272.98  ..............           17.59           90.47          381.04
LD2.....................................            1.86  ..............          329.70  ..............           17.59           90.47          437.76
LD1.....................................            1.46  ..............          258.80  ..............           17.59           90.47          366.86
LC2.....................................            1.56  ..............          276.53  ..............           17.59           90.47          384.59
LC1.....................................            1.22  ..............          216.26  ..............           17.59           90.47          324.32
LB2.....................................            1.45  ..............          257.03  ..............           17.59           90.47          365.09
LB1.....................................            1.14  ..............          202.08  ..............           17.59           90.47          310.14
CE2.....................................            1.68  ..............          297.80  ..............           17.59           90.47          405.86
CE1.....................................            1.50  ..............          265.89  ..............           17.59           90.47          373.95
CD2.....................................            1.56  ..............          276.53  ..............           17.59           90.47          384.59
CD1.....................................            1.38  ..............          244.62  ..............           17.59           90.47          352.68
CC2.....................................            1.29  ..............          228.67  ..............           17.59           90.47          336.73
CC1.....................................            1.15  ..............          203.85  ..............           17.59           90.47          311.91
CB2.....................................            1.15  ..............          203.85  ..............           17.59           90.47          311.91
CB1.....................................            1.02  ..............          180.81  ..............           17.59           90.47          288.87
CA2.....................................            0.88  ..............          155.99  ..............           17.59           90.47          264.05
CA1.....................................            0.78  ..............          138.26  ..............           17.59           90.47          246.32
BB2.....................................            0.97  ..............          171.94  ..............           17.59           90.47          280.00
BB1.....................................            0.90  ..............          159.53  ..............           17.59           90.47          267.59
BA2.....................................            0.70  ..............          124.08  ..............           17.59           90.47          232.14
BA1.....................................            0.64  ..............          113.45  ..............           17.59           90.47          221.51
PE2.....................................            1.50  ..............          265.89  ..............           17.59           90.47          373.95
PE1.....................................            1.40  ..............          248.16  ..............           17.59           90.47          356.22
PD2.....................................            1.38  ..............          244.62  ..............           17.59           90.47          352.68
PD1.....................................            1.28  ..............          226.89  ..............           17.59           90.47          334.95
PC2.....................................            1.10  ..............          194.99  ..............           17.59           90.47          303.05
PC1.....................................            1.02  ..............          180.81  ..............           17.59           90.47          288.87
PB2.....................................            0.84  ..............          148.90  ..............           17.59           90.47          256.96
PB1.....................................            0.78  ..............          138.26  ..............           17.59           90.47          246.32
PA2.....................................            0.59  ..............          104.58  ..............           17.59           90.47          212.64
PA1.....................................            0.54  ..............           95.72  ..............           17.59           90.47          203.78
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 36538]]


                                      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         $452.14         $287.91  ..............          $92.14         $832.19
RUL.....................................            2.57            1.87          435.20          287.91  ..............           92.14          815.25
RVX.....................................            2.61            1.28          441.98          197.07  ..............           92.14          731.19
RVL.....................................            2.19            1.28          370.85          197.07  ..............           92.14          660.06
RHX.....................................            2.55            0.85          431.82          130.87  ..............           92.14          654.83
RHL.....................................            2.15            0.85          364.08          130.87  ..............           92.14          587.09
RMX.....................................            2.47            0.55          418.27           84.68  ..............           92.14          595.09
RML.....................................            2.19            0.55          370.85           84.68  ..............           92.14          547.67
RLX.....................................            2.26            0.28          382.71           43.11  ..............           92.14          517.96
RUC.....................................            1.56            1.87          264.17          287.91  ..............           92.14          644.22
RUB.....................................            1.56            1.87          264.17          287.91  ..............           92.14          644.22
RUA.....................................            0.99            1.87          167.65          287.91  ..............           92.14          547.70
RVC.....................................            1.51            1.28          255.70          197.07  ..............           92.14          544.91
RVB.....................................            1.11            1.28          187.97          197.07  ..............           92.14          477.18
RVA.....................................            1.10            1.28          186.27          197.07  ..............           92.14          475.48
RHC.....................................            1.45            0.85          245.54          130.87  ..............           92.14          468.55
RHB.....................................            1.19            0.85          201.51          130.87  ..............           92.14          424.52
RHA.....................................            0.91            0.85          154.10          130.87  ..............           92.14          377.11
RMC.....................................            1.36            0.55          230.30           84.68  ..............           92.14          407.12
RMB.....................................            1.22            0.55          206.59           84.68  ..............           92.14          383.41
RMA.....................................            0.84            0.55          142.25           84.68  ..............           92.14          319.07
RLB.....................................            1.50            0.28          254.01           43.11  ..............           92.14          389.26
RLA.....................................            0.71            0.28          120.23           43.11  ..............           92.14          255.48
ES3.....................................            3.58  ..............          606.24  ..............           18.79           92.14          717.17
ES2.....................................            2.67  ..............          452.14  ..............           18.79           92.14          563.07
ES1.....................................            2.32  ..............          392.87  ..............           18.79           92.14          503.80
HE2.....................................            2.22  ..............          375.93  ..............           18.79           92.14          486.86
HE1.....................................            1.74  ..............          294.65  ..............           18.79           92.14          405.58
HD2.....................................            2.04  ..............          345.45  ..............           18.79           92.14          456.38
HD1.....................................            1.60  ..............          270.94  ..............           18.79           92.14          381.87
HC2.....................................            1.89  ..............          320.05  ..............           18.79           92.14          430.98
HC1.....................................            1.48  ..............          250.62  ..............           18.79           92.14          361.55
HB2.....................................            1.86  ..............          314.97  ..............           18.79           92.14          425.90
HB1.....................................            1.46  ..............          247.24  ..............           18.79           92.14          358.17
LE2.....................................            1.96  ..............          331.91  ..............           18.79           92.14          442.84
LE1.....................................            1.54  ..............          260.78  ..............           18.79           92.14          371.71
LD2.....................................            1.86  ..............          314.97  ..............           18.79           92.14          425.90
LD1.....................................            1.46  ..............          247.24  ..............           18.79           92.14          358.17
LC2.....................................            1.56  ..............          264.17  ..............           18.79           92.14          375.10
LC1.....................................            1.22  ..............          206.59  ..............           18.79           92.14          317.52
LB2.....................................            1.45  ..............          245.54  ..............           18.79           92.14          356.47
LB1.....................................            1.14  ..............          193.05  ..............           18.79           92.14          303.98
CE2.....................................            1.68  ..............          284.49  ..............           18.79           92.14          395.42
CE1.....................................            1.50  ..............          254.01  ..............           18.79           92.14          364.94
CD2.....................................            1.56  ..............          264.17  ..............           18.79           92.14          375.10
CD1.....................................            1.38  ..............          233.69  ..............           18.79           92.14          344.62
CC2.....................................            1.29  ..............          218.45  ..............           18.79           92.14          329.38
CC1.....................................            1.15  ..............          194.74  ..............           18.79           92.14          305.67
CB2.....................................            1.15  ..............          194.74  ..............           18.79           92.14          305.67
CB1.....................................            1.02  ..............          172.73  ..............           18.79           92.14          283.66
CA2.....................................            0.88  ..............          149.02  ..............           18.79           92.14          259.95
CA1.....................................            0.78  ..............          132.09  ..............           18.79           92.14          243.02
BB2.....................................            0.97  ..............          164.26  ..............           18.79           92.14          275.19
BB1.....................................            0.90  ..............          152.41  ..............           18.79           92.14          263.34
BA2.....................................            0.70  ..............          118.54  ..............           18.79           92.14          229.47
BA1.....................................            0.64  ..............          108.38  ..............           18.79           92.14          219.31
PE2.....................................            1.50  ..............          254.01  ..............           18.79           92.14          364.94
PE1.....................................            1.40  ..............          237.08  ..............           18.79           92.14          348.01
PD2.....................................            1.38  ..............          233.69  ..............           18.79           92.14          344.62
PD1.....................................            1.28  ..............          216.76  ..............           18.79           92.14          327.69
PC2.....................................            1.10  ..............          186.27  ..............           18.79           92.14          297.20
PC1.....................................            1.02  ..............          172.73  ..............           18.79           92.14          283.66
PB2.....................................            0.84  ..............          142.25  ..............           18.79           92.14          253.18
PB1.....................................            0.78  ..............          132.09  ..............           18.79           92.14          243.02
PA2.....................................            0.59  ..............           99.91  ..............           18.79           92.14          210.84
PA1.....................................            0.54  ..............           91.44  ..............           18.79           92.14          202.37
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 36539]]

4. 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 proposed to continue 
this practice for FY 2018, 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 2018, the updated wage data are for hospital cost 
reporting periods beginning on or after October 1, 2013 and before 
October 1, 2014 (FY 2014 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. More specifically, we believe 
auditing all SNF cost reports, similar to the process used to audit 
inpatient hospital cost reports for purposes of the Inpatient 
Prospective Payment System (IPPS) wage index, would place a burden on 
providers in terms of responding to documented audit requests. We also 
believe that adopting such an approach would require a significant 
commitment of resources by CMS and the Medicare Administrative 
Contractors, potentially far in excess of those required under the IPPS 
given that there are nearly five times as many SNFs as there are 
hospitals. Therefore, while we continue to believe that the development 
of such an audit process could improve SNF cost reports in such a 
manner as to permit us to establish a SNF-specific wage index, we do 
not regard an undertaking of this magnitude as being feasible within 
the current level of programmatic resources.
    In addition, we proposed 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 2018 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 stated in the proposed rule we would use 
the average wage index from all contiguous Core-Based Statistical Areas 
(CBSAs) as a reasonable proxy. For FY 2018, there are no rural 
geographic areas that do not have hospitals, and thus, we stated that 
this methodology would not be applied. For rural Puerto Rico, we stated 
that 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 stated 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 stated 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 2018, 
the only urban area without wage index data available is CBSA 25980, 
Hinesville-Fort Stewart, GA. The wage index applicable to FY 2018 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.
    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 https://www.whitehouse.gov/omb/bulletins_b03-04, 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 1-
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.
    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 
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). 
Subsequently, 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. 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 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 wage index applicable 
to FY 2018 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.
    Once calculated, we stated in the proposed rule 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

[[Page 36540]]

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; Professional fees: Labor-related; Administrative and 
Facilities Support Services; All other--Labor-Related Services; and a 
proportion of Capital-Related expenses. Effective beginning FY 2018, as 
discussed in section III.D.1. of the proposed rule, we proposed to 
revise the labor-related share to reflect the relative importance of 
the 2014-based SNF market basket cost weights for the following cost 
categories: Wages and Salaries; Employee Benefits; Professional fees: 
Labor-related; Administrative and Facilities Support services; 
Installation, Maintenance, and Repair 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 2018. 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 2018 than the base year weights 
from the SNF market basket. The methodology for calculating the labor-
related portion for FY 2018 is discussed in section III.D.1. of this 
final rule and the labor-related share is provided in Table 15.
    We invited public comments on these proposals. A discussion of the 
comments we received, along with our responses, appear below.
    Comment: One commenter expressed concern with what appears to be a 
precipitous drop in the New Bern, North Carolina (CBSA 35100) wage 
index. The commenter noted that in the SNF PPS final rule for 2017, the 
wage index for this CBSA was 0.8539, but that in the FY 2018 SNF PPS 
proposed rule, this value had dropped to 0.5988. The commenter requests 
that the information used to determine the wage indexes be reviewed 
prior to the release of the final rule.
    Response: We appreciate the commenter's concern regarding the 
decrease in the wage index for CBSA 35100. There is a wage data 
verification and correction process which is discussed in the Inpatient 
Prospective Payment System (IPPS) proposed and final rules each year. 
The most recent discussion appears in the FY 2018 IPPS proposed rule 
(82 FR 19899 through 19900. 19911 through 19915). Based on the final 
wage data for FY 2018, the wage index for CBSA 35100 has been updated 
to 0.8277, which is only a slight decrease compared to the FY 2017 
value.
    Comment: Several commenters recommend that we continue exploring 
potential approaches to establish a SNF-specific wage index either by 
modifying the use of current hospital wage data by eliminating certain 
job categories specific to hospitals only, or by utilizing collected 
SNF-specific wage data only. More specifically, these commenters 
suggest that a SNF-specific wage index could benefit from weighting it 
by occupational mix data for SNFs, allowing for a rural floor policy, 
and by implementation of a reclassification system.
    Response: We appreciate the commenters raising these concerns 
regarding the use of the hospital wage index data under the SNF PPS, 
and the commenter's recommendation to continue exploring potential 
approaches for collecting SNF-specific wage data to establish a SNF-
specific wage index. However, we note that, consistent with the 
preceding discussion in this final rule as well as our previous 
responses to these recurring comments (most recently published in the 
FY 2017 SNF PPS final rule (81 FR 51979 through 51980)), developing 
such a wage index would require a resource-intensive audit process 
similar to that used for IPPS hospital data, to improve the quality of 
the SNF cost report data in order for it to be used as part of this 
analysis. We would further note that as this audit process is quite 
extensive in the case of approximately 3,300 hospitals, it would be 
significantly more so in the case of approximately 15,000 SNFs. As 
discussed above, we believe auditing all SNF cost reports, similar to 
the process used to audit inpatient hospital cost reports for purposes 
of the Inpatient Prospective Payment System (IPPS) wage index, would 
place a burden on providers in terms of recordkeeping and completion of 
the cost report worksheet. We also believe that adopting such an 
approach would require a significant commitment of resources by CMS and 
the Medicare Administrative Contractors, potentially far in excess of 
those required under the IPPS given that there are nearly five times as 
many SNFs as there are hospitals. Therefore, while we continue to 
review all available data and contemplate the potential methodological 
approaches for a SNF-specific wage index in the future, we continue to 
believe that in the absence of the appropriate SNF-specific wage data, 
using the pre-reclassified hospital inpatient wage data (without the 
occupational mix adjustment) is appropriate and reasonable for the SNF 
PPS.
    Further, we appreciate these commenters' suggestion that we modify 
the current hospital wage data used to construct the SNF PPS wage index 
to reflect the SNF environment more accurately by eliminating certain 
job categories specific to hospitals only. While we consider whether or 
not such an approach may constitute an interim step in the process of 
developing a SNF-specific wage index, we would note that other provider 
types also use the hospital wage index as the basis for their 
associated wage index. As such, we believe that such a recommendation 
should be part of a broader discussion of wage index reform across 
Medicare payment systems.
    We note that section 315 of BIPA authorized us to establish a 
geographic reclassification procedure that is specific to SNFs, only 
after collecting the data necessary to establish a SNF-specific wage 
index that is based on data from nursing homes. However, to date this 
has been infeasible 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. To the extent we are able to develop and 
implement a SNF-specific wage index in the future, we may consider at 
that time whether it would be appropriate to implement a 
reclassification system and an occupational mix adjustment, as 
suggested by commenters.
    As it relates to the suggestion that we adopt a rural floor policy 
with a SNF-specific wage index, we do not believe it would be prudent 
to adopt such a policy under the SNF PPS. As we stated in the FY 2016 
SNF PPS final rule (80 FR 46401), MedPAC has recommended eliminating 
the rural floor policy (which actually sets a floor for urban 
hospitals) from the calculation of the IPPS wage index (see, for 
example, Chapter 3 of MedPAC's March 2013 Report to Congress on 
Medicare Payment Policy, available at http://medpac.gov/docs/default-source/reports/mar13_ch03.pdf, which notes on page 65 that in 2007, 
MedPAC had ``. . . recommended eliminating these special wage index 
adjustments and adopting a new wage index system to avoid geographic 
inequities that can occur due to current wage index policies (Medicare 
Payment Advisory Commission 2007b.'') As we stated in the FY 2016 SNF 
PPS final

[[Page 36541]]

rule, if we were to adopt the rural floor under the SNF PPS, we believe 
that the SNF PPS wage index could become vulnerable to problems similar 
to those that MedPAC identified in its March 2013 Report to Congress.
    Accordingly, after considering the comments received and for the 
reasons discussed previously in this section and in the FY 2018 SNF PPS 
proposed rule (82 FR 21022 through 21026), we are finalizing the FY 
2018 wage index adjustment and related policies as proposed in the FY 
2018 SNF PPS proposed rule. For FY 2018, the updated wage data are for 
hospital cost reporting periods beginning on or after October 1, 2013 
and before October 1, 2014 (FY 2014 cost report data). As noted above, 
the wage index applicable to FY 2018 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. Tables 6 and 7 show the 
RUG-IV case-mix adjusted federal rates for FY 2018 by labor-related and 
non-labor-related components.

         Table 6--RUG-IV Case-Mix Adjusted Federal Rates for Urban SNFs by Labor and Non-Labor Component
----------------------------------------------------------------------------------------------------------------
                                                                                                     Non-labor
                         RUG-IV category                            Total rate    Labor  portion      portion
----------------------------------------------------------------------------------------------------------------
RUX.............................................................         $813.43         $575.91         $237.52
RUL.............................................................          795.71          563.36          232.35
RVX.............................................................          724.03          512.61          211.42
RVL.............................................................          649.58          459.90          189.68
RHX.............................................................          655.97          464.43          191.54
RHL.............................................................          585.07          414.23          170.84
RMX.............................................................          601.74          426.03          175.71
RML.............................................................          552.11          390.89          161.22
RLX.............................................................          528.47          374.16          154.31
RUC.............................................................          616.68          436.61          180.07
RUB.............................................................          616.68          436.61          180.07
RUA.............................................................          515.64          365.07          150.57
RVC.............................................................          529.04          374.56          154.48
RVB.............................................................          458.14          324.36          133.78
RVA.............................................................          456.37          323.11          133.26
RHC.............................................................          460.99          326.38          134.61
RHB.............................................................          414.90          293.75          121.15
RHA.............................................................          365.27          258.61          106.66
RMC.............................................................          404.98          286.73          118.25
RMB.............................................................          380.17          269.16          111.01
RMA.............................................................          312.81          221.47           91.34
RLB.............................................................          393.75          278.78          114.98
RLA.............................................................          253.71          179.63           74.08
ES3.............................................................          742.65          525.80          216.85
ES2.............................................................          581.34          411.59          169.75
ES1.............................................................          519.30          367.66          151.64
HE2.............................................................          501.58          355.12          146.46
HE1.............................................................          416.49          294.87          121.62
HD2.............................................................          469.67          332.53          137.14
HD1.............................................................          391.68          277.31          114.37
HC2.............................................................          443.08          313.70          129.38
HC1.............................................................          370.40          262.24          108.16
HB2.............................................................          437.76          309.93          127.83
HB1.............................................................          366.86          259.74          107.12
LE2.............................................................          455.49          322.49          133.00
LE1.............................................................          381.04          269.78          111.26
LD2.............................................................          437.76          309.93          127.83
LD1.............................................................          366.86          259.74          107.12
LC2.............................................................          384.59          272.29          112.30
LC1.............................................................          324.32          229.62           94.70
LB2.............................................................          365.09          258.48          106.61
LB1.............................................................          310.14          219.58           90.56
CE2.............................................................          405.86          287.35          118.51
CE1.............................................................          373.95          264.76          109.19
CD2.............................................................          384.59          272.29          112.30
CD1.............................................................          352.68          249.70          102.98
CC2.............................................................          336.73          238.40           98.33
CC1.............................................................          311.91          220.83           91.08
CB2.............................................................          311.91          220.83           91.08
CB1.............................................................          288.87          204.52           84.35
CA2.............................................................          264.05          186.95           77.10
CA1.............................................................          246.32          174.39           71.93
BB2.............................................................          280.00          198.24           81.76
BB1.............................................................          267.59          189.45           78.14
BA2.............................................................          232.14          164.36           67.78
BA1.............................................................          221.51          156.83           64.68
PE2.............................................................          373.95          264.76          109.19
PE1.............................................................          356.22          252.20          104.02
PD2.............................................................          352.68          249.70          102.98

[[Page 36542]]

 
PD1.............................................................          334.95          237.14           97.81
PC2.............................................................          303.05          214.56           88.49
PC1.............................................................          288.87          204.52           84.35
PB2.............................................................          256.96          181.93           75.03
PB1.............................................................          246.32          174.39           71.93
PA2.............................................................          212.64          150.55           62.09
PA1.............................................................          203.78          144.28           59.50
----------------------------------------------------------------------------------------------------------------


         Table 7--RUG-IV Case-Mix Adjusted Federal Rates for Rural SNFs by Labor and Non-Labor Component
----------------------------------------------------------------------------------------------------------------
                                                                                                     Non-labor
                         RUG-IV category                            Total rate    Labor  portion      portion
----------------------------------------------------------------------------------------------------------------
RUX.............................................................         $832.19         $589.19         $243.00
RUL.............................................................          815.25          577.20          238.05
RVX.............................................................          731.19          517.68          213.51
RVL.............................................................          660.06          467.32          192.74
RHX.............................................................          654.83          463.62          191.21
RHL.............................................................          587.09          415.66          171.43
RMX.............................................................          595.09          421.32          173.77
RML.............................................................          547.67          387.75          159.92
RLX.............................................................          517.96          366.72          151.24
RUC.............................................................          644.22          456.11          188.11
RUB.............................................................          644.22          456.11          188.11
RUA.............................................................          547.70          387.77          159.93
RVC.............................................................          544.91          385.80          159.11
RVB.............................................................          477.18          337.84          139.34
RVA.............................................................          475.48          336.64          138.84
RHC.............................................................          468.55          331.73          136.82
RHB.............................................................          424.52          300.56          123.96
RHA.............................................................          377.11          266.99          110.12
RMC.............................................................          407.12          288.24          118.88
RMB.............................................................          383.41          271.45          111.96
RMA.............................................................          319.07          225.90           93.17
RLB.............................................................          389.26          275.60          113.66
RLA.............................................................          255.48          180.88           74.60
ES3.............................................................          717.17          507.76          209.41
ES2.............................................................          563.07          398.65          164.42
ES1.............................................................          503.80          356.69          147.11
HE2.............................................................          486.86          344.70          142.16
HE1.............................................................          405.58          287.15          118.43
HD2.............................................................          456.38          323.12          133.26
HD1.............................................................          381.87          270.36          111.51
HC2.............................................................          430.98          305.13          125.85
HC1.............................................................          361.55          255.98          105.57
HB2.............................................................          425.90          301.54          124.36
HB1.............................................................          358.17          253.58          104.59
LE2.............................................................          442.84          313.53          129.31
LE1.............................................................          371.71          263.17          108.54
LD2.............................................................          425.90          301.54          124.36
LD1.............................................................          358.17          253.58          104.59
LC2.............................................................          375.10          265.57          109.53
LC1.............................................................          317.52          224.80           92.72
LB2.............................................................          356.47          252.38          104.09
LB1.............................................................          303.98          215.22           88.76
CE2.............................................................          395.42          279.96          115.46
CE1.............................................................          364.94          258.38          106.56
CD2.............................................................          375.10          265.57          109.53
CD1.............................................................          344.62          243.99          100.63
CC2.............................................................          329.38          233.20           96.18
CC1.............................................................          305.67          216.41           89.26
CB2.............................................................          305.67          216.41           89.26
CB1.............................................................          283.66          200.83           82.83
CA2.............................................................          259.95          184.04           75.91
CA1.............................................................          243.02          172.06           70.96
BB2.............................................................          275.19          194.83           80.36
BB1.............................................................          263.34          186.44           76.90
BA2.............................................................          229.47          162.46           67.01
BA1.............................................................          219.31          155.27           64.04

[[Page 36543]]

 
PE2.............................................................          364.94          258.38          106.56
PE1.............................................................          348.01          246.39          101.62
PD2.............................................................          344.62          243.99          100.63
PD1.............................................................          327.69          232.00           95.69
PC2.............................................................          297.20          210.42           86.78
PC1.............................................................          283.66          200.83           82.83
PB2.............................................................          253.18          179.25           73.93
PB1.............................................................          243.02          172.06           70.96
PA2.............................................................          210.84          149.27           61.57
PA1.............................................................          202.37          143.28           59.09
----------------------------------------------------------------------------------------------------------------

    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 2018 (federal rates 
effective October 1, 2017), we stated in the proposed rule that we 
would apply an adjustment to fulfill the budget neutrality requirement. 
We stated 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 2017 to the weighted average wage adjustment factor for 
FY 2018. For this calculation, we stated we would use the same FY 2016 
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. We proposed a budget 
neutrality factor of 1.0003. We did not receive any comments regarding 
our proposed budget neutrality calculation. Thus, we are finalizing the 
budget neutrality methodology as proposed. The final budget neutrality 
factor for FY 2018 is 1.0013. We note that this is different from the 
budget neutrality factor provided in the FY 2018 SNF PPS proposed rule 
(82 FR 21026) due to an updated wage index file and updated claims file 
used to calculate the budget neutrality factor.
5. Adjusted Rate Computation Example
    Using the hypothetical SNF XYZ, Table 8 shows the adjustments made 
to the federal per diem rates to compute the provider's actual per diem 
PPS payment for FY 2018. We derive the Labor and Non-labor columns from 
Table 6. The wage index used in this example is based on the FY 2018 
SNF PPS wage index, which may be found in Table A available on the CMS 
Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html. As illustrated in Table 8, SNF XYZ's 
total PPS payment for FY 2018 would equal $47,596.42.

                   TABLE 8--Adjusted Rate Computation Example SNF XYZ: Located in Frederick, MD (Urban CBSA 43524) Wage Index: 0.9863
                                                             [See Wage Index in Table A] \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Adjusted                  Adjusted     Percent      Medicare
                   RUG-IVgroup                       Labor     Wage  index     labor      Non-labor       rate      adjustment      days       Payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
RVX.............................................      $512.61       0.9863      $505.59      $211.42      $717.01      $717.01           14   $10,038.14
ES2.............................................       411.59       0.9863       405.95       169.75       575.70       575.70           30    17,271.00
RHA.............................................       258.61       0.9863       255.07       106.66       361.73       361.73           16     5,787.68
CC2 *...........................................       238.40       0.9863       235.13        98.33       333.46       760.29           10     7,602.90
BA2.............................................       164.36       0.9863       162.11        67.78       229.89       229.89           30     6,896.70
                                                                                                                               -------------------------
                                                  ...........  ...........  ...........  ...........  ...........  ...........          100    47,596.42
--------------------------------------------------------------------------------------------------------------------------------------------------------
* 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.

C. Additional Aspects of the SNF PPS

1. 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.B.3. of this final 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 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 5-day, Medicare-required assessment are 
automatically classified as meeting the SNF level of care

[[Page 36544]]

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 final rule, we 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 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.
    In connection with the administrative level of care presumption, in 
the FY 2018 SNF PPS proposed rule (82 FR 21027), we proposed to amend 
the existing regulations text at Sec.  413.345 by removing the 
parenthetical phrase ``(including the designation of those specific 
Resource Utilization Groups under the resident classification system 
that represent the required SNF level of care, as provided in Sec.  
409.30 of this chapter)'' that currently appears in the second sentence 
of Sec.  413.345. We stated in the proposed rule that the deletion of 
the current reference to publishing such material annually in the 
Federal Register, along with the specific reference to ``Resource 
Utilization Groups,'' would serve to conform the text of these 
regulations more closely to that of the corresponding statutory 
language at section 1888(e)(4)(H)(ii) of the Act, which refers in more 
general terms to the applicable ``case mix classification system.'' 
Moreover, we noted in the proposed rule that the recurring 
announcements in the Federal Register of the administrative 
presumption's designated groups as part of each annual update of the 
SNF PPS rates has in actual practice proven to be largely a formality, 
resulting in exactly the same designated groups repetitively being 
promulgated routinely year after year. Accordingly, we proposed instead 
to disseminate this standard description of the administrative 
presumption's designated groups exclusively through the SNF PPS Web 
site, and to announce such designations in rulemaking only in the event 
that we are actually proposing to make changes in them.
    Along with this proposed revision, we also proposed to make 
appropriate conforming revisions in other portions of the regulations 
text (82 FR 21027). Specifically, we proposed to remove from the 
introductory text of Sec.  409.30, the parenthetical phrase ``(in the 
annual publication of Federal prospective payment rates described in 
Sec.  413.345 of this chapter)'' for the same reasons we proposed to 
remove the parenthetical phrase from Sec.  413.345, as discussed in the 
proposed rule and in this final rule above. In addition, we proposed to 
replace the phrase to ``one of the Resource Utilization Groups that is 
designated'' in Sec.  409.30's introductory text with the phrase ``one 
of the case-mix classifiers CMS designates'' to conform more closely 
with the statutory language in section 1888(e)(4)(G) and (H) of the 
Act, which refers in more general terms to the ``resident 
classification system'' or ``case mix classification system,'' and to 
clarify that ``CMS'' makes these designations. Additionally, we 
proposed to revise Sec.  409.30 to reflect more clearly our 
longstanding policy that the assignment of a designated case-mix 
classifier would serve to trigger the administrative presumption only 
when that assignment is itself correct. As we noted in the FY 2000 SNF 
PPS final rule (64 FR 41667, July 30, 1999), ``. . . 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.'' We also proposed to make similar conforming 
revisions in the ``resident classification system'' definition that 
currently appears in Sec.  413.333 to replace ``Resource Utilization 
Groups'' with ``resident classification system'', as well as in the 
material in Sec.  424.20(a)(1)(ii) on SNF level of care certifications 
to replace the phrase ``one of the Resource Utilization Groups 
designated'' with ``one of the case-mix classifiers that CMS 
designates,'' in both cases to conform more closely with the statutory 
language in section 1888(e)(4)(G) and (H) of the Act, as discussed in 
the proposed rule (82 FR 21027) and in this final rule, which refers in 
more general terms to the ``resident classification system'' or ``case 
mix classification system,'' and to clarify in Sec.  424.20(a)(1)(ii) 
that ``CMS'' designates these case-mix classifiers. Finally, regarding 
Sec.  424.20, we proposed to revise paragraph (e)(2)(ii)(B)(2) by 
updating its existing cross-reference to the provision at Sec.  
483.40(e) on delegating physician tasks in SNFs, which was recently 
redesignated as new Sec.  483.30(e) under the revised long-term care 
facility requirements for participation (81 FR 68861, October 4, 2016). 
Finally, we proposed to remove the word ``Optional'' from the title of 
42 CFR part 413 (82 FR 21098), as this is an obsolete reference to an 
optional prospective payment methodology for low-volume SNFs that 
predated the SNF PPS and is no longer in effect.
    Commenters submitted the following comments on our proposals 
described above related to the SNF Level of Care--Administrative 
Presumption aspects of the SNF PPS. A discussion of these comments, 
along with our responses, appears below.
    Comment: We received a comment about our proposed revisions to 
Sec. Sec.  413.333 and 413.345 that would result in removing the term 
``Resource Utilization Groups,'' and in Sec.  413.333, utilizing the 
term ``resident

[[Page 36545]]

classification system'' in its place. The commenter interpreted our use 
of the term ``resident classification system'' in this context as 
referring specifically to the Resident Classification System, Version I 
(RCS-I), the particular case-mix classification model that is currently 
under development as discussed in our advance notice of proposed 
rulemaking with comment (CMS-1686-ANPRM, 82 FR 20980, May 4, 2017). 
Based on that assumption, the commenter expressed the view that it 
would be premature and confusing to adopt terminology referencing a 
particular model that has not been finalized at this point.
    Response: We wish to clarify that our use of the term ``resident 
classification system'' in this context refers solely to a case-mix 
classification system in the generic sense, and not to the particular 
model discussed in the ANPRM, which we will continue to refer to as the 
Resident Classification System, Version I (or RCS-I). We note that the 
term ``resident classification system'' in the more generic sense has 
long been utilized as such in the existing regulations at Sec.  
413.333, and that our proposed changes were not intended to restrict 
the regulations text to any one particular type of classification 
system, but rather, to do the opposite by removing the existing, 
specific references to the RUG model. As we noted in the proposed rule 
(82 FR 21027), such revisions would actually serve to conform the 
regulations text ``. . . more closely with the statutory language in 
section 1888(e)(4)(G) and (H) of the Act, . . . which refers in more 
general terms to the `resident classification system' . . .'' (emphasis 
added). Accordingly, we are revising these portions of the regulations 
text as proposed, as discussed in this final rule.
    Comment: One commenter inquired about our proposed clarification in 
Sec.  409.30 which, similar to the existing regulations at Sec.  
424.20(a)(1)(ii), would specify that a resident qualifies for the level 
of care presumption only when ``correctly'' assigned to one of the 
case-mix classifiers designated for this purpose. In explaining the 
reason for this clarification in the proposed rule (82 FR 21027), we 
cited a prior discussion of the presumption in the FY 2000 final rule 
(64 FR 41667, July 30, 1999), which had noted that ``. . . 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.'' The commenter questioned whether, in 
this scenario, the resident's assignment to a RUG that turns out to be 
incorrect would result in disqualifying the resident from SNF coverage 
altogether. The commenter also requested clarification in the wording 
of a portion of Sec.  30.1 of the Medicare Benefit Policy Manual 
(MBPM), Chapter 8 that discusses how services furnished during the 
prior hospital stay are to be coded on the resident assessment.
    Response: Regarding the scenario discussed above (in which the 
services that triggered a given RUG assignment on the initial 
assessment are found to be not reasonable and necessary), if the 
resident is then reassigned to a different RUG that is itself 
designated as meeting the level of care presumption, the resident 
would, in fact, still qualify for the presumption on that basis, as the 
end result of the reassignment would be that the resident has been 
``correctly assigned'' to one of the designated RUGs on that 
assessment. Alternatively, if the reassignment is to one of the less 
intensive RUGs that is not designated as meeting the presumption, the 
resident would still receive an individual level of care determination 
using the existing administrative criteria. Finally, regarding the 
request to clarify the MBPM instructions on coding procedures, we 
believe this comment is beyond the scope of this rule. As we noted in 
the FY 2002 SNF PPS final rule, ``. . . specific operational 
instructions (such as those describing the details of particular 
billing procedures) are beyond the scope of the SNF PPS final rule'' 
(66 FR 39588, July 31, 2001). However, we will forward this comment to 
the appropriate component within CMS for consideration.
    After consideration of the comments received, for the reasons 
discussed above and in the FY 2018 SNF PPS proposed rule (82 FR 21026 
through 21027), we are finalizing, without modification, our proposed 
revisions to Sec. Sec.  409.30, 413.333, 413.345, 424.20(a)(1)(ii) and 
(e)(2)(ii)(B)(2), and our revision to the title of 42 CFR part 413 as 
discussed in this final rule. In addition, as we proposed, we will 
henceforth disseminate the standard description of the administrative 
presumption's designated groups exclusively through the SNF PPS Web 
site, and will announce such designations in rulemaking only in the 
event that we are actually proposing to make changes in them.
2. 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 (MAC) 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_04152015.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

[[Page 36546]]

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, the amendments enacted in 
section 103 of the BBRA do not 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 is consistent with 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 the FY 2018 SNF PPS proposed rule (82 FR 21028), we 
specifically invited 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 
stated that we may consider excluding a particular service if it meets 
our criteria for exclusion as specified above. We also requested that 
commenters 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, we stated in the proposed rule that, 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, 2017). 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.
    In the proposed rule, we noted that one category of services which 
consolidated billing excludes under Sec.  411.15(p)(3) consists of 
certain exceptionally intensive types of outpatient hospital services. 
As we explained in the FY 2000 SNF PPS final rule, this exclusion 
applies to ``. . . those types of outpatient hospital services that we 
specifically identify as being beyond the scope of SNF care plans 
generally'' (64 FR 41676, July 30, 1999, emphasis added). As discussed 
in the FY 2018 SNF PPS proposed rule (82 FR 21028), to further clarify 
this longstanding policy noted above that the outpatient hospital 
exclusion applies solely to those services that we specifically 
designate for this purpose, we proposed to revise Sec.  
411.15(p)(3)(iii) to state this more explicitly. In addition, we note 
that recent revisions in the long-term care facility requirements for 
participation (81 FR 68858, October 4, 2016) have moved the 
comprehensive care plan regulations from their previous location at 
Sec.  483.20(k) to a new, redesignated Sec.  483.21(b); accordingly, we 
proposed to make a conforming revision in the existing cross-reference 
to that provision that appears in Sec.  411.15(p)(3)(iii).
    We did not receive any public comments on our proposed revisions to 
Sec.  411.15(p)(3)(iii). Therefore, for the reasons discussed in this 
final rule and in the FY 2018 SNF PPS proposed rule, we are finalizing 
our revisions to Sec.  411.15(p)(3)(iii) as proposed, without 
modification.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the consolidated billing aspects of the SNF PPS. A 
discussion of these comments, along with our responses, appears below.
    Comment: One commenter suggested that, rather than specifying those 
particular items and services that are excluded from SNF consolidated 
billing, CMS should comprehensively identify the full range of items 
and services that are subject to this provision.
    Response: We note that the online listing by HCPCS code of those 
services that are excluded from consolidated billing (in the annual 
updates that are posted at https://www.cms.gov/Medicare/Billing/SNFConsolidatedBilling/index.html) follows the overall structure of the 
statutory provision itself. This statutory provision, in turn, 
specifies in section 1888(e)(2)(A)(ii) through (iv) of the Act those 
particular services that are excluded from it, so that any services not 
so specified would remain subject to the provision (this follows the 
similar structure that was originally established in the hospital 
bundling provision at section 1862(a)(14) of the Act, which served as 
the model for SNF consolidated billing). As discussed in the General 
Explanation of the Major Categories (available online at https://www.cms.gov/Medicare/Billing/SNFConsolidatedBilling/Downloads/2017-General-Explanation.pdf), one exception to this overall pattern 
involves the administrative carve-out from SNF consolidated billing 
under 42 CFR 411.15(p)(3)(iii) for ambulatory surgical services 
performed in the outpatient hospital setting (Major Category I.F):

    Inclusions, rather than exclusions, are given in this one case, 
because of the great number of surgery procedures that are excluded 
and can only be safely performed in a hospital operating room 
setting. It is easier to automate edits around the much shorter list 
of inclusions under this category, representing minor procedures 
that can be performed in the SNF itself (emphasis in the original).

    Comment: We received a number of comments regarding the statutory 
exclusion from consolidated billing for certain high-intensity 
chemotherapy drugs and the administrative exclusion for certain high-
intensity outpatient hospital services. One commenter in particular 
expressed continuing dissatisfaction with what it characterized as 
CMS's ``inadequate regulatory action'' in modifying the consolidated 
billing requirement to

[[Page 36547]]

reflect the introduction of expensive new drugs, and the expanded 
provision of outpatient services in nonhospital settings. The commenter 
cited as examples some previous comments that it had submitted during 
the FY 2004 rulemaking cycle, in which it had recommended the exclusion 
of certain additional chemotherapy drugs, and the expansion of the 
existing administrative exclusion for certain high-intensity outpatient 
hospital services to encompass freestanding (nonhospital) settings as 
well. Regarding the latter recommendation, the commenter indicated that 
to date, CMS has not revisited this ``site of service'' rule.
    Response: Regarding the commenter's previous recommendation during 
the FY 2004 rulemaking cycle for additional chemotherapy exclusions, 
our response in the FY 2004 final rule (68 FR 46060, August 4, 2003) 
explained that ``. . . most of the chemotherapy drugs . . . mentioned 
by commenters were considered for exclusion under the BBRA, but were 
not adopted by the Congress in the BBRA list of excluded items and 
services.'' As further explained in several subsequent rulemaking 
cycles (most recently, in the FY 2016 final rule (80 FR 46407, August 
4, 2015)),

. . . our position has always been that the BBRA's discretionary 
authority to exclude codes within certain designated service 
categories applies solely to codes that were created subsequent to 
the BBRA's enactment, and not to those codes that were already in 
existence as of July 1, 1999 (the date that the legislation itself 
uses as the reference point for identifying the codes that it 
designates for exclusion). As we explained in the FY 2010 final rule 
(74 FR 40354), this position reflects the assumption that if a 
particular code was already in existence as of that date but not 
designated for exclusion, this meant that it was intended to remain 
within the SNF PPS bundle, subject to the BBRA Conference Report's 
provision for a GAO review of the code set that was conducted the 
following year (H.R. Rep. 106-479 at 854 (1999) (Conf. Rep.)).

    Further, we note that we have indeed continued to solicit 
recommendations periodically for additional exclusions within those 
specified service categories (such as chemotherapy services) for which 
the law authorizes us to do so, and we have, in fact, adopted those 
recommendations to the extent that the recommended services meet the 
applicable criteria for exclusion.
    With regard to the administrative exclusion for high-intensity 
outpatient hospital services, we note that we not only addressed this 
issue in the FY 2004 final rule itself (68 FR 46061, August 4, 2003) 
but, as discussed below, we have revisited it repeatedly in subsequent 
rulemaking in response to the recurring public comments that we have 
received on the issue since that time. For example, the FY 2014 final 
rule (78 FR 47957 through 47958, August 6, 2013) cited the explanation 
in numerous previous rules (along with Medicare Learning Network (MLN) 
Matters article SE0432, available online at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE0432.pdf) that ``. . . the rationale for 
establishing this exclusion was to address those types of services that 
are so far beyond the normal scope of SNF care that they require the 
intensity of the hospital setting in order to be furnished safely and 
effectively'' (emphasis in the original), and also noted that when the 
Congress enacted the consolidated billing exclusion for certain RHC and 
FQHC services in section 410 of the MMA, the accompanying legislative 
history's description of present law directly acknowledged the 
hospital-specific nature of this exclusion. In addition, the FY 2012 
final rule (76 FR 48532, August 8, 2011) indicated that ever since its 
inception, this exclusion was intended to be hospital-specific: It 
cited the applicable discussion in the May 12, 1998 interim final rule 
(63 FR 26298), which explained that this exclusion was created within 
the context of the concurrent development of a new PPS specifically for 
outpatient hospital services, reflecting the need ``. . . to delineate 
the respective areas of responsibility for the SNF under the 
Consolidated Billing provision, and for the hospital under the 
outpatient bundling provision, with regard to these services.'' This 
point was further reinforced in the subsequent final rule for FY 2000 
(64 FR 41676, July 30, 1999), which noted that

. . . a key concern underlying the development of the consolidated 
billing exclusion of certain outpatient hospital services 
specifically involves the need to distinguish those services that 
comprise the SNF bundle from those that will become part of the 
outpatient hospital bundle that is currently being developed in 
connection with the outpatient hospital PPS. Accordingly, we are not 
extending the outpatient hospital exclusion from consolidated 
billing to encompass any other, freestanding settings.

    Finally, the FY 2010 final rule (74 FR 40355, August 11, 2009), 
while acknowledging that advances in medical technology over time may 
make it feasible to perform such high-intensity outpatient services 
more widely in nonhospital settings, then went on to cite the FY 2006 
final rule in noting that such a development ``. . . would not argue in 
favor of excluding the nonhospital performance of the service from 
consolidated billing, . . . but rather, would call into question 
whether the service should continue to be excluded from consolidated 
billing at all, even when performed in the hospital setting'' (70 FR 
45049, August 4, 2005).
    Comment: One commenter reiterated a recommendation made in previous 
rulemaking cycles to exclude the oral chemotherapy drug 
Revlimid[supreg] (lenalidomide).
    Response: We note that a discussion of our decision not to adopt 
the exclusion recommendations regarding this drug appears in the final 
rule for FY 2015 (79 FR 45641 through 45642, August 5, 2014), which was 
also referenced in the FY 2017 final rule (81 FR 51985, August 5, 2016) 
as well.
    Comment: Several commenters reiterated the same set of comments 
that they had submitted previously during last year's rulemaking cycle, 
which had noted the importance of continuing to exclude certain 
customized prosthetic devices from consolidated billing, and urged 
expanding that exclusion to encompass orthotics as well. These 
commenters had also recommended the following four HCPCS codes for 
exclusion: L5010--Partial foot, molded socket, ankle height, with toe 
filler; L5020--Partial foot, molded socket, tibial tubercle height, 
with toe filler; L5969--Addition, endoskeletal ankle-foot or ankle 
system, power assist, includes any type motor(s); and L5987--All lower 
extremity prosthesis, shank foot system with vertical loading pylon. 
One of the commenters now noted in addition that although our previous 
response in the FY 2017 final rule (81 FR 51986, August 5, 2016) had 
indicated that code L5969 ``. . . actually appears already on the 
exclusion list under Major Category III.D. (`Customized Prosthetic 
Devices'), where this particular L code has, in fact, been listed ever 
since its initial assignment in January 2014,'' the commenter has been 
unable to locate this code on the list of exclusions in the 2017 Annual 
Part B MAC Update.
    Response: We refer to the previous discussion in the FY 2017 final 
rule (81 FR 51986, August 5, 2016) regarding our decision not to adopt 
the recommendations for excluding orthotics and HCPCS codes L5010, 
L5020, and L5987. In addition, while that final rule was correct in 
noting that ever since its initial assignment, code L5969 has appeared 
as an exclusion under Major Category III.D. (``Customized Prosthetic 
Devices'') in the Annual Part A MAC Update, this

[[Page 36548]]

particular code was inadvertently omitted from the corresponding 
exclusion list in File 1 of the Annual Part B MAC Update. We appreciate 
being apprised of the omission, and will take the necessary steps to 
rectify this oversight.
    Comment: One commenter made reference to high-cost medications that 
are currently not excluded from consolidated billing, and requested 
guidance in this context regarding the applicable policy on residents 
being requested to supply their own medications to minimize the cost to 
the nursing home.
    Response: In terms of Medicare payment, with limited exceptions 
(such as certain specified, high-intensity chemotherapy drugs), 
medications that are required during the course of a Medicare-covered 
SNF stay are included within the SNF's bundled per diem payment for the 
covered stay itself, which the SNF is required under the terms of its 
provider agreement to accept as payment in full (see section 
1866(a)(1)(A)(i) of the Act and the implementing regulations at Sec.  
489.21(a)). Further, Sec.  489.20(s) requires the SNF to furnish these 
bundled services either directly with its own resources, or under an 
``arrangement'' in which the SNF itself accepts the professional and 
financial responsibility for the arranged-for services (see the 
discussion of arrangements that appears in Sec.  409.3 and in Sec.  
10.3 of the Medicare General Information, Eligibility, and Entitlement 
Manual, Chapter 5). Section 489.21(h) further indicates that even if an 
SNF fails to furnish directly or make arrangements for such a service, 
the beneficiary is not to bear the financial liability for the service.
3. 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, SNF-level 
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 final 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. We 
received no comments on this aspect of the proposed rule.

D. Other Issues

1. Revising and Rebasing the SNF Market Basket Index
    Section 1888(e)(5)(A) of the Act requires the Secretary to 
establish a market basket index that reflects the 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 in section III.B. of this rule, to update the SNF PPS per 
diem rates and to determine the labor-related share on an annual basis.
    The SNF market basket is a fixed-weight, Laspeyres-type price 
index. A Laspeyres price index measures the change in price, over time, 
of the same mix of goods and services purchased in the base period. Any 
changes in the quantity or mix of goods and services (that is, 
intensity) purchased over time relative to a base period are not 
measured.
    The index itself is constructed in three steps. First, a base 
period is selected (in the FY 2018 SNF PPS proposed rule (82 FR 21029), 
the proposed base period was 2014) and total base period expenditures 
are estimated for a set of mutually exclusive and exhaustive spending 
categories with the proportion of total costs that each category 
represents being calculated. These proportions are called cost or 
expenditure weights. Second, each expenditure category is matched to an 
appropriate price or wage variable, referred to as a price proxy. In 
nearly every instance, these price proxies are derived from publicly 
available statistical series that are published on a consistent 
schedule (preferably at least on a quarterly basis). Finally, the 
expenditure weight for each cost category is multiplied by the level of 
its respective price proxy. The sum of these products (that is, the 
expenditure weights multiplied by their price levels) for all cost 
categories yields the composite index level of the market basket in a 
given period. Repeating this step for other periods produces a series 
of market basket levels over time. Dividing an index level for a given 
period by an index level for an earlier period produces a rate of 
growth in the input price index over that timeframe.
    Effective for cost reporting periods beginning on or after July 1, 
1998, we revised and rebased our 1977 routine costs input price index 
and adopted a total expenses SNF input price index using FY 1992 as the 
base year. In the FY 2002 SNF PPS final rule (66 FR 39582), we rebased 
and revised the market basket to a base year of FY 1997. In the FY 2008 
SNF PPS final rule (72 FR 43425), we rebased and revised the market 
basket to a base year of FY 2004. In the FY 2014 SNF PPS final rule (78 
FR 47939), we last revised and rebased the SNF market basket, which 
included updating the base year from FY 2004 to FY 2010. For FY 2018, 
we proposed (82 FR 21029) to rebase the market basket to reflect 2014 
Medicare-allowable total cost data (routine, ancillary, and capital-
related) from freestanding SNFs and to revise applicable cost 
categories and price proxies used to determine the market basket. We 
proposed to maintain our policy of using data from freestanding SNFs, 
which represent 93 percent of the total SNFs shown in Table 26. We 
believe using freestanding MCR data, as opposed to the hospital-based 
SNF MCR data, for the proposed cost weight calculation is most 
appropriate because of the complexity of hospital-based data and the 
representativeness of the freestanding data. Hospital-based SNF 
expenses, are embedded in the hospital cost report. Any attempt to 
incorporate data from hospital-based facilities requires more complex 
calculations and assumptions regarding the ancillary costs related to 
the hospital-based SNF unit. We believe the use of freestanding SNF 
cost report

[[Page 36549]]

data is technically appropriate for reflecting the cost structures of 
SNFs serving Medicare beneficiaries.
    We proposed to use 2014 as the base year as we believe that the 
2014 Medicare cost reports represented the most recent, complete set of 
Medicare cost report (MCR) data available to develop cost weights for 
SNFs at the time of rulemaking. The 2014 Medicare cost reports are for 
cost reporting periods beginning on and after October 1, 2013 and 
before October 1, 2014. While these dates appear to reflect fiscal year 
data, we note that a Medicare cost report that begins in this timeframe 
is generally classified as a ``2014 cost report.'' For example, we 
found that of the available 2014 Medicare cost reports for SNFs, 
approximately 7 percent had an October 1, 2013 begin date, 
approximately 70 percent of the reports had a January 1, 2014 begin 
date, and approximately 12 percent had a July 1, 2014 begin date. For 
this reason, and for the reasons explained below, we proposed to define 
the base year of the market basket as ``2014-based'' instead of ``FY 
2014-based''.
    Specifically, we proposed to develop cost category weights for the 
2014-based SNF market basket in two stages. First, we proposed to 
derive eight major expenditures or cost weights from the 2014 MCR data 
(CMS Form 2540-10) for freestanding SNFs: Wages and Salaries; Employee 
Benefits; Contract Labor; Pharmaceuticals; Professional Liability 
Insurance; Home Office Contract Labor; Capital-related; and a residual 
``All Other''. With the exception of the Home Office Contract Labor 
cost weight, these are the same cost categories calculated using the 
2010 MCR data for the FY 2010-based SNF market basket. We provided a 
detailed discussion of our proposal to use the 2014 MCR data to 
determine the Home Office Contract Labor cost weight in section 
IV.A.1.a of the proposed rule and in section III.D.1.a of this final 
rule. The residual ``All Other'' category would reflect all remaining 
costs that are not captured in the other seven cost categories. Second, 
we proposed to divide the residual ``All Other'' cost category into 
subcategories using U.S. Department of Commerce Bureau of Economic 
Analysis' (BEA) 2007 Benchmark Input-Output (I-O) ``use table before 
redefinitions, purchaser's value'' for the Nursing and Community Care 
Facilities industry (NAICS 623A00) aged forward to 2014 using price 
changes. Furthermore, we proposed to continue to use the same overall 
methodology as was used for the FY 2010-based SNF market basket to 
develop the capital related cost weights of the 2014-based SNF market 
basket. We note that we are no longer referring to the market basket as 
a ``FY 2014-based'' market basket and instead refer to the market 
basket as simply ``2014-based.'' We proposed this change in naming 
convention for the market basket because the base year cost weight data 
for the proposed market basket do not reflect strictly fiscal year 
data. For example, the 2014-based SNF market basket uses Medicare cost 
report data and other government data that reflects fiscal year 2014, 
calendar year 2014, and state fiscal year 2014 expenses to determine 
the base year cost weights. Given that it is based on a mix of 
classifications of 2014 data, we proposed to refer to the market basket 
simply as ``2014-based'' as opposed to a ``FY 2014-based'' or ``CY 
2014-based''.
    We refer readers to the FY 2018 SNF PPS proposed rule (82 FR 21029 
through 21041) for a complete discussion of our proposals and 
associated rationale related to revising and rebasing the SNF market 
basket. We received a number of comments on the proposed revising and 
rebasing of the SNF market basket. A discussion of these comments, with 
our responses, appears throughout this section.
    Comment: Several commenters supported the rebasing and revising of 
the SNF market basket from base year 2010 to base year 2014, stating 
that the weights for calculating the market basket update should 
reflect the most up-to-date cost data available. Other commenters 
requested that we meet with certain health care association 
representatives before we move forward with the proposed rebasing of 
the SNF market basket for FY 2018.
    Response: We appreciate the commenters' support to rebase the 
market basket to 2014. We believe that it is reasonable and appropriate 
to rebase the market basket to 2014 as we believe this reflects the 
most complete and up-to-date cost data available. We note that we are 
available to meet with interested parties upon request to discuss their 
research and ideas for future rebasings.
    Comment: Several commenters requested that we align the rebasing 
schedule of the SNF market basket with the acute inpatient hospital 
market basket rebasing schedule. They claimed that updating the SNF 
market basket schedule will improve the accuracy of the SNF market 
basket updates, particularly since the SNF wage index is directly 
linked to the hospital wage index. One commenter requested we provide 
information on ways to work collaboratively with the industry to 
develop an alternative approach to the SNF market basket methodology 
and to more appropriately update weights using more current data on a 
rolling basis. The commenter requested an explanation of why a chained 
index, which updates cost weights on a continual basis is not employed 
instead of a fixed-weight index approach.
    Response: We appreciate the commenters' suggestion to align the 
rebasing schedule of the SNF market basket with the acute inpatient 
hospital market basket rebasing schedule. As discussed in the FY 2006 
IPPS final rule (70 FR 47407), in accordance with section 404 of Public 
Law 108-173, we established a rebasing frequency of every four years 
for the IPPS hospital market basket. We last rebased the SNF market 
basket four years ago, reflecting a FY 2010 base year, in the FY 2014 
SNF PPS final rule (78 FR 47939). We will continue to monitor the major 
cost share weights derived from the Medicare cost reports to evaluate 
whether a rebasing of the SNF market basket is necessary and may 
consider rebasing the SNF market basket consistent with the IPPS 
rebasing schedule.
    In regards to the use of a fixed-weight index approach, we have 
found that healthcare provider cost share weights do not change 
substantially on an annual basis and, therefore, the use of a Laspeyres 
index formula, with base year weights updated on a regular basis (such 
as every few years), is technically appropriate for the CMS market 
baskets. In a 2008 paper,\1\ the CMS Office of the Actuary (OACT) 
investigated the impact of using an alternative price index formula on 
the inpatient hospital market basket and concluded that market basket 
rebasings more frequent than every 5 years would not result in any 
significant changes in update factors. This study also found that the 
use of an alternative index formula, such as a Paasche, Fisher, or 
Tornqvist, would not lead to an appreciable change to the results.
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    \1\ https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/Downloads/alternativeindexweights.pdf.
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a. Development of Cost Categories and Weights
i. Use of Medicare Cost Report Data To Develop Major Cost Weights
    To create a market basket that is representative of freestanding 
SNF providers serving Medicare patients and to help ensure accurate 
major cost weights (which is the percent of total Medicare allowable 
costs, as defined below), we proposed to apply edits to remove 
reporting errors and outliers. Specifically, the SNF Medicare cost

[[Page 36550]]

reports used to calculate the market basket cost weights excluded any 
providers that reported costs less than or equal to zero for the 
following categories: Total facility costs; total operating costs; 
Medicare general inpatient routine service costs; and Medicare PPS 
payments. The final sample used included roughly 96 percent of those 
providers who submitted a Medicare cost report for 2014.
    Additionally, for each of the major cost weights, except the Home 
Office Contract Labor cost weight (Wages and Salaries, Employee 
Benefits, Contract Labor, Pharmaceuticals, Professional Liability 
Insurance, and Capital-related Expenses) the data were trimmed to 
remove outliers (a standard statistical process) by: (1) Requiring that 
major expenses (such as Wages and Salaries costs) and total Medicare-
allowable costs are greater than zero; and (2) excluding the top and 
bottom five percent of the major cost weight (for example, Wages and 
Salaries costs as a percent of total Medicare-allowable costs).
    We note that in the FY 2018 SNF PPS proposed rule, we mistakenly 
referenced that we used the same trimming methodology for the Home 
Office Contract Labor cost weight that we used for the other major cost 
weights (a top and bottom five percent trimming methodology).
    For the Home Office Contract Labor cost weight, we applied a one 
percent top-only trimming methodology. This allowed all providers' 
Medicare-allowable costs to be included, even if their home office 
contract labor costs were zero. We believe, as the Medicare cost report 
data (Worksheet S2 line 45) indicate, that not all SNF providers have a 
Home Office. Providers without a Home Office can incur these expenses 
directly by having their own staff, for which the costs would be 
included in the Wages and Salaries and Benefits cost weights. 
Alternatively, providers without a Home Office could also purchase 
related services from external contractors for which these expenses 
would be captured in the residual ``All-Other'' cost weight. We believe 
this one percent top-only trimming methodology is appropriate as it 
addresses outliers while allowing providers with zero Home Office 
Contract Labor costs to be included in the Home Office Contract Labor 
cost weight calculation. If we applied both top and bottom five percent 
trimming methodology we would exclude providers who have zero Home 
Office Contract Labor costs.
    The major cost weight trimming process is done for each cost weight 
individually and, therefore, providers excluded from one cost weight 
calculation are not automatically excluded from other cost weight 
calculations. These were the same types of edits utilized for the FY 
2010-based SNF market basket (with the exception of the Home Office 
Contract Labor cost weight which was not broken out using Medicare Cost 
Reports for the FY 2010 based SNF market basket), as well as other PPS 
market baskets (including but not limited to IPPS market basket and HHA 
market basket). We believe this trimming process improves the accuracy 
of the data used to compute the major cost weights by removing possible 
data misreporting.
    Finally, the final weights of the proposed 2014-based SNF market 
basket were based on weighted means. For example, the final Wages and 
Salaries cost weight after trimming is equal to the sum of total 
Medicare-allowable wages and salaries divided by the sum of total 
Medicare-allowable costs. This methodology is consistent with the 
methodology used to calculate the FY 2010-based SNF market basket cost 
weights and other PPS market basket cost weights.
    As stated above, the major cost weights of the 2014-based SNF 
market basket were derived from 2014 MCR data that is reported on CMS 
Form 2540-10, effective for freestanding SNFs with a cost reporting 
period beginning on or after December 1, 2010. The major cost weights 
for the FY 2010-based SNF market basket were derived from the 2010 MCR 
data that is reported on CMS Form 2540-96. CMS Form 2540-96 was 
effective for freestanding SNFs with cost reporting periods beginning 
on and after October 1, 1997. The OMB control number for both Form 
2549-10 and Form 2540-96 is 0938-0463.
    For all of the cost weights, we proposed to use Medicare allowable-
total costs as the denominator (that is, Wages and Salaries cost weight 
= Wages and Salaries costs divided by Medicare-allowable total costs). 
Medicare-allowable total costs were proposed to be equal to total costs 
(after overhead allocation) from Worksheet B part 1, column 18, for 
lines 30, 40 through 49, 51, 52, and 71 plus Medicaid drug costs as 
defined below. We also proposed to include estimated Medicaid drug 
costs in the pharmacy cost weight, as well as the denominator for total 
Medicare-allowable costs. This is the same methodology used for the FY 
2010-based SNF market basket and the FY 2004-based SNF market basket. 
The inclusion of Medicaid drug costs was finalized in the FY 2008 SNF 
PPS final rule (72 FR 43425 through 43430), and for the same reasons 
set forth in that final rule, we proposed to continue to use this 
methodology in the 2014-based SNF market basket.
    We proposed that for the 2014-based SNF market basket we obtain 
costs for one new major cost category from the Medicare cost reports 
that was not used in the FY 2010-based SNF market basket--Home Office 
Contract Labor Costs.
    We described the detailed methodology for obtaining costs for each 
of the eight major cost categories in section V.A.1.a. of the FY 2018 
SNF PPS proposed rule (82 FR 21030) and below in section III.D.1.a. of 
this rule. The methodology used is similar to the methodology used in 
the FY 2010-based SNF market basket, as described in the FY 2014 SNF 
PPS final rule (78 FR 47940 through 47942).
    (1) Wages and Salaries: To derive Wages and Salaries costs for the 
Medicare-allowable cost centers, we proposed first to calculate total 
unadjusted wages and salaries costs as reported on Worksheet S-3, part 
II, column 3, line 1. We then proposed to remove the wages and salaries 
attributable to non-Medicare-allowable cost centers (that is, excluded 
areas), as well as a portion of overhead wages and salaries 
attributable to these excluded areas. Excluded area wages and salaries 
were equal to wages and salaries as reported on Worksheet S-3, part II, 
column 3, lines 3, 4, and 7 through 11 plus nursing facility and non-
reimbursable salaries from Worksheet A, column 1, lines 31, 32, 50, and 
60 through 63.
    Overhead wages and salaries are attributable to the entire SNF 
facility; therefore, we proposed to include only the proportion 
attributable to the Medicare-allowable cost centers. We proposed to 
estimate the proportion of overhead wages and salaries that is 
attributable to the non-Medicare-allowable costs centers (that is, 
excluded areas) by multiplying the ratio of excluded area wages and 
salaries (as defined above) to total wages and salaries as reported on 
Worksheet S-3, part II, column 3, line 1 by total overhead wages and 
salaries as reported on Worksheet S3, Part III, column 3, line 14. We 
used a similar methodology to derive wages and salaries costs in the FY 
2010-based SNF market basket.
    (2) Employee Benefits: We proposed Medicare-allowable employee 
benefits to be equal to total benefits as reported on Worksheet S-3, 
part II, column 3, lines 17 through 19 minus non-Medicare-allowable 
(that is, excluded area) employee benefits and minus a portion of 
overhead benefits attributable

[[Page 36551]]

to these excluded areas. Non-Medicare-allowable employee benefits were 
derived by multiplying total excluded wages and salaries (as defined 
above in the `Wages and Salaries' section) times the ratio of total 
benefit costs as reported on Worksheet S-3, part II, column 3, lines 17 
through 19 to total wages and salary costs as reported on Worksheet S3, 
part II, column 3, line 1. Likewise, the portion of overhead benefits 
attributable to the excluded areas was derived by multiplying overhead 
wages and salaries attributable to the excluded areas (as defined in 
the `Wages and Salaries' section) times the ratio of total benefit 
costs to total wages and salary costs (as defined above). We used a 
similar methodology in the FY 2010-based SNF market basket.
    (3) Contract Labor: We proposed to derive Medicare-allowable 
contract labor costs from Worksheet S-3, part II, column 3, line 17. We 
note that in the FY 2018 SNF PPS proposed rule (82 FR 21030), we 
mistakenly referenced line 17. These costs are actually reported in 
Worksheet S-3, part II, column 3, line 14 as per the CMS Form 2540-10 
instructions (which reflects costs for contracted direct patient care 
services, that is, nursing, therapeutic, rehabilitative, or diagnostic 
services furnished under contract rather than by employees and 
management contract services). We note that the processing of the data 
was correct. We used Worksheet S-3, part II, column 3, line 14 in our 
analysis. Our written description in the proposed rule of the line we 
used was, however, incorrect.
    (4) Pharmaceuticals: We proposed to calculate pharmaceuticals costs 
using the non-salary costs from the Pharmacy cost center (Worksheet B, 
part I, column 0, line 11 less Worksheet A, column 1, line 11) and the 
Drugs Charged to Patients' cost center (Worksheet B, part I, column 0, 
line 49 less Worksheet A, column 1, line 49). Since these drug costs 
were attributable to the entire SNF and not limited to Medicare-
allowable services, we proposed to adjust the drug costs by the ratio 
of Medicare-allowable pharmacy total costs (Worksheet B, part I, column 
11, for lines 30, 40 through 49, 51, 52, and 71) to total pharmacy 
costs from Worksheet B, part I, column 11, line 11. Worksheet B, part I 
allocates the general service cost centers, which are often referred to 
as ``overhead costs'' (in which pharmacy costs are included) to the 
Medicare-allowable and non-Medicare-allowable cost centers. This 
adjustment was made for those providers who reported Pharmacy cost 
center expenses. Otherwise, we assumed the non-salary Drugs Charged to 
Patients costs were Medicare-allowable.
    Second, similar to the FY 2010-based SNF market basket, we proposed 
to continue to adjust the drug expenses reported on the MCR to include 
an estimate of total Medicaid drug costs, which are not represented in 
the Medicare-allowable drug cost weight. Similar to the FY 2010-based 
SNF market basket, we estimated Medicaid drug costs based on data 
representing dual-eligible Medicaid beneficiaries. Medicaid drug costs 
were estimated by multiplying Medicaid dual-eligible drug costs per day 
times the number of Medicaid days as reported in the Medicare-allowable 
skilled nursing cost center (Worksheet S3, part I, column 5, line 1) in 
the SNF MCR. Medicaid dual-eligible drug costs per day (where the day 
represents an unduplicated drug supply day) were estimated using a 
sample of 2014 Part D claims for those dual-eligible beneficiaries who 
had a Medicare SNF stay during the year. Medicaid dual-eligible 
beneficiaries would receive their drugs through the Medicare Part D 
benefit, which would work directly with the pharmacy and, therefore, 
these costs would not be represented in the Medicare SNF MCRs. A random 
twenty percent sample of Medicare Part D claims data yielded a Medicaid 
drug cost per day of $19.62. We note that the FY 2010-based SNF market 
basket also relied on data from the Part D claims, which yielded a 
dual-eligible Medicaid drug cost per day of $17.39 for 2010.
    Provided below are summaries of the comments we received related to 
the Pharmaceuticals cost category, as well as our responses.
    Comment: One commenter was concerned with the lower Pharmaceuticals 
cost weight in the 2014-based SNF market basket compared to the 2010-
based SNF market basket. They were unable to explain the decrease given 
their experience with annual pharmaceutical price increases and the 
introduction of new pharmaceuticals.
    Several commenters also had specific concerns regarding the 
methodology utilized to determine the Pharmaceuticals cost weight. The 
commenters stated that the vast majority of SNFs did not report costs 
on the cost report line for the ``Pharmacy'' department. They stated 
that only a small number of SNFs have in-house Pharmacies and that 
those SNFs were used as a proxy for the pharmaceutical costs for all 
SNFs; one commenter requested an alternative method.
    Several commenters were also concerned by the addition of estimated 
Part D medication costs to the ``Drugs Charged to Patients'' data 
reported on Row 49 of the cost report. The commenter questioned why 
this type of ``gross up'' was not, as far as they could tell, applied 
to any of the other ancillary cost centers.
    Response: The methodology used to determine the cost weights in the 
2014-based SNF market basket and 2010-based SNF market basket is the 
same. The change in the Pharmaceuticals cost weight in the 2014-based 
SNF market basket (7.3 percent) from the FY 2010-based SNF market 
basket (7.9 percent) is a function of the growth rate of pharmaceutical 
expenses relative to other components of the market basket over this 
time period. Our own internal analysis shows increasing drug costs from 
FY 2010 to FY 2014; however, during this time period, pharmaceutical 
costs increased at a slower rate than other components of the market 
basket--such as capital and contract labor expenses. This relative 
comparison resulted in a decrease in the Pharmaceuticals cost weight of 
0.6 percentage point between the FY 2010-based SNF market basket and 
2014-based SNF market basket (7.9 percent to 7.3 percent) while the 
capital cost weight increased 0.5 percentage point (7.4 percent to 7.9 
percent) and contract labor grew 1.3 percentage points (5.5 percent to 
6.8 percent). It is also important to consider that the increase in 
pharmaceutical costs over this period reflects changes in both the 
price of prescription drugs, proxied by the Producer Price Index for 
Prescription Drugs, as well the quantity and intensity of 
prescriptions. Our analysis of the data shows that the decrease in the 
Pharmaceuticals cost weight was consistent, in aggregate, across urban 
and rural status SNFs as well as across for-profit, government, and 
nonprofit ownership type SNFs.
    As stated above and in the FY 2018 SNF PPS proposed rule (82 FR 
21030 through 21031), we proposed to calculate pharmaceutical costs 
using the non-salary costs reported in the Pharmacy cost center 
(Worksheet B, part I, column 0, line 11 less Worksheet A, column 1, 
line 11) and the Drugs Charged to Patients' cost center (Worksheet B, 
part I, column 0, line 49 less Worksheet A, column 1, line 49), 
hereafter referred to as total MCR drug costs. Since these drug costs 
were attributable to the entire SNF and not limited to Medicare-
allowable services, we proposed to adjust the drug costs by the ratio 
of Medicare-allowable pharmacy total costs (Worksheet B, part I, column 
11, for lines 30, 40 through 49, 51, 52, and 71) to total pharmacy

[[Page 36552]]

costs (Worksheet B, part I, column 11, line 11).
    We understand the commenter's concern regarding the adjustment to 
the total MCR drug costs using the Pharmacy cost center as only 20 
percent of providers reported Pharmacy cost center expenses. We are 
clarifying that the adjustment was only applied to those 20 percent of 
providers who reported Pharmacy costs. We assumed that all of the drug 
costs were Medicare-allowable for the remaining 80 percent of 
providers. We added a clarifying sentence in the Pharmacy cost weight 
calculation of this final rule. Applying this adjustment had only a 
marginal impact on the drug cost weight (lowering it by only 0.1 
percentage point). As a sensitivity, we also derived an alternative by 
using the ratio of Skilled Nursing Facility days (as reported on 
Worksheet S3, part 1, column 7 line 1) to Total Facility days. This 
would result in a Pharmaceuticals cost weight of 7.1 percent compared 
to the 2014-based cost weight of 7.3 percent.
    As stated in the proposed rule (82 FR 21031), the 2014-based SNF 
market basket included an adjustment to the drug expenses reported on 
the MCR to include an estimate of total Medicaid drug costs, which are 
not represented in the Medicare-allowable drug cost weight. As stated 
above, the 2014-based SNF market basket reflects total Medicare 
allowable costs (that is, total costs for all payers for those services 
reimbursable under the SNF PPS). For the FY 2006-based SNF market 
basket (72 FR 43426), commenters noted that the total pharmaceutical 
costs reported on the MCR did not include pharmaceutical costs for 
dual-eligible Medicaid patients as these were directly reimbursed by 
Medicaid. Since all of the other cost category weights reflect Medicaid 
patients (including the compensation costs for dispersing these drugs), 
we made an adjustment to include these drug expenses. The 
pharmaceutical cost weight using only 2014 MCR data without any 
adjustments is 3.0 percent, compared to the proposed Pharmaceuticals 
cost weight (including the adjustment for Medicaid dual-eligible drug 
costs) of 7.3 percent.
    Comment: One commenter requested further explanation on how Part D 
drug costs were incorporated into the Pharmaceuticals cost weight. They 
questioned how the 20 percent sample was selected and the rationale for 
selecting this population to estimate non-SNF Medicaid drug costs. They 
questioned if there were analytics to support these decisions and also 
requested clarification for why the drug costs for patients with a SNF 
stay would be comparable to patients in a nursing facility that had not 
had a hospitalization during the year. They also questioned whether the 
Part D claims were matched to the SNF stay and if Part D claims for the 
SNF stay were excluded. They further questioned which cost variables in 
Part D claims were used, how the costs per day were calculated and the 
rationale for producing this estimate.
    Response: As stated previously in this section, the 2014-based SNF 
market basket reflects total Medicare allowable costs (that is, total 
costs for all payers for those services reimbursable under the SNF 
PPS). For the FY 2006-based SNF market basket (72 FR 43426), commenters 
noted that the total pharmaceutical costs reported on the MCR did not 
include pharmaceutical costs for dual-eligible Medicaid patients as 
these were directly reimbursed by Medicaid. Since all of the other cost 
category weights reflect Medicaid patients (including the compensation 
costs for dispensing these drugs), we made an adjustment to include 
these Medicaid drug expenses so the market basket cost weights would be 
calculated consistently.
    For the 2014-based SNF market basket, as stated in the FY 2018 SNF 
PPS proposed rule (82 FR 21031), we estimated Medicaid drug costs by 
multiplying Medicaid dual-eligible drug costs per day times the number 
of Medicaid days as reported in the Medicare-allowable skilled nursing 
facility cost center (Worksheet S3, part I, column 5, line 1) on the 
SNF MCR. The Medicaid dual-eligible drug costs per day (where the day 
represents an unduplicated drug supply day) were estimated using a 
random 20 percent sample of 2014 Part D claims for those dual-eligible 
beneficiaries who had a Medicare SNF stay during the year. We believe 
this sample is a reasonable proxy for total drug costs per day for 
Medicaid patients residing in a skilled nursing unit under a Medicaid 
stay. Our analysis of the Part D claims data shows that dual-eligible 
beneficiaries have higher drug costs per day than ``non-duals'' and 
that dual-eligible beneficiaries who have had a SNF Part A stay during 
the year have higher drug costs per day ($19.62) compared to those 
dual-eligible beneficiaries with no SNF Part A stay during the year 
($14.82).
    The total drug costs per unduplicated day represented all drug 
costs incurred during the 2014 calendar year for those dual-eligible 
beneficiaries with a SNF Medicare stay during that 2014 calendar year. 
Therefore, they include drug costs incurred during the Medicaid SNF 
stay occurring in the 2014 calendar year. The total drug costs from the 
Part D claims includes the drug ingredient cost, the dispensing fee, 
vaccine administration fee and sales tax. We used a 20 percent sample 
of Part D claims (approximately 287 million claims) where claims were 
randomly selected based on the beneficiary ID number.
    Comment: One commenter stated that they see an increase in the 
number of Veterans being served by SNFs. They further stated that 
Medicare patients, if they were admitted to a non-VA nursing home, 
would use their Medicare benefit. However, in a VA home, the commenter 
claimed that the patient would use their VA benefit which covers the 
drug costs--and not the nursing home. The commenter concluded that 
there would be many drug costs that are not represented on the cost 
report that traditionally would have been. The commenter requested 
clarification on how we will address this challenge.
    Response: We appreciate the commenter raising this concern. We 
believe the current methodology and resulting Pharmaceutical cost 
weight is reasonable, in part because VA costs would not have a 
significant impact on the market basket cost weights (according to the 
CMS National Health Expenditure Accounts, VA spending accounted for 
roughly 3 percent of total Nursing Care Facilities and Continuing Care 
Retirement Communities expenditures in 2014). However, in the future we 
plan to monitor this issue in more depth to ensure the market basket is 
adequately capturing the appropriate costs.
    (5) Professional Liability Insurance: We proposed to calculate the 
professional liability insurance costs from Worksheet S-2 of the MCRs 
as the sum of premiums; paid losses; and self-insurance (Worksheet S-2, 
column 1 through 3, line 41).
    Provided below are summaries of the comments we received related to 
the Professional Liability Insurance cost category, as well as our 
responses.
    Comment: One commenter stated that we should calculate a weight for 
professional liability insurance considering other data sources. As an 
example, the commenter provided a link to AHCA's Aon Professional 
Liability Study stating that the 2016 report documents a significant 
and continual increase in professional liability costs.
    Response: We thank the commenter for providing the link to this 
study. As stated in the FY 2018 SNF proposed rule (82 FR 21031), the 
professional liability insurance cost weight is derived using data from 
Worksheet S-2

[[Page 36553]]

of the Medicare Cost Reports. These data represent the sum of premiums, 
paid losses, and self-insurance (Worksheet S-2, column 1 through 3, 
line 41). We continue to believe that using these data submitted by 
SNFs on the Medicare cost report represent the best data source to 
derive the professional liability insurance cost weight. We will 
continue to evaluate other data sources, including the study provided 
by the commenter, to obtain additional information regarding 
professional liability insurance costs for SNFs.
    (6) Capital-Related: We proposed to derive the Medicare-allowable 
capital-related costs from Worksheet B, part II, column 18 for lines 
30, 40 through 49, 51, 52, and 71.
    (7) Home Office Contract Labor Costs: We proposed to calculate 
Medicare-allowable home office contract labor costs by multiplying 
total home office contract labor costs (as reported on Worksheet S3, 
part 2, column 3, line 16) times the ratio of Medicare-allowable 
operating costs (Medicare-allowable total costs less Medicare-allowable 
capital costs) to total operating costs (equal to Worksheet B, part I, 
column 18, line 100 less Worksheet B, part I, column 0, line 1 and 2).
    (8) All Other (residual): We proposed to calculate the ``All 
Other'' cost weight as a residual, calculated by subtracting the major 
cost weights (Wages and Salaries, Employee Benefits, Contract Labor, 
Pharmaceuticals, Professional Liability Insurance, Home Office Contract 
Labor, and Capital-Related) from 100.
    Provided below are summaries of the general comments we received 
related to the major cost category weights, as well as our responses.
    Comment: One commenter noted that the decrease in cost weights 
related to wages, benefits, contract labor, and pharmaceuticals from FY 
2010 to the proposed base year of 2014 did not reflect, in any way, 
their experience. For geographic locations that have a large proportion 
of staff whose wages and benefits are driven by collective bargaining 
agreements, such as the NY metropolitan area where providers have seen 
regular cost increases over the 4 years, the commenter claimed that the 
decrease in cost weight does not make sense.
    Response: The purpose of the SNF market basket is to measure the 
price inflation facing average SNFs serving Medicare beneficiaries at 
the national level. A change in the Wages and Salaries cost weight is a 
function of the growth rate of Wages and Salaries expenses relative to 
other components of the market basket, based on data directly supplied 
to CMS by SNFs. We would further note that differences in wage and 
wage-related costs among geographic regions are accounted for by the 
application of the wage index.
    Comment: One commenter requested we show the numerators and 
denominators for the calculation of each weight so that it is possible 
to comment on any bias that may be introduced by exclusions.
    Response: We disagree with the commenter's suggestion that we 
should provide the numerators and denominators for the calculation as 
we do not believe this would allow commenters to determine whether any 
bias may be introduced by exclusions. Rather, we believe that the 
detailed description of the data (specifically the Medicare cost report 
worksheet fields) and trimming methodologies allow the commenter to 
evaluate the bias. Specifically, commenters are able to evaluate the 
accuracy and reasonableness of the Medicare cost report worksheet 
fields. They are also able to replicate the results and then compare 
the trimmed cost share weight samples to the national average 
distribution of total costs. We reiterate that in deriving the proposed 
SNF cost weights, we used a similar trimming methodology for each of 
the major cost weights, with the exception of the Home Office Contract 
Labor cost weight as discussed earlier in this final rule (as we 
explained, for the Home Office Contract Labor cost weight, we used an 
alternative methodology). Our review of the trimmed samples for each of 
the major cost weights (Wages and Salaries, Employee Benefits, Contract 
Labor, Professional Liability, Home Office Contract Labor, 
Pharmaceuticals and Capital) resulted in a total cost distribution that 
was similar to the cost distribution of the untrimmed sample when 
compared by urban/rural status, ownership-type (for-profit, nonprofit, 
or government) and then by census region. We would further note that, 
as stated above, the trimming of the individual cost weights was done 
independently of each other, in an effort to produce the most 
representative data for each of the major cost weights. Finally, we 
would note that the 5 percent trim is the same methodology used to 
derive cost share weights (with the exception of the Home Office 
Contract Labor cost weight) for other CMS market baskets.
    Comment: One commenter questioned whether it is time to possibly 
make some revisions to Worksheet A of the Medicare SNF cost report. 
They provided suggested additional cost categories that they believe 
would help construct a more accurate market basket and to account for 
regional fluctuations (for example, utility costs, property insurance 
rates, etc).
    Response: The commenter's specific detailed recommendations for 
changes to the Medicare cost report are outside the scope of the FY 
2018 SNF PPS proposed rule. However, we appreciate and will consider 
the commenter's suggestion to capture additional information on the SNF 
Medicare cost report for possible future use in the SNF market basket.
    Comment: One commenter had several questions on the methodology 
used to develop the major cost weights of the 2014-based SNF market 
basket. The commenter specifically questioned our trimming methods and 
whether we excluded partial-year cost reports (that is, providers with 
cost report data of less than 12 months). They also stated there was no 
information provided regarding the treatment of missing data in the 
cost report fields and that zero and missing data do not have the same 
meaning. They further stated that missing data was high for certain 
weights with over 40 percent of cost reports having missing values for 
professional liability insurance, over 70 percent of cost reports 
having missing values in home office contract labor costs, and over 80 
percent having missing values in the Pharmacy cost center used to 
determine the Pharmaceuticals cost weight.
    Response: We appreciate the commenter's review of the methodology 
used to develop the 2014-based SNF market basket. We made no edits to 
remove providers with partial cost reporting periods and, therefore, 
they were included in the initial set of cost reports. In response to 
this comment, we examined the impact of excluding those providers that 
reported costs for a period of fewer than 270 days (representing about 
\3/4\ of the cost reporting year) and, similar to the commenter's 
finding, found that its impact on the major cost weights was minimal 
with less than 0.1 percentage point in absolute terms. Given its small 
impact, we do not believe it is necessary to revise the 2014-based SNF 
market basket to reflect the exclusion of reports with a partial cost 
reporting period; however, we will consider the merits of this edit for 
future rebasings.
    In regards to the commenter's request for information on the 
treatment of missing data in the cost report fields, CMS receives 
Medicare cost report data via the Electronic Cost Reporting file from 
the Medicare Administrative Contractor. These files do not have missing 
values for numeric fields; therefore, fields are zero or greater. The

[[Page 36554]]

public-use files provided on the CMS Web site, however, convert the 
zero values to missing or null.
    We recognize the commenter's concern of providers' reporting zero 
Professional Liability and Pharmaceutical costs. As stated, in the FY 
2018 SNF PPS proposed rule (82 FR 21030), for each of the major cost 
weights, except for Home Office Contract Labor as discussed above, 
(that is (Wages and Salaries, Employee Benefits, Contract Labor, 
Pharmaceuticals, Professional Liability Insurance, Home Office Contract 
Labor, and Capital-related Expenses) the data were trimmed to remove 
outliers (a standard statistical process) by first requiring that major 
expenses and total Medicare-allowable costs are greater than zero. For 
these major cost weights (Wages and Salaries, Employee Benefits, 
Contract Labor, Professional Liability, Capital and Pharmaceuticals), 
we believe that providers should incur these expenses to provide SNF 
services to beneficiaries. Therefore, cost reports with zero costs for 
major expenses (except Home Office Contract Labor costs) were excluded 
from the market basket cost weight calculation before trimming the top 
and bottom five percent. We note, as stated in the proposed rule, the 
trimming method is done for each cost weight individually and, 
therefore, providers excluded from one cost weight calculation are not 
automatically excluded from other cost weight calculations. This 
methodology allows us to use the largest possible sample of providers 
that report expenses for any given category.
    However, as discussed earlier, we do not believe, as the Medicare 
cost report data (Worksheet S2, line 45) indicates, that all SNF 
providers will have a Home Office and then will also ``purchase'' 
services from their home office. Rather, providers can incur these 
expenses directly by having their own staff, for which the costs would 
be included in the Wages and Salaries and Benefits cost weights, or be 
purchased from contractors that are not directly affiliated with SNF, 
for which these expenses would be captured in the residual ``All-
Other'' cost weight. Therefore, as discussed above, for the Home Office 
Contract Labor cost weight, we instead applied a one percent top 
trimming methodology but allowed all providers' Medicare-allowable 
costs to be included, even if their home office contract labor costs 
were zero.
    Also, we included all data for subcategories of the major cost 
weights, except Home Office Contract Labor costs, (such as excluded 
area salaries component of the Wages and Salaries costs) even if they 
are zero as we believe it is reasonable for some of these specific 
costs to not be applicable to some providers. We must rely on the data 
that are submitted by providers and always encourage providers to fill 
out the cost report forms using the most accurate and complete data 
available to them.
    Comment: One commenter made note of their inability to replicate 
all of the proposed cost weights using the methodology provided in the 
proposed rule. Specifically, the commenter was unable to replicate the 
Contract Labor cost weight and Home Office Contract Labor cost weight.
    Response: We appreciate the commenter's review of our methodology 
and their replication efforts. We note that in the FY 2018 SNF PPS 
proposed rule, we made an error in the description of which Medicare 
cost report line is used to determine the Medicare allowable contract 
labor costs. The proposed rule stated that Medicare allowable contract 
labor costs would be equal to Worksheet S-3, part II, column 3, line 
17, which reflects costs for contracted direct patient care services, 
that is, nursing, therapeutic, rehabilitative, or diagnostic services 
furnished under contract, rather than by employees and management 
contract services. These Medicare allowable contract labor costs are 
actually reported in Worksheet S-3, part II, column 3, line 14 as per 
the CMS Form 2540-10 instructions. We note that the processing of the 
data was correct, and we appropriately used Worksheet S-3, part II, 
column 3, line 14, but our written description of the line used was 
not. We apologize for any confusion and have corrected this 
typographical error in this final rule.
    As stated above, in the FY 2018 SNF PPS proposed rule, we 
mistakenly indicated that we used the same trimming methodology for the 
Home Office Contract Labor cost weight that we used for the other major 
cost weights (a top and bottom five percent trimming method). For the 
Home Office Contract Labor cost weight we applied a one percent top-
only trimming methodology. This trimming methodology allowed all 
providers' Medicare-allowable costs to be included, even if their home 
office contract labor costs were zero. We believe this one percent 
trimming methodology is appropriate for the Home Office Contract Labor 
cost weight as it addresses outliers while allowing providers with zero 
Home Office Contract Labor costs to be included in the Home Office 
Contract Labor cost weight calculation. Applying a five percent top and 
bottom trimming methodology would exclude providers who have zero Home 
Office Contract Labor costs.
    After consideration of the public comments we received, for the 
reasons discussed above and in the FY 2018 SNF PPS proposed rule, we 
are finalizing the major cost weights as proposed, without 
modification. Table 9 below shows the major cost categories and their 
respective cost weights as derived from the Medicare cost reports for 
this final rule.

Table 9--Major Cost Categories as Derived From the Medicare Cost Reports
------------------------------------------------------------------------
                                           Final  2014-
          Major cost categories                based      FY  2010-based
------------------------------------------------------------------------
Wages and Salaries......................            44.3            46.1
Employee Benefits.......................             9.3            10.5
Contract Labor..........................             6.8             5.5
Pharmaceuticals.........................             7.3             7.9
Professional Liability Insurance........             1.1             1.1
Home Office Contract Labor *............             0.7             n/a
Capital-related.........................             7.9             7.4
All other (residual)....................            22.6            21.5
------------------------------------------------------------------------
* Home office contract labor costs were included in the residual ``All
  Other'' cost weight of the FY 2010-based SNF market basket.


[[Page 36555]]

    The Wages and Salaries and Employee Benefits cost weights as 
calculated directly from the Medicare cost reports decreased by 1.8 and 
1.2 percentage points, respectively, while the Contract Labor cost 
weight increased 1.3 percentage points between the FY 2010-based SNF 
market basket and 2014-based SNF market basket. The decrease in the 
Wages and Salaries occurred among most cost centers and in aggregate 
for the General Service (overhead) and Inpatient Routine Service cost 
centers, which together account for about 80 percent of total facility 
costs.
    As we did for the FY 2010-based SNF market basket (78 FR 26452), we 
proposed to allocate contract labor costs to the Wages and Salaries and 
Employee Benefits cost weights based on their relative proportions 
under the assumption that contract labor costs are comprised of both 
wages and salaries and employee benefits. The contract labor allocation 
proportion for wages and salaries is equal to the Wages and Salaries 
cost weight as a percent of the sum of the Wages and Salaries cost 
weight and the Employee Benefits cost weight. Using the 2014 Medicare 
cost report data, this percentage is 83 percent; therefore, we proposed 
to allocate approximately 83 percent of the Contract Labor cost weight 
to the Wages and Salaries cost weight and 17 percent to the Employee 
Benefits cost weight. For the FY 2010-based SNF market basket, the 
wages and salaries to employee benefit ratio was 81/19 percent.
    We did not receive public comments on our proposed allocation of 
contract labor costs to Wages and Salaries and Employee Benefits. For 
the reasons discussed above and in the FY 2018 SNF PPS proposed rule, 
we are finalizing the allocation methodology and percentages as 
proposed, without modification. Table 10 below shows the Wages and 
Salaries and Employee Benefits cost weights after contract labor 
allocation for the FY 2010-based SNF market basket and the 2014-based 
SNF market basket.

  Table 10--Wages and Salaries and Employee Benefits Cost Weights After
                        Contract Labor Allocation
------------------------------------------------------------------------
                                            Final 2014-
          Major cost categories            based market    FY 2010-based
                                              basket       market basket
------------------------------------------------------------------------
Wages and Salaries......................            50.0            50.6
Employee Benefits.......................            10.5            11.5
------------------------------------------------------------------------

ii. Derivation of the Detailed Operating Cost Weights
    To further divide the ``All Other'' residual cost weight estimated 
from the 2014 Medicare cost report data into more detailed cost 
categories, we proposed to use the 2007 Benchmark I-O ``Use Tables/
Before Redefinitions/Purchaser Value'' for Nursing and Community Care 
Facilities industry (NAICS 623A00), published by the Census Bureau's 
Bureau of Economic Analysis (BEA). These data are publicly available at 
the following Web site: http://www.bea.gov/industry/io_annual.htm. The 
BEA Benchmark I-O data are generally scheduled for publication every 5 
years with the most recent data available for 2007. The 2007 Benchmark 
I-O data are derived from the 2007 Economic Census and are the building 
blocks for BEA's economic accounts. Therefore, they represent the most 
comprehensive and complete set of data on the economic processes or 
mechanisms by which output is produced and distributed.\2\ BEA also 
produces Annual I-O estimates. However, while based on a similar 
methodology, these estimates reflect less comprehensive and less 
detailed data sources and are subject to revision when benchmark data 
become available. Instead of using the less detailed Annual I-O data, 
we proposed to inflate the 2007 Benchmark I-O data aged forward to 2014 
by applying the annual price changes from the respective price proxies 
to the appropriate market basket cost categories that are obtained from 
the 2007 Benchmark I-O data. We repeated this practice for each year. 
We then calculated the cost shares that each cost category represents 
of the 2007 data inflated to 2014. These resulting 2014 cost shares 
were applied to the ``All Other'' residual cost weight to obtain the 
detailed cost weights for the proposed 2014-based SNF market basket. 
For example, the cost for Food: Direct Purchases represents 13.7 
percent of the sum of the ``All Other'' 2007 Benchmark I-O Expenditures 
inflated to 2014. Therefore, the Food: Direct Purchases cost weight 
represents 3.1 percent of the proposed 2014-based SNF market basket's 
``All Other'' cost category (0.137 x 22.6 percent = 3.1 percent). For 
the FY 2010-based SNF market basket (78 FR 26456), we used the same 
methodology utilizing the 2002 Benchmark I-O data (aged to FY 2010).
---------------------------------------------------------------------------

    \2\ http://www.bea.gov/papers/pdf/IOmanual_092906.pdf.
---------------------------------------------------------------------------

    Using this methodology, we proposed to derive 21 detailed SNF 
market basket operating cost category weights from the proposed 2014-
based SNF market basket ``All Other'' residual cost weight (22.6 
percent). These categories are: (1) Fuel: Oil and Gas; (2) Electricity; 
(3) Water and Sewerage; (4) Food: Direct Purchases; (5) Food: Contract 
Services; (6) Chemicals; (7) Medical Instruments and Supplies; (8) 
Rubber and Plastics; (9) Paper and Printing Products; (10) Apparel; 
(11) Machinery and Equipment; (12) Miscellaneous Products; (13) 
Professional Fees: Labor-Related; (14) Administrative and Facilities 
Support Services; (15) Installation, Maintenance, and Repair Services; 
(16) All Other: Labor-Related Services; (17) Professional Fees: 
Nonlabor-Related; (18) Financial Services; (19) Telephone Services; 
(20) Postage; and (21) All Other: Nonlabor-Related Services.
    We note that the machinery and equipment expenses are for equipment 
that is paid for in a given year and not depreciated over the asset's 
useful life. Depreciation expenses for movable equipment are reflected 
in the capital component of the proposed 2014-based SNF market basket 
(described in section V.A.1.c. of the proposed rule (82 FR 21032) and 
section III.D.1.c. of this final rule).
    We would also note that for ease of reference we proposed to rename 
the Nonmedical Professional Fees: Labor-Related and Nonmedical 
Professional Fees: Nonlabor-related cost categories (as labeled in the 
FY 2010-based SNF market basket) to be Professional Fees: Labor-Related 
and Professional Fees: Nonlabor-Related in the 2014-based SNF market 
basket. These cost categories still represent the same nonmedical 
professional fees that were included in the FY 2010-based SNF

[[Page 36556]]

market basket, which we describe in section V.A.4. of the proposed rule 
(82 FR 21039) and section III.D.1.d. of this final rule.
    For the 2014-based SNF market basket, we proposed to include a 
separate cost category for Installation, Maintenance, and Repair 
Services to proxy these costs by a price index that better reflects the 
price changes of labor associated with maintenance-related services. 
Previously these costs were included in the All Other: Labor-Related 
Services category of the FY 2010-based SNF market basket.
    Provided below are summaries of the comments we received regarding 
the derivation of the detailed operating cost weights, as well as our 
responses.
    Comment: Several commenters believe a SNF cost distribution study 
from 2007 is out-of-date and not likely to represent the distribution 
of cost in 2014 or going forward. For example, according to the 
commenter, operational changes driven by the Requirements of 
Participation will have substantial impacts. The commenter stated that 
the function of a market basket is to update SNF payment based on real 
changes in cost over time. The commenter claimed that the use of a 
static 2007 study is inconsistent with the fundamental intent of the 
market basket. The commenter requested information regarding how CMS 
could gather more current data on SNF costs.
    Response: To further divide the ``All Other'' residual cost weight 
of 22.6 percent into more detailed cost categories, we proposed to use 
the 2007 Benchmark I-O for Nursing and Community Care Facilities 
industry (NAICS 623A00). For each of the detailed expenses (such as 
food: Direct purchase), we inflate the 2007 expense to 2014 using the 
relevant price proxies. The resulting 2014 cost shares based on these 
inflated expenses were applied to the ``All Other'' residual cost 
weight to obtain the detailed cost weights for the 2014-based SNF 
market basket.
    Thus, our methodology does in fact reflect changes in expenses from 
2007 to 2014, but is based on the assumption that the change in 
quantities over this period is equal to the change in prices. We 
believe this is a reasonable assumption as it is consistent with 
historical data which shows the cost shares changing over time. We 
believe this is a better methodology for developing the market basket 
rather than keeping the shares fixed between 2007 and 2014 or proxying 
the ``All Other'' residual by an aggregate index such as the CPI All-
Items, which would not reflect the unique cost structures of SNFs.
    It is not until late 2018, when BEA is expected to release 2012 
Benchmark I-O data, that we will be able to determine whether the 
growth in quantities for these specific costs grew similarly to prices 
over this period, as we currently assume in the market basket. We will 
evaluate these data and consider its inclusion for the development of 
the SNF market basket in the future.
    After consideration of the public comments we received, for the 
reasons discussed above and in the FY 2018 SNF PPS proposed rule, we 
are finalizing the detailed operating cost weights and methodology for 
deriving such weights as proposed, without modification.
iii. Derivation of the Detailed Capital Cost Weights
    Similar to the FY 2010-based SNF market basket, we proposed to 
further divide the Capital-related cost weight into: Depreciation, 
Interest, Lease and Other Capital-related cost weights.
    We proposed to calculate the depreciation cost weight (that is, 
depreciation costs excluding leasing costs) using depreciation costs 
from Worksheet S-2, column 1, lines 20 and 21. Since the depreciation 
costs reflect the entire SNF facility (Medicare and non-Medicare-
allowable units), we proposed to use total facility capital costs as 
the denominator. This methodology assumes that the depreciation of an 
asset is the same regardless of whether the asset was used for Medicare 
or non-Medicare patients. This methodology yielded depreciation as a 
percent of capital costs of 27.3 percent for 2014. We then applied this 
percentage to the proposed 2014-based SNF market basket Medicare-
allowable Capital-related cost weight of 7.9 percent, yielding a 
Medicare-allowable depreciation cost weight (excluding leasing 
expenses, which is described in more detail below) of 2.2 percent. To 
further disaggregate the Medicare-allowable depreciation cost weight 
into fixed and moveable depreciation, we proposed to use the 2014 SNF 
MCR data for end-of-the-year capital asset balances as reported on 
Worksheet A7. The 2014 SNF MCR data showed a fixed/moveable split of 
83/17. The FY 2010-based SNF market basket, which utilized the same 
data from the FY 2010 MCRs, had a fixed/moveable split of 85/15.
    We also proposed to derive the interest expense share of capital-
related expenses from 2014 SNF MCR data, specifically from Worksheet A, 
column 2, line 81. Similar to the depreciation cost weight, we proposed 
to calculate the interest cost weight using total facility capital 
costs. This methodology yielded interest as a percent of capital costs 
of 27.4 percent for 2014. We then applied this percentage to the 
proposed 2014-based SNF market basket Medicare-allowable Capital-
related cost weight of 7.9 percent, yielding a Medicare-allowable 
interest cost weight (excluding leasing expenses) of 2.2 percent. As 
done with the last SNF market basket rebasing (78 FR 26454), we 
proposed to determine the split of interest expense between for-profit 
and not-for-profit facilities based on the distribution of long-term 
debt outstanding by type of SNF (for-profit or not-for-profit/
government) from the 2014 SNF MCR data. We estimated the split between 
for-profit and not-for-profit interest expense to be 27/73 percent 
compared to the FY 2010-based SNF market basket with 41/59 percent.
    Because the detailed data were not available in the MCRs, we 
proposed to use the most recent 2014 Census Bureau Service Annual 
Survey (SAS) data to derive the capital-related expenses attributable 
to leasing and other capital-related expenses. The FY 2010-based SNF 
market basket used the 2010 SAS data. Based on the 2014 SAS data, we 
determined that leasing expenses are 63 percent of total leasing and 
capital-related expenses costs. In the FY 2010-based SNF market basket, 
leasing costs represent 62 percent of total leasing and capital-related 
expenses costs. We then applied this percentage to the proposed 2014-
based SNF market basket residual Medicare-allowable capital costs of 
3.6 percent derived from subtracting the Medicare-allowable 
depreciation cost weight and Medicare-allowable interest cost weight 
from the 2014-based SNF market basket of total Medicare-allowable 
capital cost weight (7.9 percent - 2.2 percent - 2.2 percent = 3.6 
percent). This produced the proposed 2014-based SNF Medicare-allowable 
leasing cost weight of 2.3 percent and all-other capital-related cost 
weight of 1.3 percent.
    Lease expenses are not broken out as a separate cost category in 
the SNF market basket, but are distributed among the cost categories of 
depreciation, interest, and other capital-related expenses, reflecting 
the assumption that the underlying cost structure and price movement of 
leasing expenses is similar to capital costs in general. As was done 
with past SNF market baskets and other PPS market baskets, we assumed 
10 percent of lease expenses are overhead and proposed to assign them 
to the other capital-related expenses cost category. This is based on 
the assumption that leasing expenses

[[Page 36557]]

include not only depreciation, interest, and other capital-related 
costs but also additional costs paid to the lessor. We distributed the 
remaining lease expenses to the three cost categories based on the 
proportion of depreciation, interest, and other capital-related 
expenses to total capital costs, excluding lease expenses.
    We did not receive any public comments on our proposed methodology 
for deriving the detailed capital cost weights. Therefore, for the 
reasons discussed above and in the FY 2018 SNF PPS proposed rule, we 
are finalizing the detailed capital cost weights and methodology as 
proposed, without modification.
    Table 11 shows the capital-related expense distribution (including 
expenses from leases) in the final 2014-based SNF market basket and the 
FY 2010-based SNF market basket.

 Table 11--Comparison of the Capital-Related Expense Distribution of the
  2014-Based SNF Market Basket and the FY 2010-Based SNF Market Basket
------------------------------------------------------------------------
                                            Final 2014-    FY 2010-based
              Cost category                  based SNF      SNF market
                                           market basket      basket
------------------------------------------------------------------------
Capital-related Expenses................             7.9             7.4
    Total Depreciation..................             2.9             3.2
    Total Interest......................             3.0             2.1
    Other Capital-related Expenses......             2.0             2.1
------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For
  presentational purposes, we are displaying one decimal and therefore,
  the detail capital cost weights may not add to the total capital-
  related expenses cost weight due to rounding.

    Table 12 presents the final 2014-based SNF market basket and the FY 
2010-based SNF market basket.

   Table 12--2014-Based SNF Market Basket and FY 2010-Based SNF Market
                                 Basket
------------------------------------------------------------------------
                                            Final 2014-    FY 2010-based
              Cost category                  based SNF      SNF market
                                           market basket      basket
------------------------------------------------------------------------
Total...................................           100.0           100.0
Compensation............................            60.4            62.1
    Wages and Salaries \1\..............            50.0            50.6
    Employee Benefits \1\...............            10.5            11.5
Utilities...............................             2.6             2.2
    Electricity.........................             1.2             1.4
    Fuel: Oil and Gas...................             1.3             0.7
    Water and Sewerage..................             0.2             0.1
Professional Liability Insurance........             1.1             1.1
All Other...............................            27.9            27.2
  Other Products........................            14.3            16.1
    Pharmaceuticals.....................             7.3             7.9
    Food: Direct Purchase...............             3.1             3.7
    Food: Contract Purchase.............             0.7             1.2
    Chemicals...........................             0.2             0.2
    Medical Instruments and Supplies....             0.6             0.8
    Rubber and Plastics.................             0.8             1.0
    Paper and Printing Products.........             0.8             0.8
    Apparel.............................             0.3             0.2
    Machinery and Equipment.............             0.3             0.2
    Miscellaneous Products..............             0.3             0.3
All Other Services......................            13.6            11.0
  Labor-Related Services................             7.4             6.2
    Professional Fees: Labor-related....             3.8             3.4
    Installation, Maintenance, and                   0.6             n/a
     Repair Services....................
    Administrative and Facilities                    0.5             0.5
     Support............................
    All Other: Labor-Related Services...             2.5             2.3
  Non Labor-Related Services............             6.2             4.8
    Professional Fees: Nonlabor-Related.             1.8             2.0
    Financial Services..................             2.0             0.9
    Telephone Services..................             0.5             0.6
    Postage.............................             0.2             0.2
    All Other: Nonlabor-Related Services             1.8             1.1
Capital-Related Expenses................             7.9             7.4
  Total Depreciation....................             2.9             3.2
    Building and Fixed Equipment........             2.5             2.7
    Movable Equipment...................             0.4             0.5
  Total Interest........................             3.0             2.1
    For-Profit SNFs.....................             0.8             0.9

[[Page 36558]]

 
    Government and Nonprofit SNFs.......             2.1             1.2
  Other Capital-Related Expenses........             2.0             2.1
------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For
  presentational purposes, we are displaying one decimal and therefore,
  the detailed cost weights may not add to the aggregate cost weights or
  to 100.0 due to rounding.
\1\ Contract labor is distributed to wages and salaries and employee
  benefits based on the share of total compensation that each category
  represents.

b. Price Proxies Used To Measure Operating Cost Category Growth
    After developing the 30 cost weights for the 2014-based SNF market 
basket, we selected the most appropriate wage and price proxies 
currently available to represent the rate of change for each 
expenditure category. With four exceptions (three for the capital-
related expenses cost categories and one for Professional Liability 
Insurance (PLI)), we base the wage and price proxies on Bureau of Labor 
Statistics (BLS) data, and group them into one of the following BLS 
categories:
     Employment Cost Indexes: Employment Cost Indexes (ECIs) 
measure the rate of change in employment wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. ECIs are superior to Average Hourly Earnings (AHE) 
as price proxies for input price indexes because they are not affected 
by shifts in occupation or industry mix, and because they measure pure 
price change and are available by both occupational group and by 
industry. The industry ECIs are based on the 2004 North American 
Classification System (NAICS).
     Producer Price Indexes: Producer Price Indexes (PPIs) 
measure price changes for goods sold in other than retail markets. PPIs 
are used when the purchases of goods or services are made at the 
wholesale level.
     Consumer Price Indexes: Consumer Price Indexes (CPIs) 
measure change in the prices of final goods and services bought by 
consumers. CPIs are only used when the purchases are similar to those 
of retail consumers rather than purchases at the wholesale level, or if 
no appropriate PPI were available.
    We evaluated the price proxies using the criteria of reliability, 
timeliness, availability, and relevance. Reliability indicates that the 
index is based on valid statistical methods and has low sampling 
variability. Widely accepted statistical methods ensure that the data 
were collected and aggregated in a way that can be replicated. Low 
sampling variability is desirable because it indicates that the sample 
reflects the typical members of the population. (Sampling variability 
is variation that occurs by chance because only a sample was surveyed 
rather than the entire population.) Timeliness implies that the proxy 
is published regularly, preferably at least once a quarter. The market 
baskets are updated quarterly, and therefore, it is important for the 
underlying price proxies to be up-to-date, reflecting the most recent 
data available. We believe that using proxies that are published 
regularly (at least quarterly, whenever possible) helps to ensure that 
we are using the most recent data available to update the market 
basket. We strive to use publications that are disseminated frequently, 
because we believe that this is an optimal way to stay abreast of the 
most current data available. Availability means that the proxy is 
publicly available. We prefer that our proxies are publicly available 
because this will help ensure that our market basket updates are as 
transparent to the public as possible. In addition, this enables the 
public to be able to obtain the price proxy data on a regular basis. 
Finally, relevance means that the proxy is applicable and 
representative of the cost category weight to which it is applied. The 
CPIs, PPIs, and ECIs that we have selected to propose in this 
regulation meet these criteria. Therefore, we believe that they 
continue to be the best measure of price changes for the cost 
categories to which they would be applied.
    Table 15 in the proposed rule (82 FR 21039) lists all price proxies 
for the 2014-based SNF market basket. Below is a detailed explanation 
of the proposed price proxies used for each operating cost category.
     Wages and Salaries: We proposed to use the ECI for Wages 
and Salaries for Private Industry Workers in Nursing Care Facilities 
(NAICS 6231; BLS series code CIU2026231000000I) to measure price growth 
of this category. NAICS 623 includes facilities that provide a mix of 
health and social services, with many of the health services being 
largely some level of nursing services. Within NAICS 623 is NAICS 6231, 
which includes nursing care facilities primarily engaged in providing 
inpatient nursing and rehabilitative services. These facilities, which 
are most comparable to Medicare-certified SNFs, provide skilled nursing 
and continuous personal care services for an extended period of time, 
and, therefore, have a permanent core staff of registered or licensed 
practical nurses. This is the same index used in the FY 2010-based SNF 
market basket.
     Employee Benefits: We proposed to use the ECI for Benefits 
for Nursing Care Facilities (NAICS 6231) to measure price growth of 
this category. The ECI for Benefits for Nursing Care Facilities is 
calculated using BLS's total compensation (BLS series ID 
CIU2016231000000I) for nursing care facilities series and the relative 
importance of wages and salaries within total compensation. We believe 
this constructed ECI series is technically appropriate for the reason 
stated above in the Wages and Salaries price proxy section. This is the 
same index used in the FY 2010-based SNF market basket.
     Electricity: We proposed to use the PPI Commodity for 
Commercial Electric Power (BLS series code WPU0542) to measure the 
price growth of this cost category. This is the same index used in the 
FY 2010-based SNF market basket.
     Fuel: Oil and Gas: We proposed to change the proxy used 
for the Fuel: Oil and Gas cost category. The FY 2010-based SNF market 
basket uses the PPI Commodity for Commercial Natural Gas (BLS series 
code WPU0552) to proxy these expenses. For the 2014-based SNF market 
basket, we proposed to use a blend of the PPI Industry for Petroleum 
Refineries (BLS series code PCU32411-32411) and the PPI Commodity for 
Natural Gas (BLS series code WPU0531). Our analysis of the Bureau of 
Economic Analysis' 2007 Benchmark I-O data for Nursing and Community 
Care Facilities shows that petroleum refineries expenses accounts for

[[Page 36559]]

approximately 65 percent and natural gas accounts for approximately 35 
percent of the fuel: Oil and gas expenses. Therefore, we proposed a 
blended proxy of 65 percent of the PPI Industry for Petroleum 
Refineries (BLS series code PCU32411-32411) and 35 percent of the PPI 
Commodity for Natural Gas (BLS series code WPU0531). We believe that 
these two price proxies are the most technically appropriate indices 
available to measure the price growth of the Fuel: Oil and Gas category 
in the 2014-based SNF market basket.
     Water and Sewerage: We proposed to use the CPI All Urban 
for Water and Sewerage Maintenance (BLS series code CUUR0000SEHG01) to 
measure the price growth of this cost category. This is the same index 
used in the FY 2010-based SNF market basket.
     Professional Liability Insurance: We proposed to use the 
CMS Hospital Professional Liability Insurance Index to measure price 
growth of this category. We were unable to find a reliable data source 
that collects SNF-specific PLI data. Therefore, we proposed to use the 
CMS Hospital Professional Liability Index, which tracks price changes 
for commercial insurance premiums for a fixed level of coverage, 
holding non-price factors constant (such as a change in the level of 
coverage). This is the same index used in the FY 2010-based SNF market 
basket. We believe this is an appropriate proxy to measure the price 
growth associated of SNF professional liability insurance as it 
captures the price inflation associated with other medical institutions 
that serve Medicare patients.
     Pharmaceuticals: We proposed to use the PPI Commodity for 
Pharmaceuticals for Human Use, Prescription (BLS series code 
WPUSI07003) to measure the price growth of this cost category. This is 
the same index used in the FY 2010-based SNF market basket.
     Food: Wholesale Purchases: We proposed to use the PPI 
Commodity for Processed Foods and Feeds (BLS series code WPU02) to 
measure the price growth of this cost category. This is the same index 
used in the FY 2010-based SNF market basket.
     Food: Retail Purchase: We proposed to use the CPI All 
Urban for Food Away From Home (All Urban Consumers) (BLS series code 
CUUR0000SEFV) to measure the price growth of this cost category. This 
is the same index used in the FY 2010-based SNF market basket.
     Chemicals: For measuring price change in the Chemicals 
cost category, we proposed to use a blended PPI composed of the 
Industry PPIs for Other Basic Organic Chemical Manufacturing (NAICS 
325190) (BLS series code PCU32519-32519), Soap and Cleaning Compound 
Manufacturing (NAICS 325610) (BLS series code PCU32561-32561), and 
Other Miscellaneous Chemical Product Manufacturing (NAICS 3259A0) (BLS 
series code PCU325998325998).
    Using the 2007 Benchmark I-O data, we found that these three NAICS 
industries accounted for approximately 96 percent of SNF chemical 
expenses. The remaining four percent of SNF chemical expenses are for 
three other incidental NAICS chemicals industries such as Paint and 
Coating Manufacturing. We proposed to create a blended index based on 
those three NAICS chemical expenses listed above that account for 96 
percent of SNF chemical expenses. We proposed to create this blend 
based on each NAICS' expenses as a share of their sum. These expenses 
as a share of their sum are listed in Table 34.
    The FY 2010-based SNF market basket also used a blended chemical 
proxy that was based on 2002 Benchmark I-O data. We believe our 
proposed chemical blended index for the 2014-based SNF market basket is 
technically appropriate as it reflects more recent data on SNFs 
purchasing patterns. Table 13 in the proposed rule (82 FR 21035) 
provided the weights for the 2014-based blended chemical index and the 
FY 2010-based blended chemical index. The table is also shown below.

                                Table 13--Proposed Chemical Blended Index Weights
----------------------------------------------------------------------------------------------------------------
                                                                                    2014-based      2010-based
                   NAICS                             Industry description            index (%)       index (%)
----------------------------------------------------------------------------------------------------------------
325190.....................................  Other basic organic chemical                     22               7
                                              manufacturing.
25510......................................  Paint and coating manufacturing....             n/a              12
325610.....................................  Soap and cleaning compound                       37              49
                                              manufacturing.
3259A0.....................................  Other miscellaneous chemical                     41              32
                                              product manufacturing.
                                                                                 -------------------------------
    Total..................................  ...................................             100             100
----------------------------------------------------------------------------------------------------------------

    As discussed below, we are finalizing the weights for the 2014-
based blended chemical index as proposed, without modification.
     Medical Instruments and Supplies: We proposed to use a 
blend for the Medical Instruments and Supplies cost category. The 2007 
Benchmark I-O data shows an approximate 60/40 split between `Medical 
and Surgical Appliances and Supplies' and `Surgical and Medical 
Instruments'. Therefore, we proposed a blend composed of 60 percent of 
the PPI Commodity for Medical and Surgical Appliances and Supplies (BLS 
series code WPU1563) and 40 percent of the PPI Commodity for Surgical 
and Medical Instruments (BLS series code WPU1562).
    The FY 2010-based SNF market basket used the single, higher level 
PPI Commodity for Medical, Surgical, and Personal Aid Devices (BLS 
series code WPU156). We believe that the proposed price proxy better 
reflects the mix of expenses for this cost category as obtained from 
the 2007 Benchmark I-O data.
     Rubber and Plastics: We proposed to use the PPI Commodity 
for Rubber and Plastic Products (BLS series code WPU07) to measure 
price growth of this cost category. This is the same index used in the 
FY 2010-based SNF market basket.
     Paper and Printing Products: We proposed to use the PPI 
Commodity for Converted Paper and Paperboard Products (BLS series code 
WPU0915) to measure the price growth of this cost category. This is the 
same index used in the FY 2010-based SNF market basket.
     Apparel: We proposed to use the PPI Commodity for Apparel 
(BLS series code WPU0381) to measure the price growth of this cost 
category. This is the same index used in the FY 2010-based SNF market 
basket.
     Machinery and Equipment: We proposed to use the PPI 
Commodity for Machinery and Equipment (BLS series code WPU11) to 
measure the price growth of this cost category. This is the

[[Page 36560]]

same index used in the FY 2010-based SNF market basket.
     Miscellaneous Products: For measuring price change in the 
Miscellaneous Products cost category, we proposed to use the PPI 
Commodity for Finished Goods less Food and Energy (BLS series code 
WPUFD4131). Both food and energy are already adequately represented in 
separate cost categories and should not also be reflected in this cost 
category. This is the same index used in the FY 2010-based SNF market 
basket.
     Professional Fees: Labor-Related: We proposed to use the 
ECI for Total Compensation for Private Industry Workers in Professional 
and Related (BLS series code CIU2010000120000I) to measure the price 
growth of this category. This is the same index used in the FY 2010-
based SNF market basket (which was called the Nonmedical Professional 
Fees: Labor-Related cost category).
     Administrative and Facilities Support Services: We 
proposed to use the ECI for Total Compensation for Private Industry 
Workers in Office and Administrative Support (BLS series code 
CIU2010000220000I) to measure the price growth of this category. This 
is the same index used in the FY 2010-based SNF market basket.
     Installation, Maintenance and Repair Services: We proposed 
to include a separate cost category for Installation, Maintenance, and 
Repair Services to proxy these costs by a price index that better 
reflects the price changes of labor associated with maintenance-related 
services. We proposed to use the ECI for Total Compensation for All 
Civilian Workers in Installation, Maintenance, and Repair (BLS series 
code CIU1010000430000I) to measure the price growth of this new cost 
category. Previously these costs were included in the All Other: Labor-
Related Services category and were proxied by the ECI for Total 
Compensation for Private Industry Workers in Service Occupations (BLS 
series code CIU2010000300000I).
     All Other: Labor-Related Services: We proposed to use the 
ECI for Total Compensation for Private Industry Workers in Service 
Occupations (BLS series code CIU2010000300000I) to measure the price 
growth of this cost category. This is the same index used in the FY 
2010-based SNF market basket.
     Professional Fees: NonLabor-Related: We proposed 
to use the ECI for Total Compensation for Private Industry Workers in 
Professional and Related (BLS series code CIU2010000120000I) to measure 
the price growth of this category. This is the same index used in the 
FY 2010-based SNF market basket (which was called the Nonmedical 
Professional Fees: Nonlabor-Related cost category).
     Financial Services: We proposed to use the ECI 
for Total Compensation for Private Industry Workers in Financial 
Activities (BLS series code CIU201520A000000I) to measure the price 
growth of this cost category. This is the same index used in the FY 
2010-based SNF market basket.
     Telephone Services: We proposed to use the CPI 
All Urban for Telephone Services (BLS series code CUUR0000SEED) to 
measure the price growth of this cost category. This is the same index 
used in the FY 2010-based SNF market basket.
     Postage: We proposed to use the CPI All Urban for Postage 
(BLS series code CUUR0000SEEC) to measure the price growth of this cost 
category. This is the same index used in the FY 2010-based SNF market 
basket.
     All Other: NonLabor-Related Services: We proposed to use 
the CPI All Urban for All Items Less Food and Energy (BLS series code 
CUUR0000SA0L1E) to measure the price growth of this cost category. This 
is the same index used in the FY 2010-based SNF market basket.
    We did not receive any public comments on our proposed price 
proxies for each of the operating cost categories. For the reasons 
discussed above and in the FY 2018 SNF PPS proposed rule, we are 
finalizing the price proxies of the operating cost categories as 
proposed, without modification. In addition, we did not receive any 
public comments on our proposed weights for the 2014-based blended 
chemical index. Thus, for the reasons discussed above and in the FY 
2018 SNF PPS proposed rule, we are finalizing the weights for 2014-
based blended chemical index as proposed, without modification.
c. Price Proxies Used To Measure Capital Cost Category Growth
    We proposed to apply the same price proxies as were used in the FY 
2010-based SNF market basket, and below is a detailed explanation of 
the price proxies used for each capital cost category. We also proposed 
to continue to vintage weight the capital price proxies for 
Depreciation and Interest to capture the long-term consumption of 
capital. This vintage weighting method is the same method that was used 
for the FY 2010-based SNF market basket and is described below.
     Depreciation--Building and Fixed Equipment: We proposed to 
use the BEA Chained Price Index for Private Fixed Investment in 
Structures, Nonresidential, Hospitals and Special Care (BEA Table 
5.4.4. Price Indexes for Private Fixed Investment in Structures by 
Type). This BEA index is intended to capture prices for construction of 
facilities such as hospitals, nursing homes, hospices, and 
rehabilitation centers.
     Depreciation--Movable Equipment: We proposed to use the 
PPI Commodity for Machinery and Equipment (BLS series code WPU11). This 
price index reflects price inflation associated with a variety of 
machinery and equipment that would be utilized by SNFs including but 
not limited to medical equipment, communication equipment, and 
computers.
     Nonprofit Interest: We proposed to use the average yield 
on Municipal Bonds (Bond Buyer 20-bond index).
     For-Profit Interest: We proposed to use the average yield 
on Moody's AAA corporate bonds (Federal Reserve). We proposed different 
proxies for the interest categories because we believe interest price 
pressures differ between nonprofit and for-profit facilities.
     Other Capital: Since this category includes fees for 
insurances, taxes, and other capital-related costs, we proposed to use 
the CPI All Urban for Owners' Equivalent Rent of Primary Residence (BLS 
series code CUUR0000SEHC01), which would reflect the price growth of 
these costs.
    We believe that these price proxies continue to be the most 
appropriate proxies for SNF capital costs that meet our selection 
criteria of relevance, timeliness, availability, and reliability.
    As stated above, we proposed to continue to vintage weight the 
capital price proxies for Depreciation and Interest to capture the 
long-term consumption of capital. To capture the long-term nature, the 
price proxies are vintage-weighted; and the vintage weights are 
calculated using a two-step process. First, we determined the expected 
useful life of capital and debt instruments held by SNFs. Second, we 
identified the proportion of expenditures within a cost category that 
is attributable to each individual year over the useful life of the 
relevant capital assets, or the vintage weights.
    We proposed to rely on Bureau of Economic Analysis (BEA) fixed 
asset data to derive the useful lives of both fixed and movable 
capital, which is the same data source used to derive the useful lives 
for the FY 2010-based SNF market basket. The specifics of the data 
sources used are explained below.

[[Page 36561]]

i. Calculating Useful Lives for Moveable and Fixed Assets
    Estimates of useful lives for movable and fixed assets for the 
2014-based SNF market basket are 10 and 23 years, respectively. These 
estimates are based on three data sources from the BEA: (1) Current-
cost average age; (2) historical-cost average age; and (3) industry-
specific current cost net stocks of assets.
    BEA current-cost and historical-cost average age data by asset type 
are not available by industry but are published at the aggregate level 
for all industries. The BEA does publish current-cost net capital 
stocks at the detailed asset level for specific industries. There are 
61 detailed movable assets (including intellectual property) and there 
are 32 detailed fixed assets in the BEA estimates. Since we seek 
aggregate useful life estimates applicable to SNFs, we developed a 
methodology to approximate movable and fixed asset ages for nursing and 
residential care services (NAICS 623) using the published BEA data. For 
the proposed FY 2014 SNF market basket, we used the current-cost 
average age for each asset type from the BEA fixed assets Table 2.9 for 
all assets and weight them using current-cost net stock levels for each 
of these asset types in the nursing and residential care services 
industry, NAICS 6230. (For example, nonelectro medical equipment 
current-cost net stock (accounting for about 37 percent of total 
moveable equipment current-cost net stock in 2014) is multiplied by an 
average age of 4.7 years. Current-cost net stock levels are available 
for download from the BEA Web site at http://www.bea.gov/national/FA2004/Details/Index.html. We then aggregated the ``weighted'' current-
cost net stock levels (average age multiplied by current-cost net 
stock) into moveable and fixed assets for NAICS 6230. We then adjusted 
the average ages for moveable and fixed assets by the ratio of 
historical-cost average age (Table 2.10) to current-cost average age 
(Table 2.9).
    This produced historical cost average age data for movable 
(equipment and intellectual property) and fixed (structures) assets 
specific to NAICS 6230 of 4.8 and 11.6 years, respectively. The average 
age reflects the average age of an asset at a given point in time, 
whereas we want to estimate a useful life of the asset, which would 
reflect the average over all periods an asset is used. To do this, we 
multiplied each of the average age estimates by two to convert to 
average useful lives with the assumption that the average age is 
normally distributed (about half of the assets are below the average at 
a given point in time, and half above the average at a given point in 
time). This produced estimates of likely useful lives of 9.6 and 23.2 
years for movable and fixed assets, which we rounded to 10 and 23 
years, respectively. We proposed an interest vintage weight time span 
of 21 years, obtained by weighting the fixed and movable vintage 
weights (23 years and 10 years, respectively) by the fixed and movable 
split (87 percent and 13 percent, respectively). This is the same 
methodology used for the FY 2010-based SNF market basket which had 
useful lives of 22 years and 6 years for fixed and moveable assets, 
respectively. The impact of revising the useful life for moveable 
assets from 6 years to 10 years had little to no impact on the growth 
rate of the 2014-based SNF market basket capital cost weight. Over the 
2014 to 2026 time period, the impact on the growth rate of the capital 
cost weight was no larger than 0.01 percent in absolute terms.
ii. Constructing Vintage Weights
    Given the expected useful life of capital (fixed and moveable 
assets) and debt instruments, we then must determine the proportion of 
capital expenditures attributable to each year of the expected useful 
life for each of the three asset types: Building and fixed equipment, 
moveable equipment, and interest. These proportions represent the 
vintage weights. We were not able to find a historical time series of 
capital expenditures by SNFs. Therefore, we proposed to approximate the 
capital expenditure patterns of SNFs over time, using alternative SNF 
data sources. For building and fixed equipment, we used the stock of 
beds in nursing homes from the National Nursing Home Survey (NNHS) 
conducted by the National Center for Health Statistics (NCHS) for 1962 
through 1999. For 2000 through 2010, we extrapolated the 1999 bed data 
forward using a 5-year moving average of growth in the number of beds 
from the SNF MCR data. For 2011 to 2014, we proposed to extrapolate the 
2010 bed data forward using the average growth in the number of beds 
over the 2011 to 2014 time period. We then used the change in the stock 
of beds each year to approximate building and fixed equipment purchases 
for that year. This procedure assumes that bed growth reflects the 
growth in capital-related costs in SNFs for building and fixed 
equipment. We believe that this assumption is reasonable because the 
number of beds reflects the size of a SNF, and as a SNF adds beds, it 
also likely adds fixed capital.
    As was done for the FY 2010-based SNF market basket (as well as 
prior market baskets), we proposed to estimate moveable equipment 
purchases based on the ratio of ancillary costs to routine costs. The 
time series of the ratio of ancillary costs to routine costs for SNFs 
measures changes in intensity in SNF services, which are assumed to be 
associated with movable equipment purchase patterns. The assumption 
here is that as ancillary costs increase compared to routine costs, the 
SNF caseload becomes more complex and would require more movable 
equipment. The lack of movable equipment purchase data for SNFs over 
time required us to use alternative SNF data sources. A more detailed 
discussion of this methodology was published in the FY 2008 SNF final 
rule (72 FR 43428). We believe the resulting two time series, 
determined from beds and the ratio of ancillary to routine costs, 
reflect real capital purchases of building and fixed equipment and 
movable equipment over time.
    To obtain nominal purchases, which are used to determine the 
vintage weights for interest, we converted the two real capital 
purchase series from 1963 through 2014 determined above to nominal 
capital purchase series using their respective price proxies (the BEA 
Chained Price Index for Nonresidential Construction for Hospitals & 
Special Care Facilities and the PPI for Machinery and Equipment). We 
then combined the two nominal series into one nominal capital purchase 
series for 1963 through 2014. Nominal capital purchases are needed for 
interest vintage weights to capture the value of debt instruments.
    Once we created these capital purchase time series for 1963 through 
2014, we averaged different periods to obtain an average capital 
purchase pattern over time: (1) For building and fixed equipment, we 
averaged 30, 23-year periods; (2) for movable equipment, we averaged 
43, 10-year periods; and (3) for interest, we averaged 32, 21-year 
periods. We calculate the vintage weight for a given year by dividing 
the capital purchase amount in any given year by the total amount of 
purchases during the expected useful life of the equipment or debt 
instrument. To provide greater transparency, we posted on the CMS 
market basket Web site at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html, an illustrative spreadsheet that contains an 
example of how the vintage-weighted price indexes are calculated.

[[Page 36562]]

    We did not receive any public comments on our proposed price 
proxies used for each of the detailed capital cost categories or on our 
methodology for deriving the vintage weights. For the reasons discussed 
above and in the FY 2018 SNF PPS proposed rule, we are finalizing the 
price proxies of the capital cost categories, the vintage weights, and 
the methodology for deriving the vintage weights, as proposed without 
modification.
    The vintage weights for the 2014-based SNF market basket and the FY 
2010-based SNF market basket are presented in Table 14.

                                      Table 14--Final 2014-Based Vintage Weights and FY 2010-Based Vintage Weights
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Building and fixed equipment          Movable equipment                   Interest
                                                         -----------------------------------------------------------------------------------------------
                        Year \1\                           2014-based 23  FY 2010- based   2014-based 10  FY 2010- based   2014-based 21  FY 2010- based
                                                               years         25 years          years          6 years          years         22 years
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................            .056            .061            .085            .165            .032            .030
2.......................................................            .055            .059            .087            .160            .033            .030
3.......................................................            .054            .053            .091            .167            .034            .032
4.......................................................            .052            .050            .097            .167            .036            .033
5.......................................................            .049            .046            .099            .169            .037            .035
6.......................................................            .046            .043            .102            .171            .039            .037
7.......................................................            .044            .041            .108  ..............            .041            .039
8.......................................................            .043            .039            .109  ..............            .043            .040
9.......................................................            .040            .036            .110  ..............            .044            .041
10......................................................            .038            .034            .112  ..............            .045            .043
11......................................................            .038            .034  ..............  ..............            .048            .045
12......................................................            .039            .034  ..............  ..............            .052            .047
13......................................................            .039            .033  ..............  ..............            .056            .048
14......................................................            .039            .032  ..............  ..............            .058            .048
15......................................................            .039            .031  ..............  ..............            .060            .050
16......................................................            .039            .031  ..............  ..............            .059            .052
17......................................................            .040            .032  ..............  ..............            .057            .055
18......................................................            .041            .034  ..............  ..............            .057            .058
19......................................................            .043            .035  ..............  ..............            .056            .060
20......................................................            .042            .036  ..............  ..............            .056            .060
21......................................................            .042            .038  ..............  ..............            .057            .058
22......................................................            .042            .039  ..............  ..............  ..............            .058
23......................................................            .042            .042  ..............  ..............  ..............  ..............
24......................................................  ..............            .043  ..............  ..............  ..............  ..............
25......................................................  ..............            .044  ..............  ..............  ..............  ..............
26......................................................  ..............  ..............  ..............  ..............  ..............  ..............
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................           1.000           1.000           1.000           1.000           1.000           1.000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The vintage weights are calculated using thirteen decimals. For presentational purposes, we are displaying three decimals and therefore, the
  detail vintage weights may not add to 1.000 due to rounding.
\1\ Year 1 represents the vintage weight applied to the farthest year while the vintage weight for year 23, for example, would apply to the most recent
  year.

    Table 15 shows all the price proxies for the final 2014 based SNF 
market basket.

   Table 15--Price Proxies for the Final 2014-Based SNF Market Basket
------------------------------------------------------------------------
         Cost category               Weight        Proposed price proxy
------------------------------------------------------------------------
Total..........................           100.0
Compensation...................            60.4
    Wages and Salaries \1\.....            50.0  ECI for Wages and
                                                  Salaries for Private
                                                  Industry Workers in
                                                  Nursing Care
                                                  Facilities.
    Employee Benefits \1\......            10.5  ECI for Total Benefits
                                                  for Private Industry
                                                  Workers in Nursing
                                                  Care Facilities.
Utilities......................             2.6
    Electricity................             1.2  PPI Commodity for
                                                  Commercial Electric
                                                  Power.
    Fuel: Oil and Gas..........             1.3  Blend of Fuel PPIs.
    Water and Sewerage.........             0.2  CPI for Water and
                                                  Sewerage Maintenance
                                                  (All Urban Consumers).
Professional Liability                      1.1  CMS Professional
 Insurance.                                       Liability Insurance
                                                  Premium Index.
All Other......................            27.9
    Other Products.............            14.3
        Pharmaceuticals........             7.3  PPI Commodity for
                                                  Pharmaceuticals for
                                                  Human Use,
                                                  Prescription.
        Food: Direct Purchase..             3.1  PPI Commodity for
                                                  Processed Foods and
                                                  Feeds.
        Food: Contract Purchase             0.7  CPI for Food Away From
                                                  Home (All Urban
                                                  Consumers).

[[Page 36563]]

 
        Chemicals..............             0.2  Blend of Chemical PPIs.
        Medical Instruments and             0.6  Blend of Medical
         Supplies.                                Instruments and
                                                  Supplies PPIs.
        Rubber and Plastics....             0.8  PPI Commodity for
                                                  Rubber and Plastic
                                                  Products.
        Paper and Printing                  0.8  PPI Commodity for
         Products.                                Converted Paper and
                                                  Paperboard Products.
        Apparel................             0.3  PPI Commodity for
                                                  Apparel.
        Machinery and Equipment             0.3  PPI Commodity for
                                                  Machinery and
                                                  Equipment.
        Miscellaneous Products.             0.3  PPI Commodity for
                                                  Finished Goods Less
                                                  Food and Energy.
All Other Services.............            13.6
    Labor-Related Services.....             7.4
        Professional Fees:                  3.8  ECI for Total
         Labor-related.                           Compensation for
                                                  Private Industry
                                                  Workers in
                                                  Professional and
                                                  Related.
        Installation,                       0.6  ECI for Total
         Maintenance, and                         Compensation for All
         Repair Services.                         Civilian workers in
                                                  Installation,
                                                  Maintenance, and
                                                  Repair.
        Administrative and                  0.5  ECI for Total
         Facilities Support.                      Compensation for
                                                  Private Industry
                                                  Workers in Office and
                                                  Administrative
                                                  Support.
        All Other: Labor-                   2.5  ECI for Total
         Related Services.                        Compensation for
                                                  Private Industry
                                                  Workers in Service
                                                  Occupations.
    Non Labor-Related Services.             6.2
        Professional Fees:                  1.8  ECI for Total
         Nonlabor-Related.                        Compensation for
                                                  Private Industry
                                                  Workers in
                                                  Professional and
                                                  Related.
        Financial Services.....             2.0  ECI for Total
                                                  Compensation for
                                                  Private Industry
                                                  Workers in Financial
                                                  Activities.
        Telephone Services.....             0.5  CPI for Telephone
                                                  Services.
        Postage................             0.2  CPI for Postage.
        All Other: Nonlabor-                1.8  CPI for All Items Less
         Related Services.                        Food and Energy.
Capital-Related Expenses.......             7.9
    Total Depreciation.........             2.9
        Building and Fixed                  2.5  BEA's Chained Price
         Equipment.                               Index for Private
                                                  Fixed Investment in
                                                  Structures,
                                                  Nonresidential,
                                                  Hospitals and Special
                                                  Care--vintage weighted
                                                  23 years.
        Movable Equipment......             0.4  PPI Commodity for
                                                  Machinery and
                                                  Equipment--vintage
                                                  weighted 10 years.
    Total Interest.............             3.0
        For-Profit SNFs........             0.8  Moody's--Average yield
                                                  on AAA bonds, vintage
                                                  weighted 21 years.
        Government and                      2.1  Moody's--Average yield
         Nonprofit SNFs.                          on Domestic Municipal
                                                  Bonds--vintage
                                                  weighted 21 years.
    Other Capital-Related                   2.0  CPI for Owners'
     Expenses.                                    Equivalent Rent of
                                                  Primary Residence.
------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For
  presentational purposes, we are displaying one decimal and, therefore,
  the detailed cost weights may not add to the aggregate cost weights or
  to 100.0 due to rounding.
\1\ Contract labor is distributed to wages and salaries and employee
  benefits based on the share of total compensation that each category
  represents.

c. Labor-Related Share
    We define the labor-related share (LRS) as those expenses that are 
labor-intensive and vary with, or are influenced by, the local labor 
market. Each year, we calculate a revised labor-related share based on 
the relative importance of labor-related cost categories in the input 
price index. Effective beginning with FY 2018, we proposed to revise 
and update the labor-related share to reflect the relative importance 
of the 2014-based SNF market basket cost categories that we believe are 
labor-intensive and vary with, or are influenced by, the local labor 
market. For the proposed 2014-based SNF market basket, these are: (1) 
Wages and Salaries (including allocated contract labor costs as 
described above); (2) Employee Benefits (including allocated contract 
labor costs as described above); (3) Professional fees: Labor-related; 
(4) Administrative and Facilities Support Services; (5) Installation, 
Maintenance, and Repair services; (6) All Other: Labor-Related 
Services; and (7) a proportion of capital-related expenses. We proposed 
to continue to include a proportion of capital-related expenses because 
a portion of these expenses are deemed to be labor-intensive and vary 
with, or are influenced by, the local labor market. For example, a 
proportion of construction costs for a medical building would be 
attributable to local construction workers' compensation expenses.
    Consistent with previous SNF market basket revisions and rebasings, 
the All Other: Labor-related services cost category is mostly comprised 
of building maintenance and security services (including, but not 
limited to, landscaping services, janitorial services, waste management 
services, and investigation and security services). Because these 
services tend to be labor-intensive and are mostly performed at the SNF 
facility (and therefore, unlikely to be purchased in the national 
market), we believe that they meet our definition of labor-related 
services.
    The proposed inclusion of the Installation, Maintenance, and Repair 
Services cost category into the labor-related share remains consistent 
with the current labor-related share, since this cost category was 
previously included in the FY 2010-based SNF market basket All Other: 
Labor-related Services cost category. We proposed to establish a 
separate Installation, Maintenance, and Repair Services cost category 
so that we can use the ECI for Total Compensation for All Civilian 
Workers in Installation, Maintenance, and Repair to reflect the 
specific price

[[Page 36564]]

changes associated with these services. We also use this cost category 
in the 2012-based IRF market basket (80 FR 47059), 2012-based IPF 
market basket (80 FR 46667), and 2013-based LTCH market basket (81 FR 
57091).
    As discussed in the FY 2014 SNF PPS proposed rule (78 FR 26462), in 
an effort to determine more accurately the share of nonmedical 
professional fees (included in the 2014-based SNF market basket 
Professional Fees cost categories) that should be included in the 
labor-related share, we surveyed SNFs regarding the proportion of those 
fees that are attributable to local firms and the proportion that are 
purchased from national firms. Based on these weighted results, we 
determined that SNFs purchase, on average, the following portions of 
contracted professional services inside their local labor market:
     78 percent of legal services.
     86 percent of accounting and auditing services.
     89 percent of architectural, engineering services.
     87 percent of management consulting services.
    Together, these four categories represent 3.3 percentage points of 
the total costs for the 2014-based SNF market basket. We applied the 
percentages from this special survey to their respective SNF market 
basket weights to separate them into labor-related and nonlabor-related 
costs. As a result, we proposed to designate 2.8 percentage points of 
the 3.3 percentage points to the labor-related share, with the 
remaining 0.5 percentage point is categorized as nonlabor-related.
    For the proposed 2014-based SNF market basket, we conducted a 
similar analysis of home office data. The Medicare cost report CMS Form 
2540-10 requires a SNF to report information regarding their home 
office provider. Approximately 57 percent of SNFs reported some type of 
home office information on their Medicare cost report for 2014 (for 
example, city, state, zip code). Using the data reported on the 
Medicare cost report, we compared the location of the SNF with the 
location of the SNF's home office. For the FY 2010-based SNF market 
basket, we used the Medicare HOMER database to determine the location 
of the provider's home office as this information was not available on 
the Medicare cost report CMS Form 2540-96. For the 2014-based SNF 
market basket, we proposed to determine the proportion of home office 
contract labor costs that should be allocated to the labor-related 
share based on the percent of total SNF home office contract labor 
costs as reported in Worksheet S-3, Part II attributable to those SNFs 
that had home offices located in their respective local labor markets--
defined as being in the same Metropolitan Statistical Area (MSA). We 
determined a SNF's and home office's MSAs using their zip code 
information from the Medicare cost reports.
    Using this methodology, we determined that 28 percent of SNFs' home 
office contract labor costs were for home offices located in their 
respective local labor markets. Therefore, we proposed to allocate 28 
percent of home office expenses to the labor-related share. The FY 
2010-based SNF market basket allocated 32 percent of home office 
expenses to the labor-related share.
    In the proposed 2014-based SNF market basket, home office expenses 
that were subject to allocation based on the home office allocation 
methodology represent 0.7 percent of the 2014-based SNF market basket. 
Based on the home office results, we proposed to apportion 0.2 
percentage point of the 0.7 percentage point figure into the labor-
related share (0.7 x 0.28 = 0.193, or 0.2) and designate the remaining 
0.5 percentage point as nonlabor-related. Therefore, based on the two 
allocations mentioned above, we proposed to apportion 3.0 percentage 
points into the labor-related share. This amount is added to the 
portion of professional fees that we continue to identify as labor-
related using the I-O data such as contracted advertising and marketing 
costs (0.8 percentage point of total operating costs) resulting in a 
Professional Fees: Labor-Related cost weight of 3.8 percent.
    We did not receive any public comments on our proposed methodology 
for deriving the labor-related share. For the reasons discussed above 
and in the FY 2018 SNF PPS proposed rule, we are finalizing our 
proposals, without modification, as discussed above to update and 
revise the labor-related share effective October 1, 2017, to reflect 
the relative importance of the following 2014-based SNF market basket 
cost weights that we believe are labor-intensive and vary with, or are 
influenced by, the local labor market: (1) Wages and Salaries 
(including allocated contract labor costs as described above); (2) 
Employee Benefits (including allocated contract labor costs as 
described above); (3) Professional fees: Labor-related; (4) 
Administrative and Facilities Support Services; (5) Installation, 
Maintenance, and Repair services; (6) All Other: Labor-Related 
Services; and (7) a proportion of capital-related expenses.
    Table 16 compares the 2014-based labor-related share and the FY 
2010-based labor-related share based on the relative importance of 
IGI's most recent second quarter 2017 forecast with historical data 
through the first quarter of 2017. The FY 2018 SNF PPS proposed rule 
(82 FR 21040) reflected IGI's first quarter 2017 forecast with 
historical data through the fourth quarter of 2016. As stated in the FY 
2018 SNF PPS proposed rule (82 FR 21019), our policy has been that, if 
more recent data becomes available (for example, a more recent estimate 
of the SNF market basket and/or MFP adjustment), we would use such 
data, if appropriate, to determine the SNF market basket percentage 
change, labor-related share relative importance, forecast error 
adjustment, and MFP adjustment in the SNF PPS final rule.
    We note that in Table 16 of the FY 2018 SNF PPS proposed rule (82 
FR 21041), we misreported the FY 2017 labor-related share as 69.1 
percent (this was the FY 2016 labor-related share (80 FR 46402)). The 
FY 2017 labor-related share was 68.8 percent as finalized in the FY 
2017 SNF PPS final rule (81 FR 51979, 51980). We present the FY 2017 
labor-related share in Table 16 below.

          Table 16--FY 2018 and FY 2017 SNF Labor-Related Share
------------------------------------------------------------------------
                                                            Relative
                                          Relative         importance,
                                         importance,     labor-related,
                                       labor-related,     FY 2017  (FY
                                       FY 2018  (2014-     2010-based
                                        based index)     index)  2016:Q2
                                      2017:Q2 forecast      forecast
------------------------------------------------------------------------
Wages and Salaries \1\..............              50.3              48.8
Employee Benefits \1\...............              10.2              11.1

[[Page 36565]]

 
Professional fees: Labor-Related....               3.7               3.4
Administrative and Facilities                      0.5               0.5
 Support Services...................
Installation, Maintenance and Repair               0.6               n/a
 Services \2\.......................
All Other: Labor-related Services...               2.5               2.3
Capital-related (.391)..............               3.0               2.7
                                     -----------------------------------
    Total...........................              70.8              68.8
------------------------------------------------------------------------
\1\ The Wages and Salaries and Employee Benefits cost weight reflect
  contract labor costs as described above.
\2\ Previously classified in the All Other: Labor-related services cost
  category in the FY 2010-based SNF market basket.
Source: IHS Global Inc. 2nd quarter 2017 forecast with historical data
  through 1st quarter 2017.

    The FY 2018 SNF labor-related share (LRS) is 2.0 percentage points 
higher than the FY 2017 SNF LRS, which is based on the FY 2010-based 
SNF market basket relative importance. This implies an increase in the 
quantity of the labor-related services because rebasing the index 
contributed significantly to the increase. Also contributing to the 
higher labor-related share is a higher capital-related cost weight in 
the 2014-based SNF market basket compared to the FY 2010-based SNF 
market basket. As stated above, we include a proportion of capital-
related expenses in the labor-related share as we believe a portion of 
these expenses (such as construction labor costs) are deemed to be 
labor-intensive and vary with, or are influenced by, the local labor 
market.
d. Market Basket Estimate for the FY 2018 SNF PPS Update
    As discussed previously in this final rule, beginning with the FY 
2018 SNF PPS update, we are adopting the 2014-based SNF market basket 
as the appropriate market basket of goods and services for the SNF PPS. 
Based on IHS Global Inc.'s (IGI) second quarter 2017 forecast with 
historical data through the first quarter of 2017, the most recent 
estimate of the 2014-based SNF market basket for FY 2018 is 2.6 
percent. As stated above, the FY 2018 SNF PPS proposed rule reflected 
IGI's first quarter 2017 forecast with historical data through the 
fourth quarter of 2016. IGI is a nationally recognized economic and 
financial forecasting firm that contracts with CMS to forecast the 
components of CMS' market baskets.
    Table 17 compares the 2014-based SNF market basket and the FY 2010-
based SNF market basket percent changes. For the historical period 
between FY 2013 and FY 2016, the average difference between the two 
market baskets is -0.3 percentage point. This is primarily the result 
of the lower pharmaceuticals cost category weight, increased Fuel: Oil 
and Gas cost category weight, and the change in the Fuels price proxy. 
For the forecasted period between FY 2017 and FY 2019, there is no 
difference in the average growth rate.

   Table 17--2014-Based SNF Market Basket and FY 2010-Based SNF Market
                  Basket, Percent Changes: 2013 to 2019
------------------------------------------------------------------------
                                            2014-based     FY 2010-based
            Fiscal year  (FY)               SNF market      SNF market
                                              basket          basket
------------------------------------------------------------------------
Historical data:
    FY 2013.............................             1.6             1.8
    FY 2014.............................             1.6             1.7
    FY 2015.............................             1.8             2.3
    FY 2016.............................             1.9             2.3
    Average FY 2013-2016................             1.7             2.0
Forecast:
    FY 2017.............................             2.7             2.7
    FY 2018.............................             2.6             2.7
    FY 2019.............................             2.7             2.7
    Average FY 2017-2019................             2.7             2.7
------------------------------------------------------------------------
Source: IHS Global Inc. 2nd quarter 2017 forecast with historical data
  through 1st quarter 2017.

    While we ordinarily would adopt the use of this 2014-based SNF 
market basket percentage to update the SNF PPS per diem rates for FY 
2018, we note that section 411(a) of the MACRA amended section 1888(e) 
of the Act to add section 1888(e)(5)(B)(iii) of the Act, which 
establishes a special rule for FY 2018 that requires the market basket 
percentage, after the application of the productivity adjustment, to be 
1.0 percent. In accordance with section 1888(e)(5)(B)(iii) of the Act, 
we will use a market basket percentage of 1.0 percent to update the 
federal rates set forth in this final rule. We proposed to use the 
2014-based SNF market basket to determine the market basket percentage 
update for the SNF PPS per diem rates effective FY 2019. For the 
reasons discussed above and in the FY 2018 SNF PPS proposed rule, we 
are finalizing our proposal to use the 2014-based SNF market basket to 
determine

[[Page 36566]]

the market basket percentage update for the SNF PPS per diem rates, 
effective FY 2019. In addition, as stated in section III.D.1.d. in this 
preamble, we are adopting the use of the 2014-based SNF market basket 
to determine the labor-related share effective October 1, 2017.
2. Skilled Nursing Facility (SNF) Quality Reporting Program (QRP)
a. Background and Statutory Authority
    Section 1888(e)(6)(A)(i) of the Act, as added by section 2(c)(4) of 
the Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act), requires that for fiscal years beginning with FY 2018, in 
the case of a SNF that does not submit data as applicable in accordance 
with sections 1888(e)(6)(B)(i)(II) and (III) of the Act for a fiscal 
year, the Secretary reduce the market basket percentage described in 
section 1888(e)(5)(B)(i) of the Act for payment rates during that 
fiscal year by two percentage points. In section III.B.2. of this final 
rule, we discuss revisions in the market basket update regulations at 
Sec.  413.337(d) that will implement this provision. In accordance with 
this statutory mandate, we have implemented a SNF Quality Reporting 
Program (QRP), which we believe promotes higher quality and more 
efficient health care for Medicare beneficiaries. 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 a full discussion of 
the statutory background and policy considerations that have shaped the 
SNF QRP.
    When we use the term ``FY (year)SNF QRP,'' we are referring to the 
fiscal year for which the SNF QRP requirements applicable to that 
fiscal year must be met in order for a SNF to receive the full market 
basket percentage when calculating the payment rates applicable to it 
for that fiscal year.
    The IMPACT Act (Pub. L. 113-185) amended Title XVIII of the Act, in 
part, by adding a new section 1899B that requires the Secretary to 
establish new data reporting requirements for certain post-acute care 
(PAC) providers, including SNFs. Specifically, new sections 
1899B(a)(1)(A)(ii) and (iii) of the Act require SNFs, inpatient 
rehabilitation facilities (IRFs), Long Term Care Hospitals (LTCHs), and 
home health agencies (HHAs), under the provider-type's respective 
quality reporting program (which, for SNFs, is found at section 
1888(e)(6) of the Act), to report data on quality measures specified 
under section 1899B(c)(1) of the Act for at least five domains, and 
data on resource use and other measures specified under section 
1899B(d)(1) of the Act for at least three domains. Section 
1899B(a)(1)(A)(i) of the Act further requires each of these PAC 
provider-types to report under its respective quality reporting program 
standardized resident assessment data in accordance with subsection 
(b), for at least the quality measures specified under subsection 
(c)(1), and that is for at least five specific categories: Functional 
status; cognitive function and mental status; special services, 
treatments, and interventions; medical conditions and co-morbidities; 
and impairments. Section 1899B(a)(1)(B) of the Act requires that all of 
the data that must be reported in accordance with section 
1899B(a)(1)(A) of the Act be standardized and interoperable to allow 
for the exchange of the information among PAC providers and other 
providers and the use of such data to enable access to longitudinal 
information and to facilitate coordinated care. We refer readers to the 
FY 2016 SNF PPS final rule (80 FR 46427 through 46429) for additional 
information on the IMPACT Act and its applicability to SNFs.
b. General Considerations Used for Selection of Quality 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,\3\ which incorporates the three broad aims of the 
National Quality Strategy.\4\
---------------------------------------------------------------------------

    \3\ http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html.
    \4\ http://www.ahrq.gov/workingforquality/nqs/nqs2011annlrpt.htm.
---------------------------------------------------------------------------

    As part of our consideration for measures for use in the SNF QRP, 
we review and evaluate measures that have been implemented in other 
programs and take into account measures that have been endorsed by NQF 
for provider settings other than the SNF setting. We have previously 
adopted measures that we referred to as ``applications'' of those 
measures. We have received questions pertaining to the term 
``application'' and want to clarify that when we refer to a proposed or 
implemented measure as an ``application of'' the measure, we mean that 
the measure will be used in the SNF setting, rather than the setting 
for which it was endorsed by the NQF. For example, in the FY 2016 SNF 
PPS final rule (80 FR 46440 through 46444), we adopted a measure 
entitled Application of Percent of Residents Experiencing One or More 
Falls With Major Injury (Long Stay) (NQF #0674), which is currently 
endorsed for the nursing home setting but not for the SNF setting. For 
such measures, we intend to seek NQF endorsement for the SNF setting, 
and if the NQF endorses one or more of them, we will update the title 
of the measure to remove the reference to ``application''.
    We received several comments generally related to the proposed 
measures, the IMPACT Act, NQF endorsement, and training needs. The 
comments and our responses are discussed below.
    Comment: A few commenters expressed concern that CMS has not 
provided a timeline for seeking NQF endorsement for non-NQF-endorsed 
quality measures in the SNF QRP. One commenter expressed further 
concern that non-NQF-endorsed measures may be implemented before 
undergoing adequate testing, as required for NQF endorsement. Another 
commenter expressed concern regarding the adequacy of resources 
allocated to complete necessary testing and obtain consensus 
endorsement for measures as required by the IMPACT Act. All commenters 
commenting on this topic requested further information from CMS 
regarding the process and timeline for seeking NQF endorsement.
    Response: We recognize that the NQF endorsement process is an 
important part of measure development and plan to submit non-NQF-
endorsed quality measures in the SNF QRP adopted in this rule for NQF 
endorsement as soon as feasible, with an intended timeframe of 2018. 
With regard to adequate testing prior to implementation, we wish to 
note that we engage in multiple testing activities prior to measure 
implementation. These activities include testing of items and measures 
in their intended settings, public posting of measure testing data, 
when possible, seeking public comment on measures in the various stages 
of their development, and utilization of technical expert input on 
measure development, including expert evaluation of the validity and 
importance of measures. We interpret the commenter's comment regarding 
the adequacy of the resources necessary to obtain consensus endorsement 
as efforts to engage stakeholders. We believe that we commit an 
adequate level of resources to the measure development process and the 
NQF endorsement process. Such resources are outlined above and include 
engaging in pilot

[[Page 36567]]

testing with providers, seeking public comment, convening TEPs, and 
engaging subject matter experts to provide feedback throughout the 
measure development process.
    Comment: One commenter recommended aligning the SNF QRP quality 
measures with other CMS initiatives such as the Financial Alignment 
Initiative, the value-based payment program and the Medicaid managed 
care initiatives under the Section 1115 waiver authorities.
    Response: We acknowledge the value of aligning the SNF QRP measures 
to other CMS initiatives and we will seek to align measures with other 
initiatives in an effort to reduce provider burden where feasible.
(1) Measuring and Accounting for Social Risk Factors in the SNF QRP
    In, the FY 2018 SNF PPS proposed rule (82 FR 21042 through 21043), 
we discussed accounting for social risk factors in the SNF QRP. We 
stated that we consider related factors that may affect measures in the 
SNF QRP. We understand that social risk factors such as income, 
education, race and ethnicity, employment, disability, community 
resources, and social support (certain factors of which are also 
sometimes referred to as socioeconomic status (SES) factors or socio-
demographic status (SDS) factors) play a major role in health. One of 
our core objectives is to improve beneficiary outcomes including 
reducing health disparities, and we want to ensure that all 
beneficiaries, including those with social risk factors, receive high 
quality care. In addition, we seek to ensure that the quality of care 
furnished by providers and suppliers is assessed as fairly as possible 
under our programs while ensuring that beneficiaries have adequate 
access to excellent care.
    We have been reviewing reports prepared by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) and the National 
Academies of Sciences, Engineering, and Medicine on the issue of 
measuring and accounting for social risk factors in CMS' quality 
measurement and payment programs, and considering options on how to 
address the issue in these programs. On December 21, 2016, ASPE 
submitted a Report to Congress on a study it was required to conduct 
under section 2(d) of the IMPACT Act. The study analyzed the effects of 
certain social risk factors of Medicare beneficiaries on quality 
measures and measures of resource use used in one or more of nine 
Medicare value-based purchasing programs.\5\ The report also included 
considerations for strategies to account for social risk factors in 
these programs. In a January 10, 2017 report released by The National 
Academies of Sciences, Engineering, and Medicine, that body provided 
various potential methods for measuring and accounting for social risk 
factors, including stratified public reporting.\6\
---------------------------------------------------------------------------

    \5\ Office of the Assistant Secretary for Planning and 
Evaluation. 2016. Report to Congress: Social Risk Factors and 
Performance Under Medicare's Value-Based Purchasing Programs. 
Available at https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \6\ National Academies of Sciences, Engineering, and Medicine. 
2017. Accounting for social risk factors in Medicare payment. 
Washington, DC: The National Academies Press.
---------------------------------------------------------------------------

    In addition, the NQF undertook a 2-year trial period in which new 
measures, measures undergoing maintenance review, and measures endorsed 
with the condition that they enter the trial period were assessed to 
determine whether risk adjustment for selected social risk factors was 
appropriate for these measures. This trial entailed temporarily 
allowing inclusion of social risk factors in the risk-adjustment 
approach for these measures. The trial has concluded and NQF will issue 
recommendations on the future inclusion of social risk factors in risk 
adjustment for quality measures.
    As we continue to consider the analyses and recommendations from 
these reports and await the recommendations of the NQF trial on risk 
adjustment for quality measures, we are continuing to work with 
stakeholders in this process. As we have previously communicated, we 
are concerned about holding providers to different standards for the 
outcomes of their patients with social risk factors because we do not 
want to mask potential disparities or minimize incentives to improve 
the outcomes for disadvantaged populations. Keeping this concern in 
mind, while we sought input on this topic previously, we continue to 
seek public comment on whether we should account for social risk 
factors in measures in the SNF QRP, and if so, what method or 
combination of methods would be most appropriate for accounting for 
social risk factors. Examples of methods include: Confidential 
reporting to providers of measure rates stratified by social risk 
factors, public reporting of stratified measure rates, and potential 
risk adjustment of a particular measure as appropriate based on data 
and evidence.
    In addition, in the FY 2018 SNF PPS proposed rule (82 FR 21042 
through 21043), we sought public comment on which social risk factors 
might be most appropriate for reporting stratified measure scores and/
or potential risk adjustment of a particular measure. Examples of 
social risk factors include, but are not limited to, dual eligibility/
low-income subsidy, race and ethnicity, and geographic area of 
residence. We also sought comments on which of these factors, including 
current data sources where this information would be available, could 
be used alone or in combination, and whether other data should be 
collected to better capture the effects of social risk. We will take 
commenters' input into consideration as we continue to assess the 
appropriateness and feasibility of accounting for social risk factors 
in the SNF QRP. We note that any such changes would be proposed through 
future notice and comment rulemaking.
    We look forward to working with stakeholders as we consider the 
issue of accounting for social risk factors and reducing health 
disparities in CMS programs. Of note, implementing any of the above 
methods would be taken into consideration in the context of how this 
and other CMS programs operate (for example, data submission methods, 
availability of data, statistical considerations relating to 
reliability of data calculations, among others), so we sought comment 
on operational considerations. We are committed to ensuring that 
Medicare beneficiaries have access to and receive excellent care, and 
that the quality of care furnished by providers and suppliers is 
assessed fairly in CMS programs. A discussion of the comments we 
received on this topic, along with our responses, appears below.
    Comment: Some commenters were generally supportive of accounting 
for social risk factors for the SNF QRP quality measures. Many 
commenters stated that there was evidence demonstrating that these 
factors can have substantial influence on patient health outcomes. Some 
commenters noted that social risk factors are beyond the control of the 
facility and were concerned that without risk adjustment, differences 
in quality scores may reflect differences in patient populations rather 
than differences in quality. Commenters also recommended incorporating 
the results of the NQF SES trial period into consideration of adopting 
risk-adjustment strategies.
    A few commenters, while acknowledging the influence of social risk 
factors on health outcomes, cautioned against adjusting for them in 
quality measurement due to the potential for unintended consequences. 
These commenters expressed concern

[[Page 36568]]

over the possibility that risk-adjusted measures may remove incentives 
for quality improvement among facilities that serve higher levels of 
underserved populations.
    Regarding the methodology for risk adjustment, some commenters made 
specific recommendations regarding the type of risk adjustment that 
should be used. One commenter suggested that both risk stratification 
and statistical risk adjustment be used. Commenters stated that any 
risk stratification should be considered on a measure-by-measure basis, 
and that measures that are broadly within the control of the facility 
and reflective of direct care, such as pressure ulcers, should not be 
stratified. Multiple commenters recommended that we conduct further 
research and testing of risk-adjustment methods. A few commenters noted 
the importance of continued monitoring of the effect of social risk 
factors on health outcomes and on the SNF QRP over time. Other 
commenters recommended adjusting for social risk factors, specifically 
for resource use measures assessing potentially preventable 
readmissions, Medicare Spending Per Beneficiary, and social and 
environmental risk factors for functional improvement measures. Another 
commenter noted there are meaningful SES, clinical or other differences 
between traditional Medicare versus Medicare Advantage (MA) enrollees 
that could affect comparisons between facilities with different 
proportion of Medicare Advantage and Part A stays. The commenter 
further requested that this possibility should be investigated.
    In addition to support for our suggested categories of race and 
ethnicity, dual eligibility status, and geographical location, specific 
social risk factors suggested by commenters included: Patient-level 
factors such as lack of personal resources, education level, healthcare 
literacy, employment, and limited English proficiency. Commenters also 
suggested community resources and other factors such as access to 
adequate food, medications, availability of primary care and therapy 
services, living conditions including living alone, lack of an adequate 
support system or caregiver availability. Regarding sources for data 
collection, a commenter suggested the use of confidential patient-
reported data to determine social risk and another commenter suggested 
using confidential electronic health records to collect data relevant 
to social risk factors.
    There were a few comments discussing confidential and public 
reporting of data adjusted for social risk factors. While a commenter 
recommended that risk-stratified measures should be publicly reported 
for purposes of transparency, another commenter noted that the public 
reporting of stratified rates could create a disincentive to care for 
disadvantaged populations.
    Response: As we have previously stated, we are concerned about 
holding providers to different standards for the outcomes of their 
patients with social risk factors, because we do not want to mask 
potential disparities. We believe that the path forward should 
incentivize improvements in health outcomes for disadvantaged 
populations while ensuring that beneficiaries have adequate access to 
excellent care.
    We will consider all suggestions as we continue to assess each 
measure and the overall program. We intend to explore options including 
but not limited to measure stratification by social risk factors in a 
consistent manner across programs, informed by considerations of 
stratification methods described in section IX.A.13 of the preamble of 
the FY 2018 IPPS/LTCH PPS final rule. We thank commenters for this 
important feedback and will continue to consider options to account for 
social risk factors that would allow us to view disparities and 
potentially incentivize improvement in care for patients and 
beneficiaries. We will also consider providing feedback to providers on 
outcomes for individuals with social risk factors in confidential 
reports.
c. Collection of Standardized Resident Assessment Data Under the SNF 
QRP
(1) Definition of Standardized Resident Assessment Data
    Section 1888(e)(6)(B)(i)(III) of the Act requires that for fiscal 
year 2019 (beginning October 1, 2018) and each subsequent year, SNFs 
report standardized resident assessment data required under section 
1899B(b)(1) of the Act. For purposes of meeting this requirement, 
section 1888(e)(6)(B)(ii) of the Act requires a SNF to submit the 
standardized resident assessment data required under section 1819(b)(3) 
of the Act using the standard instrument designated by the state under 
section 1819(e)(5) of the Act.
    For purposes of the SNF QRP, we refer to beneficiaries who receive 
services from SNFs as ``residents,'' and we collect certain information 
about the SNF services they receive using the Resident Assessment 
Instrument Minimum Data Set (MDS).
    Section 1899B(b)(1)(B) of the Act describes standardized resident 
assessment data as data required for at least the quality measures 
described in sections 1899B(c)(1) of the Act and that is for the 
following categories:
     Functional status, such as mobility and self-care at 
admission to a PAC provider and before discharge from a PAC provider;
     Cognitive function, such as ability to express ideas and 
to understand and mental status, such as depression and dementia;
     Special services, treatments and interventions such as the 
need for ventilator use, dialysis, chemotherapy, central line placement 
and total parenteral nutrition;
     Medical conditions and comorbidities such as diabetes, 
congestive heart failure and pressure ulcers;
     Impairments, such as incontinence and an impaired ability 
to hear, see or swallow; and
     Other categories deemed necessary and appropriate.
    As required under section 1899B(b)(1)(A) of the Act, the 
standardized resident assessment data must be reported at least for SNF 
admissions and discharges, but the Secretary may require the data to be 
reported more frequently.
    In the FY 2018 SNF PPS proposed rule (82 FR 21043 through 21044), 
we proposed to define the standardized resident assessment data that 
SNFs must report to comply with section 1888(e)(6) of the Act, as well 
as the requirements for the reporting of these data. The collection of 
standardized resident assessment data is critical to our efforts to 
drive improvement in health care quality across the four post-acute 
care (PAC) settings to which the IMPACT Act applies. We intend to use 
these data for a number of purposes, including facilitating their 
exchange and longitudinal use among health care providers to enable 
high quality care and outcomes through care coordination, as well as 
for quality measure calculation, and identifying comorbidities that 
might increase the medical complexity of a particular admission.
    SNFs are currently required to report resident assessment data 
through the MDS by responding to an identical set of assessment 
questions using an identical set of response options (we refer to each 
solitary question/response option as a data element and we refer to a 
group of questions/responses as data elements), both of which 
incorporate an identical set of definitions and standards. The primary 
purpose of the identical questions and response options is to ensure 
that we collect a set of standardized resident assessment data elements 
across SNFs which we

[[Page 36569]]

can then use for a number of purposes, including SNF payment and 
measure calculation for the SNF QRP.
    LTCHs, IRFs, and HHAs are also required to report patient 
assessment data through their applicable PAC assessment instruments, 
and they do so by responding to identical assessment questions 
developed for their respective settings using an identical set of 
response options (which incorporate an identical set of definitions and 
standards). Like the MDS, the questions and response options for each 
of these other PAC assessment instruments are standardized across the 
PAC provider type to which the PAC assessment instrument applies. 
However, the assessment questions and response options in the four PAC 
assessment instruments are not currently standardized with each other. 
As a result, questions and response options that appear on the MDS 
cannot be readily compared with questions and response options that 
appear, for example, on the Inpatient Rehabilitation Facility-Patient 
Assessment Instrument (IRF-PAI) the PAC assessment instrument used by 
IRFs. This is true even when the questions and response options are 
similar. This lack of standardization across the four PAC provider 
types has limited our ability to compare one PAC provider type with 
another for purposes such as care coordination and quality improvement.
    To achieve a level of standardization across SNFs, LTCHs, IRFs, and 
HHAs that enables us to make comparisons between them, we proposed to 
define ``standardized resident assessment data'' \7\ as patient or 
resident assessment questions and response options that are identical 
in all four PAC assessment instruments, and to which identical 
standards and definitions apply. Standardizing the questions and 
response options across the four PAC assessment instruments will also 
enable the data to be interoperable allowing it to be shared 
electronically, or otherwise, between PAC provider types. It will 
enable the data to be comparable for various purposes, including the 
development of cross-setting quality measures, which may enhance 
provider and resident choice when selecting a post-acute care setting 
that will deliver the best outcome possible, and to inform payment 
models that take into account patient characteristics rather than 
setting, as described in the IMPACT Act.
---------------------------------------------------------------------------

    \7\ The FY 2018 SNF PPS proposed rule (82 FR 21044) used the 
term ``standardized patient assessment data.'' For purposes of the 
final rule we use the term ``standardized resident assessment 
data''.
---------------------------------------------------------------------------

    We sought comment on this definition. A discussion of these 
comments, along with our responses, appears below.
    Comment: Most commenters expressed general support for the 
definition of standardized patient/resident assessment data. One 
commenter further expressed support for CMS efforts to standardize 
assessment data to promote care coordination and quality improvements 
as required under the IMPACT Act.
    Response: We thank the commenters for their support.
    Final Decision: We are finalizing our definition of standardized 
resident assessment data as proposed.
(2) General Considerations Used for the Selection of Standardized 
Resident Assessment Data
    As part of our effort to identify appropriate standardized resident 
assessment data for purposes of collecting under the SNF QRP, we sought 
input from the general public, stakeholder community, and subject 
matter experts on items that would enable person-centered, high quality 
health care, as well as access to longitudinal information to 
facilitate coordinated care and improved beneficiary outcomes.
    To identify optimal data elements for standardization, our data 
element contractor organized teams of researchers for each category, 
and each team worked with a group of advisors made up of clinicians and 
academic researchers with expertise in PAC. Information-gathering 
activities were used to identify data elements, as well as key themes 
related to the categories described in section 1899B(b)(1)(B) of the 
Act. In January and February 2016, our data element contractor also 
conducted provider focus groups for each of the four PAC provider 
types, and a focus group for consumers that included current or former 
PAC patients and residents, caregivers, ombudsmen, and patient advocacy 
group representatives. The Development and Maintenance of Post-Acute 
Care Cross-Setting Standardized Patient Assessment Data Focus Group 
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.
    We also assembled a 16-member TEP that met on April 7 and 8, 2016, 
and January 5 and 6, 2017, in Baltimore, Maryland, to provide expert 
input on data elements that are currently in each PAC assessment 
instrument, as well as data elements that could be standardized. The 
Development and Maintenance of Post-Acute Care Cross-Setting 
Standardized Patient Assessment Data TEP Summary Reports are 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.
    As part of the environmental scan, data elements currently in the 
four existing PAC assessment instruments were examined to see if any 
could be considered for proposal as standardized resident assessment 
data. Specifically, this evaluation included consideration of data 
elements in OASIS-C2 (effective January 2017); IRF-PAI, v1.4 (effective 
October 2016); LCDS, v3.00 (effective April 2016); and MDS 3.0, v1.14 
(effective October 2016). Data elements in the standardized assessment 
instrument that we tested in the Post-Acute Care Payment Reform 
Demonstration (PAC PRD)--the Continuity Assessment Record and 
Evaluation (CARE) were also considered. A literature search was also 
conducted to determine whether additional data elements to propose as 
standardized resident assessment data could be identified.
    We additionally held four Special Open Door Forums (SODFs) on 
October 27, 2015; May 12, 2016; September 15, 2016; and December 8, 
2016, to present data elements we were considering and to solicit 
input. At each SODF, some stakeholders provided immediate input, and 
all were invited to submit additional comments via the CMS IMPACT 
Mailbox at [email protected].
    We also convened a meeting with federal agency subject matter 
experts (SMEs) on May 13, 2016. In addition, a public comment period 
was open from August 12, to September 12, 2016, to solicit comments on 
detailed candidate data element descriptions, data collection methods, 
and coding methods. The IMPACT Act Public Comment Summary Report 
containing the public comments (summarized and verbatim) and our 
responses, 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.
    We specifically sought to identify standardized resident assessment 
data that we could feasibly incorporate into the LTCH, IRF, SNF, and 
HHA assessment instruments and that have

[[Page 36570]]

the following attributes: (1) Being supported by current science; (2) 
testing well in terms of their reliability and validity, consistent 
with findings from the Post-Acute Care Payment Reform Demonstration 
(PAC PRD); (3) the potential to be shared (for example, through 
interoperable means) among PAC and other provider types to facilitate 
efficient care coordination and improved beneficiary outcomes; (4) the 
potential to inform the development of quality, resource use and other 
measures, as well as future payment methodologies that could more 
directly take into account individual beneficiary health 
characteristics; and (5) the ability to be used by practitioners to 
inform their clinical decision and care planning activities. We also 
applied the same considerations that we apply with quality measures, 
including the CMS Quality Strategy which is framed using the three 
broad aims of the National Quality Strategy.
d. Policy for Retaining SNF QRP Measures and Application of That Policy 
to Standardized Resident Assessment Data
    In the FY 2016 SNF PPS final rule (80 FR 46431 through 46432), we 
adopted our policy for measure removal and also finalized that when we 
initially adopt a measure for the SNF QRP, 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. In the FY 2018 SNF PPS proposed rule (82 FR 21044) we proposed 
to apply this policy to the standardized resident assessment data that 
we adopt for the SNF QRP.
    We sought public comment on our proposal. A discussion of these 
comments, along with our responses, appears below.
    Comment: Several commenters supported applying the existing policy 
for retaining SNF QRP measures to standardized resident assessment 
data.
    Response: We thank the commenters for their support.
    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposal to apply the policy for 
retaining SNF QRP measures to the standardized resident assessment data 
as proposed.
e. Policy for Adopting Changes to SNF QRP Measures and Application of 
That Policy to Standardized Resident Assessment Data
    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 did not propose to make any 
changes to this policy in the FY 2018 SNF PPS proposed rule (82 FR 
21044 through 20145). We did propose to apply this policy to the 
standardized resident assessment data that we adopt for the SNF QRP.
    We sought public comment on our proposal. A discussion of these 
comments, along with our responses, appears below.
    Comment: All commenters who commented on this topic expressed 
support for our subregulatory process for adopting non-substantive 
changes to SNF QRP measures, recognizing that the measures will require 
adjustments over time to reflect changes in practice or populations. 
All of these commenters also specifically expressed support for our 
proposal to apply this approach to the standardized resident assessment 
data proposed for the SNF QRP. Many of these commenters further 
supported our policy to make substantive changes to quality measures 
using the rulemaking process. The commenters also recognized that 
corrections and adjustments to measures may become necessary over time 
and that we will provide a clear rationale for such changes, as well as 
a mechanism for public comment on these changes.
    Response: We appreciate the commenters' support.
    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposal to apply our policy for 
adopting changes to the SNF QRP measures to the standardized resident 
assessment data as proposed.
f. Quality Measures Currently Adopted for the SNF QRP
    The SNF QRP currently has seven adopted measures as outlined in 
Table 18.

      Table 18--Quality Measures Currently Adopted for the SNF QRP
------------------------------------------------------------------------
            Short name                   Measure name & data source
------------------------------------------------------------------------
             Resident Assessment Instrument Minimum Data Set
------------------------------------------------------------------------
Pressure Ulcers...................  Percent of Residents or Patients
                                     with Pressure Ulcers that are New
                                     or Worsened (Short Stay) (NQF
                                     #0678).
Application of Falls..............  Application of the NQF-endorsed
                                     Percent of Residents Experiencing
                                     One or More Falls with Major Injury
                                     (Long Stay) (NQF #0674).*
Application of Functional           Application of Percent of LTCH
 Assessment/Care Plan.               Patients with an Admission and
                                     Discharge Functional Assessment and
                                     a Care Plan That Addresses Function
                                     (NQF #2631).*
DRR...............................  Drug Regimen Review Conducted with
                                     Follow-Up for Identified Issues-
                                     Post Acute Care (PAC) Skilled
                                     Nursing Facility Quality Reporting
                                     Program.*
------------------------------------------------------------------------
                              Claims-based
------------------------------------------------------------------------
MSPB..............................  Total Estimated Medicare Spending
                                     Per Beneficiary (MSPB)--Post Acute
                                     Care (PAC) Skilled Facility (SNF)
                                     Quality Reporting Program (QRP).*
DTC...............................  Discharge to Community-Post Acute
                                     Care (PAC) Skilled Nursing Facility
                                     (SNF) Quality Reporting Program
                                     (QRP).*
PPR...............................  Potentially Preventable 30-Day Post-
                                     Discharge Readmission Measure for
                                     Skilled Nursing Facility Quality
                                     Reporting Program.*
------------------------------------------------------------------------
* Not currently NQF-endorsed for the SNF Setting.

    We received several comments about quality measures currently 
adopted for the SNF QRP which are summarized and discussed below.
    Comment: A few commenters expressed views regarding the Potentially 
Preventable 30-Day Post-Discharge Readmission Measure for SNF QRP, a 
measure previously finalized in the FY 2017 SNF PPS final rule (81 FR 
52030 through 52034). Comments included recommendations for

[[Page 36571]]

additional testing and evaluation of the PPR definition and measure 
exclusions. One commenter supported the public reporting thresholds. 
Another commenter requested that patient-level data be made available 
to SNFs to facilitate quality improvement and review and corrections. 
We also received some comments related to accounting for social risk 
factors.
    Response: While we received comments regarding this previously 
finalized measure, the changes we proposed pertain only to the years of 
data used to calculate this measure and therefore we consider these 
comments to be out of scope of this current rule. We did address these 
issues in the FY 2017 SNF PPS final rule (81 FR 52030 through 52034), 
and we refer the reader to that detailed discussion. We continue to 
believe that the measure specifications are appropriate for this 
measure. We also refer readers to section III.D.2.b.1 of this rule for 
responses to comments received related to social risk factors for this 
measure.
    Comment: We received a comment regarding the Drug Regimen Review 
Conducted with Follow-Up for Identified Issues-PAC SNF QRP measure, a 
measure previously finalized in the FY 2017 SNF PPS final rule. The 
commenter expressed support for MedPAC comments regarding the measure, 
including the MedPAC recommendation that we develop a measure to 
evaluate PAC provider support for medication reconciliation throughout 
the care continuum, including provider transfer of the patient 
medication list to the follow-up provider at patient discharge. The 
commenter stated the importance of provider access to patient 
medication lists and suggested that requiring providers to transmit the 
patient medication list to the follow-up provider at discharge may 
improve patient safety and prevent avoidable readmissions.
    Response: We appreciate the comments received for this finalized 
measure. We refer readers to the FY 2017 SNF PPS final rule (81 FR 
52034 through 52039) for detailed responses related to the previously 
finalized Drug Regimen Review Conducted with Follow-Up for Identified 
Issues-PAC SNF QRP measure.
    Comment: A few commenters expressed views regarding the Medicare 
Spending per Beneficiary-PAC SNF QRP, a measure finalized in the FY 
2017 SNF PPS final rule (81 FR 52014 through 52021). Commenters 
addressed the risk-adjustment approach, clinically unrelated services, 
confidential feedback reporting, accounting for social risk factors, 
MSPB-PAC measure alignment, and unintended consequences related to 
implementation of the measure. One commenter felt that the measure was 
confusing, and that patients and providers might incorrectly interpret 
it as a measure of quality rather than efficiency. Another commenter 
encouraged CMS to utilize claims and patient assessment data to 
incorporate functional status into the risk-adjustment. Another 
commenter expressed concern that PAC providers' performance on this 
measure would focus on costs per patient, without fully accounting for 
patient outcomes, and that efficiency should not be based solely on the 
MSPB-PAC measures. This commenter also noted that this measure may 
result in limiting access to certain patients. One commenter stated 
that the MSPB-PAC measures should be more uniformly defined so as to 
facilitate a meaningful comparison of spending for beneficiaries across 
PAC settings. Another commenter felt that the measure was flawed with 
regard to putting SNFs at risk for post-discharge services beyond their 
control. The commenter encouraged CMS to provide additional details 
regarding the types of services that would be considered ``included and 
associated services.'' Another commenter urged CMS to provide the 
opportunity for confidential feedback between CMS and providers before 
publicly displaying the MSPB-PAC measures.
    Response: While we received comments regarding the previously 
finalized measure, Medicare Spending per Beneficiary-PAC SNF QRP, since 
no changes were proposed to this measure, we consider comments received 
to be outside the scope of the current rule. We addressed these issues 
in the FY 2017 SNF PPS final rule (81 FR 52014 through 52021), and we 
refer readers to that detailed discussion. We continue to believe that 
the measure specifications, including the risk-adjustment, are 
appropriate for this measure. With regard to comments related to 
accounting for social risk factors, we refer readers to section 
III.D.2.b.1. of this rule.
    Comment: We received comments related to the Discharge to 
Community-PAC SNF QRP measure, a measure previously finalized in the FY 
2017 SNF PPS final rule. Comments included suggestions to adjust for 
sociodemographic and socioeconomic risk factors and caregiver support, 
to adjust for factors unique to providers offering dedicated services 
to specialty residents (for example, those with HIV/AIDS) who may 
encounter greater challenges with community transitions, to exclude 
patients who died in the observation window following return to a 
community setting, to distinguish between a patient's return to home in 
the community versus home in a custodial nursing facility, to assess 
reliability and validity of the claims discharge status code used to 
calculate the measure, and to submit the measure for NQF endorsement. 
Commenters also shared concerns about risk adjustment for social 
factors as this could mask disparities in care, potential unintended 
consequences for patients expected to have difficult transitions to the 
community such as decreased PAC access and increased healthcare costs 
due to more costly acute care stays, lack of adjustment for regional 
differences in community-based needs and supports, and lack of 
adjustment for patients' goals in the community, such as those seeking 
end-of-life care outside of formal hospice services.
    Response: While we received comments regarding the previously 
finalized Discharge to Community-PAC SNF QRP measure, since no changes 
were proposed to this measure, we consider comments received to be 
outside the scope of the current rule. We previously responded to 
comments on these topics in the FY 2017 SNF PPS final rule (81 FR 52021 
through 52029); we refer the commenters to the FY 2017 SNF PPS final 
rule for a detailed response on these issues. We also note that in the 
FY 2018 SNF PPS proposed rule (81 FR 21058), we sought comment on the 
exclusion of baseline nursing facility residents as a potential future 
modification of the Discharge to Community-PAC SNF QRP measure. We 
refer readers to section III.D.2.i.1 of this final rule for a 
discussion of this issue. We also refer readers to section III.D.2.b.1. 
of this final rule for responses to comments received related to 
accounting for social risk factors for the Discharge to Community-PAC 
SNF QRP measure.
g. SNF QRP Quality Measures Beginning With the FY 2020 SNF QRP
    In the FY 2018 SNF PPS proposed rule (82 FR 21045 through 21057), 
beginning with the FY 2020 SNF QRP, in addition to the quality measures 
we are retaining under our policy described in section III.D.2.f. of 
this final rule, we proposed to remove the current pressure ulcer 
measure entitled Percent of Residents or Patients with Pressure Ulcers 
That Are New or Worsened (Short Stay) (NQF #0678) and to replace it 
with a modified version of the measure entitled Changes in Skin 
Integrity Post-Acute Care: Pressure Ulcer/Injury and to adopt four 
function

[[Page 36572]]

outcome measures on resident functional status. We also proposed to 
characterize the data elements described below as standardized resident 
assessment data under section 1899B(b)(1)(B) of the Act that must be 
reported by SNFs under the SNF QRP through the MDS.
    The measures are as follows:
     Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/
Injury.
     Application of IRF Functional Outcome Measure: Change in 
Self-Care Score for Medical Rehabilitation Patients (NQF #2633).
     Application of IRF Functional Outcome Measure: Change in 
Mobility Score for Medical Rehabilitation Patients (NQF #2634).
     Application of IRF Functional Outcome Measure: Discharge 
Self-Care Score for Medical Rehabilitation Patients (NQF #2635).
     Application of IRF Functional Outcome Measure: Discharge 
Mobility Score for Medical Rehabilitation Patients (NQF #2636).
    The measures are described in more detail below.
    (1) Replacing the Current Pressure Ulcer Quality Measure, Percent 
of Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short Stay) (NQF #0678), with a Modified Pressure Ulcer Measure, 
Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/Injury
(a) Measure Background
    In the FY 2018 SNF PPS proposed rule (82 FR 21045 through 21049), 
we proposed to remove the current pressure ulcer measure, Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short Stay) (NQF #0678) from the SNF QRP measure set and replace it 
with a modified version of that measure, Changes in Skin Integrity 
Post-Acute Care: Pressure Ulcer/Injury, beginning with the FY 2020 SNF 
QRP. The change in the measure name is to reduce confusion about the 
new modified measure. The modified version differs from the current 
version of the measure because it includes new or worsened unstageable 
pressure ulcers, including deep tissue injuries (DTIs), in the measure 
numerator. The modified version of the measure would satisfy the IMPACT 
Act domain of skin integrity and changes in skin integrity.
    We note that the technical specifications for the pressure ulcer 
measure were updated in August 2016 through a subregulatory process to 
ensure technical alignment of the SNF measure specifications with the 
LTCH, IRF, and HH specifications. The technical updates were added to 
ensure clarity in how the measure is calculated, and to avoid possible 
over counting of pressure ulcers in the numerator. We corrected the 
technical specifications to mitigate the risk of over counting new or 
worsened pressure ulcers and to reflect the actual unit of analysis as 
finalized in the rule, which is a stay (Medicare Part A stay) for SNF 
QRP, consistent with the IRF, and LTCH QRPs, rather than an episode 
(which could include multiple stays) as is used in the case of Nursing 
Home Compare. Thus, we updated the SNF measure specifications to 
reflect all resident stays, rather than the most-recent episode in a 
quarter, which is comprised of one or more stays in that measure 
calculation. Also, to ensure alignment, we corrected our specifications 
to ensure that healed wounds are not incorrectly captured in the 
measure. Further, we corrected the specifications to ensure the 
exclusion of residents who expire during their SNF stay. The SNF 
specifications can be reviewed on our Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
(b) Measure Importance
    As described in the FY 2016 SNF PPS final rule (80 FR 46433), 
pressure ulcers are high-cost adverse events and an important measure 
of quality. For information on the history and rationale for the 
relevance, importance, and applicability of having a pressure ulcer 
measure in the SNF QRP, we refer readers to the FY 2016 SNF PPS final 
rule (80 FR 46433 through 46434).
    We proposed to adopt a modified version of the current pressure 
ulcer measure because unstageable pressure ulcers, including DTIs, are 
similar to Stage 2, Stage 3, and Stage 4 pressure ulcers in that they 
represent poor outcomes, are a serious medical condition that can 
result in death and disability, are debilitating and painful, and are 
often an avoidable outcome of medical care.8 9 10 11 12 13 
Studies show that most pressure ulcers can be avoided and can also be 
healed in acute, post-acute, and long-term care settings with 
appropriate medical care.\14\
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    \8\ Casey, G. (2013). ``Pressure ulcers reflect quality of 
nursing care.'' Nurs N Z 19(10):20-24.
    \9\ Gorzoni, M.L. and S.L. Pires (2011). ``Deaths In nursing 
homes.'' Rev Assoc Med Bras 57(3):327-331.
    \10\ Thomas, J.M., et al. (2013). ``Systematic review: health-
related characteristics of elderly hopitalized adults and nursing 
home residents associated with short-term mortality.'' J Am Geriatr 
Soc 61(6): 902-911.
    \11\ White-Chu, E.F., et al. (2011). ``Pressure ulcers in long-
term care.'' Clin Geriatr Med 27(2):241-258.
    \12\ Bates-Jensen BM. Quality indicators for prevention and 
management of pressure ulcers in vulnerable elders. Ann Int Med. 
2001;135 (8 Part 2), 744-51.
    \13\ Bennet, G, Dealy, C Posnett, J (2004). The cost of pressure 
ulcers in the UK, Age and Aging, 33(3):230-235.
    \14\ Black, Joyce M., et al. ``Pressure ulcers: avoidable or 
unavoidable? Results of the national pressure ulcer advisory panel 
consensus conference.'' Ostomy-Wound Management 57.2 (2011): 24.
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    Furthermore, some studies indicate that DTIs, if managed using 
appropriate care, can be resolved without deteriorating into a worsened 
pressure ulcer.15 16 While DTIs are a subset of unstageable 
pressure ulcers, we collect DTI data elements separately and analyze 
them both separately and with other unstageable pressure ulcer item 
categories in our analysis below. We note that DTIs are categorized as 
a type of unstageable pressure ulcer on the MDS and other post-acute 
care item sets.
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    \15\ Sullivan, R. (2013). A Two-year Retrospective Review of 
Suspected Deep Tissue Injury Evolution in Adult Acute Care Patients. 
Ostomy Wound Management 59(9) http://www.o-wm.com/article/two-year-retrospective-review-suspected-deep-tissue-injury-evolution-adult-acute-care-patien.
    \16\ Posthauer, ME, Zulkowski, K. (2005). Special to OWM: The 
NPUAP Dual Mission Conference: Reaching Consensus on Staging and 
Deep Tissue Injury. Ostomy Wound Management 51(4) http://www.o-wm.com/content/the-npuap-dual-mission-conference-reaching-consensus-staging-and-deep-tissue-injury.
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    While there are few studies that provide information regarding the 
incidence of unstageable pressure ulcers in PAC settings, an analysis 
conducted by a contractor suggests the incidence of unstageable 
pressure ulcers varies according to the type of unstageable pressure 
ulcer and setting.\17\ This analysis examined the national incidence of 
new unstageable pressure ulcers in SNFs at discharge compared with 
admission using SNF discharges from January through December 2015. The 
contractor found a national incidence of 0.40 percent of new 
unstageable pressure ulcers due to slough and/or eschar, 0.02 percent 
of new unstageable pressure ulcers due to non-removable dressing/
device, and 0.57 percent of new DTIs. In addition, an international 
study spanning the time period 2006 to 2009, provides some evidence to 
suggest that the

[[Page 36573]]

proportion of pressure ulcers identified as DTI has increased over 
time.\18\
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    \17\ Final Measure Specifications for SNF QRP Quality Measures 
and Standardized Resident Assessment Data Elements, available at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    \18\ VanGilder, C, MacFarlane, GD, Harrison, P, Lachenbruch, C, 
Meyer, S (2010). The Demographics of Suspected Deep Tissue Injury in 
the United States: An Analysis of the International Pressure Ulcer 
Prevalence Survey 2006-2009. Advances in Skin & Wound Care. 23(6): 
254-261.
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    The inclusion of unstageable pressure ulcers, including DTIs, in 
the numerator of this measure is expected to increase measure scores 
and variability in measure scores, thereby improving the ability to 
discriminate among poor- and high-performing SNFs. In the currently 
implemented pressure ulcer measure, Percent of Residents or Patients 
with Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678), 
analysis using data from Quarter 4 2015 through Quarter 3 2016 reveals 
that the SNF mean score is 1.75 percent; the 25th and 75th percentiles 
are 0.0 percent and 2.53 percent, respectively; and 29.11 percent of 
facilities have perfect scores. In the measure, Changes in Skin 
Integrity Post-Acute Care: Pressure Ulcer/Injury, during the same 
timeframe, the SNF mean score is 2.58 percent; the 25th and 75th 
percentiles are 0.65 percent and 3.70 percent, respectively; and 20.32 
percent of facilities have perfect scores.
(c) Stakeholder Feedback
    Our measure development contractor sought input from subject matter 
experts, including Technical Expert Panels (TEPs), over the course of 
several years on various skin integrity topics and specifically those 
associated with the inclusion of unstageable pressure ulcers, including 
DTIs. Most recently, on July 18, 2016, a TEP convened by our measure 
development contractor provided input on the technical specifications 
of this quality measure, including the feasibility of implementing the 
proposed measure's updates related to the inclusion of unstageable 
ulcers, including DTIs, across PAC settings. The TEP supported the 
updates to the measure across PAC settings, including the inclusion in 
the numerator of unstageable pressure ulcers due to slough and/or 
eschar that are new or worsened, new unstageable pressure ulcers due to 
a non-removable dressing or device, and new DTIs. The TEP recommended 
supplying additional guidance to providers regarding each type of 
unstageable pressure ulcer. This support was in agreement with earlier 
TEP meetings, held on June 13, and November 15, 2013, which had 
recommended that CMS update the specifications for the pressure ulcer 
measure to include unstageable pressure ulcers in the 
numerator.19 20 Exploratory data analysis conducted by our 
measure development contractor suggests that the addition of 
unstageable pressure ulcers, including DTIs, will increase the observed 
incidence and variation in the rate of new or worsened pressure ulcers 
at the facility level, which may improve the ability of the proposed 
quality measure to discriminate between poor- and high-performing 
facilities.
---------------------------------------------------------------------------

    \19\ Schwartz, M., Nguyen, K.H., Swinson Evans, T.M., Ignaczak, 
M.K., Thaker, S., and Bernard, S.L.: Development of a Cross-Setting 
Quality Measure for Pressure Ulcers: OY2 Information Gathering, 
Final Report. Centers for Medicare & Medicaid Services, November 
2013. Available: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Quality-Measure-for-Pressure-Ulcers-Information-Gathering-Final-Report.pdf.
    \20\ Schwartz, M., Ignaczak, M.K., Swinson Evans, T.M., Thaker, 
S., and Smith, L.: The Development of a Cross-Setting Pressure Ulcer 
Quality Measure: Summary Report on November 15, 2013, Technical 
Expert Panel Follow-Up Webinar. Centers for Medicare & Medicaid 
Services, January 2014. Available: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Pressure-Ulcer-Quality-Measure-Summary-Report-on-November-15-2013-Technical-Expert-Pa.pdf.
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    We solicited stakeholder feedback on this proposed measure by means 
of a public comment period held from October 17 through November 17, 
2016. In general, we received considerable support for the proposed 
measure. A few commenters supported all of the changes to the current 
pressure ulcer measure that resulted in the measure, with one commenter 
noting the significance of the work to align the pressure ulcer quality 
measure specifications across the PAC settings. Many commenters 
supported the inclusion of unstageable pressure ulcers due to slough/
eschar, due to non-removable dressing/device, and DTIs in the quality 
measure. Other commenters did not support the inclusion of DTIs in the 
quality measure because they stated that there is no universally 
accepted definition for this type of skin injury.
    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. 
This summary includes further detail about our responses to various 
concerns and ideas stakeholders raised at that time.
    The NQF-convened Measures Application Partnership (MAP) Post-Acute 
Care/Long-Term Care (PAC/LTC) Workgroup met on December 14 and 15, 
2016, and provided input to us about this measure. The workgroup 
provided a recommendation of ``support for rulemaking'' for use of the 
measure in the SNF QRP. The MAP Coordinating Committee met on January 
24 and 25, 2017, and provided a recommendation of ``conditional support 
for rulemaking'' for use of the proposed measure in the SNF QRP. The 
MAP's conditions of support include that, as a part of measure 
implementation, CMS provide guidance on the correct collection and 
calculation of the measure result, as well as guidance on public 
reporting Web sites explaining the impact of the specification changes 
on the measure result. The MAP's conditions also specify that CMS 
continue analyzing the proposed measure to investigate unexpected 
results reported in public comment. We intend to fulfill these 
conditions by offering additional training opportunities and 
educational materials in advance of public reporting, and by continuing 
to monitor and analyze the proposed measure. More information about the 
MAP's recommendations for this measure is available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=84452.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed pressure ulcer quality measures for PAC 
settings that are inclusive of unstageable pressure ulcers. There are 
related measures, but after careful review, we determined these 
measures are not applicable for use in SNFs based on the populations 
addressed or other aspects of the specifications. We are unaware of any 
other such quality measures that have been endorsed or adopted by 
another consensus organization for the SNF setting. Therefore, based on 
the evidence discussed above, we proposed to adopt the quality measure 
entitled, Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/
Injury, for the SNF QRP beginning with the FY 2020 SNF QRP. We plan to 
submit the proposed measure to the NQF for endorsement consideration as 
soon as feasible.
(d) Data Collection
    The data for this quality measure would be collected using the MDS, 
which is currently submitted by SNFs through the Quality Improvement 
and Evaluation System (QIES) Assessment Submission and Processing 
(ASAP) System. The proposed standardized resident assessment data 
applicable to this measure that must be reported by SNFs for admissions 
as well as discharges occurring on or after October

[[Page 36574]]

1, 2018 is described in section III.D.2. of this final rule. SNFs are 
already required to complete unstageable pressure ulcer data elements 
on the MDS. While the inclusion of unstageable wounds in the proposed 
measure results in a measure calculation methodology that is different 
from the methodology used to calculate the current pressure ulcer 
measure, the data elements needed to calculate the proposed measure are 
already included in the MDS. In addition, this proposed measure will 
further standardize the data elements used in risk adjustment of this 
measure. Our proposal to eliminate duplicative data elements will 
result in an overall reduced reporting burden for SNFs for the proposed 
measure.
    To view the updated MDS, with the proposed changes, we refer to the 
reader to https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/nursinghomequalityinits/mds30raimanual.html. For 
more information on MDS submission using the QIES ASAP System, we refer 
readers to https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/NHQIMDS30TechnicalInformation.html.
    For technical information about this proposed measure, including 
information about the measure calculation and the standardized resident 
assessment data elements used to calculate this measure, we refer 
readers to the document titled, Final Measure Specifications for SNF 
QRP Quality Measures and Standardized Resident Assessment Data 
Elements, available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    We proposed that SNFs begin reporting the proposed pressure ulcer 
measure, Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/
Injury, which will replace the current pressure ulcer measure, with 
data collection beginning October 1, 2018 for admissions as well as 
discharges.
    We sought public comment on our proposal to replace the current 
pressure ulcer measure, Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (Short Stay) (NQF #0678), with a 
modified version of that measure, entitled Changes in Skin Integrity 
Post-Acute Care: Pressure Ulcer/Injury, beginning with the FY 2020 SNF 
QRP. A discussion of these comments, along with our responses, appears 
below.
    Comment: Many commenters supported the proposed replacement of the 
current pressure ulcer measure, the Percent of Residents or Patients 
with Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678), 
with a modified version of that measure, entitled Changes in Skin 
Integrity Post-Acute Care: Pressure Ulcer/Injury. Commenters recognized 
that the proposed measure will meet the requirements of the IMPACT Act 
for the Skin Integrity and Changes in Skin Integrity domain. Commenters 
believed that the revisions identified in the proposed rule will 
improve on the existing pressure ulcer measure and ensure that the data 
collected accurately reflects the care and conditions of the SNF 
patient population. One commenter supported the use of data elements 
that are already in use in the MDS to reduce reporting burden for 
providers. Another commenter noted that revisions to quality measures 
are an important part of ensuring accurate information that is 
reflective of advances in knowledge and technology, and ensuring that 
the data reflect the patient population.
    Response: We appreciate the commenters' support to replace the 
current pressure ulcer measure, Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678), with 
a modified version of the measure, Changes in Skin Integrity Post-Acute 
Care: Pressure Ulcer/Injury to fulfill the requirements of the IMPACT 
Act. We agree that this proposal will limit regulatory burden and 
promote high quality care, as the commenters describe.
    Comment: A few commenters expressed concerns that the variation in 
measure scores between facilities could reflect differences in the 
interpretation of definitions for unstageable pressure ulcers or DTIs, 
rather than actual differences in quality or care practices. One 
commenter cautioned that a measure should not be changed to create 
performance variation, but rather to be consistent with current science 
or to provide clarity and consistent data collection. The commenters 
encouraged additional testing of the measure to ensure that it collects 
accurate data.
    Response: We have performed testing to compare the performance of 
the proposed measure with the existing pressure ulcer/injury measure. 
Current findings indicate that the measure is both valid and reliable 
in the SNF, LTCH, and IRF settings.
    The reliability and validity of the data elements used to calculate 
this quality measure have been tested in several ways. Rigorous testing 
on both reliability and validity of the data elements in the MDS 3.0 
provides evidence for the data elements used in the SNF, LTCH, and IRF 
settings.\21\ The MDS 3.0 pilot test showed good reliability, and the 
results are applicable to the IRF-PAI as well as the LTCH CARE Data Set 
because the data elements tested are the same as those used in the IRF-
PAI and LTCH CARE Data Set. Across pressure ulcer data elements, 
average gold-standard to gold-standard kappa statistic was 0.905. The 
average gold-standard to facility-nurse kappa statistic was 0.937. 
These kappa scores indicate ``almost perfect'' agreement using the 
Landis and Koch standard for strength of agreement.\22\
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    \21\ Saliba, D., & Buchanan, J. (2008, April). Development and 
validation of a revised nursing home assessment tool: MDS 3.0. 
Contract No. 500-00-0027/Task Order #2. Santa Monica, CA: Rand 
Corporation. Retrieved from http://www.cms.hhs.gov/NursingHomeQualityInits/Downloads/MDS30FinalReport.pdf.
    \22\ Landis, R., & Koch, G. (1977, March). The measurement of 
observer agreement for categorical data. Biometrics 33(1), 159-174.
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    To assess the construct validity of this measure, or the degree to 
which the measure construct measures what it claims or purports to be 
measuring, our measure contractor sought input from TEPs over the 
course of several years. Most recently, on July 18, 2016, a TEP 
supported the inclusion in the numerator of unstageable pressure ulcers 
due to slough and/or eschar that are new or worsened, new unstageable 
pressure ulcers/injuries due to a non-removable dressing or device, and 
new DTIs. The measure testing activities were presented to TEP members 
for their input on the reliability, validity, and feasibility of this 
measure change. The TEP members supported the measure construct.
    The proposed measure also increased the variability of measures 
scores between providers, as noted by some commenters. We would like to 
clarify that the goal of the proposed measure is not to create 
performance variation where none exists, but rather to better measure 
existing performance variation. This increased variability of scores 
between facilities will improve the ability of the measure to 
distinguish between high- and low-performing facilities.
    We will continue to perform reliability and validity testing in 
compliance with NQF guidelines and the Blueprint for the CMS Measures 
Management System to ensure that that the measure demonstrates 
scientific acceptability (including reliability and validity) and meets 
the goals of the QRP.

[[Page 36575]]

Finally, as with all measure development and implementation, we will 
provide training and guidance prior to implementation of the measure to 
promote consistency in the interpretation of the measure.
    Comment: Commenters requested further training and guidance in 
completing the M0300 data element that will be used to calculate the 
proposed quality measure. One commenter stated that confusion exists 
related to worsening of pressure ulcers, unstageable pressure ulcers 
due to slough or eschar, and the concept of ``present on admission''. 
One commenter stated that the use of these data elements would require 
SNFs to calculate the number of new or worsened pressure ulcers by 
subtracting those present on admission. Some commenters stated that the 
modified measure may be difficult for providers to capture because they 
are being asked to report on a different data element.
    Response: The measure will be calculated using data reported on the 
M0300 data element collected at discharge, which only requires SNFs to 
report the number of pressure ulcers for each stage (including stages 
2, 3, and 4, unstageable due to slough and/or eschar, unstageable due 
to non-removable dressing/device, and DTIs), and of those, the number 
that were present on admission. The M0300 data element currently exists 
on the MDS, and the current MDS RAI Manual, as well as prior versions 
of the Manual, include guidance about how to complete the data element, 
including unstageable pressure ulcers and pressure ulcers that are 
present on admission. The MDS RAI Manual can be found at https://
www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-
Instruments/NursinghomeQualityInits/MDS30RAIManual.html.
    Comment: We received several comments regarding the inclusion of 
unstageable pressure ulcers in the proposed measure. One commenter 
specifically supported the inclusion of these types of pressure ulcers. 
Other commenters did not support the inclusion of unstageable pressure 
ulcers, in the quality measure as proposed, and encouraged further 
testing. Some commenters stated that there is a lack of clear 
definition of pressure ulcers included in this measure, and that those 
definitions may be too subjective to get reliable data. Commenters also 
requested that we provide training opportunities and educational 
materials prior to the implementation of this measure.
    Response: We appreciate the support we have received regarding the 
inclusion of unstageable pressure ulcers, including DTIs, in the 
proposed quality measure. We believe that the inclusion of unstageable 
pressure ulcers in the measure will result in a fuller picture of 
quality to residents and families, and lead to further quality 
improvement efforts that will advance patient safety by reducing the 
rate of facility acquired pressure ulcers at any stage. We would like 
to clarify that the definitions of pressure ulcers are adapted from the 
National Pressure Ulcer Advisory Panel (NPUAP), and are standardized 
across all PAC settings. These definitions are universally accepted, 
objective, and considered to be the gold-standard definition by 
national and international stakeholders such as the NPUAP, European 
Pressure Ulcer Advisory Panel (EPUAP), Wound, Ostomy and Continence 
Nurses Society (WOCN), amongst others. As a result, the use of these 
universally accepted definitions of pressure ulcers furthers our 
commitment to ensuring that all quality measures implemented in the QRP 
meet the testing goals of the QRP.
    To provide greater clarity about the definitions of different types 
of unstageable pressure ulcers and how to code them on the MDS, we are 
currently engaged in multiple educational efforts. These include 
training events, updates to the manuals and training materials, and 
responses to Help Desk questions to promote understanding and proper 
coding of these data elements. We will continue to engage in these 
training activities prior to implementation of the proposed measure.
    Comment: One commenter specifically supported the new measure and 
the specific inclusion of DTIs, and stressed the importance and impact 
of such change in increasing the number of pressure ulcers captured. 
The commenter stated that it would be important to note the impact on 
the Five Star Quality Rating System. This commenter also noted that 
some DTIs can also evolve or worsen, despite being managed with 
appropriate care. Other commenters did not support the inclusion of 
DTIs in the measure. These commenters stated that there is not a 
universally accepted definition of DTIs, and that DTIs are commonly 
misdiagnosed, which could lead to surveillance bias.
    Response: We appreciate the comments regarding the inclusion of 
DTIs in the proposed quality measure. DTIs are often an avoidable 
outcome of medical care, are debilitating and painful, and can result 
in death and/or disability, similar to Stage 2, Stage 3 and Stage 4 
pressure ulcers. While some DTIs may worsen, studies indicate that many 
DTIs, if managed using appropriate care, can be resolved without 
deteriorating into a worsened pressure ulcer. Therefore, we believe 
that the inclusion of DTIs in the proposed quality measure is essential 
to be able to accurately reflect the number of these types of pressure 
injuries and to provide the appropriate patient care. Further, we 
believe that it is important to do a thorough assessment on every 
patient in each PAC setting, including a thorough skin assessment 
documenting the presence of any pressure ulcers or injuries of any 
kind, including DTIs. We agree that it is important to conduct thorough 
and consistent assessments to avoid the possibility of surveillance 
bias.
    When considering the addition of DTIs to the measure numerator, we 
convened cross-setting TEPs in June and November 2013, and obtained 
input from clinicians, experts, and other stakeholders. An additional 
cross-setting TEP convened by our measure development contractor in 
July 2016 also supported the recommendation to include unstageable 
pressure ulcers, including DTIs, in the numerator of the quality 
measure. Given DTIs' potential impact on mortality, morbidity, and 
quality of life, it may be detrimental to the quality of care to 
exclude DTIs from a pressure ulcer quality measure.
    We do not intend to include the proposed measure in the Five Star 
Quality Rating System calculations.
    Comment: Several commenters recommended that we attain NQF 
endorsement of the Changes in Skin Integrity Post-Acute Care: Pressure 
Ulcer/Injury measure prior to implementation.
    Response: While this measure is not currently NQF-endorsed, we 
recognize that the NQF endorsement process is an important part of 
measure development and plan to submit this measure for NQF endorsement 
consideration as soon as feasible.
    Comment: Several commenters noted that there is a difference in the 
denominator across settings in terms of which payer sources (Medicare 
Part A or Medicare Advantage) are included in the measure. Commenters 
recommended that we ensure that common denominators are used when 
displaying this measure for quality comparison purposes. One commenter 
stated that there is an IMPACT Act mandate to implement ``interoperable 
measures'' across PAC settings.
    Response: We recognize that data is currently collected from 
different payer sources for each PAC setting. We believe

[[Page 36576]]

that quality care is best assessed through the collection of data from 
all patients, and strive to include the largest possible patient 
population in the measure denominator. For this reason, we do not seek 
to limit the denominator in each setting based on the data currently 
available in other settings (that is, limiting every setting 
denominator to Medicare Part A patients). Regarding the concern that 
different patient population denominators are misleading to consumers 
and providers, we seek to clarify the intent and use of this quality 
measure through rulemaking, provider training, and ongoing 
communication with stakeholders. Ongoing communication includes the 
posting of measure specifications and communication accompanying public 
reporting. Further, we will take into consideration the expansion of 
the SNF QRP to include all payer sources through future rulemaking.
    The Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/
Injury measure is harmonized across all PAC settings and uses 
standardized resident assessment data as required by the IMPACT Act. 
Further, we would like to clarify that the M0300 data element used to 
calculate this measure is standardized across all PAC settings, 
enabling interoperability. This standardization and interoperability of 
data elements allows for the exchange of information among PAC 
providers and other providers to whom this data is applicable. We refer 
readers to the measure specifications, which describe the 
specifications for the measure in PAC settings, Final Specifications 
for SNF QRP Quality Measures and Standardized Resident Assessment Data 
Elements, available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    Comment: One commenter indicated support for our efforts to 
standardize data elements across PAC settings and encouraged further 
standardization of coding instructions across settings. The commenter 
specifically noted that coding guidance surrounding Kennedy Ulcers 
seems to differ between the LTCH and SNF manuals. The commenter urged 
us to thoroughly review all manuals to ensure standardization of coding 
guidance and instructions.
    Response: The LTCH QRP Manual Version 3.0 instructs LTCHS to not 
count Kennedy ulcers in the pressure ulcer data elements. The MDS RAI 
Manual Version 1.14 provides guidance regarding the etiology of ulcers 
that should be reported in the data elements, but does not provide 
specific guidance on Kennedy ulcers. The guidance in the two manuals 
differs in order to be specific to each setting. Although the guidance 
is tailored to be most applicable to each setting, the data elements 
are standardized. Therefore, we do not expect this tailored guidance to 
add variation to the measure outcome or to the standardized resident 
assessment data.
    Comment: A few commenters noted that SNF performance scores on the 
proposed measure are likely to differ from performance scores on the 
currently implemented pressure ulcer measure, Percent of Residents or 
Patients with Pressure Ulcers That Are New or Worsened (Short Stay) 
(NQF #0678). They recommended development of educational materials for 
the public to explain the perceived shifts in performance.
    Response: We appreciate commenters' concerns about differences in 
performance scores between the two measures and the possibility of 
misinterpretation. While the proposed measure will not be directly 
comparable to the existing measure, it is expected to provide an 
improved measure of quality moving forward since it will more 
accurately capture the number of new and worsened pressure ulcers and 
include unstageable pressure ulcers. Further information and training 
will be provided to providers as well as consumers regarding how to 
interpret scores on the proposed measure, to avoid any possible 
confusion between the proposed measure and the existing measure.
    Comment: One commenter suggested that we include additional risk 
factors in the proposed measure for populations that may be compromised 
physically, such as the ventilator-dependent population, and to include 
factors such as whether the resident experienced a hospital stay, was 
in the emergency department for an extended period of time, was on a 
stretcher for an extended period of time, was receiving palliative 
care, and other hospital factors that may lead to the development of 
pressure ulcers. The commenter also recommended that social risk 
factors be accounted for in the quality measure. One commenter stated 
that the proposed measure should be properly risk adjusted.
    Response: The proposed quality measure would be risk adjusted for 
functional mobility admission performance, bowel continence, diabetes 
mellitus or peripheral vascular disease/peripheral arterial disease, 
and low body mass index in each of the four settings. This risk 
adjustment methodology is described further in the Final Specifications 
for SNF QRP Quality Measures and Standardized Resident Assessment Data 
Elements, available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html. As with our 
measure modification and evaluation processes, we will continue to 
analyze this measure, specifically assessing the addition of variables 
to the risk adjustment model, and testing the inclusion of other risk 
factors as additional risk adjustors. This continued refinement of the 
risk adjustment models will ensure that the measure remains valid and 
reliable to inform quality improvement within and across each PAC 
setting, and to fulfill the public reporting goals of quality reporting 
programs. Our approach to using social risk factors for risk adjustment 
is further described in section III.D.2.B.1 of this final rule.
    Comment: One commenter requested clarification regarding the 
proposed measure and the population it is applied to, stating that the 
long stay pressure ulcer quality measure and short stay pressure ulcer 
quality measure appear to be combined into a single measure.
    Response: The proposed measure, Changes in Skin Integrity Post-
Acute Care: Pressure Ulcer/Injury, is distinct from both the Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short-Stay) Measure (NQF #0678) and the Percent of High Risk Residents 
with Pressure Ulcers (Long Stay) Measure (NQF #0679). There are several 
key differences between these measures and the programs they are used 
in. The long-stay measure, Percent of High-Risk Residents with Pressure 
Ulcers (NQF #0679), measures the percent of residents with one or more 
conditions indicating high risk to develop pressure ulcers (impaired 
bed mobility or transfer, comatose, or malnutrition/risk of 
malnutrition) with any pressure ulcers. This measure is used in the 
Nursing Home Quality Initiative (NHQI) and reported on Nursing Home 
Compare. Conversely, the short-stay measure, Percent of Residents with 
Pressure Ulcers that are New or Worsened (short-stay) (NQF #0678), 
currently used in used in the SNF QRP, assesses the percentage of 
residents who develop new pressure ulcers or have existing

[[Page 36577]]

pressure ulcers worsen over their course of stay in a PAC facility.
    The short stay measure does not include unstageable pressure ulcers 
in the numerator. The measure is used in the NHQI and reported on 
Nursing Home Compare, and is also currently applied to SNF residents 
for the SNF QRP.
    We reviewed both the short stay and long stay measures for 
suitability, but the short stay measure does not include unstageable 
pressure ulcers in the numerator, as described above, and the long stay 
measure was determined to not be applicable for use in SNFs due to the 
populations addressed. The proposed measure is to be applied to the SNF 
population, which comprises residents who are receiving skilled nursing 
services. This measure includes new or worsened pressure ulcers that 
are numerically staged or unstageable, and is standardized across the 
PAC settings. Further information about the specifications of this 
measure can be found at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposal to remove the current pressure 
ulcer measure, Percent of Residents or Patients with Pressure Ulcers 
That Are New or Worsened (Short Stay) (NQF #0678), from the SNF QRP 
measure set and to replace it with a modified version of that measure, 
entitled Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/
Injury, for the SNF QRP with an implementation date of October 1, 2018.
(2) Functional Outcome Measures
    In the FY 2018 SNF PPS proposed rule (82 FR 21047 through 21057) we 
proposed for the SNF QRP four measures that we are specifying under 
section 1899B(c)(1) of the Act for the purposes of meeting the 
functional status, cognitive function, and changes in function and 
cognitive function domain: (1) Application of the IRF Functional 
Outcome Measure: Change in Self-Care Score for Medical Rehabilitation 
Patients (NQF #2633); (2) Application of the IRF Functional Outcome 
Measure: Change in Mobility Score for Medical Rehabilitation Patients 
(NQF #2634); (3) Application of the IRF Functional Outcome Measure: 
Discharge Self-Care Score for Medical Rehabilitation Patients (NQF 
#2635); and (4) Application of the IRF Functional Outcome Measure: 
Discharge Mobility Score for Medical Rehabilitation Patients (NQF 
#2636). We finalized the same functional outcome measures for the IRF 
QRP in the FY 2016 IRF PPS final rule (80 FR 47111 through 47117). 
These measures are: (1) IRF Functional Outcome Measure: Change in Self-
Care for Medical Rehabilitation Patients (NQF #2633); (2) IRF 
Functional Outcome Measure: Change in Mobility Score for Medical 
Rehabilitation (NQF #2634); (3) IRF Functional Outcome Measure: 
Discharge Self-Care Score for Medical Rehabilitation Patients (NQF 
#2635); and (4) IRF Functional Outcome Measure: Discharge Mobility 
Score for Medical Rehabilitation Patients (NQF #2636). We believe these 
measures satisfy section 1899B(c)(1)(A) of the Act because they address 
functional status, cognitive function, and changes in function and 
cognitive function domain. We intend to propose functional outcome 
measures for the home health and long-term care hospital settings in 
the future.
    In developing these SNF functional outcome quality measures, we 
sought to build on our cross-setting function work by leveraging data 
elements currently collected in the MDS section GG, which would 
minimize additional data collection burden while increasing the 
feasibility of cross-setting item comparisons.
    SNFs provide skilled services, such as skilled nursing or therapy 
services. Residents receiving care in SNFs include those whose illness, 
injury, or condition has resulted in a loss of function, and for whom 
rehabilitative care is expected to help regain that function. Treatment 
goals may include fostering residents' ability to manage their daily 
activities so that they can complete self-care and mobility activities 
as independently as possible, and, if feasible, return to a safe, 
active, and productive life in a community-based setting. Given that 
the primary goal of many SNF residents is improvement in function, SNF 
clinicians assess and document residents' functional status at 
admission and at discharge to evaluate the effectiveness of the 
rehabilitation care provided to individual residents and the SNF's 
effectiveness.
    Examination of SNF data shows that SNF treatment practices directly 
influence resident outcomes. For example, therapy services provided to 
SNF residents have been found to be correlated with the functional 
improvement that SNF residents achieve (that is, functional 
outcomes).\23\ Several studies found patients' functional outcomes vary 
based on treatment by physical and occupational therapists. 
Specifically, therapy was associated with significantly greater odds of 
improving mobility and self-care functional independence,\24\ shorter 
length of stay,\25\ and a greater likelihood of discharge to 
community.\26\ Furthermore, Jung et al.\27\ found that an additional 
hour of therapy treatment per week was associated with approximately a 
3.1 percentage-point increase in the likelihood of returning to the 
community among residents with a hip fracture. Achieving these targeted 
resident outcomes, including improved self-care and mobility functional 
independence, reduced length of stay, and increased discharges to the 
community, is a core goal of SNFs.
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    \23\ Jette, D. U., R. L. Warren, & C. Wirtalla. (2005). The 
relation between therapy intensity and outcomes of rehabilitation in 
skilled nursing facilities. Archives of Physical Medicine and 
Rehabilitation, 86 (3), 373-9.
    \24\ Lenze, E.J., Host, H.H., Hildebrand, M.W., Morrow-Howell, 
N., Carpenter, B., Freedland, K.E., . . . & Binder, E.F. (2012). 
Enhanced medical rehabilitation increases therapy intensity and 
engagement and improves functional outcomes in post acute 
rehabilitation of older adults: a randomized-controlled trial. 
Journal of the American Medical Directors Association, 13(8), 708-
712.
    \25\ Medicare Payment Advisory Commission (US). (2016). Report 
to the Congress: Medicare payment policy. Medicare Payment Advisory 
Commission.
    \26\ Cary, M.P., Pan, W., Sloane, R., Bettger, J.P., Hoenig, H., 
Merwin, E.I., & Anderson, R.A. (2016). Self-Care and Mobility 
Following Postacute Rehabilitation for Older Adults with Hip 
Fracture: A Multilevel Analysis. Archives of Physical Medicine and 
Rehabilitation, 97(5), 760-771.
    \27\ Jung, H.Y., Trivedi, A.N., Grabowski, D.C., & Mor, V. 
(2016). Does More Therapy in Skilled Nursing Facilities Lead to 
Better Outcomes in Patients With Hip Fracture? Physical therapy, 
96(1), 81-89.
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    Among SNF residents receiving rehabilitation services, the amount 
of treatment received can vary. For example, the amount of therapy 
treatment provided varies by type (that is, for-profit versus not-for-
profit) and facility location (that is, urban versus 
rural).28 29
---------------------------------------------------------------------------

    \28\
    \29\ Grabowski, D.C., Feng, Z., Hirth, R., Rahman, M., & Mor, V. 
(2013). Effect of nursing home ownership on the quality of post-
acute care: An instrumental variables approach. Journal of Health 
Economics, 32(1), 12-21.
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    Measuring residents' functional improvement across all SNFs on an 
ongoing basis would permit identification of SNF characteristics, such 
as ownership types or locations, associated with better or worse 
resident risk adjusted outcomes and thus help SNFs optimally target 
quality improvement efforts.

[[Page 36578]]

    MedPAC \30\ noted that while there was an overall increase in the 
share of intensive therapy days between 2002 and 2012, the for-profit 
and urban facilities had higher shares of intensive therapy than not-
for-profit facilities and those located in rural areas. Data from 2011 
to 2014 indicate that this variation is not explained by patient 
characteristics, such as activities of daily living, comorbidities and 
age, as SNF residents with stays in 2011 were more independent on 
average than the average SNF resident with stays in 2014. Because more 
intense therapy is associated with more functional improvement for 
certain beneficiaries, this variation in rehabilitation services 
supports the need to monitor SNF residents' functional outcomes. 
Therefore, we believe there is an opportunity for improvement in this 
area.
---------------------------------------------------------------------------

    \30\ Medicare Payment Advisory Commission (US). (2016). Report 
to the Congress: Medicare payment policy. Medicare Payment Advisory 
Commission.
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    In addition, a recent analysis that examined the incidence, 
prevalence, and costs of common rehabilitation conditions found that 
back pain, osteoarthritis, and rheumatoid arthritis are the most common 
and costly conditions affecting more than 100 million individuals and 
costing more than $200 billion per year.\31\ Persons with these medical 
conditions are admitted to SNFs for rehabilitation treatment.
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    \31\ Ma V.Y., Chan L., & Carruthers K.J. (2014). Incidence, 
Prevalence, Costs, and Impact on Disability of Common Conditions 
Requiring Rehabilitation in the United States: Stroke, Spinal Cord 
Injury, Traumatic Brain Injury, Multiple Sclerosis, Osteoarthritis, 
Rheumatoid Arthritis, Limb Loss, and Back Pain. Archives of Physical 
Medicine and Rehabilitation, 95(5), 986-995.
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    The use of standardized mobility and self-care data elements would 
standardize the collection of functional status data, which could 
improve communication when residents are transferred between providers. 
Most SNF residents receive care in an acute care hospital prior to the 
SNF stay, and many SNF residents receive care from another provider 
after the SNF stay.
    Recent research provides empirical support for the risk adjustment 
variables for these quality measures. In a study of resident functional 
improvement in SNFs, Wysocki et al.\32\ found that several resident 
conditions were significantly related to resident functional 
improvement, including cognitive impairment, delirium, dementia, heart 
failure, and stroke. Also, Cary et al. found that several resident 
characteristics were significantly related to resident functional 
improvement, including age, cognitive function, self-care function at 
admission, and comorbidities.\33\
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    \32\ Wysocki, A., Thomas, K.S., & Mor, V. (2015). Functional 
Improvement Among Short-Stay Nursing Home Residents in the MDS 3.0. 
Journal of the American Medical Directors Association, 16(6), 470-
474. http://doi.org/10.1016/j.jamda.2014.11.018.
    \33\ Cary, M.P., Pan, W., Sloane, R., Bettger, J.P., Hoenig, H., 
Merwin, E.I., & Anderson, R.A. (2016). Self-Care and Mobility 
Following Postacute Rehabilitation for Older Adults With Hip 
Fracture: A Multilevel Analysis. Archives of Physical Medicine and 
Rehabilitation, 97(5), 760-771.
---------------------------------------------------------------------------

    These outcome-based quality measures could inform SNFs about 
opportunities to improve care in the area of function and strengthen 
incentives for quality improvement related to resident function.
    We describe each of the four functional outcome quality measures 
below, and then follow with a discussion of the comments we received.
(a) Application of IRF Functional Outcome Measure: Change in Self-Care 
Score for Medical Rehabilitation Patients (NQF #2633)
    The outcome quality measure, Application of IRF Functional Outcome 
Measure: Change in Self-Care Score for Medical Rehabilitation Patients 
(NQF #2633), is an application of the outcome measure finalized in the 
IRF QRP entitled, IRF Functional Outcome Measure: Change in Self-Care 
Score for Medical Rehabilitation Patients (NQF #2633). The quality 
measure estimates the mean risk-adjusted improvement in self-care score 
between admission and discharge among SNF residents. A summary of the 
NQF-endorsed quality measure specifications can be accessed on the NQF 
Web site: http://www.qualityforum.org/qps/2633. Detailed specifications 
for the NQF-endorsed quality measure can be accessed at http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2633.
    The functional outcome measure, the Application of IRF Functional 
Outcome Measure: Change in Self-Care Score for Medical Rehabilitation 
Patients (NQF #2633), requires the collection of admission and 
discharge functional status data by trained clinicians using 
standardized patient data elements that assess specific functional 
self-care activities such as shower/bathe self, dressing upper body and 
dressing lower body. These self-care items are daily activities that 
clinicians typically assess at the time of admission and/or discharge 
to determine residents' needs, evaluate resident progress, and/or 
prepare residents and families for a transition to home or to another 
provider. The standardized self-care function data elements are coded 
using a 6-level rating scale that indicates the resident's level of 
independence with the activity; higher scores indicate more 
independence. The outcome quality measure also requires the collection 
of risk factor data, such as resident functioning prior to the current 
reason for admission, bladder continence, communication ability and 
cognitive function, at the time of admission.
    The data elements included in the quality measure were originally 
developed and tested as part of the PAC PRD version of the Continuity 
Assessment Record and Evaluation (CARE) Item Set,\34\ which was 
designed to standardize assessment of patients' and residents' status 
across acute and post-acute providers, including IRFs, SNFs, HHAs and 
LTCHs. The development of the CARE Item Set and a description and 
rationale for each item is described in a report entitled ``The 
Development and Testing of the Continuity Assessment Record and 
Evaluation (CARE) Item Set: Final Report on the Development of the CARE 
Item Set: Volume 1 of 3.'' \35\ Reliability and validity testing were 
conducted as part of CMS' Post-Acute Care Payment Reform Demonstration, 
and we concluded that the functional status items have acceptable 
reliability and validity. A description of the testing methodology and 
results are available in several reports, including the report entitled 
``The Development and Testing of the Continuity Assessment Record And 
Evaluation (CARE) Item Set: Final Report On Reliability Testing: Volume 
2 of 3'' \36\ and the report entitled ``The Development and Testing of 
The Continuity Assessment Record And Evaluation (CARE) Item Set: Final 
Report on Care Item Set and Current Assessment Comparisons: Volume 3 of 
3.'' \37\ The reports are available on CMS' Post-Acute Care Quality 
Initiatives Web page at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
---------------------------------------------------------------------------

    \34\ Barbara Gage et al., ``The Development and Testing of the 
Continuity Assessment Record and Evaluation (CARE) Item Set: Final 
Report on the Development of the CARE Item Set'' (RTI International, 
2012).
    \35\ Barbara Gage et al., ``The Development and Testing of the 
Continuity Assessment Record and Evaluation (CARE) Item Set: Final 
Report on the Development of the CARE Item Set'' (RTI International, 
2012).
    \36\ Ibid.
    \37\ Ibid.

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[[Page 36579]]

(i) Stakeholder Input
    A cross-setting function TEP convened by our measure development 
contractor on September 9, 2013 provided input on the initial technical 
specifications of this quality measure, Application of IRF Functional 
Outcome Measure: Change in Self-Care Score for Medical Rehabilitation 
Patients (NQF #2633). The TEP was supportive of the implementation of 
this measure and supported CMS's efforts to standardize patient/
resident assessment data elements. The 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 MAP met on December 14 and 15, 2015, and provided input on the 
measure, Application of IRF Functional Outcome Measure: Change in Self-
Care Score for Medical Rehabilitation Patients (NQF #2633) for use in 
the SNF QRP. The MAP recognized that this quality outcome measure is an 
adaptation of a currently endorsed measure for the IRF population, and 
encouraged continued development to ensure alignment of this measure 
across PAC settings. The MAP noted there should be some caution in the 
interpretation of measure results due to resident differentiation 
between facilities. The MAP also noted possible duplication as the MDS 
already includes function data elements. We note that the data elements 
for the measure are similar, but not the same as the existing MDS 
Section G function data elements. The data elements for the measure 
include those that are the standardized patient assessment data for 
functional status under section 1899B(b)(1)(B)(i) of the Act. The MAP 
also stressed the importance of considering burden on providers when 
measures are considered for implementation. The MAP's overall 
recommendation was for ``encourage further development.'' More 
information about the MAP's recommendations for this measure is 
available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
    Since the MAP's review and recommendation for further development, 
we have continued to develop this measure by soliciting input via a 
TEP, providing a public comment opportunity, and providing an update on 
measure development to the MAP via the feedback loop. More 
specifically, our measure development contractor convened a SNF-
specific function TEP on May 5, 2016, to provide further input on the 
technical specifications of this quality measure by reviewing the IRF 
specifications and the specifications of competing and related function 
quality measures. Overall, the TEP was supportive of the measure and 
supported our efforts to standardize patient assessment data elements. 
The SNF-specific function 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.
    We also solicited stakeholder feedback on the development of this 
measure by means of a public comment period that was open from October 
7, 2016, until November 4, 2016. There was general support of the 
measure concept and the importance of functional improvement. Comments 
on the measure varied, with some commenters supportive of the measure, 
while others were either not in favor of the measure, or in favor of 
suggested potential modifications to the measure specifications. The 
public comment summary report for the 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.
    Further, we engaged with stakeholders when we presented an update 
on the development of this quality measure to the MAP on October 19, 
2016, during a MAP feedback loop meeting. Slides from that meeting are 
available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=83640.
(ii) Competing and Related Measures and Measure Justification
    During the development of this proposed functional outcome measure, 
we have monitored and reviewed NQF-endorsed measures that are competing 
and/or related to the proposed quality measures. We identified six 
competing and related quality measures focused on self-care functional 
improvement for residents in the SNF setting entitled: (1) CARE: 
Improvement in Self Care (NQF #2613); (2) Functional Change: Change in 
Self-Care Score for Skilled Nursing Facilities (NQF #2769); (3) 
Functional Status Change for Patients with Shoulder Impairments (NQF 
#0426); (4) Functional Status Change for Patients with Elbow, Wrist and 
Hand Impairments (NQF #0427); (5) Functional Status Change for Patients 
with General Orthopedic Impairments (NQF #0428); and (6) Change in 
Daily Activity Function as Measures by the AM-PAC (NQF #0430). We 
reviewed the technical specifications for these six quality measures 
and compared these specifications to those of our outcome-based quality 
measure, the Application of IRF Functional Outcome Measure: Change in 
Self-Care Score for Medical Rehabilitation Patients (NQF #2633), and 
have noted the following differences in the technical specifications: 
(1) The number of risk adjustors and variance explained by these risk 
adjustors in the regression models; (2) the use of functional 
assessment items that were developed and tested for cross-setting use; 
(3) the use of items that are already on the MDS 3.0 and what this 
means for burden; (4) the handling of missing functional status data; 
and (5) the use of exclusion criteria that are baseline clinical 
conditions. We describe these key specifications of the proposed 
outcome measure, Application of IRF Functional Outcome Measure: Change 
in Self-Care Score for Medical Rehabilitation Patients (NQF #2633), in 
detail below.
    Our literature review, input from technical expert panels, public 
comment feedback, and data analyses demonstrated the importance of 
adequate risk adjustment of admission case mix factors for functional 
outcome measures. Inadequate risk adjustment of admission case mix 
factors may lead to erroneous conclusions about the quality of care 
delivered within the facility, and thus is a potential threat to the 
validity of a quality measure that examines outcomes of care, such as 
functional outcomes. The quality measure, the Application of IRF 
Functional Outcome Measure: Change in Self-Care Score for Medical 
Rehabilitation Patients (NQF #2633) risk adjusts for more than 60 risk 
factors, explaining approximately 25 percent of the variance in change 
in function, and includes all of the following risk factors: prior 
functioning, prior device use, age, functional status at admission, 
primary diagnosis, and comorbidities. These risk factors are key 
predictors of functional performance and should be accounted for in any 
facility-level comparison of functional outcomes.
    Another key feature of the measure, the Application of IRF 
Functional Outcome Measure: Change in Self-Care Score for Medical 
Rehabilitation Patients (NQF #2633), is that it uses the functional 
assessment data elements and the associated rating scale that were 
developed and tested for cross-setting

[[Page 36580]]

use. The measure uses functional assessment items from the CARE Item 
Set, which were developed and tested as part of the PAC-PRD between 
2006 and 2010. The items were designed to build on the existing science 
for functional assessment instruments, and included a review of the 
strengths and limitations of existing functional assessment 
instruments. An important strength of the standardized function items 
from the CARE instrument is that they allow comparison and tracking of 
patients' and residents' functional outcomes as they move across post-
acute settings. Specifically, the CARE Item Set was designed to 
standardize assessment of patients' status across acute and post-acute 
settings, including SNFs, IRFs, LTCHs, and HHAs. The risk-adjustors for 
various setting-specific versions of this measure differ by the 
inclusion of adjustors such as comorbidities in the IRF measure. 
However, we believe that the differences in risk adjustment will not 
hinder future comparability across settings. Agencies such as MedPAC 
have supported a coordinated approach to measurement across settings 
using standardized patient data elements.
    A third important consideration is that some of the data elements 
associated with the measure are already included on the MDS in section 
GG, because we adopted a cross-setting function process measure in the 
SNF QRP FY 2016 Final Rule (FR 80 46444 through 46453). Three of the 
self-care data elements necessary to calculate that quality measure, an 
Application of the Percent of Long-Term Care Hospital Patient with a 
Functional Assessment and a Care Plan that Addresses Function (NQF 
#2631) are used to calculate the quality measure. Provider burden of 
reporting on multiple items was a key consideration discussed by 
stakeholders in our recent TEP 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.
    We believe it is important to include the records of residents with 
missing functional assessment data when calculating a facility-level 
functional outcome quality measure for SNFs. The proposed measure, the 
Application of IRF Functional Outcome Measure: Change in Self-Care 
Score for Medical Rehabilitation Patients (NQF #2633), incorporates a 
method to address missing functional assessment data.
    We believe certain clinically-defined exclusion criteria are 
important to specify in a functional outcome quality measure to 
maintain the validity of the quality measure. Exclusions for the 
quality measure, Application of IRF Functional Outcome Measure: Change 
in Self-Care Score for Medical Rehabilitation Patients (NQF #2633), 
were selected through a review of the literature, input from Technical 
Expert Panels, and input from the public comment process. The quality 
measure, Application of IRF Functional Outcome Measure: Change in Self-
Care Score for Medical Rehabilitation Patients (NQF #2633) is intended 
to capture improvement in self-care function from admission to 
discharge for residents who are admitted with an expectation of 
functional improvement. Therefore, we exclude residents with certain 
conditions, for example progressive neurologic conditions, because 
these residents are typically not expected to improve on self-care 
skills for activities such as lower body dressing. Furthermore, we 
exclude residents who are independent on all self-care items at the 
time of admission, because no improvement in self-care can be measured 
with the selected set of items by discharge. Including residents with 
limited expectation for improvement could introduce incentives for SNFs 
to restrict access to these residents.
    We would like to note that our measure developer presented and 
discussed these technical specification differentiations with TEP 
members during the May 6, 2016 TEP meeting to obtain TEP input on 
preferred specifications for valid functional outcome quality measures. 
The differences in measure specifications and the TEP feedback are 
presented in the TEP Summary Report, which 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. Overall, the TEP supported the 
use of a risk adjustment model that addressed all of the following risk 
factors: Prior functioning, admission functioning, prior diagnosis and 
comorbidities. In addition, they supported exclusion criteria that 
would address functional improvement expectations of residents.
(iii) Data Collection Mechanism
    Data for the quality measure, the Application of IRF Functional 
Outcome Measure: Change in Self-Care Score for Medical Rehabilitation 
Patients (NQF #2633), would be collected using the MDS, with the 
submission through the QIES ASAP system. For more information on SNF 
QRP reporting through the QIES ASAP system, refer to CMS Web site at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html. The calculation of the quality measure would be based 
on the data collection of standardized items to be included in the MDS. 
The function items used to calculate this measure are the same set of 
functional status data items that have been added to the IRF-PAI 
version 1.4, for the purpose of providing standardized resident 
assessment data elements under the domain of functional status, which 
is required by the IMPACT Act.
    If finalized for implementation into the SNF QRP, the MDS would be 
modified so as to enable us to calculate this quality measure using 
additional data elements that are standardized with the IRF-PAI and 
such data would be obtained at the time of admission and discharge for 
all SNF residents covered under a Part A stay. The standardized items 
used to calculate this proposed quality measure do not duplicate 
existing Section G items currently used for data collection within the 
MDS. The quality measure and standardized data element specifications 
for the Application of IRF Functional Outcome Measure: Change in Self-
Care Score for Medical Rehabilitation Patients (NQF #2633) can be found 
on the SNF QRP Measures and Technical Information Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
(b) Application of IRF Functional Outcome Measure: Change in Mobility 
Score for Medical Rehabilitation Patients (NQF #2634)
    This quality measure is an application of the outcome measure 
finalized in the IRF QRP entitled, IRF Functional Outcome Measure: 
Change in Mobility Score for Medical Rehabilitation Patients (NQF 
#2634). This quality measure estimates the risk-adjusted mean 
improvement in mobility score between admission and discharge among SNF 
residents. A summary of this quality measure can be accessed on the NQF 
Web site: http://www.qualityforum.org/qps/2634. Detailed specifications 
for this quality measure can be accessed at http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2634.

[[Page 36581]]

    As previously noted, residents seeking care in SNFs include those 
whose illness, injury, or condition has resulted in a loss of function, 
and for whom rehabilitative care is expected to help regain that 
function. Several studies found patients' functional outcomes vary 
based on treatment. Physical and occupational therapy treatment was 
associated with greater functional gains, shorter stays, and a greater 
likelihood of a discharge to a community. Among SNF residents receiving 
rehabilitation services, the amount of therapy prescribed can vary 
widely, and this variation is not always associated with resident 
characteristics. This variation in rehabilitation services supports the 
need to monitor SNF resident's functional outcomes, as we believe there 
is an opportunity for improvement in this area.
    The functional outcome measure, the Application of IRF Functional 
Outcome Measure: Change in Mobility Score for Medical Rehabilitation 
Patients (NQF #2634), requires the collection of admission and 
discharge functional status data by trained clinicians using 
standardized resident data elements that assess specific functional 
mobility activities such as toilet transfer and walking. These mobility 
items are daily activities that clinicians typically assess at the time 
of admission and/or discharge to determine resident's needs, evaluate 
resident progress, and prepare residents and families for a transition 
to home or to another care provider. The standardized mobility function 
items are coded using a 6-level rating scale that indicates the 
resident's level of independence with the activity; higher scores 
indicate more independence.
    The functional assessment items included in the outcome quality 
measures were originally developed and tested as part of the Post-Acute 
Care Payment Reform Demonstration version of the CARE Item Set, which 
was designed to standardize assessment of patients' status across acute 
and post-acute providers, including SNFs, HHAs, IRFs, and LTCHs.
    This outcome quality measure also requires the collection of risk 
factors data, such as resident functioning prior to the current reason 
for admission, history of falls, bladder continence, communication 
ability and cognitive function, at the time of admission.
    A cross-setting function TEP convened by our measure development 
contractor on September 9, 2013 provided input on the initial technical 
specifications of this proposed quality measure, the Application of IRF 
Functional Outcome Measure: Change in Mobility Score for Medical 
Rehabilitation Patients (NQF #2634). The TEP was supportive of the 
implementation of this measure and supported our efforts to standardize 
patient/resident assessment data elements. The 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 list of measures under consideration for the SNF QRP, including 
this quality measure, was released to the public on November 27, 2015, 
and early comments were submitted between December 1 and December 7, 
2015. The MAP met on December 14 and 15, 2015, sought public comment on 
this measure from December 23, 2015, to January 13, 2015, and met on 
January 26 and 27, 2016. The NQF provided the MAP's input to us as 
required under section 1890A(a)(3) of the Act in the final report, MAP 
2016 Considerations for Implementing Measures for Federal Programs: 
Post-Acute and Long-Term Care, which is available at http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. The MAP recognized that this measure is an 
adaptation of currently endorsed measures for the IRF population, and 
encouraged continued development to ensure alignment across PAC 
settings. They also noted there should be some caution in the 
interpretation of measure results due to patient/resident 
differentiation between facilities. To alignment across PAC settings, 
the self-care items included in the proposed quality measure are the 
same self-care items that are included in the IRF-PAI Version 1.4. We 
agree with the MAP that patient/resident populations can vary across 
IRFs and SNFs, and we have taken this issue into consideration while 
selecting and testing the risk adjustors, which include medical 
conditions, admission function, prior functioning and comorbidities. 
The risk-adjustors for the IRF and the SNF versions of this measure 
differ by the inclusion of adjustors such as comorbidities in the IRF 
measure. As noted, though there are differences between the measures we 
believe that the differences in risk adjustment will not hinder future 
comparability across measures.
    The MAP also noted possible duplication as the MDS already includes 
function data elements. The data elements for the measure are similar, 
but not the same as the existing MDS Section G function data elements. 
The data elements for the measures include those that are the proposed 
standardized resident assessment data elements for function. The MAP 
also stressed the importance of considering burden on providers when 
measures are considered for implementation. We appreciate the issue of 
burden and have taken that into consideration in developing the 
measure. Please refer to the FY 2016 SNF PPS final rule (80 FR 46428) 
for more information on the MAP.
    The MAP's overall recommendation was for ``encourage further 
development.'' More information about the MAP's recommendations for 
this proposed measure is available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
    Since the MAP's review and recommendation for further development, 
we have continued to develop this measure including soliciting input 
from a TEP, providing a public comment opportunity, and providing an 
update on measure development to the MAP via the feedback loop. More 
specifically, our measure development contractor convened a SNF-
specific TEP on May 5, 2016 to provide further input on the technical 
specifications of this proposed quality measure by reviewing the IRF 
specifications and the specifications of competing and related function 
quality measures. Overall, the TEP was supportive of the measure and 
supported our efforts to standardize patient/resident assessment data 
elements. The SNF-specific function 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.
    We also solicited stakeholder feedback on the development of this 
measure by means of a public comment period open from October 7, until 
November 4, 2016. There was general support of the measure concept and 
the importance of functional improvement. Comments on the measure 
varied, with some commenters supportive of the measure, while others 
were either not in favor of the measure, or in favor of suggested 
potential modifications to the measure specifications. 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.

[[Page 36582]]

    We also engaged with the NQF convened MAP when we presented an 
update on the development of this quality measure on October 19, 2016, 
during a MAP feedback loop meeting. Slides from that meeting are 
available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=idamp;ItemID=83640.
    During the development of this measure, we have monitored and 
reviewed NQF-endorsed measures that are competing and related. We 
identified seven competing and related quality measures focused on 
improvement in mobility for residents in the SNF setting entitled: (1) 
CARE: Improvement in Mobility (NQF #2612); (2) Functional Change: 
Change in Mobility Score (NQF 2774); (3) Functional Status Change for 
Patients with Knee Impairments (NQF #0422); (4) Functional Status 
Change for Patients with Hip Impairments (NQF #0423); (5) Functional 
Status Change for Patients with Foot and Ankle Impairments (NQF #0424); 
(6) Functional Status Change for Patients with Lumbar Impairments (NQF 
#0425); and (7) Change in Basic Mobility as Measures by the AM-PAC (NQF 
#0429). We reviewed the technical specifications for these seven 
measures carefully and compared them with the specifications of the 
proposed quality measure, the Application of IRF Functional Outcome 
Measure: Change in Mobility Score for Medical Rehabilitation Patients 
(NQF #2634) and have noted the following differences in the technical 
specifications: (1) The number of risk adjustors and variance explained 
by these risk adjustors in the regression models; (2) the use of 
functional assessment items that were developed and tested for cross-
setting use; (3) the use of items that are already on the MDS 3.0 and 
what this means for burden; (4) the handling of missing functional 
status data; and (5) the use of exclusion criteria that are baseline 
clinical conditions. We describe these key specifications of the 
proposed outcome measure, the Application of IRF Functional Outcome 
Measure: Change in Mobility Score for Medical Rehabilitation Patients 
(NQF #2634), below in more detail.
    Our literature review, input from technical expert panels, public 
comment feedback, and analyses demonstrated the importance of adequate 
risk adjustment of admission case mix factors for functional outcome 
measures. Inadequate risk adjustment of admission case mix factors may 
lead to erroneous conclusions about the quality of care delivered 
within the facility, and thus is a potential threat to the validity of 
a quality measure that examines outcomes of care, such as functional 
status. The quality measure, the Application of IRF Functional Outcome 
Measure: Change in Mobility Score for Medical Rehabilitation Patients 
(NQF #2634) risk adjusts for more than 60 risk factors, explaining 
approximately 23 percent of the variance in change in function, and 
includes all of the following risk adjusters: Prior functioning, prior 
device use, age, functional status at admission, primary diagnosis and 
comorbidities. These are key predictors of functional performance and 
need to be accounted for in any facility-level functional outcome 
quality measure.
    Another key feature of the proposed measure, Application of IRF 
Functional Outcome Measure: Change in Mobility Score for Medical 
Rehabilitation Patients (NQF #2634), is that it uses the functional 
assessment data elements and the associated rating scale that were 
developed and tested for cross-setting use. The measure uses functional 
assessment items from the CARE Item Set, which were developed and 
tested as part of the PAC PRD between 2006 and 2010.
    The items were designed to build on the existing science for 
functional assessment instruments, and included a review of the 
strengths and limitations of existing functional assessment 
instruments. An important strength of the cross-setting function items 
from the CARE instrument is that they allow tracking of patients' and 
residents' functional outcomes as they move across post-acute settings. 
Specifically, the CARE Item Set was designed to standardize assessment 
of patients' and residents' status across acute and post-acute 
settings, including SNFs, IRFs, LTCHs, and HHAs. MedPAC has publicly 
supported a coordinated approach to measurement across settings using 
standardized resident assessment data elements.
    A third important consideration is that some of the data elements 
associated with the measure, Application of IRF Functional Outcome 
Measure: Change in Mobility Score for Medical Rehabilitation Patients 
(NQF #2634), are already included on the MDS in section GG, because we 
adopted a cross-setting function process measure in the SNF QRP FY 2016 
Final Rule (FR 80 46444 through 46453), and seven of the mobility data 
elements necessary to calculate that quality measure, an Application of 
the Percent of Long-Term Care Hospital Patient with a Functional 
Assessment and a Care Plan that Addresses Function (NQF #2631) are used 
to calculate the proposed quality measure. Provider burden of reporting 
on multiple measures was a key consideration discussed by stakeholders 
in our recent TEP: 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 believe it is important to include the records of residents with 
missing functional assessment data when calculating a facility-level 
functional outcome quality measure for SNFs. The measure, Application 
of IRF Functional Outcome Measure: Change in Mobility Score for Medical 
Rehabilitation Patients (NQF #2634), incorporates a method to address 
missing functional assessment data.
    We believe certain clinically-defined exclusion criteria are 
important to specify in a functional outcome quality measure to 
maintain the validity of the quality measure. Exclusions for the 
proposed quality measure, Change in Mobility Score for Medical 
Rehabilitation Patients (NQF #2634), were selected through a literature 
review, input from TEPs, and input from the public comment process. The 
Application of IRF Functional Outcome Measure: Change in Mobility Score 
for Medical Rehabilitation Patients (NQF #2634) is intended to capture 
improvement in mobility from admission to discharge for residents who 
are admitted with an expectation of functional improvement. Therefore, 
we exclude residents with certain conditions, for example progressive 
neurologic conditions, because these residents are typically not 
expected to improve on mobility skills for activities such as walking. 
Furthermore, we exclude residents who are independent on all mobility 
items at the time of admission, because no improvement can be measured 
with the selected set of items by discharge. Inclusion of residents 
with limited expectation for improvement could introduce incentives for 
SNF providers to limited access to these residents.
    Our measure developer contractor presented and discussed these 
technical specification differentiations during the May 6, 2016 TEP 
meeting to obtain TEP input on preferred specifications for valid 
functional outcome quality measures. The differences in measure 
specifications and the TEP feedback are presented in the TEP Summary 
Report, which is available at https://www.cms.gov/Medicare/Quality-
Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-
Initiatives/IMPACT-Act-of-2014/

[[Page 36583]]

IMPACT-Act-Downloads-and-Videos.html.
    Data for the quality measure, the Application of IRF Functional 
Outcome Measure: Change in Mobility Score for Medical Rehabilitation 
Patients (NQF #2634), would be collected using the MDS, with the 
submission through the QIES ASAP system. For more information on SNF 
QRP reporting through the QIES ASAP system, refer to https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    The calculation of the quality measure would be based on the data 
collection of standardized items to be included in the MDS. The 
function items used to calculate this measure are the same set of 
functional status data items that have been added to the IRF-PAI 
version 1.4, for the purpose of providing standardized resident 
assessment data elements under the domain of functional status. If this 
quality measure is finalized for implementation in the SNF QRP, the MDS 
would be modified so as to enable the calculation of these standardized 
items that are used to calculate this proposed quality measure. The 
collection of data by means of the standardized items would be obtained 
at admission and discharge. The standardized items used to calculate 
this quality measure do not duplicate existing items currently used for 
data collection within the MDS. The quality measure and standardized 
data element specifications for the Application of IRF Functional 
Outcome Measure: Change in Mobility Score for Medical Rehabilitation 
Patients (NQF #2634) is available on the SNF QRP Measures and Technical 
Information Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
(c) Application of IRF Functional Outcome Measure: Discharge Self-Care 
Score for Medical Rehabilitation Patients (NQF #2635)
    This quality measure is an application of the outcome quality 
measure finalized in the IRF QRP entitled, IRF Functional Outcome 
Measure: Discharge Self-Care Score for Medical Rehabilitation Patients 
(NQF #2635). The quality measure estimates the percentage of SNF 
residents who meet or exceed an expected discharge self-care score. A 
summary of this quality measure can be accessed on the NQF Web site at 
http://www.qualityforum.org/qps/2635. Detailed specifications for the 
quality measure can be accessed at http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2635.
    As previously noted, residents seeking care in SNFs include 
individuals whose illness, injury, or condition has resulted in a loss 
of function, and for whom rehabilitative care is expected to help 
regain that function. Several studies found patients' functional 
outcomes vary based on treatment by physical and occupational 
therapists. Therapy was associated with greater functional gains, 
shorter stays, and a greater likelihood of discharge to community. 
Among SNF residents receiving rehabilitation services, the amount of 
treatment prescribed can vary widely, and this variation is not 
associated with resident characteristics. This variation in 
rehabilitation services supports the need to monitor SNF resident's 
functional outcomes, as we believe there is an opportunity for 
improvement in this area.
    The outcome quality measure, Application of IRF Functional Outcome 
Measure: Discharge Self-Care Score or Medical Rehabilitation Patients 
(NQF #2635), requires the collection of functional status data at 
admission and discharge by trained clinicians using standardized 
resident assessment data elements such as eating, oral hygiene, and 
lower body dressing. These self-care items are daily activities that 
clinicians typically assess at the time of admission and discharge to 
determine residents' needs, evaluate resident progress, and prepare 
residents and families for a transition to home or to another provider. 
The self-care function data elements are coded using a 6-level rating 
scale that indicates the resident's level of independence with the 
activity; higher scores indicate more independence.
    The functional assessment items included in the outcome quality 
measures were originally developed and tested as part of the Post-Acute 
Care Payment Reform Demonstration version of the CARE Item Set, which 
was designed to standardize assessment of patients' status across acute 
and post-acute providers, including SNFs, HHAs, IRFs, and LTCHs.
    This outcome quality measure also requires the collection of risk 
factors data, such as resident functioning prior to the current reason 
for admission, bladder continence, communication ability, and cognitive 
function at the time of admission.
    A cross-setting function TEP convened by our measure development 
contractor on September 9, 2013 provided input on the initial technical 
specifications of this proposed quality measure, the Application of IRF 
Functional Outcome Measure: Discharge Self-Care Score for Medical 
Rehabilitation Patients (NQF #2635). The TEP was supportive of the 
implementation of this measure and supported CMS's efforts to 
standardize patient/resident assessment data elements. The 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 MAP met on December 14 and 15, 2015, and provided input on the 
proposed measure, Application of IRF Functional Outcome Measure: 
Discharge Self-Care Score for Medical Rehabilitation Patients (NQF 
#2635) for use in the SNF QRP. The MAP recognized that this quality 
measure is an adaptation of a currently endorsed measure for the IRF 
population, and encouraged continued development to ensure alignment of 
this measure across PAC settings. The MAP also noted there should be 
some caution in the interpretation of measure results due to patient/
resident differentiation between facilities. The MAP also stressed the 
importance of considering burden on providers when measures are 
considered for implementation. The MAP also noted possible duplication 
as the MDS already includes function data elements. The data elements 
for the proposed measure are similar, but not the same as the existing 
MDS function data elements. The data elements for the measures include 
those that are the proposed standardized assessment data elements for 
function. The MAP's overall recommendation was to ``encourage further 
development.'' More information about the MAP's recommendations for 
this measure is available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
    Since the 2015 MAP's review and recommendation for further 
development, we have continued to develop this measure including 
soliciting input via a TEP, proving a public comment opportunity and 
providing an update on measure development to the MAP via the feedback 
loop. More specifically, our measure development contractor convened a 
SNF-specific TEP on May 5, 2016 to provide further input on the

[[Page 36584]]

technical specifications of this quality measure by reviewing the IRF 
specifications and the specifications of competing and related function 
quality measures. Overall, the TEP was supportive of the measure. 
Specifically, they supported the risk adjustors, suggested some 
additional risk adjustors, supported the exclusion criteria and 
supported CMS's efforts to standardize patient/resident assessment data 
elements. The SNF-specific function 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.
    We also solicited stakeholder feedback on the development of this 
measure by means of a public comment period open from October 7, 2016 
until November 4, 2016. There was general support of the measure 
concept and the importance of functional improvement. Comments on the 
measure varied, with some commenters supportive of the measure, while 
others were either not in favor of the measure, or in favor of 
suggested potential modifications to the measure specifications. Some 
comments focused on suggestions for additional risk adjustors, and the 
data elements. The public comment summary report for the 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.
    We also engaged with stakeholders when we presented an update on 
the development of this quality measure to the MAP on October 19, 2016, 
during a MAP feedback loop meeting. Slides from that meeting are 
available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=83640.
    During the development of this measure, we monitored and reviewed 
NQF-endorsed measures that are competing and related. We identified six 
competing and related quality measures focused on self-care functional 
improvement for residents in the SNF setting entitled: (1) CARE: 
Improvement in Self Care (NQF #2613); (2) Functional Change: Change in 
Self-Care Score (NQF #2286); (3) Functional Status Change for Patients 
with Shoulder Impairments (NQF #0426); (4) Functional Status Change for 
Patients with Elbow, Wrist and Hand Impairments (NQF #0427); (5) 
Functional Status Change for Patients with General Orthopedic 
Impairments (NQF #0428); and (6) Change in Daily Activity Function as 
Measures by the AM-PAC (NQF #0430).
    As described above, we reviewed the technical specifications for 
these six measures and compared them with the specifications for the 
quality measure, Application of IRF Functional Outcome Measure: 
Discharge Self-Care Score for Medical Rehabilitation Patients (NQF 
#2635) and, as described in detail above, we noted the following 
differences in the technical specifications: (1) The number of risk 
adjustors and variance explained by these risk adjustors in the 
regression models; (2) the use of functional assessment items that were 
developed and tested for cross-setting use; (3) the use of items that 
are already on the MDS 3.0 and what this means for burden; (4) the 
handling of missing functional status data; and (5) the use of 
exclusion criteria that are baseline clinical conditions.
    Consistent with the other functional outcome measures, the 
specifications for this quality measure, Application of IRF Functional 
Outcome Measure: Discharge Self-Care Score for Medical Rehabilitation 
Patients (NQF #2635), were developed based on our literature review, 
input from technical expert panels, public comment feedback and data 
analyses. The details about the specifications for the measures 
described above also apply to this quality measure. Overall, the TEP 
supported the use of a risk adjustment model that addressed prior 
functioning, admission functioning, prior diagnosis and comorbidities. 
In addition, they supported exclusion criteria that would address 
functional improvement expectations of residents.
    Our measure developer contractor presented and discussed these 
technical specification differentiations during the May 6, 2016 TEP 
meeting to obtain TEP input on preferred specifications for valid 
functional outcome quality measures. The differences in measure 
specifications and the TEP feedback are presented in the TEP Summary 
Report, which 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.
    Data for the quality measure, the Application of IRF Functional 
Outcome Measure: Discharge Self-Care Score for Medical Rehabilitation 
Patients (NQF #2635), would be collected using the MDS, with the 
submission through the QIES ASAP system. For more information on SNF 
QRP reporting through the QIES ASAP system, refer to CMS Web site at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    The calculation of the proposed quality measure would be based on 
the data collection of standardized items to be included in the MDS. 
The function items used to calculate this measure are the same set of 
functional status data items that have been added to the IRF-PAI 
version 1.4, for the purpose of providing standardized resident 
assessment data elements under the domain of functional status.
    The collection of data by means of the standardized items would be 
obtained at admission and discharge. The standardized items used to 
calculate this quality measure do not duplicate existing items 
currently used for data collection within the MDS. The quality measure 
and standardized data element specifications for the Application of IRF 
Functional Outcome Measure: Discharge Self-Care Score for Medical 
Rehabilitation Patients (NQF #2635) can be found on the SNF QRP 
Measures and Technical Information Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    If finalized for implementation into the SNF QRP, the MDS would be 
modified so as to enable us to calculate the proposed measure using 
additional data elements that are standardized with the IRF-PAI and 
such data would be obtained at the time of admission and discharge for 
all SNF residents covered under a Part A stay.
(d) Application of IRF Functional Outcome Measure: Discharge Mobility 
Score for Medical Rehabilitation Patients (NQF #2636)
    This quality measure is an application of the outcome quality 
measure finalized in the IRF QRP entitled, IRF Functional Outcome 
Measure: Discharge Mobility Score for Medical Rehabilitation Patients 
(NQF #2636). This quality measure estimates the percentage of SNF 
residents who meet or exceed an expected discharge mobility score. A 
summary of this quality measure can be accessed on the NQF Web site: 
http://www.qualityforum.org/qps/2636. Detailed specifications for this 
quality measure can be accessed at http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2636.

[[Page 36585]]

    As previously noted, residents seeking care in SNFs include 
individuals whose illness, injury, or condition has resulted in a loss 
of function, and for whom rehabilitative care is expected to help 
regain that function. Several studies found patients' functional 
outcomes vary based on treatment by physical and occupational 
therapists. Therapy was associated with greater functional gains, 
shorter stays, and a greater likelihood of discharge to community. 
Among SNF residents receiving rehabilitation services, the amount of 
treatment prescribed can vary widely, and this variation is not 
associated with resident characteristics. This variation in 
rehabilitation services supports the need to monitor SNF resident's 
functional outcomes, as we believe there is an opportunity for 
improvement in this area.
    The functional outcome measure, Application of IRF Functional 
Outcome Measure: Discharge Mobility Score for Medical Rehabilitation 
Patients (NQF #2636), requires the collection of admission and 
discharge functional status data by trained clinicians using 
standardized resident data elements that assess specific functional 
mobility activities such as bed mobility and walking. These 
standardized mobility items are daily activities that clinicians 
typically assess at the time of admission and/or discharge to determine 
residents' needs, evaluate resident progress and prepare residents and 
families for a transition to home or to another care provider. The 
standardized mobility function items are coded using a 6-level rating 
scale that indicates the resident's level of independence with the 
activity; higher scores indicate more independence.
    The functional assessment items included in the outcome quality 
measures were originally developed and tested as part of the Post-Acute 
Care Payment Reform Demonstration version of the CARE Item Set, which 
was designed to standardize assessment of patient or resident status 
across acute and post-acute providers, including SNFs, HHAs, IRFs, and 
LTCHs.
    This quality measure requires the collection of risk factors data, 
such as resident functioning prior to the current reason for admission, 
history of falls, bladder continence, communication ability and 
cognitive function, at the time of admission.
    A cross-setting function TEP convened by our measure development 
contractor on September 9, 2013 provided input on the initial technical 
specifications of this quality measure, Application of IRF Functional 
Outcome Measure: Discharge Mobility Score for Medical Rehabilitation 
Patients (NQF #2636). The TEP was supportive of the implementation of 
this measure and supported our efforts to standardize patient 
assessment data elements. The 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 MAP met on December 14 and 15, 2015, and provided input on the 
measure, Application of IRF Functional Outcome Measure: Discharge 
Mobility Score for Medical Rehabilitation Patients (NQF #2636), for use 
in the SNF QRP. The MAP recognized that this quality measure is an 
adaptation of a currently endorsed measure for the IRF population, and 
encouraged continued development to ensure alignment of this measure 
across PAC settings. The MAP noted there should be some caution in the 
interpretation of measure results due to patient/resident 
differentiation between facilities. The MAP also stressed the 
importance of considering burden on providers when measures are 
considered for implementation. The MAP also noted possible duplication 
as the MDS already includes function data elements. The data elements 
for the proposed measure are similar, but not the same as the existing 
MDS function data elements. The data elements for the measure include 
those that are the standardized patient data elements for function. The 
MAP's overall recommendation was to ``encourage further development.'' 
More information about the MAP's recommendations for this proposed 
measure is available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
    Since the MAP's review and recommendation for further development, 
we have continued to develop this measure including soliciting input 
via a TEP, proving a public comment opportunity and providing an update 
on measure development to the MAP via the feedback loop. More 
specifically, our measure development contractor convened a SNF-
specific TEP on May 5, 2016, to provide further input on the technical 
specifications of this quality measure by reviewing the IRF 
specifications and the specifications of competing and related function 
quality measures. Overall, the TEP was supportive of the measure and 
supported our efforts to standardize patient/resident assessment data 
elements. The SNF-specific function 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.
    We also solicited stakeholder feedback on the development of this 
measure by means of a public comment period open from October 7, 2016, 
until November 4, 2016. There was general support of the measure 
concept and the importance of functional improvement. Comments on the 
measure varied, with some commenters supportive of the measure, while 
others were either not in favor of the measure, or suggested potential 
modifications to the measure specifications.
    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.
    We also engaged with stakeholders when we presented an update on 
the development of this quality measure to the MAP on October 19, 2016, 
during a MAP feedback loop meeting. Slides from that meeting are 
available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=83640.
    During the development of this measure, we have monitored and 
reviewed the NQF-endorsed measures that are competing and related. We 
identified seven competing and related quality measures focused on 
mobility functional improvement for residents in the SNF setting 
entitled: (1) CARE: Improvement in Mobility (NQF #2612); (2) Functional 
Change: Change in Mobility Score (NQF #2774); (3) Functional Status 
Change for Patients with Knee Impairments (NQF #0422); (4) Functional 
Status Change for Patients with Hip Impairments (NQF #0423); (5) 
Functional Status Change for Patients with Foot and Ankle Impairments 
(NQF #0424); (6) Functional Status Change for Patients with Lumbar 
Impairments (NQF #0425); and (7) Change in Basic Mobility as Measures 
by the AM-PAC (NQF #0429). As described above, we reviewed the 
technical specifications for these seven measures carefully and 
compared them with the specifications of the proposed quality measure, 
Application of IRF Functional Outcome Measure: Discharge Mobility Score 
for Medical Rehabilitation Patients (NQF #2636) and have noted the 
following differences in the technical specifications: (1) The

[[Page 36586]]

number of risk adjustors and variance explained by these risk adjustors 
in the regression models; (2) the use of functional assessment items 
that were developed and tested for cross-setting use; (3) the use of 
items that are already on the MDS 3.0 and what this means for burden; 
(4) the handling of missing functional status data; and (5) the use of 
exclusion criteria that are baseline clinical conditions.
    Consistent with the other functional outcome measures, the 
specifications for this quality measure, Application of IRF Functional 
Outcome Measure: Discharge Mobility Score for Medical Rehabilitation 
Patients (NQF #2636), were developed based on our literature review, 
input from technical expert panels, public comment feedback and data 
analyses. The details about how the specifications for the measures 
differ as described in the previous functional outcome measure 
sections, also apply to this quality measure.
    Our measure developer contractor presented and discussed these 
technical specification differentiations during the May 6, 2016 TEP 
meeting to obtain TEP input on preferred specifications for valid 
functional outcome quality measures. The differences in measure 
specifications and the TEP feedback are presented in the TEP Summary 
Report, which 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.
    Data for the quality measure, the Application of IRF Functional 
Outcome Measure: Discharge Mobility Score for Medical Rehabilitation 
Patients (NQF #2636), would be collected using the MDS, with the 
submission through the QIES ASAP system. Additional information on SNF 
QRP reporting through the QIES ASAP system can be found on the CMS Web 
site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    The calculation of the quality measure would be based on the data 
collection of standardized items to be included in the MDS. The 
function items used to calculate this measure are the same set of 
functional status data items that have been added to the IRF-PAI 
version 1.4, for the purpose of providing standardized resident 
assessment data elements under the domain of functional status.
    The collection of data by means of the standardized items would be 
obtained at admission and discharge. The standardized items used to 
calculate this quality measure do not duplicate existing items 
currently used for data collection within the MDS. The quality measure 
and standardized resident data element specifications for the 
Application of IRF Functional Outcome Measure: Discharge Change in 
Mobility Score for Medical Rehabilitation Patients (NQF #2636) can be 
found on the SNF QRP Measures and Technical Information Web site at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    If finalized for implementation into the SNF QRP, the MDS would be 
modified so as to enable us to calculate the measure using additional 
data elements that are standardized with the IRF-PAI and such data 
would be obtained at the time of admission and discharge for all SNF 
residents covered under a Part A stay.
    We sought public comments on our proposal to adopt the four 
functional outcome quality measures, entitled Application of IRF 
Functional Outcome Measure: Change in Self-Care Score for Medical 
Rehabilitation Patients (NQF #2633); Application of IRF Functional 
Outcome Measure: Change in Mobility Score for Medical Rehabilitation 
Patients (NQF #2634);, Application of IRF Functional Outcome Measure: 
Discharge Self-Care Score for Medical Rehabilitation Patients (NQF 
#2635); and Application of IRF Functional Outcome Measure: Discharge 
Mobility Score for Medical Rehabilitation Patients (NQF #2636), 
beginning with the FY 2020 SNF QRP. All of the comments we received 
addressed all four measures, and our discussion of them follows.
    Comment: Several stakeholders supported the adoption of all four 
functional status quality measures into the SNF QRP. One commenter 
noted that self-care and mobility are of particular concern for persons 
with advanced illness. This commenter further noted that function 
affects daily life and quality of life for both persons and caregivers, 
and that tracking this information during a SNF stay and at discharge 
would improve transitions. The commenter encouraged us to increase 
measurement of functional status for all patients in all settings. 
Another commenter who supported the measures noted that valid and 
reliable measures of functional outcomes are important for informing 
treatment planning. Two commenters supported all 4 functional status 
quality measures in the SNF setting, and noted their general support 
for quality measures in all PAC settings that assess functional status 
and the real-life needs of beneficiaries. These two commenters believe 
that these four functional outcome measures move the SNF QRP in this 
direction. Another commenter stated that having a core set of data 
elements will allow for tracking of function across the continuum of 
care and is in alignment with the goals of the IMPACT Act. Another 
commenter supported our efforts to improve quality of care and ensure 
appropriate resource allocation among PAC settings, and specifically 
voiced agreement for adapting the NQF-endorsed functional outcome 
measures from the IRF setting to the SNF setting to align measures 
noting the intent of the IMPACT Act. This commenter stated that 
measures should be clinically relevant, representative for a given 
setting and patient population, and meaningful to patients and 
families.
    Response: We appreciate the commenters' support for the four 
functional status outcome quality measures that we proposed to adopt 
for the SNF QRP. We agree that patient and resident functioning in the 
areas of self-care care and mobility are clinically relevant and are an 
important area of quality in post-acute care (PAC) settings. In 
addition, we believe that examining resident functioning during the SNF 
stay will help SNFs focus on optimizing residents' functioning and 
discharge planning and support residents' transitions from the SNF to 
home or another setting. Finally, we agree that valid and reliable 
measures of functional outcomes will assist SNFs in planning treatment 
aimed at increasing or maintaining functional status.
    Comment: One commenter offered support for these measures in 
concept, but expressed concern that the proposed measures have not been 
tested in the SNF setting. The commenter recommended that testing 
across population types take place prior to any public reporting to 
avoid confusion among providers and consumers.
    Response: CMS strongly agrees that item and quality measure 
validity and reliability are important. The self-care and mobility 
items underwent several types of testing across post-acute care 
settings, including SNFs, as part of the Post-Acute Care Payment Reform 
Demonstration (PAC PRD). This testing, which included data from 60 SNFs 
(contributing almost 4,000 CARE

[[Page 36587]]

assessments) examined the items' feasibility, reliability, and 
validity. Overall, these results indicate moderate to substantial 
agreement on these items. Details regarding the reliability and 
validity testing, can be found in reports entitled The Development and 
Testing of the Continuity Assessment Record and Evaluation (CARE) Item 
Set, Volumes 1 through 3, Continuity Assessment Record and Evaluation 
(CARE) Item Set: Video Reliability Testing, and Continuity Assessment 
Record and Evaluation (CARE) Item Set: Additional provider-Type 
Specific Interater Reliability Analyses. These reports are available at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
    As part of our quality measure development work, we conducted 
additional reliability and validity testing, including Rasch analysis, 
which showed acceptable reliability and validity, and these results 
were discussed during the May 2016 TEP meeting and are summarized in 
the SNF Function TEP Summary Report, which is available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html. Therefore, given the overall findings of these 
reliability and validity analyses, we believe that the proposed 
functional outcome measures are sufficiently reliable for the SNF QRP.
    In addition, beginning October 1, 2016, SNFs are reporting several 
of the self-care and mobility data elements that are needed to 
calculate these measures. The quality measure, an Application of the 
Percent of LTCH Patients with a Functional Assessment and a Care Plan 
that Addresses Function (NQF #2631), was finalized for use in the SNF 
QRP in FY 2016 (80 FR 46444 through 46453). This process measure 
includes several of the self-care and mobility items included in the 
SNF functional outcome measures, and we are conducting tests of the 
reliability and validity of that data. We conduct ongoing analysis of 
reliability and validity of adopted measures.
    Comment: One commenter did not support the proposed function 
measures because the NQF has not endorsed them for the SNF setting and 
the Measure Applications Partnership (MAP) recommended continued 
development. Two commenters recommended that we seek rapid NQF 
endorsement for the four outcome measures to remove the ``application 
of'' and ``IRF'' wording from the measure titles and to prevent 
confusion among consumers, policymakers, and payers when displayed. One 
of these commenters stated that quality performance outcomes reported 
by an NQF endorsed measure in one setting may not necessarily be 
comparable to an ``application'' of the same measure in another setting 
due to differences in patient populations, payment policy, and specific 
measure calculation details, case mix adjustors such as co-morbidities, 
and other measure details. Another commenter recommended that the 
official name of the proposed measure distinguish them as SNF quality 
measures, which would decrease the public confusion when viewing them 
on Nursing Home Compare.
    Response: While these measures are not currently NQF-endorsed for 
SNFs, we recognize that the NQF endorsement process is an important 
part of measure development and plan to submit these four measures for 
consideration of NQF endorsement after one full year of data 
collection. We initially presented the four SNF outcome measures to the 
MAP in December 2015. After the MAP meeting, we continued development 
as recommended. Our measure developer contractor convened a SNF 
Function TEP in May 2016 and we then requested and received public 
comment via the CMS Measures Management Web site. In October 2016, we 
presented a review of our additional measure development work to the 
MAP as part of the feedback loop to give an update on the measure 
development activities.
    We appreciate the comments pertaining to NQF endorsement of the 
measures before they are publicly displayed and comments on the titling 
of the proposed functional outcome measures. With regard to the measure 
title, we recognize the confusion of leveraging the words ``IRF'' in 
our title application when we are collecting for a SNF population, and 
we will reassess the titling for these outcome measures to decrease 
confusion among all stakeholders.
    Comment: Several commenters expressed concern about the added 
burden of collecting data for the functional outcome measures. One 
commenter noted that the addition of the section GG items needed for 
the function outcome measures will increase the time providers need to 
complete residents' assessments. A few commenters stated that changes 
in the MDS as a result of these measures will involve additional staff 
time and resources for training and monitoring compliance. One 
commenter suggested that we provide financial support for the 
additional reporting burden.
    Response: We appreciate the commenters' concerns associated with 
the proposed functional outcome measures. We recognize that any new 
data collection is associated with burden and take such concerns under 
consideration when developing and selecting quality measures. As we 
develop quality measures, we review existing items and consider the 
appropriateness of adding or deleting any items. We note that some of 
the data elements associated with the measure are already included on 
the MDS in section GG, because we adopted a cross-setting function 
process measure in the SNF QRP FY 2016 Final Rule (80 FR 46444 through 
46453). Three of the self-care data elements and seven mobility data 
elements necessary to calculate that quality measure, an Application of 
the Percent of Long-Term Care Hospital Patient with a Functional 
Assessment and a Care Plan that Addresses Function (NQF #2631) are used 
to calculate the quality measure and are finalized in this rule as 
standardized resident assessment data elements.
    Comment: Three commenters noted that the requirement to assess 
residents while utilizing both the section G--Functional Status and 
section GG--Functional Abilities and Goals items on the MDS is 
burdensome. One of the commenters explained that to address the same 
functional activities in two different sections of the MDS, with 
different item definitions, and with different look-back periods, is 
excessively burdensome, and introduces unnecessary risk for reporting 
errors. The two other commenters further suggested that we analyze the 
section G mobility and self-care items that address the same or similar 
domains in section GG to identify opportunities to eliminate the 
redundant and non-compliant mobility and self-care items from section 
G.
    Response: We recognize that the items in section G and section GG 
address similar domains of mobility and self-care. However, for the SNF 
QRP, we believe that the section GG items and the associated 6-level 
scale will allow us to better distinguish change at the highest and 
lowest levels of functioning by documenting minimal change from no 
change at the low end of the scale. This is important for measuring 
progress in some of the most complex cases treated in PAC. The items in 
section GG were developed with input from the clinical therapy 
communities to better measure the change in function,

[[Page 36588]]

regardless of the severity of the individual's functional limitations. 
To reduce the potential burden associated with collecting additional 
items, we have included several mechanisms in the section GG to reduce 
the number of items that apply to any one resident. First, in section 
GG, there are skip patterns pertaining to walking and wheelchair 
mobility that allow the clinician to skip items if the resident does 
not walk or does not use a wheelchair, respectively. The skip patterns 
mean that only a subset of section GG items are needed for most 
residents. Second, section GG items will only be collected at admission 
and discharge.
    Comment: Two comments requested more detailed information about how 
the functional outcome measures could be used to improve quality and 
how we expect to use the information.
    Response: We believe that examining residents' functional outcomes 
will help SNF staff focus on optimizing patients' functioning and 
supporting patients' transition from the SNF to home or another 
setting. Furthermore, we believe that the feedback we provide to SNFs 
on these measures will allow providers to monitor their performance on 
key rehabilitation outcomes, relative to other facilities, and identify 
opportunities to improve their quality of care.
    Comment: One commenter voiced concern about the proposal to include 
functional outcome measures that focus on functional improvement 
without also proposing measures that cover SNF residents who are in the 
facility for functional maintenance or the prevention or slowing of 
functional decline. The commenter stated that the standards of care and 
goals for patients in an IRF cannot be adopted for SNFs unless an 
additional measure that focuses on residents covered under functional 
maintenance is also adopted. The commenter further noted that adoption 
of the four functional outcome measures will send the wrong message to 
SNFs and indicate they are being judged solely on whether they improve 
residents' functioning. The commenter recommends delaying 
implementation of these measures until a maintenance measure can also 
be implemented simultaneously. This commenter disagreed that the 
exclusion of patients not receiving physical therapy or occupational 
therapy is an appropriate proxy for SNF residents for whom there is no 
expectation of functional improvement and suggested we consider another 
measure that does not penalize SNFs that provide maintenance therapy.
    Response: We agree that our measures should address maintenance and 
the prevention or slowing of functional decline, and we note that the 
functional process measure, Application of Percent of LTCH Patients 
with an Admission and Discharge Functional Assessment and a Care Plan 
that Addresses Function (NQF #2631), which is already included in the 
SNF QRP measure set, addresses this topic. The functional process 
measure requires that a SNF conduct a functional assessment at both 
admission and discharge and that such assessment include at least one 
goal related to function. Such functional status goals may focus on 
maintenance of function, slowing decline in function or functional 
improvement. Likewise, the proposed discharge functional outcome 
measures, Application of the IRF Function Outcome Measure: Discharge 
Self-Care Score for Medical Rehabilitation Patients (NQF #2635) and 
Application of the IRF Function Outcome Measure: Discharge Mobility 
Score for Medical Rehabilitation Patients (NQF #2636), calculate the 
residents' observed and expected discharge functional status. 
Maintenance of function or slowed decline in function may be expected 
based on the resident's characteristics and this would be captured in 
these measures. We also support future quality measurement work that 
will assess the development of other measures that focus on maintaining 
function and the slowing of functional decline.
    Finally, we would like to note that the Nursing Home Quality 
Initiative includes two quality measures focused on functional 
maintenance and slowing decline. These measures are reported to the 
public on the Nursing Home Compare Web site and are calculated using 
MDS Section G data elements. We intend to develop similar quality 
measures focused on maintenance of function and decline in function 
that would be calculated using section GG Self-Care and Mobility data 
elements. With regard to unintended consequences, we will monitor 
potential unintended consequences of this exclusion criterion, and take 
these suggestions into consideration during our ongoing efforts to 
improve our quality measures.
    Comment: One commenter agreed with the exclusion of residents who 
do not have an expectation of functional improvement for the 2 change 
functional outcome measures (Application of IRF Functional Outcome 
Measure: Change in Self-Care for Medical Rehabilitation Patients (NQF 
#2633) and Application of IRF Functional Outcome Measure: Change in 
Mobility Score for Medical Rehabilitation Patients (NQF #2634)) and 
requested clarification as to how we would identify these residents. 
The commenter requested additional detail regarding residents who 
qualify for this exclusion at admission and for residents whose status 
changes during the SNF stay. The commenter noted that to ensure 
accurate and appropriate identification of beneficiaries who qualify 
for this exclusion, CMS needs to provide more detail regarding it. One 
commenter stated that we should provide additional information 
regarding how SNFs will be held accountable if the goal changes from 
expecting functional improvement in a resident to not expecting 
functional improvement during the resident's stay. Another commenter 
also voiced concern that changes in residents' goals between admission 
and discharge are common and would impact outcomes.
    Response: For this exclusion criterion, we provide the list of 
medical conditions that we will use in the Final Rule Specifications 
for SNF QRP Quality Measures document, which is available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    We recognize that a resident's status or goals may change during 
the SNF stay, and the measures include several exclusions that are 
applied based on the resident's status at discharge to reflect this 
change prior to the end of the stay. For example, a resident may 
experience an incomplete stay due to an urgent medical condition and is 
discharged to an acute care hospital. We recognize that it is 
challenging to collect discharge functional assessment data under these 
circumstances. For this reason, these residents are excluded from the 
four functional outcome measures. We would also like to clarify that 
the collection of a patient's goal is simply to track whether a 
patient's goal was established on admission rather than to track the 
expectation of function improvement.
    Another exclusion criterion in the 4 functional outcome measures 
relates to residents who are discharged to hospice. This may be a 
circumstance where a resident's status changed during the stay due to a 
new medical diagnosis or an unexpected worsening of a resident's 
condition. The list of all measure exclusions and the specifications 
for each of these exclusion criteria are

[[Page 36589]]

provided in the Final Rule Specifications for SNF QRP Quality Measures 
document. We will continue to monitor for other examples as part of our 
ongoing quality measure development work.
    Comment: Several commenters disagreed with one proposed exclusion 
criteria, Residents who do not receive physical or occupational therapy 
services. Two commenters suggested that we adopt more person-centered 
criteria that reflect functional improvement expectations in addition 
to or to replace the current proposed exclusion that focuses on therapy 
services. The two commenters stated that providers who administer 
therapy services to residents to maintain, but not improve function, 
would have lower functional improvement scores and the criterion 
``creates a significant disincentive to provide any physical therapy 
(PT) or occupational therapy (OT) to SNF residents that require skilled 
services to maintain or delay decline in function.'' One of the two 
commenters stated this may be a disincentive to provide therapy to 
residents who fit into the Jimmo class of beneficiaries who may not 
improve but still need SNF services. One of these commenters 
recommended that CMS exclude residents whose aggregate ``Admission 
Performance'' mobility (GG01701) or self-care (GG01301) score (see Step 
1 of the CMS proposed quality measures algorithms) is greater than or 
equal to their ``Discharge Goal'' mobility (GG01702) or self-care 
(GG01302) score. Another commenter opposed excluding from the 
functional outcome measures residents who do not receive occupational 
therapy or physical therapy.
    One commenter who disagreed with the proposed exclusions criterion 
further noted that the exclusion of ``residents who do not receive 
physical or occupational therapy services,'' for the 4 functional 
outcome measures is substantively different than the May 2016 SNF 
Function TEP discussion, and the 2016 CMS Measurement Management Public 
Comment document. This commenter recognized that the exclusion did 
refer to ``Residents who do not have an expectation of functional 
improvement,'' which was subsequently clarified to exclude ``Residents 
who do not receive physical or occupational therapy services.'' The 
commentator expressed that no explanation or data analysis was provided 
to justify the change in the exclusion definition.
    Response: We thank the commenters for their feedback and 
suggestions. We acknowledge the commenters' concern about excluding 
residents who do not receive physical or occupational therapy services. 
As noted in the SNF Function TEP Report, our measure development 
contractor did solicit suggestions from TEP members about methods to 
operationalize exclusion criteria so that the quality measure would 
include only residents who were expected to improve functional status, 
and TEP members did not offer a specific recommendation to address this 
issue. For residents who are expected to improve their functional 
abilities, physical and/or occupational therapy would be part of the 
resident's care plan to assist the resident to relearn how to perform 
the activity or to learn a new way to perform the activity. With regard 
to the commenter's suggestion to exclude residents whose aggregate 
``Admission Performance'' is greater than or equal to their ``Discharge 
Goal,'' we would like to clarify that the Function Process Measure 
requires SNFs to code at least one Discharge Goal item on the 5-day 
admission assessment. The suggestion would require SNFs to code all 
function Discharge Goal items, which is not currently required, and 
this would incur a significant burden on SNFs.
    Comment: MedPAC noted the importance of monitoring the accuracy of 
data that is reported on measures that assess functional status.
    Response: We agree with MedPAC on the importance of monitoring the 
accuracy of functional status data that is reported to CMS, as data 
accuracy is necessary to calculate reliable and valid quality measures. 
To that end, we conduct ongoing analyses of the assessment data 
submitted from PAC providers to ensure accuracy by examining the 
reliability and validity of the data elements on a quarterly basis.
    Comment: One commenter cautioned that the education level and 
professional expertise of personnel collecting SNF functional outcome 
measure data are important to consider when analyzing and drawing 
conclusions about the data.
    Response: We recognize that each SNF may have unique workflow 
issues, which may mean that data collection protocols are not exactly 
alike. However, we require that SNFs submit accurate data, and we 
provide training and other resources.
    Comment: One commenter supported the general numerator and 
denominator definitions proposed for the four proposed SNF functional 
outcome measures.
    Response: We appreciate the commenter's support.
    Comment: One commenter expressed support for the denominator 
exclusion criteria proposed for the four proposed SNF functional 
outcome measures.
    Response: We appreciate the commenter's support.
    Comment: One commenter expressed concern regarding the exclusion, 
``residents who are scored as independent upon admission,'' from the 
change in self-care score measure and the inclusion of these residents 
in the self-care discharge score measure. The commenter explained that 
this will cause confusion among providers, and recommended that further 
education be offered to providers.
    Response: This exclusion criterion only applies to the two change 
quality measures (Application of IRF Functional Outcome Measure: Change 
in Self-Care for Medical Rehabilitation Patients (NQF #2633) and 
Application of IRF Functional Outcome Measure: Change in Mobility Score 
for Medical Rehabilitation Patients (NQF #2634)), and is related to a 
measurement issue. A resident who is independent with each of the self-
care or mobility activities in section GG at the time of admission 
would be coded a 6 on each of those items, and any improvement in self-
care or mobility skills the resident achieved during the stay could not 
be measured with the same set of function data elements and rating 
scale at discharge. Therefore, residents who are at the ``ceiling'' of 
the self-care or mobility scale at the start of a SNF stay are excluded 
from the respective change in self-care or change in mobility quality 
measure. Including these residents in a change quality measure may 
disadvantage providers serving these residents, as the change in self-
care or mobility could not be mathematically higher than zero. We would 
like to note that residents who are independent with all self-care or 
mobility activities are included in the discharge self-care and the 
discharge mobility quality measures, and for the discharge quality 
measures, maintaining independence with all the self-care or mobility 
activities is the expected outcome. With regard to provider knowledge 
about this topic, we recognize the importance of comprehensive training 
and we intend to provide such training.
    Comment: Two commenters noted that the calculation of the 4 
functional outcome quality measures requires recoding of ``activity did 
not occur'' codes. These commenters expressed concern about recoding 
the ``activity did not occur'' codes (that is, codes 07, 09, 88) to 
01--Dependent, and one of the two commenters did not support recoding 
of missing data as the method was not clear. [The other commenter 
expressed concern that recoding the

[[Page 36590]]

activity not attempted codes to 01 will not accurately reflect resident 
status or change, and that mobility and self-care tasks being refused, 
not applicable, or not attempted due to medical or safety concerns, 
does not necessarily mean the resident is dependent.
    Another commenter noted that this recoding can result in different 
statistical and clinical inferences compared to not recoding items to 
01. The commenter recommended further detail regarding the use of 
``activity did not occur'' codes and that an analysis be conducted that 
compares the recoding method to excluding any or all the four 
``activity did not occur'' item responses, and provide the percentage 
of patient stays impacted. The commenter requested that these results 
be shared with stakeholders for comment before adopting these four 
proposed functional outcomes measures.
    Response: We appreciate the concerns presented by commenters about 
handling missing data and the ``activity not attempted'' codes. 
``Activity did not occur'' codes and missing data are recoded to 01. 
Dependent to calculate the quality measure. The rationale for this 
recoding relates to the likelihood that when a resident cannot attempt 
an activity due to a medical condition or safety concern, that the 
resident often would have required significant assistance from one or 
more helpers to complete the activity had the activity been attempted. 
Thus, the resident would have been considered dependent with the 
activity. Likewise, the code 09, ``Not applicable,'' is used to 
indicate that the activity was not attempted, and that the resident did 
not perform the activity prior to the current illness, injury or 
exacerbation. We believe our re-coding approach is better than 
excluding any resident stays that include one or more items coded as 
``activity not attempted,'' because excluding these residents would 
exclude residents who, in general, are lower functioning. That said, we 
are exploring other methods of recoding items when an activity was not 
attempted. We believe it is important to continue to monitor the 
reliability and validity of the functional outcome measures, including 
issues such as this one. Ongoing analyses of these items and outcomes 
may provide support for an alternative approach to item recoding in the 
future.
    Comment: One commenter conditionally supported the inclusion of 
only Medicare Part A residents, but requested that we consider revising 
this criterion in the future to include SNF Medicare Advantage 
enrollees. The commenter noted that with growing enrollment in the 
Medicare Advantage program, excluding these beneficiaries may result in 
the outcome measure not adequately representing quality of care for the 
entire SNF. The commenter recommended that we pursue the regulatory 
and/or statutory approaches necessary to make data reporting and 
analysis possible include the Medicare Advantage population, and that 
this was essential so that functional outcomes of all Medicare 
beneficiaries (Part A or Medicare Advantage) reported by these proposed 
measures would more accurately represent the quality of care provided 
by a SNF. Two commenters commented that the description of the proposed 
measures should specify that the measure estimates outcomes for the 
Medicare Part A coverage benefit, as opposed to the admission and 
discharge from a nursing home. The commenter noted this was important 
because a Medicare Part A resident may remain in the nursing facility 
at the end of the Part A coverage period, so while the resident may be 
``discharged'' from Part A benefits, he/she is not ``discharged'' from 
the nursing home.
    Response: The commenter is correct that the functional outcome 
measures apply only to Medicare Part A SNF residents. The assessment 
data for the functional outcome measures would be collected at the 
start of the SNF Part A stay and the end of the Part A stay. We 
appreciate the suggestion to expand the proposed measure collection to 
a Medicare Advantage population. We will take the recommendation to 
expand the measure population into consideration in future measure 
development efforts. Additional discussion of the expansion of quality 
measures to include all residents regardless of payer status can be 
found in section III.D.2.k.5
    Comment: One commenter noted there are meaningful SES, clinical, or 
other differences between traditional Medicare versus Medicare 
Advantage (MA) enrollees that could affect comparisons between 
facilities with different proportion of Medicare Advantage and Part A 
stays. The commenter further requested that this possibility should be 
investigated.
    Response: For a discussion of social risk factors in the SNF QRP, 
please see the discussion in section III.D.2.b.1 of this rule.
    Comment: One commenter stated that the calculation of the four 
proposed measures is complex, particularly with respect to the 
calculation of the expected discharge functional status score using a 
formula, which may result in providers not understanding the precise 
target outcome. The commenter further noted that the measure scores 
might be inappropriately compared across PAC settings even though they 
are calculated differently using different risk adjustor coefficients. 
The commenter stated that significant education and ongoing feedback 
for providers will be necessary when these measures are implemented to 
improve quality of care and suggested that we simplify the calculations 
for the functional outcome measures.
    Another commenter voiced concern that the calculated ``Expected 
score'' for the function outcome measures would be an inaccurate point 
of comparison if the risk adjustors were not accurate. The commenter 
suggested that we fully evaluate the risk adjustors in a large data 
sample to ensure they are appropriate prior to implementation. The 
commenter also suggested that we should have a transparent process that 
is clearly communicated with stakeholders to clarify and refine risk 
adjustors for the functional outcome measures. The commenter noted that 
if there is not a refinement period of the risk adjustors, providers 
will be penalized for their performance on these measures at the same 
time that we are examining the risk adjustors' accuracy and possibly 
modifying them.
    Response: We continuously examine the performance of quality 
measures and revise measures, including risk adjustment, to optimize 
measurement of quality ensuring that our measures and their components 
are accurate. We also continue to seek stakeholder input as we conduct 
our internal measure maintenance work. Further, we agree that education 
is important and necessary to help SNFs, as well as other PAC settings, 
understand how the four proposed functional outcome measures will be 
calculated. To that end, we intend to provide training materials 
through the CMS webinars, open door forums, and help desk support. The 
expected scores are calculated using the results of our risk-adjustment 
models. During our May 2016 TEP, we discussed the risk adjustment 
models extensively, and these discussions included a review of our 
analyses of the mean admission, discharge and change for the self-care 
and mobility scores for each risk adjustor. We also reviewed the risk 
adjustors for competing measures. These discussions are summarized in 
the SNF Function Summary TEP report, which is available at https://
www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-
Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-
Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-

[[Page 36591]]

Information.html. We believe the risk adjustment model is 
methodologically strong.
    Comment: One commenter generally supported the proposed risk 
adjustment approach for the four proposed functional outcome measures, 
but requested additional items to address social risk, such as 
Medicare-Medicaid status. The commenter recommended testing of the risk 
adjustment methodology to ensure it adjusts for meaningful differences. 
Another commenter suggested that we risk adjust the four proposed 
functional outcome measures for social and environmental factors, such 
as social support and an accessible home environment. The commenter 
stated that by not adjusting for social and environmental risk factors, 
we might be creating conflicting incentives between functional 
improvement and resource use measures. Another commenter supported the 
use of other assessment data, such as mode of communication and gateway 
processes. One commenter expressed support for the proposed risk 
adjustors for the functional outcome measures, but recommended that we 
reassess all risk adjusters once the new MDS data are submitted.
    Response: We selected the risk factors based on literature review, 
clinical relevance, TEP input, and empirical findings from the PAC-PRD 
analyses. For a discussion of social risk factors in the SNF QRP, we 
refer the commenter to section III.D.2.b.1. of this rule. We agree with 
the importance of testing and continuously monitoring the risk 
adjustment models so that the functional outcome quality measures 
reflect true differences in the effectiveness of treatments provided by 
SNFs. We will continue to examine the performance of our quality 
measures and revise risk adjustment approaches as necessary to optimize 
quality measurement.
    Comment: Several commenters supported the use of selected risk 
adjustors and specifically noted that they support risk adjustors in 
the areas of age, admission function score, medical conditions, and 
impairments. One commenter stated that the proposed list of 
comorbidities used for risk adjustment of the functional outcome 
measures appears comprehensive but requested further detail of the 
source of the comorbidities data and the proposed look-back period for 
including the comorbidities. One commenter supported the inclusion of 
prior functioning and prior device use items for risk adjustment in the 
functional outcome measures but was concerned that the collection of 
this data will add administrative burden. Some commenters noted that 
coding for addition risk adjusters might cause additional provider 
burden. One commenter supported the inclusion of new data elements for 
risk adjustment, specifically the prior functioning, prior device use, 
primary medical condition category and prior surgery items, but under 
the condition that we appropriately account for the additional 
reporting burden within the SNF PPS rates. Another commenter expressed 
concern about the accuracy and burden of collecting the items that 
refer to a time period outside the defined period of the SNF stay. One 
commenter stated that SNFs would not know what determines the model 
estimate, and proposed that we provide the benchmark for comparison 
prior to the fiscal year. In addition, this commenter questioned the 
use of a statistical model since section GG includes the establishment 
of goals, arguing outcomes could be compared to the SNF's own 
established goals. Other commenters requested that we use the median 
discharge scores instead of the mean values as a way to avoid the 
impact of outliers on the expected score. Another commenter expressed 
that poor risk adjustment would penalize SNFs that provide care to 
medically-complex and socioeconomically disadvantaged residents, and 
threaten access to care.
    Response: We agree with commenters on the importance of risk 
adjustment as functional outcomes can vary based on residents' 
demographic and admission clinical status. Risk adjustment allows for 
the comparison of functional outcomes across SNFs. As with other risk 
adjustors, both prior functioning and prior device use were identified 
as important risk adjustors for the functional outcome measures through 
data analyses. In development of the quality measures, we selected 
risk-adjustors including comorbidities, and other health and prior 
functioning items, based on evidence in the literature, stakeholder 
comments during TEPs, public comment opportunities statistical 
findings, and input from subject matter experts. As we develop and 
refine quality measures, we review existing items, listen to feedback 
from providers, and consider the appropriateness of adding or deleting 
any items to the MDS. Reduction of burden is an important consideration 
as we develop and refine quality measures, which includes risk 
adjustors for outcome measures. We would like to emphasize the 
importance of risk adjustment as functional outcomes can vary based on 
residents' demographic and clinical factors. Prior functioning is an 
important predictor of functional improvement and this is data 
routinely collected by therapists when developing a resident's care 
plan.
    We agree with the commenter that it is important for risk 
adjustment of quality measures to be reliable and valid. As mentioned 
previously, the risk adjustors were determined based on data analysis, 
stakeholder input, literature review, clinical relevance and public 
comment. As noted above, we agree with the commenter for the need to 
re-examine the risk adjustment model when additional data become 
available. In addition, we appreciate the continued involvement of 
stakeholders in all phases of measure development and implementation.
    We refer the commenter to the Specifications for SNF QRP Quality 
Measures and Standardized Resident Assessment Data Elements document 
available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html for additional details about 
the risk adjustment approach.
    With regard to the use of the discharge goals, we would like to 
note that the quality measure, Application of Percent of Long-Term Care 
Hospital Patients with an Admission and Discharge Functional Assessment 
and a Care Plan that Addresses Function (NQF #2631), requires 
documentation of only one goal. Using goals to determine outcomes would 
require SNFs to complete all goals in section GG, which would add 
significant burden. With regard to the suggestion of using the median 
rather than the mean value, we will examine this approach as we examine 
additional data to determine how it affects quality measure scores.
    We would like to note that the risk adjustment model for these 
outcomes includes up to 60 risk-adjusters, and includes more clinically 
and statistically relevant adjusters for function than other risk-
adjusted functional outcomes measures. We will pursue ongoing 
monitoring and analysis of these proposed functional outcome measures 
to identify any potential disparities across patient and facility 
characteristics.
    Comment: One commenter was concerned that the PAC PRD data from 34 
nursing facilities and other providers used to develop the risk 
adjustors for the functional outcome measures for SNFs were inadequate. 
The commenter felt that a larger volume of data is

[[Page 36592]]

necessary to verify the current risk adjustors. The commenter 
recommended that we reevaluate these risk adjustors on a regular basis 
to ensure their accuracy and to ensure that SNF providers are not 
evaluated and penalized in the future based on inadequate risk 
adjustment. The commenter also stated that suggestions offered during a 
Technical Expert Panel should be tested with data before becoming part 
of the quality measure and payment system.
    Response: As previously discussed, the risk adjustors were selected 
based on literature review, clinical relevance, Technical Expert Panel 
input, public comment opportunities, and empirical findings from the 
data analyses from 60 SNFs and approximately 4,000 resident 
assessments. Based on our comprehensive approach to developing the 
models and the alignment between these models and the IRF models, we 
believe that our models are adequate for risk adjustment for the four 
SNF functional outcome measures. As part of measure maintenance and 
evaluation, we routinely analyze data to monitor the performance of 
implemented quality measures, including risk adjustment models, and 
thus we agree with the commenter that we should re-examine the risk 
adjustment model when national data become available. We aim to develop 
accurate and fair measures and we continuously examine the performance 
of quality measures and revise measures, including risk adjustment, to 
optimize measurement of quality.
    Comment: Some commenters requested that additional risk adjusters 
be included in the proposed outcome measures' statistical models, and 
that each model includes a similar set of risk adjusters. One commenter 
requested that cognition and age be included in the model, while other 
commenters were concerned that ``prior functioning: functional 
cognition'', ``fall history'', and ``prior functioning: mobility'' were 
not included in the self-care model. Another commenter disagreed with 
the specification ``independent'' as the reference category since it 
appeared this also included residents with an unknown prior functional 
status. The commenter explained that in PAC settings, it is more likely 
that a patient who cannot report their prior functional status was more 
dependent rather than more independent before being admitted, so should 
not be grouped into the ``independent'' reference category.
    Response: The majority of risk adjusters are the same in both the 
self-care and mobility functional outcome models. With regard to the 
variables included in the mobility models, but not included in the 
self-care models, these variables were all tested in the self-care 
model, but they were not statistically significant predictors of the 
change in self-care scores or the discharge self-care scores. As noted 
above, we will continue to examine the risk adjustment models when more 
data become available. We would also like to clarify that cognition and 
age are included in risk adjustment models and that the Brief Interview 
for Mental Status (BIMS) specifically accounts for functional variation 
associated with cognition status. Regarding the reference group 
``independent'' for the prior functional status risk adjustors, we 
appreciate the commenter's suggestion and will take it into 
consideration.
    Comment: Several commenters requested additional information 
regarding coding of some of the risk adjustment variables. One 
commenter requested additional detail about how a SNF would identify 
the appropriate primary medical condition category for the proposed new 
MDS item I0020, which is used for risk adjustment of the functional 
outcome measures. The commenter stated that the current approach of 
requiring the provider to identify one of the 13 primary medical 
diagnoses or list an ICD-10 code is burdensome and suggested rather a 
provider should enter the applicable ICD-10 code onto the MDS, which 
would then be mapped by the MDS grouper software to identify the 
applicable condition. The commenter further stated that the admitting 
diagnosis for admission to a SNF may not be directly relevant to the 
diagnosis associated with mobility and self-care treatment plans and 
goals, unlike with IRFs, and recommended that we revise this section of 
the MDS to request providers report the primary medical condition 
associated with mobility and self-care treatment. Another commenter 
requested more clarification on the use ICD-10 codes in defining the 
primary medical condition category, and further noted concern that 
these codes are more prevalent in the IRF setting, compared to the SNF 
setting. This commenter expressed concern about where the diagnosis 
group information will come from and explained that ICD-10 coding is 
complete and requires multiple levels of consideration and clinical 
input. Another commenter requested information on how ``medically 
complex'' is defined. Other commenters requested further clarification 
on where information for items such as mechanical ventilation will be 
acquired, how ``major surgery'' is defined and how the interaction 
between primary diagnosis and SNF admission functional status is 
determined in risk adjustment.
    Response: We appreciate the commenters' concerns regarding coding 
of the primary medical conditions as well as the coding of mechanical 
ventilation and major surgery for risk adjustment. As previously noted, 
we intend to provide guidance on these issues as part of our 
comprehensive training. Some of these variables were added to the IRF-
PAI Version 1.4 when the functional outcome measures were adopted in 
the IRF QRP, and since these primary medical conditions will be aligned 
across the IRF and SNF settings, providers can get a preview of the 
coding guidance and definitions in the IRF PAI Training Manual on page 
J-5, which is available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-PAI-and-IRF-QRP-Manual.html. The RAI manual will also be updated with 
all timely and accurate information. With regard to the primary medical 
condition diagnosis, which are risk adjustors for the four functional 
outcome measures, the proposed MDS effective October 1, 2018 does 
include primary diagnosis as a data element.
    Comment: One commenter noted that the use of the term ``Primary 
rehabilitation diagnosis'' does not recognize that not all patients are 
admitted for rehabilitation.
    Response: We would like to clarify that the term ``Primary 
rehabilitation diagnosis'' is not used as part of the four proposed 
functional outcome measures.
    Comment: One commenter supported the use of the BIMS for risk 
adjustment of the functional outcome measures, stating that learning 
and memory deficits can significantly impact the rehabilitation of 
residents with functional impairments. However, the commenter stated 
that the BIMS is designed as a resident interview and that the use of 
the BIMS alone as risk adjustment in the SNF setting would be 
problematic due to the high percentage of residents unable to complete 
the BIMS as a result of severe cognitive or physical impairments. The 
commenter stated that a SNF resident's inability to complete the BIMS 
is often associated with slower rates and lesser degrees of functional 
improvement than those residents that can complete the BIMS. This 
commenter requested clarification as to how we will address risk 
adjustment for these residents and suggested excluding SNF residents 
that cannot complete the BIMS items if they are not accounted for in 
the current risk adjustment model. The commenter also

[[Page 36593]]

suggested development of standardized patient assessment data for 
clinician observation of cognitive function and mental status in the 
future to account for residents who are unable to complete the BIMS.
    Response: We appreciate the commenter's feedback regarding the use 
of the BIMS in risk adjustment for the functional outcome measures. We 
would like to clarify that in the MDS 3.0, if a resident is unable to 
complete the BIMS, the provider is directed to administer the Staff 
Assessment for Mental Status (C0700-C1000), and the data from the staff 
assessment for mental status is used for cognitive status risk 
adjustment when the BIMS score is not available. With regard to the 
residents who are unable to be interviewed for the BIMS due to 
communication disorders, the BIMS can also be administered in writing. 
Further, we note that communication impairment is also a risk adjusters 
the self-care and mobility models. With regard to the residents who are 
unable to be interviewed for the BIMS due to communication disorders, 
we note that communication impairment is also a risk adjusters the 
self-care and mobility models.
    Comment: MedPAC noted the importance of using a consistent 
definition for ``at admission'' to enable accurate comparisons across 
PAC providers. The commenter stated that we should require that the 
assessment be completed within 3 days of admission and stated that the 
Day-5 assessment in SNFs is problematic since it can be conducted 
between Day 1 and Day 8.
    Response: We appreciate the importance of data collection within 
consistent assessment time frames and we maintain a consistent approach 
to collecting information on or as close to the time of admission as 
possible. For example, on the 5-day assessment in SNF, the assessment 
time frame for the section GG Self-Care and Mobility data items on the 
MDS is 3 calendar days at the time of admission (first 3 calendar days) 
and discharge (day of discharge and the 2 days prior to the day of 
discharge). Therefore, across all PAC assessment instruments, we are 
collecting on a patient's usual performance within that three-day time 
period. That is, the 3-day assessment time frame for the section GG 
Self-Care and Mobility data elements is standardized across the three 
institutional PAC settings, SNFs, IRFs and LTCHs.
    Comment: Two commenters requested that we ensure that the four 
quality measures are consistently reviewed for reliability, accuracy, 
and applicability to patients in different PAC settings to develop 
standards to compare quality across PAC settings. The commenters 
requested that we consider whether variation in training and practices 
among providers in various PAC settings affects data entry processes 
for the MDS and other PAC instruments, and whether this undermines the 
comparability of the proposed functional outcome measures. Another 
commenter requested that we provide clear language that cross-setting 
applications are not valid at this time due to differences in patient 
populations, payment policy, and specific measure calculation details. 
One commenter voiced concern that additional time, testing, and 
training may be necessary to ensure measures are implemented 
consistently across different settings that use very different 
processes, scales, definitions, and time frames, to allow data to be 
comparable across settings.
    One commenter requested that we use the same set of definitions for 
standardized and interoperable functional assessment data in each PAC 
setting. The commenter further stated that this would mitigate 
providers collecting and calculating data for these measures 
differently across settings. The commenter was concerned discrepancies 
could result in unintended consequences with regard to payment and 
public reporting.
    Response: We agree with the commenters that the accurate collection 
of functional assessment data is important across all PAC settings. 
Providers are required to submit accurate data to us, and we provide 
training and other resources. Providers should collect data in a manner 
that fits with the clinical workflow within their facility. With regard 
to the concern that reporting variability may impact comparability 
across facilities, we agree that comprehensive training is needed to 
ensure accuracy of data collection and interpretation as well as 
successful implementation of new measures. As with previous measures, 
we will provide training sessions, training manuals, Webinars, open 
door forums, help desk support, and a Web site that hosts training 
information (http://www.youtube.com/user/CMSHHSgov). At this time, we 
are adopting these measures into the SNF QRP, which is a pay-for-
reporting program, and have not specified a timeframe for public 
reporting of these measures for SNFs.
    With regard to the request for standardized and interoperable 
functional assessment data in each PAC setting, we agree with the 
commenter about the importance of accurate collection of standardized 
patient assessment data across the PAC settings. The item definitions 
are the same across PAC settings, and we continue to work to harmonize 
the coding guidance for the standardized assessment data elements as we 
believe that this is key to the collection of accurate data.
    Comment: One commenter supported our proposal to collect data on 
the proposed function quality measures through the MDS using the QIES 
ASAP system.
    Response: We appreciate the commenter's support.
    Final Decision: After careful consideration of the public comments 
received, we are finalizing our proposal to adopt the four functional 
outcome measures, Application of IRF Functional Outcome Measure: Change 
in Self-Care Score for Medical Rehabilitation Patients (NQF #2633), 
Application of IRF Functional Outcome Measure: Change in Mobility Score 
for Medical Rehabilitation Patients (NQF #2634), the Application of IRF 
Functional Outcome Measure: Discharge Self-Care Score for Medical 
Rehabilitation Patients (NQF #2635), the Application of IRF Functional 
Outcome Measure: Discharge Mobility Score for Medical Rehabilitation 
Patients (NQF #2636), beginning with the FY 2020 SNF QRP.
h. Modifications to Potentially Preventable 30-Day Post-Discharge 
Readmission Measure for Skilled Nursing Facility (SNF) Quality 
Reporting Program (QRP)
    In the FY 2017 SNF PPS final rule (81 FR 52030 through 52034), we 
adopted the Potentially Preventable 30-Day Post-Discharge Readmission 
Measure for SNF QRP. This measure was developed to meet section 
1899B(d)(1)(C) of the Act, which calls for measures to reflect all-
condition risk-adjusted potentially preventable hospital readmission 
rates for PAC providers, including SNFs.
    This measure was specified to be calculated using 1 year of 
Medicare FFS claims data; however, in the FY 2018 SNF PPS proposed rule 
(82 FR 21057) we proposed to increase the measurement period to 2 years 
of claims data. The rationale for this change is to expand the number 
of SNFs with 25 stays or more, which is the minimum number of stays 
that we require for public reporting. Furthermore, this modification 
will align the SNF measure more closely with other potentially 
preventable hospital readmission measures developed to meet the IMPACT 
Act requirements and adopted for the IRF and LTCH QRPs, which are

[[Page 36594]]

calculated using 2 consecutive years of data.
    We also proposed to update the dates associated with public 
reporting of SNF performance on this measure. In the FY 2017 SNF PPS 
final rule (81 FR 52030 through 52034), we finalized initial 
confidential feedback reports by October 2017 for this measure based on 
1 calendar year of claims data from discharges during CY 2016 and 
public reporting by October 2018 based on data from CY 2017. However, 
to make these measure data publicly available by October 2018, we 
proposed to shift this measure from calendar year to fiscal year, 
beginning with publicly reporting on claims data for discharges in 
fiscal years 2016 and 2017.
    Additional information regarding the Potentially Preventable 30-Day 
Post-Discharge Readmission Measure for SNF QRP can be found at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    We sought public comment on our proposal to increase the length of 
the measurement period and to update the public reporting dates for 
this measure. A discussion of these comments, along with our responses, 
appears below.
    Comment: We received several comments on our proposal to expand the 
data reporting period for SNFs from one year to 2 years for the 
Potentially Preventable 30-Day Post-Discharge Readmission Measure for 
SNF QRP. MedPAC and other commenters supported this proposal because it 
would increase the number of SNFs included in public reporting. Other 
commenters expressed support for aligning the SNF measure with the 
potentially preventable hospital readmission measures we have adopted 
for the IRF and LTCH QRPs, which also use 2 years of data.
    Some commenters were concerned that the greater lag associated with 
expanding the reporting period to 2 years would make the measure less 
valuable or sensitive to quality improvement. One commenter was 
concerned that publicly reporting performance data based on 2 years of 
data may not accurately reflect the quality of care that SNFs are 
currently furnishing. Some commenters were opposed to the proposal 
because it would not align with measurement periods used in other SNF 
quality measures. One commenter was specifically opposed to shifting 
this measure to a fiscal year cycle because most SNF data are based on 
calendar years, noting that inconsistent time periods may create 
confusion. Another commenter did not oppose the shift to fiscal year as 
long as confidential feedback reports and review and correction 
timelines would not be negatively impacted.
    Response: We appreciate commenters' concerns that increasing the 
measurement period from one year to 2 years would create a greater 
delay between data collection and public reporting of this measure. 
However, we agree with those commenters that noted the benefit of 
increasing the number of SNFs for public reporting purposes outweighs 
the concerns associated with the data delays. We also agree with 
commenters that this change would better align the SNF measure with the 
other PPR measures developed to meet the requirements of the IMPACT 
Act. We also note that changing the public reporting dates for this 
measure from calendar to fiscal year will not impact providers' 
confidential feedback reports or the length of time they have to review 
and correct the data to be made publicly available.
    Final Decision: After careful consideration of the public comments, 
we are finalizing our proposal to increase the measurement period from 
1 year to 2 years for the calculation of the Potentially Preventable 
30-day Post-Post Discharge Readmission Measure for SNF QRP measure. We 
are also finalizing our proposal to shift from calendar to fiscal years 
for public reporting of this measure.
i. SNF QRP Quality Measures Under Consideration for Future Years
    In the FY 2018 SNF PPS proposed rule (82 FR 21058), we invited 
public comment on the importance, relevance, appropriateness, and 
applicability of each of the quality measures listed in Table 19 for 
future years in the SNF QRP.

 Table 19--SNF QRP Quality Measures Under Consideration for Future Years
------------------------------------------------------------------------
                                        Patient- and Caregiver-Centered
             NQS Priority                             Care
------------------------------------------------------------------------
Measure..............................   Application of Percent
                                        of Residents Who Self-Report
                                        Moderate to Severe Pain.
------------------------------------------------------------------------
NQS Priority                           Health and Well-Being
------------------------------------------------------------------------
Measure..............................   Application of 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.
------------------------------------------------------------------------
NQS Priority                           Communication and Care
                                        Coordination
------------------------------------------------------------------------
Measure..............................   Modification of the
                                        Discharge to Community-Post
                                        Acute Care (PAC) Skilled Nursing
                                        Facility (SNF) Quality Reporting
                                        Program (QRP) measure.
------------------------------------------------------------------------

    We are also considering a measure focused on pain that relies on 
the collection of patient-reported pain data, and another measure 
regarding the Percent of Residents Who Were Assessed and Appropriately 
Given the Seasonal Influenza Vaccine. Finally, we are considering a 
measure related to patient safety, that is, Patients Who Received an 
Antipsychotic Medication.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the SNF QRP Quality Measures Under Consideration 
for Future Years. A discussion of these comments, along with our 
responses, appears below.
    Comment: One commenter supporting the future measure concept of the 
percent of residents who self-report moderate to severe pain, suggested 
inclusion of this measure by FY 2019 at the latest. Another commenter 
suggested

[[Page 36595]]

that they do not believe that pain experience alone should be a quality 
measure, expressing that the presence of pain does not provide enough 
information to help an individual's overall quality of life improve.
    One commenter suggested that a measure be developed that reflects 
patient-centered care pain management regardless of ability to self-
report as a significant portion of SNF residents are not able to self-
report pain and suggested using reliable and valid observational 
assessment items such as those in the current MDS 3.0 Section J0800 and 
J0850. The commenter encouraged us to consider incorporating the 
standardized observational pain assessment data elements that are 
currently being developed and tested to fulfill the requirements of the 
IMPACT Act. The commenter also urged us to seek NQF endorsement for any 
new measures to be incorporated into the SNF QRP program. Another 
commenter encouraged assessment for communication about pain rather 
than experience of pain without inadvertently incentivizing the use of 
opioid medications in alignment with proposed changes to HCAHPS. 
Another commenter suggested modifying this measure to reflect the 
proportion of residents for which moderate to severe pain interferes 
with or prevents important daily functional tasks and drive 
improvements in quality of life.
    Response: We appreciate the comments pertaining to the Application 
of Percent of Residents Who Self-Report Moderate to Severe Pain (Short 
Stay) (NQF #0676) measure under consideration for future implementation 
in the SNF QRP. We note that appropriately assessing pain as an outcome 
is important, acknowledge the importance of avoiding unintended 
consequences that may arise from such assessments, and will take into 
consideration the commenters' recommendations. We would like to note 
that our goal is to submit all fully developed measures to NQF for 
consideration of endorsement.
    Comment: We received several comments supporting the development of 
a seasonal influenza vaccine measure appropriate for the SNF 
population. One commenter stated that the incidence and impact of 
influenza disease is severe within the population of older adults in a 
SNF setting, and stated that as a result, there is a need for this 
measure. One commenter further suggested that a measure of this type 
presents an important opportunity to promote higher quality and more 
efficient health care for Medicare beneficiaries. One commenter 
recommended that we give due consideration to the cost of these 
services when the costs (for example, the purchase of the vaccine) of 
these services are bundled into the SNF Part A payment rates. This 
commenter supported alignment with ongoing efforts to collect and 
report this measure in the Long-Term Care Hospital Quality Reporting 
Program (LTCH QRP). Further, this commenter suggested CMS may want to 
add a pneumococcal vaccine measure in addition to an influenza measure.
    Response: We acknowledge the commenters' support of inclusion of a 
seasonal influenza vaccine measure. We will take all recommendations 
into consideration in our ongoing efforts to identify and propose 
appropriate measures for the SNF QRP.
    Comment: We received general support for development of an 
antipsychotic medication measure appropriate for the SNF population. 
One commenter expressed support for this measure concept and suggested 
inclusion of the measure by FY 2019 at the latest. One commenter 
expressed support for including most individuals in the measure 
regardless of dementia diagnoses. However, this commenter further 
suggested that Food and Drug Administration (FDA) approved indications 
of the medications should be excluded from this measure. Another 
commenter suggested further development of the measure as there is no 
existing baseline measurement. Another commenter suggested that any 
future measure should account for informed choices by persons with 
behavioral and psychotic symptoms of dementia (BPSD) and their families 
regarding the use of antipsychotic medications for appropriately-used 
antipsychotics, even if the medication does not have an indication 
approved by the FDA for their symptoms.
    Response: We acknowledge the support of inclusion of an 
antipsychotic measure and note the suggestion pertaining to the 
exclusions as well as the measure accounting for persons with BPSD. 
Recommendations will be taken into consideration in our ongoing efforts 
to identify and propose appropriate measures for the SNF QRP in the 
future.
    Comment: MedPAC suggested that we consider the adoption of future 
measures that can assess providers' ability to maintain function and 
prevent functional decline. MedPAC noted that the two quality measures 
for change in function do not capture whether a provider can maintain 
function as residents with conditions who are not expected to improve 
or who are already independent are excluded from the four measures that 
we are finalizing.
    Response: We agree with MedPAC that future quality measurement work 
should include the development of quality measures that focus on 
maintaining function and prevention of functional decline. We 
appreciate MedPAC's concern regarding the exclusion of residents who 
are not expected to improve due to certain medical conditions or who 
are independent. We would like to point out that two of the measures we 
are adopting in this final rule for the SNF QRP, Application of the IRF 
Function Outcome Measure: Discharge Self-Care Score for Medical 
Rehabilitation Patients (NQF #2635) and Application of the IRF Function 
Outcome Measure: Discharge Mobility Score for Medical Rehabilitation 
Patients (NQF #2636), capture residents who are independent with 
function at admission. In that situation, maintenance of independence 
for the section GG self-care or mobility activities would apply to 
these residents.
    Comment: One commenter recommended the addition of a quality 
measure of maintenance of functional status to the SNF QRP to address 
requirements of the Jimmo Settlement. The commenter noted that 
functional improvement is not a goal for all residents receiving 
rehabilitation; for some residents, maintaining or slowing functional 
decline is a goal.
    Response: We appreciate the commenter's suggestions, and we will 
consider this recommendation in future measure development.
    Comment: One commenter encouraged us to consider the importance of 
instrumental activities of daily living as a measurement construct for 
assessing patient need, monitoring quality, and affecting care and 
payment, stating that instrumental activities of daily living 
performance is critical to maintaining safety and avoiding 
readmissions.
    Response: We appreciate the commenter's suggestions for future 
measures and we will consider this recommendation in future measure 
development.
    Comment: MedPAC commented that while the proposed future measures 
capture important dimensions of SNF care, MedPAC prefers that Medicare 
hold providers accountable for claims-based outcome measures. Several 
commenters suggested further development and standardization of outcome 
measures to compare and contrast between PAC settings and to assess 
short- and long-term patient status post injury or illness. One

[[Page 36596]]

commenter suggested moving away from an emphasis on process measures 
toward more outcome-related measures. Another commenter added that any 
additional vaccination measure give due consideration to the cost of 
these services. Others suggested measures related to consumer 
satisfaction following short stay rehabilitation and discharge home. 
One commenter suggested that any patient experience of care survey for 
SNFs be economical in its approach and carefully aligned with other 
surveys to reduce duplicative collection activities. Other commenters 
suggested a number of additional measures for inclusion in the SNF QRP. 
One commenter suggested that we consider developing measures to assess 
quality of life and long-term functional outcomes such as community-
oriented factors including ability to live independently, return to 
work (where appropriate), community participation and social 
interaction. Another commenter suggested workforce related measures 
such as staffing quality metrics from payroll-based journal staffing 
and collection such as staff turnover, nursing staff hours per resident 
stay and CNA hours per resident stay. The commenter further recommended 
measures that include language related to initiating palliative care 
and making ethical considerations regarding continuing or terminating 
complex medical care. The commenter also suggested incorporating 
coordination and collaboration on patient, family, and medical goals of 
care as well as assessment of family members' and caregivers' capacity 
to assume patient care post-discharge. Another commenter further 
recommended that measures such as those currently reported on Nursing 
Home Compare be used in the interim until more post-acute care cross-
setting measures are developed.
    Response: We appreciate the input from MedPAC and other commenters 
for their suggestions on future measure concepts as well as on the 
interim use of measures currently reported on Nursing Home Compare. 
With all measures, we seek to fulfill the mandate of the IMPACT Act to 
align across settings and will take these comments into consideration 
as we further develop measures for use in the SNF QRP.
(1) IMPACT Act Measure--Possible Future Update to Measure 
Specifications
    In the FY 2017 SNF PPS final rule (81 FR 52021 through 52029), we 
finalized the Discharge to Community-Post Acute Care (PAC) Skilled 
Nursing Facility (SNF) Quality Reporting Program (QRP) measure, which 
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. We received public comments (see 81 FR 52025 through 52026) 
recommending exclusion of baseline nursing facility residents from the 
measure, as these residents did not live in the community prior to 
their SNF stay. At that time, we highlighted that using Medicare FFS 
claims alone, we were unable to accurately identify baseline nursing 
facility residents. We stated that potential future modifications of 
the measure could include assessment of the feasibility and impact of 
excluding baseline nursing facility residents from the measure through 
the addition of patient assessment-based data. In response to these 
public comments, we are considering a future modification of the 
Discharge to Community-PAC SNF QRP measure, which would exclude 
baseline nursing facility residents from the measure. Further, this 
measure is specified to be calculated using one year of Medicare FFS 
claims data. We are considering expanding the measurement period in the 
future to two consecutive years of data to increase SNF sample sizes 
and reduce the number of SNFs with fewer than 25 stays that would 
otherwise be excluded from public reporting. This modification would 
also align the measurement period with that of the discharge to 
community measures adopted for the IRF and LTCH Quality Reporting 
Programs to meet the IMPACT Act requirements; both the IRF and LTCH 
measures have measurement periods of two consecutive years.
    We sought public comment on these considerations for Discharge to 
Community-PAC SNF QRP measure in future years of the SNF QRP. A 
discussion of these comments, along with our responses, appears below.
    Comment: Multiple commenters expressed support for excluding 
baseline nursing facility residents from the discharge to community 
measure as a potential future measure modification. Commenters stated 
that this exclusion would result in the measure more accurately 
portraying quality of care provided by SNFs, while controlling for 
factors outside of SNF control.
    Response: We acknowledge the commenters' support for the potential 
exclusion of baseline nursing facility residents as a future measure 
modification. We will consider their views and determine whether to 
propose to exclude baseline nursing facility residents from the 
Discharge to Community-PAC SNF QRP measure in future years of the SNF 
QRP.
    Comment: MedPAC supported expanding the Discharge to Community-PAC 
SNF QRP measurement period from 1 year to 2 years, acknowledging that 
it is important to include as many providers in public reporting as 
possible and that expansion to 2 years is a good strategy to help 
include more low-volume providers in public reporting. A few commenters 
opposed expansion of the measurement period to 2 years, expressing 
concern that it decreased the timeliness of the data and actionability 
for providers to drive change in quality or process improvement. One 
commenter expressed concern that the expansion would misalign the 
measurement period with that of other SNF measures in use, and that 
inclusion of older data would decrease sensitivity to change in 
quality, particularly for high volume SNFs. This commenter stated that 
a 2-year window would not accurately reflect recent improvement or 
decline in discharge planning practices, resulting in inaccurate 
portrayal of the current quality of care furnished by a SNF. Another 
commenter expressed concern that a two-year measurement period 
penalized facilities with adverse ratings for longer periods of time.
    Response: We acknowledge MedPAC for its support for possible 
expansion of the Discharge to Community-PAC SNF QRP measurement period 
to 2 years in future years of the SNF QRP. We would like to clarify 
that we did not propose this change, but are considering it for future 
years. We also acknowledge commenters' concerns about expanding the 
measurement period to 2 years. We will consider these views and 
determine whether to propose expanding the Discharge to Community-PAC 
SNF QRP measurement period from 1 year to 2 years in future years of 
the SNF QRP.
(2) IMPACT Act Implementation Update
    As a result of the input and suggestions provided by technical 
experts at the TEPs held by our measure developer, and through public 
comment, we are engaging in additional development work for two 
measures that would satisfy the domain of accurately communicating the 
existence of and providing for the transfer of health information and 
care preferences when the individual transitions, in section 
1899B(c)(1)(E) of the Act, including performing additional testing. The 
measures under development are: Transfer of Information at Post-Acute 
Care Admission, Start or Resumption of Care from other Providers/
Settings; and Transfer of Information at Post-Acute Care Discharge, and 
End of Care to

[[Page 36597]]

other Providers/Settings. We intend to specify these measures under 
section 1899B(c)(1)(E) of the Act no later than October 1, 2018 and we 
intend to propose to adopt them for the FY 2021 SNF QRP, with data 
collection beginning on or about October 1, 2019.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the IMPACT Act Implementation Update. A discussion 
of these comments, along with our responses, appears below.
    Comment: One commenter suggested that we be cautious in our 
development of the Transfer of Health Information measure set and only 
proceed to propose and adopt measures that receive NQF endorsement. 
This commenter cited concerns about the measure development, citing the 
2016 MAP PAC/LTC meeting. A commenter supported our efforts to promote 
coordination of care across the care continuum, and commented that the 
transfer of accurate health information--including resident 
preferences, care plan, and other information--is essential to quality 
outcomes for residents. A commenter expressed appreciation that we are 
developing measures that will help facilitate the accurate 
communication of a person's health information and care preferences 
across the continuum of care and believes that these measures will 
facilitate better care coordination and outcomes. The commenter also 
appreciated that we have engaged providers and consumers in the 
development of these measures and encourages us to develop measures 
that represent a balance between the volume and detail of information 
exchanged and reported, and the underlying administrative burdens the 
measures may create. The commenter noted that the burden is 
particularly important for small and rural providers that may have more 
challenges with technology-driven information exchange because health 
information technology incentive programs for hospitals and physicians 
have not been extended to SNF providers.
    Response: We appreciate the comments and feedback on the Transfer 
of Health Information measures that are currently under development. We 
also appreciate the recognition that we have engaged providers and 
consumers in the development of these measures. As we continue to 
develop these measures, we will consider this feedback. We would like 
to clarify that the measure under development does not currently 
require the adoption of health IT and electronic means of information 
transfer. We intend to re-submit these measures, once fully specified 
and tested, for review to the MAP PAC/LTC Workgroup. Further, we plan 
to submit the measures to the NQF for consideration for endorsement 
when we believe the measures are ready for NQF review.
j. Standardized Resident Assessment Data Reporting for the SNF QRP
(1) Standardized Resident Assessment Data Reporting for the FY 2019 SNF 
QRP
    Section 1888(e)(6)(B)(i)(III) of the Act requires that for fiscal 
year 2019 and each subsequent year, SNFs report standardized resident 
assessment data required under section 1899B(b)(1) of the Act. As we 
describe in section III.D.2.g.(1) above, we are finalizing in this 
final rule that the current pressure ulcer measure, Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short Stay) (NQF #0678), will be replaced with the proposed pressure 
ulcer measure, Changes in Skin Integrity Post-Acute Care: Pressure 
Ulcer/Injury, beginning with the FY 2020 SNF QRP. The current pressure 
ulcer measure will remain in the SNF QRP until that time. Accordingly, 
for the requirement that SNFs report standardized resident assessment 
data for the FY 2019 SNF QRP, we proposed that the data elements used 
to calculate that measure meet the definition of standardized resident 
assessment data for medical conditions and co-morbidities under section 
1899B(b)(1)(B)(iv) and that the successful reporting of that data under 
section 1888(e)(6)(B)(i)(II) for admissions as well as discharges 
occurring during fourth quarter CY 2017 would also satisfy the 
requirement to report standardized resident assessment data for the FY 
2019 SNF QRP.
    The collection of assessment data pertaining to skin integrity, 
specifically pressure related wounds, is important for multiple 
reasons. Clinical decision support, care planning, and quality 
improvement all depend on reliable assessment data collection. Pressure 
related wounds represent poor outcomes, are a serious medical condition 
that can result in death and disability, are debilitating, painful and 
are often an avoidable outcome of medical 
care.38 39 40 41 42 43 Pressure related wounds are 
considered health care acquired conditions.
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    \38\ Casey, G. (2013). ``Pressure ulcers reflect quality of 
nursing care.'' Nurs N Z 19(10): 20-24.
    \39\ Gorzoni, M.L. and S.L. Pires (2011). ``Deaths in nursing 
homes.'' Rev Assoc Med Bras 57(3): 327-331.
    \40\ Thomas, J.M., et al. (2013). ``Systematic review: health-
related characteristics of elderly hospitalized adults and nursing 
home residents associated with short-term mortality.'' J Am Geriatr 
Soc 61(6): 902-911.
    \41\ White-Chu, E.F., et al. (2011). ``Pressure ulcers in long-
term care.'' Clin Geriatr Med 27(2): 241-258.
    \42\ Bates-Jensen, B.M. Quality indicators for prevention and 
management of pressure ulcers in vulnerable elders. Ann Int Med. 
2001;135 (8 Part 2), 744-51.
    \43\ Bennet, G, Dealy, C, Posnett, J (2004). The cost of 
pressure ulcers in the UK, Age and Aging, 33(3):230-235.
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    As we note above, the data elements needed to calculate the current 
pressure ulcer measure are already included on the MDS and reported for 
SNFs, and exhibit validity and reliability for use across PAC 
providers. Item reliability for these data elements was also tested for 
the nursing home setting during implementation of MDS 3.0. Testing 
results are from the RAND Development and Validation of MDS 3.0 
project.\44\ The RAND pilot test of the MDS 3.0 data elements showed 
good reliability and is also applicable to both the IRF-PAI and the 
LTCH CARE Data Set because the data elements tested are the same. 
Across the pressure ulcer data elements, the average gold-standard 
nurse to gold-standard nurse kappa statistic was 0.905. The average 
gold-standard nurse to facility-nurse kappa statistic was 0.937. Data 
elements used to risk adjust this quality measure were also tested 
under this same pilot test, and the gold-standard to gold-standard 
kappa statistic, or percent agreement (where kappa statistic not 
available), ranged from 0.91 to 0.99 for these data elements. These 
kappa scores indicate ``almost perfect'' agreement using the Landis and 
Koch standard for strength of agreement.\45\
---------------------------------------------------------------------------

    \44\ Saliba, D., & Buchanan, J. (2008, April). Development and 
validation of a revised nursing home assessment tool: MDS 3.0. 
Contract No. 500-00-0027/Task Order #2. Santa Monica, CA: Rand 
Corporation. Retrieved from http://www.cms.hhs.gov/NursingHomeQualityInits/Downloads/MDS30FinalReport.pdf.
    \45\ Landis, R., & Koch, G. (1977, March). The measurement of 
observer agreement for categorical data. Biometrics 33(1), 159-174.
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    The data elements used to calculate the current pressure ulcer 
measure received public comment on several occasions, including when 
that measure was proposed in the FY 2012 IRF PPS (76 FR 47876) and 
IPPS/LTCH PPS proposed rules (76 FR 51754). Further, they were 
discussed in the past by TEPs held by our measure development 
contractor on June 13 and November 15, 2013, and recently by a TEP on 
July 18, 2016. TEP members supported the measure and its cross-setting 
use in PAC. The report, Technical Expert Panel Summary Report: 
Refinement of the Percent of Patients or Residents with

[[Page 36598]]

Pressure Ulcers that are New or Worsened (Short-Stay) (NQF #0678) 
Quality Measure for Skilled Nursing Facilities (SNFs), Inpatient 
Rehabilitation Facilities (IRFs), Long-Term Care Hospitals (LTCHs), and 
Home Health Agencies (HHAs), 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.
    We sought public comment on this proposal. A discussion of these 
comments, along with our responses, appears below.
    Comment: We received many comments in support of reporting the data 
elements already implemented in the SNF QRP to fulfill the requirement 
to report standardized resident assessment data for the FY 2019 SNF 
QRP. Specifically, many commenters supported the use of data elements 
used in calculation of the Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678) to 
fulfill this requirement.
    Response: We appreciate the commenter's support of the proposal.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal that the data elements 
currently reported by SNFs to calculate the current measure, Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short Stay) (NQF #0678), meet the definition of standardized resident 
assessment data for medical conditions and co-morbidities under section 
1899B(b)(1)(B)(iv) of the Act, and that the successful reporting of 
that data under section 1888(e)(6)(B)(i)(II) of the Act would also 
satisfy the requirement to report standardized resident assessment data 
under section 1888(e)(6)(B)(i)(III) of the Act.
(2) Standardized Resident Assessment Data Reporting Beginning With the 
FY 2020 SNF QRP
    In the FY 2018 SNF PPS proposed rule (82 FR 21059 through 21076), 
we described our proposals for the reporting of standardized resident 
assessment data by SNFs beginning with the FY 2020 SNF QRP. SNFs would 
be required to report these data for SNF admissions at the start of the 
Medicare Part A stay and SNF discharges at the end of the Medicare Part 
A stay that occur between October 1, 2018 and December 31, 2018, with 
the exception of two data elements (Hearing and Vision), which would be 
required for SNF admissions at the start of the Medicare Part A stay 
only that occur between October 1, 2018, and December 31, 2018. 
Following the initial reporting year for the FY 2020 SNF QRP, 
subsequent years for the SNF QRP would be based on a full calendar year 
of such data reporting.
    In selecting the data elements, we carefully weighed the balance of 
burden in assessment-based data collection and aimed to minimize 
additional burden through the utilization of existing data in the 
assessment instruments. We also note that the resident assessment 
instruments are considered part of the medical record, and sought the 
inclusion of data elements relevant to resident care. We also took into 
consideration the following factors for each data element: overall 
clinical relevance; ability to support clinical decisions, care 
planning and interoperable exchange to facilitate care coordination 
during transitions in care; and the ability to capture medical 
complexity and risk factors that can inform both payment and quality. 
Additionally, the data elements had to have strong scientific 
reliability and validity; be meaningful enough to inform longitudinal 
analysis by providers; had to have received general consensus agreement 
for its usability; and had to have the ability to collect such data 
once but support multiple uses. Further, to inform the final set of 
data elements for proposal, we took into account technical and clinical 
subject matter expert review, public comment and consensus input in 
which such principles were applied. We also took into account the 
consensus work and empirical findings from the PAC PRD. We acknowledge 
that during the development process that led to these proposals, some 
providers expressed concern that changes to the MDS to accommodate 
standardized resident assessment data reporting would lead to an 
overall increased reporting burden. However, we note that there is no 
additional data collection burden for standardized data already 
collected and submitted on the quality measures.
    Comment: Many commenters expressed significant concerns with 
respect to our standardized resident assessment data proposals. Several 
commenters stated that the new standardized resident assessment data 
reporting requirements will impose significant burden on providers, 
given the volume of new standardized resident assessment data elements 
that were proposed to be added to the MDS. Several commenters noted 
that the addition of the proposed standardized resident assessment data 
elements would require hiring more staff, retraining staff on revised 
questions or coding guidance, and reconfiguring internal databases and 
EHRs. Other commenters expressed concerns about the gradual but 
significant past and future expansion of the MDS through the addition 
of standardized resident assessment data elements and quality measures, 
noting the challenge of coping with ongoing additions and changes.
    Several commenters expressed concern related to the implementation 
timeline in the proposed rule, which would require SNFs to begin 
collecting the proposed standardized resident assessment data elements 
in the timeframe stated in the proposed rule. A few commenters noted 
that CMS had not yet provided sufficient specifications or educational 
materials to support implementation of the new resident assessments in 
the proposed timeline.
    Several commenters urged CMS to delay the reporting of new 
standardized resident assessment data elements by at least one year, 
and to carefully assess whether all of the proposed standardized 
resident assessment data elements are necessary under the IMPACT Act. 
Commenters suggested ways to delay the proposals for standardized 
resident assessment data elements in the categories of Cognitive 
Function and Mental Status; Special Services, Treatments, and 
Interventions; and Impairments, including allowing voluntary or limited 
reporting for a period of time before making comprehensive reporting 
mandatory, and delaying the beginning of mandatory data collection for 
a period of time. Some commenters recommended that during the delay, 
CMS re-evaluate whether it can require the reporting of standardized 
resident assessment data in a less burdensome manner.
    Response: We understand the concerns raised by commenters that the 
finalization of our standardized resident assessment data proposals 
would require SNFs to spend a significant amount of resources preparing 
to report the data, including updating relevant protocols and systems 
and training appropriate staff. We also recognize that we can meet our 
obligation to require the reporting of standardized resident assessment 
data with respect to the categories described in section 1899B(b)(1)(B) 
of the Act while simultaneously being responsive to these concerns. 
Therefore, after consideration of the public comments we received on 
these issues, we have decided that at this time, we will not finalize 
the standardized resident

[[Page 36599]]

assessment data elements we proposed for three of the five categories 
under section 1899B(b)(1)(B) of the Act: Cognitive Function and Mental 
Status; Special Services, Treatments, and Interventions; and 
Impairments. Although we believe that the proposed standardized 
resident assessment data elements would promote transparency around 
quality of care and price as we continue to explore reforms to PAC 
payment system, the data elements that we proposed for each of these 
categories would have imposed a new reporting burden on SNFs. We agree 
that it would be useful to evaluate further how to best identify the 
standardized resident assessment data that would satisfy each of these 
categories; would be most appropriate for our intended purposes 
including payment and measure standardization; and can be reported by 
SNFs in the least burdensome manner. As part of this effort, we intend 
to conduct a national field test that allows for stakeholder feedback 
and to consider how to maximize the time SNFs have to prepare for the 
reporting of standardized resident assessment data in these categories. 
We intend to make new proposals with respect to the categories 
described in sections 1899B(b)(1)(B)(ii), (iii) and (v) of the Act no 
later than in the FY 2020 SNF PPS proposed rule.
    In this final rule, we are finalizing the standardized resident 
assessment data elements that we proposed to adopt for the IMPACT Act 
categories of Functional Status and Medical Conditions and Co-
Morbidities. Unlike the standardized resident assessment data that we 
are not finalizing, the standardized resident assessment data that we 
proposed for these categories are already required to calculate the 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (NQF #0678) quality measure, the Changes in Skin Integrity 
Post-Acute Care: Pressure Ulcer/Injury quality measure (which we are 
finalizing in this final rule), and the Application of Percent of Long-
Term Care Hospital Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631) quality 
measure (which we finalized in the FY 2016 SNF PPS final rule). As a 
result, we do not believe that finalizing these proposals creates a new 
reporting burden for SNFs or otherwise necessitates a delay.
    Comment: Several commenters expressed support for the adoption of 
standardized resident assessment data elements. A few commenters 
expressed support for standardizing the definitions as well as the 
implementation of the data collection effort. Several commenters also 
supported CMS' goal of standardizing the questions and responses across 
all PAC settings to help ``enable the data to be interoperable, 
allowing it to be shared electronically, or otherwise between PAC 
provider types.'' Another commenter noted full support of the IMPACT 
Act's goals and objectives and appreciated CMS' efforts to regularly 
communicate with stakeholders through various national provider calls, 
convening of stakeholders, and meetings with individual organizations.
    Response: We appreciate the support of these proposals, but note 
that for the reasons explained above, we have decided at this time to 
not finalize the proposals for three of the five categories under 
section 1899B(b)(1)(B) of the Act: Cognitive Function and Mental 
Status; Special Services, Treatments, and Interventions; and 
Impairments.
    Comment: Several commenters stated that there is insufficient 
evidence demonstrating the reliability and validity of the proposed 
standardized resident assessment data elements. Some commenters stated 
that the expanded standardized resident assessment data reporting 
requirements have not yet been adequately tested to ensure they collect 
accurate and useful data in this setting. A few commenters stated that 
six of the items that are currently reported in the MDS would be 
expanded to include additional sub-elements that SNFs would be required 
to complete. One of these commenters stated that CMS' conclusion that 
the collection of these standardized resident assessment data elements 
in the SNF setting would be feasible and the standardized resident 
assessment data elements would result in valid and reliable data was 
based on the current use of these data elements in the MDS and the 
testing of these data elements in the PAC PRD. One commenter stated 
that several of the proposed standardized resident assessment data 
elements that had not been adequately tested were deemed close enough 
to an item that had been tested in the PAC PRD or in other PAC settings 
and thus appropriate for implementation.
    Response: Our standardized resident assessment data elements were 
selected based on a rigorous multi-stage process described in the FY 
2018 SNF PPS proposed rule (82 FR 21044). In addition, we believe that 
the PAC PRD testing of many of these data elements provides good 
evidence from a large, national sample of patients and residents in PAC 
settings to support the use of these standardized patient/resident 
assessment data elements in and across PAC settings. However, as noted 
above, we have decided at this time to not finalize the proposals for 
three of the five categories under section 1899B(b)(1)(B) of the Act: 
Cognitive Function and Mental Status; Special Services, Treatments, and 
Interventions; and Impairments. Prior to making new proposals for these 
categories, we intend to conduct extensive testing to ensure that the 
standardized resident assessment data elements we select are reliable, 
valid and appropriate for their intended use.
    Comment: MedPAC supported the addition of standardized resident 
assessment data elements, but cautioned that measures, when used for 
risk-adjustment, may be susceptible to inappropriate manipulation by 
providers. MedPAC believed that CMS may want to consider requiring a 
physician signature to attest that the reported service was reasonable 
and necessary and including a statement adjacent to the signature line 
warning that filing a false claim is subject to treble damages under 
the False Claims Act.
    Response: We acknowledge MedPAC's feedback, and agree with the 
importance of data integrity within resident assessments. We will 
explore the suggestions made by MedPAC.
    Comment: One commenter noted that the absence of a single source 
document that identifies the MDS data element, assessment type, 
allowable item responses, and item responses that could negatively 
impact SNF QRP performance scores and creates administrative challenges 
in keeping up to date with measure and item changes. This commenter 
urged us to provide a single resource for SNF providers to identify 
each individual MDS 3.0 data element identified by CMS and applicable 
to the various measures and standardized cross-setting data elements 
that apply to the SNF QRP. Another commenter urged us to provide 
detailed guidance and training documents that includes prescriptive 
coding, similar to what was done for the MDS. Another commenter 
stressed the importance of timely, appropriate education and training 
for providers to ensure that there is interoperability following full 
implementation. Another commenter also believed that standardized 
resident assessment data collected may be affected by educational level 
and professional expertise of the evaluator and advocated for fully 
developed risk-adjusters.
    Response: We acknowledge the commenters' feedback with respect to 
administrative challenges and the desire for detailed guidance and 
training. In ongoing standardized resident

[[Page 36600]]

assessment data element development work, we will continue to be 
mindful of the administrative challenges that new mandated assessment 
items will place on providers. We agree with the commenter about the 
importance of providing clear coding guidelines for the proposed 
standardized resident assessment data elements for a range of education 
levels. We are also committed to providing comprehensive training and 
guidance to providers, for any new data elements, including 
standardized resident assessment data elements, to ensure the fidelity 
of the assessment.
    Comment: A few commenters sought clarification on interoperability 
requirements, if and how SNF providers will be required to demonstrate 
interoperability, and described potential challenges to interoperable 
data exchange, such as timeframes related to data submission (for 
example, 14 days after discharge for SNFs) and inconsistencies in how 
data are captured. One commenter encouraged CMS to consider 
interoperability standards that promote information exchange utilizing 
EHRs and to specify which data standards are to be used and how they 
are to be implemented to ensure consistency across providers. The same 
commenter recommended that CMS work with EHR vendors and other IT 
developers to implement changes and to consider the time required for 
implementing changes adopted in the final rule, which may require 
adopting timelines that are more extended than what was originally 
required. Further, two commenters urged CMS to develop methods to 
incentivize providers who are ``stepping up'' and adopting health 
information technology (HIT), despite the costs and the absence of a 
regulatory requirement to do so.
    Response: We acknowledge commenters' concerns regarding 
standardization and interoperability of the proposed standardized 
resident assessment data elements to meet section 1899B(a)(1)(B) of the 
Act requirements. We wish to clarify that implementation of the 
proposed standardized resident assessment data elements is intended to 
facilitate interoperability. We acknowledge that the provision requires 
that we make certain resident assessment data standardized and 
interoperable to allow for the exchange of data among PAC settings and 
other providers in order to access longitudinal information which will 
facilitate coordinated care and improved outcomes. While the IMPACT Act 
requires that the post-acute resident assessment instruments be 
modified so that certain resident assessment data are standardized and 
interoperable, it does not require the exchange of electronic health 
information by such providers. We appreciate the comments surrounding 
the need for more time for providers to implement the changes necessary 
in response to such modifications, and have addressed this topic in our 
proposals within this section.
    A full discussion of the standardized resident assessment data 
elements that we proposed to adopt for the categories described in 
sections 1899B(b)(1)(B)(ii), (iii) and (v) can be found in the FY 2018 
SNF PPS proposed rule (82 FR 21060 through 21076). In light of our 
decision to not finalize our proposals with respect to these 
categories, we are not going to address in this final rule the specific 
technical comments that we received on these proposed data elements. 
However, we appreciate the many technical comments we did receive 
specific to each of these data elements, and we will take them into 
consideration as we develop new proposals for these categories. Below 
we discuss the comments we received specific to the standardized 
resident assessment data we proposed to adopt, and are finalizing in 
this final rule, for the categories of Functional Status and Medical 
Conditions and Co-Morbidities.
a. Standardized Resident Assessment Data by Category
(1) Functional Status Data
    We proposed that the data elements currently reported by SNFs to 
calculate the measure, Application of Percent of Long-Term Care 
Hospital Patients with an Admission and Discharge Functional Assessment 
and a Care Plan That Addresses Function (NQF #2631), would also meet 
the definition of standardized resident assessment data for functional 
status under section 1899B(b)(1)(B)(i) of the Act, and that the 
successful reporting of that data under section 1886(m)(5)(F)(i) of the 
Act would also satisfy the requirement to report standardized resident 
assessment data under section 1886(m)(5)(F)(ii) of the Act.
    These patient assessment data for functional status are from the 
CARE Item Set. The development of the CARE Item Set and a description 
and rationale for each item is described in a report entitled ``The 
Development and Testing of the Continuity Assessment Record and 
Evaluation (CARE) Item Set: Final Report on the Development of the CARE 
Item Set: Volume 1 of 3.'' \46\ Reliability and validity testing were 
conducted as part of CMS' Post-Acute Care Payment Reform Demonstration, 
and we concluded that the functional status items have acceptable 
reliability and validity. A description of the testing methodology and 
results are available in several reports, including the report entitled 
``The Development and Testing of the Continuity Assessment Record And 
Evaluation (CARE) Item Set: Final Report On Reliability Testing: Volume 
2 of 3'' \47\ and the report entitled ``The Development and Testing of 
The Continuity Assessment Record And Evaluation (CARE) Item Set: Final 
Report on Care Item Set and Current Assessment Comparisons: Volume 3 of 
3.'' \48\ The reports are available on CMS' Post-Acute Care Quality 
Initiatives Web page at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html. For more information about 
this quality measure, we refer readers to the FY 2016 SNF PPS final 
rule (80 FR 46444 through 46453).
---------------------------------------------------------------------------

    \46\ Barbara Gage et al., ``The Development and Testing of the 
Continuity Assessment Record and Evaluation (CARE) Item Set: Final 
Report on the Development of the CARE Item Set'' (RTI International, 
2012).
    \47\ Ibid.
    \48\ Ibid.
---------------------------------------------------------------------------

    We sought public comment on this proposal. A discussion of these 
comments, along with our responses, appears below.
    Comment: Several commenters supported the collection of 
standardized resident assessment data across PAC settings to satisfy 
the IMPACT Act's functional status data reporting requirement. Some 
commenters specifically expressed support for our proposal that data 
elements used to calculate Application of Percent of Long-Term Care 
Hospital Patients with an Admission and Discharge Functional Assessment 
and a Care Plan that Addresses Function (NQF #2631) be used to meet the 
definition of standardized resident assessment data for functional 
status. One commenter noted that their support of standardized resident 
assessment data was contingent on not adding to facilities' costs or 
burden.
    Response: We appreciate the commenters' support of the functional 
status standardized resident assessment data for SNFs. These 
standardized resident assessment data have the potential to facilitate 
communication among providers and improve care. With regard to burden 
and cost, we would like to clarify that the data elements from the 
quality measure Application of Percent of Long-Term Care Hospital 
Patients with an

[[Page 36601]]

Admission and Discharge Functional Assessment and a Care Plan that 
Addresses Function (NQF #2631) are data elements that are currently 
being collected on the MDS by SNFs, and therefore, there is no 
additional burden or cost associated with this reporting.
    Comment: One commenter requested that we clarify that reporting on 
the Discharge Goal items for each mobility and self-care item in the 
SNF PPS admission assessment is for SNF QRP reporting purposes, and 
does not require a care plan to be developed for each discharge goal.
    Response: The proposal to use the data elements used to calculate 
the function process quality measure as standardized resident 
assessment data refers to the admission and discharge performance self-
care and mobility items. The adopted measure Application of Percent of 
Long-Term Care Hospital Patients with an Admission and Discharge 
Functional Assessment and a Care Plan that Addresses Function (NQF 
#2631) requires that only one goal be reported for each SNF patient 
stay, and that the requirement for that quality measure remains 
unchanged. Reporting one goal on the MDS satisfies the measure 
numerator care plan criteria. The SNF does not need to provide any 
further documentation about a resident's care plan.
    Final Decision: Based on the evidence provided above, we are 
finalizing that the data elements currently reported by SNFs to 
calculate the measure, Application of Percent of Long-Term Care 
Hospital Patients with an Admission and Discharge Functional Assessment 
and a Care Plan That Addresses Function (NQF #2631), would also meet 
the definition of standardized resident assessment data for functional 
status under section 1899B(b)(1)(B)(i) of the Act, and that the 
successful reporting of that data under section 1886(m)(5)(F)(i) of the 
Act would also satisfy the requirement to report standardized resident 
assessment data under section 1886(m)(5)(F)(ii) of the Act.
(2) Medical Condition and Comorbidity Data
    We proposed that the data elements needed to calculate the current 
measure, Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (Short Stay) (NQF #0678), and the proposed measure, 
Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/Injury, meet 
the definition of standardized resident assessment data for medical 
conditions and co-morbidities under section 1899B(b)(1)(B)(iv) of the 
Act, and that the successful reporting of that data under section 
1888(e)(6)(B)(i)(II) of the Act would also satisfy the requirement to 
report standardized resident assessment data under section 
1888(e)(6)(B)(i)(III) of the Act.
    ``Medical conditions and comorbidities'' and the conditions 
addressed in the standardized resident assessment data used in the 
calculation and risk adjustment of these measures, that is, the 
presence of pressure ulcers, diabetes, incontinence, peripheral 
vascular disease or peripheral arterial disease, mobility, as well as 
low body mass index, are all health-related conditions that indicate 
medical complexity that can be indicative of underlying disease 
severity and other comorbidities.
    Specifically, the data elements used in the measure are important 
for care planning and provide information pertaining to medical 
complexity. Pressure ulcers are serious wounds representing poor 
healthcare outcomes, and can result in sepsis and death. Assessing skin 
condition, care planning for pressure ulcer prevention and healing, and 
informing providers about their presence in patient transitions of care 
is a customary and best practice. Venous and arterial disease and 
diabetes are associated with low blood flow which may increase the risk 
of tissue damage. These diseases are indicators of factors that may 
place individuals at risk for pressure ulcer development and are 
therefore important for care planning. Low BMI, which may be an 
indicator of underlying disease severity, may be associated with loss 
of fat and muscle, resulting in potential risk for pressure ulcers. 
Bowel incontinence and the possible maceration to the skin associated, 
can lead to higher risk for pressure ulcers. In addition, the bacteria 
associated with bowel incontinence can complicate current wounds and 
cause local infection. Mobility is an indicator of impairment or 
reduction in mobility and movement which is a major risk factor for the 
development of pressure ulcers. Taken separately and together, these 
data elements are important for care planning, transitions in services 
and identifying medical complexities.
    In sections III.D.2.g.1. and III.D.2.j.1. of this final rule, we 
discuss our rationale for proposing that the data elements used in the 
measures meet the definition of standardized resident assessment data. 
In summary, we believe that the collection of such assessment data is 
important for multiple reasons, including clinical decision support, 
care planning, and quality improvement, and that the data elements 
assessing pressure ulcers and the data elements used to risk adjust 
showed good reliability. We solicited stakeholder feedback on the 
quality measure, and the data elements from which it is derived, by 
means of a public comment period and TEPs, as described in section 
III.D.2.g.1. of this final rule.
    We sought public comment on this proposal. A discussion of these 
comments, along with our responses, appears below.
    Comment: We received support for the reporting of data elements 
already implemented in the SNF QRP to satisfy the requirement to report 
standardized resident assessment data. Specifically, many commenters 
supported the use of data elements used in calculation of the current 
measure, Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (Short Stay) (NQF #0678), or the proposed measure, 
Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/Injury, to 
fulfill this requirement.
    Response: We appreciate the comments in support of the proposal, 
and agree that these data elements currently reported by SNFs meet the 
definition of standardized resident assessment data and satisfy the 
requirement to report standardized resident assessment data.
    Final Decision: After consideration of the public comments we 
received, we are finalizing as proposed that the data elements 
currently reported by SNFs to calculate the current measure, Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short Stay) (NQF #0678), and the proposed measure, Changes in Skin 
Integrity Post-Acute Care: Pressure Ulcer/Injury, meet the definition 
of standardized resident assessment data for medical conditions and co-
morbidities under section 1899B(b)(1)(B)(iv) of the Act, and that the 
successful reporting of that data under section 1888(e)(6)(B)(i)(II) of 
the Act would also satisfy the requirement to report standardized 
resident assessment data under section 1888(e)(6)(B)(i)(III) of the 
Act.
k. Form, Manner, and Timing of Data Submission Under the SNF QRP
(1) Start Date for Standardized Resident Assessment Data Reporting by 
New SNFs
    In the FY 2016 SNF PPS final rule (80 FR 46455), we adopted timing 
for new SNFs to begin reporting quality data under the SNF QRP 
beginning with the FY 2018 SNF QRP. We proposed in the FY 2018 SNF PPS 
proposed rule (82 FR

[[Page 36602]]

21076) that new SNFs will be required to begin reporting standardized 
resident assessment data on the same schedule.
    We sought public comment on the proposal that new SNFs will be 
required to begin reporting standardized resident assessment data on 
the same schedule. A discussion of these comments, along with our 
responses, appears below.
    Comment: We received a comment in support of maintaining the same 
start date policy for both standardized resident assessment data and 
SNF QRP measures as this creates consistency in reporting.
    Response: We appreciate the commenter's support for extending this 
policy to the standardized resident assessment data under the SNF QRP.
    Final Decision: We are finalizing that new SNFs will be required to 
begin reporting standardized resident assessment data on the same 
schedule that they are currently required to begin reporting other 
quality data under the SNF QRP.
(2) Mechanism for Reporting Standardized Resident Assessment Data 
Beginning With the FY 2019 SNF QRP
    Under our current policy, SNFs report data by completing applicable 
sections of the MDS, and submitting the MDS-RAI to CMS through the 
QIESASAP system. 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. 
In addition to the data currently submitted on quality measures as 
previously finalized and discussed in section III.D.2.f. of this final 
rule, in the FY 2018 SNF PPS proposed rule (82 FR 21076) we proposed 
that SNFs would be required to begin submitting the proposed 
standardized resident assessment data for SNF Medicare resident 
admissions and discharges that occur on or after October 1, 2018 using 
the MDS. Details on the modifications and assessment collection for the 
MDS for the proposed standardized resident assessment data are 
available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    We sought public comments on this proposal. A discussion of these 
comments, along with our responses, appears below.
    Comment: A commenter expressed support for maintaining the same 
data submission mechanism policy for submitting both standardized 
resident assessment data and data on SNF QRP measures, as this 
facilitates consistency in reporting.
    Response: We appreciate the commenter's support.
    Final Decision: We are finalizing that beginning with the FY 2019 
SNF QRP, SNFs will be required to begin submitting standardized 
resident assessment data for SNF Medicare resident admissions and 
discharges that occur on or after October 1, 2018 using the MDS. We 
note that for the FY 2019 SNF QRP, the standardized resident data 
elements are already submitted using the same (existing) data 
submission mechanism.
(3) Schedule for Reporting Standardized Resident Assessment Data 
Beginning With the FY 2019 SNF QRP
    Starting with the FY 2019 SNF QRP, we proposed to apply our current 
schedule for the reporting of measure data to the reporting of 
standardized resident assessment data. Under this proposed policy, 
except for the first program year for which a measure is adopted, SNFs 
must report data on measures for SNF Medicare admissions that occur 
during the 12-month calendar year (CY) period that apply to the program 
year. For the first program year for which a measure is adopted, SNFs 
are only required to report data on SNF Medicare admissions that occur 
on or after October 1 and discharged from the SNF up to and including 
December 31 of the calendar year that applies to that program year. For 
example, for the FY 2018 SNF QRP, data on measures adopted for earlier 
program years must be reported for all CY 2016 SNF Medicare admissions 
that occur on or after October 1, 2016 and discharges that occur on or 
before December 31, 2016. However, data on newly adopted measures for 
the FY 2018 SNF QRP program year must only be reported for SNF Medicare 
admissions and discharges that occur during the last calendar quarter 
of 2016.
    Tables 20 and 21 illustrate this policy using the FY 2019 and FY 
2020 SNF QRP as examples.

   Table 20--Summary Illustration of Initial Reporting Cycle for Newly
   Adopted Measure and Standardized Resident Assessment Data Reporting
                           Using CY Q4 Data *
------------------------------------------------------------------------
                                            Data submission quarterly
  Data collection/submission quarterly     deadlines beginning with FY
           reporting period *               2019 SNF QRP * [supcaret]
------------------------------------------------------------------------
Q4: CY 2017 10/1/2017-12/31/2017.......  CY 2017 Q4 Deadline: May 15,
                                          2018.
------------------------------------------------------------------------
* We note that submission of the MDS must also adhere to the SNF PPS
  deadlines.
[supcaret] The term ``FY 2019 SNF QRP'' means the fiscal year for which
  the SNF QRP requirements applicable to that fiscal year must be met in
  order for a SNF to receive the full market basket percentage when
  calculating the payment rates applicable to it for that fiscal year.


   Table 21--Summary Illustration of Calendar Year Quarterly Reporting
Cycles for Measure and Standardized Resident Assessment Data Reporting *
------------------------------------------------------------------------
                                            Data submission quarterly
  Data collection/submission quarterly     deadlines beginning with FY
           reporting period *               2020 SNF QRP * [supcaret]
------------------------------------------------------------------------
Q1: CY 2018 1/1/2018-3/31/2018.........  CY 2018 Q1 Deadline: August 15,
                                          2018.
Q2: CY 2018 4/1/2018-6/30/2018.........  CY 2018 Q2 Deadline: November
                                          15, 2018.
Q3: CY 2018 7/1/2018-9/30/2018.........  CY 2018 Q3 Deadline: February
                                          15, 2019.
Q4: CY 2018 10/1/2018-12/31/2018.......  CY 2018 Q4 Deadline: May 15,
                                          2019.
------------------------------------------------------------------------
* We note that submission of the MDS must also adhere to the SNF PPS
  deadlines.
[supcaret] The term ``FY 2020 SNF QRP'' means the fiscal year for which
  the SNF QRP requirements applicable to that fiscal year must be met in
  order for a SNF to receive the full market basket percentage when
  calculating the payment rates applicable to it for that fiscal year.


[[Page 36603]]

    In the FY 2018 SNF PPS proposed rule (82 FR 21076 through 21077), 
we proposed that for the SNF QRP starting with the 2019 SNF QRP, we 
would apply our current schedule for the reporting of measure data to 
the reporting of standardized resident assessment data. Specifically, 
we proposed to apply to the submission of standardized resident 
assessment data our policy that except for the first program year for 
which a measure is adopted, SNFs must report data on measures for SNF 
Medicare admissions that occur during the 12 month calendar year period 
that apply to the program year and that for the first program year for 
which a measure is adopted, SNFs are only required to report data on 
SNF Medicare admissions that occur on or after October 1 and are 
discharged from the SNF up to and including December 31 of the calendar 
year that applies to the program year. We sought comment on our 
proposal to extend our current policy governing the schedule for 
reporting the quality measure data to the reporting of standardized 
resident assessment data beginning with the FY 2019 SNF QRP. A 
discussion of these comments, along with our responses, appears below.
    Comment: Commenters supported our proposal to adopt the same data 
reporting schedule for both standardized resident assessment data and 
SNF QRP measure data as this creates consistency in reporting. Another 
commenter added that we should allow facilities to become familiar with 
the assessment and coding requirements associated with the new 
standardized resident assessment data elements for a period of time 
before quality measure reporting begins.
    Response: We appreciate commenters' support to extend this policy 
to the standardized resident assessment data submitted under the SNF 
QRP. We agree that comprehensive training is needed to ensure accurate 
data collection and to ensure successful reporting on new measures that 
are constructed using the new data. As with the data collection 
required on new assessment data collection in the past, we will provide 
training sessions, training manuals, webinars, open door forums, help 
desk support, and a Web site that hosts training information and will 
continue to provide the training providers may need to understand item 
concepts and coding instructions.
    Comment: In light of the additional data elements being proposed 
for the MDS, one commenter recommended that the reporting data for the 
purposes of quality measures for the SNF QRP not begin at the same time 
as new items are added to the MDS, and requested at least a 3-month 
time frame of data collection with the new items before the data is 
collected for use in a quality measure.
    Response: We interpret the comment to mean that given the new data 
elements and need for SNFs to become familiar with the coding of the 
new standardized resident assessment data elements, the commenter 
believes that we should not use the first three months of data in the 
calculation of the measures to be publicly reported. We acknowledge 
that SNFs may need time to transition to new data reporting 
requirements. As discussed previously, data collection on new measures 
that are calculated using resident assessment data begins using a 
schedule that starts on October 1 of a given year, we anticipate using 
the subsequent calendar year of data for public reporting.
    Final Decision: After careful consideration of the public comments, 
we are finalizing our proposal to extend our current policy governing 
the schedule for reporting quality measure data to the standardized 
resident assessment data elements beginning with the FY 2019 SNF QRP.
(4) Schedule for Reporting the Quality Measures Beginning with the FY 
2020 SNF QRP
    As discussed in section III.D.2.g. of this final rule, we are 
finalizing the adoption of five quality measures beginning with the FY 
2020 SNF QRP: (1) Changes in Skin Integrity Post-Acute Care: Pressure 
Ulcer/Injury; (2) Application of IRF Functional Outcome Measure: Change 
in Self-Care for Medical Rehabilitation Patients (NQF #2633); (3) 
Application of IRF Functional Outcome Measure: Change in Mobility Score 
for Medical Rehabilitation Patients (NQF #2634); (4) Application of IRF 
Functional Outcome Measure: Discharge Self-Care Score for Medical 
Rehabilitation Patients (NQF #2635); (5) and Application of IRF 
Functional Outcome Measure: Discharge Mobility Score for Medical 
Rehabilitation Patients (NQF #2636). In the FY 2018 SNF PPS proposed 
rule (82 FR 21077) we proposed that SNFs would report data on these 
measures using the MDS that is submitted through the QIES ASAP system. 
For the FY 2020 SNF QRP, SNFs would be required to report these data 
for admissions as well as discharges that occur between October 1, 2018 
and December 31, 2018. More information on SNF reporting using the QIES 
ASAP system is located at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/index.html?redirect=/NursingHomeQualityInits/30_NHQIMDS30TechnicalInformation.asp#TopOfPage. Starting in CY 2019, 
SNFs would be required to submit data for the entire calendar year 
beginning with the FY 2021 SNF QRP.
    We sought public comment on this proposal. A discussion of these 
comments, along with our responses, appears below.
    Comment: Two commenters supported our proposal that SNFs report 
admission and discharge data for the five quality measures beginning 
with the FY 2020 SNF QRP using the QIES ASAP system.
    Response: We thank the commenters for their support.
    Final Decision: We are finalizing our policy as proposed for the 
Schedule for Reporting the Quality Measures Beginning with the FY 2020 
SNF QRP.
(5) Input Sought on Data Reporting Related to Assessment Based Measures
    Through various means of public input, including that through 
previous rules (FY 2016 SNF PPS final rule, 80 FR 46415), public 
comment on measures, and the MAP, we received input suggesting that we 
expand the quality measures to include all residents and patients 
regardless of payer status so as to ensure representation of the 
quality of the services provided on the population as a whole, rather 
than a subset limited to Medicare. While we appreciate that many SNF 
residents are also Medicare beneficiaries, we agree that collecting 
quality data on all residents in the SNF setting supports our mission 
to ensure quality care for all individuals, including Medicare 
beneficiaries. We also agree that collecting data on all patients 
provides the most robust and accurate reflection of quality in the SNF 
setting. Accurate representation of quality provided in SNFs is best 
conveyed using data on all SNF residents, regardless of payer. We also 
appreciate that collecting quality data on all SNF residents regardless 
of payer source may create additional burden. However, we also note 
that the effort to separate out SNF residents covered by other non-FFS 
Medicare payers could have clinical and work flow implications with an 
associated burden, and we further appreciate that it is common practice 
for SNFs to collect MDS data on all residents regardless of payer 
source. Additionally, we note that data collected through MDS for 
Medicare beneficiaries should match that beneficiary's claims data in 
certain key respects (for example, diagnoses and procedures); this 
makes it easier for us to evaluate the accuracy of

[[Page 36604]]

reporting in the MDS, such as by comparing diagnoses at hospital 
discharge to diagnoses at the follow-on SNF admission. However, we 
would not have access to such claims data for non-Medicare 
beneficiaries. Thus, we sought input on whether we should require 
quality data reporting on all SNF residents, regardless of payer, where 
feasible--noting that Part A claims data are limited to only Medicare 
beneficiaries.
    We sought comments on this topic. A discussion of these comments, 
along with our responses, appears below.
    Comment: We received overwhelming support from commenters including 
MedPAC and others for the expansion of quality measures to include all 
residents regardless of payer. Several commenters as well as MedPAC 
expressed the benefit of enabling comparisons between FFS beneficiaries 
and other users (including beneficiaries enrolled in Medicare 
Advantage), expressing that such data would serve to better inform 
beneficiaries on the broader quality of the entire facility, especially 
those who are or will become long-term care residents of the same 
facility. MedPAC also highlighted that while the data collection 
activity incurs some cost, some providers currently assess all 
residents routinely. Some commenters conveyed that data collection on 
all payers is more feasible than having to select only Medicare 
populations. Several commenters noted that it is advantageous for 
facilities to focus on quality outcomes for all residents regardless of 
payer, and several commenters noted that having information on rates 
for all residents regardless of payor allows providers to utilize these 
measures in system-based quality improvement initiatives.
    One commenter noted a preference for using claims-based data and 
urged that claims-based SNF QRP measures be re-specified to allow for 
this inclusion. Another commenter highlighted the value in using 
readily available MDS assessment-based data to better represent 
facility performance on measures previously reported using Medicare 
Part A claims data only.
    Response: We acknowledge support for this policy from MedPAC and 
other commenters. We agree that having such information from all payers 
adds value to data comparisons, allows enhanced use of assessment data 
already being collected on all residents, and further supports system-
wide quality improvement goals.
(l) Application of the SNF QRP Data Completion Thresholds to the 
Submission of Standardized Resident Assessment Data Beginning with the 
FY 2019 SNF QRP
    We have received questions surrounding the data completion policy 
we adopted beginning with the FY 2018 program year, specifically with 
respect to how that policy applies to patients who reside in the SNF 
for part of an applicable period, for example, a patient who is 
admitted to a SNF during one reporting period but discharged in 
another, or a patient who is assessed upon admission using one version 
of the MDS but assessed at discharge using another version. We 
previously finalized in the FY 2016 SNF PPS final rule (80 FR 46458) 
that SNFs must report all of the data necessary to calculate the 
measures that apply to that program year on at least 80 percent of the 
MDS assessments that they submit. The term ``measures'' refers to 
quality measures, resource use, and other measures. We also stated, in 
response to a comment, that we would consider data to have been 
satisfactorily submitted for a program year if the SNF reported all of 
the data necessary to calculate the measures if the data actually can 
be used for purposes of such calculations (as opposed to, for example, 
the use of a dash [-]).
    Some stakeholders interpreted our requirement that data elements be 
necessary to calculate the measures to mean that if a patient is 
assessed, for example, using one version of the MDS at admission and 
another version of the MDS at discharge, the two assessments are 
included in the pool of assessments used to determine data completion 
only if the data elements at admission and discharge can be used to 
calculate the measures. Our intention, however, was not to exclude 
assessments on this basis. Rather, our intention was solely to clarify 
that for purposes of determining whether a SNF has met the data 
completion threshold, we would only look at the completeness of the 
data elements in the MDS for which reporting is required under the SNF 
QRP.
    To clarify our intended policy, in the FY 2018 SNF PPS proposed 
rule (82 FR 21077 through 21078), we proposed that for the purposes of 
determining whether a SNF has met the data completion threshold, we 
would consider whether the SNF has reported all of the required data 
elements applicable to the program year on at least 80 percent of the 
MDS assessments that they submit for that program year. For example, if 
a resident is admitted on December 20, 2017 but discharged on January 
10, 2018: (1) The resident's 5-Day PPS assessment would be used to 
determine whether the SNF met the data completion threshold for the 
2017 reporting period (and associated program year), and (2) the 
discharge assessment would be used to determine whether the SNF met the 
data completion threshold for the 2018 reporting period (and associated 
program year). We also clarified in the FY 2018 SNF PPS proposed rule 
(82 FR 21078) that some assessment data will not invoke a response; in 
those circumstances, data are not ``missing'' or incomplete. For 
example, in the case of a resident who does not have any of the medical 
conditions in a check all that apply listing, the absence of a response 
indicates that the condition is not present, and it would be incorrect 
to consider the absence of such data as missing in a threshold 
determination.
    We also proposed to apply this policy to the submission of 
standardized resident assessment data, and to codify it at Sec.  
413.360(b) of our regulations. We sought comment on these proposals. A 
discussion of these comments, along with our responses, appears below.
    Comment: We received a comment noting the usefulness of a document 
we published indicating which data we would be using to determine 
compliance by SNFs beginning with the FY 2018 SNF QRP. The commenter 
also requested that we continue providing that resource. The commenter 
also acknowledged our clarification of which MDS assessments are 
included in compliance determinations when the resident admission 
occurs in one reporting period for the SNF QRP, while their discharge 
occurs in a subsequent reporting period. The commenter further 
acknowledged our clarification that an MDS item will not be considered 
as missing data in the circumstances when no response is necessary.
    Another commenter requested additional explanation and examples 
regarding how the threshold compliance calculation is applied. One 
commenter suggested that the 80 percent data completion threshold 
finalized in the SNF PPS FY 2016 final rule is set too low and 
requested that, for the FY 2018 payment determination year and beyond, 
the data completion threshold be increased to at least ninety percent. 
We also received a comment suggesting that requiring that SNFs submit 
data on 100% of all items necessary to calculate quality measures and 
all additional standardized resident assessment data elements is set 
too high. They also expressed that the tracking of dash use, which is 
what is used to determine compliance, is burdensome. Another

[[Page 36605]]

commenter suggested that we omit the first quarter of required data 
reporting in our determination of compliance given the newness of the 
reporting. They further expressed that for FY 2018 SNF QRP, the Review 
and Correct reports that were proved were unavailable for the SNFs to 
help them identify if they were successful in meeting the compliance 
threshold.
    One commenter did not support the codification of this proposal in 
our regulations with respect to the FY 2019 SNF QRP, and requested that 
we first review the results of the initial implementation of this 
policy and propose such codification in the future.
    Response: We appreciate the commenter's support of the materials we 
provided to help SNFs identify the required MDS data elements for 
accurate submission in order to meet the requirements of the SNF QRP. 
We have published the document, Technical Specifications for Reporting 
Assessment-Based Measures for FY2018, which identifies item completion 
specifications for calculation of missing data rates on our Web site at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html and intend to update this resource document as 
suggested.
    We do not believe that the Review and Correct Reports would be an 
appropriate mechanism for informing SNFs whether they have complied 
with our data completion threshold. This report is intended to provide 
SNFs information related to their overall quality measure calculations. 
It will not provide SNFs with the discrete, data element level 
information on what response was coded for every resident assessment 
data element. We refer to the CMS SNF QRP Training Web site for 
detailed information on the Review and Correct Reports: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Training.html.
    Although the Review and Correct Reports do not enable SNFs to track 
the coding of dashes which is what can lead to non-compliance, we 
provide other reports via the Certification and Survey Provider 
Enhanced Reports Reporting (CASPER) System which SNFs can use to track 
their dash use in the assessment data they have submitted and other 
submission information. These reports include: Submitter Validation 
Reports, Facility Final Validation Reports, Error Detail by Facility 
Reports, Activity or Submission Activity Reports and Assessment Print 
Reports. We are also looking into other mechanisms and reports that 
would serve to further assist SNFs in easily identifying their data 
completion thresholds.
    To illustrate an example as requested, if a provider submitted 100 
records in a reporting period and 80% of those records had all of the 
standardized resident assessment data elements that we require and the 
data necessary to calculate the measures used in the SNF QRP, the SNF 
would meet our compliance determination.
    We currently believe that the completion of all of the required 
data elements on at least 80 percent of all required assessments is a 
fair criterion for a new program and is consistent with other post-
acute care programs. Regarding the suggestion that we not consider the 
initial quarter of data reporting by SNFs on new data that is required, 
we have analyzed the first quarter of data reporting and found that 
most SNFs were successful in their data submission. We appreciate that 
SNFs seek to track their compliance rates and the burden that may be 
associated with their tracking of such data submission. However, we 
believe that ensuring the submission of accurate data is an inherent 
responsibility of the SNF. We note that the use of dashes, which is 
what can lead to a determination of non-compliance, should be rare in 
that the assessment data collected is required and the expectation is 
that SNFs perform these assessments on their residents for not only 
data reporting purposes for the SNF QRP, but also for other purposes as 
well. As has been noted, overall dash use by SNFs is already low. That 
said, the reports we provide can assist in a SNF's tracking of their 
dash rates and we will evaluate other types of reports that can assist.
    Final Decision: We are finalizing our proposal to apply the 
threshold levels as proposed, to extend this policy to the submission 
of standardized resident assessment data, and to codify the requirement 
at Sec.  413.360(b) of our regulations.
m. SNF QRP Data Validation Requirements
    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.
n. SNF QRP Submission Exception and Extension Requirements
    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 SNF QRP. We did 
not propose any changes to the SNF QRP requirements that we adopted in 
these final rules. However, in the FY 2018 SNF PPS proposed rule (82 FR 
21078) we proposed to codify the SNF QRP Submission Exception and 
Extension Requirements at new Sec.  413.360(c).
    We remind readers that, in the FY 2016 SNF PPS final rule (80 FR 
46459 through 46460) we stated that SNF's must request an exception or 
extension by submitting a written request along with all supporting 
documentation to CMS via email to the SNF Exception and Extension 
mailbox at [email protected]. We further stated that 
exception or extension requests sent to CMS through any other channel 
would not be considered as a valid request for an exception or 
extension from the SNF QRP's reporting requirements for any payment 
determination. To be considered, a request for an exception or 
extension must contain all of the requirements as outlined on our Web 
site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-QR-Reconsideration-and-Exception-and-Extension.html. We sought public comments on our proposal 
to codify the SNF QRP submission exception and extension requirements. 
A discussion of these comments, along with our responses, appears 
below.
    Comment: A few commenters did not support codification of the SNF 
QRP Submission Exception and Extension Requirements until one SNF QRP 
program year has been completed.
    Response: Our proposal to codify existing policy in our regulations 
was technical in nature and would have no effect on its existing 
applicability and enforceability. To the extent that the commenter was 
asking us to delay the effective date of this policy, we did not 
propose such a delay, and we believe that SNFs will benefit from having 
this process available to them in the event that they experience an 
extraordinary circumstance during the FY 2018 program year.

[[Page 36606]]

    Final Decision: After considering the comments we received, we are 
codifying the SNF QRP submission exception and extension requirements 
at Sec.  413.360(c) of our regulations.
o. SNF QRP Submission Reconsideration and Appeals Procedures
    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 beginning with the FY 2018 SNF QRP. 
We did not propose any changes to these procedures in the FY 2018 SNF 
PPS proposed rule (82 FR 21078). However, we proposed to codify the SNF 
QRP Reconsideration and Appeals procedures at new Sec.  413.360(d). 
Under these procedures, a SNF must follow a defined process to file a 
request for reconsideration if it believes that a finding of 
noncompliance with the reporting requirements for the applicable fiscal 
year is erroneous, and the SNF can file a request for reconsideration 
only after it has been found to be noncompliant. To be considered, a 
request for a reconsideration must contain all of the elements outlined 
on our Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-QR-Reconsideration-and-Exception-and-Extension.html. We stated that we would not review any 
reconsideration request that is not accompanied by the necessary 
documentation and evidence, and that the request should be emailed to 
CMS at the following email address: [email protected]. 
We further stated that reconsideration requests sent to CMS through any 
other channel would not be considered.
    We sought public comments on our proposal to codify the SNF QRP 
reconsideration and appeals procedures. A discussion of these comments, 
along with our responses, appears below.
    Comment: Several commenters did not support the codification of SNF 
QRP Submission Reconsideration and Appeals Procedures until at least 
the FY 2018 SNF QRP program year has been completed.
    Response: Our proposal to codify existing policy in our regulations 
was technical in nature and would have no effect on its existing 
applicability and enforceability. To the extent that the commenter was 
asking us to delay the effective date of this policy, we did not 
propose such a delay, and we believe that SNFs will benefit from having 
this process available to them in the event that they wish to seek 
reconsideration during the FY 2018 program year.
    Final Decision: After considering the comments, we are finalizing 
our decision to codify the SNF QRP submission reconsideration and 
appeals requirements at new Sec.  413.360(d) of our regulations.
p. Policies Regarding Public Display of Measure Data for the SNF QRP
    Section 1899B(g) of the Act requires the Secretary to establish 
procedures for the public reporting of SNFs' performance, including the 
performance of individual SNFs, on the quality measures specified under 
section (c)(1) and resource use and other measures specified under 
section (d)(1) of the Act (collectively, IMPACT Act measures) beginning 
not later than 2 years after the specified application date under 
section 1899B(a)(2)(E) of the Act. This is consistent with the process 
applied under section 1886(b)(3)(B)(viii)(VII) of the Act, which refers 
to the public display and review requirements for the Hospital 
Inpatient Quality Reporting (IQR) Program. For a more detailed 
discussion about the provider's confidential review process prior to 
public display of measures, we refer readers to the FY 2017 SNF PPS 
final rule (81 FR 52045 through 52048).
    In the FY 2018 SNF PPS proposed rule, pending the availability of 
data, we proposed to publicly report data in CY 2018 for the following 
3 assessment-based measures: (1) Application of Percent of Long-Term 
Care Hospital (LTCH) Patients With an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631); (2) Percent of Residents or Patients with Pressure Ulcers That 
Are New or Worsened (NQF #0678); and (3) Application of Percent of 
Residents Experiencing One or More Falls with Major Injury (NQF #0674). 
Data collection for these 3 assessment-based measures began on October 
1, 2016. We proposed to display data for the assessment-based measures 
based on rolling quarters of data, and we would initially use 
discharges from January 1, 2016 through December 31, 2016.
    In addition, we proposed to publicly report 3 claims-based measures 
for: (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 measures were adopted for the SNF QRP in the FY 2017 SNF PPS 
rule to be based on data from one calendar year. As previously adopted 
in the FY 2017 SNF PPS final rule (81 FR 52045 through 52047), 
confidential feedback reports for these 3 claims-based measures will be 
based on data collected for discharges beginning January 1, 2016 
through December 31, 2016. However, our current proposal revises the 
dates for public reporting and we proposed to transition from calendar 
year to fiscal year to make these measure data publicly available by 
October 2018.
    For the Medicare Spending Per Beneficiary-PAC SNF QRP and Discharge 
to Community-PAC SNF QRP measures, we proposed public reporting 
beginning in calendar year 2018 based on data collected from discharges 
beginning October 1, 2016, through September 30, 2017 and rates will be 
displayed based on one fiscal year of data. For the Potentially 
Preventable 30-day Post-Discharge Readmission Measure for SNF QRP, we 
also proposed to increase the years of data used to calculate this 
measure from one year to 2 years and to update the associated reporting 
dates. These proposed revisions to the Potentially Preventable 30-Day 
Post-Discharge Readmission Measure for SNF QRP will result in the data 
being publicly reported with discharges beginning October 1, 2015, 
through September 30, 2017 and rates will be displayed based on two 
consecutive fiscal years of data.
    Also, we proposed to discontinue the public display of data on the 
assessment-based measure ``Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678)'' and 
to replace it with a modified version of the measure entitled ``Changes 
in Skin Integrity Post-Acute Care: Pressure Ulcer/Injury'' from the SNF 
QRP by October 2020.
    For the assessment-based measures, Application of Percent of Long-
Term Care Hospital (LTCH) Patients With an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631); Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (NQF #0678); and Application of Percent of Residents 
Experiencing One or More Falls with Major Injury (NQF #0674), to ensure 
the statistical reliability of the measures, we proposed to assign SNFs 
with fewer than 20 eligible cases during a performance period to a 
separate category: ``The number of cases/resident stays is too small to 
report''. If a SNF had fewer than 20 eligible cases, then the SNF's 
performance would not be publicly reported for the measure for that 
performance period.

[[Page 36607]]

    For the claims-based measures Medicare Spending Per Beneficiary-PAC 
SNF QRP; Discharge to Community-PAC SNF QRP; and Potentially 
Preventable 30-Day Post-Discharge Readmission Measure for SNF QRP, we 
proposed to assign SNFs with fewer than 25 eligible cases during a 
performance period to a separate category: ``The number of cases/
resident stays is too small to report,'' to ensure the statistical 
reliability of the measures. If a SNF had fewer than 25 eligible cases, 
the SNF's performance would not be publicly reported for the measure 
for that performance period. For Medicare Spending Per Beneficiary-PAC 
SNF QRP we proposed to assign SNFs with fewer than 20 eligible cases 
during a performance period to a separate category: ``The number of 
cases/resident stays is too small to report'' to ensure the statistical 
reliability of the measure. If a SNF has fewer than 20 eligible cases, 
the SNF's performance would not be publicly reported for the measure 
for that performance period.

    Table 22--Summary of Proposed Measures for CY 2018 Public Display
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Proposed Measures:
    Percent of Residents or Patients with Pressure Ulcers that Are New
     or Worsened (Short Stay) (NQF #0678).
    Application of Percent of Residents Experiencing One or More Falls
     with Major Injury (Long Stay) (NQF #0674).
    Application of Percent of Long-Term Care Hospital (LTCH) Patients
     With an Admission and Discharge Functional Assessment and a Care
     Plan That Addresses Function (NQF #2631).
    Potentially Preventable 30-Day Post-Discharge Readmission Measure
     for SNF QRP.
    Discharge to Community--(PAC) SNF QRP.
    Medicare Spending Per Beneficiary (PAC) SNF QRP.
------------------------------------------------------------------------

    We invited public comment on the proposal for the public display of 
these three assessment-based measures and three claims-based measures, 
and the replacement of ``Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (Short Stay) (NQF #0678)'' with a 
modified version of the measure, ``Changes in Skin Integrity Post-Acute 
Care: Pressure Ulcer/Injury'' described above. A discussion of these 
comments, along with our responses, appears below.
    Comment: A commenter requested that we consider aligning the public 
reporting periods and provider deadlines across PAC settings and other 
CMS programs.
    Response: We are working to achieve alignment where possible. For 
example, with respect to the following 3 assessment-based measures: (1) 
Application of Percent of Long-Term Care Hospital (LTCH) Patients With 
an Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631); (2) Percent of Residents or Patients 
with Pressure Ulcers That Are New or Worsened (NQF #0678); and (3) 
Application of Percent of Residents Experiencing One or More Falls with 
Major Injury (NQF #0674), we intend to initially report data using 
discharges from January 1, 2017 through December 31, 2017 for the 
public display of data, which aligns with the IRF and LTCH QRPs.
    Comment: A commenter supported the proposed minimum denominator 
requirements for public display.
    Response: We appreciate the commenter's support.
    Comment: A few commenters supported the public display of 
assessment-based measures based on rolling quarters since it reflects 
more recent SNF quality performance.
    Response: We appreciate the commenters' support.
    Final Decision: After consideration of the public comments we 
received, we are finalizing that we intend to begin publicly reporting 
in 2018 the following assessment-based measures based on the 
availability of data: (1) ``Application of Percent of Long-Term Care 
Hospital (LTCH) Patients With an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631); (2) 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (NQF #0678); and (3) Application of Percent of Residents 
Experiencing One or More Falls with Major Injury (NQF #0674), as well 
as the following claims-based measures: (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. In addition, we will discontinue the public reporting of 
data on the assessment-based measure: ``Percent of Residents or 
Patients with Pressure Ulcers That Are New or Worsened (Short Stay) 
(NQF #0678)'' by October 2020.
q. Mechanism for Providing Confidential Feedback Reports to SNFs
    Section 1899B(f) of the Act requires the Secretary to provide 
confidential feedback reports to PAC providers on their performance on 
the measures specified under subsections (c)(1) and (d)(1) of section 
1899B of the Act, beginning 1 year after the specified application date 
that applies to such measures and PAC providers. In the FY 2017 SNF PPS 
final rule (81 FR 52046 through 52048), we finalized processes to 
provide SNFs the opportunity to review their data and information using 
confidential feedback reports that will enable SNFs to review their 
performance on the measures required under the SNF QRP. Information on 
how to obtain these and other reports available to the SNF QRP can be 
found at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Spotlights-and-Announcements.html. We did not propose any changes to 
this policy but received comments, which are discussed below.
    Comment: A few commenters requested more granular resident-specific 
data in the reports.
    Response: Resident level data will be available in the CASPER QM 
reports.
    Comment: A commenter suggested that we provide confidential 
feedback reports to SNFs prior to the time that we publicly display 
their quality measure data.
    Response: Before publicly displaying measure scores, providers have 
several opportunities to review their facility- and resident-level data 
to ensure the accuracy of quality measure scores. Two separate 
confidential feedback reports will be provided, in addition to Review 
and Correct reports, for providers to review their single quarter and 
aggregate quality measure scores, respectively. The confidential 
feedback reports are the QM facility- and resident-level reports that 
will be available to providers beginning in fall 2017, which is prior 
to public display, and contain quality measure information for a single 
reporting period. The facility-level QM reports will provide 
information such as the numerator, denominator, facility

[[Page 36608]]

observed percent, facility adjusted percent, and national average. The 
resident-level QM reports will contain individual resident data and 
provide information related to which residents were included in the 
quality measures.
    The Review and Correct reports, currently available to SNFs, 
provide aggregate performance for up to the past four full quarters as 
the data are available. The reports contain information on assessment 
based measures performance at the facility-level and observed rates. 
The reports also display data correction deadlines and whether the data 
correction period is open or closed. Please refer to the SNF QRP Web 
site for information from the training on the Review and Correct 
reports: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Training.html.
    Finally, the Provider Preview reports will be available beginning 
in the summer of 2018. Provider Preview reports are available about 5 
months after the end of each reporting period. They contain facility-
level quality measure data results and will contain information such as 
the numerator, denominator, facility observed percent, facility 
adjusted percent, and national average. Providers will have 30 days 
upon receiving the Provider Preview reports via their CASPER system 
folders to review their data. We note at that point in time providers 
are no longer able to correct the underlying data in these reports. At 
this point, the data correction period has ended so providers are not 
able to correct the underlying data in these reports.
3. Skilled Nursing Facility Value-Based Purchasing Program (SNF VBP)
a. Background
    Section 215 of the Protecting Access to Medicare Act of 2014 (PAMA) 
(Pub. L. 113-93) authorized the SNF VBP Program (the ``Program'') by 
adding sections 1888(g) and (h) to the Act. As a prerequisite to 
implementing the SNF VBP Program, in the FY 2016 SNF PPS final rule (80 
FR 46409 through 46426) we adopted an all-cause, all-condition hospital 
readmission measure, as required by section 1888(g)(1) of the Act. In 
the FY 2017 SNF PPS final rule (81 FR 51986 through 52009), we adopted 
an all-condition, risk-adjusted potentially preventable hospital 
readmission measure for SNFs, as required by section 1888(g)(2) of the 
Act. In this final rule, we are finalizing proposals related to the 
Program's implementation.
    Section 1888(h)(1)(B) of the Act requires that the SNF VBP Program 
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 
towards transforming how care is paid for, moving increasingly towards 
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). We also refer 
readers to the FY 2017 SNF PPS final rule (81 FR 51986 through 52009) 
for discussion of the policies that we adopted related to the 
potentially preventable hospital readmission measure, scoring, and 
other topics.
    In this rule, we are finalizing requirements for the SNF VBP 
Program, as well as codifying some of those requirements at Sec.  
413.338, including certain definitions, the process for making value-
based incentive payments, and limitations on review.
    We received several general comments on the SNF VBP Program. We 
note that we did not receive any comments specific to the proposed 
regulation text. A discussion of the general comments that we received, 
along with our responses, appears below.
    Comment: One commenter urged us to seek the statutory authority to 
broaden the scope of the SNF VBP Program to include other post-acute 
care outcome measures beyond measures of readmissions.
    Response: We thank the commenter for this suggestion.
    Comment: One commenter suggested that we authorize the inclusion of 
certified peer specialists in value-based, patient-centered treatment, 
as well as transition teams assigned to nursing home patients with 
mental illness or substance use disorders who might benefit in recovery 
from a return to community-based services. The commenter stated that 
peer support specialists' work could result in savings to the Medicare 
Program due to reduced rehospitalizations and from reduced medical 
expenditures for recurring medical conditions.
    Response: We appreciate the comment. We will consider whether peer 
support specialists could play a role providing technical assistance to 
SNFs to help them reduce avoidable hospital readmissions through our 
collaboration with the CMS Quality Innovation and Improvement Network.
    Comment: One commenter suggested that we analyze the New York State 
Nursing Home Quality Initiative, which the commenter stated 
incorporates quality, compliance and efficiency with a focus on 
potentially avoidable hospitalizations. While the initiative is limited 
to long-stay Medicaid patients, the commenter stated that it presents 
several important lessons for the SNF VBP Program. The commenter 
specifically pointed to the need to structure measures narrowly for 
participating facilities, regional adjustments, and detailed 
information that the commenter believes must be provided to 
participating facilities. The commenter also stated that potentially 
avoidable hospitalizations are the most important factor, and that 
incentive payments must be large enough and close enough to the 
performance period to maximize improvement.
    Response: The New York State Nursing Home Quality Initiative ``is 
an annual quality and performance evaluation project to improve the 
quality of care for residents in Medicaid-certified nursing facilities 
across New York State.'' \49\ The initiative scores Medicaid-certified 
nursing facilities in the state on previous performance and awards up 
to 100 points for performance on measures of quality, compliance, and 
efficiency. The initiative also incorporates deficiencies cited during 
the health inspection survey process and creates an overall score for 
each facility that forms the basis for a quintile ranking. We 
appreciate the commenter's suggestion that we consider the New York 
initiative's results and lessons and we agree that it may be 
instructive for our continuing SNF VBP Program development. As the 
commenter noted, its basis in long-stay Medicaid patients differs 
somewhat from the SNF VBP Program's focus on shorter-stay Medicare 
patients. However, as the commenter notes, the initiative provides 
detailed information to participating facilities, a goal that we 
believe we are now meeting by providing patient-level information to 
SNF VBP Program participants. We also believe that the SNF VBP Program 
is, as the commenter

[[Page 36609]]

suggests, narrowly constructed due to its focus on measures of hospital 
readmissions, and while we have not considered regional adjustments in 
the SNF VBP Program to date, we will consider if such adjustments are 
appropriate in the future.
---------------------------------------------------------------------------

    \49\ See https://www.health.ny.gov/health_care/medicaid/redesign/nursing_home_quality_initiative.
---------------------------------------------------------------------------

    Comment: One commenter questioned whether the SNF VBP Program's 
statute actually limits the Program to the specified measures of 
readmissions, or whether other indicators could be included in 
performance scoring. The commenter suggested that, at a minimum, we 
should coordinate our approach and goals between SNF VBP, SNF QRP, and 
the Staffing Data Collection initiative. Another commenter suggested 
that we consider additional quality measures for the Program, 
potentially including measures drawn from Nursing Home Compare, the NH 
VBP demonstration, or the SNF QRP. The commenter also specifically 
suggested that we measure turnover as a percentage of nursing staff, 
total CNA hours per patient day, and total licensed nursing hours per 
patient day. The commenter stated that these measures can be integrated 
into SNF VBP because the payroll-based journal staffing information 
collection system has been operational since July 2016. The commenter 
also stated that several studies have positively correlated a higher 
staffing level with higher care quality and outcomes, and stated that 
such metrics will encourage SNFs to invest in their staffs.
    Response: We interpret sections 1888(h)(2)(A) and (B) of the Act to 
only allow us to include in the Program first the readmission measure 
specified under section 1888(g)(1), and then in its place, the 
readmission measure specified under section 1888(g)(2) of the Act. We 
will continue our collaborative effort with the SNF QRP and Nursing 
Home Compare programs to align our readmission measure to the fullest 
extent feasible and practicable. Our collaborative focus area across 
these programs is to improve the quality of care and reduce hospital 
readmissions.
    We thank the commenters for this feedback.
b. Measures
(1) Background
    For background on the measures in the SNF VBP Program, we refer 
readers to the FY 2016 SNF PPS final rule (80 FR 46419), where we 
finalized the Skilled Nursing Facility 30-Day All-Cause Readmission 
Measure (SNFRM) (NQF #2510) that we will use for the SNF VBP Program. 
We also refer readers to the FY 2017 SNF PPS final rule (81 FR 51987 
through 51995), where we finalized the Skilled Nursing Facility 30-Day 
Potentially Preventable Readmission Measure (SNFPPR) that we will use 
for the SNF VBP Program instead of the SNFRM as soon as practicable.
(2) Request for Comment on Measure Transition
    Section 1886(h)(2)(B) of the Act requires us to apply the SNFPPR to 
the SNF VBP Program instead of the SNFRM ``as soon as practicable.'' We 
intend to propose a timeline for replacing the SNFRM with the SNFPPR in 
future rulemaking, after we have had a sufficient opportunity to 
analyze the potential effects of this replacement on SNFs' measured 
performance. We believe we must approach the decision about when it is 
practicable to replace the SNFRM thoughtfully, and we continue to 
welcome public feedback on when it is practicable to replace the SNFRM 
with the SNFPPR.
    In the FY 2017 SNF PPS final rule (81 FR 51995), we summarized the 
public comments we received in response to our request for when we 
should begin to measure SNFs on their performance on the SNFPPR instead 
of the SNFRM. Commenters' views were mixed; one suggested that we 
replace the SNFRM immediately, while others requested that we wait 
until the SNFPPR receives NQF endorsement, or that we allow SNFs to 
receive and understand their SNFPPR data for at least 1 year prior to 
beginning to use it. Another commenter suggested that we decline to use 
the SNFPPR until the measure receives additional support from the 
Measure Application Partnership and is the subject of additional public 
comment.
    We would like to thank stakeholders for their input on this issue. 
We believe the first opportunity to replace the SNFRM with the SNFPPR 
would be the FY 2021 program year, which would give SNFs experience 
with the SNFRM and other measures of readmissions such as those adopted 
under the SNF QRP. However, we have not yet determined if it would be 
practicable to replace the SNFRM at that time. We intend to continue to 
analyze SNF performance on the SNFPPR in comparison to the SNFRM and 
assess how the replacement of the SNFRM with the SNFPPR will affect the 
quality of care provided to Medicare beneficiaries.
    In the FY 2018 SNF PPS proposed rule, we sought public comments on 
when we should replace the SNFRM with the SNFPPR, particularly in light 
of our proposal (discussed further in this section) to adopt 
performance and baseline periods based on the federal FY rather than on 
the calendar year. A discussion of these comments, along with our 
responses, appears below.
    Comment: Several commenters supported transitioning to the SNFPPR 
beginning with the FY 2021 program year as long as the measure has 
received NQF endorsement. Commenters stated that the measure's 
importance to the program necessitates thorough vetting, including NQF 
endorsement, and agreed that waiting until FY 2021 provides SNFs with 
the opportunity to gain experience with the SNFRM prior to the measure 
transition. One commenter requested that we provide a timeline for when 
the measure will replace the SNFRM.
    Response: We appreciate the feedback, and we intend to submit the 
SNFPPR to NQF for consideration of endorsement as soon as possible. We 
will address the replacement of the SNFRM with the SNFPPR in future 
rulemaking.
    Comment: One commenter expressed continued concern about the 
SNFPPR, stating that we should conduct additional testing and analysis 
of the measure before implementing it in the Program. The commenter 
specifically requested that we await full endorsement by NQF, and if we 
intend to proceed with its implementation, that we provide SNFPPR 
performance information in our quarterly reports to SNFs.
    Response: As we noted above, we intend to submit the SNFPPR to NQF 
for consideration of endorsement as soon as possible. We also intend to 
provide SNFs with SNFPPR performance information in their quarterly 
reports prior to future replacement of the SNFRM. We intend to update 
affected stakeholders on timing in future rulemaking.
    Comment: One commenter supported adoption of the SNFPPR and did not 
have any objection to transitioning the Program to the SNFPPR in FY 
2021. The commenter also suggested that we consider including 
additional measures in the Program to cover other relevant quality 
improvement topics, such as resource use and functional outcomes.
    Response: As we discussed above, we interpret sections 
1888(h)(2)(A) and (B) of the Act to only allow us to include in the 
Program first the readmission measure specified under section 
1888(g)(1) of the Act, and then in its place, the readmission measure 
specified under section 1888(g)(2) of the Act. We intend to provide 
SNF's with SNFPPR rates prior to the replacement for SNF's to learn 
more about the measure and incorporate into their

[[Page 36610]]

quality improvement and care transitions efforts to reduce 
readmissions. We also intend to further analyze the SNFPPR prior to 
replacing the SNFRM for any association with social risk factors, in 
collaboration with the Assistant Secretary for Planning and Evaluation. 
We intend to update stakeholders on this analysis in future rulemaking.
    Comment: One commenter supported transitioning the Program to the 
SNFPPR in FY 2021, if not sooner, and requested additional information 
on why we believe that FY 2021 is the first opportunity to transition 
the Program from the SNFRM.
    Response: As we discussed in the FY 2018 SNF PPS proposed rule (82 
FR 21080), we concluded that FY 2021 would be the first opportunity to 
replace the SNFRM with the SNFPPR because we believe that giving SNFs 
two Program years' experience with the SNFRM will provide them with 
valuable experience with measures of readmissions that will be helpful 
for their quality improvement efforts generally and with their specific 
efforts to improve their scores under the SNF VBP Program. To expand on 
that point, we did not believe it would be helpful to SNFs' quality 
improvement efforts to adopt a quality measure for a single year, then 
to replace that measure after that 1 year, particularly because the 
Program is limited by statute to a single measure at a time. We viewed 
that instability in the Program's quality metrics as undesirable and 
unnecessary. We are also concerned that transitioning the Program too 
quickly could prove confusing for SNFs and for affected patients.
    We also intend to provide SNFs with their SNFPPR rates prior to the 
replacement so that they have an opportunity to learn more about the 
measure and incorporate that information into their quality improvement 
and care transitions efforts to reduce readmissions. We also intend to 
further analyze the SNFPPR prior to replacing the SNFRM for any 
association with social risk factors, in collaboration with the 
Assistant Secretary for Planning and Evaluation. We intend to update 
stakeholders on this analysis in future rulemaking.
    Comment: One commenter recommended that we transition the Program 
to the SNFPPR no sooner than FY 2021 to allow sufficient time for SNFs 
to adjust to the measure's implementation.
    Response: We agree that SNFs need time to adjust to transitions 
under the Program, which is why we sought comment in the FY 2017 SNF 
PPS proposed rule on this topic and again sought comment in the FY 2018 
SNF PPS proposed rule. We will consider the commenter's feedback as we 
determine when it is practicable to transition the Program to the 
SNFPPR.
    We thank the commenters for this feedback and will take it into 
consideration in the future. We also received a number of unsolicited 
comments on the SNF VBP Program measures. The comments, together with 
our responses, appear below.
    Comment: One commenter expressed concern about our use of measures 
of readmissions in the Program. The commenter was particularly 
concerned that these measures place non-profit facilities at a 
disadvantage compared to their for-profit competitors because non-
profits take all patients, including high-risk and high-acuity level 
patients. The commenter also stated that the measures' risk adjustment 
methodologies do not fully capture the additional effort needed to 
treat these patients in the SNF setting, such as the risk of patient 
non-compliance with medical direction after discharge. The commenter 
requested that we provide additional transparency into claims-based 
quality measures in order to improve providers' understanding of their 
calculations and methodologies.
    Response: We thank the commenter for this feedback, but we disagree 
with their concern. As we discussed in the FY 2016 SNF PPS final rule 
(80 FR 46418), we believe that the risk adjustment model that we have 
adopted for the SNFRM will ensure that SNFs serving more complex 
patient populations will not be penalized inadvertently under the 
Program. As we discussed in the FY 2017 SNF PPS final rule (81 FR 
51993), we have also specified the SNF Potentially Preventable 
Readmissions Measure for the Program, and that measure estimates the 
risk-standardized rate of unplanned, potentially preventable hospital 
readmissions for Medicare FFS beneficiaries. The comprehensive claims-
based risk-adjustment model that the measure employs takes into account 
demographic and eligibility characteristics, principal diagnoses, types 
of surgery or procedure from the prior short-term hospital stay, 
comorbidities, length of stay and ICU/CCU utilization from the 
immediately prior short-term hospital stay, and number of admissions in 
the year preceding the SNF admission. We continue to believe that the 
measures' risk adjustment methodologies appropriately adjust for 
factors beyond SNFs' control. We will carefully monitor the Program's 
effects on SNFs' measured performance and on care quality, and will 
work with SNFs to provide as much assistance as possible with their 
efforts to improve on the Program's measures. For additional 
information on the SNFRM's calculation and methodology, we refer 
readers to the SNFRM Technical Report available on our Web site at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Downloads/SNFRM-Technical-Report-3252015.pdf. For additional information on the SNFPPR's calculation and 
methodology, we refer readers to the SNFPPR Technical Report available 
on our Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNFPPR-Technical-Report.pdf.
    Comment: Two commenters suggested that we consider removing 
readmissions from the measure when they are associated with events 
unrelated to SNF care, such as car accidents or disease outbreaks.
    Response: We note that the SNF VBP Program's statute requires that 
the measure specified under section 1888(g)(1) of the Act must be an 
``all-cause all-condition hospital readmission'' measures, which we 
specified as the SNFRM (NQF #2510). We previously addressed this issue 
in detail in the FY 2016 SNF PPS Final Rule (80 FR 46412 through 
46413). We explained that the SNFRM has been risk adjusted for case-mix 
to account for differences in patient populations. The goal of risk 
adjustment is to account for these differences so that providers who 
treat sicker or more vulnerable patient populations are not 
unnecessarily penalized for factors that are outside of their control. 
Regarding hospitalizations due to other incidents unrelated to SNF care 
such as car accidents and non-preventable disease outbreaks, we note 
that these events are random and would not be likely to cluster in 
certain SNFs over time; thus they would not result in systematic bias 
in the measure.
    Comment: One commenter suggested that we factor the expansion of 
managed care into our measure development process, noting that many 
states are rapidly expanding managed care offerings for both Medicare 
and Medicaid patients. The commenter suggested that we consider 
consolidating quality measure requirements between Medicare and 
Medicaid to minimize the burden on participating providers, and 
suggested that we promote best practices in quality improvement as 
widely as possible.

[[Page 36611]]

    Response: The measures that we have adopted for the Program are 
based on Medicare claims, and are thus restricted to Medicare fee-for-
service beneficiaries. We believe that policy to be appropriate given 
the Program's focus on Medicare fee-for-service payments. From our 
collaboration with the Quality Innovation and Improvement Networks, we 
also believe that many of the care transitions and quality improvement 
strategies used by SNFs are broadly applicable to reduce readmissions 
for Medicaid and managed-care patients. We will consider methods to 
monitor managed-care performance in the future, and welcome commenters' 
input on that topic.
    Comment: One commenter urged us to refine and test the SNFPPR 
further before adopting it for the Program. The commenter was also 
concerned about our use of differing measures within the same service 
line, noting that the re-hospitalization measure currently in use in 
the Nursing Home Five-Star Quality Rating differs from the SNFPPR. The 
commenter stated that our longer-term goal should be to align the SNF 
VBP measure with other relevant hospitalization measures such as those 
used in VBP programs developed under Medicaid waivers.
    Response: We thank the commenter for the suggestion. We wish to 
clarify that we are conducting additional testing on the SNFPPR 
measure, in preparation to submit that measure to NQF for endorsement 
consideration. We wish to clarify that the re-hospitalization measure 
reported on Nursing Home Compare is not a measure of potentially 
preventable readmissions, as required by PAMA. We agree that aligning 
measures across Programs, when feasible, may reduce provider confusion.
    Comment: One commenter discussed the length of the readmission 
window for both the SNFRM (NQF #2510) and the SNFPPR. The commenter 
urged us to extend the readmission window to include the entire SNF 
stay and a set period after discharge from the SNF.
    Response: We believe that the length of the readmission windows for 
the SNFRM and SNFPPR is appropriate because they are harmonized with 
measures used in the hospital setting. We note also that a longer 
readmission window, such as 90-days, would make it difficult to ensure 
that potentially preventable readmissions occurring up to 90 days after 
prior hospital discharge are attributable to the SNF care received. We 
refer readers to the FY 2017 SNF PPS Final Rule (81 FR 51993) for 
additional details concerning the length of the readmission window for 
SNF VBP Program measures.
    We thank commenters for their feedback.
(3) Updates to the Skilled Nursing Facility 30-Day All-Cause 
Readmission Measure (NQF#2510)
    Since finalizing the SNFRM for use in the SNF VBP Program, we have 
continued to conduct analyses using more recent data, as well as to 
make some necessary non-substantive measure refinements. Results of 
this work and all refinements are detailed in a Technical Report 
Supplement that is available on the following CMS Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNF-VBP.html.
    We did not receive any public comments on this topic.
(4) Accounting for Social Risk Factors in the SNF VBP Program
    We understand that social risk factors such as income, education, 
race and ethnicity, employment, disability, community resources, and 
social support (certain factors of which are also sometimes referred to 
as socioeconomic status (SES) factors or socio-demographic status (SDS) 
factors) play a major role in health. One of our core objectives is to 
improve beneficiary outcomes including reducing health disparities, and 
we want to ensure that all beneficiaries, including those with social 
risk factors, receive high quality care. In addition, we sought to 
ensure that the quality of care furnished by providers and suppliers is 
assessed as fairly as possible under our programs while ensuring that 
beneficiaries have adequate access to excellent care.
    We have been reviewing reports prepared by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) \50\ and the 
National Academies of Sciences, Engineering, and Medicine on the issue 
of accounting for social risk factors in CMS's value-based purchasing 
and quality reporting programs, and considering options on how to 
address the issue in these programs. On December 21, 2016, ASPE 
submitted a Report to Congress on a study it was required to conduct 
under section 2(d) of the Improving Medicare Post-Acute Care 
Transformation (IMPACT) Act of 2014. The study analyzed the effects of 
certain social risk factors in Medicare beneficiaries on quality 
measures and measures of resource use used in one or more of nine 
Medicare value- based purchasing programs, including the SNF VBP 
Program.\51\ The report also included considerations for strategies to 
account for social risk factors in these programs. In a January 10, 
2017 report released by The National Academies of Sciences, 
Engineering, and Medicine, that body provided various potential methods 
for measuring and accounting for social risk factors, including 
stratified public reporting.\52\
---------------------------------------------------------------------------

    \50\ Office of the Assistant Secretary for Planning and 
Evaluation. 2016. Report to Congress: Social Risk Factors and 
Performance Under Medicare's Value-Based Purchasing Programs. 
Available at https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \51\ Office of the Assistant Secretary for Planning and 
Evaluation. 2016. Report to Congress: Social Risk Factors and 
Performance Under Medicare's Value-Based Purchasing Programs. 
Available at https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \52\ National Academies of Sciences, Engineering, and Medicine. 
2017. Accounting for social risk factors in Medicare payment. 
Washington, DC: The National Academies Press.
---------------------------------------------------------------------------

    As noted in the FY 2017 IPPS/LTCH PPS final rule, the NQF has 
undertaken a 2-year trial period in which certain new measures, 
measures undergoing maintenance review, and measures endorsed with the 
condition that they enter the trial period can be assessed to determine 
whether risk adjustment for selected social risk factors is appropriate 
for these measures. This trial entails temporarily allowing inclusion 
of social risk factors in the risk-adjustment approach for these 
measures. At the conclusion of the trial, NQF will issue 
recommendations on the future inclusion of social risk factors in risk 
adjustment for these quality measures, and we will closely review its 
findings.
    The SNF VBP section of ASPE's report examined the relationship 
between social risk factors and performance on the 30-day SNF 
readmission measure for beneficiaries in SNFs. Findings indicated that 
beneficiaries with social risk factors were more likely to be re-
hospitalized but that this effect was significantly smaller when the 
measure's risk adjustment variables were applied (including adjustment 
for age, gender, and comorbidities), and that the effect of dual 
enrollment disappeared. In addition, being at a SNF with a high 
proportion of beneficiaries with social risk factors was associated 
with an increased likelihood of readmissions, regardless of a 
beneficiary's social risk factors.
    As we continue to consider the analyses and recommendations from 
these reports and await the results of the NQF trial on risk adjustment 
for quality measures, we are continuing to work with stakeholders in 
this process. As we

[[Page 36612]]

have previously communicated, we are concerned about holding providers 
to different standards for the outcomes of their patients with social 
risk factors because we do not want to mask potential disparities or 
minimize incentives to improve the outcomes for disadvantaged 
populations. Keeping this concern in mind, while we sought input on 
this topic previously, we again sought public comment on whether we 
should account for social risk factors in the SNF VBP Program, and if 
so, what method or combination of methods would be most appropriate for 
accounting for social risk factors. Examples of methods include: 
Adjustment of the payment adjustment methodology under the SNF VBP 
Program; adjustment of provider performance scores (for instance, 
stratifying providers based on the proportion of their patients who are 
dual eligible); confidential reporting of stratified measure rates to 
providers; public reporting of stratified measure rates; risk 
adjustment of measures as appropriate based on data and evidence; and 
redesigning payment incentives (for instance, rewarding improvement for 
providers caring for patients with social risk factors or incentivizing 
providers to achieve health equity). While we consider whether and to 
what extent we currently have statutory authority to implement one or 
more of the above-described methods, we sought comments on whether any 
of these methods should be considered, and if so, which of these 
methods or combination of methods would best account for social risk 
factors in the SNF VBP Program.
    In addition, we sought public comment on which social risk factors 
might be most appropriate for stratifying measure scores and/or 
potential risk adjustment of a particular measure. Examples of social 
risk factors include, but are not limited to, dual eligibility/low-
income subsidy, race and ethnicity, and geographic area of residence. 
We are seeking comments on which of these factors, including current 
data sources where this information would be available, could be used 
alone or in combination, and whether other data should be collected to 
better capture the effects of social risk. We will take commenters' 
input into consideration as we continue to assess the appropriateness 
and feasibility of accounting for social risk factors in the SNF VBP 
Program. We note that any such changes would be proposed through future 
notice-and-comment rulemaking.
    We look forward to working with stakeholders as we consider the 
issue of accounting for social risk factors and reducing health 
disparities in CMS programs. Of note, implementing any of the above 
methods would be taken into consideration in the context of how this 
and other CMS programs operate (for example, data submission methods, 
availability of data, statistical considerations relating to 
reliability of data calculations, among others), and we also welcome 
comment on operational considerations. CMS is committed to ensuring 
that its beneficiaries have access to and receive excellent care, and 
that the quality of care furnished by providers and suppliers is 
assessed fairly in CMS programs.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the Accounting for Social Risk Factors in the SNF 
VBP Program. A discussion of these comments, along with our responses, 
appears below.
    Comment: Many commenters encouraged us to incorporate social risk 
factors adjustments in various forms, including stratifying providers 
into peer groups. Commenters stated that we should require measure 
developers to incorporate SDS data elements testing in risk adjustment 
models and suggested that we consider adjusting measures for dual-
eligible status as well as education level, limited English 
proficiency, and living alone, among other possible factors. Some 
commenters suggested that we examine the Program's effects on specialty 
populations such as children and residents that are ventilator-
dependent, patients receiving dialysis, or patients living with HIV/
AIDS. Other commenters suggested that we use IMPACT Act measure data to 
risk-adjust measures and provider performance scores. One commenter 
suggested that we consider a stratification approach similar to that 
proposed for the Hospital Readmissions Reduction Program.
    Other commenters encouraged us to incorporate into our future 
policies the findings both from NQF's sociodemographics trial and from 
ASPE's report. One commenter noted that the ASPE report found that 
provider-level factors are more powerful predictors of readmissions 
than beneficiary-level factors, and that high-dual SNFs were among the 
best performers on the readmission measure examined. The commenter 
stated that these results alone do not suggest a need for risk 
adjustment, but suggested again that we examine NQF's results before 
determining whether or not risk adjustment is appropriate in the 
Program, and further suggested that incorporating SES variables into 
the measures' risk-adjustment model could embed health disparities, 
create biases in reporting, undermine system-based approaches to 
providing high-quality care, and create care access problems. Another 
commenter noted that adjusting for social risk factors could negatively 
affect providers and facilities in regions where social risk factors 
are higher, but cautioned that adjusting for such factors may increase 
health disparities by essentially masking them.
    One commenter suggested that we consider developing readmission 
measures or statistical approaches to report quality performance 
specifically for beneficiaries with social risk factors. The commenter 
noted that high social risk beneficiaries are substantially more likely 
to be re-hospitalized, and that beneficiaries at SNFs serving a high 
proportion of beneficiaries with social risk factors are also more 
likely to be re-hospitalized. The commenter stated that these findings 
suggest that the SNFPPR's outcomes could vary significantly due to 
factors beyond the SNF's control.
    Response: We appreciate all the comments and interest in this 
topic. As we have previously stated, we are concerned about holding 
providers to different standards for the outcomes of their patients 
with social risk factors, because we do not want to mask potential 
disparities or minimize incentives to improve outcomes for 
disadvantaged populations. We believe that the path forward should 
incentivize improvements in health outcomes for disadvantaged 
populations while ensuring that beneficiaries have access to excellent 
care. We intend to consider all suggestions as we continue to assess 
each measure and the overall program. We appreciate that some 
commenters recommended risk adjustment as a strategy to account for 
social risk factors, while others stated a concern that risk adjustment 
could minimize incentives and reduce efforts to address disparities for 
patients with social risk factors. We intend to conduct further 
analyses on the impact of strategies such as measure-level risk 
adjustment and stratifying performance scoring to account for social 
risk factors including the options suggested by commenters. In 
addition, we appreciate the recommendations from the commenters about 
consideration of specific social risk factor variables and will work to 
determine the feasibility of collecting these patient-level variables. 
As we consider the feasibility of collecting patient-level data and the 
impact of strategies to account for social risk factors through further 
analysis, we will continue to evaluate the reporting

[[Page 36613]]

burden on providers. Future proposals would be made after further 
research and continued stakeholder engagement.
    We thank commenters for their feedback. We will take it into 
account in future rulemaking.
c. FY 2020 Performance Standards
    We refer readers to the FY 2017 SNF PPS final rule (81 FR 51995 
through 51998) for a summary of the statutory provisions governing 
performance standards under the SNF VBP Program and our finalized 
performance standards policy, as well as the numerical values for the 
achievement threshold and benchmark for the FY 2019 program year. We 
also responded to public comments on these policies in that final rule.
    In the proposed rule (82 FR 21081 through 21802), we proposed 
estimated performance standards for the FY 2020 SNF VBP Program based 
on the FY 2016 MedPAR files including a 3-month run-out period. We 
stated our intention to include the final numerical values of the 
performance standards in the final rule. We have displayed the 
estimated performance standards' numerical values from the proposed 
rule in Table 23. As we have done previously, we have inverted the 
SNFRM rates in Table 23 so that higher values represent better 
performance.

                        Table 23--Estimated FY 2020 SNF VBP Program Performance Standards
----------------------------------------------------------------------------------------------------------------
                                                                                    Achievement
                  Measure ID                           Measure description           threshold       Benchmark
----------------------------------------------------------------------------------------------------------------
SNFRM.........................................  SNF 30-Day All-Cause Readmission         0.80218         0.83721
                                                 Measure (NQF #2510).
----------------------------------------------------------------------------------------------------------------

    We sought public comments on these estimated achievement threshold 
and benchmark values. A discussion of these comments, along with our 
responses, appears below.
    Comment: One commenter supported our performance standards 
methodology in general. The commenter was concerned, however, that 
continually rewarding lower readmission rates may not be in the best 
interests of SNF patients. The commenter suggested that we explore 
identifying an optimal readmission rate.
    Response: Our statistically based benchmark is intended to set an 
empirically based performance standard of top performing SNFs as an 
achievable goal for all SNFs during the performance period. We 
recognize that this benchmark might not be an optimal readmission rate 
as suggested by the commenter due to performance gaps between current 
and optimal care, but the intent of the Program's incentives is to 
encourage SNFs to improve the care they provide. We also caution that 
establishing a single optimal readmission rate may not be feasible for 
a nationwide quality program affecting care for millions of Medicare 
beneficiaries. We intend to carefully monitor the Program's effects on 
readmission rates and on care quality, and if warranted, will revisit 
the performance standards methodology in future rulemaking.
    In this final rule, we are providing the finalized numerical values 
of the achievement threshold and the benchmark for the FY 2020 program 
year. We note that the values have not changed since we published the 
proposed rule.
    Additionally, as discussed further below, we are finalizing 
baseline and performance periods for the FY 2020 program year based on 
the federal fiscal year rather than the calendar year as we had 
finalized for the FY 2019 program year. The numerical values for the 
achievement threshold and benchmark in Table 24 reflect this final 
policy by using FY 2016 claims data. As we have done in prior 
rulemaking, we have inverted the SNFRM rates in Table 24 so that higher 
values represent better performance.

                          Table 24--Final FY 2020 SNF VBP Program Performance Standards
----------------------------------------------------------------------------------------------------------------
                                                                                    Achievement
                  Measure ID                           Measure description           threshold       Benchmark
----------------------------------------------------------------------------------------------------------------
SNFRM.........................................  SNF 30-Day All-Cause Readmission         0.80218         0.83721
                                                 Measure (NQF #2510).
----------------------------------------------------------------------------------------------------------------

    After consideration of the public comments that we received, we are 
finalizing the performance standards for the FY 2020 SNF VBP Program as 
proposed.
d. FY 2020 Performance Period and Baseline Period
(1) Background
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46422) 
for a discussion of the considerations that we took into account when 
specifying performance periods for the SNF VBP Program. Based on those 
considerations, as well as public comments received, we adopted CY 2017 
as the performance period for the FY 2019 SNF VBP Program, with a 
corresponding baseline period of CY 2015.
(2) FY 2020 Policies
    As we stated in the proposed rule (82 FR 21082), we continue to 
believe that a 12-month performance and baseline period are appropriate 
for the Program, and we are concerned about the operational challenges 
of linking the 12-month periods to the calendar year. Specifically, the 
allowance of an approximately 90-day claims run out period following 
the last date of discharge, coupled with the length of time needed to 
calculate the measure rates using multiple sources of claims needed for 
statistical modeling, determine achievement and improvement scores, 
allow SNFs to review their measure rates, and determine the amount of 
payment adjustments could risk delay in meeting requirement at section 
1888(h)(7) of the Act to notify SNFs of their value-based incentive 
payment percentages not later than 60 days prior to the fiscal year 
involved.
    We therefore considered what policy options we had to mitigate this 
risk and ensure that we comply with the statutory deadline to notify 
SNFs of their payment adjustments under the Program.
    We continue to believe that a 12-month performance and baseline 
period provide a sufficiently reliable and valid data set for the SNF 
VBP Program. We

[[Page 36614]]

also continue to believe that, where possible and practicable, the 
baseline and performance period should be aligned in length and in 
months included in the selections. Taking those considerations and 
beliefs into account, we proposed to adopt FY 2018 (October 1, 2017, 
through September 30, 2018) as the performance period for the FY 2020 
SNF VBP Program, with FY 2016 (October 1, 2015, through September 30, 
2016) as the baseline period for purposes of calculating performance 
standards and measuring improvement. We noted that this proposed 
policy, would, if finalized, give us an additional 3 months between the 
conclusion of the performance period and the 60-day notification 
deadline prescribed by section 1888(h)(7) of the Act to complete the 
activities described above.
    We are aware that making this transition from the calendar year to 
the FY will result in our measuring SNFs on their performance during Q4 
of 2017 (October 1, 2017, through December 31, 2017) for both the FY 
2019 program year and the FY 2020 program year. During the FY 2019 
program year, that quarter will fall at the end of the finalized 
performance period (January 1, 2017, through December 31, 2017), while 
during the FY 2020 program year, that quarter will fall at the 
beginning of the proposed performance period (October 1, 2017, through 
September 30, 2018). We believe that, on balance, this overlap in data 
is more beneficial than the alternative. We considered proposing not to 
use that quarter of measured performance during the FY 2020 program 
year, but, as a result, we would be left with fewer than 12 months of 
data with which to score SNFs under the program. As we have stated, we 
believe it is important to use 12 months of data to avoid seasonality 
issues and to assess SNFs fairly. We therefore believe that meeting 
these operational challenges, in total, outweighs any cost to SNFs 
associated with including a single quarter's SNFRM data in their SNF 
performance scores twice.
    However, as an alternative, we requested comments on whether or not 
we should instead consider adopting for the FY 2020 Program a one-time, 
three-quarter performance period of January 1, 2018, through September 
30, 2018, and a one-time, three-quarter baseline period of January 1, 
2016 through September 30, 2016 to avoid the overlap in performance 
period quarters that we describe above. We believe this option could 
provide us with sufficiently reliable SNFRM data for purposes of the 
Program's scoring while ensuring that SNFs are not scored on the same 
quality measure data in successive Program years. However, we noted 
that the shorter measurement period could result in lower denominator 
counts and seasonal variations in care, as well as disparate effects of 
cold weather months on SNFs' care could also create variations in 
quality measurement, and could potentially disproportionately affect 
SNFs in different areas of the country. Under this alternative, we 
would resume a 12-month performance and baseline period beginning with 
the FY 2021 program year.
    We sought public comments on our proposal and alternative. In 
addition, as we continue considering potential policy changes once we 
replace the SNFRM with the SNFPPR, we also sought comment on whether we 
should consider other potential performance and baseline periods for 
that measure. We specifically sought comments on whether we should 
attempt to align the SNF VBP Program's performance and baseline periods 
with other CMS value-based purchasing programs, such as the Hospital 
VBP Program or Hospital Readmissions Reduction Program, which could 
mean proposing to adopt performance and baseline periods that run from 
July 1st to June 30th. A discussion of these comments, along with our 
responses, appears below.
    Comment: Some commenters supported our proposed performance and 
baseline periods for the FY 2020 Program, acknowledging that the one-
quarter overlap may be unavoidable and agreeing with us that a three-
quarter performance period would not be appropriate. Commenters also 
stated that it is not necessary to align the SNF VBP Program's 
performance periods with other VBP programs.
    Response: We thank the commenters for their support and feedback.
    Comment: Some commenters expressed concern about the SNF VBP 
Program's shift from calendar year to fiscal year measurement periods 
while the SNF QRP has proposed the reverse. Commenters were concerned 
that this lack of alignment between the two programs could be confusing 
for providers.
    Response: As described above, the SNF VBP Program's shift from 
calendar year to fiscal year measurement periods is logistically 
necessary to meet the statutory deadlines for the program. CMS will 
take all necessary steps to minimize any potential confusion among 
providers.
    Comment: One commenter opposed our proposal to maintain 12-month 
performance and baseline periods while shifting to fiscal year 
reporting periods, and stated that we should instead use a one-time 
three-quarter baseline and performance period for the FY 2020 Program 
year. Another commenter recommended that we use only 9 months for the 
performance and baseline periods for FY 2019 and FY 2020, and then 
beginning with FY 2021, consider aligning the reporting periods to 
other VBP programs that run from July 1 to June 30 of each year. The 
commenter noted that making this change would result in a six-month 
overlap as opposed to the 3-month overlap under the proposal, with the 
result being that the change would occur over 2 years.
    Response: We thank the commenters for this feedback. However, as we 
described in the proposed rule, we are concerned that a shorter 
performance period than a 12-month period could result in lower 
denominator counts and seasonal variations in care, which could 
disproportionately affect SNFs in different regions of the country. Our 
analysis of 9 and 12 month SNFRM denominator size reveals that these 
issues are sufficiently mitigated by the commenters' suggestion, and we 
continue to believe that a one-quarter overlap in performance periods 
between FY 2019 and FY 2020 is an acceptable compromise to make this 
transition to performance and baseline periods centered on the federal 
fiscal year.
    Additionally, we believe that using a full year of claims data to 
calculate performance on the measures ensures that the variation found 
among SNF performance is due to real differences in care delivery 
between SNFs, and not within-facility variation due to issues such as 
seasonality. Based on our SNFRM denominator analysis, we do not believe 
that using a 9-month performance period would provide us with 
sufficiently reliable data for a performance year, and given the 
Program's focus on a single quality measure, we do not believe scoring 
insufficiently reliable quality measure data to be a practical policy.
    After consideration of the public comments that we have received, 
we are finalizing the performance and baseline period for the FY 2020 
SNF VBP Program as proposed.
e. SNF VBP Performance Scoring
    We refer readers to the FY 2017 SNF PPS final rule (81 FR 52000 
through 52005) for a detailed discussion of the scoring methodology 
that we have finalized for the Program, along with responses to public 
comments on our policies and examples of scoring calculations.

[[Page 36615]]

(1) Rounding Clarification for SNF VBP Scoring
    In the FY 2017 SNF PPS final rule (81 FR 52001), we adopted 
formulas for scoring SNFs on achievement and improvement. The final 
step in these calculations is rounding the scores to the nearest whole 
number.
    As we have continued examining SNFRM data, we have identified a 
concern related to that rounding step. Specifically, we are concerned 
that rounding SNF performance scores to the nearest whole number is 
insufficiently precise for purposes of establishing value-based 
incentive payments under the Program. Rounding scores in this manner 
has the effect of producing significant numbers of tie scores, since 
SNFs have between 0 and 100 points available under the Program, and we 
estimate that more than 15,000 SNFs will participate in the Program. As 
discussed further in this section, the exchange function methodology 
that we proposed to adopt is most easily implemented when we are able 
to differentiate precisely among SNF performance scores to provide each 
SNF with a unique value-based incentive payment percentage.
    We therefore proposed to change the rounding policy from that 
previously finalized for SNF VBP Program scoring methodology, and 
instead to award points to SNFs using the formulas that we adopted in 
last year's rule by rounding the results to the nearest ten-thousandth 
of a point. Using significant digits terminology, we proposed to use no 
more than five significant digits to the right of the decimal point 
when calculating SNF performance scores and subsequently calculating 
value-based incentive payments.
    We view this policy change as necessary to ensure that the Program 
scores SNFs as precisely as possible and to ensure that value-based 
incentive payments reflect SNF performance scores as accurately as 
possible.
    We sought public comments on this proposal. A discussion of these 
comments, along with our responses, appears below.
    Comment: Some commenters supported our proposal to round SNF 
performance scores to the fifth significant digit, noting that the step 
is necessary to avoid ties and that it will have only minor financial 
impacts.
    Response: We thank the commenters for their support.
    Comment: Several commenters cautioned that we should not implement 
policy changes merely to ensure more differentiation among providers.
    Response: We thank the commenters for their support. We agree with 
the commenters that we should not implement policy changes solely to 
ensure more differentiation, but we view this policy as necessary in 
order to ensure that SNF performance scores are accurate. We will also 
consider this caution as we adopt policies in future rulemaking.
    Comment: One commenter opposed our proposal to round SNF 
performance scores to the nearest ten-thousandth of a point, stating 
that scoring in this manner is ``too narrow.'' The commenter 
recommended instead that we round scores to the nearest tenth of a 
point.
    Response: We thank the commenter for this feedback, but we believe 
that rounding scores to the nearest tenth of a point would still result 
in numerous scoring ties due to the estimated 15,000 SNFs that will 
participate in the Program. We believe that the rounding policy we have 
proposed ensures that we have sufficient precision to calculate 
performance scores under the program.
    Comment: One commenter suggested that if our proposed change to the 
rounding policy for SNF performance scores results in SNFs with nearly 
identical readmission rates receiving materially different VBP payment 
amounts, we should consider revising the methodology.
    Response: We thank the commenter and agree. Our expectation is that 
the additional precision will not significantly affect SNFs' payment 
amounts when they have nearly identical SNF performance scores, but we 
will monitor this issue carefully.
    After consideration of the public comments that we have received, 
we are finalizing that we will round the SNF performance scores to the 
fifth significant digit.
(2) Policies for Facilities With Zero Readmissions During the 
Performance Period
    In our analyses of historical SNFRM data, we identified a unit 
imputation issue associated with certain SNFs' measured performance. 
Specifically, we found that a small number of facilities had zero 
readmissions during the applicable performance period. An observed 
readmission rate of zero is a desirable outcome; however, due to risk-
adjustment and the statistical approach used to calculate the measure, 
outlier values are shifted towards the mean, particularly for smaller 
SNFs. As a result, observed readmission rates of zero result in risk-
standardized readmission rates that are greater than zero. Analysis 
conducted by our measure development contractor revealed that it may be 
possible--although rare--for SNFs with zero readmissions to receive a 
negative value-based incentive payment adjustment. We are concerned 
that assigning a net negative value-based incentive payment to a SNF 
that achieved zero readmissions during the applicable performance 
period would not support the Program's goals.
    We considered our policy options for SNFs that could be affected by 
this issue, including excluding SNFs with zero readmissions from the 
Program entirely to ensure that they are not unduly harmed by being 
assigned a non-zero RSRR by the measure's finalized methodology. 
However, because the Program's statute requires us to include all SNFs 
in the Program, we do not believe we have the authority to exclude any 
SNFs from the payment withhold and from value-based incentive payments. 
We also considered proposing to replace SNF performance scores for 
those SNFs in this situation with the median SNF performance score. But 
because we must pay SNFs ranked in the lowest 40 percent less than the 
amount they would otherwise be paid in the absence of the SNF VBP, we 
do not believe that assigning these SNFs the median performance rate on 
the applicable measure would necessarily protect them from receiving 
net negative value-based incentive payments.
    We are considering different policy options to ensure that SNFs 
achieving zero readmissions among their patient populations during the 
performance period do not receive a negative payment adjustment. We 
intend to address this topic in future rulemaking, and we request 
public comments on what accommodations, if any, we should employ to 
ensure that SNFs meeting our quality goals are not penalized under the 
Program. We specifically sought comments on the form this potential 
accommodation should take. A discussion of these comments, along with 
our responses, appears below.
    Comment: Some commenters expressed concerns about the risk 
adjustment methodology employed to calculate the measures, particularly 
for SNFs with zero readmissions during the applicable period. 
Commenters noted that the statistical approach employed by the measures 
means that SNFs with low volume or zero readmissions during the 
applicable period could receive a worse risk-standardized readmission 
rate, which could hide true differences in performance and may dampen 
SNFs' incentives to improve. Commenters

[[Page 36616]]

suggested that we consider expanding the performance periods for SNFs 
with low volume to mitigate these effects. Other commenters suggested 
that we consider returning the full 2 percentage points withheld from 
SNFs' Medicare payments when those SNFs have zero readmissions during 
the applicable period, provide a rolling average readmission rate, or 
stratify readmission rates and value-based incentive payments by 
facility size.
    Response: We intend to address this topic in future rulemaking, and 
will take these suggestions into account at that time.
    Comment: One commenter believed that we should develop an 
exceptions policy for SNFs in special circumstances, and recommended 
that under this policy, we return affected SNFs' entire payment 
withhold and not assign public rankings or scores. The commenter 
recommended that we offer this exception to SNFs based on a small 
denominator size of fewer than 25 cases rather than zero readmissions. 
The commenter noted that a small denominator size would likely capture 
SNFs with zero readmissions and would ensure that low-volume SNFs do 
not stack at the top of the Program's ranking and harm non-zero 
denominator facilities' standing.
    Response: We thank the commenter for this feedback and will take it 
into account in future rulemaking.
    We thank the commenters for their feedback, and will take it into 
account in the future.
(3) Request for Comments on Extraordinary Circumstances Exception 
Policy
    In other value-based purchasing programs, such as the Hospital VBP 
Program (see 78 FR 50704 through 50706), as well as several of our 
quality reporting programs, we have adopted Extraordinary Circumstances 
Exceptions policies intended to allow participating facilities to 
receive administrative relief from program requirements due to natural 
disasters or other circumstances beyond the facility's control that may 
affect the facility's ability to provide high-quality health care.
    We are considering whether this type of policy would be appropriate 
for the SNF VBP Program. We intend to address this topic in future 
rulemaking. We therefore sought public comments on whether we should 
implement such a policy, and if so, the form the policy should take. If 
we propose such a policy in the future, our preference would be to 
align it with the Extraordinary Circumstances Exception policy adopted 
under our other quality programs. A summary of the public comments that 
we received, along with our responses, appears below.
    Comment: Some commenters stated their belief that we should adopt 
an Extraordinary Circumstances Exception policy to provide 
administrative relief to SNFs suffering from circumstances beyond their 
control, and recommended that we align the policy with the Hospital VBP 
Program. Other commenters suggested that we consider adopting the same 
exception process as has been adopted under the SNF QRP.
    Response: We thank the commenters for their suggestions, and will 
take it into consideration if we decide to propose an Extraordinary 
Circumstances Exception policy in future rulemaking.
f. SNF Value-Based Incentive Payments
(1) Exchange Function
    We refer readers to the FY 2017 SNF PPS final rule (81 FR 52005 
through 52006) for discussion of four possible exchange functions that 
we considered adopting to translate SNFs' performance scores into 
value-based incentive payments. We created new graphical 
representations of the four functions that we have considered in the 
past--linear, cube, cube root, and logistic--and presented those 
updated representations in the proposed rule (82 FR 21084). We noted 
that the actual exchange functions' forms and slopes will vary 
depending on the distributions of SNFs' performance scores from the FY 
2019 performance period, and wished to emphasize that these 
representations are presented solely for the reader's clarity as we 
discussed our exchange function policy.

[[Page 36617]]

[GRAPHIC] [TIFF OMITTED] TR04AU17.010

    We have continued examining historical SNFRM data while considering 
our policy options for this program. We have attempted to assess how 
each of the four possible exchange functions that we set out in the FY 
2017 SNF PPS final rule, as well as potential variations, would affect 
SNFs' incentive payments under the Program. We specifically considered 
the effects of the statutory constraints on the Program's value-based 
incentive payments and our belief that to create an effective incentive 
payment program, SNFs' value-based incentive payments must be widely 
distributed to reward higher performing SNFs through increased payment 
and to make reduced payments to lower performing SNFs. We also 
considered our desire to avoid unintended consequences of the Program's 
incentive payments, particularly since the Program is limited by 
statute to using a single measure at a time, and our view that an 
equitable distribution of value-based incentive payments would be most 
appropriate to ensure that all SNFs, including SNFs serving at-risk 
populations, could potentially qualify for incentive payments.
    In our view, important factors when adopting an exchange function 
include the number of SNFs that receive more in value-based incentive 
payments than the number of SNFs for which a reduction is applied to 
their Medicare payments, as well as the incentive for SNFs to reduce 
hospital readmissions. We hold this view because we believe that the 
Program will be most effective at encouraging SNFs to improve the 
quality of care that they provide to Medicare beneficiaries if SNFs 
have the opportunity to earn incentives, rather than simply avoid 
penalties, through high performance on the applicable quality measure. 
We also believe that SNFs must have incentives to reduce hospital 
readmissions for their patients

[[Page 36618]]

no matter where their performance lies in comparison to their peers.
    Taking those considerations into account, we analyzed the four 
exchange functions on which we have previously sought comment--linear, 
cube, cube root, and logistic--as well as variations of those exchange 
functions. We scored SNFs using historical SNFRM data and modeled SNFs' 
value-based incentive payments using each of the functions in turn. We 
evaluated the distribution of value-based incentive payments that 
resulted from each function, as well as the number of SNFs with 
positive payment adjustments and the value-based incentive payment 
percentages that resulted from each function. We also evaluated the 
functions' results for the statutory requirements in section 
1888(h)(5)(C)(ii) of the Act, including the requirements in subclause 
(I) that the percentage be based on the SNF performance score for each 
SNF, in subclause (II) that the application of all such percentages 
results in an appropriate distribution, and in items (aa), (bb), and 
(cc) of subclause (II), specifying that SNFs with the highest rankings 
receive the highest value-based incentive payment amounts, that SNFs 
with the lowest rankings receive the lowest value-based incentive 
payment amounts, and that the SNFs in the lowest 40 percent of the 
ranking receive a lower payment rate than would otherwise apply.
    In our analyses of the four baseline functions, we found that the 
logistic function maximized the number of SNFs with positive payment 
adjustments among SNFs measured using the SNFRM. We also found that the 
logistic function best fulfills the requirement that the SNFs in the 
lowest 40 percent of the ranking receive a lower payment rate than 
would otherwise apply, resulted in an appropriate distribution of 
value-based incentive payment percentages, and fulfilled the other 
statutory requirements described in this final rule. Specifically, we 
noted that the logistic function provided a broad range of SNFs with 
net-positive value-based incentive payments, and while it did not 
provide the highest value-based incentive payment percentage to the top 
performers of all the functions, we viewed the number of SNFs with 
positive payment adjustments as a more important consideration than the 
highest value-based incentive payment percentages being awarded.
    We also considered alignment of VBP payment methodologies across 
fee-for-service Medicare VBP programs, including the Hospital VBP 
program and Quality Payment Program (QPP). We recognize that aligning 
payment methodologies would help stakeholders that use VBP payment 
information across care settings better understand the SNF VBP payment 
methodology. Both the Hospital VBP program and QPP use some form of a 
linear exchange function for payment. Three key program aspects that 
facilitate the use of a linear exchange function are the programs' 
number of measures, measure weights, and correlation across program 
measures. These three aspects in tandem contribute to the approximately 
normal distribution of scores expected in the Hospital VBP program and 
QPP. No single measure is the key driver that might ``tilt'' scores to 
a non-normal distribution. Since both programs are required to be 
budget neutral, our modeling estimates that scores translate into an 
approximately equal number of providers with positive payment 
adjustments and providers receiving a net payment reduction.
    In contrast, the SNF VBP payment adjustment is driven, in part, by 
two specific SNF VBP statutory requirements: The program's use of a 
single measure; and the requirement that the total amount of value-
based incentive payments for all SNFs in a fiscal year be between 50 
and 70 percent of the total amount of reductions to payments for that 
fiscal year, as estimated by the Secretary. Our analysis of the linear 
exchange function showed that more SNFs would receive a net payment 
reduction than a payment incentive because the total amount available 
for incentive payments in a fiscal year is limited to between 50 and 70 
percent of the total amount of the reduction to SNF payments for that 
fiscal year. The linear exchange function also results in the provision 
of a net payment reduction to a higher percentage of SNFs that exceeded 
the 50th percentile of national performance, relative to the logistic 
payment function. We believe that these findings are unique to the SNF 
VBP program, relative to other fee-for-service Medicare programs, 
because of the limitation on the total amount that we can use for 
incentive payments, coupled with the use of a single measure and the 
corresponding scoring distribution.
    In addition to the four baseline functions described further above, 
we considered adjusting the linear function to be able to make positive 
payment adjustments to a greater number of SNFs. Specifically, we 
tested an alternative where we reduced the baseline linear function by 
20 percent, then redistributed the resulting funds to the middle 40 
percent of SNFs. We found that the use of this linear function with 
adjustment would enable us to make a positive payment adjustment to a 
slightly greater number of SNFs than we would be able to make using the 
logistic function. However, we were concerned with the additional 
complexity involved in implementing this type of two-step adjustment to 
the linear exchange function.
    Taking all of these considerations into account, we proposed to 
adopt a logistic function for the FY 2019 SNF VBP Program and 
subsequent years. Under this policy, we would:
    1. Estimate Medicare spending on SNF services for the FY 2019 
payment year;
    2. Estimate the total amount of reductions to SNFs' adjusted 
Federal per diem rates for that year, as required by statute;
    3. Calculate the amount realized under the payback percentage 
policy (discussed further below);
    4. Order SNFs by their SNF performance scores; and
    5. Assign a value-based incentive payment multiplier to each SNF 
that corresponds to a point on the logistic exchange function that 
corresponds to its SNF performance score.
    As we discussed in the proposed rule (82 FR 21085), we would model 
the logistic exchange function in such a form that the estimated total 
amount of value-based incentive payments equals not more than 60 
percent of the amounts withheld from SNFs' claims. While the function's 
specific form would also depend on the distribution of SNF performance 
scores during the performance period, the formula that we used to 
construct the logistic exchange function and that we proposed to use 
for FY 2019 program calculations is:
[GRAPHIC] [TIFF OMITTED] TR04AU17.011

where xi is the SNF's performance score.
    We sought public comments on this proposal, and in particular, on 
whether a linear function with adjustment would alternatively be 
feasible for the SNF VBP Program, potentially beginning with FY 2019. A 
discussion of these comments, along with our responses, appears below.
    Comment: Some commenters supported the logistic exchange function, 
agreeing that it best incentivizes SNFs to improve continuously and 
allows for the greatest number of SNFs to receive net-positive 
payments. The commenters also agreed that the linear function with 
adjustment could create confusion, and requested that we provide an 
example calculation

[[Page 36619]]

of a provider's payment multiplier in the final rule.
    Response: We thank the commenters for their support and feedback. 
In response to the commenters' request for an example, we can provide 
two hypothetical examples of SNFs' performance scores based on 
historical performance data and historical Medicare spending that would 
be subject to the Program. We would like to emphasize that the actual 
multipliers that will result from the calculation of the logistic 
exchange function for the FY 2019 Program year will depend on the 
distribution of SNF performance scores that result from the performance 
period as well as estimated Medicare spending subject to the Program 
for the FY 2019 payment year, and thus SNFs should not expect to 
receive the example multipliers below if their FY 2019 SNF performance 
scores approximate either of these examples.
    A SNF with a baseline period SNFRM rate of 0.16980, which inverts 
to 0.83020, and a performance period SNFRM rate of 0.19989, which 
inverts to 0.80011, would, according to the formulas that we have 
adopted in previous regulations, receive 20.56057 points for 
achievement and 0 points for improvement since its measured performance 
declined. The higher of those two values is 20.56057, and that value 
would become the SNF's performance score. Based on the distribution of 
historical performance in the data sets that we analyzed, that SNF 
performance score translates into a value-based incentive payment 
multiplier of 0.150052 percent, which would be applied after the 
application of the 2% reduction required by section 1888(h)(6)(B).
    Conversely, a SNF with a baseline period SNFRM rate of 0.18842, 
which inverts to 0.81158, and a performance period SNFRM rate of 
0.17384, which inverts to 0.82616, would, according to the formulas 
that we have adopted in previous regulations, receive 70.23616 points 
for achievement and 4.78908 points for improvement. The higher of those 
two values is 70.23616, and that value would become the SNF's 
performance score. Based on the distribution of historical performance 
in the data sets that we analyzed, that SNF performance score 
translates into a value-based incentive payment multiplier of 2.64944 
percent, which would be applied after the application of the 2 percent 
reduction required by section 1888(h)(6)(B) of the Act.
    Comment: Two commenters requested additional details on the 
analyses that we conducted to reach the proposed policy, and also 
requested that we detail how the future transition to the SNFPPR would 
influence the distribution of incentive payments. One commenter 
suggested that we perform a ``dry run'' with the proposed methodology 
and provide confidential feedback reports to SNFs with the results.
    Response: We thank the commenters for this feedback. We will 
consider providing a dry run or other additional information prior to 
the planned summer 2018 dissemination of Fiscal Year 2019 payment 
reports that will notify SNFs of the adjustments to their Medicare 
payments as required by section 1888(h)(7) of the Act. We also wish to 
inform the commenters that SNFs received confidential feedback reports 
with their calendar year 2015 baseline period readmission rates, as 
captured by the SNFRM, in early 2017. We continue to analyze the 
potential effects of the Program's transition to the SNFPPR, and we 
intend to provide additional details on the resulting distribution of 
value-based incentive payments in the future.
    Comment: One commenter requested that we provide a scaling factor 
that we would use to ensure that payouts equate to 60 percent of the 
total amount withheld from SNFs' Medicare payments. The commenter also 
recommended that we not consider the cube exchange function, noting 
that it would result in extremely high payouts to top providers who may 
be outliers, and suggested that we provide the slope of each 
alternative function listed in the rule.
    Response: We thank the commenter for the feedback on the exchange 
function form, and we agree with the commenter that the cube function 
results in an undesirable distribution of incentive payments to SNFs. 
As discussed further below, we are finalizing the logistic exchange 
function for the FY 2019 Program.
    In response to the commenter's request that we provide the scaling 
factor that we would use to ensure that value-based incentive payments 
under the Program equal the 60 percent payback percentage that we 
proposed and are finalizing in this final rule, we note that the 
distribution of incentive payments provided under the Program depends 
entirely on the distribution of SNFs' performance on the applicable 
measure during the baseline and performance periods. We are unable to 
provide a scaling factor for the FY 2019 program year at this time 
because the performance period (CY 2017) has not concluded yet, though 
we may consider doing so after the performance period has concluded. We 
intend to provide additional detail on the distribution of SNF 
performance scores and the resulting value-based incentive payment 
percentages, potentially including the scaling factor, in the future.
    After consideration of the public comments that we have received, 
we are finalizing the logistic exchange function as proposed.
(2) Payback Percentage
    Section 1888(h)(6)(A) of the Act requires the Secretary to reduce 
the adjusted federal per diem rate determined under section 
1888(e)(4)(G) of the Act otherwise applicable to a SNF for services 
furnished by that SNF during a fiscal year by the applicable percent 
(which, under section 1888(h)(6)(B) of the Act is 2 percent for FY 2019 
and succeeding fiscal years) to fund the value-based incentive payments 
for that fiscal year. Section 1888(h)(5)(C)(ii)(III) of the Act further 
specifies that the total amount of value-based incentive payments under 
the Program for all SNFs in a fiscal year 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 that fiscal year under the Program, as 
estimated by the Secretary. Thus, we must decide what percentage of the 
total amount of the reductions to payments for a fiscal year we will 
pay as value-based incentive payments to SNFs based on their 
performance under the Program for that fiscal year.
    As with our exchange function policy described in this final rule, 
we view the important factors when specifying a payback percentage to 
be the number of SNFs that receive a positive payment adjustment, the 
marginal incentives for all SNFs to reduce hospital readmissions and 
make broad-based care quality improvements, and the Medicare Program's 
long-term sustainability through the additional estimated Medicare 
trust fund savings. We intend for the proposed payback percentage to 
appropriately balance these factors. We analyzed the distribution of 
value-based incentive payments using historical data, focusing on the 
full range of available payback percentages.
    Taking these considerations into account, we proposed that the 
total amount of funds that would be available to pay as value-based 
incentive payments in a fiscal year would be 60 percent of the 
reductions to payments otherwise applicable to SNF Medicare payments 
for that fiscal year, as estimated by the Secretary. We believe that 60 
percent is the most appropriate payback percentage to balance the 
considerations described in the proposed rule.

[[Page 36620]]

    We noted that we intend to closely monitor the effects of the 
payback percentage policy on Medicare beneficiaries, on participating 
SNFs, and on their measured performance. We also stated that we intend 
to consider proposing to adjust the payback percentage in future 
rulemaking. In our consideration, we would include the Program's 
effects on readmission rates, potential unintended consequences of SNF 
care to beneficiaries included in the measure, and SNF profit margins. 
Since the SNF VBP Program is a new, single measure value-based 
purchasing program and will continue to evolve as we implement it--
including, for example, changing from the SNFRM to the SNFPPR as 
required by statute--we stated that we intend to evaluate its effects 
carefully.
    We noted also that the Medicare Payment Advisory Commission's 
research has shown that for-profit SNFs' average Medicare margins are 
significantly positive,\53\ though not-for-profit SNFs' average 
Medicare margins are substantially lower, and we requested comment on 
the extent to which that should be considered in our policy. We also 
recognized that there is some evidence that not-for-profit SNFs tend to 
perform better on measures of hospital readmissions than for-profit 
SNFs,\54\ and we requested comment on whether our proposed payback 
percentage appropriately balances Medicare's long-term sustainability 
with the need to provide strong incentives for quality improvement to 
top-performing but lower-margin SNFs.
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    \53\ Medicare Payment Advisory Commission, March 2017 Report to 
the Congress, ch. 8: Skilled nursing facility services, Table 8-6. 
http://medpac.gov/docs/default-source/reports/mar17_entirereport.pdf.
    \54\ Neuman MD, Wirtalla C, Werner RM. Association Between 
Skilled Nursing Facility Quality Indicators and Hospital 
Readmissions. JAMA. 2014;312(15):1542-1551. doi:10.1001/
jama.2014.13513. Retrieved from http://jamanetwork.com/journals/jama/fullarticle/1915609.
---------------------------------------------------------------------------

    We sought public comments on this proposal. A discussion of these 
comments, along with our responses, appears below.
    Comment: Several commenters recommended that we finalize a 70 
percent payback percentage, stating that the largest possible incentive 
pool will have a larger impact on changing practices and will provide a 
softer landing for participating providers. Commenters were also 
concerned that the actual payback percentage may be different than 60 
percent if our forecast turns out to be erroneous, and suggested that 
we instead calculate confidence intervals around the payback 
percentage.
    Other commenters stated that the greatest percentage of dollars 
should be made available to facilities that invest in their staffs and 
are therefore top performers, noting also that MedPAC analysis shows 
that top performers are not enjoying large margins on their Medicare 
business, and that a larger incentive pool would provide more incentive 
dollars to high-performing SNFs. Commenters also stated that the 
Medicare Trust Fund will benefit from reduced hospital spending 
resulting from lower readmission rates.
    Some commenters recommended that we adopt a 70 percent payback 
percentage and that we use the other 30 percent of amounts withheld 
from SNFs' Medicare payments to fund quality improvement initiatives. 
One commenter cited the reduction to SNF PPS rates to fund physician 
payments, significant MDS changes that will drive staffing and training 
costs, and the possible revamping of the RUG methodology, as rationale 
for selecting the maximum possible payback percentage under the 
Program. The commenter stated that these changes mean that CMS should 
not make any additional funding reductions beyond those absolutely 
required.
    Response: We thank the commenters for this feedback. Section 
1888(h)(5)(C)(ii)(III) of the Act provides that the total amount of 
value-based incentive payments for all skilled nursing facilities in a 
fiscal year must be greater than or equal to 50 percent, but not 
greater than 70 percent of the total amount of the reductions to SNFs' 
Medicare payments for that fiscal year, as estimated by the Secretary. 
We are confident that our payback percentage can be implemented 
accurately, based on our experience estimating the total amount 
available for value-based incentive payments under the Hospital Value 
Based Purchasing program. We intend to utilize a similar methodology 
for the SNF VBP Program by using the most currently available historic 
SNF claims to estimate the pool of available funds, the finalized 
payback percentage and corresponding withhold percentage, and the 
finalized payment exchange function. It is important to note that the 
50 to 70 percent range is based on national Medicare spending using the 
entire population of about 15,000 SNF claims data, and that large data 
set means that we are able to estimate the payment exchange function 
that applies the finalized withhold and payback percentage with a high 
degree of accuracy.
    In response to comments that we finalize 70 percent as the payback 
percentage for the Program, we intended for the proposed payback 
percentage to balance several policy considerations, including the 
number of SNFs that receive a positive payment adjustment, the marginal 
incentives for SNFs to reduce hospital readmissions and make broad-
based care quality improvements, and the long-term financial 
sustainability of the Medicare Program. We do not believe that 
finalizing a 70 percent payback percentage appropriately balances those 
factors, particularly the Medicare Program's long-term sustainability, 
because it results in significantly higher Medicare spending under the 
Program in a provider sector already experiencing significantly 
positive Medicare margins. We believe that the other policies we are 
finalizing in this final rule, including the logistic exchange 
function, ensure that we provide strong incentives for quality 
improvement to SNFs within the constraints imposed by the SNF VBP 
Program's statute.
    We intend to carefully monitor the Program's effects on SNFs' care 
quality improvement efforts and providers' Medicare margins. We would 
also like to clarify that the savings realized from the Program (that 
is, the 30 to 50 percent of the amounts withheld from SNFs' claims) are 
not authorized to be distributed separately for quality improvement 
initiatives, and are instead retained in the Medicare Trust Fund and 
used for other Medicare Program purposes authorized by statute.
    Comment: One commenter stated that it is unnecessary to adjust the 
payback percentage based on facility ownership type, stating that the 
data do not support differential treatment among SNFs.
    Response: We thank the commenter for this feedback. However, we 
would like to clarify that we did not propose to adjust the payback 
percentage based on facility ownership type. We will monitor the 
Program's effects on SNFs carefully.
    Comment: Two commenters requested that we provide additional 
information regarding the empirical modeling used to inform our 
proposed policies, including the proposed 60 percent payback 
percentage. The commenters stated that the explanations we provided in 
the proposed rule do not provide sufficient transparency into our 
decision-making.
    Response: We believe that we released sufficient information in the 
proposed rule to give commenters enough information to submit 
meaningful comments on our selection of the 60 percent payback 
proposal, including the

[[Page 36621]]

considerations that we took into account when developing our proposed 
policy (82 FR 21086) and the detailed analytical results that we 
presented in the proposed rule's regulatory impact analysis (82 FR 
21094 through 21095). However, we are in the process of compiling 
additional empirical modeling information and intend to make that 
information available to the public on the CMS.gov Web site no later 
than November 2017.
    Comment: One commenter stated that CMS should redistribute the full 
amount withheld from SNFs' claims in incentive payments rather than 50 
to 70 percent. The commenter also stated that the requirement that the 
bottom 40 percent of SNFs not be eligible for incentive payments is 
unfair, and requested that we provide details on the funds not being 
redistributed to SNFs.
    Response: We thank the commenter for this feedback. However, the 
requirements that the total amount available for value-based incentive 
payments in a fiscal year be greater than or equal to 50 percent, but 
not greater than 70 percent, as well as the requirement that the SNFs 
ranked in the lowest 40 percent receive a payment rate for services 
furnished during a fiscal year that less than the payment rate they 
would have received otherwise for that fiscal year, are statutory in 
origin. As a result, we do not believe we have the discretion to 
redistribute the full amount withheld from SNFs' claims as incentive 
payments or to pay SNFs in the bottom 40 percent the same or a higher 
rate than they would have otherwise received in the absence of the 
Program.
    In response to the commenter's question about funds not being 
redistributed to SNFs (that is, the 30 to 50 percent of SNFs' Medicare 
payments remaining after the payment withhold is determined), as we 
stated above, those funds are not authorized to be distributed 
separately for quality improvement initiatives, and are instead 
retained in the Medicare Trust Fund and used for other Medicare Program 
purposes authorized by statute.
    Comment: Commenter agreed in general with our view that the Program 
will be most effective if it offers incentive payments to SNFs rather 
than payment penalties.
    Response: We believe that the policies we are finalizing in this 
final rule, including the payback percentage and the use of the 
logistical exchange function, will enable us to offer incentive 
payments to a broad number of SNFs while balancing that consideration 
with the Medicare Program's long-term sustainability.
    After consideration of the public comments that we received, we are 
finalizing the payback percentage for the FY 2019 SNF VBP program as 60 
percent of the total amount of the reduction to SNFs' Medicare payments 
for that fiscal year, as estimated by the Secretary. We will set the 
exchange function such that we remit 60 percent of the estimated total 
amount withheld from SNFs' Medicare payments as value-based incentive 
payments, though each individual SNF's value-based incentive payment 
percentage will vary according to its SNF performance score.
g. SNF VBP Reporting
(1) Confidential Feedback Reports
    We refer readers to the FY 2017 SNF PPS final rule (81 FR 52006 
through 52007) for discussion of our intention to use the QIES system 
CASPER files to fulfill the requirement in section 1888(g)(5) of the 
Act that we provide quarterly confidential feedback reports to SNFs on 
their performance on the Program's measures. We also responded in that 
final rule to public comments on the appropriateness of the QIES 
system.
    We provided SNFs with a test report in September 2016, followed by 
data on SNFs' CY 2013 performance on the SNFRM in December 2016 and 
SNFs' CY 2014 performance on the SNFRM in March 2017. We then provided 
SNFs with their CY 2015 performance on the SNFRM in June 2017, along 
with a supplemental workbook providing patient-level data. We intend to 
continue providing SNFs with their performance data each quarter as 
required by the statute.
    We sought feedback from SNFs on the contents of the quarterly 
reports and what additional elements, if any, we should consider 
including that would be useful for quality improvement efforts. We 
specifically sought comment on what patient-level data would be most 
helpful to SNFs if they were to request such data from us as part of 
their quality improvement efforts. A discussion of these comments, 
along with our responses, appears below.
    Comment: Several commenters expressed their view that specific 
facility-level and patient-level data elements should be provided in 
quarterly confidential feedback reports. Other commenters expressed 
support for both the facility level and patient identifiers that we are 
providing. One commenter suggested that dual eligibility status for 
patients be provided in quarterly confidential feedback reports. 
Another commenter requested that we provide additional information in 
our quarterly confidential feedback reports, including national 
benchmarks used to calculate achievement and improvement scores, peer 
ranking information, and SNF-specific trend data and top causes of 
readmission. This commenter also requested that quarterly confidential 
feedback reports contain the SNF VBP Program measure calculated using 
12 rolling months of data, and that we update such calculations 
quarterly. Lastly, one commenter requested that reports be provided 
more frequently than quarterly.
    Response: We are currently providing many patient-level indicators 
to SNFs as part of the quarterly reports process, and since we began 
that reporting during the public comment period on the proposed rule, 
we believe some commenters may have erroneously believed that we did 
not intend to provide patient-level data. June 2017 quarterly 
confidential feedback reports and supplemental workbooks included the 
following patient-level data: Patient identifiers (Health Insurance 
Claim Number [HICN], Sex, Age); Index SNF information (admission/
discharge dates, discharge status code); Prior proximal hospital 
information CMS Certification Number [CCN], admission/discharge dates, 
principal diagnosis); Readmission hospital information (CCN, admission/
discharge dates, principal diagnosis); and SNFRM risk-adjustment 
factors. The following facility-level information is also included: 
Number of Eligible Stays, Number of Unplanned Readmissions, Observed 
Readmission Rate, Predicted Number of Readmissions, Expected Number of 
Readmissions, Standardized Risk Ratio (SRR), National Average 
Readmission Rate, RSRR. We will take the commenter's request to report 
patient's dual eligibility status under consideration for future 
reports.
    We intend to publish performance standards for each program year in 
the SNF PPS final rule, and we intend to provide peer ranking 
information to SNFs as it becomes available. We believe that providing 
the SNF VBP program measure rate calculations using 12 rolling months 
of data updated quarterly would create confusion among providers 
regarding which of these rates would be used to calculate value-based 
incentive payments for a specific program year. We strive to provide 
information that is as user-friendly as possible and will take the 
commenter's request for SNF-specific trend data and top causes of 
readmission under consideration. Finally, while we appreciate the need 
for frequent updates, monthly reports containing this information are 
not logistically

[[Page 36622]]

feasible at this time. However, we continue to look for ways in which 
we may provide this information more frequently in the future.
    We thank the commenters for this feedback.
(2) Review and Corrections Process: Phase Two
    In the FY 2017 SNF PPS final rule (81 FR 52007 through 52009), we 
adopted a two-phase review and corrections process for SNFs' quality 
measure data that will be made public under section 1888(g)(6) of the 
Act and SNF performance information that will be made public under 
section 1888(h)(9) of the Act. We explained that we would accept 
corrections to the quality measure data used to calculate the measure 
rates that is included in any SNF's quarterly confidential feedback 
report, and also that we would provide SNFs with an annual confidential 
feedback report containing the performance information that will be 
made public. We detailed the process for requesting Phase One 
corrections and finalized a policy whereby we would accept Phase One 
corrections to SNFs' quarterly reports through March 31 following the 
report's issuance via the CASPER system.
    In the proposed rule (82 FR 21086 through 21087), we proposed 
additional specific requirements for the Phase Two review and 
correction process that we are finalizing in this final rule. 
Specifically, we proposed to limit Phase Two correction requests to the 
SNF's performance score and ranking because all SNFs would have already 
had the opportunity to correct their quality measure data through the 
Phase One corrections process.
    We also proposed to provide these reports to SNFs at least 60 days 
prior to the FY involved. SNFs will not be allowed to request 
corrections to their value-based incentive payment adjustments. 
However, we stated that we will make confirming corrections to a SNF's 
value-based incentive payment adjustment if a SNF successfully requests 
a correction to its SNF performance score.
    As with Phase One, we proposed that Phase Two correction requests 
must be submitted to the [email protected] mailbox, and must 
contain the following information:
     SNF's CMS Certification Number (CCN);
     SNF Name;
     The correction requested and the SNF's basis for 
requesting the correction.
    Specifically, the SNF must identify the error for which it is 
requesting correction, and explain the reason for requesting the 
correction. The SNF must also submit documentation or other evidence, 
if available, supporting the request. As noted above, corrections 
requested during Phase Two will be limited to SNFs' performance score 
and ranking. However, we noted that the [email protected] 
mailbox cannot receive secured email messages. If any SNF believes it 
needs to submit patient-sensitive information as part of a correction 
request, we requested that the SNF contact us at the mailbox to arrange 
a secured transfer.
    We further proposed that SNFs must make any correction requests no 
later than 30 days following the date of our posting of their annual 
SNF performance score report via the QIES system CASPER files. For 
example, if we post the reports on August 1, 2017, SNFs must review 
these reports and submit any correction requests by 11:59 p.m. Eastern 
Standard Time on August 31, 2017 (or the next business day, if the 30th 
day following the date of the posting is a weekend or federal holiday). 
We stated that we would not consider any requests for corrections to 
SNF performance scores or rankings that are received after this 
deadline.
    We proposed to review all timely Phase Two correction requests that 
we receive and provide responses to SNFs that have requested 
corrections as soon as practicable. We also proposed to issue an 
updated SNF performance score report to any SNF that requests a 
correction with which we agree, and if necessary, to update any public 
postings on Nursing Home Compare and value-based incentive payment 
percentages, as applicable.
    We sought public comments on this proposed Phase Two corrections 
process. A discussion of these comments, along with our responses, 
appears below.
    Comment: Some commenters recommended that SNFs be provided access 
to the information used to calculate their SNFRM scores and estimate 
their payment adjustment factors based on the payment exchange 
function. Commenters stated that SNFs' may wish to replicate their SNF 
VBP performance scores as closely as possible, and requested that SNFs 
receive their predicted and expected readmission rates, national 
average readmission rates, and RSRRs for both the baseline and 
performance periods, as well as the cut points used to determine 
performance standards. Commenters explained that such information will 
help SNFs be more confident about their final payment adjustments as 
well as to understand what they need to do to improve their SNFRM 
scores and payment adjustments.
    Response: We thank the commenters for this feedback. While it is 
correct that SNFs cannot calculate their own risk-standardized 
readmission rates because such a calculation would require national 
stay-level data, including risk-adjustment information, we believe that 
the additional patient-level and facility-level information that we are 
now providing to SNFs (as discussed further above) along with their 
quarterly reports will be useful to SNFs with their quality improvement 
efforts. We also provide SNFs with their predicted and expected 
readmission rates, national average readmission rates, and RSRRs in 
their quarterly confidential feedback reports and supplemental 
workbooks. We welcome commenters' continued feedback on the contents of 
the supplemental workbooks containing facility-level and patient-level 
data that accompany the quarterly confidential feedback reports.
    Comment: One commenter requested that we provide Phase Two scoring 
reports to SNFs as soon as possible if we elect to change from calendar 
year to fiscal year performance periods to ensure that SNFs have 
sufficient time to review those reports and submit correction requests.
    Response: We thank the commenter for this suggestion, and we will 
strive to provide SNF performance score reports to SNFs as quickly as 
possible. We note, however, that it is time consuming for us to 
complete the tasks necessary to ensure that the information contained 
in the performance score reports is accurate. At this time, we do not 
believe we can feasibly provide SNF performance score reports prior to 
the statutorily-required deadline described in section 1888(h)(7) of 
the Act that SNFs be notified of the adjustments to their Medicare 
payments as a result of the Program. We will consider future 
improvements if information technology and claims processing 
improvements allow for earlier dissemination of this information to 
SNFs.
    Comment: One commenter supported our review and correction policies 
in general, but was unsure how a SNF could challenge its SNF 
performance score or ranking since SNFs do not receive patient-level 
data, and requested that we make such data available to SNFs. The 
commenter noted that additional information could be useful to SNFs, 
including their predicted readmission rate, their expected readmission 
rate, the national average, the SNF's baseline and performance period 
rates, the SNF's ranking, and the

[[Page 36623]]

achievement and improvement thresholds.
    Response: Our intention is to provide SNFs with the patient level 
data and associated data elements that the commenter suggests in the 
SNF performance score reports scheduled for delivery next year, though 
we note, as stated above, that we are now providing patient-level data 
in SNFs' quarterly confidential feedback reports. We welcome 
commenters' continued feedback on those data and any other elements 
that may be helpful to SNFs with their quality improvement efforts.
    After consideration of the public comments that we received, we are 
finalizing the Phase Two review and corrections process, as proposed.
(3) SNF VBP Program Public Reporting
    We refer readers to the FY 2017 SNF PPS final rule (81 FR 52009) 
for discussion of the statutory requirements governing the public 
reporting of SNFs' performance information under the SNF VBP Program. 
We also sought and responded to public comments on issues that we 
should take into account when posting performance information on 
Nursing Home Compare or a successor Web site.
    We proposed to begin publishing SNF performance information under 
the SNF VBP Program on Nursing Home Compare not later than October 1, 
2017. We stated that we would only publish performance information for 
which SNFs have had the opportunity to review and submit corrections. 
We sought comments on this proposal. A discussion of these comments, 
along with our responses, appears below.
    Comment: One commenter supported posting SNF performance scores on 
Nursing Home Compare, but opposed posting quality measure performance 
scores, including achievement/improvement scores. The commenter stated 
that achievement and improvement scores are not required by statute to 
be publicly posted and could be confusing to the public. The commenter 
also noted that the Program's quality measures differ from those 
already posted on Nursing Home Compare, and stated that having multiple 
rehospitalization rates would not be ideal.
    Response: We thank the commenter for this feedback. We note that 
section 1888(g)(6) of the Act directs the Secretary to make SNF-
specific information available to the public, including information on 
measure-level performance, and we will consider the commenter's views 
as we develop our plans for public reporting of SNF VBP data in the 
future.
    Comment: Commenter requested that we clarify our intentions for 
public reporting of SNF VBP information on Nursing Home Compare, 
wondering if this information will replace the current readmission rate 
information and definitions on the site or if SNF VBP information will 
be added to the site's current content. The commenter also expressed 
frustration that CMS is using multiple definitions of readmissions for 
different programs, and suggested that we align our efforts.
    Response: We intend to publish SNF VBP performance information on 
Nursing Home Compare or a successor Web site as directed by the SNF VBP 
Program's statute. We are cognizant of the possibility for confusion, 
and we intend to align our efforts as much as possible across programs, 
including giving providers sufficient information to aid them in 
distinguishing between the readmission measures on Nursing Home 
Compare.
    Comment: Commenter encouraged us to publish as much information as 
possible on Nursing Home Compare, including readmissions rates, 
achievement and improvement points, SNF performance scores, rankings, 
and payment adjustments. The commenter noted that many of these data 
points are available for the Hospital VBP and Readmissions Reduction 
Programs, and noted that the public should expect the same transparency 
for SNFs.
    Response: We thank the commenter for this feedback and will take it 
into consideration as we continue developing our public reporting 
plans.
    After consideration of the public comments that we have received, 
we are finalizing our public reporting policy as proposed.
(4) Ranking of SNFs' Performance
    We refer readers to the FY 2017 SNF PPS final rule (81 FR 52009) 
for discussion of the statutory requirement that we rank SNFs based on 
their performance on the Program. In that rule, we discussed the 
statutory requirements to order SNF performance scores from low to high 
and publish those rankings on both the Nursing Home Compare and 
QualityNet Web sites, and to publish the ranking after August 1, 2018, 
when performance scores and value-based incentive payment adjustments 
will be made available to SNFs. We intend to publish the ranking for 
each program year once performance scores and value-based incentive 
payment adjustments are made available to SNFs.
    Having considered those statutory requirements, we proposed to rank 
SNFs for the FY 2019 program year and to publish the ranking after 
August 1, 2018. We further proposed that the ranking include the 
following data elements:
     Rank,
     Provider ID,
     Facility name,
     Address,
     Baseline period (CY 2015) risk-standardized readmission 
rate,
     Performance period (CY 2017) risk-standardized readmission 
rate,
     Achievement score,
     Improvement score, and
     SNF performance score.
    We believe that these data elements will provide consumers and 
other stakeholders with the necessary information to evaluate SNFs' 
performance under the program, including each component of the SNF 
performance score, including both achievement and improvement. We 
sought public comments on these proposals. We stated in the proposed 
rule that we would address rankings for future program years in 
subsequent rulemaking. A discussion of these comments, along with our 
responses, appears below.
    Comment: One commenter stated its belief that we must publish the 
FY 2019 program ranking not later than August 1, 2018, rather than 
after August 1 as we described in the proposed rule. The commenter 
noted that publishing the ranking by that date will provide all 
stakeholders with sufficient time to review the ranking prior to the 
fiscal year.
    Response: Section 1888(h)(9) of the Act does not provide a specific 
deadline for public reporting of SNF performance scores and the ranking 
for a given fiscal year. Our intention in stating that we would publish 
the ranking after August 1, 2018, was only to communicate that we would 
publish the ranking publicly after SNFs have been notified of their SNF 
performance scores, value-based incentive payment percentages, and 
ranking as required by section 1888(h)(7) of the Act, which must take 
place not later than 60 days prior to the fiscal year involved.
    After consideration of the public comments, we are finalizing the 
SNF VBP Program's ranking policies as proposed.
4. Survey Team Composition
a. Background
    To participate in the Medicare and Medicaid programs, long term 
care facilities, including skilled nursing facilities (SNFs) in 
Medicare and nursing facilities (NFs) in Medicaid, must be certified as 
meeting Federal

[[Page 36624]]

participation requirements, which are specified in 42 CFR part 483. 
Section 1864(a) of the Act authorizes the Secretary to enter into 
agreements with state survey agencies to determine whether SNFs meet 
the federal participation requirements for Medicare and section 
1902(a)(33)(B) of the Act provides for state survey agencies to perform 
the same survey tasks for NFs participating or seeking to participate 
in the Medicaid program. Surveys are performed directly by us and also 
under contract for certain surveys. The results of these surveys are 
used by us and the Medicaid state agency as the basis for a 
determination to enter into, deny, or terminate a provider agreement 
with the facility, or to impose an enforcement remedy or remedies on a 
facility, as appropriate, for failure to be in substantial compliance 
with federal participation requirements. To assess compliance with 
federal participation requirements, surveyors conduct onsite 
inspections (surveys) of facilities. In the survey process, surveyors 
gather evidence and directly observe the actual provision of care and 
services to residents and the effect or possible effects of that care, 
or lack thereof, to assess whether the care provided meets the assessed 
needs of individual residents.
    Sections 1819(g) and 1919(g) of the Act, and corresponding 
regulations at 42 CFR part 488, subpart E, specify the requirements for 
the types and periodicity of surveys that are to be performed for each 
facility. Specifically, sections 1819(g)(2) and 1919(g)(2) of the Act 
reference standard, special, and extended surveys. Sections 
1819(g)(2)(E) and 1919(g)(2)(E) of the Act specify that surveys under 
section 1819(g)(2) of the Act in general must consist of a 
multidisciplinary team of professionals, including a registered nurse. 
In addition, the statutory requirements governing the investigation of 
complaints and for monitoring on-site a SNF's or NF's compliance with 
participation requirements are found in sections 1819(g)(4) and 
1919(g)(4) of the Act and Sec.  488.332.
    These sections specify that a specialized team, including an 
attorney, an auditor, and appropriate health care professionals may be 
maintained and utilized in the investigation of complaints for the 
purpose of identifying, surveying, gathering and preserving evidence, 
and carrying out appropriate enforcement actions against SNFs and NFs, 
respectively.
    Consistent with the statutory provisions noted above, two separate 
regulations directly address survey team composition. Section 488.314, 
Survey Teams, reflects the statutory language under sections 
1819(g)(2)(E)(i) and 1919(g)(2)(E)(i) of the Act, and states that 
``[s]urvey teams must be conducted by an interdisciplinary team of 
professions, which must include a registered nurse.'' Section 488.332, 
Investigation of Complaints of Violations and Monitoring of Compliance, 
reflects the statutory language under sections 1819(g)(4) and 
1919(g)(4) of the Act, and states that the state survey agency may use 
a specialized team, which may include an attorney, auditor, and 
appropriate health professionals, but not necessarily a registered 
nurse, to investigate complaints and conduct on-site monitoring. A 
survey conducted to monitor on-site a SNF's or NF's compliance with 
participation requirements, such as a revisit survey to determine 
whether a noncompliant facility has achieved substantial compliance, is 
also subject to the provisions of Sec.  488.332, and not Sec.  488.314.
    Section 488.308(e) also addresses complaint investigations, but as 
currently written, it combines special surveys, which are authorized 
under sections 1819(g)(2)(A)(iii)(II) and 1919(g)(2)(A)(iii)(II) of the 
Act, with the requirements associated with the investigations of 
complaints, which are governed by sections 1819(g)(4) and 1919(g)(4) of 
the Act. In the statute, ``special surveys'' are referenced at sections 
1819(g)(2)(A)(iii)(II) and 1919(g)(2)(A)(iii)(II) of the Act, while the 
investigation of complaints is referenced at sections 1819(g)(4) and 
1919(g)(4) of the Act.
    The regulations as currently written do not clearly indicate which 
survey team requirement applies to complaint surveys. The language at 
Sec.  488.314 could be broadly interpreted to cover the survey team 
composition for all surveys, including those used to investigate a 
complaint. Such an interpretation, however, would ignore the provisions 
of Sec.  488.332, which allow a state survey agency to utilize a 
specialized investigative team that does not necessarily include a 
registered nurse to survey a facility in connection with a complaint 
investigation. The placement of surveys to investigate a complaint 
together with special surveys under Sec.  488.308(e) further places 
into question which survey team requirement applies to complaint 
surveys. However, CMS' State Operations Manual (SOM) (Internet Only 
Manual Pub. 100-07) notes that ``Section 488.332 provides the Federal 
regulatory basis for the investigation of complaints about nursing 
homes,'' thus indicating CMS' view that provisions related to survey 
team composition in Sec.  488.332 apply to complaint surveys. See SOM, 
Ch. 5, Section 5300; see also SOM, Ch. 7, Sections 7203.5 and 
7205.2(3); SOM, Appendix P, II.B.4A.
    The lack of clarity as to which regulatory provision, that is, 
Sec.  488.314 or Sec.  488.332, applies to the survey team composition 
related to the investigation of complaints has been the cause of recent 
administrative litigation. We thus believe that regulatory changes are 
needed to clarify that only surveys conducted under sections 1819(g)(2) 
and 1919(g)(2) of the Act are subject to the requirement at Sec.  
488.314 that a survey team consist of an interdisciplinary team that 
must include a registered nurse. Complaint surveys and surveys related 
to on-site monitoring, including revisit surveys, are subject to the 
requirements of sections 1819(g)(4) and 1919(g)(4) of the Act and Sec.  
488.332, which allow the state survey agency to use a specialized 
investigative team that may include appropriate health care 
professionals but need not include a registered nurse.
b. Major Provisions
    We proposed to make changes to Sec. Sec.  488.30, 488.301, 488.308, 
and 488.314 to clarify the regulatory requirements for team composition 
for surveys conducted for investigating a complaint and to align 
regulatory provisions for investigation of complaints with the 
statutory requirements found in sections 1819 and 1919 of the Act.
    (a) Proposed revision of the definition of ``complaint survey'' 
under Sec.  488.30 to add a provision stating that the requirements of 
sections 1819(g)(4) and 1919(g)(4) of the Act and Sec.  488.332 apply 
to complaint surveys.
    (b) Proposed revision of the definition of ``abbreviated standard 
survey'' under Sec.  488.301 to clarify that abbreviated standard 
surveys conducted to investigate a complaint or to conduct on-site 
monitoring to verify compliance with participation requirements are 
subject to the requirements of Sec.  488.332.
    (c) Proposed relocation of the requirements included in Sec.  
488.308(e)(2) and (3) related to surveys conducted to investigate a 
complaint from under the heading ``Special Surveys'' to a new paragraph 
(f), titled ``Investigations of Complaints.''
    (d) Proposed revision of the language at Sec.  488.314(a)(1) to 
specify that the team composition requirements at Sec.  488.314(a)(1) 
apply only to surveys under sections 1819(g)(2) and 1919(g)(2) of the 
Act.

[[Page 36625]]

    Commenters submitted the following comments related to the proposed 
rule's discussion of the Survey Team Composition. A discussion of these 
comments, along with our responses, appears below.
    Comment: We received one comment supporting our proposal and the 
commenter agreed with our clarification on the survey team composition. 
The commenter further stated that states should be able to determine 
the composition of the survey team based on the complaint received and 
the purpose of the revisit to determine compliance.
    Response: We want to thank the commenter for their support of our 
clarifications to the survey team composition. We agree that the states 
should be able to determine which professional would be most 
appropriate based on the complaint received, such as a registered nurse 
for clinical concerns, a dietitian for dietary concerns, or a 
pharmacist for medication issues for example.
    Comment: We received several comments recommending us to consider 
adding a Registered Nurse (RN) to all survey teams. Multiple commenters 
stated that an RN should be the individual to investigate any alleged 
incident. Another commenter stated that they believed statutory 
language is clear that a survey team must include a registered 
professional nurse, and that the citation of clinical violations should 
be observed and made by a registered professional nurse. One commenter 
recommended that we add a requirement for a psychosocial professional 
to be on each team in addition to a registered nurse. One commenter 
also recommended that in addition to having an RN on the survey team, 
the team should also include an additional professional based on the 
complaint type.
    Response: We appreciate the feedback from the commenters regarding 
the suggestion to have an RN on all surveys or to add a psychosocial 
professional to the team, but the proposed change to the language 
regarding survey team composition is not to change the composition of 
survey teams, but to clarify the requirement that survey teams 
conducted by an interdisciplinary team of professionals, including a 
registered nurse applies only to surveys under sections 1819(g)(2) and 
1919(g)(2) of the Act and does not apply to complaint surveys in which 
the appropriate professional would be used to conduct the investigation 
based on the type of allegation.
    Comment: One commenter stated that they disagreed with our 
interpretation of its statutory authority. The commenter stated that 
they believed statutory requirement for a registered nurse on this team 
is clear and that the statute draws no distinction between a complaint 
survey and a standard survey. The commenter further stated that 
citations of clinical violations should be observed and confirmed or 
dismissed by a registered professional nurse based upon his or her 
clinical judgment.
    Response: The preamble to the proposed rule states that the 
proposed change is to clarify the requirement that survey teams 
conducted by an multidisciplinary team of professionals, including a 
registered nurse, applies only to surveys described under sections 
1819(g)(2) and 1919(g)(2) of the Act and does not apply to the 
investigation of complaints. The authority for complaint surveys arises 
under sections 1819(g)(4) and 1919(g)(4) of the Act, which authorizes 
the State survey agency to use a specialized team, which includes 
appropriate healthcare professionals that may or may not, if not 
required, include a registered nurse, for purposes of, among other 
things, ``surveying'' noncompliant facilities. As discussed in the 
preamble, we believe these clarifying changes are consistent with the 
statutory provisions of sections 1819(g)(2) and (g)(4) and 1919(g)(2) 
and (g)(4) of the Act, as well as our long standing interpretation of 
the statute, as expressed in the implementation of current regulations 
at Sec. Sec.  488.314 and 488.332 and the State Operations Manual 
(``SOM''). We believe that if we were to require a registered nurse on 
all surveys including those that are meant to investigate complaint 
allegations, it would place an undue burden on the resources of state 
survey agencies and render the statutory language under sections 
1819(g)(4) and 1919(g)(4) of the Act as meaningless. In addition, as 
previously mentioned, we believe that the statute enables us to 
determine which professional would be most appropriate to investigate 
complaint allegations based on the nature of the complaint allegation 
received.
    Comment: We received one comment requesting a revision based on the 
decision at DAB No. CR4670 (2016) (H.H.S.), 2016 WL 499224, in which an 
Administrative Law Judge provided an interpretation of the survey 
composition provisions in the statute and current regulations.
    Response: We appreciate the commenter's reference to this case, 
however the ALJ decision is currently being reviewed by the 
Departmental Appeals Board Appellate Division and therefore we cannot 
comment on this case at this time.
    Based on the comments received, we are proceeding with the 
finalization of our proposal without any changes.
5. Correction of the Performance Period for the National Healthcare 
Safety Network (NHSN) Healthcare Personnel (HCP) Influenza Vaccination 
Immunization Reporting Measure in the End-Stage Renal Disease (ESRD) 
Quality Incentive Program (QIP) for Payment Year (PY) 2020
    In the CY 2017 ESRD PPS final rule (81 FR 77834), we finalized that 
the performance period for the NHSN Healthcare Personnel Influenza 
Vaccination Reporting Measure for Payment Year (PY) 2020 would be from 
October 1, 2016, through March 31, 2017 (81 FR 77915). We proposed to 
revise that performance period so that it aligns with the schedule we 
previously set for this measure. Specifically, we previously finalized 
that for the PY 2018 ESRD QIP, the performance period for this measure 
would be from October, 1, 2015 through March 31, 2016, which is 
consistent with the length of the 2015-2016 influenza season (79 FR 
66209), and that for the PY 2019 ESRD QIP, the performance period for 
this measure would be from October, 1, 2016 through March 31, 2017, 
which is consistent with the length of the 2016- 2017 influenza season 
(80 FR 69059 through 69060). Maintaining the performance period we 
finalized in the CY 2017 ESRD PPS final rule would result in scoring 
facilities on the same data twice, and would not be consistent with our 
intended schedule to collect data on the measure in successive 
influenza seasons. Therefore, we proposed to revise the performance 
period for the NHSN HCP Influenza Vaccination Reporting Measure for the 
PY 2020 ESRD QIP. Specifically, we proposed that for the PY 2020 ESRD 
QIP, the performance period for this measure would be October 1, 2017, 
through March 31, 2018, which is consistent with the length of the 
2017-2018 influenza season.
    We sought comments on this proposal. A discussion of these 
comments, along with our responses, appears below.
    Comment: Commenters were generally supportive of our proposal to 
set the performance period as October 1, 2017 through March 31, 2018 
because it is consistent with the length of the 2017-2018 influenza 
season, however they stated that to be truly consistent with the 
influenza season and the standard practice of administering the 
vaccine, the performance period for the measure should be aligned with 
the CDC's recommendations that

[[Page 36626]]

vaccination occur as early as possible to protect against infection. 
They stated that without including the phrase ``or when the vaccine 
becomes available,'' the measure penalizes facilities that provide the 
vaccine as soon as it becomes available in August or September. One 
commenter also stated that not making this change could place patients 
at increased risk early in the influenza season.
    Response: As stated in the CY 2015 ESRD PPS final rule (79 FR 
66207) in response to a commenter who was concerned about whether 
vaccinations received before October 1 would qualify under this 
measure, ``the performance period for the denominator (the number of 
healthcare personnel working in a facility) is from October 1 through 
March 31. However, the numerator measurement (vaccination status) 
includes vaccines obtained `as soon as the vaccine is available.' As a 
result, a Healthcare Personnel (HCP) working at the facility as of 
October 1 who was vaccinated in September would be considered 
vaccinated for the performance period under this measure'' (79 FR 
66207). As a result, facilities will not be penalized for providing the 
vaccine as soon as it becomes available and patients will not be placed 
at an increased risk at any point during the influenza season due to 
the vaccination status of HCPs working in the facility.
    After carefully considering the comments received we are finalizing 
the Performance Period for the NHSN HCP Influenza Vaccination Reporting 
Measure for the ESRD QIP for Payment Year 2020 as proposed.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), we are required to publish a 60-day notice in the Federal 
Register and solicit public comment before a collection of information 
requirement is submitted to the Office of Management and Budget (OMB) 
for review and approval.
    To fairly evaluate whether an information collection should be 
approved by OMB, PRA section 3506(c)(2)(A) requires that we solicit 
comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our burden estimates.
     The quality, utility, and clarity of the information to be 
collected.
     Our effort to minimize the information collection burden 
on the affected public, including the use of automated collection 
techniques.
    We solicited public comment in the FY 2018 SNF PPS proposed rule on 
each of the section 3506(c)(2)(A)-required issues for the following 
information collection requirements (ICRs).

A. Information Collection Requirements (ICRs)

1. ICRs Regarding the SNF VBP Program
    As discussed in the FY 2016 SNF PPS final rule (80 FR 46473) and 
the FY 2017 SNF PPS final rule (81 FR 52049 through 52050), we have 
specified claims-based measures to fulfill the SNF VBP Program's 
requirements. As required by the SNF VBP Program's statute, we will 
score SNFs' performance on these measures in order to make value-based 
incentive payments to SNFs beginning in FY 2019.
    In this final rule, we are finalizing additional policies for the 
SNF VBP Program, including performance standards and performance/
baseline periods for the FY 2020 Program year, an exchange function for 
the FY 2019 Program year, and administrative requirements related to 
review and correction of performance information to be made public. 
None of these requirements result in any additional information 
collections or reporting burden associated with the Program.
    Additionally, because claims-based measures are calculated based on 
claims figures that are already submitted to the Medicare program for 
payment purposes, there is no additional respondent burden associated 
with data collection or submission for either the SNFRM or SNFPPR 
measures. Thus, there is no additional reporting burden associated with 
the SNF VBP Program's measures finalized in this rule.
2. ICRs Regarding the Potentially Preventable 30-Day Post-Discharge 
Readmission Measure
    This rule modifies the Potentially Preventable 30-Day Post-
Discharge Readmission Measure by increasing the length of the 
measurement period and updating the confidential feedback and public 
reporting dates, as described in section III.D.2.h. Because this is a 
claims-based measure, no data collection beyond Medicare claims 
submitted by SNFs for the furnishing of SNF covered services are 
required for the calculation of this measure. We believe the SNF QRP 
burden estimate is unaffected by the modifications of this measure as 
the modifications have no impact on any of the claims-based reported 
data fields.
3. ICRs Exempt From the PRA
    As discussed in this final rule, we are adopting five new measures 
beginning with the FY 2020 SNF QRP (see section III.D.2.g). The five 
new measures being finalized are: (1) Changes in Skin Integrity Post-
Acute Care: Pressure Ulcer/Injury; (2) Application of the IRF 
Functional Outcome Measure: Change in Self-Care Score for Medical 
Rehabilitation Patients (NQF #2633); (3) Application of IRF Functional 
Outcome Measure: Change in Mobility Score for Medical Rehabilitation 
Patients (NQF #2634); (4) Application of IRF Functional Outcome 
Measure: Discharge Self-Care Score for Medical Rehabilitation Patients 
(NQF #2635); and (5) Application of IRF Functional Outcome Measure: 
Discharge Mobility Score for Medical Rehabilitation Patients (NQF 
#2636). The measures must be collected by SNFs and reported to CMS 
using the Resident Assessment Instrument, Minimum Data Set (MDS).
    These measures will be calculated using data elements that are 
included in the MDS. The data elements are discrete questions and 
response codes that collect information on a SNF patient's health 
status, preferences, goals and general administrative information. To 
view the MDS, with the finalized data elements, we refer to the reader 
to https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    This rule also finalizes that SNFs would be required to report 
certain standardized resident assessment data beginning with the FY 
2019 SNF QRP (see section III.D.2.j.). We are finalizing our definition 
of the term ``standardized resident assessment data'' as patient 
assessment questions and response options that are identical in all 
four PAC assessment instruments, and to which identical standards and 
definitions apply. The standardized resident assessment data are 
intended to be shared electronically among PAC providers and will 
otherwise enable the data to be comparable for various purposes, 
including the development of cross-setting quality measures and to 
inform payment models that take into account patient characteristics 
rather than setting.
    Under section 1899B(m) of the Act, the Paperwork Reduction Act does 
not apply to the specific changes in the collections of information 
described in this final rule. These changes to the collections of 
information are being

[[Page 36627]]

finalized under section 2(a) of the IMPACT Act, which added new section 
1899B to the Act. That section requires SNFs to report standardized 
resident assessment data, data on quality measures, and data on 
resource use and other measures. All of this data must, under section 
1899B(a)(1)(B) of the Act, be standardized and interoperable to allow 
for its exchange among PAC providers and other providers and the use by 
such providers to provide access to longitudinal information to 
facilitate coordinated care and improved Medicare beneficiary outcomes. 
Section 1899B(a)(1)(C) of the Act requires us to modify the MDS to 
allow for the submission of quality measure data and standardized 
resident assessment data to enable its comparison across SNFs and other 
providers. We are, however, setting out the burden as a courtesy to 
advise interested parties of the proposed actions' time and costs and 
for reference refer to section V.A of this final rule of the regulatory 
impact analysis (RIA). The requirement and burden will be submitted to 
OMB for review and approval when the modifications to the MDS have 
achieved standardization and are no longer exempt from the requirements 
under section 1899B(m) of the Act.
    For the new measure ``Changes in Skin Integrity Post-Acute Care: 
Pressure Ulcer/Injury'' (NQF #2633) the items used to calculate this 
measure are already present on the MDS, so the adoption of this measure 
will not require SNFs to report any new data elements. In addition, we 
are removing some data elements related to pressure ulcers that have 
been identified as duplicative. Taking these final policies together, 
we estimate that there will be a 1.5 minute reduction in clinical staff 
time needed to report the pressure ulcer measure data. We are also 
removing 9 additional data elements from the MDS 3.0. The removal of 
these data elements from the skin integrity section of the MDS provide 
a reduction in burden with data reporting by SNFs and therefore serve 
as offsets to the SNF QRP. These removals are: Date of oldest Stage 2 
pressure ulcer; three items pertaining to the dimensions of an unhealed 
pressure ulcer; the most severe tissue type for any pressure ulcer; and 
four data elements pertaining to healed pressure ulcers. We estimate 
that the data elements we are removing will reduce overall reporting 
burden from the assessments, constituting a reduction of an additional 
7 minutes of clinical staff time per stay which provide a reduction in 
burden with data reporting by SNFs. Taken together, we are removing a 
total of 12 data elements from the skin integrity section of the MDS. 
Based on the data provided in Table 25 of this final rule, and 
estimating 2,886,336 discharges from 15,447 SNFs annually, we also 
estimate that the total cost of reporting these data will reduce 
overall reporting burden for the assessments from what was proposed 
constituting a total reduction of 8.5 minutes of clinical staff time 
per stay or $1,837 per SNF annually, or $28,377,493 for all SNFs 
annually. We believe that the MDS items will be completed by registered 
nurses (BLS Occupation Code: 29-1141) at $69.40/hr \55\ including 
overhead and fringe benefits.
---------------------------------------------------------------------------

    \55\ U.S. Bureau of Labor Statistics, May 2016 National 
Occupational Employment and Wage Estimates (see http://www.bls.gov/oes/current/oes_nat.htm).
---------------------------------------------------------------------------

    For the four functional outcome measures (NQF: #2633, #2634, #2635, 
and #2636) that we are finalizing in this final rule, we note that 
although some of the data elements needed to calculate these measures 
are currently included on the MDS, other data elements need to be added 
to the MDS. As a result, we estimate that reporting these measures will 
require an additional 9 minutes of nursing and therapy staff time to 
report data on admission and 5.5 minutes of nursing and therapy time to 
report data on discharge, for a total of 14.5 additional minutes per 
stay. We estimate that the additional MDS items we are finalizing will 
be completed by Registered Nurses for approximately 7 percent of the 
time. Occupational Therapists (BLS Occupation Code: 29-1122) at $80.50/
hr including overhead and fringe benefits for approximately 41 percent 
of the time, and Physical Therapists (BLS Occupation Code: 29-1123) at 
$83.86/hr including overhead and fringe benefits for approximately 52 
percent of the time. Individual providers determine the staffing 
resources necessary. With 2,886,336 discharges from 15,447 SNFs 
annually, we estimate that the reporting of the four functional outcome 
measures would impose on SNFs an additional burden of 697,531 total 
hours (2,886,336 discharges x 14.5 min/60) or 45.16 hours per SNF 
(697,531 hr/15,447 SNFs). Of the 14.5 minutes per stay, 1 minute of 
that time is for a Registered Nurse, 3.5 minutes is for an Occupational 
Therapist, and 4.5 minutes is for a Physical Therapist for a total of 9 
minutes are required for admission. For discharge, 2.5 minutes are for 
an Occupational Therapist, and 3 minutes for a Physical Therapist for a 
total of 5.5 minutes. For one stay we estimate a cost of $19.69 or, in 
aggregate, an annual cost of $56,829,551. Per SNF, we estimate an 
annual cost of $3,679. A summary of these estimates is provided in 
Table 25.
    We are not finalizing our proposal to adopt 1 new standardized 
resident assessment data elements with respect to SNF admissions and 11 
new standardized resident assessment data elements with respect to SNF 
discharges. This results in a reduction to the burden that we estimated 
in the proposed rule. We refer readers to the proposed rule (82 FR 
21091 through 21092) for a discussion of our burden estimates for these 
proposals. Our updated estimate is provided in Table 25 (Revised 
Calculation of Burden), and results in a final estimated burden for the 
SNF QRP of $28,452,058.

                                                         Table 25--Revised Calculation of Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Aggregate                                       Aggregate
                 QRP QM                    Data elements      Minutes      annual hours    Hours per SNF    Dollars per     annual cost     Annual cost
                                                                             all SNFs        annually          stay          all SNFs         per SNF
--------------------------------------------------------------------------------------------------------------------------------------------------------
Functional Outcome Measures.............              18            14.5         697,531           45.16         $ 19.69    $ 56,829,551         $ 3,679
Changes in Skin Integrity...............            (12)           (8.5)       (408,898)         (26.47)          (9.83)    (28,377,493)         (1,837)
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................               6               6         288,633           18.69            9.86      28,452,058           1,842
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 36628]]

    We received the following public comments on our collection of 
information estimates.
    Comment: A few commenters expressed concern about the 
administrative burden imposed by the SNF QRP, specifically referring to 
the volume and the pace of data collection that is required by the 
implementation of the SNF QRP.
    Response: We appreciate the commenters' concerns regarding burden 
due to changes to the SNF QRP as a result of the fulfillment of the 
requirements of the IMPACT Act. We appreciate the importance of 
avoiding undue burden on providers and will continue to evaluate and 
avoid any unnecessary burden associated with the implementation of the 
SNF QRP. We will continue to work with stakeholders to explore ways to 
minimize and decrease burden as our mutual goal is to focus on 
improving patient care. Finally, in response to stakeholders' concerns 
regarding burden, we have decided not to finalize a number of the 
proposed standardized resident assessment data elements. This results 
in a reduction to the burden estimate that appeared in the proposed 
rule.

V. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of this final 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), the Congressional Review Act (5 U.S.C. 804(2)), and Executive 
Order 13771 on Reducing Regulation and Controlling Regulatory Costs 
(January 30, 2017). 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.
    Executive Order 13771, titled Reducing Regulation and Controlling 
Regulatory Costs, was issued on January 30, 2017. This final rule is 
considered an EO 13771 regulatory action. Details on the estimated 
costs of this rule can be found in the preceding and subsequent 
analyses.
2. Statement of Need
    This final rule updates the FY 2017 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 on these issues.
3. Overall Impacts
    This final rule sets forth updates of the SNF PPS rates contained 
in the SNF PPS final rule for FY 2017 (81 FR 51970). Based on the 
above, we estimate that the aggregate impact is an increase of $370 
million in payments to SNFs in FY 2018, resulting from the SNF market 
basket update to the payment rates, as required by section 
1888(e)(5)(B)(iii) of the Act. We would note that this estimate is 
different from the estimated impact of $390 million provided in the FY 
2018 SNF PPS proposed rule (82 FR 21016, 21093), as we relied on an 
updated SNF baseline spending figure for the final rule which reflect 
baseline spending from the FY 2018 President's budget, as opposed to 
that used in the proposed rule which was based on the Mid-session 
review of the FY 2017 President's budget.
    We would note that 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 events that may occur 
within the assessed impact time period.
    In accordance with sections 1888(e)(4)(E) and 1888(e)(5) of the 
Act, if not for the enactment of section 411(a) of MACRA (as discussed 
in section III.B.2. of this final rule), we would update the FY 2017 
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 2018. As discussed previously, section 1888(e)(5)(B)(iii) of the 
Act establishes a special rule for FY 2018 requiring the market basket 
percentage used to update the federal SNF PPS rates to be equal to 1.0 
percent. The impact to Medicare is included in the total column of 
Table 25. In updating the SNF PPS rates for FY 2018, we made a number 
of standard annual revisions and clarifications mentioned elsewhere in 
this final 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 final rule applies to SNF PPS 
payments in FY 2018. Accordingly, the analysis of the impact of the 
annual update that follows only describes the impact of this single 
year. Furthermore, in accordance with the requirements of the Act, we 
will publish a rule or notice for each subsequent FY that will provide 
for an update to the payment rates and include an associated impact 
analysis.
    We estimate the impact for the SNF QRP based on 15,447 SNFs in FY 
2016 which had a total of 2,886,336 Medicare covered discharges for 
Medicare fee for service beneficiaries. This would equate to 288,633 
total added hours or 18.69 hours per SNF annually. We anticipate that 
the additional MDS items we finalized will be completed by Registered 
Nurses (RN), Occupational Therapists (OT), and/or Physical Therapists 
(PT), depending on the item. Individual providers determine the 
staffing resources necessary. We obtained mean hourly wages for these 
staff from the U.S. Bureau of Labor Statistics' May 2016 National 
Occupational Employment and Wage Estimates (https://www.bls.gov/oes/current/oes_nat.htm), and to account for overhead and fringe benefits, 
we have doubled the mean hourly wage.
    Estimated impacts for the SNF QRP are based on analysis discussed 
in section III.D.2. of this final rule. For the 8.5 minute reduction in 
burden associated with the new pressure ulcer measure and the removal 
of duplicative pressure ulcer data elements and data elements no longer 
being used, and the additional 14.5 additional minutes of burden for 
the functional outcome measures, the overall cost associated with 
finalized changes to the SNF QRP is $28,452,058.
4. Detailed Economic Analysis
    The FY 2018 SNF PPS payment impacts appear in Table 26. Using the 
most recently available data, in this case FY 2016, we apply the 
current FY 2017

[[Page 36629]]

wage index and labor-related share value to the number of payment days 
to simulate FY 2017 payments. Then, using the same FY 2016 data, we 
apply the FY 2018 wage index and labor-related share value to simulate 
FY 2018 payments. We tabulate the resulting payments according to the 
classifications in Table 26 (for example, facility type, geographic 
region, facility ownership), and compare the simulated FY 2017 payments 
to the simulated FY 2018 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 6 rows show the 
effects on facilities split by hospital-based, freestanding, urban, and 
rural categories. The next 19 rows show the effects on facilities by 
urban versus rural status by census region. The last 3 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 2018 payments. The update of 1.0 percent 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 1.0 
percent, assuming facilities do not change their care delivery and 
billing practices in response.
    As illustrated in Table 26, the combined effects of all of the 
changes vary by specific types of providers and by location. For 
example, due to changes finalized in this rule, providers in the urban 
Pacific region could experience a 1.5 percent increase in FY 2018 total 
payments.

                              Table 26--Projected Impact to the SNF PPS for FY 2018
----------------------------------------------------------------------------------------------------------------
                                                                     Number of
                                                                   facilities FY    Update wage    Total change
                                                                       2018          data (%)           (%)
----------------------------------------------------------------------------------------------------------------
Group:
    Total.......................................................          15,468             0.0             1.0
    Urban.......................................................          11,008             0.1             1.1
    Rural.......................................................           4,460            -0.6             0.4
    Hospital-based urban........................................             518             0.2             1.2
    Freestanding urban..........................................          10,490             0.1             1.1
    Hospital-based rural........................................             577            -0.7             0.3
    Freestanding rural..........................................           3,883            -0.6             0.4
Urban by region:
    New England.................................................             791             0.2             1.2
    Middle Atlantic.............................................           1,487             0.4             1.4
    South Atlantic..............................................           1,867            -0.2             0.8
    East North Central..........................................           2,121             0.0             1.0
    East South Central..........................................             551            -0.6             0.4
    West North Central..........................................             919             0.7             1.7
    West South Central..........................................           1,339             0.1             1.1
    Mountain....................................................             511            -0.2             0.8
    Pacific.....................................................           1,417             0.5             1.5
    Outlying....................................................               5            -2.0            -1.0
Rural by region:
    New England.................................................             137             1.4             2.5
    Middle Atlantic.............................................             215            -0.5             0.5
    South Atlantic..............................................             502            -0.7             0.3
    East North Central..........................................             937            -1.1            -0.1
    East South Central..........................................             528            -0.9             0.1
    West North Central..........................................           1,076            -0.4             0.6
    West South Central..........................................             738            -0.6             0.4
    Mountain....................................................             228            -0.3             0.7
    Pacific.....................................................              99             0.1             1.1
Ownership:
    Profit......................................................           1,045            -0.3             0.7
    Non-profit..................................................          10,822             0.0             1.0
    Government..................................................           3,601             0.0             1.0
----------------------------------------------------------------------------------------------------------------
Note: The Total column includes the 1.0 percent market basket increase required by section 1888(e)(5)(B)(iii) of
  the Act. Additionally, we found no SNFs in rural outlying areas.

5. Estimated Impacts for the SNF QRP
    We estimate the impact for the SNF QRP based on 15,447 SNFs in FY 
2016 which had a total of 2,886,336 Medicare covered discharges for 
Medicare fee for service beneficiaries. This would equate to 288,633 
total added hours or 18.69 hours per SNF annually. We anticipate that 
the additional MDS items we finalized will be completed by Registered 
Nurses (RN), Occupational Therapists (OT), and/or Physical Therapists 
(PT), depending on the item. Individual providers determine the 
staffing resources necessary. We obtained mean hourly wages for these 
staff from the U.S. Bureau of Labor Statistics' May 2016 National 
Occupational Employment and Wage Estimates (https://www.bls.gov/oes/current/oes_nat.htm), and to account for overhead and fringe benefits, 
we have doubled the mean hourly wage.

[[Page 36630]]

    Estimated impacts for the SNF QRP are based on analysis discussed 
in section III.D.2. of this final rule. For the 8.5 minute reduction in 
burden associated with the new pressure ulcer measure and the removal 
of duplicative pressure ulcer data elements and data elements no longer 
being used, and the additional 14.5 additional minutes of burden for 
the functional outcome measures, the overall cost associated with 
finalized changes to the SNF QRP is $28,452,058.

                                                Table 27--Revised Calculation of Cost Per Quality Measure
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Aggregate                                       Aggregate
                 QRP QM                    Data elements      Minutes      annual hours    Hours per SNF    Dollars per     annual cost     Annual cost
                                                                             all SNFs        annually          stay          all SNFs         per SNF
--------------------------------------------------------------------------------------------------------------------------------------------------------
Functional Outcome Measures.............              18            14.5         697,531           45.16          $19.69     $56,829,551          $3,679
Changes in Skin Integrity...............            (12)           (8.5)       (408,898)         (26.47)          (9.83)    (28,377,493)         (1,837)
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................               6               6         288,633           18.69            9.86      28,452,058           1,842
--------------------------------------------------------------------------------------------------------------------------------------------------------

6. Estimated Impacts for the SNF VBP Program
    Estimated impacts of the FY 2019 SNF VBP Program are based on 
historical data that appear in Table 28. We modeled SNFs' performance 
under the Program using SNFRM data from CY 2013 as the baseline period 
and CY 2015 as the performance period. Additionally, we modeled a 
logistic exchange function with a payback percentage of 60 percent, as 
discussed further in the preamble to this final rule.
    As illustrated in Table 28, the effects of the SNF VBP Program vary 
by specific types of providers and by location. For example, we 
estimate that rural SNFs perform better on the SNFRM, on average, 
compared to urban SNFs. Similarly, we estimate that non-profit SNFs 
perform better on the SNFRM compared to for-profit SNFs, and that 
government-owned SNFs perform better still. We also estimate that 
smaller SNFs (measured by bed size) tend to perform better, on average, 
compared to larger SNFs. (We note that the risk-standardized 
readmission rates presented below are not inverted; that is, lower 
rates represent better performance).
    These differences in performance on the SNFRM result in differences 
in value-based incentive payment percentages computed by the Program. 
For example, we estimate that, at the proposed 60 percent payback 
percentage, SNFs in urban areas would receive a 1.161 percent incentive 
multiplier, on average, in FY 2019, while SNFs in rural areas would 
receive a slightly higher incentive multiplier of 1.227 percent, on 
average. Additionally, SNFs in the smallest 25 percent as measured by 
bed size would receive an incentive multiplier of 1.203 percent, on 
average, while SNFs in the 2nd quartile as measured by bed size would 
receive an incentive multiplier of 1.166 percent, on average. We note 
that the multipliers that we have listed in Table 27 are applied to 
SNFs' adjusted Federal per diem rates after application of the 2 
percent reduction to those rates required by statute.

                                                   Table 28--Estimated FY 2019 SNF VBP Program Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                               Mean
                                                                                                                             incentive      Percent of
                    Category                                    Criterion                    Number of      RSRR (mean)     multiplier       proposed
                                                                                            facilities                     (60% payback)      payback
                                                                                                                                (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Group..........................................  Total..................................          15,746         0.19061           1.218           100.0
                                                 Urban..................................           11116         0.18790           1.161            83.5
                                                 Rural..................................           4,630         0.18293           1.227            16.5
Urban by Region................................  Total..................................          11,116
                                                 01=Boston..............................             808         0.18734           1.165           5.978
                                                 02=New York............................             922         0.18848           1.116          10.590
                                                 03=Philadelphia........................           1,132         0.18611           1.307          10.295
                                                 04=Atlanta.............................           1,890         0.19291           1.025          12.443
                                                 05=Chicago.............................           2,330         0.18728           1.213          16.248
                                                 06=Dallas..............................           1,379         0.19131           0.920           6.126
                                                 07=Kansas City.........................             666         0.18764           1.109           2.815
                                                 08=Denver..............................             323         0.17831           1.644           2.879
                                                 09=San Francisco.......................           1,325         0.18518           1.174          12.107
                                                 10=Seattle.............................             341         0.17634           1.765           3.983
Rural by Region................................  Total..................................           4,630
                                                 01=Boston..............................             145         0.17458           1.648           1.009
                                                 02=New York............................              94         0.17746           1.435           0.409
                                                 03=Philadelphia........................             287         0.18145           1.231           1.431
                                                 04=Atlanta.............................             918         0.18633           1.011           3.363
                                                 05=Chicago.............................           1,127         0.18156           1.361           4.662
                                                 06=Dallas..............................             814         0.18676           0.926           1.824
                                                 07=Kansas City.........................             801         0.18459           1.291           1.575
                                                 08=Denver..............................             284         0.17596           1.570           0.883
                                                 09=San Francisco.......................              68         0.16620           1.650           0.706
                                                 10=Seattle.............................              92         0.17488           1.569           0.670
Ownership Type.................................  Total..................................          15,746

[[Page 36631]]

 
                                                 Government.............................           1,096         0.17844           1.240           4.601
                                                 Profit.................................          10,973         0.18864           1.113          71.137
                                                 Non-Profit.............................           3,677         0.18225           1.364          24.260
No. of Beds....................................
                                                 1st Quartile:..........................           3,986         0.17935           1.203          13.393
                                                 2nd Quartile:..........................           3,937         0.18646           1.166          19.738
                                                 3rd Quartile:..........................           3,887         0.19009           1.148          26.388
                                                 4th Quartile:..........................           3,938         0.19000           1.204          40.481
--------------------------------------------------------------------------------------------------------------------------------------------------------

7. Regulatory Review Costs
    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this final rule, we 
should estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of entities 
that will review the rule, we assume that the total number of unique 
commenters on the published proposed rule will be the number of 
reviewers of this final rule. We acknowledge that this assumption may 
understate or overstate the costs of reviewing this final rule. It is 
possible that not all commenters reviewed the proposed rule in detail, 
and it is also possible that some reviewers chose not to comment on the 
proposed rule. For these reasons we thought that the number of comments 
received on the proposed rule would be a fair estimate of the number of 
reviewers of this final rule.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of this final rule, and 
therefore for the purposes of our estimate we assume that each reviewer 
reads approximately 50 percent of the rule.
    Using the wage information from the BLS for medical and health 
service managers (Code 11-9111), we estimate that the cost of reviewing 
this rule is $105.16 per hour, including overhead and fringe benefits 
(https://www.bls.gov/oes/current/oes_nat.htm) Assuming an average 
reading speed, we estimate that it would take approximately 4 hours for 
the staff to review half of this final rule. For each SNF that reviews 
the rule, the estimated cost is $421 (4 hours x $105.16). Therefore, we 
estimate that the total cost of reviewing this regulation is $103,987 
($421 x 247 reviewers).
8. Alternatives Considered
    As described in this section, we estimate that the aggregate impact 
for FY 2018 under the SNF PPS is an increase of $370 million in 
payments to SNFs, resulting from the SNF market basket update to the 
payment rates, as required by section 1888(e)(5)(B)(iii) of the Act.
    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 base 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 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 this process.
9. Accounting Statement
    As required by OMB Circular A-4 (available online at https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/) in Table 29, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with the provisions of this final rule for FY 
2018. Table 29 provides our best estimate of the possible changes in 
Medicare payments under the SNF PPS as a result of the policies in this 
final rule, based on the data for 15,468 SNFs in our database and the 
cost for the SNF QRP of implementing the IMPACT Act.

       Table 29--Accounting Statement: Classification of Estimated
   Expenditures, from the 2017 SNF PPS Fiscal Year to the 2018 SNF PPS
                               Fiscal Year
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $370 million.*
From Whom To Whom?                          Federal Government to SNF
                                             Medicare Providers.
------------------------------------------------------------------------
         FY 2018 Cost to Updating the Quality Reporting Program
------------------------------------------------------------------------
Cost for SNFs to Submit Data for the        $29 million.
 Quality Reporting Program**.
------------------------------------------------------------------------
* The net increase of $370 million in transfer payments is a result of
  the market basket increase of $370 million.
** Costs associated with the submission of data for the quality
  reporting program will occur in 2018 and likely continue in the future
  years.

10. Conclusion
    This final rule sets forth updates of the SNF PPS rates contained 
in the SNF PPS final rule for FY 2017 (81 FR 51970). Based on the 
above, we estimate the overall estimated payments for SNFs in FY 2018 
are projected to increase by $370 million, or 1.0 percent, compared 
with those in FY 2017. We estimate that in FY 2018 under RUG-IV, SNFs 
in urban and rural areas will experience, on average, a 1.1 percent 
increase and 0.4 percent increase, respectively, in estimated payments 
compared with FY 2017. Providers in the rural New England region will 
experience the largest estimated increase in payments of approximately 
2.5 percent. Providers in the urban Outlying region will experience the 
largest estimated decrease in payments of 1.0 percent.
    Additionally, Sec.  488.314 regarding survey team composition 
implements section 1819(g)(4) of the Act and provides that States may 
maintain and

[[Page 36632]]

utilize a specialized team that need not include a registered nurse for 
the investigation of complaints. Section 1919 of the Act contains the 
same statutory language as applicable to nursing facilities (NFs). Part 
488 was originally established under the authority of sections 1819 and 
1919 of the Act, which were added by the Omnibus Budget Reconciliation 
Act of 1987 (OBRA 87, Pub. L. 100-203, enacted on December 22, 1987) 
and further amendments to OBRA 87 by subsequent 1988, 1989, and 1990 
legislation.
    Sections 4204(b) and 4214(d) of OBRA 87 pertain to SNFs and NFs, 
respectively, and provide for a waiver of PRA requirements for the 
regulations that implement the OBRA 87 requirements. The provisions of 
OBRA 87 that exempt agency actions to collect information from states 
or facilities relevant to survey and enforcement activities from the 
PRA are not time-limited.

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 97 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 
https://www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-sba-size-standards). In addition, approximately 23 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 final rule sets forth updates of the SNF PPS rates contained 
in the SNF PPS final rule for FY 2017 (81 FR 51970). Based on the 
above, we estimate that the aggregate impact for FY 2018 is an increase 
of $370 million in payments to SNFs, resulting from the SNF market 
basket update to the payment rates. While it is projected in Table 26 
that most providers will 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 2018 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. In their March 2017 Report to Congress 
(available at http://medpac.gov/docs/default-source/reports/mar17_medpac_ch8.pdf), MedPAC states that Medicare covers approximately 
11 percent of total patient days in freestanding facilities and 21 
percent of facility revenue (March 2017 MedPAC Report to Congress, 
202). 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 26. As 
indicated in Table 25, the effect on facilities is projected to be an 
aggregate positive impact of 1.0 percent for FY 2018. 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 final rule will not 
have a significant impact on a substantial number of small entities for 
FY 2018.
    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 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of an MSA and has fewer 
than 100 beds. This final rule affects 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 will be 
similar to the impact on SNF providers overall. Moreover, as noted in 
previous SNF PPS final rules (most recently, the one for FY 2017 (81 FR 
51970)), the category of small rural hospitals is included within the 
analysis of the impact of this final rule on small entities in general. 
As indicated in Table 25, the effect on facilities for FY 2018 is 
projected to be an aggregate positive impact of 1.0 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 final rule does not have a significant impact on a substantial 
number of small rural hospitals for FY 2018.

C. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2017, that 
threshold is approximately $148 million. This final rule will impose no 
mandates on state, local, or tribal governments or on the private 
sector.

D. Federalism Analysis

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

E. Congressional Review Act

    This 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 
final rule was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 409

    Health facilities, Medicare.

42 CFR Part 411

    Diseases, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 413

    Health facilities, Diseases, Medicare, Reporting and recordkeeping 
requirements.

42 CFR part 424

    Emergency medical services, Health facilities, Health professions, 
Medicare, Reporting and recordkeeping requirements.

[[Page 36633]]

42 CFR Part 488

    Administrative practice and procedure, Health facilities, Medicare, 
Reporting and recordkeeping requirements.
    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 409--HOSPITAL INSURANCE BENEFITS

0
1. The authority citation for part 409 continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).


0
2. Section 409.30 is amended by revising the introductory text to read 
as follows:


Sec.  409.30  Basic requirements.

    Posthospital SNF care, including SNF-type care furnished in a 
hospital or CAH that has a swing-bed approval, is covered only if the 
beneficiary meets the requirements of this section and only for days 
when he or she needs and receives care of the level described in Sec.  
409.31. A beneficiary in an SNF is also considered to meet the level of 
care requirements of Sec.  409.31 up to and including the assessment 
reference date for the 5-day assessment prescribed in Sec.  413.343(b) 
of this chapter, when correctly assigned one of the case-mix 
classifiers that CMS designates for this purpose as representing the 
required level of care. For the purposes of this section, the 
assessment reference date is defined in accordance with Sec.  
483.315(d) of this chapter, and must occur no later than the eighth day 
of posthospital SNF care.
* * * * *

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE 
PAYMENT

0
3. The authority citation for part 411 continues to read as follows:

    Authority: Secs. 1102, 1860D-1 through 1860D-42, 1871, and 1877 
of the Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-
152, 1395hh, and 1395nn).


0
4. Section 411.15 is amended by revising paragraph (p)(3)(iii) to read 
as follows:


Sec.  411.15  Particular services excluded from coverage.

* * * * *
    (p) * * *
    (3) * * *
    (iii) The beneficiary receives outpatient services from a Medicare-
participating hospital or CAH (but only for those services that CMS 
designates as being beyond the general scope of SNF comprehensive care 
plans, as required under Sec.  483.21(b) of this chapter); or
* * * * *

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT 
RATES FOR SKILLED NURSING FACILITIES; PAYMENT FOR ACUTE KIDNEY 
INJURY DIALYSIS

0
5. The authority citation for part 413 continues to read as follows:

    Authority: 42 U.S.C. 1302; 42 U.S.C. 1395d(d); 42 U.S.C. 
1395f(b); 42 U.S.C. 1395g; 42 U.S.C. 1395l(a), (i), and (n); 42 
U.S.C. 1395x(v); 42 U.S.C. 1395hh; 42 U.S.C. 1395rr; 42 U.S.C. 
1395tt; 42 U.S.C. 1395ww; sec. 124 of Public Law 106-113, 113 Stat. 
1501A-332; sec. 3201 of Public Law 112-96, 126 Stat. 156; sec. 632 
of Public Law 112-240, 126 Stat. 2354; sec. 217 of Public Law 113-
93, 129 Stat. 1040; sec. 204 of Public Law 113-295, 128 Stat. 4010; 
and sec. 808 of Public Law 114-27, 129 Stat. 362.


0
6. The heading for part 413 is revised to read as set forth above.

0
7. Section 413.333 is amended by revising the definition of ``Resident 
classification system'' to read as follows:


Sec.  413.333  Definitions.

* * * * *
    Resident classification system means a system for classifying SNF 
residents into mutually exclusive groups based on clinical, functional, 
and resource-based criteria. For purposes of this subpart, this term 
refers to the current version of the resident classification system, as 
set forth in the annual publication of Federal prospective payment 
rates described in Sec.  413.345.
* * * * *

0
8. Section 413.337 is amended by adding paragraph (d)(4) to read as 
follows:


Sec.  413.337  Methodology for calculating the prospective payment 
rates.

* * * * *
    (d) * * *
    (4) Penalty for failure to report quality data. For fiscal year 
2018 and subsequent fiscal years--
    (i) In the case of a SNF that does not meet the requirements in 
Sec.  413.360, for a fiscal year, the SNF market basket index 
percentage change for the fiscal year (as specified in paragraph 
(d)(1)(v) of this section, as modified by any applicable forecast error 
adjustment under paragraph (d)(2) of this section, reduced by the MFP 
adjustment specified in paragraph (d)(3) of this section, and as 
specified for FY 2018 in section 1888(e)(5)(B)(iii) of the Act), is 
further reduced by 2.0 percentage points.
    (ii) The application of the 2.0 percentage point reduction 
specified in paragraph (d)(4)(i) of this section to the SNF market 
basket index percentage change may result in such percentage being less 
than zero for a fiscal year, and may result in payment rates for that 
fiscal year being less than such payment rates for the preceding fiscal 
year.
    (iii) Any 2.0 percentage point reduction applied pursuant to 
paragraph (d)(4)(i) of this section will apply only to the fiscal year 
involved and will not be taken into account in computing the payment 
amount for a subsequent fiscal year.
* * * * *

0
9. Section 413.338 is added to read as follows:


Sec.  413.338  Skilled nursing facility value-based purchasing.

    (a) Definitions. As used in this section:
    (1) Achievement threshold (or achievement performance standard) 
means the 25th percentile of SNF performance on the SNF readmission 
measure during the baseline period for a fiscal year.
    (2) Adjusted Federal per diem rate means the payment made to SNFs 
under the skilled nursing facility prospective payment system (as 
described under section 1888(e)(4)(G) of the Act).
    (3) Applicable percent means for FY 2019 and subsequent fiscal 
years, 2.0 percent.
    (4) Baseline period means the time period used to calculate the 
achievement threshold, benchmark and improvement threshold that apply 
for a fiscal year.
    (5) Benchmark means, for a fiscal year, the arithmetic mean of the 
top decile of SNF performance on the SNF readmission measure during the 
baseline period for that fiscal year.
    (6) Logistic exchange function means the function used to translate 
a SNF's performance score on the SNF readmission measure into a value-
based incentive payment percentage.
    (7) Improvement threshold (or improvement performance standard) 
means an individual SNF's performance on the SNF readmission measure 
during the applicable baseline period.
    (8) Performance period means the time period during which 
performance on the SNF readmission measure is calculated for a fiscal 
year.

[[Page 36634]]

    (9) Performance standards are the levels of performance that SNFs 
must meet or exceed to earn points under the SNF VBP Program for a 
fiscal year, and are announced no later than 60 days prior to the start 
of the performance period that applies to the SNF readmission measure 
for that fiscal year.
    (10) Ranking means the ordering of SNFs based on each SNF's 
performance score under the SNF VBP Program for a fiscal year.
    (11) SNF readmission measure means, for a fiscal year, the all-
cause all-condition hospital readmission measure (SNFRM) or the all-
condition risk-adjusted potentially preventable hospital readmission 
rate (SNFPPR) specified by CMS for application in the SNF Value-Based 
Purchasing Program.
    (12) Performance score means the numeric score ranging from 0 to 
100 awarded to each SNF based on its performance under the SNF VBP 
Program for a fiscal year.
    (13) SNF Value-Based Purchasing (VBP) Program means the program 
required under section 1888(h) of the Social Security Act.
    (14) Value-based incentive payment amount is the portion of a SNF's 
adjusted Federal per diem rate that is attributable to the SNF VBP 
Program.
    (15) Value-based incentive payment adjustment factor is the number 
that will be multiplied by the adjusted Federal per diem rate for 
services furnished by a SNF during a fiscal year, based on its 
performance score for that fiscal year, and after such rate is reduced 
by the applicable percent.
    (b) Applicability of the SNF VBP Program. The SNF VBP Program 
applies to SNFs, including facilities described in section 
1888(e)(7)(B).
    (c) Process for reducing the adjusted Federal per diem rate and 
applying the value-based incentive payment adjustment factor under the 
SNF VBP Program--(1) General. CMS will make value-based incentive 
payments to each SNF based on its performance score for a fiscal year 
under the SNF VBP Program under the requirements and conditions 
specified in this paragraph.
    (2) Value-based incentive payment amount--(i) Total amount 
available for a fiscal year. The total amount available for value-based 
incentive payments for a fiscal year is equal to 60 percent of the 
total amount of the reduction to the adjusted SNF PPS payments for that 
fiscal year, as estimated by CMS.
    (ii) Calculation of the value-based incentive payment amount. The 
value-based incentive payment amount is calculated by multiplying the 
adjusted Federal per diem rate by the value- based incentive payment 
adjustment factor, after the adjusted Federal per diem rate has been 
reduced by the applicable percent.
    (iii) Calculation of the value-based incentive payment adjustment 
factor. The value-based incentive payment adjustment factor is 
calculated by estimating Medicare spending under the skilled nursing 
facility prospective payment system to estimate the total amount 
available for value-based incentive payments, ordering SNFs by their 
SNF performance scores, then assigning an adjustment factor value for 
each performance score subject to the limitations set by the exchange 
function.
    (iv) Reporting of adjustment to SNF payments. CMS will inform each 
SNF of the value-based incentive payment adjustment factor that will be 
applied to its adjusted Federal per diem rate for services furnished 
during a fiscal year at least 60 days prior to the start of that fiscal 
year.
    (d) Performance scoring under the SNF VBP Program. (1) CMS will 
award points to SNFs based on their performance on the SNF readmission 
measure applicable to a fiscal year during the performance period 
applicable to that fiscal year as follows:
    (i) CMS will award from 1 to 99 points for achievement to each SNF 
whose performance meets or exceeds the achievement threshold but is 
less than the benchmark.
    (ii) CMS will award from 0 to 90 points for improvement to each SNF 
whose performance exceeds the improvement threshold but is less than 
the benchmark.
    (iii) CMS will award 100 points to a SNF whose performance meets or 
exceeds the benchmark.
    (2) The highest of the SNF's achievement, improvement and benchmark 
score will be the SNF's performance score for the fiscal year.
    (e) Confidential feedback reports and public reporting. (1) 
Beginning October 1, 2016, CMS will provide quarterly confidential 
feedback reports to SNFs on their performance on the SNF readmission 
measure. SNFs will have the opportunity to review and submit 
corrections for this data by March 31st following the date that CMS 
provides the reports. Any such correction requests must be accompanied 
by appropriate evidence showing the basis for the correction.
    (2) Beginning not later than 60 days prior to each fiscal year, CMS 
will provide SNF performance score reports to SNFs on their performance 
under the SNF VBP Program for a fiscal year. SNFs will have the 
opportunity to review and submit corrections to their SNF performance 
scores and ranking contained in these reports for 30 days following the 
date that CMS provides the reports. Any such correction requests must 
be accompanied by appropriate evidence showing the basis for the 
correction.
    (3) CMS will publicly report the information described in 
paragraphs (e)(1) and (2) of this section on the Nursing Home Compare 
Web site.
    (f) Limitations on review. There is no administrative or judicial 
review of the following:
    (1) The methodology used to determine the value-based incentive 
payment percentage and the amount of the value-based incentive payment 
under section 1888(h)(5) of the Act.
    (2) The determination of the amount of funding available for value-
based incentive payments under section 1888(h)(5)(C)(ii)(III) of the 
Act and the payment reduction under section 1888(h)(6) of the Act.
    (3) The establishment of the performance standards under section 
1888(h)(3) of the Act and the performance period.
    (4) The methodology developed under section 1888(h)(4) of the Act 
that is used to calculate SNF performance scores and the calculation of 
such scores.
    (5) The ranking determinations under section 1888(h)(4)(B) of the 
Act.

0
10. Section 413.345 is revised to read as follows:


Sec.  413.345  Publication of Federal prospective payment rates.

    CMS publishes information pertaining to each update of the Federal 
payment rates in the Federal Register. This information includes the 
standardized Federal rates, the resident classification system that 
provides the basis for case-mix adjustment, and the factors to be 
applied in making the area wage adjustment. This information is 
published before May 1 for the fiscal year 1998 and before August 1 for 
the fiscal years 1999 and after.

0
11. Section 413.360 is added to subpart J to read as follows:


Sec.  413.360  Requirements under the Skilled Nursing Facility (SNF) 
Quality Reporting Program (QRP).

    (a) Participation start date. Beginning with the FY 2018 program 
year, a SNF must begin reporting data in accordance with paragraph (b) 
of this section 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, which designates the SNF as operating in the 
Certification and Survey Provider Enhanced Reports (CASPER) system. For 
purposes of this section, a program

[[Page 36635]]

year is the fiscal year in which the market basket percentage described 
in Sec.  413.337(d) is reduced by two percentage points if the SNF does 
not report data in accordance with paragraph (b) of this section.
    (b) Data submission requirement. (1) Except as provided in 
paragraph (c) of this section, and for a program year, SNFs must submit 
to CMS data on measures specified under sections 1899B(c)(1) and 
1899B(d)(1) of the Social Security Act and standardized resident 
assessment data in accordance with section 1899B(b)(1) of the Social 
Security Act, in the form and manner, and at a time, specified by CMS.
    (2) CMS will consider a SNF to have complied with paragraph (b)(1) 
of this section for a program year if the SNF reports: 100 percent of 
the required data elements on at least 80 percent of the MDS 
assessments submitted for that program year.
    (c) Exception and extension requests. (1) A SNF may request and CMS 
may grant exceptions or extensions to the reporting requirements under 
paragraph (b) of this section for one or more quarters, when there are 
certain extraordinary circumstances beyond the control of the SNF.
    (2) A SNF may request an exception or extension within 90 days of 
the date that the extraordinary circumstances occurred by sending an 
email to [email protected] that contains all of the 
following information:
    (i) SNF CMS Certification Number (CCN).
    (ii) SNF Business Name.
    (iii) SNF Business Address.
    (iv) CEO or CEO-designated personnel contact information including 
name, telephone number, title, email address, and mailing address. (The 
address must be a physical address, not a post office box.)
    (v) SNF's reason for requesting the exception or extension.
    (vi) Evidence of the impact of extraordinary circumstances, 
including, but not limited to, photographs, newspaper, and other media 
articles.
    (vii) Date when the SNF believes it will be able to again submit 
SNF QRP data and a justification for the proposed date.
    (3) Except as provided in paragraph (c)(4) of this section, CMS 
will not consider an exception or extension request unless the SNF 
requesting such exception or extension has complied fully with the 
requirements in this paragraph (c).
    (4) CMS may grant exceptions or extensions to SNFs without a 
request if it determines that one or more of the following has 
occurred:
    (i) An extraordinary circumstance affects an entire region or 
locale.
    (ii) A systemic problem with one of CMS's data collection systems 
directly affected the ability of a SNF to submit data in accordance 
with paragraph (b) of this section.
    (d) Reconsideration. (1) SNFs that do not meet the requirement in 
paragraph (b) of this section for a program year will receive a letter 
of non-compliance through the Quality Improvement and Evaluation System 
Assessment Submission and Processing (QIES-ASAP) system, as well as 
through the United States Postal Service. A SNF may request 
reconsideration no later than 30 calendar days after the date 
identified on the letter of non-compliance.
    (2) Reconsideration requests must be submitted to CMS by sending an 
email to [email protected] containing all of the 
following information:
    (i) SNF CCN.
    (ii) SNF Business Name.
    (iii) SNF Business Address.
    (iv) CEO or CEO-designated personnel contact information including 
name, telephone number, title, email address, and mailing address. (The 
address must be a physical address, not a post office box.)
    (v) CMS identified reason(s) for non-compliance stated in the non-
compliance letter.
    (vi) Reason(s) for requesting reconsideration, including all 
supporting documentation.
    (3) CMS will not consider a reconsideration request unless the SNF 
has complied fully with the requirements in paragraph (d)(2) of this 
section.
    (4) CMS will make a decision on the request for reconsideration and 
provide notice of the decision to the SNF through the QIES-ASAP system 
and via letter sent through the United States Postal Service.
    (e) Appeals. A SNF that is dissatisfied with CMS' decision on a 
request for reconsideration may file an appeal with the Provider 
Reimbursement Review Board (PRRB) under 42 CFR part 405, subpart R.

PART 424--CONDITIONS FOR MEDICARE PAYMENT

0
12. The authority citation for part 424 continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).


Sec.  424.20   [Amended]

0
13. In Sec.  424.20--
0
a. Amend paragraph (a)(1)(ii) by removing the phrase ``to one of the 
Resource Utilization Groups designated'' and adding in its place the 
phrase ``one of the case-mix classifiers that CMS designates''; and
0
b. Amend paragraph (e)(2)(ii)(B)(2) by removing the reference ``Sec.  
483.40(e)'' and adding in its place the reference ``Sec.  483.30(e)''.

PART 488--SURVEY, CERTIFICATION, AND ENFORCEMENT PROCEDURES

0
14. The authority citation for part 488 continues to read as follows:

    Authority: Secs. 1102, 1128l, 1864, 1865, 1871 and 1875 of the 
Social Security Act, unless otherwise noted (42 U.S.C 1302, 1320a-
7j, 1395aa, 1395bb, 1395hh) and 1395ll.

0
15. Section 488.30(a) is amended by revising the definition of 
``Complaint surveys'' to read as follows:


Sec.  488.30  Revisit user fee for revisit surveys.

    (a) * * *
    Complaint surveys means those surveys conducted on the basis of a 
substantial allegation of noncompliance, as defined in Sec.  488.1. The 
requirements of sections 1819(g)(4) and 1919(g)(4) of the Social 
Security Act and Sec.  488.332 apply to complaint surveys.
* * * * *

0
16. Section 488.301 is amended by revising the definition of 
``Abbreviated standard survey'' to read as follows:


Sec.  488.301  Definitions.

* * * * *
    Abbreviated standard survey means a survey other than a standard 
survey that gathers information primarily through resident-centered 
techniques on facility compliance with the requirements for 
participation. An abbreviated standard survey may be premised on 
complaints received; a change of ownership, management, or director of 
nursing; or other indicators of specific concern. Abbreviated standard 
surveys conducted to investigate a complaint or to conduct on-site 
monitoring to verify compliance with participation requirements are 
subject to the requirements of Sec.  488.332. Other premises for 
abbreviated standard surveys would follow the requirements of Sec.  
488.314.
* * * * *

0
17. In Sec.  488.308--
0
a. Redesignate paragraphs (e)(2) and (3) as paragraphs (f)(1) and (2);
0
b. Reserve paragraph (e)(2);

[[Page 36636]]

0
c. Add a paragraph heading for new paragraph (f); and
0
d. Revise newly redesignated paragraph (f)(1) introductory text.
    The addition and revision read as follows:


Sec.  488.308  Survey frequency.

* * * * *
    (e) * * *
    (2) [Reserved]
* * * * *
    (f) Investigation of complaints. (1) The survey agency must review 
all complaint allegations and conduct a standard or an abbreviated 
survey to investigate complaints of violations of requirements by SNFs 
and NFs if its review of the allegation concludes that--
* * * * *

0
18. Section 488.314 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  488.314  Survey teams.

    (a) * * *
    (1) Surveys under sections 1819(g)(2) and 1919(g)(2) of the Social 
Security Act must be conducted by an interdisciplinary team of 
professionals, which must include a registered nurse.
* * * * *

    Dated: July 26, 2017.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: July 27, 2017.
Thomas E. Price,
Secretary, Department of Health and Human Services.
[FR Doc. 2017-16256 Filed 7-31-17; 4:15 pm]
BILLING CODE 4120-01-P