[Federal Register Volume 83, Number 153 (Wednesday, August 8, 2018)]
[Rules and Regulations]
[Pages 39162-39290]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-16570]



[[Page 39161]]

Vol. 83

Wednesday,

No. 153

August 8, 2018

Part II





 Department of Health and Human Service





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Centers for Medicare & Medicaid Services





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42 CFR Parts 411, 413, and 424





 Medicare Program; Prospective Payment System and Consolidated Billing 
for Skilled Nursing Facilities (SNF) Final Rule for FY 2019, SNF Value-
Based Purchasing Program, and SNF Quality Reporting Program; Final Rule

  Federal Register / Vol. 83 , No. 153 / Wednesday, August 8, 2018 / 
Rules and Regulations  

[[Page 39162]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 411, 413, and 424

[CMS-1696-F]
RIN 0938-AT24


Medicare Program; Prospective Payment System and Consolidated 
Billing for Skilled Nursing Facilities (SNF) Final Rule for FY 2019, 
SNF Value-Based Purchasing Program, and SNF Quality Reporting Program

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) 2019. This final rule also replaces the existing 
case-mix classification methodology, the Resource Utilization Groups, 
Version IV (RUG-IV) model, with a revised case-mix methodology called 
the Patient-Driven Payment Model (PDPM) beginning on October 1, 2019. 
The rule finalizes revisions to the regulation text that describes a 
beneficiary's SNF ``resident'' status under the consolidated billing 
provision and the required content of the SNF level of care 
certification. The rule also finalizes updates to the SNF Quality 
Reporting Program (QRP) and the Skilled Nursing Facility Value-Based 
Purchasing (VBP) Program.

DATES: 
    Effective Date: This final rule is effective October 1, 2018.
    Implementation Date: The implementation date for revised case-mix 
methodology, PDPM, and associated policies discussed in section V. is 
October 1, 2019.

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, and general 
information.
    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, and consolidated billing.
    Mary Pratt, (410) 786-6867, for information related to the skilled 
nursing facility quality reporting program.
    Celeste Bostic, (410) 786-5603, for information related to the 
skilled nursing facility value-based purchasing program.

SUPPLEMENTARY INFORMATION: 

Availability of Certain Tables Exclusively Through the Internet on the 
CMS Website

    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 
website. 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
    A. Purpose
    B. Summary of Major Provisions
    C. Summary of Cost and Benefits
    D. Improving Patient Outcomes and Reducing Burden Through 
Meaningful Measures
    E. Advancing Health Information Exchange
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 2019 SNF 
PPS Proposed Rule
    A. General Comments on the FY 2019 SNF PPS Proposed Rule
    B. SNF PPS Rate Setting Methodology and FY 2019 Update
    1. Federal Base Rates
    2. SNF Market Basket Update
    3. Case-Mix Adjustment
    4. Wage Index Adjustment
    5. SNF Value-Based Purchasing Program
    6. Adjusted Rate Computation Example
IV. Additional Aspects of the SNF PPS
    A. SNF Level of Care--Administrative Presumption
    B. Consolidated Billing
    C. Payment for SNF-Level Swing-Bed Services
V. Revisions to SNF PPS Case-Mix Classification Methodology
    A. Background and General Comments
    B. Revisions to SNF PPS Federal Base Payment Rate Components
    C. Design and Methodology for Case-Mix Adjustment of Federal 
Rates
    D. Use of the Resident Assessment Instrument--Minimum Data Set, 
Version 3
    E. Revisions to Therapy Provision Policies Under the SNF PPS
    F. Interrupted Stay Policy
    G. Relationship of PDPM to Existing Skilled Nursing Facility 
Level of Care Criteria
    H. Effect of PDPM on Temporary AIDS Add-On Payment
    I. Potential Impacts of Implementing the PDPM and Parity 
Adjustment
VI. Other Issues
    A. Other Revisions to the Regulation Text
    B. Skilled Nursing Facility (SNF) Quality Reporting Program 
(QRP)
    C. Skilled Nursing Facility Value-Based Purchasing Program (SNF 
VBP)
    D. Request for Information on Promoting Interoperability and 
Electronic Healthcare Information Exchange Through Possible 
Revisions to the CMS Patient Health and Safety Requirements for 
Hospitals and Other Medicare- and Medicaid-Participating Providers 
and Suppliers
VII. Collection of Information Requirements
VIII. Economic Analyses
    A. Regulatory Impact Analysis
    B. Regulatory Flexibility Act Analysis
    C. Unfunded Mandates Reform Act Analysis
    D. Federalism Analysis
    E. Congressional Review Act
    F. Regulatory Review Costs

I. Executive Summary

A. Purpose

    This final rule updates the SNF prospective payment rates for FY 
2019 as required under section 1888(e)(4)(E) of the Social Security Act 
(the Act). It will also respond to section 1888(e)(4)(H) of the Act, 
which requires the Secretary to provide for publication in the Federal 
Register, before the August 1 that precedes the start of each fiscal 
year (FY), certain specified information relating to the payment update 
(see section II.C. of this final rule). This final rule also replaces 
the existing case-mix classification methodology, the Resource 
Utilization Groups, Version IV (RUG-IV) model, with a revised case-mix 
methodology called the Patient-Driven Payment Model (PDPM) effective 
October 1, 2019. This rule also finalizes updates to the Skilled 
Nursing Facility Quality Reporting Program (SNF QRP) and Skilled 
Nursing Facility Value-Based Purchasing Program (SNF VBP).

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 will reflect an update to 
the rates that we published in the SNF PPS final

[[Page 39163]]

rule for FY 2018 (82 FR 36530), as corrected in the FY 2018 SNF PPS 
correction notice (82 FR 46163), which reflects the SNF market basket 
update for FY 2019, as required by section 1888(e)(5)(B)(iv) of the Act 
(as added by section 53111 of the Bipartisan Budget Act of 2018). This 
final rule also replaces the existing case-mix classification 
methodology, the Resource Utilization Groups, Version IV (RUG-IV) 
model, with a revised case-mix methodology called the Patient-Driven 
Payment Model (PDPM). It also finalizes revisions at 42 CFR 
411.15(p)(3)(iv), which describes a beneficiary's SNF ``resident'' 
status under the consolidated billing provision, and 42 CFR 
424.20(a)(1)(i), which describes the required content of the SNF level 
of care certification. Furthermore, in accordance with section 1888(h) 
of the Act, this final rule, beginning October 1, 2018, will reduce the 
adjusted federal per diem rate determined under section 1888(e)(4)(G) 
of the Act by 2 percent, and adjust the resulting rate by the value-
based incentive payment amount earned by the SNF for that fiscal year 
under the SNF VBP Program. Additionally, this final rule updates 
policies for the SNF VBP, including requirements that apply beginning 
with the FY 2021 SNF VBP program year, changes to the SNF VBP scoring 
methodology, and the adoption of an Extraordinary Circumstances 
Exception policy. Finally, this rule updates requirements for the SNF 
QRP, including adopting a new quality measure removal factor and 
codifying in our regulations a number of requirements.

C. Summary of Cost and Benefits

                       Table 1--Cost and Benefits
------------------------------------------------------------------------
         Provision description                   Total transfers
------------------------------------------------------------------------
FY 2019 SNF PPS payment rate update\...  The overall economic impact of
                                          this final rule is an
                                          estimated increase of $820
                                          million in aggregate payments
                                          to SNFs during FY 2019.
FY 2019 SNF VBP changes................  The overall economic impact of
                                          the SNF VBP Program is an
                                          estimated reduction of $211
                                          million in aggregate payments
                                          to SNFs during FY 2019.
------------------------------------------------------------------------

D. Improving Patient Outcomes and Reducing Burden Through Meaningful 
Measures

    Regulatory reform and reducing regulatory burden are high 
priorities for us. To reduce the regulatory burden on the healthcare 
industry, lower health care costs, and enhance patient care, in October 
2017, we launched the Meaningful Measures Initiative.\1\ This 
initiative is one component of our agency-wide Patients Over Paperwork 
Initiative,\2\ which is aimed at evaluating and streamlining 
regulations with a goal to reduce unnecessary cost and burden, increase 
efficiencies, and improve beneficiary experience. The Meaningful 
Measures Initiative is aimed at identifying the highest priority areas 
for quality measurement and quality improvement in order to assess the 
core quality of care issues that are most vital to advancing our work 
to improve patient outcomes. The Meaningful Measures Initiative 
represents a new approach to quality measures that fosters operational 
efficiencies, and will reduce costs including the collection and 
reporting burden while producing quality measurement that is more 
focused on meaningful outcomes.
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    \1\ Meaningful Measures web page: https:/www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitativesGenIndo/MMF/General-info-Sub-Page.html.
    \2\ See Remarks by Administrator Seema Verma at the Health Care 
Payment Learning and Action Network (LAN) Fall Summit, as prepared 
for delivery on October 30, 2017 https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-items/2017-10-30.html
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    The Meaningful Measures Framework has the following objectives:
     Address high-impact measure areas that safeguard public 
health;
     Patient-centered and meaningful to patients;
     Outcome-based where possible;
     Fulfill each program's statutory requirements;
     Minimize the level of burden for health care providers 
(for example, through a preference for EHR-based measures where 
possible, such as electronic clinical quality measures);
     Significant opportunity for improvement;
     Address measure needs for population based payment through 
alternative payment models; and
     Align across programs and/or with other payers.
    In order to achieve these objectives, we have identified 19 
Meaningful Measures areas and mapped them to six overarching quality 
priorities as shown in Table 2.

    Table 2--Meaningful Measures Framework Domains and Measure Areas
------------------------------------------------------------------------
            Quality priority                  Meaningful measure area
------------------------------------------------------------------------
Making Care Safer by Reducing Harm        Healthcare-Associated
 Caused in the Delivery of Care.           Infections.
                                          Preventable Healthcare Harm.
Strengthen Person and Family Engagement   Care is Personalized and
 as Partners in Their Care.                Aligned with Patient's Goals.
                                          End of Life Care according to
                                           Preferences.
                                          Patient's Experience of Care
                                          Patient Reported Functional
                                           Outcomes.
Promote Effective Communication and       Medication Management.
 Coordination of Care.
                                          Admissions and Readmissions to
                                           Hospitals.
                                          Transfer of Health Information
                                           and Interoperability.
Promote Effective Prevention and          Preventive Care.
 Treatment of Chronic Disease.
                                          Management of Chronic
                                           Conditions.
                                          Prevention, Treatment, and
                                           Management of Mental Health.
                                          Prevention and Treatment of
                                           Opioid and Substance Use
                                           Disorders.
                                          Risk Adjusted Mortality.
Work with Communities to Promote Best     Equity of Care.
 Practices of Healthy Living.
                                          Community Engagement.

[[Page 39164]]

 
Make Care Affordable....................  Appropriate Use of Healthcare.
                                          Patient-focused Episode of
                                           Care.
                                          Risk Adjusted Total Cost of
                                           Care.
------------------------------------------------------------------------

    By including Meaningful Measures in our programs, we believe that 
we can also address the following cross-cutting measure criteria:
     Eliminating disparities;
     Tracking measurable outcomes and impact;
     Safeguarding public health;
     Achieving cost savings;
     Improving access for rural communities; and
     Reducing burden.
    We believe that the Meaningful Measures Initiative will improve 
outcomes for patients, their families, and health care providers while 
reducing burden and costs for clinicians and providers and promoting 
operational efficiencies.
    Comment: We received numerous comments from stakeholders regarding 
the Meaningful Measures Initiative and the impact of its implementation 
in CMS' quality programs. Many of these comments pertained to specific 
program proposals, and are discussed in the appropriate program-
specific sections of this final rule. However, commenters also provided 
insights and recommendations for the ongoing development of the 
Meaningful Measures Initiative generally, including: ensuring 
transparency in public reporting and usability of publicly reported 
data; evaluating the benefit of individual measures to patients via use 
in quality programs weighed against the burden to providers of 
collecting and reporting that measure data; and identifying additional 
opportunities for alignment across CMS quality programs.
    Response: We will continue to work with stakeholders to refine and 
further implement the Meaningful Measures Initiative, and will take 
commenters' insights and recommendations into account moving forward.

E. Advancing Health Information Exchange

    The Department of Health and Human Services (HHS) has a number of 
initiatives designed to encourage and support the adoption of 
interoperable health information technology and to promote nationwide 
health information exchange to improve health care. The Office of the 
National Coordinator for Health Information Technology (ONC) and CMS 
work collaboratively to advance interoperability across settings of 
care, including post-acute care.
    The Improving Medicare Post-Acute Care Transformation Act of 2015 
(IMPACT Act, Pub. L. 113-185) requires assessment data to be 
standardized and interoperable to allow for exchange of the data among 
post-acute providers and other providers. To further interoperability 
in post-acute care, CMS has developed a Data Element Library to serve 
as a publicly available centralized, authoritative resource for 
standardized data elements and their associated mappings to health IT 
standards. These interoperable data elements can reduce provider burden 
by allowing the use and reuse of healthcare data, support provider 
exchange of electronic health information for care coordination, 
person-centered care, and support real-time, data driven, clinical 
decision making. Standards in the Data Element Library (https://del.cms.gov/) can be referenced on the CMS website and in the ONC 
Interoperability Standards Advisory (ISA). The 2018 Interoperability 
Standards Advisory (ISA) is available at https://www.healthit.gov/isa.
    Most recently, the 21st Century Cures Act (Pub. L. 114-255), 
enacted in late 2016, requires HHS to take new steps to enable the 
electronic sharing of health information ensuring interoperability for 
providers and settings across the care continuum. Specifically, 
Congress directed ONC to ``develop or support a trusted exchange 
framework, including a common agreement among health information 
networks nationally.'' This framework (https://beta.healthit.gov/topic/interoperability/trusted-exchange-framework-and-common-agreement) 
outlines a common set of principles for trusted exchange and minimum 
terms and conditions for trusted exchange in order to enable 
interoperability across disparate health information networks. In 
another important provision, Congress defined ``information blocking'' 
as practices likely to interfere with, prevent, or materially 
discourage access, exchange, or use of electronic health information, 
and established new authority for HHS to discourage these practices.
    We invite providers to learn more about these important 
developments and how they are likely to affect SNFs.

II. Background on SNF PPS

A. Statutory Basis and Scope

    As amended by section 4432 of the Balanced Budget Act of 1997 (BBA 
1997, 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.
    Section 215(a) of the Protecting Access to Medicare Act of 2014 
(PAMA) (Pub. L. 113-93, enacted on April 1, 2014) added section 1888(g) 
to the Act requiring 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 section 1888(h) 
to the Act requiring the Secretary to implement a VBP program for SNFs. 
Finally, section 2(c)(4) of the IMPACT Act added section 1888(e)(6) to 
the Act, which requires the Secretary to implement a quality reporting 
program for SNFs under which SNFs report data on measures and resident 
assessment data.

[[Page 39165]]

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 
2018 (82 FR 36530), as corrected in the FY 2018 SNF PPS correction 
notice (82 FR 46163).
    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 will provide the required annual updates to the per diem 
payment rates for SNFs for FY 2019.

III. Analysis and Responses to Public Comments on the FY 2019 SNF PPS 
Proposed Rule

    In response to the publication of the FY 2019 SNF PPS proposed 
rule, we received 290 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 2019 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: A few commenters requested clarification of how a SNF may 
comply with the coverage requirement to provide skilled services on a 
daily basis and communicate intended compliance with such policy when 
skilled rehabilitative services are halted temporarily due to a holiday 
or patient illness, and the only skilled service required is 
rehabilitation services.
    Response: As stated in the FY 2000 SNF PPS final rule (64 FR 
41670), the requirement for daily skilled services should not be 
applied so strictly that it would not be met merely because there is a 
brief, isolated absence from the facility in a situation where 
discharge from the facility would not be practical. With regard to the 
``daily basis'' requirement, the Medicare program does not specify in 
regulations or guidelines an official list of holidays of other 
specific occasions that a facility may observe as breaks in 
rehabilitation services, but recognizes that the resident's own 
condition dictates the amount of service that is appropriate. 
Accordingly, the facility itself must judge whether a brief, temporary 
pause in the delivery of therapy services would adversely affect the 
resident's condition.
    This policy is also discussed at Sec.  409.34(b), where the 
paragraph states that a break of 1 or 2 days in the furnishing of 
rehabilitation services will not preclude coverage if discharge would 
not be practical for the 1 or 2 days during which, for instance, the 
physician has suspended the therapy sessions because the patient 
exhibited extreme fatigue.
    Comment: One commenter requested that CMS allow the addition of 
advanced registered nurse practitioners (ARNPs) to the rehabilitation 
team to meet regulatory requirements and deal with a shortage of 
rehabilitation physicians.
    Response: We appreciate the comment. While ARNPs are eligible to 
enroll and participate in Medicare, it is unclear what federal 
regulatory requirements the commenter is concerned about that would 
prevent ARNPs from participating in rehabilitation team activities.

B. SNF PPS Rate Setting Methodology and FY 2019 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 be payable under Part B for covered 
SNF services furnished to individuals during the course of a covered 
Part A stay in a SNF.
    In developing the rates for the initial period, we updated costs to 
the first effective year of the PPS (the 15-month period beginning July 
1, 1998) using a SNF market basket index, and then standardized for 
geographic variations in wages and for the costs of facility 
differences in case mix. In compiling the database used to compute the 
federal payment rates, we excluded those providers that received new 
provider exemptions from the routine cost limits, as well as costs 
related to payments for exceptions to the routine cost limits. Using 
the formula that the BBA 1997 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 2018 (82 FR 36548 through 36566), we revised and 
rebased the market basket index, which

[[Page 39166]]

included 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 2019, the growth rate of the 2014-based SNF market basket in the 
proposed rule was estimated to be 2.7 percent, based on the IHS Global 
Insight, Inc. (IGI) first quarter 2018 forecast with historical data 
through fourth quarter 2017, before the multifactor productivity 
adjustment is applied. Using IGIs most recent forecast, the second 
quarter 2018 forecast with historical data through first quarter 2018, 
we calculate a growth rate of the 2014-based SNF market basket of 2.8 
percent.
    However, we note that section 53111 of the Bipartisan Budget Act of 
2018 (BBA 2018) (Pub. L. 115-123, enacted on February 9, 2018) amended 
section 1888(e) of the Act to add section 1888(e)(5)(B)(iv) of the Act. 
Section 1888(e)(5)(B)(iv) of the Act establishes a special rule for FY 
2019 that requires the market basket percentage, after the application 
of the productivity adjustment, to be 2.4 percent. In accordance with 
section 1888(e)(5)(B)(iv) of the Act, we will use a market basket 
percentage of 2.4 percent to update the federal rates set forth in this 
final rule. We proposed to revise Sec.  413.337(d) to reflect this 
statutorily required 2.4 percent market basket percentage for FY 2019. 
In addition, to conform with section 1888(e)(5)(B)(iii) of the Act, we 
proposed to update the regulations to reflect the 1 percent market 
basket percentage required for FY 2018 (as discussed in the FY 2018 SNF 
PPS final rule, 82 FR 36533). Accordingly, we proposed to revise 
paragraph (d)(1) of Sec.  413.337, which sets forth the market basket 
update formula, by revising paragraph (d)(1)(v), and by adding 
paragraphs (d)(1)(vi) and (d)(1)(vii). The revision to add paragraph 
(d)(1)(vi) reflects section 1888(e)(5)(B)(iii) of the Act (as added by 
section 411(a) of the Medicare Access and CHIP Reauthorization Act of 
2015 (MACRA) (Pub. L. 114-10)), which, as discussed above, 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. The revision to add paragraph (d)(1)(vii) reflects section 
1888(e)(5)(B)(iv) of the Act (as added by section 53111 of BBA 2018), 
which establishes a special rule for FY 2019 that requires the market 
basket percentage, after the application of the productivity 
adjustment, to be 2.4 percent. These statutory provisions are self-
implementing and do not require the exercise of discretion by the 
Secretary. In section III.B.2.e. of this final rule, we discuss the 
specific application of the BBA 2018-specified market basket adjustment 
to the forthcoming annual update of the SNF PPS payment rates. In 
addition, we also discuss in that section 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)(iv) of the Act, added by 
section 53111 of BBA 2018, we would have used the percentage change in 
the SNF market basket index to compute the update factor for FY 2019. 
This factor is based on the FY 2019 percentage increase in the 2014-
based SNF market basket index reflecting routine, ancillary, and 
capital-related expenses. In the proposed rule, the SNF market basket 
percentage was estimated to be 2.7 percent for FY 2019 based on IGI's 
first quarter 2018 forecast (with historical data through fourth 
quarter 2017). In this final rule, we are using IGI's more recent 
second quarter 2018 forecast (with historical data through first 
quarter 2018) and we calculate a SNF market basket percentage increase 
of 2.8 percent. 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)(iv) of the Act, added by section 53111 of the BBA 2018, 
requires us to update the SNF PPS rates for FY 2019 using a 2.4 percent 
SNF market basket percentage change, instead of the estimated 2.8 
percent market basket percentage change adjusted by the multifactor 
productivity adjustment as described below. 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 2017 (the most recently available FY for which there is 
final data), the estimated increase in the market basket index was 2.7 
percentage points, while the actual increase for FY 2017 was 2.7 
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 2019 market 
basket percentage change of 2.7 percent would not have been adjusted to 
account for the forecast error correction. Table 3 shows the forecasted 
and actual market basket amounts for FY 2017.

[[Page 39167]]



            Table 3--Difference Between the Forecasted and Actual Market Basket Increases for FY 2017
----------------------------------------------------------------------------------------------------------------
                                                                Forecasted  FY
                            Index                               2017  increase   Actual FY 2017      FY 2017
                                                                      *           increase **       difference
----------------------------------------------------------------------------------------------------------------
SNF..........................................................             2.7              2.7              0.0
----------------------------------------------------------------------------------------------------------------
* Published in Federal Register; based on second quarter 2016 IGI forecast (2010-based index).
** Based on the second quarter 2018 IGI forecast, with historical data through the first quarter 2018 (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 
payment system (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 
website 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 website 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.
    The MFP adjustment, calculated as the 10-year moving average of 
changes in MFP for the period ending September 30, 2019, is estimated 
to be 0.8 percent based on IGI's second quarter 2018 forecast. Also, 
consistent with section 1888(e)(5)(B)(i) of the Act and Sec.  
413.337(d)(2), the market basket percentage for FY 2019 for the SNF PPS 
is based on IGI's second quarter 2018 forecast of the SNF market basket 
percentage, which is estimated to be 2.8 percent. The proposed rule 
reflected a market basket percentage for FY 2019 of 2.7 percent and an 
MFP adjustment of 0.8 percent based on IGI's first quarter 2018 
forecast.
    If not for the enactment of section 53111 of the BBA 2018, the FY 
2019 update would have been calculated in accordance with section 
1888(e)(5)(B)(i) and (ii) of the Act, pursuant to which the market 
basket percentage determined under section 1888(e)(5)(B)(i) of the Act 
(that is, 2.8 percent) would have been reduced by the MFP adjustment 
(the 10-year moving average of changes in MFP for the period ending 
September 30, 2019) of 0.8 percent, which would have been calculated as 
described above and based on IGI's second quarter 2018 forecast. Absent 
the enactment of section 53111 of the BBA 2018, the resulting MFP-
adjusted SNF market basket update would have been equal to 2.0 percent, 
or 2.8 percent less 0.8 percentage point. However, as discussed above, 
section 1888(e)(5)(B)(iv) of the Act, added by section 53111 of the BBA 
2018, requires us to apply a 2.4 percent market basket percentage 
increase in determining the FY 2019 SNF payment rates set forth in this 
final rule (without regard to the MFP adjustment described above).
e. Market Basket Update Factor for FY 2019
    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 2019 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, 2017, through September 30, 
2018 to the average market basket level for the period of October 1, 
2018, through September 30, 2019. This process yields a percentage 
change in the 2014-based SNF market basket of 2.8 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 2017 SNF market basket percentage change and the 
actual FY 2017 SNF market basket percentage change (FY 2017 is the most 
recently available FY for which there is historical data) did not 
exceed the 0.5 percentage point threshold, the FY 2019 market basket 
percentage change of 2.8 percent would not be adjusted by the forecast 
error correction.
    If not for the enactment of section 53111 of the BBA 2018, the SNF 
market basket for FY 2019 would have been determined in accordance with 
section

[[Page 39168]]

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 September 30, 2019) of 
0.8 percent, as described in section III.B.2.d.1. of this final rule. 
Thus, absent the enactment of the BBA 2018, the resulting net SNF 
market basket update would have been equal to 2.0 percent, or 2.8 
percent less the 0.8 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.
    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)(iv) of the Act, as added by 
section 53111 of the BBA 2018, requires us to use a market basket 
percentage of 2.4 percent, after application of the MFP to adjust the 
federal rates for FY 2019. Under section 1888(e)(5)(B)(iv) of the Act, 
the market basket percentage increase used to determine the federal 
rates set forth in Table 4 and 5 in this final rule will be 2.4 percent 
for FY 2019.
    In addition, we note that section 1888(e)(6)(A)(i) of the Act 
provides that, beginning with 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). 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 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 applies only with respect to the 
fiscal year involved, and that the reduction cannot be taken into 
account in computing the payment amount for a subsequent fiscal year.
    Accordingly, we proposed that for SNFs that do not satisfy the 
reporting requirements for the FY 2019 SNF QRP, we would apply a 2.0 
percentage point reduction to the SNF market basket percentage change 
for that fiscal year, after application of any applicable forecast 
error adjustment as specified in Sec.  413.337(d)(2) and the MFP 
adjustment as specified in Sec.  413.337(d)(3). In the FY 2019 SNF PPS 
proposed rule (83 FR 21024), we proposed that, for FY 2019, the 
application of this reduction to SNFs that have not met the 
requirements for the FY 2019 SNF QRP would result in a market basket 
index percentage change for FY 2019 that is less than zero 
(specifically, a net update of negative 0.1 percentage point, derived 
by subtracting 2 percent from the MFP-adjusted market basket update of 
1.9 percent), and would also result in FY 2019 payment rates that are 
less than such payment rates for the preceding FY. However, we 
inadvertently applied the 2.0 percent reduction to the market basket 
adjustment factor that would have applied were it not for the 
application of the BBA 2018 stipulated market basket update factor 
rather than to the BBA 2018 stipulated market basket update factor of 
2.4 percent. Therefore, when properly applied, the net update for 
providers that fail to meet the requirements for the FY 2019 SNF QRP 
will be 0.4 percent, rather than the negative 0.1 percent discussed in 
the proposed rule. We invited comments on these proposals.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the Market Basket Update Factor for FY 2019. A 
discussion of these comments, along with our responses, appears below.
    Comment: We received a number of comments in relation to applying 
the FY 2019 market basket update factor in the determination of the FY 
2019 unadjusted federal per diem rates, with some commenters supporting 
its application in determining the FY 2019 unadjusted per diem rates, 
while others opposed its application. In their March 2018 report 
(available at http://www.medpac.gov/docs/default-source/reports/mar18_medpac_ch8_sec.pdf) and in their comment on the FY 2019 SNF PPS 
proposed rule, MedPAC recommended that we eliminate the market basket 
update for SNFs altogether for FY 2019 and FY 2020 and implement 
revisions to the SNF PPS.
    Response: We appreciate all of the comments received on the 
proposed market basket update for FY 2019. In response to those 
comments opposing the application of the FY 2019 market basket update 
factor in determining the FY 2019 unadjusted federal per diem rates, 
specifically MedPAC's proposal to eliminate the market basket update 
for SNFs, we are required to update the unadjusted Federal per diem 
rates for FY 2019 by 2.4 percent under section 1888(e)(4)(E)(ii)(IV) 
and (e)(5)(B) of the Act. as amended by section 53111 of the BBA 2018.
    Comment: A few commenters expressed concern with regard to CMS 
applying the 2.0 percentage point reduction to the market basket 
increase to the standard market basket adjustment of 1.9 percent, 
rather than to the market basket required as a result of the BBA 2018. 
These commenters requested that CMS reconsider this decision and to 
apply the QRP-related market basket reduction to the BBA 2018-
stipulated market basket.
    Response: We appreciate the comments on this issue. Further, we 
agree with commenters that the QRP-related reduction to the market 
basket should be applied to the BBA 2018-stipulated market basket. 
Therefore, the market basket update factor that would be applied in 
cases where a provider has not met the requirements of the FY 2019 SNF 
QRP would be a positive 0.4 percent, rather than the negative 0.1 
percent discussed in the FY 2019 SNF PPS proposed rule.
    Accordingly, for the reasons specified in this final rule and in 
the FY 2019 SNF PPS proposed rule (83 FR 21021 through 21024), we are 
applying the FY 2019 SNF market basket increase factor of 2.4 percent, 
as stipulated by the BBA 2018, in our determination of the FY 2019 SNF 
PPS unadjusted federal per diem rates. As described in this section, we 
are adjusting each per diem component of the federal rates forward to 
reflect the BBA 2018 stipulated update factor for FY 2019.
    Tables 4 and 5 reflect the updated components of the unadjusted 
federal rates for FY 2019, prior to adjustment for case-mix.

[[Page 39169]]



                            Table 4--FY 2019 Unadjusted Federal Rate per Diem--Urban
----------------------------------------------------------------------------------------------------------------
                                              Nursing-- case-  Therapy-- case-   Therapy-- non-
               Rate component                       mix              mix            case-mix       Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount.............................         $181.44          $136.67           $18.00           $92.60
----------------------------------------------------------------------------------------------------------------


                            Table 5--FY 2019 Unadjusted Federal Rate per Diem--Rural
----------------------------------------------------------------------------------------------------------------
                                              Nursing-- case-  Therapy-- case-   Therapy-- Non-
               Rate component                       mix              mix            case-mix       Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount.............................         $173.34          $157.60           $19.23           $94.31
----------------------------------------------------------------------------------------------------------------

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 IV.A. 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 timeframes 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 website 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 MMA 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. (We discuss in section V.H. 
of this final rule the specific payment adjustments that we proposed 
under the proposed PDPM to provide for an appropriate adjustment in the 
case mix to compensate for the increased costs associated with such 
residents.)
    For the limited number of SNF residents that qualify for the MMA 
add-on, there is a significant increase in payments. 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 from using 
ICD-9-CM code 042 to ICD-10-CM code B20 for identifying those residents 
for whom it is appropriate to apply the AIDS add-on established by 
section 511 of the MMA. For FY 2019, an urban facility with a resident 
with AIDS in RUG-IV group ``HC2'' would have a case-mix adjusted per 
diem payment of $453.52 (see Table 6) 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 
$1,034.03.
    Under section 1888(e)(4)(H), each update of the payment rates must 
include the case-mix classification methodology applicable for the 
upcoming FY. The FY 2019 payment rates set forth in this final rule 
reflect the use of the RUG-IV case-mix classification system from 
October 1, 2018, through September 30, 2019. We list the final case-mix 
adjusted RUG-IV payment rates for FY 2019, provided separately for 
urban and rural SNFs, in

[[Page 39170]]

Tables 6 and 7 with corresponding case-mix values. We use the revised 
OMB delineations adopted in the FY 2015 SNF PPS final rule (79 FR 
45632, 45634) to identify a facility's urban or rural status for the 
purpose of determining which set of rate tables would apply to the 
facility. Tables 6 and 7 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). 
Additionally, Tables 6 and 7 do not reflect adjustments which may be 
made to the SNF PPS rates as a result of either the SNF QRP, discussed 
in section VI.B of this final rule, or the SNF VBP program, discussed 
in sections III.B.5 and VI.C of this final rule.

                                      Table 6--RUG-IV Case-Mix Adjusted Federal Rates and Associated Indexes--Urban
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Nursing         Therapy      Non-case mix    Non-case mix
             RUG-IV category               Nursing index   Therapy index     component       component     therapy comp      component      Total rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUX.....................................            2.67            1.87         $484.44         $255.57  ..............          $92.60         $832.89
RUL.....................................            2.57            1.87          466.30          255.57  ..............           92.60          814.74
RVX.....................................            2.61            1.28          473.56          174.94  ..............           92.60          741.34
RVL.....................................            2.19            1.28          397.35          174.94  ..............           92.60          665.11
RHX.....................................            2.55            0.85          462.67          116.17  ..............           92.60          671.66
RHL.....................................            2.15            0.85          390.10          116.17  ..............           92.60          599.06
RMX.....................................            2.47            0.55          448.16           75.17  ..............           92.60          616.13
RML.....................................            2.19            0.55          397.35           75.17  ..............           92.60          565.31
RLX.....................................            2.26            0.28          410.05           38.27  ..............           92.60          541.10
RUC.....................................            1.56            1.87          283.05          255.57  ..............           92.60          631.42
RUB.....................................            1.56            1.87          283.05          255.57  ..............           92.60          631.42
RUA.....................................            0.99            1.87          179.63          255.57  ..............           92.60          527.97
RVC.....................................            1.51            1.28          273.97          174.94  ..............           92.60          541.69
RVB.....................................            1.11            1.28          201.40          174.94  ..............           92.60          469.09
RVA.....................................            1.10            1.28          199.58          174.94  ..............           92.60          467.27
RHC.....................................            1.45            0.85          263.09          116.17  ..............           92.60          472.01
RHB.....................................            1.19            0.85          215.91          116.17  ..............           92.60          424.82
RHA.....................................            0.91            0.85          165.11          116.17  ..............           92.60          374.00
RMC.....................................            1.36            0.55          246.76           75.17  ..............           92.60          414.66
RMB.....................................            1.22            0.55          221.36           75.17  ..............           92.60          389.25
RMA.....................................            0.84            0.55          152.41           75.17  ..............           92.60          320.28
RLB.....................................            1.50            0.28          272.16           38.27  ..............           92.60          403.16
RLA.....................................            0.71            0.28          128.82           38.27  ..............           92.60          259.78
ES3.....................................            3.58  ..............          649.56  ..............           18.00           92.60          760.41
ES2.....................................            2.67  ..............          484.44  ..............           18.00           92.60          595.25
ES1.....................................            2.32  ..............          420.94  ..............           18.00           92.60          531.72
HE2.....................................            2.22  ..............          402.80  ..............           18.00           92.60          513.57
HE1.....................................            1.74  ..............          315.71  ..............           18.00           92.60          426.45
HD2.....................................            2.04  ..............          370.14  ..............           18.00           92.60          480.90
HD1.....................................            1.60  ..............          290.30  ..............           18.00           92.60          401.04
HC2.....................................            1.89  ..............          342.92  ..............           18.00           92.60          453.68
HC1.....................................            1.48  ..............          268.53  ..............           18.00           92.60          379.26
HB2.....................................            1.86  ..............          337.48  ..............           18.00           92.60          448.23
HB1.....................................            1.46  ..............          264.90  ..............           18.00           92.60          375.63
LE2.....................................            1.96  ..............          355.62  ..............           18.00           92.60          466.38
LE1.....................................            1.54  ..............          279.42  ..............           18.00           92.60          390.15
LD2.....................................            1.86  ..............          337.48  ..............           18.00           92.60          448.23
LD1.....................................            1.46  ..............          264.90  ..............           18.00           92.60          375.63
LC2.....................................            1.56  ..............          283.05  ..............           18.00           92.60          393.78
LC1.....................................            1.22  ..............          221.36  ..............           18.00           92.60          332.07
LB2.....................................            1.45  ..............          263.09  ..............           18.00           92.60          373.82
LB1.....................................            1.14  ..............          206.84  ..............           18.00           92.60          317.55
CE2.....................................            1.68  ..............          304.82  ..............           18.00           92.60          415.56
CE1.....................................            1.50  ..............          272.16  ..............           18.00           92.60          382.89
CD2.....................................            1.56  ..............          283.05  ..............           18.00           92.60          393.78
CD1.....................................            1.38  ..............          250.39  ..............           18.00           92.60          361.11
CC2.....................................            1.29  ..............          234.06  ..............           18.00           92.60          344.78
CC1.....................................            1.15  ..............          208.66  ..............           18.00           92.60          319.37
CB2.....................................            1.15  ..............          208.66  ..............           18.00           92.60          319.37
CB1.....................................            1.02  ..............          185.07  ..............           18.00           92.60          295.77
CA2.....................................            0.88  ..............          159.67  ..............           18.00           92.60          270.36
CA1.....................................            0.78  ..............          141.52  ..............           18.00           92.60          252.21
BB2.....................................            0.97  ..............          176.00  ..............           18.00           92.60          286.70
BB1.....................................            0.90  ..............          163.30  ..............           18.00           92.60          273.99
BA2.....................................            0.70  ..............          127.01  ..............           18.00           92.60          237.69
BA1.....................................            0.64  ..............          116.12  ..............           18.00           92.60          226.80
PE2.....................................            1.50  ..............          272.16  ..............           18.00           92.60          382.89
PE1.....................................            1.40  ..............          254.02  ..............           18.00           92.60          364.74
PD2.....................................            1.38  ..............          250.39  ..............           18.00           92.60          361.11
PD1.....................................            1.28  ..............          232.24  ..............           18.00           92.60          342.96
PC2.....................................            1.10  ..............          199.58  ..............           18.00           92.60          310.29
PC1.....................................            1.02  ..............          185.07  ..............           18.00           92.60          295.77
PB2.....................................            0.84  ..............          152.41  ..............           18.00           92.60          263.10

[[Page 39171]]

 
PB1.....................................            0.78  ..............          141.52  ..............           18.00           92.60          252.21
PA2.....................................            0.59  ..............          107.05  ..............           18.00           92.60          217.73
PA1.....................................            0.54  ..............           97.98  ..............           18.00           92.60          208.65
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                      Table 7--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         $462.82         $294.71  ..............          $94.31         $852.10
RUL.....................................            2.57            1.87          445.48          294.71  ..............           94.31          834.76
RVX.....................................            2.61            1.28          452.42          201.73  ..............           94.31          748.68
RVL.....................................            2.19            1.28          379.61          201.73  ..............           94.31          675.85
RHX.....................................            2.55            0.85          442.02          133.96  ..............           94.31          670.48
RHL.....................................            2.15            0.85          372.68          133.96  ..............           94.31          601.13
RMX.....................................            2.47            0.55          428.15           86.68  ..............           94.31          609.32
RML.....................................            2.19            0.55          379.61           86.68  ..............           94.31          560.77
RLX.....................................            2.26            0.28          391.75           44.13  ..............           94.31          530.34
RUC.....................................            1.56            1.87          270.41          294.71  ..............           94.31          659.64
RUB.....................................            1.56            1.87          270.41          294.71  ..............           94.31          659.64
RUA.....................................            0.99            1.87          171.61          294.71  ..............           94.31          560.81
RVC.....................................            1.51            1.28          261.74          201.73  ..............           94.31          557.95
RVB.....................................            1.11            1.28          192.41          201.73  ..............           94.31          488.59
RVA.....................................            1.10            1.28          190.67          201.73  ..............           94.31          486.86
RHC.....................................            1.45            0.85          251.34          133.96  ..............           94.31          479.76
RHB.....................................            1.19            0.85          206.27          133.96  ..............           94.31          434.67
RHA.....................................            0.91            0.85          157.74          133.96  ..............           94.31          386.12
RMC.....................................            1.36            0.55          235.74           86.68  ..............           94.31          416.86
RMB.....................................            1.22            0.55          211.47           86.68  ..............           94.31          392.59
RMA.....................................            0.84            0.55          145.61           86.68  ..............           94.31          326.70
RLB.....................................            1.50            0.28          260.01           44.13  ..............           94.31          398.57
RLA.....................................            0.71            0.28          123.07           44.13  ..............           94.31          261.59
ES3.....................................            3.58  ..............          620.56  ..............           19.23           94.31          734.31
ES2.....................................            2.67  ..............          462.82  ..............           19.23           94.31          576.52
ES1.....................................            2.32  ..............          402.15  ..............           19.23           94.31          515.83
HE2.....................................            2.22  ..............          384.81  ..............           19.23           94.31          498.50
HE1.....................................            1.74  ..............          301.61  ..............           19.23           94.31          415.27
HD2.....................................            2.04  ..............          353.61  ..............           19.23           94.31          467.29
HD1.....................................            1.60  ..............          277.34  ..............           19.23           94.31          390.99
HC2.....................................            1.89  ..............          327.61  ..............           19.23           94.31          441.28
HC1.....................................            1.48  ..............          256.54  ..............           19.23           94.31          370.19
HB2.....................................            1.86  ..............          322.41  ..............           19.23           94.31          436.08
HB1.....................................            1.46  ..............          253.08  ..............           19.23           94.31          366.72
LE2.....................................            1.96  ..............          339.75  ..............           19.23           94.31          453.41
LE1.....................................            1.54  ..............          266.94  ..............           19.23           94.31          380.59
LD2.....................................            1.86  ..............          322.41  ..............           19.23           94.31          436.08
LD1.....................................            1.46  ..............          253.08  ..............           19.23           94.31          366.72
LC2.....................................            1.56  ..............          270.41  ..............           19.23           94.31          384.06
LC1.....................................            1.22  ..............          211.47  ..............           19.23           94.31          325.11
LB2.....................................            1.45  ..............          251.34  ..............           19.23           94.31          364.99
LB1.....................................            1.14  ..............          197.61  ..............           19.23           94.31          311.23
CE2.....................................            1.68  ..............          291.21  ..............           19.23           94.31          404.87
CE1.....................................            1.50  ..............          260.01  ..............           19.23           94.31          373.66
CD2.....................................            1.56  ..............          270.41  ..............           19.23           94.31          384.06
CD1.....................................            1.38  ..............          239.21  ..............           19.23           94.31          352.85
CC2.....................................            1.29  ..............          223.61  ..............           19.23           94.31          337.24
CC1.....................................            1.15  ..............          199.34  ..............           19.23           94.31          312.97
CB2.....................................            1.15  ..............          199.34  ..............           19.23           94.31          312.97
CB1.....................................            1.02  ..............          176.81  ..............           19.23           94.31          290.43
CA2.....................................            0.88  ..............          152.54  ..............           19.23           94.31          266.15
CA1.....................................            0.78  ..............          135.21  ..............           19.23           94.31          248.81
BB2.....................................            0.97  ..............          168.14  ..............           19.23           94.31          281.76
BB1.....................................            0.90  ..............          156.01  ..............           19.23           94.31          269.62
BA2.....................................            0.70  ..............          121.34  ..............           19.23           94.31          234.94
BA1.....................................            0.64  ..............          110.94  ..............           19.23           94.31          224.54
PE2.....................................            1.50  ..............          260.01  ..............           19.23           94.31          373.66
PE1.....................................            1.40  ..............          242.68  ..............           19.23           94.31          356.32
PD2.....................................            1.38  ..............          239.21  ..............           19.23           94.31          352.85
PD1.....................................            1.28  ..............          221.88  ..............           19.23           94.31          335.51
PC2.....................................            1.10  ..............          190.67  ..............           19.23           94.31          304.30

[[Page 39172]]

 
PC1.....................................            1.02  ..............          176.81  ..............           19.23           94.31          290.43
PB2.....................................            0.84  ..............          145.61  ..............           19.23           94.31          259.22
PB1.....................................            0.78  ..............          135.21  ..............           19.23           94.31          248.81
PA2.....................................            0.59  ..............          102.27  ..............           19.23           94.31          215.87
PA1.....................................            0.54  ..............           93.60  ..............           19.23           94.31          207.20
--------------------------------------------------------------------------------------------------------------------------------------------------------

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 2019, 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 2019, the updated wage data are for hospital cost 
reporting periods beginning on or after October 1, 2014 and before 
October 1, 2015 (FY 2015 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, 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. As discussed 
in greater detail later in this section, 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 inpatient 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 2019 SNF PPS wage index. For rural geographic areas that do not 
have hospitals, and therefore, lack hospital wage data on which to base 
an area wage adjustment, we would use the average wage index from all 
contiguous Core-Based Statistical Areas (CBSAs) as a reasonable proxy. 
For FY 2019, there are no rural geographic areas that do not have 
hospitals, and thus, this methodology would not be applied. For rural 
Puerto Rico, we would not apply this methodology due to the distinct 
economic circumstances that exist there (for example, due to the close 
proximity to one another of almost all of Puerto Rico's various urban 
and non-urban areas, this methodology would produce a wage index for 
rural Puerto Rico that is higher than that in half of its urban areas); 
instead, we would continue to use the most recent wage index previously 
available for that area. For urban areas without specific hospital wage 
index data, we would use the average wage indexes of all of the urban 
areas within the state to serve as a reasonable proxy for the wage 
index of that urban CBSA. For FY 2019, the only urban area without wage 
index data available is CBSA 25980, Hinesville-Fort Stewart, GA. The 
final wage index applicable to FY 2019 is set forth in Tables A and B 
available on the CMS website 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 OMB Bulletin No. 03-04 (June 
6, 2003), 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 1-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

[[Page 39173]]

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 wish to note 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.
    On August 15, 2017, OMB announced that one Micropolitan Statistical 
Area now qualifies as a Metropolitan Statistical Area (OMB Bulletin No. 
17-01). The new urban CBSA is as follows:
     Twin Falls, Idaho (CBSA 46300). This CBSA is comprised of 
the principal city of Twin Falls, Idaho in Jerome County, Idaho and 
Twin Falls County, Idaho.
    The OMB bulletin is available on the OMB website at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2017/b-17-01.pdf. As we stated in the proposed rule (83 FR 21028), we did not 
have sufficient time to include this change in the computation of the 
proposed FY 2019 wage index, rate setting, and tables. We also stated 
that this new CBSA may affect the budget neutrality factor and wage 
indexes, depending on the impact of the overall payments of the 
hospital located in this new CBSA. In the proposed rule, we provided an 
estimate of this new area's wage index based on the average hourly 
wage, unadjusted for occupational mix, for new CBSA 46300 and the 
national average hourly wages from the wage data for the proposed FY 
2019 wage index. Currently, provider 130002 is the only hospital 
located in Twin Falls County, Idaho, and there are no hospitals located 
in Jerome County, Idaho. Thus, the wage index for CBSA 46300 is 
calculated using the average hourly wage data for one provider 
(provider 130002). In this final rule, we are providing below this new 
area's wage index based on the updated average hourly wage, unadjusted 
for occupational mix, for new CBSA 46300 and the updated national 
average hourly wages from the wage data for the FY 2019 wage index, and 
we are incorporating this change into the final FY 2019 wage index, 
rate setting and tables. Taking the unadjusted average hourly wage of 
$35.8336 of new CBSA 46300 and dividing by the national average hourly 
wage of $42.955567020 results in the FY 2019 wage index of 0.8334 for 
CBSA 46300.
    In the proposed rule, we stated that in the final rule, we would 
incorporate this change into the final FY 2019 wage index, rate setting 
and tables. We did not receive any comments on this issue. Thus, in 
this final rule, we have incorporated this change into the final FY 
2019 wage index, rate setting and tables. As we proposed, for FY 2019, 
we will use the OMB delineations that were adopted beginning with FY 
2015 to calculate the area wage indexes, with updates as reflected in 
OMB Bulletin Nos. 15-01 and 17-01. As noted above, the wage index 
applicable to FY 2019 (with the CBSA update from OMB Bulletin No. 17-01 
specified above) is set forth in Tables A and B available on the CMS 
website at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.
    Once calculated, we stated in the proposed rule that we would apply 
the wage index adjustment to the labor-related portion of the federal 
rate. Each year, we calculate a revised labor-related share, based on 
the relative importance of labor-related cost categories (that is, 
those cost categories that are labor-intensive and vary with the local 
labor market) in the input price index. In the SNF PPS final rule for 
FY 2018 (82 FR 36548 through 36566), we finalized a proposal 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 2019. 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 2019 than the base year weights 
from the SNF market basket.
    We calculate the labor-related relative importance for FY 2019 in 
four steps. First, we compute the FY 2019 price index level for the 
total market basket and each cost category of the market basket. 
Second, we calculate a ratio for each cost category by dividing the FY 
2019 price index level for that cost category by the total market 
basket price index level. Third, we determine the FY 2019 relative 
importance for each cost category by multiplying this ratio by the base 
year (2014) weight. Finally, we add the FY 2019 relative importance for 
each of the labor-related 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 portion of Capital-
Related expenses) to produce the FY 2019 labor-related relative 
importance. Table 8 summarizes the updated labor-related share for FY 
2019, based on IGI's second quarter 2018 forecast with historical data 
through first quarter 2018, compared to the labor-related share that 
was used for the FY 2018 SNF PPS final rule. In the FY 2019 proposed 
rule, we presented the FY 2019 labor-related share based on IGI's first 
quarter 2018 forecast and further stated that if more recent data 
became 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.

[[Page 39174]]



                         Table 8--Labor-Related Relative Importance, FY 2018 and FY 2019
----------------------------------------------------------------------------------------------------------------
                                                                                  Relative          Relative
                                                                                 importance,       importance,
                                                                               labor-related,    labor-related,
                                                                                FY 2018 17:2      FY 2019 18:2
                                                                                forecast \1\      forecast \2\
----------------------------------------------------------------------------------------------------------------
Wages and salaries..........................................................              50.3              50.2
Employee benefits...........................................................              10.2              10.1
Professional Fees: Labor-Related............................................               3.7               3.7
Administrative and facilities support services..............................               0.5               0.5
Installation, Maintenance and Repair Services...............................               0.6               0.6
All Other: Labor Related Services...........................................               2.5               2.5
Capital-related (.391)......................................................               3.0               2.9
                                                                             -----------------------------------
    Total...................................................................              70.8              70.5
----------------------------------------------------------------------------------------------------------------
\1\ Published in the Federal Register; based on second quarter 2017 IGI forecast.
\2\ Based on second quarter 2018 IGI forecast, with historical data through first quarter 2018.

    Tables 9 and 10 show the RUG-IV case-mix adjusted federal rates for 
FY 2019 by labor-related and non-labor-related components. Tables 9 and 
10 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). Additionally, Tables 9 
and 10 do not reflect adjustments which may be made to the SNF PPS 
rates as a result of either the SNF QRP, discussed in section VI.B. of 
this final rule, or the SNF VBP program, discussed in sections III.B.5. 
and VI.C. of this final rule.

BILLING CODE 4120-01-P

[[Page 39175]]

[GRAPHIC] [TIFF OMITTED] TR08AU18.000


[[Page 39176]]


[GRAPHIC] [TIFF OMITTED] TR08AU18.001

BILLING CODE 4120-01-C
    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 2019 (federal rates 
effective October 1, 2018), 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 2018 to the weighted average wage adjustment factor for 
FY 2019. For this calculation, we stated we would use the same FY 2017 
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 did not receive any 
comments regarding our proposed budget neutrality factor calculation. 
Thus, we are finalizing the budget neutrality methodology as proposed. 
The final budget neutrality factor for FY 2019 is 0.9999. We note that 
this is different from the budget neutrality factor (1.0002) provided 
in the FY 2018 SNF PPS proposed rule (83 FR 21031) due to an updated 
wage index file and updated

[[Page 39177]]

claims file used to calculate the budget neutrality factor.
    As discussed above, we have historically used, and propose to 
continue using, pre-reclassified IPPS hospital wage data, unadjusted 
for occupational mix and the rural and imputed floors, as the basis for 
the SNF wage index. That being said, in the proposed rule, we noted 
that we have received recurring comments in prior rulemaking (most 
recently in the FY 2018 SNF PPS final rule (82 FR 36539 through 36541)) 
regarding the development of a SNF-specific wage index. It has been 
suggested that we develop a SNF-specific wage index utilizing SNF cost 
report wage data instead of hospital wage data. We have noted, in 
response that 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. This audit process is quite extensive in 
the case of approximately 3,300 hospitals, and it would be 
significantly more so in the case of approximately 15,000 SNFs. As 
discussed previously in this rule, we believe auditing all SNF cost 
reports, similar to the process used to audit inpatient hospital cost 
reports for purposes of the 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, pre-rural and imputed floor hospital inpatient 
wage data (without the occupational mix adjustment) is appropriate and 
reasonable for the SNF PPS.
    As an alternative to a SNF-specific wage index, it has also been 
suggested that we consider adopting certain wage index policies in use 
under the IPPS, such as geographic reclassification or rural floor. 
Although we have the authority under section 315 of BIPA to establish a 
geographic reclassification procedure specific to SNFs under certain 
conditions, as discussed previously, under BIPA, we cannot adopt a 
reclassification policy until we have collected the data necessary to 
establish a SNF-specific wage index. Thus, we cannot adopt a 
reclassification procedure at this time. With regard to adopting a 
rural floor policy, as we stated in the FY 2017 SNF PPS final rule (82 
FR 36540), 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 2017 SNF PPS final 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.
    Given the perennial nature of these comments and responses on the 
SNF PPS wage index policy, in the proposed rule (89 FR 21032) we 
invited further comments on the issues discussed above. Specifically, 
we requested comment on how a SNF-specific wage index may be developed 
without creating significant administrative burdens for providers, CMS, 
or its contractors. Further, we requested comments on specific 
alternatives we may consider in future rulemaking which could be 
implemented in advance of, or in lieu of, a SNF-specific wage index. A 
discussion of the comments we received, along with our responses, 
appear below.
    Comment: One commenter encouraged CMS to continue using hospital 
wage data when determining the SNF wage index, since it did not have a 
proposal for how to obtain a SNF-specific wage index in a manner that 
does not cause burden on providers.
    Response: We appreciate the commenter's encouragement to continue 
using hospital wage data as a proxy for a SNF wage index.
    Comment: Several commenters recommend that CMS pursue the 
establishment of a SNF-specific wage index. These commenters proposed 
phased-in recommendations to trim hospital wage data (as an interim 
step), to reflect positions staffed in nursing homes, allow for a 
reclassification system, account for occupational mix differences 
between hospitals and each post-acute care (PAC) setting using 
published BLS data, and apply a rural floor. Further, if determining a 
SNF wage index using SNF cost report data is too administratively 
complex, it was recommended that Payroll-based Journal (PBJ) data be 
used. Finally, the commenters recommended communicating with hospitals 
through Medicare Learning Network (MLN) transmittals for education and 
technical support.
    Response: We appreciate the commenter's recommendation for 
collecting SNF cost report wage data to establish a SNF-specific wage 
index. 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 2018 SNF PPS final rule (82 
FR 36540 through 36541)), 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.
    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 trimming hospital 
wage data to reflect positions staffed in nursing homes, weighing it by 
occupational mix data published by the BLS, and using PBJ data. 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 on wage index 
reform across Medicare payment systems. With regard to the PBJ 
recommendation, we will pass this comment to our colleagues managing 
that initiative for further consideration.
    With regard to reclassification and rural floor, as discussed 
above, 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. Furthermore, we do not believe that using 
hospital reclassification data would be

[[Page 39178]]

appropriate as this data is specific to the requesting hospitals and it 
may or may not apply to a given SNF in a given instance. With regard to 
implementing a rural floor, we do not believe it would be prudent at 
this time to adopt such a policy, because MedPAC has recommended 
eliminating the rural floor policy 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/documents/reports/mar13_entirereport.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.'') If we adopted the rural 
floor at this time 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.
    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, pre-
rural and imputed floor hospital inpatient wage data (without the 
occupational mix adjustment) is appropriate and reasonable for the SNF 
PPS. We believe the commenters' recommendations should be part of a 
broader discussion of wage index reform across Medicare payment 
systems. In the event that a SNF-specific wage index is implemented in 
the future, CMS will provide education and support in a manner it deems 
appropriate, which may include MLN transmittals. We will continue to 
monitor closely research efforts surrounding the development of an 
alternative hospital wage index for the IPPS and the potential impact 
or influence of that research on the SNF PPS.
5. SNF Value-Based Purchasing Program
    Beginning with payment for services furnished on October 1, 2018, 
section 1888(h) 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 during 
a fiscal year by 2 percent, and to adjust the resulting rate for a SNF 
by the value-based incentive payment amount earned by the SNF based on 
the SNF's performance score for that fiscal year under the SNF VBP 
Program. To implement these requirements, we proposed to add a new 
paragraph (f) to Sec.  413.337. We did not receive any public comments 
regarding this proposal. Therefore, we are finalizing the addition of 
paragraph (f) to Sec.  413.337 as proposed, without modification.
    Please see section VI.C. of this final rule for further information 
regarding the SNF VBP Program, including a discussion of the 
methodology we will use to make the payment adjustments.
6. Adjusted Rate Computation Example
    Using the hypothetical SNF XYZ, Table 11 shows the adjustments made 
to the federal per diem rates (prior to application of any adjustments 
under the SNF QRP and SNF VBP programs as discussed above) to compute 
the provider's actual per diem PPS payment for FY 2019. We derive the 
Labor and Non-labor columns from Table 9. The wage index used in this 
example is based on the FY 2019 SNF PPS wage index that appears in 
Table A available on the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html. As illustrated 
in Table 11, SNF XYZ's total PPS payment for FY 2019 would equal 
$48,779.14.

                  Table 11--Adjusted Rate Computation Example SNF XYZ: Located in Frederick, MD (Urban CBSA 43524), Wage Index: 0.9880
                                                             [See wage index in Table A] \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Adjusted                Adjusted     Percent    Medicare
                      RUG-IV group                           Labor    Wage index     labor     Non-labor     rate     adjustment     days       Payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
RVX.....................................................     $522.48      0.9880     $516.21     $218.62     $734.83     $734.83          14  $10,287.62
ES2.....................................................      419.50      0.9880      414.47      175.54      590.01      590.01          30   17,700.30
RHA.....................................................      263.59      0.9880      260.43      110.29      370.72      370.72          16    5,931.52
CC2 \2\.................................................      242.99      0.9880      240.07      101.67      341.74      779.17          10    7,791.70
BA2.....................................................      167.52      0.9880      165.51       70.09      235.60      235.60          30    7,068.00
                                                         -----------------------------------------------------------------------------------------------
                                                          ..........  ..........  ..........  ..........  ..........  ..........         100   48,779.14
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Available on the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.
\2\ Reflects a 128 percent adjustment from section 511 of the MMA.

IV. Additional Aspects of the SNF PPS

A. SNF Level of Care--Administrative Presumption

    The establishment of the SNF PPS did not change Medicare's 
fundamental requirements for SNF coverage. However, because the case-
mix classification is based, in part, on the beneficiary's need for 
skilled nursing care and therapy, we have attempted, where possible, to 
coordinate claims review procedures with the existing resident 
assessment process and case-mix classification system discussed in 
section III.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 current 66-group RUG-
IV case-mix classification system to assist in making certain SNF level 
of care determinations.
    In accordance with the regulations at Sec.  413.345, we include in 
each update of the federal payment rates in the Federal Register a 
discussion of the resident classification system that provides the 
basis for case-mix adjustment. Under that discussion, we designate 
those specific classifiers under the case-mix 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 definition up to and including the assessment 
reference date (ARD) on the 5-day Medicare-required assessment.

[[Page 39179]]

    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. The FY 2018 final rule (82 FR 36544) further specified that 
we would henceforth disseminate the standard description of the 
administrative presumption's designated groups via the SNF PPS website 
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html (where such designations appear in the paragraph 
entitled ``Case Mix Adjustment''), and would publish such designations 
in rulemaking only to the extent that we actually intend to make 
changes in them. (We discuss in section V.G. of this final rule the 
modifications to the administrative level of care presumption that we 
are finalizing in order to accommodate the PDPM case-mix classification 
system.)
    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 assignment of one of 
the designated case-mix classifiers (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.

B. Consolidated Billing

    Sections 1842(b)(6)(E) and 1862(a)(18) of the Act (as added by 
section 4432(b) of the BBA 1997) 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. (Please 
refer to section VI.A. of this final rule for a discussion of a 
revision to the regulation text that describes a beneficiary's status 
as a SNF ``resident'' for consolidated billing purposes.) 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 website 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 
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 proposed rule (83 FR 21033), 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

[[Page 39180]]

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 met our criteria for 
exclusion as specified above. We further stated that commenters should 
identify in their comments the specific HCPCS code that is associated 
with the service in question, as well as their rationale for requesting 
that the identified HCPCS code(s) be excluded.
    We note that the original BBRA amendment (as well as the 
implementing regulations) identified a set of excluded services by 
means of specifying HCPCS codes that were in effect as of a particular 
date (in that case, as of July 1, 1999). Identifying the excluded 
services in this manner made it possible for us to utilize program 
issuances as the vehicle for accomplishing routine updates of the 
excluded codes, to reflect any minor revisions that might subsequently 
occur in the coding system itself (for example, the assignment of a 
different code number to the same service). Accordingly, 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, 2018). 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.
    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: Some commenters reiterated previous recommendations 
regarding the exclusion of certain drugs from consolidated billing that 
had been submitted and addressed repeatedly in a number of prior 
rulemaking cycles. One such recommendation involved excluding the 
commonly used prostate cancer drug Lupron[reg] (leuprolide acetate). 
Other commenters once again raised the issue of nursing home residents 
bringing their own medications, as a means of minimizing the nursing 
home's cost of caring for the resident. Still another reiterated 
previous recommendations to exclude a broader range of expensive drugs 
beyond the category of chemotherapy alone, citing anecdotal evidence 
that leaving such drugs within the SNF PPS bundle may, among other 
things, create a disincentive for admitting those patients who require 
them.
    Response: For the reasons discussed previously in prior rulemaking, 
the particular drugs cited in these comments remain subject to 
consolidated billing. In the case of leuprolide acetate, the most 
recent discussion appears in the SNF PPS final rule for FY 2015 (79 FR 
45642, August 5, 2014), which explained that this drug is unlikely to 
meet the criterion of ``low probability'' specified in the BBRA. 
Regarding the issue of nursing homes having residents supply their own 
medications, the SNF PPS final rule for FY 2018 (82 FR 36548, August 4, 
2017) explained that the applicable terms of the SNF's provider 
agreement would preclude this practice, in that they require the SNF to 
accept Medicare's payment for covered services as payment in full. 
Finally, the issue of establishing a broader exclusion that would 
encompass expensive non-chemotherapy drugs was addressed in the SNF PPS 
final rule for FY 2017 (81 FR 51985, August 5, 2016), which explained 
that existing law does not provide for such an expansion. In addition, 
it is worth noting in this context that in accounting more accurately 
for the costs of NTA services such as drugs, the PDPM model has the 
potential to ameliorate some of the concerns cited in these comments.
    Comment: One commenter urged us to expand the scope of the 
chemotherapy exclusion, advancing an interpretation of the Secretary's 
authority under section 1888(e)(2)(A)(iii)(II) of the Act to designate 
``additional'' chemotherapy items for exclusion as not actually being 
restricted to the types of ``high-cost, low probability'' chemotherapy 
items and services described elsewhere in that provision, and further 
suggesting that identifying a given item or service as either ``high-
cost'' or ``low probability'' alone should be sufficient grounds for 
its exclusion. The commenter also submitted well over 100 codes that it 
suggested should be added to the chemotherapy portion of the exclusion 
list. The commenter reiterated previous recommendations to expand the 
existing chemotherapy exclusion to encompass related drugs such as 
anti-emetics (anti-nausea drugs)--which, while they do not in 
themselves fight cancer, are commonly administered along with the 
chemotherapy drug to ameliorate its side effects. While we have, in 
fact, already addressed such recommendations repeatedly in previous 
rulemaking (most recently, in the FY 2015 SNF PPS final rule (79 FR 
45642, August 5, 2014)), the commenter cited in further support of its 
position the similarity between the recommended approach and the 
existing policy under the dialysis exclusion from consolidated billing, 
in which the exclusion encompasses related services along with the 
dialysis itself. In addition, the commenter reiterated previous 
concerns about the complexity of the existing set of consolidated 
billing exclusions, suggesting that it should be streamlined and 
simplified.
    Response: Approximately two-thirds of the codes that the commenter 
submitted already appear on the chemotherapy exclusion list. Of the 
remaining codes, several were already in existence in 1999 when the 
BBRA enacted the statutory ranges of excluded codes, but were skipped 
over by those ranges; as discussed repeatedly in previous rulemaking--
most recently, in the FY 2018 SNF PPS final rule (82 FR 36547, August 
4, 2017)--this action indicates that such drugs were 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. Still others were codes such as those for anti-emetic 
(anti-nausea) drugs, which serve to address the chemotherapy drug's 
side effects rather than actually fighting the cancer itself; as we 
have noted repeatedly in prior rulemaking (most recently, in the FY 
2015 SNF PPS final rule, 79 FR 45642, August 5, 2014), such drugs do 
not, in fact, represent ``chemotherapy'' (that is, cancer-fighting) 
drugs within the meaning of this exclusion. Further, the commenter's 
proposed interpretation suggesting that the exclusion is not restricted 
to ``high-cost, low probability'' chemotherapy services, or that a 
given chemotherapy service need only be either ``high-cost'' or ``low 
probability'' alone in order to qualify for exclusion would not be 
consistent with Congress' stated intent with respect to this provision. 
In fact, in the above-cited BBRA Conference Report (H.R. Rep. 106-479 
at 854 (1999) (Conf. Rep.)), the Congress clearly specified the overall 
purpose of this provision: ``This provision is an attempt to exclude 
from the PPS certain services and costly items that are provided 
infrequently in SNFs'' (emphasis added); thus, any ``additional'' 
chemotherapy services that the Secretary might designate for exclusion 
under this authority, like those already excluded, would remain subject 
to both the ``high-cost'' and ``low

[[Page 39181]]

probability'' thresholds. Regarding the commenter's further suggestion 
that the dialysis exclusion might serve as a possible precedent for 
broadening the chemotherapy exclusion to include related services, we 
note that as one of the BBA 1997's original set of consolidated billing 
exclusions enacted in clause (ii) of section 1888(e)(2)(A) of the Act, 
the dialysis exclusion fundamentally differs from the BBRA's 
subsequent, more targeted set of exclusions in clause (iii) of that 
section (such as the one for chemotherapy) in that the BBA 1997 
excluded entire service categories from consolidated billing, whereas 
the BBRA focused more narrowly on excluding certain designated ``high-
cost, low probability'' services, identified by HCPCS code, within 
several broader categories that otherwise remained subject to the 
provision. In the FY 2015 SNF PPS final rule (79 FR 45644, August 5, 
2014), we specifically contrasted the relatively broad exclusions 
enacted in the BBA 1997 with the more narrowly targeted BBRA 
exclusions, in the context of another one of the latter exclusions that 
involves radioisotope services. In that context, we noted that the 
statutory exclusion for ``radioisotope services'' at section 
1888(e)(2)(A)(iii)(IV) of the Act stands in marked contrast, for 
example, to the ones for dialysis and erythropoietin (EPO) at section 
1888(e)(2)(A)(ii) of the Act, which consist of--and, in fact, are 
defined by--explicit cross-references to the corresponding Part B 
benefit categories appearing in sections 1861(s)(2)(F) and 
1861(s)(2)(O) of the Act, respectively. Under this framework, the scope 
of the consolidated billing provision's dialysis exclusion is 
effectively defined by the scope of coverage under the separate Part B 
dialysis benefit at section 1861(s)(2)(F) of the Act, which would 
encompass dialysis-related services along with the dialysis itself. By 
contrast, the more targeted BBRA exclusions in areas such as 
chemotherapy and radioisotope services focus specifically on those 
particular services that are directly designated as in themselves 
meeting the applicable criteria for exclusion.
    Finally, regarding the comment about the complexity of this 
provision, in the FY 2010 SNF PPS final rule (74 FR 40355, August 11, 
2009), we noted in response to a previous, similar comment that while 
the commenter's interest in promoting improved ease of administration 
is understandable, current law contains no authority to effect a 
comprehensive overhaul of the existing requirements administratively. 
However, we would also note in this context that we continue to conduct 
an active educational and training initiative on the consolidated 
billing provision that includes the following:
     A recently updated and expanded set of consolidated 
billing instructions in Chapter 6 of the Medicare Claims Processing 
Manual (available online at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c06.pdf), at Sec. Sec.  10-
20.6;
     Addressing questions that arise on this topic during CMS's 
recurring nationwide SNF/Long-Term Care Open Door Forums (https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/ODF_SNFLTC.html);
     Development of sample model agreements between SNFs and 
their suppliers, which are posted online for review at our ``Best 
Practices'' website (at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/BestPractices.html); and
     Creation of a web-based training (WBT) module accessible 
from the Medicare Learning Network (MLN) website at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/WebBasedTraining.html, which offers interactive online 
training on consolidated billing.
    Comment: One commenter recommended for exclusion a pair of oral 
chemotherapy drugs, ZYTIGA[reg] (abiraterone acetate) and ERLEADA[reg] 
(apalutamide), which are used in treating certain uncommon and 
otherwise resistant forms of prostate cancer. The commenter 
acknowledged our previous discussion of oral drugs in this context in 
the FY 2017 SNF PPS final rule (81 FR 51985, August 5, 2016), which 
described them as not reasonably characterized as meeting the BBRA's 
chemotherapy exclusion criterion of ``requiring special staff expertise 
to administer.'' However, the commenter then went on to point out that 
the accompanying Conference Report language (H. Conf. Rep. No. 106-479 
at 854), in discussing the statutory exclusion of ``high-cost, low 
probability'' chemotherapy items, lists as examples those drugs that 
``. . . are not typically administered in a SNF, or are exceptionally 
expensive, or are given as infusions, thus requiring special staff 
expertise to administer'' (emphasis added). Thus, the commenter 
suggested that while the Conference Report language itself specifies 
``high-cost, low probability'' as the applicable standard for the 
chemotherapy exclusion, its use of the word ``or'' in the specific 
context of ``requiring special staff expertise to administer'' 
identifies this particular criterion as merely an illustrative example 
that is not an absolute prerequisite for meeting the standard in all 
cases. The commenter also acknowledged our explanation in the FY 2015 
SNF PPS final rule (79 FR 45642, August 5, 2014) in connection with a 
previous comment regarding ZYTIGA[reg] and another oral chemotherapy 
drug, REVLIMID[reg] (lenalidomide), that it would not be operationally 
feasible to utilize a miscellaneous ``not otherwise specified'' (NOS) 
code such as J8999 to effect such an exclusion, and then urged us to 
consider other options, such as establishing a separate code or 
modifier for the particular drugs in question, or utilizing the 
already-existing National Drug Codes (NDCs) that are specific to those 
drugs. Other commenters similarly recommended the oral chemotherapy 
drugs REVLIMID[reg] and GLEEVEC[reg] (imatinib mesylate) for exclusion.
    Response: We believe that the commenter's point that an oral 
chemotherapy drug which does not require ``special staff expertise to 
administer'' can nonetheless qualify for exclusion as long as it can 
otherwise meet the ``high-cost, low probability'' standard merits 
further consideration. However, we note that the four oral chemotherapy 
drugs at issue here differ from previously-excluded, non-oral 
chemotherapy drugs in that they are not covered under Part B. We note 
that while Part B would authorize coverage for drugs (including those 
chemotherapy drugs that are excluded from consolidated billing under 
section 1888(e)(2)(A)(iii)(II) of the Act) as either an incident to a 
physician's professional services (under section 1861(s)(2)(A) of the 
Act) or as an outpatient hospital service (under section 1861(s)(2)(B) 
of the Act), this authority is specifically limited in both cases to 
those drugs ``that are not usually self-administered by the patient,'' 
thus effectively excluding oral drugs as a class. Further, while Part B 
does, in fact, include a specific benefit category for oral 
chemotherapy drugs (at section 1861(s)(2)(Q) of the Act), that benefit 
is restricted to those with the same indication and active 
ingredient(s) as a covered non-oral anti-cancer drug, which is not the 
case for the specific four drugs in question.
    Because the drugs at issue here would not be covered under Part B, 
we believe that the applicable provisions at section 1888(e)(2)(A) may 
not provide a basis for excluding them from consolidated billing. 
Accordingly, because of the need for further consideration of this

[[Page 39182]]

issue, we are unable to adopt the commenters' recommendations at this 
time.
    Comment: A few commenters reiterated previous recommendations to 
expand the existing exclusion for certain high-intensity outpatient 
hospital services to encompass non-hospital settings as well.
    Response: Similar concerns have been raised and addressed 
repeatedly in prior rulemaking (most recently, in the FY 2018 SNF PPS 
final rule (82 FR 36547, August 4, 2017)), as follows:
     As noted in numerous previous rules, as well as in 
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), 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. Moreover, 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.
     Ever since its inception, this exclusion was intended to 
be hospital-specific; as explained in the original SNF PPS interim 
final rule (63 FR 26298, May 12, 1998), 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), in which we explained that a key concern 
underlying the development of the consolidated billing exclusion of 
certain outpatient hospital services specifically involved 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 noted at that time that we would not be 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 (70 FR 45049, August 4, 2005) 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.
    Comment: Several commenters reiterated comments submitted 
previously during the FY 2016 rulemaking cycle in the context of the 
SNF VBP provision, in which they had sought to portray a portable x-ray 
service's transportation and setup as a separately billable 
``physician'' service by suggesting that such activities should 
appropriately be regarded as part of the diagnostic test's professional 
component (PC) for interpreting the test results rather than the 
technical component (TC) for performing the test itself. They now 
reiterated those same comments in the context of the PDPM, and 
additionally indicated that allowing these services to be paid 
separately outside of the Part A bundle would be consistent with the 
proration policy that applies under Part B when a single portable x-ray 
visit serves multiple patients, under which the trip itself is 
allocated among all of the patients served (regardless of payment 
source) in order to calculate the prorated payment amount that applies 
specifically to each of the Part B patients. Some of the commenters 
also cited certain HCPCS codes, such as R0076 (``transportation of 
portable EKG to facility or location, per patient''), and suggested 
that all of the ``medical and other health services'' enumerated in 
section 1861(s) of the Act--including the diagnostic test benefit at 
section 1861(s)(3) of the Act--should be regarded as excluded 
``physician'' services.
    Response: As we explained previously in the FY 2016 SNF PPS final 
rule (80 FR 46408, August 4, 2015), we do not share the view of those 
commenters who would categorize a portable x-ray service's 
transportation and setup as part of the separately billable PC. In that 
discussion, we cited Sec.  90.5 of the Medicare Claims Processing 
Manual, Chapter 13 (available online at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c13.pdf), 
which states that the bundled TC (to which consolidated billing 
applies) specifically includes ``any associated transportation and 
setup costs.'' As indicated in the FY 2016 SNF PPS final rule (80 FR 
46408, August 4, 2015), to be considered a separately billable 
``physician'' service in this context, a given service must not only be 
furnished personally by a physician, but must actually be a type of 
service that ordinarily requires such performance; we further noted 
that a portable x-ray service's transportation and setup would never 
meet these criteria, as the service's excluded PC relates solely to 
reading the x-ray rather than taking it, and the physician's personal 
performance clearly would not be required for activities such as 
driving the supplier's vehicle to the SNF, or setting up the equipment 
once it arrives there.
    Further, we believe the comments that cited the proration policy in 
this context (which involves a single portable x-ray trip that serves 
multiple patients) may reflect a certain amount of misunderstanding 
about the proration policy's actual nature and purpose. As explained in 
the Medicare Physician Fee Schedule (MPFS) final rule for calendar year 
(CY) 2016 (80 FR 70886, November 16, 2015), the reason for allocating 
such a trip among all of the patients served is to ensure that Medicare 
Part B should not pay for more than its share of the transportation 
costs for portable x-ray services (80 FR 71068 through 71069). However, 
while all of the patients served (both the Part B and non-Part B 
patients) would be included in calculating the proration itself, the 
resulting prorated amount would be payable only for the Part B 
patients. By contrast, for any Part A SNF residents served by the same 
trip, the transportation cost associated with the portable x-ray 
service would be subsumed in the SNF's payment to the supplier for the 
bundled TC, as discussed above. In terms of Part A payment, that 
bundled TC, in turn, would be included (along with all other bundled 
services) within the global PPS per diem that the SNF receives for the 
covered Part A stay itself. Moreover, the SNF's actual payment amount 
to its supplier in this scenario would not be tied to the prorated 
payment amount made for the Part B patients served on the same trip; as 
explained in Sec.  70.4 of the Medicare Benefit Policy Manual, Chapter 
8 (available online at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c08.pdf), for a bundled service, the 
specific details of the ensuing payment arrangement between the SNF and 
the outside supplier (such as the actual payment

[[Page 39183]]

amount and timeframe) represent a private, ``marketplace'' transaction 
that is negotiated between the parties themselves.
    Regarding the suggestion that all of the Part B ``medical and other 
health services'' specified in section 1861(s) of the Act (including 
diagnostic tests such as portable x-ray services) should be considered 
physician services, we note that the physician services benefit at 
section 1861(s)(1) of the Act actually represents only a small subset 
of the overall ``medical and other health services'' enumerated 
throughout section 1861(s) of the Act, and that the diagnostic test 
benefit at section 1861(s)(3) of the Act (which would encompass the TC 
for a portable x-ray service) is, in fact, a separate and distinct 
benefit category from the one at section 1861(s)(1) of the Act for 
physician services. Finally, regarding the comments on certain HCPCS 
codes, we acknowledge that among the various consolidated billing 
exclusions listed in section 1888(e)(2)(A)(ii) of the Act are 
``transportation costs of electrocardiogram equipment for 
electrocardiogram test services (HCPCS code R0076).'' However, that 
portion of the law additionally specifies that this particular 
exclusion is in effect ``only with respect to services furnished during 
1998;'' accordingly, the statutory exclusion for these particular 
services has long since expired.

C. Payment for SNF-Level Swing-Bed Services

    Section 1883 of the Act permits certain small, rural hospitals to 
enter into a Medicare swing-bed agreement, under which the hospital can 
use its beds to provide either acute- or SNF-level care, as needed. For 
critical access hospitals (CAHs), Part A pays on a reasonable cost 
basis for SNF-level services furnished under a swing-bed agreement. 
However, in accordance with section 1888(e)(7) of the Act, 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 website at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html. We refer 
readers to section V.D.2. of this final rule for a discussion of the 
revisions we are finalizing to the MDS 3.0 swing-bed assessment 
effective October 1, 2019.

V. Revisions to SNF PPS Case-Mix Classification Methodology

A. Background and General Comments

    In the FY 2019 SNF PPS proposed rule, we discussed our proposed 
changes to the SNF PPS, specifically the proposed comprehensive 
revisions to the SNF PPS case-mix classification system whereby we 
proposed to replace the current RUG-IV system with the Patient Driven 
Payment Model (PDPM) effective October 1, 2019. In section V.A of the 
FY 2019 SNF PPS proposed rule (83 FR 21034-21036), we discuss the basis 
for the proposed PDPM and our reasons for proposing to replace the 
existing case-mix classification system with the PDPM, effective 
October 1, 2019.
    Section 1888(e)(4)(G)(i) of the Act requires the Secretary to make 
an adjustment to the per diem rates to account for case-mix. The 
statute specifies that the adjustment is to be based on both a resident 
classification system that the Secretary establishes that accounts for 
the relative resource use of different resident types, as well as 
resident assessment and other data that the Secretary considers 
appropriate.
    In general, the case-mix classification system currently used under 
the SNF PPS classifies residents into payment classification groups, 
called RUGs, based on various resident characteristics and the type and 
intensity of therapy services provided to the resident. Under the 
existing SNF PPS methodology, there are two case-mix-adjusted 
components of payment: Nursing and therapy. Each RUG is assigned a CMI 
for each payment component to reflect relative differences in cost and 
resource intensity. The higher the CMI, the higher the expected 
resource utilization and cost associated with residents assigned to 
that RUG. The case-mix-adjusted nursing component of payment reflects 
relative differences in a resident's associated nursing and non-therapy 
ancillary (NTA) costs, based on various resident characteristics, such 
as resident comorbidities, and treatments. The case-mix-adjusted 
therapy component of payment reflects relative differences in a 
resident's associated therapy costs, which is based on a combination of 
PT, OT, and SLP services. Resident classification under the existing 
therapy component is based primarily on the amount of therapy the SNF 
chooses to provide to a SNF resident. Under the RUG-IV model, residents 
are classified into rehabilitation groups, where payment is determined 
primarily based on the intensity of therapy services received by the 
resident, and into nursing groups, based on the intensity of nursing 
services received by the resident and other aspects of the resident's 
care and condition. However, only the higher paying of these groups is 
used for payment purposes. For example, if a resident is classified 
into a both the RUA (Rehabilitation) and PA1 (Nursing) RUG-IV groups, 
where RUA has a higher per-diem payment rate than PA1, the RUA group is 
used for payment purposes. It should be noted that the vast majority of 
Part A covered SNF days (over 90 percent) are paid using a 
rehabilitation RUG. A variety of concerns have been raised with the 
current SNF PPS, specifically the RUG-IV model, which we discuss below.
    When the SNF PPS was first implemented in 1998 (63 FR 26252), we 
developed the RUG-III case-mix classification model, 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 CMIs. 
This initial RUG-III model was refined by changes finalized in the FY 
2006 SNF PPS final rule (70 FR 45032), which included adding nine case-
mix groups to the top of the original 44-group RUG-III hierarchy, which 
created the RUG-53 case-mix model.
    In the FY 2010 SNF PPS proposed rule (74 FR 22208), we proposed the 
RUG-IV model based on, among other reasons, concerns that incentives in 
the SNF PPS had changed the relative amount of nursing resources 
required to treat SNF residents (74 FR 22220). These concerns led us to 
conduct a new

[[Page 39184]]

Staff Time Measurement (STM) study, the Staff Time and Resource 
Intensity Verification (STRIVE) project, which served as the basis for 
developing the current SNF PPS case-mix classification model, RUG-IV, 
which became effective in FY 2011. At that time, we considered 
alternative case mix models, including predictive models of therapy 
payment based on resident characteristics; however, we had a great deal 
of concern that by separating payment from the actual provision of 
services, the system, and more importantly, the beneficiaries would be 
vulnerable to underutilization (74 FR 22220). Other options considered 
at the time included a non-therapy ancillary (NTA) payment model based 
on resident characteristics (74 FR 22238) and a DRG-based payment model 
that relied on information from the prior inpatient stay (74 FR 22220); 
these and other options are discussed in detail in a CMS Report to 
Congress issued in December 2006 (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/RC_2006_PC-PPSSNF.pdf).
    As we explained in the proposed rule (83 FR 21034), in the years 
since we implemented the SNF PPS, finalized RUG-IV, and made statements 
regarding our concerns about underutilization of services in previously 
considered models, we have witnessed a significant trend that has 
caused us to reconsider these concerns. More specifically, as discussed 
in section V.E. of the FY 2015 SNF PPS proposed rule (79 FR 25767), we 
documented and discussed trends observed in therapy utilization in a 
memo entitled ``Observations on Therapy Utilization Trends'' (which may 
be accessed at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Therapy_Trends_Memo_04212014.pdf). The two 
most notable trends discussed in that memo were that the percentage of 
residents classifying into the Ultra-High therapy category has 
increased steadily and, of greater concern, that the percentage of 
residents receiving just enough therapy to surpass the Ultra-High and 
Very-High therapy thresholds has also increased. In that memo, we state 
``the percentage of claims-matched MDS assessments in the range of 720 
minutes to 739 minutes, which is just enough to surpass the 720 minute 
threshold for RU groups, has increased from 5 percent in FY 2005 to 33 
percent in FY 2013'' and this trend has continued since that time. We 
stated in the proposed rule (83 FR 21035) that while it might be 
possible to attribute the increasing share of residents in the Ultra-
High therapy category to increasing acuity within the SNF population, 
we believe the increase in ``thresholding'' (that is, of providing just 
enough therapy for residents to surpass the relevant therapy 
thresholds) is a strong indication of service provision predicated on 
financial considerations rather than resident need. We discussed this 
issue in response to comments in the FY 2015 SNF PPS final rule. In 
that rule, in response to comments regarding the lack of ``current 
medical evidence related to how much therapy a given resident should 
receive,'' we stated that with regard to the comments which highlight 
the lack of existing medical evidence for how much therapy a given 
resident should receive, we would note that the number of therapy 
minutes provided to SNF residents within certain therapy RUG categories 
is, in fact, clustered around the minimum thresholds for a given 
therapy RUG category. We further stated that given the comments 
highlighting the lack of medical evidence related to the appropriate 
amount of therapy in a given situation, it is all the more concerning 
that practice patterns would appear to be as homogenized as the data 
would suggest. (79 FR 45651).
    In response to comments which highlighted potential explanatory 
factors for the observed trends, such as internal pressure within SNFs 
that would override clinical judgment, we stated that we found these 
potential explanatory factors troubling and entirely inconsistent with 
the intended use of the SNF benefit. Specifically, the minimum therapy 
minute thresholds for each therapy RUG category are certainly not 
intended as ceilings or targets for therapy provision. As discussed in 
Chapter 8, Section 30 of the Medicare Benefit Policy Manual (Pub. 100-
02), to be covered, the services provided to a SNF resident must be 
``reasonable and necessary for the treatment of a patient's illness or 
injury, that is, are consistent with the nature and severity of the 
individual's illness or injury, the individual's particular medical 
needs, and accepted standards of medical practice.'' Therefore, we 
stated that services which are not specifically tailored to meet the 
individualized needs and goals of the resident, based on the resident's 
condition and the evaluation and judgment of the resident's clinicians, 
may not meet this aspect of the definition for covered SNF care, and we 
stated we believe that internal provider rules should not seek to 
circumvent the Medicare statute, regulations and policies, or the 
professional judgment of clinicians. (79 FR 45651 through 45652).
    In addition to this discussion of observed trends, we noted in the 
proposed rule (83 FR 21035) that others have also identified potential 
areas of concern within the current SNF PPS. The two most notable 
sources are the Office of the Inspector General (OIG) and the Medicare 
Payment Advisory Commission (MedPAC).
    For the OIG, three recent OIG reports describe the OIG's concerns 
with the current SNF PPS. In December 2010, the OIG released a report 
entitled ``Questionable Billing by Skilled Nursing Facilities'' (which 
may be accessed at https://oig.hhs.gov/oei/reports/oei-02-09-00202.pdf). In this report, among its findings, the OIG found that 
``from 2006 to 2008, SNFs increasingly billed for higher paying RUGs, 
even though beneficiary characteristics remained largely unchanged'' 
(OEI-02-09-00202, ii), and among other things, recommended that we 
should ``consider several options to ensure that the amount of therapy 
paid for by Medicare accurately reflects beneficiaries' needs'' (OEI-
02-09-00202, iii). Further, in November 2012, the OIG released a report 
entitled ``Inappropriate Payments to Skilled Nursing Facilities Cost 
Medicare More Than a Billion Dollars in 2009'' (which may be accessed 
at https://oig.hhs.gov/oei/reports/oei-02-09-00200.pdf). In this 
report, the OIG found that ``SNFs billed one-quarter of all claims in 
error in 2009'' and that the ``majority of the claims in error were 
upcoded; many of these claims were for ultrahigh therapy.'' (OEI-02-09-
00200, Executive Summary). Among its recommendations, the OIG stated 
that ``the findings of this report provide further evidence that CMS 
needs to change how it pays for therapy'' (OEI-02-09-00200, 15). 
Finally, in September 2015, the OIG released a report entitled ``The 
Medicare Payment System for Skilled Nursing Facilities Needs to be 
Reevaluated'' (which may be accessed at https://oig.hhs.gov/oei/reports/oei-02-13-00610.pdf). Among its findings, the OIG found that 
``Medicare payments for therapy greatly exceed SNFs' costs for 
therapy,'' further noting that ``the difference between Medicare 
payments and SNFs' costs for therapy, combined with the current payment 
method, creates an incentive for SNFs to bill for higher levels of 
therapy than necessary'' (OEI-02-13-00610, 7). Among its 
recommendations, the OIG stated that CMS should ``change the method of 
paying for therapy'', further stating that ``CMS should accelerate its 
efforts to develop and implement a new method of paying for therapy 
that relies on

[[Page 39185]]

beneficiary characteristics or care needs.'' (OEI-02-13-00610, 12).
    For MedPAC's recommendations in this area, Chapter 8 of MedPAC's 
March 2017 Report to Congress (available at http://www.medpac.gov/docs/default-source/reports/mar17_medpac_ch8.pdf) includes the following 
recommendation: ``The Congress should . . . direct the Secretary to 
revise the prospective payment system (PPS) for skilled nursing 
facilities'' and ``. . . make any additional adjustments to payments 
needed to more closely align payment with costs.'' (March 2017 MedPAC 
Report to Congress, 220). This recommendation is seemingly predicated 
on MedPAC's own analysis of the current SNF PPS, where they state that 
``almost since its inception the SNF PPS has been criticized for 
encouraging the provision of excessive rehabilitation therapy services 
and not accurately targeting payments for nontherapy ancillaries'' 
(March 2017 MedPAC Report to Congress, 202). Finally, with regard to 
the possibility of changing the existing SNF payment system, MedPAC 
stated that ``since 2015, [CMS] has gathered four expert panels to 
receive input on aspects of possible design features before it proposes 
a revised PPS'' and further that ``the designs under consideration are 
consistent with those recommended by the Commission'' (March 2017 
MedPAC Report to Congress, 203).
    As we discussed in the proposed rule (83 FR 21035), the combination 
of the observed trends in the current SNF PPS discussed above (which 
strongly suggest that providers may be basing service provision on 
financial reasons rather than resident need), the issues raised in the 
OIG reports discussed above, and the issues raised by MedPAC, has 
caused us to consider significant revisions to the existing SNF PPS, in 
keeping with our overall responsibility to ensure that payments under 
the SNF PPS accurately reflect both resident needs and resource 
utilization.
    We explained in the proposed rule (83 FR 20135 through 21036) that 
under the RUG-IV system, therapy service provision determines not only 
therapy payments but also nursing payments. This is because, as noted 
above, payment is based on the highest RUG category that the resident 
could be assigned to, so only one of a resident's assigned RUG groups, 
rehabilitation or nursing, is used for payment purposes. Each 
rehabilitation group is assigned a nursing CMI to reflect relative 
differences in nursing costs for residents in those rehabilitation 
groups, which is less specifically tailored to the individual nursing 
costs for a given resident than the nursing CMIs assigned for the 
nursing RUGs. We explained that, as mentioned above, because most 
resident days are paid using a rehabilitation RUG, and since assignment 
into a rehabilitation RUG is based on therapy service provision, this 
means that therapy service provision effectively determines nursing 
payments for those residents who are assigned to a rehabilitation RUG. 
Thus, we stated that we believe any attempts to revise the SNF PPS 
payment methodology to better account for therapy service provision 
under the SNF PPS would need to be comprehensive and affect both the 
therapy and nursing case-mix components. Moreover, we noted that in the 
FY 2015 SNF PPS final rule, in response to comments regarding access 
for certain ``specialty'' populations (such as those with complex 
nursing needs), that we agreed with the commenter that access must be 
preserved for all categories of SNF residents, particularly those with 
complex medical and nursing needs. We stated that, as appropriate, we 
would examine our current monitoring efforts to identify any revisions 
which may be necessary to account appropriately for these populations. 
(79 FR 45651).
    In addition, MedPAC, in its March 2017 Report to Congress, stated 
that it has previously recommended that we revise the current SNF PPS 
to ``base therapy payments on patient characteristics (not service 
provision), remove payments for NTA services from the nursing 
component, [and] establish a separate component within the PPS that 
adjusts payments for NTA services'' (March 2017 MedPAC Report to 
Congress, 202). Accordingly, included among the proposed revisions we 
discussed in the proposed rule were revisions to the SNF PPS to address 
longstanding concerns regarding the ability of the RUG-IV system to 
account for variation in nursing and NTA services.
    In May 2017, CMS released an Advance Notice of Proposed Rulemaking 
with comment (82 FR 20980) (the ANPRM), in which we discussed the 
history of and analyses conducted during the SNF Payment Models 
Research (PMR) project, which sought to address these concerns with the 
RUG-IV model, and sought comments on a possible replacement to the 
current RUG-IV model, which we called the Resident Classification 
System, Version I (RCS-I). As we stated in the proposed rule (83 FR 
21036), this model was intended as an improvement over the RUG-IV model 
because it would better account for resident characteristics and care 
needs, thus better aligning SNF PPS payments with resource use and 
eliminating therapy provision-related financial incentives inherent in 
the current payment model used in the SNF PPS. We received many 
comments from stakeholders on a wide variety of aspects of the RCS-I 
model. After considering these comments, we made significant revisions 
to the RCS-I model to account for the concerns or questions raised by 
stakeholders, resulting in a revised case-mix classification model 
which we proposed in the FY 2019 SNF PPS proposed rule (83 FR 21018). 
To make clear the purpose and intent of replacing the existing RUG-IV 
system, the model we proposed is called the Patient-Driven Payment 
Model (PDPM). We refer readers to the FY 2019 SNF PPS proposed rule (83 
FR 21036) for a discussion of the SNF PMR project, and the resulting 
SNF PMR technical report which contains supporting language and 
documentation related to the RCS-I model (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/SNF_Payment_Models_Research_Technical_Report201704.pdf), and the SNF 
PDPM technical report which presents analyses and results that were 
used to develop the proposed PDPM (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/PDPM_Technical_Report_508.pdf). We invited comments on any and all 
aspects of the proposed PDPM, including the research analyses described 
in the proposed rule, the SNF PDPM technical report and the SNF PMR 
technical report.
    As further detailed below, and as we stated in the proposed rule 
(83 FR 21036), we believe that the PDPM represents an improvement over 
the RUG-IV model and the RCS-I model because it would better account 
for resident characteristics and care needs while reducing both 
systemic and administrative complexity. To better ensure that resident 
care decisions appropriately reflect each resident's actual care needs, 
we believe it is important to remove, to the extent possible, service-
based metrics from the SNF PPS and derive payment from verifiable 
resident characteristics. In the sections that follow, we describe the 
comprehensive revisions we are implementing to the SNF PPS through the 
PDPM. Additionally, we discuss the comments we received on each of the 
proposed policies, our responses to these comments and the PDPM-related 
policies we are finalizing in this rule.
    Before moving into the specific policy areas, we first discuss 
general comments

[[Page 39186]]

we received on the PDPM, along with our responses.
    Comment: Many commenters expressed support for the goals of the 
proposed PDPM, acknowledging that changes must be made to the current 
payment system. Many commenters also expressed concerns regarding the 
potential impacts on patient care which could result from implementing 
PDPM, specifically that PDPM will introduce new incentives into SNF 
payment that will have a negative impact on patient care. Some 
commenters believe that SNF providers could stint on care, most notably 
therapy services, and that such providers will be overcompensated for 
care that is not being delivered. Some commenters urged CMS to monitor 
the impacts on patient care of implementing PDPM and take action upon 
evidence of adverse trends. One commenter noted that PDPM does not 
correct the problems in the existing reimbursement model, assigning too 
few resources to nursing and NTAs.
    Response: We appreciate the support we have received for PDPM and 
its goals. With respect to the concerns raised by commenters with 
regard to the potential impact of PDPM on patient care, specifically 
the possibility that some providers may stint on care or provide fewer 
services to patients, we plan to monitor closely service utilization, 
payment, and quality trends which may change as a result of 
implementing PDPM. If changes in practice and/or coding patterns arise, 
then we may take further action, which may include administrative 
action against providers as appropriate and/or proposing changes in 
policy (for example, system recalibration, rebasing case-mix weights, 
case mix creep adjustment) to address any concerns. We will also 
continue to work with the HHS Office of Inspector General, should any 
specific provider behavior be identified which may justify a referral 
for additional action.
    With regard to the comment that PDPM does not correct the issues 
with the current reimbursement model and assigns too few resources to 
nursing and NTAs, we would refer the commenter to the impact analysis 
presented in Table 37, which indicates that the broadest shifts in 
payment are to those patients with high nursing and NTA needs.
    Comment: Several commenters raised concerns regarding the use of 
historical data as the basis for developing PDPM. One commenter stated 
that PDPM is overly complex and that the majority of patient days are 
captured in a small number of case-mix groups. One commenter stated 
that because PDPM is based on historical utilization, it does not 
sufficiently reflect current best practices or high quality care.
    Response: Historical data are the only form of data that can be 
used for any data analysis, so it is not clear what other data, that 
are not historical, CMS could have used to develop PDPM. Further, as 
these data are reported by SNFs, we believe that these data should be 
best reflective of SNF costs and patient needs. With regard to the 
comment that the majority of patient days are captured in a small 
number of case-mix groups, we agree with this comment and believe that 
this is precisely part of the motivation for implementing a new case-
mix classification model. The current case-mix model has caused a 
homogenization in patient classification such that the current payment 
model does not adequately reflect differences among SNF patients. We 
believe that PDPM is a significant improvement in this regard, better 
reflecting the myriad differences between SNF patients in terms of 
their characteristics, care needs, and goals.
    With regard to the comment that the historical data do not 
sufficiently reflect current best practices or high quality care, while 
we are concerned about this assertion from a patient care perspective, 
we do not believe that this would affect the accuracy of the reported 
data in terms of reflecting relative differences in costs, which is all 
that is necessary for developing accurate case-mix groups.
    Comment: Several commenters requested clarification on the effect 
of implementing PDPM on the development of a unified Post-Acute Care 
(PAC) PPS and how PDPM would interact with a PAC PPS. One commenter 
requested that CMS establish a panel to advise on payment system 
changes across the PAC continuum.
    Response: As a PAC PPS has not been established, we cannot provide 
guidance as to how the PDPM would interact with such a system, once 
developed. However, given that PDPM shifts away from the current case-
mix model that utilizes service-based metrics as the primary 
determinant of payment for most days paid under the SNF Part A benefit 
to a model that utilizes patient characteristics as the basis for 
payment, and that most other PAC payment systems already rely more 
heavily on patient characteristics within their payment model, we 
believe that PDPM will better align the SNF PPS for this eventual 
transition to a PAC PPS as it brings the SNF PPS closer to those other 
PAC payment systems. We will consider the commenter's recommendation to 
establish a panel on payment system changes across the PAC continuum, 
particularly as we work to develop a PAC PPS.
    Comment: Some commenters suggested that CMS consider including 
quality measures of effective rehabilitation services when evaluating 
the impact of PDPM.
    Response: We appreciate these commenters' suggestion. In monitoring 
the impact of the PDPM, we will consider including measures for a 
variety of service areas as a component of our planned monitoring 
efforts.
    Comment: Several commenters suggested that CMS should establish a 
plan to recalibrate the system to address any unanticipated impacts. 
More specifically, these commenters requested that CMS provide more 
details on plans to recalibrate the system in case of unanticipated 
service and performance changes, as well as plans to recalibrate the 
payment weights associated with the revised payment model.
    Response: We appreciate the suggestions made by these commenters 
with regard to CMS providing plans for recalibrating the payment system 
after implementing PDPM. However, such recalibrations will depend 
largely on the results of our monitoring efforts and could take various 
forms. For example, in the FY 2012 SNF PPS final rule (76 FR 48486), we 
recalibrated the parity adjustment that was intended to ensure that SNF 
payments under RUG-IV matched those that would have been made under 
RUG-III, similar to how the parity adjustment discussed below for PDPM 
is intended to ensure that SNF payments under PDPM mirror those that 
would have been made under RUG-IV. As discussed in that rule, our 
assumptions regarding case-mix distribution that were used to calculate 
the RUG-IV parity adjustment subsequently proved to be inaccurate, 
which caused us to recalculate the RUG-IV parity adjustment in the 
following year. We anticipate similarly monitoring PDPM implementation 
closely and may propose adjustments as appropriate if we discover 
evidence that payments are either higher or lower than anticipated, or 
if provider costs change in such a manner that the current relationship 
between provider costs and provider payments changes from that 
currently observed.
    Comment: One commenter raised the concern that the PDPM model has 
low explanatory power and lacks an objective threshold for inclusion of 
various components in the model. This commenter suggested that if CMS 
intends to update this model with new

[[Page 39187]]

data over time to reflect changes in clinical practice and resource 
utilization, there is a need for a systematic determination of the 
minimum acceptable R-squared values for the model features. Model 
components currently excluded may increase in predictive power over 
time and merit inclusion in future versions of PDPM. In addition, 
current model components may decrease in predictive power such that 
they should be removed from the model.
    Response: Setting an absolute minimum threshold would not only be 
arbitrary but also deviates from the practical use of the R-squared 
metric, which is to evaluate the proportion of variance explained and 
compare models with the same dependent variable vector. Additionally, 
R-squared is not the only measure we use to evaluate PDPM. In fact, 
because the current system is heavily based on service provision and 
most residents are classified into the Ultra-High therapy category, we 
are dealing with a dataset with little explainable variance. Each of 
the PDPM case-mix groups meets clinical expectations, which is a 
convincing validation of the model given the data available. We note 
that with the change to a patient driven model, we expect more 
variation will appear in therapy costs. This will allow for future 
development of models with higher explanatory power.
    Comment: Several commenters requested clarification on how PDPM 
would interact with other CMS initiatives, such as the SNF Quality 
Reporting Program (QRP), Value-Based Purchasing (VBP) program, revised 
conditions of participation and other such initiatives. A few 
commenters also requested clarification on how PDPM accounts for or 
would interact with the Jimmo v Sebelius settlement surrounding the 
provision of maintenance therapy. These commenters requested 
clarification on how CMS would track maintenance therapy services, as 
compared to other forms of therapy. Several commenters requested 
clarification on how Comprehensive Person-Centered Plan maintenance 
services, new Requirements of Participation and other CMS initiatives 
will be factored into CMS burden estimates and that CMS should revise 
existing burden estimates to incorporate these changes.
    Response: We anticipate that PDPM will only serve to strengthen the 
various quality and payment reform initiatives throughout CMS, by 
shifting payment away from the current service-driven model that has 
produced nearly homogenized care for SNF beneficiaries, to a more 
resident-centered model that focuses more on the individual patient's 
needs and characteristics. We also believe that through the use of 
standardized assessment items (as discussed in section V.D. of this 
final rule) and changes to the assessment schedule to mirror that of 
other PAC settings that use a similar admission/discharge assessment 
model (as discussed in section V.E. of this final rule), the PDPM would 
better align with the current direction of PAC reform and 
standardization efforts supported by the IMPACT Act.
    With regard to the comment about tracking maintenance services, we 
do not believe it is necessary at this time to track maintenance 
services separately. Such tracking would be burdensome and it would be 
difficult to do so accurately, as it is possible that many patients 
have both maintenance and restorative goals, and allocating therapy 
minutes among these varied goals would be particularly complicated for 
providers.
    With regard to the burden of the Comprehensive Person-Centered 
Plan, new requirements of participation, and other CMS initiatives, the 
burdens estimated in relation to PDPM are only those in relation to 
implementation of the PDPM and its related policies. As the 
Comprehensive Person-Centered Plan and other issues mentioned are 
outside of these PDPM related policies, we do not address the potential 
burden of such issues in this section.
    Comment: Several commenters expressed concerns regarding the 
potential impact of implementing PDPM on Medicaid programs. A few 
commenters raised concerns regarding the impact of PDPM on calculating 
the Upper Payment Limit (UPL), which is utilized as part of calculating 
Medicaid payment rates. One commenter questioned if states would be 
permitted to still use RUG-IV as the basis for estimating the UPL. One 
commenter requested clarification on if any changes would be necessary 
for Medicaid claims systems. One commenter stated that Medicaid 
providers will have less incentive to provide therapy and Medicaid 
beneficiaries will have lower nursing case-mix scores under PDPM, 
thereby incentivizing states to transition to PDPM in order to reduce 
Medicaid spending. Commenters suggested that CMS work closely with 
states, who may wish to transition to PDPM, to ensure a smooth 
transition. Some commenters also stated that, should certain states not 
transition to PDPM, this would mean operating two different payment 
systems. A few commenters requested clarification on if CMS would 
continue to support previous payment systems for states that do not 
make the transition to PDPM or have access to MDS data for Medicaid 
rate-setting purposes. These commenters also requested if CMS could 
provide a further breakdown of certain cost categories, such as NTA 
costs, in a manner that would be more helpful to states in conducting 
UPL calculations.
    Response: We appreciate the commenters' concerns with the potential 
impact of PDPM on Medicaid programs. We agree with the commenters that 
this is an area that deserves significant attention in terms of 
education and training, and we plan to work with states to ensure a 
smooth transition between the current RUG-IV model and PDPM. With 
regard to questions on how PDPM may relate to UPL calculations, these 
calculations are based on how Medicare pays for services under Part A 
and not based on a prior payment system. Therefore, UPL calculations, 
after PDPM has been implemented, would need to be based on the payments 
made under PDPM. That being said, we expect that, because PDPM bases 
payment on patient characteristics and not service utilization, 
payments made under PDPM will more accurately reflect patient needs and 
goals, which should also improve the basis for Medicaid payments which 
may be related to Medicare payments. With regard to having the data 
necessary for such UPL calculations, whether in regard to specific rate 
components (for example, NTA costs) or more generally, we will work 
with states to help ensure that they have the necessary information so 
PDPM implementation does not negatively impact on their ability to 
manage their Medicaid programs.
    With regard to the comment that states may have more of an 
incentive to transition to PDPM in order to reduce Medicaid spending, 
we believe that the primary reason that Medicaid programs may adopt 
PDPM is due to its focus on patient characteristics and goals, rather 
than on service utilization. Given the improvements in Medicare payment 
that this transition represents, we would expect a similar improvement 
in Medicaid payments in states that make this transition.
    With regard to the comment that Medicaid providers will be 
incentivized to provide less therapy or that Medicaid beneficiaries 
will have lower nursing case-mix scores, we would encourage states that 
decide to transition to PDPM to ensure they are monitoring the impacts 
of such a change on their beneficiaries and the care they receive.

[[Page 39188]]

    In terms of those states that opt not to transition to PDPM and 
instead use some form of legacy payment system, we would note that a 
number of states use systems quite distinct from the existing RUG-IV 
model and we are not aware of any difficulties or complexities for 
providers or states in managing these systems concurrently. These 
states still have access to MDS data for ratesetting purposes and 
nothing associated with PDPM implementation, in and of itself, would 
affect state access to MDS data. That being said, we would likely need 
to evaluate the costs and benefits of continued support for certain 
legacy payment systems, most notably any RUG-III based payment models.
    Comment: One commenter requested that CMS consider the possibility 
that some Medicare Advantage plans could reform their payment models to 
mirror PDPM, while others may maintain their existing payment models, 
which could include models that resemble RUG-IV. The commenter 
requested that CMS consider working with those plans that opt to modify 
their payment models to resemble PDPM and consider the impact of having 
multiple payment models that providers must operate under 
simultaneously.
    Response: We acknowledge that some Medicare Advantage plans could 
change their payment models to mirror PDPM, while others may not change 
their payment models in relation to the changes finalized in this rule. 
We would note, however, that, as private plans, Medicare Advantage 
plans currently take a wide variety of forms, with some already 
approximating the structure of PDPM, using patient characteristics 
rather than service utilization as the basis for payment. We will work 
generally with stakeholders, including these private plans, to help 
ensure that adequate education and resources are available for all 
parties.
    Comment: One commenter requested clarification on how CMS will 
track and reconcile patient diagnosis and classification information 
reported at admission with such information at discharge, expressing 
concern regarding what might occur in the case that the information 
from these two points is different, as well as diagnosis or procedural 
information from the preceding hospital stay, noting that some 
information for SNF payment comes from the hospital, and how these 
issues could affect provider risk of alleged improper billing and 
recovery efforts.
    Response: We plan to develop a robust monitoring program that 
utilizes data from many sources, such as assessments, claims, cost 
reports and other data that would prove valuable in assessing both the 
impact of implementing PDPM, as well as identify any provider level 
issues related to PDPM payments. While the vast majority of information 
related to PDPM classification and payment is derived from the SNF, 
there is one area (surgical procedural information) which may come from 
the preceding hospital stay. However, nothing in PDPM should change the 
relationship or need for information between the hospital and SNF, 
given that the information that PDPM requires is no more information 
than the SNF would need simply for basic care planning purposes. As 
such, there should be no impact on improper billing or recovery efforts 
that derive from the implementation of PDPM.
    Comment: One commenter requested clarification on how PDPM will 
address the number of face-to-face hours the registered therapist 
spends treating the patients. This commenter states they have observed 
nursing staff instructed to complete certain activities with patients 
who are receiving therapy.
    Response: PDPM does not address the specific number of face-to-face 
hours that therapists spend with their patients. The expectations for 
what is considered skilled therapy and reasonable and necessary care 
found in Chapter 8 of the Medicare Benefit Policy Manual (https://
www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/
bp102c08.pdf) and the MDS 3.0 RAI manual (https://downloads.cms.gov/files/MDS-30-RAI-Manual-v115-October-2017.pdf) will not change under 
PDPM. We continue to expect that patients will receive high quality 
skilled rehabilitation services based on their individual needs and we 
do not believe that patients should have any nursing care that they 
require reduced because they happen to be receiving therapy. If a 
patient requires nursing care (including restorative nursing), the SNF 
should provide that nursing care as medically necessary. Similarly, if 
a patient requires therapy, the SNF should provide the therapy as 
medically necessary. One should not impact the other and PDPM does not 
affect this either.
    Comment: Several commenters requested clarification about how SNFs 
are expected to comply with Medicare and Medicaid Conditions of 
Participation and whether SNFs will continue to be required to complete 
the discharge assessments required by the Omnibus Budget Reconciliation 
Act (OBRA), as well as the end of therapy-related assessments.
    Response: PDPM is not intended to affect any of the Medicare and 
Medicaid Conditions of Participation for SNFs. Facilities should 
continue to follow these regulations as they always have. Additionally, 
even though under PDPM, the majority of PPS assessments will now be 
removed (as discussed later in this final rule), all OBRA assessments 
will still be required. PDPM will not affect the OBRA requirements. 
With regard to existing therapy-related assessments (the Start of 
Therapy, End of Therapy, and Change of Therapy assessments), these 
assessments would no longer exist under PDPM.
    Comment: Several commenters expressed concern that PDPM may not 
fully account for mild cognitive impairment and encouraged CMS to 
collect more sensitive data, in line with the IMPACT Act, to ensure 
necessary attention to cognition.
    Response: We appreciate these commenters' concerns and also believe 
that attention should be paid to cognition as an area for potential 
future system refinements. However, as the only change in the proposed 
use of cognition as a factor in payment classification is under the SLP 
component, and because for this component, we proposed to use even mild 
cognitive impairment as the basis for a payment classification, we 
believe that PDPM does adequately account for mild cognitive 
impairment. We will consider the commenter's concerns as we continue to 
evaluate potential refinements to our assessment tools.
    Comment: One commenter expressed concern that PDPM does not 
incorporate incentives for quality improvement.
    Response: PDPM, as a case-mix classification system, is intended to 
classify SNF patients for purposes of reimbursement based on the 
resource utilization associated with treating those patients. However, 
there do exist programs, such as the SNF VBP program, that is a part of 
the SNF PPS which does incentivize quality improvement. Therefore, 
while we agree that PDPM, in and of itself, does not include incentives 
for quality improvement, other aspects of the SNF PPS do include such 
incentives.
    Comment: Some commenters requested clarification about the appeals 
process that will be available to help patients in case of shortcomings 
in their care and coverage, including any inaccurate assignments to 
payment classifications.
    Response: We appreciate this comment, but would note that nothing 
associated with PDPM implementation would affect existing patient 
appeal rights or processes.
    Comment: One commenter requested clarification on how items Z0100A 
and

[[Page 39189]]

Z0150A on the MDS would be populated and how the classifications would 
translate to a billable claim code.
    Response: We will provide detail on how these MDS items, which 
relate to patient billing codes, will be populated as part of our 
updates to the MDS manual.
    Comment: One commenter requested clarification on how a patient's 
voice would be heard in a care design driven by medical information.
    Response: While patient case-mix classification, for purposes of 
payment, would be driven by medical information, as occurs under the 
current payment system, care design should be driven by patient goals 
and needs, as well as discussions with the patient and his or her 
family. Further, while under the current payment model over 90 percent 
of patient days are paid for using a therapy RUG, which utilizes only 
therapy minutes and ADLs as the basis for payment, PDPM provides a more 
holistic approach to payment classifications. More specifically, by 
separately adjusting for the nursing component, which utilizes patient 
interviews as a major component of patient classification, we believe 
that this achieves the commenter's goal of elevating the patient's 
voice.
    Comment: Some commenters requested that CMS consider adopting an 
outlier policy as part of the SNF PPS to account for patients whose 
costs far exceed the cost of typical patients. These commenters stated 
that a SNF outlier policy would ensure access to clinically complex 
patients and align with other PAC systems.
    Response: Under the current statutory provisions governing the SNF 
PPS, there is no specific statutory authority for an outlier payment as 
part of the SNF PPS.

B. Revisions to SNF PPS Federal Base Payment Rate Components

1. Background on SNF PPS Federal Base Payment Rates and Components
    Section 1888(e)(4) of the Act requires that the SNF PPS per diem 
federal payment rates be based on FY 1995 costs, updated for inflation 
to the first effective period of the PPS. These base rates are then 
required to be adjusted to reflect differences among facilities in 
patient case-mix and in average wage levels by area. In keeping with 
this statutory requirement, the base per diem payment rates were set in 
1998 and reflect average SNF costs in a base year (FY 1995), updated 
for inflation to the first period of the SNF PPS, which was the 15-
month period beginning on July 1, 1998. The federal base payment rates 
were calculated separately for urban and rural facilities and based on 
allowable costs from the FY 1995 cost reports of hospital-based and 
freestanding SNFs, where allowable costs included all routine, 
ancillary, and capital-related costs (excluding those related to 
approved educational activities) associated with SNF services provided 
under Part A, and all services and items for which payment could be 
made under Part B prior to July 1, 1998.
    In general, routine costs are those included by SNFs in a daily 
service charge and include regular room, dietary, and nursing services, 
medical social services and psychiatric social services, as well as the 
use of certain facilities and equipment for which a separate charge is 
not made. Ancillary costs are directly identifiable to residents and 
cover specialized services, including therapy, drugs, and laboratory 
services. Lastly, capital-related costs include the costs of land, 
building, and equipment and the interest incurred in financing the 
acquisition of such items (63 FR 26253).
    There are four federal base payment rate components which may 
factor into SNF PPS payment. Two of these components, ``nursing case-
mix'' and ``therapy case-mix,'' are case-mix adjusted components, while 
the remaining two components, ``therapy non-case-mix'' and ``non-case-
mix,'' are not case-mix adjusted. While we discussed the details of the 
proposed PDPM and justifications for certain associated policies we 
proposed throughout section V of the FY 2019 SNF PPS proposed rule, we 
note that, as part of the PDPM case-mix model, we proposed to bifurcate 
the ``nursing case-mix'' component of the federal base payment rate 
into two case-mix adjusted components and separate the ``therapy case-
mix'' component of the federal base payment rate into three case-mix 
adjusted components, thereby creating five case-mix adjusted components 
of the federal base per diem rate. More specifically, we proposed to 
separate the ``therapy case-mix'' rate component into a ``Physical 
Therapy'' (PT) component, an ``Occupational Therapy'' (OT) component, 
and a ``Speech-Language Pathology'' (SLP) component. Our rationale for 
separating the therapy case-mix component in this manner is presented 
in section V.D.3.b. of the proposed rule. Based on the results of the 
SNF PMR, we also proposed to separate the ``nursing case-mix'' rate 
component into a ``Nursing'' component and a ``Non-Therapy Ancillary'' 
(NTA) component. Our rationale for proposing to bifurcate the nursing 
case-mix component in this manner is presented in section V.D.3.d. of 
the proposed rule. Given that all SNF residents under PDPM would be 
assigned to a classification group for each of the three proposed 
therapy-related case-mix adjusted components as further discussed 
below, we proposed eliminating the ``therapy non-case-mix'' rate 
component under PDPM and stated that we would distribute the dollars 
associated with this current rate component amongst the proposed PDPM 
therapy components. We also stated in the proposed rule (83 FR 21038) 
that the existing non-case-mix component would be maintained as it is 
currently constituted under the existing SNF PPS. We explained that 
although the case-mix components of the proposed PDPM case-mix 
classification system would address costs associated with individual 
resident care based on an individual's specific needs and 
characteristics, the non-case-mix component addresses consistent costs 
that are incurred for all residents, such as room and board and various 
capital-related expenses. As these costs are not likely to change, 
regardless of what changes we might make to the SNF PPS, we proposed to 
maintain the non-case-mix component as it is currently used.
    In the next section, we discuss the methodology used to create the 
proposed PDPM case-mix adjusted components, as well as the data sources 
used in this calculation. As we stated in the proposed rule (83 FR 
21038), the proposed methodology does not calculate new federal base 
payment rates but simply proposes to modify the existing base rate 
case-mix components for therapy and nursing. The methodology and data 
used in this calculation are based on the data and methodology used in 
the calculation of the original federal payment rates in 1998, as 
further discussed below.
2. Data Sources Utilized for Revision of Federal Base Payment Rate 
Components
    Section II.A.2. of the interim final rule with comment period that 
initially implemented the SNF PPS (63 FR 26256 through 26260) provides 
a detailed discussion of the data sources used to calculate the 
original federal base payment rates in 1998. Except as discussed below, 
we proposed to use the same data sources (that is, cost information 
from FY 1995 cost reports) to determine the portion of the therapy 
case-mix component base rate that would be assigned to each of the 
proposed therapy component base rates (PT, OT, and SLP). As we stated 
in the proposed rule (83 FR 21038), we believe that using the same data 
sources, to the extent possible, that were used to calculate the 
original federal base

[[Page 39190]]

payment rates in 1998 results in base rates for the components that 
resemble as closely as possible what they would have been had these 
components initially been established in 1998. The portion of the 
nursing component base rate that corresponds to NTA costs was already 
calculated using the same data source used to calculate the federal 
base payment rates in 1998. As explained below and in the proposed rule 
(83 FR 21038), we used the previously calculated percentage of the 
nursing component base rate corresponding to NTA costs to set the NTA 
base rate and verified this calculation with the analysis described in 
section V.C.3. of the FY 2019 SNF PPS proposed rule. Therefore, the 
steps described below address the calculations performed to separate 
out the therapy base rates alone.
    As discussed in the proposed rule (83 FR 21038), the percentage of 
the current therapy case-mix component of the federal base payment 
rates that would be assigned to the three proposed therapy components 
(PT, OT, and SLP) of the federal base payment rates was determined 
using cost information from FY 1995 cost reports, after making the 
following exclusions and adjustments: First, only settled and as-
submitted cost reports for hospital-based and freestanding SNFs for 
periods beginning in FY 1995 and spanning 10 to 13 months were 
included. This set of restrictions replicates the restrictions used to 
derive the original federal base payment rates as set forth in the 1998 
interim final rule with comment period (63 FR 26256). Following the 
methodology used to derive the SNF PPS base rates, routine and 
ancillary costs from as-submitted cost reports were adjusted down by 
1.31 and 3.26 percent, respectively. As discussed in the 1998 interim 
final rule with comment period, the specific adjustment factors were 
chosen to reflect average adjustments resulting from cost report 
settlement and were based on a comparison of as-submitted and settled 
reports from FY 1992 to FY 1994 (63 FR 26256); these adjustments are in 
accordance with section 1888(e)(4)(A)(i) of the Act. We used similar 
data, exclusions, and adjustments as in the original base rates 
calculation so the resulting base rates for the components would 
resemble as closely as possible what they would have been had they been 
established in 1998. However, as we discussed in the proposed rule, 
there were two ways in which the PT, OT, and SLP percentage 
calculations deviate from the 1998 base rates calculation. First, the 
1998 calculation of the base rates excluded reports for facilities 
exempted from cost limits in the base year. The available data do not 
identify which facilities were exempted from cost limits in the base 
year, so this restriction was not implemented. As we stated in the 
proposed rule, we do not believe this had a notable impact on our 
estimate of the PT, OT, and SLP percentages, because only a small 
fraction of facilities were exempted from cost limits. Consistent with 
the 1998 base rates calculation, we excluded facilities with per diem 
costs more than three standard deviations higher than the geometric 
mean across facilities. Therefore, facilities with unusually high costs 
did not influence our estimate. Second, the 1998 calculation of the 
base rates excluded costs related to exceptions payments and costs 
related to approved educational activities. The available cost report 
data did not identify costs related to exceptions payments nor indicate 
what percentage of overall therapy costs or costs by therapy discipline 
were related to approved educational activities, so these costs are not 
excluded from the PT, OT, and SLP percentage calculations. We stated in 
the proposed rule that because exceptions were only granted for routine 
costs, we believe the inability to exclude these costs should not 
affect our estimate of the PT, OT, and SLP percentages as exceptions 
would not apply to therapy costs. Additionally, the data indicate that 
educational costs made up less than one-hundredth of 1 percent of 
overall SNF costs. Therefore, we stated that we believe the inability 
to exclude educational costs should have a negligible impact on our 
estimates.
    In addition to Part A costs from the cost report data, the 1998 
federal base rates calculation incorporated estimates of amounts 
payable under Part B for covered SNF services provided to Part A SNF 
residents, as required by section 1888(e)(4)(A)(ii) of the Act. We 
stated in the proposed rule (83 FR 21038) that in calculating the PT, 
OT, and SLP percentages, we also estimated the amounts payable under 
Part B for covered SNF services provided to Part A residents. All Part 
B claims associated with Part A SNF claims overlapping with FY 1995 
cost reports were matched to the corresponding facility's cost report. 
For each cost center (PT, OT, and SLP) in each cost report, a ratio was 
calculated to determine the amount by which Part A costs needed to be 
increased to account for the portion of costs payable under Part B. 
This ratio for each cost center was determined by dividing the total 
charges from the matched Part B claims by the total charges from the 
Part A SNF claims overlapping with the cost report. The 1998 interim 
final rule (63 FR 26256) states that to estimate the amounts payable 
under Part B for covered SNF services provided to Part A SNF residents, 
CMS (then known as HCFA) matched 100 percent of Part B claims 
associated with Part A covered SNF stays to the corresponding 
facility's cost report. Part B allowable charges were then incorporated 
at the facility level by the appropriate cost report center. Although 
the interim final rule does not provide further detail on how Part B 
allowable charges were incorporated at the facility level, we stated in 
the proposed rule that we believe our methodology reasonably 
approximates the methodology described in the interim final rule, and 
provides a reasonable estimate of the amounts payable under Part B for 
covered SNF services provided to Part A residents for purposes of 
calculating the PT, OT, and SLP percentages. Therefore, we stated that 
we believe it is reasonable to use this methodology to calculate the 
PT, OT, and SLP percentages of the therapy case-mix component.
    Finally, the 1998 federal base rates calculation standardized the 
cost data for each facility to control for the effects of case-mix and 
geographic-related wage differences, as required by section 
1888(e)(4)(C) of the Act. As we stated in the proposed rule, when 
calculating the PT, OT and SLP shares of the current therapy base rate, 
we replicated the method used in 1998 to standardize for wage 
differences, as described in the 1998 interim final rule with comment 
period (63 FR 26259 through 26260). We applied a hospital wage index to 
the labor-related share of costs, estimated at 75.888 percent, and used 
an index composed of hospital wages from FY 1994. We noted in the 
proposed rule that the PT, OT, and SLP percentage calculations did not 
include the case-mix adjustment used in the 1998 calculation because 
the 1998 adjustment relied on the obsolete RUG-III classification 
system. In the 1998 federal base rates calculation, information from 
SNF and inpatient claims was mapped to RUG-III clinical categories at 
the resident level to case-mix adjust facility per diem costs. However, 
the 1998 interim final rule did not document this mapping, and the data 
used as the basis for this adjustment are no longer available, and 
therefore, this step could not be replicated. We stated in the proposed 
rule that we believe the inability to apply the case-mix

[[Page 39191]]

adjustment likely has a small impact on our estimate of the PT, OT, and 
SLP percentages. The 1998 interim final rule indicates that the case-
mix adjustment was applied by dividing facility per diem costs for a 
given component by average facility case mix for that component; in 
other words, multiplying by the inverse of average facility case mix. 
As we discussed in the proposed rule, as long as average facility case-
mix values are within a relatively narrow range, adjustment for 
facility case mix should not have a large impact on the estimated PT, 
OT, and SLP percentages. Because the RUG-III case-mix indexes shown in 
the 1998 interim final rule are within a relatively narrow range (for 
example, therapy indexes range from 0.43 to 2.25), we stated that we do 
not expect the inability to apply the case-mix adjustment to facility 
per diem costs to have a large influence on the estimated PT, OT, and 
SLP percentages. These data sources are described in more detail in 
section 3.10. of the SNF PDPM technical report, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html.
    We invited comments on the data sources used to determine the PT, 
OT, and SLP rate components, as discussed above.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the Data Sources Utilized for Proposed Revision of 
Federal Base Payment Rate Components. A discussion of these comments, 
along with our responses, appears below.
    Comment: One commenter requested additional information on the data 
sources used to develop PDPM. Specifically, the commenter requested 
that CMS clarify which year of claims and cost report data was used to 
develop PDPM.
    Response: As detailed in section 3.1 of the SNF PDPM technical 
report and FY 2019 SNF PPS proposed rule (83 FR 21041), we used data, 
including claims and assessments, corresponding to Medicare Part A SNF 
stays with admissions in FY 2017. This was the most complete year of 
data available when PDPM was developed and continues to be the most 
complete year of data available as of the FY 2019 final rule. 
Foundational analyses--for example, those discussed throughout the SNF 
PMR technical report that accompanied the 2017 ANPRM--used FY 2014 
data, as that was the most recent complete year of data available when 
those analyses were completed. Finally, based on suggestions from 
commenters responding to the 2017 ANPRM, the analysis that established 
the list of comorbidities used for payment in the PDPM NTA component 
and the points associated with each comorbid condition used multiple 
years of data to generate more robust results. Specifically, resource 
utilization and assessment data from FYs 2014-2017 were used to 
determine the comorbid conditions associated with high NTA utilization 
and estimate the specific resource utilization associated with each 
condition for the purpose of assigning points and payment to these 
conditions under PDPM. This methodology is discussed in further detail 
in section 3.7 of the SNF PDPM technical report and in the FY 2019 SNF 
PPS proposed rule (83 FR 21056). In terms of cost reports, since 
providers have their own fiscal year and reporting schedule, we used 
the cost report closest to the stay window among the cost reports of 
that provider recorded in the database as of November 2017.
    Comment: Some commenters questioned whether it is appropriate to 
use the same data sources and methodology from 1998 (that is, 1995 cost 
reports) to set base rates given updated technology and changes in SNF 
care practices since then. Particularly, a few commenters stated that 
the estimated share of the nursing base rate attributed to NTA services 
(43 percent) is outdated and not representative of the proportion of 
the nursing base rate that corresponds to NTA services. These 
commenters requested that we consider recalculating SNF base rates 
using more recent data on SNF costs.
    Response: We appreciate the commenters' suggestion to use more 
recent data in calculating the SNF base rates. However, in accordance 
with section 1888(e)(4)(A) of the Act, the federal per diem rates used 
for SNF payment are based on the FY 1995 cost reports. Therefore, we 
cannot consider recalculating the SNF base rates using more recent 
data. Additionally, given this statutory requirement, we believed that 
it was appropriate to use these cost reports to set the base rates for 
the proposed new components to reflect as closely as possible what the 
base rates would have been for these components if they had been 
separately established in 1998. Finally, while it may be the case that, 
as the commenter stated, changes in SNF care practices may have 
occurred, such changes would more likely be reflected in differences in 
the relative costs of treating different types of patients and these 
types of changes in relative costs are reflected in the revised case-
mix weights under PDPM, which does use more recent data than FY 1995. 
Specifically, as discussed in section 3.1 of the SNF PDPM technical 
report and FY 2019 SNP PPS proposed rule (83 FR 21041), we developed 
PDPM using data, including claims and assessments, corresponding to 
Medicare Part A SNF stays with admissions in FY 2017.
    Comment: One commenter recommends that CMS treat respiratory 
therapy as ``therapy'' and not ``nursing'' for purpose of payment, and 
recommends CMS consider incorporating an add-on payment for respiratory 
therapy to ensure it is reimbursed appropriately to safeguard the 
continuation of these therapy services.
    Response: Under Chapter 8 of the Medicare Benefit Policy manual, 
section 30.4, ``skilled therapy services'' includes physical therapy, 
occupational therapy, and speech-language pathology therapy (reflecting 
the regulations at 42 CFR 409.23). Respiratory therapy, on the other 
hand, is treated as a separate service category in section 50.8.2 of 
the same chapter (reflecting the regulations at Sec.  409.27(b)). As 
such, respiratory therapy is distinct from other forms of therapy and 
is not included among the other therapy components. Additionally, 
therapy services, as defined in Sec.  409.33 make specific reference to 
skilled therapy services provided by physical and occupational 
therapists and speech-language pathologists. Finally, while respiratory 
therapists have specialized training in addressing respiratory issues, 
much of the work conducted by respiratory therapists falls within the 
scope of practice for nurses, which further supports the closer 
relationship between respiratory therapy and nursing, rather than with 
the three therapy disciplines. With regard to developing an add-on 
payment for respiratory therapy, given that such services are currently 
captured through the global per diem payment, we do not believe that an 
add-on payment would be warranted.
3. Methodology Used for the Calculation of Federal Base Payment Rate 
Components
    As discussed previously in this section, we proposed to separate 
the current therapy components into a PT component, an OT component, 
and an SLP component. To do this, we calculated the percentage of the 
current therapy component of the federal base rate that corresponds to 
each of the three proposed PDPM therapy components (PT, OT, and SLP) in 
accordance with the methodology set forth below and in the FY 2019 SNF 
PPS proposed rule (83 FR 21039).
    The data described in section V.C.2. of the proposed rule 
(primarily, cost information from FY 1995 cost reports)

[[Page 39192]]

provides cost estimates for the Medicare Part A SNF population for each 
cost report that met the inclusion criteria. Cost reports stratify 
costs by a number of cost centers that indicate different types of 
services. For instance, costs are reported separately for each of the 
three therapy disciplines (PT, OT, and SLP). Cost reports also include 
the number of Medicare Part A utilization days during the cost 
reporting period. As we stated in the proposed rule, this allows us to 
calculate both average total therapy costs per day and average therapy 
costs by discipline in the facility during the cost reporting period. 
Therapy costs are defined as the sum of costs for the three therapy 
disciplines.
    As explained in the proposed rule (83 FR 21039), the goal of this 
methodology is to estimate the proportion of therapy costs that 
corresponds to each of the three therapy disciplines. We use the 
facility-level per-diem costs developed from 1995 cost reports to 
derive average per diem amounts for both total therapy costs and for 
PT, OT, and SLP costs separately. To do this, we followed the 
methodology outlined in section II.A.3. of the 1998 interim final rule 
with comment period (63 FR 26260), which was used by CMS (then known as 
HCFA) to create the federal base payment rates:
    (1) For each of the four measures of cost (PT, OT, SLP, and total 
therapy costs per day), we computed the mean based on data from 
freestanding SNFs only. This mean was weighted by the total number of 
Medicare days of the facility.
    (2) For each of the four measures of cost (PT, OT, SLP, and total 
therapy costs per day), we computed the mean based on data from both 
hospital-based and freestanding SNFs. This mean was weighted by the 
total number of Medicare days of the facility.
    (3) For each of the four measures of cost (PT, OT, SLP, and total 
therapy costs per day), we calculated the arithmetic mean of the 
amounts determined under steps (1) and (2) above.
    In section 3.10.3. of the SNF PDPM technical report (available at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html), we show the results of these calculations.
    The three steps outlined above produce a measure of costs per day 
by therapy discipline and a measure of total therapy costs per day. We 
divided the discipline-specific (PT, OT, SLP) cost measure by the total 
therapy cost measure to obtain the percentage of the therapy component 
that corresponds to each therapy discipline. As we discussed in the 
proposed rule (83 FR 21039), we believe that following a methodology to 
derive the discipline-specific therapy percentages that is consistent 
with the methodology used to determine the base rates in the 1998 
interim final rule with comment period is appropriate because a 
consistent methodology helps to ensure that the resulting base rates 
for the components resemble what they would be had they been 
established in 1998. We found that PT, OT, and SLP costs correspond to 
43.4 percent, 40.4 percent, and 16.2 percent of the therapy component 
of the federal per diem rate for urban SNFs, and 42.9 percent, 39.4 
percent, and 17.7 percent of the therapy component of the federal per 
diem rate for rural SNFs. Under the proposed PDPM, we stated that the 
current therapy case-mix component would be separated into a Physical 
Therapy component, an Occupational Therapy component, and a Speech-
Language Pathology component using the percentages derived above. We 
stated that this process would be done separately for urban and for 
rural facilities. In the appendix of the SNF PDPM technical report 
(available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html) we provided the specific cost 
centers used to identify PT, OT, and SLP costs.
    In addition, we proposed to separate the current nursing case-mix 
component into a nursing case-mix component and an NTA component. 
Similar to the therapy component, we calculated the percentage of the 
current nursing component of the federal base rates that corresponds to 
each of the two proposed PDPM components (NTA and nursing). The 1998 
reopening of the comment period for the interim final rule (63 FR 
65561, November 27, 1998) states that NTA costs comprise 43.4 percent 
of the current nursing component of the urban federal base rate, and 
the remaining 56.6 percent accounts for nursing and social services 
salary costs. These percentages for the nursing component of the 
federal base rate for rural facilities are 42.7 percent and 57.3 
percent, respectively (63 FR 65561). Therefore, we proposed to assign 
43 percent of the current nursing component of the federal base rates 
to the new NTA component of the federal base rates and assign the 
remaining 57 percent to the new nursing component of the federal base 
rates to reflect what the base rates would have been for these 
components if they had been separately established in 1998.
    As discussed in the proposed rule (83 FR 21040), we verified the 
1998 calculation of the percentages of the nursing component federal 
base rates that correspond to NTA costs by developing a measure of NTA 
costs per day for urban and rural facilities. We used the same data 
(that is, cost information from 1995 cost reports) and followed the 
same methodology described above to develop measures of PT, OT, and SLP 
costs per day and total therapy costs per day. The measure of NTA costs 
per day produced by this analysis was $47.70 for urban facilities and 
$47.30 for rural facilities. The original 1998 federal base rates for 
the nursing component, which relied on a similar methodology, were 
$109.48 for urban facilities and $104.88 for rural facilities. 
Therefore, our measure of NTA costs in urban facilities was equivalent 
to 43.6 percent of the urban 1998 federal nursing base rate, and our 
measure of NTA costs in rural facilities was equivalent to 45.1 percent 
of the rural 1998 federal nursing base rate. These results are similar 
to the estimates published in the 1998 reopening of the comment period 
for the interim final rule (63 FR 65561, November 27, 1998), which we 
stated we believe supports the validity of the 43 percent figure stated 
above.
    For illustration purposes, Tables 12 and 13 set forth what we 
stated the unadjusted federal per diem rates would be for each of the 
case-mix adjusted components if we were to apply the proposed PDPM to 
the FY 2019 base rates given in Tables 4 and 5. These were derived by 
dividing the FY 2019 SNF PPS base rates according to the percentages 
described above. Tables 12 and 13 also show what the unadjusted federal 
per diem rates for the non-case-mix component would be, which are not 
affected by the change in case-mix methodology from RUG-IV to PDPM. We 
used these unadjusted federal per diem rates in calculating the impact 
analysis discussed in section V.J. of the proposed rule.

[[Page 39193]]



                                           Table 12--FY 2019 PDPM Unadjusted Federal Rate per Diem--Urban \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  Rate component                        Nursing            NTA               PT               OT              SLP          Non-case-mix
--------------------------------------------------------------------------------------------------------------------------------------------------------
Per Diem Amount...................................         $103.46           $78.05           $59.33           $55.23           $22.15           $92.63
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The rates shown in Tables 12 and 13 illustrate what the adjusted federal per diem rates would be for each of the case-mix adjusted components if we
  were to apply the proposed PDPM to the proposed FY 2019 base rates given in Tables 4 and 5.


                                             Table 13--FY 2019 PDPM Unadjusted Federal Rate per Diem--Rural
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  Rate component                        Nursing            NTA               PT               OT              SLP          Non-case-mix
--------------------------------------------------------------------------------------------------------------------------------------------------------
Per Diem Amount...................................          $98.83           $74.56           $67.63           $62.11           $27.90           $94.34
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We invited comments on the proposed data sources and proposed 
methodology for calculating the unadjusted federal per diem rates that 
would be used in conjunction with the proposed PDPM effective October 
1, 2019.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the Methodology Used for the Calculation of 
Federal Base Payment Rate Components. A discussion of these comments, 
along with our responses, appears below.
    Comment: Some commenters supported the proposed changes to the SNF 
PPS base rates. One commenter specifically highlighted their support 
for including an NTA component. Some commenters sought clarification 
regarding how CMS intends to distribute system resources currently 
associated with the ``therapy non-case-mix'' base rate. Specifically, 
they stated that the FY 2019 SNF proposed rule and the SNF PDPM 
technical report that accompanied the proposed rule appear to be 
inconsistent in describing how resources associated with this payment 
component will be distributed under the new payment model. Commenters 
note that the proposed rule stated that resources associated with the 
``therapy non-case-mix'' base rate will be redistributed among the 
three PDPM case-mix therapy components, while the SNF PDPM technical 
report states that the ``therapy non-case-mix'' payment component is 
dropped from the payment model under PDPM.
    Response: We appreciate the support for our proposed changes. As 
stated in the proposed rule, we believe it is appropriate to eliminate 
the non-case-mix therapy base rate because facilities will be 
compensated for residents who receive nominal amounts of therapy (for 
example, therapy evaluations) through the three PDPM base rates 
corresponding to the three disciplines of therapy provided in the SNF 
setting (PT, OT, and SLP) under the new payment model. In other words, 
whereas under the existing RUG-IV reimbursement model, facilities 
receive a non-case-mix therapy payment for residents who receive 
nominal amounts of therapy, under PDPM facilities would receive payment 
for these residents through the PT, OT, and SLP payment components.
    Additionally, in setting component base rates under PDPM, we sought 
to replicate the methodology used to estimate the SNF PPS original base 
rates in 1998 as closely as possible. This is consistent with the 
requirements of section 1888(e)(4) of the Act, which requires that SNF 
PPS per diem federal payment rates be based on FY 1995 costs reports. 
Therefore, to ensure that the PDPM base rates resembled as closely as 
possible what they would have been had these components been 
established in 1998, we used FY 1995 cost reports to determine the 
share of therapy costs accounted for by PT, OT, and SLP. As described 
in the proposed rule (83 FR 21038 through 21039) and in section 3.10 of 
the SNF PDPM technical report, we then used the percentage of costs 
associated with each of these disciplines to calculate the 
corresponding base rates for the PT, OT, and SLP components under PDPM.
    Finally, as further discussed in section 3.11 of the SNF PDPM 
technical report, we adjusted CMIs for each of the five case-mix-
adjusted components of PDPM to ensure budget neutrality between RUG-IV 
and PDPM. In doing so, we applied a multiplier to CMIs for all five 
case-mix-adjusted PDPM payment components so that total estimated 
payments under PDPM are budget neutral relative to RUG-IV. This 
procedure effectively distributes resources that are currently 
associated with the ``therapy non-case-mix'' component of RUG-IV across 
all five case-mix components of PDPM. We acknowledge that the proposed 
rule inadvertently stated that the resources associated with the 
therapy non-case mix component were distributed across only the three 
PDPM case-mix therapy components. Thus, we are clarifying that, while 
we did eliminate the therapy non-case mix component from the model, we 
redistributed resources associated with this component across the five 
PDPM case-mix components as described in section 3.11 of the PDPM 
technical report.
    Comment: Many commenters expressed concern regarding the base rate 
for the SLP component, specifically that it is much lower than that of 
the other therapy base rates. Commenters suggested that this may be 
taken to devalue SLP services and that low reimbursement will lead to a 
decrease in the utilization of SLP services. Some commenters further 
suggested that such low reimbursement rates could lead to layoffs among 
SLPs and believe that PDPM should pay equally for all three therapy 
disciplines.
    Response: We appreciate the concerns raised by these commenters 
regarding the potential impact on SLP services resulting from the 
payment policies in relation to SLP services discussed in the proposed 
rule. With regard to the comment about the SLP component base rate, as 
described above, we utilized the proportion of the current therapy base 
rate corresponding to each therapy discipline as the basis for 
allocating the therapy base rate as the basis for allocating the 
therapy base rate among each of the individual components. As SLP 
services represented approximately 17 percent, on average, of overall 
therapy costs, we believed it was appropriate to allocate this 
percentage as the base rate for the SLP component. If we were to make 
all three components equal, as one commenter had suggested, then this 
would overinflate SLP payment in relation to SLP costs. We would note, 
however, that while the base rate for the SLP component is lower than 
the other therapy component base rates, the case-mix weights for this 
component, as described in section V.B.3.c. of this final rule, are far 
greater for the SLP component than for either of the PT or OT 
components. This reflects that when SLP services are

[[Page 39194]]

predicted to be necessary, there is adequate reimbursement for these 
services. Therefore, we expect that utilization of and access to SLP 
services should not be adversely affected merely because the base rate 
is lower for this component.
    Accordingly, after considering the comments received, for the 
reasons specified in the FY 2019 SNF PPS proposed rule and in this 
final rule, we are finalizing, effective October 1, 2019, our proposals 
related to the calculation of the federal base payment rate components, 
as described in this section, with the following clarification. As 
discussed above, we are clarifying that, while we did eliminate the 
therapy non-case mix component from the model, we redistributed 
resources associated with this component across the five PDPM case-mix 
components as described in the PDPM technical report.
4. Updates and Wage Adjustments of Revised Federal Base Payment Rate 
Components
    In section III.B. of the proposed rule, we described the process 
used to update the federal per diem rates each year. Additionally, as 
discussed in section III.B.4 of the proposed rule, SNF PPS rates are 
adjusted for geographic differences in wages using the most recent 
hospital wage index data. Under PDPM, we proposed to continue to update 
the federal base payment rates and adjust for geographic differences in 
wages following the current methodology used for such updates and wage 
index adjustments under the SNF PPS (83 FR 21040). Specifically, we 
proposed to continue the practice of using the SNF market basket, 
adjusted as described in section III.B. of the proposed rule to update 
the federal base payment rates and to adjust for geographic differences 
in wages as described in section III.B.4. of the proposed rule.
    We received comments on the proposed methodology for updating the 
federal base payment rates and adjusting the per diem rates for 
geographic differences in wages under the PDPM. Those comments, and our 
responses, appear below.
    Comment: Most commenters agreed with using the standard rate update 
policy and the existing wage index policy as the basis for updating the 
payment rates and adjusting the rates for geographic variation. One 
commenter stated that the lack of separate labor-share adjustment for 
each component may lead to provision of fewer services as each 
component would not be appropriately wage adjusted. This commenter 
stated that because CMS has already calculated payment amounts for each 
component and because cost reports contain all the information 
necessary to determine the labor share for each component, it would be 
appropriate for CMS to make separate wage adjustment calculations for 
each PDPM component.
    Response: We appreciate the support for this proposal. With regard 
to the comment that CMS should separately wage adjust each PDPM 
component, the labor-related share reflects the facility Medicare-
allowable costs (including all of the PDPM components) that are labor-
intensive and vary with the local labor market. Specifically, it is 
equal to the following cost categories from the 2014-based SNF market 
basket: 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. The 
majority of these labor-related costs are derived using the MCR data; 
however, a notable portion is based on other government data sources. A 
complete description of the methodology used to derive the 2014-based 
SNF market basket is available in the FY 2018 final rule (82 FR 36548 
through 36566). Given that these categories cut across PDPM components, 
to wage adjust for each component separately would require a 
substantial increase in the specificity of reporting these MCR data 
items, as well as developing a methodology for accurately assigning 
these costs to each component. We believe that the additional reporting 
burden associated with implementing this suggestion would not justify 
the increased specificity of applying the wage index adjustment to each 
component under PDPM.
    Accordingly, after considering the comments received, for the 
reasons specified in the FY 2019 SNF PPS proposed rule (83 FR 21040) 
and discussed in this section, we are finalizing our proposal, without 
modification, for updating the federal base payment rates and for 
adjusting the per diem rates for geographic differences in wages under 
the PDPM, effective October 1, 2019.

C. Design and Methodology for Case-Mix Adjustment of Federal Rates

1. Background on PDPM
    Section 1888(e)(4)(G)(i) of the Act requires that the Secretary 
provide an appropriate adjustment to account for case mix and that such 
an adjustment shall be based on a resident classification system that 
accounts for the relative resource utilization of different patient 
types. The current case-mix classification system uses a combination of 
resident characteristics and service intensity metrics (for example, 
therapy minutes) to assign residents to one of 66 RUGs, each of which 
corresponds to a therapy CMI and a nursing CMI, which are indicative of 
the relative cost to a SNF of treating residents within that 
classification category. However, as noted in section V.A. of the 
proposed rule, incorporating service-based metrics into the payment 
system can incentivize the provision of services based on a facility's 
financial considerations rather than resident needs. To better ensure 
that resident care decisions appropriately reflect each resident's 
actual care needs, we stated in the proposed rule (83 FR 21040) that we 
believe it is important to remove, to the extent possible, service-
based metrics from the SNF PPS and derive payment from verifiable 
resident characteristics that are patient, and not facility, centered. 
To that end, as we stated in the proposed rule, the proposed PDPM was 
developed to be a payment model which derives payment classifications 
almost exclusively from verifiable resident characteristics.
    Additionally, the current RUG-IV case-mix classification system 
reduces the varied needs and characteristics of a resident into a 
single RUG-IV group that is used for payment. As of FY 2017, of the 66 
possible RUG classifications, over 90 percent of covered SNF PPS days 
are billed using one of the 23 Rehabilitation RUGs, with over 60 
percent of covered SNF PPS days billed using one of the three Ultra-
High Rehabilitation RUGs. As we stated in the proposed rule (83 FR 
21040), the implication of this pattern is that more than half of the 
days billed under the SNF PPS effectively utilize only a resident's 
therapy minutes and Activities of Daily Living (ADL) score to determine 
the appropriate payment for all aspects of a resident's care. Both of 
these metrics, more notably a resident's therapy minutes, may not 
derive so much from the resident's own characteristics, but rather, 
from the type and amount of care the SNF decides to provide to the 
resident. We stated that even assuming that the facility takes the 
resident's needs and unique characteristics into account in making 
these service decisions, the focus of payment remains centered, to a 
potentially great extent, on the facility's own decision making and not 
on the resident's needs.
    We explained in the proposed rule (83 FR 21041) that while the RUG-
IV model

[[Page 39195]]

utilizes a host of service-based metrics (type and amount of care the 
SNF decides to provide) to classify the resident into a single RUG-IV 
group, the proposed PDPM would separately identify and adjust for the 
varied needs and characteristics of a resident's care and combine this 
information together to determine payment. We stated we believe the 
proposed PDPM would improve the SNF PPS by basing payments 
predominantly on clinical characteristics rather than service 
provision, thereby enhancing payment accuracy and strengthening 
incentives for appropriate care. For these reasons, we proposed that, 
effective October 1, 2019, SNF residents would be classified using the 
PDPM, as further discussed below. As discussed in the proposed rule and 
in section V.I. of this final rule, we proposed to implement the PDPM 
on October 1, 2019 to allow all stakeholders adequate time for systems 
updates and staff training needed to assure smooth implementation.
2. Data Sources Utilized for Developing PDPM
    To understand, research, and analyze the costs of providing Part A 
services to SNF residents, we utilized a variety of data sources in the 
course of research. In the proposed rule (83 FR 21041) and in this 
section, we discuss these sources and how they were used in the SNF PMR 
in developing the proposed PDPM. A more thorough discussion of the data 
sources used during the SNF PMR is available in section 3.1. of the SNF 
PDPM technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html).
a. Medicare Enrollment Data
    Beneficiary enrollment and demographic information was extracted 
from the CMS enrollment database (EDB) and Common Medicare Environment 
(CME). Beneficiaries' Medicare enrollment was used to apply 
restrictions to create a study population for analysis. For example, 
beneficiaries were required to have continuous Medicare Part A 
enrollment during a SNF stay. Demographic characteristics (for example, 
age) were incorporated as being predictive of resource use. 
Furthermore, enrollment and demographic information from these data 
sources were used to assess the impact of the proposed PDPM on 
subpopulations of interest. In particular, the EDB and CME include 
indicators for potentially vulnerable subpopulations, such as those 
dually-enrolled in Medicaid and Medicare.
b. Medicare Claims Data
    Medicare Parts A and B claims from the CMS Common Working File 
(CWF) were used to conduct claims analyses as part of the SNF PMR. SNF 
claims (CMS-1450 form, OMB control number 0938-0997), including type of 
bill (TOB) 21x (SNF Inpatient Part A) and 18x (hospital swing bed), 
were used to identify Medicare Part A stays paid under the SNF PPS. 
Part A stays were constructed by linking claims that share the same 
beneficiary, facility CMS Certification Number (CCN), and admission 
date. Stays created from SNF claims were linked to other claims data 
and assessment data via beneficiary identifiers.
    Acute care hospital stays that qualified the beneficiary for the 
SNF benefit were identified using Medicare inpatient hospital claims. 
The dates of the qualifying hospital stay listed in the span codes of 
the SNF claim were used to connect inpatient claims with those dates 
listed as the admission and discharge dates. Although there are 
exceptions, the claims from the preceding inpatient hospitalization 
commonly contain clinical and service information relevant to the care 
administered during a SNF stay. Components of this information were 
used in the regression models predicting therapy and NTA costs and to 
better understand patterns of post-acute care (PAC) referrals for 
patients requiring SNF services. Additionally, the most recent hospital 
stay was matched to the SNF stay, which often (though not always) was 
the same as the preceding inpatient hospitalization, and used in the 
regression models.
    Other Medicare claims, including outpatient hospital, physician, 
home health, hospice, durable medical equipment, and drug 
prescriptions, were incorporated, as necessary, into the analysis in 
one of three ways: (1) To verify information found on assessments or on 
SNF or inpatient claims; (2) to provide additional resident 
characteristics to test outside of those found in assessment and SNF 
and inpatient claims data; and (3) to stratify modeling results to 
identify effects of the system on beneficiary subpopulations. These 
claims were linked to SNF claims using beneficiary identifiers.
c. Assessment Data
    Minimum Data Set (MDS) assessments were the primary source of 
resident characteristic information used to explain resource 
utilization in the SNF setting. The data repositories include MDS 
assessments submitted by SNFs and swing-bed hospitals. MDS version 2.0 
assessments were submitted until October 2010, at which point MDS 
version 3.0 assessments began. MDS data were extracted from the Quality 
Improvement Evaluation System (QIES). MDS assessments were then matched 
to SNF claims data using the beneficiary identifier, assessment 
indicator, assessment date, and Resource Utilization Group (RUG).
d. Facility Data
    Facility characteristics, while not considered as explanatory 
variables when modeling service use, were used for impact analyses. By 
incorporating this facility-level information, we could identify any 
disproportionate effects of the proposed case-mix classification system 
on different types of facilities.
    Facility-level characteristics were taken from the Certification 
and Survey Provider Enhanced Reports (CASPER). From CASPER, we draw 
facility-level characteristics such as ownership, location, facility 
size, and facility type. CASPER data were supplemented with information 
from publicly available data sources. The principal data sources that 
are publicly available include the Medicare Cost Reports (Form 2540-10, 
2540-96, and 2540-92) extracted from the Healthcare Cost Report 
Information System (HCRIS) files, Provider-Specific Files (PSF), 
Provider of Service files (POS), and Nursing Home Compare (NHC). These 
data sources have information on facility costs, payment, and 
characteristics that directly affect PPS calculations.
    We received comments from stakeholders regarding the data used to 
develop PDPM, though we address these comments later in this section in 
relation to the specific PDPM component to which the comments were 
addressed.
3. Resident Classification Under PDPM
a. Background
    As noted above, section 1888(e)(4)(G)(i) of the Act requires that 
the Secretary provide for an appropriate adjustment to account for case 
mix and that such an adjustment shall be based on a resident 
classification system that accounts for the relative resource 
utilization of different patient types. As we stated in the proposed 
rule (83 FR 21040), the proposed PDPM was developed to be a payment 
model which derives almost exclusively from resident characteristics. 
We stated that the proposed PDPM would separately identify and adjust 
five different case-mix components for the varied needs and 
characteristics of a resident's care

[[Page 39196]]

and then combine these together with the non-case-mix component to form 
the full SNF PPS per diem rate for that resident.
    We stated in the proposed rule (83 FR 21041 through 21042) that, as 
with any case-mix classification system based on resident 
characteristics, the proposed predictors that would be part of case-mix 
classification under PDPM are those which our analysis identified as 
associated with variation in costs for the given case-mix component. We 
explained that the proposed federal per diem rates discussed above 
serve as ``base rates'' specifically because they set the basic average 
cost of treating a typical SNF resident. Based on the presence of 
certain needs or characteristics, caring for certain residents may cost 
more or less than that average cost. We explained that a case-mix 
system identifies certain aspects of a resident or of a resident's care 
which, when present, lead to average costs for that group being higher 
or lower than the average cost of treating a typical SNF resident. For 
example, if we found that therapy costs were the same for two residents 
regardless of having a particular condition, then that condition will 
not be relevant in predicting increases in therapy costs. If, however, 
we found that, holding all else constant, the presence of a given 
condition was correlated with an increase in therapy costs for 
residents with that condition over those without that condition, then 
this could mean that this condition is indicative, or predictive, of 
increased costs relative to the average cost of treating SNF residents 
generally.
    In the subsections that follow, we describe each of the five case-
mix adjusted components under the proposed PDPM and the basis for each 
of the predictors that we stated would be used within the PDPM to 
classify residents for payment purposes.
b. Physical and Occupational Therapy Case-Mix Classification
    As we stated in the proposed rule (83 FR 21042), a fundamental 
aspect of the proposed PDPM is to use resident characteristics to 
predict the costs of furnishing similarly situated residents with SNF 
care. Costs derived from the charges on claims and cost-to-charge 
ratios (CCRs) on facility cost reports were used as the measure of 
resource use to develop the proposed PDPM. We explained that costs 
better reflect differences in the relative resource use of residents as 
opposed to charges, which partly reflect decisions made by providers 
about how much to charge payers for certain services. We further 
explained that costs derived from charges are reflective of therapy 
utilization as they are correlated to the therapy minutes recorded for 
each therapy discipline. Under the current RUG-IV case-mix model, 
therapy minutes for all three therapy disciplines (PT, OT, SLP) are 
added together to determine the appropriate case-mix classification for 
the resident. However, as shown in section 3.3.1. of the SNF PDPM 
technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html), and as explained 
in the proposed rule, when we began to investigate resident 
characteristics predictive of therapy costs for each therapy 
discipline, we found that PT and OT costs per day are only weakly 
correlated with SLP costs per day (correlation coefficient of 0.04). 
The set of resident characteristics from the MDS that predicted PT and 
OT utilization was different than the set of characteristics predicting 
SLP utilization. Additionally, many predictors of high PT and OT costs 
per day predicted lower SLP costs per day, and vice versa. For example, 
we found that residents with cognitive impairments receive less 
physical and occupational therapy but receive more speech-language 
pathology. As a result of this analysis, as we explained in the 
proposed rule, we found that basing case-mix classification on total 
therapy costs per day obscured differences in the determinants of PT, 
OT, and SLP utilization.
    In contrast, we stated in the proposed rule (83 FR 21042) that the 
correlation coefficient between PT and OT costs per day was high 
(0.62). Additionally, regression analyses found that predictors of high 
PT costs per day were also predictive of high OT costs per day. For 
example, the analyses found that late-loss ADLs are strong predictors 
of both PT and OT costs per day. We then used a range of resident 
characteristics to predict PT and OT costs per day separately and we 
found that the coefficients in both models followed similar patterns. 
Finally, we noted that resident characteristics were found to be better 
predictors of the sum of PT and OT costs per day than for either PT or 
OT costs separately. These analyses used a variety of items from the 
MDS as independent variables and used PT, OT, and SLP costs per day as 
dependent variables. In the proposed rule, we referred readers to 
section 3.3.1. of the SNF PMR technical report that accompanied the 
ANPRM available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html for more information on 
these analyses.
    Given the results of this analytic work, as well as feedback from 
multiple stakeholders, we proposed three separate case-mix adjusted 
components, one corresponding to each therapy discipline: PT, OT, and 
SLP. In the original RCS-I model presented in the ANPRM, we stated that 
we were considering addressing PT and OT services through a single 
component, given the strong correlation between PT and OT costs and our 
finding that very similar predictors explained variation in the 
utilization of both therapy disciplines. However, as we explained in 
the proposed rule (83 FR 21042), commenters on the ANPRM stated that 
having a single combined PT and OT component could encourage providers 
to inappropriately substitute PT for OT and vice versa. We stated that 
this belief comports with feedback received from professional 
organizations and other stakeholders during technical expert panels 
(TEPs). The TEP commenters stated that PT and OT services should be 
addressed via separate components given the different aims of the two 
therapy disciplines and differences in the clinical characteristics of 
the resident subpopulations for which PT or OT services are warranted. 
For example, clinicians consulted during development of PDPM advised 
that personal hygiene, dressing, and upper extremity motion may bear a 
closer clinical relationship to OT utilization, while lower extremity 
motion may be more closely related to PT utilization. We stated in the 
proposed rule that while we do not believe that RCS-I, which included 
two separate components for PT/OT and SLP, contained stronger 
incentives for substitution across therapy disciplines compared to RUG-
IV, which reimburses all three therapy disciplines through a single 
therapy component, we concur with the TEP commenters that PT and OT 
have different aims and that there are clinically relevant differences 
between residents who could benefit from PT, residents who could 
benefit from OT, and residents who could benefit from both disciplines. 
For the foregoing reasons, we decided to separate the combined PT/OT 
component presented in the ANPRM into two separate case-mix adjusted 
components in the proposed PDPM. As we stated in the proposed rule, 
because of the strong correlation between the dependent variables used 
for both components and the similarity in predictors, we decided to 
maintain the same case-mix classification model for

[[Page 39197]]

both components. We stated that in practice, this means that the same 
resident characteristics will determine a resident's classification for 
PT and OT payment. However, we stated that each resident would be 
assigned separate case-mix groups for PT and OT payment, which 
correspond to separate case-mix indexes and payment rates. We explained 
that we believe providing separate case-mix-adjusted payments for PT 
and OT may allay concerns about inappropriate substitution across 
disciplines and encourage provision of these services according to 
clinical need. We further noted that as clinical practices evolve 
independently of incentives created by the current RUG-IV payment 
model, we would re-evaluate the different sets of resident 
characteristics that are predictive of PT and OT utilization after the 
PDPM is implemented. We stated that if based on this re-evaluation we 
determine that different sets of characteristics are predictive of PT 
and OT resource utilization, we could consider revising the payment 
model to better reflect clinical differences between residents who 
receive PT services and those who receive OT services.
    After delineating the three separate case-mix adjusted therapy 
components, we continued our analysis, as described in the proposed 
rule (83 FR 21043), by identifying resident characteristics that were 
best predictive of PT and OT costs per day. To accomplish this, we 
conducted cost regressions with a host of variables from the MDS 
assessment, the prior inpatient claims, and the SNF claims that were 
believed to be potentially predictive of relative increases in PT and 
OT costs. As we stated in the proposed rule, the variables were 
selected with the goal of being as inclusive as possible with respect 
to characteristics related to the SNF stay and the prior inpatient 
stay. The selection also incorporated clinical input. We explained that 
these initial costs regressions were exploratory and meant to identify 
a broad set of resident characteristics that are predictive of PT and 
OT resource utilization. The results were used to inform which 
variables should be investigated further and ultimately included in the 
payment system. A table of all of the variables considered as part of 
this analysis appears in the appendix of the SNF PMR technical report 
that accompanied the ANPRM available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html. As 
explained in the proposed rule, based on our regression analyses, we 
found that the three most relevant categories of predictors of PT and 
OT costs per day were the clinical reasons for the SNF stay, the 
resident's functional status, and the presence of a cognitive 
impairment. More information on this analysis can be found in section 
3.4.1. of the SNF PDPM technical report available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html.
    Under the RUG-IV case-mix model, residents are first categorized 
based on being a rehabilitation resident or a non-rehabilitation 
resident, then categorized further based on additional aspects of the 
resident's care. As explained in the proposed rule (83 FR 21043), under 
the proposed PDPM, for the purposes of determining the resident's PT 
and OT groups and, as will be discussed below, the resident's SLP 
group, the resident would first be categorized based on the clinical 
reasons for the resident's SNF stay. We stated that empirical analyses 
demonstrated that the clinical basis for the resident's stay (that is, 
the primary reason the resident is in the SNF) is a strong predictor of 
therapy costs. For example, we explained that all of the clinical 
categories (described below) developed to characterize the primary 
reason for a SNF stay (except the clinical category used as the 
reference group) were found to be statistically significant predictors 
of therapy costs per day. More detail on these analyses can be found in 
section 3.4.1. of the SNF PMR technical report that accompanied the 
ANPRM (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html). In consultation with 
stakeholders (industry representatives, beneficiary representatives, 
clinicians, and payment policy experts) at multiple technical expert 
panels (TEPs), we created a set of ten inpatient clinical categories 
that we believe capture the range of general resident types which may 
be found in a SNF. These proposed clinical categories were provided in 
Table 14 of the proposed rule (83 FR 21043) and are reflected in Table 
14.

                   Table 14--PDPM Clinical Categories
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Major Joint Replacement or Spinal Surgery.
Non-Surgical Orthopedic/Musculoskeletal.
Orthopedic Surgery (Except Major Joint Replacement or Spinal Surgery).
Acute Infections.
Medical Management.
Cancer.
Pulmonary.
Cardiovascular and Coagulations.
Acute Neurologic.
Non-Orthopedic Surgery.
------------------------------------------------------------------------

    We proposed to categorize a resident into a PDPM clinical category 
using item I8000 on the MDS 3.0. We stated in the proposed rule (83 FR 
21043) that providers would use the first line in item I8000 to report 
the ICD-10-CM code that represents the primary reason for the 
resident's Part A SNF stay. We further stated that this code would be 
mapped to one of the ten clinical categories provided in Table 14 of 
the proposed rule (set forth at Table 14 of this final rule). The 
mapping between ICD-10-CM codes and the ten clinical categories is 
available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html. As explained in the proposed rule, 
the mapping indicates that in some cases, a single ICD-10-CM code maps 
to more than one clinical category because the care plan for a resident 
with this diagnosis may differ depending on the inpatient procedure 
history. In these cases, we explained that a resident may be 
categorized into a surgical clinical category if the resident received 
a surgical procedure during the immediately preceding inpatient stay 
that relates to the primary reason for the Part A SNF stay and 
typically requires extensive post-surgical rehabilitation or nursing 
care. If the resident did not receive a related surgical procedure 
during the prior inpatient stay that typically requires extensive post-
surgical rehabilitation or nursing care, the resident may be 
categorized into a non-surgical clinical category. For example, we 
explained that certain wedge compression fractures that were treated 
with an invasive surgical procedure such as a fusion during the prior 
inpatient stay would be categorized as Major Joint Replacement or 
Spinal Surgery, but if these cases were not treated with a surgical 
procedure they would be categorized as Non-Surgical Orthopedic/
Musculoskeletal. For residents who received a related surgical 
procedure during the prior inpatient stay, we stated that a provider 
would need to indicate the type of surgical procedure performed for the 
resident to be appropriately classified under PDPM. Thus, in these 
cases we proposed to require providers to record the type of inpatient 
surgical procedure performed during the prior inpatient stay so that 
residents can be appropriately classified into a PDPM clinical category 
for purposes of PT, OT, and SLP classification. We proposed that 
providers record the type of surgical procedure performed during the 
prior inpatient stay by coding an ICD-10-PCS code that corresponds to 
the inpatient

[[Page 39198]]

surgical procedure in the second line of item I8000 in cases where 
inpatient surgical information is required to appropriately categorize 
a resident under PDPM. We noted that if we were to use the second line 
of item I8000 to record inpatient surgical information, we would 
provide a list of ICD-10-PCS codes that map to the surgical clinical 
categories. We stated that we believe this approach would allow for 
patients to be appropriately classified under the PDPM because it would 
provide sufficient information on the primary reason for SNF care and 
inpatient surgical procedures to assign a resident to the appropriate 
surgical or non-surgical clinical category. We invited comments on this 
proposal. In addition, we solicited comments on alternative methods for 
recording the type of inpatient surgical procedure to appropriately 
classify a patient into a clinical category. We explained that the 
clinical category into which the resident is classified would be used 
to classify the resident into a PT and OT category as discussed below, 
as well as an SLP category, as explained in section V.D.3.c. of the 
proposed rule.
    As discussed above, we proposed to categorize a resident into a 
PDPM clinical category for purposes of PT, OT, and SLP classification 
using the ICD-10-CM code in the first line of item I8000, and if 
applicable, the ICD-10 PCS code in the second line of item I8000. As an 
alternative to using item I8000 to classify a resident into a clinical 
category, we stated in the proposed rule (83 FR 21044) that we were 
considering using a resident's primary diagnosis as reflected in MDS 
item I0020 as the basis for assigning the resident to a clinical 
category, and were evaluating the categories provided in item I0020 to 
determine if there is sufficient overlap between the categories used in 
item I0020 and the proposed PDPM clinical categories provided in Table 
14 that this item could serve as the basis for a resident's initial 
classification into a clinical category under PDPM. We stated that the 
MDS item I0020 would require facilities to select a primary diagnosis 
from a pre-populated list of primary diagnoses representing the most 
common types of beneficiaries treated in a SNF, while item I8000, if 
used to assign residents to clinical categories, would require 
facilities to code a specific ICD-10-CM code that corresponds to the 
primary reason for the resident's Part A SNF stay. As indicated above, 
we also proposed that providers would code a specific ICD-10-PCS code 
in the second line of item I8000 when surgical information from the 
prior inpatient stay is necessary to assign a resident to a clinical 
category. We explained that if we were to use item I0020 to categorize 
residents under PDPM, we would not require providers to record 
additional information on inpatient surgical procedures as we expect 
the primary diagnosis information provided through item I0020 to be 
adequate to appropriately assign a resident to a clinical category.
    We invited comments on our proposal to categorize a resident into a 
PDPM clinical category using the ICD-10-CM code recorded in the first 
line of item I8000 on the MDS 3.0, and the ICD-10-PCS code recorded on 
the second line of item I8000 on the MDS 3.0. In addition, we solicited 
comments on the alternative of using item I0020 on the MDS 3.0, as 
discussed above, as the basis for resident classification into one of 
the ten clinical categories in Table 14.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the clinical category assignments under PDPM. A 
discussion of these comments, along with our responses, appears below.
    Comment: Several commenters expressed concern about ICD-10 coding 
requirements under PDPM. Some commenters are concerned that these 
requirements, especially ICD-10-PCS coding requirements, would create 
compliance risks because of SNFs' limited expertise in using ICD codes. 
A few commenters request that CMS offer ICD-10 coding training for 
clinicians, billers, coders, and other SNF personnel, prior and 
subsequent to PDPM implementation. Another commenter requested that CMS 
provide case studies and other resources as part of its educational 
strategy with respect to ICD-10 coding in the SNF setting. This 
commenter also recommended that CMS develop explicit instructions for 
how providers should record diagnosis and procedure information in MDS 
item I8000 for resident classification purposes under PDPM. One 
commenter recommends requiring the employment of credentialed medical 
record staff to ensure accurate coding. One commenter seeks 
clarification about potential consequences of ICD-10 coding errors 
during RAC audits. Another commenter questioned if the proposed ICD-10 
coding is considered a transaction under the HIPPA transaction coding 
requirement.
    Response: We appreciate the commenters' concerns regarding ICD-10 
coding, but do not concur with stakeholder claims that SNF providers 
are unfamiliar with ICD-10 coding practices. While ICD-10 codes are 
not, in most instances, a factor in determining payment under the 
current SNF Part A benefit, ICD-10 has been an aspect of Medicare since 
FY 2016. Moreover, ICD-10 provides the most accurate coding and 
diagnosis information on patients, which can only serve to improve 
provider understanding of their patient's condition and resultant care 
plan. Finally, we believe that given the type of homogeneity of care 
currently provided by SNF providers (as evidenced by the existing case-
mix distribution that has over 90 percent of patient billed days in one 
of 23 RUGs that utilize therapy service utilization as the primary 
determinant), moving to a system that utilizes the primary patient 
diagnosis as the key determinant of payment will help to ensure that 
the patient's unique condition and goals is the primary driver of care 
planning and care delivery and case mix classification, rather than the 
patient's ability to tolerate a high volume of therapy services.
    With regard to the comment that CMS offer ICD-10 coding training 
for clinicians and other personnel, we do not believe it is the role of 
CMS to offer this type of professional training, as it is the 
responsibility of the provider to ensure that their staff is properly 
trained to perform these types of more general tasks that are not 
specific to a given payer or requirement. With regard to the comment 
that CMS provide case studies and other resources as part of an 
educational strategy, we appreciate this comment and will take it into 
consideration as we develop the educational materials for PDPM. In 
terms of the explicit instructions for how providers record diagnosis 
and procedure information, we do intend to provide such information in 
the MDS RAI manual.
    With regard to the comment that we should require that providers 
employ credentialed medical record staff to ensure accurate coding, we 
agree that the emphasis on ICD-10 could cause changes in staffing at 
some providers. However, we do not believe it would be appropriate for 
CMS, in this instance, to specifically identify the type of staff that 
providers must employ to ensure accurate coding, as this is a decision 
best left to the provider. With regard to the potential consequences of 
ICD-10 coding errors on RAC audits, as under the current payment 
system, the information reported to CMS must be accurate. Inaccuracies 
in the data reported to CMS, or a failure to document the basis for 
such data, will necessitate the same types of administrative actions as 
occur today.

[[Page 39199]]

    Finally, with regard to the question of whether the reporting of 
ICD-10 coding information constitutes a HIPAA transaction, we note that 
while some HIPAA Administrative Simplification requirements at 45 CFR 
part 162 require the use of ICD-10 codes, reporting ICD-10 codes does 
not in and of itself constitute a HIPAA transaction.
    Comment: One commenter stated that CMS's proposal to use the first 
line of I8000 to capture the primary reason for SNF stay, the second 
line to capture procedure code, and the remaining spaces to capture 
comorbidities is overly complex. The commenter expressed concern that 
coding a procedure code in the second line of I8000 would not follow 
current RAI coding instructions. Some commenters support using MDS item 
I0020 to record the primary diagnosis, stating this will reduce 
provider burden. Other commenters opposed using item I0020 for this 
purpose because this item is designed for the Quality Reporting Program 
and does not align well with the PDPM clinical categories. One 
commenter stated that coding primary reason for SNF care in both item 
I8000 and item I0020 for different purposes will be confusing and will 
lead to errors. Another commenter sought clarity on whether providers 
would still be required to code ICD-10 diagnosis or procedure codes in 
item I8000 if item I0020 is used for resident classification. This 
commenter also questioned what providers should do if a resident does 
not fall into one of the I0020 categories. A few commenters suggest 
instead adding checkboxes in section I of the MDS to indicate the ten 
PDPM clinical categories. One commenter recommended the use of MDS item 
J2000 for procedure information, because SNFs have minimal experience 
with ICD-10-PCS codes and it can be difficult to obtain precise 
information on procedures performed during the preceding inpatient 
stay.
    Response: We appreciate these comments regarding the complexity of 
the proposed methodology for collecting diagnosis and procedure 
information and appreciate the suggestions for ways to improve coding 
without compromising the overall integrity of the information reported. 
We agree with commenters who stated that the I0020 categories are not 
currently aligned with the clinical categories used under PDPM, 
specifically that the categories used under I0020 do not match the 
clinical categories that we use under PDPM, which means that using 
I0020 at this time would not be appropriate. We will continue to work 
to determine if refinements may be made in that item in the future 
which could allow for a transition to this item. With regard to 
comments concerning the potential for confusion associated with coding 
the patient's primary diagnosis in both I8000 and I0020 for different 
purposes, we believe this both affords the potential to confirm the 
primary diagnosis coding on the MDS (to the extent that we can identify 
areas of alignment between the two items) and helps us to refine the 
categories for a potential future transition to item I0020 under PDPM. 
With regard to the question of what providers should do if a patient 
does not fall into one of the I0020 categories, we would recommend that 
the provider refer to the I0020 coding instructions in the MDS manual 
for guidance on this issue.
    With regard to suggestions of using a checkbox for recording 
diagnosis information, we believe that the use of such checkboxes for 
recording diagnosis information may not provide sufficient granularity 
for CMS to monitor properly the effects of PDPM implementation or to 
accurately classify patients for payment purposes, nor provide enough 
information for the SNF in terms of care planning. Given the use of 
ICD-10 diagnosis coding in other Medicare payment systems and given 
efforts to align payment across multiple post-acute care payment 
systems, we believe that using the actual diagnosis code, rather than a 
checkbox for a category, will provide greater consistency between 
payment systems and would provide a smoother transition to the extent 
such payment systems are aligned further in the future.
    With regard to the comment that CMS consider using item J2000 to 
report procedural information, we believe that while the actual ICD-10 
code is important in the case of diagnosis coding, we agree with the 
commenter that the procedural information may be coded at a more 
aggregated level, as this information is only being used to augment the 
patient's classification rather than as the primary basis for the 
classification. However, we believe that item J2000 (which requires 
providers to report if the patient experienced a surgical procedure in 
the preceding 100 days) would not adequately link to the care being 
delivered in the SNF, potentially close to 100 days after the surgical 
event. To address this, consistent with this commenter's suggestion, 
and in response to other concerns about the complexity of the proposed 
methodology, we believe that it would be appropriate and sufficient to 
develop subitems for item J2000 that would allow providers to report, 
through a checkbox-style mechanism, if a surgical procedure occurred 
during the preceding hospital stay (as opposed to the previous 100 
days, as is used for J2000), and then provide a series of procedural 
categories, related to the PDPM clinical categories, that providers 
could select using a checkbox style mechanism, that would allow the 
provider to report on the relevant procedural information (rather than 
recording the specific ICD-10-PCS code). We believe this is a 
substantial improvement to the procedure we proposed for recording 
surgical procedure information, as it reduces the burden and complexity 
of provider reporting on procedural information while maintaining 
payment accuracy and integrity. Moreover, similar to how PDPM utilizes 
the procedural information to augment the patient's clinical category 
classification, we believe that using a checkbox mechanism also 
augments care-planning by helping ensure that the procedural history 
information from the hospital is properly taken into account in 
determining the resident's care needs and care plan. Therefore, we are 
developing sub-items for item J2000, which will allow providers to 
report the patient's procedural information in a way that uses a 
checkbox mechanism, and this procedural information will be used in 
concert with the patient's diagnosis information, as was discussed 
above and in the FY 2019 SNF PPS proposed rule, to classify the patient 
into a clinical category. We will provide both the subitems under item 
J2000, and the instructions regarding their use, for this purpose in 
the RAI manual.
    Comment: One commenter was opposed to PDPM's focus on one primary 
diagnosis, as SNF residents can be admitted with complex medical 
conditions and multiple diagnoses. The commenter recommends that SNFs 
should select all resident conditions and allow the software to select 
the highest case-mix index achieved. In a similar vein, another 
commenter requested that CMS clarify which inpatient procedure SNFs 
should select for purposes of resident classification and payment under 
PDPM when the patient record includes multiple procedure codes.
    Response: While we agree with the commenter that a SNF patient may 
suffer from multiple conditions, we believe that one of these reasons 
prompted transfer to the SNF. This reason would function as the 
patient's primary diagnosis, as it represents the primary reason for 
the patient being in the SNF. We would also note that primary 
diagnosis, as a concept, is used throughout the Medicare program as the 
basis for payment and, in each area in

[[Page 39200]]

which it is used, patients have the potential to present with multiple 
conditions and multiple diagnoses. Therefore, we do not believe it 
would be appropriate for providers simply to report all conditions and 
be paid for the highest case-mix index, but rather that providers 
should determine the primary reason for the patient's stay, as this 
should also be the primary motivation behind the patient's SNF care.
    With regard to the comment related to multiple inpatient surgical 
procedures, we expect that the checkbox mechanism discussed above, 
which would include more aggregated procedural groupings, should 
address much of this possibility, as often times multiple procedures 
may be done of the same type. In the case of different types of 
procedures, providers should code or check-off all information 
supportable by the patient's medical record.
    Comment: One commenter stated that ICD-10 codes do not contain 
adequate specificity to indicate whether a condition is active/stable 
or active/non-stable. This information, according to the commenter, is 
needed to identify relevant comorbidities. As a result, the commenter 
states that SNFs may inappropriately use active/stable conditions to 
achieve higher reimbursement although these conditions may not indicate 
higher resource utilization.
    Response: We do not agree with the commenter that the ICD-10 codes 
do not contain this degree of specificity. Further, to the extent that 
providers would code conditions solely for purposes of achieving higher 
reimbursement, this type of behavior can be identified through medical 
record reviews, which could prompt additional administrative action.
    Comment: One commenter stated that chronic conditions may not be 
coded consistently year over year. Specifically, a chronic condition 
may be coded one year but not the following year for a long term care 
resident moving in and out of post-acute stays or a post-acute-care 
patient with more than one spell of illness. For example, the commenter 
noted that care may have been provided to the patient but the provider 
did not accurately capture it in reporting. The commenter further 
stated that such coding inconsistencies may lead to unexpected payment 
changes. The commenter recommended that CMS should clarify how chronic 
conditions should be reported and handled by medical reviewers as PDPM 
is implemented.
    Response: We do not believe that any of the PDPM-related policies 
should affect the reporting of chronic conditions. Care should be 
properly documented, regardless of whether it is for a chronic or acute 
condition. Failure to document and code such information accurately 
could lead not only to payment errors, but also to patient care errors. 
We encourage providers to ensure the accuracy and completeness of their 
documentation.
    Comment: Several commenters expressed concern about potential 
logistical issues arising from the time lag in SNFs receiving clinical 
information on admitted patients from the prior inpatient stay. 
Specifically, they state that it is difficult for SNF providers to 
obtain diagnosis and procedure information, as well as other clinical 
information such as discharge summaries, from the facility where a 
resident was treated during their prior inpatient stay. A commenter 
recommended that CMS require hospitals to provide diagnostic and 
procedural information within 48 hours of discharge to the receiving 
facility. This commenter requested that CMS clarify which medical 
records SNFs may rely upon to determine the principal reason for a SNF 
stay or which inpatient procedures were performed. The commenter 
questioned how SNFs should assess this information if they lack 
adequate documentation. Additionally, commenters stated that ICD-10-CM 
and ICD-10-PCS coding require a high level of clinical detail that may 
be difficult to obtain without clinical information from the prior 
inpatient stay.
    Response: For case-mix classification under the PDPM, SNFs will not 
be required to collect any information from the hospital where the 
prior inpatient stay took place beyond that which is required under the 
current RUG-IV system, except for the procedural information discussed 
above. The information that SNFs already collect from hospitals should 
already include sufficient information for the SNF to be able to 
properly care plan and provide care based on the patient's condition. 
In order to do this effectively, SNFs should already be receiving 
documentation and records from the hospital that substantiate the need 
for care and the type of care that is required for that patient. This 
level of information, that is essential in developing an appropriate 
care plan for the patient, should be sufficient for addressing the 
payment requirements under PDPM. For proper classification and payment 
under PDPM, facilities will only be required to record the primary 
reason for SNF care at the time of SNF admission and record the 
associated ICD-10-CM code and procedural information. As discussed in 
Chapter 8 of the Medicare Benefit Policy Manual, a beneficiary in a 
Medicare Part A SNF stay must require skilled nursing care for a 
condition that was treated during the qualifying hospital stay, or for 
a condition that arose while in the SNF for treatment of a condition 
for which the beneficiary was previously treated in the hospital. 
However, CMS recognizes that in many cases, the primary reason for SNF 
care may not be the same as the primary reason for the prior inpatient 
stay. For example, a beneficiary may be treated in a SNF for a 
secondary condition that arose during the prior inpatient stay but that 
is different from the condition that precipitated the acute inpatient 
stay in the first place. PDPM requires facilities to code the diagnosis 
that corresponds most closely to the primary reason for SNF care (in 
this case, the secondary condition that arose during the hospital stay) 
rather than the primary reason for the prior hospitalization. 
Facilities currently must assess beneficiaries' health status and 
reason for SNF care at admission in order to treat them appropriately 
and formulate a patient-centered care plan. PDPM does not require a 
level of data collection that exceeds the requirements of the existing 
admission and care planning processes. Therefore, PDPM does not require 
SNFs to obtain additional clinical information from the inpatient 
setting, beyond the surgical procedure information discussed above.
    Comment: One commenter recommended that CMS allow providers to 
correct the diagnosis or procedure information recorded at admission 
any time prior to discharge and to direct Medicare Administrative 
Contractors, Recovery Audit Contractors, and other contractors to 
assign low priority to reviewing ICD-10 codes in the medical review 
process.
    Response: We appreciate the commenter's concern and would note that 
there are existing processes for modifying and correcting MDS 
assessments, as described in Chapter 5 of the MDS RAI manual. With 
regard to the comment on CMS directing contractor review activities, we 
see no reason to assign low priority to any issues at this time.
    Comment: One commenter requested additional information about codes 
listed as ``Return to Provider'' in the PDPM Clinical Category Mapping. 
Specifically, the commenter requested that CMS provide clarity on why 
these codes are not accepted as valid primary diagnoses for the 
purposes of resident classification. Additionally, the commenter 
requests clarification on

[[Page 39201]]

what actions providers are required to take when a code is returned.
    Response: As discussed above and in the proposed rule (83 FR 
21043), PDPM would use ICD-10-CM diagnosis codes entered in the first 
line of section I8000 on the MDS assessment to assign residents to 
clinical categories for classification and payment purposes in three 
PDPM payment components (PT, OT, and SLP). Codes listed in the PDPM 
Clinical Category Mapping as ``Return to Provider'' are not deemed 
appropriate to enter as the primary reason for SNF care. Such codes 
either lack certainty and specificity required to properly categorize a 
resident under PDPM or the underlying condition cannot be the main 
reason of care in SNFs. Therefore, these codes cannot be used to assign 
a resident to a clinical category for payment purposes under PDPM. When 
a code is returned to a provider, the provider is to select an 
appropriate ICD-10-CM diagnosis code from the SNF PDPM Clinical 
Category Mapping available at CMS' website.
    Comment: Another commenter stated that the PDPM Clinical Category 
Mapping file inappropriately includes ICD-10-CM codes that correspond 
to an initial encounter. The commenter states that initial encounter 
codes include ``A'' as the 7th character and can only occur in a 
hospital where the initial treatment is completed. According to the 
commenter, initial encounter codes cannot be used in the SNF setting 
and should be excluded from the clinical category mapping. 
Additionally, the commenter states that Z codes are not appropriate to 
assign to patients receiving aftercare for traumatic fractures. These 
issues, state the commenter, lead to non-traumatic major joint 
replacements being assigned to Major Joint Replacement while major 
joint replacements as a result of traumatic injury are assigned to 
Orthopedic Surgery (Except Major Joint Replacement or Spinal Surgery). 
The commenter stated that this is inappropriate because aftercare of a 
traumatic injury resulting in hip replacement needs higher complexity 
of care than a scheduled non-traumatic hip replacement.
    Response: We do not agree with the commenter's assertion that 
initial encounter codes cannot be used in the SNF and should be 
excluded from the clinical category mapping. Particularly given the 
increased focus of some commenters on the ability of PDPM to allow 
alignment across different payer types, we believe it is possible that 
some conditions could result as an initial encounter in the SNF. 
Moreover, as SNF services may be covered for conditions that arise in 
the hospital or arise in the SNF, we believe that it is important to 
allow for initial encounter codes to be coded within the SNF and mapped 
to clinical categories in case such a condition serves as the primary 
diagnosis for a SNF stay.
    With regard to the comment that Z codes are not appropriate for 
traumatic fractures, as detailed in the ICD-10-CM Official Guidelines 
for Coding and Reporting, the aftercare codes cover situations when the 
initial treatment of a disease has been performed and the patient 
requires continued care during the healing or recovery phase, or for 
the long-term consequences of the disease. The aftercare Z codes should 
not be used if treatment is directed at a current, acute disease. 
Therefore, the aftercare Z codes should not be used for aftercare for 
traumatic fractures. For aftercare of a traumatic fracture, providers 
are instructed to assign the acute fracture code with the appropriate 
7th character. We agree with the commenter and will update the PDPM 
mapping accordingly.
    Comment: Some commenters expressed concern over the use of MS-DRGs 
to develop the PDPM clinical categories. Commenters noted that hospital 
MS-DRGs are unrelated to the reason for SNF admission and are poor 
predictors of cost in post-acute care. These commenters stated that if 
SNF MDS coding produces a substantially different set of case-mix 
adjustments from the case-mix derived from hospital DRG assignments, 
then the model will produce inappropriate payment rates for the cases 
which deviate from the ``predicted'' case mix rate. They suggested that 
CMS should consider retroactively evaluating this case-mix adjustment 
as soon as it has SNF data following PDPM implementation to correct any 
inaccurate payments in future updates of the PDPM. A commenter states 
that PDPM will need significant recalibration due to payment 
inaccuracies based on the discrepancy between inpatient hospital and 
SNF reason for admission.
    Response: We appreciate the commenters' concerns with the use of 
MS-DRGs to develop the PDPM clinical categories. We would note, 
however, that while the MS-DRGs were used to identify patient 
categories in the SNF, they were not used to determine the cost of 
treating these types of patients. Given this distinction, while we 
might expect some difference in the distribution of SNF case-mix based 
on the potential differences between the prior hospital MS-DRG and SNF-
generated diagnosis information under PDPM, we do not believe that 
using the MS-DRGs compromised the integrity of the clinical categories 
themselves. In developing PDPM clinical categories, we used MS-DRGs 
from the prior inpatient stay to define the primary reason for SNF care 
and assign residents to clinical categories. As stated in section 3.4.1 
of the SNF PDPM technical report, we selected this source of diagnosis 
information because of data quality concerns relating to the principal 
diagnosis from the SNF claim. At the time the clinical categories were 
developed, we found that 47 percent of SNF claims assigned generic ICD-
9-CM codes, with roughly a third assigned V57.89 ``care involving other 
specified rehabilitation procedure'', as the principal diagnosis, 
limiting the usefulness of diagnoses from SNF claims in classifying 
residents. Per the Medicare Benefit Policy Manual, the SNF reason for 
admission must be related to a condition treated during the qualifying 
inpatient stay. Therefore, we believe it is reasonable to use clinical 
information from the prior inpatient stay to characterize the major 
types of beneficiaries who receive SNF care. Additionally, the clinical 
categories were validated by multiple clinicians consulted by CMS and 
participants at technical expert panels. Therefore, we believe the 
proposed clinical categories are appropriate to use to classify major 
clinical types found in the SNF setting. With regard to the possibility 
that the actual case-mix distribution may be distinct from the 
``predicted'' case-mix distribution, we intend to monitor for these 
types of effects and may make adjustments to the payment rates as may 
be appropriate. We also appreciate the commenter's suggestion to 
recalibrate PDPM in the future.
    Accordingly, after considering the comments received, for the 
reasons discussed above and in the proposed rule, we are finalizing our 
proposals discussed above relating to PT and OT case-mix classification 
under the PDPM, with the modification discussed below. As discussed 
above, rather than requiring providers to record the type of inpatient 
surgical procedure performed during the prior inpatient hospital stay 
by coding an ICD-10-PCS code in the second line of item I8000 as we 
proposed, we will instead require providers to select, as necessary, a 
surgical procedure category in a sub-item within Item J2000 which would 
identify the relevant surgical procedure that occurred during the 
patient's preceding hospital stay and which would augment the patient's 
PDPM clinical category.

[[Page 39202]]

(i) Clinical Categories
    Once we identified these clinical categories as being generally 
predictive of resource utilization in a SNF, we then undertook the 
necessary work to identify those categories predictive of PT and OT 
costs specifically. As we discussed in the proposed rule (83 FR 21044), 
we conducted additional regression analyses to determine if any of 
these categories predicted similar levels of PT and OT as other 
categories, which may provide a basis for combining categories. As a 
result of this analysis, for the RCS-I model presented in the ANPRM, we 
found that the ten inpatient clinical categories could be collapsed 
into five clinical categories, which predict varying degrees of PT and 
OT costs. However, as explained in the proposed rule, we received 
comments on the ANPRM regarding the number of possible case-mix group 
combinations under RCS-I, so we sought to try and reduce this number of 
possible case-mix group combinations by further simplifying the model. 
As part of that effort, we observed similar PT and OT resource 
utilization patterns in the clinical categories of Non-Orthopedic 
Surgery and Acute Neurologic and, therefore, proposed to collapse these 
categories for the purpose of PT and OT classification. Additionally, 
as reflected in the RCS-I model presented in the ANPRM, we proposed 
that under PDPM, the remaining clinical categories would be collapsed 
as follows: Acute infections, cancer, pulmonary, cardiovascular and 
coagulations, and medical management would be collapsed into one 
clinical category entitled ``Medical Management'' because their 
residents had similar PT and OT costs. Similarly, we proposed that 
orthopedic surgery (except major joint replacement or spinal surgery) 
and non-surgical orthopedic/musculoskeletal would be collapsed into a 
new ``Other Orthopedic'' category for equivalent reasons. Finally, the 
remaining category, Major Joint Replacement, showed a distinct PT and 
OT cost profile and, thus, we proposed to retain it as an independent 
category. More information on this analysis can be found in section 
3.4.2. of the SNF PMR technical report that accompanied the ANPRM and 
in section 3.4.2. of the SNF PDPM technical report, both available at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html. These proposed collapsed categories, which would 
be used to categorize a resident initially under the proposed PT and OT 
case-mix components, were presented in Table 15 of the proposed rule 
(and are reflected in Table 15 of this final rule).

  Table 15--Collapsed Clinical Categories for PT and OT Classification
------------------------------------------------------------------------
                                           Collapsed PT and OT clinical
         PDPM clinical category                      category
------------------------------------------------------------------------
Major Joint Replacement or Spinal        Major Joint Replacement or
 Surgery.                                 Spinal Surgery.
Non-Orthopedic Surgery.................  Non-Orthopedic Surgery and
                                          Acute Neurologic.
Acute Neurologic.
Non-Surgical Orthopedic/Musculoskeletal  Other Orthopedic.
Orthopedic Surgery (Except Major Joint
 Replacement or Spinal Surgery).
Medical Management.....................  Medical Management.
Acute Infections.
Cancer.
Pulmonary.
Cardiovascular and Coagulations.
------------------------------------------------------------------------

    We received several comments regarding the collapsed PT and OT 
clinical categories. These comments, along with our responses, appear 
below.
    Comment: A commenter disagreed with the decision to collapse the 
initial 10 clinical categories into five clinical groupings for 
purposes of resident classification and payment in the PT and OT 
components. The commenter stated that the five clinical categories used 
for resident classification in the PT and OT components are too broad 
and not representative of the clinical needs of residents. Another 
commenter recommends that CMS not finalize the proposal to combine the 
Acute Neurologic and Non-Orthopedic Surgery residents into a single 
category because patients should be classified based on clinically 
coherent categories, not on similar cost patterns observed under the 
current SNF case-mix classification model, for the latter is reflective 
of current reimbursement incentives to provide therapy based on 
financial considerations. A commenter suggests that CMS consider 
separate clinical category for elective major joint replacement of the 
lower extremity because its cost profile is different from other 
episode types. The commenter suggests that joint replacements as a 
result of a fracture could possibly be combined into the Other 
Orthopedic category.
    Response: As described in section 3.4.2 of the SNF PMR technical 
report that accompanied the 2017 ANPRM, in developing RCS-I (the 
predecessor to PDPM), we created 10 broad clinical categories to 
characterize the major patient types found in the SNF setting. In using 
the CART algorithm to develop resident groups for PT and OT payment, we 
included the 10 clinical categories as a categorical variable. Allowing 
the CART algorithm to group the 10 clinical categories into a smaller 
number of groups resulted in fewer resident groups but a similar R-
squared value for predicting costs. In building PDPM we first retained 
these five collapsed clinical categories to characterize major patient 
types relevant to predicting PT and OT utilization. As detailed in the 
proposed rule, we then further collapsed the clinical categories into 
four categories, in response to comments on the ANPRM regarding the 
number of possible case-mix group combinations under RCS-I. Based on 
the greater simplicity achieved in using fewer clinical categories for 
PT and OT classification and the maintenance in predictive accuracy, we 
believe using the collapsed four categories is a superior option to 
capture variation in PT and OT utilization and to characterize the 
major types of clinical conditions relevant to PT and OT utilization in 
the SNF population. Non-Orthopedic Surgery and Acute Neurologic are 
combined into one category based on their similar PT and OT resource 
utilization pattern, as shown in section 3.4.2 and Table 16 of the SNF 
PDPM technical report. We recognize that the observed data are 
reflective of current reimbursement incentives to provide therapy based 
on financial considerations, which may disguise the relationship 
between

[[Page 39203]]

clinical traits and patient need based on best practice assumptions. We 
will monitor closely the resource utilization pattern of the 10 
clinical categories after the implementation of PDPM. Regarding the 
elective major joint replacement comment, as detailed in section 3.4.1 
of the SNF PMR technical report, we observed that MS-DRG groups with a 
high percentage of elective surgeries correspond to two types of 
procedures: Major joint replacements and spinal surgeries, while MS-DRG 
groups with a high percentage of emergent surgeries include other types 
of orthopedic surgeries involving extremities, often related to falls. 
We discovered that average therapy costs per day were similar for 
resident in a given surgical orthopedic MS-DRG group regardless of 
whether they received elective or emergent surgery.
    Accordingly, after considering the comments received, for the 
reasons discussed above and in the proposed rule, we are finalizing our 
proposals without modification relating to the collapsed clinical 
categories for the PT and OT components.
(ii) Functional Status
    As discussed previously in this section and in the proposed rule 
(83 FR 21044), regression analyses demonstrated that the resident's 
functional status is also predictive of PT and OT costs in addition to 
the resident's initial clinical categorization. In the RCS-I model 
discussed in the ANPRM, we presented a function score similar to the 
existing ADL score to measure functional abilities for the purposes of 
PT and OT payment. In response to the ANPRM, we received comments 
requesting that we consider replacing the functional items used to 
build the RCS-I function score with newer, IMPACT Act-compliant items 
from section GG. Therefore, we constructed, and proposed as discussed 
below, a new function score for PT and OT payment based on section GG 
functional items.
    Under the RUG-IV case-mix system, a resident's ADL or function 
score is calculated based on a combination of self-performance and 
support items coded by SNFs in section G of the MDS 3.0 for four ADL 
areas: Transfers, eating, toileting, and bed mobility. These four areas 
are referred to as late-loss ADLs because they are typically the last 
functional abilities to be lost as a resident's function declines. Each 
ADL is assigned a score of up to four points, with a potential total 
score as high as 16 points. Under the proposed PDPM, we proposed that 
section G items would be replaced with functional items from section GG 
of the MDS 3.0 (Functional Abilities and Goals) as the basis for 
calculating the function score for resident classification used under 
PDPM. We explained that section GG offers standardized and more 
comprehensive measures of functional status and therapy needs. 
Additionally, we stated that the use of section GG items better aligns 
the payment model with other quality initiatives. SNFs have been 
collecting section GG data since October 2016 as part of the 
requirements for the IMPACT Act. We stated that given the advantages of 
section GG and of using a more comprehensive measure of functional 
abilities, we received numerous comments in response to the ANPRM 
requesting the incorporation of section GG items and of early ADLs 
items into the function score.
    As explained in the proposed rule (83 FR 21045), multiple 
stakeholders commented on the ANPRM that late-loss items do not 
adequately reflect functional abilities on their own. These commenters 
stated that early-loss ADL items also capture essential clinical 
information on functional status. Therefore, we stated in the proposed 
rule that in building a new function score based on section GG items, 
we also investigated the incorporation of early-loss items. To explore 
the incorporation of section GG items, we evaluated each item's 
relationship with PT and OT costs. We ran individual regressions using 
each of the 12 section GG items assessed at admission to separately 
predict PT and OT costs per day. As explained in the proposed rule, the 
regression results showed that early-loss items are indeed strong 
predictors of PT and OT costs, with the exception of two wheeling 
items. Both wheeling items were excluded from the functional measure 
due to their weak predictive relationship with PT and OT costs. We 
observed high predictive ability among the remaining items. In total, 
we selected ten items for inclusion in the functional measure for the 
PT and OT components based on the results of the analysis. Thus, under 
the proposed functional measure for the PT and OT components, a 
resident's function would be measured using four late-loss ADL 
activities (bed mobility, transfer, eating, and toileting) and two 
early-loss ADL activities (oral hygiene and walking). Specifically, the 
proposed measure includes: Two bed mobility items, three transfer 
items, one eating item, one toileting item, one oral hygiene item, and 
two walking items that were all found to be highly predictive of PT and 
OT costs per day. A list of proposed section GG items that would be 
included in the functional measure for the PT and OT components was 
included in Table 18 of the proposed rule (and is shown in Table 18 of 
this final rule). Section 3.4.1. in the SNF PDPM technical report 
(available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html) provides more detail on these 
analyses.
    We explained in the proposed rule (83 FR 21045) that, similar to 
the RUG-IV ADL score, each of these ADL areas would be assigned a score 
of up to 4 points. However, in contrast to the RUG-IV ADL score, we 
stated that points were assigned to each response level to track 
functional independence rather than functional dependence. In other 
words, higher points are assigned to higher levels of independence. We 
stated that this approach is consistent with functional measures in 
other care settings, such as the IRF PPS. Further, under the RUG-IV 
model, if the SNF codes that the ``activity did not occur'' or 
``occurred only once,'' these items are assigned the same point value 
as ``independent.'' However, as explained in the proposed rule, we 
observed that residents who were unable to complete an activity had 
similar PT and OT costs as dependent residents. Therefore, we stated 
that when the activity cannot be completed, the equivalent section GG 
responses (``Resident refused,'' ``Not applicable,'' ``Not attempted 
due to medical condition or safety concerns'') are grouped with 
``dependent'' for the purpose of point assignment. For the two walking 
items, we proposed an additional response level to reflect residents 
who skip the walking assessment due to their inability to walk. We 
stated that we believe this is appropriate because this allows us to 
assess the functional abilities of residents who cannot walk and assign 
them a function score. We explained that without this modification, we 
could not calculate a function score for residents who cannot walk 
because they would not be assessed on the two walking items included in 
the function score. We further stated that residents who are coded as 
unable to walk receive the same score as dependent residents to match 
with clinical expectations. In Tables 16 and 17 of the proposed rule 
(set forth at Tables 16 and 17 in this final rule), we provided the 
proposed scoring algorithm for the PT and OT functional measure.

[[Page 39204]]



             Table 16--PT and OT Function Score Construction
                         [Except walking items]
------------------------------------------------------------------------
                        Response                               Score
------------------------------------------------------------------------
05, 06--Set-up assistance, Independent..................               4
04--Supervision or touching assistance..................               3
03--Partial/moderate assistance.........................               2
02--Substantial/maximal assistance......................               1
01, 07, 09, 88--Dependent, Refused, N/A, Not Attempted..               0
------------------------------------------------------------------------


    Table 17--PT and OT Function Score Construction for Walking Items
------------------------------------------------------------------------
                        Response                               Score
------------------------------------------------------------------------
05, 06--Set-up assistance, Independent..................               4
04--Supervision or touching assistance..................               3
03--Partial/moderate assistance.........................               2
02--Substantial/maximal assistance......................               1
01, 07, 09, 88--Dependent, Refused, N/A, Not Attempted,                0
 Resident Cannot Walk *.................................
------------------------------------------------------------------------
* Coded based on response to GG0170H1 (Does the resident walk?).

    We explained in the proposed rule (83 FR 21046) that, unlike 
section G, section GG measures functional areas with more than one 
item. We noted that this results in substantial overlap between the two 
bed mobility items, the three transfer items, and the two walking 
items. Because of this overlap, we stated that a simple sum of all 
scores for each item may inappropriately overweight functional areas 
measured by multiple items. Therefore, to adjust for this overlap, we 
proposed to calculate an average score for these related items. That 
is, we would average the scores for the two bed mobility items, the 
three transfer items, and the two walking items. We stated that the 
average bed mobility, transfer, and walking scores would then be summed 
with the scores for eating, oral hygiene, and toileting hygiene, 
resulting in equal weighting of the six activities. This proposed 
scoring algorithm produces a function score that ranges from 0 to 24. 
In section 3.4.1. of the SNF PDPM technical report (available at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html), we provide additional information on the 
analyses that led to the construction of this proposed function score.

   Table 18--Section GG Items Included in PT and OT Functional Measure
------------------------------------------------------------------------
         Section GG item                           Score
------------------------------------------------------------------------
GG0130A1--Self-care: Eating......  0-4.
GG0130B1--Self-care: Oral Hygiene  0-4.
GG0130C1--Self-care: Toileting     0-4.
 Hygiene.
GG0170B1--Mobility: Sit to lying.  0-4 (average of 2 items).
GG0170C1--Mobility: Lying to
 sitting on side of bed.
GG0170D1--Mobility: Sit to stand.  0-4 (average of 3 items).
GG0170E1--Mobility: Chair/bed-to-
 chair transfer.
GG0170F1--Mobility: Toilet
 transfer.
GG0170J1--Mobility: Walk 50 feet   0-4 (average of 2 items).
 with 2 turns.
GG0170K1--Mobility: Walk 150
 feet.
------------------------------------------------------------------------

We received comments on the use of section GG items as the basis for 
determining the patient's PDPM functional score for purposes of 
classifying under the PT and OT components. Those comments, along with 
our responses, appear below.
    Comment: Some comments welcomed the use of IMPACT-Act compliant 
section GG data to build new function scores for the PT, OT, and 
nursing components of PDPM, which was a recommendation provided by many 
commenters on the ANPRM. However, commenters also expressed concern 
about using section GG data, stating that this data should first be 
validated and that the results of this validation should be made 
public. Commenters stated that the first year of section GG data likely 
contains inaccuracies as providers adjust to the new items. Some 
commenters therefore stated that it is inappropriate to base resident 
classification and payment on a single year of section GG data and 
request that CMS collect a minimum of two years of section GG data to 
ensure reliability and validity before using this data to determine 
payment. One commenter suggested that, due to the issues with section 
GG, CMS should continue to use section G as the basis for functional 
assessment under the payment system. Another commenter sought 
clarification regarding whether CMS compared the first 6 months of 
section GG data to the second 6 months of section GG data to determine 
whether there were any changes in assessment practices for the new 
assessment items.
    Response: We conducted several investigations to validate the 
section GG data. First, we verified that the relationship between 
section G responses and PT and OT utilization was very similar to the 
relationship between corresponding section GG responses and PT and OT 
utilization. Second, we determined that section GG items performed 
similarly to section G items in predicting PT and OT utilization. 
Finally, we compared coding of section GG items during the first 6 
months of FY 2017 to coding of these items during the second 6 months 
of FY 2017 and found only small

[[Page 39205]]

changes in the frequency of responses. Based on the results of these 
checks, we believe the FY 2017 section GG data are valid and reliable, 
and therefore, appropriate to use as a basis of resident classification 
and payment under PDPM.
    Comment: One commenter stated that the proposed PDPM function 
scores ignore missing values for section GG assessment items and urged 
CMS to map missing values to a function score. Another commenter stated 
that the function score should incorporate the new response ``10. Not 
attempted due to environmental limitations''. A few commenters 
requested that CMS consider assigning a score of 1 to ``dependent'' 
responses instead of 0, stating that this scoring aligns better with 
the SNF Quality Reporting Program. These commenters also seek 
clarification on the rationale for grouping ``dependent'' responses 
with ``resident refused,'' ``not applicable,'' and ``not attempted due 
to medical conditions or safety concerns.'' One commenter pointed out 
that the MDS item GG0170H1 (Does the resident walk) will be retired on 
September 30, 2018, and recommended that CMS adopt MDS item GG0170I 
(Walk 10 feet) as a substitute for retired item GG0170H1.
    Response: We appreciate the comment that missing values for section 
GG assessments items are not currently mapped to a point value for 
computing function score. CMS will follow this suggestion to map all 
values to a function score by assigning missing section GG responses to 
receive zero points for the function score calculation as other 
incomplete responses are also assigned zero points. This is also 
consistent with the current RUG-IV ADL scoring methodology, which 
assigns the same point value for missing responses and other incomplete 
responses. Similarly, we will map the new response of 10: ``Not 
attempted due to environmental limitations,'' which was highlighted by 
another commenter, to receive zero points for function score assignment 
to make sure every response has a corresponding point value. We believe 
these point value assignments are appropriate as they are consistent 
with other similar responses that receive zero points for function 
score assignment, including ``resident refused,'' ``not applicable,'' 
and ``not attempted due to medical condition or safety concerns''. In 
response to the comment requesting us to consider assigning 1 point to 
``dependent'' responses instead of 0, this suggested scoring would 
group ``dependent'' responses with ``substantial/maximal assistance'' 
responses. However, we found that dependent residents have different 
levels of PT and OT resource utilization than residents receiving 
substantial/maximal assistance. As described in section 3.4.1 the SNF 
PDPM technical report, we observed that residents who were unable to 
complete an activity had similar PT and OT costs as dependent 
residents. Therefore, we grouped the equivalent section GG responses 
(``resident refused,'' ``not applicable,'' and ``not attempted due to 
medical condition or safety concerns'') with ``dependent'' responses 
for the purpose of point assignment in constructing the function score 
for PT and OT classification and payment. In terms of alignment with 
the SNF QRP quality measures, the PDPM function score uses similar 
scoring logic as the QRP functional outcome measure. As with the PDPM 
function score, the QRP Change in Self-Care score assigns higher points 
to higher levels of functional independence and assigns the same point 
value to ``dependent'' and incomplete responses. The QRP functional 
outcome measure, however, differs in scale. Whereas the PDPM function 
score ranges from 0-4, the QRP Change in Self-Care score ranges from 1-
6. The QRP functional outcome measure assigns 1 point to ``dependent'' 
and all ``activity was not attempted'' codes (``resident refused,'' 
``not applicable,'' and ``not attempted due to medical condition or 
safety concerns''), and 2 points to ``substantial/maximal assistance''. 
This score assignment is very similar to that of the PDPM function 
score. Additionally, one item currently used to compute function score, 
MDS GG0170H1 (Does the resident walk), which is used to determine if 
the resident can walk before proceeding to assess GG0170J1 (Walk 50 
Feet with Two Turns) and GG0170K1 (Walk 150 Feet), is set to be retired 
on September 30, 2018 with the introduction of the newer, more detailed 
SNF QRP mobility and self-care outcome measure items. CMS concurs with 
the commenter's suggestion to select a replacement for PDPM 
implementation. Consistent with the commenter's suggestion, MDS item 
GG0170I1 (Walk 10 feet) will be used as the substitute for MDS GG0170H1 
since the inability to walk at least 10 feet or to complete the 
assessment for this item suggests a significant mobility impairment 
that is essentially equivalent to the definition of the retired 
``cannot walk'' MDS item. Responses 07: ``resident refused,'' 09: ``not 
applicable,'' 10: ``not attempted due to environmental limitations,'' 
or 88: ``not attempted due to medical condition or safety concerns'' 
from MDS item GG0170I1 will be used to identify residents who cannot 
walk.
    Comment: Commenters also stated that the proposed function scores 
should be updated to reflect new section GG items for FY 2019. 
Specifically, they stated that toileting, dressing, and bathing are 
important activities of daily living that are addressed by occupational 
therapy, and therefore, should be considered in measuring residents' 
functional status under PDPM.
    Response: In constructing the function score for PT and OT payment, 
we investigated the use of all existing section GG items. Toileting is 
one of the items included in the proposed function scores for the PT, 
OT, and nursing components of PDPM. We are aware that additional 
section GG items are scheduled to be implemented in FY 2019, including 
items that measure a resident's dressing and bathing abilities. 
However, because these new items have not yet been implemented, there 
is no data available on resource utilization associated with these 
items. Therefore, it is not appropriate to include these items in the 
calculation of the PDPM function scores at this time. We will consider 
adding section GG items that are demonstrated to have a meaningful 
relationship with utilization of SNF resources as new items are added 
and an appropriate amount of data (for example, one year) is available 
to assess this relationship. We will also consider other changes to the 
function score as necessary to reflect additional updates to the 
section GG items, for example, the addition, deletion, or modification 
of particular items or responses.
    Comment: One commenter advised CMS to account for weight bearing 
restrictions among residents who are categorized into the Major Joint 
Replacement or Spinal Surgery or Other Orthopedic clinical categories. 
The commenter stated that patients who cannot bear weight have a more 
complicated post-surgical recovery.
    Response: We appreciate the concern of the commenter regarding 
post-surgical residents who cannot bear weight. However, we believe the 
ability of a resident to bear weight is adequately captured by the 
mobility items in MDS item GG0170, which are included in the function 
score used for classification and payment in the PT and OT components. 
Therefore, we do not believe additional modifications are necessary at 
this time.
    Comment: One commenter noted that in some cases, PT and OT payment 
is higher for case-mix groups with higher

[[Page 39206]]

functional independence. The commenter said this is counterintuitive 
because it implies that some residents who are more dependent require 
less therapy. Another commenter sought clarification on the 
relationship between function score and average PT and OT costs per 
day.
    Response: The commenter is correct that in some cases payment is 
higher for residents who have higher levels of functional independence. 
This reflects the finding that PT and OT utilization is highest for 
residents with moderate functional independence and lower for residents 
with both the highest levels of functional dependence and independence. 
In the first case, this likely reflects residents whose functional 
abilities are too impaired to receive intensive therapy, while the 
second case likely corresponds to residents who require less therapy 
because they already have a high level of functional independence. 
Therefore, we believe PDPM appropriately assigns payment according to 
the observed relationship between functional independence and PT/OT 
utilization.
    Comment: One commenter expressed concern regarding the potential 
for gaming the function score and recommended that CMS remove the 
function score from use as a patient classifier.
    Response: We appreciate this concern for gaming of the function 
score and plan to monitor closely for any changes in functional coding 
before and after implementation of PDPM. That being said, we do believe 
that a patient's functional score is relevant in terms of predicting 
payment accurately, as described elsewhere in this section. Therefore, 
we believe it is important to keep function as an aspect of patient 
classification for payment.
    Accordingly, after considering the comments received, for the 
reasons discussed in the proposed rule and in this final rule, we are 
finalizing our proposals relating to the use of the section GG items as 
the basis for determining the patient's PDPM functional score and for 
classifying the patient under PDPM PT and OT components, with 
modifications. As discussed above, in response to comments, all missing 
values for section GG assessment items will receive zero points as a 
function score. Similarly, the function score will incorporate a new 
response ``10. Not attempted due to environmental limitations'' and we 
will assign it a point value of zero. Furthermore, consistent with a 
commenter's suggestion, we will adopt MDS item GG0170I1 (Walk 10 feet) 
as a substitute for retired item GG0170H1 (Does the resident walk), and 
we will use responses 07: ``resident refused,'' 09: ``not applicable,'' 
10: ``not attempted due to environmental limitations,'' or 88: ``not 
attempted due to medical condition or safety concerns'' from MDS item 
GG0170I1 to identify residents who cannot walk.
(iii) Cognitive Status
    Under the RCS-I case-mix model presented in the ANPRM, we used 
cognitive status to classify residents under the PT and OT components 
in addition to the primary reason for SNF care and functional ability. 
As explained in the proposed rule (83 FR 21046) and in greater detail 
below, after publication of the ANPRM, we removed cognitive status as a 
determinant of resident classification for the PT and OT components. 
Still, although cognitive status was not ultimately selected as a 
determinant of PT and OT classification, it was considered as a 
possible element in developing the proposed resident groups for these 
components via the Classification and Regression Trees (CART) algorithm 
described in greater detail in the proposed rule and below. Because we 
included cognitive status as an independent variable in the CART 
analysis used to develop case-mix groups for PT and OT, we stated that 
we believed it was appropriate to discuss construction of the proposed 
new cognitive measure here even though it was not ultimately selected 
as a determinant of payment for PT and OT. Thus, we discussed 
construction of the instrument used to measure cognitive status under 
the proposed PDPM in the section addressing case-mix classification 
under the PT and OT components, rather than introducing it when 
discussing SLP classification, in which we proposed cognitive status as 
a determinant of resident classification. Under the current SNF PPS, 
cognitive status is used to classify a small portion of residents that 
fall into the Behavioral Symptoms and Cognitive Performance RUG-IV 
category. For all other residents, cognitive status is not used in 
determining the appropriate payment for a resident's care. However, as 
we explained in the proposed rule, industry representatives and 
clinicians at multiple TEPs suggested that a resident's cognitive 
status can have a significant impact on a resident's PT and OT costs. 
Based on this feedback, we explored a resident's cognitive status as a 
predictor of PT and OT costs.
    Under the RUG-IV model, cognitive status is assessed using the 
Brief Interview for Mental Status (BIMS) on the MDS 3.0. The BIMS is 
based on three items: ``repetition of three words,'' ``temporal 
orientation,'' and ``recall.'' These items are summed to produce the 
BIMS summary score. The BIMS score ranges from 0 to 15, with 0 assigned 
to residents with the worst cognitive performance and 15 assigned to 
residents with the highest performance. Residents with a BIMS score 
less than or equal to 9 classify for the Behavioral Symptoms and 
Cognitive Performance category. Residents with a summary score greater 
than 9 but not 99 (resident interview was not successful) are 
considered cognitively intact for the purpose of classification under 
RUG-IV.
    As we explained in the proposed rule (83 FR 21046), in 
approximately 15 percent of 5-day MDS assessments, the BIMS is not 
completed: in 12 percent of cases the interview is not attempted, and 
for 3 percent of cases the interview is attempted but cannot be 
completed. The MDS directs assessors to skip the BIMS if the resident 
is rarely or never understood (this is scored as ``skipped''). In these 
cases, the MDS requires assessors to complete the Staff Assessment for 
Mental Status (items C0700 through C1000). The Cognitive Performance 
Scale (CPS) is then used to assess cognitive function based on the 
Staff Assessment for Mental Status and other MDS items (``Comatose'' 
(B0100), ``Makes Self Understood'' (B0700), and the self-performance 
items of the four late-loss ADLs). The Staff Assessment for Mental 
Status consists of four items: ``Short-term Memory OK,'' ``Long-term 
Memory OK,'' ``Memory/Recall Ability,'' and ``Cognitive Skills for 
Daily Decision Making.'' Only ``Short-term Memory OK'' and ``Cognitive 
Skills for Daily Decision Making'' are currently used for payment. In 
MDS 2.0, the CPS was used as the sole measure of cognitive status. A 
resident was assigned a CPS score from 0 to 6 based on the Staff 
Assessment for Mental Status and other MDS items, with 0 indicating the 
resident was cognitively intact and 6 indicating the highest level of 
cognitive impairment. In addition to the items on the Staff Assessment 
for Mental Status, MDS items ``Comatose'' (B0100), ``Makes Self 
Understood'' (B0700), and the self-performance items of the four late-
loss ADLs factored into the CPS score. Any score of 3 or above was 
considered cognitively impaired. The CPS on the current version of the 
MDS (3.0) functions very similarly. Instead of assigning a score to 
each resident, a resident is determined to be cognitively impaired if 
he or she meets the criteria to receive a score of 3 or above on the 
CPS, based on the MDS items mentioned above. In other words, whereas 
the MDS 2.0 assigned a CPS

[[Page 39207]]

score to each resident, the MDS 3.0 only determines whether a 
resident's score is greater than or equal to 3 and does not assign a 
specific score to each resident for whom the CPS is used to assess 
cognitive status. Residents who are determined to be cognitively 
impaired based on the CPS are classified in the Behavioral Symptoms and 
Cognitive Performance category under RUG-IV, if they do not meet the 
criteria for a higher-paying category.
    We stated in the proposed rule (83 FR 21047) that given that the 15 
percent of residents who are not assessed on the BIMS must be assessed 
using a different scale that relies on a different set of MDS items, 
there is currently no single measure of cognitive status that allows 
comparison across all residents. To address this issue, Thomas et al., 
in a 2015 paper, proposed use of a new cognitive measure, the Cognitive 
Function Scale (CFS), which combines scores from the BIMS and CPS into 
one scale that can be used to compare cognitive function across all 
residents (Thomas KS, Dosa D, Wysocki A, Mor V; The Minimum Data Set 
3.0 Cognitive Function Scale. Med Care. https://www.ncbi.nlm.nih.gov/pubmed/?term=25763665). Following a suggestion from the June 2016 TEP, 
we explored using the CFS as a measure of cognition and found that 
there is a relationship between the different levels of the cognitive 
scale and resident costs. Specifically, we observed that as cognitive 
function declines, PT and OT costs per day decrease, while SLP costs 
per day more than double. More information on this analysis can be 
found in section 3.4.1. of the SNF PMR technical report that 
accompanied the ANPRM available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html. Based on 
these initial investigations, we used the CFS as a cognitive measure in 
the RCS-I payment model described in the ANPRM. As we noted above, the 
RUG-IV system incorporates both the BIMS and CPS score separately, but 
the CFS blends them together into one measure of cognitive status. 
Details on how the BIMS score and CPS score are determined using the 
MDS assessment are described above. The CFS uses these scores to place 
residents into one of four cognitive performance categories, as shown 
in Table 19 of the proposed rule (set forth in Table 19 of this final 
rule). After publication of the ANPRM, we received stakeholder comments 
questioning this scoring methodology, specifically the classification 
of a CPS score of 0 as ``mildly impaired.'' Based on a subsequent 
analysis showing that residents with a CPS score of 0 were similar to 
residents classified as ``cognitively intact'' under the CFS 
methodology, as well as clinical feedback, we determined that it was 
appropriate to reclassify residents with a CPS score of 0 as 
cognitively intact, consistent with ANPRM feedback. This analysis is 
described in more detail in section 3.4.1. of the SNF PDPM technical 
report, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html. The scoring methodology 
for the proposed PDPM cognitive measure was shown in Table 20 of the 
proposed rule (set forth in Table 20 of this final rule). We would note 
once again that while we discussed this scoring methodology in section 
V.D.3.b of the proposed rule (83 FR 21046 through 21047) and this 
section of the final rule because cognitive status was considered in 
developing the PT and OT classification, the cognitive score was not 
proposed as a factor in classification for the PT and OT components 
under PDPM, as further discussed in the proposed rule (83 FR 21047) and 
below.

      Table 19--Cognitive Function Scale (CFS) Scoring Methodology
------------------------------------------------------------------------
             Cognitive level                BIMS score       CPS score
------------------------------------------------------------------------
Cognitively Intact......................           13-15  ..............
Mildly Impaired.........................            8-12             0-2
Moderately Impaired.....................             0-7             3-4
Severely Impaired.......................  ..............             5-6
------------------------------------------------------------------------


       Table 20--PDPM Cognitive Measure Classification Methodology
------------------------------------------------------------------------
             Cognitive level                BIMS score       CPS score
------------------------------------------------------------------------
Cognitively Intact......................           13-15               0
Mildly Impaired.........................            8-12             1-2
Moderately Impaired.....................             0-7             3-4
Severely Impaired.......................  ..............             5-6
------------------------------------------------------------------------

(iv) PT and OT Case-Mix Groups
    As explained in the proposed rule (83 FR 21047), once each of these 
variables--clinical reasons for the SNF stay, the resident's functional 
status, and the presence of a cognitive impairment--was identified, we 
then used a statistical regression technique called Classification and 
Regression Trees (CART) to explore the most appropriate splits in PT 
and OT case-mix groups using these three variables. In other words, 
CART was used to investigate how many PT and OT case-mix groups should 
exist under the proposed PDPM and what types of residents or score 
ranges should be combined to form each of those PT and OT case-mix 
groups. CART is a non-parametric decision tree learning technique that 
produces either classification or regression trees, depending on 
whether the dependent variable is categorical or numeric, respectively. 
We stated that using the CART technique to create payment groups is 
advantageous because it is resistant to both outliers and irrelevant 
parameters. The CART algorithm has been used to create payment groups 
in other Medicare settings. For example, it was used to determine Case 
Mix Groups (CMGs) splits within rehabilitation impairment groups (RICs) 
when the inpatient rehabilitation facility (IRF) PPS was developed. 
This methodology is more thoroughly explained in section 3.4.2. of the 
SNF PDPM technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html).
    As explained in the proposed rule (83 FR 21047), we used CART to 
develop splits within the four collapsed clinical categories shown in 
Table 15 of the proposed rule (set forth in Table 15 of

[[Page 39208]]

this final rule). Splits within each of these four collapsed clinical 
categories were based on the two independent variables included in the 
algorithm: Function score and cognitive status. The CART algorithm 
split residents into 18 groups for the PT component and 14 groups for 
the OT component. These splits are primarily based on differences in 
resident function. As stated in the proposed rule, in the CART-
generated groups, cognitive status plays a role in categorizing less 
than half of the PT groups and only two of the 14 OT groups. In 
addition, we stated that to create the proposed resident classification 
for the PT and OT components, we made certain administrative decisions 
that further refined the PT and OT case-mix classification groups 
beyond those produced through use of the CART algorithm. For example, 
while CART may have created slightly different breakpoints for the 
function score in different clinical categories, we state that we 
believe using a consistent split in scores across clinical categories 
improves the simplicity of the case-mix model without compromising its 
accuracy. Therefore, we used the splits created by the CART algorithm 
as the basis for the consistent splits selected for the case-mix 
groups, simplifying the CART output while retaining important features 
of the CART-generated splits. In our proposed classification for the PT 
and OT components, we retained function as the sole determinant of 
resident categorization within each of the four collapsed clinical 
categories. We created function score bins based on breakpoints that 
recurred in the CART splits, such as 5, 9, and 23. As noted in the 
proposed rule (83 FR 21048) and above, we dropped cognitive status as a 
determinant of classification because of the reduced role it played in 
categorizing residents within the CART-generated groups. Finally, we 
used the same function score bins to categorize residents within each 
of the four collapsed clinical categories for both the PT and OT 
components. As shown in section 3.4.2. of the SNF PDPM technical report 
(available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.htm), and as explained in the proposed 
rule, using the proposed case-mix groups for the PT and OT components 
results in a reduction of 0.005 in the R-squared values for both PT and 
OT classification models. We stated that this shows that although the 
proposed case-mix groups improve simplicity by removing one predictor 
revealed to be less important in categorizing residents (cognitive 
status) and grouping residents similarly (using the same function score 
bins) across clinical categories, these decisions have only a minor 
negative impact on predictive accuracy. These analyses are described in 
further detail in section 3.4.2. of the SNF PDPM technical report 
(available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html).
    Based on the CART results and the administrative decisions 
described above, we proposed 16 case-mix groups to classify residents 
for PT and OT payment. We noted in the proposed rule (83 FR 21048) that 
this represents a marked reduction in the number of case-mix groups for 
PT and OT classification under the RCS-I model discussed in the ANPRM. 
As discussed in the proposed rule and throughout the sections above, 
after publication of the ANPRM, we received feedback from stakeholders 
that the RCS-I payment model was overly complex. In particular, 
commenters expressed concern about the relatively large number of 
possible combinations of case-mix groups. Based on this feedback, we 
sought to reduce the number of resident groups in the PT and OT 
components. First, as discussed in the proposed rule and in this final 
rule, because we observed similar PT and OT resource utilization 
patterns in the clinical categories of Non-Orthopedic Surgery and Acute 
Neurologic, we decided to collapse these categories for the purpose of 
PT and OT classification. In addition, as discussed in the proposed 
rule and in this final rule, we replaced the section G-based functional 
measure from RCS-I with a new functional measure based on section GG 
items. We found that the inclusion of the section GG-based functional 
measure in the CART algorithm resulted in case-mix groups in which 
cognitive function played a less important role in classification. 
Based on these results, we determined that we could remove cognitive 
function as a determinant of PT and OT classification without a notable 
loss in the predictive ability of the payment model, as discussed 
above. We also consulted with clinicians who advised CMS during 
development of PDPM, who confirmed the appropriateness of this 
decision. We stated in the proposed rule that the decisions to collapse 
Non-Orthopedic Surgery and Acute Neurologic into one clinical category 
and remove cognitive status resulted in a large reduction in the number 
of PT and OT case-mix groups, from the 30 in RCS-I to the 16 in the 
proposed PDPM provided in Table 21 of the proposed rule (and set forth 
in Table 21 of this final rule). We provided the criteria for each of 
these groups along with its CMI for both the PT and OT components in 
Table 21. As shown in Table 21, two factors would be used to classify 
each resident for PT and OT payment: Clinical category and function 
score. Each case-mix group corresponds to one clinical category and one 
function score range. We proposed classifying each SNF resident into 
one of the 16 groups shown in Table 21 based on these two factors.
    To help ensure that payment reflects the average relative resource 
use at the per diem level, we stated in the proposed rule (83 FR 21048) 
that CMIs would be set to reflect relative case-mix related differences 
in costs across groups. We stated that this method helps ensure that 
the share of payment for each case-mix group would be equal to its 
share of total costs of the component. We further explained that CMIs 
for the PT and OT components were calculated based on two factors. One 
factor was the average per diem costs of a case-mix group relative to 
the population average. The other factor was the average variable per 
diem adjustment factor of the group relative to the population average. 
In this calculation, average per diem costs equaled total PT or OT 
costs in the group divided by number of utilization days in the group. 
Similarly, the average variable per diem adjustment factor equaled the 
sum of variable per diem adjustment factors corresponding to a given 
component (PT or OT) for all utilization days in the group divided by 
the number of utilization days in the group. We calculated CMIs such 
that they equal the ratio of relative average per diem costs for a 
group to the relative average variable per diem adjustment factor for 
the group. In this calculation, relative average per diem costs and the 
relative average variable per diem adjustment factor were weighted by 
length of stay to account for the different length of stay 
distributions across case-mix groups (as further discussed in section 
3.11.1. of the SNF PDPM technical report, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html). The relative average variable per diem 
adjustment factors for a given PT group and the corresponding OT group 
were the same because residents were classified into the same case-mix 
group under both components. However, relative average per diem costs 
were different across the two corresponding

[[Page 39209]]

PT and OT groups, therefore the resulting CMIs calculated for each 
group were different, as shown in Table 21. After calculating CMIs as 
described above, we then applied adjustments to help ensure that the 
distribution of resources across payment components is aligned with the 
statutory base rates. We stated that the base rates implicitly allocate 
resources to case-mix components in proportion to the relative 
magnitude of the respective component base rates. For example, if the 
base rate for one component were twice as large as the base rate for 
another component, this would imply that the component with the larger 
base rate should receive double the resources of the other component. 
To ensure that the distribution of resources across payment components 
was aligned with the statutory base rates, in the proposed rule, we set 
CMIs such that the average product of the CMI and the variable per diem 
adjustment factor for a day of care equals 1.0 for each of the five 
case-mix-adjusted components in PDPM. If the average product of the CMI 
and the variable per diem adjustment factor for a day of care were 
different across case-mix components, this would result in allocating 
resources in a manner inconsistent with the distribution of resources 
implied by the statutory base rates.
    After adjusting the CMIs to align the distribution of resources 
across payment components with the statutory base rates, a parity 
adjustment was then applied by multiplying the CMIs by the ratio of 
case-mix-related payments in RUG-IV over estimated case-mix-related 
payments in PDPM, as further discussed in section V.J. of the proposed 
rule. More information on the variable per diem adjustment factors is 
discussed in section V.D.4. of the proposed rule. The full methodology 
used to develop CMIs is presented in section 3.11. of the SNF PDPM 
technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html).

                               Table 21--PT and OT Case-Mix Classification Groups
----------------------------------------------------------------------------------------------------------------
                                                    Section GG    PT OT case-mix    PT case-mix     OT case-mix
                Clinical category                 function score       group           index           index
----------------------------------------------------------------------------------------------------------------
Major Joint Replacement or Spinal Surgery.......             0-5              TA            1.53            1.49
Major Joint Replacement or Spinal Surgery.......             6-9              TB            1.69            1.63
Major Joint Replacement or Spinal Surgery.......           10-23              TC            1.88            1.68
Major Joint Replacement or Spinal Surgery.......              24              TD            1.92            1.53
Other Orthopedic................................             0-5              TE            1.42            1.41
Other Orthopedic................................             6-9              TF            1.61            1.59
Other Orthopedic................................           10-23              TG            1.67            1.64
Other Orthopedic................................              24              TH            1.16            1.15
Medical Management..............................             0-5              TI            1.13            1.17
Medical Management..............................             6-9              TJ            1.42            1.44
Medical Management..............................           10-23              TK            1.52            1.54
Medical Management..............................              24              TL            1.09            1.11
Non-Orthopedic Surgery and Acute Neurologic.....             0-5              TM            1.27            1.30
Non-Orthopedic Surgery and Acute Neurologic.....             6-9              TN            1.48            1.49
Non-Orthopedic Surgery and Acute Neurologic.....           10-23              TO            1.55            1.55
Non-Orthopedic Surgery and Acute Neurologic.....              24              TP            1.08            1.09
----------------------------------------------------------------------------------------------------------------

    We stated in the proposed rule that, under the proposed PDPM, all 
residents would be classified into one and only one of these 16 PT and 
OT case-mix groups for each of the two components. We explained that as 
opposed to the RUG-IV system that determines therapy payments based 
only on the amount of therapy provided, these groups classify residents 
based on the two resident characteristics shown to be most predictive 
of PT and OT utilization: Clinical category and function score. Thus, 
we believe that the PT and OT case-mix groups better reflect relative 
resource use of clinically relevant resident subpopulations, and 
therefore, provide for more appropriate payment under the SNF PPS.
    Commenters submitted the following additional comments related to 
the proposed rule's discussion of the Physical and Occupational Therapy 
Case-Mix Classification. A discussion of these comments, along with our 
responses, appears below.
    Comment: Several commenters expressed concern that CMS did not 
include cognition or swallowing disorders as determinants of payment 
for the OT component. One commenter stated that the removal of 
cognitive status as a determinant of PT and OT payment will lead to 
underpayment because cognitive impairment leads to longer recovery time 
and an increased need for therapy services, particularly occupational 
therapy.
    Response: As discussed in the proposed rule (83 FR 21046) and in 
section 3.4.2 of the SNF PDPM technical report, cognitive status was 
initially considered as a determinant of resident classification and 
payment in the PT and OT components of PDPM. However, after replacing 
the section G-based function score for PT and OT classification with a 
function score based on new, IMPACT Act-compliant section GG items, we 
reran the CART analysis used to develop possible case-mix groups. We 
found that after including the section GG-based function score, 
cognitive status played a minimal role in resident classification. As 
noted in the proposed rule (83 FR 21047), cognition played a role in 
categorizing less than half of the 18 CART-generated PT groups and only 
two of the 14 CART-generated OT groups. Based on the reduced role of 
cognition in resident classification for PT and OT payment, we decided 
to remove cognitive status as a determinant of payment for these 
components. This decision also allowed us to substantially reduce the 
number of case-mix groups for the PT and OT components from the 30 
presented in the 2017 ANPRM to the 16 presented in the proposed rule, 
contributing to a simplification of the payment model, which was 
requested by a number of commenters responding to the ANPRM. We also 
confirmed that the decision to remove cognitive status as a determinant 
of PT and OT classification had only a minor negative impact on 
predictive accuracy, reducing the R-squared values of the both the PT 
and OT classification models by only 0.005.
    Comment: One commenter expressed concern about the reliability of 
the cognitive measure used in PDPM.

[[Page 39210]]

    Response: As detailed in section 3.4.1 of the SNF PDPM technical 
report, the PDPM cognitive measure was built based on two existing 
cognitive measures: The Brief Interview for Mental Status (BIMS) and 
the Cognitive Performance Scale (CPS). Both measures are used in the 
current RUG-IV system to determine cognitive impairment. BIMS is used 
when the resident is able to complete the interview, while CPS is used 
when the resident is unable to complete the interview and the staff 
assessment has to be conducted. Thus, the PDPM cognitive measure is 
based on cognitive measures that have been validated and used for 
years. It combines the existing scores from BIMS and CPS into one scale 
that can be used to compare cognitive function across all residents.
    Comment: Some commenters stated that CMS should consider including 
comorbidities related to PT or OT utilization, in particular conditions 
associated with high therapy intensity or duration. Commenters stated 
coronary artery disease, congestive heart failure, diabetes, chronic 
obstructive pulmonary disease (COPD), asthma, chronic wounds, 
depression, swallowing disorders and multiple sclerosis are conditions 
that could be considered as possible comorbidities for the PT or OT 
components.
    Response: As described in section 3.4.1 of the SNF PDPM technical 
report, we investigated the impact of a broad list of conditions on PT 
and OT utilization. These conditions were selected for investigation 
based on comments received in response to the 2017 ANPRM, clinical 
input, and a literature search. This broad list included several of the 
conditions mentioned by commenters, including congestive heart failure, 
diabetes, depression, and swallowing disorders. To focus on conditions 
that have non-negligible impact on increasing costs, only those that 
had a positive impact on PT or OT costs per day of $2 or more were 
selected for further investigation. None of the conditions mentioned by 
commenters that were included in this investigation (congestive heart 
failure, diabetes, depression, swallowing disorders, and multiple 
sclerosis) met this criterion; therefore, they were not selected for 
inclusion in the payment model. Additionally, as mentioned in section 
3.4.1 of the SNF PDPM technical report, we investigated the impact of 
an even broader range of MDS items, diagnosis-related groups (DRGs), 
and hierarchical condition categories (HCCs) on PT and OT utilization. 
Among the conditions included in this analysis were coronary artery 
disease, COPD, asthma, and various types of wounds/wound care including 
wound infection, surgical wounds, and surgical wound care. Based on 
this analysis, we determined that all of these conditions had either a 
small or statistically insignificant impact on PT costs per day and OT 
costs per day. As previously stated, because the current system is 
heavily based on service provision and most residents are classified 
into the Ultra-High therapy category, there is currently little 
variance available in PT and OT costs per day to be explained by the 
presence of comorbidities. For the foregoing reasons, we do not believe 
it is appropriate to include the conditions mentioned by commenters as 
comorbidities for PT or OT payment at this time. However, as care 
practices change over time, we may consider adding comorbidities that 
have a strong impact on PT or OT utilization.
    Comment: Many commenters supported the proposed separation of the 
PT and OT components, as compared to the RCS-I model that combined 
these components into a single component. One commenter questioned if 
therapy would be covered for pain management and wound care treatments 
as these types of treatments are not explicitly covered under the 
clinical categories.
    Response: We appreciate the support for the decision to separate 
the PT and OT components. With regard to the question of therapy 
coverage for certain conditions, we would note that neither the 
clinical categories, nor any other aspects of PDPM implementation, 
should be taken to change any coverage guidelines.
    Accordingly, after considering the comments received, for the 
reasons discussed in the proposed rule and in the final rule, we are 
finalizing the proposed PT and OT components under the PDPM and our 
proposals relating to the methodology for classifying residents under 
the PT and OT components, effective October 1, 2019, with the 
modifications discussed in this section. As discussed above, in 
response to comments, rather than requiring providers to record the 
type of inpatient surgical procedure performed during the prior 
inpatient hospital stay by coding an ICD-10-PCS code in the second line 
of item I8000 as we proposed, we will instead require providers to 
select, as necessary, a surgical procedure category in a sub-item 
within Item J2000 which would identify the relevant surgical procedure 
that occurred during the patient's preceding hospital stay and which 
would augment the patient's PDPM clinical category. For purposes of 
calculating the function score, all missing values for section GG 
assessment items will receive zero points. Similarly, the function 
score will incorporate a new response ``10. Not attempted due to 
environmental limitations'' and we will assign it a point value of 
zero. Furthermore, consistent with a commenter's suggestion, we will 
adopt MDS item GG0170I1 (Walk 10 feet) as a substitute for retired item 
GG0170H1 (Does the resident walk), and we will use responses 07: 
``resident refused,'' 09: ``not applicable,'' 10: ``not attempted due 
to environmental limitations,'' or 88: ``not attempted due to medical 
condition or safety concerns'' from MDS item GG0170I1 to identify 
residents who cannot walk.
c. Speech-Language Pathology Case-Mix Classification
    As discussed above and in the proposed rule (83 FR 21049), many of 
the resident characteristics that we found to be predictive of 
increased PT and OT costs were predictive of lower SLP costs. We stated 
that as a result of this inverse relationship, using the same set of 
predictors to case-mix adjust all three therapy components would 
obscure important differences in variables predicting variation in 
costs across therapy disciplines and make any model that attempts to 
predict total therapy costs inherently less accurate. Therefore, we 
stated that we believe it is appropriate to have a separately adjusted 
case-mix SLP component that is specifically designed to predict 
relative differences in SLP costs. As discussed in the proposed rule 
and in the prior section of this final rule, costs derived from the 
charges on claims and CCRs on facility cost reports were used as the 
measure of resource use to develop an alternative payment model. Costs 
are reflective of therapy utilization as they are correlated to therapy 
minutes recorded for each therapy discipline.
    Following the same methodology we used to identify predictors of PT 
and OT costs, we explained in the proposed rule that our project team 
conducted cost regressions with a host of variables from the MDS 
assessment, prior inpatient claims, and SNF claims that were identified 
as likely to be predictive of relative increases in SLP costs. The 
variables were selected with the goal of being as inclusive of the 
measures recorded on the MDS assessment as possible and also included 
diagnostic information from the prior inpatient stay. The selection 
process also incorporated clinical input from TEP panelists, the 
contractor's clinical staff, and CMS clinical staff. We stated that

[[Page 39211]]

these initial costs regressions were exploratory and meant to identify 
a broad set of resident characteristics that are predictive of SLP 
resource utilization. The results were used to inform which variables 
should be investigated further and ultimately included in the payment 
system. A table of all of the variables considered in this analysis 
appears in the appendix of the SNF PMR technical report that 
accompanied the ANPRM (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html).
    As we stated in the proposed rule (83 FR 21049), based on these 
cost regressions, we identified a set of three categories of predictors 
relevant in predicting relative differences in SLP costs: Clinical 
reasons for the SNF stay, presence of a swallowing disorder or 
mechanically-altered diet, and the presence of an SLP-related 
comorbidity or cognitive impairment. We explained that a model using 
these predictors to predict SLP costs per day accounted for 14.5 
percent of the variation in SLP costs per day, while a very extensive 
model using 1,016 resident characteristics only predicted 19.3 percent 
of the variation. We stated that this shows that these predictors alone 
explain a large share of the variation in SLP costs per day that can be 
explained with resident characteristics.
    As with the proposed PT and OT components, we began with the set of 
clinical categories identified in Table 14 of the proposed rule (set 
forth in Table 14 of this final rule) meant to capture general 
differences in resident resource utilization and ran cost regressions 
to determine which categories may be predictive of generally higher 
relative SLP costs. Through this analysis, we found that one clinical 
category, the Acute Neurologic group, was particularly predictive of 
increased SLP costs. More detail on this investigation can be found in 
section 3.5.2. of the SNF PMR technical report that accompanied the 
ANPRM, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html. Therefore, to determine 
the initial resident classification into an SLP group under the 
proposed PDPM, we stated that residents would first be categorized into 
one of two groups using the clinical reasons for the resident's SNF 
stay recorded on the first line of Item I8000 on the MDS assessment: 
Either the ``Acute Neurologic'' clinical category or a ``Non-
Neurologic'' group that includes the remaining clinical categories in 
Table 14 (Major Joint Replacement or Spinal Surgery; Non-Surgical 
Orthopedic/Musculoskeletal; Orthopedic Surgery (Except Major Joint 
Replacement or Spinal Surgery); Acute Infections; Cancer; Pulmonary; 
Non-Orthopedic Surgery; Cardiovascular and Coagulations; and Medical 
Management).
    In addition to the clinical reason for the SNF stay, based on cost 
regressions and feedback from TEP panelists, we stated in the proposed 
rule (83 FR 21050) that we also identified the presence of a swallowing 
disorder or a mechanically-altered diet (which refers to food that has 
been altered to make it easier for the resident to chew and swallow to 
address a specific resident need) as a predictor of relative increases 
in SLP costs. First, we stated that residents who exhibited the signs 
and symptoms of a swallowing disorder, as identified using K0100Z on 
the MDS 3.0, demonstrated significantly higher SLP costs than those who 
did not exhibit such signs and symptoms. Therefore, we considered 
including the presence of a swallowing disorder as a component in 
predicting SLP costs. However, when this information was presented 
during the October 2016 TEP, stakeholders indicated that the signs and 
symptoms of a swallowing disorder may not be as readily observed when a 
resident is on a mechanically-altered diet and requested that we also 
consider evaluating the presence of a mechanically-altered diet, as 
determined by item K0510C2 on the MDS 3.0, as an additional predictor 
of increased SLP costs. As we further explained in the proposed rule, 
our project team conducted this analysis and found that there was an 
associated increase in SLP costs when a mechanically-altered diet was 
present. Moreover, we stated that this analysis revealed that while SLP 
costs may increase when either a swallowing disorder or mechanically-
altered diet is present, resident SLP costs increased even more when 
both of these items were present. More detail on this investigation and 
these analyses can be found in section 3.5.3. of the SNF PDPM technical 
report, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html. As a result, we agreed 
with the stakeholders that both swallowing disorder and mechanically-
altered diet are important components of predicting relative increases 
in resident SLP costs, and thus, in addition to the clinical 
categorization, we proposed classifying residents as having either a 
swallowing disorder, being on a mechanically altered diet, both, or 
neither for the purpose of classifying the resident under the SLP 
component. We also noted that we plan to monitor specifically for any 
increases in the use of mechanically altered diet among the SNF 
population that may suggest that beneficiaries are being prescribed 
such a diet based on facility financial considerations, rather than for 
clinical need.
    As a final aspect of the proposed SLP component case-mix 
adjustment, we explored how SLP costs vary according to cognitive 
status and the presence of an SLP-related comorbidity. As we explained 
in the proposed rule, we observed that SLP costs were notably higher 
for residents who had a mild to severe cognitive impairment as defined 
by the PDPM cognitive measure methodology described in Table 20 of the 
proposed rule (set forth in Table 20 of this final rule) or who had an 
SLP-related comorbidity present. We stated that for each condition or 
service included as an SLP-related comorbidity, the presence of the 
condition or service was associated with at least a 43 percent increase 
in average SLP costs per day. The presence of a mild to severe 
cognitive impairment was associated with at least a 100 percent 
increase in average SLP costs per day. Similar to the analysis 
conducted in relation to the PT and OT components, the project team ran 
cost regressions on a broad list of possible conditions. As we stated 
in the proposed rule (83 FR 21050), based on that analysis, and in 
consultation with stakeholders during our TEPs and clinicians, we 
identified the conditions listed in Table 22 of the proposed rule (set 
forth in Table 22 of this final rule) as SLP-related comorbidities 
which we believe best predict relative differences in SLP costs. As 
discussed in the proposed rule, we used diagnosis codes on the most 
recent inpatient claim and the first SNF claim, as well as MDS items on 
the 5-day assessment for each SNF stay to identify these diagnoses and 
found that residents with these conditions had much higher SLP costs 
per day. Further, we stated that rather than accounting for each SLP-
related comorbidity separately, all conditions were combined into a 
single flag. If the resident has at least one SLP-related comorbidity, 
the combined flag is turned on. We explained in the proposed rule that 
we combined all SLP-related comorbidities into a single flag because we 
found that the predictive ability of including a combined SLP 
comorbidity flag is comparable to the predictive ability of including 
each SLP-related comorbidity as an individual predictor. Additionally, 
we stated that using a combined SLP-

[[Page 39212]]

related comorbidity flag greatly improves the simplicity of the payment 
model. More detail on these analyses can be found in section 3.5.1. of 
the SNF PMR technical report that accompanied the ANPRM (available at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html).

                   Table 22--SLP-Related Comorbidities
------------------------------------------------------------------------
 
---------------------------------------------------------------------------
Aphasia.
CVA, TIA, or Stroke.
Hemiplegia or Hemiparesis.
Traumatic Brain Injury.
Tracheostomy Care (While a Resident).
Ventilator or Respirator (While a Resident).
Laryngeal Cancer.
Apraxia.
Dysphagia.
ALS.
Oral Cancers.
Speech and Language Deficits.
------------------------------------------------------------------------

Once each of these variables--clinical reasons for the SNF stay, 
presence of a swallowing disorder or mechanically-altered diet, and the 
presence of an SLP-related comorbidity or cognitive impairment--found 
to be useful in predicting resident SLP costs was identified, as we 
discussed in the proposed rule (83 FR 21050), we used the CART 
algorithm, as we discussed above in relation to the PT and OT 
components, to determine appropriate splits in SLP case-mix groups 
based on CART output breakpoints using these three variables. We stated 
we then further refined the SLP case-mix classification groups beyond 
those produced by the CART algorithm. We used consistent criteria to 
group residents into 18 payment groups across the two clinical 
categories determined to be relevant to SLP utilization (Acute 
Neurologic and Non-Neurologic). These groups simplified the SLP case-
mix classification by reducing the number of groups while maintaining 
the CART predictive power in terms of R-squared. This methodology and 
the results of our analysis are more thoroughly explained in sections 
3.4.2. and 3.5.2. of the SNF PMR technical report that accompanied the 
ANPRM (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html).
    Under the original RCS-I SLP component, a resident could be 
classified into one of 18 possible case-mix groups. Comments received 
in response to the ANPRM expressed concern over the complexity of the 
payment model due to the high number of possible combinations of case-
mix groups. We stated in the proposed rule (83 FR 21051) that, to 
reduce the number of possible SLP case-mix groups, we simplified the 
consistent splits model selected for RCS-I. To accomplish this, we 
combined clinical category (Acute Neurologic or Non-Neurologic), 
cognitive impairment, and the presence of an SLP-related comorbidity 
into a single predictor due to the clinical relationship between acute 
neurologic conditions, cognition, and SLP comorbidities. We explained 
in the proposed rule that these three predictors are highly 
interrelated as acute neurologic conditions may often result in 
cognitive impairment or SLP-related comorbidities such as speech and 
language deficits. As we discussed in the proposed rule, using this 
combined variable along with presence of a swallowing disorder or 
mechanically-altered diet results in 12 groups. We compared the 
predictive ability of the simplified model with more complex 
classification options, including the original RCS-I SLP model. We 
explained that regression results showed that the reduction in case-mix 
groups by collapsing independent variables had little to no effect on 
payment accuracy. Specifically, we noted that the proposed PDPM SLP 
model has an R-squared value almost identical to that of the original 
RCS-I SLP model, while reducing the number of resident groups from 18 
to 12. Therefore, we determined that 12 case-mix groups would be 
necessary to classify residents adequately in terms of their SLP costs 
in a manner that captures sufficient variation in SLP costs without 
creating unnecessarily granular separations. More information on this 
analysis can be found in section 3.5.2. of the SNF PDPM technical 
report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html). We provided the criteria 
for each of these groups along with its CMI in Table 23 of the proposed 
rule (set forth in Table 23 of this final rule).
    To help ensure that payment reflects the average relative resource 
use at the per diem level, we stated in the proposed rule (83 FR 21051) 
that CMIs would be set to reflect relative case-mix related differences 
in costs across groups. We stated that this method helps ensure that 
the share of payment for each case-mix group would be equal to its 
share of total costs of the component. We further explained that CMIs 
for the SLP component were calculated based on the average per diem 
costs of a case-mix group relative to the population average. Relative 
average differences in costs were weighted by length of stay to account 
for the different length of stay distributions across case-mix groups 
(as further discussed in section 3.11.1. of the SNF PDPM technical 
report, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html). In this calculation, 
average per diem costs equaled total SLP costs in the group divided by 
number of utilization days in the group. Because the SLP component does 
not have a variable per diem schedule (as further discussed in section 
3.9.1. of the SNF PDPM technical report, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html), variable per diem adjustment factors were not 
involved in SLP CMI calculation. We further stated that a parity 
adjustment was then applied by multiplying the CMI by the ratio of 
case-mix-related payments in RUG-IV over estimated case-mix-related 
payments in PDPM, as further discussed in section V.J. of the proposed 
rule. We stated that this method helps ensure that the share of payment 
for each case-mix group is equal to its share of total costs of the 
component and that PDPM is budget neutral relative to RUG-IV. The full 
methodology used to develop CMIs is presented in section 3.11. of the 
SNF PDPM technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html).

                                  TABLE 23--SLP Case-Mix Classification Groups
----------------------------------------------------------------------------------------------------------------
Presence of acute neurologic condition, SLP-
     related comorbidity, or cognitive           Mechanically altered diet or      SLP case-mix    SLP case-mix
                 impairment                          swallowing disorder               group           index
----------------------------------------------------------------------------------------------------------------
None.......................................  Neither............................              SA            0.68
None.......................................  Either.............................              SB            1.82
None.......................................  Both...............................              SC            2.66

[[Page 39213]]

 
Any one....................................  Neither............................              SD            1.46
Any one....................................  Either.............................              SE            2.33
Any one....................................  Both...............................              SF            2.97
Any two....................................  Neither............................              SG            2.04
Any two....................................  Either.............................              SH            2.85
Any two....................................  Both...............................              SI            3.51
All three..................................  Neither............................              SJ            2.98
All three..................................  Either.............................              SK            3.69
All three..................................  Both...............................              SL            4.19
----------------------------------------------------------------------------------------------------------------

    As with the PT and OT components, we stated that all residents 
would be classified into one and only one of these 12 SLP case-mix 
groups under the PDPM. We explained that, as opposed to the RUG-IV 
system that determines therapy payments based only on the amount of 
therapy provided, under the PDPM, residents would be classified into 
SLP case-mix groups based on resident characteristics shown to be 
predictive of SLP utilization. Thus, we stated that believe the SLP 
case-mix groups will provide a better measure of resource use and will 
provide for more appropriate payment under the SNF PPS.
    We invited comments on the approach we proposed above to classify 
residents for SLP payment under the proposed PDPM.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the classification of residents for SLP payment 
under the PDPM. A discussion of these comments, along with our 
responses, appears below.
    Comment: Some commenters agreed with the SLP-related patient 
classifiers. Some commenters suggested using a different assessment of 
cognition than that currently used on the MDS, such as the Montreal 
Cognitive Assessment (MOCA). One commenter expressed concerns regarding 
the use of cognition as a first tier classification criterion, as 
changes in cognition can be difficult to identify and this could impact 
on the possibility of late or missed IPAs. This commenter suggested 
moving cognition into the second tier classification criteria.
    Response: We appreciate the support for the SLP component 
classification criteria. With regard to the comment on using a 
different assessment for assessing cognition, we are not opposed to 
this idea and would encourage stakeholders to work with CMS in 
developing potential revisions to the MDS to improve care planning and 
management. That being said, as the MOCA is not currently in use on the 
MDS, we must utilize the data and assessment tools to which we 
currently have access. Finally, with regard to the concern about the 
interplay between cognition and the IPA, we expect that this concern 
would be addressed by having the IPA be completed on an optional basis, 
as described in section V.D.1 of this final rule.
    Comment: One commenter expressed concern that having a separate SLP 
component could result in the overutilization of SLP services, 
specifically for treating cognitive impairments. The commenter advised 
CMS to limit the overutilization of SLP services for cognitive 
impairment issues.
    Response: As discussed above, we found that cognitive impairment is 
a relevant characteristic in predicting SLP resource utilization and 
costs. However, we understand the concern regarding the potential for 
providers to overutilize SLP services in certain instances and will 
monitor the use of SLP services under PDPM to identify any potential 
consequences of using this payment classifier as part of the SLP 
component.
    Comment: A commenter questioned the accuracy of using the same 
primary diagnosis to assign clinical category across the PT, OT, and 
SLP components. This commenter states that multiple diagnoses can 
contribute to the reason for the SNF stay and proposes distinguishing 
between PT/OT and SLP diagnoses. Specifically, the commenter suggests 
allowing providers to enter the clinical reason for PT/OT services in 
the first two lines of MDS item I8000 and the clinical reason for SLP 
services in the third line of item I8000. This commenter points to our 
decision to separate therapy disciplines into different payment 
components based on our observation that different sets of resident 
characteristics were predictive of PT and OT costs, on one hand, and 
SLP costs, on the other. Given that utilization of PT and OT resources 
and utilization of SLP services are explained by a different set of 
predictors, this commenter concludes that the clinical reasons for 
receiving SLP services are distinct from those motivating PT/OT 
services.
    Response: As detailed in the proposed rule (83 FR 21043) and 
section 3.4.1 of the SNF PDPM technical report, when constructing the 
ten clinical categories, we explored conditions that are clinically 
relevant to general SNF resource utilization. Within each component, we 
further consolidated the ten clinical categories into groups that have 
significant impact on component-specific resource utilization. We found 
that the clinical reason for a SNF stay as represented by the clinical 
categories was highly predictive of PT, OT, and SLP utilization, and 
thus we do not believe it is necessary to enter separate clinical 
reasons for PT/OT and SLP services, as suggested by the commenter. For 
this reason, we believe it is appropriate to include the clinical 
categories as determinants of resident classification and payment for 
all three components. We would also emphasize that clinical category is 
the only predictor shared by the PT/OT and SLP components. The other 
independent variables are unique to the PT and OT or SLP components and 
capture other clinical reasons for PT/OT and SLP services. As a result, 
in many cases, a resident's cognitive status and the presence of SLP-
related comorbidities may be as relevant as primary diagnosis in 
determining resident classification and payment.
    Comment: A few commenters stated that the proposed SLP-related 
comorbidity list is an incomplete reflection of all comorbidities that 
require SLP treatment. One commenter stated that the SLP comorbidity 
list should include progressive neurologic disorders that increase SLP 
resource use. This commenter suggests relabeling the ``ALS'' MDS 
checkbox item as ``Progressive Neurologic Diseases'' and updating the 
MDS manual definition for

[[Page 39214]]

this item to meet the criteria of specific progressive neurologic 
diseases.
    Response: We appreciate commenters' concerns regarding additional 
conditions that may be related to SLP utilization. We may consider 
adding conditions that have a demonstrated relationship to SLP resource 
use in future revisions to the payment model. To examine the impact of 
PDPM on residents with chronic neurological conditions, we included 
this subpopulation in our resident impact analysis and found that PDPM 
is estimated to slightly increase the payment associated with these 
residents.
    Comment: Some commenters agreed with the use of mechanically 
altered diet as a payment classifier. One commenter requested that CMS 
provide evidence that a mechanically altered diet is associated with 
higher SLP utilization than other nutritional approaches such as 
personal assistance with feeding. One commenter requested that CMS 
monitor the use of mechanically altered diets under PDPM to identify 
any potentially inappropriate use of such diets. One commenter stated 
that overutilization of such diets can have negative repercussions for 
patient care.
    Response: As described in section 3.5.1 and 3.5.2 of the SNF PMR 
technical report, besides mechanically altered diet, we additionally 
explored feeding tube as a determinant of classification and payment 
for the SLP component. We used CART to test several SLP models with 
different variables related to swallowing and nutritional approach. 
This investigation found that mechanically altered diet notably 
increased the predictive power of the models, whereas feeding tube only 
had a small impact on predictive ability. While feeding tube was 
associated with an increase in SLP costs per day, we did not include 
feeding tube in the payment model because it only had a small impact on 
the predictive accuracy of the model relative to mechanically altered 
diet. We also explored the MDS item Eating Self-Performance (G0110H1) 
as a potential predictor of SLP utilization. While increased eating 
dependence was associated with higher SLP utilization, when we included 
Eating Self-Performance as an independent variable in the CART analysis 
used to explore possible case-mix groups, Eating Self-Performance was 
only selected as a determinant of classification for half of the 18 
groups created by the CART algorithm. As a result, we determined that 
we could remove Eating Self-Performance from the SLP classification 
without notably sacrificing predictive ability. As shown in section 
3.5.2 of the SNF PMR technical report, removing Eating Self-Performance 
and combining various independent variables to simplify the 
classification reduced the R-squared value of the classification by 
only 0.005. As a result, this classification was used as the basis for 
the proposed PDPM SLP component.
    With regard to the possibility of some providers prescribing 
mechanically altered diets inappropriately or the possibility of 
overutilization, we do plan to monitor the use of these diets as part 
of our general PDPM monitoring strategy.
    Accordingly, after considering the comments received, for the 
reasons discussed in the proposed rule and in this final rule, we are 
finalizing, without modification, the proposed SLP component of PDPM 
and our proposals relating to the classification of residents under the 
SLP component.
d. Nursing Case-Mix Classification
    As we explained in the proposed rule (83 FR 21051 through 21052), 
the RUG-IV classification system first divides residents into 
``rehabilitation residents'' and ``non-rehabilitation residents'' based 
on the amount of therapy a resident receives. We stated that 
differences in nursing needs can be obscured for rehabilitation 
residents, where the primary driver of payment classification is the 
intensity of therapy services that a resident receives. For example, 
for two residents classified into the RUB RUG-IV category, which would 
occur on the basis of therapy intensity and ADL score alone, the 
nursing component for each of these residents would be multiplied by a 
CMI of 1.56. We stated that this reflects that residents in that group 
were found, during our previous Staff time measurement (STM) work, to 
have nursing costs 56 percent higher than residents with a 1.00 index. 
We noted that while this CMI also includes adjustments made in FY 2010 
and FY 2012 for budget-neutrality purposes, what is clear is that two 
residents, who may have significantly different nursing needs, are 
nevertheless deemed to have the very same nursing costs, and SNFs would 
receive the same nursing payment for each. Given the discussion above 
and in the proposed rule, which noted that approximately 60 percent of 
resident days are billed using one of three Ultra-High Rehabilitation 
RUGs (two of which have the same nursing index), we stated that the 
current case-mix model effectively classifies a significant portion of 
SNF therapy residents as having exactly the same degree of nursing 
needs and requiring exactly the same amount of nursing resources. As 
such, we stated we believed that further refinement of the case-mix 
model would be appropriate to better differentiate among patients, 
particularly those who receive therapy services with different nursing 
needs.
    We further explained in the proposed rule (83 FR 21052) that an 
additional concern in the RUG-IV system is the use of therapy minutes 
to determine not only therapy payments but also nursing payments. For 
example, residents classified into the RUB RUG fall in the same ADL 
score range as residents classified into the RVB RUG. The only 
difference between those residents is the number of therapy minutes 
that they received. However, as we stated in the proposed rule, the 
difference in payment that results from this difference in therapy 
minutes impacts not only the RUG-IV therapy component but also the 
nursing component: Nursing payments for RUB residents are 40 percent 
higher than nursing payments for RVB residents. We stated that as a 
result of this feature of the RUG-IV system, the amount of therapy 
minutes provided to a resident is one of the main sources of variation 
in nursing payments, while other resident characteristics that may 
better reflect nursing needs play a more limited role in determining 
payment.
    As discussed in the proposed rule (83 FR 21052), the more nuanced 
and resident-centered classifications in current RUG-IV non-
rehabilitation categories are obscured under the current payment model, 
which utilizes only a single RUG-IV category for payment purposes and 
has over 90 percent of resident days billed using a rehabilitation RUG. 
The RUG-IV non-rehabilitation groups classify residents based on their 
ADL score, the use of extensive services, the presence of specific 
clinical conditions such as depression, pneumonia, or septicemia, and 
the use of restorative nursing services, among other characteristics. 
These characteristics are associated with nursing utilization, and the 
STRIVE study accounted for relative differences in nursing staff time 
across groups. Therefore, we proposed to use the existing RUG-IV 
methodology for classifying residents into non-rehabilitation RUGs to 
develop a proposed nursing classification that helps ensure nursing 
payment reflects expected nursing utilization rather than therapy 
utilization.
    For example, in the proposed rule (83 FR 21052), we considered two 
residents. The first patient classifies into the RUB rehabilitation RUG 
(on the basis of the

[[Page 39215]]

resident's therapy minutes) and into the CC1 non-rehabilitation RUG (on 
the basis of having pneumonia), while the second classifies into the 
RUB rehabilitation RUG (on the basis of the resident's therapy minutes) 
and the HC1 non-rehabilitation RUG (on the basis of the resident having 
quadriplegia and a high ADL score). Under the current RUG-IV based 
payment model, the billing for both residents would utilize only the 
RUB rehabilitation RUG, despite clear differences in their associated 
nursing needs and resident characteristics. We proposed an approach 
where, for the purpose of determining payment under the nursing 
component, the first resident would be classified into CC1, while the 
second would be classified into HC1 under the PDPM. We stated that 
believe classifying the residents in this manner for payment purposes 
would capture variation in nursing costs in a more accurate and 
granular way than relying on the rehabilitation RUG's nursing CMI.
    While resident classification in the proposed PDPM nursing 
component is guided by RUG-IV methodology, we proposed to make several 
modifications to the RUG-IV nursing RUGs and classification methodology 
under the proposed PDPM. First, we proposed under the PDPM to reduce 
the number of nursing RUGs by decreasing distinctions based on 
function. We stated that under RUG-IV, residents with a serious medical 
condition/service such as septicemia or respiratory therapy are 
classified into one of eight nursing RUGs in the Special Care High 
category. The specific RUG into which a resident is placed depends on 
the resident's ADL score and whether the resident is depressed. RUG-IV 
groups ADL score into bins for simplicity (for example, 2-5 and 6-10). 
For example, under RUG-IV, a resident in the Special Care High category 
who has depression and an ADL score of 3 would fall into the 2-5 ADL 
score bin, and therefore, be classified into the HB2 RUG, which 
corresponds to Special Care High residents with depression and an ADL 
score between 2 and 5 (a mapping of clinical traits and ADL score to 
RUG-IV nursing groups is shown in the appendix of the SNF PDPM 
technical report, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html). To explore 
options to reduce the number of nursing RUGs, we explained in the 
proposed rule that we compared average nursing utilization across all 
43 RUG-IV nursing RUGs. The dependent variable used in this 
investigation was the average wage-weighted staff time (WWST) for each 
nursing RUG from the STRIVE study. WWST is a measure of nursing 
resource utilization used in the STRIVE study. As discussed in more 
detail in the proposed rule (83 FR 21052) and in section 3.2.1. of the 
PDPM technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html), we were 
unable to construct a measure of nursing utilization based on current 
data because facilities do not report resident-specific nursing costs. 
As discussed in the proposed rule, we observed that nursing resource 
use as measured by WWST does not vary markedly between nursing case-mix 
groups defined by contiguous ADL score bins (for example, 11-14 and 15-
16) but otherwise sharing the same clinical traits (for example, 
classified into Special Care High and depressed). We explained that 
this suggests that collapsing contiguous ADL score bins for RUGs that 
are otherwise defined by the same set of clinical traits is unlikely to 
notably affect payment accuracy. Section 3.6.1. of the SNF PDPM 
technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html) provides more 
detail on this analysis.
    In the Special Care High, Special Care Low, Clinically Complex, and 
Reduced Physical Function classification groups (RUGs beginning with H, 
L, C, or P), for nursing groups that were otherwise defined with the 
same clinical traits (for example, extensive services, medical 
conditions, depression, restorative nursing services received), we 
proposed to combine the following pairs of second characters due to 
their contiguous ADL score bins: (E, D) and (C, B). These characters 
correspond to ADL score bins (15 to 16, 11 to 14) and (6 to 10, 2 to 
5), respectively. We observed that nursing utilization did not vary 
notably across these contiguous ADL score bins; therefore, we stated 
that we believe it is appropriate to collapse pairs of RUGs in these 
classification groups that correspond to contiguous ADL score bins but 
are otherwise defined by the same clinical traits. For example, HE2 and 
HD2, which are both in the Special Care High group and both indicate 
the presence of depression, would be collapsed into a single nursing 
case-mix group. Similarly, we stated that PC1 and PB1 (Reduced Physical 
Function and 0 to 1 restorative nursing services) also would be 
combined into a single nursing case-mix group. Section 3.6.1. of the 
SNF PDPM technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html) provides 
more detail on this analysis. In the Behavioral and Cognitive 
Performance classification group (RUGs beginning with B), for RUGs that 
are otherwise defined by the same number of restorative nursing 
services (0 to1 or 2 or more), we proposed to combine RUGs with the 
second character B and A, which correspond to contiguous ADL score bins 
2 to 5 and 0 to 1, respectively. We observed that nursing utilization 
did not vary notably across these contiguous ADL score bins; therefore, 
we stated that we believe it is appropriate to collapse pairs of RUGs 
in this classification group that correspond to contiguous ADL score 
bins but are otherwise defined by the same clinical traits. In other 
words, BB2 and BA2 would be combined into a single nursing group, and 
BB1 and BA1 would also be combined into a single nursing group. Section 
3.6.1. of the SNF PDPM technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html) provides more detail on this analysis. We 
proposed to maintain CA1, CA2, PA1, and PA2 as separate case-mix groups 
under the nursing component of the PDPM. We observed that these RUGs do 
not share similar levels of nursing resource use with RUGs in adjacent 
ADL score bins that are otherwise defined by the same clinical traits 
(for example, medical conditions, depression, restorative nursing 
services received). Rather, we noted that CA1, CA2, PA1, and PA2 are 
associated with distinctly lower nursing utilization compared to RUGs 
that otherwise have the same clinical traits (for example, medical 
conditions, depression, restorative nursing services received) but 
higher ADL score bins. Section 3.6.1. of the SNF PDPM technical report 
(available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html) provides more detail on this 
analysis. We further stated that ES3, ES2, and ES1 also would be 
maintained as separate case-mix groups under the nursing component of 
the proposed PDPM because, although they are defined by the same ADL 
score bin, they are defined by different clinical traits unlike the 
pairs of RUGs that were combined. Specifically, ES3, ES2, and ES1 are 
defined by different combinations of extensive services. We stated that 
we believe collapsing case-mix groups based on ADL score for the RUGs 
specified above would reduce

[[Page 39216]]

model complexity by decreasing the number of nursing case-mix groups 
from 43 to 25, which thereby decreases the total number of possible 
combinations of case-mix groups under the proposed PDPM. Table 26 of 
the proposed rule (set forth in Table 26 of this final rule) shows the 
proposed 25 case-mix groups for nursing payment. Section 3.6.1. of the 
SNF PDPM technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html) provides 
more detail on the analyses and data supporting these proposals.
    As explained in the proposed rule (83 FR 21053), the second 
modification to the RUG-IV nursing classification methodology would 
update the nursing ADL score to incorporate section GG items. 
Currently, the RUG-IV ADL score is based on four late-loss items from 
section G of MDS 3.0: eating, toileting, transfer, and bed mobility. We 
stated that under the proposed PDPM, these section G items would be 
replaced with an eating item, a toileting item, three transfer items, 
and two bed mobility items from the admission performance assessment of 
section GG. In contrast to the RUG-IV ADL score, the proposed PDPM 
score assigns higher points to higher levels of independence. 
Therefore, an ADL score of 0 (independent) corresponds to a section GG-
based function score of 16, while an ADL score of 16 (dependent) 
corresponds to a section GG-based function score of 0. We explained 
that this scoring methodology is consistent with the proposed PDPM PT 
and OT function score, as well as functional scores in other care 
settings, such as the IRF PPS. The proposed nursing scoring methodology 
also assigns 0 points when an activity cannot be completed (``Resident 
refused,'' ``Not applicable,'' ``Not attempted due to medical condition 
or safety concerns''). As described in section V.D.3.c. (PT and OT 
Case-Mix Classification) of the proposed rule, grouping these responses 
with ``dependent'' aligns with clinical expectations of resource 
utilization for residents who cannot complete an ADL activity. The 
proposed scoring methodology is shown in Table 24 of the proposed rule 
(set forth in Table 24 of this final rule). As discussed in section 
V.D.3.c. of the proposed rule, section GG measures functional areas 
with more than one item, which results in substantial overlap between 
the two bed mobility items and the three transfer items. To address 
overlap, we proposed to calculate an average score for each of these 
related items. That is, we stated we would average the scores for the 
two bed mobility items and for the three transfer items. This averaging 
approach was also used in the proposed PT and OT function scores and is 
illustrated in Table 25 of the proposed rule (set forth in Table 25 of 
this final rule). We stated that the final score sums the average bed 
mobility and transfer scores with eating and toileting scores, 
resulting in a nursing function score that ranges from 0 to 16.

              Table 24--Nursing Function Score Construction
------------------------------------------------------------------------
                        Response                             ADL score
------------------------------------------------------------------------
05, 06--Set-up assistance, Independent..................               4
04--Supervision or touching assistance..................               3
03--Partial/moderate assistance.........................               2
02--Substantial/maximal assistance......................               1
01, 07, 09, 88--Dependent, Refused, N/A, Not Attempted..               0
------------------------------------------------------------------------


                        Table 25--Section GG Items Included in Nursing Functional Measure
----------------------------------------------------------------------------------------------------------------
                      Section GG item                                             ADL score
----------------------------------------------------------------------------------------------------------------
GG0130A1--Self-care: Eating................................  0-4.
GG0130C1--Self-care: Toileting Hygiene.....................  0-4.
GG0170B1--Mobility: Sit to lying...........................  0-4 (average of 2 items).
GG0170C1--Mobility: Lying to sitting on side of bed........
GG0170D1--Mobility: Sit to stand...........................  0-4 (average of 3 items).
GG0170E1--Mobility: Chair/bed-to-chair transfer............
GG0170F1--Mobility: Toilet transfer........................
----------------------------------------------------------------------------------------------------------------

    In addition to proposing to replace the nursing ADL score with a 
function score based on section GG items and to collapse certain 
nursing RUGs, we also proposed (83 FR 21054) to update the existing 
nursing CMIs using the STRIVE staff time measurement data that were 
originally used to create these indexes. We explained that under the 
current payment system, non-rehabilitation nursing indexes were 
calculated to capture variation in nursing utilization by using only 
the staff time collected for the non-rehabilitation population. We 
stated we believe that, to provide a more accurate reflection of the 
relative nursing resource needs of the SNF population, the nursing 
indexes should reflect nursing utilization for all residents. To 
accomplish this, we stated in the proposed rule that we replicated the 
methodology described in the FY 2010 SNF PPS rule (74 FR 22236 through 
22238) but classified the full STRIVE study population under non-
rehabilitation RUGs using the RUG-IV classification rules. The 
methodology set forth in the proposed rule for updating resource use 
estimates for each nursing RUG proceeded according to the following 
steps:
    (1) Calculate average wage-weighted staff time (WWST) for each 
STRIVE study resident using FY 2015 SNF wages.
    (2) Assign the full STRIVE population to the appropriate non-
rehabilitation RUG.
    (3) Apply sample weights to WWST estimates to allow for unbiased 
population estimates. The reason for this weighting is that the STRIVE 
study was not a random sample of residents. Certain key subpopulations, 
such as residents with HIV/AIDS, were over-sampled to ensure that there 
were enough residents to draw conclusions on the subpopulations' 
resource use. As a result, STRIVE researchers also developed sample 
weights, equal to the inverse of each resident's probability of 
selection, to permit calculation of unbiased population estimates.

[[Page 39217]]

Applying the sample weights to a summary statistic results in an 
estimate that is representative of the actual population. The sample 
weight method is explained in Phase I of the STRIVE study. A link to 
the STRIVE study is available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/TimeStudy.html.
    (4) Smooth WWST estimates that do not match RUG hierarchy in the 
same manner as the STRIVE study. RUG-IV, from which the nursing RUGs 
are derived, is a hierarchical classification in which payment should 
track clinical acuity. It is intended that residents who are more 
clinically complex or who have other indicators of acuity, including a 
higher ADL score, depression, or restorative nursing services, would 
receive higher payment. When STRIVE researchers estimated WWST for each 
RUG, several inversions occurred because of imprecision in the means. 
These are defined as WWST estimates that are not in line with clinical 
expectations. The methodology used to smooth WWST estimates is 
explained in Phase II of the STRIVE study. A link to the STRIVE study 
is available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/TimeStudy.html.
    (5) Calculate nursing indexes, which reflect the average WWST for 
each of the 25 nursing case-mix groups divided by the average WWST for 
the study population used throughout our research. To impute WWST for 
each stay in the population, we assigned each resident the average WWST 
of the collapsed nursing RUG into which they are categorized. To derive 
the average WWST of each collapsed RUG, we first estimate the average 
WWST of the original 43 nursing RUGs based on steps 1 through 4 above, 
then calculate a weighted mean of the average WWST of the two RUGs that 
form the collapsed RUG. More details on this analysis can be found in 
section 3.6.3. of the SNF PDPM technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html).
    Through this refinement, we stated that we believe the nursing 
indexes under the proposed PDPM better reflect the varied nursing 
resource needs of the full SNF population. In Table 26 of the proposed 
rule (set forth in Table 26 of this final rule), we provided the 
nursing indexes under the proposed PDPM.
    To help ensure that payment reflects the average relative resource 
use at the per diem level, we stated that the nursing CMIs would be set 
to reflect case-mix related relative differences in WWST across groups. 
We further stated that Nursing CMIs would be calculated based on the 
average per diem nursing WWST of a case-mix group relative to the 
population average. In this calculation, average per diem WWST equaled 
total WWST in the group divided by number of utilization days in the 
group. We further explained that because the nursing component does not 
have a variable per diem schedule (as further discussed in section 
3.9.1. of the SNF PDPM technical report, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html), variable per diem adjustment factors were not 
involved in nursing CMI calculation. We then applied a parity 
adjustment by multiplying the CMI by the ratio of case-mix-related 
payments in RUG-IV over estimated case-mix-related payments in PDPM, as 
discussed further in section V.J. of the proposed rule. The full 
methodology used to develop CMIs is presented in section 3.11. of the 
SNF PDPM technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html).

                                                Table 26--Nursing Indexes Under PDPM Classification Model
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Number of        GG-based                     Nursing
   RUG-IV nursing RUG      Extensive services     Clinical conditions        Depression          restorative       function    PDPM nursing     case-mix
                                                                                              nursing  services     score     case-mix group     index
--------------------------------------------------------------------------------------------------------------------------------------------------------
ES3....................  Tracheostomy &          .....................  ...................  ...................       0-14  ES3                    4.04
                          Ventilator.
ES2....................  Tracheostomy or         .....................  ...................  ...................       0-14  ES2                    3.06
                          Ventilator.
ES1....................  Infection.............  .....................  ...................  ...................       0-14  ES1                    2.91
HE2/HD2................  ......................  Serious medical        Yes................  ...................        0-5  HDE2                   2.39
                                                  conditions e.g.
                                                  comatose,
                                                  septicemia,
                                                  respiratory therapy.
HE1/HD1................  ......................  Serious medical        No.................  ...................        0-5  HDE1                   1.99
                                                  conditions e.g.
                                                  comatose,
                                                  septicemia,
                                                  respiratory therapy.
HC2/HB2................  ......................  Serious medical        Yes................  ...................       6-14  HBC2                   2.23
                                                  conditions e.g.
                                                  comatose,
                                                  septicemia,
                                                  respiratory therapy.
HC1/HB1................  ......................  Serious medical        No.................  ...................       6-14  HBC1                   1.85
                                                  conditions e.g.
                                                  comatose,
                                                  septicemia,
                                                  respiratory therapy.
LE2/LD2................  ......................  Serious medical        Yes................  ...................        0-5  LDE2                   2.07
                                                  conditions e.g.
                                                  radiation therapy or
                                                  dialysis.
LE1/LD1................  ......................  Serious medical        No.................  ...................        0-5  LDE1                   1.72
                                                  conditions e.g.
                                                  radiation therapy or
                                                  dialysis.
LC2/LB2................  ......................  Serious medical        Yes................  ...................       6-14  LBC2                   1.71
                                                  conditions e.g.
                                                  radiation therapy or
                                                  dialysis.
LC1/LB1................  ......................  Serious medical        No.................  ...................       6-14  LBC1                   1.43
                                                  conditions e.g.
                                                  radiation therapy or
                                                  dialysis.
CE2/CD2................  ......................  Conditions requiring   Yes................  ...................        0-5  CDE2                   1.86
                                                  complex medical care
                                                  e.g. pneumonia,
                                                  surgical wounds,
                                                  burns.
CE1/CD1................  ......................  Conditions requiring   No.................  ...................        0-5  CDE1                   1.62
                                                  complex medical care
                                                  e.g. pneumonia,
                                                  surgical wounds,
                                                  burns.
CC2/CB2................  ......................  Conditions requiring   Yes................  ...................       6-14  CBC2                   1.54
                                                  complex medical care
                                                  e.g. pneumonia,
                                                  surgical wounds,
                                                  burns.
CA2....................  ......................  Conditions requiring   Yes................  ...................      15-16  CA2                    1.08
                                                  complex medical care
                                                  e.g. pneumonia,
                                                  surgical wounds,
                                                  burns.
CC1/CB1................  ......................  Conditions requiring   No.................  ...................       6-14  CBC1                   1.34
                                                  complex medical care
                                                  e.g. pneumonia,
                                                  surgical wounds,
                                                  burns.
CA1....................  ......................  Conditions requiring   No.................  ...................      15-16  CA1                    0.94
                                                  complex medical care
                                                  e.g. pneumonia,
                                                  surgical wounds,
                                                  burns.
BB2/BA2................  ......................  Behavioral or          ...................  2 or more..........      11-16  BAB2                   1.04
                                                  cognitive symptoms.
BB1/BA1................  ......................  Behavioral or          ...................  0-1................      11-16  BAB1                   0.99
                                                  cognitive symptoms.
PE2/PD2................  ......................  Assistance with daily  ...................  2 or more..........        0-5  PDE2                   1.57
                                                  living and general
                                                  supervision.

[[Page 39218]]

 
PE1/PD1................  ......................  Assistance with daily  ...................  0-1................        0-5  PDE1                   1.47
                                                  living and general
                                                  supervision.
PC2/PB2................  ......................  Assistance with daily  ...................  2 or more..........       6-14  PBC2                   1.21
                                                  living and general
                                                  supervision.
PA2....................  ......................  Assistance with daily  ...................  2 or more..........      15-16  PA2                    0.70
                                                  living and general
                                                  supervision.
PC1/PB1................  ......................  Assistance with daily  ...................  0-1................       6-14  PBC1                   1.13
                                                  living and general
                                                  supervision.
PA1....................  ......................  Assistance with daily  ...................  0-1................      15-16  PA1                    0.66
                                                  living and general
                                                  supervision.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As with the previously discussed components, we stated that all 
residents would be classified into one and only one of these 25 nursing 
case-mix groups under the proposed PDPM. As explained in the proposed 
rule (83 FR 21055), we also used the STRIVE data to quantify the 
effects of an HIV/AIDS diagnosis on nursing resource use. We controlled 
for case mix by including the proposed PDPM resident groups (in this 
case, the nursing RUGs) as independent variables. The results showed 
that even after controlling for nursing RUG, HIV/AIDS status is 
associated with a positive and significant increase in nursing 
utilization. Based on the results of regression analyses, we found that 
wage-weighted nursing staff time is 18 percent higher for residents 
with HIV/AIDS. (The estimate of average wage-weighted nursing staff 
time for the SNF population was adjusted to account for the deliberate 
over-sampling of certain sub-populations in the STRIVE study. 
Specifically, we applied sample weights from the STRIVE dataset equal 
to the inverse of each resident's probability of selection to permit 
calculation of an unbiased estimate.) Based on these findings, as 
discussed in the proposed rule, we concluded that the proposed PDPM 
nursing groups may not fully capture the additional nursing costs 
associated with HIV/AIDS residents. More information on this analysis 
can be found in section 3.8.2. of the SNF PDPM technical report 
(available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html). Thus, as part of the case-mix 
adjustment of the nursing component, we proposed an 18 percent increase 
in payment for the nursing component for residents with HIV/AIDS. We 
stated that this adjustment would be applied based on the presence of 
ICD-10-CM code B20 on the SNF claim. In cases where a resident is coded 
as having this diagnosis, we stated that the nursing component per diem 
rate for this resident would be multiplied by 1.18, to account for the 
18 percent increase in nursing costs for residents with this diagnosis. 
We also discussed this proposal, as well as its relation to the 
existing AIDS add-on payment under RUG-IV, in section V.I. of the 
proposed rule.
    We invited comments on the approach we proposed to classify 
residents for nursing payment under the proposed PDPM.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the classification of residents for nursing 
payment under the PDPM. A discussion of these comments, along with our 
responses, appears below.
    Comment: One commenter supported the nursing case-mix 
classification model that would be used under PDPM, specifically citing 
the nursing function score refinements and using a separate function 
score for the therapy components than would be used for the nursing 
component. This commenter also requested that CMS consider aligning the 
nursing classification under PDPM with certain hospice criteria. 
Finally, one commenter expressed concern regarding the collapsing of 
nursing groups to only 25 groups and that these groups may not 
accurately account for the variety of patient conditions.
    Response: We appreciate the support for the nursing component 
classification criteria. We can examine the hospice criteria specified 
by the commenter for future consideration. With regard to the comment 
on the collapsed nursing groups, we believe that, given that we 
collapsed groups primarily based on functional score bins and did not 
collapse any of the general nursing group categories (such as extensive 
services and special care high), we believe that the level of 
granularity in the nursing classifications is not significantly 
impacted. As stated in the proposed rule (83 FR 21052) and in section 
3.6.1 of the SNF PDPM technical report, we collapsed groups based on 
function score due to the observation that among nursing RUGs defined 
by the same clinical traits, nursing resource use is similar across 
contiguous functional score bins (for example, 11-14 and 15-16). Since 
WWST does not vary markedly between nursing RUGs defined by contiguous 
functional score bins, collapsing groups based on functional score bins 
simplifies the payment model without a notable loss in accuracy. 
Therefore, we believe that 25 nursing rugs sufficiently captures 
variation in patient conditions.
    Comment: Several commenters questioned the appropriateness of using 
staff-time measurement data from the STRIVE study to estimate relative 
differences in nursing utilization across the nursing groups given the 
age of the data, methodological flaws in the collection of therapy 
minutes, and small sample sizes for certain resident groups used to 
estimate CMIs. Additionally, one commenter stated that the STRIVE study 
underestimates the nursing needs of residents by only measuring the 
usual nursing time provided to residents in the sampled homes. The 
commenter further stated that the STRIVE study did not take into 
account nursing time needed to assure resident safety and maintain 
resident well-being. The commenter expressed concern that basing 
nursing payment on STRIVE data will provide inadequate reimbursement, 
which will result in understaffing. A couple of commenters recommended 
replacing STRIVE with the Schnelle et al. 2016 simulation model to 
estimate nursing resource requirements.
    Response: Unlike the therapy and NTA charges, nursing charges are 
reported on SNF claims as part of routine revenue centers, which also 
include non-case mix services such as room and board, rather than 
revenue centers specific to nursing. Due to the lack of resident-
specific nursing charges, we used WWST from STRIVE data as a measure of 
nursing resource use in limited instances. Specifically, STRIVE data 
was not used to select determinants of payment for the nursing 
component. We only used STRIVE data to update case-mix indexes for the 
nursing component, so that nursing CMIs were calculated based on the 
entire SNF population rather than only on non-rehabilitation residents. 
We conducted a series of investigations into possible changes in 
resident characteristics from the time of the STRIVE study (2006) to 
fiscal year 2014

[[Page 39219]]

to determine if resident characteristics had changed in a manner that 
would suggest it would not be appropriate to use data from the STRIVE 
study in designing payment alternatives. The resident characteristics 
investigated include, but not limited to, most common Major Diagnostic 
Categories (MDC), percent of stays with complications or comorbidities 
in the qualifying inpatient stay, and frequency of MDS section I active 
diagnoses. The result of the investigations suggest that although there 
are small changes in prior inpatient hospital stay and SNF stay 
lengths, there have not been notable changes in resident 
characteristics or acuity over time. Given the stability of resident 
characteristics over time, there is no strong evidence of change in the 
relative resource utilization pattern among nursing groups since the 
time of STRIVE study in 2006.
    In response to the concern about the methodology in collecting 
therapy minutes, we note that we only used nursing time to estimate 
CMIs for the nursing component under PDPM. Because therapy minutes were 
not included in the nursing staff time measure, concerns about how the 
STRIVE study collected therapy utilization data are not relevant to our 
use of STRIVE data to estimate nursing CMIs under PDPM.
    As for the comments on the small sample sizes of certain resident 
groups in the STRIVE study, as detailed in section 4.1.2 of the STRIVE 
Phase II Report available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/TimeStudy.html, the STRIVE study used 
several procedures to address these concerns. First, STRIVE researchers 
deliberately over-sampled certain vulnerable resident groups to obtain 
more robust estimates of resource utilization for these subpopulations. 
Second, the STRIVE authors applied sample weights to obtain reliable 
population estimates. Because the proportion of facilities included in 
the study varied from state to state, the study population was not 
truly random. To account for this, the study developed sampling weights 
equal to the inverse of a resident's probability of selection for 
inclusion in the study population. The use of sampling weights allows 
the calculation of unbiased population estimates from the sample data, 
as described in section 4.1.2 of the STRIVE Phase II Report.
    With regard to the comment stating concerns about how the STRIVE 
study measured nursing time, it is unclear what the commenter means by 
``usual nursing time'' and ``nursing time needed to assure resident 
safety and maintain resident well-being.'' As discussed in the STRIVE 
Phase I and Phase II reports available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/TimeStudy.html, the STRIVE 
study collected three kinds of staff time: Resident Specific Time 
(RST), Non-Resident Specific Time (NRST), and Non-Study Time (NST). It 
was not appropriate to include NST in the dependent variable used to 
measure nursing utilization because these minutes did not benefit 
residents in the study population. As for NRST, while these minutes did 
benefit the study population, there are numerous methodological issues 
involved in including these minutes in the dependent variable. As noted 
in the STRIVE Phase II Report available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/TimeStudy.html, for 
many types of NRST, it is not clear how to allocate these non-resident 
specific minutes to specific residents. The STRIVE authors note that 
during development of RUG-III, NRST was allocated to individual 
residents in proportion to a resident's RST, based on the assumption 
that a resident's utilization of NRST was proportional to their 
utilization of RST. However, as the STRIVE authors note, this 
assumption may not be accurate. Accurate allocation of NRST would have 
involved extensive additional data collection that was beyond the scope 
of the STRIVE study. Without confidence in the allocation methodology, 
including NRST in the dependent variable for nursing would have 
introduced substantial noise into the dependent variable that could 
obscure the relationships between resident characteristics and resource 
utilization. As a result, the STRIVE authors decided to set relative 
payment weights based on RST alone. However, we disagree with the 
commenter if they are suggesting that excluding NRST leads us to 
underestimate nursing utilization. As noted in the STRIVE Phase II 
Report, the STRIVE study was only used to allocate nursing resources 
based on estimated relative resource utilization. It did not determine 
aggregate nursing resources, which are largely determined based on the 
methodology for setting and updating the federal per diem rates as 
specified in the Act. Therefore, it is incorrect to assert that relying 
on the STRIVE data for case-mix adjustment leads to inadequate nursing 
reimbursement since STRIVE is used to determine allocation of nursing 
resources rather than total nursing resources.
    In response to the alternative data source proposed by commenters, 
the Schnelle et al. simulation model estimates resource use for nurse 
aides only; therefore, it is not a comprehensive or appropriate measure 
of nursing utilization.
    Accordingly, after considering the comments received, for the 
reasons discussed in the proposed rule and in this final rule, we are 
finalizing our proposals, without modification, relating to the 
methodology, as described in this section, for classifying patients 
under the nursing component of PDPM.
e. Non-Therapy Ancillary Case-Mix Classification
    Under the current SNF PPS, payments for NTA costs incurred by SNFs 
are incorporated into the nursing component. This means that the CMIs 
used to adjust the nursing component of the SNF PPS are intended to 
reflect not only differences in nursing resource use but also NTA 
costs. However, as we explained in the proposed rule (83 FR 21055), 
there have been concerns that the current nursing CMIs do not 
accurately reflect the basis for or the magnitude of relative 
differences in resident NTA costs. In its March 2016 Report to 
Congress, MedPAC wrote: ``Almost since its inception, the SNF PPS has 
been criticized for encouraging the provision of unnecessary 
rehabilitation therapy services and not accurately targeting payments 
for nontherapy ancillary (NTA) services such as drugs (Government 
Accountability Office 2002, Government Accountability Office 1999, 
White et al. 2002)'' (available at http://medpac.gov/docs/default-source/reports/chapter-7-skilled-nursing-facility-services-march-2016-report-.pdf). In the proposed rule, we stated that while the proposed 
PT, OT, and SLP components were designed to address the issue related 
to provision of therapy services raised by MedPAC above, the proposed 
NTA component was designed to address the issue related to accurately 
targeting payments for NTA services--specifically, that the current 
manner of using the RUG-IV case-mix system to determine NTA payment 
levels inadequately adjusts for relative differences in resident NTA 
costs.
    As noted in the quotation from MedPAC above, MedPAC is not the only 
group to offer this critique of the SNF PPS. We stated in the proposed 
rule that just as the aforementioned criticisms that MedPAC cited have 
existed almost since the inception of the SNF PPS itself, ideas for 
addressing this concern have a similarly long history. In

[[Page 39220]]

response to comments on the 1998 interim final rule which served to 
establish the SNF PPS, we published a final rule on July 30, 1999 (64 
FR 41644). In this 1998 interim final rule, we acknowledged the 
commenters' concerns about the new system's ability to account 
accurately for NTA costs, stating that there were a number of comments 
expressing concern with the adequacy of the PPS rates to cover the 
costs of ancillary services other than occupational, physical, and 
speech therapy (non-therapy ancillaries), including such things as 
drugs, laboratory services, respiratory therapy, and medical supplies. 
We stated in the 1998 interim final rule that prescription drugs or 
medication therapy were frequently noted areas of concern due to their 
potentially high cost for particular residents. Some commenters 
suggested that the RUG-III case-mix classification methodology did not 
adequately provide for payments that account for the variation in, or 
the real costs of, these services provided to their residents. (64 FR 
41647)
    In response to those comments, we stated in the 1998 interim final 
rule that ``we are funding substantial research to examine the 
potential for refinements to the case-mix methodology, including an 
examination of medication therapy, medically complex patients, and 
other nontherapy ancillary services'' (64 FR 41648). In the FY 2019 SNF 
PPS proposed rule (83 FR 21055 through 21056), we proposed a 
methodology that we believe would case-mix adjust SNF PPS payments more 
appropriately to reflect differences in NTA costs.
    Following the same methodology we used for the proposed PT, OT, and 
SLP components, the project team ran cost regression models to 
determine which resident characteristics may be predictive of relative 
increases in NTA costs. As explained in the proposed rule, the three 
categories of cost-related resident characteristics identified through 
this analysis were resident comorbidities, the use of extensive 
services (services provided to residents that are particularly 
expensive and/or invasive), and resident age. However, as discussed in 
the proposed rule, we removed age from further consideration as part of 
the NTA component based on concerns shared by TEP panelists during the 
June 2016 TEP. Particularly, some panelists expressed concern that 
including age as a determinant of NTA payment could create access 
issues for older populations. Additionally, we state that the CART 
algorithm used to explore potential resident groups for the NTA 
component only selected age as a determinant of classification for 2 of 
the 7 groups created. We noted that we also tested a classification 
option that used age as a determinant of classification for every NTA 
group. This only led to a 5 percent increase in the R-squared value of 
the NTA classification. More information on these analyses can be found 
in section 3.7.1. of the SNF PMR technical report available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html.
    As we explained in the proposed rule (83 FR 21056), with regard to 
capturing comorbidities and extensive services associated with high NTA 
utilization, we used multiple years of data (FY 2014 to FY 2017) to 
estimate the impact of comorbidities and extensive services on NTA 
costs. This was in response to comments on the ANPRM that the design of 
the NTA component should be more robust and remain applicable in light 
of potential changes in the SNF population and care practices over 
time. We explained in the proposed rule that conditions and services 
were defined in three ways. First, clinicians identified MDS items that 
correspond to conditions/extensive services likely related to NTA 
utilization. However, we stated that since many conditions/extensive 
services related to NTA utilization are not included on the MDS 
assessment, we then mapped ICD-10 diagnosis codes from the prior 
inpatient claim, the first SNF claim, and section I8000 of the 5-day 
MDS assessment to condition categories from the Part C risk adjustment 
model (CCs) and the Part D risk adjustment model (RxCCs). The CCs and 
RxCCs define conditions by aggregating related diagnosis codes into a 
single condition flag. We use the condition flags defined by the CCs 
and RxCCs to predict Part A and B expenditures or Part D expenditures, 
respectively for Medicare beneficiaries. The predicted relationship 
between the conditions defined in the respective models and Medicare 
expenditures is then used to risk-adjust capitated payments to Part C 
and Part D sponsors. Similarly, we explained that our comorbidities 
investigation aimed to use a comprehensive list of conditions and 
services to predict resource utilization for beneficiaries in Part A-
covered SNF stays. As we stated in the proposed rule, ultimately, the 
predicted relationship between these conditions/services and 
utilization of NTA services would be used to case-mix adjust payments 
to SNF providers, in a process similar to risk adjustment of capitated 
payments. Given these similarities, we decided to use the diagnosis-
defined conditions from the Part C and Part D risk adjustment models to 
define conditions and services that were not defined on the MDS. 
Because the CCs were developed to predict utilization of Part A and B 
services, while the RxCCs were developed to predict Part D drug costs, 
the largest component of NTA costs, we stated that believe using both 
sources allows us to define the conditions and services potentially 
associated with NTA utilization more comprehensively. Lastly, we used 
ICD-10 diagnosis codes to define additional conditions that clinicians 
who advised CMS during PDPM development identified as being potentially 
associated with increased NTA service utilization but are not fully 
reflected in either the MDS or the CCs/RxCCs. The resulting list was 
meant to encompass as many diverse and expensive conditions and 
extensive services as possible from the MDS assessment, the CCs, the 
RxCCs, and diagnoses. As discussed in the proposed rule, using cost 
regressions, we found that certain comorbidity conditions and extensive 
services were highly predictive of relative differences in resident NTA 
costs. These conditions and services were identified in Table 27 of the 
proposed rule (set forth in Table 27 in this final rule). More 
information on this analysis can be found in section 3.7.1. of the SNF 
PDPM technical report available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html. We noted 
in the proposed rule that certain conditions that were associated with 
higher NTA utilization were nevertheless excluded from the list because 
of clinical concerns. Esophageal reflux was excluded because it is a 
very common condition in the SNF population and clinicians noted that 
coding can be discretionary. Migraine headache was also excluded due to 
clinicians' concerns about coding reliability. Additionally, we noted 
that clinicians stated that in many cases migraine headache is not 
treated by medication, the largest component of NTA costs.
    Having identified the list of relevant conditions and services for 
adjusting NTA payments, in the proposed rule (83 FR 21056 through 
21057), we considered different options for how to capture the 
variation in NTA costs explained by these identified conditions and 
services. We stated that one such method would be merely to count the 
number of comorbidities and services a resident receives and assign a 
score to that resident based on this count. We found that this option 
accounts for the additive effect of having multiple comorbidities and 
extensive services but

[[Page 39221]]

did not adequately reflect the relative differences in the impact of 
certain higher-cost conditions and services. We also considered a tier 
system similar to the one used in the IRF PPS, where SNF residents 
would be placed into payment tiers based on the costliest comorbidity 
or extensive service. However, we found that this option did not 
account for the additive effect noted above. To address both of these 
issues, we proposed basing a resident's NTA score, which would be used 
to classify the resident into an NTA case-mix classification group, on 
a weighted-count methodology. Specifically, as shown in Table 27, each 
of the comorbidities and services that factored into a resident's NTA 
classification was assigned a certain number of points based on its 
relative impact on a resident's NTA costs. Those conditions and 
services with a greater impact on NTA costs were assigned more points, 
while those with less of an impact were assigned fewer points. The 
relative impacts are estimated based the coefficients of an ordinary 
least squares (OLS) regression that used the selected conditions and 
extensive services to predict NTA costs per day. Points were assigned 
by grouping together conditions and extensive services with similar OLS 
regression estimates. More information on this methodology and analysis 
can be found in section 3.7.1. of the SNF PDPM technical report 
available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html. We stated that the effect of this 
methodology was that the NTA component would adequately reflect 
relative differences in the NTA costs for each condition or service, as 
well as the additive effect of having multiple comorbidities.
    We stated in the proposed rule (83 FR 21057) that a resident's 
total comorbidity score, which would be the sum of the points 
associated with all of a resident's comorbidities and services, would 
be used to classify the resident into an NTA case-mix group. For 
conditions and services where the source is indicated as MDS item 
I8000, SNF PDPM NTA Comorbidity Mapping (which accompanied the FY 2019 
SNF PPS proposed rule) (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html) provides 
a crosswalk between the listed condition and the ICD-10-CM codes which 
may be coded to qualify that condition to serve as part of the 
resident's NTA classification. MDS item I8000 is an open-ended item in 
the MDS assessment where the assessment provider can fill in additional 
active diagnoses that are not explicitly on the MDS for the resident in 
the form of ICD-10 codes. In the case of Parenteral/IV Feeding, we 
stated that we observed that NTA costs per day increase as the amount 
of intake through parenteral or tube feeding increases. For this 
reason, we proposed to separate this item into a high intensity item 
and a low intensity item, similar to how it is defined in the RUG-IV 
system. In order for a resident to qualify for the high intensity 
category, the percent of calories taken in by the resident by 
parenteral or tube feeding, as reported in item K0710A2 on the MDS 3.0, 
must be greater than 50 percent. We further stated that in order to 
qualify for the low intensity category, the percent of calories taken 
in by the resident by parenteral or tube feeding, as reported in item 
K0710A2 on the MDS 3.0, must be greater than 25 percent but less than 
or equal to 50 percent, and the resident must receive an average fluid 
intake by IV or tube feeding of at least 501cc per day, as reported in 
item K0710B2 of the MDS 3.0.
    We also noted that the source of the HIV/AIDS diagnosis is listed 
as the SNF claim. We explained in the proposed rule that this is 
because 16 states have state laws that prevent the reporting of HIV/
AIDS diagnosis information to CMS through the current assessment system 
and/or prevent CMS from seeing such diagnosis information within that 
system, should that information be mistakenly reported. We noted that 
the states are Alabama, Alaska, California, Colorado, Connecticut, 
Idaho, Illinois, Massachusetts, Nevada, New Hampshire, New Jersey, New 
Mexico, South Carolina, Texas, Washington, and West Virginia. Given 
this restriction, it would not be possible to have SNFs utilize the MDS 
3.0 as the vehicle to report HIV/AIDS diagnosis information for 
purposes of determining a resident's NTA classification. We noted that 
the current SNF PPS uses a claims reporting mechanism as the basis for 
the temporary AIDS add-on payment which exists under RUG-IV. To address 
the issue discussed above with respect to reporting of HIV/AIDS 
diagnosis information under the proposed PDPM, we proposed to utilize 
this existing claims reporting mechanism to determine a resident's HIV/
AIDS status for the purpose of NTA classification. More specifically, 
we explained that HIV/AIDS diagnosis information reported on the MDS 
would be ignored by the GROUPER software used to classify a resident 
into an NTA case-mix group. Instead, we stated that providers would be 
instructed to locate the HIPPS code provided to the SNF on the 
validation report associated with that assessment and report it to CMS 
on the associated SNF claim. Following current protocol, the provider 
would then enter ICD-10-CM code B20 on the associated SNF claim as if 
it were being coded to receive payment through the current AIDS add-on 
payment. The PRICER software, which we use to determine the appropriate 
per diem payment for a provider based on their wage index and other 
factors, would make the adjustment to the resident's NTA case-mix group 
based on the presence of the B20 code on the claim, as well as adjust 
the associated per diem payment based on the adjusted resident HIPPS 
code. Again, we noted that this methodology follows the same logic that 
the SNF PPS currently uses to pay the temporary AIDS add-on adjustment 
but merely changes the target and type of adjustment from the SNF PPS 
per diem to the NTA component of the proposed PDPM. We explained that 
the difference is that while under the current system, the presence of 
the B20 code would lead to a 128 percent increase in the per diem rate, 
under the proposed PDPM, the presence of the B20 code would mean the 
addition of 8 points (as determined by the OLS regression described 
above) to the resident's NTA score, the categorization of the resident 
into the appropriate NTA group, and an adjustment to the nursing 
component, as described in section V.D.3.d. of the proposed rule. 
Section 1888(e)(12) of the Act enacted a temporary 128 percent increase 
in the PPS per diem payment for SNF residents with HIV/AIDS and 
stipulated that the temporary adjustment was to be applied only until 
the Secretary certifies that there is an appropriate case-mix 
adjustment to compensate for the increased costs associated with this 
population. As we explained in the proposed rule, based on this 
language, we conducted an analysis similar to that used to determine 
the HIV/AIDS add-on for the nursing component to examine the adequacy 
of payment for ancillary services (all non-nursing services: PT, OT, 
SLP, and NTA) for residents with HIV/AIDS under the proposed PDPM. This 
analysis determined that after accounting for the 8 points assigned for 
HIV/AIDS in the NTA component and controlling for case-mix 
classification across the three therapy components and NTA component, 
HIV/AIDS was not associated with an increase in ancillary costs. We 
noted that nursing costs were not included in this regression because 
we separately

[[Page 39222]]

investigated the increased nursing utilization associated with HIV/
AIDS, as described in section V.D.3.d. of the proposed rule. Based on 
the results of this investigation, we concluded that the four ancillary 
case-mix components (PT, OT, SLP, and NTA) adequately reimburse costs 
associated with residents with HIV/AIDS. Therefore, we stated that we 
do not believe an HIV/AIDS add-on is warranted for the ancillary cost 
components. More information on this analysis can be found in section 
3.8.2. of the PDPM technical report available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html.
    Table 27 provides the proposed list of conditions and extensive 
services that would be used for NTA classification, the source of that 
information, and the associated number of points for that condition.

 Table 27--Conditions and Extensive Services Used for NTA Classification
------------------------------------------------------------------------
    Condition/extensive service            Source             Points
------------------------------------------------------------------------
HIV/AIDS..........................  SNF Claim...........               8
Parenteral IV Feeding: Level High.  MDS Item K0510A2,                  7
                                     K0710A2.
Special Treatments/Programs:        MDS Item O0100H2....               5
 Intravenous Medication Post-admit
 Code.
Special Treatments/Programs:        MDS Item O0100F2....               4
 Ventilator or Respirator Post-
 admit Code.
Parenteral IV feeding: Level Low..  MDS Item K0510A2,                  3
                                     K0710A2, K0710B2.
Lung Transplant Status............  MDS Item I8000......               3
Special Treatments/Programs:        MDS Item O0100I2....               2
 Transfusion Post-admit Code.
Major Organ Transplant Status,      MDS Item I8000......               2
 Except Lung.
Active Diagnoses: Multiple          MDS Item I5200......               2
 Sclerosis Code.
Opportunistic Infections..........  MDS Item I8000......               2
Active Diagnoses: Asthma COPD       MDS Item I6200......               2
 Chronic Lung Disease Code.
Bone/Joint/Muscle Infections/       MDS Item I8000......               2
 Necrosis--Except Aseptic Necrosis
 of Bone.
Chronic Myeloid Leukemia..........  MDS Item I8000......               2
Wound Infection Code..............  MDS Item I2500......               2
Active Diagnoses: Diabetes          MDS Item I2900......               2
 Mellitus (DM) Code.
Endocarditis......................  MDS Item I8000......               1
Immune Disorders..................  MDS Item I8000......               1
End-Stage Liver Disease...........  MDS Item I8000......               1
Other Foot Skin Problems: Diabetic  MDS Item M1040B.....               1
 Foot Ulcer Code.
Narcolepsy and Cataplexy..........  MDS Item I8000......               1
Cystic Fibrosis...................  MDS Item I8000......               1
Special Treatments/Programs:        MDS Item O0100E2....               1
 Tracheostomy Care Post-admit Code.
Active Diagnoses: Multi-Drug        MDS Item I1700......               1
 Resistant Organism (MDRO) Code.
Special Treatments/Programs:        MDS Item O0100M2....               1
 Isolation Post-admit Code.
Specified Hereditary Metabolic/     MDS Item I8000......               1
 Immune Disorders.
Morbid Obesity....................  MDS Item I8000......               1
Special Treatments/Programs:        MDS Item O0100B2....               1
 Radiation Post-admit Code.
Highest Stage of Unhealed Pressure  MDS Item M0300X1....               1
 Ulcer--Stage 4.
Psoriatic Arthropathy and Systemic  MDS Item I8000......               1
 Sclerosis.
Chronic Pancreatitis..............  MDS Item I8000......               1
Proliferative Diabetic Retinopathy  MDS Item I8000......               1
 and Vitreous Hemorrhage.
Other Foot Skin Problems: Foot      MDS Item M1040A,                   1
 Infection Code, Other Open Lesion   M1040B, M1040C.
 on Foot Code, Except Diabetic
 Foot Ulcer Code.
Complications of Specified          MDS Item I8000......               1
 Implanted Device or Graft.
Bladder and Bowel Appliances:       MDS Item H0100D.....               1
 Intermittent Catheterization.
Inflammatory Bowel Disease........  MDS Item I8000......               1
Aseptic Necrosis of Bone..........  MDS Item I8000......               1
Special Treatments/Programs:        MDS Item O0100D2....               1
 Suctioning Post-admit Code.
Cardio-Respiratory Failure and      MDS Item I8000......               1
 Shock.
Myelodysplastic Syndromes and       MDS Item I8000......               1
 Myelofibrosis.
Systemic Lupus Erythematosus,       MDS Item I8000......               1
 Other Connective Tissue
 Disorders, and Inflammatory
 Spondylopathies.
Diabetic Retinopathy--Except        MDS Item I8000......               1
 Proliferative Diabetic
 Retinopathy and Vitreous
 Hemorrhage.
Nutritional Approaches While a      MDS Item K0510B2....               1
 Resident: Feeding Tube.
Severe Skin Burn or Condition.....  MDS Item I8000......               1
Intractable Epilepsy..............  MDS Item I8000......               1
Active Diagnoses: Malnutrition      MDS Item I5600......               1
 Code.
Disorders of Immunity--Except:      MDS Item I8000......               1
 RxCC97: Immune Disorders.
Cirrhosis of Liver................  MDS Item I8000......               1
Bladder and Bowel Appliances:       MDS Item H0100C.....               1
 Ostomy.
Respiratory Arrest................  MDS Item I8000......               1
Pulmonary Fibrosis and Other        MDS Item I8000......               1
 Chronic Lung Disorders.
------------------------------------------------------------------------

    Given the NTA scoring methodology described in the proposed rule 
(83 FR 21058 through 21059) and above, and following the same 
methodology used for the PT, OT, and SLP components, we used the CART 
algorithm to determine the most appropriate splits in resident NTA 
case-mix groups. This methodology is more thoroughly explained in 
sections 3.4.2. and 3.7.2. of the SNF PDPM technical report available 
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html. Based on the

[[Page 39223]]

breakpoints generated by the CART algorithm, we determined that 6 case-
mix groups would be necessary to classify residents adequately in terms 
of their NTA costs in a manner that captures sufficient variation in 
NTA costs without creating unnecessarily granular separations. As 
discussed in the proposed rule, we made certain administrative 
decisions that further refined the NTA case-mix classification groups 
beyond those produced through use of the CART algorithm but maintained 
the CART output predictive accuracy. We explained that the proposed NTA 
case-mix classification departs from the CART comorbidity score bins in 
grouping residents with a comorbidity score of 1 with residents with 
scores of 2 instead of with residents with scores of 0. This is to 
maintain the distinction between residents with no comorbidities and 
the rest of the population. In addition, we grouped residents with a 
score of 5 together with residents with scores of 3 to 4 based on their 
similarity in average NTA costs per day. More information on this 
analysis can be found in section 3.7.2. of the SNF PDPM technical 
report available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html. We provided the criteria 
for each of these groups along with its CMI in Table 28 of the proposed 
rule (set forth in Table 28 of this final rule).
    We stated in the proposed rule (83 FR 21059) that to help ensure 
payment reflects the average relative resource use at the per diem 
level, CMIs would be set to reflect relative case-mix related 
differences in costs across groups. We further stated that this method 
helps ensure that the share of payment for each case-mix group would be 
equal to its share of total costs of the component. CMIs for the NTA 
component were calculated based on two factors. One factor was the 
average per diem costs of a case-mix group relative to the population 
average. The other factor was the average variable per diem adjustment 
factor of the group relative to the population average. In this 
calculation, average per diem costs equaled total NTA costs in the 
group divided by number of utilization days in the group. Similarly, 
the average variable per diem adjustment factor equaled the sum of NTA 
variable per diem adjustment factors for all utilization days in the 
group divided by the number of utilization days in the group. We 
calculated CMIs such that they equaled the ratio of relative average 
per diem costs for a group to the relative average variable per diem 
adjustment factor for the group. In this calculation, relative average 
per diem costs and the relative average variable per diem adjustment 
factor were weighted by length of stay to account for the different 
length of stay distributions across case-mix groups (as further 
discussed in section 3.11.1. of the SNF PDPM technical report, 
available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html). After calculating CMIs as 
described above, we then applied adjustments to ensure that the 
distribution of resources across payment components was aligned with 
the statutory base rates as discussed in section V.D.3.b. of the 
proposed rule. We also applied a parity adjustment by multiplying the 
CMIs by the ratio of case-mix-related payments in RUG-IV over estimated 
case-mix-related payments in PDPM, as further discussed in section V.J. 
of the proposed rule. More information on the variable per diem 
adjustment factor is discussed in section V.D.4. of the proposed rule. 
The full methodology used to develop CMIs is presented in section 3.11. 
of the SNF PDPM technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html).

              Table 28--NTA Case-Mix Classification Groups
------------------------------------------------------------------------
                                                 NTA  case-   NTA  case-
                NTA score range                  mix group    mix index
------------------------------------------------------------------------
12+...........................................           NA         3.25
9-11..........................................           NB         2.53
6-8...........................................           NC         1.85
3-5...........................................           ND         1.34
1-2...........................................           NE         0.96
0.............................................           NF         0.72
------------------------------------------------------------------------

    We stated in the proposed rule (83 FR 21059) that as with the 
previously discussed components, all residents would be classified into 
one and only one of these 6 NTA case-mix groups under the proposed 
PDPM. We explained that the proposed PDPM would create a separate 
payment component for NTA services, as opposed to combining NTA and 
nursing into one component as in the RUG-IV system. This separation 
would allow payment for NTA services to be based on resident 
characteristics that predict NTA resource utilization rather than 
nursing staff time. Thus, we stated that we believe the proposed NTA 
case-mix groups would provide a better measure of resource utilization 
and lead to more accurate payments under the SNF PPS.
    We invited comments on the approach proposed above to classify 
residents for NTA payment under the proposed PDPM.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the classification of residents for NTA payment 
under the PDPM. A discussion of these comments, along with our 
responses, appears below.
    Comment: A few commenters recommended CMS include additional 
conditions as comorbidities for NTA classification and payment, 
including: Parkinson's disease, non-refractory epilepsy/seizure 
disorders, and mental health conditions that bear a strong relationship 
to NTA utilization. One commenter recommended that CMS include all 
conditions associated with higher NTA costs, not only the 50 costliest 
comorbidities. Another commenter suggested implementing a periodic 
review process to update the NTA comorbidity list based on changes in 
care practices. One commenter recommended CMS add cardio-respiratory 
failure and shock, respiratory arrest, pulmonary fibrosis or other 
chronic lung disorders, oxygen therapy, and non-invasive ventilation 
(for example, BiPAP/CPAP) to the NTA comorbidity list, as these 
conditions/services reflect medical complexity and high acuity. Another 
commenter stated that NTA comorbidities should include wound care and 
all pressure ulcers, not only stage 4 pressure ulcers.
    Response: As described in section 3.7.1 of the SNF PDPM technical 
report, we investigated a broad list of conditions and services as 
potential NTA comorbidities, defined using MDS items, ICD-10-CM 
diagnoses, and CCs and RxCCs from the Medicare Parts C and D risk 
adjustment models. We used MDS item I5300 to identify residents with 
Parkinson's disease, RxCC 164 to identify residents with non-refractory 
epilepsy, CC 84 to identify residents with cardio-respiratory failure 
and shock, CC 83 to identify residents with respiratory arrest, CC 112 
and RxCC 227 to identify residents with pulmonary fibrosis or other 
chronic lung disorders, MDS item M1200F to identify residents receiving 
wound care, and MDS item M0300X1 to identify residents with a pressure 
ulcer. For mental health conditions, we used RxCC 135 to identify 
residents with anxiety, RxCC 133 to identify residents with specified 
anxiety, personality, and behavior disorders, RxCC 132 and 134 to 
identify residents with depression, CC 58 to identify residents with 
Major Depressive, Bipolar, and Paranoid Disorder, CC 57, RxCC 130 to 
identify

[[Page 39224]]

residents with schizophrenia, CC 54 to identify residents with drug or 
alcohol psychosis, and CC 55 to identify residents with drug or alcohol 
dependence. Neither Parkinson's disease, non-refractory epilepsy, 
pulmonary fibrosis or other chronic lung disorders, nor any mental 
health condition were among the top 50 costliest conditions/services in 
terms of NTA utilization. Non-refractory epilepsy was associated with 
an increase of about $1.60 in NTA costs per day, while Parkinson's 
disease was associated with an increase of about $2.50 in NTA costs per 
day and pulmonary fibrosis or other chronic lung disorders were 
associated with an increase of about $4 per day in NTA costs. Wound 
care was associated with an increase of about $2 in NTA costs per day, 
while stage 3 pressure ulcers (the next highest level of severity after 
stage 4) were associated with an increase of about $1 in NTA costs per 
day. Among mental health conditions, major depression was the most 
costly and associated with an increase of about $4 per day in NTA 
costs. The other mental health conditions were associated with less 
than $2 in NTA costs per day. In contrast, the least costly comorbidity 
included in the final list of included comorbidities for NTA 
classification and payment was associated with an increase of about 
$4.50 in NTA costs per day. Therefore, these conditions were not 
included as NTA comorbidities. On the other hand, cardio-respiratory 
failure and shock, as well as respiratory arrest were found to be among 
the 50 costliest conditions in terms of NTA utilization. Therefore, 
these two conditions were included in the final list of NTA 
comorbidities. As for oxygen therapy and non-invasive ventilation such 
as BiPAP and CPAP, clinicians advised CMS that it was not appropriate 
to include these services in the payment model because their inclusion 
would likely lead to inappropriate provision of these services in 
excess of clinical need. We do not believe it is appropriate to include 
conditions/services that do not have a notable impact on NTA costs per 
day, and therefore, we only included the 50 costliest comorbidities.
    Comment: A commenter states that the points assigned to ventilator 
care should be much higher because this service requires 24-hour 
assistance. Additionally, this commenter requests CMS modify the term 
``ventilator/respirator'' to only ``ventilator'' as the term 
``respirator'' is outdated. Another commenter recommended further 
evaluation of the proposed point assignment, particularly for pressure 
ulcers, diabetic ulcers, respiratory failure, severe burns, multi-drug 
resistant organisms, and morbid obesity. According to the commenter, 
these items require higher resource utilization compared to other 
conditions/services that are assigned the same number of points.
    Response: As described in section 3.7.1 of the SNF PDPM technical 
report, after determining the 50 costliest comorbidities in terms of 
NTA utilization, we ran an OLS regression to estimate the increase in 
NTA costs associated with each included condition or service. We then 
assigned points to each condition/service in proportion to the 
associated increase in NTA costs by dividing the coefficient for each 
condition or service by 10 and then rounding to the nearest integer. 
Based on this procedure, we assigned 4 points to ventilator/respirator 
care to reflect our finding that this service was associated with an 
increase of about $40 in NTA costs per day. Using the same procedure, 
we assigned 1 point to stage 4 pressure ulcers, diabetic foot ulcers, 
respiratory failure, severe burns, multi-drug resistant organisms, and 
morbid obesity as each of these conditions was associated with an 
increase of roughly $10 in NTA costs per day. Therefore, our analysis 
does not support increasing the points assigned to these services. The 
nomenclature used to refer to ventilator/respirator care under PDPM is 
consistent with the description of this service on the current version 
of the MDS 3.0 assessment. We appreciate the feedback on the 
appropriateness of the current name and will consider modifying the 
name of this item as appropriate to reflect current usage.
    Comment: One commenter states that given the theoretical maximum 
NTA score is 83, the highest NTA score bin should not be 12+. This 
commenter suggests creating additional score bins at the upper end of 
the score, such as 12-14, 15-17, and 18+, to more accurately reflect 
residents with highly complex conditions and multiple extensive 
services.
    Response: While it is true that some stays have very high NTA 
costs, we find that stays with an NTA comorbidity score of 12 or above 
are very rare (about 1 percent of all stays). As the number of stays 
included in each group declines, the magnitude of the standard error 
associated with the estimate of a group's resource utilization 
increases, raising concerns about the precision of these estimates. For 
the foregoing reasons, we do not believe it is appropriate to add 
additional NTA groups to include residents with extraordinarily high 
NTA utilization at this time. We will also consider revisiting both the 
list of included NTA comorbidities and the points assigned to each 
condition/service based on changes in the resident population and care 
practices over time.
    Comment: Another commenter expressed concern that NTA costs, 
especially high-cost cases, are impossible to predict through use of 
existing administrative data due to the small sample size of these 
high-cost outliers. Since PDPM was developed on data that may fail to 
account for high-cost outliers, the commenter believes that PDPM is not 
sufficient to explain NTA utilization and will underpay the actual 
high-cost cases that cannot be predicted. One commenter questioned the 
validity of current NTA data, stating that providers do not accurately 
record NTA costs because these services are not important determinants 
of payment under RUG-IV. As a result, current data may underestimate 
NTA costs. Therefore, PDPM may not accurately reimburse NTA 
utilization.
    Response: As shown in section 3.7.1 of the SNF PDPM technical 
report, average NTA costs per day by comorbidity score varies from 
around $30 to near $180, which indicates the data being used captures 
great variations of NTA costs and includes many expensive cases. The 
NTA comorbidity list as shown in Table 27 of the proposed rule (83 FR 
21058) captures comorbidities and services with high NTA costs. 
Moreover the selected comorbidities and services meet clinical 
expectations of conditions that are expected to require high NTA 
utilization. Although the data available may be limited in capturing 
high-cost cases due to the small sample size of less common 
comorbidities, the proposed rule (83 FR 21073 through 21077) and 
section 3.12 of the SNF PDPM technical report show that payments for 
beneficiaries with high NTA costs will increase notably under PDPM 
compared with RUG IV. In particular, our impact analysis finds that 
payment increases by 27.2 percent for residents with 12 or more 
conditions under PDPM compared to RUG-IV.
    Regarding the concern that current administrative data may not 
fully capture NTA utilization for the SNF population, first, as 
described in Section 3.2.2. of the SNF PDPM technical report, we 
checked the quality of self-reported NTA utilization data by comparing 
charges from cost reports and charges from claims and verifying that 
these were generally consistent. Second, we used four years of data 
(FYs 2014-2017) to identify the conditions and services associated with 
high NTA utilization and assign points to these comorbidities

[[Page 39225]]

reflective of their impact on resource use. Using several years of data 
addresses a key concern of commenters responding to the 2017 ANPRM and 
ensures a higher level of robustness compared to using a single year of 
data. Third, if NTA utilization is indeed underreported overall, this 
should not affect relative NTA resource use across different types of 
residents, therefore PDPM should still assign payment appropriately 
based on observed relative differences in NTA utilization. Fourth, 
clinicians reviewed the proposed NTA classification and verified that 
it accords with clinical expectations regarding conditions and services 
that are associated with high NTA utilization. Finally, as SNF care 
practices and reporting patterns change in response to the new payment 
model and other factors, we will consider revising elements of PDPM, 
including the NTA comorbidities, to reflect changes in relative 
resource use.
    Comment: One commenter requested clarification on the NTA 
comorbidity list change from RCS-I to PDPM.
    Response: The change in the comorbidity list from RCS-I to PDPM is 
due to the following: first, we used 4 years of data (FY2014-FY2017) 
under PDPM instead of a single year of data under RCS-I to make the 
list more robust to changes in the SNF population and care practices 
over time; second, we added Part D condition categories to better 
capture conditions associated with high medication costs; finally, we 
expanded the list to the top 50 comorbidities to include more 
conditions.
    Comment: One commenter recommended that PDPM include an NTA default 
category to accommodate new conditions and services for greater 
flexibility.
    Response: We are not clear on how such a default category would 
operate, nor what level of reimbursement would be appropriate to set 
for the addition of new conditions and services. We would need 
additional information on how such a default category could be 
constructed.
    Comment: One commenter expressed concern regarding access to novel 
therapies, and encouraged CMS to consider adding a new technology add-
on payment, similar to that done for inpatient hospitals, and make 
additional payments to SNFs when new treatment options become 
available. One commenter also stated that PDPM does not account for new 
classes of expensive medications.
    Response: The points associated with each NTA comorbidity under the 
PDPM are based on existing cost data, which may be updated in future 
years to reflect the costs of new technologies and treatments or new 
classes of medications. Rather than merely incentivizing new 
treatments, we expect providers to utilize the best treatments for a 
given patient, which may or may not be more costly than existing 
treatments. Further, we note that the inpatient hospital PPS's new 
technology add-on payment is specifically authorized by sections 
1886(d)(5)(K) and (L) of the Act, whereas no similar statutory 
authority exists under the SNF PPS.
    Comment: One commenter expressed concern that using a patient's NTA 
score as a first tier classification criterion could put providers at 
risk of late or missing IPAs.
    Response: As discussed in section V.D of this final rule, the IPA 
would be an optional assessment and, as such, not susceptible to late 
or missed assessment penalties.
    Accordingly, after considering the comments received, for the 
reasons discussed in the proposed rule and in this final rule, we are 
finalizing the proposed NTA component of the PDPM and the proposed 
classification methodology for the NTA component, without modification.
f. Payment Classifications Under PDPM
    RUG-IV classifies each resident into a single RUG, with a single 
payment for all services. By contrast, the PDPM classifies each 
resident into five components (PT, OT, SLP, NTA, and nursing) and 
provide a single payment based on the sum of these individual 
classifications. The payment for each component would be calculated by 
multiplying the CMI for the resident's group first by the component 
federal base payment rate, then by the specific day in the variable per 
diem adjustment schedule (as discussed in section V.D.4 of the proposed 
rule and in section V.D.4 of this final rule). Additionally, for 
residents with HIV/AIDS indicated on their claim, the nursing portion 
of payment would be multiplied by 1.18 (as discussed in section 
V.D.3.d. of the proposed rule and section V.H of this final rule). 
These payments would then be added together along with the non-case-mix 
component payment rate to create a resident's total SNF PPS per diem 
rate under the PDPM. This section describes how two hypothetical 
residents would be classified into payment groups under the current 
RUG-IV model and PDPM. To begin, consider two residents, Resident A and 
Resident B, with the resident characteristics identified in Table 29.

                                 Table 29--Hypothetical Resident Characteristics
----------------------------------------------------------------------------------------------------------------
     Resident characteristics                    Resident A                              Resident B
----------------------------------------------------------------------------------------------------------------
Rehabilitation Received?.........  Yes...................................  Yes.
Therapy Minutes..................  730...................................  730.
Extensive Services...............  No....................................  No.
ADL Score........................  9.....................................  9.
Clinical Category................  Acute Neurologic......................  Major Joint Replacement.
PT and OT Function Score.........  10....................................  10.
Nursing Function Score...........  7.....................................  7.
Cognitive Impairment.............  Moderate..............................  Intact.
Swallowing Disorder?.............  No....................................  No.
Mechanically Altered Diet?.......  Yes...................................  No.
SLP Comorbidity?.................  No....................................  No.
Comorbidity Score................  7 (IV Medication and DM)..............  1 (Chronic Pancreatitis).
Other Conditions.................  Dialysis..............................  Septicemia.
Depression?......................  No....................................  Yes.
----------------------------------------------------------------------------------------------------------------

    Currently under the SNF PPS, Resident A and Resident B would be 
classified into the same RUG-IV group. They both received 
rehabilitation, did not receive extensive services, received 730 
minutes of therapy, and have an

[[Page 39226]]

ADL score of 9. This places the two residents into the ``RUB'' RUG-IV 
group and SNFs would be paid at the same rate, despite the many 
differences between these two residents in terms of their 
characteristics, expected care needs, and predicted costs of care.
    Under the PDPM, however, these two residents would be classified 
very differently. With regard to the PT and OT components, Resident A 
would fall into group TO, as a result of his categorization in the 
Acute Neurologic group and a function score within the 10 to 23 range. 
Resident B, however, would fall into group TC for the PT and OT 
components, as a result of his categorization in the Major Joint 
Replacement group and a function score within the 10 to 23 range. For 
the SLP component, Resident A would be classified into group SH, based 
on his categorization in the Acute Neurologic group, the presence of 
moderate cognitive impairment, and the presence of Mechanically-Altered 
Diet, while Resident B would be classified into group SA, based on his 
categorization in the Non-Neurologic group, the absence of cognitive 
impairment or any SLP-related comorbidity, and the lack of any 
swallowing disorder or mechanically-altered diet. For the Nursing 
component, following the existing nursing case-mix methodology, 
Resident A would fall into group LBC1, based on his use of dialysis 
services and a nursing function score of 7, while Resident B would fall 
into group HBC2, due to the diagnosis of septicemia, presence of 
depression, and a nursing function score of 7. Finally, with regard to 
NTA classification, Resident A would be classified in group NC, with an 
NTA score of 7, while Resident B would be classified in group NE, with 
an NTA score of 1. This demonstrates that, under the PDPM, more aspects 
of a resident's unique characteristics and needs factor into 
determining the resident's payment classification, which makes for a 
more resident-centered case-mix model while also eliminating, or 
greatly reducing, the number of service-based factors which are used to 
determine the resident's payment classification. Because this system is 
based on specific resident characteristics predictive of resource 
utilization for each component, we expect that payments will be better 
aligned with resident need.
4. Variable per Diem Adjustment Factors and Payment Schedule
    Section 1888(e)(4)(G)(i) of the Act provides that payments must be 
adjusted for case mix, based on a resident classification system which 
accounts for the relative resource utilization of different types of 
residents. Additionally, section 1888(e)(1)(B) of the Act specifies 
that payments to SNFs through the SNF PPS must be made on a per-diem 
basis. Currently under the SNF PPS, each RUG is paid at a constant per 
diem rate, regardless of how many days a resident is classified in that 
particular RUG. However, we explained in the proposed rule (83 FR 
21060) that during the course of the SNF PMR project, analyses on cost 
over the stay for each of the case-mix adjusted components revealed 
different trends in resource utilization over the course of the SNF 
stay. These analyses utilized costs derived from claim charges as a 
measure of resource utilization. Costs were derived by multiplying 
charges from claims by the CCRs on facility-level costs reports. As 
described in section V.B.3.b. of the proposed rule, costs better 
reflect differences in the relative resource use of residents as 
opposed to charges, which partly reflect decisions made by providers 
about how much to charge payers for certain services. In examining 
costs over a stay, we stated we found that for certain categories of 
SNF services, notably PT, OT and NTA services, costs declined over the 
course of a stay. Based on the claim submission schedule and variation 
in the point during the month when a stay began, we were able to 
estimate resource use for a specific day in a stay. Facilities are 
required to submit monthly claims. Each claim covers the period from 
the first day during the month a resident is in the facility to the end 
of the month. If a resident was admitted on the first day of the month, 
remains in the facility, and continues to have Part A SNF coverage 
until the end of the month, the claim for that month will include all 
days in the month. However, if a resident is admitted after the first 
day of the month, the first claim associated with the resident's stay 
will be shorter than a month. We stated in the proposed rule that to 
estimate resource utilization for each day in the stay, we used the 
marginal estimated cost from claims of varying length based on random 
variation in the day of a month when a stay began. Using this 
methodology, we observed a decline in the marginal estimated cost of 
each additional day of SNF care over the course of the stay. We further 
stated that to supplement this analysis, we also looked at changes in 
the number of therapy minutes reported in different assessments 
throughout the stay. Because therapy minutes are recorded on the MDS, 
the presence of multiple assessments throughout the stay provided 
information on changes in resource use. For example, it was clear 
whether the number of therapy minutes a resident received changed from 
the 5-day assessment to the 14-day assessment. We explained that the 
results from this analysis were consistent with the cost from claims 
analysis and showed that, on average, the number of therapy minutes is 
lower for assessments conducted later in the stay. This finding was 
consistent across different lengths of stay. More information on these 
analyses can be found in section 3.9. of the SNF PDPM technical report 
and section 3.9. of the SNF PMR technical report that accompanied the 
ANPRM, both available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html.
    As discussed in the proposed rule (83 FR 21060 through 21061), 
analyses of the SLP component revealed that the per diem costs remain 
relatively constant over time, while the PT, OT, and NTA component cost 
analyses indicate that the per diem cost for these three components 
decline over the course of the stay. We stated in the proposed rule 
that in the case of the PT and OT components, costs start higher at the 
beginning of the stay and decline slowly over the course of the stay. 
By comparison, the NTA component cost analyses indicated significantly 
increased NTA costs at the beginning of a stay that then drop to a much 
lower level that holds relatively constant over the remainder of the 
SNF stay. This is consistent with how most SNF drug costs are typically 
incurred at the outset of a SNF stay. We stated that these results 
indicate that resource utilization for PT, OT, and NTA services changes 
over the course of the stay. More information on these analyses can be 
found in section 3.9.1. of the SNF PMR technical report that 
accompanied the ANPRM available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html. As we 
stated in the proposed rule, we were unable to assess potential changes 
in the level of nursing costs over a resident's stay, in particular 
because nursing charges are not separately identifiable in SNF claims, 
and nursing minutes are not reported on the MDS assessments. However, 
stakeholders (industry representatives and clinicians) at multiple TEPs 
indicated that nursing costs tend to remain relatively constant over 
the course of a resident's stay.
    We explained in the proposed rule that constant per diem rates, by

[[Page 39227]]

definition, do not track variations in resource use throughout a SNF 
stay. We stated we believe this may lead to too few resources being 
allocated for SNF providers at the beginning of a stay. Given the 
trends in resource utilization over the course of a SNF stay discussed 
above, and that section 1888(e)(4)(G)(i) of the Act requires the case-
mix classification system to account for relative resource use, we 
proposed adjustments to the PT, OT, and NTA components in the proposed 
PDPM to account for changes in resource utilization over a stay. These 
adjustments were referred to as the variable per diem adjustments. We 
did not propose such adjustments to the SLP and nursing components 
based on findings and stakeholder feedback, as discussed above, that 
resource use tends to remain relatively constant over the course of a 
SNF stay.
    As noted above and in the proposed rule (83 FR 21061), and 
discussed more thoroughly in section 3.9. of the SNF PMR technical 
report that accompanied the ANPRM (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html), 
PT and OT costs decline at a slower rate than the decline in NTA costs. 
Therefore, in addition to proposing a variable per diem adjustment, we 
further proposed separate adjustment schedules and indexes for the PT 
and OT components and the NTA component to reflect more closely the 
rate of decline in resource utilization for each component. Table 30 of 
the proposed rule provided the adjustment factors and schedule that we 
proposed for the PT and OT components, while Table 31 of the proposed 
rule provided the adjustment factors and schedule that we proposed for 
the NTA component.
    In Table 30 of the proposed rule, the adjustment factor for the PT 
and OT components was 1.00 for days 1 to 20. We explained that this was 
because the analyses described above indicated that PT and OT costs 
remain relatively high for the first 20 days and then decline. The 
estimated daily rates of decline for PT and OT costs relative to the 
initial 20 days were both 0.3 percent. Thus, we stated that a 
convenient and appropriate way to reflect this was to bin days in the 
PT and OT variable per diem adjustment schedules such that payment 
declines at less frequent intervals, while still reflecting a 0.3 
percent daily rate of decline in PT and OT costs. Therefore, we 
proposed to set the adjustment factors such that payment would decline 
2 percent every 7 days after day 20 (0.3 * 7 = 2.1). We explained that 
the 0.3 percent rate of decline was derived from a regression model 
that estimates the level of resource use for each day in the stay 
relative to the beginning of the stay. The regression methodology and 
results are presented in section 3.9. of the SNF PDPM technical report, 
available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html.
    As described previously in this section and in the proposed rule 
(83 FR 21061), NTA resource utilization exhibits a somewhat different 
pattern. The analyses described above indicate that NTA costs are very 
high at the beginning of the stay, drop rapidly after the first 3 days, 
and remain relatively stable from the fourth day of the stay. We stated 
that starting on day 4 of a stay, the per diem costs drop to roughly 
one-third of the per diem costs in the initial 3 days. We explained 
that this suggests that many NTA services are provided in the first few 
days of a SNF stay. Therefore, we proposed setting the NTA adjustment 
factor to 3.00 for days 1 to 3 to reflect the extremely high initial 
costs, then setting it at 1.00 (two-thirds lower than the initial 
level) for subsequent days. We explained that the value of the 
adjustment factor was set at 3.00 for the first 3 days and 1.00 after 
(rather than, for example, 1.00 and 0.33, respectively) for simplicity. 
The results are presented in section 3.9. of the SNF PDPM technical 
report, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html.
    As we described in the proposed rule (83 FR 21061), case-mix 
adjusted federal per diem payment for a given component and a given day 
would be equal to the base rate for the relevant component (either 
urban or rural), multiplied by the CMI for that resident, multiplied by 
the variable per diem adjustment factor for that specific day, as 
applicable. Additionally, as described in further detail in section 
V.D.3.d. of the proposed rule, we stated that an additional 18 percent 
would be added to the nursing per-diem payment to account for the 
additional nursing costs associated with residents who have HIV/AIDS. 
We further explained that these payments would then be added together 
along with the non-case-mix component payment rate to create a 
resident's total SNF PPS per diem rate under the proposed PDPM. We 
invited comments on the proposed variable per diem adjustment factors 
and payment schedules discussed in this section.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the variable per diem adjustment factors and 
payment schedules. A discussion of these comments, along with our 
responses, appears below.
    Comment: Some commenters supported the use of the variable per diem 
adjustment under PDPM. Several commenters stated that PDPM, 
specifically the variable per diem payment adjustments included in the 
PT, OT, and NTA components, may negatively affect access for 
beneficiaries with long stays and complex medical needs. These 
commenters stated that the variable per diem payment adjustments will 
encourage early discharges and the provision of fewer services. One 
commenter stated that residents with chronic conditions may not exhibit 
a trend of declining NTA utilization over a stay and that resource 
utilization for these patients is sustained at a relatively constant 
level throughout the stay. The commenter states that in these cases, 
variable per diem payment adjustments will incentivize facilities to 
provide less expensive medications later in the stay, which the 
commenter states may be harmful to the patient. Finally, one commenter 
seeks clarification on the rationale for beginning the decline in 
payment for the PT and OT components after day 20 of a stay.
    Response: We note that we investigated the impact of PDPM on 
various resident subpopulations, including residents with many 
expensive comorbidities, multiple extensive services, severe cognitive 
impairment, long stays (utilization days = 100), stroke, IV medication, 
diabetes, wound infection, amputation/prosthesis care, Alzheimer's, or 
the presence of addictions, bleeding disorders, behavioral issues, 
chronic neurological conditions, or bariatric care. CMS investigated 
the potential impact of the proposed payment model on these 
subpopulations based on comments received in response to the 2017 
ANPRM. For almost all of these subpopulations with complex medical 
needs, we found that PDPM is estimated to increase payment associated 
with these residents compared to RUG-IV, as discussed in the proposed 
rule (83 FR 21075) and section 3.12 of the SNF PDPM technical report. 
Thus, we do not believe the variable per diem payment will negatively 
affect access for beneficiaries with expensive comorbidities or complex 
medical needs. We estimated that payment associated with very long 
stays (utilization = 100 days) would decline by 1.9 percent under PDPM, 
and we obtained similar results for stays longer than 90 days. However, 
this decline in payment is a reflection of the lower resource 
utilization per day associated

[[Page 39228]]

with longer stays. We observed that stays longer than 90 days have 
lower therapy and NTA costs per day than their shorter counterparts. 
However, the majority of such long stays are categorized as ultra-high 
rehabilitation groups in the current case-mix classification suggesting 
potential overpayment. Nevertheless, given the potential payment 
reduction for long stays, we plan to monitor provider behavior closely 
to identify facilities whose beneficiaries experience inappropriate 
early discharge or provision of fewer services.
    Regarding the concern about resource utilization patterns of 
residents with chronic conditions, we would note that as discussed 
above, we estimated that PDPM would actually increase overall per-stay 
payment for many resident subpopulations with chronic conditions. 
Further, while payment would be highest during the early part of a 
stay, facilities would have flexibility to allocate this payment to 
cover costs later in a stay, as they do now. Our research, discussed in 
the proposed rule (83 FR 21061) and section 3.9 of the SNF PDPM 
technical report, revealed that for the average SNF stay, NTA 
utilization declines dramatically after the first 3 days of a stay. Of 
course, we acknowledge that there are cases that may not match this 
resource utilization pattern exactly. However, we believe that PDPM, 
because it is based on the observed relationship between patient 
characteristics and resource utilization, represents an improvement 
over the current payment model in terms of payment accuracy. Further, 
as stated, our investigations show that for many of the specific cases 
cited by commenters as potential concerns, we expect PDPM actually to 
increase associated payment compared to RUG-IV. While the variable per 
diem schedule decreases pay throughout the stay, the overall increase 
in payment accounts for the treatment cost of chronic conditions, which 
is costly due to the sustained level of care needed to manage chronic 
conditions.
    As discussed in the proposed rule (83 FR 21060 through 21061) and 
section 3.9 of the SNF PDPM technical report, we developed a 
methodology to estimate per-diem resource use over a stay for PT, OT, 
and NTA. Based on this methodology, we observed that estimated per-diem 
PT and OT costs remain high for the first 20 days of a stay and decline 
thereafter. Therefore, we established a variable per diem payment 
adjustment schedule for the PT and OT components that begins to adjust 
payment downward beginning on day 21.
    Comment: Some commenters suggested that CMS consider creating a 
waiver from the variable per diem adjustment for NTAs to mitigate 
potential access issues for patients in SNF stays that exceed 90 days. 
Additionally, these commenters expressed concern that, for long stays, 
the variable per diem payment adjustment may erode payments to the 
point where payment for the stay is below the cost of providing the 
associated services. Some commenters believe that decreasing payment 
for PT and OT over the course of the stay without exceptions is not 
patient-centered and urged CMS to identify certain diagnoses associated 
with longer duration of high-intensity therapy services as exceptions 
to the variable per diem schedule. Several commenters requested 
clarification on if and how CMS intends to monitor the impact of the 
variable per diem adjustment on patient access and length of stay, 
expressing concerns that the variable per diem adjustment could have a 
disproportionate impact on patients with chronic conditions. Finally, 
one commenter believed that reducing payments over time through the 
variable per diem adjustment will reduce treatment options for stroke 
and trauma victims.
    Response: With regard to the waiver for either the PT and OT 
variable per diem adjustment or the NTA variable per diem adjustment in 
cases of long stays, we do not believe that such a waiver is necessary. 
While payments do reduce over time, as discussed above, this reduction 
is to reflect the decrease in patient costs over time. Therefore, given 
the parallel reductions in costs and payments, over the course of the 
stay, providers should be adequately reimbursed for the provision of 
care, even in cases of long stays. With regard to the commenters' 
concern regarding the impact on stroke and trauma patients, as well as 
those with chronic conditions, we do plan to monitor closely these 
types of SNF patients under PDPM to identify any adverse trends which 
may result from application of the variable per diem adjustment. That 
being said, given that we proposed to implement PDPM in a budget 
neutral manner, this means that while the overall sum of monies paid 
out under the SNF benefit would not change under PDPM, the allocation 
and distribution of that money to individual SNFs could change. Given 
that PT, OT, and NTA costs at the beginning of a stay tend to be higher 
than those at the middle or end of a stay, most notably in the case of 
long stay patients, maintaining a constant per diem rate will allocate 
too few funds at the beginning of the stay, thereby increasing the 
chance that the early portions of a stay may not be adequately 
reimbursed. By aligning the payments with the cost trends, this 
produces the best chance to ensure that providers receive adequate and 
appropriate reimbursement at every point in the stay. Finally, as 
stated above, we do plan to monitor the impact of this policy and may 
consider revisions to the policy if there is evidence of adverse trends 
either systemically or within certain patient populations.
    Comment: One commenter questioned if CMS would expect the variable 
per diem adjustment to continue until the payment reaches zero, for 
purposes of calculating the UPL for the PT and OT components.
    Response: As the variable per diem adjustment was developed based 
on Medicare Part A data, we cannot speak to the ability of the 
adjustment factor to be drawn out past the point of the Medicare Part A 
stay. Moreover, as coverage for a Medicare Part A stay cannot be longer 
than 100 days, the variable per diem adjustment, for purposes of 
calculating the UPL, would go as far as Day 100 in Table 30.
    Accordingly, after considering the comments received, for the 
reasons discussed in the proposed rule and in this final rule, we are 
finalizing our proposal without modification to apply a variable per 
diem adjustment as part of the PDPM effective October 1, 2019. Table 30 
sets forth the final PDPM Variable Per Diem Payment Adjustment Factors 
and Schedule for the PT and OT components, and Table 31 sets for the 
final PDPM Variable Per Diem Payment Adjustment Factors and Schedule 
for the NTA component.

 Table 30--Variable Per-Diem Adjustment Factors and Schedule--PT and OT
------------------------------------------------------------------------
                                                            Adjustment
                  Medicare payment days                       factor
------------------------------------------------------------------------
1-20....................................................            1.00
21-27...................................................            0.98
28-34...................................................            0.96
35-41...................................................            0.94
42-48...................................................            0.92
49-55...................................................            0.90
56-62...................................................            0.88
63-69...................................................            0.86
70-76...................................................            0.84
77-83...................................................            0.82
84-90...................................................            0.80
91-97...................................................            0.78
98-100..................................................            0.76
------------------------------------------------------------------------


[[Page 39229]]


    Table 31--Variable Per-Diem Adjustment Factors and Schedule--NTA
------------------------------------------------------------------------
                                                            Adjustment
                  Medicare payment days                       factor
------------------------------------------------------------------------
1-3.....................................................             3.0
4-100...................................................             1.0
------------------------------------------------------------------------

D. Use of the Resident Assessment Instrument--Minimum Data Set, Version 
3

1. Revisions to Minimum Data Set (MDS) Completion Schedule
    Consistent with section 1888(e)(6)(B) of the Act, to classify 
residents under the SNF PPS, we use the MDS 3.0 Resident Assessment 
Instrument. Within the SNF PPS, there are two categories of 
assessments, scheduled and unscheduled. In terms of scheduled 
assessments, SNFs are currently required to complete assessments on or 
around days 5, 14, 30, 60, and 90 of a resident's Part A SNF stay, 
including certain grace days. Payments based on these assessments 
depend upon standard Medicare payment windows associated with each 
scheduled assessment. More specifically, each of the Medicare-required 
scheduled assessments has defined days within which the Assessment 
Reference Date (ARD) must be set. The ARD is the last day of the 
observation (or ``look-back'') period that the assessment covers for 
the resident. The facility is required to set the ARD on the MDS form 
itself or in the facility software within the appropriate timeframe of 
the assessment type being completed. The clinical data collected from 
the look-back period is used to determine the payment associated with 
each assessment. For example, the ARD for the 5-day PPS Assessment is 
any day between days 1 to 8 (including Grace Days). The clinical data 
collected during the look-back period for that assessment is used to 
determine the SNF payment for days 1 to 14. Unscheduled assessments, 
such as the Start of Therapy (SOT) Other Medicare Required Assessment 
(OMRA), the End of Therapy OMRA (EOT OMRA), the Change of Therapy (COT) 
OMRA, and the Significant Change in Status Assessment (SCSA or 
Significant Change), may be required during the resident's Part A SNF 
stay when triggered by certain defined events.
    For example, if a resident is being discharged from therapy 
services, but remaining within the facility to continue the Part A 
stay, then the facility may be required to complete an EOT OMRA. Each 
of the unscheduled assessments affects payment in different and defined 
manners. A description of the SNF PPS scheduled and unscheduled 
assessments, including the criteria for using each assessment, the 
assessment schedule, payment days covered by each assessment, and other 
related policies, are set forth in the MDS 3.0 RAI manual on the CMS 
website (available at https://downloads.cms.gov/files/MDS-30-RAI-Manual-v115-October-2017.pdf).
    Table 32 outlines when each of the current SNF PPS assessments is 
required to be completed and its effect on SNF PPS payment.

                                    Table 32--Current PPS Assessment Schedule
----------------------------------------------------------------------------------------------------------------
                                                                 Assessment
  Medicare MDS  assessment schedule     Assessment reference      reference      Applicable  standard medicare
                type                            date             date grace               payment days
                                                                    days
----------------------------------------------------------------------------------------------------------------
                                            Scheduled PPS assessments
----------------------------------------------------------------------------------------------------------------
5-day...............................  Days 1-5...............             6-8  1 through 14.
14-day..............................  Days 13-14.............           15-18  15 through 30.
30-day..............................  Days 27-29.............           30-33  31 through 60.
60-day..............................  Days 57-59.............           60-63  61 through 90.
90-day..............................  Days 87-89.............           90-93  91 through 100.
----------------------------------------------------------------------------------------------------------------


 
 
------------------------------------------------------------------------
                       Unscheduled PPS assessments
------------------------------------------------------------------------
Start of Therapy OMRA...........  5-7 days after the  Date of the first
                                   start of therapy.   day of therapy
                                                       through the end
                                                       of the standard
                                                       payment period.
End of Therapy OMRA.............  1-3 days after all  First non-therapy
                                   therapy has ended.  day through the
                                                       end of the
                                                       standard payment
                                                       period.
Change of Therapy OMRA..........  Day 7 (last day)    The first day of
                                   of the COT          the COT
                                   observation         observation
                                   period.             period until end
                                                       of standard
                                                       payment period,
                                                       or until
                                                       interrupted by
                                                       the next COT-OMRA
                                                       assessment or
                                                       scheduled or
                                                       unscheduled PPS
                                                       Assessment.
Significant Change in Status      No later than 14    ARD of Assessment
 Assessment.                       days after          through the end
                                   significant         of the standard
                                   change identified.  payment period.

    As we explained in the proposed rule (83 FR 21062), an issue which 
has been raised in the past with regard to the existing SNF PPS 
assessment schedule is that the sheer number of assessments, as well as 
the complex interplay of the assessment rules, significantly increases 
the administrative burden associated with the SNF PPS. We stated that 
case-mix classification under the proposed SNF PDPM relies to a much 
lesser extent on characteristics that may change very frequently over 
the course of a resident's stay (for example, therapy minutes may 
change due to resident refusal or unexpected changes in resident 
status), but instead relies on more stable predictors of resource 
utilization by tying case-mix classification, to a much greater extent, 
to resident characteristics such as diagnosis information. We explained 
that in view of the greater reliance of the proposed SNF PDPM (as 
compared to the RUG-IV model) on resident characteristics that are 
relatively stable over a stay and our general focus on reducing 
administrative burden for providers across the Medicare program, we are 
making an effort to reduce the administrative burden on providers by 
concurrently proposing to revise the assessments that would be required 
under the proposed SNF PDPM. Specifically, we proposed to use the 5-day 
SNF PPS scheduled assessment to classify a resident under the proposed 
SNF PDPM for the entirety of his or her Part A SNF stay effective 
beginning FY

[[Page 39230]]

2020 in conjunction with the implementation of the proposed PDPM, 
except as described below. We stated that if we were to finalize this 
proposal, we would propose revisions to the regulations at Sec.  
413.343(b) during the FY 2020 rulemaking cycle so that such regulations 
would no longer reflect the RUG-IV SNF PPS assessment schedule as of 
the proposed conversion to the PDPM on October 1, 2019.
    We also stated in the proposed rule (83 FR 21062) that we 
understand Medicare beneficiaries are each unique and can experience 
clinical changes which may require a SNF to reassess the resident to 
capture changes in the resident's condition. Therefore, to allow SNFs 
to capture these types of changes, effective October 1, 2019 in 
conjunction with the proposed implementation of the PDPM, we proposed 
to require providers to reclassify residents as appropriate from the 
initial 5-day classification using a new assessment called an Interim 
Payment Assessment (IPA), which would be comprised of the 5-day SNF PPS 
MDS Item Set (Item Set NP). We stated that providers would be required 
to complete an IPA in cases where the following two criteria are met:
    (1) There is a change in the resident's classification in at least 
one of the first tier classification criteria for any of the components 
under the proposed PDPM (which are those clinical or nursing payment 
criteria identified in the first column in Tables 21, 23, 26, and 27 of 
the proposed rule), such that the resident would be classified into a 
classification group for that component that differs from that provided 
by the 5-day scheduled PPS assessment, and the change in classification 
group results in a change in payment either in one particular payment 
component or in the overall payment for the resident; and
    (2) The change(s) are such that the resident would not be expected 
to return to his or her original clinical status within a 14-day 
period.
    In addition, we proposed that the Assessment Reference Date (ARD) 
for the IPA would be no later than 14 days after a change in a 
resident's first tier classification criteria is identified. We stated 
that the IPA is meant to capture substantial changes to a resident's 
clinical condition and not everyday, frequent changes. We believe 14 
days gives the facility an adequate amount of time to determine whether 
the changes identified are in fact routine or substantial. To clarify, 
we explained that the change in classification group described above 
refers not only to a change in one of the first tier classification 
criteria in any of the proposed payment components, but also to one 
that would be sufficient to change payment in either one component or 
in the overall payment for the resident. For example, we stated that 
given the collapsed categories under the PT and OT components, this 
would mean that a change from the medical management group to the 
cancer group would not necessitate an IPA, as they are both collapsed 
under the medical management group for purposes of the PT and OT 
components. However, we stated a change from the major joint 
replacement group to the medical management group would necessitate an 
IPA, as this would change the resident's clinical category group for 
purposes of categorization under the PT and OT components and would 
result in a change in payment.
    We stated that we believe the proposed requirement to complete an 
IPA balances the need to ensure accurate payment and monitor for 
changes in the resident's condition with the importance of ensuring a 
more streamlined assessment approach under the proposed PDPM.
    In cases where the IPA is required and a facility fails to complete 
one, we proposed that the facility would follow the guidelines for late 
and missed unscheduled MDS assessments which are explained in Chapters 
2.13 and 6.8 of the MDS RAI Manual (https://downloads.cms.gov/files/MDS-30-RAI-Manual-v115-October-2017.pdf). Specifically, we stated in 
the proposed rule (83 FR 21063) that if the SNF fails to set the ARD 
within the defined ARD window for an IPA, and the resident is still in 
a Part A stay, the SNF would be required to complete a late assessment. 
The ARD can be no earlier than the day the error was identified. We 
explained that if the ARD on the late assessment is set for a date that 
is prior to the end of the time period during which the assessment 
would have controlled the payment, had the ARD been set timely, the SNF 
would bill the default rate for the number of days that the assessment 
is out of compliance. This is equal to the number of days between the 
day following the last day of the available ARD window and the late ARD 
(including the late ARD). We provided an example where a SNF Part A 
resident, who is in the major joint replacement payment category for 
the PT and OT components, develops a skin ulcer of such a nature that, 
in terms of developing a care and treatment plan for this resident, the 
skin ulcer takes precedence as the resident's primary diagnosis. As a 
result, the resident's primary diagnosis, as coded in item I8000, is 
for this skin ulcer, which would cause him to be classified into the 
medical management category for these components. The facility notes 
this clinical change on November 10, 2018. However, they do not 
complete the IPA until November 26, 2018 which is 16 days after the 
change in criteria was identified and two days after the ARD window. 
The facility would bill the default rate for the two days that it was 
out of compliance. We stated that if the SNF fails to set the ARD for 
an IPA within the defined ARD window for that assessment, and the 
resident has been discharged from Part A, the assessment is missed and 
cannot be completed. We noted that all days that would have been paid 
by the missed assessment (had it been completed timely) are considered 
provider-liable. Taking the example above, we stated that if the 
facility recognized the IPA needed to be completed after the resident 
has left the building, the facility would be liable for all days from 
November 10, 2018 until the date of the resident's Part A Discharge.
    In addition to proposing to require completion of the IPA as 
described above, we also considered the implications of a SNF 
completing an IPA on the variable per diem adjustment schedule 
described in section V.D.4. the proposed rule. More specifically, in 
the proposed rule, we considered whether an SNF completing an IPA 
should cause a reset in the variable per diem adjustment schedule for 
the associated resident. In examining costs over a stay, we found that 
for certain categories of SNF services, notably PT, OT, and NTA 
services, costs declined over the course of a stay. Our analyses showed 
that, on average, the number of therapy minutes is lower for 
assessments conducted later in the stay. Additionally, we stated that 
we were concerned that by providing for the variable per diem 
adjustment schedule to be reset after an IPA is completed, providers 
may be incentivized to conduct multiple IPAs during the course of a 
resident's stay to reset the variable per diem adjustment schedule each 
time the adjustment is reduced. Therefore, in cases where an IPA is 
completed, we proposed that this assessment would reclassify the 
resident for payment purposes as outlined in Table 33 of the proposed 
rule, but that the resident's variable per diem adjustment schedule 
would continue rather than being reset on the basis of completing the 
IPA.
    Finally, we stated that believe, regardless of the payment system 
or case-mix classification model used, residents should continue to 
receive therapy that is appropriate to their care needs, and this 
includes both the

[[Page 39231]]

intensity and modes of therapy utilized. However, we recognized that 
because the initial 5-day PPS assessment would classify a resident for 
the entirety of his or her Part A SNF stay (except in cases where an 
IPA is completed) as outlined above, there would be no mechanism by 
which SNFs are required to report the amount of therapy provided to a 
resident over the course of the stay or by which we may monitor that 
they are in compliance with the proposed 25 percent group and 
concurrent therapy limit as described in section V.F. of the proposed 
rule. Therefore, for these reasons, under the proposed PDPM, we 
proposed to require that SNFs continue to complete the PPS Discharge 
Assessment, as appropriate (including the proposed therapy items 
discussed in section V.E.3. of the proposed rule), for each SNF Part A 
resident at the time of Part A or facility discharge (see section V.E. 
of this proposed rule for a discussion of our proposed revisions to 
this assessment to include therapy items). Under the current 
instructions in the MDS 3.0 RAI manual, the Part A PPS Discharge 
assessment is completed when a resident's Medicare Part A stay ends, 
but the resident remains in the facility (MDS 3.0 RAI Manual Chapter 
2.5). However, we proposed to require this assessment to be completed 
at the time of facility discharge for Part A residents as well. Thus, 
we would continue to collect data on therapy provision as proposed in 
section V.F. of the proposed rule, to assure that residents are 
receiving therapy that is reasonable, necessary, and specifically 
tailored to meet their unique needs. We stated that we believe the 
combination of the 5-day Scheduled PPS Assessment, the IPA Assessment, 
and PPS Discharge Assessment would provide flexibility for providers to 
capture and report accurately the resident's condition, as well as 
accurately reflect resource utilization associated with that resident, 
while minimizing the administrative burden on providers under the 
proposed SNF PDPM.
    In addition to these proposed changes, we also examined in the 
proposed rule (83 FR 21064) the current use of grace days in the MDS 
assessment schedule. Grace days have been a longstanding part of the 
SNF PPS. They were created in order to allow clinical flexibility when 
setting ARD dates of scheduled PPS assessments. In the FY 2012 final 
rule (76 FR 48519), we discussed that in practice, there is no 
difference between regular ARD windows and grace days and we encouraged 
the use of grace days if their use would allow a facility more clinical 
flexibility or would more accurately capture therapy and other 
treatments. Thus, we do not intend to penalize any facility that 
chooses to use the grace days for assessment scheduling or to audit 
facilities based solely on their regular use of grace days. We may 
explore the option of incorporating the grace days into the regular ARD 
window in the future; nevertheless, we will retain them as part of the 
assessment schedule at the present time consistent with the current 
policy and the new assessment schedule proposed in the proposed rule.
    We proposed, effective beginning October 1, 2019, in conjunction 
with the proposed implementation of the PDPM, to incorporate the grace 
days into the existing assessment window. We explained that this 
proposal would eliminate grace days as such from the SNF PPS assessment 
calendar and provide for only a standard assessment window. We stated 
that, as discussed, there is no practical difference between the 
regular assessment window and grace days and there is no penalty for 
using grace days. Accordingly, we stated that we believe it would be 
appropriate to eliminate the use of grace days in PPS assessments.
    Table 33 of the proposed rule, set forth at Table 33 of this final 
rule, sets forth the proposed SNF PPS assessment schedule, 
incorporating the proposed revisions discussed above, which we stated 
would be effective October 1, 2019 concurrently with the proposed PDPM.

              Table 33--PPS Assessment Schedule Under PDPM
------------------------------------------------------------------------
                                                     Applicable standard
   Medicare MDS assessment    Assessment reference    Medicare payment
        schedule type                 date                  days
------------------------------------------------------------------------
5-day Scheduled PPS           Days 1-8............  All covered Part A
 Assessment.                                         days until Part A
                                                     discharge (unless
                                                     an IPA is
                                                     completed).
Interim Payment Assessment    No later than 14      ARD of the
 (IPA).                        days after change     assessment through
                               in resident's first   Part A discharge
                               tier classification   (unless another IPA
                               criteria is           assessment is
                               identified.           completed).
PPS Discharge Assessment....  PPS Discharge: Equal  N/A.
                               to the End Date of
                               the Most Recent
                               Medicare Stay
                               (A2400C) or End
                               Date.
------------------------------------------------------------------------

    We noted in the proposed rule (83 FR 21064) that, as in previous 
years, we intend to continue to work with providers and software 
developers to assist them in understanding changes we proposed to the 
MDS. Further, we noted that none of the proposals related to changes to 
the MDS assessment schedule should be understood to change any 
assessment requirements which derive from the Omnibus Budget 
Reconciliation Act of 1987 (OBRA 87), which establishes assessment 
requirements for all nursing home residents, regardless of payer. We 
invited comments on our proposals to revise the SNF PPS assessment 
schedule and related policies as discussed above.
    We also solicited comment on the extent to which implementing these 
proposals would reduce provider burden.
    Commenters submitted the following comments related to the proposed 
changes to the MDS assessment schedule and related assessment policies 
as discussed above. A discussion of these comments, along with our 
responses, appears below.
    Comment: One commenter expressed approval of the proposal to 
incorporate grace days into the existing assessment window. This 
commenter agrees that this will simplify things and reduce burden, cost 
and time for providers. Many commenters agreed with using the 5-day 
assessment to establish per diem payment for the stay. However, several 
commenters were concerned that the timing of 5-day assessments may 
still be difficult for SNFs. These commenters stated that securing 
clinician sign off and all needed information, such as lab results, 
will be challenging for SNFs. Several commenters requested an allowance 
for 5-day assessments to be submitted up until Day 14 of a SNF stay.
    Response: We appreciate the support for incorporating grace days 
into the existing assessment window and for using the 5-day assessment 
to establish per diem payment for the entirety of the stay, assuming 
that an IPA is not completed. Regarding the timing of the

[[Page 39232]]

5-day assessment under the current RUG-IV system, the 5-day assessment 
window (which goes until Day 8 of a SNF stay) is no different than that 
proposed under PDPM. FY 2017 MDS data show that almost 98 percent of 5-
day assessments were completed timely. This demonstrates that 
facilities have been able to complete this assessment with minimal 
difficulty until now and we do not foresee the new system adding an 
amount of complexity that would prevent them from completing it going 
forward. Regarding the suggestion to allow providers to have until Day 
14 to submit the initial assessment, we do not believe this is 
necessary or appropriate, given that, as the data above indicate, there 
is sufficient time for coding the 5-day assessment and because the 5-
day assessment provides a snapshot of the resident closer to the point 
of admission.
    Comment: One commenter questioned if on the 5-day Assessment a 
facility were to establish a RUG in the Ultra High category for a 
patient, would that RUG be maintained throughout the entire stay 
regardless of whether there is a drop in the amount of minutes of 
therapy provided in an assessment window.
    Response: We would note that the proposed changes to the assessment 
schedule would take place upon implementation of PDPM, and under PDPM, 
patients would no longer be classified into RUG-IV categories. They 
would instead be classified into case mix groups (CMGs) based on PDPM 
classification as described in the proposed rule (83 FR 21034-21061). 
Once a patient is classified into a CMG, that payment group would be 
maintained through the entire stay unless an Interim Payment Assessment 
(IPA), as discussed below, is completed and reclassifies the patient 
into a different CMG.
    Comment: Several commenters were concerned with the proposed 
reduction in payment assessments. They believe that the reduction in 
assessments could limit the ability of CMS and surveyors to track 
changes in status and progress of patients and reduce the amount of 
data CMS has available to use as a basis for future payment adjustments 
on. These commenters urged CMS to keep the existing PPS assessments as 
they are. Several commenters recommended that CMS revise the assessment 
period and ARD to align more closely with other PAC providers in order 
to implement standardized patient data elements as required by the 
IMPACT Act.
    Response: We appreciate commenters' concern that a reduction in 
assessments could limit the ability of CMS and surveyors to track 
status changes and could reduce the amount of data available for use in 
future payment policy development. However, PDPM relies on stable 
characteristics that we do not expect to change significantly over the 
course of the stay. Therefore, additional SNF PPS payment assessments 
would not necessarily capture different data throughout the stay. 
Additionally, the OBRA assessment schedule will remain the same and 
those assessments would provide needed information and data for 
surveyors and research purposes. Moreover, if clinical characteristics 
do change, we would expect facilities to elect the option (as discussed 
further below) to complete the IPA to track these changes.
    We appreciate the recommendation to revise the assessment period 
and ARD to align more closely with other PAC providers in order to 
implement standardized patient data elements required by the IMPACT 
Act. We believe that many of the policies being finalized as part of 
PDPM serve to improve alignment with other PAC settings such as the 
utilization of functional measures similar to those in IRFs, and the 
interrupted stay policy which is similar to the IRF and IPF policies, 
and we hope to continue to improve this alignment in future 
refinements. As such, we may consider these recommendations in the 
future.
    Comment: Most commenters supported CMS reducing the number of 
assessments that are required for SNF payment. These commenters 
expressed that their support for the reduction of the number of payment 
assessments is due to burden relief and a desire to align with other 
PAC settings such as IRFs and Home Health that require far fewer 
patient assessments than SNFs require. One commenter was concerned that 
while the number of assessments have been reduced, the MDS itself has 
become more complex with new reporting requirements and items, leaving 
administrative burden unchanged. Additionally, most commenters conveyed 
confusion about the proposed IPA. The first area of confusion arose 
from which criteria CMS wants SNFs to use to determine whether an IPA 
needs to be completed. Commenters noted that in the proposed rule (83 
FR 21063) we stated that there must be a change in the resident's 
classification in at least one of the first tier classification 
criteria for any of the components under the proposed PDPM (which are 
those clinical or nursing payment criteria identified in the first 
column in Tables 21, 23, 26, and 27), such that the resident would be 
classified into a classification group for that component that differs 
from that provided by the 5-day scheduled PPS assessment, and the 
change in classification group must result in a change in payment 
either in one particular payment component or in the overall payment 
for the resident. Additionally, the commenter stated that later in the 
proposed rule, we clarified that the change in classification group 
described above refers to not only a change in one of the first tier 
classification criteria in any of the proposed payment components, but 
also to one that would be sufficient to change payment in either one 
component or in the overall payment for the resident (83 FR 21063). 
Commenters questioned whether an IPA would be required when there is 
any clinical change that would cause a payment change for a SNF 
patient. Many commenters requested a general simplification and more 
guidance surrounding the IPA criterion. Additionally, several 
commenters believed that there should be guidance about whether an IPA 
is needed when a patient's functional status and need for specific 
services changes and whether the IPA should include section GG in order 
to capture function change.
    Most commenters were concerned about the complexity of the proposed 
IPA. They believed it would create more burden for providers to have to 
monitor the clinical changes and subsequent payment changes that would 
trigger the IPA on a daily basis. Several commenters doubted whether 
the proposed changes would support CMS' Patients over Paperwork 
initiative and related Medicare Simplifying Document Requirements. One 
commenter stated that monitoring the first tier changes in each of the 
case-mix adjusted components would be just as burdensome as the current 
assessment schedule and is too high a bar, particularly for NTAs. 
Furthermore, some commenters communicated that the complexities and 
uncertainties of the IPA would cause providers not to do them and the 
aim of CMS to provide SNFs with satisfactory reimbursement would not 
come to fruition. Similarly, some commenters expressed that because of 
the confusion and burden related to the IPA, this would unnecessarily 
increase the risk of provider error and potential medical review. This, 
in turn, would cause facilities to complete fewer IPAs and consequently 
this could lead to less quality care provided to patients who otherwise 
would have needed it had it

[[Page 39233]]

been identified appropriately using the IPA. Some commenters are 
concerned that the IPA will likely require MDS coordinators to take on 
more of a care coordination role which would require additional 
operating costs for SNFs.
    Response: We are pleased that so many commenters support the 
proposal to reduce the number of payment assessments in SNFs. We agree 
that alignment across PAC settings is very important and anticipate 
that the reduction of assessments will further this alignment. We also 
agree that the reduction of assessments will significantly decrease the 
burden for providers.
    We disagree with the commenter that stated that even though the 
number of assessments have been reduced, the MDS itself has become more 
complex with new reporting requirements and items, leaving 
administrative burden unchanged. Section VII. of this final rule 
discusses burden associated with the changes we are making and our 
calculations show that there is a significant reduction in 
administrative burden to providers under PDPM.
    We thank the commenters for calling our attention to their 
questions and confusion about the IPA. We continue to believe that it 
is necessary for SNFs to continually monitor the clinical status of 
each and every patient in the facility regularly regardless of payment 
or assessment requirements and we believe that there should be a 
mechanism in place that would allow facilities to do this. However, we 
also believe that providers may be best situated, as in the case of the 
Significant Change in Status Assessment, to determine when a change has 
occurred that should be reported through the IPA. Therefore, to further 
ease the administrative burden associated with PDPM and improve clarity 
on when an IPA should be completed, we have decided to make the IPA an 
optional assessment. Facilities will be able to determine when IPAs 
will be completed for their patients to address potential changes is 
clinical status and what criteria should be used to decide when an IPA 
would be necessary. We are not finalizing the proposed criteria for the 
triggering of the IPA, but rather we will seek additional stakeholder 
input on this issue. We note that we are finalizing the proposal 
surrounding IPA completions and the variable per diem adjustment 
schedule (including the NTA variable per diem, that is, the completion 
of an IPA will not reset the variable per diem adjustment schedule)) 
even though the IPA will now be optional. However, because the IPA will 
be optional and providers can determine their own criteria for when an 
IPA is completed, we are revising the ARD criteria we proposed. The ARD 
for the IPA will be the date the facility chooses to complete the 
assessment relative to the triggering event that causes a facility to 
choose to complete the IPA. Payment based on the IPA will begin the 
same day as the ARD. The IPA will not be susceptible to assessment 
penalties, given the optional nature of the assessment. We reiterate 
that we expect facilities to complete IPAs as they deem necessary to 
address clinical changes throughout a SNF stay and that the removal of 
the requirement to complete these assessments does not in any way 
negate the need to provide excellent skilled nursing and rehabilitative 
care and continually monitor and document patient status.
    Comment: Many comments addressed the IPA criteria that ``. . . the 
resident would not be expected to return to his or her original 
clinical status within a 14-day period.'' Commenters stated that this 
is a very subjective determination and that it is difficult for 
providers to predict the course of recovery for patients who have an 
acute clinical change and providers would not necessarily know if this 
episode would or would not resolve in a 2-week period. On the other 
hand, several other commenters expressed that the 14-day period seemed 
excessive since the average of most SNF stays is currently around 19 or 
20 days and CMS estimates the majority of the stays under PDPM will be 
between 1-15 days. Some commenters recommend that CMS shorten the 
timeframe to 3 days consistent with the proposed interrupted stay 
policy. Other commenters suggested that this time period should be 
reduced to 7 days. One commenter recommended that CMS should use an 
approach similar to the change in status policy in the home health 
setting (https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/oasis/downloads/qandadocument0909.pdf). Many 
comments requested more examples that show various scenarios in which 
an IPA would be required. Additionally, several commenters requested 
CMS to describe when an IPA would be used versus a Significant Change 
in Status Assessment.
    Response: Given that the IPA will now be an optional assessment 
under PDPM and we are not finalizing criteria for when an IPA should be 
completed, but rather, will seek additional stakeholder input on this 
issue, we will take all of the comments regarding these criteria under 
consideration for future policy making.
    Comment: One commenter requested clarification on the nursing 
classification change that would trigger an IPA. This commenter 
questioned what constitutes a substantial change versus a titration of 
services. Another commenter requested clarification as to what would 
constitute a first tier change in the nursing component. Another 
commenter requested clarification on what a first tier change in the 
SLP Case-Mix classification would look like.
    Response: We appreciate the requests for clarification on the IPA 
triggers. However, because the IPA will now be an optional assessment, 
we will allow facilities to determine on their own when IPAs are 
necessary. As such, we will seek additional stakeholder feedback on 
this issue in the future.
    Comment: Many commenters supported the addition of the IPA; with 
several commenters supporting the variable per diem adjustment policy 
relating to the IPA, stating that this would reduce the incentive for 
providers to complete multiple IPAs over the course of a SNF stay each 
time payment was reduced based on the adjustment. Some commenters 
disagreed and stated that the variable per diem for the NTA component 
should be reset following the completion of an IPA, while other 
commenters supported the variable per diem adjustment but had concerns 
about the NTA per diem rate following the completion of an IPA. These 
commenters suggested the variable per diem rate be reset for NTA 
services when an IPA is completed. Some commenters stated they 
recognize CMS' concern that providers might be incentivized to complete 
multiple IPAs in order to reset the NTA rate during one SNF stay. 
However, these commenters were concerned that in cases where IPAs are 
legitimately completed and the result is a change in NTA use, the 
potential financial loss could be significant or could result in re-
hospitalization if facilities do not end up providing NTAs that 
patients need because of financial considerations. Commenters offered 
several solutions to this concern. One commenter suggested that the NTA 
variable per diem adjustment schedule be reset for patients who 
experience adverse changes in status resulting in the completion of an 
IPA. Another commenter suggested that CMS use the points associated 
with NTAs to develop a threshold of additional NTA points that would 
allow facilities to reset the NTA variable per diem rate to Day 1. One 
commenter suggested a physician verified post-stay process for patients 
to dispute the variable per diem

[[Page 39234]]

adjustment when their need for PT, OT, or NTAs would substantially 
increase from what was originally anticipated.
    Response: We are pleased that so many commenters supported the 
addition of the IPA, and appreciate the support for not resetting the 
variable per diem adjustment when an IPA is completed. We disagree with 
those commenters who suggested that the variable per diem be reset 
every time an IPA is completed. As stated in the proposed rule (83 FR 
21060), in examining costs over a stay, we found that for certain 
categories of SNF services, notably PT, OT and NTA services, costs 
declined over the course of a stay. Our analyses showed that, on 
average, the number of therapy minutes is lower for assessments 
conducted later in the stay.
    We believe that the ability to reset the variable per diem would 
incentivize providers to complete IPAs every time the variable per diem 
was reduced. We also believe it is possible that providers may refrain 
from coding certain conditions on an initial assessment and then code 
other conditions on later assessments to justify the variable per diem 
adjustment reset.
    With regard to the ideas presented by commenters for when the 
variable per diem should be reset, we do not believe that the variable 
per diem should be reset except in cases of an entirely new SNF stay 
(we also refer readers to section V.F. of this final rule for a 
discussion of our interrupted stay policy). We understand that some 
commenters are concerned that unless the variable per diem adjustment 
schedule is reset, a patient's per diem rate may not reflect changes in 
NTA use identified in an IPA that is completed during a patient's stay. 
However, we note that if a new condition is coded on an IPA during a 
SNF stay, the SNF PPS per diem payment for the patient may in fact 
increase to reflect changes in the patient's clinical condition if the 
new condition results in a change to the patient's case-mix group. 
Thus, a patient's case-mix group and associated payment could change 
within a stay to reflect a change in NTA use on the IPA. However, we do 
not think that resetting the variable per diem adjustment would be 
appropriate each time such a change occurs. As we explained above, we 
found that for PT, OT, and NTA services, costs generally decline over 
the course of a stay and we believe the variable per diem adjustment 
appropriately accounts for this decline in costs. Furthermore, as the 
SNF PPS is a prospective payment system, it is not intended to 
reimburse for each additional condition or service separately, but 
rather provides a predictive payment based on a snapshot of the 
patient's condition. Resetting the variable per diem adjustment in each 
case of a change in the patient's condition would be more akin to a 
traditional fee-for-service model, providing additional payment for 
each additional service or condition, which is precisely the opposite 
of the goals of implementing PDPM.
    Commenters were also concerned that there might be financial 
implications to not re-setting the variable per diem for NTAs and that 
this might result in facilities not providing the drugs that patients 
require because of financial reasons. However, we do not believe that 
the variable per diem adjustment creates new financial implications 
that would affect patient care, as this incentive also exists under the 
current payment system that utilizes a constant per diem rate and we 
have no evidence that SNF patients are being denied necessary 
medications or services. Further, we would note that there are quality 
safeguards in place such as readmission penalties and quality metrics 
such as the SNF QRP quality measures that should provide a disincentive 
against providers engaging in this type of stinting behavior.
    Comment: Several commenters requested that CMS consider adding 
additional assessments to capture changes in patient need during the 
SNF stay. These commenters explained their concern that PDPM does not 
differentiate between processes designed to adjust payment and the 
continuous need to assess patient care needs. Additionally, these 
commenters believe that status changes-especially of the functional 
nature-that may not rise to the level of a required IPA might be 
missed, especially in longer stay patients. These commenters stated 
that therapy assessments may not be documented frequently enough to 
capture serious status changes of patients under PDPM. Specifically, 
they noted that patient care needs must be documented through an 
additional assessment after day 20 and they are apprehensive that the 
change in the variable per diem payment after Day 20 of a SNF stay may 
directly affect patient care if these assessments are not completed. 
These commenters suggested that CMS add an additional assessment after 
Day 20 of the stay that would specifically capture therapy needs.
    Response: We appreciate the commenters' concerns regarding how 
assessments relate to functional change, the ongoing need to assess 
patient care needs, and the necessity to capture therapy needs 
throughout the stay, especially during long stays. It is our 
expectation that the optional nature of the IPA will allow facilities 
to capture all of these changes as they occur during a SNF stay. 
Facilities will determine when IPAs should be completed, and we expect 
them to pay special attention to clinical and functional changes. It 
should be noted that, even absent an IPA requirement, we expect SNFs to 
constantly evaluate, capture, document and treat clinical and 
functional changes that occur in patients throughout a SNF stay. We 
defer to the judgment of clinicians and expect that the care they are 
providing is always evaluative in nature, meaning that therapists are 
continually assessing the needs of the patient and changing 
interventions as needed throughout the course of the therapy regimen, 
and we note that the absence or presence of a required assessment tool 
should not change this.
    Accordingly, after considering the comments received, for the 
reasons discussed in the proposed rule and in this final rule, we are 
finalizing our proposed changes to the MDS assessment schedule and 
related assessment policies as discussed in the proposed rule, with the 
following modifications. As discussed above, rather than making the IPA 
a required assessment as we proposed, this assessment will be optional, 
and providers may determine whether and when an IPA is completed. In 
addition, because the IPA is an optional assessment and providers can 
determine their own criteria for when an IPA is completed, we are 
revising the ARD criteria such that the ARD will be the date the 
facility chooses to complete the IPA relative to the triggering event 
that causes the facility to choose to complete the IPA. Payment based 
on the IPA would begin the same day as the ARD. These changes will be 
effective October 1, 2019 in conjunction with the implementation of the 
PDPM.
2. Item Additions to the Swing Bed PPS Assessment
    As noted previously in section IV.C of this final rule, section 
1883 of the Act permits certain small, rural hospitals to enter into a 
Medicare swing-bed agreement, under which the hospital can use its beds 
to provide either acute or SNF care, as needed. For critical access 
hospitals (CAHs), Part A pays on a reasonable cost basis for SNF 
services furnished under a swing-bed agreement. However, in accordance 
with section 1888(e)(7) of the Act, such services furnished by non-CAH 
rural hospitals are paid under the SNF PPS, effective

[[Page 39235]]

with cost reporting periods beginning on or after July 1, 2002. A more 
detailed discussion of this provision appears in section IV.C of the 
proposed rule.
    For purposes of the proposed PDPM, we proposed to add three items 
to the Swing Bed PPS Assessment. Until now, these additional items have 
not been part of the Swing Bed PPS Assessment form because they have 
not been used for payment. However, we stated in the proposed rule (83 
FR 21064) that presence of each of these items would be used to 
classify swing bed residents under the proposed SNF PDPM as explained 
in section V.D. of the proposed rule. Thus, we stated that believed it 
was necessary and appropriate to include these items in the Swing Bed 
PPS Assessment beginning October 1, 2019, in conjunction with the 
proposed implementation of the PDPM. The items we proposed to add to 
the Swing Bed PPS assessment are provided in Table 34 of the proposed 
rule (also set forth in Table 34).
    Commenters submitted the following comments related to the proposed 
addition of three items to the Swing Bed PPS assessment. A discussion 
of these comments, along with our responses, appears below.
    Comment: Commenters supported the addition of the three proposed 
items to the Swing Bed PPS assessment and stated that these items will 
be important to establish the SLP and NTA component case-mix rates.
    Response: We are pleased that commenters support the addition of 
these items to the Swing Bed PPS Assessment. We agree that these items 
are necessary to determine the SLP and NTA case-mix rates. We will 
continue to consider additions to the Swing Bed PPS Assessment as it 
becomes necessary to ensure consistency between swing bed and non-swing 
bed providers.
    Accordingly, after considering the comments received, for the 
reasons discussed in the proposed rule and in this final rule, we are 
finalizing the addition of the items in Table 34 to the Swing Bed PPS 
Assessment as proposed without modification, effective October 1, 2019 
in conjunction with the implementation of the PDPM.

           Table 34--Items To Add to Swing Bed PPS Assessment
------------------------------------------------------------------------
                                                    Related PDPM payment
      MDS Item No.                Item name               component
------------------------------------------------------------------------
K0100...................  Swallowing Disorder.....  SLP
I4300...................  Active Diagnoses:         SLP
                           Aphasia.
O0100D2.................  Special Treatments,       NTA
                           Procedures and
                           Programs: Suctioning,
                           While a Resident.
------------------------------------------------------------------------

3. Items To Be Added to the PPS Discharge Assessment
    Under the MDS 3.0, the Part A PPS Discharge assessment is completed 
when a resident's Medicare Part A stay ends, but the resident remains 
in the facility (MDS 3.0 RAI Manual Chapter 2.5). The PPS Discharge 
Assessment uses the Item Set NPE and does not currently contain section 
O of the MDS 3.0. The therapy items in section O of the MDS allow CMS 
to collect data from providers on the volume, type (physical therapy, 
occupational therapy and speech-language pathology), and mode 
(individual, concurrent, or group therapy) of the therapy provided to 
SNF residents. As noted in comments received on the ANPRM in relation 
to therapy provision, this data would be particularly important to 
monitor. Specifically, a significant number of commenters expressed 
concerns that the amount of therapy provided to SNF residents, were 
RCS-I to have been implemented, would drop considerably as compared to 
the amount currently delivered under RUG-IV. Commenters noted that this 
is because the incentive to provide a high volume of therapy services 
to SNF residents (to achieve the highest resident therapy group 
classification) would no longer exist under RCS-I, potentially leading 
providers to reduce significantly the amount of therapy provided to SNF 
residents.
    We stated in the proposed rule (83 FR 21065) that, given that the 
RCS-I model and PDPM both present the potential for providers to reduce 
significantly the amount of therapy provided to SNF residents as 
compared to RUG-IV, we believe that the same potential result may occur 
under the proposed PDPM as commenters identified with RCS-I. To better 
track therapy utilization under PDPM, and to better ensure that 
residents continue to receive an appropriate amount of therapy 
commensurate with their needs, given the reduction in the frequency of 
resident assessments required under the proposed PDPM, we proposed to 
add therapy collection items to the PPS Discharge assessment and to 
require providers to complete these items beginning October 1, 2019, in 
conjunction with the proposed implementation of the PDPM.
    Specifically, we proposed to add the items listed in Table 35 of 
the proposed rule (as set forth in Table 35 of this final rule) to the 
PPS Discharge Assessment.

         Table 35--Items To Add to SNF PPS Discharge Assessment
------------------------------------------------------------------------
       MDS Item No.                          Item name
------------------------------------------------------------------------
O0400A5..................  Special Treatments, Procedures and Programs:
                            Speech-Language Pathology and Audiology
                            Services: Therapy Start Date.
O0400A6..................  Special Treatments, Procedures and Programs:
                            Speech-Language Pathology and Audiology
                            Services: Therapy End Date.
O0400A7..................  Special Treatments, Procedures and Programs:
                            Speech-Language Pathology and Audiology
                            Services: Total Individual Minutes.
O0400A8..................  Special Treatments, Procedures and Programs:
                            Speech-Language Pathology and Audiology
                            Services: Total Concurrent Minutes.
O0400A9..................  Special Treatments, Procedures and Programs:
                            Speech-Language Pathology and Audiology
                            Services: Total Group Minutes.
O0400A10.................  Special Treatments, Procedures and Programs:
                            Speech-Language Pathology and Audiology
                            Services: Total Days.
O0400B5..................  Special Treatments, Procedures and Programs:
                            Occupational Therapy: Therapy Start Date.
O0400B6..................  Special Treatments, Procedures and Programs:
                            Occupational Therapy: Therapy End Date.
O0400B7..................  Special Treatments, Procedures and Programs:
                            Occupational Therapy: Total Individual
                            Minutes.
O0400B8..................  Special Treatments, Procedures and Programs:
                            Occupational Therapy: Total Concurrent
                            Minutes.

[[Page 39236]]

 
O0400B9..................  Special Treatments, Procedures and Programs:
                            Occupational Therapy: Total Group Minutes.
O0400B10.................  Special Treatments, Procedures and Programs:
                            Occupational Therapy: Total Days.
O0400C5..................  Special Treatments, Procedures and Programs:
                            Physical Therapy: Therapy Start Date.
O0400C6..................  Special Treatments, Procedures and Programs:
                            Physical Therapy: Therapy End Date.
O0400C7..................  Special Treatments, Procedures and Programs:
                            Physical Therapy: Total Individual Minutes.
O0400C8..................  Special Treatments, Procedures and Programs:
                            Physical Therapy: Total Concurrent Minutes.
O0400C9..................  Special Treatments, Procedures and Programs:
                            Physical Therapy: Total Group Minutes.
O0400C10.................  Special Treatments, Procedures and Programs:
                            Physical Therapy: Total Days.
------------------------------------------------------------------------

    We stated that for the proposed items, which refer to the total 
number of minutes for each therapy discipline and each therapy mode, 
this would allow CMS both to conduct reviews of changes in the volume 
and intensity of therapy services provided to SNF residents under the 
proposed PDPM compared to that provided under RUG-IV, as well as to 
assess compliance with the proposed group and concurrent therapy limit 
discussed in section V.F of the FY 2019 SNF PPS proposed rule. We 
further stated that the proposed ``total days'' items for each 
discipline and mode of therapy would further support our monitoring 
efforts for therapy, as requested by commenters on the ANPRM, by 
allowing us to monitor not just the total minutes of therapy provided 
to SNF residents under the proposed PDPM, but also assess the daily 
intensity of therapy provided to SNF residents under the proposed PDPM, 
as compared to that provided under RUG-IV. As we explained in the 
proposed rule, ultimately, these proposed items would allow facilities 
to easily report therapy minutes provided to SNF residents and allow us 
to monitor the volume and intensity of therapy services provided to SNF 
residents under the proposed PDPM, as suggested by commenters on the 
ANPRM. We stated that if we discovered that the amount of therapy 
provided to SNF residents did change significantly under the proposed 
PDPM, if implemented, then we would assess the need for additional 
policies to ensure that SNF residents continued to receive sufficient 
and appropriate therapy services consistent with their unique needs and 
goals.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the SNF PPS Discharge Assessment. A discussion of 
these comments, along with our responses, appears below.
    Comment: Several commenters opposed the addition of items and the 
reporting of therapy services in section O of the SNF PPS Discharge 
Assessment. These commenters acknowledged that the fundamental design 
of PDPM (which will no longer tie payment to the amount of therapy a 
patient receives, as occurs under the current RUG-IV payment system) 
could perhaps cause some patients appropriately to receive less 
therapy. The commenters stated that this would be a positive 
anticipated outcome for many residents considering that the recurring 
concern of RUG-IV has been that the model may incentivize SNFs to 
provide therapy services beyond what patients need. These commenters 
noted that while they recognize the importance of monitoring the 
impacts of policy changes especially in the initial stages of the 
implementation, they were disappointed that CMS appears to be 
interested in collecting this data merely in order to monitor changes 
in volume of services and that CMS did not discuss evaluating this 
aspect of PDPM in relation to quality and outcomes measures (such as 
through the SNF Quality Reporting Program) that are normally associated 
with effective therapy provision. These commenters noted that the MDS 
should be used for care-planning and case-mix payment determination and 
that since therapy time is not relevant to the case-mix methodology 
under PDPM, this proposed addition of therapy collection of items 
serves no purpose on the MDS. These commenters suggested that instead 
of collecting therapy provision information on the MDS, facilities 
should gather and report therapy provision information on claims on a 
line-item, date-of-service basis that would be in line with Medicare 
Part B and other payers and limit provider burden.
    Response: We agree with commenters that it is possible that, in 
some cases, less therapy will be provided under PDPM than under RUG-IV 
and that this would be a positive development in those cases where 
therapy was provided regardless of patient need and simply because of 
higher payments for higher volumes of therapy. However, we continue to 
be concerned that under PDPM, providers may reduce the amount of 
therapy provided to SNF patients because of financial considerations. 
We agree with commenters that quality and outcomes measures (like those 
in the SNF Quality Reporting Program) would be a positive way to 
evaluate the efficacy of therapy provision, and we will take this into 
consideration for future policy development. However, we disagree that 
the collection of these items is not relevant to case-mix 
determination. While the days and minutes of therapy provided will not 
be a determining factor in the therapy case-mix classification under 
PDPM, the need to ensure beneficiary protection under this payment 
system is very relevant to the therapy case-mix classification, and the 
ability to collect this data will safeguard the integrity of the case-
mix classification and help ensure that patients receive an appropriate 
amount of therapy services. Should we discover that the amount of 
therapy under PDPM is distinctly different from the amount of therapy 
under RUG-IV, we will evaluate the potential reasons for this change 
and consider potential actions, either at the provider or systemic 
level, to address these issues.
    We appreciate the commenters' suggestion of using claims 
information as the basis for therapy reporting, but would note that 
this mechanism would be more complicated and not provide the same level 
of detail in the data as is currently reported in section O of the MDS. 
Further, as providers are already familiar with the section O items, we 
believe that this method will provide the simplest transition for 
providers.
    Comment: Many commenters supported the proposal to add therapy 
collection items to the SNF PPS Discharge Assessment in order to 
monitor compliance with the group and concurrent therapy limits. One 
commenter stated that they believed this proposal may protect against 
therapists being pressured to provide an unreasonable amount of group 
or concurrent therapy. Several commenters, however, were concerned that 
the monitoring effort proposed is

[[Page 39237]]

not strong enough to enforce the aforementioned limits. One commenter 
suggested that based on CMS' assertion that ``services furnished to SNF 
residents may be considered reasonable and necessary insomuch as 
services are consistent with `the individual's particular medical 
needs,' '' (83 FR 21068) they question whether excessive group and 
concurrent therapy serves as justification to deny SNF coverage. This 
commenter proposed that rather than a ``warning edit'' that would 
notify providers that they have exceeded the group and concurrent 
threshold, CMS should decide whether these occurrences violate coverage 
requirements and if it is determined that they do, payment should be 
denied for the claim. Many commenters suggested that in addition to 
monitoring the therapy provision, CMS should monitor resident outcomes. 
One commenter recommended that CMS utilize the four new SNF QRP section 
GG outcome measures, and current readmission measures and qualitatively 
measure the current the effectiveness of therapy provided in the SNF.
    Response: We appreciate the comments we received in support of the 
proposal to add therapy collection items to the SNF PPS Discharge 
Assessment. We agree that this proposal would enable us to monitor 
group and concurrent therapy compliance and will hopefully help prevent 
therapists from feeling pressured to provide an unreasonable amount of 
group and/or concurrent therapy. We appreciate the concern that the 
monitoring effort proposed is not strict enough to enforce the 
concurrent and group therapy limits. We would note that the monitoring 
plan is intended for this exact reason. As stated in the proposed rule 
(83 CFR 21067), as part of our regular monitoring efforts on SNF Part A 
services, we would monitor group and concurrent therapy utilization 
under the proposed PDPM and consider making future proposals to address 
abuses of this proposed policy or flag providers for additional review 
should an individual provider be found to consistently exceed the 
proposed threshold after the implementation of the proposed PDPM.
    We appreciate the suggestion to deny claims if the threshold is 
exceeded and we may consider this option further in the future. As 
stated in the FY 2019 SNF PPS proposed rule (83 FR 21068), services 
furnished to SNF residents may be considered reasonable and necessary 
insomuch as the services are consistent with the individual's 
particular medical needs and that excessive levels of group and/or 
concurrent therapy could constitute a reason to deny SNF coverage for 
such stays. We appreciate the suggestion to monitor patient outcomes in 
addition to collecting therapy provision data, as well as the 
recommendation to specifically use the four new SNF QRP section GG 
outcome measures and current readmission measures to measure the 
effectiveness of therapy provided in SNFs. We may consider these 
suggestions in future policy making decisions.
    Accordingly, after considering the comments received, for the 
reasons discussed in the proposed rule and in this final rule, we are 
finalizing the addition of the items in Table 35 to the PPS Discharge 
Assessment as proposed, without modification, effective October 1, 2019 
in conjunction with the implementation of the PDPM.

E. Revisions to Therapy Provision Policies Under the SNF PPS

    Currently, almost 90 percent of residents in a Medicare Part A SNF 
stay receive therapy services. Under the current RUG-IV model, therapy 
services are case mix-adjusted primarily based on the therapy minutes 
reported on the MDS. As discussed in the proposed rule (83 FR 21065), 
when the original SNF PPS model was developed, most therapy services 
were furnished on an individual basis, and the minutes reported on the 
MDS served as a proxy for the staff resource time needed to provide the 
therapy care. Over the years, we have monitored provider behavior and 
have made policy changes as it became apparent that, absent safeguards 
like quality measurement to ensure that the amount of therapy provided 
did not exceed the resident's actual needs, there were certain inherent 
incentives for providers to furnish as much therapy as possible. Thus, 
for example, in the SNF PPS FY 2010 final rule (74 FR 40315 through 
40319), we decided to allocate concurrent therapy minutes for purposes 
of establishing the RUG-IV group to which the patient belongs, and to 
limit concurrent therapy to two patients at a time who were performing 
different activities.
    As we explained in the proposed rule (83 FR 21066), following the 
decision to allocate concurrent therapy, using STRIVE data as a 
baseline, we found two significant provider behavior changes with 
regard to therapy provision under the RUG-IV payment system. First, 
there was a significant decrease in the amount of concurrent therapy 
that was provided in SNFs. Simultaneously, we observed a significant 
increase in the provision of group therapy, which was not subject to 
allocation at that time. We concluded that the manner in which group 
therapy minutes were counted in determining a patient's RUG-IV group 
created a payment incentive to provide group therapy rather than 
individual therapy or concurrent therapy, even in cases where 
individual therapy (or concurrent therapy) was more appropriate for the 
resident. Thus, we stated that we made two policy changes regarding 
group therapy in the FY 2012 SNF PPS final rule (76 FR 48511 through 
48517). We defined group therapy as exactly four residents who are 
performing the same or similar therapy activities. Additionally, we 
allocated group therapy among the four patients participating in group 
therapy--meaning that the total amount of time that a therapist spent 
with a group will be divided by 4 (the number of patients that comprise 
a group) to establish the RUG-IV group to which the patient belongs.
    We stated in the proposed rule (83 FR 21066) that since we began 
allocating group therapy and concurrent therapy, these modes of therapy 
(group and concurrent) represent less than one percent of total therapy 
provided to SNF residents. Table 36, which appeared in the FY 2014 SNF 
PPS Proposed Rule (78 FR 26464) (and was also presented in the FY 2019 
SNF PPS proposed rule) and sets forth our findings with respect to the 
effect of policies finalized in the FY 2012 SNF PPS Final Rule, 
demonstrates the change in therapy provision between the STRIVE study 
and the implementation of the therapy policy changes in FY 2012. As we 
noted in the proposed rule, the distribution of therapy modes presented 
in Table 36 reflecting therapy provision in FY 2012 is also an accurate 
reflection of current therapy provision based on resident data 
collected in the QIES Database and continued monitoring of therapy 
utilization.

[[Page 39238]]



                                       Table 36--Mode of Therapy Provision
----------------------------------------------------------------------------------------------------------------
                                                                    STRIVE (%)      FY 2011 (%)     FY 2012 (%)
----------------------------------------------------------------------------------------------------------------
Individual......................................................              74            91.8            99.5
Concurrent......................................................              25             0.8             0.4
Group...........................................................              <1             7.4             0.1
----------------------------------------------------------------------------------------------------------------

    As we explained in the proposed rule (83 FR 21066), based on our 
prior experience with the provision of concurrent and group therapy in 
SNFs, we again were concerned that if we were to implement the proposed 
SNF PDPM, providers may base decisions regarding the particular mode of 
therapy to use for a given resident on financial considerations rather 
than on the clinical needs of SNF residents. We stated that because the 
proposed SNF PDPM would not use the minutes of therapy provided to a 
resident to classify the resident for payment purposes, we were 
concerned that SNFs may once again become incentivized to emphasize 
group and concurrent therapy, over the kind of individualized therapy 
which is tailored to address each beneficiary's specific care needs 
which we believe is generally the most appropriate mode of therapy for 
SNF residents. As we stated in the FY 2012 proposed rule (76 FR 26387), 
while group therapy can play an important role in SNF patient care, 
group therapy is not appropriate for either all patients or for all 
conditions, and is primarily effective as a supplement to individual 
therapy, which we maintain should be considered the primary therapy 
mode and standard of care in therapy services provided to SNF 
residents. We stated in the FY 2012 proposed rule that, as evidenced by 
the application of a cap on the amount of group therapy services that 
may be provided to SNF residents, we do not believe that a SNF 
providing the preponderance of therapy in the form of group therapy 
would be demonstrating the intensity of therapy appropriate to this 
most frail and vulnerable nursing home population.
    We stated in the FY 2019 SNF PPS proposed rule (83 FR 21066) that 
since the inception of the SNF PPS, we have limited the amount of group 
therapy provided to each SNF Part A resident to 25 percent of the 
therapy provided to them by discipline. We referred to the FY 2000 
final rule (64 FR 41662), where we stated that although we recognize 
that receiving PT, OT, or ST as part of a group has clinical merit in 
select situations, we do not believe that services received within a 
group setting should account for more than 25 percent of the Medicare 
resident's therapy regimen during the SNF stay.
    We explained that although we recognize that group and concurrent 
therapy may have clinical merit in specific situations, we also 
continue to believe that individual therapy is generally the best way 
of providing therapy to a resident because it is most tailored to that 
specific resident's care needs. As such, we stated that individual 
therapy should represent the majority of the therapy services received 
by SNF residents both from a clinical and payment perspective. As we 
stated in the FY 2012 proposed rule (76 CFR 26372), even under the 
previous RUG-53 model, it was clear that the predominant mode of 
therapy that the payment rates were designed to address was individual 
therapy rather than concurrent or group therapy.
    We stated in the proposed rule (83 FR 21066) that to help ensure 
that SNF residents would receive the majority of therapy services on an 
individual basis, if we were to implement the proposed PDPM, we 
believed concurrent and group therapy combined should be limited to no 
more than 25 percent of a SNF resident's therapy minutes by discipline. 
In combination, this limit would ensure that at least 75 percent of a 
resident's therapy minutes are provided on an individual basis. We 
stated that because the change in how therapy services would be used to 
classify residents under the proposed PDPM gives rise to the concern 
that providers may begin to utilize more group and concurrent therapy 
due to financial considerations, we proposed to set a combined 25 
percent limit on concurrent therapy and group therapy for each 
discipline of therapy provided. For example, if a resident received 800 
minutes of physical therapy, no more than 200 minutes of this therapy 
could be provided on a concurrent or group basis. Finally, we noted 
that under RUG-IV, we currently allocate minutes of therapy because we 
pay for therapy based on therapy minutes and not resident 
characteristics. We stated that given that therapy minutes would no 
longer be a factor in determining payment classifications for residents 
under the proposed PDPM, we would utilize the total, unallocated number 
of minutes by therapy mode reported on the MDS, to determine compliance 
with the proposed limit. We explained that utilizing unallocated 
therapy minutes also serves to underscore the patient-driven nature of 
the PDPM, as it focuses the proposed limit on concurrent and group 
therapy on the way in which the therapy is received by the beneficiary, 
rather than furnished by the therapist, and would better ensure that 
individual therapy represents at least a vast majority of the therapy 
services received by a resident.
    In the proposed rule (83 FR 21067), we considered other possible 
limits, and even no limit, on group and concurrent therapy. For 
example, we considered placing no limit on group or concurrent therapy, 
in order to afford providers the greatest degree of flexibility in 
designing a therapy program for each SNF resident. However, even in 
response to this option to have no limit on concurrent and group 
therapy, many commenters on the ANPRM expressed concerns regarding the 
lack of appropriate safeguards for ensuring that SNF residents continue 
to receive an appropriate level of therapy under the revised case-mix 
model. We stated in the proposed rule that we agree with these 
commenters and believe that there should be some limit on the amount of 
group and concurrent therapy that is provided to residents in order to 
ensure that residents receive an appropriate amount of individual 
therapy that is tailored to their specific needs. Also, in the ANPRM, 
we discussed the possibility of proposing a 25 percent limit on each of 
concurrent and group therapy, allowing for up to 50 percent of therapy 
services provided in the SNF to be provided in a non-individual 
modality. We stated in the proposed rule that this option sought to 
balance the flexibility afforded to therapists in designing an 
appropriate therapy plan that meets the needs and goals of the specific 
resident with the importance of ensuring that SNF residents receive an 
appropriate level of individual therapy. However, we were concerned 
that a separate 25 percent limit for group and concurrent therapy would 
not provide sufficient assurance that at least a majority of a 
resident's therapy would be provided on an individual basis.

[[Page 39239]]

Therefore, we stated that we believe the separate 25 percent limits on 
concurrent and group therapy discussed in the ANPRM, or any option 
which would impose a higher limit on group and concurrent therapy, 
would not provide the necessary protection for SNF residents. By 
contrast, we stated that we believe a combined 25 percent limit on 
group and concurrent therapy would provide sufficient assurance that at 
least a majority of each resident's therapy would be provided on an 
individual basis, consistent with our position that individual therapy 
is generally the best way of providing therapy to SNF residents because 
it is most tailored to their care needs. We noted that, assuming that 
existing therapy delivery patterns (as set forth in Table 36) are 
accurate and they reflect the individually-tailored needs of SNF 
residents currently being treated under the SNF benefit, the number of 
group and concurrent minutes that have been reported by SNFs thus far 
are significantly lower than the limit described in our proposal. In 
other words, we stated that, based on the data presented in Table 36, 
the proposed limit on group and concurrent therapy affords a 
significantly greater degree of flexibility on therapy modality than 
appears to be required to meet the needs of SNF residents, given that 
less than one percent of therapy currently being delivered is either 
group or concurrent therapy. Therefore, we concluded that a combined 
limit of 25 percent for group and concurrent therapy should provide 
SNFs with more than enough flexibility with respect to therapy mode to 
meet the care needs of their residents.
    As discussed in the proposed rule (83 FR 21067), we believe that 
individual therapy is usually the best mode of therapy provision as it 
permits the greatest degree of interaction between the resident and 
therapist, and should therefore represent, at a minimum, the majority 
of therapy provided to an SNF resident. However, we recognized that, in 
very specific clinical situations, group or concurrent therapy may be 
the more appropriate mode of therapy provision, and therefore, we 
stated we would want to allow providers the flexibility to be able to 
utilize these modes. We continued to stress that group and concurrent 
therapy should not be utilized to satisfy therapist or resident 
schedules, and that all group and concurrent therapy should be well 
documented in a specific way to demonstrate why they are the most 
appropriate mode for the resident and reasonable and necessary for his 
or her individual condition.
    Currently the RUG-IV grouper calculates the percentage of group 
therapy each resident receives in the SNF based on the algorithms 
described in section 6.6 of the MDS RAI Manual (found at https://downloads.cms.gov/files/MDS-30-RAI-Manual-v115-October-2017.pdf). When 
a resident is found to have exceeded the 25 percent group therapy 
limit, the minutes of therapy received in excess are not counted 
towards the calculation of the RUG-IV therapy classification. We 
explained that because the proposed PDPM would not use the minutes of 
therapy provided to a resident to classify the resident for payment 
purposes, we would need to determine a way under the proposed PDPM to 
address situations in which facilities exceed the combined 25 percent 
group and concurrent therapy limit.
    Therefore, we proposed that at a component level (PT, OT, SLP), 
when the amount of group and concurrent therapy exceeds 25 percent 
within a given therapy discipline, that providers would receive a non-
fatal warning edit on the validation report that the provider receives 
when submitting an assessment which would alert the provider that the 
therapy provided to that resident exceeded the threshold. To explain, a 
fatal error in the QIES ASAP system occurs when one or more items in 
the submitted record fail to pass the requirements identified in the 
MDS data submission specifications. A warning error occurs when an item 
or combination of items in the submitted record trigger a non-fatal 
edit in the QIES ASAP system. We stated that the non-fatal warning 
would serve as a reminder to the facility that they are out of 
compliance with the proposed limit for group and concurrent therapy. We 
also stated that, as part of our regular monitoring efforts on SNF Part 
A services, we would monitor group and concurrent therapy utilization 
under the proposed PDPM and consider making future proposals to address 
abuses of this proposed policy or flag providers for additional review 
should an individual provider consistently be found to exceed the 
proposed threshold after the implementation of the proposed PDPM. We 
noted that as the proportion of group and/or concurrent therapy (which 
are, by definition, non-individual modes of therapy provision) 
increases, the chances that the provider is still meeting the 
individualized needs of each resident would diminish. We stated that 
given that meeting the individualized needs of the resident is a 
component of meeting the coverage requirements for SNF Part A services, 
as described in section 1814(a)(2)(B) of the Act and further described 
in section 30 of Chapter 8 of the Medicare Benefit Policy Manual 
(accessible at https://www.cms.gov/Regulations-and-Guidance/Guidance/
Manuals/downloads/bp102c08.pdf), where it states that services 
furnished to SNF residents may be considered reasonable and necessary 
insomuch as the services are consistent with ``the individual's 
particular medical needs'', excessive levels of group and/or concurrent 
therapy could constitute a reason to deny SNF coverage for such stays. 
We invited comments on this proposed compliance mechanism.
    Commenters submitted the following comments related to the proposed 
revisions to the therapy policies under the PDPM. A discussion of these 
comments, along with our responses, appears below.
    Comment: The vast majority of commenters supported the proposal to 
limit concurrent and group therapy to 25 percent. Several stated that 
the combined limit is not restrictive enough and recommended that CMS 
implement further real-time efforts (beyond the warning edit outlined 
in the proposed rule) to ensure that patients are receiving the therapy 
they need, monitor compliance, and have stricter enforcement outcomes. 
Conversely, several commenters supported the notion that CMS could 
possibly raise the group and concurrent therapy limit following close 
monitoring of utilization and determining that patients are indeed 
receiving the individualized therapy they need even in group and 
concurrent sessions, and that SNFs are not taking advantage of the 
financial incentives that providing group and concurrent therapy offer. 
These commenters stated that they were in favor of the idea that 
providers would be reporting and counting the patients' time in therapy 
rather than the therapists' allocated time to determine compliance with 
the proposed group and concurrent therapy limit under PDPM since this 
is more consistent with the concept of patient-centered care and best 
clinical practice.
    Response: We are pleased that the vast majority of commenters 
supported the proposal to limit concurrent and group therapy to 25 
percent. We appreciate both the concern that 25 percent may not be 
restrictive enough and the concern that it is too restrictive, and we 
will continue to track the amount of therapy provided via the different 
modes in conjunction with our monitoring efforts described throughout 
section V. of this final rule. We will determine whether group and

[[Page 39240]]

concurrent therapy are being over or underutilized and we will consider 
revising the policy and enforcement efforts as necessary. Because 
therapy minutes would no longer be a factor in determining case-mix 
classification under the PDPM, as it is under RUG-IV, we agree with the 
commenters that using the total, unallocated number of minutes by 
therapy mode reported on the MDS versus therapists' allocated time 
makes the most sense in determining compliance with the group and 
concurrent therapy limit, and we appreciate that the commenters 
recognized the patient-centered nature of the proposal.
    Comment: Several commenters stated that the current policy 
regarding group and concurrent therapy allocation has increased 
provider costs. Specifically, these comments stated that concurrent and 
group therapy are more cost-effective modes than individual therapy and 
that the 25 percent drop in the delivery of concurrent and group 
therapy from FY 2011 until now demonstrates a significant increase in 
provider costs. These commenters believe that restoring flexibility in 
therapy service under PDPM will permit SNFs to develop more cost-
effective innovative approaches to care.
    Response: We disagree with the assertion that the current policy to 
allocate group and concurrent therapy increases cost. As we stated in 
the FY 2012 final rule (76 FR 48515), to fulfill our responsibilities 
to ensure appropriate payment based on resource utilization and cost, 
we proposed the allocation of group therapy minutes, which equalizes 
the reimbursement incentives across modes of therapy. Although case-mix 
classification under PDPM is not based primarily on volume of services 
provided, as is the case with the RUG-IV payment system, it is still 
important that there are equal financial incentives to provide the 
different modes of therapy. Further, given that the payment incentives 
are equal among the various therapy modes because of the allocation of 
minutes and that over 99 percent of therapy minutes are reported as 
individual therapy, this provides evidence that the mode of therapy 
that providers believe is most effective in addressing a beneficiary's 
needs is individual therapy. Regarding the need to restore flexibility 
in therapy service under PDPM, we think that the 25 percent cap will 
allow for flexibility in therapy services. As mentioned above, since 
currently, over 99 percent of therapy minutes are delivered 
individually, SNFs should continue to have adequate leeway to provide 
the mode of therapy which is most appropriate for the patients even 
with the revised cap. Nevertheless, to the extent that provider costs 
have increased, these cost increases have been captured as part of the 
data analysis used to set the case-mix weights under PDPM. To the 
extent that these costs change as a result of PDPM, more specifically 
changes in the mode of therapy service delivery, we can consider 
revising the case-mix weights to reflect these changes in provider 
costs.
    Comment: Several commenters opposed the proposed limitations on 
group and concurrent therapy and expressed concern that even though 
there is a lack of data demonstrating what the most appropriate 
threshold is for each individual patient, the combined 25 percent group 
and concurrent therapy limit is an arbitrary amount and would restrict 
therapists' ability to make appropriate treatment decisions. These 
commenters also stated that setting a limit on group and concurrent 
therapy may also restrict some patients from receiving the most 
appropriate mode of therapy for their individual need and that group or 
concurrent therapy might indeed be the most appropriate mode of therapy 
for a patient. These commenters stressed the importance of trusting the 
professional judgment of therapists in deciding which combination of 
each mode of therapy is appropriate for each patient in conjunction 
with Medicare guidelines for skilled therapy and medical necessity.
    Response: We agree that therapists are the most appropriate 
professionals to determine the mode of therapy a patient should receive 
and that professional judgment must be trusted and used in SNFs. 
However we do not agree that 25 percent is an arbitrary amount. As 
stated in the proposed rule, (83 FR 21066), since we began allocating 
group therapy and concurrent therapy, these modes of therapy (group and 
concurrent) represent less than one percent of total therapy provided 
to SNF residents. Further, we do not agree that data do not exist with 
regard to the appropriate threshold for each individual patient, as 
over 99 percent of therapy services are currently reported as 
individual. This would suggest that a much lower threshold for 
concurrent and group therapy would likely be acceptable and 
appropriate, though we also believe that added flexibility is important 
under a new payment system. Therefore, we believe it is appropriate to 
use the 25 percent combined therapy limit for concurrent and group 
therapy.
    We also do not agree that setting a limit on group and concurrent 
therapy may restrict some patients from receiving the most appropriate 
mode of therapy for their individual needs. We currently have a 25 
percent limit in place for group therapy and, based on our data, this 
limit has not restricted patients from receiving what we assume is the 
most appropriate amount of therapy for their individual needs. Given 
the stakeholders' comments that individual therapy is the most costly 
form of therapy along with the evidence of therapy being furnished to 
SNF patients on the basis of financial considerations rather than 
patient need, the extremely high prevalence of individual therapy would 
indicate that the amount of individual therapy, despite being the most 
costly, is the most effective for beneficiaries, which would comport 
with our reasons for supporting either the limit we proposed or a lower 
such limit. To hold otherwise would indicate that the minutes currently 
being reported are an inaccurate representation of the way in which 
therapy is currently being delivered, which could potentially 
constitute fraud on the part of some SNF providers. Based on the MDS 
assessment data mentioned above that demonstrate that almost no group 
or concurrent therapy is being reported on the MDS currently, the 
commenters' characterization of the proposed limit (which is far above 
the current level of furnishing such services) as insufficiently 
flexible would actually beg the question of why commenters would appear 
to believe that group and concurrent therapy would be better suited to 
address patient needs under PDPM rather than under RUG-IV.
    Given the historical precedent of 25 percent as a therapy threshold 
and the very limited amount that group and concurrent therapy that has 
actually been reported in SNFs, we believe it is an appropriate 
threshold. That being said, using the new items in section O of the PPS 
Discharge Assessment, we will monitor therapy provision as discussed in 
section V.D of this final rule and we will consider policy changes as 
we receive data and see how therapy is being furnished under PDPM.
    Comment: Some commenters suggested that CMS revise the group 
therapy definition to include two to four participants while many 
commenters suggested that CMS revise the definition to include two to 
six participants doing the same or similar activities. In addition to 
better aligning with other settings such as Inpatient Rehabilitation 
Facilities (IRFs), commenters stated that this revision would allow 
increased flexibility so that patients in smaller SNFs could utilize 
and benefit from

[[Page 39241]]

group therapy. One commenter stated that the CMS definition of 
concurrent therapy is arbitrary and does not reflect therapists' 
preferred practice. This commenter urged us to redefine concurrent 
therapy. Several commenters requested that CMS reconsider the ``rigid'' 
documentation requirements that accompany group therapy provision, 
stating a preference as a practitioner to use group therapy when 
patients can benefit from it. One commenter requested that we provide 
additional guidance to providers and MACs related to the level of 
appropriate documentation required for participation in group or 
concurrent therapy.
    Response: We recognize the importance of alignment across settings. 
We may consider changing the definition of group therapy and/or 
concurrent therapy to align with other PAC settings in future 
rulemaking efforts.
    With regard to the ``rigid'' documentation requirements, we would 
like to remind the commenter that we did not impose new documentation 
requirements on SNFs with regard to concurrent and group therapy. 
Rather, in the FY 2012 proposed rule, we simply clarified certain 
already-established documentation standards (76 FR 26387 through 
26388). As we wrote in the FY 2012 final rule in response to comments, 
since we simply clarified existing expectations, we did not agree that 
these documentation guidelines would increase or create undue burden on 
therapists, or that these guidelines create a disincentive for 
clinicians to perform group therapy due to increased paperwork. We 
stated that there should be no additional burden to provide this 
documentation, as it should be a standard part of any documentation. We 
agreed with those commenters who stated that rehabilitation 
professionals need to support the work they do through documentation, 
and that the documentation should reflect the need for skilled care and 
the mode of therapy provided, as well as demonstrate how the therapy 
provision will support patients' needs and goals. (76 FR 48516).
    We continue to believe that it is vital for SNFs to document 
services appropriately in order to demonstrate the skilled nature and 
the fact that the services are reasonable and necessary. This will be 
especially important when the 25 percent cap on concurrent and group 
therapy is in place after the implementation of PDPM. We will monitor 
the mode of therapy given and we will be interested to see how 
facilities document the therapy used so we can determine whether we 
will increase, decrease or maintain the limit following extensive 
monitoring.
    Regarding the request to provide additional guidance related to 
documentation of group and concurrent therapy, we remind commenters of 
the guidance provided in the FY2012 proposed rule (76 FR 26388) 
regarding group therapy: Because group therapy is not appropriate for 
either all patients or all conditions, and in order to verify that 
group therapy is medically necessary and appropriate to the needs of 
each beneficiary, SNFs should include in the patient's plan of care an 
explicit justification for the use of group, rather than individual or 
concurrent, therapy. This description should include, but need not be 
limited to, the specific benefits to that particular patient of 
including the documented type and amount of group therapy; that is, how 
the prescribed type and amount of group therapy will meet the patient's 
needs and assist the patient in reaching the documented goals. In 
addition, we believe that the above documentation is necessary to 
demonstrate that the SNF is providing services to attain or maintain 
the highest practicable physical, mental, and psychosocial well-being 
of each resident in accordance with section 1819(b)(2) of the Act.
    While the above guidance was provided in relation to group therapy, 
we believe that it applies to concurrent therapy as well.
    Comment: Some commenters disagreed with the proposal of a combined 
limit of 25 percent for concurrent and group therapy, with one 
commenter stating that this contradicted the discussion in the ANPRM 
that considered a 25 percent limit on concurrent therapy and a separate 
25 percent limit on group therapy. This commenter pointed out that we 
stated, we believe that individual therapy is usually the best mode of 
therapy provision as it permits the greatest degree of interaction 
between the resident and therapist, and should therefore represent, at 
a minimum, the majority of therapy provided to an SNF resident (82 FR 
21004). This commenter and several others requested that CMS return to 
the separate 25 percent caps for concurrent therapy and for group 
therapy, as discussed in the ANPRM. According to these commenters, 
prior to CMS allocating concurrent and group therapy in FY 2011 and FY 
2012, respectively, the average amount of concurrent and group therapy 
that was furnished to all residents combined was about 26 percent. 
These commenters believe this means that there were many residents who 
received higher amounts than an average of 25 percent group and 
concurrent therapy and others who received lower amounts based on their 
clinical status and need. According to these commenters, CMS has not 
produced any evidence the quality of care changed dramatically since FY 
2011 and FY 2012, which would suggest the quality of care furnished in 
FY 2010 and earlier was meeting individual resident needs of patients. 
One commenter suggested that we implement a 25 percent combined cap for 
group and concurrent therapy at a facility level rather than at a per-
patient level. One commenter requested that CMS consider having 
providers report ``individual'' and ``non-individual'' therapy, rather 
than separately reporting group and concurrent therapy.
    Response: We do not agree that there is a contradiction between the 
ANPRM and our current proposal. We continue to believe that individual 
therapy should represent a majority of therapy provided in a SNF. We 
continue to contend that although group and concurrent therapy may have 
clinical merit in specific situations, we believe that individual 
therapy is generally the best way of providing therapy to a resident 
because it is most tailored to that specific resident's care needs. As 
such, we believe that individual therapy should represent at least the 
majority of the therapy services received by SNF residents. (82 FR 
21004).
    Our latest (FY 2017) data indicate that individual therapy was 
provided 99.77 percent of the time, meaning that group and concurrent 
therapy combined was reported as having been provided 0.23 percent of 
the time. If therapy continues to be provided in the same way, there is 
no reason to believe that a combined 25 percent limit on group and 
concurrent therapy is not a generous limit given the amount of group 
and concurrent therapy that has been provided under RUG IV. Therefore, 
we do not agree with the request to implement the separate 25 percent 
caps for group and concurrent therapy discussed in the ANPRM. We 
further disagree that CMS put restrictions on the ``ability to furnish 
concurrent and group therapy.'' We did not change any restrictions in 
FY 2011 and FY 2012 on the amount or type of therapy provided. The 25 
percent cap on group therapy was in place since the inception of the 
SNF PPS. Rather, we allocated first concurrent therapy in FY 2011 (74 
FR 40315-40319) and then group therapy in FY 2012 (76 FR 48511-48517) 
as a way to equalize payment across therapy modes and remove any 
financial

[[Page 39242]]

incentives for providing a certain therapy mode, which appeared to 
drive at least some portion of the approximately 1,000 percentage 
increase in the amount of group therapy provided under the SNF Part A 
benefit in FY 2011. This was not an effort to restrict any mode of 
therapy. As we wrote in the FY 2012 final rule (76 FR 48513, 48514), by 
allocating group therapy among the four group therapy participants, we 
are also equalizing the reimbursement incentive across the modes of 
therapy. We stated we believe this would once again encourage 
clinicians to choose the mode of therapy based on clinical rather than 
financial reasons. We stated in the FY 2012 final rule that the purpose 
of our allocation policy is to provide payment that better reflects 
resource utilization and cost, and that we do not believe this policy 
should affect clinical determinations regarding the appropriate mode of 
therapy provided to a patient.
    We appreciate the suggestion to implement a combined 25 percent 
group and concurrent therapy limit at the facility level rather than 
the patient level; however, given that a significant part of the reason 
we proposed a limit on group and concurrent therapy is so that patients 
receive therapy that reflects their individualized needs, we believe 
that implementing a facility based limit on concurrent and group 
therapy would defeat the purpose. With regard to a facility level 
limit, as opposed to the patient-level limit, we believe that therapy 
decisions should be driven by clinical standards and judgment related 
to an individual patient and not in relation to all patients within a 
facility. Utilizing a facility-level cap may allow for certain patients 
to receive excessive levels of group or concurrent therapy, which we do 
not believe would be advisable for any patient.
    With regard to the comment that providers not be required to report 
group and concurrent therapy separately, while we have a combined cap, 
we believe that it is important to understand which of the two modes of 
therapy, concurrent or group therapy, is actually occurring in relation 
to this cap. Given that some commenters requested separate caps on 
group and concurrent therapy, we would not be in a position to assess 
the need for this separation in the future if group and concurrent 
therapy were reported under a single heading.
    Comment: Several commenters expressed concern with how the combined 
group and concurrent therapy limit would interplay with student 
supervision in SNFs. One commenter stated the following, ``Students' 
minutes are often counted as concurrent therapy when the clinical 
instructor is also treating a patient and we anticipate residents being 
treated by students will quickly exceed the 25 percent threshold.'' The 
commenters went on to explain that the 25 percent limitation on group 
and concurrent therapy minutes could make it inefficient for the 
treating therapist or assistant and could deter facilities from taking 
students. One commenter was concerned that ``CMS currently requires 
that student treatment must be labeled as ``concurrent,'' and 
therefore, this would fall under the 25 percent limitation on group and 
concurrent therapy. They stated that positive clinical education 
experiences in post-acute settings often translate into quality 
therapists and assistants getting jobs in those settings upon 
graduation. One commenter explained that if a SNF accepts more 
students, ``the average of 1 percent for group and concurrent therapy 
represented in CMS data may not prove accurate.'' They described a 
scenario where SNFs that prefer to have higher than average volumes of 
students may deliver concurrent therapy in excess of 25 percent and 
that the combined 25 percent limit of group and concurrent therapy 
could be a deterrent to SNFs taking therapy students One commenter 
recommended that CMS create a reporting requirement that would 
delineate between student and therapist/assistant minutes so that those 
minutes could be separated from the total of group and concurrent 
therapy minutes.
    Response: We appreciate the concern that these commenters raised. 
We agree that our policies should not deter SNFs from taking students, 
and we agree that the therapy student internship is crucial to ensuring 
that students gain valuable SNF experience that would cause quality 
therapist and assistant graduates to pursue employment at SNFs when 
they eventually graduate. We appreciate the candor with which the 
commenters have described how they provide concurrent therapy at the 
same time as their therapy students consistent with current policy 
allowances. We would like to clarify that CMS does not require that 
student therapy be labeled as concurrent. The following is written in 
the MDS 3.0 RAI Manual (Chapter 3, section O):

    When a therapy student is involved with the treatment, and one 
of the following occurs, the minutes may be coded as concurrent 
therapy: The therapy student is treating one resident and the 
supervising therapist/assistant is treating another resident, and 
both residents are in line of sight of the therapist/assistant or 
student providing their therapy.

    This instruction is describing one possible scenario. We would like 
to reiterate that CMS does not require students to do concurrent 
therapy. As stated in the FY 2012 final rule (76 FR 48511), as the 
therapy student is under the direction of the supervising therapist 
(even if no longer required to be under line-of-sight supervision), the 
time the student spends with a patient will continue to be billed as if 
it were the supervising therapist alone providing the therapy. In other 
words, the therapy student, for the purpose of billing, is treated as 
simply an extension of the supervising therapist rather than being 
counted as an additional practitioner.
    We suspect that, as noted in the FY 2012 final rule referenced 
above, because we do not allow facilities to count therapy students' 
independent time on the MDS, many facilities rely on the MDS 
instructions above (allowing a therapist or assistant and a student to 
treat one patient each while both residents are in line of sight of the 
therapist/assistant or student providing their therapy) to permit them 
to count student concurrent therapy time. However, this should in no 
way be considered mandatory practice and like all concurrent therapy, 
should be used sparingly.
    Further, as mentioned above, our most recent (FY 2017) data show 
that individual therapy was provided 99.77 percent of the time, meaning 
that group and concurrent therapy combined was reported as having been 
provided 0.23 percent of the time. It concerns us that commenters have 
stated that they are providing so much concurrent therapy with students 
that the 25 percent cap would be too low for them, because this would 
suggest that either the comments were provided mistakenly or that 
facilities are falsely reporting concurrent therapy as individual 
therapy. While we agree with commenters that the opportunity to 
supervise student therapists in SNFs is valuable to the education of 
future therapists and assistants, our data indicate that a 25 percent 
combined cap on group and concurrent therapy should not deter 
facilities from taking more therapy students. We believe the 
recommendation to monitor student therapy minutes along with just 
therapist/assistant minutes has merit and it is something we will 
consider for future policy making.
    Comment: Some commenters expressed concern with CMS' implication 
that clinical decisions about

[[Page 39243]]

therapy are principally driven by ``. . . financial considerations 
rather than the clinical needs of the SNF residents''.
    Response: The available data support our assertion that at least 
some SNFs principally utilize financial considerations, rather than 
relying on clinical judgment, when making decisions regarding the 
manner and amount of care to provide to SNF residents. In 2016, CMS 
released the Skilled Nursing Facility Utilization and Payment Public 
Use File (Skilled Nursing Facility PUF) (https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/SNF.html). The Skilled Nursing Facility PUF 
contained information on utilization, payment (allowed amount, Medicare 
payment and standard payment), submitted charges, and beneficiary 
demographic and chronic condition indicators organized by CMS 
Certification Number (6-digit provider identification number), Resource 
Utilization Group (RUG), and state of service. The SNF PUF included 
information on the number of provider assessments where residents were 
classified into an Ultra-High Rehabilitation RUG or a Very-High 
Rehabilitation RUG. It also included the percentage of those 
assessments that were within ten minutes of the minimum threshold used 
to classify a resident into that Rehabilitation RUG category (that is, 
between 500-510 minutes for RV RUGs and 720-730 minutes for RU RUGs). 
Based on this information, we found the following:
     51 percent of all RV assessments showed therapy provided 
between 500 and 510 minutes.
     65 percent of all RU assessments showed therapy provided 
between 720 and 730 minutes.
     For 88 providers, all of their RV assessments showed 
therapy provided between 500 and 510 minutes.
     For 215 providers, all of their RU assessments showed 
therapy provided between 720 and 730 minutes.
     More than one in five providers had more than 75 percent 
of both RU and RV assessments that showed therapy provided within 10 
minutes of the minimum threshold.
    This clear evidence of thresholding behavior supports our assertion 
regarding SNFs that are driven by payment considerations rather than 
therapy needs of patients. Furthermore, we received a significant 
number of comments from stakeholders on the proposed rule who believe 
that the quality and volume of therapy services are likely to diminish 
under PDPM. This belief is, itself, predicated on the notion that SNFs 
will continue to utilize financial considerations as the basis for care 
planning decisions. However, with better and more reliable patient 
diagnosis and characteristic data and given the removal of therapy 
service volume as a component of the payment system, we expect that we 
will be better positioned under PDPM to exercise our authority to make 
case-mix creep adjustments under section 1888(e)(4)(F) of the Act, as 
may be appropriate, to address any changes in payment which are merely 
the result of changes in the coding or classification of SNF patients 
that do not reflect actual changes in case mix. This type of analysis 
will also be a part of CMS monitoring efforts under PDPM.
    Comment: One commenter recommended that, in the future, CMS 
consider whether it would be reasonable to track rehabilitative versus 
maintenance therapy, similar to how it is done in the home health 
setting.
    Response: We appreciate this suggestion and may take it into 
consideration for future policy making decisions.
    Accordingly, after considering the comments received, for the 
reasons discussed in the proposed rule and in this final rule, we are 
finalizing our proposal, without modification, to set a combined 25 
percent limit on group and concurrent therapy per discipline. 
Additionally, we are finalizing our proposal, without modification, to 
implement a non-fatal warning edit on the validation report upon 
submission when the amount of group and concurrent therapy exceeds 25 
percent within a given therapy discipline, which would alert the 
provider to the fact that the therapy provided to that resident 
exceeded the threshold.

F. Interrupted Stay Policy

    Under section 1812(a)(2)(A) of the Act, Medicare Part A covers a 
maximum of 100 days of SNF services per spell of illness, or ``benefit 
period.'' A benefit period starts on the day the beneficiary begins 
receiving inpatient hospital or SNF benefits under Medicare Part A. 
(See section 1861(a) of the Act; Sec.  409.60). SNF coverage also 
requires a prior qualifying, inpatient hospital stay of at least 3 
consecutive days' duration (counting the day of inpatient admission but 
not the day of discharge). (See section 1861(i) of the Act; Sec.  
409.30(a)(1)). Once the 100 available days of SNF benefits are used, 
the current benefit period must end before a beneficiary can renew SNF 
benefits under a new benefit period. For the current benefit period to 
end so a new benefit period can begin, a period of 60 consecutive days 
must elapse throughout which the beneficiary is neither an inpatient of 
a hospital nor receiving skilled care in a SNF. (See section 1861(a) of 
the Act; Sec.  409.60). Once a benefit period ends, the beneficiary 
must have another qualifying 3-day inpatient hospital stay and meet the 
other applicable requirements before Medicare Part A coverage of SNF 
care can resume. (See section 1861(i); Sec.  409.30)
    While the majority of SNF benefit periods, approximately 77 
percent, involve a single SNF stay, it is possible for a beneficiary to 
be readmitted multiple times to a SNF within a single benefit period, 
and such cases represent the remaining 23 percent of SNF benefit 
periods. For instance, a resident can be readmitted to a SNF within 30 
days after a SNF discharge without requiring a new qualifying 3-day 
inpatient hospital stay or beginning a new benefit period. SNF 
admissions that occur between 31 and 60 days after a SNF discharge 
require a new qualifying 3-day inpatient hospital stay, but fall within 
the same benefit period. (See sections 1861(a) and (i) of the Act; 
Sec. Sec.  409.30, 409.60)
    Other Medicare post-acute care (PAC) benefits have ``interrupted 
stay'' policies that provide for a payment adjustment when the 
beneficiary temporarily goes to another setting, such as an acute care 
hospital, and then returns within a specific timeframe. In the 
inpatient rehabilitation facility (IRF) and inpatient psychiatric 
facility (IPF) settings, for instance, an interrupted stay occurs when 
a patient returns to the same facility (or in the case of an IPF, the 
same or another IPF) within 3 days of discharge. The interrupted stay 
policy for long-term care hospitals (LTCHs) is more complex, consisting 
of several policies depending on the length of the interruption and, at 
times, the discharge destination: An interruption of 3 or fewer days is 
always treated as an interrupted stay, which is similar to the IRF PPS 
and IPF PPS policies; if there is an interruption of more than 3 days, 
the length of the gap required to trigger a new stay varies depending 
on the discharge setting. In these three settings, when a beneficiary 
is discharged and returns to the facility within the interrupted stay 
window, Medicare treats the two segments as a single stay.
    As we explained in the proposed rule (83 FR 21068), while other 
Medicare PAC benefit categories have interrupted stay policies, the SNF 
benefit under the RUG-IV case-mix model had no need for such a policy 
because, given a resident's case-mix group, payment did not change over 
the course of a stay. In other words, assuming no change in a

[[Page 39244]]

patient's condition or treatment, the payment rate was the same on Day 
1 of a covered SNF stay as it is at Day 7. Accordingly, a beneficiary's 
readmission to the SNF--even if only a few days may have elapsed since 
a previous discharge--could essentially be treated as a new and 
different stay without affecting the payment rates.
    However, as described in section V.D of the proposed rule (83 FR 
21068) and section V.C.4 of this final rule, we stated that the PDPM 
would adjust the per diem rate across the length of a stay (the 
variable per diem adjustment) to better reflect how and when costs are 
incurred and resources used over the course of the stay, such that 
earlier days in a given stay receive higher payments, with payments 
trending lower as the stay continues. In other words, the adjusted 
payment rate on Day 1 and Day 7 of a SNF stay may not be the same. 
Although we stated that we believe this variable per diem adjustment 
schedule more accurately reflects the increased resource utilization in 
the early portion of a stay for single-stay benefit periods (which 
represent the majority of cases), we considered whether and how such an 
adjustment should be applied to payment rates for cases involving 
multiple stays per benefit period. In other words, in the proposed 
rule, we considered instances in which a resident has a Part A stay in 
a SNF, leaves the facility for some reason, and then is readmitted to 
the same SNF or a different SNF; and how this readmission should be 
viewed in terms of both resident classification and the variable per 
diem adjustment schedule under the proposed PDPM. We explained that 
application of the variable per diem adjustment is of particular 
concern because providers may consider discharging a resident and then 
readmitting the resident shortly thereafter to reset the resident's 
variable per diem adjustment schedule and maximize the payment rates 
for that resident.
    We stated in the proposed rule (83 FR 21068) that, given the 
potential harm which may be caused to the resident if discharged 
inappropriately, and other concerns outlined previously in this section 
and in the proposed rule, we discussed in last year's FY 2018 ANPRM the 
possibility of adopting an interrupted stay policy under the SNF PPS in 
conjunction with the implementation of the RCS-I case-mix model. 
Several commenters expressed support for this interrupted stay policy 
in responding to the ANPRM, saying that the interrupted stay policy is 
in alignment with similar policies in other post-acute settings, and 
that a similar policy would likely be implemented under any cross-
setting PAC payment system.
    Thus, we proposed to implement an interrupted stay policy as part 
of the SNF PPS, effective beginning FY 2020 in conjunction with the 
proposed implementation of the SNF PDPM. Specifically, in cases where a 
resident is discharged from a SNF and returns to the same SNF by 12:00 
a.m. at the end of the third day of the interruption window (as defined 
below), we proposed treating the resident's stay as a continuation of 
the previous stay for purposes of both resident classification and the 
variable per diem adjustment schedule. In cases where the resident's 
absence from the SNF exceeds this 3-day interruption window (as defined 
below), or in any case where the resident is readmitted to a different 
SNF, we proposed treating the readmission as a new stay, in which the 
resident would receive a new 5-day assessment upon admission and the 
variable per diem adjustment schedule for that resident would reset to 
Day 1. We stated in the proposed rule (83 FR 21068 through 21069) that, 
consistent with the existing interrupted stay policies for the IRF and 
IPF settings, we would define the interruption window as the 3-day 
period starting with the calendar day of discharge and additionally 
including the 2 immediately following calendar days. We stated that for 
the purposes of the interrupted stay policy, the source of the 
readmission would not be relevant. That is, the beneficiary may be 
readmitted from the community, from an intervening hospital stay, or 
from a different kind of facility, and the interrupted stay policy 
would operate in the same manner. We explained that the only relevant 
factors in determining if the interrupted stay policy would apply are 
the number of days between the resident's discharge from a SNF and 
subsequent readmission to a SNF, and whether the resident is readmitted 
to the same or a different SNF.
    In the proposed rule (83 FR 21069), we presented the following 
examples, which we believed aided in clarifying how this policy would 
be implemented:
    Example A: A beneficiary is discharged from a SNF on Day 3 of the 
stay. Four days after the date of discharge, the beneficiary is then 
readmitted (as explained above, this readmission would be in the same 
benefit period) to the same SNF. The SNF would conduct a new 5-day 
assessment at the start of the second admission and reclassify the 
beneficiary accordingly. In addition, for purposes of the variable per 
diem adjustment schedule, the payment schedule for the second admission 
would reset to Day 1 payment rates for the beneficiary's new case-mix 
classification.
    Example B: A beneficiary is discharged from a SNF stay on Day 7 and 
is readmitted to the same SNF within the 3-day interruption window. For 
the purposes of classification and payment, this would be considered a 
continuation of the previous stay (an interrupted stay). The SNF would 
not conduct a new 5-day assessment to reclassify the patient and for 
purposes of the variable per diem adjustment schedule, the payment 
schedule would continue where it left off at the rate for the day of 
discharge; we stated in the proposed rule that, in this case, the first 
day of the second stay would be paid at the Day 8 per diem rates under 
that schedule.
    Example C: A beneficiary is discharged from a SNF stay on Day 7 and 
is readmitted to a different SNF within the 3-day interruption window. 
The SNF would conduct a new 5-day assessment at the start of the second 
admission and classify the beneficiary accordingly. In addition, for 
purposes of the variable per diem adjustment schedule, the payment 
schedule for the second admission would reset to Day 1 payment rates 
for the beneficiary's new case-mix classification.
    We note two clarifications to the preceding examples. In each of 
the above examples, when the beneficiary is discharged from the SNF 
stay, the SNF would complete the required PPS Discharge Assessment (see 
Table 33: PPS Assessment Schedule under PDPM). Additionally, in Example 
B, we inadvertently indicated in the proposed rule that the first day 
of the second stay would be paid at the Day 8 per diem rates. However, 
the first day of the second stay would actually be paid at the rate for 
the day of discharge, Day 7. These points are further addressed in our 
responses to comments below.
    We also stated in the proposed rule (83 FR 21069) that we 
considered alternative ways of structuring the interrupted stay policy. 
For example, we considered possible ranges for the interrupted stay 
window other than the 3 calendar day window proposed. For example, we 
considered windows of fewer than 3 days (for example, 1 or 2 day 
windows for readmission), as well as windows of more than 3 days (for 
example, 4 or 5 day windows for readmission). However, we stated we 
believe that 3 days represents a reasonable window after which it is 
more likely that a resident's condition and resource needs will have 
changed. We also stated that we believe

[[Page 39245]]

consistency with other payment systems, like that of IRF and IPF, is 
helpful in providing clarity and consistency to providers in 
understanding Medicare payment systems, as well as making progress 
toward standardization among PAC payment systems.
    In addition, we explained that, to determine how best to 
operationalize an interrupted stay policy within the SNF setting, we 
considered three broad categories of benefit periods consisting of 
multiple stays. The first type of scenario, SNF-to-SNF transfers, is 
one in which a resident is transferred directly from one SNF to a 
different SNF. The second case we considered, and the most common of 
all three multiple-stay benefit period scenarios, is a benefit period 
that includes a readmission following a new hospitalization between the 
two stays--for instance, a resident who was discharged from a SNF back 
to the community, re-hospitalized at a later date, and readmitted to a 
SNF (the same SNF or a different SNF) following the new hospital stay. 
The last case we considered was a readmission to the same SNF or a 
different SNF following a discharge to the community, with no 
intervening re-hospitalization.
    We further explained that, to simplify the analysis, we primarily 
examined benefit periods with two stays. We stated that benefit periods 
with exactly two stays account for a large majority (70 percent) of all 
benefit periods with multiple stays, and benefit periods with more than 
two stays represent a very small portion (less than 7 percent) of all 
benefit periods overall. We therefore assume the data for cases where 
there are exactly two stays in a benefit period are representative of 
all benefit periods with multiple stays. We noted that, of cases where 
there are exactly two stays in a benefit period, over three quarters 
(76.4 percent) consist of re-hospitalization and readmission (to the 
same SNF or a different SNF). Discharge to the community and 
readmission without re-hospitalization cases represent approximately 14 
percent of cases, while direct SNF-to-SNF transfers represent 
approximately 10 percent.
    For each of these case types, in which a resident was readmitted to 
a SNF after discharge, we explained that we examined whether (1) the 
variable per diem adjustment schedule should be ``reset'' back to the 
Day 1 rates at the outset of the second stay versus ``continuing'' the 
variable per diem adjustment schedule at the point at which the 
previous stay ended, and (2) a new 5-day assessment and resident 
classification should be required at the start of the subsequent SNF 
stay.
    With regard to the first question above, specifically whether or 
not a readmission to a SNF within the proposed 3-day interruption 
window would reset the resident's variable per diem adjustment 
schedule, we stated that in each of the cases described above, we were 
concerned generally that an interrupted stay policy that ``restarts'' 
the variable per diem adjustment schedule to Day 1 after readmissions 
could incentivize unnecessary discharges with quick readmissions. We 
explained that this concern is particularly notable in the second and 
third cases described above, as the beneficiary may return to the same 
facility. As we discussed in the proposed rule (83 FR 21069), to 
investigate this question, we conducted linear regression analyses to 
examine changes in costs in terms of both PT/OT and NTA costs per day 
from the first to second admission for the three scenarios described 
above (SNF-to-SNF direct transfers, readmissions following re-
hospitalization, and readmissions following community discharge). As 
discussed in section V.D.4. of the proposed rule (83 FR 21060 through 
21061) and in section V.C.4 of this final rule, investigations revealed 
that utilization of PT, OT, and NTA services changes over the course of 
a stay. Based on both empirical analysis and feedback from multiple 
technical expert panels, we determined that SLP and nursing utilization 
remained fairly constant over a stay. Therefore, we proposed variable 
per diem adjustment schedules for the PT, OT, and NTA components but 
not for the SLP or nursing components. We stated in the proposed rule 
that, because the analysis of changes in costs across two stays in a 
single benefit period is relevant to determining how the variable per 
diem payment adjustments should apply to benefit periods with multiple 
stays, we restricted our analysis to the three payment components for 
which we are proposing variable per diem adjustments (PT, OT, and NTA). 
For this analysis, both the re-hospitalization and community discharge 
cases were separated into two sub-cases: When the resident returns to 
the same SNF, and when the resident is admitted to a different SNF. By 
definition, SNF-to-SNF transfer cases always have different providers 
for the first and second stays. We stated in the proposed rule that the 
regression results showed that PT/OT costs from the first to second 
admission were very similar for SNF-to-SNF transfers and for 
readmissions to a different provider following re-hospitalization or 
discharge to community, suggesting that the second admission is 
comparable to a new stay. NTA costs from the first to second admission 
also were very similar for SNF-to-SNF transfers. We stated that, for 
readmissions following re-hospitalization or discharge to community, 
NTA costs for readmissions to the same provider were notably less than 
NTA costs for readmissions to a different provider. We explained that, 
overall, these results suggest that a readmission to a different SNF, 
regardless of whether it was a direct SNF-to-SNF transfer, or whether 
the beneficiary was re-hospitalized or discharged to the community 
before the second admission, are more comparable to a new stay than an 
interrupted stay. Thus, we proposed to always reset the variable per 
diem adjustment schedule to Day 1 whenever residents are discharged and 
readmitted to a different SNF. We acknowledged that this could lead to 
patterns of inappropriate discharges and readmissions that could be 
inconsistent with the intent of this policy; for example, we stated we 
would be concerned about patients in SNF A consistently being admitted 
to SNF B to the exclusion of other SNFs in the area. We explained that 
should we discover such behavior, we would flag these facilities for 
additional scrutiny and review and consider potential policy changes in 
future rulemaking. However, based on the results of our regression 
analyses, and because of the concern that a SNF provider could 
discharge and promptly readmit a resident to reset the variable per 
diem adjustment schedule to Day 1, we stated that in cases where a 
resident returns to the same provider we were proposing to allow the 
payment schedule to reset only when the resident has been out of the 
facility for at least 3 days. As previously mentioned, we stated that 
believe 3 days represents a reasonable window after which it is more 
likely that a resident's condition and resource needs will have 
changed, and this 3-day requirement is also consistent with the 
interrupted stay policies of similar Medicare PAC benefits. Moreover, 
we stated that while we found that PT and OT costs for cases where the 
gap is longer than 3 days are similar to PT and OT costs for cases 
where the gap is shorter than 3 days, NTA costs are notably higher for 
cases where the gap is longer than 3 days. We explained that this 
provides further support for resetting the variable per diem schedule 
for cases where the gap is longer than 3 days (as costs tend to be 
higher, similar to a new stay). More information on these analyses can 
be found in section 3.10.3. of the SNF PMR technical report available 
at https://

[[Page 39246]]

www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/
therapyresearch.html.
    We explained in the proposed rule (83 FR 21070) that with regard to 
the question of whether or not SNFs would be required to complete a new 
5-day assessment and reclassify the resident after returning to the SNF 
within the proposed 3-day interruption window, we investigated changes 
in resident characteristics from the first to the second stay within a 
benefit period. First, we looked at changes in clinical categories from 
the first to second stay for residents with an intervening re-
hospitalization. We explained that this analysis could only be 
conducted for residents with a re-hospitalization because, as described 
in section 3.10.2. of the SNF PMR technical report, for research 
purposes, classification into clinical categories was based on the 
diagnosis from the prior inpatient stay. We stated that for those 
residents who had a re-hospitalization and were readmitted to a SNF 
(either the same or a different SNF), and therefore, could be 
reclassified into a new clinical category (because of new diagnostic 
information as a result of the intervening re-hospitalization), we 
found that a majority had the same clinical category for both the first 
and second admission. We further explained that because we could not 
conduct this investigation for SNF-to-SNF transfers or community 
discharge cases (as they lack a new hospitalization), we separately 
investigated changes in function from the first to second stay for SNF-
to-SNF transfers and for readmissions following community discharge. We 
found that in a large majority of cases, there was no change in 
function from the first to second stay, regardless of whether the 
second provider was the same or different as the first provider. Thus, 
we stated we believe it would be appropriate to maintain the 
classification from the first stay for those residents returning to the 
same SNF no more than 3 calendar days after discharge from the same 
facility. However, we stated that because we proposed to exclude from 
the interrupted stay policy readmissions to a different SNF (regardless 
of the number of days between admissions) and readmissions to the same 
SNF when the gap between admissions is longer than 3 days, and to treat 
these readmissions as new stays for purpose of the variable per diem 
adjustment schedule, we believe it would be appropriate and consistent 
to treat these cases as new stays for purposes of clinical 
classification and to require a new 5-day PPS assessment. More 
information on these analyses can be found in section 3.10.2. of the 
SNF PMR technical report available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html. 
Additionally, we noted that under the approach discussed in section 
V.E.1. of the proposed rule, providers would be afforded the 
flexibility to use the IPA, which would allow for resident 
reclassification under certain circumstances.
    We also noted that we believe that frequent SNF readmissions may be 
indicative of poor quality care being provided by the SNF. Given this 
belief, we stated we plan to monitor the use of this policy closely to 
identify those facilities whose beneficiaries experience frequent 
readmission, particularly facilities where the readmissions occur just 
outside the 3-day window used as part of the proposed interrupted stay 
policy. We stated that should we discover such behavior, we would flag 
these facilities for additional scrutiny and review and consider 
potential policy changes in future rulemaking.
    We invited comments on the proposals outlined above. Commenters 
submitted the following comments related to the proposed rule's 
discussion of the proposed interrupted stay policy under the PDPM. A 
discussion of these comments, along with our responses, appears below.
    Comment: Several commenters pointed out a potential adverse 
incentive associated with the interaction between the interrupted stay 
policy, the proposed Interim Payment Assessment (IPA), and the variable 
per diem adjustment. Specifically, these comments were concerned with 
issues that could arise because an IPA does not return the NTA 
component to day 1 payment rates under the variable per diem adjustment 
schedule. Commenters stated that if a patient requires a new high cost 
medication or piece of equipment, the inability to return to day 1 of 
the variable per diem adjustment schedule could result in an array of 
unintended issues. Commenters noted that these unintended issues 
include incentivizing unnecessary discharges to a hospital followed by 
quick readmissions (which, the commenter pointed out, was a risk CMS 
had specifically considered and attempted to avoid in crafting the 
proposed interrupted stay policy) and reluctance to admit patients who 
are at high risk of changes in care needs. One commenter stated that 
CMS has not aligned the planned monitoring of unnecessary discharges 
with existing quality measures, and instead has created an incentive 
for unnecessary discharges and readmissions just outside the 3-day 
interruption window by prohibiting providers from returning patients to 
days one through three of the variable per diem adjustment schedule for 
typically high cost NTAs when an IPA is conducted or in the instance of 
interrupted stays of 3 or less days.
    Response: While we appreciate the commenters' concerns regarding 
the potential for an adverse incentive, we believe that frequent SNF 
readmissions may be indicative of poor quality care being provided by 
the SNF. CMS plans to monitor the use of this policy closely to 
identify those facilities whose beneficiaries experience frequent 
readmission, particularly facilities where the readmissions occur just 
outside the 3-day window used as part of the proposed interrupted stay 
policy. Should we discover such behavior, we will flag these facilities 
for additional scrutiny and review and consider potential policy 
changes in future rulemaking.
    We do not believe that facilities have cause for reluctance to 
admit patients who are at high risk of changes in care needs. The 
optional IPA allows for patients to be reclassified in cases of 
significant changes in care needs.
    With regard to the question of the IPA resetting the variable per 
diem adjustment, this issue is addressed in our responses to comments 
in section V.D. of this final rule.
    With regard to the question of interruptions of 3 or less days 
resetting the variable per diem adjustment, as we stated in the 
proposed rule, our analyses found that some costs, specifically NTA 
costs, are notably higher for cases where the gap is longer than 3 
days, compared to cases where the interruption is 3 or less days, where 
costs are more similar to uninterrupted stays. We believe this supports 
the use of a 3-day gap as the metric for when to reset the variable per 
diem adjustment.
    Regarding any current alignment of quality measures and the 
monitoring of unnecessary discharges, we interpret the commenter to be 
suggesting that CMS does not currently have in place quality measures 
that address unnecessary discharges to the hospital during the SNF 
Stay. We disagree with this assertion in that CMS has developed and 
implemented a hospital readmission measure for SNF.
    Comment: Commenters requested clarification as to whether the 
readmission of a patient under the interrupted stay policy (for 
example, within the 3-day window) would trigger an IPA.

[[Page 39247]]

    Response: As discussed in section V.D. of this final rule, the IPA 
under PDPM would be an optional assessment. Therefore, readmission 
after an interrupted stay would not trigger an IPA. If the provider 
believes, even in the case of a short absence from the facility, that 
an IPA is warranted, then we would encourage the provider to complete 
an IPA in that instance.
    Comment: Several commenters requested clarification about 
completing initial evaluations for therapy upon readmission of a 
patient in an interrupted stay under the interrupted stay policy. 
Commenters questioned whether CMS has an expectation that therapists 
will always complete a new evaluation upon the resident's return to a 
SNF as currently instructed in the MDS RAI Manual, or whether CMS would 
defer to the clinical judgment of the therapist in a way that is more 
like the EOT/EOT-R practice. Commenters also questioned whether CMS 
would require SNFs to indicate on the claim form when a resident has 
been readmitted and/or when an evaluation was complete after the 
resident was readmitted. Commenters pointed out that, per the current 
instruction in section O of the MDS RAI Manual, ``If a resident returns 
from a hospital stay, an initial evaluation must be performed after 
entry to the facility, and only those therapies that occurred since 
admission/reentry to the facility and after the initial evaluation 
shall be counted.'' (MDS 3.0 Chapter 3, section O, V1.15, page O-19). 
On the other hand, commenters pointed out that the premise for the 
interrupted stay policy is similar to the policy for the End-of Therapy 
(EOT) Other Medicare Required Assessment (OMRA), which leaves it to the 
clinician's judgment whether or not a new therapy evaluation should be 
completed. Commenters stated that when therapy is the primary skill, 
and the patient misses 3 consecutive calendar days of therapy, the 
provider must complete an EOT OMRA, which effectively changes the 
payment resource utilization group (RUG). Commenters pointed out that 
in cases where therapy resumes after the EOT-OMRA is performed and the 
resumption of therapy date is no more than 5 consecutive calendar days 
after the last day of therapy provided, and the therapy services have 
resumed at the same RUG-IV classification level, and with the same 
therapy plan of care that had been in effect prior to the EOT OMRA, an 
EOT OMRA with Resumption (EOT-R) may be completed. Commenters noted 
that in these cases, it is left to the clinician's judgment whether or 
not a new therapy evaluation should be completed.
    Response: Given that an interrupted stay does not prompt the need 
for a new 5-day PPS assessment and continues the stay from the point 
when the interruption occurred, providers should not be required to 
always complete an evaluation upon the resident's readmission after an 
interrupted stay. Per the proposed interrupted stay policy, a new 5-day 
assessment must be completed only if the interruption lasts longer than 
3 days (or if the beneficiary is readmitted to a different SNF). If the 
interruption was less than 3 days but patient care needs have changed 
significantly, clinicians may complete an IPA at their discretion. The 
instructions in the MDS RAI Manual will be updated accordingly as part 
of the implementation of PDPM.
    With regard to whether providers would be required to report on the 
claim form when a patient is readmitted or an evaluation is completed 
for such a patient, we do not anticipate such changes in claims 
reporting, though we would have providers report on the claim when an 
interrupted stay occurred.
    Comment: Many commenters had questions and concerns related to 
discharge practices under the interrupted stay policy, and requested 
clarification of the requirements surrounding the PPS Part A Discharge 
(NPE) when beneficiaries meet the criteria of an interrupted stay. One 
commenter stated that it is unclear in the proposed rule whether the 
NPE would be completed in example B in the FY 2019 SNF PPS proposed 
rule (83 FR 21069). Assuming that an NPE would be required once the 
resident has been out of the facility for 24 hours, whether the 
resident returns within 1 day or 3 days, commenters questioned how the 
facility would manage the assessment schedule versus the payment 
schedule. Other commenters questioned whether CMS expects SNFs to wait 
to see whether the beneficiary returns before completing the discharge 
assessment. Commenters questioned what the implications would be for 
setting the Assessment Reference Date (ARD) approximately 4 to 5 days 
after discharge in cases when the beneficiary does not return within 
the 3-day window. Commenters stated that as currently defined, doing 
this would be considered a late assessment, and could subject the SNF 
to penalties. Commenters also stated that if this discharge assessment 
is required, then this adds to the administrative burden, which is 
contradictory to CMS' stated goals.
    Response: As is the current policy, SNFs would be expected to 
complete the PPS discharge assessment and/or OBRA discharge assessment 
upon any discharge and within currently established timeframes, 
regardless of any expectation as to whether or not a patient might be 
readmitted and/or whether the readmission would be considered an 
interrupted stay. This does not add administrative burden beyond what 
SNFs are currently expected to do. This information is also important 
in our ability to assess instances in which facilities may abuse the 
interrupted stay policy.
    With regard to managing the assessment schedule and payment 
schedule, we would refer commenters to the assessment schedule 
discussed in section V.D of this final rule, which outlines both the 
assessment calendar and payment timeline for each assessment under 
PDPM.
    Comment: Some commenters sought clarification as to how the SNF 
should count the total volume, mode, and type of therapy to report in 
section O of the MDS for purposes of the discharge assessment when a 
resident's stay included one or more interrupted stays. Would they 
count it from Day 1, the original admission date, even though there was 
an interrupted stay, or would this discharge assessment only include 
the volume, mode, and type of therapy delivered since the time of 
return to discharge?
    Response: In cases where a resident is discharged and then 
readmitted to a SNF in a manner that triggers an interrupted stay under 
the interrupted stay policy, only those therapies that occurred since 
the readmission would be included in section O of the MDS for each 
discharge assessment.
    Comment: A commenter expressed concerns related to the use of the 
length of an interruption in days (for example, less than or equal to 3 
days) as the trigger for a 5-day assessment. The commenter stated 
appreciation for CMS efforts to reduce the number of 5-day assessments, 
but stated that no reduction in burden is achieved by not requiring a 
5-day assessment for patients returning following 3 or fewer days, 
assuming that SNFs must still conduct a patient assessment upon 
readmission for all patients. Also, the commenter believes not 
performing a 5-day assessment for all returning patients creates 
unneeded risk for patients and SNFs. The commenter recommended 
performing the 5-day assessment after every readmission, the result of 
which--not the number of days in the interruption--should determine 
whether the patient's condition has

[[Page 39248]]

changed and new care needs are present that would warrant resetting the 
variable per diem rate. Commenters stated that the number of days in an 
interruption is irrelevant to costs of treatment and it is the 
patient's condition upon return from the interruption that should 
determine whether the payment resets to day 1 per diem rates or not.
    Response: Contrary to the commenter's assertion, we believe that a 
reduction in burden is, in fact, achieved by not requiring a 5-day 
assessment for patients returning following 3 or fewer days. While SNFs 
may be required to complete OBRA assessments and other statutorily 
required assessments beyond the scope of SNF PPS payment, it will no 
longer be the case that SNFs must conduct a patient assessment upon 
readmission for all patients for the purposes of PPS payment. As 
discussed above, in conjunction with the implementation of the PDPM, 
CMS will reduce the assessment schedule significantly to ease provider 
burden (see section V. E. and Table 33 of the proposed rule). The Start 
of Therapy OMRA, the assessment that would have previously been 
required for PPS payment upon a readmission, is no longer required. The 
new schedule utilizes the 5-day Assessment and PPS Discharge 
Assessments as the only required assessments, with IPAs being optional 
at clinician discretion.
    We disagree that not performing an assessment for all returning 
patients creates unneeded risk. We believe that the new assessment 
schedule we proposed achieves efficiencies in terms of provider burden 
while still providing enough data to accurately monitor provider 
behavior, changes in patient condition, and outcomes via the 5-day 
assessment, IPA assessments, and discharge assessments. While a 5-day 
assessment would not be required upon readmission in the case of an 
interrupted stay, the provider has the option of completing an IPA as 
it determines appropriate to assess whether the patient's condition and 
care needs have changed.
    While we appreciate the commenter's concern, we believe the use of 
the number of days between discharge and readmission to determine 
whether there is an interrupted stay is appropriate. As described in 
the proposed rule, our analyses found that some types of costs, notably 
NTA costs, tend to be higher for cases where the gap is longer than 3 
days, suggesting that such stays are more like new stays than 
continuing stays and thus supporting the 3-day metric for resetting the 
variable per diem schedule. The length of the interruption is also used 
in determining whether there is an interrupted stay in other Medicare 
post-acute payment systems and we expect that its use here will be just 
as effective.
    With regard to the commenters' recommendation that a 5-day 
assessment be completed upon readmission after an interrupted stay, we 
believe that this would constitute an unnecessary burden on providers, 
particularly given the provider's option to complete an IPA upon 
readmission to the SNF. We also do not believe a 5-day assessment is 
necessary upon readmission after an interrupted stay of 3 days or less. 
While we found that PT and OT costs for cases where the gap is longer 
than 3 days are similar to PT and OT costs for cases where the gap is 
shorter than 3 days, NTA costs are notably higher for cases where the 
gap is longer than 3 days. We explained that this provides further 
support for resetting the variable per diem schedule for cases where 
the gap is longer than 3 days (as costs tend to be higher, similar to a 
new stay). As discussed in section 3.10 of the SNF PMR technical 
report, our analyses also showed that clinical category (in cases with 
an intervening re-hospitalization) and functional status (in cases 
involving SNF-to-SNF transfers and readmissions following community 
discharge) tended not to change between the first stay and the second 
stay in an interrupted stay of 3 days or less. Thus, we believe our 
research suggests that stays with interruptions of 3 days or less are 
more similar in cost to uninterrupted stays and are less likely to 
involve significant changes in patient condition or function. 
Therefore, we do not agree that a 5-day assessment should be required 
upon readmission after an interrupted stay, or that it is appropriate 
to reset the variable per diem adjustment schedule to day 1 after an 
interrupted stay.
    We agree with the commenter that the patient's condition should be 
the most relevant factor in determining the need for a new assessment, 
and CMS has given providers the option of performing an IPA at their 
discretion based on changing conditions. As we explained previously, if 
a new condition is coded on an IPA, the SNF PPS per diem payment for 
the patient could increase to reflect changes in the patient's clinical 
condition if there is a change in the patient's case-mix group.
    Comment: A commenter stated that CMS does not explicitly discuss 
discharge to the community and the interrupted stay policy, and 
requested clarification.
    Response: In the FY 2019 SNF PPS proposed rule (83 FR 21068 through 
21069), we discussed discharge to the community and the interrupted 
stay policy. The beneficiary may be readmitted from the community, from 
an intervening hospital stay, or from a different kind of facility, and 
the interrupted stay policy would operate in the same manner. The 
interrupted stay policy would operate in the same manner for discharges 
to the community.
    Comment: One commenter commented that the RAI User's Manual 
instructions for A2400A, on page A-32, are to code 1, yes, if the 
resident has had a Medicare Part A covered SNF stay since the most 
recent admission/entry or reentry. The commenter stated that providers 
also use the Medicare Stay End Date Algorithm on page A-37 of the RAI 
User's Manual to correctly code A2400C, the end of the Medicare SNF 
stay. A2400C is also used to determine whether the PPS Part A Discharge 
assessment is required. The commenter referenced Example B on page 
21069 of the proposed rule, which describes a beneficiary who is 
discharged on day 7 and is readmitted to the same SNF within the 3-day 
interruption window. The example states a SNF would not conduct a new 
5-day assessment, and for the purposes of payment, this would be 
considered a continuation of the previous stay. The commenter expressed 
concern that, even though the Example B beneficiary is considered a 
continuation of the previous stay for payment purposes, A2400 on the 
MDS would still be coded as two separate Medicare stays. The commenter 
stated that when the resident is discharged on day 7, this date would 
be considered the end of the Medicare stay at A2400C. The entry record 
completed when the resident returned would have a new Medicare start 
date (A2400B) that would equal the reentry date. The commenter stated 
that this could lead to unmatched stays and inaccurate SNF QRP 
measures.
    Response: We appreciate the comments on the potential revisions 
needed to the MDS manual or any technical specifications associated 
with SNF programs to implement the interrupted stay policy, and will 
consider these issues when making revisions to these materials as part 
of implementing the PDPM and related policies. With regard to the 
commenter's concern about the alignment of individual stays in the SNF 
QRP and the PDPM, we are aware of the issue and will revise the codes 
so that a hospital admission and return to the SNF does

[[Page 39249]]

not trigger a new Medicare stay for purposes of the SNF QRP.
    Comment: A commenter expressed concern regarding how the 
interrupted stay policy will operate in situations where the SNF 
provided the resident with the Notice of Medicare Non-Coverage (NOMNC), 
which is required to be provided prior to a discharge to the community. 
The commenter requested clarification on how or if issuance of the 
NOMNC or SNFABN would have any effect on the interrupted stay policy. 
Their concern was that if a resident meets the criteria of an 
interrupted stay following a discharge where denial notices were 
issued, the resident would be considered a new admission to the SNF. 
The commenter stated the cost of an admission in this situation is more 
like that of a new admission than a readmission. They recommended that 
the interrupted stay policy not be applied following a discharge with 
issuance of denial notices.
    Response: The basic purpose of the interrupted stay policy is to 
ensure that when two segments of a resident's stay in the facility are 
separated by only a brief absence, the variable per diem payment 
adjustment is not inappropriately reset to Day 1 upon the resident's 
return. We do not believe that the mere issuance of a denial notice 
such as a NOMNC or SNFABN prior to the resident's departure would, in 
itself, have any effect on the nature of the care needed by the 
resident upon subsequent resumption of SNF care, the costs of 
readmission, or the way in which providers would be paid under the 
PDPM, and, accordingly, we are not adopting the commenter's suggestion.
    Comment: A commenter expressed concern about the impact an OBRA 
Discharge Return Not Anticipated assessment would have on the 
interrupted stay policy. The commenter stated that currently, when a 
resident discharges to the community with the intent not to return, the 
SNF is required to complete the OBRA Discharge Return Not Anticipated 
assessment and would combine this assessment with the PPS Part A 
Discharge. The commenter stated that the OBRA Discharge Return Not 
Anticipated ends the resident's ``episode of care.'' The commenter 
stated that if this resident were to be readmitted to the SNF within 
the interruption window, this would be considered a new admission, 
require an admission type of entry record, and start a new ``episode of 
care.'' Furthermore, the commenter stated that this discharge would end 
all of the resident's orders, meaning that a new admission order is 
required, along with new physician certification of skilled care and 
new therapy evaluations. The commenter was highly concerned that the 
interrupted stay policy would apply following an OBRA Discharge Return 
Not Anticipated assessment, when the resident is considered a ``new 
admission'' for all other regulations. The commenter stated that the 
cost of an admission in this situation is more like that of a new 
admission than a readmission. The commenter recommended that the 
interrupted stay policy not be applied following a Discharge Return Not 
Anticipated.
    Response: We appreciate this concern though we do not agree that 
the interrupted stay policy should not apply in cases where the 
resident is discharged return not anticipated. While the provider may 
have prepared a discharge plan for this patient based on the notion 
that the patient would not return, the patient's return to the SNF 
within that 3-day window would suggest that either the patient was not 
adequately prepared for discharge or may have been discharged too early 
from the facility. Further, providers should consider the possibility 
that a patient may return before finalizing the precise discharge type 
coded on the MDS. Finally, we believe that exempting such discharges 
from the interrupted stay policy could incentivize providers to merely 
code discharges in this manner only for this purpose and without 
sufficient basis.
    Comment: One commenter stated that currently a Medicare Part A stay 
in the SNF will end if the resident has been discharged to the 
community, has been admitted to the hospital, or is on a hospital 
observation stay or emergency room visit that spans midnight and 
exceeds 24 hours. The commenter stated that the interrupted stay policy 
would consider any readmission within the 3-day interruption window as 
a continuation of the previous stay, therefore changing the number of 
Medicare stays the facility would have had prior to this proposal. One 
commenter expressed concern that the reduction in Medicare stays has 
the potential to affect the SNF QRP measures adversely by resulting in 
a higher number of unmatched stays and potential errors with SNF QRP 
measure calculation. The commenter referenced the Skilled Nursing 
Facility Quality Reporting Program Measure Calculation and Reporting 
User's Manual 1.0 (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Downloads/SNF-QM-Users-Manual-V10-FINAL-5-22-17.pdf) and the instructions on how to 
identify a Medicare Part A stay for SNF QRP: Start by sorting 
assessments in reverse order during the 12-month target period. If the 
most recent assessment is a PPS Part A Discharge assessment, look for 
the next qualifying assessment; if the assessment is a 5-day, this is a 
matched assessment, and if not a 5-day, the stay is unmatched. The 
commenter expressed concern for potential negative impact to the SNF 
QRP measures, regardless of whether the Discharge Assessment NPE is 
required with the discharge prior to the interrupted stay, with the 
following reasoning.
    The commenter described a sequence of assessments and events that 
the commenter stated would occur under the current payment system if 
Example B on page 21069 were to occur: 5-day assessment, NPE, discharge 
of less than 3 days, 5-day assessment, and final NPE. This would be 
counted as two Medicare stays for SNF QRP.
    The commenter then described how this sequence might differ under 
the new system, depending on whether the NPE is required or not. In 
Example B, if the NPE was required on day 7 when the resident was 
discharged, but a new 5-day assessment was not required when the 
resident returned within the interruption window, then the sequence of 
assessments and events would be: 5-day assessment, NPE, interrupted 
stay, NPE. This would result in one unmatched stay (between the return 
from the interrupted stay to the final NPE) and one matched stay.
    In Example B, if the NPE is not required on day 7 when the resident 
discharges for less than 3 days, the sequence would be: 5-day 
assessment, interrupted stay, NPE. This would result in only one 
Medicare stay.
    The commenter requested clarification on how the Medicare stays 
will be calculated with the interrupted stay policy, presumably for the 
purposes of the QRP, and recommended evaluation by the SNF QRP CMS team 
to evaluate any further risks, errors, or concerns that may arise from 
this proposed policy.
    Response: We agree with the commenter's description of how the 
current matching occurs for assessments. As previously discussed, we 
are aware that admissions and discharges are currently coded for 
purposes of the SNF QRP in a way that might conflict with how stays 
will be captured under the new PDPM. We intend to revise the codes so 
that a Medicare stay is captured the same way for purposes of the SNF 
QRP and the PDPM.
    Comment: One commenter stated concerns with the suggestion that CMS

[[Page 39250]]

would monitor this interrupted stay policy for frequent readmission, 
particularly facilities where the readmissions occur just outside the 
3-day window used as part of the proposed interrupted stay policy. The 
commenter stated that SNFs already are the most highly regulated and 
monitored profession in health care. They stated a new policy with 
additional scrutiny and risk increases provider burden. They pointed 
out that CMS has programs in place to monitor and penalize SNFs for 
rehospitalization. The commenter stated that the SNF Rehospitalization 
VPB Program reduces all SNF rates by 2 percent. The commenter further 
stated that SNFs may earn a portion of these funds back by keeping 
rehospitalization rates low. Also, the commenter pointed out that SNF 
performance on return to community and related quality measures under 
the SNF QRP are publicly reported. The commenter stated that SNFs that 
perform poorly on QRP measures are less likely to be included in 
Medicare Advantage Plan or Accountable Care Organization provider 
networks. Thus, the commenter concluded that heightened scrutiny for 
poor performance already is in place. They recommended that SNF re-
admissions to hospitals under the existing program--presumably meaning 
the SNF Rehospitalization VPB Program--should serve as the monitoring 
tool. They stated that, as with the SNF VBP Program, QRP performance 
also will serve a monitoring tool. They added that poorly performing 
SNFs will be penalized by the market, so that no additional government 
action is needed.
    Response: We acknowledge that these monitoring tools exist and will 
utilize these existing tools to the fullest extent possible, but will 
also monitor specifically for inappropriate behavior in the context of 
the interrupted stay policy and decide the appropriate form of 
administrative action for whatever behavior is identified.
    Comment: One commenter stated that CMS should develop a policy 
specific to the interrupted stay and the calculation of group/
concurrent minutes. An interrupted stay could prevent the individual 
therapy minutes from being provided, and therefore, result in exceeding 
the 25 percent threshold. For example, if a resident is admitted to a 
facility and receives 100 percent group therapy on Day 1 of their SNF 
stay, with the full intent to move the resident to individual therapy 
in the days that follow, and then an interrupted stay occurs on Day 2 
of the resident's stay; what would be the resulting impact to the 
facility from the resident receiving over the allowed 25 percent group 
therapy?
    Response: As noted in section V.E of this final rule, there 
currently is no penalty associated with the group and concurrent 
therapy limits; instead, providers will receive a non-fatal warning 
edit on the validation report. We stated that we would monitor and 
evaluate how group and concurrent therapy are used under PDPM and 
consider making future proposals to address abuses of this policy or 
flag providers for additional review should a provider be found to 
consistently exceed the threshold. That being said, in terms of 
calculating adherence with the concurrent and group therapy limit, such 
a calculation is, as described in section V.E. of this final rule, 
completed at the stay level. Therefore, in cases of an interrupted 
stay, the therapy minutes over the course of the entire stay, both 
before and after the interruption, would be used to calculate the 
proportion of therapy time furnished within a concurrent or group 
setting. We believe this is the fairest option, as to calculate the 
proportion of such minutes based on only one portion of the stay may 
unduly identify a given provider as having failed to adhere to the 
established limit only because that particular portion of the stay had 
a larger amount of a given therapy mode.
    Comment: Several commenters pointed out a discrepancy in the 
Medicare days count in Example B in the FY 2019 SNF PPS proposed rule 
(83 FR 21069). Specifically, commenters highlighted that Example B 
states that the resident is discharged on day 7 and that ``the first 
day of the second stay would be paid at the Day 8 per diem rates under 
that schedule.'' This implies that if a SNF resident has an interrupted 
stay, for the purposes of determining day in the stay for the per diem 
payment, when the patient returns to the SNF after the interruption, 
the stay resumes on the next day of the stay. For example, if a SNF 
resident is on day 7 of a stay which is then interrupted, when the 
resident returns within a certain time frame the day in the stay would 
be day 8. If the resident is discharged on day 7 of the stay, the SNF 
would be unable to bill for this day, resulting in the beneficiary 
using only 6 of the Medicare days. This would be unfair for both the 
resident and the SNF. Commenters recommended that CMS clarify the 
policy so that providers are paid for the day when a resident leaves a 
SNF in the case of an interrupted stay. Commenters said that under the 
policy as proposed, providers would not be paid for the day the 
resident leaves the SNF and so would lose one day of reimbursement.
    Response: We agree with commenters regarding this typographical 
error and that payments should resume at the rate of the day of 
discharge, rather than the day after discharge. In other words, if a 
SNF resident is on day 7 of a stay which is interrupted, when the 
resident is readmitted, the payment rate would resume at day 7, not day 
8, as Example B incorrectly stated.
    The day of discharge in an interrupted stay would not be counted 
against the beneficiary's count of 100 days of covered Part A care in a 
benefit period. SNFs are not currently paid for the day of discharge, 
even with an anticipated leave of absence, unless the patient returns 
to the SNF before midnight of the same day. We do not believe there is 
anything about the interrupted stay policy that warrants changing this.
    Comment: Multiple commenters expressed general support for the 
interrupted stay policy as proposed. Commenters supported the 
implementation of a SNF interrupted stay policy that is consistent with 
the policies in other post-acute care settings. Commenters recognized 
that with the proposed changes under the PDPM, which include variable 
per diem payment adjustments that provide higher payments at the 
beginning of the stay, implementing an interrupted stay policy will be 
appropriate for SNFs. As a further point of support, commenters noted 
that under the current system, rates of discharge to institutions (such 
as acute hospital or emergency department) are monitored very closely. 
Commenters expected that the proposed interrupted stay policy would 
allow for short term discharges where medically necessary while 
allowing for appropriate payment across a patient's stay.
    Response: We agree with the commenters that the PDPM will benefit 
from the interrupted stay policy proposed.
    Accordingly, after considering the comments received, for the 
reasons discussed in the proposed rule and in this final rule, we are 
finalizing our proposed interrupted stay policy without modification, 
to be effective October 1, 2019 in conjunction with the implementation 
of the PDPM.

G. Relationship of the PDPM to Existing Skilled Nursing Facility Level 
of Care Criteria

    As discussed in the proposed rule (83 FR 21070), the establishment 
of the SNF PPS did not change Medicare's fundamental requirements for 
SNF coverage. However, because the case-

[[Page 39251]]

mix adjustment aspect of the SNF PPS has been based, in part, on the 
beneficiary's need for skilled nursing care and therapy, we have 
coordinated claims review procedures with the existing resident 
assessment process and case-mix classification system. 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 system to assist in making certain SNF level of care determinations.
    As further discussed below, in the proposed rule (83 FR 21070-72), 
we proposed to adopt a similar approach under the PDPM effective 
October 1, 2019, by retaining an administrative presumption mechanism 
that would utilize the initial assignment of one of the case-mix 
classifiers that we designate for this purpose to assist in making 
certain SNF level of care determinations. This designation would 
reflect an administrative presumption under the PDPM that beneficiaries 
who are correctly assigned one of the designated case-mix classifiers 
on the initial 5-day, Medicare-required assessment are automatically 
classified as meeting the SNF level of care definition up to and 
including the assessment reference date on the 5-day Medicare required 
assessment.
    We stated that, as under the existing RUG-IV administrative 
presumption, a beneficiary who is not assigned one of the designated 
classifiers would not automatically be classified as either meeting or 
not meeting the level of care definition, but instead would receive an 
individual level of care determination using the existing 
administrative criteria. We stated that the use of the administrative 
presumption reflects the strong likelihood that those beneficiaries who 
are assigned one of the designated classifiers during the immediate 
post-hospital period require a covered level of care, which would be 
less likely for other beneficiaries.
    In the ANPRM (82 FR 21007), we discussed some potential adaptations 
of the RUG-IV model's administrative presumption to accommodate 
specific features of the RCS-I model, including the possible 
designation of the following case-mix classifiers for purposes of the 
administrative presumption:
     Continued designation of the same nursing (non-
rehabilitation) groups that currently comprise the Extensive Services, 
Special Care High, Special Care Low, and Clinically Complex categories 
under RUG-IV, as those groups would crosswalk directly from RUG-IV to 
the RCS-I model we were considering;
     In addition, designation of the most intensive functional 
score (14 to 18) under the RCS-I model's combined PT/OT component, as 
well as the uppermost comorbidity score (11+) under its NTA component.
    In response, a number of comments expressed concern that the 
possible adaptations of the presumption could adversely affect access 
to care for some beneficiaries. Others questioned whether using the PT/
OT component's highest functional score bin (14 to 18) as a trigger for 
the presumption would be appropriate, inasmuch as the residents that 
typically require the most therapy are those with only moderate 
functional impairments. In addition, commenters questioned the 
discussion's inclusion of the RCS-I model's NTA component as a possible 
classifier under the presumption, as well as its omission of RCS-I's 
SLP component.
    Regarding the commenters' concerns about access to care, we noted 
in the proposed rule that we have indicated in the ANPRM and in 
previous rulemaking that the actual purpose of the level of care 
presumption has always been to afford a streamlined and simplified 
administrative procedure for readily identifying those beneficiaries 
with the greatest likelihood of meeting the level of care criteria; 
however, we have also emphasized that in focusing on such 
beneficiaries, this approach in no way serves to disadvantage other 
beneficiaries who may also meet the level of care criteria. As we noted 
in the ANPRM, an individual beneficiary's inability to qualify for the 
administrative presumption would not in itself serve to disqualify that 
resident from receiving SNF coverage. While such residents are not 
automatically presumed to require a skilled level of care, neither are 
they automatically classified as requiring nonskilled care; rather, any 
resident who does not qualify for the presumption would instead receive 
an individual level of care determination using the existing 
administrative criteria (82 FR 21007). As we further explained in the 
FY 2016 SNF PPS final rule (80 FR 46406, August 4, 2015), structuring 
the presumption in this manner serves specifically to ensure that the 
presumption does not disadvantage such residents, by providing them 
with an individualized level of care determination that fully considers 
all pertinent factors.
    As for concerns about the appropriateness of certain classifiers, 
including the possible use of the PT/OT component's highest functional 
score bin (14 to 18) for this purpose under RCS-I, we noted in the 
proposed rule that the case-mix classification model for PT and OT that 
we were proposing in connection with the PDPM would essentially 
reconfigure the PT/OT component from the RCS-I model. As discussed in 
section V.D.3.b. of the proposed rule, the proposed PDPM would divide 
the RCS-I model's combined PT/OT component into two separate case-mix 
adjusted components, under which each resident would be assigned 
separate case-mix groups for PT and OT payment. Those groups would 
classify residents based on clinical category and function score, the 
two resident characteristics shown to be most predictive of PT and OT 
utilization.
    The proposed rule's discussion also cited section III.B.4. of the 
ANPRM (``Variable Per Diem Adjustment Factors and Payment Schedule''), 
as well as section V.D.4. of the proposed rule itself, which indicated 
that our initial analyses revealed that in contrast to the SLP 
component--where per diem costs remain relatively constant over time--
costs for the PT, OT, and NTA components typically are highest at the 
outset and then decline over the course of the stay. The proposed rule 
noted that our research to date continues to show a strong correlation 
between the dependent variables used for the proposed separate PT and 
OT components and a similarity in predictors, in that the associated 
costs for both therapy disciplines remain highest in the initial (and 
typically most intensive) portion of the SNF stay. We stated that this 
heightened resource intensity during the initial part of the SNF stay 
under the PT, OT, and NTA components, in turn, more closely reflects 
the distinctive utilization patterns that served as the original 
foundation for the level of care presumption itself--that is, the 
tendency as noted in the FY 2000 SNF PPS final rule for SNF stays to be 
at their most intensive and unstable immediately following admission as 
justifying a presumption of coverage at the very outset of the SNF stay 
(64 FR 41667, July 30, 1999). We also stated that we believe this would 
make the most intensive classifiers within each of these three proposed 
components well-suited to serve as clinical proxies for identifying 
those beneficiaries with the most intensive care needs and greatest 
likelihood of requiring an SNF level of care.
    Accordingly, for purposes of the administrative presumption under 
the proposed PDPM, we proposed to continue utilizing the same 
designated nursing (non-rehabilitation) categories under the PDPM as 
had been used to

[[Page 39252]]

date under RUG-IV. We noted that the most direct crosswalk between the 
existing RUG-IV model and the proposed PDPM would involve nursing 
services, for which, under the proposed PDPM, each resident would 
continue to be classified into one of the groups that fall within the 
existing non-rehabilitation RUG-IV categories. (As explained in section 
V.D.3.d. of the proposed rule, while the PDPM would streamline the 
total number of nursing case-mix groups from the current 43 under RUG-
IV down to 25 through the consolidation of similar groups within 
individual categories, the overall number and structure of the nursing 
categories themselves would remain the same.) Under our proposal, 
effective in conjunction with the proposed implementation of the PDPM 
(that is, as of October 1, 2019), we stated that the administrative 
presumption would apply to those groups encompassed by the same nursing 
categories as have been designated for this purpose under the existing 
RUG-IV model:
     Extensive Services;
     Special Care High;
     Special Care Low; and,
     Clinically Complex.
    In addition, along with the continued use of the RUG-IV nursing 
categories above, we also proposed to apply the administrative 
presumption using those other classifiers under the proposed PDPM that 
we identified as relating the most directly to identifying a patient's 
need for skilled care at the outset of the SNF stay. We proposed to 
designate such classifiers for this purpose based on their ability to 
fulfill the administrative presumption's role as described in the FY 
2000 SNF PPS final rule (64 FR 41668 through 41669, July 30, 1999)--
that is, to identify those situations that involve a high probability 
of the need for skilled care when taken in combination with the 
characteristic tendency for an SNF resident's condition to be at its 
most unstable and intensive state at the outset of the SNF stay.
    Specifically, we additionally proposed to designate for this 
purpose proposed PT and OT case-mix groups TB, TC, TD, TF, and TG, the 
groups displayed in Table 21 of the proposed rule that collectively 
accounted for the five highest case-mix indexes for PT, as well as for 
OT and, thus, would consistently be associated with the most resource-
intensive care across both of these therapy disciplines. We also 
proposed to designate the uppermost comorbidity group under the NTA 
component, in the belief that this particular classifier would serve to 
identify those cases that are the most likely to involve the kind of 
complex medication regimen (for example, a highly intensive drug 
requiring specialized expertise to administer, or an exceptionally 
large and diverse assortment of medications posing an increased risk of 
adverse drug interactions) that would require skilled oversight to 
manage safely and effectively. As discussed in section V.D.3.e of this 
final rule, the specific value assigned to the NTA component's 
uppermost comorbidity score (which was 11+ under the RCS-I model and is 
12+ under PDPM) might change once again in the future if the NTA score 
bins are reconfigured to reflect changes in the resident population and 
care practices over time.
    We further explained that under this proposed approach, those 
residents not classifying into a case-mix group in one of the 
designated nursing RUG categories under the proposed PDPM on the 
initial, 5-day Medicare-required assessment could nonetheless still 
qualify for the administrative presumption on that assessment by being 
placed in one of the designated case-mix groups for either the PT or OT 
components, or by receiving the uppermost comorbidity score under the 
NTA component. We indicated that these particular case-mix classifiers 
would appropriately serve to fulfill the administrative presumption's 
role of identifying those cases with the highest probability of 
requiring an SNF level of care throughout the initial portion of the 
SNF stay. We additionally noted that in order to help improve the 
accuracy of these newly-designated groups in serving this function, we 
would continue to review the new designations going forward and may 
make further adjustments to the proposed designations over time as we 
gain actual operating experience under the new classification model. As 
discussed above, this proposed administrative presumption mechanism 
would take effect October 1, 2019 in conjunction with the proposed PDPM 
itself. We invited comments on our proposed administrative presumption 
mechanism under the proposed PDPM.
    Commenters submitted the following comments related to the proposed 
rule's discussion on our proposed administrative presumption mechanism 
under the proposed PDPM. A discussion of these comments, along with our 
responses, appears below.
    Comment: One commenter mistakenly assumed that under the PDPM, the 
administrative presumption would change from its current use of the 
initial, 5-day Medicare-required assessment to using the initial MDS 
assessment (that is, the OBRA-required Admission assessment) instead, 
and expressed concern that the timeframes associated with the latter 
would be inappropriate for this purpose.
    Response: We note that consistent with the discussion in the 
proposed rule (83 FR 21070-21072), the presumption's current use of the 
initial, 5-day Medicare-required assessment will, in fact, continue 
under the PDPM.
    Comment: Several commenters urged us to designate other therapy 
groups, in addition to those set forth in the proposed rule, as 
appropriately serving to identify a level of acuity that would qualify 
for the presumption. They equated the omission of a given case-mix 
classifier from the presumption with a restriction on access and 
coverage, and characterized the individual level of care determinations 
that SNFs would routinely conduct absent the presumption as an added 
administrative burden. The commenters specifically cited as a concern 
the proposed rule's omission of any PT and OT groups for non-orthopedic 
conditions, as well as of any groups at all from the SLP component. One 
commenter took issue with the proposed rule's stated rationale for the 
omission of SLP (that is, that such services, unlike PT and OT, remain 
relatively constant over time and are not concentrated in the initial 
portion of the stay), noting that nursing services similarly do not 
taper off over the course of the stay and yet have been utilized under 
the presumption ever since its inception. The commenter pointed out 
that as with the other components, it is possible to identify 
individual groups within the SLP component that have relatively high 
service intensity. Along with the groups from the PT and OT components 
that were already proposed for designation under the presumption, the 
commenter recommended the designation of several additional PT and OT 
groups (that is, TA, TE, TJ, TK, TN, and TO), as well as a number of 
groups (that is, SC, SE, SF, SH, SI, SJ, SK, and SL) from the SLP 
component, and presented these particular groups as reflecting the most 
intensive therapy needs within their respective clinical categories. 
The commenter also suggested that the proposed designation of the NTA's 
uppermost comorbidity group might not actually be necessary, as anyone 
assigned to that group would likely qualify for the presumption 
already, based on their classification under the nursing component. 
Another commenter recommended that all of the PT and OT groups in the 
Other Orthopedic category should be

[[Page 39253]]

designated for use under the presumption, and pointed out that under 
PDPM, the NTA component's uppermost comorbidity score is actually 12+ 
rather than 11+ as indicated in the proposed rule.
    Response: We agree with the commenters that the administrative 
presumption should encompass all of the groups that serve to fulfill 
the basic purpose of this provision--that is, readily identifying those 
beneficiaries with the greatest likelihood of meeting the level of care 
criteria. With one exception, we also concur with the commenters' 
analysis that the additional therapy groups recommended for designation 
under the presumption would appropriately serve to reflect the most 
intensive therapy needs within their respective clinical categories, as 
evidenced by the relatively high CMI that is associated with each of 
the recommended groups. However, regarding the recommendation to 
designate all PT and OT groups in the Other Orthopedic category, we 
note that one such group, TH, has a significantly lower CMI than all of 
the other recommended groups and, thus, is not being selected for 
designation under the presumption. Accordingly, we are adopting the 
remainder of the commenters' recommendations regarding the designation 
of additional groups from the PT and OT components, as well as all of 
the recommended groups from the SLP component. In addition, we are 
finalizing as proposed the use of the designated classifiers from the 
nursing component along with the uppermost comorbidity score of the NTA 
component. Regarding the latter, we appreciate the comment pointing out 
that the specific value assigned to the NTA component's uppermost 
comorbidity score under the PDPM is, in fact, 12+ and not 11+ as 
incorrectly indicated in the proposed rule's discussion of the 
presumption. We also appreciate another commenter's concern that the 
proposed NTA classifier might in some instances prove redundant in 
relation to the nursing groups; however, because we believe, as stated 
above, that the presumption should encompass all appropriate 
classifiers, we are finalizing the use of this particular classifier as 
we believe this particular classifier would serve to identify those 
cases that are the most likely to involve the kind of complex 
medication regimen that would require skilled oversight to manage 
safely and effectively. We also will evaluate the use of this 
classifier in actual operation and confirm whether there are instances 
in which it appropriately serves this function independently of the 
nursing groups. As we indicated in the proposed rule (83 FR 21072) 
regarding the NTA and other components, we will continue to review the 
new designations going forward and make further adjustments over time 
as we gain actual operating experience under the new classification 
model.
    However, we would also note in this context that we do not share 
and cannot support the view that would essentially equate a given case-
mix classifier's non-designation under the administrative presumption 
with a restriction on access or a denial of SNF coverage, or an 
increase in administrative burden. SNF coverage ultimately is based not 
on whether a beneficiary is assigned one of the designated classifiers, 
but on whether the SNF level of care criteria are met. As further 
explained in the proposed rule (83 FR 21071), the purpose of the 
administrative presumption is solely to afford a streamlined and 
simplified administrative procedure for readily identifying those 
beneficiaries with the greatest likelihood of meeting the level of care 
criteria, which in no way serves to disadvantage other beneficiaries 
who may also meet the level of care criteria. In fact, far from 
creating an overall increase in administrative burden from the non-
designated classifiers, we expect that the presumption's framework of 
streamlined and simplified initial determinations for the designated 
classifiers will actually serve to free up staff resources, which can 
then be used for assessing coverage in the other cases.
    Accordingly, for the reasons set forth in the proposed rule and in 
this final rule, we are finalizing our proposed classifiers for 
purposes of applying the administrative presumption under the PDPM with 
the following modifications. As discussed above, we are adding the 
following PT and OT classifiers to those we proposed: TA, TE, TJ, TK, 
TN and TO. We are also adding the following 8 SLP classifiers: SC, SE, 
SF, SH, SI, SJ, SK, and SL. Thus, effective October 1, 2019, we are 
designating the classifiers shown below for purposes of the 
administrative presumption under the PDPM:
     The case-mix classifiers in the following nursing 
categories: Extensive Services, Special Care High, Special Care Low, 
and Clinically Complex;
     The following PT and OT groups: TA, TB, TC, TD, TE, TF, 
TG, TJ, TK, TN, and TO;
     The following SLP groups: SC, SE, SF, SH, SI, SJ, SK, and 
SL; and
     The NTA component's uppermost comorbidity group (which, as 
finalized in this final rule, is 12+).

H. Effect of PDPM on Temporary AIDS Add-On Payment

    As discussed in section V.I. of the proposed rule (83 FR 21072) and 
also in section III.E. of the ANPRM (82 FR 21007), section 511(a) of 
the MMA 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 intended to be of 
limited duration, as the MMA legislation specified that it 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 temporary 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, August 
11, 2009), 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.
    In the House Ways and Means Committee Report that accompanied the 
MMA, the explanation of the MMA's temporary AIDS adjustment notes the 
following under Reason for Change: ``According to prior work by the 
Urban Institute, AIDS patients have much higher costs than other 
patients in the same resource utilization groups in skilled nursing 
facilities. The adjustment is based on that data analysis'' (H. Rep. 
No. 108-178, Part 2 at 221). The data analysis from that February 2001 
Urban Institute study (entitled ``Medicare Payments for Patients with 
HIV/AIDS in Skilled Nursing Facilities''), in turn, had been conducted 
under a Report to Congress mandated under a predecessor provision, 
section 105 of the BBRA. This earlier BBRA provision, which ultimately 
was superseded by the temporary AIDS add-on provision required by the 
MMA, had amended section 1888(e)(12) of the Act to provide for special 
consideration for facilities serving specialized patient populations 
(that is, those who are ``immuno-compromised secondary to an infectious

[[Page 39254]]

disease, with specific diagnoses as specified by the Secretary'').
    As we noted in the ANPRM and in the proposed rule, at that point 
over a decade and a half had elapsed since the Urban Institute 
conducted its study on AIDS patients in SNFs, a period that has seen 
major advances in the state of medical practice in treating this 
condition. We stated that these advances have notably included the 
introduction of powerful new drugs and innovative prescription regimens 
that have dramatically improved the ability to manage the viral load 
(the amount of human immunodeficiency virus (HIV) in the blood). We 
noted that the decrease in viral load secondary to medications has 
contributed to a shift from intensive nursing services for AIDS-related 
illnesses to an increase in antiretroviral therapy. We further stated 
that this phenomenon, in turn, is reflected in our recent analysis of 
differences in SNF resource utilization, which indicates that while the 
overall historical disparity in costs between AIDS and non-AIDS 
patients has not entirely disappeared, that disparity is now far 
greater with regard to drugs than it is for nursing. Specifically, as 
explained in the proposed rule, NTA costs per day for residents with 
AIDS were 151 percent higher than those for other residents while the 
difference in wage-weighted nursing staff time between the two groups 
was only 19 percent, as discussed in section 3.8.3. of the SNF PMR 
technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html), which the ANPRM 
referenced for further information on the underlying data analysis (82 
FR 21007 through 21008). In the ANPRM, we also described how the RCS-I 
model would account for those NTA costs, including drugs, which 
specifically relate to residents with AIDS (82 FR 20997 through 20999). 
We additionally discussed in the ANPRM the possibility of making a 
specific 19 percent AIDS adjustment as part of the case-mix adjustment 
of the nursing component (82 FR 20995 through 20997). We further 
expressed our belief in the ANPRM (82 FR 21008) that when taken 
collectively, these adjustments would appropriately serve to justify 
issuing the certification prescribed under section 511(a) of the MMA, 
which would permit the MMA's existing, temporary AIDS add-on to be 
replaced by a permanent adjustment in the case mix that appropriately 
compensates for the increased costs associated with these residents.
    As discussed in the proposed rule, in response to the ANPRM, we 
received comments expressing concerns that a projected 40 percent drop 
in overall payments for SNF residents with AIDS under the RCS-I model 
could adversely affect access to care for this patient population. 
Regarding those concerns, we noted in the proposed rule that the 
special add-on for SNF residents with AIDS itself was never meant to be 
permanent, and does not serve as a specific benchmark for use in 
establishing either the appropriate methodology or level of payment for 
this patient population. Rather, we stated that, as discussed in the 
ANPRM, it was designed to be only a temporary measure, representing a 
general approximation that reflected the current state of research and 
clinical practice at the time (82 FR 21007 through 21008). As such, we 
stated that the special add-on would not account for the significant 
changes in the care and treatment of this condition that have occurred 
over the intervening years. We further noted that as a simple across-
the-board multiplier, the MMA adjustment by its very nature is not 
accurately targeted at those particular rate components that actually 
account for the disparity in cost between AIDS patients and others.
    As discussed in section V.D.3.e. of the proposed rule (83 FR 
21058), our updated investigations into the adequacy of payments under 
the proposed PDPM for residents with HIV/AIDS indicated that the four 
proposed ancillary payment components (PT, OT, SLP, and NTA) would 
adequately reimburse ancillary costs associated with HIV/AIDS residents 
(see section 3.8.2. of the SNF PDPM technical report, available at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html). Therefore, we stated that we believe it would be 
appropriate to issue the prescribed certification under section 511(a) 
of the MMA on the basis of the proposed PDPM's ancillary case-mix 
adjustment alone, as effectively providing the required appropriate 
adjustment in the case mix to compensate for the increased costs 
associated with such residents. However, to further ensure that the 
proposed PDPM would account as fully as possible for any remaining 
disparity with regard to nursing costs, as discussed in section 
V.D.3.d. of the proposed rule (83 FR 21055), we additionally proposed 
to include a specific AIDS adjustment as part of the case-mix 
adjustment of the nursing component. As discussed in section V.D.3.d. 
of the proposed rule, we used the STRIVE data to quantify the effects 
of HIV/AIDS diagnosis on nursing resource use. Regression analyses 
found that wage-weighted nursing staff time is 18 percent higher for 
residents with HIV/AIDS, controlling for the non-rehabilitation RUG of 
the resident. We noted that this figure is slightly lower than the 19 
percent increase in wage-weighted nursing staff time reported in the 
ANPRM and the SNF PRM technical report because the updated 
investigation uses a FY 2017 study population and is based on the PDPM 
case-mix groups, while the earlier analysis was based on a FY 2014 
study population and the RCS-I case-mix groups. More information on 
this analysis can be found in section 3.8.2. of the SNF PDPM technical 
report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html). Thus, we proposed an 18 
percent increase in payment for the nursing component for residents 
with HIV/AIDS under the proposed PDPM to account for the increased 
nursing costs for such residents. We stated that similar to the 
proposed NTA adjustment for residents with HIV/AIDS, this adjustment 
would be identified by ICD-10-CM code B20 on the SNF claim and would be 
processed through the PRICER software used by CMS to set the 
appropriate payment rate for a resident's SNF stay. We also explained 
(83 FR 21073) that the 18 percent adjustment would be applied to the 
unadjusted base rate for the nursing component, and then this amount 
would be further case-mix adjusted per the resident's PDPM nursing 
classification.
    In the proposed rule, we expressed the belief that when taken 
collectively, these adjustments under the proposed PDPM would 
appropriately serve to justify issuing the certification prescribed 
under section 511(a) of the MMA effective with the proposed conversion 
to the PDPM on October 1, 2019, thus permitting the MMA's existing, 
temporary AIDS add-on to be replaced by a permanent adjustment in the 
case mix (as proposed under the PDPM) that appropriately compensates 
for the increased costs associated with these residents, and we invited 
comments on this proposal. At the same time, we acknowledged that even 
with an accurately targeted model that compensates for the increased 
costs of SNF residents with AIDS, an abrupt conversion to an altogether 
different payment methodology might nevertheless be potentially 
disruptive for facilities, particularly those that serve a significant 
number of patients with AIDS and may have become accustomed to 
operating under the

[[Page 39255]]

existing payment methodology for those patients. Accordingly, we also 
invited comments on possible ways to help mitigate any potential 
disruption stemming from the proposed replacement of the special add-on 
payment with the permanent case-mix adjustments for SNF residents with 
AIDS under the proposed PDPM.
    Commenters submitted the following comments related to the proposed 
rule's discussion on the Effect of the Proposed PDPM on Temporary AIDS 
Add-on Payment. A discussion of these comments, along with our 
responses, appears below.
    Comment: Several commenters expressed concern about the adequacy of 
payments under the PDPM for SNF residents with AIDS, once again citing 
the projected decrease in payments relative to the RUG-IV model (which 
currently includes the MMA's temporary 128 percent adjustment for such 
residents). One commenter specifically questioned the adequacy of the 
PDPM's NTA component in addressing the drug costs of AIDS patients, and 
cited a 2017 MedPAC report that characterized the SNF PPS's NTA 
payments as poorly targeted.
    Response: We note that as with the previous comments on the 
corresponding aspect of the ANPRM, most of the commenters' concerns in 
this area stemmed from comparing the projected payment levels under the 
PDPM to those under the existing RUG-IV model's temporary 128 percent 
AIDS adjustment, and focused specifically on the contrast in payment 
levels between the two models. However, as noted above and explained in 
the proposed rule (83 FR 21073), it is not appropriate to use the MMA 
adjustment as a benchmark in assessing the accuracy of the PDPM's 
payment methodology, as the special add-on for SNF residents with AIDS 
itself was never meant to be permanent, and does not serve as a 
specific benchmark for use in establishing either the appropriate 
methodology or level of payment for this patient population. Rather, it 
was designed to be only a temporary measure, representing a general 
approximation that reflected the current state of research and clinical 
practice at the time. As such, the special add-on would not account for 
the significant changes in the care and treatment of this condition 
that have occurred over the intervening years. Moreover, as a simple 
across-the-board multiplier, the MMA adjustment by its very nature is 
not accurately targeted at those particular rate components that 
actually account for the disparity in cost between AIDS patients and 
others.
    Regarding that final point about the imprecision of applying an 
across-the-board multiplier in this context, we further noted in the 
proposed rule (83 FR 20180) that our research found that HIV/AIDS was 
associated with a negative and statistically significant decrease in 
PT, OT and SLP costs per day. This means inherently that, to the extent 
that the existing add-on is applied against the full SNF PPS per diem 
payment, the magnitude of the add-on payment increases with increases 
in therapy payment, which conflicts with the data described above 
regarding the relationship between therapy costs and the presence of an 
AIDS diagnosis. As a result, maintaining the current add-on would 
create an inconsistency between how SNF payments would be made and the 
data regarding AIDS diagnoses and resident therapy costs.
    Furthermore, to the extent that the RUG-IV model's case-mix 
classification system may have included inherent incentives toward the 
overprovision of therapy services, the MMA adjustment's operation as an 
across-the-board multiplier would actually serve to magnify the effects 
of any such incentives, by inflating the resulting payment levels even 
further beyond the patient's actual therapy care needs. In this 
context, we note that the specific standard prescribed for the 
Secretary's required certification under section 511(a) of the MMA is 
that ``. . . there is an appropriate adjustment in the case mix . . . 
to compensate for the increased costs'' associated with SNF residents 
with AIDS. As set forth in the proposed rule, we believe that the 
PDPM's payment methodology for patients with AIDS clearly meets this 
statutory standard of appropriately accounting for the actual costs 
incurred in caring for such patients. In fact, we believe it provides a 
far more accurate and current accounting of those costs than the 
temporary MMA adjustment that it would replace, which represents only a 
very broad approximation that was developed at a time when the 
treatment regimens for this condition differed dramatically from what 
they are currently. Finally, it is worth noting that the cited 2017 
MedPAC report, which characterized the SNF PPS's NTA payments as poorly 
targeted, reflected that the SNF PPS has always included NTA costs 
within its nursing component rather than accounting for them 
separately, and the longstanding concerns about that approach were, in 
fact, the very impetus behind our development of a separate component 
for NTA costs under the PDPM.
    Accordingly, for the reasons discussed in the proposed rule and in 
this final rule, the Secretary is certifying that there is an 
appropriate adjustment in the PDPM to compensate for the increased 
costs associated with residents with AIDS, and thus we are finalizing 
our proposal without modification to replace the temporary MMA add-on 
with the PDPM's permanent adjustment in the case mix that appropriately 
accounts for the increased costs of patients with AIDS, effective with 
the conversion to the PDPM on October 1, 2019.

I. Potential Impacts of Implementing the PDPM and Parity Adjustment

    This section outlines the projected impacts of implementing the 
PDPM effective October 1, 2019 under the SNF PPS and the related 
policies finalized in sections V of this final rule that would be 
effective in conjunction with the PDPM. This impact analysis makes a 
series of assumptions, as described below (as were discussed in the 
proposed rule (83 FR 21073 through 21080)). First, the impacts 
presented here assume consistent provider behavior in terms of how care 
is provided under RUG-IV and how care might be provided under the PDPM, 
as we do not make any attempt to anticipate or predict provider 
reactions to the implementation of the PDPM. That being said, we 
acknowledge the possibility that implementing the PDPM could 
substantially affect resident care and coding behaviors. Most notably, 
based on the concerns raised during a number of TEPs, we acknowledge 
the possibility that, as therapy payments under the PDPM would not have 
the same connection to service provision as they do under RUG-IV, it is 
possible that some providers may choose to reduce their provision of 
therapy services to increase margins under the PDPM. However, we do not 
have any basis on which to assume the approximate nature or magnitude 
of these behavioral responses, nor have we received any sufficiently 
specific guidance on the likely nature or magnitude of behavioral 
responses from ANPRM commenters, TEP panelists, or other sources of 
feedback. As a result, lacking an appropriate basis to forecast 
behavioral responses, we do not adjust our analyses of resident and 
provider impacts discussed in this section for projected changes in 
provider behavior. However, we do intend to monitor behavior which may 
occur in response to the implementation of PDPM, and may consider 
proposing policies in the future to address such behaviors to the 
extent determined appropriate.

[[Page 39256]]

Additionally, we acknowledge that a number of states utilize some form 
of the RUG-IV case-mix classification system as part of their Medicaid 
programs and that any change in Medicare policy can have an impact on 
state programs. Again, we do not have any basis on which to assume the 
approximate nature or magnitude of these responses, for the same 
reasons cited above. Additionally, we do not expect impacts on state 
Medicaid programs resulting from PDPM implementation to have a notable 
impact on payments for Medicare-covered SNF stays, which are the basis 
for the impact analyses discussed in this section. Therefore, we do not 
consider possible changes to state Medicaid programs when conducting 
these analyses. We invited comments on our assumptions that behavior 
would remain unchanged under the proposed PDPM and that changes in 
state Medicaid programs resulting from PDPM implementation would not 
have a notable impact on payments for Medicare-covered SNF stays. We 
also invited comment on the impact of these policy proposals on state 
Medicaid programs. These comments are addressed among the general 
comments in section V.A. of this final rule.
    As with prior system transitions, we proposed to implement the PDPM 
case-mix system, along with the other policy changes discussed 
throughout this section, in a budget neutral manner through application 
of a parity adjustment to the case-mix weights under the proposed PDPM, 
as further discussed below. We proposed to implement the PDPM in a 
budget neutral manner because, as with prior system transitions, in 
proposing changes to the case-mix methodology, we do not intend to 
change the aggregate amount of Medicare payments to SNFs. Rather, we 
aim to utilize a case-mix methodology to classify residents in such a 
manner as to best ensure that payments made for specific residents are 
an accurate reflection of resource utilization without introducing 
potential incentives which could encourage inappropriate care delivery, 
as we believe may exist under the current case-mix methodology. 
Therefore, the impact analysis presented here assumes implementation of 
these proposed changes in a budget neutral manner. We invited comments 
on the proposal, as further discussed below, to implement the PDPM in a 
budget neutral manner. In addition, we solicited comment on whether it 
would be appropriate to implement the proposed PDPM in a manner that is 
not budget neutral.
    As discussed above, the impact analysis presented here assumes 
implementation of these changes in a budget neutral manner without a 
behavioral change. The prior sections describe how case-mix weights are 
set to reflect relative resource use for each case-mix group. We stated 
in the proposed rule that the proposed PDPM payment before application 
of a parity adjustment would be calculated using the unadjusted CMI for 
each component, the variable per diem payment adjustment schedule, the 
unadjusted urban and rural federal per diem rates shown in Tables 12 
and 13, the labor-related share, and the geographic wage indexes. In 
applying a parity adjustment to the case-mix weights, we stated in the 
proposed rule that we would maintain the relative value of each CMI but 
would multiply every CMI by a ratio to achieve parity in overall SNF 
PPS payments under the PDPM and under the RUG-IV case-mix model. The 
parity adjustment multiplier was calculated through the following 
steps, as described in the proposed rule (83 FR 21074). First, we 
calculated RUG-IV total payment. Total RUG-IV payments were calculated 
by adding total allowed amounts across all FY 2017 SNF claims. The 
total allowed amount in the study population was the summation of 
Medicare and non-Medicare payments for Medicare-covered days. More 
specifically, it was the sum of Medicare claim payment amount, National 
Claim History (NCH) primary payer claim paid amount, NCH beneficiary 
inpatient deductible amount, NCH beneficiary Part A coinsurance 
liability amount, and NCH beneficiary blood deductible liability 
amount. Second, we calculated what total payment would have been under 
the proposed PDPM in FY 2017 before application of the parity 
adjustment. Total estimated payments under PDPM were calculated by 
summing the predicted payment for each case-mix component together for 
all FY 2017 SNF stays. This represented the total allowed amount if 
PDPM had been in place in FY 2017. Total estimated FY 2017 payments 
under the PDPM were calculated using resident information from FY 2017 
SNF claims, the MDS assessment, and other Medicare claims, as well as 
the unadjusted CMI for each component, the variable per diem payment 
adjustment schedule, the unadjusted urban and rural federal per diem 
rates shown in Tables 12 and 13, the labor-related share, and the 
geographic wage indexes. After calculating total actual RUG-IV payments 
and total estimated case-mix-related PDPM payments, we subtracted non-
case-mix component payments from total RUG-IV payments, as this 
component does not change across systems. This subtraction did not 
include the temporary add-on for residents with HIV/AIDS in the RUG-IV 
system, which PDPM replaces with additional payments for residents with 
HIV/AIDS through the NTA and nursing components (as discussed in 
section V.I. of the proposed rule and section V.H. of this final rule). 
By retaining the portion of non-case-mix component payments associated 
with the temporary HIV/AIDS add-on in total RUG-IV payments, all 
payments associated with the add-on under RUG-IV were re-allocated to 
the case-mix-adjusted components in PDPM. This was appropriate because, 
as discussed, under the PDPM, additional payments for residents with 
HIV/AIDS are made exclusively through the case-mix-adjusted components 
(that is, the nursing and NTA components). Lastly, in calculating 
budget neutrality, we set total estimated case-mix-related payment 
under PDPM such that it equals total allowable Medicare payments under 
RUG-IV. To do this, we divided the remaining total RUG-IV payments over 
the remaining total estimated PDPM payments prior to the parity 
adjustment. This division yielded a ratio (parity adjustment) of 1.46 
by which the PDPM CMIs were multiplied so that total estimated payments 
under the PDPM would be equal to total actual payments under RUG-IV, 
assuming no changes in the population, provider behavior, and coding. 
We stated in the proposed rule that, if this parity adjustment had not 
been applied, total estimated payments under the PDPM would be 46 
percent lower than total actual payments under RUG-IV, therefore the 
implementation of the PDPM would not be budget neutral. More details 
regarding this calculation and analysis are described in section 
3.11.2. of the SNF PDPM technical report (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html). The impact analysis presented in this section 
(and in the proposed rule) focuses on how payments under the PDPM would 
be re-allocated across different resident groups and among different 
facility types, assuming implementation in a budget neutral manner.
    The projected resident-level impacts are presented in Table 37. The 
first column identifies different resident subpopulations and the 
second column

[[Page 39257]]

shows what percent of SNF stays in FY 2017 are represented by the given 
subpopulation. The third column shows the projected change in total 
payments for residents in a given subpopulation, represented as a 
percentage change in actual FY 2017 payments made for that 
subpopulation under RUG-IV versus estimated payments which would have 
been made to that subpopulation in FY 2017 had the PDPM been in place. 
Total RUG-IV payments are calculated by adding total allowed amounts 
across all FY 2017 SNF claims associated with a resident subpopulation. 
The total allowed amount in the study population is the summation of 
Medicare and non-Medicare payments for Medicare-covered days. More 
specifically, it is the summation of Medicare claim payment amount, NCH 
primary payer claim paid amount, NCH beneficiary inpatient deductible 
amount, NCH beneficiary Part A coinsurance liability amount, and NCH 
beneficiary blood deductible liability amount. Payments corresponding 
to the non-case-mix component are subtracted from the RUG-IV total 
payments, not including the portion of non-case-mix payments 
corresponding to the temporary add-on for residents with HIV/AIDS. 
Total estimated payments under PDPM are calculated by summing the 
predicted payment for each case-mix component together for all FY 2017 
SNF stays associated with a resident subpopulation. Positive changes in 
this column represent a projected positive shift in payments for that 
subpopulation under the PDPM, while negative changes in this column 
represent projected negative shifts in payment for that subpopulation. 
More information on the construction of current payments under RUG-IV 
and payments under the PDPM for purposes of this impact analysis can be 
found in section 3.12. of the SNF PDPM technical report (available at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html). Based on the data presented in Table 37, we 
observe that the most significant shift in payments created by 
implementation of the PDPM would be to redirect payments away from 
residents who are receiving very high amounts of therapy under the 
current SNF PPS, which strongly incentivizes the provision of therapy, 
to residents with more complex clinical needs. For example, we project 
that for residents whose most common therapy level is RU (ultra-high 
therapy)--the highest therapy level, there would be a reduction in 
associated payments of 8.4 percent, while payments for residents 
currently classified as non-rehabilitation would increase by 50.5 
percent. Other resident types for which there may be higher relative 
payments under the PDPM are: Residents who have high NTA costs, receive 
extensive services, are dually enrolled in Medicare and Medicaid, use 
IV medication, have ESRD, diabetes, or a wound infection, receive 
amputation/prosthesis care, and/or have longer prior inpatient stays. 
Additionally, we received several comments in response to the 2017 
ANPRM requesting that we estimate the impact of RCS-1 on the following 
potentially vulnerable subpopulations: Residents with addictions, 
bleeding disorders, behavioral issues, chronic neurological conditions, 
and bariatric care. In response to these comments, we added these 
subpopulations to our PDPM impact analysis. Table 37 shows that the 
PDPM is projected to increase the proportion of total payment 
associated with each of those subpopulations.

             Table 37--PDPM Impact Analysis, Resident-Level
------------------------------------------------------------------------
                                            Percent of
        Resident characteristics               stays      Percent change
------------------------------------------------------------------------
All Stays...............................           100.0             0.0
Sex:
    Female..............................            60.3            -0.8
    Male................................            39.7             1.2
Age:
    Below 65 years......................            10.3             7.2
    65-74 years.........................            24.1             3.1
    75-84 years.........................            32.5            -0.4
    85-89 years.........................            17.6            -3.1
    Over 90 years.......................            15.6            -4.3
Race/Ethnicity:
    White...............................            83.8            -0.2
    Black...............................            11.2             0.8
    Hispanic............................             1.7             0.9
    Asian...............................             1.3            -0.6
    Native American.....................             0.5             7.1
    Other or Unknown....................             1.5             0.8
Medicare/Medicaid Dual Status:
    Dually Enrolled.....................            34.7             3.3
    Not Dually Enrolled.................            65.3            -2.1
Original Reason for Medicare Enrollment:
    Aged................................            74.6            -1.7
    Disabled............................            24.5             4.8
    ESRD................................             0.9            10.5
Utilization Days:
    1-15 days...........................            35.4            13.7
    16-30 days..........................            33.8             0.0
    31+ days............................            30.9            -2.5
Utilization Days = 100:
    No..................................            98.4             0.1
    Yes.................................             1.6            -1.9
Length of Prior Inpatient Stay:
    0-2 days............................             2.2             1.3
    3 days..............................            22.5            -3.3
    4-30 days...........................            73.6             0.7

[[Page 39258]]

 
    31+ days............................             1.7             6.7
Most Common Therapy Level:
    RU..................................            58.4            -8.4
    RV..................................            22.4            11.4
    RH..................................             6.8            27.4
    RM..................................             3.3            41.1
    RL..................................             0.1            67.5
    Non-Rehab...........................             9.1            50.5
Number of Therapy Disciplines Used:
    0...................................             2.3            63.1
    1...................................             2.4            44.2
    2...................................            51.6             1.6
    3...................................            43.7            -3.1
Physical Therapy Utilization:
    No..................................             3.7            50.9
    Yes.................................            96.3            -0.7
Occupational Therapy Utilization:
    No..................................             4.5            47.7
    Yes.................................            95.5            -0.8
Speech Language Pathology Utilization:
    No..................................            55.0             2.8
    Yes.................................            45.0            -2.5
Therapy Utilization:
    PT+OT+SLP...........................            43.7            -3.1
    PT+OT Only..........................            50.8             1.3
    PT+SLP Only.........................             0.4            27.3
    OT+SLP Only.........................             0.4            30.1
    PT Only.............................             1.3            41.3
    OT Only.............................             0.6            47.9
    SLP Only............................             0.5            46.8
    Non-Therapy.........................             2.3            63.1
NTA Costs ($):
    0-10................................            13.7            -3.5
    10-50...............................            44.5            -3.2
    50-150..............................            32.2             4.2
    150+................................             9.6            18.7
NTA Comorbidity Score:
    0...................................            23.5           -10.4
    1-2.................................            30.5            -4.7
    3-5.................................            31.0             4.0
    6-8.................................             9.9            15.0
    9-11................................             3.6            24.4
    12+.................................             1.4            27.2
Extensive Services Level:
    Tracheostomy and Ventilator/                     0.3            22.2
     Respirator.........................
    Tracheostomy or Ventilator/                      0.6             7.3
     Respirator.........................
    Infection Isolation.................             1.1             9.1
    Neither.............................            98.0            -0.3
CFS Level:
    Cognitively Intact..................            58.5            -0.3
    Mildly Impaired.....................            20.7            -0.2
    Moderately Impaired.................            16.8            -0.7
    Severely Impaired...................             3.9             8.8
Clinical Category:
    Acute Infections....................             6.5             3.4
    Acute Neurologic....................             6.4            -3.7
    Cancer..............................             4.6            -3.2
    Cardiovascular and Coagulations.....             9.8             0.5
    Major Joint Replacement or Spinal                8.6            -2.1
     Surgery............................
    Medical Management..................            30.4             0.0
    Non-Orthopedic Surgery..............            10.8             5.7
    Non-Surgical Orthopedic/                         5.9            -6.1
     Musculoskeletal....................
    Orthopedic Surgery (Except Major                 8.9            -2.4
     Joint Replacement or Spinal
     Surgery)...........................
    Pulmonary...........................             8.1             5.4
Level of Complications in MS-DRG of
 Prior Inpatient Stay:
    No Complication.....................            35.8            -3.1
    CC/MCC..............................            64.2             1.7
Stroke:
    No..................................            90.9             0.0
    Yes.................................             9.1             0.3
HIV/AIDS:

[[Page 39259]]

 
    No..................................            99.7             0.3
    Yes.................................             0.3           -40.5
IV Medication:
    No..................................            91.7            -2.1
    Yes.................................             8.3            23.5
Diabetes:
    No..................................            64.0            -3.0
    Yes.................................            36.0             5.4
Wound Infection:
    No..................................            98.9            -0.3
    Yes.................................             1.1            22.2
Amputation/Prosthesis Care:
    No..................................           100.0             0.0
    Yes.................................             0.0             6.4
Presence of Dementia:
    No..................................            70.9             0.5
    Yes.................................            29.1            -1.2
MDS Alzheimer's:
    No..................................            95.2             0.0
    Yes.................................             4.8            -0.3
    Unknown.............................             0.0             5.0
Presence of Addictions:
    No..................................            94.6            -0.1
    Yes.................................             5.4             1.8
Presence of Bleeding Disorders:
    No..................................            90.9            -0.1
    Yes.................................             9.1             1.5
Presence of Behavioral Issues:
    No..................................            53.1            -0.9
    Yes.................................            46.9             1.0
Presence of Chronic Neurological
 Conditions:
    No..................................            74.4            -0.2
    Yes.................................            25.6             0.6
Presence of Bariatric Care:
    No..................................            91.3            -0.6
    Yes.................................             8.7             6.5
------------------------------------------------------------------------

    The projected provider-level impacts are presented in Table 38. The 
first column identifies different facility subpopulations and the 
second column shows what percentage of SNFs in FY 2017 are represented 
by the given subpopulation. The third column shows the projected change 
in total payments for facilities in a given subpopulation, represented 
as a percentage change in actual FY 2017 payments made for that 
subpopulation under RUG-IV versus estimated payments which would have 
been made to that subpopulation in FY 2017 had the PDPM been in place. 
Total RUG-IV payments are calculated by adding total allowed amounts 
across all FY 2017 SNF claims associated with a facility subpopulation. 
The total allowed amount in the study population is the summation of 
Medicare and non-Medicare payments for Medicare-covered days. More 
specifically, it is the summation of Medicare claim payment amount, NCH 
primary payer claim paid amount, NCH beneficiary inpatient deductible 
amount, NCH beneficiary Part A coinsurance liability amount, and NCH 
beneficiary blood deductible liability amount. Payments corresponding 
to the non-case-mix component are subtracted from the RUG-IV total 
payments, not including the portion of non-case-mix payments 
corresponding to the temporary add-on for residents with HIV/AIDS. 
Total estimated payments under PDPM are calculated by summing the 
predicted payment for each case-mix component together for all FY 2017 
SNF stays associated with a facility subpopulation. Positive changes in 
this column represent a projected positive shift in payments for that 
subpopulation under the PDPM, while negative changes in this column 
represent projected negative shifts in payment for that subpopulation. 
More information on the construction of current payments under RUG-IV 
and payments under the PDPM for purposes of this impact analysis can be 
found in section 3.12. of the SNF PDPM technical report (available at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html). Based on the data presented in Table 38, we 
observe that the most significant shift in Medicare payments created by 
implementation of the PDPM would be from facilities with a high 
proportion of rehabilitation residents (particularly facilities with 
high proportions of Ultra-High Rehabilitation residents) to facilities 
with high proportions of non-rehabilitation residents. We project that 
payments to facilities that bill 0 to 10 percent of utilization days as 
RU (ultra-high rehabilitation) would increase an estimated 27.6 percent 
under the PDPM while facilities that bill 90 to 100 percent of 
utilization days as RU would see an estimated decrease in payments of 
9.8 percent. Other facility types that may see higher relative payments 
under the PDPM are small facilities, non-profit facilities, government-
owned facilities, and hospital-based and swing-bed facilities.

[[Page 39260]]



             Table 38--PDPM Impact Analysis, Facility-Level
------------------------------------------------------------------------
                                            Percent of        Percent
        Provider characteristics             providers        change
------------------------------------------------------------------------
    All Stays...........................           100.0             0.0
Ownership:
    For profit..........................            72.0            -0.7
    Non-profit..........................            22.6             1.9
    Government..........................             5.4             4.2
Number of Certified SNF Beds:
    0-49................................            10.0             3.5
    50-99...............................            38.2             0.6
    100-149.............................            34.7            -0.2
    150-199.............................            11.1            -0.3
    200+................................             5.9            -1.8
Location:
    Urban...............................            72.7            -0.7
    Rural...............................            27.3             3.8
Facility Type:
    Freestanding........................            96.2            -0.3
    Hospital-Based/Swing Bed............             3.8            16.7
Location by Facility Type:
Urban [bond] Freestanding:                          70.6            -1.0
    Urban [bond] Hospital-Based/Swing                2.2            15.3
     Bed................................
    Rural [bond] Freestanding...........            25.6             3.2
    Rural [bond] Hospital-Based/Swing                1.6            21.1
     Bed................................
Census Division:
    New England.........................             5.9             2.0
    Middle Atlantic.....................            10.8            -2.6
    East North Central..................            20.6             0.7
    West North Central..................            12.5             6.7
    South Atlantic......................            15.7            -0.4
    East South Central..................             6.6             1.0
    West South Central..................            13.1            -1.0
    Mountain............................             4.7             1.1
    Pacific.............................            10.1            -0.8
Location by Region:
    Urban [bond] New England............             5.1             1.8
    Urban [bond] Middle Atlantic........             9.5            -2.9
    Urban [bond] East North Central.....            14.4            -0.1
    Urban [bond] West North Central.....             6.0             4.6
    Urban [bond] South Atlantic.........            12.6            -1.1
    Urban [bond] East South Central.....             3.6             0.3
    Urban [bond] West South Central.....             8.7            -1.2
    Urban [bond] Mountain...............             3.4             0.1
    Urban [bond] Pacific................             9.5            -0.9
    Rural [bond] New England............             0.8             4.0
    Rural [bond] Middle Atlantic........             1.3             2.7
    Rural [bond] East North Central.....             6.2             3.6
    Rural [bond] West North Central.....             6.5            10.5
    Rural [bond] South Atlantic.........             3.1             4.2
    Rural [bond] East South Central.....             3.0             2.1
    Rural [bond] West South Central.....             4.4            -0.1
    Rural [bond] Mountain...............             1.3             6.2
    Rural [bond] Pacific................             0.6             2.2
% Stays with Maximum Utilization Days =
 100:
    0-10................................            94.4             0.1
    10-25...............................             5.1            -2.8
    25-100..............................             0.4            -3.6
% Medicare/Medicaid Dual Enrollment:
    0-10................................             8.6            -1.3
    10-25...............................            17.5            -1.3
    25-50...............................            36.0             0.3
    50-75...............................            26.5             1.3
    75-90...............................             8.2             0.4
    90-100..............................             3.1             1.6
% Utilization Days Billed as RU:
    0-10................................             8.9            27.6
    10-25...............................             8.0            15.5
    25-50...............................            24.1             7.0
    50-75...............................            39.2            -0.4
    75-90...............................            17.2            -6.0
    90-100..............................             2.6            -9.8
% Utilization Days Billed as Non-Rehab:
    0-10................................            79.8            -1.5

[[Page 39261]]

 
    10-25...............................            16.6             8.6
    25-50...............................             2.7            23.1
    50-75...............................             0.4            35.8
    75-90...............................             0.2            41.8
    90-100..............................             0.4            33.6
------------------------------------------------------------------------

    We proposed to implement the PDPM effective beginning in FY 2020 
(that is, October 1, 2019). This effective date would incorporate a 1-
year period to allow time for provider education and training, internal 
system transitions, and to allow states to make any Medicaid program 
changes which may be necessary based on the changes related to PDPM.
    With regard to the changes finalized in this rule, we provide our 
reasons for each change throughout the subsections above. Below in this 
section, we discuss alternatives we considered which relate generally 
to implementation of the PDPM.
    When making major system changes, CMS often considers possible 
transition options for providers and other stakeholders between the 
former system and the new system. For example, when we updated OMB 
delineations used to establish a provider's wage index under the SNF 
PPS in FY 2015, we utilized a blended rate in the first year of 
implementation, whereby 50 percent of the provider's payment was 
derived from their former OMB delineation and 50 percent from their new 
OMB delineation (79 FR 45644-45646).
    However, due to the fundamental nature of the change from the 
current RUG-IV case-mix model to the PDPM, which includes differences 
in resident assessment, payment algorithms, and other policies, as we 
stated in the proposed rule (83 FR 21079), we believe that proposing a 
blended rate for the whole system (that would require two full case-mix 
systems--RUG-IV and the PDPM--to run concurrently) is not advisable as 
part of any transition strategy for implementing the PDPM, due to the 
significant administrative and logistical issues that would be 
associated with such a transition strategy. Specifically, CMS and 
providers would be required to manage both the RUG-IV payment model and 
PDPM simultaneously, creating significant burden and undue complexity 
for all involved parties. Furthermore, providers would be required to 
follow both sets of MDS assessment rules, each of which carries with it 
its own level of complexity. CMS would also be required to process 
assessments and claims under each system, which would entail a 
significant amount of resources and burden for CMS, MACs, and 
providers. Finally, a blended rate option would also mitigate some of 
the burden reduction associated with implementing PDPM, estimated to 
save SNFs close to $200 million per year as compared to estimated 
burden under RUG-IV, given that the current assessment schedule would 
need to continue until full implementation of PDPM was achieved. As we 
stated in the proposed rule, we believe these issues also would be 
implicated in any alternative transition strategy which would require 
both case-mix systems to exist concurrently, such as giving providers a 
choice in the first year of implementation of operating under either 
the RUG-IV or PDPM. Therefore, we did not pursue any alternatives which 
required concurrent operation of both the RUG-IV and PDPM.
    As discussed in the proposed rule (83 FR 21079), we then considered 
alternative effective dates for implementing the PDPM, and other 
associated policy changes. We considered implementing the new case-mix 
model effective beginning in FY 2019, but we believe that this would 
not permit sufficient time for providers and other stakeholders, 
including CMS, to make the necessary preparations for a change of this 
magnitude in the SNF PPS. We also believe that such a quick transition 
would not be in keeping with how similar types of SNF PPS changes have 
been implemented in the past. We also considered implementing PDPM more 
than one year after being finalized, such as implementing the PDPM 
effective beginning October 1, 2020 (FY 2021). However, we believe that 
setting the effective date of PDPM this far out is not necessary, based 
on our prior experience with similar SNF PPS changes. As is customary, 
we plan to continue to provide free software to providers which can be 
used to group residents under the PDPM, as well as providing data 
specifications for this grouper software as soon as is practicable, 
thereby mitigating potential concerns around software vendors having 
sufficient time to develop products for PDPM. Moreover, given the 
issues identified throughout the proposed rule and this final rule with 
the current RUG-IV model, notably the issues surrounding the burden and 
complexity of the current SNF PPS assessment schedule and concerns 
around the incentives for therapy overprovision under the RUG-IV 
system, we believe it appropriate to implement the PDPM as soon as is 
practicable.
    Finally, we considered alternatives related to the proposal 
discussed in section V.I. of this final rule, specifically the proposed 
certification that we have met the requirements set forth in section 
511(a) of the MMA, which would permit us to use the PDPM's permanent 
case-mix adjustments for SNF residents with AIDS to replace the 
temporary special add-on in the PPS per diem payment for such 
residents. As noted in section V.I. of this final rule, this special 
add-on for SNF residents with AIDS was intended to be of limited 
duration, as the MMA legislation specified that it 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. We considered maintaining this 
adjustment under the PDPM. However, given the adjustment incorporated 
into the NTA and nursing components under the PDPM to account for the 
increased costs of treating residents with AIDS, this would result in a 
substantial increase in payment for such residents beyond even the 
current add-on payment. Moreover, as discussed in section V.I. of this 
final rule, we believe that the PDPM provides a tailored case-mix 
adjustment that more accurately accounts for the additional costs and 
resource use of residents with AIDS, as compared to an undifferentiated 
add-on which simply applies an across-the-board multiplier to the full 
SNF PPS per diem. Finally, as stated in section 3.8.2. of the SNF PDPM 
technical report (available at https://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/SNFPPS/therapyresearch.html), HIV/AIDS was 
associated with a negative and

[[Page 39262]]

statistically significant decrease in PT, OT and SLP costs per day. 
This means inherently that, to the extent that the existing add-on is 
applied against the full SNF PPS per diem payment, the magnitude of the 
add-on payment increases with increases in therapy payment, which 
conflicts with the data described above regarding the relationship 
between therapy costs and the presence of an AIDS diagnosis. As a 
result, maintaining the current add-on would create an inconsistency 
between how SNF payments would be made and the data regarding AIDS 
diagnoses and resident therapy costs. Therefore, we proposed (and are 
finalizing in this rule) replacing this add-on payment with appropriate 
case-mix adjustments for the increased costs of care for this 
population of residents through the NTA and nursing components of the 
PDPM.
    We invited comments on the projected impacts and on the proposals 
and alternatives discussed throughout this section.
    Commenters submitted the following comments related to the proposed 
rule's discussion of the Potential Impacts of Implementing the Proposed 
PDPM and Proposed Parity Adjustment. A discussion of these comments, 
along with our responses, appears below.
    Comment: Commenters agreed that PDPM should be implemented in a 
budget neutral manner. With regard to the impact analysis, several 
commenters suggest that CMS run the entire PDPM model on a second year 
of data (or partial 2018 data) to examine the impact on individual 
providers and beneficiaries. Commenters state that using only one year 
of data does not allow analysis of the impact of changing patient 
populations over time.
    Response: We appreciate the support for our proposed budget neutral 
implementation. With regards to the comment that CMS should use more 
than one year of data for the impact analysis, we would note that while 
CMS did not specifically examine the impact of PDPM on individual 
providers and beneficiaries across multiple years, we did take several 
steps to ensure robustness of our results. First, to ensure that the 
classification would be relevant for the current SNF population, we 
used the latest complete year of data available, FY 2017, to construct 
the payment model. Second, based on comments received in response to 
the 2017 ANPRM, we used four years of data (FYs 2014-2017) to determine 
which comorbidities to include in the NTA component and the number of 
points to assign to each condition/service for purposes of resident 
classification and payment. Third, as discussed in section 1.3 of the 
SNF PDPM technical report, we conducted a series of investigations to 
test the robustness of our results across multiple years. We found 
that: The distribution of stays and resource utilization by each 
classifier used in the payment model (for example, clinical category, 
cognitive status, etc.), the case-mix groups generated by the CART 
algorithm, the costliest NTA comorbidities, and the distribution of 
stays across nursing RUGs was very similar across multiple years. 
Fourth, we examined changes in SNF resident characteristics over time 
in response to concerns raised by participants in technical expert 
panels, focusing on specific resident characteristics that TEP 
panelists identified as indicators of increasing acuity. These 
investigations generally found that resident characteristics changed 
little over time.
    Finally, while we did not analyze the impact of PDPM on individual 
providers and beneficiaries across multiple years, we note that we also 
examined the impact of the RCS-I payment model, which has substantially 
similar classification criteria as PDPM, on various resident and 
provider subpopulations using FY 2014 data. The results of this 
analysis, shown in section 3.13 of the SNF PMR technical report and the 
2017 ANPRM (82 FR 21008 through 21012), were consistent with the 
resident and provider subpopulation impact analysis conducted for PDPM 
(section 3.12 of the SNF PDPM technical report) in showing that a 
payment model based on the set of resident characteristics used to 
construct PDPM would be expected to increase payment associated with 
resident subpopulations with complex clinical needs, such as extensive 
services, high NTA utilization, IV medications, ESRD, diabetes, wound 
infections, amputation/prosthesis care, and longer inpatient stays. For 
all of the foregoing reasons, we expect PDPM to be robust and to have 
similar impacts on residents and providers across multiple years.
    Comment: One commenter stated that there are several methodological 
issues that may affect the accuracy of PDPM impact calculations under 
budget neutrality. This includes:
    (1) The use of hospital MS-DRGs in developing clinical categories 
will likely result in an inaccurate estimation of payment. Payment 
rates were set and impacts predicted based on using the MS-DRG 
assignment of the patient, whereas PDPM when implemented will rely on 
MDS responses. If SNFs report patients at a net lower acuity level in 
MDS data than the predicted clinical categorization, then the budget 
neutrality assumptions made by PDPM will be invalid.
    (2) The conversion of charges to costs will likely result in an 
underestimation of payment. Because SNF charges have not driven 
payments under the SNF PPS before, it is possible SNFs will 
systematically re-evaluate their charges practices to bring them more 
in line with the cost information within their accounting systems. As a 
result, the use of SNF charges may need to be rapidly reevaluated once 
PDPM is implemented.
    (3) The quality of FY 2017 section GG data is questionable due to 
the likely inaccuracies in newly implemented items. Thus, PDPM impacts 
may need to be re-run once more stable section GG data are available to 
ensure PDPM accurately accounts for patient functional characteristics.
    Response: As stated in the proposed rule (83 FR 21074) and section 
3.11.2 of the SNF PDPM technical report, the budget neutrality 
assumption refers to having total payments if PDPM had been in place be 
equal to total actual RUG-IV payments in FY 2017. It does not account 
for provider behavior change after the implementation of PDPM. We 
appreciate the concerns raised, and we will monitor the reporting of 
MDS clinical categories, charges, and section GG items under PDPM.
    Comment: One commenter stated that PDPM does not adequately account 
for residents with behavioral health issues. The commenter stated that 
SNFs are treating younger patients with longer stays and complex 
behavioral needs. Further, the commenter said representatives of 
geriatric behavioral health services were not included in the TEPs that 
were convened during PDPM development. A few commenters requested that 
CMS study the impact of PDPM on beneficiaries with long stays, such as 
those exceeding 84 days in length to determine whether the payment 
model creates potential access issues for such beneficiaries.
    Response: While our TEPs did not include a specific representative 
of geriatric behavioral health services, in response to the feedback 
received from TEP panelists, we investigated the impact of PDPM on 
residents with behavioral health issues. As discussed in section 3.12 
of the SNF PDPM technical report, we found that PDPM is predicted to 
slightly increase payment associated with residents who have behavioral 
issues. Therefore, we believe the proposed payment model appropriately 
accounts for the resource needs of this subpopulation. Additionally, we 
found that PDPM is

[[Page 39263]]

expected to notably increase payment associated with younger residents 
(below 65 and 65-74 years of age). However, we also estimated that 
payment associated with very long stays (utilization = 100 days) would 
decline by 1.9 percent under PDPM. We do plan to monitor the impact of 
PDPM on many different subpopulations, including those with long SNF 
stays.
    Comment: Another commenter raised concerns about the provider-
specific impact analysis included in the supplementary materials that 
were designed to aid stakeholders in reviewing and commenting on the 
proposed rule. The commenter stated that there were large differences 
in the estimated payment impact on individual providers between the 
provider-level impact file that accompanied the 2017 ANPRM and the 
provider-level impact file that accompanied the FY 2019 proposed rule. 
Additionally, the commenter stated that some providers have impact 
estimates in the RCS-I provider-level impact file (which accompanied 
the 2017 ANPRM) but are missing estimates in the PDPM provider-level 
impact file (which accompanied the FY 2019 SNF PPS proposed rule). 
According to the commenter, these discrepancies raise concerns about 
the reliability, accuracy, and completeness of the data used to develop 
PDPM.
    Response: The commenter that raised concerns about changes in the 
provider-level impacts between the RCS-I and the PDPM provider-level 
impact files correctly notes that the provider-level impacts changed 
across the two files. There are two main reasons for changes in 
provider-level impacts across these two files that do not raise 
concerns about the quality of the data used to conduct the provider-
specific impact analysis or to develop PDPM. First, the year of 
analysis is different across the two files. The RCS-I analysis uses 
data from FY 2014, which was also the year of data used to develop RCS-
I, while the PDPM analysis uses data from FY 2017. Changes in the 
resident population of specific providers could contribute to changes 
in the estimated provider-level impact of the payment models.
    Second, the two provider-level files provide impacts for two 
different payment models: The first displays impacts for RCS-I, while 
the second displays impacts for PDPM. While the two payment models are 
similar, differences between the two models also contribute to changes 
in estimated provider-level impacts. For the foregoing reasons, we 
should not expect the estimated payment impact for each provider be the 
same across the two payment models and data years. We further note that 
at the population level, the estimated impact on specific types of 
providers and residents was similar under RCS-I and PDPM, reflecting 
the similarity of the payment models. Specifically, for both models we 
estimate that payment would shift from stays receiving high amounts of 
therapy and providers that provide high amounts of therapy to stays 
associated with medically complex beneficiaries and providers that 
serve these beneficiaries.
    Regarding providers that were included in the RCS-I provider-
specific file but not in the PDPM provider-specific file, this occurs 
for three reasons: (1) The provider had no stays in FY 2017, the year 
of analysis for the PDPM file, (2) after applying matching and validity 
restrictions, the provider had no stays remaining in the dataset, or 
had fewer than 11 stays (and therefore could not be included for 
confidentiality reasons), or (3) after excluding stays that did not 
have sufficient information to be classified into a case-mix group for 
each PDPM component, the provider had fewer than 11 stays. Of the 
roughly 1,100 providers that were included in the RCS-I file but not 
included in the PDPM file, about 60 percent were excluded for reason 
(3); of the remaining excluded providers, about half were excluded for 
reason (1) and half were excluded for reason (2). It should also be 
noted that in total, there are about 700 fewer providers in the PDPM 
file than there are in the RCS-I file. Because this number is less than 
the number of providers included in the RCS-I file but not included in 
the PDPM file, this indicates that there are also a number of providers 
that are included in the PDPM file but not in the RCS-I file. To 
confirm the representativeness of our PDPM study population, we 
compared resident characteristics for the study population and the 
Medicare Part A SNF population, as shown in section 3.1.5 of the SNF 
PDPM technical report. As noted in the technical report, the two 
populations are similar in most respects, although the study population 
contains a higher proportion of stays from for-profit and freestanding 
facilities and a lower proportion of stays from non-profit, government, 
hospital-based, and swing bed facilities. Given the similarity of the 
two populations, we do not believe our population restrictions 
compromised the representativeness of our study population or the 
reliability of our results.
    Comment: One commenter stated that there are apparent errors in the 
PDPM provider-specific impact file. The commenter states that the total 
numbers of days and stays shown in the file do not match the sum of the 
values in the respective columns. Additionally, the commenter states 
that the percentages of stays shown in the case-mix group distribution 
does not sum to 500 percent (as they should because 100 percent of days 
are assigned to a case-mix group within each of the five components) 
for three specific facilities. The commenter notes that all other rows 
in this tab correctly sum to 500 percent. The commenter recommends CMS 
research these issues and publish a corrected file as necessary.
    Response: The commenter that stated the total stays and days shown 
in provider-specific file do not match the sum of the values in the 
respective columns is correct. The reason for this apparent discrepancy 
is that, while the total stays and days shown in this file include 
providers with fewer than 11 stays, these providers are not shown 
separately in the file for confidentiality reasons. As a result, the 
displayed totals across all facilities do not match the totals 
calculated from summing across rows. Regarding the three instances the 
commenter cites in which the percentages for the case-mix group 
distribution do not sum to 500 percent, we were unable to replicate 
this issue. We verified that the case-mix group distribution shown in 
the provider-specific file for each of these three providers does in 
fact sum to 500 percent and further verified that the case-mix group 
distribution sums to 500 percent for all providers shown in the file. 
Therefore, we do not believe a correction is warranted.
    Comment: Some commenters supported CMS' decision not to propose a 
blended rate transition between RUG-IV and PDPM, but rather to make a 
full transition from one system to the other. Some commenters expressed 
support for a transition, requesting that CMS conduct a feasibility 
study to examine the impact of PDPM, particularly the therapy 
components, on access to medically necessary therapy. One commenter 
requested that CMS phase-in any negative impacts on providers from 
implementing PDPM. One commenter stated that, given the similarities 
between the RCS-I model and the PDPM, CMS should move forward with 
implementing PDPM in FY 2019. One commenter requested clarification on 
how a patient's reimbursement would be affected if the stay began under 
RUG-IV and ended under PDPM.
    Response: We appreciate the support for our decision not to 
implement a transition strategy such as a blended rate option. We do 
not believe that such

[[Page 39264]]

a transition, or one that would phase in negative impacts, would be 
beneficial for SNFs or their patients given the complexity of operating 
two systems simultaneously. With regard to the suggestion that CMS 
conduct a feasibility study to examine the impact of PDPM, we believe 
that the monitoring program we plan to undertake with implementation of 
PDPM will provide all of the necessary information in an efficient and 
expeditious manner that would negate the reasons for conducting a 
feasibility study. Finally, with regard to the comment that CMS 
implement PDPM in FY 2019, despite the similarities between RCS-I and 
PDPM, the education and training efforts necessary to ensure successful 
implementation of PDPM will likely require more time than such an 
implementation date would permit.
    With regard to the comment about a patient that begins a stay under 
RUG-IV but ends under PDPM, given that there will be no transition 
period between RUG-IV and PDPM, providers would bill under RUG-IV for 
all days up to and including September 30, 2019 and then bill under 
PDPM for all days beginning October 1, 2019. Further, RUG-IV assessment 
scheduling and other RUG-IV payment-related policies would be in effect 
until September 30, 2019. Beginning on October 1, 2019, all PDPM 
related assessment scheduling and other PDPM payment-related policies 
would take effect.
    Comment: One commenter stated that PDPM would require a minimum of 
12 months for programming, testing, validating and deploying of 
software updates and tools. This commenter requested that CMS allow for 
our systems to report to providers RUG-IV payment data, such as 
associated HIPPS codes, up to 60 days after implementation of PDPM.
    Response: We agree with the commenter regarding the timeframe for 
software development, which is part of the reason we are implementing 
PDPM on October 1, 2019, rather than in 2018. With regard to the 
comment that we report RUG-IV payment data after implementation of 
PDPM, we will consider this suggestion as part of transition planning.
    Comment: Many commenters stressed the importance of provider 
education and training to support successful implementation of the 
PDPM. These commenters suggested that extensive education and training 
of all involved parties will be needed because PDPM is such a 
significant change from the existing system. These commenters recommend 
that CMS immediately begin work with stakeholders to identify and to 
plan for meeting these needs and to provide the necessary tools to 
implement the new system smoothly. Further, commenters suggested that, 
in Fall 2018, CMS should convene a PDPM Implementation Technical Expert 
Panel (TEP) comprised of SNF PPS stakeholders, representatives from 
states, referral sources, and payer representatives, and that the TEP 
Report should be made public and serve as the basis for a PDPM 
Transition Plan. Finally, several commenters urged CMS to release any 
technical specifications and manual revisions as soon as possible, to 
give providers and vendors as much time as possible to adapt to any 
PDPM-related changes.
    Response: We agree with the comments regarding the importance of 
provider education and training and will be providing extensive 
opportunities and resources to accomplish this task. With regard to the 
suggestion for a TEP related to PDPM implementation, we appreciate this 
suggestion and will consider several methods to engage the stakeholder 
community in preparing for PDPM implementation. With regard to the 
comments on the need for transition planning and for CMS' timely 
release of any technical specifications and manual revisions, we agree 
with commenters and intend to release technical specifications and 
manual revisions as soon as possible, which will include specific 
instructions on operationalizing the transition from RUG-IV to PDPM.
    Comment: A few commenters requested that CMS establish a formal and 
transparent process and timeline for refining the PDPM therapy 
components after implementation of PDPM.
    Response: While we agree with using a transparent process for 
refining PDPM, as was used during its development, we believe it is 
premature at this time to provide such a timeframe for revisions to the 
model, until we are able to observe the impact of implementing this 
model.
    Comment: One commenter requested that CMS consider providing 
additional funding during initial implementation of PDPM, given that 
providers will be under financial pressures associated with training, 
software purchases, as well as changes associated with other CMS 
initiatives.
    Response: We do not believe that additional funding would be 
warranted for the activities described by the commenter. Given that CMS 
provides free grouper software, as well as a myriad of training and 
education resources, we believe that additional costs, such as software 
purchases, are private business decisions that exist outside the scope 
of SNF payments.
    Accordingly, after considering the comments received, for the 
reasons discussed throughout section V of the FY 2019 SNF PPS proposed 
rule and for the reasons presented in this final rule, we are 
finalizing our proposals to implement the PDPM, as well as the other 
PDPM related changes discussed in this final rule, with the 
modifications previously discussed in this final rule, effective 
beginning October 1, 2019. Specifically, in section V.B of this final 
rule, we finalized our proposal, without modification, for updating the 
federal base payment rates and for adjusting the per diem rates for 
geographic differences under the PDPM. In section V.C.3.b of this final 
rule, we finalized the proposed PT and OT components under the PDPM and 
our proposals relating to the methodology for classifying residents 
under the PT and OT components, effective October 1, 2019, with the 
modifications discussed in that section. More specifically, in response 
to comments, rather than requiring providers to record the type of 
inpatient surgical procedure performed during the prior inpatient 
hospital stay by coding an ICD-10-PCS code in the second line of item 
I8000 as we proposed, we will instead require providers to select, as 
necessary, a surgical procedure category in a sub-item within Item 
J2000 which would identify the relevant surgical procedure that 
occurred during the patient's preceding hospital stay and which would 
augment the patient's PDPM clinical category. For purposes of 
calculating the function score, all missing values for section GG 
assessment items will receive zero points. Similarly, the function 
score will incorporate a new response ``10. Not attempted due to 
environmental limitations'' and we will assign it a point value of 
zero. Furthermore, consistent with a commenter's suggestion, we will 
adopt MDS item GG0170I1 (Walk 10 feet) as a substitute for retired item 
GG0170H1 (Does the resident walk), and we will use responses 07: 
``resident refused,'' 09: ``not applicable,'' 10: ``not attempted due 
to environmental limitations,'' or 88: ``not attempted due to medical 
condition or safety concerns'' from MDS item GG0170I1 to identify 
residents who cannot walk. In section V.C.3.b of this final rule, we 
finalized, without modification, the proposed SLP component of PDPM and 
our proposals relating to the classification of residents under the SLP 
component. In section V.C.3.d of this final rule, we finalized,

[[Page 39265]]

without modification, our proposals relating to the methodology for 
classifying patients under the nursing component of PDPM. In section 
V.C.3.e of this final rule, we finalized, without modification, our 
proposed NTA component of the PDPM and the proposed classification 
methodology for the NTA component. In section V.C.4 of this final rule, 
we finalized, without modification, to apply a variable per diem 
adjustment as part of the PDPM, utilizing the adjustment factors and 
schedule for the PT and OT components found in Table 30 and the 
adjustment factors and schedule for the NTA component found in Table 
31. In section V.D.1 of this final rule, we finalized our proposed 
changes to the MDS assessment schedule and related assessment policies 
as discussed in the proposed rule, with the following modifications. As 
discussed in that section, rather than making the IPA a required 
assessment as we proposed, this assessment will be optional, and 
providers may determine whether and when an IPA is completed. In 
addition, because the IPA is an optional assessment and providers can 
determine their own criteria for when an IPA is completed, we are 
revising the ARD criteria such that the ARD will be the date the 
facility chooses to complete the assessment relative to the triggering 
event that makes the facility complete the IPA. Payment based on the 
IPA would begin the same day as the ARD. In section V.D.2 of this final 
rule, we finalized, without modification, our proposed additions to the 
Swing Bed PPS Assessment found in Table 34 of this final rule. In 
section V.D.3 of this final rule, we finalized, without modification, 
the proposed additions to the PPS Discharge Assessment found in Table 
35 of this final rule. In section V.E of this final rule, we finalized, 
without modification, our proposed application of a combined 25 percent 
limit on group and concurrent therapy, per therapy discipline, as well 
as our proposal to implement a non-fatal warning edit on a provider's 
validation report when the amount of group and concurrent therapy 
exceeds 25 percent within a given therapy discipline. In section V.F of 
this final rule, we finalized, without modification, our proposed 
interrupted stay policy. In section V.G of this final rule, we 
finalized our proposed classifiers for purposes of applying the 
administrative presumption, with the following modification. As 
discussed in that section, we added 6 PT and OT classifiers and 8 SLP 
classifiers. In section V.H of this final rule, we finalized our 
proposal to replace the existing MMA add-on for patients with AIDS with 
the PDPM permanent adjustment in the case-mix that appropriate accounts 
for the increased costs of patients with AIDS.
    As we proposed and as discussed in section V.I of this final rule, 
we will implement the PDPM and the other PDPM-related changes finalized 
in this rule in a budget neutral manner.

VI. Other Issues

A. Other Revisions to the Regulation Text

    Along with our revisions to the regulations as discussed elsewhere 
in this final rule, we also proposed (83 FR 21080) to make two other 
revisions in the regulation text. The first involves Sec.  
411.15(p)(3)(iv), which specifies that whenever a beneficiary is 
formally discharged (or otherwise departs) from the SNF, this event 
serves to end that beneficiary's status as a ``resident'' of the SNF 
for purposes of consolidated billing (the SNF ``bundling'' 
requirement), unless he or she is readmitted (or returns) to that or 
another SNF ``by midnight of the day of departure.'' In initially 
establishing this so-called ``midnight rule,'' the FY 2001 SNF PPS 
final rule (65 FR 46770, July 31, 2000) noted in this particular 
context that, as we explained in the proposed rule, a patient ``day'' 
begins at 12:01 a.m. and ends the following midnight, so that the 
phrase ``midnight of the day of departure'' refers to the midnight that 
immediately follows the actual moment of departure, rather than to the 
midnight that immediately precedes it (65 FR 46792).
    However, the Medicare program's standard practice for counting 
inpatient days is actually one in which an inpatient day would begin at 
midnight (see, for example, Sec.  20.1 in the Medicare Benefit Policy 
Manual, Chapter 3, which specifies that in counting inpatient days, ``. 
. . a day begins at midnight and ends 24 hours later'' (emphasis 
added)). Accordingly, in order to ensure consistency with that 
approach, we proposed to revise Sec.  411.15(p)(3)(iv) to specify that 
for consolidated billing purposes, a beneficiary's ``resident'' status 
ends whenever he or she is formally discharged (or otherwise departs) 
from the SNF, unless he or she is readmitted (or returns) to that or 
another SNF ``before the following midnight.'' We further noted that 
this revision would not alter the underlying principle that a 
beneficiary's SNF ``resident'' status in this context ends upon 
departure from the SNF unless he or she returns to that or another SNF 
later on that same day; rather, it would simply serve to conform the 
actual wording of the applicable regulations text with the Medicare 
manual's standard definition of the starting point of a patient 
``day.''
    We also proposed a technical correction to Sec.  424.20(a)(1)(i) 
(which describes the required content of the SNF level of care 
certification) in order to conform it more closely to that of the 
corresponding statutory requirements at section 1814(a)(2)(B) of the 
Act. This statutory provision defines the SNF level of care in terms of 
skilled services furnished on a daily basis which, as a practical 
matter, can only be provided on an inpatient basis in a SNF. In 
addition, it provides that the SNF-level care must be for either:
     An ongoing condition that was one of the conditions that 
the beneficiary had during the qualifying hospital stay; or
     A new condition that arose while the beneficiary was in 
the SNF for treatment of that ongoing condition.
    In setting forth the SNF level of care definition itself, the 
implementing regulations at Sec.  409.31 reflect both of the above two 
criteria (at paragraphs (b)(2)(i) and (b)(2)(ii), respectively); 
however, as we stated in the proposed rule (83 FR 21080), the 
regulations describing the content of the initial level of care 
certification at Sec.  424.20(a)(1)(i) have inadvertently omitted the 
second criterion. Further, while that criterion admittedly might not be 
relevant in those instances where the initial certification is obtained 
promptly ``at the time of admission'' in accordance with the 
regulations at 42 CFR 424.20(b)(1), that same provision alternatively 
allows this requirement to be met ``as soon thereafter as is reasonable 
and practicable.'' Accordingly, in order to rectify this omission, we 
proposed to revise Sec.  424.20(a)(1)(i) so that it more accurately 
tracks the language in the corresponding statutory authority at section 
1814(a)(2)(B) of the Act.
    We invited comments on our proposed revisions to Sec.  
411.15(p)(3)(iv) and Sec.  424.20(a)(1)(i), but received no comments on 
either revision. Accordingly, in this final rule, we are finalizing 
both revisions as proposed, without further modification.

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

1. Background
    The Skilled Nursing Facility Quality Reporting Program (SNF QRP) is 
authorized by section 1888(e)(6) of the Act and it applies to 
freestanding SNFs, SNFs affiliated with acute care facilities,

[[Page 39266]]

and all non-CAH swing-bed rural hospitals. Under the SNF QRP, the 
Secretary reduces by 2 percentage points the annual market basket 
percentage update described in section 1888(e)(5)(B)(i) of the Act 
applicable to a SNF for a fiscal year, 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), in the case of a SNF that does not submit data in accordance 
with sections 1888(e)(6)(B)(i) of the Act for that fiscal year. For 
more information on the requirements we have adopted for the SNF QRP, 
we refer readers to the FY 2016 SNF PPS final rule (80 FR 46427 through 
46429), FY 2017 SNF PPS final rule (81 FR 52009 through 52010) and FY 
2018 SNF PPS final rule (82 FR 36566).
    Although we have historically used the preamble to the SNF PPS 
proposed and final rules each year to remind stakeholders of all 
previously finalized program requirements, we have concluded that 
repeating the same discussion each year is not necessary for every 
requirement, especially if we have codified it in our regulations. 
Accordingly, the following discussion is limited as much as possible to 
a discussion of our proposals, responses to comments submitted on those 
proposals, and policies we are finalizing for future years of the SNF 
QRP after consideration of the comments, and it represents the approach 
we intend to use in our rulemakings for this program going forward.
2. General Considerations Used for the Selection of Measures for the 
SNF QRP
a. Background
    For a detailed discussion of the considerations we historically 
used for the selection of SNF QRP quality, resource use, and other 
measures, we refer readers to the FY 2016 SNF PPS final rule (80 FR 
46429 through 46431).
    We received several comments generally related to the SNF QRP. The 
comments and our responses are discussed below.
    Comment: Several commenters expressed general support for CMS's 
proposals related to the SNF QRP, acknowledging CMS's goal of improving 
the quality of health care for Medicare beneficiaries through 
improvements to patient assessments and quality reporting. One 
commenter highlighted the need for additional transparency from CMS 
through this ongoing process. Another commenter requested that CMS 
ensure that the SNF QRP efforts do not negatively impact specialty 
populations.
    Response: We appreciate commenters' general support for the SNF QRP 
proposals. To foster transparency, we continue to seek stakeholder 
input and will take into consideration the impact of specialty 
populations in the ongoing measure development and maintenance efforts 
of the SNF QRP.
    Comment: One commenter expressed support for the IMPACT Act's 
objectives. However, the commenter expressed concern over the rapid 
development and implementation of the standardized patient assessment 
data element (SPADE) work, suggesting that further evaluation is 
necessary.
    Response: We understand the concerns raised by commenters 
pertaining to the development and implementation of the SPADEs. As 
discussed in the FY 2018 SNF PPS Final Rule, we agreed that further 
evaluation of the data elements was necessary. Specifically, we thought 
that more time was needed to develop, test, to think through the 
implementation, and to reflect on how to maximize the time SNFs have to 
prepare for the reporting of standardized resident assessment data in 
these categories. We have worked to be responsive to the concerns 
raised by stakeholders while meeting 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. Therefore, 
as outlined in the FY 2018 SNF PPS final rule, we did not finalize the 
standardized 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 in that we felt this work needed more time for development 
and evaluation. Since the time of this proposal work, we have worked 
closely with stakeholders, solicited comments, reconvened our TEP, and 
are currently re-testing the SPADEs in a national field test (also 
known as the Alpha test). For more information on our prior proposal 
addressed in the FY 2018 SNF PPS final rule (82 FR 36568 through 36570, 
36597 through 36605), we refer the reader to that detailed discussion. 
For more information on our national field test and associated work for 
SPADEs, please see: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/-IMPACT-Act-Standardized-Assessment-National-Testing-.html.
b. Accounting for Social Risk Factors in the SNF QRP
    In the FY 2018 SNF PPS final rule (82 FR 36567 through 36568), we 
discussed the importance of improving beneficiary outcomes including 
reducing health disparities. We also discussed our commitment to 
ensuring that medically complex residents, as well as those with social 
risk factors, receive excellent care. We discussed how studies show 
that social risk factors, such as being near or below the poverty level 
as determined by HHS, belonging to a racial or ethnic minority group, 
or living with a disability, can be associated with poor health 
outcomes and how some of this disparity is related to the quality of 
health care.\3\ Among our core objectives, we aim to improve health 
outcomes, attain health equity for all beneficiaries, and ensure that 
complex residents, as well as those with social risk factors receive 
excellent care. Within this context, reports by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) and the National 
Academy of Medicine have examined the influence of social risk factors 
in our value-based purchasing programs.\4\ As we noted in the FY 2018 
SNF PPS final rule (82 FR 36567 through 36568), ASPE's report to 
Congress, which was required by the IMPACT Act, found that, in the 
context of value-based purchasing programs, dual eligibility was the 
most powerful predictor of poor health care outcomes among those social 
risk factors that they examined and tested. ASPE is continuing to 
examine this issue in its second report required by the IMPACT Act, 
which is due to Congress in the fall of 2019. In addition, as we noted 
in the FY 2018 SNF PPS final rule (82 FR 36567), the National Quality 
Forum (NQF) undertook a 2-year trial period in which certain new 
measures and measures undergoing maintenance review have been assessed 
to determine if risk adjustment for social risk factors is

[[Page 39267]]

appropriate for these measures.\5\ The trial period ended in April 2017 
and a final report is available at http://www.qualityforum.org/SES_Trial_Period.aspx. The trial concluded that ``measures with a 
conceptual basis for adjustment generally did not demonstrate an 
empirical relationship'' between social risk factors and the outcomes 
measured. This discrepancy may be explained in part by the methods used 
for adjustment and the limited availability of robust data on social 
risk factors. NQF has extended the socioeconomic status (SES) trial,\6\ 
allowing further examination of social risk factors in outcome 
measures.
---------------------------------------------------------------------------

    \3\ See, for example, United States Department of Health and 
Human Services. ``Healthy People 2020: Disparities. 2014.'' 
Available at http://www.healthypeople.gov/2020/about/foundation-health-measures/Disparities; or National Academies of Sciences, 
Engineering, and Medicine. Accounting for Social Risk Factors in 
Medicare Payment: Identifying Social Risk Factors. Washington, DC: 
National Academies of Sciences, Engineering, and Medicine 2016.
    \4\ Department of Health and Human Services Office of the 
Assistant Secretary for Planning and Evaluation (ASPE), ``Report to 
Congress: Social Risk Factors and Performance Under Medicare's 
Value-Based Purchasing Programs.'' December 2016. Available at 
https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \5\ Available at http://www.qualityforum.org/SES_Trial_Period.aspx.
    \6\ Available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier= id&ItemID=86357.
---------------------------------------------------------------------------

    In the FY 2018/CY 2018 proposed rules for our quality reporting and 
value-based purchasing programs, we solicited feedback on which social 
risk factors provide the most valuable information to stakeholders and 
the methodology for illuminating differences in outcomes rates among 
patient groups within a provider that would also allow for a comparison 
of those differences, or disparities, across providers. Feedback we 
received across our quality reporting programs included encouraging us 
to explore whether factors that could be used to stratify or risk 
adjust the measures (beyond dual eligibility); to consider the full 
range of differences in resident backgrounds that might affect 
outcomes; to explore risk adjustment approaches; and to offer careful 
consideration of what type of information display would be most useful 
to the public.
    We also sought public comment on confidential reporting and future 
public reporting of some of our measures stratified by resident dual 
eligibility. In general, commenters noted that stratified measures 
could serve as tools for SNFs to identify gaps in outcomes for 
different groups of residents, improve the quality of health care for 
all residents, and empower consumers to make informed decisions about 
health care. Commenters encouraged us to stratify measures by other 
social risk factors such as age, income, and educational attainment. 
With regard to value-based purchasing programs, commenters also 
cautioned CMS to balance fair and equitable payment while avoiding 
payment penalties that mask health disparities or discouraging the 
provision of care to more medically complex patients. Commenters also 
noted that value-based payment program measure selection, domain 
weighting, performance scoring, and payment methodology must account 
for social risk.
    As a next step, we are considering options to improve health 
disparities among patient-groups within and across hospitals by 
increasing the transparency of disparities as shown by quality 
measures. We also are considering how this work applies to other CMS 
quality programs in the future. We refer readers to the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38403 through 38409) for more details, where 
we discuss the potential stratification of certain Hospital Inpatient 
Quality Reporting (IQR) Program outcome measures. Furthermore, we 
continue to consider options to address equity and disparities in our 
value-based purchasing programs.
    We plan to continue working with ASPE, the public, and other key 
stakeholders on this important issue to identify policy solutions that 
achieve the goals of attaining health equity for all beneficiaries and 
minimizing unintended consequences.
    Comment: Several commenters supported CMS' continuing evaluation of 
how social risk factors could impact SNF QRP measure rates and 
encouraged CMS to consider strategies and solutions in this area. 
Specific comments noted that lack of adjustment for social risk factors 
may negatively impact facility measure rates, and CMS should 
incorporate risk adjustment for sociodemographic and socioeconomic 
status into appropriate SNF QRP measures. We also received comments 
about the public display of measure information related to social risk 
factors, suggesting stratified measures be used and expressing concerns 
that publicly reported outcome measures could be misleading to 
consumers.
    Response: We thank commenters for their comments and will take 
these comments into account as we further consider how to appropriately 
account for social risk factors in the SNF QRP. We also refer the 
reader to the FY 2018 SNF PPS final rule (82 FR 36567 through 36568) 
where we discussed in depth many of the issues raised by these 
commenters.
3. New Measure Removal Factor for Previously Adopted SNF QRP Measures
    As a part of our Meaningful Measures Initiative discussed in 
section I.D. of this final rule, we strive to put patients first, 
ensuring that they, along with their clinicians, are empowered to make 
decisions about their own healthcare using data-driven information that 
is increasingly aligned with a parsimonious set of meaningful quality 
measures. We began reviewing the SNF QRP's measures in accordance with 
the Meaningful Measures Initiative, and we are working to identify how 
to move the SNF QRP forward in the least burdensome manner possible 
while continuing to incentivize improvement in the quality of care 
provided to patients.
    Specifically, we believe the goals of the SNF QRP and the measures 
used in the program cover most of the Meaningful Measures Initiative 
priorities, including making care safer, strengthening person and 
family engagement, promoting coordination of care, promoting effective 
prevention and treatment, and making care affordable.
    We also evaluated the appropriateness and completeness of the SNF 
QRP's current measure removal factors. We have previously finalized 
that we would use notice and comment rulemaking to remove measures from 
the SNF QRP based on the following factors \7\
---------------------------------------------------------------------------

    \7\ We refer readers to the FY 2016 SNF PPS final rule (80 FR 
46431 through 46432) for more information on the factors we consider 
for removing measures.
---------------------------------------------------------------------------

     Factor 1. Measure performance among SNFs is so high and 
unvarying that meaningful distinctions in improvements in performance 
can no longer be made.
     Factor 2. Performance or improvement on a measure does not 
result in better resident outcomes.
     Factor 3. A measure does not align with current clinical 
guidelines or practice.
     Factor 4. A more broadly applicable measure (across 
settings, populations, or conditions) for the particular topic is 
available.
     Factor 5. A measure that is more proximal in time to 
desired resident outcomes for the particular topic is available.
     Factor 6. A measure that is more strongly associated with 
desired resident outcomes for the particular topic is available.
     Factor 7. Collection or public reporting of a measure 
leads to negative unintended consequences other than resident harm.
    We continue to believe that these measure removal factors are 
appropriate for use in the SNF QRP. However, even if one or more of the 
measure removal factors applies, we may nonetheless choose to retain 
the measure for certain specified reasons. Examples of such instances 
could include when a particular measure addresses a gap in quality that 
is so significant that removing the measure could in turn

[[Page 39268]]

result in poor quality, or in the event that a given measure is 
statutorily required. We note further that, consistent with other 
quality reporting programs, we apply these factors on a case-by-case 
basis.
    In the FY 2019 SNF PPS proposed rule (83 FR 21082), we proposed to 
adopt an additional factor to consider when evaluating potential 
measures for removal from the SNF QRP measure set:
     Factor 8. The costs associated with a measure outweigh the 
benefit of its continued use in the program.
    As we discussed in section I.D. of this final rule, with respect to 
our new Meaningful Measures Initiative, we are engaging in efforts to 
ensure that the SNF QRP measure set continues to promote improved 
health outcomes for beneficiaries while minimizing the overall costs 
associated with the program. We believe these costs are multifaceted 
and include not only the burden associated with reporting, but also the 
costs associated with implementing and maintaining the program. We have 
identified several different types of costs, including, but not limited 
to: (1) The provider and clinician information collection burden and 
burden associated with the submission/reporting of quality measures to 
CMS; (2) the provider and clinician cost associated with complying with 
other programmatic requirements; (3) the provider and clinician cost 
associated with participating in multiple quality programs, and 
tracking multiple similar or duplicative measures within or across 
those programs; (4) the cost to CMS associated with the program 
oversight of the measure including measure maintenance and public 
display; and (5) the provider and clinician cost associated with 
compliance with other federal and/or state regulations (if applicable).
    For example, it may be needlessly costly and/or of limited benefit 
to retain or maintain a measure which our analyses show no longer 
meaningfully supports program objectives (for example, informing 
beneficiary choice). It may also be costly for health care providers to 
track the confidential feedback, preview reports, and publicly reported 
information on a measure where we use the measure in more than one 
program. CMS may also have to expend unnecessary resources to maintain 
the specifications for the measure, as well as the tools we need to 
collect, validate, analyze, and publicly report the measure data. 
Furthermore, beneficiaries may find it confusing to see public 
reporting on the same measure in different programs.
    When these costs outweigh the evidence supporting the continued use 
of a measure in the SNF QRP, we believe it may be appropriate to remove 
the measure from the program. Although we recognize that one of the 
main goals of the SNF QRP is to improve beneficiary outcomes by 
incentivizing health care providers to focus on specific care issues 
and making data public related to those issues, we also recognize that 
those goals can have limited utility where, for example, the publicly 
reported data is of limited use because it cannot be easily interpreted 
by beneficiaries and used to influence their choice of providers. In 
these cases, removing the measure from the SNF QRP may better 
accommodate the costs of program administration and compliance without 
sacrificing improved health outcomes and beneficiary choice.
    We proposed that we would remove measures based on this factor on a 
case-by-case basis. We might, for example, decide to retain a measure 
that is burdensome for health care providers to report if we conclude 
that the benefit to beneficiaries justifies the reporting burden. Our 
goal is to move the program forward in the least burdensome manner 
possible, while maintaining a parsimonious set of meaningful quality 
measures and continuing to incentivize improvement in the quality of 
care provided to patients.
    We invited public comment on our proposal to adopt an additional 
measure removal Factor 8. The costs associated with a measure outweigh 
the benefit of its continued use in the program.
    We also proposed to add a new Sec.  413.360(b)(3) that would codify 
the removal factors we have previously finalized for the SNF QRP, as 
well as the new measure removal factor that we proposed to adopt in the 
proposed rule.
    We sought comments on these proposals. A discussion of these 
comments, along with our responses, appears below.
    Comment: Several commenters expressed support for an additional 
factor to consider when evaluating potential measures for removal from 
the SNF QRP measure set: Factor 8. The costs associated with a measure 
outweigh the benefit of its continued use in the program. One commenter 
acknowledged that removal of a measure from the program may be 
appropriate when the costs outweigh the evidence supporting its 
continued use. Another commenter supported the addition of the new 
measure removal factor because it reduces unnecessary administrative 
burden.
    Response: We appreciate the commenters' support.
    Comment: One commenter supported CMS' proposal to codify the 
proposed measure removal factor in the regulatory text.
    Response: We appreciate the commenter's support.
    Comment: Some commenters expressed concerns related to the new 
measure removal factor. One commenter did not support the addition of 
the factor, suggesting that the costs and benefits considered under 
this factor are not equivalent, as costs are typically imposed on 
providers while benefits are rendered to beneficiaries. This commenter 
expressed the concern that providers may argue for removal of a measure 
that is costly to collect and report despite its benefits. Another 
commenter suggested that using administrative cost to CMS as a basis 
for removal may be problematic if clinicians or patients believe the 
measure is important. Another commenter added that the proposed measure 
removal factor is subjective and recommended clearer guidelines and 
criteria for determining the costs and benefits of a measure before it 
is removed.
    Response: We agree that it is possible that providers may recommend 
removal of measures they do not support based on the argument that 
these measures are costly to report. However, input from providers is 
only one element of our case-by-case analysis of measures that we would 
take into account when weighing the costs associated with a measure 
against the benefit of retaining the measure in a program. We will 
weigh input we receive from all stakeholders with our own analysis of 
each measure to make our case-by-case determination of whether it would 
be appropriate to remove a measure based on its costs outweighing the 
benefit of its continued use in the program. We wish to clarify that it 
is not our intent to remove measures that continue to benefit residents 
or providers solely because these measures incur administrative costs 
to CMS; this is only one example of costs that would be weighed against 
the benefits when considering each measure on a case-by-case basis.
    Regarding concern over the subjectivity of the new measure removal 
factor and the suggestion for clearer guidelines and criteria for 
determining the costs and benefits of a measure before it is removed, 
we intend to be transparent in our assessment of measures under this 
measure removal factor. As described above, there are various 
considerations of costs and

[[Page 39269]]

benefits, direct and indirect, financial and otherwise, that we will 
evaluate in applying removal Factor 8, and we will take into 
consideration the perspectives of multiple stakeholders. However, 
because we intend to evaluate each measure on a case-by-case basis, and 
each measure has been adopted to fill different needs in the SNF QRP, 
we do not believe it would be meaningful to identify a specific set of 
assessment criteria to apply to all measures. We believe costs include 
costs to stakeholders such as patients, caregivers, providers, CMS, and 
other entities. In addition, we note that the benefits we will consider 
center around benefits to residents and caregivers as the primary 
beneficiaries of our quality reporting program. When we propose through 
rulemaking to remove a measure under this measure removal factor, we 
will provide information on the costs and benefits we considered in 
evaluating the measure.
    Comment: One commenter noted that the existing seven removal 
factors are sufficient for appropriate measure evaluation.
    Response: While we acknowledge that there are seven factors 
currently adopted that may be used for considering measure removal from 
the SNF QRP, we believe the proposed new measure removal factor adds a 
new criterion that is not captured in the other seven factors. The 
proposed new measure removal factor will help advance the goals of the 
Meaningful Measures Initiative, which aims to improve outcomes for 
patients, their families, and health care providers while reducing 
burden and costs for clinicians and providers. We are also making minor 
grammatical edits to the SNF QRP measure removal factor language to 
align with the language of other CMS quality programs.
    After considering the comments, we are finalizing our proposal to 
add an additional measure removal factor: Factor 8. The costs 
associated with a measure outweigh the benefit of its continued use in 
the program. We are also finalizing our proposal to the updates to the 
regulatory text and to codify the seven removal factors we have 
previously finalized for the SNF QRP, as well as the new measure 
removal factor, Factor 8 at new Sec.  413.360(b)(3). We are also making 
minor grammatical edits to the SNF QRP measure removal factor language 
to align with the language of other CMS quality programs.
4. Quality Measures Currently Adopted for the FY 2020 SNF QRP
    The SNF QRP currently has 12 measures for the FY 2020 program year, 
which are outlined in Table 39.

  Table 39--Quality Measures Currently Adopted for the FY 2020 SNF QRP
------------------------------------------------------------------------
            Short name                  Measure name and data source
------------------------------------------------------------------------
             Resident Assessment Instrument Minimum Data Set
------------------------------------------------------------------------
Pressure Ulcer....................  Percent of Residents or Patients
                                     With Pressure Ulcers That Are New
                                     or Worsened (Short Stay) (NQF
                                     #0678).*
Pressure Ulcer/Injury.............  Changes in Skin Integrity Post-Acute
                                     Care: Pressure Ulcer/Injury.
Application of Falls..............  Application of Percent of Residents
                                     Experiencing One or More Falls with
                                     Major Injury (Long Stay) (NQF
                                     #0674).
Application of Functional           Application of Percent of Long-Term
 Assessment/Care Plan.               Care Hospital (LTCH) Patients with
                                     an Admission and Discharge
                                     Functional Assessment and a Care
                                     Plan That Addresses Function (NQF
                                     #2631).
Change in Mobility Score..........  Application of IRF Functional
                                     Outcome Measure: Change in Mobility
                                     Score for Medical Rehabilitation
                                     Patients (NQF #2634).
Discharge Mobility Score..........  Application of IRF Functional
                                     Outcome Measure: Discharge Mobility
                                     Score for Medical Rehabilitation
                                     Patients (NQF #2636).
Change in Self-Care Score.........  Application of the IRF Functional
                                     Outcome Measure: Change in Self-
                                     Care Score for Medical
                                     Rehabilitation Patients (NQF
                                     #2633).
Discharge Self-Care Score.........  Application of IRF Functional
                                     Outcome Measure: Discharge Self-
                                     Care Score for Medical
                                     Rehabilitation Patients (NQF
                                     #2635).
DRR...............................  Drug Regimen Review Conducted With
                                     Follow-Up for Identified Issues--
                                     Post Acute Care (PAC) Skilled
                                     Nursing Facility (SNF) Quality
                                     Reporting Program (QRP).
------------------------------------------------------------------------
                              Claims-Based
------------------------------------------------------------------------
MSPB SNF..........................  Medicare Spending Per Beneficiary
                                     (MSPB)--Post Acute Care (PAC)
                                     Skilled Nursing 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 (SNF)
                                     Quality Reporting Program (QRP).
------------------------------------------------------------------------
* The measure will be replaced with the Changes in Skin Integrity Post-
  Acute Care: Pressure Ulcer/Injury measure, effective October 1, 2018.

    Comment: While we did not solicit comment on currently adopted or 
future measures for the SNF QRP, we received multiple comments 
suggesting the removal or modification of measures finalized in 
previous rules as well as recommendations for future measure 
development.
    Response: We thank commenters for their comments. We did not 
propose any changes to our previously finalized measures or to adopt 
any new measures for the SNF QRP. We will take these comments into 
consideration as we engage in future measure development and selection 
activities for the SNF QRP. The SNF QRP measures described in Table 39 
were adopted in the FY 2016 SNF PPS final rule (80 FR 46432 through 
46453), FY 2017 SNF PPS final rule (81 FR 52012 through 52039), or FY 
2018 SNF PPS final rule (82 FR 36570 through 36594), and we refer the 
reader to those detailed discussions.
5. IMPACT Act Implementation Update
    In the FY 2018 SNF PPS final rule (82 FR 36596 through 36597), we 
stated that we intended to specify two measures that would satisfy the 
domain of

[[Page 39270]]

accurately communicating the existence and provision of the transfer of 
health information and care preferences under section 1899B(c)(1)(E) of 
the Act no later than October 1, 2018, and intended to propose to adopt 
them for the FY 2021 SNF QRP, with data collection beginning on or 
about October 1, 2019.
    As stated in the FY 2019 SNF PPS proposed rule (83 FR 21083), as a 
result of the input provided during a public comment period between 
November 10, 2016 and December 11, 2016, input provided by a technical 
expert panel (TEP), and pilot measure testing conducted in 2017, we are 
engaging in continued development work on these two measures, including 
supplementary measure testing and providing the public with an 
opportunity for comment in 2018. We stated that we would reconvene a 
TEP for these measures in mid-2018 which occurred in April 2018. We 
stated that we now intend to specify the measures under section 
1899B(c)(1)(E) of the Act no later than October 1, 2019 and intend to 
propose to adopt the measures for the FY 2022 SNF QRP, with data 
collection beginning with residents admitted as well as discharged on 
or after October 1, 2020. For more information on the pilot testing, we 
refer readers to 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.
    Comment: A few commenters supported the delayed implementation of 
the measures. One commenter supported the continued evaluation and 
testing of the measures prior to adoption. The commenter believed that 
this delay is appropriate as it allows more time for thorough measure 
development, continued field testing of the measures, and public input 
on the draft measures. This commenter noted that continued development 
of the measures will help to ensure they are measuring the domain of 
interest and will have a meaningful impact on the quality of care.
    Response: We appreciate the commenters support.
6. Form, Manner, and Timing of Data Submission Under the SNF QRP
    Under our current policy, SNFs report data on SNF QRP assessment-
based measures and standardized resident assessment data by reporting 
the designated data elements for each applicable resident on the 
Minimum Data Set (MDS) resident assessment instrument and then 
submitting completed instruments to CMS using the Quality Improvement 
Evaluation System Assessment Submission and Processing (QIES ASAP) 
system. We refer readers to the FY 2018 SNF PPS final rule (82 FR 36601 
through 36603) for the data collection and submission time frames for 
assessment-based measures and standardized resident assessment data 
that we finalized for the SNF QRP.
7. Changes to the SNF QRP Reconsideration Requirements
    Section 413.360(d)(1) of our regulations states, in part, that SNFs 
that do not meet the SNF QRP requirements for a program year will 
receive a letter of non-compliance through the QIES ASAP system, as 
well as through the United States Postal Service.
    In the FY 2019 SNF PPS proposed rule (83 FR 21083), we proposed to 
revise Sec.  413.360(d)(1) to expand the methods by which we would 
notify a SNF of non-compliance with the SNF QRP requirements for a 
program year. Revised Sec.  413.360(d)(1) would state that we would 
notify SNFs of non-compliance with the SNF QRP requirements via a 
letter sent through at least one of the following notification methods: 
The QIES ASAP system; the United States Postal Service; or via an email 
from the Medicare Administrative Contractor (MAC). We believe that this 
change will address feedback from providers who requested additional 
methods for notification.
    In addition, Sec.  413.360(d)(4) currently states that we 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.
    We proposed to revise Sec.  413.360(d)(4) to state that we will 
notify SNFs, in writing, of our final decision regarding any 
reconsideration request via a letter sent through at least one of the 
following notification methods: The QIES ASAP system, the United States 
Postal Service, or via an email from the Medicare Administrative 
Contractor (MAC).
    We invited public comments on these proposals.
    Comment: Several commenters expressed support for CMS' efforts to 
expand the methods for notifying providers of non-compliance and 
decisions on reconsideration requests. One commenter acknowledged that 
the addition of email notifications from the Medicare Administrative 
Contractor (MAC) as a third notification method may help reduce burden, 
adding that providers should be notified via at least two of the three 
methods and that letters should require return receipt to ensure 
notifications are not lost in the mail. Another commenter recommended 
that CMS either specify a notification method that will always be used, 
allow providers to select a preferred method, or consistently use all 
three methods to ensure that notifications are received by appropriate 
organization leaders. Several commenters suggested that CMS provide 
additional information regarding how to specify appropriate recipients 
of email notifications from the Medicare Administrative Contractor 
(MAC). Another commenter recommended selecting a consistent 
notification process, using the same methods for all SNFs, noting that 
consistent and predictable notification will reduce provider burden and 
lower the risk of missing a notification.
    Response: We thank commenters for their support. We will use at 
least one method of notification, and providers will be notified 
regarding the specific method of communication that CMS will use via 
the SNF QRP Reconsideration and Exception and Extension website 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 and announcements via the PAC listserv. The 
announcements will be posted annually following the May 15th data 
submission deadline--prior to the distribution of the initial notices 
of non-compliance determination in late spring/early summer. Messaging 
will include the method of communication for the notices, instructions 
for sending a reconsideration request, and the final deadline for 
submitting the request. This policy would be effective October 1, 2018.
    With regard to the comment about specifying the recipient of 
notification for a facility, our notifications are sent to the point of 
contact on file in the QIES database. This information is populated via 
ASPEN. It is the responsibility of the facility to ensure that this 
information is up-to-date. For information regarding how to update 
provider information in QIES, we refer providers to contact their 
Medicare Administrative Contractor or CMS Regional Office at https://www.cms.gov/About-CMS/Agency-Information/RegionalOffices/index.html. 
Downloads of contact information for each Regional Office are available 
at the bottom of the web page.
    We disagree with the recommendation that CMS notify all

[[Page 39271]]

SNFs using the same method in order to account for circumstances that 
are beyond our control, such as technical issues that may impede the 
delivery of electronic notifications. As discussed, providers will be 
notified in advance of the specific method of communication that CMS 
will use.
    We are finalizing our proposal to revise Sec.  413.360(d)(1) to 
state that we will notify a SNF of non-compliance with the SNF QRP 
requirements for a program year via a letter sent through at least one 
of the following notification methods: The QIES ASAP system; the United 
States Postal Service; or via an email from the Medicare Administrative 
Contractor (MAC).
    We are also finalizing our proposal, to revise Sec.  413.360(d)(4) 
to state that we will notify SNFs, in writing, of our final decision 
regarding any reconsideration request via a letter sent through at 
least one of the following notification methods: The QIES ASAP system, 
the United States Postal Service, or via an email from the Medicare 
Administrative Contractor (MAC).
8. Policies Regarding Public Display for the SNF QRP
    Section 1899B(g) of the Act requires the Secretary to establish 
procedures for the public reporting of SNFs' performance on measures 
under sections 1899B(c)(1) and 1899B(d)(1) of the Act. SNF QRP measure 
data will be displayed on the Nursing Home Compare website, an 
interactive web tool that assists individuals by providing information 
on SNF quality of care to those who need to select a SNF.
    In the FY 2018 SNF PPS final rule (82 FR 36606 through 36607), we 
finalized that we would publicly display the Medicare Spending Per 
Beneficiary-PAC SNF QRP and Discharge to Community-PAC SNF QRP measures 
in calendar year 2018 based on discharges from October 1, 2016 through 
September 30, 2017. In the FY 2019 SNF PPS proposed rule (83 FR 21084), 
we proposed to increase the number of years of data used to calculate 
the Medicare Spending Per Beneficiary-PAC SNF QRP and Discharge to 
Community-PAC SNF QRP measures for purposes of display from 1 year to 2 
years. Under this proposal, data on these measures would be publicly 
reported in CY 2019, or as soon thereafter as operationally feasible, 
based on discharges from October 1, 2016 through September 30, 2018.
    Increasing the measure calculation and public display periods from 
1 to 2 years of data increases the number of SNFs with enough data 
adequate for public reporting for the Medicare Spending Per 
Beneficiary-PAC SNF QRP measure from 86 percent (based on 2016 Medicare 
FFS claims data) to 95 percent (based on 2015 through 2016 Medicare FFS 
claims data), and for the Discharge to Community-PAC SNF QRP measure 
from 83 percent (based on 2016 Medicare FFS claims data) to 94 percent 
(based on 2015 through 2016 Medicare FFS claims data). Increasing 
measure public display periods to 2 years also aligns with the public 
display periods of these measures in the IRF QRP and LTCH QRP.
    We also proposed to begin publicly displaying data in CY 2020, or 
as soon thereafter as is operationally feasible, on the following four 
assessment-based measures: (1) Application of IRF Functional Outcome 
Measure: Change in Self-Care Score for Medical Rehabilitation Patients 
(NQF #2633) (Change in Self-Care Score); (2) Application of IRF 
Functional Outcome Measure: Change in Mobility Score for Medical 
Rehabilitation Patients (NQF #2634) (Change in Mobility Score); (3) 
Application of IRF Functional Outcome Measure: Discharge Self-Care 
Score for Medical Rehabilitation Patients (NQF #2635) (Discharge Self-
Care Score); and (4) Application of IRF Functional Outcome Measure: 
Discharge Mobility Score for Medical Rehabilitation Patients (NQF 
#2636) (Discharge Mobility Score). SNFs are required to submit data on 
these four assessment-based measures with respect to admissions as well 
as discharges occurring on or after October 1, 2018. We proposed to 
display data for these assessment-based measures based on 4 rolling 
quarters of data, initially using 4 quarters of discharges from January 
1, 2019 through December 31, 2019. To ensure the statistical 
reliability of the measure rates for these four assessment-based 
measures, we also proposed that if a SNF has fewer than 20 eligible 
cases during any 4 consecutive rolling quarters of data that we are 
displaying for any of these measures, then we would note in our public 
display of that measure that with respect to that SNF, the number of 
cases/resident stays is too small to publicly report.
    Comment: One commenter supported the proposal to publicly display 
the four SNF functional outcome measures on the SNF Compare website in 
CY 2020.
    Response: We thank the commenter for the support.
    Comment: Several commenters, including MedPAC, supported increasing 
the number of years of data used to calculate the Medicare Spending per 
Beneficiary-PAC SNF QRP and Discharge to Community-PAC SNF QRP measures 
from 1 year to 2 years to increase the number of providers that can be 
included in public reporting and also to align the measurement period 
with that used in other PAC settings. One commenter was concerned that 
increasing the measurement period to 2 years would penalize facilities 
that showed improvement in a one-year period, as the data would be 
aggregated across 2 years. Two commenters agreed with increasing the 
measurement period from 1 to 2 years but questioned the usefulness of a 
measure that they stated required a significant adjustment in 
collection methods to acquire data necessary to calculate a rate.
    Response: We thank MedPAC and the other commenters for their 
support to increase the number of years of data used to calculate the 
Medicare Spending per Beneficiary-PAC SNF QRP measure and Discharge to 
Community-PAC SNF QRP measure from 1 to 2 years. We appreciate the 
commenter's concern about the impact of aggregating data across 2 years 
on the ability to demonstrate improvement in a 1-year period; however, 
we believe that the benefit of increasing the number of SNFs in public 
reporting outweighs the expressed concern associated with increasing 
the measurement period to 2 years because it would provide more 
information to consumers who may have a limited number of SNFs in their 
area. Further, improvements in 1-year period will be included in the 2-
year data, so providers' efforts to improve can still be reflected in 
their measure scores. The proposed change will also align with the 
measurement period of the three claims-based measures (Medicare 
Spending per Beneficiary, Discharge to Community, and Potentially 
Preventable Readmissions) across the IRF, LTCH, and SNF QRPs.
    Comment: MedPAC suggested that if CMS increases the measurement 
period for the Medicare Spending per Beneficiary PAC SNF QRP measure 
and Discharge to Community PAC SNF QRP measure to 2 years, CMS could 
consider giving more weight to the most recent performance year. MedPAC 
also suggested that CMS reconsider the approach to establishing minimum 
counts of episodes for public reporting of the Medicare Spending per 
Beneficiary-PAC SNF QRP measure to ensure accurate representation of a 
provider's performance.
    Response: We thank MedPAC for its suggestion to consider greater 
weighting of the most recent year of data and to reconsider the 
approach to establishing minimum counts of episodes for public 
reporting. We will consider testing these suggestions in the future.
    Comment: A commenter noted the importance of understanding the

[[Page 39272]]

relationship between the Medicare Spending per Beneficiary-PAC SNF QRP 
measure, quality, and beneficiary out-of-pocket expenses. The commenter 
also noted the importance of educating consumers on this measure. The 
commenter suggested that CMS analyze these relationships further and 
define a strategy for interpreting the results before making the 
measure results public. Another commenter noted that facilities should 
not be penalized for decisions made by physicians that are beyond 
providers' control.
    Response: We thank the commenters for the suggestions for 
additional analyses on the relationship between the Medicare Spending 
per Beneficiary-PAC SNF QRP measure, quality, and out-of-pocket 
spending. We will consider analyses on these topics in the future. 
Regarding beneficiary education for interpreting results, we will 
continue to work to develop language to support beneficiary 
understanding of the measures in public reporting. Regarding the 
comment on facility penalty for physician decision-making, the measure 
is intended to promote care coordination and improve efficiency by 
creating a continuum of accountability between Medicare providers.
    Comment: Some commenters suggested that the public reporting of the 
SNF functional outcome measures: (1) Change in Self-Care Score; (2) 
Change in Mobility Score; (3) Discharge Self-Care Score; and (4) 
Discharge Mobility Score, on the SNF Compare website be delayed beyond 
CY 2020. One commenter suggested that the reporting be delayed until 
additional measures that address the maintenance of functional 
abilities are also developed and reported alongside the functional 
improvement measures and also encouraged the development of measures 
related to other nursing goals. Other commenters suggested that CMS 
reconsider publicly reporting the SNF functional quality measures in CY 
2020 if these measures do not receive NQF endorsement prior to public 
display.
    Response: We thank the commenters for their suggestions. We 
addressed the importance of measuring functional maintenance for SNF 
residents in the FY 2018 SNF PPS final rule (82 FR 36588). We interpret 
the commenter's recommendation of ``at least one nursing goals 
measure'' to refer to the development of new measures relating to 
functional status for SNF residents. We support future quality 
measurement work that will address the development of other measures 
that focus on maintaining function and the slowing of functional 
decline. We agree that the NQF endorsement process is an important part 
of measure development. The four functional outcome quality measures 
that we proposed to publicly report are NQF-endorsed for the IRF 
setting, and we plan to submit these four assessment-based measures to 
NQF for endorsement consideration in the SNF setting as soon as 
feasible.
    After consideration of public comments we received, we are 
finalizing our proposal, to increase the number of years of data used 
to calculate the Medicare Spending per Beneficiary-PAC SNF QRP measure 
and Discharge to Community-PAC SNF QRP measure for purposes of public 
display from 1 to 2 years, starting in CY 2019 or as soon thereafter as 
operationally feasible. We are also finalizing our proposal to begin 
publicly displaying data in CY 2020, or as soon thereafter as is 
operationally feasible, on the following four assessment-based 
measures: (1) Application of IRF Functional Outcome Measure: Change in 
Self-Care Score for Medical Rehabilitation Patients (NQF #2633); (2) 
Application of IRF Functional Outcome Measure: Change in Mobility Score 
for Medical Rehabilitation Patients (NQF #2634); (3) Application of IRF 
Functional Outcome Measure: Discharge Self-Care Score for Medical 
Rehabilitation Patients (NQF #2635); and (4) Application of IRF 
Functional Outcome Measure: Discharge Mobility Score for Medical 
Rehabilitation Patients (NQF #2636).

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

1. Background
    Section 215(b) of the Protecting Access to Medicare Act of 2014 
(PAMA) (Pub. L. 113-93) authorized the SNF VBP Program (the 
``Program'') by adding section 1888(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 the FY 2018 SNF PPS final rule (82 FR 36608 
through 36623), we adopted additional policies for the Program, 
including an exchange function methodology for disbursing value-based 
incentive payments.
    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 
rewarding 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. Finally, we refer readers to the FY 2018 SNF PPS final 
rule (82 FR 36608 through 36623) for discussions of the policies that 
we adopted related to value-based incentive payments, the exchange 
function, and other topics.
    We proposed additional requirements for the FY 2021 SNF VBP Program 
in the FY 2019 SNF PPS proposed rule (83 FR 21084 through 21089). We 
received several general comments on the SNF VBP Program.
    Comment: One commenter supported our goal of reducing preventable 
hospital readmissions, noting that those readmissions increase costs 
for the Medicare program, significantly affect beneficiaries, and 
increase the likelihood of medical errors related to care coordination.
    Response: We thank the commenter for this support.
    Comment: A commenter suggested that we consider developing an 
integrated approach that provides incentives to SNFs to accept more 
medically complex patients and promotes readmission prevention. The 
commenter suggested that, while the PDPM and SNF VBP Programs are 
authorized separately, integrating them might be helpful to that end, 
and could include payments for telemedicine, post-discharge care 
coordination, and training on readmission prevention protocols and 
refinements to Interrupted Stay policies. The commenter stated that 
readmissions prevention strategies can be very effective at saving 
Medicare spending and improving the patient experience, but can also 
require initial investments in technology and staff training.
    Response: We agree that readmission prevention strategies can be 
effective at

[[Page 39273]]

saving Medicare spending and improving the patient experience. At this 
time, we do not believe it is possible to integrate the PDPM and SNF 
VBP Program given their separate authorities and purposes. However, we 
will continue to monitor the effects of the SNF VBP Program and the 
case-mix classification methodology in the SNF prospective payment 
system, including the PDPM.
    Comment: One commenter encouraged us to make public as much SNF VBP 
data as possible on Nursing Home Compare and data.medicare.gov, 
including individual facilities' baseline and performance period 
readmissions rates, achievement and improvement points, performance 
scores, rankings, and value-based incentive payment percentages. The 
commenter noted that CMS has provided most of this type of information 
for other programs, and that the public should expect the same level of 
transparency from SNF VBP.
    Response: We agree with the comment and intend to be as transparent 
as possible in order to inform consumer decision-making, quality 
improvement initiatives, and high quality patient care. As required by 
section 1888(h)(9) of the Act, we will publish facility performance 
information, including SNF performance scores and rankings, the range 
of SNF performance scores, the number of SNFs receiving value-based 
incentive payments, and the range and total amounts of those payments, 
on the Nursing Home Compare website.
    Comment: One commenter requested that we ensure that specialty 
populations such as children, patients with HIV/AIDS, ventilator-
dependent patients, and those with Huntington's disease or other 
neurodegenerative disorders, do not experience unintended negative 
results based on the SNF VBP Program's incentives.
    Response: We monitor numerous aspects of the SNF VBP Program, 
including trends in measure rates, SNF performance scores, and starting 
with FY 2019, value-based incentive payment percentages and their 
effects on SNFs' care quality and on beneficiaries' access to care. We 
understand the commenter's concerns about specialty patient 
populations, and we will continue working to ensure that such 
populations do not experience unintended consequences because of the 
SNF VBP Program.
2. Measures
    For background on the measures we have adopted for 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 are currently 
using 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, as required by statute.
    We did not propose any changes to the Program's measures. However, 
we received several comments on the Program's measures.
    Comment: One commenter requested that we announce when we will 
transition the SNF VBP Program to a measure of potentially preventable 
readmissions rather than the current all-cause readmissions measure. 
One commenter recommended that we not replace the SNFRM with the SNFPPR 
before FY 2021 to allow SNFs time to adjust to the SNFRM and other 
measures of readmissions. Another commenter encouraged us to transition 
the Program to the measure of potentially preventable readmissions, 
stating that the PPR will exclude planned readmissions that are not 
considered a negative outcome, and therefore, should not be counted 
against SNFs. Other commenters urged us to seek NQF endorsement and 
input from the Measure Applications Partnership as soon as possible on 
the SNFPPR, and requested that we provide a timeline for when we will 
replace the all-cause measure with the SNFPPR. Another commenter 
requested that we consider standardizing and consolidating various SNF 
hospitalization measures used in Medicare to focus SNFs' quality 
improvement efforts. The commenter noted that state initiatives may 
also have similar measures based on different data, and that the 
multitude of hospitalization measures may be confusing for consumers 
and may dilute provider improvement efforts.
    Response: We sought input from the MAP on the SNFPPR prior to 
proposing it for adoption in the SNF VBP. The MAP published its views 
in a February 2016 report, as we described in the FY 2017 SNF PPS final 
rule (81 FR 51989 through 51990). In that report,\8\ MAP noted the 
statutory requirement that we specify a measure of potentially 
preventable readmissions for the SNF VBP Program, and explained support 
for the importance of the measure and its acknowledgement that 
``readmission for the SNF setting is not an occasional occurrence.'' 
MAP's report also noted public commenters' input, including general 
support for the recommendation to ``encourage continued development'' 
of the SNFPPR and some concerns about the measure's specifications and 
MAP's making a recommendation on a measure that is not fully tested. 
Regarding submission of the SNFPPR for consensus endorsement, we 
currently plan to submit the measure for NQF endorsement in 2019 upon 
completion of additional testing. We plan to propose transitioning to 
this measure after the completion of the endorsement process.
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    \8\ Available at http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx.
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    We also acknowledge the commenter's concern about the number of 
hospitalization measures in Medicare and in other quality programs, 
including those used by the states. We will consider how we might 
further streamline our quality programs, particularly under the 
Meaningful Measures Initiative. However, we note that all 
rehospitalization measures share the same underlying care focus--that 
is, avoiding rehospitalizations--even if they vary somewhat in the 
specifics of which hospitalizations they measure. We continue to 
believe that SNFs working to improve care quality and minimize 
rehospitalizations for their patients will perform well on 
hospitalization measures.
    We continue to determine when it is practicable to transition the 
Program to the measure of potentially preventable readmissions, and we 
will propose that transition in future rulemaking, which we believe 
will provide sufficient notice to SNFs about the quality measure that 
will form the basis for the SNF VBP Program. We intend to take all of 
the views expressed by public commenters into account when we make that 
decision, as well as the operational necessities of the Program (such 
as the time needed to calculate measure rates on the SNFPPR and how 
that time interacts with the Program's performance and baseline 
periods). However, we would like to clarify that the SNFRM currently 
excludes certain planned readmissions.
    Comment: One commenter stated that the SNF VBP Program should 
consist of more than just one hospital readmissions measure, and 
encouraged us to work with Congress to include additional measures in 
the Program, potentially including those currently displayed on Nursing 
Home Compare, were part of the SNF VBP demonstration, or are part of 
the SNF QRP. The commenter also specifically

[[Page 39274]]

suggested measures including turnover as a percentage of nursing staff, 
total CNA hours per patient day, and total licensed nursing hours per 
patient day, noting that higher staffing levels are correlated with 
higher quality of care outcomes.
    Response: We thank the commenter for these suggestions. As the 
commenter noted, any changes to expand the SNF VBP Program's measure 
set would require Congressional action.
    Comment: One commenter expressed concern about the data elements 
that SNFs must document to track their performance on the SNFRM, noting 
that they are different than those used for the CMS Star Ratings. The 
commenter also urged us to better align the measures between the SNF 
QRP and SNF VBP Programs, stating that SNFs want harmonization in what 
they are required to collect, document, and extract for performance 
tracking and improvement purposes.
    Response: SNFs may choose to track readmissions to the hospitals as 
part of their quality improvement efforts, and we note that the 
measures that we have specified for the SNF VBP program impose no data 
collection requirements on SNFs. Additionally, while we understand the 
potential benefits of quality measure alignment between the SNF QRP and 
SNF VBP Programs, we do not believe that this type of alignment meets 
the SNF VBP Program's needs at this time. While we generally agree that 
aligning measures across programs is ideal, we hesitate to do so when 
it is inappropriate to the programs and does not align with statutory 
direction. In this case, aligning with the SNF QRP readmission measure 
would require the SNF VBP Program to ignore readmissions that occur 
during the SNF stay, and we believe this is inappropriate to a value-
based purchasing program intended to reduce readmissions among SNF 
patients in accordance with the statute. Likewise, the SNF QRP 
readmission measure must follow a statutory requirement to align with 
readmission measures in other post-acute QRPs that are not compatible 
with the needs of the SNF VBP program.
    We thank the commenters for their feedback on SNF VBP measures.
a. Accounting for Social Risk Factors in the SNF VBP Program
    In the FY 2018 SNF PPS final rule (82 FR 36611 through 36613), we 
discussed the importance of improving beneficiary outcomes including 
reducing health disparities. We also discussed our commitment to 
ensuring that medically complex patients, as well as those with social 
risk factors, receive excellent care. We discussed how studies show 
that social risk factors, such as being near or below the poverty level 
as determined by HHS, belonging to a racial or ethnic minority group, 
or living with a disability, can be associated with poor health 
outcomes and how some of this disparity is related to the quality of 
health care.\9\ Among our core objectives, we aim to improve health 
outcomes, attain health equity for all beneficiaries, and ensure that 
complex patients, as well as those with social risk factors, receive 
excellent care. Within this context, reports by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) and the National 
Academy of Medicine have examined the influence of social risk factors 
in our value-based purchasing programs.\10\ As we noted in the FY 2018 
SNF PPS final rule (82 FR 36611), ASPE's report to Congress found that, 
in the context of value-based purchasing programs, dual eligibility for 
Medicare and Medicaid was the most powerful predictor of poor health 
care outcomes among those social risk factors that they examined and 
tested. In addition, as noted in the FY 2018 SNF PPS final rule, the 
National Quality Forum (NQF) undertook a 2-year trial period in which 
certain new measures and measures undergoing maintenance review have 
been assessed to determine if risk adjustment for social risk factors 
is appropriate for these measures.\11\ The trial period ended in April 
2017 and a final report is available at http://www.qualityforum.org/SES_Trial_Period.aspx. The trial concluded that ``measures with a 
conceptual basis for adjustment generally did not demonstrate an 
empirical relationship'' between social risk factors and the outcomes 
measured. This discrepancy may be explained in part by the methods used 
for adjustment and the limited availability of robust data on social 
risk factors. NQF has extended the socioeconomic status (SES) 
trial,\12\ allowing further examination of social risk factors in 
outcome measures.
---------------------------------------------------------------------------

    \9\ See, for example United States Department of Health and 
Human Services. ``Healthy People 2020: Disparities. 2014.'' 
Available at http://www.healthypeople.gov/2020/about/foundation-health-measures/Disparities; or National Academies of Sciences, 
Engineering, and Medicine. Accounting for Social Risk Factors in 
Medicare Payment: Identifying Social Risk Factors. Washington, DC: 
National Academies of Sciences, Engineering, and Medicine 2016.
    \10\ Department of Health and Human Services Office of the 
Assistant Secretary for Planning and Evaluation (ASPE), ``Report to 
Congress: Social Risk Factors and Performance Under Medicare's 
Value-Based Purchasing Programs.'' December 2016. Available at 
https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \11\ Available at http://www.qualityforum.org/SES_Trial_Period.aspx.
    \12\ Available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id& ItemID=86357.
---------------------------------------------------------------------------

    In the FY 2018/CY 2018 proposed rules for our quality reporting and 
value-based purchasing programs, we solicited feedback on which social 
risk factors provide the most valuable information to stakeholders and 
the methodology for illuminating differences in outcomes rates among 
patient groups within a provider that would also allow for a comparison 
of those differences, or disparities, across providers. Feedback we 
received across our quality reporting programs included encouraging CMS 
to explore whether factors could be used to stratify or risk adjust the 
measures (beyond dual eligibility); to consider the full range of 
differences in patient backgrounds that might affect outcomes; to 
explore risk adjustment approaches; and to offer careful consideration 
of what type of information display would be most useful to the public.
    We also sought public comment on confidential reporting and future 
public reporting of some of our measures stratified by patient dual 
eligibility. In general, commenters noted that stratified measures 
could serve as tools for hospitals to identify gaps in outcomes for 
different groups of patients, improve the quality of health care for 
all patients, and empower consumers to make informed decisions about 
health care. Commenters encouraged us to stratify measures by other 
social risk factors such as age, income, and educational attainment. 
With regard to value-based purchasing programs, commenters also 
cautioned CMS to balance fair and equitable payment while avoiding 
payment penalties that mask health disparities, or discouraging the 
provision of care to more medically complex patients. Commenters also 
noted that value-based payment program measure selection, domain 
weighting, performance scoring, and payment methodology must account 
for social risk.
    We stated in the FY 2019 SNF VBP PPS proposed rule that as a next 
step, we are considering options to improve health disparities among 
patient groups within and across hospitals, SNFs, and other health care 
providers by increasing the transparency of disparities as shown by 
quality measures. We also stated that we are considering how this work 
applies to other CMS quality programs in the future. We refer readers 
to the FY 2018

[[Page 39275]]

IPPS/LTCH PPS final rule (82 FR 38403 through 38409) for more details, 
where we discuss the potential stratification of certain Hospital 
Inpatient Quality Reporting Program outcome measures. Furthermore, we 
stated that we continue to consider options to address equity and 
disparities in our value-based purchasing programs.
    We plan to continue working with ASPE, the public, and other key 
stakeholders on this important issue to identify policy solutions that 
achieve the goals of attaining health equity for all beneficiaries and 
minimizing unintended consequences.
    We received several comments on our discussion of social risk 
factors.
    Comment: One commenter suggested that we consider adjusting for 
social risk factors through peer grouping to avoid masking disparities 
in clinical performance. The commenter also suggested that we target 
technical assistance resources to low-performing providers and support 
research to reduce measurement bias. Another commenter was concerned 
that we had not yet adjusted the SNF Readmission Measure based on 
socioeconomic factors. The commenter expressed concern that we would 
score SNFs unfairly due to more challenging case mixes, and stated that 
we must adjust readmission scores to avoid unfair payment penalties for 
those SNFs serving patient populations with lower socioeconomic status. 
One commenter acknowledged that we are required by statute to adopt a 
measure of all-cause readmissions, but expressed concerns about the 
SNFRM due to its lack of risk adjustment for socioeconomic status, its 
lacking focus on preventable readmissions, and some design elements. 
The commenter encouraged us to create a socioeconomic status risk 
adjustment for this measure, noting that SNFs in underserved areas 
predominantly caring for low-income, dual-eligible residents may be 
penalized by measures of all-cause readmissions. Another commenter 
urged us to include risk adjustment for socioeconomic status for any 
readmission measures adopted under the SNF VBP Program. The commenter 
concurred with the December 2016 Report to Congress on Social Risk 
Factors' conclusion that social risk factors are essential determinants 
of health and stated that the IMPACT Act provides CMS with a wealth of 
patient-specific data that it can use to develop additional risk 
adjustment policies. The commenter encouraged us to use those data to 
adjust SNF VBP measures and provide incentives to SNFs caring for 
patients with social risk factors.
    Response: We thank the commenters for these suggestions and will 
take them into account as we develop additional policies on social risk 
factors in the future. However, in response to the commenter who 
expressed concern about the current SNF Readmission Measure, we note 
that the SNF Readmission Measure includes the following case-mix 
adjustments that we believe promote fairness in the application of 
financial penalties: Demographic characteristics (age and sex), 
principal diagnosis from the Medicare claim corresponding to the prior 
proximal hospitalization as categorized by AHRQ's Clinical 
Classification Software (CCS) groupings, length of stay during the 
patient's prior proximal hospitalization, length of stay in the 
intensive care unit (ICU), end-stage renal disease (ESRD) status, the 
patient's disability status, the number of prior hospitalizations in 
the previous 365 days, system-specific surgical indicators, individual 
comorbidities as grouped by Hierarchical Condition Categories (HCCs) or 
other comorbidity indices, and a variable counting the number of 
comorbidities if the patient had more than two HCCs. We refer readers 
to the FY 2016 SNF PPS final rule (80 FR 46411 through 46419) for 
additional technical details on the SNFRM.
    Comment: One commenter encouraged us to continue using findings 
from the NQF Sociodemographic Status trial to inform our efforts to 
address equity and disparities in our VBP Programs, but recommended 
that we not add SES covariates to the SNFRM risk adjustment model as 
that action may create biases in reporting, undermine system-based 
approaches to providing high quality care, and create access to care 
problems.
    Response: We remain concerned about the possibility that additional 
risk adjustment may mask important performance differences for 
providers and suppliers that treat patients with additional 
comorbidities or complications, and we will continue studying the 
issue. We intend to monitor NQF's ongoing work on this topic carefully.
    Comment: One commenter agreed with recommendations to incorporate 
social risk factors in risk adjustment, but was not sure about which 
risk characteristics are available in the Medicare eligibility files 
and whether those characteristics have been evaluated independently. 
The commenter also suggested that we coordinate research efforts with 
states that may already be conducting work in this area. One commenter 
urged us to incorporate risk adjustment for sociodemographic and 
socioeconomic status into SNF VBP measures, but expressed support for 
the continued use of unadjusted data for measures related to items that 
are within the SNF's control. The commenter urged us to make unadjusted 
performance measure data available to the public to ensure that 
analysis of health care disparities can continue, and until risk-
adjusted measures are available, to report stratified measure rates to 
the public. The commenter also expressed support for alternative 
payment mechanisms that account for the complexities of extremely 
disadvantaged patients, and called on us to monitor the effects of our 
quality improvement programs carefully. Another commenter supported our 
continued evaluation of social determinants of health, including 
providers' commitments to caring for the Medicaid population, and their 
impact on our payment systems. The commenter encouraged us to ensure 
that our payment methodologies are updated consistently to account for 
these factors and maintain equitable access to care.
    Response: We intend to continue working with states and other 
stakeholders to the greatest extent possible to understand the 
challenges associated with additional risk adjustment for socioeconomic 
and sociodemographic status in quality measurement programs, including 
assessing the appropriateness of incorporating specific risk factors in 
the risk adjustment models. That work includes identifying appropriate 
data sources for social risk factors, and we will consider the 
commenter's point about the Medicare eligibility files as a potential 
data source.
    We agree with the commenters that studying health care disparities 
is critically important for the health care system, and we will 
continue to do so. We will also take that point under consideration as 
we consider social risk factors adjustment policies for the SNF VBP 
Program in the future. We will continue monitoring the SNF VBP Program 
to ensure that Medicare beneficiaries maintain access to needed SNF 
care.
    We thank the commenters for this feedback, and will take it account 
as we consider the appropriateness of accounting for social risk 
factors in the SNF VBP Program.
3. Performance Standards
a. FY 2021 Performance Standards
    We refer readers to the FY 2017 SNF PPS final rule (81 FR 51995 
through

[[Page 39276]]

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.
    We published the final numerical values for the FY 2020 performance 
standards in the FY 2018 SNF PPS final rule (82 FR 36613), and for 
reference, we are displaying those values again in Table 40.

                          Table 40--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).
----------------------------------------------------------------------------------------------------------------

    We will continue to use the achievement threshold and benchmark as 
previously finalized in the FY 2018 SNF PPS final rule. However, due to 
timing constraints associated with the compilation of the FY 2017 
MedPAR file to include 3 months of data following the last discharge 
date, we were unable to provide estimated numerical values for the FY 
2021 Program year's performance standards in the proposed rule. As 
discussed further below, we proposed to adopt FY 2017 as the baseline 
period for the FY 2021 program year. While we did not expect either the 
achievement threshold or benchmark to change significantly from what 
was finalized for the FY 2020 Program year, we stated our intent to 
publish the final numerical values for the performance standards based 
on the FY 2017 baseline period in the FY 2019 SNF PPS final rule.
    We welcomed public comment on this approach.
    Comment: One commenter urged us to score SNFs on achievement only, 
stating that Medicare's quality programs should reward providers based 
on clear, absolute, and prospectively set performance targets.
    Response: While we appreciate this suggestion, we note that we are 
required by section 1888(h)(3)(B) of the Act to establish performance 
standards that include levels of achievement and improvement, and to 
use to the higher of either improvement or achievement when calculating 
the SNF performance score.
    Comment: One commenter stated its understanding of the timing 
constraints that we discussed with respect to the MedPAR file for 
performance standards calculations, and reiterated its prior support 
for the Program's switch to fiscal year instead of calendar year 
performance periods.
    Response: We appreciate the continued support for the policy we 
finalized in the FY 2018 SNF PPS final rule (82 FR 36613 through 36614) 
to change the SNF VBP Program's performance and baseline periods from 
calendar years to fiscal years. Additionally, as we note further below, 
we are finalizing FY 2019 (October 1, 2018 through September 30, 2019) 
as the performance period for the FY 2021 SNF VBP Program year.
    Comment: One commenter supported our efforts to measure improvement 
and encouraged us to reward providers that consistently achieve high 
performance under the SNF VBP Program.
    Response: We believe that the performance standards that we are 
adopting, which include levels of achievement and improvement as 
required by the SNF VBP Program's statute, continue to offer 
opportunities for us to recognize both SNFs that achieve high 
performance and those SNFs that improve over time.
    After consideration of the public comments, we are finalizing the 
numerical values for the FY 2021 SNF VBP Program based on the FY 2017 
baseline period. Those values follow below in Table 41.

                          Table 41--Final FY 2021 SNF VBP Program Performance Standards
----------------------------------------------------------------------------------------------------------------
                                                                                  Achievement
              Measure ID                         Measure description               threshold        Benchmark
----------------------------------------------------------------------------------------------------------------
SNFRM................................  SNF 30-Day All-Cause Readmission                0.79476          0.83212
                                        Measure (NQF #2510).
----------------------------------------------------------------------------------------------------------------

b. Correction of Performance Standard Numerical Values in Cases of 
Errors
    As noted previously, section 1888(h)(3)(C) of the Act requires that 
we establish and announce the performance standards for a fiscal year 
not later than 60 days prior to the performance period for the fiscal 
year involved. However, we currently do not have a policy that would 
address the situation where, subsequent to publishing the numerical 
values for the finalized performance standards for a program year, we 
discover an error that affects those numerical values. Examples of the 
types of errors that we could subsequently discover are inaccurate 
variables on Medicare claims, programming errors, excluding data should 
have been included in the performance standards calculations, and other 
technical errors that resulted in inaccurate achievement threshold and 
benchmark calculations. While we do not have reason to believe that the 
SNF VBP Program has previously published inaccurate numerical values 
for performance standards, in the FY 2019 SNF PPS proposed rule (83 FR 
21086), we stated our concern about the possibility that we would 
discover an error in the future and have no ability to correct the 
numerical values.
    We are aware that SNFs rely on the performance standards that we 
publicly display in order to target quality improvement efforts, and we 
do not believe that it would be fair to SNFs to repeatedly update our 
finalized performance standards if we were to identify multiple errors. 
In order to balance the need of SNFs to know what performance standards 
they will be held accountable to for a SNF VBP program year with our 
obligation to provide SNFs with the most accurate performance standards 
that we can based on the data available at the time, we proposed that 
if we discover an error in the calculations subsequent to having 
published the numerical values for the performance standards for a 
program year, we would update the numerical values to correct the 
error. We also

[[Page 39277]]

proposed that we would only update the numerical values one time, even 
if we subsequently identified a second error, because we believe that a 
one-time correction would allow us to incorporate new information into 
the calculations without subjecting SNFs to multiple updates. Any 
update we would make to the numerical values based on a calculation 
error would be announced via the CMS website, listservs, and other 
available channels to ensure that SNFs are made fully aware of the 
update.
    We welcomed public comments on this proposal.
    Comment: One commenter supported our proposal to adopt correction 
authority for performance standards and agreed that making multiple 
changes to the performance standards in a given program year would be 
difficult for SNFs' quality improvement efforts. The commenter also 
urged us to be transparent if we find additional technical errors.
    Response: We thank the commenter for the support, and we intend to 
be as transparent as possible if we identify any errors in the 
calculation of the numerical values of the SNF VBP Program's 
performance standards.
    After consideration of the public comments we have received, we are 
finalizing our policy to correct performance standard numerical values 
in cases of errors as proposed.
4. FY 2021 Performance Period and Baseline Period and for Subsequent 
Years
a. Background
    We refer readers to the FY 2016 SNF PPS final rule (80 FR 46422) 
for a discussion of our considerations for determining performance 
periods under the SNF VBP Program. Based on those considerations, as 
well as public comment, we adopted CY 2017 as the performance period 
for the FY 2019 SNF VBP Program, with a corresponding baseline period 
of CY 2015.
    Additionally, in the FY 2018 SNF PPS final rule (82 FR 36613 
through 36614), we adopted FY 2018 as the performance period for the FY 
2020 SNF VBP Program, with a corresponding baseline period of FY 2016. 
We refer readers to that rule for a discussion of the need to shift the 
Program's measurement periods from the calendar year to the fiscal 
year.
b. FY 2021 Performance and Baseline Periods
    As we discussed with respect to the FY 2019 and FY 2020 SNF VBP 
Program years, we continue to believe that a 12-month duration for the 
performance and baseline period is the most appropriate for the SNF VBP 
Program. Therefore, we proposed to adopt FY 2019 (October 1, 2018 
through September 30, 2019) as the performance period for the FY 2021 
SNF VBP Program year. We also proposed to adopt FY 2017 (October 1, 
2016 through September 30, 2017) hospital discharges as the baseline 
period for the FY 2021 SNF VBP Program year.
    We welcomed public comment on these proposals.
    Comment: One commenter expressed concern about our proposal to use 
FY 2019 as the performance period for the FY 2021 SNF VBP Program year, 
stating that SNFs need more time to improve their data collection, 
reporting, and evaluation efforts. The commenter requested that we 
align our measures with the SNF QRP and other quality programs, which 
will allow SNFs additional time for performance tracking and 
improvement activities. The commenter also requested that we provide 
SNFs with more timely performance feedback to help them identify areas 
for improvement efforts. One commenter expressed concern about the 
proposed performance period, stating that SNFs do not believe they are 
ready for FY 2019 to be used as the performance period and indicated 
that the collection and reporting of quality measures is a significant 
administrative burden. The commenter urged us to move to an automated 
system to reduce the reporting burden on SNFs and requested that we 
provide SNFs with timely performance feedback that they can use to 
identify areas where they need to focus their improvement efforts.
    Response: We would like to clarify for the commenter that the SNF 
VBP Program's measure is calculated based on hospital claims, and 
therefore, does not require data collection or impose any reporting 
burden on SNFs, though SNFs may choose to track readmissions to the 
hospital for their patients as part of their care coordination and 
quality improvement efforts. We do not believe that SNFs need 
additional time to track readmissions to the hospital for their 
patients or to undertake quality improvement efforts to minimize those 
readmissions because SNFs have had ample notice about the SNF VBP 
Program's operations and its focus on measures of hospital 
readmissions. We will, however, strive to provide as much timely 
information to SNFs as possible on their measured performance, but we 
note that the measure that we have specified for the Program includes 
significant calculations, including detailed risk adjustment, that 
complicates our intention to provide feedback more promptly than on a 
quarterly basis to SNFs.
    Comment: One commenter supported our performance and baseline 
period proposals and agreed that 12-month periods are appropriate for 
both the SNFRM and the SNFPPR.
    Response: We thank the commenter for the support.
    After consideration of the public comments that we received, we are 
finalizing the performance period and baseline period for FY 2021 as 
proposed.
c. Performance Periods and Baseline Periods for Subsequent Program 
Years
    As we have described in previous rules (see, for example, the FY 
2016 SNF PPS final rule, 80 FR 46422), we strive to link performance 
furnished by SNFs as closely as possible to the program year to ensure 
clear connections between quality measurement and value-based payment. 
We also strive to measure performance using a sufficiently reliable 
population of patients that broadly represent the total care provided 
by SNFs.
    Therefore, we proposed that beginning with the FY 2022 program year 
and for subsequent program years, we would adopt for each program year, 
a performance period that is the 1-year period following the 
performance period for the previous program year. We also proposed that 
beginning with the FY 2022 program year and for subsequent program 
years, we would adopt for each program year a baseline period that is 
the 1-year period following the baseline period for the previous year. 
Under this policy, the performance period for the FY 2022 program year 
would be FY 2020 (the 1-year period following the proposed FY 2021 
performance period of FY 2019), and the baseline period for the FY 2022 
program year would be FY 2018 (the 1-year period following the proposed 
FY 2021 baseline period of FY 2017). We believe adopting this policy 
will provide SNFs with certainty about the performance and baseline 
periods during which their performance will be assessed for future 
program years.
    We welcomed public comments on this proposal.
    Comment: One commenter supported our proposal to adopt performance 
and baseline periods automatically for subsequent program years.
    Response: We thank the commenter for the support.
    After consideration of the public comments that we have received, 
we are finalizing our policy to adopt performance periods and baseline

[[Page 39278]]

periods for subsequent program years as proposed.
5. SNF VBP Performance Scoring
a. Background
    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. We also 
refer readers to the FY 2018 SNF PPS final rule (82 FR 36614 through 
36616) for discussion of the rounding policy we adopted, our request 
for comments on SNFs with zero readmissions, and our request for 
comments on a potential extraordinary circumstances exception policy.
b. Scoring Policy for SNFs Without Sufficient Baseline Period Data
    In some cases, a SNF will not have sufficient baseline period data 
available for scoring for a Program year, whether due to the SNF not 
being open during the baseline period, only being open for a small 
portion of the baseline period, or other reasons (such as receiving an 
extraordinary circumstance exception, which we finalize below). The 
availability of baseline data for each SNF is an integral component of 
our scoring methodology, and we are concerned that the absence of 
sufficient baseline data for a SNF will preclude us from being able to 
score that SNF on improvement for a program year. As discussed further 
below, with respect to the proposed scoring adjustment for a SNF 
without sufficient data in the performance period to create a reliable 
SNF performance score, we are concerned that measuring SNFs with fewer 
than 25 eligible stays (or index SNF stays that would be included in 
the calculation of the SNF readmission measure) during the baseline 
period may result in unreliable improvement scores, and as a result, 
unreliable SNF performance scores. We considered policy options to 
address this issue.
    We continue to believe it is important to compare SNF performance 
during the same periods to control for factors that may not be 
attributable to the SNF, such as increased patient case-mix acuity 
during colder weather periods when influenza, pneumonia, and other 
seasonal conditions and illnesses are historically more prevalent in 
the beneficiary population. Using a 12-month performance and baseline 
period for all SNFs ensures that, to the greatest extent possible, 
differences in performance can be attributed to the SNF's care quality 
rather than to exogenous factors.
    Additionally, because we have proposed that for FY 2021 and future 
Program years, the start of the performance period for a Program year 
would begin exactly 12-months after the end of the baseline period for 
that Program year and there would not be sufficient time to compute 
risk-standardized readmission rates from another 12-month baseline 
period before the performance period if a SNF had insufficient data 
during the baseline period. For the FY 2021 Program, for example, the 
proposed baseline period would conclude at the end of FY 2017 
(September 30, 2017) and the proposed performance period would begin on 
the first day of FY 2019 (October 1, 2018). We also do not believe it 
would be equitable to score SNFs without sufficient baseline period 
data using data from a different period. Doing so would, in our view, 
impede our ability to compare SNFs' performance on the Program's 
quality measure fairly, as additional factors that may affect SNFs' 
care could arise when comparing performance during different time 
periods. Therefore, we have concluded that it is not operationally 
feasible or equitable to use different baseline periods for purposes of 
awarding improvement scores to SNFs for a Program year.
    We believe that SNFs without sufficient data from a single baseline 
period, which we would define for this purpose as SNFs with fewer than 
25 eligible stays during the baseline period for a fiscal year based on 
an analysis of Pearson correlation coefficients at various denominator 
counts, should not be measured on improvement for that Program year. 
Accordingly, we are proposing to score these SNFs based only on their 
achievement during the performance period for any Program year for 
which they do not have sufficient baseline period data. The analysis of 
Pearson correlation coefficients at various denominator counts used in 
developing this proposal is available on our website at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNFRM-Reliability-Testing-Memo.pdf.
    We proposed to codify this proposal by adding Sec.  
413.338(d)(1)(iv). We welcomed public comment on this proposal.
    Comment: One commenter agreed with our proposal to not score SNFs 
on improvement when they do not have sufficient data during the 
baseline period for appropriate year-over-year comparisons. However, 
the commenter expressed concern that this approach is different for 
this group of low-volume SNFs compared to SNFs that are consistently 
low-volume. The commenter expressed continued concerns with the 
readmission rates awarded to SNFs when they have low case volume.
    Response: We note that the policies that we have proposed for SNFs 
without sufficient baseline period data and for low-volume adjustment 
are intended to address separate permutations of the SNFRM reliability 
issue. In the first case, our intent is to ensure that we compare 
sufficiently-reliable SNFRM rates when assessing SNFs' improvement over 
time. That assessment relies on SNFRM rates being sufficiently reliable 
in both the baseline period and performance period to make the 
comparison that we use to award improvement points. In contrast, the 
low-volume scoring adjustment proposal focuses on the SNFRM's 
reliability during the performance period, which is necessary for both 
achievement and improvement scoring. We believe that these proposals 
ensure that SNFRM rates are sufficiently reliable for purposes of SNF 
VBP scoring, and as the commenter requested, ensure that SNFs are not 
scored on the SNFRM when the measure's case count is too low to produce 
sufficiently reliable scores.
    Comment: One commenter supported our proposal to score SNFs without 
sufficient baseline period data on achievement only, agreeing with our 
view that measure results in those cases are susceptible to random 
variation and may not reliably represent quality in that facility.
    Response: We thank the commenter for the support.
    After consideration of the public comments that we received, we are 
finalizing our scoring policy for SNFs without sufficient baseline 
period data as proposed. We are also finalizing our regulation text on 
this policy as proposed.
c. SNF VBP Scoring Adjustment for Low-Volume SNFs
    In previous rules, we have discussed and sought comment on policies 
related to SNFs with zero readmissions during the performance period. 
For example, in the FY 2018 SNF PPS rule (82 FR 36615 through 36616), 
we sought comment on policies we should consider for SNFs with zero 
readmissions during the performance period because under the risk 
adjustment and the statistical approach used to calculate the SNFRM, 
outlier values are shifted towards the

[[Page 39279]]

mean, especially for smaller SNFs. As a result, SNFs with observed 
readmission rates of zero may receive risk-standardized readmission 
rates that are greater than zero. We continue to be concerned about the 
effects of the SNFRM's risk adjustment and statistical approach on the 
scores that we award to SNFs under the Program. We are specifically 
concerned that as a result of this approach, the SNFRM is not 
sufficiently reliable to generate accurate performance scores for SNFs 
with a low number of eligible stays during the performance period. We 
would like to ensure that the Program's scoring methodology results in 
fair and reliable SNF performance scores because those scores are 
linked to a SNF's ranking and payment.
    Therefore, we considered whether we should make changes to our 
methodology for assessing the total performance of SNFs for a Program 
year that better accounts for SNFs with zero or low numbers of eligible 
stays during the performance period. Because the number of eligible SNF 
stays makes up the denominator of the SNFRM, we have concluded that the 
reliability of a SNF's measure rate and resulting performance score is 
adversely impacted if the SNF has less than 25 eligible stays during 
the performance period, as the Pearson correlation coefficient is lower 
at denominator counts of 5, 10, 15, and 20 eligible stays in comparison 
to 25 eligible stays. The analysis of Pearson correlation coefficients 
at various denominator counts used in developing this proposal is 
available on our website at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNFRM-Reliability-Testing-Memo.pdf.
    We believe that the most appropriate way to ensure that low-volume 
SNFs (which we define for purposes of the SNF VBP Program as SNFs with 
fewer than 25 eligible stays during the performance period) receive 
sufficiently reliable SNF performance scores is to adopt an adjustment 
to the scoring methodology we use for the SNF VBP Program. We proposed 
that if a SNF has less than 25 eligible stays during a performance 
period for a Program year, we would assign a performance score to the 
SNF for that Program year. That assigned performance score would, when 
used to calculate the value-based incentive payment amount for the SNF, 
result in a value-based incentive payment amount that is equal to the 
adjusted Federal per diem rate that the SNF would have received for the 
fiscal year in the absence of the Program. The actual performance score 
that we would assign to an individual low-volume SNF for a Program year 
would be identified based on the distribution of all SNFs' performance 
scores for that Program year after calculating the exchange function. 
We would then assign that score to an individual low-volume SNF, and we 
would notify the low-volume SNF that it would be receiving an assigned 
performance score for the Program year in the SNF Performance Score 
Report that we provide not later than 60 days prior to the fiscal year 
involved.
    We believe this scoring adjustment policy would appropriately 
ensure that our SNF performance score methodology is fair and reliable 
for SNFs with fewer than 25 eligible stays during the performance 
period for a Program year.
    In section X.A.6. of the proposed rule, we estimated that $527.4 
million would be withheld from SNFs' payments for the FY 2019 Program 
year based on the most recently available data. Additionally, the 60 
percent payback percentage would result in an estimated $316.4 million 
being paid to SNFs in the form of value-based incentive payments with 
respect to FY 2019 services. Of the $316.4 amount, we estimated that 
$8.6 million will be paid to low-volume SNFs. However, if our proposal 
to adopt a scoring adjustment for low-volume SNFs were finalized, we 
estimated that we would redistribute an additional $6.7 million in 
value-based incentive payments to low-volume SNFs with respect to FY 
2019 services, for a total of $15.3 million of the estimated $527.4 
million available for value-based incentive payments for that Program 
year. The additional $6.7 million in value-based incentive payments 
that would result from finalizing this proposal would increase the 60 
percent payback percentage for FY 2019 by approximately 1.28 percent, 
which would result in a payback percentage 61.28 percent of withheld 
funds. The payback percentage would similarly increase for all other 
Program years, however the actual amount of the increase for a 
particular Program year would vary based on the number of low-volume 
SNFs that we identify for that Program year and the distribution of all 
SNFs' performance scores for that Program year.
    As an alternative, we considered assigning a performance score to 
SNFs with fewer than 25 eligible stays during the performance period 
that would result in a value-based incentive payment percentage of 1.2 
percent, or 60 percent of the 2 percent withhold. This amount would 
match low-volume SNFs' incentive payment percentages with the finalized 
SNF VBP Program payback percentage of 60 percent, and would represent a 
smaller adjustment to low-volume SNFs' incentive payment percentages 
than the proposed policy described above. We estimated that this 
alternative would redistribute an additional $1 million with respect to 
FY 2019 services to low-volume SNFs. We also estimated that this 
alternative would increase the 60 percent payback percentage for FY 
2019 by approximately 0.18 percent of the approximately $527.4 million 
of the total withheld from SNFs' payments, which would result in a 
payback percentage of 60.18 percent of the estimated $527.4 million in 
withheld funds for that Program year. However, as with the proposal 
above, we stated that the specific amount by which the payback 
percentage would increase for each Program year would vary based on the 
number of low-volume SNFs that we identify for each Program year and 
the distribution of all SNFs' performance scores for that Program year.
    We welcomed public comments on this proposal and on the alternative 
that we considered. We also proposed to codify the definition of low-
volume SNF at Sec.  413.338(a)(16), and the definition of eligible stay 
at Sec.  413.338(a)(17). We proposed to codify the low-volume scoring 
adjustment proposal at Sec.  413.338(d)(3). We also proposed a 
conforming edit to the payback percentage policy at Sec.  
413.338(c)(2)(i).
    Comment: One commenter expressed support for our proposed low-
volume adjustment that would provide SNFs with a neutral value-based 
incentive payment percentage.
    Response: We thank the commenter and appreciate the support.
    Comment: One commenter requested clarification on how the SNF VBP 
will affect newly certified facilities that have no data from either 
the performance period or baseline period for the FY 2019 SNF VBP 
Program year.
    Response: SNFs with zero eligible stays during both the baseline 
and performance periods are not covered by the low-volume adjustment 
policy. For the purposes of the SNF readmission measure, an eligible 
stay is an index SNF admission that would be included in the 
denominator of the measure. We will notify all SNFs of their incentive 
multipliers for the Program year, including SNFs with zero eligible 
stays during the baseline and performance periods. These SNFs will 
receive an incentive multiplier that results in the adjusted Federal 
per diem rate under the Medicare SNF PPS that they would

[[Page 39280]]

otherwise have received absent the Program.
    Comment: Commenter suggested as an alternative to our low-volume 
adjustment proposal that we consider adopting a 2-year performance 
period for low-volume SNFs only and weight the most recent year more 
highly.
    Response: We thank the commenter for this feedback and will 
consider this in future rulemaking.
    Comment: One commenter suggested that we consider assigning a 2 
percent payment penalty to low-volume SNFs instead of adopting the low-
volume scoring adjustment as proposed. The commenter suggested that 
this policy would encourage low-volume SNFs to increase their Medicare 
cases sizes, which would enable Medicare to adequately measure their 
care quality and hold all SNFs accountable for their care.
    Response: We do not believe the intent of the SNF VBP was to 
incentivize SNFs to increase their Medicare case volume. We wish to 
avoid increasing possible healthcare disparities for smaller facilities 
when payment differences are driven solely by smaller measure 
denominators, and not quality of care as reflected in measure 
performance. Finally, we are concerned about the possibility of gaming 
this kind of policy, as SNFs might seek out Medicare cases to avoid the 
2 percent penalty the commenter suggests.
    Comment: One commenter expressed support for our proposed low-
volume adjustment and opposition to the alternative that we presented, 
stating that performance scores under the Program can be skewed by a 
single readmission and that the alternative would reduce Medicare rates 
for low-volume SNFs regardless of their performance and with no 
opportunity to earn additional incentive payments. Another commenter 
supported our proposal to adopt a low-volume scoring adjustment, noting 
that the evidence shows that the SNFRM is not a reliable quality 
indicator when facilities have fewer than 25 qualifying admissions. The 
commenter also agreed with our proposal to adjust the Program's payback 
percentage to account for this policy.
    Response: We thank the commenters for the support.
    Comment: One commenter stated that low-volume SNFs should be 
excluded from the SNF VBP Program since they have no realistic 
opportunity to earn value-based incentive payments.
    Response: We believe that the low-volume scoring adjustment policy 
ensures that these SNFs are adequately protected from being scored on 
insufficiently-reliable SNFRM rates.
    Comment: One commenter appreciated our efforts to address low-
volume SNFs and SNFs without baseline period data. However, the 
commenter was concerned that CMS had not provided enough information on 
these topics and requested additional clarity.
    Response: We believe we have provided as much clarity as possible 
on the effects of the low-volume scoring adjustment policy in both the 
preamble of the proposed rule and the Regulatory Impact Analysis that 
was included in the proposed rule. We have also provided additional 
clarity in this final rule and in the Regulatory Impact Analysis that 
is included in this final rule. We will also ensure that affected SNFs 
are made fully aware when their SNF performance scores were assigned as 
a result of the policy and notify them of their value-based incentive 
payment percentage for the fiscal year, as required by section 
1888(h)(7) of the Act. We believe that notification will ensure that 
SNFs are aware of the effects that this policy has on their SNF 
performance scores and incentive payments.
    After consideration of the public comments that we have received, 
we are finalizing our scoring adjustment for low-volume SNFs as 
proposed. We are also finalizing our regulation text on this policy as 
proposed.
d. Extraordinary Circumstances Exception Policy for the SNF VBP Program
    In the FY 2018 SNF PPS final rule (82 FR 36616), we summarized 
public comments that we received on the topic of a possible 
extraordinary circumstances exception policy for the SNF VBP Program. 
As we stated in that rule, in other value-based purchasing and quality 
reporting programs, we have adopted Extraordinary Circumstances 
Exceptions (ECE) policies intended to allow facilities to receive 
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.
    In other programs, we have defined a ``disaster'' as any natural or 
man-made catastrophe which causes damages of sufficient severity and 
magnitude to partially or completely destroy or delay access to medical 
records and associated documentation or otherwise affect the facility's 
ability to continue normal operations. Natural disasters could include 
events such as hurricanes, tornadoes, earthquakes, volcanic eruptions, 
fires, mudslides, snowstorms, and tsunamis. Man-made disasters could 
include such events as terrorist attacks, bombings, flood caused by 
man-made actions, civil disorders, and explosions. A disaster may be 
widespread and impact multiple structures or be isolated and affect a 
single site only. As a result of either a natural or man-made disaster, 
we are concerned that SNFs' care quality and subsequent impact on 
measure performance in the SNF VBP Program may suffer, and as a result, 
SNFs might be penalized under the Program's quality measurement and 
scoring methodology. However, we do not wish to penalize SNFs in these 
circumstances. For example, we recognize that SNFs might receive 
patients involuntarily discharged from hospitals facing mandatory 
evacuation due to probable flooding, and these patients might be 
readmitted to inpatient acute care hospitals and result in poorer 
readmission measure performance in the SNF VBP Program. We therefore 
proposed to adopt an ECE policy for the SNF VBP Program to provide 
relief to SNFs affected by natural disasters or other circumstances 
beyond the facility's control that affect the care provided to the 
facility's patients. We proposed that if a SNF can demonstrate that an 
extraordinary circumstance affected the care that it provided to its 
patients and subsequent measure performance, we would exclude from the 
calculation of the measure rate for the applicable baseline and 
performance periods the calendar months during which the SNF was 
affected by the extraordinary circumstance. Under this proposal, a SNF 
requesting an ECE would indicate the dates and duration of the 
extraordinary circumstance in its request, along with any available 
evidence of the extraordinary circumstance, and if approved, we would 
exclude the corresponding calendar months from that SNF's measure rate 
for the applicable measurement period and by extension, its SNF 
performance score.
    We further proposed that SNFs must submit this ECE request to CMS 
by filling out the ECE request form that we will place on the 
QualityNet website to the [email protected] mailbox within 90 
days following the extraordinary circumstance.
    To accompany an ECE request, SNFs must provide any available 
evidence showing the effects of the extraordinary circumstance on the 
care they provided to their patients, including, but not limited to, 
photographs, newspaper and other media articles, and any other

[[Page 39281]]

materials that would aid CMS in making its decision. We stated that we 
will review exception requests, and at our discretion based on our 
evaluation of the impact of the extraordinary circumstances on the 
SNF's care, provide a response to the SNF as quickly as feasible.
    We stated our intent for this policy to offer relief to SNFs whose 
care provided to patients suffered as a result of the disaster or other 
extraordinary circumstance, and we believe that excluding calendar 
months affected by extraordinary circumstances from SNFs' measure 
performance under the Program appropriately ensures that such 
circumstances do not unduly affect SNFs' performance rates or 
performance scores. We developed this process to align with the ECE 
process adopted by the SNF Quality Reporting Program to the greatest 
extent possible and to minimize burden on SNFs. This policy is not 
intended to preclude us from granting exceptions to SNFs that have not 
requested them when we determine that an extraordinary circumstance, 
such as an act of nature, affects an entire region or locale. If we 
made the determination to grant an exception to all SNFs in a region or 
locale, we proposed to communicate this decision through routine 
communication channels to SNFs and vendors, including but not limited 
to, issuing memos, emails, and notices on our SNF VBP website at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Other-VBPs/SNF-VBP.html.
    We noted that if we finalize this policy, we would score any SNFs 
receiving ECEs on achievement and improvement for any remaining months 
during the performance period, provided the SNF had at least 25 
eligible stays during both of those periods. If a SNF should receive an 
approved ECE for 6 months of the performance period, for example, we 
would score the SNF on its achievement during the remaining 6 months on 
the Program's measure as long as the SNF met the proposed 25 eligible 
stay threshold during the performance period. We would also score the 
SNF on improvement as long as it met the proposed 25 eligible stay 
threshold during the applicable baseline period.
    We welcomed public comments on this proposal. We also proposed to 
codify this proposal at Sec.  413.338(d)(4).
    Comment: Two commenters expressed appreciation and support for our 
proposal to adopt an ECE policy for the SNF VBP Program. The commenters 
acknowledged that these exceptions are provided in other programs and 
agreed that we should align our ECE policy with the Hospital VBP 
Program as much as possible. A third commenter reiterated its previous 
support for an ECE policy in the SNF VBP Program.
    Response: We thank the commenters for the support.
    After consideration of the public comments that we received, we are 
finalizing our Extraordinary Circumstances Exception policy as 
proposed. We are also finalizing our regulation text on this policy as 
proposed.
6. SNF Value-Based Incentive Payments
    We refer readers to the FY 2018 SNF PPS final rule (82 FR 36616 
through 36621) for discussion of the exchange function methodology that 
we have adopted for the Program, as well as the specific form of the 
exchange function (logistic, or S-shaped curve) that we finalized, and 
the payback percentage of 60 percent. We adopted these policies for FY 
2019 and subsequent fiscal years.
    As required by section 1888(h)(7) of the Act, we will inform each 
SNF of the adjustments to its Medicare payments as a result of the SNF 
VBP Program that we will make not later than 60 days prior to the 
fiscal year involved. We will fulfill that requirement via SNF 
Performance Score Reports that we will circulate to SNFs using the 
QIES-CASPER system, which is also how we distribute the quarterly 
confidential feedback reports that we are required to provide to SNFs 
under section 1888(g)(5) of the Act. The SNF Performance Score Reports 
will contain the SNF's performance score, ranking, and value-based 
incentive payment adjustment factor that will be applied to claims 
submitted for the applicable fiscal year. Additionally, as we finalized 
in the FY 2018 SNF PPS final rule (82 FR 36622 through 36623), the 
provision of the SNF Performance Score Report will trigger the Phase 
Two Review and Corrections Process, and SNFs will have 30 days from the 
date we post the report on the QIES-CASPER system to submit corrections 
to their SNF performance score and ranking to the 
[email protected] mailbox.
    Finally, as we discussed in the FY 2018 SNF PPS final rule (82 FR 
36618), beginning with FY 2019 (October 1, 2018) payments, we intend to 
make the 2 percent reduction and the SNF-specific value-based incentive 
payment adjustment to SNF claims simultaneously. Beginning with FY 
2019, we will identify the adjusted federal per diem rate for each SNF 
for claims under the SNF PPS. We will then reduce that amount by 2 
percent by multiplying the per diem amount by 0.98, in accordance with 
the requirements in section 1888(h)(6) of the Act. We will then 
multiply the result of that calculation by each SNF's specific value-
based incentive payment adjustment factor, which will be based on each 
SNF's performance score for the program year and will be calculated by 
the exchange function, to generate the value-based incentive payment 
amount that applies to the SNF for the fiscal year. Finally, we will 
add the value-based incentive payment amount to the reduced rate, 
resulting in a new adjusted federal per diem rate that applies to the 
SNF for the fiscal year.
    At the time of the publication of the proposed rule, we had not 
completed SNF performance score calculations for the FY 2019 program 
year. However, we stated our intent to provide the range of value-based 
incentive payment adjustment factors applicable to the FY 2019 program 
year in this final rule. For the FY 2019 SNF VBP Program Year, and 
incorporating the 2 percent reduction to SNFs' payments, we estimate 
the value-based incentive payment adjustment factors that we will award 
to SNFs range from 0.9802915381 to 1.02326809. That is, we estimate 
that SNFs may receive incentive payment percentages ranging from 
approximately -1.97 percent to approximately +2.33 percent, on a net 
basis.
    We proposed to codify the SNF VBP Program's payment adjustments at 
Sec.  413.337(f).
    Comment: Two commenters urged us to revisit the payback percentage 
policy that we adopted in the FY 2018 SNF PPS final rule (82 FR 36619 
through 36621), stating that we should distribute 70 percent of the 
funds withheld from SNFs' Medicare payments through the SNF VBP 
Program, the maximum amount allowable under the statute. One commenter 
requested that we return the remaining 30 percent of funds for SNF 
quality improvement initiatives, including programs to improve SNFs' 
performance when they have high readmission rates, while the other 
commenter stated that we should remit 100 percent of the Program's 
funds as is done in the Hospital Value-Based Purchasing Program.
    Response: As we discussed in the FY 2018 SNF PPS final rule (82 FR 
36621), we are not authorized to distribute the 30 percent of SNFs' 
Medicare payments that would remain after the payment withhold is 
determined for any purposes. Those funds are retained in the Medicare 
Trust Fund and used for other Medicare Program purposes authorized by 
statute. We are not allowed under current law to distribute

[[Page 39282]]

100 percent of the withheld funds for SNF VBP purposes.
    Further, we do not believe it is appropriate to revisit the payback 
percentage policy at this time, with the exception of the low-volume 
policy, which we view as a narrow exception to the 60 percent payback 
percentage that would have no effect on the majority of facilities. At 
the time of the publication of this final rule, the SNF VBP Program 
will not yet have delivered its first incentive payments based on 
measured performance, and we do not believe we should consider whether 
to change the payback percentage further until we are able to more 
fully assess the effects that it has on the quality of care provided in 
SNFs. We refer readers to the FY 2018 SNF PPS final rule (82 FR 36619 
through 36621) for our full discussion of the payback percentage policy 
that we have adopted for the SNF VBP Program.
    We thank the commenters for their feedback. As noted in section 
III.B.5. of this final rule, we are finalizing the codification of the 
SNF VBP program payment adjustment as proposed.

D. Request for Information on Promoting Interoperability and Electronic 
Healthcare Information Exchange Through Possible Revisions to the CMS 
Patient Health and Safety Requirements for Skilled Nursing Facility 
Providers and Suppliers

    In the FY 2019 SNF PPS proposed rule, we included a Request for 
Information (RFI) related to promoting interoperability and electronic 
healthcare information exchange (83 FR 21089). We received 22 comments 
on this RFI, and appreciate the input provided by commenters.

VII. 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.
    In our May 8, 2018 proposed rule (83 FR 21018), we solicited public 
comment on each of the section 3506(c)(2)(A)-required issues for the 
following information collection requirements (ICRs).We did not receive 
any comments on the ICR section of the proposed rule.

A. Wages

    To derive average costs, we used data from the U.S. Bureau of Labor 
Statistics' May 2017 National Occupational Employment and Wage 
Estimates for all salary estimates (as compared to the FY 2019 SNF PPS 
proposed rule when we used May 2016 estimates) (http://www.bls.gov/oes/current/oes_nat.htm). In this regard, Table 42 presents the mean hourly 
wage, the cost of fringe benefits and overhead (calculated at 100 
percent of salary), and the adjusted hourly wage. We are using the 
adjusted wages to derive our cost estimates.

                          Table 42--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
                                                                                      Fringe
                                                    Occupation      Mean hourly    benefits and      Adjusted
                Occupation  title                      code        wage  ($/hr)    overhead  ($/    hourly wage
                                                                                        hr)           ($/hr)
----------------------------------------------------------------------------------------------------------------
Health Information Technician...................         29-2071           20.59           20.59           41.18
Registered Nurse................................         29-1141           35.36           35.36           70.72
----------------------------------------------------------------------------------------------------------------

    As indicated, we are adjusting our employee hourly wage estimates 
by a factor of 100 percent. This is necessarily a rough adjustment, 
both because fringe benefits and overhead costs vary significantly from 
employer to employer, and because methods of estimating these costs 
vary widely from study to study. We believe that doubling the hourly 
wage to estimate total cost is a reasonably accurate estimation method.

B. Information Collection Requirements (ICRs)

1. ICRs Regarding the SNF PPS Assessment Schedule Under the PDPM
    The following sets out the requirements and burden associated with 
the MDS assessment schedule that will be effective October 1, 2019 
under the SNF PPS in conjunction with implementation of the PDPM. The 
requirements and burden will be submitted to OMB for approval under 
control number 0938-1140 (CMS-10387).
    Section V.D. of this final rule finalizes revisions to the current 
SNF PPS assessment schedule to require only two scheduled assessments 
(as opposed to the current requirement for five scheduled assessments) 
for each SNF stay: A 5-day scheduled PPS assessment and a discharge 
assessment.
    The current 5-day scheduled PPS assessment will be used as the 
admission assessment under this rule's finalized PDPM and set the 
resident's case-mix classification for the resident's SNF stay. The PPS 
discharge assessment (which is already required for all SNF Part A 
residents) will serve as the discharge assessment and be used for 
monitoring purposes. In section V.D. of this final rule, we discuss 
that while we proposed to require SNFs to reclassify residents under 
the PDPM using the Interim Payment Assessment (IPA) if certain criteria 
are met, we have decided in this final rule to make this assessment 
optional, thereby leaving completion of this assessment at the 
discretion of the individual provider. Thus, the 5-day SNF PPS 
scheduled assessment will be the only PPS assessment required to 
classify a resident under the PDPM for payment purposes, while the IPA 
may also be completed, as discussed in section V.D. of this final rule. 
This eliminates the requirement for the following assessments under the 
SNF PPS: 14-day scheduled PPS assessment, 30-day scheduled PPS 
assessment, 60-day scheduled PPS assessment, 90-day scheduled PPS 
assessment, Start of Therapy Other Medicare Required

[[Page 39283]]

Assessment (OMRA), End of Therapy OMRA, and Change of Therapy OMRA.
    In estimating the amount of time to complete a PPS assessment, we 
utilize the OMRA assessment, or the NO/SO item set (this is consistent 
with the current information collection request as approved by OMB on 
July 28, 2017; see https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201703-0938-018) as a proxy for all 
assessments. In section V.D. of this final rule, we finalized the 
addition of 18 items to the PPS discharge assessment in order to 
calculate and monitor the total amount of therapy provided during a SNF 
stay. These items are listed in Table 35 under section V.D. of this 
final rule. Given that the PPS OMRA assessment has 272 items (as 
compared to 125 items currently on the PPS discharge assessment) we 
believe the items that we are adding to the PPS discharge assessment, 
while increasing burden for each of the respective assessments, is 
accounted for by using the longer PPS OMRA assessment as a proxy for 
the time required to complete all assessments.
    When calculating the burden for each assessment, we estimated that 
it will take 40 minutes (0.6667 hours) at $70.72/hr for an RN to 
collect the information necessary for preparing the assessment, 10 
minutes (0.1667 hours) at $55.95/hr (the average hourly wage for RN 
($70.72/hr) and health information technician ($41.18/hr)) for staff to 
code the responses, and 1 minute (0.0167 hours) at $41.18/hr for a 
health information technician to transmit the results. In total, we 
estimate that it would take 51 minutes (0.85 hours) to complete a 
single PPS assessment. Based on the adjusted hourly wages for the noted 
staff, we estimate that it would cost $57.17 [($70.72/hr x 0.6667 hr) + 
($55.95/hr x 0.1667 hr) + ($41.18/hr x 0.0167 hr)] to prepare, code, 
and transmit each PPS assessment.
    The ongoing burden associated with the revisions to the SNF PPS 
assessment schedule is the time and effort it would take each Medicare 
Part A SNF to complete the 5-day PPS and discharge assessments. Based 
on our most current data, there are 15,471 Medicare Part A SNFs (as 
opposed to the 15,455 discussed in the proposed rule). Based on FY 2017 
data, we estimate that 2,406,401 5-day PPS assessments will be 
completed and submitted by Part A SNFs each year under the PDPM. We 
used the same number of assessments (2,406,401) as a proxy for the 
number of PPS discharge assessments that would be completed and 
submitted each year, since all residents who require a 5-day PPS 
assessment will also require a discharge assessment under the SNF PDPM.
    As compared to the FY 2019 SNF PPS proposed rule, in which we used 
the Significant Change in Status Assessment (SCSA) as a proxy to 
estimate the number of IPAs (83 FR 21093), we have eliminated this 
portion of our burden estimate as this assessment would not be 
required, per the discussion in section V.D. of this final rule. 
Therefore, we estimate that the total number of 5-day scheduled PPS 
assessments, and PPS discharge assessments that would be completed 
across all facilities is 4,812,802 assessments (2,406,401 + 2,406,401, 
respectively) instead of 4,905,042 assessments (2,406,401 + 92,240 + 
2,406,401) that was set out in the proposed rule. For all assessments 
under the PDPM, we estimated a burden of 4,090,882 hours (4,812,802 
assessments x 0.85 hr/assessment) at a cost of $275,147,890 (4,812,802 
assessments x $57.17/assessment).
    Based on the same FY 2017 data, there were 5,833,476 non-discharge 
related assessments (scheduled and unscheduled PPS assessments) 
completed under the RUG- IV payment system. To this number we add the 
same proxy as above for the number of discharge assessments 
(2,406,401), since every resident under RUG-IV who required a 5-day 
scheduled PPS assessment would also require a discharge assessment. 
This brings the total number of estimated assessments under RUG-IV to 
8,239,877. Using the same wage and time figures (per assessment), we 
estimated a burden of 7,003,895 hours (8,239,877 assessments x 0.85 hr/
assessment) at a cost of $471,073,768 (8,239,877 assessments x $57.17/
assessment).
    When comparing the currently approved RUG-IV burden with the PDPM 
burden, we estimate a savings of 2,913,013 administrative hours 
(7,003,895 RUG-IV hours - 4,090,882 PDPM hours) or approximately 188 
hours per provider per year (2,913,013 hours/15,471 providers). As 
depicted in Table 43, we also estimate a cost savings of $195,925,878 
($471,073,768 RUG-IV costs - $275,147,890 PDPM costs) or $12,664 per 
provider per year ($195,925,878/15,471 providers). This represents a 
significant decrease in administrative burden to providers under PDPM.

                                                                 Table 43--PDPM Savings
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           Total annual
          Burden reconciliation                    Respondents *             Responses     Burden per  response  (hours)      burden         Cost  ($)
                                                                           (assessments)                                      (hours)
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUG-IV..................................  15,455........................       8,239,877  0.85..........................       7,003,895     471,073,768
PDPM....................................  15,471........................       4,812,802  0.85..........................       4,090,882     275,147,890
SAVINGS.................................  (16)..........................     (3,427,075)  No change.....................     (2,913,013)   (195,925,878)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The RUG-IV number of respondents is based on the last approved PRA package in 2017. Numbers of respondents changes from year to year.

    Finally, in section V.D. of this final rule, we finalized the 
addition of 3 items, as listed in Table 34 of this final rule), to the 
MDS 3.0 for Nursing Homes and Swing Bed Providers. Based on the small 
number of items being added and the small percentage of assessments 
that Swing Bed providers make up, we do not believe this action will 
cause any measurable adjustments to our currently approved burden 
estimates. Consequently, we are not revising any of those estimates.
2. ICRs Regarding the SNF VBP Program
    In section VI.C.5.d. of this final rule, we are adopting an 
Extraordinary Circumstances Exception (ECE) process for the SNF VBP. 
Because the same CMS Extraordinary Circumstances Exceptions (ECE) 
Request Form would be used across ten quality programs: Hospital IQR 
Program, Hospital Outpatient Reporting Program, Inpatient Psychiatric 
Facility Quality Reporting Program, PPS-Exempt Cancer Hospital Quality 
Reporting Program, Ambulatory Surgical Center Quality Reporting 
Program, Hospital VBP Program, Hospital-Acquired Condition Reduction 
Program, Hospital Readmissions Reduction Program, End Stage Renal 
Disease Quality Incentive Program, and

[[Page 39284]]

Skilled Nursing Facility Value-Based Purchasing Program--the form and 
its associated requirements/burden will be submitted to OMB for 
approval under one information collection request (CMS-10210, OMB 
control number: 0938-1022) and in association with our IPPS final rule 
(CMS-1694-F; RIN 0938-AT27). To avoid double counting we are not 
setting out the form's SNF-related burden in this final rule. 
Separately, we are not removing or adding any new or revised SNF VBP 
measure-related requirements or burden in this rule. Consequently, this 
final rule does not set out any new VBP-related collections of 
information that would be subject to OMB approval under the authority 
of the PRA.
3. ICRs for the SNF Quality Reporting Program (QRP)
    We are not removing or adding any new or revised SNF QRP measure-
related requirements or burden in this rule. Consequently, this final 
rule does not set out any new QRP-related collections of information 
that would be subject to OMB approval under the authority of the PRA.

C. Summary of Requirements and Annual Burden Estimates

                                                               Table 44--Information Collection Requirements and Burden Estimates
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Responses  (per       Total           Time per        Total time                                    Annualized cost
               Requirement                 OMB control No.    Respondents       respondent)      responses      response  (hr)        (hr)        Labor cost per hour  ($/hr)          ($)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
SNF PPS Assessment Schedule..............       0938-1140           15,471            (311)      (4,812,802)             0.85      (4,090,882)   Varies.......................    (275,147,890)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

VIII. Economic Analyses

A. Regulatory Impact Analysis

1. Statement of Need
    This final rule will update the FY 2018 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. We did not 
include the impacts of the proposed PDPM and related policies in the 
sections that follow, as we have included this discussion in section 
V.I. of this final rule.
2. 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. Also, the rule has been reviewed by OMB.
    Executive Order 13771, titled Reducing Regulation and Controlling 
Regulatory Costs, was issued on January 30, 2017. OMB's implementation 
guidance, issued on April 5, 2017, explains that ``Federal spending 
regulatory actions that cause only income transfers between taxpayers 
and program beneficiaries (for example, regulations associated with . . 
. Medicare spending) are considered `transfer rules' and are not 
covered by E.O. 13771. . . . However . . . such regulatory actions may 
impose requirements apart from transfers . . . In those cases, the 
actions would need to be offset to the extent they impose more than de 
minimis costs. Examples of ancillary requirements that may require 
offsets include new reporting or recordkeeping requirements.'' As 
discussed in section VII. of this final rule, we estimate that this 
final rule will lead to paperwork cost savings of approximately $196 
million per year, or $171 million per year on an ongoing basis 
discounted at 7 percent relative to year 2016, over a perpetual time 
horizon. This final rule is considered an E.O. 13771 deregulatory 
action.
3. Overall Impacts
    This final rule sets forth updates of the SNF PPS rates contained 
in the SNF PPS final rule for FY 2018 (82 FR 36530). We estimate that 
the aggregate impact will be an increase of approximately $820 million 
in payments to SNFs in FY 2019, resulting from the SNF market basket 
update to the payment rates, as required by section 53111 of the BBA 
2018. Absent the application of section 53111 of the BBA 2018, as 
discussed in section III.A.2. of this final rule, the aggregate impact 
from the 2.0 percentage point market basket increase factor would have 
been approximately $680 million. We note that these impact numbers do 
not incorporate the SNF VBP reductions that we estimate will total 
$527.4 million for FY 2019.
    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, we update the FY 2018 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 
2019. As discussed previously, section 53111 of the BBA 2018 stipulates 
a market basket increase factor of 2.4 percent. The impact to Medicare 
is included in the total column of Table 45. In updating the SNF PPS 
rates for FY 2019, we made a number of standard annual revisions and 
clarifications

[[Page 39285]]

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 2019. 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.
4. Detailed Economic Analysis
    The FY 2019 SNF PPS payment impacts appear in Table 45. Using the 
most recently available data, in this case FY 2017, we apply the 
current FY 2018 wage index and labor-related share value to the number 
of payment days to simulate FY 2018 payments. Then, using the same FY 
2017 data, we apply the proposed FY 2019 wage index and labor-related 
share value to simulate FY 2019 payments. We tabulate the resulting 
payments according to the classifications in Table 45 (for example, 
facility type, geographic region, facility ownership), and compare the 
simulated FY 2018 payments to the simulated FY 2019 payments to 
determine the overall impact. The breakdown of the various categories 
of data Table 45 follows:
     The first column shows the breakdown of all SNFs by urban 
or rural status, hospital-based or freestanding status, census region, 
and ownership.
     The first row of figures describes the estimated effects 
of the various changes on all facilities. The next six rows show the 
effects on facilities split by hospital-based, freestanding, urban, and 
rural categories. The next nineteen rows show the effects on facilities 
by urban versus rural status by census region. The last three rows show 
the effects on facilities by ownership (that is, government, profit, 
and non-profit status).
     The second column shows the number of facilities in the 
impact database.
     The third column shows the effect of the annual update to 
the wage index. This represents the effect of using the most recent 
wage data available. The total impact of this change is 0 percent; 
however, there are distributional effects of the change.
     The fourth column shows the effect of all of the changes 
on the FY 2019 payments. The update of 2.4 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 2.4 
percent, assuming facilities do not change their care delivery and 
billing practices in response.
    As illustrated in Table 45, the combined effects of all of the 
changes vary by specific types of providers and by location. For 
example, due to changes in this rule, providers in the urban Pacific 
region will experience a 3.4 percent increase in FY 2019 total 
payments.

                                   Table 45--Impact to the SNF PPS for FY 2019
----------------------------------------------------------------------------------------------------------------
                                                                     Number of
                                                                  facilities  FY    Update wage    Total change
                                                                     2019 (%)        data (%)           (%)
----------------------------------------------------------------------------------------------------------------
Group:
    Total.......................................................          15,471             0.0             2.4
    Urban.......................................................          11,042             0.0             2.4
    Rural.......................................................           4,429             0.1             2.5
    Hospital-based urban........................................             498             0.0             2.4
    Freestanding urban..........................................          10,544             0.0             2.4
    Hospital-based rural........................................             555             0.0             2.4
    Freestanding rural..........................................           3,874             0.2             2.6
Urban by region:
    New England.................................................             790            -0.7             1.7
    Middle Atlantic.............................................           1,481             0.0             2.4
    South Atlantic..............................................           1,869            -0.1             2.3
    East North Central..........................................           2,127            -0.4             2.0
    East South Central..........................................             555            -0.2             2.2
    West North Central..........................................             920            -0.4             2.0
    West South Central..........................................           1,346             0.3             2.7
    Mountain....................................................             527            -0.8             1.6
    Pacific.....................................................           1,421             1.0             3.4
    Outlying....................................................               6            -0.5             1.9
Rural by region:
    New England.................................................             134            -0.7             1.6
    Middle Atlantic.............................................             215             0.1             2.5
    South Atlantic..............................................             494             0.1             2.5
    East North Central..........................................             931             0.1             2.5
    East South Central..........................................             523            -0.3             2.1
    West North Central..........................................           1,074             0.3             2.7
    West South Central..........................................             734             1.0             3.5
    Mountain....................................................             229             0.2             2.6
    Pacific.....................................................              95            -0.5             1.9
Ownership:
    Government..................................................          10,887             0.0             2.4
    Profit......................................................           3,570            -0.1             2.3
    Non-Profit..................................................           1,014             0.0             2.4
----------------------------------------------------------------------------------------------------------------
Note: The Total column includes the 2.4 percent market basket increase required by section 53111 of the BBA
  2018. Additionally, we found no SNFs in rural outlying areas.


[[Page 39286]]

5. Impacts for the SNF QRP
    We did not propose to add, remove, or revise any measures in the 
SNF QRP. Consequently, this final rule does not set out any new QRP-
related impacts associated with the SNF QRP.
6. Impacts for the SNF VBP Program
    In Table 44 of the FY 2019 SNF PPS proposed rule (83 FR 21096 
through 20197), we estimated the impacts of the FY 2019 SNF VBP Program 
without taking into account our low-volume scoring adjustment proposal. 
We modeled SNFs' performance in the Program using SNFRM data from CY 
2014 as the baseline period and FY 2016 as the performance period. 
Additionally, we modeled a logistic exchange function with a payback 
percentage of 60 percent, as we finalized in the FY 2018 SNF PPS final 
rule (82 FR 36619 through 36621), and based the following analyses on 
payments to SNFs in FY 2016. We estimated the total reductions to 
payments required by section 1888(h)(6) of the Act, to be $527.4 
million for FY 2019. Based on the 60 percent payback percentage, we 
estimated that we would disburse approximately $316.4 million in value-
based incentive payments to SNFs in FY 2019, which we estimated would 
result in approximately $211 million in savings to the Medicare program 
in FY 2019.
    In Table 45 of the FY 2019 SNF PPS proposed rule (83 FR 21097), we 
also modeled the estimated impacts of the FY 2019 SNF VBP Program and 
included in that model the impacts of our proposed scoring adjustment 
for low-volume SNFs. We estimated that the scoring adjustment policy 
proposal would redistribute an additional $6.7 million to the group of 
low volume SNFs. As we discuss further in section II.E.3.e. of this 
final rule, we are finalizing our low-volume scoring adjustment policy, 
and our estimated FY 2019 SNF VBP impacts, which we described in Table 
45 of the proposed rule, are reproduced as Table 46 below.
    We continue to estimate that this policy will result in increasing 
low-volume SNFs' value-based incentive payment percentages by 
approximately 0.99 percent, on average, from the value-based incentive 
payment percentage that they would receive in the absence of the low-
volume adjustment. An increase in value-based incentive payment 
percentages by 0.99 percent is needed to bring low-volume SNFs back to 
the 2.0 percent that was withheld from their payments. We also continue 
to estimate that we will pay an additional $6.7 million in incentive 
payments to low-volume SNFs, which would increase the 60 percent 
payback percentage for FY 2019 by approximately 1.28 percent, making 
the new payback percentage for FY 2019 equal to 61.28 percent of the 
estimated $527.4 million in withheld funds for that fiscal year.
    Our detailed analysis of the impacts of the FY 2019 SNF VBP 
Program, including the finalized low-volume scoring adjustment policy, 
follows in Table 46.

                      Table 46--Estimated SNF VBP Program Impacts Including Effects of the Finalized Low-Volume Scoring Adjustment
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                               Mean
                                                                             Number of                       Mean SNF        incentive      Percent  of
                 Category                             Criterion             facilities      RSRR (mean)     performance     multiplier       proposed
                                                                                                               score       (60% payback)      payback
--------------------------------------------------------------------------------------------------------------------------------------------------------
Group.....................................  Total.......................          12,845         0.18912          41.371           1.192          99.9 *
                                            Urban.......................           9,604         0.18957          40.956           1.177            84.4
                                            Rural.......................           3,241         0.18779          41.011           1.181            15.4
Urban by Region...........................  Total.......................           9,604  ..............  ..............  ..............  ..............
                                            01=Boston...................             713         0.19089        37.26777           1.059             4.9
                                            02=New York.................             836         0.19029        40.90383           1.165            11.8
                                            03=Philadelphia.............           1,040         0.18601        45.31896           1.325            10.1
                                            04=Atlanta..................           1,767         0.19332        37.28735           1.052            13.3
                                            05=Chicago..................           1,961         0.18784        43.06368           1.246            16.0
                                            06=Dallas...................           1,134         0.19416        34.53275           0.949             6.1
                                            07=Kansas City..............             510         0.19057        39.26278           1.132             2.6
                                            08=Denver...................             241         0.17832        57.62596           1.790             2.9
                                            09=San Francisco............           1,098         0.18908        40.80722           1.176            12.5
                                            10=Seattle..................             304         0.17808        56.67839           1.713             4.2
Rural by Region...........................  Total.......................           3,241  ..............  ..............  ..............  ..............
                                            01=Boston...................             115         0.18133        51.89294           1.568             0.9
                                            02=New York.................              77         0.18366        50.48193           1.569             0.5
                                            03=Philadelphia.............             240         0.18789        42.12621           1.218             1.3
                                            04=Atlanta..................             764         0.19283        36.51452           1.032             3.3
                                            05=Chicago..................             818         0.18397        47.85089           1.399             4.5
                                            06=Dallas...................             557         0.19355        34.00868           0.952             1.7
                                            07=Kansas City..............             421         0.18634        42.64769           1.236             1.2
                                            08=Denver...................             132         0.18000        52.38900           1.544             0.7
                                            09=San Francisco............              48         0.17780        61.50419           1.931             0.6
                                            10=Seattle..................              69         0.17628        60.70084           1.836             0.7
Ownership Type............................  Total.......................          12,847  ..............  ..............  ..............  ..............
                                            Government..................             688         0.18529          46.450           1.380             5.2
                                            Profit......................           9,250         0.19039          39.526           1.127            72.0
                                            Non-Profit..................           2,909         0.18597          46.038           1.353            22.9
Number of Beds............................  Total.......................          12,847  ..............  ..............  ..............  ..............
                                            1st Quartile:...............           3,222         0.18760          42.466           1.226            24.6
                                            2nd Quartile:...............           3,221         0.18878          40.971           1.175            24.4
                                            3rd Quartile:...............           3,197         0.19048          40.242           1.153            23.3
                                            4th Quartile:...............           3,207         0.18963          41.800           1.212            27.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This category does not add to 100% because a small number of SNFs did not have urban/rural designations in our data.


[[Page 39287]]

7. Alternatives Considered
    As described in this section, we estimated that the aggregate 
impact for FY 2019 under the SNF PPS will be an increase of 
approximately $820 million in payments to SNFs, resulting from the SNF 
market basket update to the payment rates, as required by section 53111 
of the BBA 2018. Absent application of section 53111 of the BBA 2018, 
as discussed in section III.A.2. of this final rule, the market basket 
increase factor of 2.0 percent would have resulted in an aggregate 
increase in payments to SNFs of approximately $680 million.
    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.
    As discussed in section VI.C. of this final rule, we also 
considered an alternative SNF VBP low-volume scoring policy. This 
alternative scoring assignment would result in a value-based incentive 
payment percentage of 1.2 percent, or 60 percent of the 2 percent 
withhold. This amount would match low-volume SNFs' incentive payment 
percentages with the finalized SNF VBP Program payback percentage of 60 
percent, and would represent a smaller adjustment to low-volume SNFs' 
incentive payment percentages than the proposed policy described above. 
We estimated that this alternative would redistribute an additional $1 
million with respect to FY 2019 services to low-volume SNFs. We also 
estimated that this alternative would increase the 60 percent payback 
percentage for FY 2019 by approximately 0.18 percent of the 
approximately $527.4 million of the total withheld from SNFs' payments, 
which would result in a payback percentage of 60.18 percent of the 
estimated $527.4 million in withheld funds for that Program year. We 
estimated that this alternative would pay back SNFs about $5.7 million 
less than the proposed low-volume scoring methodology adjustment in 
total estimated payments on an annual basis. However, under this 
alternative, like the policy we are finalizing, the specific amount by 
which the payback percentage would increase for each Program year would 
vary based on the number of low-volume SNFs that we identify for each 
Program year and the distribution of all SNFs' performance scores for 
that Program year.
    We discussed the comments that we received on this alternative and 
our responses to those comments in section II.E.3.e. of this final rule 
in our discussion of the low-volume scoring adjustment policy.
8. Accounting Statement
    As required by OMB Circular A-4 (available online at https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/), in Tables 48 and 
49, we have prepared an accounting statement showing the classification 
of the expenditures associated with the provisions of this final rule 
for FY 2019. Tables 45 and 48 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 15,471 SNFs in 
our database. Tables 46 and 49 provide our best estimate of the 
possible changes in Medicare payments under the SNF VBP as a result of 
the policies in this final rule.

 Table 47--Accounting Statement: Classification of Estimated Expenditures, From the 2018 SNF PPS Fiscal Year to
                                          the 2019 SNF PPS Fiscal Year
----------------------------------------------------------------------------------------------------------------
              Category                                                 Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers......  $820 million.*
From Whom To Whom?..................  Federal Government to SNF Medicare Providers.
----------------------------------------------------------------------------------------------------------------
* The net increase of $820 million in transfer payments is a result of the market basket increase of $820
  million.


    Table 48--Accounting Statement: Classification of Estimated Expenditures for the FY 2019 SNF VBP Program
----------------------------------------------------------------------------------------------------------------
              Category                                                 Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers......  $316.4 million.*
From Whom To Whom?..................  Federal Government to SNF Medicare Providers.
----------------------------------------------------------------------------------------------------------------
* This estimate does not include the two percent reduction to SNFs' Medicare payments (estimated to be $527.4
  million) required by statute.

9. Conclusion
    This final rule sets forth updates of the SNF PPS rates contained 
in the SNF PPS final rule for FY 2018 (82 FR 36530). Based on the 
above, we estimate the overall estimated payments for SNFs in FY 2019 
are projected to increase by approximately $820 million, or 2.4 
percent, compared with those in FY 2018. We estimate that in FY 2019 
under RUG-IV, SNFs in urban and rural areas will experience, on 
average, a 2.4 percent increase and 2.5 percent increase, respectively, 
in estimated payments compared with FY 2018. Providers in the urban 
rural West South Central region will experience the largest estimated 
increase in payments of approximately 3.5 percent. Providers in the 
urban Mountain and rural New England regions will experience the 
smallest estimated increase in payments of 1.6 percent.

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-

[[Page 39288]]

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, for the purposes of the RFA, we estimate that 
almost all SNFs are small entities as that term is used in the RFA, 
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 website at 
http://www.sba.gov/category/navigation-structure/contracting/contracting-officials/eligibility-size-standards). In addition, 
approximately 20 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 2018 (82 FR 36530). Based on the 
above, we estimate that the aggregate impact for FY 2019 will be an 
increase of $820 million in payments to SNFs, resulting from the SNF 
market basket update to the payment rates. While it is projected in 
Table 45 that 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 2019 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 45. As 
indicated in Table 45, the effect on facilities is projected to be an 
aggregate positive impact of 2.4 percent for FY 2019. 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 2019.
    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 will affect small rural hospitals that 
(1) furnish SNF services under a swing-bed agreement or (2) have a 
hospital-based SNF. We anticipate that the impact on small rural 
hospitals 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 2018 (82 FR 36530)), 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 45, the effect on 
facilities for FY 2019 is projected to be an aggregate positive impact 
of 2.4 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 will not have a significant impact 
on a substantial number of small rural hospitals for FY 2019.

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 2018, that 
threshold is approximately $150 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 will 
have no substantial direct effect on state and local governments, 
preempt state law, or otherwise have federalism implications.

E. Congressional Review Act

    This final 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.

F. 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 last year's proposed rule will be the number of reviewers 
of this year's proposed rule. We acknowledge that this assumption may 
understate or overstate the costs of reviewing this rule. It is 
possible that not all commenters reviewed last year's 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 past 
commenters is a fair estimate of the number of reviewers of this rule. 
In the FY 2019 SNF PPS proposed rule (83 FR 21099), we welcomed any 
comments on the approach in estimating the number of entities which 
will review the proposed 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. We sought comments 
on this assumption in the FY 2019 SNF PPS proposed rule (83 FR 21099).
    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 $107.38 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 the proposed rule. For each SNF that 
reviews the rule, the estimated cost is $429.52 (4 hours x $107.38). 
Therefore, we estimate that the total cost of reviewing this regulation 
is $124,561 ($429.52 x 247 reviewers).
    In accordance with the provisions of Executive Order 12866, this 
final rule

[[Page 39289]]

was reviewed by the Office of Management and Budget.

List of Subjects

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.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

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

0
1. The authority citation for part 411 is revised to read as follows:

    Authority: 42 U.S.C. 1302, 1395w-101 through 1395w-152, 1395hh, 
and 1395nn.


Sec.  411.15  [Amended]

0
2. Section 411.15 is amended in paragraph (p)(3)(iv) by removing the 
phrase ``by midnight of the day of departure'' and adding in its place 
the phrase ``before the following midnight''.

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
3. The authority citation for part 413 is revised to read as follows:

    Authority: 42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), 
(i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww; and 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; and sec. 204 of 
Public Law 113-295, 128 Stat. 4010; and sec. 808 of Public Law 114-
27, 129 Stat. 362.


0
4. Section 413.337 is amended by revising paragraph (d)(1)(v) and 
adding paragraphs (d)(1)(vi) and (vii) and (f) to read as follows:


Sec.  413.337   Methodology for calculating the prospective payment 
rates.

* * * * *
    (d) * * *
    (1) * * *
    (v) For each subsequent fiscal year, the unadjusted Federal payment 
rate is equal to the rate computed for the previous fiscal year 
increased by a factor equal to the SNF market basket index percentage 
change for the fiscal year involved, except as provided in paragraphs 
(d)(1)(vi) and (vii) of this section.
    (vi) For fiscal year 2018, the unadjusted Federal payment rate is 
equal to the rate computed for the previous fiscal year increased by a 
SNF market basket index percentage change of 1 percent (after 
application of paragraphs (d)(2) and (3) of this section).
    (vii) For fiscal year 2019, the unadjusted Federal payment rate is 
equal to the rate computed for the previous fiscal year increased by a 
SNF market basket index percentage change of 2.4 percent (after 
application of paragraphs (d)(2) and (3) of this section).
* * * * *
    (f) Adjustments to payment rates under the SNF Value-Based 
Purchasing Program. Beginning with payment for services furnished on 
October 1, 2018, the adjusted Federal per diem rate (as defined in 
Sec.  413.338(a)(2)) otherwise applicable to a SNF for the fiscal year 
is reduced by the applicable percent (as defined in Sec.  
413.338(a)(3)). The resulting amount is then adjusted by the value-
based incentive payment amount (as defined in Sec.  413.338(a)(14)) 
based on the SNF's performance score for that fiscal year under the SNF 
Value-Based Purchasing Program, as calculated under Sec.  413.338.

0
5. Section 413.338 is amended by--
0
a. Revising the section heading;
0
b. Adding paragraphs (a)(16) and (17);
0
c. Revising paragraph (c)(2)(i); and
0
d. Adding paragraphs (d)(1)(iv) and (d)(3) and (4).
    The additions and revision read as follows:


Sec.  413.338   Skilled nursing facility value-based purchasing 
program.

    (a) * * *
    (16) Low-volume SNF means a SNF with fewer than 25 eligible stays 
included in the SNF readmission measure denominator during the 
performance period for a fiscal year.
    (17) Eligible stay means, for purposes of the SNF readmission 
measure, an index SNF admission that would be included in the 
denominator of that measure.
* * * * *
    (c) * * *
    (2) * * *
    (i) Total amount available for a fiscal year. The total amount 
available for value-based incentive payments for a fiscal year is at 
least 60 percent of the total amount of the reduction to the adjusted 
SNF PPS payments for that fiscal year, as estimated by CMS, and will be 
increased as appropriate for each fiscal year to account for the 
assignment of a performance score to low-volume SNFs under paragraph 
(d)(3) of this section.
    (d) * * *
    (1) * * *
    (iv) CMS will not award points for improvement to a SNF that has 
fewer than 25 eligible stays during the baseline period.
* * * * *
    (3) If CMS determines that a SNF is a low-volume SNF with respect 
to a fiscal year, CMS will assign a performance score to the SNF for 
the fiscal year that, when used to calculate the value-based incentive 
payment amount (as defined in paragraph (a)(14) of this section), 
results in a value-based incentive payment amount that is equal to the 
adjusted Federal per diem rate (as defined in paragraph (a)(2) of this 
section) that would apply to the SNF for the fiscal year without 
application of Sec.  413.337(f).
    (4)(i) A SNF may request and CMS may grant exceptions to the SNF 
Value-Based Purchasing Program's requirements under this section for 
one or more calendar months when there are certain extraordinary 
circumstances beyond the control of the SNF.
    (ii) A SNF may request an exception within 90 days of the date that 
the extraordinary circumstances occurred by sending an email to 
[email protected] that includes a completed Extraordinary 
Circumstances Request form (available on the SNF VBP section of 
QualityNet at https://www.qualitynet.org/) and any available evidence 
of the impact of the extraordinary circumstances on the care that the 
SNF furnished to patients, including, but not limited to, photographs, 
newspaper, and other media articles.
    (iii) Except as provided in paragraph (d)(4)(iv) of this section, 
CMS will not consider an exception request unless the SNF requesting 
such exception has complied fully with the requirements in this 
paragraph (d).
    (iv) CMS may grant exceptions to SNFs without a request if it 
determines that an extraordinary circumstance affects an entire region 
or locale.
    (v) CMS will calculate a SNF performance score for a fiscal year 
for a SNF for which it has granted an exception request that does not 
include its performance on the SNF readmission

[[Page 39290]]

measure during the calendar months affected by the extraordinary 
circumstance.
* * * * *

0
6. Section 413.360 is amended by adding paragraph (b)(3) and revising 
paragraphs (d)(1) and (4) to read as follows:


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

* * * * *
    (b) * * *
    (3) CMS may remove a quality measure from the SNF QRP based on one 
or more of the following factors:
    (i) Measure performance among SNFs is so high and unvarying that 
meaningful distinctions in improvements in performance can no longer be 
made.
    (ii) Performance or improvement on a measure does not result in 
better resident outcomes.
    (iii) A measure does not align with current clinical guidelines or 
practice.
    (iv) The availability of a more broadly applicable (across 
settings, populations, or conditions) measure for the particular topic.
    (v) The availability of a measure that is more proximal in time to 
desired resident outcomes for the particular topic.
    (vi) The availability of a measure that is more strongly associated 
with desired resident outcomes for the particular topic.
    (vii) Collection or public reporting of a measure leads to negative 
unintended consequences other than resident harm.
    (viii) The costs associated with a measure outweigh the benefit of 
its continued use in the program.
* * * * *
    (d) * * *
    (1) SNFs that do not meet the requirements in paragraph (b) of this 
section for a program year will receive a written notification of non-
compliance through at least one of the following methods: Quality 
Improvement Evaluation System (QIES) Assessment Submission and 
Processing (ASAP) system, the United States Postal Service, or via an 
email from the Medicare Administrative Contractor (MAC). A SNF may 
request reconsideration no later than 30 calendar days after the date 
identified on the letter of non-compliance.
* * * * *
    (4) CMS will notify SNFs, in writing, of its final decision 
regarding any reconsideration request through at least one of the 
following notification methods: QIES ASAP system, the United States 
Postal Service, or via email from the Medicare Administrative 
Contractor (MAC).
* * * * *

PART 424--CONDITIONS FOR MEDICARE PAYMENT

0
7. The authority citation for part 424 is revised to read as follows:

    Authority:  42 U.S.C. 1302 and 1395hh.

0
8. Section 424.20 is amended by revising paragraph (a)(1)(i) to read as 
follows:


Sec.  424.20   Requirements for posthospital SNF care.

* * * * *
    (a) * * *
    (1) * * *
    (i) The individual needs or needed on a daily basis skilled nursing 
care (furnished directly by or requiring the supervision of skilled 
nursing personnel) or other skilled rehabilitation services that, as a 
practical matter, can only be provided in an SNF or a swing-bed 
hospital on an inpatient basis, and the SNF care is or was needed for a 
condition for which the individual received inpatient care in a 
participating hospital or a qualified hospital, as defined in Sec.  
409.3 of this chapter, or for a new condition that arose while the 
individual was receiving care in the SNF or swing-bed hospital for a 
condition for which he or she received inpatient care in a 
participating or qualified hospital; or.
* * * * *

    Dated: July 26, 2018.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: July 26, 2018.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2018-16570 Filed 7-31-18; 4:15 pm]
 BILLING CODE 4120-01-P