[Federal Register Volume 85, Number 73 (Wednesday, April 15, 2020)]
[Proposed Rules]
[Pages 20914-20949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07875]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409 and 413

[CMS-1737-P]
RIN 0938-AU13


Medicare Program; Prospective Payment System and Consolidated 
Billing for Skilled Nursing Facilities; Updates to the Value-Based 
Purchasing Program for Federal Fiscal Year 2021

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update the payment rates used under 
the prospective payment system (PPS) for skilled nursing facilities 
(SNFs) for fiscal year (FY) 2021. The proposed rule includes proposals 
to make changes to the case-mix classification code mappings used under 
the SNF PPS and to make two minor revisions in the regulation text. 
This proposed rule also includes a proposal to adopt the recent 
revisions in Office of Management and Budget (OMB) statistical area 
delineations. The proposed rule also includes proposals for the Skilled 
Nursing Facility Value-Based Purchasing (VBP) Program that affects 
Medicare payment to SNFs.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 9, 2020.

ADDRESSES: In commenting, please refer to file code CMS-1737-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1737-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1737-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
    Penny Gershman, (410) 786-6643, for information related to SNF PPS 
clinical issues.
    Anthony Hodge, (410) 786-6645, for information related to 
consolidated billing, and payment for SNF-level swing-bed services.
    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.
    Lang Le, (410) 786-5693, for information related to the skilled 
nursing facility value-based purchasing program.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following website as soon as possible after they have been 
received: http://www.regulations.gov. Follow the search instructions on 
that website to view public comments.

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 proposed rule can be accessed 
on the SNF PPS Wage Index home page, at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.
    Readers who experience any problems accessing any of these online 
SNF PPS wage index tables should contact Kia Sidbury at (410) 786-7816.
    To assist readers in referencing sections contained in this 
document, we are providing the following Table of Contents.

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of Major Provisions
    C. Summary of Cost and Benefits
    D. 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. Proposed SNF PPS Rate Setting Methodology and FY 2021 Update
    A. Federal Base Rates
    B. SNF Market Basket Update
    C. Case-Mix Adjustment
    D. Wage Index Adjustment
    E. SNF Value-Based Purchasing Program
    F. 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
    D. Revisions to the Regulation Text
V. Other Issues
    A. Proposed Changes to SNF PPS Wage Index
    B. Technical Updates to PDPM ICD-10 Mappings
    C. Skilled Nursing Facility Value-Based Purchasing Program (SNF 
VBP)
VI. Collection of Information Requirements
VII. Response to Comments
VIII. Economic Analyses
    A. Regulatory Impact Analysis
    B. Regulatory Flexibility Act Analysis
    C. Unfunded Mandates Reform Act Analysis
    D. Federalism Analysis
    E. Reducing Regulation and Controlling Regulatory Costs
    F. Congressional Review Act
    G. Regulatory Review Costs

I. Executive Summary

A. Purpose

    This proposed rule would update the SNF prospective payment rates 
for fiscal year (FY) 2021 as required under section 1888(e)(4)(E) of 
the Social Security Act (the Act). It also responds to section 
1888(e)(4)(H) of the Act, which requires the Secretary to provide for 
publication of certain specified information relating

[[Page 20915]]

to the payment update (see section II.C. of this proposed rule) in the 
Federal Register, before the August 1 that precedes the start of each 
FY. As discussed in section IV.E. of this proposed rule, it would also 
make two minor revisions in the regulation text. This proposed rule 
also proposes changes to the code mappings used under the SNF PPS for 
classifying patients into case-mix groups. This proposed rule also 
includes a proposal to update the OMB delineations used to identify a 
facility's status as an urban or rural facility and to calculate the 
wage index. This proposed rule also proposes updates to the Skilled 
Nursing Facility Value-Based Purchasing Program (SNF VBP). There are no 
proposals or updates in this proposed rule related to the Skilled 
Nursing Facility Quality Reporting Program (SNF QRP).

B. Summary of Major Provisions

    In accordance with sections 1888(e)(4)(E)(ii)(IV) and (e)(5) of the 
Act, the federal rates in this proposed rule would reflect an update to 
the rates that we published in the SNF PPS final rule for FY 2020 (84 
FR 38728). In this proposed rule, we propose to adopt the most recent 
OMB delineations, which are used to identify a provider's status as 
being either an urban or rural facility and to calculate the provider's 
wage index. This proposed rule also includes two proposed revisions to 
the regulations text. This proposed rule also includes proposed 
revisions to the International Classification of Diseases, Version 10 
(ICD-10) code mappings used under PDPM to classify patients into case-
mix groups.
    Additionally, we are proposing a few technical updates to our SNF 
VBP regulations but are not making any substantive proposals for that 
program.

C. Summary of Cost and Benefits

                       Table 1--Cost and Benefits
------------------------------------------------------------------------
       Provision description                   Total transfers
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Proposed FY 2021 SNF PPS payment    The overall economic impact of this
 rate update.                        proposed rule is an estimated
                                     increase of $784 million in
                                     aggregate payments to SNFs during
                                     FY 2021.
Proposed FY 2021 SNF VBP changes..  The overall economic impact of the
                                     SNF VBP Program is an estimated
                                     reduction of $199.54 million in
                                     aggregate payments to SNFs during
                                     FY 2021.
------------------------------------------------------------------------

D. 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 and patient access 
to their health information. 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.
    To further interoperability in post-acute care settings, CMS 
continues to explore opportunities to advance electronic exchange of 
patient information across payers, providers and with patients, 
including developing systems that use nationally recognized health IT 
standards such as the Logical Observation Identifiers Names and Codes 
(LOINC), the Systematized Nomenclature of Medicine (SNOMED), and the 
Fast Healthcare Interoperability Resources (FHIR). In addition, CMS and 
ONC established the Post-Acute Care Interoperability Workgroup (PACIO) 
to facilitate collaboration with industry stakeholders to develop FHIR 
standards that could support the exchange and reuse of patient 
assessment data derived from the minimum data set (MDS), inpatient 
rehabilitation facility patient assessment instrument (IRF-PAI), long 
term care hospital continuity assessment record and evaluation (LCDS), 
outcome and assessment information set (OASIS) and other sources.
    The Data Element Library (DEL) continues to be updated and serves 
as the authoritative resource for PAC assessment data elements and 
their associated mappings to health IT standards. The DEL furthers CMS' 
goal of data standardization and interoperability. These interoperable 
data elements can reduce provider burden by allowing the use and 
exchange 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/DELWeb/pubHome) can be 
referenced on the CMS website and in the ONC Interoperability Standards 
Advisory (ISA). The 2020 ISA is available at https://www.healthit.gov/isa.
    In the September 30, 2019 Federal Register, CMS published a final 
rule, ``Medicare and Medicaid Programs; Revisions to Requirements for 
Discharge Planning'' (84 FR 51836) (``Discharge Planning final rule''), 
that revises the discharge planning requirements that hospitals 
(including psychiatric hospitals, long-term care hospitals, and 
inpatient rehabilitation facilities), critical access hospitals (CAHs), 
and home health agencies, must meet to participate in Medicare and 
Medicaid programs. The rule supports CMS' interoperability efforts by 
promoting the exchange of patient information between health care 
settings, and by ensuring that a patient's necessary medical 
information is transferred with the patient after discharge from a 
hospital, CAH, or post-acute care services provider. For more 
information on the Discharge planning requirements, please visit the 
final rule at https://www.federalregister.gov/documents/2019/09/30/2019-20732/medicare-and-medicaid-programs-revisions-to-requirements-for-discharge-planning-for-hospitals.

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 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

[[Page 20916]]

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 https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_2018-10-01.pdf.
    Section 215(a) of the Protecting Access to Medicare Act of 2014 
(PAMA) (Pub. L. 113-93, enacted 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 amended section 1888(e)(6) 
of the Act, which requires the Secretary to implement a QRP for SNFs 
under which SNFs report data on measures and resident assessment data.

B. Initial Transition for the SNF PPS

    Under sections 1888(e)(1)(A) and (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 
2020 (84 FR 38728).
    Section 1888(e)(4)(H) of the Act specifies that we provide for 
publication annually in the Federal Register the following:
     The unadjusted federal per diem rates to be applied to 
days of covered SNF services furnished during the upcoming FY.
     The case-mix classification system to be applied for these 
services during the upcoming FY.
     The factors to be applied in making the area wage 
adjustment for these services.
    Along with other revisions discussed later in this preamble, this 
proposed rule would provide the required annual updates to the per diem 
payment rates for SNFs for FY 2021.

III. Proposed SNF PPS Rate Setting Methodology and FY 2021 Update

A. Federal Base Rates

    Under section 1888(e)(4) of the Act, the SNF PPS uses per diem 
federal payment rates based on mean SNF costs in a base year (FY 1995) 
updated for inflation to the first effective period of the PPS. We 
developed the federal payment rates using allowable costs from 
hospital-based and freestanding SNF cost reports for reporting periods 
beginning in FY 1995. The data used in developing the federal rates 
also incorporated a Part B add-on, which is an estimate of the amounts 
that, prior to the SNF PPS, would 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.

B. SNF Market Basket Update

1. SNF Market Basket Index
    Section 1888(e)(5)(A) of the Act requires us to establish a SNF 
market basket index that reflects changes over time in the prices of an 
appropriate mix of goods and services included in covered SNF services. 
Accordingly, we have developed a SNF market basket index that 
encompasses the most commonly used cost categories for SNF routine 
services, ancillary services, and capital-related expenses. In the SNF 
PPS final rule for FY 2018 (82 FR 36548 through 36566), we revised and 
rebased the market basket index, which 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.4. of this proposed rule. For 
FY 2021, the growth rate of the 2014-based SNF market basket is 
estimated to be 2.7 percent, based on the IHS Global Insight, Inc. 
(IGI) first quarter 2020 forecast with historical data through fourth 
quarter 2019, before the multifactor productivity adjustment is 
applied.
    In section V.A. of this proposed rule, we discuss the 2 percent 
reduction applied to the market basket update for those SNFs that fail 
to submit measures data as required by section 1888(e)(6)(A) of the 
Act.
2. Use of the SNF Market Basket Percentage
    Section 1888(e)(5)(B) of the Act defines the SNF market basket 
percentage as the percentage change in the SNF market basket index from 
the midpoint of the previous FY to the midpoint of the current FY. For 
the federal rates set forth in this proposed rule, we use the 
percentage change in the SNF market basket index to compute the update 
factor for FY 2021. This factor is based on the FY 2021 percentage 
increase in the 2014-based SNF market basket index reflecting routine, 
ancillary, and capital-related expenses. In this proposed rule, the SNF 
market basket percentage is estimated to be 2.7 percent for FY 2021 
based on IGI's first quarter 2020 forecast (with historical data 
through fourth quarter 2019).
3. Forecast Error Adjustment
    As discussed in the June 10, 2003 supplemental proposed rule (68 FR 
34768) and finalized in the August 4, 2003 final rule (68 FR 46057 
through

[[Page 20917]]

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), 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), the adjustment will 
reflect both upward and downward adjustments, as appropriate.
    For FY 2019 (the most recently available FY for which there is 
final data), the forecasted or estimated increase in the market basket 
index was 2.8 percentage points, and the actual increase for FY 2019 is 
2.3 percentage points, resulting in the difference between the 
estimated and actual increase to be 0.5 percentage point. In the FY 
2014 final rule (78 FR 47946 through 47947), we finalized our proposal 
to report the forecast error to the second significant digit in only 
those instances where the forecast error rounds to 0.5 percentage point 
at one significant digit, so that we can determine whether the forecast 
error adjustment threshold has been exceeded. As we stated in the FY 
2014 SNF PPS final rule, once we determine that a forecast error 
adjustment is warranted, we will continue to apply the adjustment 
itself at one significant digit (otherwise referred to as a tenth of a 
percentage point). When rounded to the second significant digit, the 
percent change in the estimated market basket is 2.75 percent and the 
actual FY 2019 market basket increase is 2.34 percent. Subtracted, this 
yields a forecast error of 0.41 percentage point (2.75-2.34). 
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, under the policy previously described (comparing the 
forecasted and actual increase in the market basket), the FY 2021 
market basket percentage change of 2.7 percent would not be adjusted to 
account for the forecast error correction.
    However, as discussed in the FY 2019 SNF PPS final rule (83 FR 
39166), the market basket increase for FY 2019 was set at 2.4 percent, 
as a result of section 53111 of the Bipartisan Budget Act of 2018 (BBA 
2018) (Pub. L. 115-123, enacted on February 9, 2018), which amended 
section 1888(e) of the Act to add section 1888(e)(5)(B)(iv) of the Act. 
Given that the market basket adjustment for FY 2019 was set by law, 
meaning that the forecasted 2014-based market basket percentage 
increase for FY 2019 was not used to calculate the SNF PPS per diem 
rates for FY 2019, and because the forecast error adjustment discussed 
in this section is intended to correct for differences between the 
foreasted market basket increase for a given year and the actual market 
basket increase for that year, we do not believe that it would be 
appropriate to apply a forecast error correction for FY 2019.
    Table 2 shows the forecasted and actual market basket amounts for 
FY 2019.

            Table 2--Difference Between the Forecasted and Actual Market Basket Increases for FY 2019
----------------------------------------------------------------------------------------------------------------
                                                                Forecasted FY
                            Index                               2019  increase   Actual FY 2019      FY 2019
                                                                      *           increase **       difference
----------------------------------------------------------------------------------------------------------------
SNF..........................................................            2.75             2.34            -0.41
----------------------------------------------------------------------------------------------------------------
* Published in Federal Register; based on second quarter 2018 IGI forecast (2014-based index).
** Based on the first quarter 2020 IGI forecast, with historical data through the fourth quarter 2019 (2014-
  based index).

4. 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 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.
a. Incorporating the MFP Adjustment Into the Market Basket Update
    Per section 1888(e)(5)(A) of the Act, the Secretary shall establish 
a SNF market basket index that reflects changes over time in the prices 
of an appropriate mix of goods and services included in covered SNF 
services. Section 1888(e)(5)(B)(ii) of the Act, added by section 
3401(b) of the Affordable Care Act, requires that for FY 2012 and each 
subsequent FY, after determining the market basket percentage described 
in section 1888(e)(5)(B)(i) of the Act, the Secretary shall reduce such 
percentage by the

[[Page 20918]]

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. Thus, if the application 
of the MFP adjustment to the market basket percentage calculated under 
section 1888(e)(5)(B)(i) of the Act results in an MFP-adjusted market 
basket percentage that is less than zero, then the annual update to the 
unadjusted federal per diem rates under section 1888(e)(4)(E)(ii) of 
the Act would be negative, and such rates would decrease relative to 
the prior FY.
    The MFP adjustment, calculated as the 10-year moving average of 
changes in MFP for the period ending September 30, 2021, is estimated 
to be 0.4 percent based on IGI's first quarter 2020 forecast.
    Consistent with section 1888(e)(5)(B)(i) of the Act and Sec.  
413.337(d)(2), the market basket percentage for FY 2021 for the SNF PPS 
is based on IGI's first quarter 2020 forecast of the SNF market basket 
percentage, which is estimated to be 2.7 percent. In accordance with 
section 1888(e)(5)(B)(ii) of the Act and Sec.  413.337(d)(3), this 
market basket percentage is then reduced by the MFP adjustment which, 
as discussed above, is 0.4 percent. The resulting MFP-adjusted SNF 
market basket update is equal to 2.3 percent, or 2.7 percent less 0.4 
percentage point.
5. Market Basket Update Factor for FY 2021
    Sections 1888(e)(4)(E)(ii)(IV) and (e)(5)(i) of the Act require 
that the update factor used to establish the FY 2021 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, 2019, through September 30, 
2020 to the average market basket level for the period of October 1, 
2020, through September 30, 2021. This process yields a percentage 
change in the 2014-based SNF market basket of 2.7 percent.
    As further explained in section III.B.3. of this proposed rule, as 
applicable, we adjust the market basket percentage change by the 
forecast error from the most recently available FY for which there is 
final data and apply this adjustment whenever the difference between 
the forecasted and actual percentage change in the market basket 
exceeds a 0.5 percentage point threshold. Since the difference between 
the forecasted FY 2019 SNF market basket percentage change and the 
actual FY 2019 SNF market basket percentage change (FY 2019 is the most 
recently available FY for which there is historical data) did not 
exceed the 0.5 percentage point threshold, the FY 2021 market basket 
percentage change of 2.7 percent is not adjusted by the forecast error 
correction. Moreover, given that the market basket for FY 2019 was set 
independent of these estimates, as discussed above, we do not believe 
that a forecast error adjustment would be warranted even if the 
difference for FY 2019 exceeded 0.5 percentage point.
    Section 1888(e)(5)(B)(ii) of the Act requires us to reduce the 
market basket percentage change by the MFP adjustment (10-year moving 
average of changes in MFP for the period ending September 30, 2021) 
which is 0.4 percent, as described in section III.B.4. of this proposed 
rule. The resulting net SNF market basket update would equal 2.3 
percent, or 2.7 percent less the 0.4 percentage point MFP adjustment. 
We note 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, or MFP adjustment in the SNF PPS final rule.
    We also 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, for the reasons discussed in this proposed rule, we 
are proposing to apply the SNF market basket update factor of 2.3 
percent in our determination of the FY 2021 SNF PPS unadjusted federal 
per diem rates, which reflects a market basket increase factor of 2.7 
percent, less the 0.4 percentage point MFP adjustment.
6. Unadjusted Federal Per Diem Rates for FY 2021
    As discussed in the FY 2019 SNF PPS final rule (83 FR 39162), in FY 
2020 we implemented a new case-mix classification system to classify 
SNF patients under the SNF PPS, the Patient Driven Payment Model 
(PDPM). As discussed in section V.B. of that final rule, under PDPM, 
the unadjusted federal per diem rates are divided into six components, 
five of which are case-mix adjusted components (Physical Therapy (PT), 
Occupational Therapy (OT), Speech-Language Pathology (SLP), Nursing, 
and Non-Therapy Ancillaries (NTA)), and one of which is a non-case-mix 
component, as exists under RUG-IV. We used the SNF market basket, 
adjusted as described above, to adjust each per diem component of the 
federal rates forward to reflect the change in the average prices for 
FY 2021 from the average prices for FY 2020. We would further adjust 
the rates by a wage index budget neutrality factor, described later in 
this section. Further, in the past, we used the revised OMB 
delineations adopted in the FY 2015 SNF PPS final rule (79 FR 45632, 
45634), with updates as reflected in OMB Bulletin Nos, 15-01 and 17-01, 
to identify a facility's urban or rural status for the purpose of 
determining which set of rate tables would apply to the facility. As 
discussed below, in this proposed rule, we propose to adopt the revised 
OMB delineations identified in OMB Bulletin No. 18-04 (available at 
https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf) in order to identify a facility's urban or rural status.
    Tables 3 and 4 reflect the updated unadjusted federal rates for FY 
2021, prior to adjustment for case-mix.

[[Page 20919]]



                                                Table 3--FY 2021 Unadjusted Federal Rate Per Diem--URBAN
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  Rate component                           PT               OT              SLP            Nursing            NTA          Non-Case-Mix
--------------------------------------------------------------------------------------------------------------------------------------------------------
Per Diem Amount...................................          $62.04           $57.75           $23.16          $108.16           $81.60           $96.85
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                Table 4--FY 2021 Unadjusted Federal Rate Per Diem--RURAL
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  Rate component                           PT               OT              SLP            Nursing            NTA          Non-Case-Mix
--------------------------------------------------------------------------------------------------------------------------------------------------------
Per Diem Amount...................................          $70.72           $64.95           $29.17          $103.34           $77.96           $98.63
--------------------------------------------------------------------------------------------------------------------------------------------------------

C. Case-Mix Adjustment

    Under section 1888(e)(4)(G)(i) of the Act, the federal rate also 
incorporates an adjustment to account for facility case-mix, using a 
classification system that accounts for the relative resource 
utilization of different patient types. The statute specifies that the 
adjustment is to reflect both a resident classification system that the 
Secretary establishes to account for the relative resource use of 
different patient types, as well as resident assessment data and other 
data that the Secretary considers appropriate. In the FY 2019 final 
rule (83 FR 39162, August 8, 2018), we finalized a new case-mix 
classification model, the PDPM, which took effect beginning October 1, 
2019. The previous RUG-IV model classified most patients into a therapy 
payment group and primarily used the volume of therapy services 
provided to the patient as the basis for payment classification, thus 
inadvertently creating an incentive for SNFs to furnish therapy 
regardless of the individual patient's unique characteristics, goals, 
or needs. PDPM eliminates this incentive and improves the overall 
accuracy and appropriateness of SNF payments by classifying patients 
into payment groups based on specific, data-driven patient 
characteristics, while simultaneously reducing the administrative 
burden on SNFs.
    We would note that we continue to monitor the impact of PDPM 
implementation on patient outcomes and program outlays, though we 
believe it would be premature to release any information related to 
these issues based on the amount of data currently available. We hope 
to release information in the future that relates to these issues. We 
also continue to monitor the impact of PDPM implementation as it 
relates to our intention to ensure that PDPM is implemented in a budget 
neutral manner, as discussed in the FY 2020 SNF PPS final rule (84 FR 
38734). In future rulemaking, we may reconsider the adjustments made in 
the FY 2020 SNF PPS final rule to the case-mix weights used under PDPM 
to ensure budget neutrality and recalibrate these adjustments as 
appropriate, as we did after the implementation of RUG-IV in FY 2011. 
We invite comments from stakeholders on any observations or information 
related to the impact of PDPM implementation on providers or on patient 
care.
    The PDPM uses clinical data from the MDS to assign case-mix 
classifiers to each patient that are then used to calculate a per diem 
payment under the SNF PPS, consistent with the provisions of section 
1888(e)(4)(G)(i) of the Act. As discussed in section IV.A. of this 
proposed rule, the clinical orientation of the case-mix classification 
system supports the SNF PPS's use of an administrative presumption that 
considers a beneficiary's initial case-mix classification to assist in 
making certain SNF level of care determinations. Further, because the 
MDS is used as a basis for payment, as well as a clinical assessment, 
we have provided extensive training on proper coding and the timeframes 
for MDS completion in our Resident Assessment Instrument (RAI) Manual. 
As we have stated in prior rules, for an MDS to be considered valid for 
use in determining payment, the MDS assessment should 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.
    Under section 1888(e)(4)(H) of the Act, each update of the payment 
rates must include the case-mix classification methodology applicable 
for the upcoming FY. The FY 2021 payment rates set forth in this 
proposed rule reflect the use of the PDPM case-mix classification 
system from October 1, 2020, through September 30, 2021. We list the 
proposed case-mix adjusted PDPM payment rates for FY 2021, provided 
separately for urban and rural SNFs, in Tables 5 and 6 with 
corresponding case-mix values.
    Given the differences between the previous RUG-IV model and PDPM in 
terms of patient classification and billing, it is important that the 
format of Tables 5 and 6 reflect these differences. More specifically, 
under both RUG-IV and PDPM, providers use a Health Insurance 
Prospective Payment System (HIPPS) code on a claim in order to bill for 
covered SNF services. Under RUG-IV, the HIPPS code included the three-
character RUG-IV group into which the patient classified as well as a 
two-character assessment indicator code that represented the assessment 
used to generate this code. Under PDPM, while providers still use a 
HIPPS code, the characters in that code represent different things. For 
example, the first character represents the PT and OT group into which 
the patient classifies. If the patient is classified into the PT and OT 
group ``TA'', then the first character in the patient's HIPPS code 
would be an A. Similarly, if the patient is classified into the SLP 
group ``SB'', then the second character in the patient's HIPPS code 
would be a B. The third character represents the Nursing group into 
which the patient classifies. The fourth character represents the NTA 
group into which the patient classifies. Finally, the fifth character 
represents the assessment used to generate the HIPPS code.
    The format of Tables 5 and 6 reflects the PDPM's structure. 
Accordingly, Column 1 of Tables 5 and 6 represents the character in the 
HIPPS code associated with a given PDPM component. Columns 2 and 3 
provide the case-mix index and associated case-mix adjusted component 
rate, respectively, for the relevant PT group. Columns 4 and 5 provide 
the case-mix index and associated case-mix adjusted component rate, 
respectively, for the relevant OT group. Columns 6 and 7 provide the 
case-mix index and associated case-mix adjusted component rate, 
respectively, for the relevant SLP

[[Page 20920]]

group. Column 8 provides the nursing case-mix group (CMG) that is 
connected with a given PDPM HIPPS character. For example, if the 
patient qualified for the nursing group CBC1, then the third character 
in the patient's HIPPS code would be a ``P.'' Columns 9 and 10 provide 
the case-mix index and associated case-mix adjusted component rate, 
respectively, for the relevant nursing group. Finally, columns 11 and 
12 provide the case-mix index and associated case-mix adjusted 
component rate, respectively, for the relevant NTA group.
    Tables 5 and 6 reflect the proposed PDPM case-mix adjusted rates 
and case-mix indexes for FY 2021. Tables 5 and 6 do not reflect 
adjustments which may be made to the SNF PPS rates as a result of the 
SNF VBP program, discussed in section V. of this proposed rule, or 
other adjustments, such as the variable per diem adjustment. Further, 
in the past, we used the revised OMB delineations adopted in the FY 
2015 SNF PPS final rule (79 FR 45632, 45634), with updates as reflected 
in OMB Bulletin Nos, 15-01 and 17-01, to identify a facility's urban or 
rural status for the purpose of determining which set of rate tables 
would apply to the facility. As discussed below, in this proposed rule, 
we propose to adopt the revised OMB delineations identified in OMB 
Bulletin No. 18-04 (available at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf) in order to identify a facility's 
urban or rural status.
[GRAPHIC] [TIFF OMITTED] TP15AP20.001


[[Page 20921]]


[GRAPHIC] [TIFF OMITTED] TP15AP20.002

D. Wage Index Adjustment

    Section 1888(e)(4)(G)(ii) of the Act requires that we adjust the 
federal rates to account for differences in area wage levels, using a 
wage index that the Secretary determines appropriate. Since the 
inception of the SNF PPS, we have used hospital inpatient wage data in 
developing a wage index to be applied to SNFs. We propose to continue 
this practice for FY 2021, 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 under the inpatient prospective payment system 
(IPPS) 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. As in 
previous years, we would continue to use the pre-reclassified IPPS 
hospital wage data, without applying the occupational mix, rural floor, 
or outmigration adjustment, as the basis for the SNF PPS wage index. 
For FY 2021, the updated wage data are for hospital cost reporting 
periods beginning on or after October 1, 2016 and before October 1, 
2017 (FY 2017 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 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 PPS 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 IPPS wage index, would place a burden 
on providers in terms of recordkeeping and completion of the cost 
report worksheet. 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 believe this undertaking is feasible at this time.
    In addition, we propose to continue to use the same methodology 
discussed in the SNF PPS final rule for FY 2008 (72 FR 43423) to 
address those geographic areas in which there are no hospitals, and 
thus, no hospital wage index data on which to base the calculation of 
the FY 2020 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

[[Page 20922]]

a reasonable proxy. For FY 2021, 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 2021, 
the only urban area without wage index data available is CBSA 25980, 
Hinesville-Fort Stewart, GA.
    The wage index applicable to FY 2021 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 in 
the June 28, 2010 Federal Register (75 FR 37246 through 37252). 
Subsequently, on July 15, 2015, OMB issued OMB Bulletin No. 15-01, 
which provided minor updates to and superseded OMB Bulletin No. 13-01 
that was issued on February 28, 2013. The attachment to OMB Bulletin 
No. 15-01 provided detailed information on the update to statistical 
areas since February 28, 2013. The updates provided in OMB Bulletin No. 
15-01 were 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. In 
addition, on August 15, 2017, OMB issued Bulletin No. 17-01 which 
announced a new urban CBSA, Twin Falls, Idaho (CBSA 46300). 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. To this end, as discussed in section V.A.1. of this 
proposed rule, we propose to adopt the revised OMB delineations 
identified in OMB Bulletin No. 18-04 (available at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf) 
beginning October 1, 2020, including a proposed 1-year transition for 
FY 2021 under which we would apply a 5 percent cap on any decrease in a 
hospital's wage index compared to its wage index for the prior fiscal 
year (FY 2020). We believe that these updated OMB delineations more 
accurately reflect the contemporary urban and rural nature of areas 
across the country, and that use of such delineations would allow us to 
more accurately determine the appropriate wage index and rate tables to 
apply under the SNF PPS. Thus, we believe it is appropriate to use 
these updated OMB delineations for these purposes, in order to enhance 
the accuracy of payments under the SNF PPS. These changes are discussed 
further in section V.A.1. of this proposed rule. We invite comments on 
this proposal. The proposed wage index applicable to FY 2021 is set 
forth in Tables A and B and are available on the CMS website at http://cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html. Table A provides a crosswalk between the FY 2021 wage 
index for a provider using the current OMB delineations in effect in FY 
2020 and the FY 2021 wage index using the proposed revised OMB 
delineations, as well as the proposed transition wage index values that 
would be in effect in FY 2021 if these proposed changes are finalized.
    Once calculated, we would apply the wage index adjustment to the 
labor-related portion of the federal rate. Each year, we calculate a 
revised labor-related share, based on the relative importance of labor-
related cost categories (that is, those cost categories that are labor-
intensive and vary with the local labor market) in the input price 
index. In the SNF PPS final rule for FY 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 2021. 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 2021 than the base year weights 
from the SNF market basket.
    We calculate the labor-related relative importance for FY 2021 in 
four steps. First, we compute the FY 2021 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 
2021 price index level for that cost category by the total market 
basket price index level. Third, we determine the FY 2021 relative 
importance for each cost category by multiplying this ratio by the base 
year (2014) weight. Finally, we add the FY 2021 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-

[[Page 20923]]

Related expenses) to produce the FY 2021 labor-related relative 
importance.
    Table 7 summarizes the proposed labor-related share for FY 2021, 
based on IGI's first quarter 2020 forecast with historical data through 
fourth quarter 2019, compared to the labor-related share that was used 
for the FY 2020 SNF PPS final rule.
[GRAPHIC] [TIFF OMITTED] TP15AP20.003

    In order to calculate the labor portion of the case-mix adjusted 
per diem rate, we would multiply the total case-mix adjusted per diem 
rate, which is the sum of all five case-mix adjusted components into 
which a patient classifies, and the non-case-mix component rate, by the 
FY 2021 labor-related share percentage provided in Table 7. The 
remaining portion of the rate would be the non-labor portion. Under the 
previous RUG-IV model, we included tables which provided the case-mix 
adjusted RUG-IV rates, by RUG-IV group, broken out by total rate, labor 
portion and non-labor portion, such as Table 9 of the FY 2019 SNF PPS 
final rule (83 FR 39175). However, as we discussed in the FY 2020 final 
rule (84 FR 38738), under PDPM, as the total rate is calculated as a 
combination of six different component rates, five of which are case-
mix adjusted, and given the sheer volume of possible combinations of 
these five case-mix adjusted components, it is not feasible to provide 
tables similar to those that existed in the prior rulemaking.
    Therefore, to aid stakeholders in understanding the effect of the 
wage index on the calculation of the SNF per diem rate, we have 
included a hypothetical rate calculation in Table 8.
    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 2021 (federal rates 
effective October 1, 2020), we would apply an adjustment to fulfill the 
budget neutrality requirement. We would meet this requirement by 
multiplying each of the components of the unadjusted federal rates by a 
budget neutrality factor. Our proposed budget neutrality calculations 
are described in section V.A.4 of this proposed rule. We define the 
wage adjustment factor used in this calculation as the labor share of 
the rate component multiplied by the wage index plus the non-labor 
share of the rate component.
    The proposed budget neutrality factor for FY 2021 would be 0.9986. 
We note that if more recent data become available (for example, revised 
wage data), we would use such data as appropriate to determine the wage 
index budget neutrality factor in the SNF PPS final rule. Further, as 
discussed in section V.A.4. of this proposed rule, we note that this 
budget neutrality factor accounts for all proposed changes to the wage 
index contained in this proposed rule, both those described in this 
section as well as those described in section V.A. of this proposed 
rule.

E. 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 finalized in the FY 2019 
SNF PPS final rule the addition of Sec.  413.337(f) to our regulations 
(83 FR 39178).
    Please see section V.C. of this proposed rule for a further 
discussion of our policies for the SNF VBP Program.

F. Adjusted Rate Computation Example

    The following tables provide examples generally illustrating 
payment calculations during FY 2021 under PDPM for a hypothetical 30-
day SNF stay, involving the hypothetical SNF XYZ, located in Frederick, 
MD (Urban CBSA 23224), for a hypothetical patient who is classified 
into such groups that the patient's HIPPS code is NHNC1. Table 8 shows 
the adjustments made to the federal per diem rates (prior to 
application of any adjustments under the SNF VBP programs as discussed 
above) to compute the provider's case-mix adjusted per diem rate for FY 
2021, based on the patient's PDPM classification, as well as how the 
VPD adjustment factor affects calculation of the per diem rate for a 
given day of the stay. Table 9 shows the adjustments made to the case-
mix adjusted per diem rate from Table 8 to account for the provider's 
wage index. The wage index used in this example is based on the FY 2021 
SNF PPS wage index that appears

[[Page 20924]]

in Table A available on the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html. Finally, Table 
10 provides the case-mix and wage index adjusted per-diem rate for this 
patient for each day of the 30-day stay, as well as the total payment 
for this stay. Table 10 also includes the variable per diem (VPD) 
adjustment factors for each day of the patient's stay, to clarify why 
the patient's per diem rate changes for certain days of the stay. As 
illustrated in Table 10, SNF XYZ's total PPS payment for this 
particular patient's stay would equal $20,441.62.

[[Page 20925]]

[GRAPHIC] [TIFF OMITTED] TP15AP20.004


[[Page 20926]]



IV. Additional Aspects of the SNF PPS

A. SNF Level of Care--Administrative Presumption

    The establishment of the SNF PPS did not change Medicare's 
fundamental requirements for SNF coverage. However, because the case-
mix classification is based, in part, on the beneficiary's need for 
skilled nursing care and therapy, we have attempted, where possible, to 
coordinate claims review procedures with the existing resident 
assessment process and case-mix classification system discussed in 
section III.C. of this proposed rule. This approach includes an 
administrative presumption that utilizes a beneficiary's correct 
assignment, at the outset of the SNF stay, of one of the case-mix 
classifiers designated for this purpose to assist in making certain SNF 
level of care determinations.
    In accordance with Sec.  413.345, we include in each update of the 
federal payment rates in the Federal Register a discussion of the 
resident classification system that provides the basis for case-mix 
adjustment. We also designate those specific classifiers under the 
case-mix classification system that represent the required SNF level of 
care, as provided in Sec.  409.30. This designation reflects an 
administrative presumption that those beneficiaries who are correctly 
assigned one of the designated case-mix classifiers on the initial 
Medicare assessment are automatically classified as meeting the SNF 
level of care definition up to and including the assessment reference 
date (ARD) for that assessment.
    A beneficiary who does not qualify for the presumption is not 
automatically classified as either meeting or not meeting the level of 
care definition, but instead receives an individual determination on 
this point using the existing administrative criteria. This presumption 
recognizes the strong likelihood that those beneficiaries who are 
assigned one of the designated case-mix classifiers during the 
immediate post-hospital period would require a covered level of care, 
which would be less likely for other beneficiaries.
    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 propose 
changes in them. Under that approach, the set of case-mix classifiers 
designated for this purpose under PDPM was finalized in the FY 2019 SNF 
PPS final rule (83 FR 39253) and is posted on the SNF PPS website 
(https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html), in the paragraph entitled ``Case Mix Adjustment.''
    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 any 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 where the sole classifier that 
triggers the presumption is itself assigned through 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 initial 
Medicare 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. 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 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_2018-10-01.pdf. In particular, section 
103 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act 
of 1999 (BBRA, Pub. L. 106-113, enacted 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 these four 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

[[Page 20927]]

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 this proposed rule, we specifically invite public comments 
identifying HCPCS codes in any of these four service categories 
(chemotherapy items, chemotherapy administration services, radioisotope 
services, and customized prosthetic devices) representing recent 
medical advances that might meet our criteria for exclusion from SNF 
consolidated billing. We may consider excluding a particular service if 
it meets our criteria for exclusion as specified above. Commenters 
should identify in their comments the specific HCPCS code that is 
associated with the service in question, as well as their rationale for 
requesting that the identified HCPCS code(s) be excluded.
    We note that the original BBRA amendment (as well as the 
implementing regulations) identified a set of excluded services by 
means of specifying HCPCS codes that were in effect as of a particular 
date (in that case, as of July 1, 1999). Identifying the excluded 
services in this manner made it possible for us to utilize program 
issuances as the vehicle for accomplishing routine updates of the 
excluded codes, to reflect any minor revisions that might subsequently 
occur in the coding system itself (for example, the assignment of a 
different code number to the same service). Accordingly, in the event 
that we identify through the current rulemaking cycle any new services 
that would actually represent a substantive change in the scope of the 
exclusions from SNF consolidated billing, we would identify these 
additional excluded services by means of the HCPCS codes that are in 
effect as of a specific date (in this case, as of October 1, 2020). By 
making any new exclusions in this manner, we could similarly accomplish 
routine future updates of these additional codes through the issuance 
of program instructions.

C. Payment for SNF-Level Swing-Bed Services

    Section 1883 of the Act permits certain small, rural hospitals to 
enter into a Medicare swing-bed agreement, under which the hospital can 
use its beds to provide either acute- or SNF-level care, as needed. For 
critical access hospitals (CAHs), Part A pays on a reasonable cost 
basis for SNF-level services furnished under a swing-bed agreement. 
However, in accordance with section 1888(e)(7) of the Act, 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 proposed rule for the SNF PPS also apply to 
all non-CAH swing-bed rural hospitals. 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. As discussed in the FY 2019 SNF PPS final 
rule (83 FR 39235), revisions were made to the swing bed assessment in 
order to support implementation of PDPM, effective October 1, 2019. A 
discussion of the assessment schedule and the MDS effective beginning 
FY 2020 appears in the FY 2019 SNF PPS final rule (83 FR 39229 through 
39237). 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.

D. Revisions to the Regulation Text

    Along with our proposed revisions as discussed elsewhere in this 
proposed rule, we are also proposing to make certain revisions in the 
regulation text itself. Specifically, we propose to update the example 
used in illustrating the application of the SNF level of care's 
``practical matter'' criterion that appears at 42 CFR 409.35(a), as 
well as to correct an erroneous cross-reference that appears in the 
swing-bed payment regulations at 42 CFR 413.114(c)(2), as discussed 
further below.
    The statutory SNF level of care definition set forth in section 
1814(a)(2)(B) of the Act provides that the beneficiary must need and 
receive skilled services on a daily basis which, as a practical matter, 
can only be provided in a SNF on an inpatient basis.
    Section 409.35(a) provides that in making a ``practical matter'' 
determination, consideration must be given to the patient's condition 
and to the availability and feasibility of using more economical 
alternative facilities and services. In this context, in evaluating 
whether a given non-inpatient alternative is more economical than 
inpatient SNF care, the regulation provides that the availability of 
Medicare payment for those services may not be a factor.
    In illustrating this point, the existing regulation text at Sec.  
409.35(a) uses as an example the previous annual caps on Part B payment 
for outpatient therapy services. It indicates that Medicare's 
nonpayment for services that exceed the cap would not, in itself, serve 
as a basis for determining that needed care can only be provided in a 
SNF. In order to reflect the recent repeal of the Part B therapy caps 
in section 50202 of the BBA 2018, we now propose to revise the 
regulation text by rewording the example used to illustrate this point 
in a manner that omits its reference to the repealed therapy cap 
provision. Specifically, we would revise the regulation text on this 
point to provide as an example that the unavailability of Medicare 
payment for outpatient therapy due to the beneficiary's nonenrollment 
in Part B cannot serve as a basis for finding that the needed care can 
only be provided on an inpatient basis in a SNF.
    In addition, we propose to make a minor technical correction to the 
regulation text in Sec.  413.114(c), which discusses historical swing-
bed payment policies that were in effect for cost reporting periods 
beginning prior to July 1, 2002. Specifically, we would revise Sec.  
413.114(c)(2) to remove an erroneous cross-reference to a non-existent

[[Page 20928]]

Sec.  413.55(a)(1), and would substitute in its place the correct 
cross-reference to the regulations on reasonable cost reimbursement at 
Sec.  413.53(a)(1).

V. Other Issues

A. Proposed Changes to SNF PPS Wage Index

1. Core-Based Statistical Areas (CBSAs) for the FY 2021 SNF PPS Wage 
Index
a. Background
    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 2021, 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 under the IPPS 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. As in previous years, we would continue 
to use, as the basis for the SNF PPS wage index, the IPPS hospital wage 
data, unadjusted for occupational mix, without taking into account 
geographic reclassifications under section 1886(d)(8) and (d)(10) of 
the Act, and without applying the rural floor under section 4410 of the 
BBA 1997 and the outmigration adjustment under section 1886(d)(13) of 
the Act. For FY 2021, the updated wage data are for hospital cost 
reporting periods beginning on or after October 1, 2016 and before 
October 1, 2017 (FY 2017 cost report data).
    The applicable SNF PPS wage index value is assigned to a SNF on the 
basis of the labor market area in which the SNF is geographically 
located. 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 Metropolitan 
Statistical Area (MSA) and the creation of micropolitan statistical 
areas and combined statistical areas. In adopting the Core-Based 
Statistical Areas (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 MSAs, 
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 in the June 28, 2010 Federal Register (75 FR 
37246 through 37252). Subsequently, on July 15, 2015, OMB issued OMB 
Bulletin No. 15-01, which provided minor updates to and superseded OMB 
Bulletin No. 13-01 that was issued on February 28, 2013. The attachment 
to OMB Bulletin No. 15-01 provided detailed information on the update 
to statistical areas since February 28, 2013. The updates provided in 
OMB Bulletin No. 15-01 were 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. In addition, on August 15, 2017, OMB issued Bulletin No. 17-01 
which announced a new urban CBSA, Twin Falls, Idaho (CBSA 46300). As we 
previously stated in the FY 2008 SNF PPS proposed and final rules (72 
FR 25538 through 25539, and 72 FR 43423), and as we note in this 
proposed rule, 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 April 10, 2018, OMB issued OMB Bulletin No. 18-03 which 
superseded the August 15, 2017 OMB Bulletin No. 17-01. Subsequently, on 
September 14, 2018, OMB issued OMB Bulletin No. 18-04, which superseded 
the April 10, 2018 OMB Bulletin No. 18-03. These bulletins established 
revised delineations for MSAs, Micropolitan Statistical Areas, and 
Combined Statistical Areas, and provided guidance on the use of the 
delineations of these statistical areas. A copy of the most recent 
bulletin, No. 18-04, may be obtained at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf. (We note that on March 6, 
2020, OMB issued OMB Bulletin 20-01 (available on the web at https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf)), 
which, as discussed below was not issued in time for development of 
this proposed rule.) While OMB Bulletin No. 18-04 is not based on new 
census data, it includes some material changes to the OMB statistical 
area delineations, including some new CBSAs, urban counties that would 
become rural, rural counties that would become urban, and existing 
CBSAs that would be split apart. In this proposed rule, we are 
proposing to adopt the updates to the OMB delineations announced in OMB 
Bulletin No. 18-04 effective beginning in FY 2021 under the SNF PPS. As 
noted above, the March 6, 2020 OMB Bulletin 20-01 was not issued in 
time for development of this proposed rule. We intend to propose any 
updates from this bulletin in the FY 2022 SNF PPS proposed rule.
    To implement these changes for the SNF PPS beginning in FY 2021, it 
is necessary to identify the revised labor market area delineation for 
each affected county and provider in the country. The revisions OMB 
published on September 14, 2018 contain a number of significant 
changes. For example, under the proposed revised OMB delineations, 
there would be new CBSAs, urban counties that would become rural, rural 
counties that would become urban, and existing CBSAs that would split 
apart. We discuss these changes in more detail later in this proposed 
rule.
b. Proposed Implementation of Revised Labor Market Area Delineations
    We typically delay implementing revised OMB labor market area 
delineations to allow for sufficient time to assess the new changes. 
For example, as discussed in the FY 2014 SNF PPS proposed rule (78 FR 
26448) and final rule (78 FR 47952), we delayed implementing the 
revised OMB statistical area delineations described in OMB Bulletin No. 
13-01 to allow for sufficient time to assess the new changes. We 
believe it is important for the SNF PPS to use the latest labor market 
area delineations available as

[[Page 20929]]

soon as is reasonably possible to maintain a more accurate and up-to-
date payment system that reflects the reality of population shifts and 
labor market conditions. We further believe that using the delineations 
reflected in OMB Bulletin No. 18-04 would increase the integrity of the 
SNF PPS wage index system by creating a more accurate representation of 
geographic variations in wage levels. We have reviewed our findings and 
impacts relating to the revised OMB delineations set forth in OMB 
Bulletin No. 18-04, and find no compelling reason to further delay 
implementation. Because we believe we have broad authority under 
section 1888(e)(4)(G)(ii) of the Act to determine the labor market 
areas used for the SNF PPS wage index, and because we believe the 
delineations reflected in OMB Bulletin No. 18-04 better reflect the 
local economies and wage levels of the areas in which hospitals are 
currently located, we are proposing to implement the revised OMB 
delineations as described in the September 14, 2018 OMB Bulletin No. 
18-04, for the SNF PPS wage index effective beginning in FY 2021. In 
addition, we are proposing to implement a 1-year transition policy 
under which we would apply a 5 percent cap in FY 2021 on any decrease 
in a hospital's wage index compared to its wage index for the prior 
fiscal year (FY 2020) to assist providers in adapting to the revised 
OMB delineations (if we finalize the implementation of such 
delineations for the SNF PPS wage index beginning in FY 2021). This 
transition is discussed in more detail later in this proposed rule. We 
invite comments on these proposals.
(1) Micropolitan Statistical Areas
    As discussed in the FY 2006 SNF PPS proposed rule (70 FR 29093 
through 29094) and final rule (70 FR 45041), we considered how to use 
the Micropolitan Statistical Area definitions in the calculation of the 
wage index. OMB defines a ``Micropolitan Statistical Area'' as a CBSA 
``associated with at least one urban cluster that has a population of 
at least 10,000, but less than 50,000'' (75 FR 37252). We refer to 
these as Micropolitan Areas. After extensive impact analysis, 
consistent with the treatment of these areas under the IPPS as 
discussed in the FY 2005 IPPS final rule (69 FR 49029 through 49032), 
we determined the best course of action would be to treat Micropolitan 
Areas as ``rural'' and include them in the calculation of each state's 
SNF PPS rural wage index (see 70 FR 29094 and 70 FR 45040 through 
45041)).
    Thus, the SNF PPS statewide rural wage index is determined using 
IPPS hospital data from hospitals located in non-MSA areas, and the 
statewide rural wage index is assigned to SNFs located in those areas. 
Because Micropolitan Areas tend to encompass smaller population centers 
and contain fewer hospitals than MSAs, we determined that if 
Micropolitan Areas were to be treated as separate labor market areas, 
the SNF PPS wage index would have included significantly more single-
provider labor market areas. As we explained in the FY 2006 SNF PPS 
proposed rule (70 FR 29094), recognizing Micropolitan Areas as 
independent labor markets would generally increase the potential for 
dramatic shifts in year-to-year wage index values because a single 
hospital (or group of hospitals) could have a disproportionate effect 
on the wage index of an area. Dramatic shifts in an area's wage index 
from year-to-year are problematic and create instability in the payment 
levels from year-to-year, which could make fiscal planning for SNFs 
difficult if we adopted this approach. For these reasons, we adopted a 
policy to include Micropolitan Areas in the state's rural wage area for 
purposes of the SNF PPS wage index, and have continued this policy 
through the present.
    We believe that the best course of action would be to continue the 
policy established in the FY 2006 SNF PPS final rule and include 
Micropolitan Areas in each state's rural wage index. These areas 
continue to be defined as having relatively small urban cores 
(populations of 10,000 to 49,999). We do not believe it would be 
appropriate to calculate a separate wage index for areas that typically 
may include only a few hospitals for the reasons discussed in the FY 
2006 SNF PPS proposed rule, and as discussed earlier. Therefore, in 
conjunction with our proposal to implement the revised OMB labor market 
delineations beginning in FY 2021 and consistent with the treatment of 
Micropolitan Areas under the IPPS, we are proposing to continue to 
treat Micropolitan Areas as ``rural'' and to include Micropolitan Areas 
in the calculation of the state's rural wage index.
(2) Urban Counties That Would Become Rural Under the Revised OMB 
Delineations
    As previously discussed, we are proposing to implement the revised 
OMB statistical area delineations based upon OMB Bulletin No. 18-04 
beginning in FY 2021. Our analysis shows that a total of 34 counties 
(and county equivalents) that are currently considered part of an urban 
CBSA would be considered to be located in a rural area, beginning in FY 
2021, if we adopt these revised OMB delineations. Table 11 lists the 34 
urban counties that would be rural if we finalize our proposal to 
implement the revised OMB delineations.

[[Page 20930]]

[GRAPHIC] [TIFF OMITTED] TP15AP20.005

    We are proposing that, for purposes of determining the wage index 
under the SNF PPS, the wage data for all hospitals located in the 
counties listed in Table 11 would be considered rural when calculating 
their respective state's rural wage index under the SNF PPS. We 
recognize that rural areas typically have lower area wage index values 
than urban areas, and SNFs located in these counties may experience a 
negative impact in their SNF PPS payment due to the proposed adoption 
of the revised OMB delineations. A discussion of the proposed wage 
index transition policy appears later in this proposed ruled. 
Furthermore, for SNF providers currently located in an urban county 
that would be considered rural should this proposal be finalized, we 
would utilize the rural unadjusted per diem

[[Page 20931]]

rates, found in Table 4, as the basis for determining payment rates for 
these facilities beginning on October 1, 2020.
(3) Rural Counties That Would Become Urban Under the Revised OMB 
Delineations
    As previously discussed, we are proposing to implement the revised 
OMB statistical area delineations based upon OMB Bulletin No. 18-04 
beginning in FY 2021. Analysis of these OMB statistical area 
delineations shows that a total of 47 counties (and county equivalents) 
that are currently located in rural areas would be located in urban 
areas if we finalize our proposal to implement the revised OMB 
delineations. Table 12 lists the 47 rural counties that would be urban 
if we finalize our proposal to implement the revised OMB delineations.

[[Page 20932]]

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[[Page 20933]]


[GRAPHIC] [TIFF OMITTED] TP15AP20.007

    We are proposing that, for purposes of calculating the area wage 
index under the SNF PPS, the wage data for hospitals located in the 
counties listed in Table 12 would be included in their new respective 
urban CBSAs. Typically, SNFs located in an urban area would receive a 
wage index value higher than or equal to SNFs located in their state's 
rural area. A discussion of the proposed wage index transition policy 
appears later in this proposed rule. Furthermore, for SNFs currently 
located in a rural county that would be considered urban should this 
proposal be finalized, we would utilize the urban unadjusted per diem 
rates found in Table 3, as the basis for determining the payment rates 
for these facilities beginning October 1, 2020.
(4) Urban Counties That Would Move to a Different Urban CBSA Under the 
Revised OMB Delineations
    In addition to rural counties becoming urban and urban counties 
becoming rural, some urban counties would shift from one urban CBSA to 
another urban CBSA under our proposal to adopt the revised OMB 
delineations. In other cases, adopting the revised OMB delineations 
would involve a change only in CBSA name and/or number, while the CBSA 
continues to encompass the same constituent counties. For example, CBSA 
19380 (Dayton, OH) would experience both a change to its number and its 
name, and become CBSA 19430 (Dayton-Kettering, OH), while all of its 
three constituent counties would remain the same. We consider these 
proposed changes (where only the CBSA name and/or number would change) 
to be inconsequential changes with respect to the SNF PPS wage index. 
Table 13 sets forth a list of such CBSAs where there would be a change 
in CBSA name and/or number only if we adopt the revised OMB 
delineations.

[[Page 20934]]

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[[Page 20935]]


[GRAPHIC] [TIFF OMITTED] TP15AP20.009

    However, in other cases, if we adopt the revised OMB delineations, 
counties would shift between existing and new urban CBSAs, changing the 
constituent makeup of the CBSAs. In one type of change, CBSAs would 
split into multiple new CBSAs. For example, CBSA 35614 (New York Jersey 
City White Plains, NY NJ) has counties splitting off into new CBSAs, 
such as CBSA 35154 (New Brunswick Lakewood, NJ). In other cases, a CBSA 
would lose one or more counties to another urban CBSA. For example, 
Kendall County, IL, that is currently in CBSA 16974 (Chicago Naperville 
Arlington Heights, IL) is moving to CBSA 20994 (Elgin, IL).
    Table 14 lists the urban counties that would move from one urban 
CBSA to another newly proposed or modified CBSA if we adopt the revised 
OMB delineations.

[[Page 20936]]

[GRAPHIC] [TIFF OMITTED] TP15AP20.010

    If SNFs located in these counties move from one CBSA to another 
under the revised OMB delineations, there may be impacts, both negative 
and positive, upon their specific wage index values. A discussion of 
the proposed wage index transition policy appears later in this 
proposed rule.
2. Proposed Transition Policy for FY 2021 Wage Index Changes
    As discussed previously in this proposed rule, we believe that 
adopting the revised OMB delineations would result in SNF PPS wage 
index values being more representative of the actual costs of labor in 
a given area. However, we also recognize that some SNFs (42 percent) 
would experience decreases in their area wage index values as a result 
of this proposal, though just over 2 percent of providers would 
experience a significant decrease (that is, greater than 5 percent) in 
their area wage index value. We also realize that many SNFs (54 
percent) would have higher area wage index values after adopting the 
revised OMB delineations.
    To mitigate the potential impacts, we have in the past provided for 
transition periods when adopting revised OMB delineations. For example, 
we proposed

[[Page 20937]]

and finalized budget neutral transition policies to help mitigate 
negative impacts on SNFs following the adoption of the new CBSA 
delineations based on the 2010 decennial census data in the FY 2015 SNF 
PPS final rule (79 FR 45644 through 45646). Specifically, we 
implemented a 1-year 50/50 blended wage index for all SNFs due to our 
adoption of the revised delineations. This required calculating and 
comparing two wage indexes for each SNF since that blended wage index 
was computed as the sum of 50 percent of the FY 2015 SNF PPS wage index 
values under the FY 2014 CBSA delineations and 50 percent of the FY 
2015 SNF PPS wage index values under the FY 2015 new OMB delineations. 
While we believed that using the new OMB delineations would create a 
more accurate payment adjustment for differences in area wage levels, 
we also recognized that adopting such changes may cause some short-term 
instability in SNF PPS payments. Similar instability may result from 
the proposed adoption of the revised OMB delineations discussed in this 
proposed rule. For example, SNFs currently located in CBSA 35614 (New 
York-Jersey City-White Plains, NY-NJ) that would be located in new CBSA 
35154 (New Brunswick-Lakewood, NJ) under the proposed changes to the 
CBSA-based labor market area delineations would experience a nearly 17 
percent decrease in the wage index as a result of that the proposed 
change. Therefore, consistent with past practice, we are proposing a 
transition policy to help mitigate any significant negative impacts 
that SNFs may experience if we adopt the revised OMB delineations for 
FY 2021. Specifically, for FY 2021, as a transition, we are proposing 
to apply a 5-percent cap on any decrease in an SNF's wage index from 
the SNF's wage index from the prior fiscal year. This transition would 
allow the effects of adopting the revised OMB delineations to be phased 
in over 2 years, where the estimated reduction in an SNF's wage index 
would be capped at 5 percent in FY 2021 (that is, no cap would be 
applied to any reductions in the wage index for the second year (FY 
2022)).
    We considered using a 50/50 blend for the transition, similar to 
the transition we finalized in the FY 2015 SNF PPS final rule, as 
described previously in this proposed rule. However, given that a 
majority of SNFs would experience an increase in their area wage index 
values as a result of the revised OMB delineations, and given that a 
blended option would affect all SNF providers, we believe it would be 
more appropriate to allow SNFs that would experience an increase in 
wage index values to receive the full benefit of their increased wage 
index value (which is intended to reflect accurately the higher labor 
costs in that area), while mitigating any significant negative wage 
index impacts that may be experienced by a minority of SNFs. By 
utilizing a cap on negative impacts, this restricts the transition to 
only those with negative impacts and allows providers who would 
experience positive impacts to receive the full amount of their wage 
index increase. Thus, we believe a 5 percent cap on the overall 
decrease in an SNF's wage index value would be an appropriate 
transition for FY 2021. We believe 5 percent is a reasonable level for 
the cap because it would effectively mitigate any significant decreases 
in an SNF's wage index for FY 2021, while balancing the importance of 
ensuring that area wage index values accurately reflect relative 
differences in area wage levels. Additionally, a cap on significant 
wage index decreases provides a certain degree of predictability in 
payment changes for providers and allows providers time to adjust to 
any significant decreases they may face in FY 2022, after the 
transition period has ended.
    Furthermore, consistent with the requirement at section 
1888(e)(4)(G)(ii) of the Act that wage index adjustments must be made 
in a budget neutral manner, we are proposing that this proposed 5 
percent cap on the decrease in an SNF's wage index would not result in 
any change in estimated aggregate SNF PPS payments by applying a budget 
neutrality factor to the unadjusted Federal per diem rates. Our 
proposed methodology for calculating this proposed budget neutrality 
factor is discussed below in section V.A.4 of this proposed rule.
    This transition policy would be for a 1-year period, going into 
effect October 1, 2020, and continuing through September 30, 2021. That 
is, no cap would be applied to any reductions in the wage index for FY 
2022. We invite comments on our proposed transition methodology. (The 
proposed wage index applicable to FY 2021 is set forth in Table A 
available on the CMS website at http://cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html. Table A provides a crosswalk 
between the FY 2021 wage index for a provider using the current OMB 
delineations in effect in FY 2020 and the FY 2021 wage index using the 
proposed revised OMB delineations, as well as the proposed transition 
wage index values that would be in effect in FY 2021 if these proposed 
changes are finalized.)
3. Proposed Budget Neutrality Adjustments for Changes to the SNF PPS 
Wage Index
    Section 1888(e)(4)(G)(ii) of the Act requires that we apply the 
wage index adjustment in a budget neutral manner such that aggregate 
SNF PPS payments will be neither greater than nor less than aggregate 
SNF PPS payments without the wage index adjustment. Under this 
provision, we determine a wage index adjustment budget neutrality 
factor that is applied to the Federal per diem rates to ensure that any 
changes to the area wage index values would not result in any change 
(increase or decrease) in estimated aggregate SNF PPS payments. 
Accordingly, we are proposing to apply a wage index budget neutrality 
factor in determining the Federal per diem rates, and we are also 
proposing a methodology for calculating this budget neutrality factor.
    For FY 2021, we are proposing to adjust the SNF PPS unadjusted 
Federal per diem rates to account for the estimated effect of the wage 
index adjustments discussed in this section of the proposed rule on 
estimated aggregate SNF PPS payments. Under our established 
methodology, we have historically applied a single budget neutrality 
factor to ensure that any changes to the wage index are budget neutral. 
In general, annual changes to the wage index include updates to the 
wage index values based on updated hospital wage data, labor-related 
share, and geographic labor-market area (that is, CBSA) designations, 
as applicable. However, for FY 2021, as discussed previously in this 
proposed rule, we are also proposing to adopt revised OMB delineations 
and proposing to apply a 5-percent cap on any decrease in a SNF's wage 
index. Therefore, for purposes of the wage index budget neutrality 
requirement under section 1888(e)(4)(G)(ii) of the Act, in determining 
the SNF PPS Federal per diem rates, the proposed budget neutrality 
factor calculated for FY 2021, described below, accounts for all of 
these proposed changes to the SNF PPS wage index. Below we discuss our 
proposed methodology for calculating and applying the proposed wage 
index budget neutrality factor for determining the proposed FY 2021 
Federal per diem rates.
    We are proposing to apply a budget neutrality factor to adjust the 
FY 2021 SNF PPS Federal per diem rates to account for the estimated 
effect of the proposed changes to the wage index values based on 
updated hospital wage

[[Page 20938]]

data, as well as adopting the revised OMB delineations and accounting 
for the proposed 5 percent cap on any decreases in a provider's area 
wage index value, on estimated aggregate SNF PPS payments using a 
methodology that is consistent with the methodology we have used in 
prior years (most recently, in the FY 2020 SNF PPS final rule (84 FR 
38738)).
    Specifically, we are proposing to determine a budget neutrality 
factor for all updates to the wage index that would be applied to the 
SNF PPS Federal per diem rate for FY 2021 using the following 
methodology:
     Step 1--Simulate estimated aggregate SNF PPS 
payments using the FY 2020 wage index values and FY 2019 SNF PPS claims 
utilization data.
     Step 2--Simulate estimated aggregate SNF PPS 
payments using the FY 2019 SNF PPS claims utilization data and the 
proposed FY 2021 wage index values based on updated hospital wage data 
and the proposed revised OMB delineations, assuming a 5 percent cap on 
any decreases in an area wage index (that is, in cases where a 
provider's FY 2021 area wage index value would be less than 95 percent 
of the provider's FY 2020 wage index value, we set the provider's area 
FY 2021 wage index value to equal 95 percent of the provider's FY 2020 
wage index value.)
     Step 3--Calculate the ratio of these estimated 
aggregate SNF PPS payments by dividing the estimated aggregate SNF PPS 
payments using the FY 2020 wage index values (calculated in Step 1) by 
the estimated aggregate SNF PPS payments using the proposed FY 2021 
wage index values (calculated in Step 2) to determine the proposed 
budget neutrality factor for updates to the wage index that would be 
applied to the unadjusted Federal per diem rates for FY 2021.
    For this proposed rule, using the steps in the methodology 
previously described, we determined a proposed FY 2021 SNF PPS budget 
neutrality factor of 0.9982.
    Accordingly, in section III.B. of this proposed rule, to determine 
the proposed FY 2021 SNF PPS Federal per diem payment rates, we applied 
the proposed budget neutrality factor of 0.9982.

B. Technical Updates to PDPM ICD-10 Mappings

    In the FY 2019 SNF PPS final rule (83 FR 39162), we finalized the 
implementation of the Patient Driven Payment Model (PDPM), effective 
October 1, 2019. The PDPM utilizes International Classification of 
Diseases, Version 10 (ICD-10) codes in several ways, including to 
assign patients to clinical categories used for categorization under 
several PDPM components, specifically the PT, OT, SLP and NTA 
components. The ICD-10 code mappings and lists used under PDPM are 
available on the PDPM website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM.
    Each year, the ICD-10 Coordination and Maintenance Committee, a 
federal interdepartmental committee that is chaired by representatives 
from the National Center for Health Statistics (NCHS) and by 
representatives from CMS, meets biannually and publishes updates to the 
ICD-10 medical code data sets in June of each year. These changes 
become effective October 1 of the year in which these updates are 
issued by the committee. The ICD-10 Coordination and Maintenance 
Committee also has the ability to make changes to the ICD-10 medical 
code data sets effective on April 1.
    In the FY 2020 SNF PPS final rule (84 FR 38750), we outlined the 
process by which we maintain and update the ICD-10 code mappings and 
lists associated with the PDPM, as well as the SNF GROUPER software and 
other such products related to patient classification and billing, so 
as to ensure that they reflect the most up to date codes possible. 
Beginning with the updates for FY 2020, we apply nonsubstantive changes 
to the ICD-10 codes included on the PDPM code mappings and lists 
through a subregulatory process consisting of posting updated code 
mappings and lists on the PDPM website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM. Such nonsubstantive 
changes are limited to those specific changes that are necessary to 
maintain consistency with the most current ICD-10 medical code data 
set. On the other hand, substantive changes, or those that go beyond 
the intention of maintaining consistency with the most current ICD-10 
medical code data set, will be proposed through notice and comment 
rulemaking. For instance, changes to the assignment of a code to a 
comorbidity list or other changes that amount to changes in policy are 
considered substantive changes that require notice and comment 
rulemaking.
    We are proposing several changes to the PDPM ICD-10 code mappings 
and lists. The proposed updated mappings and lists may be viewed online 
at the SNF PDPM website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM. Our proposed changes are as follows.
    Under the PDPM, we classify patients in clinical categories based 
on the primary SNF diagnosis. The clinical classification may change 
based on whether the patient had a major procedure during the prior 
inpatient stay that impacts the plan of care as captured in items J2100 
through J5000 on the MDS. In the current ICD-10 to clinical category 
mapping being used in FY 2020, ICD-10 codes associated with certain 
cancers that could require a major procedure (specifically, C15 through 
C26.9, C33 through C39.9, C40.01 through C40.02, C40.11 through C40.12, 
C40.21 through C40.22, C40.31 through C40.32, C40.81 through C40.82, 
C40.91 through C41.9, C45.0 through C45.9, C46.3 through C46.9, C47.0, 
C47.11 through C47.12, C47.21 through C47.22, C47.3 through C48.8, 
C49.0, C49.11 through C49.12, C49.21 through C49.A9, C50.011 through 
C50.012, C50.021 through C50.022, C50.111 through C50.112, C50.121 
through C50.122, C50.211 through C50.212, C50.221 through C50.222, 
C50.311 through C50.312, C50.321 through C50.322, C50.411 through 
C50.412, C50.421 through C50.422, C50.511 through C50.512, C50.521 
through C50.522, C50.611 through C50.612, C50.621 through C50.622, 
C50.811 through C50.812, C50.821 through C50.822, C50.911 through 
C50.912, C50.921 through C50.922, C51.0 through C61, C62.01 through 
C62.02, C62.11 through C62.12, C62.91 through C68.9, C70.0 through 
C76.3, C76.41 through C76.42, C76.51 through C80.1, D37.09 through 
D39.9, D3A.00 through D3A.8, D40.0, D40.11 through D44.9, D48.3 through 
D48.4, D48.61 through D48.7, D49.0 through D49.7) do not include the 
option of a major procedure in the prior inpatient stay that may impact 
the plan of care. We propose to add the surgical clinical category 
options of ``May be Eligible for the Non-Orthopedic Surgery Category'' 
or ``May be Eligible for One of the Two Orthopedic Surgery Categories'' 
to the clinical category mapping of the following diagnoses when a 
major procedure, as described previously, is identified on the MDS: C15 
through C26.9, C33 through C39.9, C40.01 through C40.02, C40.11 through 
C40.12, C40.21 through C40.22, C40.31 through C40.32, C40.81 through 
C40.82, C40.91 through C41.9, C45.0 through C45.9, C46.3 through C46.9, 
C47.0, C47.11 through C47.12, C47.21 through C47.22, C47.3 through 
C48.8, C49.0, C49.11 through C49.12, C49.21 through C49.A9, C50.011 
through C50.012, C50.021 through C50.022, C50.111

[[Page 20939]]

through C50.112, C50.121 through C50.122, C50.211 through C50.212, 
C50.221 through C50.222, C50.311 through C50.312, C50.321 through 
C50.322, C50.411 through C50.412, C50.421 through C50.422, C50.511 
through C50.512, C50.521 through C50.522, C50.611 through C50.612, 
C50.621 through C50.622, C50.811 through C50.812, C50.821 through 
C50.822, C50.911 through C50.912, C50.921 through C50.922, C51.0 
through C61, C62.01 through C62.02, C62.11 through C62.12, C62.91 
through C68.9, C70.0 through C76.3, C76.41 through C76.42, C76.51 
through C80.1, D37.09 through D39.9, D3A.00 through D3A.8, D40.0, 
D40.11 through D44.9, D48.3 through D48.4, D48.61 through D48.7, D49.0 
through D49.7. We propose to include the surgical clinical category 
options specified previously in this proposed rule for these codes 
because a major procedure for these codes in a prior inpatient stay 
could affect the plan of care. These proposed changes are outlined more 
specifically below.
    We propose to include the surgical clinical category option ``May 
be Eligible for the Non-Orthopedic Surgery Category'' for cancer codes 
C15.3 through C26.9 which correspond to J2910 of the MDS and address 
cancers involving the gastrointestinal tract.
    We propose to include the surgical clinical category option ``May 
be Eligible for the Non-Orthopedic Surgery Category'' for cancer codes 
C33 through C39.9, which correspond to J2710 of the MDS and that 
address cancers involving the respiratory system.
    We propose to include the ``May be Eligible for One of the Two 
Orthopedic Surgery Categories'' option for codes C40.01 through C41.9 
(with the exception of C410 Malignant neoplasm of bones of skull and 
face) for cancers involving the bones. We propose to include the ``May 
be Eligible for the Non-Orthopedic Surgery Category'' option for code 
C410 Malignant neoplasm of bones of skull and face because this type of 
cancer is more likely to be treated by non-orthopedic than orthopedic 
surgery.
    We propose to include the ``May be Eligible for the Non-Orthopedic 
Surgery Category'' option for codes C46.3 through C46.9 for Kaposi's 
sarcoma because the cancers associated with those codes could require a 
major surgical procedure.
    We propose to include the ``May be Eligible for the Non-Orthopedic 
Surgery Category'' option for certain codes relating to neoplasms, 
specifically D37.09 through D39.9, D3A.00 through D3A.8, D40.0, D40.11 
through D44.9, D48.3 through D48.4, D48.61 through D48.7, and D49.0 
through D49.7, because these conditions sometimes require surgery.
    In the FY 2020 ICD-10 to clinical category mapping, the ICD-10 code 
D75.A ``Glucose-6-phosphate dehydrogenase (G6PD) deficiency without 
anemia'' is assigned to the default clinical category of 
``Cardiovascular and Coagulations'' to align with the other D75 codes. 
However, G6PD deficiency without anemia is generally asymptomatic and 
detected by testing. Compared to other blood diseases in the D75 code 
family, D75.A is very minor and likely asymptomatic. For this reason, 
we propose to change the assignment of D75.A to ``Medical Management''.
    Stakeholders have pointed out that in the FY 2020 ICD-10 clinical 
category mappings, certain fracture codes map to the surgical default 
clinical categories such as ``Orthopedic Surgery (Except Major Joint 
Replacement or Spinal Surgery)'' or ``Major Joint Replacement or Spinal 
Surgery'' even if no surgery was performed. The specific codes 
mentioned were S32.031D, S32.19XD, S82.001D, and S82.002D through 
S82.002J. Given the concern raised by stakeholders, we propose to 
change the default clinical category to ``Non-Surgical Orthopedic'', 
with the surgical option of ``May be Eligible for One of the Two 
Orthopedic Surgery Categories'', for the following codes mentioned by 
stakeholders: S32.031D, S32.19XD, S82.001D, and S82.002D through 
S82.002J. We will continue to address changes to the mapping of 
fracture codes on a case-by-case basis as they are raised by 
stakeholders. We further propose to change the default clinical 
category of the following fracture codes to ``Return to Provider'' 
because these codes are unspecific and lack the level of detail 
provided by more specific codes as to whether the condition is on the 
right or left side of the body: S82.009A, S82.013A, S82.016A, S82.023A, 
S82.026A, S82.033A, S82.036A, and S82.099A.
    A stakeholder pointed out that in the FY 2020 ICD-10 to clinical 
category mapping, the M48.00 through M48.08 spinal stenosis codes have 
a default clinical category mapping of ``Non-Surgical Orthopedic/
Musculoskeletal'' and no surgical option, which does not allow for 
coding in cases where patients have spinal stenosis and spinal 
laminectomy surgery. For this reason, we propose to add the surgical 
option of ``May be Eligible for One of the Two Orthopedic Surgery 
Categories'' to M48.00 through M48.08 spinal stenosis codes.
    In the FY 2020 ICD-10 to clinical category mapping, Z48 surgery 
aftercare codes map to the default clinical categories of ``Return to 
Provider'' or ``Medical Management'' even if a surgical procedure was 
indicated in J2100 of the MDS. Although Z48 codes are not very 
specific, we acknowledge that aftercare of some major non-orthopedic 
surgeries is coded through Z48 codes. Therefore, we propose to add the 
surgical option of ``May be Eligible for the Non-Orthopedic Surgery 
Category'' to the following surgery aftercare codes: Z48.21, Z48.22, 
Z48.23, Z48.24, Z48.280, Z48,.288, Z48.290, Z48.298, Z48.3, Z48.811, 
Z48.812, Z48.813, Z48.815, Z48.816, and Z48.29, to promote more 
accurate clinical category assignment.
    With regard to the NTA comorbidity to ICD-10 code mappings, in the 
FY 2020 NTA comorbidity mapping, ICD-10 codes T82.310A through T85.89XA 
for initial encounter codes map to the NTA comorbidity CC176 
``Complications of Specified Implanted Device or Graft''. This mapping 
is based on the Part C risk adjustment model condition category 
mapping, which only included ICD-10 codes for acute encounters for 
complications of internal devices. Stakeholder have requested that we 
add to the mappings the ICD-10 codes in this range with the seventh 
digit of D (subsequent encounter) or S (sequela) for subsequent care. 
We are proposing to add codes in this range with the seventh digit of D 
(but not the seventh digit of S, because sequela can be coded years 
after the event and are likely not a reason for SNF treatment) for use 
in the ICD-10 code mapping to the NTA comorbidity CC176 ``Complications 
of Specified Implanted Device or Graft'' on the NTA conditions and 
extensive services list for the purpose of calculating the PDPM NTA 
score.
    We invite comments on the proposed substantive changes to the ICD-
10 code mappings discussed previously, as well as comments on 
additional substantive and non-substantive changes that stakeholders 
believe are necessary.

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

[[Page 20940]]

hospital readmission measure, as required by section 1888(g)(1) of the 
Act, and discussed other policies to implement the Program such as 
performance standards, the performance period and baseline period, and 
scoring. 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, and adopted policies on performance standards, 
performance scoring, and sought comment on an exchange function 
methodology to translate SNF performance scores into value-based 
incentive payments, among other topics. 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. Additionally, in the FY 2019 SNF PPS 
final rule (83 FR 39272 through 39282), we adopted more policies for 
the Program, including a scoring adjustment for low-volume facilities. 
In the FY 2020 SNF PPS final rule (84 FR 38820 through 38825), we also 
adopted additional policies for the Program, including a change to our 
public reporting policy and an update to the deadline for the Phase One 
Review and Correction process.
    The SNF VBP Program applies to freestanding SNFs, SNFs affiliated 
with acute care facilities, and all non-CAH swing-bed rural hospitals. 
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. 
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 46426); the FY 2017 SNF 
PPS final rule (81 FR 51986 through 52009); the FY 2018 SNF PPS final 
rule (82 FR 36608 through 36623); the FY 2019 SNF PPS final rule (83 FR 
39272 through 39282); and the FY 2020 SNF PPS final rule (84 FR 38820 
through 38825).
2. Measures
a. Background and Proposal To Update the SNF VBP Program Measure Name 
in Our Regulations
    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 intend to 
submit the measure for NQF endorsement review during the Fall 2021 
cycle, and to assess transition timing of the SNFPPR measure to the SNF 
VBP program after NQF endorsement review is complete.
    In the FY 2020 SNF PPS final rule (84 FR 38821 through 38822), we 
adopted a policy changing the name of the SNFPPR to Skilled Nursing 
Facility Potentially Preventable Readmissions after Hospital Discharge. 
We adopted this change to differentiate the SNF VBP Program's measure 
of potentially preventable hospital readmissions from a similar measure 
specified for use in the SNF QRP, which uses a 30-day post-SNF 
discharge readmission window. We are not proposing any updates to this 
measure policy at this time.
    However, consistent with this finalized policy, we are proposing to 
amend the definition of ``SNF Readmission Measure'' under 42 CFR 
413.338(a)(11) to reflect the updated Skilled Nursing Facility 
Potentially Preventable Readmissions after Hospital Discharge measure 
name.
    We welcome public comments on this proposal to amend the regulation 
text to reflect the updated measure name.
3. SNF VBP Performance Period and Baseline Period
    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. In the FY 2019 SNF PPS final rule 
(83 FR 39277 through 39278), we adopted a policy whereby we will 
automatically adopt the performance period and baseline period for a 
SNF VBP program year by advancing the performance period and baseline 
period by one year from the previous program year. For example, under 
this policy, the FY 2023 performance period will be FY 2021, and the 
baseline period will be FY 2019. We are not proposing any changes to 
this policy in this proposed rule.
4. Performance Standards
a. Background
    We refer readers to the FY 2017 SNF PPS final rule (81 FR 51995 
through 51998) for a summary of the statutory provisions governing 
performance standards under the SNF VBP Program and our finalized 
performance standards policy, as well as the numerical values for the 
achievement threshold and benchmark for the FY 2019 program year. We 
published the final numerical values for the FY 2020 performance 
standards in the FY 2018 SNF PPS final rule (82 FR 36613) and published 
the final numerical values for the FY 2021 performance standards in the 
FY 2019 SNF PPS final rule (83 FR 39276). We also adopted a policy 
allowing us to correct the numerical values of the performance 
standards in the FY 2019 SNF PPS final rule (83 FR 39276 through 
39277). We are not proposing any changes to these policies in this 
proposed rule.
b. Proposal To Codify the SNF VBP Performance Standards Correction 
Policy
    In the FY 2019 SNF PPS final rule (83 FR 39276 through 39277), we 
finalized a policy to correct numerical values of performance standards 
for a program year in cases of errors. We also finalized that we will 
only update the numerical values for a program year one time, even if 
we identify a second error, because we believe that a one-time 
correction will allow us to incorporate new information into the 
calculations without subjecting SNFs to multiple updates. We stated 
that any update we make to the numerical values based on a calculation 
error will be announced via the CMS website, listservs, and other 
available channels to ensure that SNFs are made fully aware of the 
update. In this proposed rule, we are not proposing any changes to 
these policies.
    We are proposing to amend the definition of ``Performance 
standards'' at Sec.  413.338(a)(9), consistent with these policies 
finalized in the FY 2019 SNF PPS final rule, to reflect our ability to 
update the numerical values of performance standards if we determine 
there is an error that affects the achievement threshold or benchmark.
    We welcome public comments on this proposal to codify the 
performance standards correction policy finalized in

[[Page 20941]]

the FY 2019 SNF PPS final rule (83 FR 39276 through 39277).
c. FY 2023 Performance Standards
    Based on our previously finalized policy, as discussed above, FY 
2019 is the baseline period for the FY 2023 SNF VBP Program year. Based 
on this baseline period, we estimate that the performance standards 
would have the numerical values noted in Table 15. We note that these 
values represent estimates based on the most recently available data, 
and we will update the numerical values in the FY 2021 SNF PPS final 
rule.
[GRAPHIC] [TIFF OMITTED] TP15AP20.011

5. SNF VBP Performance Scoring
    We refer readers to the FY 2017 SNF PPS final rule (81 FR 52000 
through 52005) for a detailed discussion of the scoring methodology 
that we have finalized for the Program. 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. We also refer readers to the FY 2019 
SNF PPS final rule (83 FR 39278 through 39281), where we adopted: (1) A 
scoring policy for SNFs without sufficient baseline period data, (2) a 
scoring adjustment for low-volume SNFs, and (3) an extraordinary 
circumstances exception policy.
    We are not proposing any updates to SNF VBP scoring policies in 
this proposed rule.
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.
    We also discussed the process that we undertake for reducing SNFs' 
adjusted federal per diem rates under the Medicare SNF PPS and awarding 
value-based incentive payments in the FY 2019 SNF PPS final rule (83 FR 
39281 through 39282).
    For estimates of FY 2021 SNF VBP Program incentive payment 
multipliers, we encourage SNFs to refer to FY 2020 SNF VBP Program 
performance information, available at https://data.medicare.gov/Nursing-HomeCompare/SNF-VBP-Facility-LevelDataset/284v-j9fz. Our 
previous analysis of historical SNF VBP data shows that the Program's 
incentive payment multipliers appear to be relatively consistent over 
time. As a result, we believe that the FY 2020 payment results 
represent our best estimate of FY 2021 performance at this time.
    We are not proposing any updates to SNF VBP payment policies in 
this proposed rule.
7. Public Reporting on the Nursing Home Compare Website or a Successor 
Website
a. Background
    Section 1888(g)(6) of the Act requires the Secretary to establish 
procedures to make SNFs' performance information on SNF VBP Program 
measures available to the public on the Nursing Home Compare website or 
a successor website, and to provide SNFs an opportunity to review and 
submit corrections to that information prior to its publication. We 
began publishing SNFs' performance information on the SNFRM in 
accordance with this directive and the statutory deadline of October 1, 
2017.
    Additionally, section 1888(h)(9)(A) of the Act requires the 
Secretary to make available to the public certain information on SNFs' 
performance under the SNF VBP Program, including SNF performance scores 
and their ranking. Section 1888(h)(9)(B) of the Act requires the 
Secretary to post aggregate information on the Program, including the 
range of SNF performance scores and the number of SNFs receiving value-
based incentive payments, and the range and total amount of those 
payments.
    In the FY 2017 SNF PPS final rule (81 FR 52009), we discussed the 
statutory requirements governing public reporting of SNFs' performance 
information under the SNF VBP Program. In the FY 2018 SNF PPS final 
rule (82 FR 36622 through 36623), we finalized our policy to publish 
SNF measure performance information under the SNF VBP Program on 
Nursing Home Compare after SNFs have an opportunity to review and 
submit corrections to that information under the two-phase Review and 
Correction process that we adopted in the FY 2017 SNF PPS final rule 
(81 FR 52007 through 52009) and for which we adopted additional 
requirements in the FY 2018 SNF PPS final rule. In the FY 2018 SNF PPS 
final rule, we also adopted requirements to rank SNFs and adopted data 
elements that we will include in the ranking to provide consumers and 
stakeholders with the necessary information to evaluate SNFs' 
performance under the Program (82 FR 36623).
b. Proposal To Codify the Data Suppression Policy for Low-Volume SNFs
    In the FY 2020 SNF PPS final rule (84 FR 38823 through 38824), we 
adopted a data suppression policy for low-volume SNF performance 
information. Specifically, we finalized our proposal to suppress the 
SNF information available to display as follows: (1) If a SNF has fewer 
than 25 eligible stays during the baseline period for a program year, 
we will not display the baseline risk-standardized readmission rate 
(RSRR) or improvement score, though we will still display the 
performance period RSRR, achievement score, and total performance score 
if the SNF had sufficient data during the performance period; (2) if a 
SNF has fewer than 25 eligible stays during the performance period for 
a program year and receives an assigned SNF performance score as a 
result, we will report the assigned SNF performance score and we will 
not display the performance period RSRR, the achievement score, or 
improvement score; and (3) if a SNF has zero eligible cases during the 
performance period for a program year, we will not display any 
information for that SNF. We are not proposing any changes to this 
policy in this proposed rule.
    However, to ensure that SNFs are fully aware of this public 
reporting policy, we are proposing to codify it at Sec.  
413.338(e)(3)(i), (ii), and (iii).
    We welcome public comment on this proposal to codify the data 
suppression policy for low-volume SNFs policy finalized in the FY 2020 
SNF PPS final rule (84 FR 38823 through 38824).

[[Page 20942]]

c. Proposal To Publicly Report SNF VBP Performance Information on 
Nursing Home Compare or a Successor Website
    Section 1888(h)(9)(A) of the Act requires that the Secretary make 
available to the public on the Nursing Home Compare website or a 
successor website information regarding the performance of individual 
SNFs for a FY, including the performance score for each SNF for the FY 
and each SNF's ranking, as determined under section 1888(h)(4)(B) of 
the Act. Additionally, section 1888(h)(9)(B) of the Act requires that 
the Secretary periodically post aggregate information on the SNF VBP 
Program on the Nursing Home Compare website or a successor website, 
including the range of SNF performance scores, and the number of SNFs 
receiving value-based incentive payments and the range and total amount 
of those payments. In the FY 2018 SNF PPS final rule (82 FR 36622 
through 36623), we finalized our policy to publish SNF measure 
performance information under the SNF VBP Program on Nursing Home 
Compare.
    Our SNF VBP Program regulations currently only refer to the Nursing 
Home Compare website and do not account for the situation where a 
successor website replaces the Nursing Home Compare website. Therefore, 
we are proposing to amend Sec.  413.338(e)(3) to reflect that we will 
publicly report SNF performance information on the Nursing Home Compare 
website or a successor website. CMS announced our website transition on 
a public internet blog in January 2020 (https://www.cms.gov/blog/making-it-easier-compare-providers-and-care-settings-medicaregov). We 
intend to update SNFs and other stakeholders through internet and other 
widely used communication modes at a later date closer to the targeted 
transition date.
    We welcome public comments on this proposal.
8. Proposal To Update and Codify the Phase One Review and Correction 
Deadline
    In the FY 2017 SNF PPS final rule (81 FR 52007 through 52009), we 
adopted a two-phase review and corrections process for SNFs' quality 
measure data that will be made public under section 1888(g)(6) of the 
Act and SNF performance information that will be made public under 
section 1888(h)(9) of the Act. We detailed the process for requesting 
Phase One corrections and finalized a policy whereby we would accept 
Phase One corrections to any quarterly report provided during a 
calendar year until the following March 31. In the FY 2020 SNF PPS 
final rule (84 FR 38824 through 38835) we updated this policy to 
reflect a 30-day Phase One Review and Correction deadline rather than 
through March 31st following receipt of the performance period quality 
measure quarterly report that we issue in June. We are now proposing to 
also apply this 30-day Phase One Review and Correction deadline to the 
baseline period quality measure report that we typically issue in 
December. This proposal would align the Phase One Review and Correction 
deadlines for the quarterly reports that contain the underlying claims 
and measure rate information for the baseline period or performance 
period. Under this proposal, SNFs would have 30 days following issuance 
of those reports to review the underlying claims and measure rate 
information. Should a SNF believe that any of the information is 
inaccurate, it may submit a correction request within 30 days following 
issuance of the reports. Although these reports are typically issued in 
December (baseline period information) and June (performance period 
information), we note that the issuance dates could vary. If the 
issuance dates of these reports are significantly delayed or need to be 
shifted for any reason, we would notify SNFs through routine 
communication channels, including, but not limited to memos, emails, 
and notices on the CMS SNF VBP website. We welcome public comments on 
this proposal.
    We are also proposing to codify this policy in our regulations by 
amending the ``Confidential feedback reports and public reporting'' 
paragraph at Sec.  413.338(e)(1).
    We welcome public comments on this proposal to update the Phase One 
Review and Correction deadline and to codify that policy in our 
regulations.

VI. Collection of Information Requirements

    This proposed rule would not impose any new/revised ``collection of 
information'' requirements or burden. For the purpose of this section 
of the preamble, collection of information is defined under 5 CFR 
1320.3(c) of the Paperwork Reduction Act of 1995 (PRA's) (44 U.S.C. 
3501 et seq.) implementing regulations. Consequently, we are not 
setting out any burden nor seeking OMB approval of this rule's proposed 
changes under the authority of the PRA.

VII. Response to Comments

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

VIII. Economic Analyses

A. Regulatory Impact Analysis

1. Statement of Need
    This proposed rule would update the FY 2020 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.
2. Introduction
    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA, 
September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA, March 
22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 
4, 1999), 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

[[Page 20943]]

below. Also, the rule has been reviewed by OMB.
3. Overall Impacts
    This rule proposes updates of the SNF PPS rates contained in the 
SNF PPS final rule for FY 2020 (84 FR 38728). We estimate that the 
aggregate impact will be an increase of approximately $784 million in 
payments to SNFs in FY 2021, resulting from the SNF market basket 
update to the payment rates. We note that these impact numbers do not 
incorporate the SNF VBP reductions that we estimate will total $199.54 
million in FY 2021. 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 (e)(5) of the Act, we 
update the FY 2020 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 2021. The impact to Medicare is included in the 
total column of Table 16. In proposing the SNF PPS rates for FY 2021, 
we are proposing a number of standard annual revisions and 
clarifications mentioned elsewhere in this proposed rule (for example, 
the update to the wage and market basket indexes used for adjusting the 
federal rates).
    The annual update proposed in this rule would apply to SNF PPS 
payments in FY 2021. 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 2021 SNF PPS payment impacts appear in Table 16. Using the 
most recently available data, in this case FY 2019, we apply the 
current FY 2020 wage index and labor-related share value to the number 
of payment days to simulate FY 2020 payments. Then, using the same FY 
2019 data, we apply the proposed FY 2021 wage index and labor-related 
share value to simulate FY 2021 payments. We tabulate the resulting 
payments according to the classifications in Table 16 (for example, 
facility type, geographic region, facility ownership), and compare the 
simulated FY 2020 payments to the simulated FY 2021 payments to 
determine the overall impact. The breakdown of the various categories 
of data Table 16 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 0.0 percent; 
however, there are distributional effects of the change.
     The fourth column shows the impact of adopting the 
proposed revised OMB delineations, discussed in section V.A.1. of this 
proposed rule. The total impact of this change is 0.0 percent; however, 
there are distributional effects of the change.
     The fifth column shows the effect of all of the changes on 
the FY 2021 payments. The update of 2.3 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 2.3 
percent, assuming facilities do not change their care delivery and 
billing practices in response.
    As illustrated in Table 16, the combined effects of all of the 
changes vary by specific types of providers and by location. For 
example, due to proposed changes in this proposed rule, rural providers 
would experience a 2.5 percent increase in FY 2021 total payments.

[[Page 20944]]

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[[Page 20945]]


5. Impacts for the SNF VBP Program
    The estimated impacts of the FY 2021 SNF VBP Program are based on 
historical data and appear in Table 17. We modeled SNF performance in 
the Program using SNFRM data from FY 2016 as the baseline period and FY 
2018 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), though we note that the 60 percent payback percentage for FY 
2021 will adjust to account for the low-volume scoring adjustment that 
we adopted in the FY 2019 SNF PPS final rule (83 FR 39278 through 
39280). We estimate that the low-volume scoring adjustment would 
increase the 60 percent payback percentage for FY 2021 by approximately 
2.25 percentage points (or $11.91 million), resulting in a payback 
percentage for FY 2021 that is 62.25 percent of the estimated $528.63 
million in withheld funds for that fiscal year. Based on the 60 percent 
payback percentage (as modified by the low-volume scoring adjustment), 
we estimate that we will redistribute approximately $329.09 million in 
value-based incentive payments to SNFs in FY 2021, which means that the 
SNF VBP Program is estimated to result in approximately $199.54 million 
in savings to the Medicare Program in FY 2021. We refer readers to the 
FY 2019 SNF PPS final rule (83 FR 39278 through 39280) for additional 
information about payment adjustments for low-volume SNFs in the SNF 
VBP Program.
    Our detailed analysis of the estimated impacts of the FY 2021 SNF 
VBP Program follows in Table 17.

[[Page 20946]]

[GRAPHIC] [TIFF OMITTED] TP15AP20.013


[[Page 20947]]


6. Alternatives Considered
    As described in this section, we estimated that the aggregate 
impact for FY 2021 under the SNF PPS will be an increase of 
approximately $784 million in payments to SNFs, resulting from the SNF 
market basket update to the payment rates.
    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.
    With regard to the alternatives considered related to the other 
proposals contained in this proposed rule, such as the proposed 
adoption of revised OMB delineations and proposed cap on wage index 
decreases discussed in section V.A. of this proposed rule, we discuss 
any alternatives considered within those sections.
7. Accounting Statement
    As required by OMB Circular A-4 (available online at https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/), in Tables 18 and 
19, we have prepared an accounting statement showing the classification 
of the expenditures associated with the provisions of this proposed 
rule for FY 2020. Tables 16 and 18 provide our best estimate of the 
possible changes in Medicare payments under the SNF PPS as a result of 
the policies in this proposed rule, based on the data for 15,078 SNFs 
in our database. Tables 17 and 19 provide our best estimate of the 
possible changes in Medicare payments under the SNF VBP as a result of 
the policies we have adopted for this program.
[GRAPHIC] [TIFF OMITTED] TP15AP20.014

8. Conclusion
    This rule proposes updates of the SNF PPS rates contained in the 
SNF PPS final rule for FY 2020 (84 FR 38728). Based on the above, we 
estimate that the overall payments for SNFs under the SNF PPS in FY 
2021 are projected to increase by approximately $784 million, or 2.3 
percent, compared with those in FY 2020. We estimate that in FY 2021, 
SNFs in urban and rural areas will experience, on average, a 2.3 
percent increase and 2.5 percent increase, respectively, in estimated 
payments compared with FY 2020. Providers in the rural Pacific region 
will experience the largest estimated increase in payments of 
approximately 3.4 percent. Providers in the urban New England region 
will experience the smallest estimated increase in payments of 1.0 
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-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 $30 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 $30 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 rule proposes updates of the SNF PPS rates contained in the 
SNF PPS final rule for FY 2020 (84 FR 38728).

[[Page 20948]]

Based on the above, we estimate that the aggregate impact for FY 2021 
will be an increase of $784 million in payments to SNFs, resulting from 
the SNF market basket update to the payment rates. While it is 
projected in Table 16 that all providers would experience a net 
increase in payments, we note that some individual providers within the 
same region or group may experience different impacts on payments than 
others due to the distributional impact of the FY 2021 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 2020 Report to Congress 
(available at http://www.medpac.gov/docs/default-source/reports/mar20_medpac_ch8_sec.pdf), MedPAC states that Medicare covers 
approximately 10 percent of total patient days in freestanding 
facilities and 18 percent of facility revenue (March 2020 MedPAC Report 
to Congress, 224). 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 16. As indicated in Table 16, the effect on facilities is 
projected to be an aggregate positive impact of 2.3 percent for FY 
2021. As the overall impact on the industry as a whole, and thus on 
small entities specifically, is less than the 3 to 5 percent threshold 
discussed previously, the Secretary has determined that this proposed 
rule would not have a significant impact on a substantial number of 
small entities for FY 2021.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of an MSA and has fewer 
than 100 beds. This proposed rule would affect small rural hospitals 
that (1) furnish SNF services under a swing-bed agreement or (2) have a 
hospital-based SNF. We anticipate that the impact on small rural 
hospitals will be a positive impact. Moreover, as noted in previous SNF 
PPS final rules (most recently, the one for FY 2020 (84 FR 38728)), the 
category of small rural hospitals is included within the analysis of 
the impact of this proposed rule on small entities in general. As 
indicated in Table 16, the effect on facilities for FY 2021 is 
projected to be an aggregate positive impact of 2.3 percent. As the 
overall impact on the industry as a whole is less than the 3 to 5 
percent threshold discussed above, the Secretary has determined that 
this proposed rule would not have a significant impact on a substantial 
number of small rural hospitals for FY 2021.

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 2020, that 
threshold is approximately $156 million. This proposed rule would 
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 proposed rule (and subsequent final 
rule) that imposes substantial direct requirement costs on state and 
local governments, preempts state law, or otherwise has federalism 
implications. This proposed rule would have no substantial direct 
effect on state and local governments, preempt state law, or otherwise 
have federalism implications.

E. Reducing Regulation and Controlling Regulatory Costs

    Executive Order 13771, entitled ``Reducing Regulation and 
Controlling Regulatory Costs,'' was issued on January 30, 2017 and 
requires that the costs associated with significant new regulations 
``shall, to the extent permitted by law, be offset by the elimination 
of existing costs associated with at least two prior regulations.'' It 
has been determined that this proposed rule is a transfer rule that 
does not impose more than de minimis costs and thus is not a regulatory 
action for the purposes of Executive Order 13771.

F. Congressional Review Act

    This proposed regulation is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and has been transmitted to the Congress 
and the Comptroller General for review.

G. Regulatory Review Costs

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this proposed 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.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of the proposed rule, and 
therefore, for the purposes of our estimate we assume that each 
reviewer reads approximately 50 percent of the rule.
    Using the wage information from the BLS for medical and health 
service managers (Code 11-9111), we estimate that the cost of reviewing 
this rule is $109.36 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 $437.44 (4 hours x $109.36). 
Therefore, we estimate that the total cost of reviewing this regulation 
is $27,559 ($437.44 x 63 reviewers).
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

CMS-1737-P

List of Subjects

42 CFR Part 409

    Health facilities, Medicare.

42 CFR Part 413

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

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

[[Page 20949]]

PART 409--HOSPITAL INSURANCE BENEFITS

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

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

0
2. Section 409.35 is amended by revising paragraph (a) to read as 
follows:


Sec.  409.35   Criteria for ``practical matter''.

    (a) General considerations. In making a ``practical matter'' 
determination, as required by Sec.  409.31(b)(3), consideration must be 
given to the patient's condition and to the availability and 
feasibility of using more economical alternative facilities and 
services. However, in making that determination, the availability of 
Medicare payment for those services may not be a factor. For example, 
if a beneficiary can obtain daily physical therapy services on an 
outpatient basis, the unavailability of Medicare payment for those 
alternative services due to the beneficiary's non-enrollment in Part B 
may not be a basis for finding that the needed care can only be 
provided in a SNF.
* * * * *

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 continues 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.


Sec.  413.114   [Amended]

0
4. Section 413.114 is amended in paragraph (c)(2) by removing the 
reference ``Sec.  413.55(a)(1)'' and adding in its place the reference 
``Sec.  413.53(a)(1)''.
0
5. Section 413.338 is amended by revising paragraphs (a)(9) and (11) 
and (e)(1) and (3) to read as follows:


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

    (a) * * *
    (9) Performance standards are the levels of performance that SNFs 
must meet or exceed to earn points under the SNF VBP Program for a 
fiscal year, and are announced no later than 60 days prior to the start 
of the performance period that applies to the SNF readmission measure 
for that fiscal year. Beginning with the performance standards that 
apply to FY 2021, if CMS discovers an error in the performance standard 
calculations subsequent to publishing their numerical values for a 
fiscal year, CMS will update the numerical values to correct the error. 
If CMS subsequently discovers one or more other errors with respect to 
the same fiscal year, CMS will not further update the numerical values 
for that fiscal year.
* * * * *
    (11) SNF readmission measure means, prior to October 1, 2019, the 
all-cause all-condition hospital readmission measure (SNFRM) or the 
all-condition risk-adjusted potentially preventable hospital 
readmission rate (SNFPPR) specified by CMS for application in the SNF 
Value-Based Purchasing Program. Beginning October 1, 2019, the term SNF 
readmission measure means the all-cause all-condition hospital 
readmission measure (SNFRM) or the all-condition risk-adjusted 
potentially preventable hospital readmission rate (Skilled Nursing 
Facility Potentially Preventable Readmissions after Hospital Discharge 
measure) specified by CMS for application in the SNF Value-Based 
Purchasing Program.
* * * * *
    (e) * * *
    (1) Beginning October 1, 2016, CMS will provide quarterly 
confidential feedback reports to SNFs on their performance on the SNF 
readmission measure. SNFs will have the opportunity to review and 
submit corrections for these data by March 31st following the date that 
CMS provides the reports, for reports issued prior to October 1, 2019. 
Beginning with the performance period quality measure quarterly report 
issued on or after October 1, 2019 that contains the performance period 
measure rate and all of the underlying claim information used to 
calculate the measure rate that applies for the fiscal year, SNFs will 
have 30 days following the date that CMS provides these reports to 
review and submit corrections for the data contained in these reports. 
Beginning with the baseline period quality measure quarterly report 
issued on or after October 1, 2020 that contains the baseline period 
measure rate and all of the underlying claim information used to 
calculate the measure rate that applies for the fiscal year, SNFs will 
have 30 days following the date that CMS provides these reports to 
review and submit corrections for the data contained in these reports. 
Any such correction requests must be accompanied by appropriate 
evidence showing the basis for the correction.
* * * * *
    (3) CMS will publicly report the information described in 
paragraphs (e)(1) and (2) of this section on the Nursing Home Compare 
website or a successor website. Beginning with information publicly 
reported on or after October 1, 2019, the following exceptions apply:
    (i) If CMS determines that a SNF has fewer than 25 eligible stays 
during the baseline period for a fiscal year but has 25 or more 
eligible stays during the performance period for that fiscal year, CMS 
will not publicly report the SNF's baseline period SNF readmission 
measure rate and improvement score for that fiscal year;
    (ii) If CMS determines that a SNF is a low-volume SNF with respect 
to a fiscal year and assigns a performance score to the SNF under 
paragraph (d)(3) of this section, CMS will not publicly report the 
SNF's performance period SNF readmission measure rate, achievement 
score or improvement score for the fiscal year; and
    (iii) If CMS determines that a SNF has zero eligible cases during 
the performance period with respect to a fiscal year, CMS will not 
publicly report any information for that SNF for that fiscal year.
* * * * *

    Dated: March 24, 2020.
Seema Verma
Administrator, Centers for Medicare & Medicaid Services.
    Dated: April 9, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-07875 Filed 4-10-20; 4:15 pm]
BILLING CODE 4120-01-P