[Federal Register Volume 85, Number 151 (Wednesday, August 5, 2020)]
[Rules and Regulations]
[Pages 47594-47633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16900]



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Vol. 85

Wednesday,

No. 151

August 5, 2020

Part V





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





42 CFR Parts 409 and 413





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

  Federal Register / Vol. 85, No. 151 / Wednesday, August 5, 2020 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409 and 413

[CMS-1737-F]
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: Final rule.

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SUMMARY: This final rule updates the payment rates used under the 
prospective payment system (PPS) for skilled nursing facilities (SNFs) 
for fiscal year (FY) 2021. We are also making changes to the case-mix 
classification code mappings used under the SNF PPS and making two 
minor revisions in the regulation text. Additionally, we are adopting 
the recent revisions in Office of Management and Budget (OMB) 
statistical area delineations. This rule also updates the Skilled 
Nursing Facility Value-Based Purchasing (VBP) Program that affects 
Medicare payment to SNFs.

DATES: These regulations are effective on October 1, 2020.

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:

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

    As discussed in the FY 2014 SNF PPS final rule (78 FR 47936), 
tables setting forth the Wage Index for Urban Areas Based on CBSA Labor 
Market Areas and the Wage Index Based on CBSA Labor Market Areas for 
Rural Areas are no longer published in the Federal Register. Instead, 
these tables are available exclusively through the internet on the CMS 
website. The wage index tables for this final rule can be accessed on 
the SNF PPS Wage Index home page, at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.
    Readers who experience any problems accessing any of these online 
SNF PPS wage index tables should contact Kia Sidbury at (410) 786-7816.
    To assist readers in referencing sections contained in this 
document, we are providing the following Table of Contents.

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of Major Provisions
    C. Summary of Cost and Benefits
    D. Advancing Health Information Exchange
II. Background on SNF PPS
    A. Statutory Basis and Scope
    B. Initial Transition for the SNF PPS
    C. Required Annual Rate Updates
III. Analysis and Responses to Public Comments on the FY 2021 SNF 
PPS Proposed Rule
    A. General Comments on the FY 2021 SNF PPS Proposed Rule
    B. SNF PPS Rate Setting Methodology and FY 2021 Update
     1. Federal Base Rates
     2. SNF Market Basket Update
     3. Case-Mix Adjustment
     4. Wage Index Adjustment
     5. SNF Value-Based Purchasing Program
     6. Adjusted Rate Computation Example
    C. Additional Aspects of the SNF PPS
     1. SNF Level of Care--Administrative Presumption
     2. Consolidated Billing
     3. Payment for SNF-Level Swing-Bed Services
     4. Revisions to the Regulation Text
    D. Other Issues
     1. Finalized Changes to SNF PPS Wage Index
     2. Technical Updates to PDPM ICD-10 Mappings
     3. Skilled Nursing Facility Value-Based Purchasing Program (SNF 
VBP)
IV. Collection of Information Requirements
V. 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 final rule updates 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 to the payment 
update (see section II.C. of this final rule) in the Federal Register, 
before the August 1 that precedes the start of each FY. As discussed in 
section III.C.4. of this final rule, it also makes two minor revisions 
in the regulation text. In addition, we are making changes to the code 
mappings used under the SNF PPS for classifying patients into case-mix 
groups. Additionally, we are also updating the OMB delineations used to 
identify a facility's status as an urban or rural facility and to 
calculate the wage index. This final rule also updates the Skilled 
Nursing Facility Value-Based Purchasing Program (SNF VBP). There are no 
updates in this final 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 final rule will reflect an update to the 
rates that we published in the SNF PPS final rule for FY 2020 (84 FR 
38728). In this final rule, we adopt the most recent OMB delineations, 
which are used to identify a provider's status as either an urban or 
rural facility and to calculate the provider's wage index. This final 
rule also includes two revisions to the regulations text. This final 
rule also includes revisions to the International Classification of 
Diseases, Version 10 (ICD-10) code mappings used under Patient Driven 
Payment Model (PDPM) to classify patients into case-mix groups.
    Additionally, we are finalizing a several updates to our SNF VBP 
regulations, including a 30-day Phase One Review and Correction 
deadline for the baseline period quality measure report that is 
typically issued in December.

C. Summary of Cost and Benefits

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[GRAPHIC] [TIFF OMITTED] TR05AU20.001

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.
    The 21st Century Cures Act (Cures Act) (Pub. L. 114-255, enacted on 
December 13, 2016) requires HHS to take new steps to enable the 
electronic sharing of health information ensuring interoperability for 
providers and settings across the care continuum. On May 1 2020, ONC 
and CMS published the final rules, ``21st Century Cures Act: 
Interoperability, Information Blocking, and the ONC Health IT 
Certification Program,'' (85 FR 25642) and ``Medicare and Medicaid 
Programs; Patient Protection and Affordable Care Act; Interoperability 
and Patient Access'' (85 FR 25510), respectively, to promote secure and 
more immediate access to health information for patients and healthcare 
providers through the use of standards-based application programming 
interfaces (APIs) that enable easier access to electronic health 
information. The CMS Interoperability and Patient Access rule also 
finalizes a new regulation under the Conditions of Participation for 
hospitals (85 FR 25584), including CAHs and psychiatric hospitals, 
which will require these providers to send electronic patient event 
notifications of a patient's admission, discharge, and/or transfer to 
appropriate recipients, including applicable post-acute care providers 
and suppliers. These notifications can help alert post-acute care 
providers and suppliers when a patient has been seen in the ED or 
admitted to the hospital, supporting more effective care coordination 
across settings. We invite providers to learn more about these 
important developments and how they are likely to affect SNFs.

II. Background on SNF PPS

A. Statutory Basis and Scope

    As amended by section 4432 of the Balanced Budget Act of 1997 (BBA 
1997) (Pub. L. 105-33, enacted August 5, 1997), section 1888(e) of the 
Act provides for the implementation of a PPS for SNFs. This methodology 
uses prospective, case-mix adjusted per diem payment rates applicable 
to all covered SNF services defined in section 1888(e)(2)(A) of the 
Act. The SNF PPS is effective for cost reporting periods beginning on 
or after July 1, 1998, and covers all costs of furnishing covered SNF 
services (routine, ancillary, and capital-related costs) other than 
costs associated with approved educational activities and bad debts. 
Under section 1888(e)(2)(A)(i) of the Act, covered SNF services include 
post-hospital extended care services for which benefits are provided 
under Part A, as well as those items and services (other than a small 
number of excluded services, such as physicians' services) for which 
payment may otherwise be made under Part B and which are furnished to 
Medicare beneficiaries who are residents in a SNF during a covered Part 
A stay. A comprehensive discussion of these provisions appears in the 
May 12, 1998 interim final rule (63 FR 26252). In

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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 
final rule provides the required annual updates to the per diem payment 
rates for SNFs for FY 2021.

III. Analysis of and Responses to Public Comments on the FY 2021 SNF 
PPS Proposed Rule

    In response to the publication of the FY 2021 SNF PPS proposed rule 
(85 FR 20914), we received 47 public comments from individuals, 
providers, corporations, government agencies, private citizens, trade 
associations, and major organizations. The following are brief 
summaries of each proposed provision, a summary of the public comments 
that we received related to that proposal, and our responses to the 
comments.

A. General Comments on the FY 2021 SNF PPS Proposed Rule

    In addition to the comments we received on specific proposals 
contained within the proposed rule (which we address later in this 
final rule), commenters also submitted the following, more general, 
observations on the SNF PPS and SNF QRP generally. A discussion of 
these comments, along with our responses, appears below.
    Comment: We received a significant number of comments and 
recommendations that are outside the scope of the proposed rule 
addressing a number of different policies, including the Coronavirus 
disease 2019 (COVID-19) pandemic, the group and concurrent therapy 
limit under PDPM, and other suggested changes to the PDPM case-mix 
classification model and quality programs under the SNF PPS.
    Response: We greatly appreciate these comments and suggestions for 
revisions to policies under the SNF PPS. However, because these 
comments are outside the scope of the current rulemaking, we are not 
addressing them in this final rule, but will take them under 
consideration.
    Comment: We received several comments on the SNF QRP. The proposed 
rule contained no SNF QRP proposals. Several commenters thanked CMS for 
granting an exception to the SNF QRP reporting requirements for quarter 
1 and quarter 2 of 2020. Several commenters requested that CMS modify 
the use of COVID-19 affected data in the SNF QRP, by excluding or 
delineating the data. One commenter requested that measure reliability 
analyses be performed and shared to ensure the accuracy of measure 
calculations in light of truncated, incomplete, or COVID-19 affected 
data. One commenter requested CMS conduct stakeholder meetings to 
address the impacts of the truncated performance period on performance 
compliance. One commenter recommended that all SNFs be held harmless 
for non-compliance during the FY 2022 performance period. Several 
commenters provided recommendations for the addition of new SNF QRP 
measures. Finally, a commenter recommended measures be modified to 
protect specialty populations.
    Response: These comments fall outside the scope of the current 
rulemaking. We refer providers to 85 FR 27596 through 27597 regarding 
the delay in the adoption of the MDS 3.0 v1.18.1. We also refer 
providers to our June 23, 2020 announcement at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-quality-Reporting-Program-Spotlights-and-Announcements that 
effective July 1, 2020 providers must resume reporting their quality 
data.

B. SNF PPS Rate Setting Methodology and FY 2021 Update

1. Federal Base Rates
    Under section 1888(e)(4) of the Act, the SNF PPS uses per diem 
federal payment rates based on mean SNF costs in a base year (FY 1995) 
updated for inflation to the first effective period of the PPS. We 
developed the federal payment rates using allowable costs from 
hospital-based and freestanding SNF cost reports for reporting periods 
beginning in FY 1995. The data used in developing the federal rates 
also incorporated a Part B add-on, which is an estimate of the amounts 
that, prior to the SNF PPS, would be payable under Part B for covered 
SNF services furnished to individuals during the course of a covered 
Part A stay in a SNF.
    In developing the rates for the initial period, we updated costs to 
the first effective year of the PPS (the 15-month period beginning July 
1, 1998) using a SNF market basket index, and then standardized for 
geographic variations in wages and for the costs of facility 
differences in case mix. In compiling the database used to compute the 
federal payment rates, we excluded those providers that received new 
provider exemptions from the routine cost limits, as well as costs 
related to payments for exceptions to the routine cost limits. Using 
the formula that the BBA 1997 prescribed, we set the federal

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rates at a level equal to the weighted mean of freestanding costs plus 
50 percent of the difference between the freestanding mean and weighted 
mean of all SNF costs (hospital-based and freestanding) combined. We 
computed and applied separately the payment rates for facilities 
located in urban and rural areas, and adjusted the portion of the 
federal rate attributable to wage-related costs by a wage index to 
reflect geographic variations in wages.
2. SNF Market Basket Update
a. SNF Market Basket Index
    Section 1888(e)(5)(A) of the Act requires us to establish a SNF 
market basket index that reflects changes over time in the prices of an 
appropriate mix of goods and services included in covered SNF services. 
Accordingly, we have developed a SNF market basket index that 
encompasses the most commonly used cost categories for SNF routine 
services, ancillary services, and capital-related expenses. In the SNF 
PPS final rule for FY 2018 (82 FR 36548 through 36566), we revised and 
rebased the market basket index, which included updating the base year 
from FY 2010 to 2014.
    The SNF market basket index is used to compute the market basket 
percentage change that is used to update the SNF federal rates on an 
annual basis, as required by section 1888(e)(4)(E)(ii)(IV) of the Act. 
This market basket percentage update is adjusted by a forecast error 
correction, if applicable, and then further adjusted by the application 
of a productivity adjustment as required by section 1888(e)(5)(B)(ii) 
of the Act and described in section III.B.2.d. of this final rule. In 
the FY 2021 SNF PPS proposed rule (85 FR 20916), we proposed the FY 
2021 SNF market basket update of 2.7 percent based on IHS Global Inc.'s 
(IGI's) first quarter 2020 forecast of the 2014-based SNF market basket 
with historical data through fourth quarter 2019. We also proposed that 
if more recent data subsequently became available (for example, a more 
recent estimate of the market basket and/or the MFP), we would use such 
data, if appropriate, to determine the FY 2021 SNF market basket 
percentage change, labor-related share relative importance, forecast 
error adjustment, or MFP adjustment in the SNF PPS final rule (85 FR 
20918).
    For this final rule, based on IGI's second quarter 2020 forecast 
with historical data through the first quarter of 2020, the FY 2021 
growth rate of the 2014-based SNF market basket is estimated to be 2.2 
percent. We note that the first quarter 2020 forecast used for the 
proposed market basket update was developed prior to the economic 
impacts of the COVID-19 pandemic. This lower update (2.2 percent) for 
FY 2021 relative to the proposed rule (2.7 percent) is primarily driven 
by slower than anticipated compensation growth for both health-related 
and other occupations as labor markets are expected to be significantly 
impacted during the recession that started in February 2020 and 
throughout the anticipated recovery.
    In section III.B.2.e. of this final rule, we discuss the 2 percent 
reduction applied to the market basket update for those SNFs that fail 
to submit measures data as required by section 1888(e)(6)(A) of the 
Act.
b. Use of the SNF Market Basket Percentage
    Section 1888(e)(5)(B) of the Act defines the SNF market basket 
percentage as the percentage change in the SNF market basket index from 
the midpoint of the previous FY to the midpoint of the current FY. For 
the federal rates set forth in this final 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. As stated above, in the proposed rule, the 
SNF market basket percentage was estimated to be 2.7 percent for FY 
2021 based on IGI's first quarter 2020 forecast (with historical data 
through fourth quarter 2019). In this final rule, the SNF market basket 
percentage is estimated to be 2.2 percent for FY 2021 based on IGI's 
second quarter 2020 forecast (with historical data through first 
quarter 2020).
c. Forecast Error Adjustment
    As discussed in the June 10, 2003 supplemental proposed rule (68 FR 
34768) and finalized in the August 4, 2003 final rule (68 FR 46057 
through 46059), 42 CFR 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, we stated in the proposed rule (85 FR 20917) that 
under the policy previously described (comparing the forecasted and 
actual increase in the market basket), the FY 2021 market basket 
percentage change 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

[[Page 47598]]

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 forecasted market basket increase for a given 
year and the actual market basket increase for that year, we stated in 
the proposed rule that 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.
[GRAPHIC] [TIFF OMITTED] TR05AU20.002

d. Multifactor Productivity Adjustment
    Section 1888(e)(5)(B)(ii) of the Act, as added by section 3401(b) 
of the Patient Protection and Affordable Care Act (Affordable Care Act) 
(Pub. L. 111-148, enacted March 23, 2010) requires that, in FY 2012 and 
in subsequent FYs, the market basket percentage under the SNF payment 
system (as described in section 1888(e)(5)(B)(i) of the Act) is to be 
reduced annually by the multifactor productivity (MFP) adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 
1886(b)(3)(B)(xi)(II) of the Act, in turn, defines the MFP adjustment 
to be equal to the 10-year moving average of changes in annual economy-
wide private nonfarm business multi-factor productivity (as projected 
by the Secretary for the 10-year period ending with the applicable FY, 
year, cost-reporting period, or other annual period). The Bureau of 
Labor Statistics (BLS) is the agency that publishes the official 
measure of private nonfarm business MFP. We refer readers to the BLS 
website at http://www.bls.gov/mfp for the BLS historical published MFP 
data.
    MFP is derived by subtracting the contribution of labor and capital 
inputs growth from output growth. The projections of the components of 
MFP are currently produced by IGI, a nationally recognized economic 
forecasting firm with which CMS contracts to forecast the components of 
the market baskets and MFP. To generate a forecast of MFP, IGI 
replicates the MFP measure calculated by the BLS, using a series of 
proxy variables derived from IGI's U.S. macroeconomic models. For a 
discussion of the MFP projection methodology, we refer readers to the 
FY 2012 SNF PPS final rule (76 FR 48527 through 48529) and the FY 2016 
SNF PPS final rule (80 FR 46395). A complete description of the MFP 
projection methodology is available on our website at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html.
(1) Incorporating the MFP Into the Market Basket Update
    Per section 1888(e)(5)(A) of the Act, the Secretary shall establish 
a SNF market basket index that reflects changes over time in the prices 
of an appropriate mix of goods and services included in covered SNF 
services. Section 1888(e)(5)(B)(ii) of the Act, added by section 
3401(b) of the Affordable Care Act, requires that for FY 2012 and each 
subsequent FY, after determining the market basket percentage described 
in section 1888(e)(5)(B)(i) of the Act, the Secretary shall reduce such 
percentage by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act (which we refer to as the MFP 
adjustment). Section 1888(e)(5)(B)(ii) of the Act further states that 
the reduction of the market basket percentage by the MFP adjustment may 
result in the market basket percentage being less than zero for a FY, 
and may result in payment rates under section 1888(e) of the Act being 
less than such payment rates for the preceding fiscal year. 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.
    In the FY 2021 SNF PPS proposed rule (85 FR 20917), we proposed a 
MFP adjustment of 0.4 percentage point based on IGI's first quarter 
2020 forecast. Based on the more recent data available for this FY 2021 
SNF PPS final rule, the current estimate of the 10-year moving average 
growth of MFP for FY 2021 would be -0.1 percentage point. This MFP is 
based on the most recent macroeconomic outlook from IGI at the time of 
rulemaking (released June 2020) in order to reflect more current 
historical economic data. IGI produces monthly macroeconomic forecasts, 
which include projections of all of the economic series used to derive 
MFP. In contrast, IGI only produces forecasts of the more detailed 
price proxies used in the 2014-based SNF market basket on a quarterly 
basis. Therefore, IGI's second quarter 2020 forecast is the most recent 
forecast of the 2014-based SNF market basket percentage.
    We note that it has typically been our practice to base the 
projection of the market basket price proxies and MFP in the final rule 
on the second quarter IGI forecast. For this FY 2021 SNF final rule, we 
are using the IGI June 2020 macroeconomic forecast for MFP because it 
is a more recent forecast, and it is important to use more recent data 
during this period when economic trends, particularly employment and 
labor productivity, are notably uncertain because of the COVID-19 
pandemic. Historically, the MFP adjustment based on the second quarter 
IGI forecast has been very similar to the MFP adjustment derived with 
IGI's June macroeconomic forecast. Substantial changes in the 
macroeconomic indicators in between monthly forecasts are atypical.
    Given the unprecedented economic uncertainty as a result of the 
COVID-19 pandemic, the changes in the IGI

[[Page 47599]]

macroeconomic series used to derive MFP between the IGI second quarter 
2020 forecast and the IGI June 2020 macroeconomic forecast is 
significant. Therefore, we believe it is appropriate to use IGI's more 
recent June 2020 macroeconomic forecast to determine the MFP adjustment 
for the final rule as it reflects more recent historical data. For 
comparison purposes, the 10-year moving average growth of MFP for FY 
2021 is projected to be -0.1 percentage point based on IGI's June 2020 
macroeconomic forecast compared to a FY 2021 projected 10-year moving 
average growth of MFP of 0.7 percentage point based on IGI's second 
quarter 2020 forecast. Mechanically subtracting the negative 10-year 
moving average growth of MFP from the SNF market basket percentage 
using the data from the IGI June 2020 macroeconomic forecast would have 
resulted in a 0.1 percentage point increase in the FY 2021 SNF payment 
update percentage. However, under section 1888(e)(5)(B)(ii) of the Act, 
the Secretary is required to reduce (not increase) the SNF market 
basket percentage by changes in economy-wide productivity. Accordingly, 
we will be applying a 0.0 percentage point MFP adjustment to the SNF 
market basket percentage. Therefore, the SNF payment update percentage 
for FY 2021 is 2.2 percent.
    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 second quarter 2020 forecast of the SNF market basket 
percentage, which is estimated to be 2.2 percent. As discussed above, 
given that applying the 10-year moving average growth of MFP of -0.1 
percentage point would have resulted in an increase in the market 
basket percentage, contrary to the provisions of section 
1888(e)(5)(B)(ii) of the Act, we are applying a 0.0 percentage point 
MFP adjustment to the FY 2021 SNF market basket percentage. The FY 2021 
SNF market basket update is, therefore, equal to 2.2 percent.
e. 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. We stated in the proposed rule that 
this process yields a percentage change in the 2014-based SNF market 
basket of 2.7 percent. However, as stated above, based on a more recent 
forecast, in this final rule, this process yields a percentage change 
in the 2014-based SNF market basket of 2.2 percent.
    As further explained in section III.B.2.c. of this final rule, as 
applicable, we adjust the market basket percentage change by the 
forecast error from the most recently available FY for which there is 
final data and apply this adjustment whenever the difference between 
the forecasted and actual percentage change in the market basket 
exceeds a 0.5 percentage point threshold. Since the difference between 
the forecasted FY 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, in the proposed rule, the FY 
2021 market basket percentage change was not adjusted by the forecast 
error correction. Moreover, given that the market basket for FY 2019 
was set independent of these estimates, as discussed previously, we 
stated in the proposed rule that we do not believe 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 10-year moving average of 
changes in MFP for the period ending September 30, 2021 which, in the 
proposed rule, was estimated to be 0.4 percent, as described in section 
III.B.2.d. of this final rule. We stated that the resulting net SNF 
market basket update would equal 2.3 percent, or 2.7 percent less the 
projected 10-year moving average growth of MFP of 0.4 percentage point 
. Thus, as discussed in the FY 2021 SNF PPS proposed rule, we proposed 
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 reflected a market basket increase factor of 2.7 percent, less 
the projected 0.4 percentage point MFP adjustment.
    However, as discussed in the FY 2021 SNF PPS proposed rule, our 
policy is that if more recent data become available (for example, a 
more recent estimate of the SNF market basket and/or MFP), we would use 
such data, if appropriate, to determine the FY 2021 SNF market basket 
percentage change, labor-related share relative importance, forecast 
error adjustment, or MFP adjustment in the SNF PPS final rule. As 
discussed previously in this section, based on IGI's second quarter 
2020 forecast, the SNF market basket percentage is estimated to be 2.2 
percent. Further, as discussed above, based on IGI's June 2020 
macroeconomic forecast, the 10-year moving average growth of MFP is 
estimated to be -0.1 percent, which, absent the statutory directive to 
``reduce'' the market basket, see section 1888(e)(5)(B)(ii) of the Act, 
would have resulted in an increase in the FY 2021 SNF payment update 
percentage. In keeping with Sec.  1888, therefore, we are applying a 
0.0 percentage point MFP adjustment for FY 2021.
    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 zero 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 to the fiscal year 
involved, and that the reduction cannot be taken into account in 
computing the payment amount for a subsequent fiscal year.
    Commenters submitted the following comments related to the proposed 
market basket update factor for FY 2021. A discussion of these 
comments, along with our responses, appears below.
    Comment: Many commenters supported the proposed market basket 
increase factor for FY 2021. A few commenters suggested that CMS 
consider reweighting the cost categories used in calculating the SNF 
market basket in relation to COVID-19.
    Response: We appreciate the support for applying the market basket 
increase factor in calculating the FY 2021 SNF PPS per diem rates. With 
regard to the comment that we consider reweighting the cost categories 
based on changes in

[[Page 47600]]

SNF costs resulting from COVID-19, we do not believe that sufficient 
data exists to perform this type of analysis. We may consider this 
analysis in the future, when more data become available.
    After considering the comments received, for the reasons set forth 
in this final rule and in the FY 2021 SNF PPS proposed rule, we are 
finalizing the market basket update factor of 2.2 percent, utilizing 
the more recent forecast data. Based on more recent forecast data, as 
discussed previously in this section, the FY 2021 market basket update 
factor is 2.2 percent, which is based on an FY 2021 SNF market basket 
percentage increase of 2.2 percent.
f. 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 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. 
In the proposed rule (85 FR 20918), we used the SNF market basket, 
adjusted as described previously, 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 stated 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 in the FY 2021 SNF PPS proposed rule and later 
in this final rule, we proposed 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) 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.
[GRAPHIC] [TIFF OMITTED] TR05AU20.003

    Commenters submitted the following comments related to the proposed 
unadjusted federal per diem rates for FY 2021. A discussion of these 
comments, along with our responses, appears below.
    Comment: One commenter raised concerns with how the base rates used 
under the SNF PPS, which have been adjusted by the SNF market basket 
each year, are based on cost reports from 1995. The commenters 
requested that CMS update the cost reporting base year used in deriving 
the unadjusted federal rates.
    Response: We appreciate the commenter's suggestion regarding 
updating the cost reporting base year used for deriving the unadjusted 
federal per diem rates. However, section 1888(e)(4)(A) of the Act 
requires that we use the ``allowable costs of extended care services 
(excluding exception payments) for the facility for cost reporting 
periods beginning in 1995.'' As such, we do not have the statutory 
authority to update the cost reporting base year used to derive the SNF 
PPS federal per diem rates.
    Accordingly, after considering the comments received, for the 
reasons specified in this final rule and in the FY 2021 SNF PPS 
proposed rule, we are finalizing the unadjusted federal per diem rates 
set forth in Tables 3 and 4, which we derived using the SNF market 
basket update factor of 2.2 percent and a budget neutrality factor of 
0.9992 (as discussed later in this preamble).
3. Case-Mix Adjustment
    Under section 1888(e)(4)(G)(i) of the Act, the federal rate also 
incorporates an adjustment to account for facility case-mix, using a 
classification system that accounts for the relative resource 
utilization of different patient types. The statute specifies that the 
adjustment is to reflect both a resident classification system that the 
Secretary establishes to account for the relative resource use of 
different patient types, as well as resident assessment data and other 
data that the Secretary considers appropriate. In the 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.
    As we noted in the FY 2021 SNF PPS proposed rule, we would 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 will 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

[[Page 47601]]

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.
    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 III.C.1. of this 
final rule, the clinical orientation of the case-mix classification 
system supports the SNF PPS's use of an administrative presumption that 
considers a beneficiary's initial case-mix classification to assist in 
making certain SNF level of care determinations. Further, because the 
MDS is used as a basis for payment, as well as a clinical assessment, 
we have provided extensive training on proper coding and the 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 final 
rule reflect the use of the PDPM case-mix classification system from 
October 1, 2020, through September 30, 2021. In the FY 2021 SNF PPS 
proposed rule (85 FR 20920 through 20921), we listed 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.
    We stated in the proposed rule that given the differences between 
the previous RUG-IV model and PDPM in terms of patient classification 
and billing, it was 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 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 would 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.
    Tables 5 and 6 reflect 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 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 final PDPM case-mix adjusted rates and 
case-mix indexes for FY 2021. We would note that these numbers differ 
from those in the FY 2021 SNF PPS proposed rule, as we have used more 
recent data in calculating the final budget neutrality factor, that is 
used in calculating the FY 2021 SNF PPS unadjusted federal per diem 
rates, as discussed in section III.D.1.d. of this final rule. 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 III.D. of this 
final 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 in this 
final rule and in the FY 2021 SNF PPS proposed rule (85 FR 20928), we 
proposed 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) to identify a facility's urban or 
rural status.
BILLING CODE 4120-01-P

[[Page 47602]]

[GRAPHIC] [TIFF OMITTED] TR05AU20.004


[[Page 47603]]


[GRAPHIC] [TIFF OMITTED] TR05AU20.005

BILLING CODE 4120-01-C
4. Wage Index Adjustment
    Section 1888(e)(4)(G)(ii) of the Act requires that we adjust the 
federal rates to account for differences in area wage levels, using a 
wage index that the Secretary determines appropriate. Since the 
inception of the SNF PPS, we have used hospital inpatient wage data in 
developing a wage index to be applied to SNFs. In the FY 2021 SNF PPS 
proposed rule (85 FR 20921), 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 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 stated in the proposed rule that 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. In addition, 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, we stated in the proposed 
rule that 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 proposed to continue to use the same methodology 
discussed in the SNF PPS final rule for FY 2008 (72 FR 43423) to 
address those geographic areas in which there are no hospitals, and 
thus, no hospital wage index data on which to base the calculation of 
the FY 2020 SNF PPS wage index. For rural geographic areas

[[Page 47604]]

that do not have hospitals, and therefore, lack hospital wage data on 
which to base an area wage adjustment, we stated we would use the 
average wage index from all contiguous Core-Based Statistical Areas 
(CBSAs) as a reasonable proxy. For FY 2021, there are no rural 
geographic areas that do not have hospitals, and thus, this methodology 
will not be applied. For rural Puerto Rico, we stated we would not 
apply this methodology due to the distinct economic circumstances that 
exist there (for example, due to the close proximity to one another of 
almost all of Puerto Rico's various urban and non-urban areas, this 
methodology would produce a wage index for rural Puerto Rico that is 
higher than that in half of its urban areas); instead, we stated we 
would continue to use the most recent wage index previously available 
for that area. For urban areas without specific hospital wage index 
data, we stated we would use the average wage indexes of all of the 
urban areas within the state to serve as a reasonable proxy for the 
wage index of that urban CBSA. For FY 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), after the expiration of this 1-year transition on September 30, 
2006, we 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 noted in the proposed rule 
(85 FR 20922) 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 this final rule and in the FY 2021 SNF PPS proposed rule 
(85 FR 20922), we proposed 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 1-year transition for FY 2021 
under which we stated 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 stated that we believe 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 stated that we 
believe it is appropriate to use these updated OMB delineations for 
these purposes, to enhance the accuracy of payments under the SNF PPS. 
These changes are discussed further in section III.D.1.a. of this final 
rule. We solicited comments on this proposal. A discussion of these 
comments, along with our responses, appears in section III.D.1. of this 
final rule.
    The final wage index applicable to FY 2021 is set forth in Tables A 
and B and are available on the CMS website at http://www.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 revised OMB delineations, as well as the final 
transition wage index values that would be in effect in FY 2021.
    We stated in the proposed rule, 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

[[Page 47605]]

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-Related expenses) to 
produce the FY 2021 labor-related relative importance. Table 7 
summarizes the final labor-related share for FY 2021, based on IGI's 
second quarter 2020 forecast with historical data through first quarter 
2020, compared to the labor-related share that was used for the FY 2020 
SNF PPS final rule.
[GRAPHIC] [TIFF OMITTED] TR05AU20.006

    In the proposed rule, we stated that 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 budget neutrality calculations are 
described in section III.D.1.d. of this final rule.
    A discussion of the comments we received regarding the SNF PPS wage 
index, including the wage index budget neutrality calculation, along 
with our responses, appears in section III.D.1 of this final rule.
5. SNF Value-Based Purchasing Program
    Beginning with payment for services furnished on October 1, 2018, 
section 1888(h) of the Act requires the Secretary to reduce the 
adjusted federal per diem rate determined under section 1888(e)(4)(G) 
of the Act otherwise applicable to a SNF for services furnished during 
a fiscal year by 2 percent, and to adjust the resulting rate for a SNF 
by the value-based incentive payment amount earned by the SNF based on 
the SNF's performance score for that fiscal year under the SNF VBP 
Program. To implement these requirements, we 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 III.D.3. of this final rule for a further 
discussion of our policies for the SNF VBP Program.
6. Adjusted Rate Computation Example
    Tables 8, 9, and 10 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 program as discussed previously) 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 variable 
per diem (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 in Table A available on the 
CMS website at http://

[[Page 47606]]

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 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 $20,390.17.
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BILLING CODE 4120-01-C

C. Additional Aspects of the SNF PPS

1. SNF Level of Care--Administrative Presumption
    The establishment of the SNF PPS did not change Medicare's 
fundamental requirements for SNF coverage. However, because the case-
mix classification is based, in part, on the beneficiary's need for 
skilled nursing care and therapy, we have attempted, where possible, to 
coordinate claims review procedures with the existing resident 
assessment process and case-mix classification system discussed in 
section III.B.3. of this final rule. This approach includes an 
administrative presumption that utilizes a beneficiary's 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 42 CFR 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

[[Page 47608]]

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.
    We did not receive any comments regarding the proposed rule's 
discussion of the administrative level of care presumption. As 
previously stated in this final rule, the set of case mix classifiers 
designated for this purpose under PDPM is posted on the SNF PPS website 
(https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html).
2. 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 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

[[Page 47609]]

significance that may occur over time (for example, the development of 
new medical technologies or other advances in the state of medical 
practice) (65 FR 46791).
    In the proposed rule, we specifically invited public comments 
identifying HCPCS codes in any of these four service categories 
(chemotherapy items, chemotherapy administration services, radioisotope 
services, and customized prosthetic devices) representing recent 
medical advances that might meet our criteria for exclusion from SNF 
consolidated billing. We stated in the proposed rule that we may 
consider excluding a particular service if it meets our criteria for 
exclusion as specified previously. We requested that commenters 
identify in their comments the specific HCPCS code that is associated 
with the service in question, as well as their rationale for requesting 
that the identified HCPCS code(s) be excluded.
    We note that the original BBRA amendment (as well as the 
implementing regulations) identified a set of excluded services by 
means of specifying HCPCS codes that were in effect as of a particular 
date (in that case, July 1, 1999). Identifying the excluded services in 
this manner made it possible for us to utilize program issuances as the 
vehicle for accomplishing routine updates of the excluded codes, to 
reflect any minor revisions that might subsequently occur in the coding 
system itself (for example, the assignment of a different code number 
to the same service). Accordingly, we stated in the proposed rule that, 
in the event that we identify through the current rulemaking cycle any 
new services that would actually represent a substantive change in the 
scope of the exclusions from SNF consolidated billing, we would 
identify these additional excluded services by means of the HCPCS codes 
that are in effect as of a specific date (in this case, 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.
    A discussion of the comments we received regarding SNF consolidated 
billing, along with our responses, appears below.
    Comment: Several commenters cited the COVID-19 Public Health 
Emergency (PHE) as justification for excluding services from 
consolidated billing that would not otherwise qualify for such 
exclusion.
    Response: We appreciate these concerns and recognize the unique 
circumstances of the COVID-19 PHE. However, excluding services from SNF 
consolidated billing that would not otherwise meet the statutory 
conditions for exclusion would require congressional action.
    Comment: A commenter requested that CMS consider whether 
application of 42 CFR 411.8(b)(4), (Services paid for by a Government 
entity) ``would enable payment for COVID-19 testing under Medicare Part 
B for patients currently covered in a Medicare Part A stay.''
    Response: We are not sure we understand what the commenter is 
asking, however, we note that Sec.  411.8(b)(4) does not address 
exceptions to the SNF consolidated billing requirement.
    Comment: Some commenters suggested that CMS should consider 
removing antiviral, antibiotic, and other expensive non-chemotherapy 
medications from consolidated billing and allowing such services to be 
separately billable. A commenter stated these medications are 
oftentimes more expensive than the already excluded chemotherapy 
medications. Another commenter stated that the high cost of newer 
pharmaceutical agents is a barrier in allowing patients to access their 
Part A SNF benefits, suggesting that SNF facilities may be hesitant to 
accept eligible patients if these patients will require high cost 
medications. The commenter requested that CMS add these agents, 
including their administration costs, to the excluded list under 
Consolidated Billing. Examples of such medications include: 
Dalbavancin; Daptomycin; Ceftolozane-tazobactam; and Oritavancin.
    Response: We have responded to similar recommendations in past 
rulemaking cycles. The issue of establishing a broader exclusion that 
would encompass expensive non-chemotherapy drugs was addressed in the 
SNF PPS final rule for FY 2017 (81 FR 51985, August 5, 2016), and again 
in the final rule for FY 2019 (83 FR 39180, August 8, 2018), which 
explained that existing law does not provide for such an expansion.
    Comment: Some commenters reiterated recommendations made in 
previous rulemaking cycles for exclusions from consolidated billing of 
certain Part-D-only oral chemotherapy drugs.
    Response: We note that such drugs have been recommended for 
exclusion during previous rulemaking cycles. For the reasons discussed 
previously in prior rulemaking, the particular drugs cited in these 
comments remain subject to consolidated billing. In the FY 2020 SNF PPS 
final rule (84 FR 38743 through 38744), we stated that because the 
particular drugs at issue here would not be covered under Part B, the 
applicable provisions at section 1888(e)(2)(A) of the Act do not 
provide a basis for excluding them from consolidated billing. Moreover, 
as noted in the FY 2006 SNF PPS final rule (70 FR 45049) and the FY 
2020 SNF PPS final rule (84 FR 38744), expanding the existing statutory 
drug coverage available under Part B to include such drugs is not 
within our authority.
    Comment: A commenter requested that CMS consider excluding the 
chemotherapy medications Alkeran (Melphalan) and Bicnu (Carmustine) 
from consolidated billing, due to the high cost of daily treatments.
    Response: Both Melphalan and Carmustine already appear on the SNF 
PPS exclusion list in Major Category III.A (Chemotherapy), under codes 
J9245 and J9050, respectively.
    Comment: A commenter suggested that CMS should ``conduct a broad 
review of new chemotherapy drugs and their costs to determine whether 
any additions should be made to the exclusion list, as new drugs are 
being added regularly and do not always have their own HCPCS code.''
    Response: We routinely review a list of upcoming HCPCS code 
revisions (additions, modifications, and deletions) for the coming 
calendar year to determine whether additions should be made in the 
consolidated billing exclusion list. As discussed in the FY 2015 SNF 
PPS final rule (79 FR 45642, August 5, 2014), the approach that 
Congress adopted to identify the individual chemotherapy drugs being 
designated for exclusion consisted of listing them by HCPCS code in the 
statute itself (section 1888(e)(2)(A)(iii)(II) of the Act). Thus, a 
chemotherapy drug's assignment to its own specific code has always 
served as the mechanism of designating it for exclusion, as well as the 
means by which the claims processing system is able to recognize that 
exclusion. Accordingly, the assignment of a chemotherapy drug to its 
own code is a necessary prerequisite to consider that service for 
exclusion from consolidated billing under the SNF PPS.
    Comment: A commenter suggested that CMS exclude portable X-ray 
services from Skilled Nursing Facility Consolidated Billing (SNF CB).
    Response: As explained in the final rule for FY 2001 (65 FR 46790), 
we have the statutory authority to designate additional service codes 
for exclusion only when they fall within one of the four categories 
originally specified in the BBRA and set forth at section

[[Page 47610]]

1888(e)(2)(A)(iii) of the Act: That is, chemotherapy items, 
chemotherapy administration services, radioisotope services, and 
customized prosthetic devices. We do not have statutory authority to 
create a new category of excluded items, such as for diagnostic imaging 
services. Excluding portable x-ray services from SNF CB would require 
congressional action, as existing law does not provide for such an 
exclusion.
3. Payment for SNF-Level Swing-Bed Services
    Section 1883 of the Act permits certain small, rural hospitals to 
enter into a Medicare swing-bed agreement, under which the hospital can 
use its beds to provide either acute- or SNF-level care, as needed. For 
critical access hospitals (CAHs), Part A pays on a reasonable cost 
basis for SNF-level services furnished under a swing-bed agreement. 
However, in accordance with section 1888(e)(7) of the Act, SNF-level 
services furnished by non-CAH rural hospitals are paid under the SNF 
PPS, effective with cost reporting periods beginning on or after July 
1, 2002. As explained in the FY 2002 final rule (66 FR 39562), this 
effective date is consistent with the statutory provision to integrate 
swing-bed rural hospitals into the SNF PPS by the end of the transition 
period, June 30, 2002.
    Accordingly, all non-CAH swing-bed rural hospitals have now come 
under the SNF PPS. Therefore, all rates and wage indexes outlined in 
earlier sections of this final rule for the SNF PPS also apply to all 
non-CAH swing-bed rural hospitals. 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 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.
    A commenter submitted the following comment related to the proposed 
rule's discussion of payment for SNF-level swing-bed services. A 
discussion of that comment, along with our response, appears below.
    Comment: One commenter suggested that exempting the swing-bed 
services of CAHs from the SNF PPS creates a discrepancy in payment for 
comparable services between the CAH and any area SNFs which are not so 
exempted, to the SNF's disadvantage. The commenter urged CMS to seek 
statutory authority either to pay for CAH swing-bed services under the 
SNF PPS, or to adjust Medicare payments for those rural SNFs located in 
the same geographic area as a swing-bed CAH.
    Response: As we noted previously in the final rule for FY 2020 (84 
FR 38745, August 7, 2019) in response to a similar comment, as 
originally enacted in section 4432 of the BBA 1997, the SNF PPS applied 
uniformly to all providers of extended care services under Part A, 
including SNFs themselves along with swing-bed CAHs as well as rural 
(non-CAH) swing-bed hospitals. However, the Congress subsequently 
enacted legislation in section 203 of the BIPA that specifically 
excluded swing-bed CAHs from the SNF PPS (see section 1888)(e)(7)(C) of 
the Act), thus establishing that swing-bed CAHs are to be exempted from 
the SNF PPS while leaving this payment methodology in place for the 
other facilities, including rural SNFs. Accordingly, we cannot adjust 
Medicare payments for rural SNFs located in the same geographic area as 
a swing-bed CAH to provide for similar payments.
4. Revisions to the Regulation Text
    We proposed to make certain revisions in the regulation text 
itself. Specifically, we proposed 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. To reflect the recent repeal of the Part B therapy caps in section 
50202 of the BBA 2018, we proposed 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 proposed to 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 proposed 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 proposed to 
revise Sec.  413.114(c)(2) to remove an erroneous cross-reference to a 
non-existent Sec.  413.55(a)(1), and to substitute in its place the 
correct cross-reference to the regulations on reasonable cost 
reimbursement at Sec.  413.53(a)(1).
    We received one comment supporting our proposed revisions to the 
regulation text. We appreciate this comment and after considering the 
comment received, for the reasons set forth in this final rule and in 
the FY 2021 SNF PPS proposed rule, we are finalizing our proposed 
revisions to the regulation text without modification.

D. Other Issues

1. Changes to SNF PPS Wage Index
a. Core-Based Statistical Areas (CBSAs) for the FY 2021 SNF PPS Wage 
Index
(1) 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

[[Page 47611]]

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 proposed to 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 noted in the 
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 OMB 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 
later in this section, was not issued in time for development of the FY 
2021 SNF PPS proposed rule.) As we discussed in the proposed rule (85 
FR 20928), 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 the FY 2021 SNF PPS proposed rule, 
we proposed 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 previously, the March 6, 2020 OMB Bulletin 20-01 was not 
issued in time for development of the FY 2021 SNF PPS proposed rule. We 
intend to propose any updates from this bulletin in the FY 2022 SNF PPS 
proposed rule.
    As we stated in the 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. We further stated that the revisions OMB 
published on September 14, 2018 contain a number of significant 
changes. For example, we stated that under the 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 final rule.
b. 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. In the 
proposed rule (85 FR 20929), we stated that we believe it is important 
for the SNF PPS to use the latest labor market area delineations 
available as 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 also stated in the proposed rule 
that we further believe that using the delineations reflected in OMB 
Bulletin No. 18-04 will increase the integrity of the SNF PPS wage 
index system by creating a more accurate representation of geographic 
variations in wage levels. As we stated in the proposed rule, 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. As we explained in 
the proposed rule, because we believe we have broad authority under 
section

[[Page 47612]]

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 proposed 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 proposed 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 
were to 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 final rule.
(a) 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 stated in the proposed rule (85 FR 20929) that we believe 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). As 
discussed in the proposed rule, 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 in this final 
rule. 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 
proposed to continue to treat Micropolitan Areas as ``rural'' and to 
include Micropolitan Areas in the calculation of the state's rural wage 
index.
(b) Urban Counties That Will Become Rural Under the Revised OMB 
Delineations
    As previously discussed, we proposed to implement the revised OMB 
statistical area delineations based upon OMB Bulletin No. 18-04 
beginning in FY 2021. In the FY 2021 SNF PPS proposed rule (85 FR 
20929), we indicated 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 adopted these revised OMB delineations. In the proposed rule, we 
listed the 34 urban counties, as set forth in Table 11, that would be 
rural if we finalized our proposal to implement the revised OMB 
delineations.

[[Page 47613]]

[GRAPHIC] [TIFF OMITTED] TR05AU20.009

    We proposed 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 stated in the 
proposed rule that 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 
final rule. Furthermore, we stated in the proposed rule that 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 rates, found in Table 4 of the proposed rule, as 
the basis for determining payment rates for these facilities beginning 
on October 1, 2020.
(c) Rural Counties That Will Become Urban Under the Revised OMB 
Delineations
    As previously discussed, we proposed to implement the revised OMB 
statistical area delineations based upon OMB Bulletin No. 18-04 
beginning in FY 2021. In the proposed rule (85 FR 20931), we indicated 
that 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. In the proposed 
rule (85 FR 20932), we listed the 47 rural counties that would be 
urban, as set forth in Table 12, if we finalize our proposal to 
implement the revised OMB delineations.
BILLING CODE 4120-01-P

[[Page 47614]]

[GRAPHIC] [TIFF OMITTED] TR05AU20.010

BILLING CODE 4120-01-C
    We proposed 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. As we explained in the proposed rule (85 FR 20933), 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 
final rule. Furthermore, we stated that

[[Page 47615]]

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 of the proposed rule, as the 
basis for determining the payment rates for these facilities beginning 
October 1, 2020.
(d) Urban Counties That Will Move to a Different Urban CBSA Under the 
Revised OMB Delineations
    As we stated in the FY 2021 SNF PPS proposed rule (85 FR 20933), 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. 
Further, we stated that 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, we noted that 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 stated that we would 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. In the 
proposed rule, we listed the CBSAs where there would be a change in 
CBSA name and/or number only, as set forth in Table 13, if we adopt the 
revised OMB delineations.
[GRAPHIC] [TIFF OMITTED] TR05AU20.011

    However, we stated in the proposed rule (85 FR 20934) that in other 
cases, if we adopted the revised OMB delineations, counties would shift 
between existing and new urban CBSAs, changing the constituent makeup 
of the CBSAs. We explained that, in one type of change, CBSAs would 
split into multiple new CBSAs. For example, we noted that 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). 
Further, we explained that in other cases, a CBSA would lose one or 
more counties to another urban CBSA. For example, we noted that Kendall 
County, IL, that is currently in CBSA 16974 (Chicago Naperville 
Arlington Heights, IL) is moving to CBSA 20994 (Elgin, IL).

[[Page 47616]]

    In the proposed rule (85 FR 20936), we listed the urban counties 
that would move from one urban CBSA to another newly proposed or 
modified CBSA, as set forth in Table 14, if we adopt the revised OMB 
delineations.
[GRAPHIC] [TIFF OMITTED] TR05AU20.012

    We stated in the proposed rule that 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 wage index 
transition policy appears later in this final rule.
    Commenters submitted the following comments related to the proposed 
changes discussed above that would result from adopting the revised OMB 
delineations. A discussion of these comments, along with our responses, 
appears below.
    Comment: Most commenters concurred with adopting the revised OMB 
delineations. However, several commenters suggested that CMS delay 
adopting the revised OMB delineations until after the public health 
emergency related to COVID-19 has ended.
    Response: We appreciate the comments concurring with the proposed 
adoption of the revised OMB delineations. As we stated in the proposed 
rule (85 FR 20929), we believe that the updated OMB delineations 
increase the integrity of the SNF PPS wage index by creating a more 
accurate representation of variations in area wage levels. As such, we 
believe that the revised OMB delineations would help ensure more 
accurate and appropriate payments as compared to the current OMB 
delineations. With regard to the comments that would seek a delay in 
adopting the revised delineations until after the COVID-19 related 
public health emergency is over, given that the revised OMB 
delineations would help ensure more accurate payments than under the 
current OMB delineations, we believe it is important to adopt the 
revised delineations as soon as possible. Nothing about the COVID-19 
related emergency would diminish the importance of ensuring that 
payments are as accurate as possible. Moreover,

[[Page 47617]]

for providers that would experience an increase in payment under the 
revised OMB delineations, this means that they are currently being 
underpaid relative to the reported wage data in their geographic area. 
Ensuring that providers are not underpaid may even be of greater 
importance during this type of emergency situation. Therefore, we do 
not believe that a delay in implementation would be appropriate.
    Comment: One commenter suggested that the adoption of the New 
Brunswick-Lakewood, NJ CBSA would result in a reduction in 
reimbursement for the four New Jersey counties that would make up the 
new CBSA and recommended that CMS delay finalizing the proposal to 
implement the new OMB delineations.
    Response: We appreciate the detailed concerns sent in by the 
commenter regarding the impact of implementing the New Brunswick-
Lakewood, NJ CBSA designation on their specific counties. While, we 
understand the commenter's concern regarding the potential financial 
impact, we believe that implementing the revised OMB delineations will 
create more accurate representations of labor market areas and result 
in SNF wage index values being more representative of the actual costs 
of labor in a given area. Moreover, we believe that providers located 
in labor market areas that will experience a decline in wage index 
under the revised OMB delineations currently are being paid in excess 
of what the reported wage and labor data for their area would suggest 
is appropriate. We believe that the OMB standards for delineating 
Metropolitan and Micropolitan Statistical Areas are appropriate for 
determining area wage differences and that the values computed under 
the revised delineations will result in more appropriate payments to 
providers by more accurately accounting for and reflecting the 
differences in area wage levels. Furthermore, as explained in section 
III.D.1.c. of this final rule, we are implementing a wage index 
transition for FY 2021 under which we will apply a 5 percent cap on any 
decrease in a hospital's wage index compared to its wage index for FY 
2020 to assist providers in adapting to the revised OMB delineations. 
For these reasons, we do not believe that a delay in implementation 
would be appropriate.
    Comment: One commenter recommended that CMS take this time, during 
which we are already making and contemplating changes to the SNF PPS 
more broadly and to the wage index more specifically, to consider 
creating a SNF-specific wage index, as opposed to continuing to rely on 
hospital data as the basis for the SNF wage index.
    Response: We appreciate the commenter's suggestion as to the 
development of a SNF specific wage index. However, to date, the 
development of a SNF-specific wage index 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. In addition, 
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. While we 
continue to review all available data and contemplate potential 
methodological approaches for a SNF-specific wage index in the future, 
we continue to believe that in the absence of the appropriate SNF-
specific wage data, using the pre-reclassified, pre-rural floor 
hospital inpatient wage data (without the occupational mix adjustment) 
is appropriate and reasonable for the SNF PPS.
    After considering the comments received, for the reasons set forth 
in this final rule and in the FY 2021 SNF PPS proposed rule, we are 
finalizing our proposal to adopt the revised OMB delineations contained 
in OMB Bulletin 18-04 as proposed, without modification.
c. Transition Policy for FY 2021 Wage Index Changes
    As discussed in the FY 2021 SNF PPS proposed rule (85 FR 20936), 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 stated that 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 further stated that 
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 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. In the FY 2021 SNF PPS proposed rule 
(85 FR 20937), we recognized that similar instability may result from 
the proposed adoption of the revised OMB delineations discussed in the 
proposed rule. For example, we noted that 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 proposed a transition policy to help mitigate any significant 
negative impacts that SNFs may experience if we were to adopt the 
revised OMB delineations for FY 2021. Specifically, for FY 2021, as a 
transition, we proposed 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. 
We stated that 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)).

[[Page 47618]]

    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 final rule. However, we stated in the 
proposed rule (85 FR 20937) that, 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. We explained that 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 stated that 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 further stated that 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, we noted that 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 proposed that this 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 methodology for 
calculating the budget neutrality factor is discussed further in 
section III.D.1.d. of this final rule.
    In the proposed rule, we stated that this transition policy would 
be for a 1-year period, going into effect October 1, 2020, and 
continuing through September 30, 2021. That is, we stated that no cap 
would be applied to any reductions in the wage index for FY 2022.
    Commenters submitted the following comments related to the proposed 
transition methodology. A discussion of these comments, along with our 
responses, appears below.
    Comment: Many commenters supported the proposed transition 
methodology. A few commenters including MedPAC suggested alternatives 
to the 5 percent cap transition policy. MedPAC suggested that the 5 
percent cap limit should apply to both increases and decreases in the 
wage index so that no provider would have its wage index value increase 
or decrease by more than 5 percent for FY 2021. Finally, several 
commenters recommended that CMS consider implementing a 5 percent cap, 
similar to that which we proposed for FY 2021, for years beyond the 
implementation of the revised OMB delineations, either until no 
providers experience more than a 5 percent decline in any given year, 
or by permanently imposing a 5 percent cap on wage index declines.
    Response: We appreciate the comments supporting this proposed 
transition methodology. Further, we appreciate MedPAC's suggestion that 
the 5 percent cap should also be applied to increases in the wage 
index. However, as we discussed in the proposed rule, the purpose of 
the proposed transition policy, as well as those we have implemented in 
the past, is to help mitigate the significant negative impacts of 
certain wage index changes, not to curtail the positive impacts of such 
changes, and thus we do not believe it would be appropriate to apply 
the 5 percent cap on wage index increases as well. To the extent that a 
provider's wage index would increase under the revised OMB 
delineations, this means that the provider is currently being paid less 
than their reported wage data suggests is appropriate. We believe the 
proposed transition would help ensure these providers do not receive a 
wage index adjustment that is lower than appropriate and that payments 
are as accurate as possible. Finally, with regard to the comments 
recommending that we consider implementing this type of transition in 
future years, either on a permanent basis or only until providers no 
longer experience more than a 5 percent decline in any given year, we 
believe that this would undermine the goal of the wage index, which is 
to improve the accuracy of SNF payments. Applying such a cap each year 
would only serve to further delay improving the accuracy of SNF 
payments by continuing to pay certain providers more than their wage 
data suggest is appropriate. Therefore, while we believe that a 
transition is necessary to help mitigate some initial significant 
negative impacts from the revised OMB delineations, we also believe 
this mitigation must be balanced against the importance of ensuring 
accurate payments.
    After considering the comments received, for the reasons set forth 
in this final rule and in the FY 2021 SNF PPS proposed rule, we are 
finalizing, without modification, the proposed transition methodology, 
which places a 5 percent cap on any decrease in a SNF's FY 2021 wage 
index, from its FY 2020 wage index. The 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 revised OMB delineations, as 
well as the transition wage index values.
d. 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 proposed to apply a wage index budget neutrality factor 
in determining the federal per diem rates, and we also proposed a 
methodology for calculating this budget neutrality factor.
    For FY 2021, we proposed to adjust the SNF PPS unadjusted federal 
per diem rates to account for the estimated effect of the wage index 
adjustments discussed in the proposed rule on estimated aggregate SNF 
PPS payments. As we stated in the proposed rule (85 FR 20937), 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. We explained that, 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. For FY 2021, 
as discussed in the proposed

[[Page 47619]]

rule, we proposed to adopt revised OMB delineations and proposed 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, we proposed a budget neutrality factor for FY 
2021, described later in this section of the preamble, that accounts 
for all of these proposed changes to the SNF PPS wage index. We discuss 
below the methodology we proposed for calculating and applying the wage 
index budget neutrality factor for determining the FY 2021 federal per 
diem rates.
    In the FY 2021 SNF PPS proposed rule (85 FR 20937 through 29038), 
we proposed 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 data and the adoption of 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 proposed 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 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 the proposed rule (85 FR 20938), 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 the 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.
    Commenters submitted the following comments related to the proposed 
wage index budget neutrality calculation. A discussion of these 
comments, along with our responses, appears below.
    Comment: Several commenters requested that CMS consider waiving the 
portion of the wage index budget neutrality adjustment calculation 
accounting for changes to the wage index resulting from the proposed 
adoption of the revised OMB delineations, citing the current public 
health emergency as the basis for this request.
    Response: We appreciate this comment and its relation to the 
current public health emergency. However, section 1888(e)(4)(G)(ii) of 
the Act requires that the wage index adjustment be done in such a 
manner as to not result in a change in aggregate payments. As such, we 
believe it is necessary and appropriate to calculate a budget 
neutrality factor that accounts for all wage index changes.
    After considering the comments received, for the reasons set forth 
in this final rule and in the FY 2021 SNF PPS proposed rule, we are 
finalizing, without modification, our proposed policies related to the 
SNF PPS wage index, including the proposed budget neutrality adjustment 
methodology. However, we note that in the FY 2021 SNF PPS proposed 
rule, the budget neutrality factor calculation was based on the wage 
and cost data available at the time of the proposed rule. The proposed 
FY 2021 budget neutrality factor was 0.9982. Based on more recent 
hospital cost report data available for this FY 2021 SNF PPS Final 
Rule, the final FY 2021 budget neutrality factor, which was used in 
calculating the final unadjusted FY 2021 federal per diem rates, is 
0.9992.
2. 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 proposed several changes to the PDPM ICD-10 code mappings and 
lists. The proposed updated mappings and

[[Page 47620]]

lists were posted 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 proposed 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 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 proposed 
to include one of the surgical clinical category options specified 
previously in this section 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 later in 
this section.
    We proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed to add the surgical 
option of ``May be Eligible for One of the Two

[[Page 47621]]

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 proposed 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 proposed 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 invited comments on the proposed substantive changes to the ICD-
10 code mappings discussed previously, as well as sought comments on 
additional substantive and non-substantive changes that stakeholders 
believe are necessary. A discussion of these comments, along with our 
responses, appears below.
    Comment: A commenter requested an explanation as to how CMS plans 
to address new annual ICD-10-CM codes in the PDPM payment group 
mappings, stating that CMS described some changes to the mappings for 
2020 ICD-10-CM codes, but did not describe how it plans to address 2021 
codes or annual changes to ICD-10-CM codes. The commenter requested 
that CMS explain the process for mapping new codes, and state whether 
these will be available for comment through annual rule making.
    Response: We described in the proposed rule the process by which we 
maintain and update the ICD-10 code mappings and lists associated with 
the PDPM. Specifically, 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. This 
process is described in more detail in the portions of the FY 2020 SNF 
PPS final rule (84 FR 38750) pertaining to updates to the ICD-10 code 
mappings and lists.
    Comment: A commenter noted that the list of Z48 surgery aftercare 
codes to which CMS proposes adding the surgical option of ``May be 
Eligible for the Non-Orthopedic Surgery Category'' in the proposed rule 
(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), 
contains seemingly duplicative references to code ``Z48.290'' and 
``Z48.29''. The commenter inquired as to whether the duplicative 
``Z48.29'' entry was erroneous and was supposed to be Z48.89, 
``encounter for other specified surgical aftercare''.
    Response: We note that Z48.29 is not duplicative of Z48.290; 
Z48.290, ``aftercare following bone marrow transplant'' is in fact a 
separate code under the heading of Z48.29, ``aftercare following other 
organ transplant.'' However, in the proposed rule, we inadvertently 
included both Z48.29 and Z48.290, as well as Z48.3 for aftercare 
following surgery for neoplasm, on the list of Z48 surgery aftercare 
codes to which we proposed to add the surgical option of ``May be 
Eligible for the Non-Orthopedic Surgery Category.'' Z48.29 is not a 
valid code because it requires a sixth character. According to ICD 10 
coding guidance, ``Diagnosis codes are to be used and reported at their 
highest number of characters available. ICD-10-CM diagnosis codes are 
composed of codes with 3, 4, 5, 6 or 7 characters. A code is invalid if 
it has not been coded to the full number of characters required for 
that code, including the 7th character, if applicable'' (https://www.cms.gov/Medicare/Coding/ICD10/Downloads/2020-Coding-Guidelines.pdf 
pg. 14). The code Z48.29, ``encounter for aftercare following other 
organ transplant,'' is further subdivided into more specific codes. One 
of those codes is Z48.298, which is also aftercare following other 
organ transplant. Since the ICD-10 guidelines state that ``codes are to 
be used and reported at their highest number of characters available'' 
and the codes are duplicative in meaning, we are removing Z48.29 and 
keeping Z48.298. Code Z48.290 is for aftercare following a bone marrow 
transplant. Bone marrow transplants can be performed to treat patients 
with a variety of cancer and non-cancer indications. A bone marrow 
transplant is considered to be a medical procedure and therefore would 
not have the non-orthopedic surgery option. Bone marrow transplants 
involve injecting cells into a recipient rather than open surgery to 
replace an organ. Thus, bone marrow transplants differ from the other 
transplant codes involving open surgical procedures, so it would not be 
appropriate to include code Z48.290 in the category of non-orthopedic 
surgery which describes the provision of open surgical procedures and 
the care for patients after open surgical procedures. Finally, Z48.3 
involves the aftercare of patients for neoplasm. There are specific 
codes for specific types of neoplasm. Z48.3 does not specify that the 
neoplasm is malignant. Furthermore, many of the most common neoplasms 
removed surgically are on the skin and do not require the same level of 
aftercare as open surgical procedures. Cancer aftercare can be coded 
more specifically using the C and D codes that we included in our 
proposal, which will ensure more appropriate payment. Thus, we are not 
including the Non-orthopedic surgery option for Z48.3. Therefore, the 
correct list of Z48 surgery aftercare codes to which we are adding the 
surgical option of ``May be Eligible for the Non-Orthopedic Surgery 
Category'' is as follows: Z48.21, Z48.22, Z48.23, Z48.24, Z48.280, 
Z48.288, Z48.298, Z48.811, Z48.812, Z48.813, Z48.815, and Z48.816. This 
is consistent with the proposed updated mappings

[[Page 47622]]

and lists that were posted online at the SNF PDPM website at https://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/SNFPPS/PDPM 
coincident with the release of the proposed rule. Finally, in response 
to the comment addressing code Z48.89 (the code that the commenter 
thought we might have meant instead of Z48.29), we note that we are not 
adding the surgical option of ``May be Eligible for the Non-Orthopedic 
Surgery Category'' to code Z48.89, which is ``encounter for other 
specified surgical aftercare''. This code provides inadequate 
information about the type of surgery, the illness that required 
surgery, and the type of aftercare. There are other codes that describe 
why the surgical aftercare is needed, for example Z48.21, ``aftercare 
following a heart transplant''. In order to obtain sufficient 
information to place a patient in the proper category, code Z48.89 is 
designated as Return to Provider, since other coding options exist to 
provide the needed information.
    Comment: A commenter responded to CMS's proposal for codes C33 
through C39.9 to include the surgical clinical category option, ``May 
be Eligible for the Non-Orthopedic Surgery Category'' which corresponds 
to J2710 on the MDS for cancers involving the respiratory system. The 
commenter encouraged CMS to consider allowing ICD-10 codes C38.0-C38.8, 
cancers of the heart, to map from J2700, Cardiopulmonary surgery 
(involving the heart or major blood vessels), as these codes may have a 
surgical procedure that would only be coded under J2700. The commenter 
also suggested CMS allow ICD-10 C37 to map from either J2710 or J2920, 
stating that ``C37 code should be allowed to map to the non-orthopedic 
surgery code when J2710 (Major surgery involving the respiratory 
system) has been correctly coded.'' In addition, the commenter stated 
that C37 is coded for cancer of the thymus, which may also need to map 
to a non-orthopedic surgery category based on the MDS coding of J2920, 
surgeries involving the endocrine organs.
    Response: We would like to clarify that ``May be Eligible for the 
Non-Orthopedic Surgery Category'' does not correspond to J2710 only. As 
stated in the MDS RAI Manual Chapter 6, J2600, J2610, J2620, J2700, 
J2710, J2800, J2810, J2900, J2910, J2920, J2930, and J2940 are all 
considered non-orthopedic surgery categories. Furthermore, the codes 
C37, C38.0--C38.8 have the option of being eligible for the non-
orthopedic surgery category. Codes C38.0, C38.4 and C38.8 could map 
from J2700, cardiopulmonary surgery. C38.1, C38.2, C38.3 are too 
nonspecific as there are multiple malignancies that could form in these 
spaces and there are usually more specific codes for those 
malignancies. For example, C38.1 malignant neoplasm of anterior 
mediastinum includes the thymus and there is a more specific code, C37, 
malignancy of the thymus. Code C37 malignancy of the thymus could map 
from J2920. On the rare instance where a more specific code did not 
exist, codes C38.1, C38.2, and C38.3 could still map from J5000.
    Comment: A commenter disagreed with the exclusion of ICD-10 code 
C410, ``Malignant neoplasm of the bones of skull and face,'' from the 
orthopedic surgery mappings, stating that cancers of the skull and face 
may require orthopedic surgery and should map to one of the two 
orthopedic surgery categories when a corresponding surgery is coded.
    Response: Upon clinical investigation, we agree with the commenter 
that it is appropriate to include the ``May be Eligible for One of the 
Two Orthopedic Surgery Categories'' option for code C410, ``Malignant 
neoplasm of bones of skull and face,'' consistent with similar codes 
concerning neoplasms of bones in the face, such as C41.1, ``Malignant 
neoplasm of mandible.'' Based on clinician feedback, both orthopedic 
and non-orthopedic surgeries are possible in cases involving neoplasms 
of bones in the face, and non-orthopedic surgery is more common. 
However, the current PDPM grouper design only allows a code to be 
either orthopedic or non-orthopedic, and classification in the 
orthopedic surgery group results in a higher per diem rate than the 
non-orthopedic group. We anticipate that the need for orthopedic 
surgery and therapy should be rare but acknowledge that it is possible 
in such cases, and will monitor the use of the surgical option. 
Therefore, we will map code C410 to ``May be Eligible for One of the 
Two Orthopedic Surgery Categories'' with the rest of the codes in the 
range of C40.01 through C41.9.
    Comment: A commenter suggested that codes related to malignant 
secondary (metastatic) cancer sites should be included in the list of 
ICD-10 cancer codes to which CMS is adding surgical clinical category 
options. The commenter suggested CMS consider including the following 
malignant secondary codes to the list of codes to which CMS should add 
surgical clinical category options and as SLP-related comorbidities: 
C78.39, secondary malignant neoplasm of other respiratory organs, which 
is used to code cancers that have metastasized to the laryngeal area 
(C32.0, C32.1, C32.2, C32.3, C32.9); and C79.89, secondary malignant 
neoplasm of other specified sites which is used to code cancers that 
have metastasized to oral cancers (C00.0, C00.1, C00.2, C00.3, C00.4, 
C00.5, C00.6, C00.9, C01, C02.0, C02.1, C02.2, C02.3, C02.4, C02.8, 
C02.9, C03.0, C03.1, C03.9, C04.0, C04.1, C04.9, C09.9, C09.0, C09.1, 
C10.0, C10.1, C10.2, C10.3, C10.4, C10.9, C14.0, C14.2, C06.0 C05.0, 
C05.1, C05.2, C05.9, C06.2, C06.9).
    Response: We included ``C76.51 through C80.1'' in the list of 
clinical category to ICD-10 code mappings to which we proposed adding 
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''; therefore, both C78.39, 
``secondary malignancy of other respiratory organs,'' and C79.89, 
``secondary malignancy of other digestive organs,'' are included in the 
proposed changes to the clinical category mappings. However, we decline 
to add these codes to the SLP comorbidities list. SLP treatment can 
help patients get used to the changes in their mouth after surgery, 
chemotherapy, or radiation. Codes C78.39 and C79.89 lack specificity 
and concern respiratory and digestive organs that do not generally 
indicate the need for SLP treatment. The oral cancer codes mentioned 
(for example, C00) are included instead, as they specify the location 
of the neoplasm (tonsil, gum, tongue, etc.) in organs that are closely 
associated with the need for SLP treatment.
    Comment: Several commenters suggested additional changes to the 
ICD-10 code mappings and comorbidity lists that were outside the scope 
of this rulemaking. Multiple commenters suggested that CMS include the 
surgical option for several ``subsequent encounter'' ICD-10 codes that 
better describe the admission status of the SNF beneficiary than the 
currently permitted ``initial encounter'' ICD-10 codes; specifically, 
commenters identified several additional ``D'' seventh digit codes, as 
well as ``G, K, and P'' seventh digit codes that should include the 
surgical option. A commenter recommended that ICD-10 code G93.1, 
``Anoxic brain damage,'' should map to the Neurologic category instead 
of Return to Provider. Another commenter stated that patients may need 
SNF care due to cytokine release syndrome related to chimeric antigen 
receptor T-cell therapy, which is receiving new codes in 2021 in the 
D89.831 to D89.839 range, and the commenter questioned how CMS proposes 
to map such codes. Finally, a commenter recommended that

[[Page 47623]]

CMS should add the H90.0 to H90.A32 hearing loss range of ICD-10 codes 
to the SLP comorbidities list; add the following neurodegenerative 
diagnoses to the SLP comorbidities list: Alzheimer's disease, 
Friedrich's ataxia, Huntington's disease, Lewy body disease, 
Parkinson's disease, spinal muscular atrophy; and add the following 
mild cognitive impairment code to the SLP comorbidities list: Mild 
cognitive impairment, so stated (mild neurocognitive disorder) G31.84.
    Response: We note that such changes are outside the scope of this 
rulemaking, and will not be addressed in this rule. We will further 
consider the suggested changes to the ICD-10 code mappings and 
comorbidity lists and may implement them in the future as appropriate. 
To the extent that such changes are non-substantive, we may issue them 
in a future subregulatory update if appropriate; however, if such 
changes are substantive changes, in accordance with the update process 
established in the FY 2020 SNF PPS final rule, such changes must 
undergo full notice and comment rulemaking, and thus may be included in 
future rulemaking. See the discussion of the update process for the 
ICD-10 code mappings and lists in the FY 2020 SNF PPS final rule (84 FR 
38750) for more information.
    Comment: A commenter suggested that CMS implement an ``increased 
payment modifier for ICD-10 diagnoses that can be attributed to COVID-
19 and its symptomology through the use of PDPM groupings that reflect 
the extraordinary costs to provide care during the pandemic.'' A 
commenter also encouraged CMS to add the COVID-19 diagnosis code, 
U07.01, to the NTA comorbidities mapping list, stating that while this 
code currently maps to the medical management clinical category when 
used as a primary reason for the SNF stay, it does not have 
reimbursement equivalent to the high associated costs for the care and 
management of this disease. Multiple commenters requested that CMS 
evaluate the cost of PPE, staff time, and resources associated with 
caring for COVID-19 residents and appropriately weigh the ICD-10 code 
in establishing ``points'' toward the cumulative patient totals under 
the NTA component of PDPM. One commenter recommended 5 points, citing 
the experience of their association members and expert panel members. 
Furthermore, to allow for adequate reimbursement in the future, 
commenters requested that CMS consider adding an NTA category for 
pandemic/epidemic type infection that would allow for timely 
reimbursement and allow CMS to add new ICD-10-CM codes to the mapping 
as needed. Another commenter suggested that the use of ICD-10 code 
U07.2 should be permitted on the MDS as an alternative method to 
document a patient is being treated for COVID-19, to eliminate delays 
in treatment where testing is limited, and that this U07.2 code should 
be mapped the same as the COVID-19 diagnosis code U07.1, stating that 
this will allow for better tracking of resource utilization by patients 
that are being treated for COVID-19 but had a false-negative test or 
patients that have encountered other issues or limited testing. 
Finally, a commenter expressed concern that the new COVID-19 code 
cannot be applied to dates prior to April 1, 2020 and suggested that 
CMS allow a placeholder primary reason for SNF stay/comorbidity 
checkboxes on the MDS.
    Response: We appreciate these concerns and recognize the unique 
circumstances of the coronavirus public health emergency. However, with 
regard to the use of the U07.2 code, this code has not yet been adopted 
by the CDC and is not allowed to be used per CDC guidance. With regard 
to the COVID-19 code, U07.1, being inapplicable to dates prior to April 
1, the CDC has provided coding guidelines for COVID-19 cases before 
April 1, 2020. With regard to weighting the costs of COVID-19 in the 
NTA component, we note that we do not currently have enough post-April 
data at this time to estimate the cost, and may consider this in future 
rulemaking. Finally, we note that the commenters' suggestions to create 
additional NTA categories, add code U7.01 to the NTA comorbidities 
mapping, and other substantive changes to the ICD-10 code mappings and 
lists, as well as suggestions for ``an increased payment modifier'' are 
outside the scope of this rulemaking. We will continue to consider 
these comments and may address them in future rulemaking. We refer 
readers to our previous discussion regarding our established process 
for considering changes to the ICD-10 code mappings and lists (see FY 
2020 SNF PPS final rule (84 FR 38750)).
    Comment: A commenter expressed concern that CMS had not yet taken 
action to expand the list of conditions on the NTA comorbidity list to 
include several additional conditions such as Parkinson's disease and 
serious mental illness such as schizophrenia. The commenter suggested 
that CMS consider potential updates to the NTA comorbidity list on an 
annual basis.
    Response: We will consider potential updates to the NTA comorbidity 
list on an ongoing basis consistent with our established process for 
considering changes to the ICD-10 code mappings and lists (see FY 2020 
SNF PPS final rule (84 FR 38750)). We note that Parkinson's (MDS I5300) 
and schizophrenia (HCC 57) were both considered for inclusion in the 
NTA comorbidity list that has assigned points for each condition which 
would contribute to NTA score calculation, but were eventually excluded 
from the comorbidity list due to small coefficient estimates, meaning 
that they did not represent an apparent significant increase in 
relative resource utilization as compared to other conditions found on 
the NTA comorbidity list.
    Comment: Multiple commenters noted support for the proposed changes 
to the ICD-10 code mappings in general. Specifically, commenters noted 
support for the CMS proposals to: Add certain ICD-10 codes with the 
subsequent encounter ``D'' seventh digit for use in the ICD-code 
mapping to the NTA comorbidity CC176; move certain ICD-10 fracture 
codes which do not identify whether the condition is on the right or 
left side to ``Return to Provider''; and add the surgical option of 
``May be Eligible for One of the Two Orthopedic Surgery Categories'' to 
ICD-10 codes M48.00 to M48.08. One commenter stated appreciation for 
CMS reviewing ICD-10 mapping in correlation with MDS Section J2100 to 
J5000 and ``urge(d) the agency to correct prior total joint and surgery 
mapping to facilitate the appropriate assignment of the primary reason 
for SNF stay.''
    Response: We thank commenters for their support of our proposed 
changes. Regarding the comment concerning correcting prior total joint 
and surgery mapping, we will consider this change in the future 
consistent with the established process for considering changes to the 
ICD-10 code mappings and lists (see FY 2020 SNF PPS final rule (84 FR 
38750)).
    After considering the comments received, for the reasons set forth 
in this final rule and in the FY 2021 SNF PPS proposed rule, we are 
finalizing our proposed changes to the ICD-10 code mappings and lists 
with the modifications discussed above. As we previously stated, any 
substantive and non-substantive changes requested by commenters that 
are outside the scope of this rulemaking will be taken under 
consideration for potential future implementation consistent with the 
update process for the ICD-10 code mappings and lists established in 
the FY 2020 SNF PPS final rule (84 FR 38750).

[[Page 47624]]

3. Skilled Nursing Facility Value-Based Purchasing (SNF VBP) Program
a. Background
    Section 215(b) of the Protecting Access to Medicare Act of 2014 
(PAMA) (Pub. L. 113-93) authorized the SNF VBP Program (the 
``Program'') by adding section 1888(h) to the Act. As a prerequisite to 
implementing the SNF VBP Program, in the FY 2016 SNF PPS final rule (80 
FR 46409 through 46426), we adopted an all-cause, all-condition 
hospital readmission measure, as required by section 1888(g)(1) of the 
Act, 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, 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).
b. Measures
(1) Background and Update of the 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 did not propose any updates to this 
measure policy in the FY 2021 SNF PPS proposed rule.
    However, consistent with this finalized policy, we proposed 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 welcomed public comments on this proposal to amend the 
regulation text to reflect the updated measure name.
    Comment: Several commenters supported the proposal to amend the 
regulation text to reflect the updated Skilled Nursing Facility 
Potentially Preventable Readmissions after Hospital Discharge measure 
name. One commenter stated that this change will help the public 
differentiate this measure from a similar measure under the SNF QRP, 
which uses a 30-day post-SNF discharge readmission period.
    Response: We thank the commenters for their support.
    After consideration of the comments, we are finalizing our proposal 
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 as proposed.
c. 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 1 year from the previous program year. Under this policy, the 
FY 2023 performance period will be FY 2021, and the baseline period 
will be FY 2019. We did not propose any changes to this policy in the 
FY 2021 SNF PPS proposed rule.
d. Performance Standards
(1) 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 performance standards for 
the FY 2020 SNF VBP Program year in the FY 2018 SNF PPS final rule (82 
FR 36613) and published the final numerical values for the performance 
standards for the FY 2021 SNF VBP Program year 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 did not propose 
any changes to these policies in the FY 2021 SNF PPS proposed rule.

[[Page 47625]]

(2) Codification of 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. We did not propose any changes to these policies in the FY 2021 
SNF PPS proposed rule.
    We proposed to amend the definition of ``Performance standards'' at 
Sec.  413.338(a)(9) of our regulations, 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 welcomed public comments on this proposal to codify the 
performance standards correction policy finalized in the FY 2019 SNF 
PPS final rule (83 FR 39276 through 39277).
    Comment: Several commenters supported the proposal to codify the 
amended definition of ``Performance standards'', consistent with the 
policies finalized in the FY 2019 SNF PPS final rule, to reflect CMS' 
ability to update the numerical values of performance standards if it 
determines there is an error that affects the achievement threshold or 
benchmark.
    Response: We thank the commenters for their support.
    After consideration of the comments, we are finalizing the 
amendment to the definition of ``Performance standards'' at Sec.  
413.338(a)(9) of our regulations as proposed.
(3) Performance Standards for the FY 2023 Program Year
    Based on the baseline period of FY 2019 for the FY 2023 program 
year, we estimated in the proposed rule that the performance standards 
would have the numerical values noted in Table 15 (85 FR 20941). We 
stated that these values represented estimates based on the most 
recently-available data, and that we would update the numerical values 
in this final rule.
    The final FY 2023 SNF VBP Program year performance standards have 
the numerical values noted in Table 15.
[GRAPHIC] [TIFF OMITTED] TR05AU20.013

e. SNF VBP Performance Scoring
    We refer readers to the FY 2017 SNF PPS final rule (81 FR 52000 
through 52005) for a detailed discussion of the scoring methodology 
that we have finalized for the Program. 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 did not propose any updates to SNF VBP scoring policies in the 
FY 2021 SNF PPS proposed rule.
f. 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 did not propose any updates to SNF VBP payment policies in the 
FY 2021 SNF PPS proposed rule.
g. Public Reporting on the Nursing Home Compare Website or a Successor 
Website
(1) 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

[[Page 47626]]

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).
(2) Codification of 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 did not propose any changes to this policy 
in the FY 2021 SNF PPS proposed rule.
    However, to ensure that SNFs are fully aware of this public 
reporting policy, we proposed in the FY 2021 SNF PPS proposed rule (85 
FR 20942) to codify it at Sec.  413.338(e)(3)(i), (ii), and (iii) of 
our regulations.
    We welcomed 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).
    Comment: A commenter supported the proposal to codify language 
around the data suppression policy for low-volume SNFs, as finalized in 
the FY 2020 SNF PPS final rule (84 FR 38823 through 38824).
    Response: We thank the commenter for its support.
    After consideration of the comments, we are finalizing our proposal 
to codify our data suppression policy at Sec.  413.338(e)(3)(i), (ii), 
and (iii) of our regulations as proposed.
(3) Public Reporting of 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 proposed in the FY 2021 SNF PPS proposed rule (85 FR 20942) to amend 
Sec.  413.338(e)(3) of our regulations 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 the internet and other 
widely used communication modes at a later date closer to the targeted 
transition date.
    We welcomed public comments on this proposal.
    Comment: Several commenters supported the proposal to publicly 
report SNF VBP performance information on Nursing Home Compare or a 
successor website, as current regulations account for displaying 
information only on Nursing Home Compare. One commenter noted that 
public reporting and accessibility of data is critical for Program 
evaluation and understanding quality trends.
    Response: We thank the commenters for their support and agree that 
public reporting is important for the success of the Program.
    After consideration of the comments, we are finalizing our proposal 
to amend Sec.  413.338(e)(3) of our regulations to reflect that we will 
publicly report SNF performance information on the Nursing Home Compare 
website or a successor website as proposed.
h. Update and Codification of 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. In the FY 2021 SNF PPS 
proposed rule (85 FR 20942), we stated that we were 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. We stated that 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. We stated that under this proposal, SNFs would 
have 30 days following issuance of those reports to review the 
underlying claims and measure rate information. We stated that 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. We 
also stated that although these reports are typically issued in 
December (baseline period information) and June (performance period 
information), the issuance dates could vary. We stated that 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 also proposed to codify this policy in our regulations by 
amending the

[[Page 47627]]

``Confidential feedback reports and public reporting'' paragraph at 
Sec.  413.338(e)(1). We welcomed public comments on these proposals.
    Comment: A few commenters supported the proposal to apply a 30-day 
Phase One Review and Correction deadline to the baseline period quality 
measure quarterly reports typically issued in December. One commenter 
stated that this proposal aligns this Review and Correction process 
with the 30-day deadline that was implemented for the June performance 
period quality measure quarterly reports in the FY 2020 SNF PPS final 
rule.
    Response: We thank the commenters for their support and agree that 
this policy aligns with the 30-day Phase Two Review and Correction 
deadline under the Program. As stated above in the proposal, SNFs would 
have 30 days following issuance of the baseline period quality measure 
quarterly 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.
    Comment: A commenter did not support the proposed 30-day Phase One 
Review and Correction deadline for baseline period quality measure 
quarterly reports and stated that the time for review and corrections 
of these data should be 60-90 days. The commenter was concerned that 
the 30-day timeframe is not a long enough time period for many 
facilities to review their data for accuracy and submit correction 
requests to CMS as necessary.
    Response: Our intention with this proposal was to align all Review 
and Correction deadlines within the SNF VBP Program and specifically to 
set all Review and Correction deadlines to 30 days following the date 
we provide the applicable report. The deadline for Review and 
Correction submissions for baseline period quality measure quarterly 
reports currently differs from other Review and Correction deadlines 
within the SNF VBP Program; it currently extends to the March 31st 
following the date we provide these reports. All other Review and 
Correction deadlines for the SNF VBP Program are 30 days following the 
date we provide the applicable report. We believe aligning all Review 
and Correction deadlines within the Program would be clearer and easier 
for SNFs to track.
    Our proposal would not preclude SNFs from submitting correction 
requests prior to receipt of their quarterly report if they believe 
that an error has occurred, after reviewing data from quarterly reports 
delivered prior to the baseline period quality measure quarterly 
report. Under current program operations, a particular year of data is 
used first as a performance period and later as a baseline period, thus 
SNFs have the opportunity to familiarize themselves with the particular 
year of data when it is used for the performance period, prior to 
receiving baseline period quality measure quarterly reports that 
represent the same data collection period.
    We also believe that SNFs have accumulated extensive experience 
with the SNF VBP Program's quarterly report system, as well as the 
finalized Review and Corrections processes. We will continue to conduct 
outreach and education to ensure that SNFs are fully aware of the 
Program's operational deadlines, and we will be as clear as possible 
about the respective Review and Correction deadlines when delivering 
each quarterly report to SNFs.
    After consideration of the comments, we are finalizing our proposal 
to update the Phase One Review and Correction deadline and to codify 
that policy in our regulations by amending the ``Confidential feedback 
reports and public reporting'' at Sec.  413.338(e)(1) as proposed.

IV. Collection of Information Requirements

    This final rule does not impose any new or 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 OMB's Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 
3501 et seq.) implementing regulations. Since this rule does not impose 
any new or revised collection of information requirements or burden, 
the rule is not subject to the requirements of the PRA.

V. Economic Analyses

A. Regulatory Impact Analysis

1. Statement of Need
    This final rule updates 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 final rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA, 
September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA, March 
22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 
4, 1999), the Congressional Review Act (5 U.S.C. 804(2)), and Executive 
Order 13771 on Reducing Regulation and Controlling Regulatory Costs 
(January 30, 2017).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated an economically significant 
rule, under section 3(f)(1) of Executive Order 12866. Accordingly, we 
have prepared a regulatory impact analysis (RIA) as further discussed 
below. Also, the rule has been reviewed by OMB.
3. Overall Impacts
    This rule updates 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 $750 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 reduced by the MFP

[[Page 47628]]

adjustment to determine the payment rates for FY 2021. The impact to 
Medicare is included in the total column of Table 16. In finalizing the 
SNF PPS rates for FY 2021, we are finalizing a number of standard 
annual revisions and clarifications mentioned elsewhere in this final 
rule (for example, the update to the wage and market basket indexes 
used for adjusting the federal rates).
    The annual update in this rule will 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 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 on the wage index of 
adopting the revised OMB delineations, discussed in section III.D.1.a. 
of this final 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 2.2 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 2.2 
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 changes in this final rule, rural providers will 
experience a 2.4 percent increase in FY 2021 total payments.

[[Page 47629]]

[GRAPHIC] [TIFF OMITTED] TR05AU20.014

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 47630]]

[GRAPHIC] [TIFF OMITTED] TR05AU20.015

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 $750 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 
provisions contained in this final rule, such as the adoption of 
revised OMB delineations and cap on wage index decreases discussed in 
section III.D.1. of this final rule, we discuss any alternatives 
considered within those sections.

[[Page 47631]]

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 final rule 
for FY 2021. 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 final 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] TR05AU20.016

8. Conclusion
    This rule updates 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 $750 million, or 2.2 percent, 
compared with those in FY 2020. We estimate that in FY 2021, SNFs in 
urban and rural areas will experience, on average, a 2.2 percent 
increase and 2.4 percent increase, respectively, in estimated payments 
compared with FY 2020. Providers in the urban Middle Atlantic region 
will experience the largest estimated increase in payments of 
approximately 3.2 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 updates 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 aggregate impact for FY 2021 will be an increase of $750 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 
will experience a net increase in payments, we note that some 
individual providers within the same region or group may experience 
different impacts on payments than others due to the distributional 
impact of the FY 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 2.2 percent for FY 
2021. As the overall impact on the industry as a whole, and thus on 
small entities

[[Page 47632]]

specifically, is less than the 3 to 5 percent threshold discussed 
previously, the Secretary has determined that this final rule will not 
have a significant impact on a substantial number of small entities for 
FY 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 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of an MSA and has fewer 
than 100 beds. This final rule will affect small rural hospitals that: 
(1) Furnish SNF services under a swing-bed agreement or (2) have a 
hospital-based SNF. We anticipate that the impact on small rural 
hospitals will be 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 final 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 2.2 percent. As the 
overall impact on the industry as a whole is less than the 3 to 5 
percent threshold discussed above, the Secretary has determined that 
this final rule will not have a significant impact on a substantial 
number of small rural hospitals for FY 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 final rule will impose no 
mandates on state, local, or tribal governments or on the private 
sector.

D. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a 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 final rule will 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 final 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 final regulation is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and has been transmitted to the Congress 
and the Comptroller General for review.

G. Regulatory Review Costs

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this final rule, we 
should estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of entities 
that will review the rule, we assume that the total number of unique 
commenters on this year's proposed rule will be the number of reviewers 
of this year's final rule. We acknowledge that this assumption may 
understate or overstate the costs of reviewing this rule. It is 
possible that not all commenters reviewed this year's proposed rule in 
detail, and it is also possible that some reviewers chose not to 
comment on the proposed rule. For these reasons, we thought that the 
number of commenters on the proposed rule is a fair estimate of the 
number of reviewers of this final rule.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of 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 $110.74 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 $442.96 (4 hours x $110.74). 
Therefore, we estimate that the total cost of reviewing this regulation 
is $20,819.12 ($442.96 x 47 reviewers).
    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 409

    Health facilities, Medicare.

42 CFR Part 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 amends 42 CFR chapter IV as set forth below:

PART 409--HOSPITAL INSURANCE BENEFITS

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

    Authority:  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.

[[Page 47633]]

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: July 23, 2020.
Seema Verma
Administrator, Centers for Medicare & Medicaid Services.
    Dated: July 29, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-16900 Filed 7-31-20; 4:15 pm]
BILLING CODE 4120-01-P