[Federal Register Volume 87, Number 244 (Wednesday, December 21, 2022)]
[Proposed Rules]
[Pages 78038-78041]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-27436]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 51

RIN 2900-AR62


Payments Under State Home Care Agreements for Nursing Home Care

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The Department of Veterans Affairs proposes to amend its State 
home per diem regulation to provide a new formula for calculating the 
prevailing rate VA would pay a State home that enters into a State home 
care agreement to provide nursing home care to eligible veterans.

DATES: Comments must be received on or before February 21, 2023.

ADDRESSES: Comments must be submitted through www.regulations.gov. 
Except as provided below, comments received before the close of the 
comment period will be available at www.regulations.gov for public 
viewing, inspection, or copying, including any personally identifiable 
or confidential business information that is included in a comment. We 
post the comments received before the close of the comment period on 
the following website as soon as possible after they have been 
received: https://www.regulations.gov. VA will not post on 
Regulations.gov public comments that make threats to individuals or 
institutions or suggest that the commenter will take actions to harm 
the individual. VA encourages individuals not to submit duplicative 
comments. We will post acceptable comments from multiple unique 
commenters even if the content is identical or nearly identical to 
other comments. Any public comment received after the comment period's 
closing date is considered late and will not be considered in the final 
rulemaking.

FOR FURTHER INFORMATION CONTACT: Lisa Minor, National Director, 
Facilities Based Care, Geriatrics and Extended Care, 12GEC, Veterans 
Health Administration, Department of Veterans Affairs, 810 Vermont 
Avenue NW, Washington, DC 20420, (202) 632-8320. (This is not a toll-
free number.)

SUPPLEMENTARY INFORMATION:

I. Background

    The State homes program is the largest provider of long-term care 
for our Nation's veterans with more than 162 State homes across all 50 
states and Puerto Rico, totaling over 30,000 beds. They provide skilled 
nursing care, domiciliary care, and adult day health care (ADHC) to 
both veterans and non-veterans. Each State home is owned, operated, and 
managed by each State's government. In order to qualify for VA per diem 
payments, a State home facility must be formally recognized and 
certified by VA as meeting the requirements and standards (e.g., 
quality of life, quality of care, physical environment, etc.) necessary 
to receive such payments. After certification, VA reviews each State 
home annually to ensure continued compliance with VA's requirements and 
standards.
    As it pertains to nursing home care, VA pays State homes a per diem 
for each eligible veteran who receives nursing home care from a State 
home. There are two types of per diem rates that VA may pay a State 
home for providing nursing home care: a basic rate for veterans who 
meet the State nursing home per diem eligibility criteria or a 
prevailing rate for certain veterans with service-connected 
disabilities for whom the State provides nursing home care pursuant to 
a State home care agreement (SHCA). This rulemaking proposes changes 
that would affect the prevailing rate for nursing home care, not the 
basic rate.

II. Authority

    VA has authority to pay State homes for providing nursing home care 
to

[[Page 78039]]

eligible veterans under title 38 of the United States Code (U.S.C.), 
sections 1741 through 1745. Section 1745(a) sets forth VA's ability to 
enter into contracts or agreements with State homes to pay for nursing 
home care provided to eligible veterans within such homes. Section 
1745(a)(2) further states that the payments by VA to State homes under 
such contracts or agreements shall be based on a formula, developed by 
the Secretary in consultation with the State home, to adequately 
reimburse the State home for the care.
    Current Sec.  51.41 of title 38 of the Code of Federal Regulations 
(CFR) implements VA's authority under section 1745 to enter into 
contracts or agreements with State homes for nursing home care provided 
to eligible veterans. Paragraph (a) provides that VA and State homes 
may enter into both contracts and agreements, but each veteran's care 
will be paid through only one of these two instruments. We are not 
proposing any changes to paragraph (a) in this rulemaking. Paragraph 
(b) addresses payment to State homes by VA when the State home provides 
care under a contract. We are not proposing any changes to paragraph 
(b) in this rulemaking. Paragraph (c) addresses payment to State homes 
by VA when the State home provides care under a SHCA. Specifically, 
paragraph (c) provides the formula for calculating the prevailing rate. 
We are proposing changes to paragraph (c) in this rulemaking by:
     Listing the current steps used to calculate the prevailing 
rate in subparagraphs and labeling them.
     Establishing a baseline fiscal year from the current 
prevailing rate and the Market Basket rate.
     Adding an additional step of applying the Market Basket 
rate to track with increased costs in a new subparagraph.
     Revising the note.
     Making a few technical corrections (i.e., grammatic 
changes).

III. Current Sec.  51.41(c)(1): Formula Used To Calculate Prevailing 
Rates

    Currently, the prevailing rate is specific to each State home and 
is published each year on VA's website. Veterans Affairs, Geriatrics 
and Extended Care, https://www.va.gov/geriatrics/pages/State_Veterans_Home_Program_per_diem.asp, last updated October 6, 2022. 
The prevailing rate is based on Centers for Medicare and Medicaid 
Services (CMS) case-mix levels. A case-mix is a classification system; 
the distribution of patients into categories reflecting differences in 
severity of illness or resource consumption. Centers for Medicare and 
Medicaid Services, Glossary, https://www.cms.gov/apps/glossary/default.asp?Letter=C&Language=English, last modified May 14, 2006. VA 
began using two CMS case-mix data sets in 2013: Resource Utilization 
Groups (RUG), which applies to metropolitan areas, and Skilled Nursing 
Facility Prospective Payment System (SNF-PPS), which applies to rural 
areas. See 77 FR 72738 (December 6, 2012).
    Current Sec.  51.41(c)(1) outlines the formula for calculating 
payments. The first step is to determine whether the RUG or SNF-PPS 
case-mix level applies. The next step is to compute the daily rate for 
each State home by following this formula:
     Multiply the labor component by the State home wage index 
for each of the applicable case-mix levels.
     Add to that amount the non-labor component.
     Divide the sum of the results of these calculations by the 
number of applicable case-mix levels.
     Add to this quotient the amount based on the CMS payment 
schedule for physician services. The amount for physician services, 
based on information published by CMS, is the average hourly rate for 
all physicians, with the rate modified by the applicable urban or rural 
geographic index for physician work, then multiplied by 12, then 
divided by the number of days in the year.
    The current note to Sec.  51.41(c)(1) further explains, in 
pertinent part, that the amount calculated under this formula reflects 
the prevailing rate payable in the geographic area in which the State 
home is located for nursing home care furnished in a non-VA nursing 
home.

IV. Changes to the CMS Case-Mix Classification System

    In July 2018, CMS finalized a new case-mix classification system, 
the Patient Driven Payment Model (PDPM), which replaced the RUG and 
SNF-PPS case-mix classification systems. It became effective on October 
1, 2019. Centers for Medicare and Medicaid Services, Patient Driven 
Payment Model Overview, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM, last modified July 29, 2022. As a result 
of changes by CMS to their case-mix classification systems (RUG and 
SNF-PPS), VA is now revising its payment formula in Sec.  51.41(c)(1).
    Consistent with the requirement in 38 U.S.C. 1745(a)(2) to consult 
with State homes in developing the payment formula for nursing home 
care provided through SHCAs, VA consulted with the National Association 
of State Veterans Homes (NASVH) in June of 2019 on whether VA should 
adopt CMS's PDPM formula, or if not, what formula should be utilized. 
VA, (2019), Prevailing Rate Consultation State Home Per Diem (SHPD). 
Denver, CO. VA and NASVH agreed that it would not be appropriate to use 
the PDPM formula. Primarily, VA will not adopt the PDPM formula because 
this formula is focused on incentivizing providers to take on new 
patients, which is not an issue VA faces with State homes that provide 
nursing home care. An additional reason is that the PDPM model is 
specific to the needs of CMS facilities, rather than State homes. For 
example, under Medicare, CMS only pays for the first 100 days of 
skilled nursing home care. After which, the patient's care must be paid 
for by another source (i.e., private, insurance, Medicaid), or the 
patient is discharged. This does not apply to State homes. In many 
cases, State homes provide nursing home care to our veterans for the 
remainder of their lives.
    Further, 31 percent of the State homes that provide nursing home 
care to eligible veterans are not subject to the CMS PDPM formula as 
they are not certified by CMS and do not receive CMS payments. After 
consultation with NASVH, VA determined to instead propose revising the 
current formula as explained further below.

V. Changes to the Prevailing Rate

    We propose to keep the current formula described in Sec.  
51.41(c)(1) to create a baseline rate and then add, at the end, a 
provision for using the CMS Skilled Nursing Facilities (SNF) Market 
Basket increase to account for annual increases that will reflect price 
inflation facing providers in the provision of medical services. The 
CMS SNF Market Basket increase rates are published in the Federal 
Register on an annual basis. In 2023, the CMS SNF Market Basket rate 
increase was 5.1% percent. See 87 FR 47502 (August 3, 2022).
    The CMS SNF Market Basket is a fixed-weight index. Generally, a 
market basket is a group of products designed to track the performance 
of a specific market segment and determine inflation levels. Thus, the 
CMS SNF Market Basket increase measures the price changes of a 
permanent mix of goods and services used by nursing homes between two 
set dates. They are used to update payments and cost limits in the 
various CMS payment systems and reflect price inflation facing 
providers in the provision of medical services. Centers for Medicare 
and Medicaid

[[Page 78040]]

Services, Market Basket Definitions and General Information, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/Downloads/info.pdf.
    VA believes that the CMS SNF Market Basket rate would more 
accurately reflect actual costs than would an alternate method such as 
a component of the Consumer Price Index (CPI). The CMS SNF Market 
Basket rate is adjusted annually based on price changes in goods and 
services specifically identified as being utilized in nursing home 
care, while other measures such as the CPI reflect price changes in 
goods and services in the general medical services field.

VI. Rates for Fiscal Year (FY) 2020 Through 2023

    CMS's new payment model PDPM became effective in FY 2020. 
Therefore, we established an agreement with CMS to obtain average 
market basket data needed to continue providing an annual per diem rate 
until this rulemaking is finalized. Thus, for FY 2020 through 2023, we 
have and will continue to use the average market basket data provided 
by CMS to calculate the per diem rate that we are currently using.

VII. Rates for FY 2024

    We plan to use our new formula in FY 2024. In determining the 
baseline for this formula, we would use the rate for FY 2023 because we 
anticipate this rulemaking to be finalized and effective on or before 
October 1, 2023, which is the first day of FY 2024. If that changes due 
to delays in the rulemaking process, we will ensure that we receive the 
necessary CMS data to continue our current formula until the rule 
becomes effective, and we will ensure the correct FY used for the 
baseline is appropriately and accurately referenced in the amended 
regulation.

VIII. Regulation Text Changes to Sec.  51.41(c)

    First, we propose a nonsubstantive revision of changing the title 
of Sec.  51.41(c) from ``Payments under State home care agreements.'' 
to ``Payments for nursing home care under State home care agreements.'' 
This change clarifies that subparagraph (c) only applies to State 
nursing homes.
    We also propose to revise Sec.  51.41(c) by making the term 
``agreements'' in State home care agreements singular to ensure 
consistency with 38 U.S.C. 1745, and with revisions of 38 CFR part 51. 
83 FR 61250 (November 28, 2018). Thus, we would revise the sentence 
that currently states, ``State home care agreements under this section 
will provide for payments at the rate determined by the following 
formula'' to instead state ``A State home care agreement for nursing 
home care under this section will provide for payments at the rate 
determined by the following formula.''
    We also propose to reorganize Sec.  51.41(c)(1) by breaking apart 
the steps of the formula and putting them into a list for easier 
readability. The steps will be listed in proposed Sec.  51.41(c)(1)(i) 
through (ii).
    Section 51.41(c)(1)(i) would require that one would determine which 
case-mix applies, the RUG or SNF-PPS. We also propose to change the 
name of the case-mix level used for rural areas in Sec.  
51.41(c)(1)(i). Currently, it states Skilled Nursing Prospective 
Payment System. We propose to change it to Skilled Nursing Facility 
Prospective Payment System. The word ``facility'' was evidently left 
off through an inadvertent oversight since the rulemaking that placed 
this name in the regulation did not explain an intended deviation from 
the proper title. By making this correction, the name will align with 
the name that CMS uses.
    Proposed Sec.  51.41(c)(1)(ii) would require that one compute the 
daily rate for each State home, using the formula described above. The 
formula would be listed in proposed paragraphs (c)(1)(ii)(A) through 
(E). As previously explained, paragraphs (c)(1)(ii)(A) through (D) are 
substantively identical to the current formula, but merely listed out 
for ease of readability.
    Proposed paragraph (c)(1)(ii)(E) would include the new calculation 
to the formula and would provide that one would multiply the current 
per diem baseline by the CMS SNF Market Basket increase in effect as of 
the fiscal year in which the final rule becomes effective to obtain the 
reference total per diem baseline rate from which subsequent fiscal 
year per diem rates will be calculated. For calculation of SNF per diem 
rates for subsequent fiscal years VA will apply the CMS SNF Market 
Basket increase to the total per diem baseline each year.
    Lastly, we propose to amend the note in Sec.  51.41(c) by 
clarifying that the first sentence is applicable to State homes. 
Additionally, we propose to add a sentence stating that the amount 
calculated under the new formula applies to both new and existing 
facilities with SHCAs.

IX. Technical and Grammatic Corrections to Part 51

    We also propose to correct technical errors in 38 CFR 51.70 and 
51.300. Section 51.70(n) erroneously refers to Sec.  51.110(d)(2)(ii); 
however, the reference should be to Sec.  51.110(e)(2)(ii). Therefore, 
we propose to revise Sec.  51.70(n) by removing ``51.110(d)(2)(ii)'' 
and in its place inserting ``51.110(e)(2)(ii)''.
    Section 51.110(d) refers to Version 2.0 of the Centers for Medicare 
and Medicaid Services (CMS) Resident Assessment Instrument Minimum Data 
Set. The reference should be Version 3.0 as noted in Sec.  
51.110(b)(1). The prior amendment stated the change and explained the 
rationale. 77 FR 26183 (May 3, 2012). We propose to correct this 
inadvertent oversight by changing ``Version 2.0'' to ``Version 3.0'' in 
Sec.  51.110(d).
    Section 51.300(d)(3) refers to paragraphs (a)(2)(i) through (vii) 
of this section. However, the reference should be to paragraphs 
(d)(2)(i) through (vii), which lists the circumstances requiring the 
documentation to which paragraph (d)(3) refers. We propose to revise 
Sec.  51.300(d)(3) by removing ``(a)(2)(i) through (vii)'', and in its 
place inserting ``(d)(2)(i) through (vii)''.

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess the 
costs and benefits of available regulatory alternatives and, when 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, and other advantages; distributive impacts; 
and equity). Executive Order 13563 (Improving Regulation and Regulatory 
Review) emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
The Office of Information and Regulatory Affairs has determined that 
this rule is not a significant regulatory action under Executive Order 
12866.
    VA's impact analysis can be found as a supporting document at 
https://www.regulations.gov, usually within 48 hours after the 
rulemaking document is published. Additionally, a copy of the 
rulemaking and its Regulatory Impact Analysis (RIA) are available on 
VA's website at https://www.va.gov/orpm/, by following the link for 
``VA Regulations Published From FY 2004 Through Fiscal Year to Date.''

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed rule would not 
have a significant economic impact on a substantial number of small 
entities as they are defined in the Regulatory

[[Page 78041]]

Flexibility Act (5 U.S.C. 601-612). The rulemaking would revise the 
formula VA uses to calculate the per diem it pays State homes for 
nursing home care of certain veterans. The effect of the rule would be 
to change VA payments to State homes. Therefore, this rule only affects 
veterans and State homes.
    All State homes are owned, operated, and managed by State 
governments, except for a small number operated by entities under 
contract with State governments. Neither these contractors nor State 
governments are small entities as defined in 5 U.S.C. 601. State homes 
subject to this proposed rulemaking are State homes that are currently 
under a State home care agreement, those that enter into a new 
agreement, and any facility that begins an agreement for the first 
time. The effect of the rule would impose no direct costs on the State 
homes. Therefore, pursuant to 5 U.S.C. 605(b), the initial and final 
regulatory flexibility analysis requirements of 5 U.S.C. 603 and 604 do 
not apply.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year. This proposed rule would have no such 
effect on State, local, or tribal governments, or on the private 
sector.

Paperwork Reduction Act

    Although this action relates to provisions constituting collections 
of information at 38 CFR 51.41, under the provisions of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501-3521), no new or proposed revised 
collections of information would be associated with this proposed rule. 
The information collection requirements for Sec.  51.41(e) are 
currently approved by the Office of Management and Budget (OMB) and 
have been assigned OMB control numbers 2900-0091 and 2900-0160.

List of Subjects in 38 CFR Part 51

    Administrative practice and procedure; Claims; Adult Day Health 
Care; Domiciliary, Dental health; Government contracts; Grant 
programs--health; Grant programs--veterans; Health care; Health 
facilities; Health professions; Health records; Mental health programs; 
Nursing homes; Reporting and recordkeeping requirements; Travel and 
transportation expenses; Veterans.

Signing Authority

    Denis McDonough, Secretary of Veterans Affairs, approved this 
document on December 13, 2022, and authorized the undersigned to sign 
and submit the document to the Office of the Federal Register for 
publication electronically as an official document of the Department of 
Veterans Affairs.

Consuela Benjamin,
Regulation Development Coordinator Office of Regulation Policy & 
Management, Office of General Counsel, Department of Veterans Affairs.

    For the reasons described in the preamble, Department of Veterans 
Affairs proposes to amend 38 CFR part 51 as follows:

PART 51--PER DIEM FOR NURSING HOME, DOMICILIARY, OR ADULT DAY 
HEALTH CARE OF VETERANS IN STATE HOMES

0
1. The authority citation for part 51 continues to read as follows:

    Authority:  38 U.S.C. 101, 501, 1710, 1720, 1741-1743, 1745, and 
as follows.
* * * * *
0
2. In Sec.  51.41 revise the introductory text of paragraph (c) and 
paragraph (c)(1) and the Note under paragraph (c)(1) to read as 
follows:


Sec.  51.41  Contracts and State home care agreements for certain 
veterans with service-connected disabilities.

* * * * *
    (c) Payments for nursing home care under State home care 
agreements.
    (1) State homes must sign an agreement to receive payment from VA 
for providing care to certain eligible veterans under a State home care 
agreement. A State home care agreement for nursing home care under this 
section will provide for payments at the rate determined by the 
following formula.
    (i) Determine whether the Resource Utilization Groups (RUG) or 
Skilled Nursing Facility Prospective Payment System (SNF-PPS) applies.
    For State Homes in a metropolitan statistical area, use the 
published fiscal year Centers for Medicare and Medicaid Services (CMS) 
RUG case-mix levels for the applicable metropolitan statistical area.
    For State Homes in a rural area, use the published fiscal year CMS 
SNF-PPS case-mix levels for the applicable rural area.
    (ii) Compute the daily rate for each State home, using the 
following formula in the order described:
    (A) Multiply the labor component by the State home wage index for 
each of the applicable case-mix levels.
    (B) Add to that amount the non-labor component.
    (C) Divide the sum of the results of these calculations by the 
number of applicable case-mix levels.
    (D) Add to this quotient the amount based on the CMS payment 
schedule for physician services. The amount for physician services, 
based on information published by CMS, is the average hourly rate for 
all physicians, with the rate modified by the applicable urban or rural 
geographic index for physician work, then multiplied by 12, then 
divided by the number of days in the year. The resulting sum is the per 
diem baseline rate for the State home.
    (E) Multiply the per diem baseline rate from the previous year by 
the CMS Skilled Nursing Facilities (SNF) Market Basket increase in 
effect as of [Date 30 days after date of publication of Final Rule in 
the Federal Register]. The sum establishes the reference total per diem 
baseline rate from which subsequent fiscal year per diem rates will be 
calculated. For calculation of SNF per diem rates for subsequent fiscal 
years VA will apply the CMS SNF Market Basket increase to the total per 
diem each year.

    Note to paragraph (c)(1): The amount calculated under this 
formula reflects the prevailing rate payable in the geographic area 
in which the State home is located for nursing home care furnished 
in a State home. The amount calculated under this formula applies to 
both new and existing facilities with State home care agreements. 
Further, the formula for establishing these rates includes CMS 
information that is published in the Federal Register every year and 
is effective beginning October 1 for the entire fiscal year. 
Accordingly, VA will adjust the rates annually.

* * * * *


Sec.  51.70  [Amended]

0
3. In Sec.  51.70(n), removing the term ``51.110(d)(2)(ii)'', and 
adding in its place, the term ``51.110(e)(2)(ii)''.


Sec.  51.110  [Amended]

0
4. In Sec.  51.110(d), removing the term ``Version 2.0'', and adding in 
its place, the term ``Version 3.0''.


Sec.  51.300  [Amended]

0
5. In Sec.  51.300(d)(3), removing the term ``(a)(2)(i) through 
(vii)'', and adding in its place, the term ``(d)(2)(i) through (vii)''.

[FR Doc. 2022-27436 Filed 12-20-22; 8:45 am]
BILLING CODE 8320-01-P