Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities for FY 2012, 48486-48562 [2011-19544]
Download as PDF
48486
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
42 CFR Part 413
[CMS–1351–F]
RIN 0938–AQ29
Medicare Program; Prospective
Payment System and Consolidated
Billing for Skilled Nursing Facilities for
FY 2012
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Final rule.
AGENCY:
This final rule updates the
payment rates used under the
prospective payment system for skilled
nursing facilities (SNFs) for fiscal year
2012. In addition, it recalibrates the
case-mix indexes so that they more
accurately reflect parity in expenditures
between RUG–IV and the previous casemix classification system. It also
includes a discussion of a Non-Therapy
Ancillary component currently under
development within CMS. In addition,
this final rule discusses the impact of
certain provisions of the Affordable Care
Act, and reduces the SNF market basket
percentage by the multi-factor
productivity adjustment. This rule also
implements certain changes relating to
the payment of group therapy services
and implements new resident
assessment policies. Finally, this rule
announces that the proposed provisions
regarding the ownership disclosure
requirements set forth in section 6101 of
the Affordable Care Act will be finalized
at a later date.
DATES: Effective Date: This final rule is
effective on October 1, 2011.
FOR FURTHER INFORMATION CONTACT:
Penny Gershman, (410) 786–6643 (for
information related to clinical issues).
John Kane, (410) 786–0557 (for
information related to the
development of the payment rates and
case-mix indexes).
Kia Sidbury, (410) 786–7816 (for
information related to the wage
index).
Bill Ullman, (410) 786–5667 (for
information related to level of care
determinations, consolidated billing,
and general information).
SUPPLEMENTARY INFORMATION:
srobinson on DSK4SPTVN1PROD with RULES3
SUMMARY:
Table of Contents
I. Background
A. Current System for Payment of SNF
Services Under Part A of the Medicare
Program
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
B. Requirements of the Balanced Budget
Act of 1997 (BBA) for Updating the
Prospective Payment System for Skilled
Nursing Facilities
C. The Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of 1999
(BBRA)
D. The Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection
Act of 2000 (BIPA)
E. The Medicare Prescription Drug,
Improvement, and Modernization Act of
2003 (MMA)
F. The Affordable Care Act
G. Skilled Nursing Facility Prospective
Payment—General Overview
1. Payment Provisions—Federal Rate
2. FY 2012 Rate Updates Using the Skilled
Nursing Facility Market Basket Index
II. Summary of the Provisions of the FY 2012
Proposed Rule
III. Analysis of and Responses to Public
Comments on the FY 2012 Proposed
Rule
A. General Comments on the FY 2012
Proposed Rule
B. FY 2012 Annual Update of Payment
Rates under the Prospective Payment
System for Skilled Nursing Facilities
1. Federal Prospective Payment System
a. Costs and Services Covered by the
Federal Rates
b. Methodology Used for the Calculation of
the Federal Rates
2. Case-Mix Adjustments
a. Background
b. Development of Case-Mix Indexes
3. Wage Index Adjustment to Federal Rates
4. Updates to Federal Rates
5. Relationship of RUG–IV Case-Mix
Classification System to Existing Skilled
Nursing Facility Level-of-Care Criteria
6. Example of Computation of Adjusted
PPS Rates and SNF Payment
C. Resource Utilization Groups, Version 4
(RUG–IV)
1. Prospective Payment for SNF NonTherapy Ancillary Costs
D. Ongoing Initiatives Under the
Affordable Care Act
1. Value-Based Purchasing (Section 3006)
2. Payment Adjustment for HospitalAcquired Conditions (Section 3008)
3. Nursing Home Transparency and
Improvement (Section 6104)
E. Other Issues
1. Required Disclosure of Ownership and
Additional Disclosable Parties
Information (Section 6101)
2. Therapy Student Supervision
3. Group Therapy and Therapy
Documentation
4. Proposed Changes to the MDS 3.0
Assessment Schedule and Other
Medicare-Required Assessments
5. Discussion of Possible Future Initiatives
F. The Skilled Nursing Facility Market
Basket Index
1. Use of the Skilled Nursing Facility
Market Basket Percentage
2. Market Basket Forecast Error Adjustment
3. Multifactor Productivity Adjustment
a. Incorporating the Multifactor
Productivity Adjustment Into the Market
Basket Update
b. Federal Rate Update Factor
PO 00000
Frm 00002
Fmt 4701
Sfmt 4700
G. Consolidated Billing
H. Application of the SNF PPS to SNF
Services Furnished by Swing-Bed
Hospitals
IV. Analysis of and Responses to Public
Comments on the FY 2011 Update
Notice With Comment
V. Provisions of the Final Rule
VI. Collection of Information Requirements
VII. Economic Analyses
A. Regulatory Impact Analysis
1. Introduction
2. Statement of Need
3. Overall Impacts
4. Detailed Economic Analysis
5. Alternatives Considered
6. Accounting Statement
7. Conclusion
B. Regulatory Flexibility Act Analysis
C. Unfunded Mandates Reform Act
Analysis
D. Federalism Analysis
Regulation Text
Addendum: FY 2012 CBSA-Based Wage
Index Tables (Tables A & B)
Acronyms
In addition, because of the many
terms to which we refer by acronym in
this final rule, we are listing these
acronyms and their corresponding terms
in alphabetical order below:
ABN Advance Beneficiary Notice
AIDS Acquired Immune Deficiency
Syndrome
ARD Assessment Reference Date
ASAP Assessment Submission and
Processing
BBA Balanced Budget Act of 1997, Public
Law 105–33
BBRA Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of 1999,
Public Law 106–113
BIMS Brief Interview for Mental Status
BIPA Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act
of 2000, Public Law 106–554
CAH Critical Access Hospital
CBSA Core-Based Statistical Area
CCR Cost-to-Charge Ratio
CFR Code of Federal Regulations
CMI Case-Mix Index
CMS Centers for Medicare & Medicaid
Services
COT Change of Therapy
EOT End of Therapy
EOT—R End of Therapy—Resumption
FQHC Federally Qualified Health Center
FR Federal Register
FY Fiscal Year
GAO Government Accountability Office
HAC Hospital-Acquired Condition
HCC Hierarchical Condition Category
HCPCS Healthcare Common Procedure
Coding System
HIPAA Health Insurance Portability and
Accountability Act of 1996
HR–III Hybrid Resource Utilization Groups,
Version 3
IGI IHS (Information Handling Services)
Global Insight, Inc.
MDS Minimum Data Set
MFP Multifactor Productivity
MIPPA Medicare Improvements for Patients
and Providers Act of 2008, Public Law
110–275
E:\FR\FM\08AUR3.SGM
08AUR3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
srobinson on DSK4SPTVN1PROD with RULES3
MMA Medicare Prescription Drug,
Improvement, and Modernization Act of
2003, Public Law 108–173
MMSEA Medicare, Medicaid, and SCHIP
Extension Act of 2007, Public Law 110–173
MPAF Medicare PPS Assessment Form
MSA Metropolitan Statistical Area
NTA Non-Therapy Ancillary
OMB Office of Management and Budget
OMRA Other Medicare-Required
Assessment
ONTA Other Non-Therapy Ancillary
OSCAR Online Survey Certification and
Reporting System
PAC–PRD Post Acute Care Payment Reform
Demonstration
PECOS Medicare Provider Enrollment,
Chain, and Ownership System
PPS Prospective Payment System
QIES Quality Improvement and Evaluation
System
RAI Resident Assessment Instrument
RAVEN Resident Assessment Validation
Entry
RFA Regulatory Flexibility Act, Public Law
96–354
RNP Routine NTA Bundled Payment
RHC Rural Health Clinic
RIA Regulatory Impact Analysis
RTM Reimbursable Therapy Minutes
RUG–III Resource Utilization Groups,
Version 3
RUG–IV Resource Utilization Groups,
Version 4
RUG–53 Refined 53—Group RUG–III CaseMix Classification System
SCHIP State Children’s Health Insurance
Program
SCPA Significant Correction of a Prior
Assessment
SCSA Significant Change in Status
Assessment
SNF Skilled Nursing Facility
STM Staff Time Measurement
STRIVE Staff Time and Resource Intensity
Verification
TNP Tiered Non-Routine NTA Payment
UMRA Unfunded Mandates Reform Act,
Public Law 104–4
I. Background
In the May 6, 2011 Federal Register,
we published a proposed rule (76 FR
26364) (hereafter referred to as the FY
2012 proposed rule), setting forth
potential updates to the payment rates
used under the prospective payment
system (PPS) for skilled nursing
facilities (SNFs), for fiscal year (FY)
2012. Annual updates to the PPS rates
for (SNFs) are required by section
1888(e) of the Social Security Act (the
Act), as added by section 4432 of the
Balanced Budget Act of 1997 (BBA, Pub.
L. 105–33, enacted on August 5, 1997),
and amended by subsequent legislation
as discussed elsewhere in this preamble.
Our most recent annual update occurred
in an update notice with comment
period (75 FR 42886, July 22, 2010) that
set forth updates to the SNF PPS
payment rates for fiscal year (FY) 2011.
We subsequently published a correction
notice (75 FR 55801, September 14,
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
2010) for those payment rate updates.
We respond to public comments which
relate to the FY 2011 update notice,
along with those relating to the FY 2012
proposed rule, in this final rule.
A. Current System for Payment of
Skilled Nursing Facility Services Under
Part A of the Medicare Program
Section 4432 of the BBA amended
section 1888 of the Act to provide for
the implementation of a per diem PPS
for SNFs, covering all costs (routine,
ancillary, and capital-related) of covered
SNF services furnished to beneficiaries
under Part A of the Medicare program,
effective for cost reporting periods
beginning on or after July 1, 1998. In
this final rule, we are updating the per
diem payment rates for SNFs for FY
2012. Major elements of the SNF PPS
include:
• Rates. As discussed in section I.G.1.
of this final rule, we established per
diem Federal rates for urban and rural
areas using allowable costs from FY
1995 cost reports. These rates also
included a ‘‘Part B add-on’’ (an estimate
of the cost of those services that, before
July 1, 1998, were paid under Part B but
furnished to Medicare beneficiaries in a
SNF during a Part A covered stay). We
adjust the rates annually using a SNF
market basket index, and we adjust
them by the hospital inpatient wage
index to account for geographic
variation in wages. We also apply a
case-mix adjustment to account for the
relative resource utilization of different
patient types. As further discussed in
section I.G.1. of this final rule, for FY
2012 this adjustment will utilize the
Resource Utilization Groups, version 4
(RUG–IV) case-mix classification, and
will use information obtained from the
required resident assessments using
version 3.0 of the Minimum Data Set
(MDS 3.0). (The information collection
burden associated with the resident
assessment is approved under OMB
Control Number 0938–0739.)
Additionally, as noted elsewhere in this
preamble, the payment rates at various
times have also reflected specific
legislative provisions for certain
temporary adjustments.
• Transition. Under sections
1888(e)(1)(A) and (e)(11) of the Act, the
SNF PPS included an initial, threephase transition that blended a facilityspecific rate (reflecting the individual
facility’s historical cost experience) with
the Federal case-mix adjusted rate. The
transition extended through the
facility’s first three 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
PO 00000
Frm 00003
Fmt 4701
Sfmt 4700
48487
facilities have been paid at the full
Federal rate effective with cost reporting
periods beginning in FY 2002. As we
now base payments entirely on the
adjusted Federal per diem rates, we no
longer include adjustment factors
related to facility-specific rates for the
coming fiscal year.
• Coverage. The establishment of the
SNF PPS did not change Medicare’s
fundamental requirements for SNF
coverage. However, because the casemix 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. As
further discussed in section III.B.5. of
this final rule, this approach includes an
administrative presumption that utilizes
a beneficiary’s initial classification in
one of the upper 52 RUGs of the 66group RUG–IV case-mix classification
system to assist in making certain SNF
level of care determinations. 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 (see section
III.B.5. of this final rule for a more
detailed discussion of the relationship
between the case-mix classification
system and SNF level of care
determinations).
• Consolidated Billing. The SNF PPS
includes a consolidated billing
provision that requires a SNF to submit
consolidated Medicare bills to its fiscal
intermediary or Medicare
Administrative Contractor for almost all
of the services that its residents receive
during the course of a covered Part A
stay. In addition, this provision places
with the SNF the Medicare billing
responsibility for physical therapy,
occupational therapy, and speechlanguage pathology services that the
resident receives during a noncovered
stay. The statute excludes a small list of
services from the consolidated billing
provision (primarily those of physicians
and certain other types of practitioners),
which remain separately billable under
Part B when furnished to a SNF’s Part
A resident. A more detailed discussion
of this provision appears in section III.G
of this final rule.
• Application of the SNF PPS to SNF
services furnished by swing-bed
hospitals. Section 1883 of the Act
permits certain small, rural hospitals to
enter into a Medicare swing-bed
agreement, under which the hospital
can use its beds to provide either acute
or SNF care, as needed. For critical
E:\FR\FM\08AUR3.SGM
08AUR3
48488
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
access hospitals (CAHs), Part A pays on
a reasonable cost basis for SNF services
furnished under a swing-bed agreement.
However, in accordance with section
1888(e)(7) of the Act, these 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. A more detailed
discussion of this provision appears in
section III.H. of this final rule.
srobinson on DSK4SPTVN1PROD with RULES3
B. Requirements of the Balanced Budget
Act of 1997 (BBA) for Updating the
Prospective Payment System for Skilled
Nursing Facilities
Section 1888(e)(4)(H) of the Act
requires that we provide for publication
annually in the Federal Register:
(1) The unadjusted Federal per diem
rates to be applied to days of covered
SNF services furnished during the
upcoming FY.
(2) The case-mix classification system
to be applied for these services during
the upcoming FY.
(3) 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 these required annual updates
to the Federal rates.
C. The Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of
1999 (BBRA)
There were several provisions in the
BBRA (Pub. L. 106–113, enacted on
November 29, 1999) that resulted in
adjustments to the SNF PPS. We
described these provisions in detail in
the SNF PPS final rule for FY 2001 (65
FR 46770, July 31, 2000). In particular,
section 101(a) of the BBRA provided for
a temporary 20 percent increase in the
per diem adjusted payment rates for 15
specified groups in the original, 44group Resource Utilization Groups,
version 3 (RUG–III) case-mix
classification system. In accordance
with section 101(c)(2) of the BBRA, this
temporary payment adjustment expired
on January 1, 2006, upon the
implementation of a refined, 53-group
version of the RUG–III system, RUG–53
(see section I.G.1. of this final rule). We
included further information on BBRA
provisions that affected the SNF PPS in
Program Memoranda A–99–53 and
A–99–61 (December 1999).
Also, section 103 of the BBRA
designated certain additional services
for exclusion from the consolidated
billing requirement, as discussed in
section III.G. of this final rule. Further,
for swing-bed hospitals with more than
49 (but less than 100) beds, section 408
of the BBRA provided for the repeal of
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
certain statutory restrictions on length
of stay and aggregate payment for
patient days, effective with the end of
the SNF PPS transition period described
in section 1888(e)(2)(E) of the Act. In the
final rule for FY 2002 (66 FR 39562, July
31, 2001), we made conforming changes
to the regulations at § 413.114(d),
effective for services furnished in cost
reporting periods beginning on or after
July 1, 2002, to reflect section 408 of the
BBRA.
D. The Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection
Act of 2000 (BIPA)
The BIPA (Pub. L. 106–554, enacted
December 21, 2000) also included
several provisions that resulted in
adjustments to the SNF PPS. We
described these provisions in detail in
the final rule for FY 2002 (66 FR 39562,
July 31, 2001). In particular:
• Section 203 of the BIPA exempted
CAH swing beds from the SNF PPS. We
included further information on this
provision in Program Memorandum A–
01–09 (Change Request #1509), issued
January 16, 2001, which is available
online at https://www.cms.gov/
transmittals/downloads/a0109.pdf.
• Section 311 of the BIPA revised the
statutory update formula for the SNF
market basket, and also directed us to
conduct a study of alternative case-mix
classification systems for the SNF PPS.
In 2006, we submitted a report to the
Congress on this study, which is
available online at https://www.cms.gov/
SNFPPS/Downloads/RC_2006_PCPPSSNF.pdf.
• Section 312 of the BIPA provided
for a temporary increase of 16.66
percent in the nursing component of the
case-mix adjusted Federal rate for
services furnished on or after April 1,
2001, and before October 1, 2002;
accordingly, this add-on is no longer in
effect. This section also directed the
Government Accountability Office
(GAO) to conduct an audit of SNF
nursing staff ratios and submit a report
to the Congress on whether the
temporary increase in the nursing
component should be continued. The
report (GAO–03–176), which GAO
issued in November 2002, is available
online at https://www.gao.gov/
new.items/d03176.pdf.
• Section 313 of the BIPA repealed
the consolidated billing requirement for
services (other than physical therapy,
occupational therapy, and speechlanguage pathology services) furnished
to SNF residents during noncovered
stays, effective January 1, 2001. (A more
detailed discussion of this provision
appears in section VII. of this final rule.)
PO 00000
Frm 00004
Fmt 4701
Sfmt 4700
• Section 314 of the BIPA corrected
an anomaly involving three of the RUGs
that section 101(a) of the BBRA had
designated to receive the temporary
payment adjustment discussed above in
section I.C. of this final rule. (As noted
previously, in accordance with section
101(c)(2) of the BBRA, this temporary
payment adjustment expired upon the
implementation of case-mix refinements
on January 1, 2006.)
• Section 315 of the BIPA authorized
us to establish a geographic
reclassification procedure that is
specific to SNFs, but only after
collecting the data necessary to establish
a SNF wage index that is based on wage
data from nursing homes. 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.
We included further information on
several of the BIPA provisions in
Program Memorandum A–01–08
(Change Request #1510), issued January
16, 2001, which is available online at
https://www.cms.gov/transmittals/
downloads/a0108.pdf.
E. The Medicare Prescription Drug,
Improvement, and Modernization Act of
2003 (MMA)
The MMA (Pub. L. 108–173, enacted
on December 8, 2003) included a
provision that resulted in a further
adjustment to the SNF PPS. Specifically,
section 511 of the MMA amended
section 1888(e)(12) of the Act, to
provide for a temporary increase of 128
percent in the PPS per diem payment
for any SNF residents with Acquired
Immune Deficiency Syndrome (AIDS),
effective with services furnished on or
after October 1, 2004. This special AIDS
add-on was to remain in effect until
‘‘* * * the Secretary certifies that there
is an appropriate adjustment in the case
mix * * * to compensate for the
increased costs associated with [such]
residents. * * *’’ The AIDS add-on is
also discussed in Program Transmittal
#160 (Change Request #3291), issued on
April 30, 2004, which is available
online at https://www.cms.gov/
transmittals/downloads/r160cp.pdf. In
the SNF PPS final rule for FY 2010 (74
FR 40288, August 11, 2009), we did not
address the certification of the AIDS
add-on in that final rule’s
implementation of the case-mix
refinements for RUG–IV, thus allowing
the temporary add-on payment created
by section 511 of the MMA to remain in
effect.
For the limited number of SNF
residents that qualify for the AIDS addon, implementation of this provision
E:\FR\FM\08AUR3.SGM
08AUR3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
srobinson on DSK4SPTVN1PROD with RULES3
results in a significant increase in
payment. For example, using FY 2009
data, we identified less than 3,500 SNF
residents with a diagnosis code of 042
(Human Immunodeficiency Virus (HIV)
Infection). For FY 2012, an urban
facility with a resident with AIDS in
RUG–IV group ‘‘HC2’’ would have a
case-mix adjusted payment of $401.48
(see Table 5) before the application of
the MMA adjustment. After an increase
of 128 percent, this urban facility would
receive a case-mix adjusted payment of
approximately $915.37.
In addition, section 410 of the MMA
contained a provision that excluded
from consolidated billing certain
services furnished to SNF residents by
rural health clinics (RHCs) and
Federally Qualified Health Centers
(FQHCs). (Further information on this
provision appears in section III.G. of
this final rule.)
F. The Affordable Care Act
On March 23, 2010, the Patient
Protection and Affordable Care Act,
Public Law 111–148, was enacted.
Following the enactment of Public Law
111–148, the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111–
152, enacted on March 30, 2010)
amended certain provisions of Public
Law 111–148 and certain sections of the
Social Security Act and, in certain
instances, included ‘‘freestanding’’
provisions (Pub. L. 111–148 and Pub. L.
111–152 are collectively referred to in
this final rule as ‘‘the Affordable Care
Act’’). Section 10325 of the Affordable
Care Act included a provision involving
the SNF PPS. Section 10325 postponed
the implementation of the RUG–IV casemix classification system published in
the FY 2010 SNF PPS final rule (74 FR
40288, August 11, 2009), requiring that
the Secretary not implement the RUG–
IV case-mix classification system before
October 1, 2011. Notwithstanding this
postponement of overall RUG–IV
implementation, section 10325 further
specified that the Secretary implement,
effective October 1 2010, the changes
related to concurrent therapy and the
look-back period that were finalized as
components of RUG–IV (see 74 FR
40315–19, 40322–24, August 11, 2009).
As we noted in the FY 2011 SNF PPS
Notice with Comment Period (75 FR
42889), implementing the particular
combination of RUG–III and RUG–IV
features specified in section 10325 of
the Affordable Care Act would require
developing a revised grouper, something
that could not be accomplished by that
provision’s effective date (October 1,
2010) without risking serious disruption
to providers, suppliers, and State
agencies. Accordingly, in the FY 2011
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
Notice with Comment Period (75 FR
42889), we announced our intention to
proceed on an interim basis with
implementation of the full RUG–IV
case-mix classification system as of
October 1, 2010, followed by a
retroactive claims adjustment, using a
hybrid RUG–III (HR–III) system
reflecting the Affordable Care Act
configuration, once we had developed a
revised grouper that could
accommodate it. In that Notice with
Comment period, we also invited public
comment specifically on our plans for
implementing section 10325 of the
Affordable Care Act in this manner.
However, section 202 of the Medicare
and Medicaid Extenders Act of 2010
(Pub. L. 111–309, enacted December 15,
2010) repealed section 10325 of the
Affordable Care Act. Therefore, we leave
in place the implementation of the full
RUG–IV system as of FY 2011, as
finalized in the FY 2010 SNF PPS final
rule (74 FR 40288). Moreover, as the
repeal of section 10325 of the Affordable
Care Act eliminates the need for a
subsequent transition to the HR–III
system, this renders moot any further
discussion of public comments that we
had invited on our planned
implementation of that transition. In
addition, we note that implementation
of version 3.0 of the Minimum Data Set
(MDS 3.0) has proceeded as originally
scheduled, with an effective date of
October 1, 2010. The MDS 3.0 RAI
Manual and MDS 3.0 Item Set are
published on the MDS 3.0 Training
Materials Web site, at https://
www.cms.gov/
NursingHomeQualityInits/
45_NHQIMDS30TrainingMaterials.asp.
We note that a parity adjustment was
applied to the RUG–53 nursing case-mix
weights when the RUG–III system was
initially refined in 2006, to ensure that
the implementation of the refinements
would not cause any change in overall
payment levels (70 FR 45031, August 4,
2005). A detailed discussion of the
parity adjustment in the specific context
of the RUG–IV payment rates appears in
the FY 2010 SNF PPS proposed rule (74
FR 22236–38, May 12, 2009) and final
rule (74 FR 40338–40339, August 11,
2009), in the FY 2011 Notice with
Comment Period (75 FR 42892–42893),
and in the FY 2012 proposed rule (76
FR 26370 through 26377).
Accordingly, as discussed above,
effective October 1, 2010, we
implemented and paid claims under the
RUG–IV system that was finalized in the
FY 2010 SNF PPS final rule. In section
III.D. of this final rule, we discuss
certain ongoing Affordable Care Act
initiatives that relate to SNFs, and in
section III.E.1, we discuss proposed
PO 00000
Frm 00005
Fmt 4701
Sfmt 4700
48489
revisions involving section 6101 of the
Affordable Care Act, regarding required
disclosure of ownership and additional
disclosable parties information.
G. Skilled Nursing Facility Prospective
Payment—General Overview
We implemented the Medicare SNF
PPS effective with cost reporting
periods beginning on or after July 1,
1998. This methodology uses
prospective, case-mix adjusted per diem
payment rates applicable to all covered
SNF services. These payment rates
cover all costs of furnishing covered
skilled nursing services (routine,
ancillary, and capital-related costs)
other than costs associated with
approved educational activities and bad
debts. Covered SNF services include
post-hospital services for which benefits
are provided under Part A, as well as
those items and services (other than
physician and certain other services
specifically excluded under the BBA)
which, before July 1, 1998, had been
paid under Part B but furnished to
Medicare beneficiaries 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).
1. Payment Provisions—Federal Rate
The 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 an estimate of the amounts
that 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 the costs of facility
differences in case mix and for
geographic variations in wages. In
compiling the database used to compute
the Federal payment rates, we excluded
those providers that received new
provider exemptions from the routine
cost limits, as well as costs related to
payments for exceptions to the routine
cost limits. Using the formula that the
BBA prescribed, we set the Federal rates
at a level equal to the weighted mean of
freestanding costs plus 50 percent of the
difference between the freestanding
mean and weighted mean of all SNF
E:\FR\FM\08AUR3.SGM
08AUR3
48490
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
costs (hospital-based and freestanding)
combined. We computed and applied
separately the payment rates for
facilities located in urban and rural
areas. In addition, we adjusted the
portion of the Federal rate attributable
to wage-related costs by a wage index.
The Federal rate also incorporates
adjustments to account for facility casemix, using a classification system that
accounts for the relative resource
utilization of different patient types.
The RUG–IV classification system uses
beneficiary assessment data from the
MDS 3.0 completed by SNFs to assign
beneficiaries to one of 66 RUG–IV
groups. The original RUG–III case-mix
classification system used beneficiary
assessment data from the MDS, version
2.0 (MDS 2.0) completed by SNFs to
assign beneficiaries to one of 44 RUG–
III groups. Then, under incremental
refinements that became effective on
January 1, 2006, we added nine new
groups—comprising a new
Rehabilitation plus Extensive Services
category—at the top of the RUG–III
hierarchy. The May 12, 1998 interim
final rule (63 FR 26252) included a
detailed description of the original 44group RUG–III case-mix classification
system. A comprehensive description of
the refined RUG–53 system appeared in
the proposed and final rules for FY 2006
(70 FR 29070, May 19, 2005, and 70 FR
45026, August 4, 2005), and a detailed
description of the current 66-group
RUG–IV system appeared in the
proposed and final rules for FY 2010 (74
FR 22208, May 12, 2009, and 74 FR
40288, August 11, 2009).
Further, in accordance with sections
1888(e)(4)(E)(ii)(IV) and (e)(5) of the Act,
the Federal rates in this final rule reflect
an update to the rates that we published
in the notice with comment period for
FY 2011 (75 FR 42886, July 22, 2010)
and the associated correction notice (75
FR 55801, September 14, 2010), equal to
the full change in the SNF market basket
index, adjusted by the forecast error
correction, if applicable, and the
Multifactor Productivity (MFP)
adjustment for FY 2012. A more
detailed discussion of the SNF market
basket index and related issues appears
in sections I.G.2. and III.F. of this final
rule.
2. FY 2012 Rate Updates Using the
Skilled Nursing Facility Market Basket
Index
Section 1888(e)(5) 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. We use the SNF market
basket index, adjusted in the manner
described below, to update the Federal
rates on an annual basis. In the SNF PPS
final rule for FY 2008 (72 FR 43425
through 43430, August 3, 2007), we
revised and rebased the market basket,
which included updating the base year
from FY 1997 to FY 2004. The FY 2012
market basket increase is 2.7 percent,
which is based on IHS Global Insight,
Inc. (IGI) second quarter 2011 forecast
with historical data through first quarter
2011.
In addition, as explained in the final
rule for FY 2004 (66 FR 46058, August
4, 2003) and in section III.F.2. of this
final rule, the annual update of the
payment rates includes, as appropriate,
an adjustment to account for market
basket forecast error. As described in the
final rule for FY 2008, the threshold
percentage that serves to trigger an
adjustment to account for market basket
forecast error is 0.5 percentage point
effective for FY 2008 and subsequent
years. This adjustment takes into
account the forecast error from the most
recently available FY for which there is
final data, and applies whenever the
difference between the forecasted and
actual change in the market basket
exceeds a 0.5 percentage point
threshold. For FY 2010 (the most
recently available FY for which there is
final data), the estimated increase in the
market basket index was 2.2 percentage
points, while the actual increase was 2.0
percentage points, resulting in the
actual increase being 0.2 percentage
point lower than the estimated increase.
Accordingly, as the difference between
the estimated and actual amount of
change does not exceed the 0.5
percentage point threshold, the payment
rates for FY 2012 do not include a
forecast error adjustment. As we stated
in the final rule for FY 2004 that first
promulgated the forecast error
adjustment (68 FR 46058, August 4,
2003), the adjustment will ‘‘* * *
reflect both upward and downward
adjustments, as appropriate.’’ Table 1
shows the forecasted and actual market
basket amounts for FY 2010.
TABLE 1—DIFFERENCE BETWEEN THE FORECASTED AND ACTUAL MARKET BASKET INCREASES FOR FY 2010
Forecasted FY
2010 increase *
Index
SNF ..................................................................................................................................
Actual FY 2010
increase **
2.2
FY 2010
difference
2.0
¥0.2
srobinson on DSK4SPTVN1PROD with RULES3
* Published in Federal Register; based on second quarter 2009 IHS Global Insight Inc. forecast (2004-based index).
** Based on the second quarter 2011 IHS Global Insight forecast, with historical data through the first quarter 2011 (2004-based index).
Furthermore, effective FY 2012, as
required by section 3401(b) of the
Affordable Care Act, the market basket
percentage is reduced by a productivity
adjustment 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 fiscal year,
year, cost-reporting period or other
annual period)’’ (the MFP adjustment).
As discussed in greater detail in section
III.F.3 of this final rule, the MFP
adjustment for FY 2012 is 1.0 percent.
VerDate Mar<15>2010
21:41 Aug 05, 2011
Jkt 223001
II. Summary of the Provisions of the FY
2012 Proposed Rule
In the FY 2012 proposed rule (76 FR
26364), we presented two options for
updating the payment rates used under
the prospective payment system for
skilled nursing facilities (SNFs), for
fiscal year 2012. In this context, we
examined recent changes in provider
behavior relating to the implementation
of the Resource Utilization Groups,
version 4 (RUG–IV) case-mix
classification system and considered a
possible recalibration of the case-mix
indexes so that they more accurately
reflect parity in expenditures between
PO 00000
Frm 00006
Fmt 4701
Sfmt 4700
RUG–IV and the previous case-mix
classification system. We also included
a discussion of a Non-Therapy Ancillary
component and outlier research
currently under development within
CMS. In addition, the proposed rule
discussed the impact of certain
provisions of the Affordable Care Act.
We proposed to require for fiscal year
2012 and subsequent fiscal years that
the SNF market basket percentage
change be reduced by the multi-factor
productivity adjustment. We also
proposed to require Medicare SNFs and
Medicaid nursing facilities to disclose
certain information to the Secretary of
E:\FR\FM\08AUR3.SGM
08AUR3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
the United States Department of Health
and Human Services (the Secretary) and
other entities regarding the ownership
and organizational structure of their
facilities. Finally, we proposed certain
changes relating to the payment of
group therapy services and proposed
new resident assessment policies.
srobinson on DSK4SPTVN1PROD with RULES3
III. Analysis of and Responses to Public
Comments on the FY 2012 Proposed
Rule
In response to the publication of the
FY 2012 proposed rule, we received
over 170 timely public comments from
individual 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 2012
Proposed Rule
In addition to the comments we
received on the proposed rule’s
discussion of specific aspects of the SNF
PPS (which we address later in this final
rule), commenters also submitted the
following, more general observations on
the payment system. We received many
comments expressing concern about the
SNF PPS system as a whole and the
MDS 3.0 and RUG–IV system.
Comment: We received a number of
comments raising concerns about the
complexity of the MDS 3.0 that
included several new assessment types,
the need to clarify the RAI manual, and
the time required to become trained on
the new MDS 3.0 requirements.
Response: We appreciate these
concerns and we recognize that the
transition to the MDS 3.0 was complex
and labor-intensive. We provided
extensive training and opportunities to
assist with questions about the MDS 3.0
and RUG–IV models both prior to and
after its October 1, 2010 implementation
on audio conferences, at national
training conferences, in the form of the
RAI Manual and subsequent
clarification updates, and postings to
the MDS 3.0 and SNF PPS Web sites.
We have also provided support in
response to oral and written inquiries,
and issued clarification during Open
Door Forums, RAI Manual updates, and
through online and telephone technical
assistance. We are committed to
continuing training on both the MDS 3.0
and RUG–IV systems. In fact, we are
developing training programs to assist
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
providers to adapt to any new policy
changes introduced on and after October
1, 2011. Additionally, as we receive
provider input through these efforts, we
will continue to update and clarify the
RAI manual to ensure that it continues
to provide accurate information and
guidance on CMS policies.
Comment: One commenter
recommended that we address the need
for stricter requirements for training and
certification of food services directors
and staff. The commenter states that
stricter guidelines will improve patient
health and safety.
Response: We appreciate this
comment, but note that the specific
issues the commenter raised about the
requirements for food services staff
relate to the certification standards for
long-term care facilities and, therefore,
are beyond the scope of this final rule.
We have, however, shared these
comments with CMS survey and
certification staff so that they can
consider these suggestions as part of
their ongoing review and refinement of
our policies.
B. FY 2012 Annual Update of Payment
Rates Under the Prospective Payment
System for Skilled Nursing Facilities
1. Federal Prospective Payment System
This final rule sets forth a schedule of
Federal prospective payment rates
applicable to Medicare Part A SNF
services beginning October 1, 2011. The
schedule incorporates per diem Federal
rates that provide Part A payment for
almost all costs of services furnished to
a beneficiary in a SNF during a
Medicare-covered stay.
a. Costs and Services Covered by the
Federal Rates
In accordance with section
1888(e)(2)(B) of the Act, the Federal
rates apply to all costs (routine,
ancillary, and capital-related) of covered
SNF services other than costs associated
with approved educational activities as
defined in § 413.85. Under section
1888(e)(2)(A)(i) of the Act, covered SNF
services include post-hospital SNF
services for which benefits are provided
under Part A (the hospital insurance
program), as well as items and services
(other than those services excluded by
statute) that, before July 1, 1998, were
paid under Part B (the supplementary
medical insurance program) but
furnished to Medicare beneficiaries in a
SNF during a Part A covered stay.
(These excluded service categories are
PO 00000
Frm 00007
Fmt 4701
Sfmt 4700
48491
discussed in greater detail in section
V.B.2 of the May 12, 1998 interim final
rule (63 FR 26295 through 26297)).
b. Methodology Used for the Calculation
of the Federal Rates
The FY 2012 rates reflect an update
using the full amount of the latest
market basket index reduced by the
MFP adjustment. The FY 2012 market
basket increase factor is 2.7 percent
which, as discussed in section VI.C of
this final rule, is reduced by a 1.0
percent MFP adjustment, resulting in an
MFP-adjusted market basket percentage
of 1.7 percent. A complete description
of the multi-step process used to
calculate Federal rates initially
appeared in the May 12, 1998 interim
final rule (63 FR 26252), as further
revised in subsequent rules. We note
that the temporary increase of 128
percent in the per diem adjusted
payment rates for SNF residents with
AIDS, enacted by section 511 of the
MMA (and discussed previously in
section I.E of this final rule), remains in
effect.
We used the SNF update factor to
adjust each per diem component of the
Federal rates forward to reflect cost
increases occurring between the
midpoint of the Federal FY beginning
October 1, 2010, and ending September
30, 2011 (FY 2011), and the midpoint of
the Federal FY beginning October 1,
2011, and ending September 30, 2012
(FY 2012), to which the payment rates
apply. In accordance with section
1888(e)(4)(E)(ii)(IV) of the Act, we
update the payment rates for FY 2012 by
a factor equal to the full market basket
index percentage increase. As further
explained in sections I.G.2 and III.F.2 of
this final rule, as applicable, we adjust
the market basket index 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 change in the market basket
exceeds a 0.5 percentage point
threshold. In addition, as further
explained in sections I.G.2 and III.F.3 of
this final rule, effective FY 2012 and
each subsequent fiscal year, we are
required to reduce the market basket
percentage by the MFP adjustment. We
further adjust the rates by a wage index
budget neutrality factor, described later
in this section. Tables 2 and 3 reflect the
updated components of the unadjusted
Federal rates for FY 2012, prior to
adjustment for case-mix.
E:\FR\FM\08AUR3.SGM
08AUR3
48492
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
TABLE 2—FY 2012 UNADJUSTED FEDERAL RATE PER DIEM URBAN
Nursing—
case-mix
Rate component
Per Diem Amount ............................................................................
Therapy—
case-mix
$160.62
Therapy—
non-case-mix
$120.99
$15.94
Non-case-mix
$81.97
TABLE 3—FY 2012 UNADJUSTED FEDERAL RATE PER DIEM RURAL
Nursing—
case-mix
Rate component
Per Diem Amount ............................................................................
srobinson on DSK4SPTVN1PROD with RULES3
2. Case-Mix Adjustments
a. Background
Section 1888(e)(4)(G)(i) of the Act
requires the Secretary to make an
adjustment to account for case-mix. 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 and other data that
the Secretary considers appropriate. In
first implementing the SNF PPS (63 FR
26252, May 12, 1998), we developed the
RUG–III case-mix classification system,
which tied the amount of payment to
resident resource use in combination
with resident characteristic information.
Staff time measurement (STM) studies
conducted in 1990, 1995, and 1997
provided information on resource use
(time spent by staff members on
residents) and resident characteristics
that enabled us not only to establish
RUG–III, but also to create case-mix
indexes (CMIs).
Although the establishment of the
SNF PPS did not change Medicare’s
fundamental requirements for SNF
coverage, payment levels under the PPS
vary based on the patient’s anticipated
care needs and resource utilization. One
of the elements affecting the SNF PPS
per diem rates is the case-mix
adjustment derived from a classification
system based on comprehensive
resident assessments using the MDS.
Case-mix classification is based, in part,
on the beneficiary’s need for skilled
nursing care and therapy. The case-mix
classification system uses clinical data
from the MDS, and wage-adjusted staff
time measurement data, to assign a casemix group to each patient record that is
then used to calculate a per diem
payment under the SNF PPS. Because
the MDS is used as the basis for
payment as well as a clinical document,
we have provided extensive training on
proper coding and the time frames for
MDS completion in our Resident
Assessment Instrument (RAI) Manual.
For an MDS to be considered valid for
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
Therapy—
case-mix
$153.46
use in determining payment, the MDS
assessment must be completed in
compliance with the instructions in the
RAI Manual in effect at the time the
assessment is completed. For payment
and quality monitoring purposes, the
RAI Manual consists of both the Manual
instructions and the interpretive
guidance and policy clarifications
posted on the appropriate MDS Web site
at https://www.cms.gov/
NursingHomeQualityInits/
25_NHQIMDS30.asp.
The original RUG–III grouper logic
was based on clinical data collected in
1990, 1995, and 1997. As discussed in
the SNF PPS proposed rule for FY 2010
(74 FR 22208, May 12, 2009), we
subsequently conducted a multi-year
data collection and analysis under the
Staff Time and Resource Intensity
Verification (STRIVE) project to update
the case-mix classification system for
FY 2011. The resulting RUG–IV casemix classification system reflected the
data collected in 2006–2007 during the
STRIVE project, and was finalized in the
FY 2010 SNF PPS final rule (74 FR
40288, August 11, 2009) to take effect in
FY 2011 concurrently with an updated
new resident assessment instrument, the
MDS 3.0, which collects the clinical
data used for case-mix classification
under RUG–IV.
Under the BBA, each update of the
SNF PPS payment rates must include
the case-mix classification methodology
applicable for the coming Federal FY.
As indicated in section I.G of this final
rule, the payment rates set forth herein
reflect the use of the RUG–IV case-mix
classification system from October 1,
2011, through September 30, 2012.
b. Development of Case-Mix Indexes
In the FY 2012 proposed rule (76 FR
26370 through 36377), we discussed the
implementation of the RUG–IV
classification system, effective October
1, 2010. We also discussed the
accompanying parity adjustment that
was intended to ensure that estimated
total payments under the RUG–IV
model would be equal to those
PO 00000
Frm 00008
Fmt 4701
Sfmt 4700
Therapy—
non-case-mix
$139.51
$17.02
Non-case-mix
$83.49
payments that would have been made
under the 53-group RUG–III model that
it replaced. We then explained that
actual utilization patterns under the
refined case-mix system differed
significantly from the initial projections,
and as a consequence, rather than
achieving parity as intended, this
adjustment to the new RUG–IV system
triggered a significant increase in overall
payment levels under the RUG–IV
model, representing substantial
overpayments to SNFs.
Accordingly, the FY 2012 proposed
rule included a discussion of two
options for updating the rates for FY
2012. The first option was to recalibrate
the parity adjustment (using the
methodology discussed in the FY 2012
proposed rule) to ensure that the
adjustment actually achieves its
intended purpose, to make the
transition from RUG–53 to RUG–IV in a
budget neutral manner, as discussed
further below. Under the second option,
CMS reserved the option not to
implement a recalibration of the parity
adjustment in FY 2012 if, as additional
FY 2011 claims data became available,
they indicated that utilization patterns
are more consistent with our projections
and expenditures are more in parity
with those under the RUG–53 model.
Under this second option, we stated we
would simply update the payment rates
for FY 2012 by the FY 2012 market
basket adjustment of 2.7 percent,
reduced by the MFP adjustment of 1.0
percent, for a net market basket increase
factor of 1.7 percent.
As discussed in the FY 2012 proposed
rule, the recalibration of the FY 2011
parity adjustment, which formed the
basis of the first option discussed above,
was initially determined through an
analysis of utilization data from the first
quarter of FY 2011. The methodology
for determining the parity adjustment
necessary given utilization patterns
observed in the first quarter of FY 2011
is described in the FY 2012 proposed
rule (76 FR 26370 through 26377) and
follows the same basic methodology
described in the FY 2006 SNF PPS
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
proposed rule (70 FR 29077 through
29079), the FY 2009 SNF PPS proposed
rule (73 FR 25923) and the FY 2009 SNF
PPS final rule (73 FR 46421–23).
In the FY 2012 proposed rule, we
stated that this adjustment was based on
a set of data derived from first quarter
FY 2011 claims and MDS assessments.
We further stated that we would
continue to monitor claims data and
utilization patterns in FY 2011 to
confirm our preliminary assessment of
the recalibration that would be
necessary to achieve parity between the
RUG–53 and RUG–IV models, and
would update the parity adjustment
accordingly. For this final rule, as
further discussed below, we have been
able to update the recalibration of the
FY 2011 parity adjustment with a data
set which includes claims and MDS 3.0
assessments for the first 8 months of FY
2011.
Using the same methodology for
determining the recalibration discussed
in the FY 2012 proposed rule and
approximately 2.2 million claims
matched to the MDS 3.0 assessment,
representing 8 months (or nearly 3 full
quarters) of FY 2011 (from October 1,
2011 through May 31, 2011), we
determined that the utilization patterns
identified in our analysis of the first
quarter FY 2011 data continued
throughout the entire 8-month period
(these data are available at https://
www.cms.gov/SNFPPS/
02_Spotlight.asp). We then repeated our
recalibration calculation using the full
8-month data set, which is available at
https://www.cms.gov/SNFPPS/
02_Spotlight.asp. We found that, while
retaining the original 61 percent
adjustment to the CMIs assigned to each
of the RUG–IV non-therapy groups, the
necessary adjustment to the nursing
CMIs of the RUG–IV therapy groups
would be 19.84 percent, a difference of
only .03 percent from the 19.81 percent
adjustment discussed in the proposed
rule. We believe that this updated
analysis confirms our preliminary
analysis, and demonstrates effectively
that the utilization patterns observed in
the first quarter of FY 2011 were not
temporary aberrations or the result of a
learning curve with respect to the RUG–
IV and MDS 3.0 transition, but instead
represent a new pattern of provider
behavior that differs significantly from
expected utilization patterns that were
the basis for the original parity
adjustment, and which resulted in
significant increases in overall payment
levels under RUG–IV.
In addition, the increased expenditure
levels due to the implementation of the
RUG–IV system have been validated by
the Office of the Inspector General (OIG)
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
in a separate review of SNF payments
during the first 6 months of FY 2011.
According to a preliminary analysis by
OIG, the utilization trends related to the
shifts in the modes of therapy and the
classification of high percentages of SNF
beneficiaries into the highest-paying
RUG–IV groups were even more
pronounced in the FY 2011 second
quarter (January through April 2011)
than in the first quarter (October
through December 2010) that was used
for the analyses included in the FY 2012
proposed rule (This OIG report is
available at https://oig.hhs.gov/oei/
reports/oei-02-09-00204.asp.)
As we stated in the proposed rule (76
FR 26371), given that the most notable
differences between expected and actual
utilization patterns occurred within the
therapy RUG categories, we believe that
rather than applying the new parity
adjustment percentage to all nursing
CMIs, it is more appropriate to maintain
the 61 percent adjustment to the nursing
CMIS for the RUG–IV non-therapy
groups, and reduce the 61 percent parity
adjustment as it applied to the nursing
CMIs for the RUG–IV therapy groups.
In the proposed rule, we invited
comments on the two options discussed
above. A discussion of these comments,
including our responses, appears below.
Comment: We received a variety of
comments regarding the two options
presented in the proposed rule for
updating the payment rates for FY 2012.
Most commenters were opposed to the
option to recalibrate the FY 2011 parity
adjustment. Many of these commenters
expressed their belief that the
recalibration considered in the proposed
rule will have a significantly negative
impact on facilities and beneficiaries.
These commenters believed that the
recalibration discussed in the proposed
rule should be either withdrawn or
significantly reduced.
Response: In light of the previous
recalibration of the SNF PPS case-mix
indexes in FY 2010, which addressed
excess payments associated with the
RUG–53 implementation in FY 2006 but
only after those excess payments had
persisted for several years, we believe it
is imperative that we act in a wellconsidered but expedient manner once
excess payments such as those in FY
2011 are identified. Allowing these
significant anomalies to persist and
failing to take timely action to correct
the situation creates instability under
the RUG–IV system, in the SNF PPS,
and the Medicare program generally,
which ultimately affects Medicare
beneficiary access and quality of care.
As we explained in the FY 2012
proposed rule (76 FR 26370–26373), in
recalibrating the CMIs under the RUG–
PO 00000
Frm 00009
Fmt 4701
Sfmt 4700
48493
IV model, we expect to restore payments
to their appropriate level by correcting
an inadvertent increase in overall
payments. Because the recalibration is
removing an unintended excess
payment rather than decreasing an
otherwise appropriate payment amount,
we do not believe that the recalibration
should negatively affect facilities,
beneficiaries, or quality of care, or create
an undue hardship on providers.
Further, in its March 2011 report to
the Congress (available at https://
www.medpac.gov/documents/
Mar11_EntireReport.pdf), MedPAC
reports that average Medicare margins
have increased for freestanding SNFs
since 2005. In 2009, the aggregate
Medicare margin for freestanding SNFs,
which represent more than 90 percent of
all SNF facilities, was 18.1 percent, up
from 16.6 percent in 2008 and
representing the ninth consecutive year
where the aggregate Medicare margin for
freestanding SNFs was greater than 10
percent. For these reasons, we believe
that the parity adjustment should not be
withdrawn or reduced.
Comment: Several commenters
asserted that the higher payments
observed in FY 2011 were, at least
partially, the result of real acuity
changes which should be accounted for
in the calculation of the parity
adjustment. These commenters stated
that, as an alternative approach, CMS
should consider comparing data from
FY 2010 and FY 2011 when calculating
the recalibration factor, to account for
changes in patient acuity.
Response: We disagree with this
comment on the basis that, as described
in the FY 2012 proposed rule (76 FR
26371), the same FY 2011 claims and
MDS information were used to
determine both RUG–III payments and
RUG–IV payments. Using the same
population for the same timeframe
serves to control for acuity level
changes, as well as other factors, such
as patient volume, across the RUG–III
and RUG–IV systems and provide an
appropriate comparison for our
financial analysis.
We would also note, as discussed
further below, that we did a comparison
of data from all of FY 2010 and from the
first eight months of FY 2011 that did
not control for changes in patient acuity,
and found that it did not result in a
significant difference in the
recalibration factor necessary to
equalize RUG–IV payments and RUG–III
payments. In testing this alternative
methodology, we did control for volume
by calculating the percentage of FY 2010
days of service for each of the RUG–III
groups, broken down by urban and rural
days, and then multiplied each
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
48494
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
percentage by the total number of urban
or rural FY 2011 days of service, as
appropriate, to determine the number of
days of service for each RUG–III group,
relative to the total volume for the first
eight months of FY 2011. Therefore,
even though the recalibration
methodology discussed in the proposed
rule (76 FR 26370–73) controls for
changes in patient acuity, we note that
the alternative approach above which
was suggested by commenters would
not change the recalibration factor.
Comment: Some commenters asserted
that CMS failed to provide sufficient
information for a third party to
reproduce CMS’s conclusions with
regard to the parity adjustment. A few
commenters stated that the lack of
access to data, or the timeframe for
when certain data were released, limited
the ability of stakeholders to develop
substantive comments on the
recalibration considered in the proposed
rule. Additionally, a few commenters
referred to specific requests that were
made by a few of the major nursing
home trade associations for access to
claims and MDS data for the fourth
quarter of FY 2010 and the first quarter
of FY 2011. They noted that we had
declined to fulfill those data requests,
due to certain data disclosure
requirements in the privacy regulations
that were promulgated under the Health
Insurance Portability and
Accountability Act of 1996 (Pub. L.
104–191, enacted on August 21, 1996)
(HIPAA). These commenters asserted
that CMS should reconsider its data
security policies in light of the use of
more ‘‘real–time’’ data.
Response: We do not agree with
assertions that CMS provided
inadequate data to evaluate and
comment upon the proposals described
in our proposed rule. The methodology
used to establish the case-mix
adjustments is the same as that
described in detail in the FY 2006 SNF
PPS proposed rule (70 FR 29077
through 29079), the FY 2009 SNF PPS
proposed rule (73 FR 25923), and the FY
2009 SNF PPS final rule (73 FR 46421
through 46422), as updated in the FY
2012 proposed rule (76 FR 26370
through 26377). In addition, the data
used to calculate the adjustments are
publicly available on the CMS Web site,
as explained below. We tested the
ability to reproduce the parity
adjustment calculation using only
information available on the CMS Web
site as of May 3, 2011, and in the
proposed rule and were able to do so.
We used the first quarter FY 2011 days
of service for the RUG–IV system and a
distribution of what those days would
have looked like under RUG–III
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
(available in the Downloads section of
our Web site at https://www.cms.gov/
SNFPPS/02_Spotlight.asp). We
multiplied the RUG–IV and RUG–III
days of service by the FY 2012
unadjusted Federal per diem payment
rate components, multiplied by the
unadjusted case-mix indexes (the
unadjusted RUG–IV case-mix indexes
can be calculated by dividing the
adjusted case-mix indexes, provided in
the proposed rule in Tables 5A or 6A,
by the adjustment factor of 1.1981) to
establish expenditures under the RUG–
III and RUG–IV systems. The parity
adjustment was determined as the
percentage increase necessary for the
nursing CMIs of the RUG–IV therapy
groups to generate estimated
expenditure levels under the RUG–IV
system that were equal to estimated
expenditure levels under the RUG–III
system.
While this data alone would have
been sufficient for a third party to
reproduce our results, in an effort to
respond to data requests from
stakeholders and give the public as
much information as possible to
evaluate the two parity adjustment
options considered in the proposed rule,
we also made available on our Web site,
as of June 16, 2011, a distribution of
paid days by provider number and by
month for the fourth quarter of FY 2010
under RUG–III and the first quarter of
FY 2011 under RUG–III and RUG–IV.
This data could be used to allow
stakeholders to analyze acuity trends
and further evaluate the adequacy of the
data used to determine the appropriate
recalibration. Finally, we posted on our
Web site a detailed memo which
outlined how stakeholders could use
MDS 3.0 data to determine the
appropriate RUG–III group for a given
RUG–IV patient, even though this
information was also already available
to facilities on their final validation
reports. Thus, we provided stakeholders
and their trade associations with
extensive data described earlier, so that
they had multiple avenues for analyzing
the underlying data and verifying CMS’s
results. We believe the additional
information provided was beyond the
information necessary to replicate our
calculation. In this way, we provided
even greater transparency of our
methods and data analysis while
fulfilling our data security
responsibilities under HIPAA.
Furthermore, with regard to the
ability of stakeholders to provide
substantive comments, we do not agree
with the commenter’s statement that the
necessary data were released too late to
allow for analyses that would generate
substantive comment on the proposed
PO 00000
Frm 00010
Fmt 4701
Sfmt 4700
rule. As illustrated above, the data
provided on the CMS Web site and in
the proposed rule were more than
sufficient for stakeholders to reproduce,
evaluate, and critique the recalibration
methodology and results. This is
evident in the notable breadth and
detail of the commenters’ critiques of
our supporting data, methodology, and
results, which we view as at least in part
a reflection of the extensive amount of
data that we have made available to the
public throughout this process, and of
the ability of commenters to provide
both timely and substantive comments
on the proposed rule. Even after the
issuance of the FY 2012 proposed rule,
we continued to respond to requests for
technical assistance and posted
additional technical materials on our
Web site so that all stakeholders could
have access to the responses to the
technical questions that we received.
Certain data, such as specific MDS
and claims data requested by certain
trade associations, could not be made
available upon the request of
stakeholders. CMS’ data security policy,
which derives from our responsibilities
under HIPAA, does not allow CMS to
release patient identifiable data when
such data are not necessary to
accomplish the purpose of the
disclosure (here, analyzing our
proposals). As noted above, these data
were not necessary to provide
substantive and timely comments on the
proposals contained in the proposed
rule, as evidenced by the ability of
internal staff to replicate and verify the
results of our calculation using data
available on our Web site well before
the end of the comment period.
Accordingly, as the non-patient
identifiable information was itself
adequate for purposes of assessing our
proposals, we were not able to release
the requested patient identifiable
information.
That said, CMS does make certain
information available from the claims
and MDS files. CMS has an established
timeline for the release of such
information, which normally allows for
up to a year after the data have been
finalized in order to screen and cleanse
the data properly of anything that would
permit patient identification. Any
attempt to speed up this process would
result in the assumption of unacceptable
risks that patient-identifiable
information would be released by
mistake, which would threaten the basic
privacy protections that beneficiaries
must be afforded. Finally, as discussed
above, some commenters suggested that,
given our increased use of more realtime data (that is, data from the current
fiscal year as opposed to claims data
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
from a prior year) for our recalibration
analyses, we should consider updates to
our data security policies to ensure that
stakeholders have adequate access to
data and that the rulemaking process is
as transparent as possible. We agree that
the process should remain transparent,
but we also note that the data security
policies that cover the patient-level
claims and MDS data used as the basis
of the parity adjustment recalibration
implemented in this final rule are
required by the HIPAA privacy
regulations and exist first and foremost
to protect Medicare beneficiaries. While
commenters requested certain claims
and MDS data in order to evaluate our
recalibration results, assumptions, and
methodology, as discussed above, the
data requested were not necessary to
provide substantive and timely
comments on the proposals contained in
the proposed rule so we were unable to
provide such data under the HIPAA
privacy rule’s ‘‘minimum necessary’’
provisions. As we stated above, we
believe the data we provided on the
CMS Web site and in the proposed rule
were more than sufficient for
stakeholders to reproduce, evaluate, and
critique the recalibration methodology
and results. We will continue to make
data available to stakeholders within the
limits of the law. Finally, we have
updated the data on our Web site to
reflect the use of the eight months of
data used to finalize this rule.
Comment: Many commenters raised
general concerns over the data used to
determine the appropriate recalibration
of the FY 2011 parity adjustment. Many
of these commenters believed that one
fiscal quarter of data was insufficient to
justify a recalibration of the magnitude
discussed in the proposed rule and that
CMS should wait until it has a greater
set of data from which to draw
conclusions about utilization patterns in
FY 2011. Several commenters were
concerned that, given the increased
burden associated with transitioning
both to RUG–IV and MDS 3.0
simultaneously, it is possible that the
first quarter of FY 2011 may represent
facilities working to transition properly
rather than accurately representing
evolving provider behavior. One
commenter specifically stated that using
one quarter of data would not
adequately control for the possibility of
‘‘seasonality’’ in SNF PPS claims
submission, payments, and acuity
levels, and provided a detailed analysis
of previous fiscal quarters to
demonstrate the possibility of a
difference between the first fiscal
quarter of a given year and the
remainder of that year. One commenter
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
also raised concerns related to the
provider-level data that CMS made
available to stakeholders upon their
request, specifically that the data
provided for a certain set of providers
did not match the data that this
commenter acquired independently for
this provider. A few commenters
highlighted potential calculation errors
in the analysis and data presented in the
proposed rule, with one commenter
specifically highlighting an error in the
calculation of the nursing CMI for a
certain non-therapy RUG–IV group.
Response: We acknowledge the
commenters’ concerns about relying
solely on one fiscal quarter of data to
finalize a recalibration of the magnitude
discussed here. However, as noted in
the proposed rule, the first quarter of
data served only as the basis for our
preliminary analysis of FY 2011
utilization. In the proposed rule, we
committed to monitoring FY 2011
utilization data continually to confirm
the results of our preliminary analysis
regarding the need to recalibrate the
parity adjustment. The stated purpose of
the discussion of this first quarter FY
2011 data in the proposed rule was to
‘‘provide the public with information on
the potential scope and impact of the
recalibration’’ we considered in the
proposed rule (76 FR 26371). Given that
we have updated the data file with
claims and MDS assessments ranging
over 8 months of FY 2011 and for the
reasons outlined below, we believe that
the utilization patterns observed as part
of our preliminary analysis do, in fact,
represent an accurate reflection of
utilization for the whole of FY 2011.
Additionally, as stated above, we have
now updated the recalibration based on
8 months of FY 2011 data, and
utilization patterns are virtually
identical to FY 2011 first quarter
findings (Data available at https://
www.cms.gov/SNFPPS/
02_Spotlight.asp). Therefore, we believe
that observed utilization patterns are
more likely the result of evolving
provider behavior rather than errors and
adjustments made during the early
transition period to RUG–IV and MDS
3.0. Moreover, since facilities were
given more than one year to prepare for
the implementation of both RUG–IV and
MDS 3.0, we believe that facilities were
given ample time for education and
preparation for the transition and that
any confusion or mistakes due to
transition issues would have been
addressed prior to, or in the very early
stages of, the RUG–IV and MDS
transition.
With regard to commenters’ claims
related to ‘‘seasonality’’ of the first
quarter FY 2011 data, our own analysis
PO 00000
Frm 00011
Fmt 4701
Sfmt 4700
48495
of FY 2010 claims data demonstrated
that the first quarter of a given fiscal
year does appear to provide a reasonable
approximation of patient acuity levels
and payments for the whole of that
fiscal year. We reviewed the FY 2010
claims by RUG classification and by
month for each month of FY 2010.
Ultimately, we found that the
distribution of RUG groups remained
stable over the year and no particular
quarter, or even month, stood out as
demonstrating a different RUG
distribution from the rest of that year
(these data are available at https://
www.cms.gov/SNFPPS/
02_Spotlight.asp). In fact, the only real
difference in SNF payment levels occurs
in the transition between one fiscal year
and another, where this difference is
attributable to the annual payment
update and market basket adjustment
rather than to any ‘‘seasonality’’ existing
between the fourth quarter of a given
fiscal year and the first quarter of the
following fiscal year.
Finally, with regard to the comment
related to the provider-level data, we
were unable to verify this commenter’s
claim as we were not provided with any
details as to the location or type of
provider in question. After a review of
the data used to support the
recalibration, we found the underlying
data to be accurate, and sufficient to
perform the proper calculation of the
recalibration. We did identify one RUG
category (LB2) where we incorrectly
stated the nursing CMI as 1.46 in the
proposed rule, when it should be 1.45.
This correction, while it would have a
very small effect on the per diem
payment for that RUG group, did not
have any impact on our calculation of
the parity adjustment. This error has
since been corrected and tables 5 and 6
in this final rule reflect the correct
nursing CMI for LB2.
Comment: Many commenters
expressed concern over the possibility
of a reduction to Medicare payment
rates in light of other reductions in areas
such as Medicaid. Some commenters
stated that Medicare should maintain
SNF payment levels to cross-subsidize
what they characterized as inadequate
payment rates for nursing facilities
under the Medicaid program. Other
commenters urged CMS to reconsider
the recalibration in light of the potential
impact on the weak national economy.
A few commenters discussed the
importance of the health care industry,
specifically SNFs, as representing a
significant sector of job growth during
the recent economic recession. Finally,
a few commenters asserted that the
recalibration would drive providers into
bankruptcy, as they assert happened
E:\FR\FM\08AUR3.SGM
08AUR3
48496
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
when the SNF PPS was initially
implemented in the late 1990s.
Response: We wish to clarify that it is
not the appropriate role of the Medicare
SNF benefit to cross-subsidize nursing
home payments made under the
Medicaid program. As noted by several
commenters, the primary purpose of the
Medicare SNF benefit is to provide
accurate payment for Medicare Part A
services provided in a SNF setting.
Further, we note that MedPAC has also
indicated that it is inappropriate for the
Medicare program’s SNF payments to be
used to account for Medicaid shortfalls.
Specifically, on page 159 of its March
2011 Report to Congress on Medicare
Payment Policy (which is available
online at https://www.medpac.gov/
documents/Mar11_EntireReport.pdf),
MedPAC stated:
srobinson on DSK4SPTVN1PROD with RULES3
* * * the Commission believes such crosssubsidization is not advisable for several
reasons. First, on average, Medicare
payments account for less than a quarter of
revenues to freestanding skilled nursing
facilities. A cross-subsidization policy would
use a minority share of Medicare payments
to underwrite a majority share of states’
Medicaid payments. Second, raising
Medicare rates to supplement low Medicaid
payments would result in poorly targeted
subsidies. Facilities with high shares of
Medicare payments—presumably the
facilities that need revenues the least—would
receive the most in subsidies from the higher
Medicare payments, while facilities with low
Medicare shares—presumably the facilities
with the greatest need—would receive the
smallest subsidies. Third, increased Medicare
payment rates could encourage states to
further reduce their Medicaid payments and,
in turn, create pressure to raise Medicare
rates. In addition, a Medicare subsidy would
have an uneven impact on payments, given
the variation across states in the level and
method of paying for nursing home care. In
States where Medicaid payments were
adequate, the subsidy would add to excessive
payments. Last, higher Medicare payments
could further encourage providers to select
patients based on payer source or to
rehospitalize dual-eligible patients to qualify
them for a Medicare-covered, higher payment
stay.
We agree with MedPAC, and
therefore, do not agree with the
commenters that cited cross-subsidizing
Medicaid as a justification for
maintaining Medicare SNF payments at
any specific level.
We are also aware of the concerns that
reductions in payment levels can have
a negative impact on SNFs and the
quality of care furnished to nursing
home patients across the country.
However, in this particular case, the
recalibration discussed in the proposed
rule and finalized in this final rule
corrects, on a prospective basis only, the
unintended excess payment that we
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
observed for FY 2011. In addition, even
with the recalibration, FY 2012 rates
will still be 3.4 percent higher than FY
2010 rates, the period immediately
preceding the introduction of RUG–IV
and the unintended spike in payments.
Also, FY 2010 expenditures increased
by 4.8 percent over FY 2009, a period
where both MedPAC and CMS have
calculated margins for free-standing
SNFs to average 18.1 percent. Moreover,
we have not proposed any action to
recoup retroactively the excess
expenditures already made to SNFs
during FY 2011. Instead, we are limiting
the scope of the recalibration to
restoring the intended SNF PPS
payment levels on a prospective basis
only effective October 1, 2011.
We have also considered the concerns
raised by commenters that restoring the
intended payment levels will result in
job losses and add significant burden to
health care workers and States. CMS
cost report and Online Survey
Certification and Reporting System
(OSCAR) data show that, for the
majority of freestanding SNFs and SNFs
that operate as part of chains, there has
been little change in staffing with the
implementation of RUG–IV. Therefore,
as data do not indicate that facilities
increased staffing with the
implementation of RUG–IV and
aggregate payments will return to a level
commensurate with those made under
RUG–III, we do not believe that
restoring payments to their intended
and appropriate levels should
necessarily result in job losses or add
significant burden to health care
workers or States.
As regards the comment that CMS
should reconsider the recalibration in
light of the potential impact on a weak
economy, we do not believe that
potential economic effects justify
perpetuating observed and
acknowledged excessive and inaccurate
payments. Again, we note that MedPAC
found in 2009 that the aggregate
Medicare margin for freestanding SNFs,
which represent more than 90 percent of
all SNF facilities, was 18.1 percent, up
from 16.6 percent in 2008 and
representing the ninth consecutive year
where the aggregate Medicare margin for
freestanding SNFs was greater than 10
percent.
Finally, with regard to those
comments which asserted that the
recalibration would trigger bankruptcies
similar to those that they attributed to
the implementation of the SNF PPS in
the late 1990s, studies have indicated
multiple factors for nursing home
closures during that time, such as chain
membership, investment decisions in an
uncertain market, and market
PO 00000
Frm 00012
Fmt 4701
Sfmt 4700
competition. A more detailed analysis of
the research in this area appears in the
FY 2010 final rule (74 FR 40297 through
40298). Ultimately, the existing body of
research fails to indicate that case-mix
reimbursement is a significant
contributor to nursing home
bankruptcy, particularly considering the
small percentage of facility revenues
which derive from Medicare payments.
Thus, we do not agree with those
commenters who asserted that the
recalibration, in and of itself, could lead
to the bankruptcy of SNF providers or
that it could create the degree of fiscal
pressure that could impact negatively
on facility staffing or the quality of care
in SNFs.
Comment: Many commenters, while
conceding that overpayments in FY
2011 do exist, questioned the magnitude
of the recalibration deemed appropriate
by CMS. Several commenters expressed
concern with the distribution of RUG–
III payment days used by CMS to
calculate the parity adjustment. These
commenters stated that the RUG–III
distribution of days posted by CMS
appeared to show incorrectly a decline
in patient acuity (particularly in the
case of Rehabilitation plus Extensive
Services RUG groups) and that this
apparent decline in patient acuity may
have been due to flaws in the crosswalk
methodology. These commenters
believed that this led to an
underestimation of RUG–III payments,
thereby causing an overestimation of the
necessary parity adjustment. A few
commenters identified the methodology
used by CMS to crosswalk between
MDS 3.0 data and RUG–III group
classification as potentially introducing
certain biases and errors into the parity
adjustment calculation. One commenter
specifically referred to a potential
inaccuracy in the crosswalk
methodology as it related to ADL
conversions, the depression scale used
under MDS 2.0 and MDS 3.0, and
certain MDS items (such as IV
medications) which required facilities to
‘‘look-back’’ to services received during
the patient’s qualifying hospital stay.
Response: As stated above, several
commenters suggested that the
distribution of RUG–III payment days
(which were derived from MDS 3.0
assessments submitted in FY 2011 or
through review of final validation
reports available to stakeholders) which
appeared to reflect an apparent drop in
patient acuity between FY 2010 and FY
2011, actually reflected a flaw in the
crosswalk methodology used by CMS. In
response to this comment and in
response to the comments suggesting a
potential inaccuracy in the RUG–III
crosswalk, we conducted a detailed
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
analysis of this potential issue. We first
confirmed that the physical
programming for the crosswalk file was
correct and found no errors in the
programming. We then turned our
attention to policy and assessment
differences between the RUG–III and
RUG–IV systems that could be affected
by the simultaneous transition to MDS
3.0.
We identified a few areas where using
the MDS 3.0 could possibly affect the
determination of a patient’s case-mix
classification under RUG–III or RUG–IV.
The first area was a difference on the
depression scale used under MDS 2.0
and MDS 3.0 where we found, through
an analysis of MDS data from July 2010
through April 2011, that the number of
depression cases triggered under MDS
2.0 was greater than the number of
depression cases triggered under MDS
3.0 by approximately 6.6 percent.
However, since depression plays a small
role in the determination of a patient’s
RUG classification (using either the
MDS 2.0 FY 2010 data or the MDS 3.0
FY 2011 data, approximately 2 percent
of all Medicare beneficiaries classified
into RUG–III groups where depression
was a qualifying factor), this difference
would not have a significant impact on
the RUG–III distribution or parity
adjustment recalibration. We also
examined the ADL scale used under
MDS 2.0 and MDS 3.0 for the same
period described above and found that
the mean ADL scale score between the
two assessments was virtually identical;
that is, patients classified into the same
ADL categories under both models.
Therefore, the ADL scale could not be
a source of differences in classification
due to using the crosswalk.
Next, we examined the use of
OMRAs, particularly the End of Therapy
(EOT) OMRA and its accompanying
policies. Specifically, under MDS 2.0,
facilities could be paid at a therapy rate
for 8 to 10 days after the discontinuation
of all therapies before the EOT OMRA
would be necessary. Under MDS 3.0, the
ARD for the EOT OMRA must be set for
1 to 3 days after the discontinuation of
all therapies, and the relevant nontherapy RUG rate is paid from the date
that therapy was discontinued. We agree
that the program used to estimate RUG–
III payments did not adjust for the
change in the EOT policy. Instead, any
change from a therapy RUG group to a
non-therapy RUG group that would
normally result from the completion of
an EOT OMRA, specifically under MDS
2.0, would only be picked up on the
next scheduled MDS 2.0 assessment. As
a result, the crosswalk in this case may
have led to an overestimation of RUG–
III payments, which would mean that
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
we actually could have underestimated
the parity adjustment necessary to bring
RUG–IV payments in line with RUG–III
payments.
Finally, one commenter specifically
referred to a potential issue with the
RUG–III crosswalk related to capturing
IV services provided to SNF residents
during the resident’s qualifying hospital
stay. The commenter stated that the
crosswalk did not accurately account for
these services, leading to an
underestimation of RUG–III payments.
Based on comments we received, we
reviewed MDS assessment data related
to the coding of IV medications received
by the patient prior to admission to the
SNF. After a review of MDS data from
July 2010 through April 2011, we did
find a significant drop in coding for IV
services received prior to the resident’s
admission to the SNF between FY 2010
and FY 2011. However, given the lack
of data, it would be very difficult to
ascertain if this drop is the result of
facilities admitting a lower volume of
beneficiaries who had an IV while in the
qualifying hospital stay or, as one
commenter suggested, that it stemmed
from the elimination of a payment
incentive for collecting data from the
prior hospital stay and failure to report
this item accurately on the MDS 3.0.
While this item would not affect the
patient’s RUG–IV classification, it
would be necessary to provide an
accurate classification of that patient
into a RUG–III category, which is an
essential aspect of the recalibration
calculation. We note that many
commenters believed that patient acuity
likely did not drop from FY 2010 to FY
2011. Thus, it is possible that, as one
commenter posited, some facilities
failed to report accurately on the MDS
3.0 if the patient had received an IV
prior to admission to the SNF, due to
the elimination of the payment
incentive for reporting this item.
However, we do not have the data to
confirm the basis for the drop in coding
IV services.
We considered the potential impact of
inaccurate reporting of IVs and other
potential crosswalk issues, as described
above. However, as stated above, it is
impossible to ascertain the cause and
extent of any observed reporting
differences or to quantify the impact of
the reporting change on aggregate
expenditure levels. However, in order to
approximate the impact of these coding
changes, we compared the actual RUG–
IV payments from first quarter FY 2011
with a data set from the fourth quarter
of FY 2010 that included payments that
were actually calculated under the
RUG–III system. We found that the
necessary recalibration using this much
PO 00000
Frm 00013
Fmt 4701
Sfmt 4700
48497
less precise methodology was
remarkably similar to the recalibration
results discussed in section III.B.2 of
this final rule. In fact, these results were
within 1.5 percent of the recalibration
calculation performed using the FY
2011 data. It should be noted that by
using different data sets for the
comparisons, we could not control for
acuity changes or any other factors, such
as patient volume, but the difference in
the final result was very minor.
Therefore, we believe that any actual
issues with the RUG–III crosswalk
would have a negligible effect on the
recalibration calculation. Moreover,
because we cannot determine reliably
whether the difference in observed
versus historically predicted use of IVs
during a patient’s qualifying hospital
stay reflects actual provider behavior
and patient acuity changes, or merely a
failure on the part of facilities to
complete certain items on the MDS, we
believe that an adjustment for any such
potential factors would be inappropriate
given its limited impact. We expect that
facilities will report all necessary items
on the MDS to capture accurately the
patient’s clinical and medical needs,
rather than only coding those items
relevant to the patient’s payment level.
Finally, we note that, as we discussed
previously, we believe using FY 2011
data to determine the necessary
recalibration factor controls for patient
acuity, as the recalibration of the parity
adjustment compares payments under
the two case-mix systems using data
from the same time period (FY 2011).
Comment: Many commenters
questioned the appropriateness of the
recalibration based on the potential
impact of other proposed changes
discussed in the proposed rule, such as
the allocation of group therapy and
other changes to the MDS 3.0. These
commenters stated that reducing
payments through a recalibration of the
CMIs without accounting for the
potential impact of other changes to the
MDS will constitute a ‘‘double hit’’ on
facilities. Some commenters requested
that the recalibration be withdrawn
until the impact of these other changes
proposed for FY 2012 is better known.
Response: As illustrated by OACT
baseline expenditure data from 2006
through 2011 (which can be ascertained
by dividing the aggregate dollar impact
of a rule for a given year by the
aggregate percent impact listed in the
impact table for the same rule), the SNF
baseline has increased by over 40
percent between 2006 and 2011.
Additionally, for 3 of the past 6 years,
specifically in FY 2006, FY 2010, and
FY 2011, we have attempted to restore
budget neutrality in the transition to a
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
48498
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
new case-mix classification system by
applying a parity adjustment. In both
case-mix transitions (from RUG–44 to
RUG–53 and from RUG–53 to RUG–IV),
we found that, rather than achieving
budget neutrality, application of the
parity adjustment to the new case-mix
system resulted in excess payments to
providers, because actual utilization
patterns under the new case-mix system
were different than we originally
projected, thus necessitating a
recalibration of the adjustment. After
reviewing the effect of the FY 2011
RUG–IV policies, we have found that
despite the adoption of clinical policies
and coding changes, utilization patterns
(as evidenced by the distribution of
RUG groups) have not changed
significantly in response to these policy
revisions in ways that could be expected
based on past operational and reporting
practices. For example, while we
anticipated certain changes in the casemix distribution in response to the
implementation of RUG–IV and the
allocation of concurrent therapy along
with several other policy and reporting
changes, the percentage of residents
classified into a rehab category between
FY 2010 and FY 2011 remained stable
at approximately 92 percent; moreover,
the percentage of patients classified into
the highest paying rehabilitation RUG
category, Ultra High Rehabilitation,
actually increased from 43 percent to 45
percent over the same period.
This analysis revealed that it can be
difficult to predict provider behavior in
response to any given policy changes.
As a result, given the ability of facilities
and stakeholders to adapt quickly to the
changes in the SNF system in ways that
maintain payments and consistent
utilization patterns, from a practical and
policy perspective, we do not believe it
would be appropriate to attempt to
consider the potential impact of other
policy changes for FY 2012 as part of
the FY 2011 recalibration calculation.
Accordingly, given that it is unclear
whether the FY 2012 changes to the
MDS will have an effect on utilization
patterns and the extent of any such
effect, we do not agree that recalibrating
the CMIs without accounting for such
changes would necessarily result in a
‘‘double hit.’’
Further, consistent with past practice
during a major case-mix system
transition (that is, the transition from
RUG–44 to RUG–53 in FY 2006 and the
transition from RUG–53 to RUG–IV in
FY 2011), aggregate payments under the
new system have been adjusted to
ensure parity with payments under the
previous system. In the case of the
transition from RUG–44 to RUG–53, the
data used to recalibrate the parity
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
adjustment were based on data from CY
2006 (the year the transition was first
implemented), even though the
recalibration was not made until FY
2010. As such, major changes in the
SNF PPS case-mix classification system
have been historically accompanied by
a parity adjustment recalibration which
uses data from the year in which the
transition took place. In this case,
consistent with past practice, the most
appropriate data for recalibrating the FY
2011 parity adjustment are data from FY
2011, the year in which RUG–IV was
implemented. If we were to use data
from other years (including projected
data for a future year such as FY 2012),
this could skew the results due to
changes in patient acuity, volume, or
provider behavior, or other changes in
SNF PPS policy.
Accordingly, because the policy
refinements contained in this final rule
(such as those related to the MDS 3.0)
would apply starting in FY 2012, we
believe that these changes should not be
factored into the FY 2011 recalibration.
As discussed above, we believe that it
would be inappropriate to try to
manipulate the FY 2011 recalibration to
account for potential and unpredictable
changes in payments resulting from
policies to be implemented in FY 2012.
As in prior years, policy refinements
that do not constitute changes to the
case-mix classification system as a
whole are not necessarily made in a
budget-neutral manner. Consistent with
our past practice when implementing
new policies, we will monitor
utilization patterns and provider
behaviors in response to the changes
discussed in this final rule.
Comment: Several commenters
suggested that CMS consider the
possibility of phasing-in a recalibration
over the course of several years. A few
commenters further suggested that such
a phase-in should also take into account
the effects of any finalized FY 2012
policies.
Response: As discussed in section
XII.A.5 of the proposed rule, we
considered how the recalibration might
be implemented so as to mitigate the
economic impact of the recalibration on
facilities. Specifically, we considered
mitigating the impact of the
recalibration by phasing in the negative
adjustments prospectively over multiple
years until parity was achieved.
However, as noted in the proposed rule
(76 FR 26404), phasing-in the
recalibration would continue to
reimburse facilities at levels that
significantly exceed intended SNF
payments. Further, as discussed in
response to a preceding comment and
elsewhere in this preamble, MedPAC
PO 00000
Frm 00014
Fmt 4701
Sfmt 4700
found in 2009 that the aggregate
Medicare margin for freestanding SNFs,
which represent more than 90 percent of
all SNF facilities, was 18.1 percent, up
from 16.6 percent in 2008. Given these
high Medicare margins, we do not
believe that a phase-in approach is
justified. It is also important to note that
this recalibration would serve to remove
an unintended spike in payments rather
than decreasing an otherwise
appropriate payment amount. Thus, we
do not believe that the recalibration
should negatively affect facilities,
beneficiaries, or quality of care, or create
an undue hardship on providers. In fact,
notwithstanding the recalibration, the
FY 2012 payment rates will actually be
higher than the rates established for FY
2010, the period immediately preceding
the unintended spike in payment levels.
We continue to believe that in
implementing RUG–IV, it is essential
that we stabilize the baseline as quickly
as possible without creating a
significant adverse effect on the
industry or to beneficiaries.
Furthermore, in response to the
comment suggesting that a phase-in
should take into account the effects of
other policies finalized in FY 2012, as
discussed in response to the previous
comment, we do not believe it would be
appropriate to take into account in the
recalibration calculation, potential and
unpredictable changes in payments
resulting from policies to be
implemented in FY 2012.
Comment: Several commenters stated
that a shift in patients from Inpatient
Rehabilitation Facilities (IRFs) to SNFs
results in savings to the Medicare Trust
Fund and that the current SNF spending
levels are needed to treat higher-acuity
patients that are now being treated in
SNFs rather than in IRFs. Also, several
commenters claimed that that providing
increased levels of therapy has led to
shorter lengths of stay for SNF residents,
decreased the rate of hospital
readmissions and increased discharges
to the community, thereby creating
significant savings for the Medicare
program.
Response: We note that, in the
absence of supporting evidence, and
given the significant excess payments
identified in FY 2011 and the Medicare
profit margins for facilities identified by
various sources, such as MedPAC, it is
difficult to see how evolving utilization
patterns have created savings for the
Medicare program. In fact, MedPAC’s
analysis of recent quality measure data
related to rehospitalizations, for
example, which appears in their March
2011 Report to Congress (available at
https://www.medpac.gov/documents/
Mar11_EntireReport.pdf), suggests that
E:\FR\FM\08AUR3.SGM
08AUR3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
quality of care within SNFs has not been
improving. On the topic of
rehospitalizations, in its March 2011
report, MedPAC states:
srobinson on DSK4SPTVN1PROD with RULES3
‘‘The quality of care furnished to patients
during a Medicare-covered SNF stay
continued to show mixed results. * * *
Since 2000, one outcome measure * * * (the
risk-adjusted rate of rehospitalization for any
of five care-sensitive conditions) exhibited
almost no change.’’
Moreover, a basic principle of the
SNF PPS is to pay appropriately for the
services provided. CMS data are
consistent with the commenters’
statements that some patients formerly
treated within IRFs are now being
treated in SNFs. In fact, our data show
that a portion of patients needing
rehabilitation have always been treated
at SNFs and other non-IRF post-acute
care settings. The FY 2011 utilization
data used to recalibrate the case-mix
adjustments reflect an increase in
rehabilitation patients, and likely
includes patients who alternatively
might have been admitted to IRFs prior
to CMS enforcement of the IRF coverage
criteria and more intensive medical
review of IRF claims. However, we do
not agree with the commenters’
statement that these patients represent a
higher level of acuity than the type of
patients historically treated in SNFs. For
some time, utilization data have
demonstrated that nearly 90 percent of
all SNF payment days are for
rehabilitation services, with over 40
percent of those days falling into the
Ultra High Rehabilitation category. For
the former IRF patients who are
appropriate for SNF care, we must pay
the appropriate rate for the SNF services
provided and cannot use a reduction in
IRF payments as a reason to increase
payments to SNFs arbitrarily. It is
important to note that, as discussed
above, recalibrating the case-mix system
does not change the basic SNF PPS
structure which provides higher
payments for patients using more staff
resources and services.
Finally, as one commenter
highlighted, shifting IRF patients toward
SNF care does not necessarily improve
the quality of care provided to the
beneficiaries. A March 2005 report in
the Archives of Physical Medicine and
Rehabilitation (available at https://
www.archives-pmr.org/article/
PIIS0003999304012493/abstract) found
that 81.1 percent of IRF patients were
discharged to home, compared to 45.5
percent of SNF residents. Additionally,
IRF patients appeared to have shorter
lengths of stay, averaging approximately
a 13-day stay, compared to the average
36-day stay for a SNF resident. Finally,
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
when patients discharged from each
setting were reviewed 24 weeks after
discharge, IRF patients had consistently
better outcomes and displayed a faster
rate of recovery. Given these findings,
we do not agree with those commenters
who would assume that shifting patients
from the IRF setting to a SNF setting is
necessarily more beneficial to the
patient or the Medicare Trust Fund. We
do, however, intend to conduct
additional research to update these
findings with more recent data. Any
changes in utilization patterns, length of
stay, and/or care outcomes will be
addressed during future rule-making.
Comment: We received a number of
comments related to our decision to
apply the parity adjustment to only the
nursing CMIs for therapy RUG–IV
groups. Some commenters focused on
reasons the parity adjustment should be
applied to both the nursing and therapy
indexes, while other suggested that the
adjustment should be applied to the
nursing CMIs for all RUG groups, as it
has been applied in the past.
Response: We considered a variety of
alternative applications of the parity
adjustment, such as applying the
adjustment to both the nursing and
therapy CMIs, to all the nursing CMIs,
or to the therapy CMIs only. However,
we still believe it is most appropriate to
apply the adjustment to the nursing
CMIs within the therapy groups only.
Even for RUG–IV therapy groups, the
nursing component is a much larger
portion of the associated per diem
payment. When we tested adjusting
only the therapy CMIs, we found that
the reduction necessary to achieve
parity was so significant as to reduce
some of the recalibrated therapy CMIs to
nearly a zero index, while reducing the
relative differences between therapy
groups significantly. To maintain the
appropriate relative difference between
each therapy group CMI, we found it
best to apply the adjustment to the
nursing CMIs for those therapy groups.
Additionally, as the original parity
adjustment discussed in the FY 2011
notice with comment period (75 FR
42886) was applied to the nursing CMIs,
we considered it most appropriate to
apply a recalibration of that adjustment
to the nursing CMIs, albeit of select
RUG–IV groups, rather than to apply the
recalibration to the therapy CMIs or
some combination of the nursing and
therapy CMIs.
As discussed in the FY 2012 proposed
rule (76 FR 26371), given that the most
notable differences between expected
and actual utilization patterns occurred
within the therapy RUG categories, we
believe it most appropriate to recalibrate
the parity adjustment only as it applied
PO 00000
Frm 00015
Fmt 4701
Sfmt 4700
48499
to the RUG–IV therapy groups. As
discussed in the proposed rule (76 FR
26372), we did evaluate the impact of
applying a recalibration to all of the
nursing CMIs, but found that rates for
the complex medical groups were
disproportionately affected negatively,
in comparison to the therapy groups
that represent 90 percent of SNF
payment days. Since the vast majority of
SNF residents are classified into a RUG–
IV therapy group, and because the
greatest differences between expected
and actual utilization patterns could be
found among the RUG–IV therapy
groups, we believe that the most
appropriate method for applying the
recalibration is to apply it only to the
RUG–IV therapy groups.
Comment: A few commenters
discussed alternative parity adjustment
methodologies, and recommended that
instead of applying a fixed percentage
increase to the nursing CMI (as is done
in the case of the parity adjustment
discussed in this final rule), we should
apply a fixed percentage increase, or
decrease presumably, to the final
payment rates for each RUG group
under the new classification system.
CMS would then recalculate the
appropriate nursing CMI necessary to
reach the new total RUG payment.
According to these commenters, this
methodology would ensure that the
relative difference in payments for each
RUG group would remain the same.
Response: We agree that such a
methodology would maintain the
relative difference in the payments for
each RUG category. However, the basic
principle of the SNF PPS is to pay
accurately for services based on the
relative differences in resource and staff
costs. The data underlying the RUG–IV
CMIs, primarily the STRIVE study, are
used to determine the relative difference
between RUG groups with regard to
their resource use. By applying the
parity adjustment to the nursing CMIs,
we are able to maintain the relative
difference in resource use among the
RUG–IV groups, rather than focusing on
differences in payment. Ultimately, the
prospective nature of the program
demands that we focus more on
predicting costs through relative
utilization of resources, which are
represented in the CMIs, rather than
focusing solely on maintaining relative
differences in the total payments for
each RUG group.
Comment: A few commenters
recommended that in lieu of or in
addition to pursuing a recalibration,
CMS should consider greater fraud and
abuse monitoring, with one commenter
suggesting that CMS consider medical
review and audits of FY 2011 claims
E:\FR\FM\08AUR3.SGM
08AUR3
48500
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
srobinson on DSK4SPTVN1PROD with RULES3
and MDS data. One commenter pointed
to the lack of program monitoring
activities as an indication that there are
no problems with the current parity
adjustment.
Response: We appreciate these
commenters’ suggestions regarding the
need for greater fraud and abuse
monitoring and the need for audits of
SNF records. We have increased our
fraud and abuse monitoring efforts for
SNFs and for the Medicare program in
general. In fact, the Office of the
Inspector General (OIG) has started a
review of the increased frequency with
which patients are assigned to the
highest therapy groups. As discussed
previously, OIG’s initial research results
also corroborate changes in SNF
patterns of care that may have resulted
in an inappropriate number of
beneficiaries being classified into the
highest-paying therapy groups. We will
continue to work with OIG and with
CMS contractors to provide greater
monitoring of SNF utilization and
reporting trends. (This research is
available at https://oig.hhs.gov/oei/
reports/oei-02-09-00204.asp.)
Nevertheless, while we believe this
monitoring activity is necessary, we also
believe that it is necessary to implement
the recalibration of the parity
adjustment in FY 2012 to prevent
continued reimbursement in amounts
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
that significantly exceed our intended
policy.
Accordingly, for the reasons specified
in the FY 2012 proposed rule (76 FR
26370 through 26377) and the reasons
discussed in this final rule, we are
implementing the option discussed in
the proposed rule to recalibrate the
parity adjustment to the RUG–IV casemix indexes to restore the intended
parity in overall payments between the
RUG–53 model and the RUG–IV model,
using the methodology discussed in the
proposed rule. As discussed previously,
the parity adjustment finalized in this
final rule is based on 8 months of FY
2011 claims and MDS 3.0 data. Thus, for
FY 2012, the aggregate impact of this
recalibration would be the difference
between payments calculated using the
original FY 2011 total nursing CMI
increase for all RUG–IV groups of 61
percent, and payments calculated using
the recalibrated total nursing CMI
increase for all therapy RUG–IV groups
of 19.84 percent, while maintaining the
original 61 percent total nursing CMI
increase for all non-therapy RUG–IV
groups. The total difference is a
decrease in payments of $4.47 billion
(on an incurred basis) for FY 2012. We
also note that the $4.47 billion
reduction would be partly offset by the
FY 2012 MFP-adjusted market basket
update of 1.7 percent, or $600 million,
PO 00000
Frm 00016
Fmt 4701
Sfmt 4700
with a net result of a 11.1 percent
reduction, or $3.87 billion, in overall
payments for FY 2012. As discussed
previously, we are implementing the
recalibration on a prospective basis
beginning October 1, 2011, to restore
payments to their intended levels and to
end the current outflow of excess
dollars. While the original FY 2011
system calibration had to be based on
estimated data, this recalibration uses
actual FY 2011 RUG–IV claims data,
which we believe provide the best
picture of the actual resources used
under RUG–IV and result in more
accurate payment. Consistent with past
policy, we will continue to monitor
utilization for the rest of FY 2011, but
we do not anticipate that the remaining
four months of FY 2011 will present a
significantly different picture of SNF
utilization patterns than using the first
8 months of data.
We list the case-mix adjusted
payment rates separately for urban and
rural SNFs in Tables 4 and 5, with the
corresponding case-mix values. These
tables do not reflect the AIDS add-on
enacted by section 511 of the MMA,
which we apply only after making all
other adjustments, such as wage and
case-mix.
BILLING CODE 4120–01–P
E:\FR\FM\08AUR3.SGM
08AUR3
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00017
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
48501
ER08AU11.011
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
VerDate Mar<15>2010
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00018
Fmt 4701
Sfmt 4700
E:\FR\FM\08AUR3.SGM
08AUR3
ER08AU11.012
srobinson on DSK4SPTVN1PROD with RULES3
48502
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
srobinson on DSK4SPTVN1PROD with RULES3
BILLING CODE 4120–01–C
3. Wage Index Adjustment to Federal
Rates
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 we find
appropriate. Since the inception of a
PPS for SNFs, we have used hospital
wage data in developing a wage index
to be applied to SNFs.
In the FY 2012 proposed rule, we
proposed to continue that practice as we
continue to believe that in the absence
of SNF-specific wage data, using the
hospital inpatient wage index is
appropriate and reasonable for the SNF
PPS. As explained in the update notice
for FY 2005 (69 FR 45786, July 30,
2004), the SNF PPS does not use the
hospital area wage index’s occupational
mix adjustment, as this adjustment
serves specifically to define the
occupational categories more clearly in
a hospital setting; moreover, the
collection of the occupational wage data
also excludes any wage data related to
SNFs. Therefore, we believe that using
the updated wage data exclusive of the
occupational mix adjustment continues
to be appropriate for SNF payments.
In the FY 2012 proposed rule, we also
proposed to continue using 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 2012 SNF
PPS wage index. For rural geographic
areas that do not have hospitals and,
therefore, lack hospital wage data on
which to base an area wage adjustment,
we proposed to use the average wage
index from all contiguous CBSAs as a
reasonable proxy. This methodology
was used to construct the wage index
for rural Massachusetts for FY 2011.
However, as indicated in the FY 2012
proposed rule (76 FR 26378), there is
now a rural hospital with wage data
upon which to base an area wage index
for rural Massachusetts. Therefore, it is
not necessary to apply this methodology
to rural Massachusetts for FY 2012.
Furthermore, we indicated that we
would not apply this methodology to
rural Puerto Rico due to the distinct
economic circumstances that exist there,
but instead would continue using the
most recent wage index previously
available for that area. For urban areas
without specific hospital wage index
data, we proposed to 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. At the time of the proposed rule,
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
both CBSA 49700, Yuba City, CA, and
CBSA 25980, Hinesville-Fort Stewart,
GA, did not have wage index data.
However, for this final rule, Yuba City,
CA now has wage index data. Therefore,
the only urban area without wage index
data available is CBSA 25980,
Hinesville-Fort Stewart, GA.
The comments that we received on
the wage index adjustment to the
Federal rates, and our responses to those
comments, appear below.
Comment: A commenter
recommended that CMS improve its
area wage index methodology, and
recommended that any design,
development, or implementation of a
revised hospital wage index must
consider other post-acute care settings.
The commenter noted research by the
Medicare Payment Advisory
Commission (MedPAC) and Acumen,
LLC (Acumen) to support its concern
regarding areas such as reclassification,
SNF-specific wage index, the use of U.S.
Bureau of Labor Statistics (BLS), and
commuting patterns of health care
workers employed by SNFs.
Response: As several commenters
noted, we have research currently under
way to examine alternatives to the wage
index methodology, including the issues
the commenters mentioned about
ensuring that the wage index minimizes
fluctuations, matches the costs of labor
in the market, and provides for a single
wage index policy. Section 3137 of the
Affordable Care Act provides that the
Secretary of Health and Human Services
shall submit a report to Congress by
December 31, 2011, that includes a plan
to reform the hospital wage index
system. Section 3137 of the Affordable
Care Act further instructs the Secretary
to take into account MedPAC’s
recommendations on the Medicare wage
index classification system, and to
include one or more proposals to revise
the wage index adjustment applied
under section 1886(d)(3)(E) of the Act
for purposes of the IPPS. The
proposal(s) are to consider each of the
following:
• The use of Bureau of Labor
Statistics data or other data or
methodologies to calculate relative
wages for each geographic area.
• Minimizing variations in wage
index adjustments between and within
MSAs and statewide rural areas.
• Methods to minimize the volatility
of wage index adjustments while
maintaining the principle of budget
neutrality.
• The effect that the implementation
of the proposal would have on health
care providers in each region of the
country.
PO 00000
Frm 00019
Fmt 4701
Sfmt 4700
48503
• Issues relating to occupational mix,
such as staffing practices and any
evidence on quality of care and patient
safety, including any recommendations
for alternative calculations to the
occupational mix.
• Provide for a transition.
To assist us in meeting the
requirements of section 106(b)(2) of the
Tax Relief and Health Care Act of 2006
(Pub. L. 109–432, enacted on December
20, 2006) (TRHCA), in February 2008,
we awarded a Task Order under our
Expedited Research and Demonstration
Contract to Acumen, LLC. Acumen, LLC
conducted a study of both the current
methodology used to construct the
Medicare wage index and the
recommendations reported to Congress
by MedPAC. Parts 1 and 2 of Acumen’s
final report, which analyzes the
strengths and weaknesses of the data
sources used to construct the CMS and
MedPAC indexes, is available online at
https://www.acumenllc.com/reports/cms.
MedPAC’s recommendations were
presented in the FY 2009 IPPS final rule
(available online at https://
edocket.access.gpo.gov/2008/pdf/E817914.pdf). We plan to monitor these
efforts closely, and to determine what
impact or influence they may have on
the SNF PPS wage index. At this time,
we will continue to use the wage index
policies and methodologies described in
this final rule to adjust the SNF PPS
Federal rates for differences in area
wage levels. However, we will continue
to monitor MedPAC and Acumen’s
progress on any revisions to the IPPS
wage index to identify any policy
changes that may be appropriate for
SNFs and potential changes may be
presented in a future proposed rule. We
discuss the Federal rates by laborrelated and non-labor related
components for FY 2012 below.
To calculate the SNF PPS wage index
adjustment, we apply the wage index
adjustment to the labor-related portion
of the Federal rate, which is 68.693
percent of the total rate. This percentage
reflects the labor-related relative
importance for FY 2012, using the
revised and rebased FY 2004-based
market basket. The labor-related relative
importance for FY 2011 was 69.311, as
shown in Table 9. 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
2012. 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,
E:\FR\FM\08AUR3.SGM
08AUR3
48504
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
srobinson on DSK4SPTVN1PROD with RULES3
the relative importance figure more
closely reflects the cost-share weights
for FY 2012 than the base-year weights
from the SNF market basket.
We calculate the labor-related relative
importance for FY 2012 in four steps.
First, we compute the FY 2012 price
index level for the total market basket
and each cost category of the market
basket. Second, we calculate a ratio for
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
each cost category by dividing the FY
2012 price index level for that cost
category by the total market basket price
index level. Third, we determine the FY
2012 relative importance for each cost
category by multiplying this ratio by the
base year (FY 2004) weight. Finally, we
add the FY 2012 relative importance for
each of the labor-related cost categories
(wages and salaries, employee benefits,
PO 00000
Frm 00020
Fmt 4701
Sfmt 4700
non-medical professional fees, laborintensive services, and a portion of
capital-related expenses) to produce the
FY 2012 labor-related relative
importance. Tables 6 and 7 show the
case-mix adjusted RUG–IV Federal rates
by labor-related and non-labor-related
components.
BILLING CODE 4120–01–P
E:\FR\FM\08AUR3.SGM
08AUR3
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00021
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
48505
ER08AU11.013
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
BILLING CODE 4120–01–C
VerDate Mar<15>2010
20:38 Aug 05, 2011
Section 1888(e)(4)(G)(ii) of the Act
also requires that we apply this wage
Jkt 223001
PO 00000
Frm 00022
Fmt 4701
Sfmt 4700
index in a manner that does not result
in aggregate payments that are greater or
E:\FR\FM\08AUR3.SGM
08AUR3
ER08AU11.014
srobinson on DSK4SPTVN1PROD with RULES3
48506
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
less than would otherwise be made in
the absence of the wage adjustment. For
FY 2012 (Federal rates effective October
1, 2011), we apply an adjustment to
fulfill the budget neutrality requirement.
We meet this requirement by
multiplying each of the components of
the unadjusted Federal rates by a budget
neutrality factor equal to the ratio of the
weighted average wage adjustment
factor for FY 2011 to the weighted
average wage adjustment factor for FY
2012. For this calculation, we use the
same 2010 claims utilization data for
both the numerator and denominator of
this ratio. We define the wage
adjustment factor used in this
calculation as the labor share of the rate
component multiplied by the wage
index plus the non-labor share of the
rate component. The budget neutrality
factor for this year is 1.0007. The wage
index applicable to FY 2012 is set forth
in Tables A and B, which appear in the
Addendum of this final rule, and is also
available on the CMS Web site at https://
www.cms.gov/SNFPPS/04_
WageIndex.asp.
Comment: One commenter estimated
SNF reimbursements using both the FY
2012 SNF wage index in the proposed
rule and in the absence of a wage index
using simulation. The commenter found
that SNF reimbursement was about $400
million lower with the wage index
adjustment than without it. The
commenter believes that CMS is
incorrectly adjusting for the wage index
and that payments during the 2002 to
2011 timeframe are nearly $3 billion too
low.
Response: As previously stated in the
final rule for FY 2010 (74 FR 40303), the
intent of the wage index budget
neutrality factor is to make sure that
aggregate payments using the updated
wage index are not greater or less than
aggregate payments would be using the
previous year‘s wage index. Because the
wage index is based on the pre-floor,
pre-reclassified, no occupational mix
hospital wage index, the weighted
average wage index would be equal to
1.0000 for hospitals. However, there are
often multiple SNFs within a wage area
with varying utilization levels. The
weighted average wage index across all
SNF providers may not be equal to
1.0000 for any given fiscal year, so
payments could go up or down as a
result of their application. Estimation of
payments relies on the combination of
the geographic wage index value for
providers along with their distribution
of service days. The change in the wage
index values along with the utilization
within each urban or rural area
determines the change in aggregate
payments related to the previous year,
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
and therefore, the budget neutrality
factor. The application of the budget
neutrality factor ensures that aggregate
payments will not increase or decrease
due to the year-to-year change in the
wage index. Therefore, we do not agree
with the methodology used by the
commenter, and believe that the 1.0007
budget neutrality factor will ensure
equal payments after updating to the FY
2012 SNF PPS wage index, prior to any
other policy changes.
In the SNF PPS final rule for FY 2006
(70 FR 45026, August 4, 2005), we
adopted the changes discussed in the
Office of Management and Budget
(OMB) Bulletin No. 03–04 (June 6,
2003), available online at https://
www.whitehouse.gov/omb/bulletins_
b03–04, which announced revised
definitions for Metropolitan Statistical
Areas (MSAs), and the creation of
Micropolitan Statistical Areas and
Combined Statistical Areas. In addition,
OMB published subsequent bulletins
regarding CBSA changes, including
changes in CBSA numbers and titles. As
indicated in the FY 2008 SNF PPS final
rule (72 FR 43423, August 3, 2007), this
and all subsequent SNF PPS rules and
notices are considered to incorporate
the CBSA changes published in the
most recent OMB bulletin that applies
to the hospital wage data used to
determine the current SNF PPS wage
index. The OMB bulletins may be
accessed online at https://
www.whitehouse.gov/omb/bulletins/
index.html.
In adopting the OMB Core-Based
Statistical Area (CBSA) geographic
designations, we provided for a 1-year
transition 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),
subsequent to the expiration of this
1-year transition on September 30, 2006,
we used the full CBSA-based wage
index values, as now presented in
Tables A and B in the Addendum of this
final rule.
4. Updates to Federal Rates
In accordance with section
1888(e)(4)(E) of the Act, as amended by
section 311 of the BIPA, and section
1888(e)(5)(B) of the Act, as amended by
section 3401(b) of the Affordable Care
Act, the payment rates in this final rule
reflect an update equal to the full
market basket, estimated at 2.7
PO 00000
Frm 00023
Fmt 4701
Sfmt 4700
48507
percentage points, reduced by the MFP
adjustment. As discussed in sections
I.G.2 and VI.C of the FY 2012 proposed
rule (76 FR 26368 through 26369 and
26394 through 26396), the annual
update includes a reduction to account
for the MFP adjustment described in the
latter section. As discussed in section
III.F.3 of this final rule, the final MFP
adjustment is 1.0 percent, for a net
update of 1.7 percent for FY 2012.
5. Relationship of RUG–IV Case-Mix
Classification System to Existing Skilled
Nursing Facility Level-of-Care Criteria
As discussed in § 413.345, we include
in each update of the Federal payment
rates in the Federal Register the
designation of those specific RUGs
under the classification system that
represent the required SNF level of care,
as provided in § 409.30. As set forth in
the FY 2011 SNF PPS notice with
comment period (75 FR 42910, July 22,
2010), this designation reflects an
administrative presumption under the
66-group RUG–IV system that
beneficiaries who are correctly assigned
to one of the upper 52 RUG–IV groups
on the initial 5-day, Medicare-required
assessment are automatically classified
as meeting the SNF level of care
definition up to and including the
assessment reference date on the 5-day
Medicare-required assessment.
A beneficiary assigned to any of the
lower 14 RUG–IV groups is not
automatically classified as either
meeting or not meeting the definition,
but instead receives an individual level
of care determination using the existing
administrative criteria. This
presumption recognizes the strong
likelihood that beneficiaries assigned to
one of the upper 52 RUG–IV groups
during the immediate post-hospital
period require a covered level of care,
which would be less likely for those
beneficiaries assigned to one of the
lower 14 RUG–IV groups.
In this final rule, we are continuing
the designation of the upper 52 RUG–IV
groups for purposes of this
administrative presumption, consisting
of all groups encompassed by the
following RUG–IV categories:
• Rehabilitation plus Extensive
Services;
• Ultra High Rehabilitation;
• Very High Rehabilitation;
• High Rehabilitation;
• Medium Rehabilitation;
• Low Rehabilitation;
• Extensive Services;
• Special Care High;
• Special Care Low; and,
• Clinically Complex.
However, we note that this
administrative presumption policy does
E:\FR\FM\08AUR3.SGM
08AUR3
48508
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
not supersede the SNF’s responsibility
to ensure that its decisions relating to
level of care are appropriate and timely,
including a review to confirm that the
services prompting the beneficiary’s
assignment to one of the upper 52 RUG–
IV groups (which, in turn, serves to
trigger the administrative presumption)
are themselves medically necessary. As
we explained in the FY 2000 SNF PPS
final rule (64 FR 41667, July 30, 1999),
the administrative presumption
* * * is itself rebuttable in those individual
cases in which the services actually received
by the resident do not meet the basic
statutory criterion of being reasonable and
necessary to diagnose or treat a beneficiary’s
condition (according to section 1862(a)(1) of
the Act). Accordingly, the presumption
would not apply, for example, in those
situations in which a resident’s assignment to
one of the upper * * * groups is itself based
on the receipt of services that are
subsequently determined to be not
reasonable and necessary.
Moreover, we want to stress the
importance of careful monitoring for
changes in each patient’s condition to
determine the continuing need for Part
A SNF benefits after the assessment
reference date of the 5-day assessment,
after which the administrative
presumption no longer applies.
Comment: One commenter stated that
certain instructions contained in version
3.0 of the Long-Term Care Facility
Resident Assessment Instrument (RAI)
User’s Manual (available online at
https://www.cms.gov/NursingHome
QualityInits/45_NHQIMDS30
TrainingMaterials.asp) are inconsistent
with the SNF level of care presumption.
Specifically, the commenter cited
instructions in Chapter 3 (‘‘Overview to
the Item-by-Item Guide to the MDS
3.0’’), Section O (‘‘Special Treatments,
Procedures, and Programs (V1.05)’’),
which provide that tracheostomy care
may be coded on the assessment when
performed by residents themselves.
Similarly, these instructions provide for
coding oxygen therapy when a resident
places or removes his or her own
oxygen mask/cannula, as well as when
a resident performs his or her own
dialysis. The commenter stated that
allowing these items to be coded under
such circumstances compromises not
only the definition of ‘‘skilled services’’
but the entire RUG–IV case-mix
classification system.
Response: We believe that the
commenter errs in assuming that all of
the ‘‘special procedures’’ described in
this section of the manual necessarily
equate directly to skilled services. For
example, even though dialysis is a
critically important, life-sustaining
procedure, its various component tasks
simply do not generally require the
involvement of skilled personnel—as
evidenced by the many instances in
which beneficiaries can be successfully
trained to self-dialyze (or where a friend
or family member with no prior
caregiving experience or training can
readily be taught to perform the dialysis
for them). Moreover, while it is true that
dialysis is one of the discrete indicators
for assignment to a RUG within the
Special Care Low category—a category
to which the level of care presumption
applies for a short period of time at the
start of a SNF stay—it is the totality of
items and services included within a
given RUG, not any one specific coded
service, that actually serves to justify the
presumption. As explained in the FY
2000 SNF PPS final rule (64 FR 41667,
July 30, 1999), it is this entire cluster of
services, when combined with the
‘‘tendency * * * for the initial portion
of an SNF stay to be the most intensive
and unstable’’ that provides the basis for
making the level of care presumption, as
triggered by a resident’s assignment to
one of the designated upper RUGs on
the initial 5-day, Medicare-required
assessment.
6. Example of Computation of Adjusted
PPS Rates and SNF Payment
Using the hypothetical SNF XYZ
described in Table 8, the following
shows the adjustments made to the
Federal per diem rate to compute the
provider’s actual per diem PPS
payment. SNF XYZ’s 12-month cost
reporting period begins October 1, 2011.
As illustrated in Table 8, SNF XYZ’s
total PPS payment would equal
$40,053.06. We derive the Labor and
Non-labor columns from Table 6 of this
final rule.
TABLE 8—RUG–IV SNF XYZ: LOCATED IN CEDAR RAPIDS, IA (URBAN CBSA 16300)
[Wage index: 0.8831]
RUG–IV group
RVX ..................................
ES2 ..................................
RHA ..................................
CC2 * ................................
BA2 ..................................
Labor
Wage index
$450.67
361.85
227.35
209.59
144.49
Adjusted
labor
$0.8831
0.8831
0.8831
0.8831
0.8831
$397.99
319.55
200.77
185.09
127.60
Non-labor
$205.39
164.92
103.62
95.52
65.85
Adjusted
rate
Percent
adjustment
$603.38
484.47
304.39
280.61
193.45
$603.38
484.47
304.39
639.79
193.45
Medicare
days
14
30
16
10
30
100
Payment
$8,447.32
14,534.10
4,870.24
6,397.90
5,803.50
40,053.06
* Reflects a 128 percent adjustment from section 511 of the MMA.
C. Resource Utilization Groups, Version
4 (RUG–IV)
srobinson on DSK4SPTVN1PROD with RULES3
1. Prospective Payment for SNF NonTherapy Ancillary Costs
The FY 2012 proposed rule discussed
the issue of payment for NTA costs
under the SNF PPS (76 FR 26381
through 26384). This discussion
described the previous research that has
been conducted in this area, as well as
current policy and analysis.
Specifically, this discussion referenced
the ongoing development of a two-part
NTA component payment, as well as the
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
conceptual analysis for the types of
conditions and MDS-driven variables
which may be used to predict and pay
for patient NTA costs accurately.
Finally, this discussion included
reference to the impact of an NTA
component payment as it relates to the
temporary AIDS add-on payment
established by section 511 of the MMA
(as discussed in section I.E of this final
rule). The comments that we received
on this topic both this year and in
response to the FY 2011 notice with
comment period, and our responses,
appear below.
PO 00000
Frm 00024
Fmt 4701
Sfmt 4700
Comment: All of the comments we
received in response to this discussion
supported CMS’s broad objective to
develop a new method for paying for
NTAs received in the SNF, as well as
the basic structure described in the
proposed rule for a potential NTA rate
component. The commenters also
expressed their interest in working with
CMS to develop an appropriate NTA
rate component that is properly tailored
to capture facility NTA costs accurately.
Similarly, in response to the FY 2011
notice with comment period, several
commenters also expressed their
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
support for development of a separate
NTA component in line with CMS’s
current research.
Response: We appreciate the broad
support that we received for the
objective and overall model for
designing a separate NTA rate
component. The comments we received
provided a number of interesting and
creative ideas which will be considered
during the research and development
process. We look forward to working
with providers and stakeholders in the
future as we continue to develop this
refinement to the SNF PPS.
Comment: A few commenters stated
that the NTA rate component research
should be updated to reflect data
gathered on the MDS 3.0. One
commenter asked that CMS consider the
potential interplay between an NTA
component and those drugs and services
which may be subject to, or excluded
from, consolidated billing. Several
commenters also said that, given CMS’s
discussion related to reallocating some
portion of the nursing component to
fund the NTA component, CMS should
ensure that the nursing component still
reflects resource cost and utilization
after the carve-out is done. Finally, one
commenter, in response to the FY 2011
notice with comment period, requested
that CMS pay special attention to NTA
costs associated with providing
ventilator services within the SNF.
Response: We agree with the
commenters that our research must be
aligned with continuous improvements
made to the SNF PPS, particularly the
MDS 3.0. We expect that, as more MDS
3.0 data become available, our NTA
researchers will be able to incorporate
these data into our analysis. Similarly,
we are cognizant of the potential
relationship between the NTA research
and services and drugs which fall under
consolidated billing. As we continue
our analysis, we expect that such
relationships will be considered in
determining the appropriateness of the
NTA component.
With regard to ensuring the adequacy
of the nursing component after carving
out a separate NTA component, we
intend to ensure that the introduction of
a new rate component for NTAs does
not undermine the adequacy of
payments for nursing services, and we
will continue to monitor the adequacy
of payments after any new rate
component is implemented. It should be
noted that any new carved-out NTA
component would, in effect, remove
from the nursing component only the
costs of the NTA services themselves,
which we would then adjust separately
from nursing costs based on information
that may better predict NTA costs.
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
48509
Finally, as discussed in the FY 2010
final rule (74 FR 40341), ventilator
patients are addressed to some extent
within the RUG–IV system (through
payments under the Extensive Services
group), and we are continuing to
monitor the adequacy of payments for
this subset of SNF residents. Currently,
payments for these services are still
integrated into the nursing costs paid for
the relevant case-mix group, but in our
NTA research, we are considering a
variety of special NTA subsets,
including ventilator use, which might
deserve special attention as part of the
highest-tiered payment within the nonroutine NTA tier system.
Comment: One commenter believed
that the Post Acute Care Payment
Reform Demonstration (PAC–PRD) and
data collected as part of the research on
the CARE tool would not serve as an
appropriate source of data for the NTA
research we are conducting. This
commenter stated that it would be
premature for CMS to make use of such
data before it has been subject to both
agency and Congressional review.
Response: We appreciate the
commenter’s concern regarding the use
of these data and will certainly consider
it as the research moves forward. We
would note that data sources, such as
the PAC–PRD, are being considered for
their potential utility as part of
developing an NTA component which
would more accurately reimburse
facilities for incurred NTA costs, though
no final decision has been made as to
what are the most appropriate sources.
In the end, we will ensure that all data
sources have been thoroughly reviewed
for their accuracy and applicability
within the SNF setting.
Comment: Several commenters
discussed the possibility of including a
cost pass-through for high-cost drugs
and services as part of the outlier
development.
Response: While we appreciate
comments on the development of an
SNF outlier policy, we would note that
we do not have statutory authority to
implement an outlier payment for
certain NTA services.
designed to tie payment to performance
in such a way as to reduce inappropriate
or poorly provided care and identify
and reward those who provide effective
and efficient patient care. We also stated
that, in accordance with section 3006(a)
of the Affordable Care Act, we would
consult with stakeholders in developing
the implementation plan, and consider
the outcomes of any recent
demonstration projects related to VBP
which we believe might be relevant to
the SNF setting. The comments we
received on this topic, along with our
responses, appear below.
Comment: We received some
comments in response to our
description of the requirements of
section 3006(a) of the Affordable Care
Act to develop a plan to implement a
VBP program for SNFs, and to submit to
Congress a report by October 1, 2011.
Commenters supported our efforts to
consider a VBP program for SNFs, and
made suggestions for the content and
timing of the Report to Congress.
Response: Between December 2010
and January 2011, we held discussions
with key stakeholders representing
consumers, providers, and research
organizations about the development of
a plan to implement a VBP program for
SNFs and the Report to Congress. We
also held an Open Door Forum on
March 10, 2011, in which more than 700
stakeholders participated in the call. A
number of organizations submitted
follow-up written comments, which we
will share with the VBP project team.
We are in the process of developing
the SNF VBP plan to address areas
required by the statute. As required by
the statute, in developing the plan, we
will consider, among other things,
measures of quality and efficiency in
SNFs, reporting, collection, and
validation of quality data, the structure
of VBP adjustments, including the
determination of thresholds or
improvements in quality that would
substantiate a payment adjustment, the
size of such payments, and the sources
of funding for bonus payments. We plan
to submit the Report to Congress by the
statutory deadline of October 1, 2011.
D. Ongoing Initiatives Under the
Affordable Care Act
2. Payment Adjustment for HospitalAcquired Conditions (Section 3008)
One of the ongoing Affordable Care
Act initiatives that we discussed in the
FY 2012 SNF PPS proposed rule (76 FR
26384) is the payment adjustment added
by section 3008(a) of the Affordable
Care Act, which is intended to provide
an incentive to reduce the occurrence of
certain preventable hospital-acquired
conditions. While this hospital
provision is itself beyond the scope of
the SNF PPS, in the proposed rule, we
1. Value-Based Purchasing (Section
3006)
In the FY 2012 proposed rule (76 FR
26384), we noted that section 3006(a) of
the Affordable Care Act directs the
Secretary to develop a plan to
implement a value-based purchasing
(VBP) program for SNFs, and submit a
Report to Congress by October 1, 2011.
As stated in the proposed rule, VBP is
PO 00000
Frm 00025
Fmt 4701
Sfmt 4700
E:\FR\FM\08AUR3.SGM
08AUR3
48510
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
additionally mentioned a study required
under section 3008(b) of the Affordable
Care Act, which directs the Secretary to
evaluate possibly expanding the HAC
policy from acute care hospitals to a
variety of other settings, including
SNFs, and to submit a report to
Congress containing the results of the
study by January 1, 2012.
Comment: We received a number of
comments regarding the study
referenced in the proposed rule that is
required by section 3008(b) of the
Affordable Care Act, which directs the
Secretary to undertake a study and send
a Report to Congress considering the
feasibility of extending the Hospital
Acquired Conditions-Present on
Admission (HAC–POA) program to the
other types of facilities. The
commenters urged CMS to evaluate
carefully the types of facility-acquired
conditions that would be relevant to
SNFs, and to avoid simply applying all
of the hospital-acquired conditions to
the postacute setting.
Response: We appreciate the
comments we received on the issues
that we should consider in the study
and Report to Congress required by
section 3008(b) of the Affordable Care
Act. We are considering a broad range
of issues related to extending the HAC–
POA program to the other types of
facilities specified in the Affordable
Care Act. The required study and Report
to Congress are currently in progress,
and we intend to issue the report by the
statutory deadline.
3. Nursing Home Transparency and
Improvement (Section 6104)
In the FY 2011 proposed rule (76 FR
26385), we discussed section 6104 of
the Affordable Care Act, which requires
SNFs to report expenditures separately
for direct care staff wages and benefits
on the Medicare cost report, for cost
reporting periods beginning on or after
2 years after enactment, and also
requires the Secretary to perform certain
related activities. We received no
comments on this provision.
E. Other Issues
srobinson on DSK4SPTVN1PROD with RULES3
1. Required Disclosure of Ownership
and Additional Disclosable Parties
Information (Section 6101)
In the SNF PPS proposed rule for FY
2012 (76 FR 26364), we proposed to
revise the reporting requirements that
Medicare SNFs and Medicaid nursing
facilities must disclose at the time of
enrollment and when any change in
ownership occurs, in accordance with
section 6101 of the Affordable Care Act.
In certain regulations that apply to
Medicare SNFs and Medicaid nursing
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
facilities, we proposed to add a
definition for ‘‘additional disclosable
party’’ and ‘‘organizational structure’’
and to revise the definition for
‘‘managing employee.’’ These proposed
definitions were consistent with the
requirements set forth in section 6101 of
Affordable Care Act. Given the arguably
broad nature of the term ‘‘additional
disclosable parties,’’ we solicited
comments on how best to narrow the
scope of the definition for this term. We
also proposed to revise § 424.516 to
implement certain new disclosure
requirements that pertain to Medicare
SNFs and to amend § 455.104 to
implement certain new disclosure
requirements that pertain to Medicaid
nursing facilities. Furthermore, we
requested comments on a potential
alternative approach in which we would
collect certain information from
Medicare SNFs only upon revalidation
consistent with the requirements set
forth in § 424.515. In accordance with
§ 424.515, Medicare SNFs generally
would be subject to revalidation
requirements every 5 years. Section
424.515(d), however, provides for offcycle revalidations. We received a
number of comments on this potential
alternative approach.
To respond properly to all of the
comments received related to the
disclosure of information requirements,
we will publish a separate final rule
specifically addressing these provisions
at a later date. In accordance with the
statutory requirements of section 6101
of the Affordable Care Act, we intend to
publish that final rule early in CY 2012.
Accordingly, we are not implementing
these provisions in this SNF PPS final
rule.
2. Therapy Student Supervision
In the FY 2012 proposed rule (76 FR
26385 through 26386), we proposed to
revise a policy that had appeared
previously in the preamble to the FY
2000 final rule, which had specified that
a therapy student in the SNF setting
must ‘‘* * * be under the ‘line-of-sight’
level of supervision of the professional
therapist’’ (64 FR 41661, July 30, 1999).
We proposed that line-of-sight
supervision should no longer be
required in the SNF setting. We
proposed that, instead, each SNF would
determine for itself the appropriate
manner of supervision of therapy
students consistent with applicable
State and local laws and practice
standards. We advanced this proposal in
the interest of promoting greater
conformity with the other inpatient
settings under Part A (for example,
acute care hospitals and IRFs), which
already permit each provider to
PO 00000
Frm 00026
Fmt 4701
Sfmt 4700
determine for itself the most appropriate
manner of supervision in this context,
consistent with applicable State and
local laws and practice standards. The
comments we received on this topic,
along with our responses, may be found
below.
Comment: The great majority of
commenters were supportive of this
revision, with some criticizing the
existing policy as creating difficulty in
securing therapy students in the SNF
setting. One commenter expressed the
belief that supervising therapists will
now be able to offer an increased quality
of care in the SNF setting, and that
students will experience an elevated
quality of learning that will prepare
future clinicians to work in the SNF
setting. Many commenters were
concerned with how the time spent by
therapy students with SNF patients
could be billed, if at all. Several of the
therapy trade associations offered
detailed guidelines on therapy student
supervision, with some of those also
indicating that once a supervising
therapist deems the student capable of
treating a patient without line-of-sight
supervision, the student’s time should
then be separately counted as skilled
therapy minutes, over and above the
therapist’s own time. By contrast,
another commenter stressed the
importance of making clear that only the
line-of-sight supervision requirement
itself is being changed, to avoid
triggering an inordinate increase in
therapy student minutes that would
create another distortion in the payment
system. Several commenters suggested
that CMS publish specific criteria that
facilities should use to determine
whether a student is capable to treat
patients without line-of-sight
supervision. Others suggested that
beyond the specific criteria, CMS
should specifically state that the
supervising therapist, rather than the
facility, should be the only entity to
determine whether a student is capable
of treating patients without line-of-sight
supervision. However, two commenters
were completely opposed to rescinding
the line-of-sight requirement: One stated
that eliminating this requirement would
be inconsistent with existing Part B
therapy instructions appearing in § 230
of the Medicare Benefit Policy Manual
(MBPM), Chapter 15, while the other
expressed concern that it could result in
SNFs inappropriately misclassifying
therapy time to increase reimbursement.
Response: Regarding the Part B
instructions that one of the commenters
cited in the MBPM, we note that these
particular instructions do not actually
mandate line-of-sight supervision for
therapy students, but merely specify
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
that the services ‘‘* * * performed by a
student are not reimbursed even if
provided under ‘line of sight’
supervision of the therapist’’ (emphasis
added). Further, with regard to the
concerns over potential distortions in
reimbursement, we wish to clarify that
the change we have proposed would
solely address the specific manner of
supervision for a therapy student in this
setting, but would in no way alter that
individual’s basic status as a student
operating under the therapist’s
supervision. Thus, this policy change
would not change the manner in which
therapy minutes currently are recorded
on the MDS or cause the student’s time
to become separately reimbursable.
In response to those commenters
concerned with how to bill therapy
student time spent with SNF patients,
consistent with our existing policy as
set forth in the RAI Manual, Chapter 3,
Section O (pages O–20 through O–22),
as the therapy student is under the
direction of the supervising therapist
(even if no longer required to be under
line-of-sight supervision), the time the
student spends with a patient will
continue to be billed as if it were the
supervising therapist alone providing
the therapy. In other words, the therapy
student, for the purpose of billing, is
treated as simply an extension of the
supervising therapist rather than being
counted as an additional practitioner. It
should be noted that all policies and
definitions related to the type of therapy
provided (individual, concurrent, and
group) apply to the supervising
therapist and therapy student as set
forth in the RAI manual, Chapter 3,
Section O (pages O–20 through O–22)
even if the student is no longer required
to be under line-of-sight supervision.
Finally, we agree that students who
treat SNF residents without line-of-sight
supervision should be qualified based
on specific guidelines. As we stated in
the proposed rule, ‘‘* * * each SNF
would determine for itself the
appropriate manner of supervision of
therapy students, consistent with
applicable State and local laws and
practice standards’’ (76 FR 26835). We
expect that professional associations,
State and local licensing boards, and
facilities should have very specific
guidelines related to student clinicians’
level of education and experience.
Additionally, we expect that every
student clinician should meet these
standards and guidelines and that once
met, the supervising therapist should
have ultimate authority to determine
whether a student clinician is
adequately prepared to treat patients
without line-of-sight supervision. In this
context, we appreciate the detailed
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
supervision guidelines that several of
the trade associations have developed,
which we recognize as playing a
significant role in helping to define the
applicable standards of practice on
which providers rely in this context.
However, we believe that the question
of counting the student’s time is
actually a separate issue apart from
providing guidance on appropriate
supervisory practices themselves. As
noted previously, a therapy student’s
time was not separately reimbursable
prior to the elimination of the
requirement for line-of-sight
supervision, nor does it become so now
as a result of this change.
Therefore, for the reasons outlined in
this final rule and in the FY 2012
proposed rule (76 FR 26385 through
26386), we are finalizing our proposed
revision to the line-of-sight supervision
requirements as they pertain to students
in a SNF setting. Accordingly, in this
final rule, we are hereby discontinuing
the policy announced in the FY 2000
final rule’s preamble requiring line-ofsight supervision of therapy students in
SNFs, as set forth in the FY 2012
proposed rule. Instead, effective October
1, 2011, as with other inpatient settings,
each SNF will determine for itself the
appropriate manner of supervision of
therapy students consistent with State
and local laws and practice standards.
We will be monitoring student
participation in SNFs and expect that
facilities will ensure that students,
though no longer required to be under
line-of-sight supervision, will still be
properly supervised for both the
student’s and patient’s benefit.
3. Group Therapy and Therapy
Documentation
Under our current policy, group
therapy is the practice of one
professional therapist treating multiple
patients (up to a maximum of four) at
the same time while the patients are
performing either the same or similar
activities, consistent with the policies
first set forth in the FY 2000 SNF PPS
final rule (64 FR 41662). In the FY 2012
proposed rule (76 FR 26386 through
26388), we proposed to make certain
changes relating to the definition of
group therapy and payment of group
therapy services.
We noted that, using our STRIVE data
as a baseline, we identified two
significant changes in provider behavior
related to the provision of therapy
services to Medicare beneficiaries in
SNFs under RUG–IV. First, we saw a
major decrease in the amount of
concurrent therapy performed in SNFs,
the minutes for which are divided
between the two concurrent therapy
PO 00000
Frm 00027
Fmt 4701
Sfmt 4700
48511
participants when determining the
patient’s appropriate RUG classification.
At the same time, we found a significant
increase in the amount of group therapy
services, which are currently not subject
to the allocation requirement. Given this
increase in group therapy services, we
expressed concern that the current
method for reporting group therapy on
the MDS creates an inappropriate
payment incentive to perform the group
therapy in place of individual therapy,
because the current method of reporting
group therapy time does not require
allocation among patients, as noted by
several commenters. In addition, the
allocation of concurrent therapy
minutes effective FY 2011 may have
created an incentive to perform group
therapy in place of concurrent therapy
in situations where concurrent therapy
otherwise may have been appropriate.
In the proposed rule, we proposed to
change our policies relating to group
therapy as further discussed below.
First, we proposed to establish a
standard that defines group therapy as
therapy provided simultaneously to four
patients who are performing the same or
similar therapy activities (76 FR 26386
through 26387). As we stated in the
proposed rule (76 FR 26386), because in
group therapy patients are performing
similar activities, in contrast to
concurrent therapy, group therapy gives
patients the opportunity to benefit from
each other’s therapy regimen by
observing and interacting with one
another, and applying the lessons
learned from others to one’s own
therapy program in order to progress.
Large groups, such as those of five or
more participants, can make it difficult
for the participants to engage with one
another over the course of the session.
In addition, we have long believed that
individual therapists could not
adequately supervise large groups, and
since the inception of the SNF PPS in
July 1998, we have capped the number
of residents at four.
Furthermore, we believe that groups
of fewer than four participants do not
maximize the group therapy benefit for
the participants. As we stated in the FY
2012 proposed rule (76 FR 26386), we
believe that in groups of 2 or 3
participants, the opportunities for
patients in the group to interact and
learn from each other are significantly
diminished given the small size of the
group. Thus, we believe that groups of
two or three participants, given their
small size, significantly limit the ability
of patients to derive the unique benefits
associated with group therapy. In such
small groups, these limitations become
even more accentuated whenever one or
two patients are absent from the therapy
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
48512
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
session (in fact, with groups of two
participants, if one patient is absent
from the session, there are no longer any
patients with whom the remaining
participant can interact, thereby
eliminating any benefit that could be
derived from participation in a group).
Thus, for the reasons discussed above
and in the FY 2012 proposed rule (76
FR 26386 through 26387), we believe
that the most appropriate group therapy
size for the SNF setting is four, which
we believe is the size that permits the
therapy participants to derive the
maximum benefit from the group
therapy setting. Accordingly, we
proposed to define group therapy as
therapy provided simultaneously to four
patients who are performing similar
therapy activities (76 FR 26387).
In addition, we proposed to allocate
group therapy among the four group
therapy participants. As we stated in the
FY 2012 proposed rule (76 FR 26387),
the SNF PPS is based on resource
utilization and costs. We believe that
when a therapist treats four patients in
a group for an hour, it does not cost the
SNF four times the amount (or four
hours of a therapist’s salary) to provide
those services. The therapist would
appropriately receive one hour’s salary
for the hour of therapy provided.
Accordingly, we believe that allocating
group therapy minutes among the four
group therapy participants would best
capture the resource utilization and
cost. For therapists treating patients in
a group setting, the full time spent by
the therapist with these patients would
be divided by 4 (the number of patients
that comprise a group). As we stated in
the FY 2012 proposed rule (76 FR
26387), as is currently the procedure,
the SNF would report the total
unallocated group therapy minutes on
the MDS 3.0 for each patient. In terms
of RUG–IV classification, this total time
would be allocated (that is, divided)
among the four group therapy
participants to determine the
appropriate number of RTM and,
therefore, the appropriate RUG–IV
therapy group and payment level, for
each participant. We stated in the FY
2012 proposed rule that the 25 percent
cap on group therapy minutes, as
defined in the July 30, 1999 final rule
(64 FR 41662) will remain in effect, as
we continue to believe that group
therapy should serve only as an adjunct
to individual therapy. The 25 percent
cap would be applied to the patient’s
reimbursable group therapy minutes. In
addition, consistent with our current
policy (64 FR 41662), the supervising
therapist may not be supervising any
individuals other than the four
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
individuals who are in the group at the
time of the therapy session.
Additionally, we made a number of
clarifications with regard to clinical
documentation requirements related to a
patient’s plan of care (76 FR 26387
through 26388). In the proposed rule,
we discussed these requirements and
clarified a number of regulatory
provisions related to documentation
within the SNF setting (see 76 FR 26387
through 26388 for a full discussion).
Specifically, we noted (76 FR 26387)
that SNFs are currently required to
follow a prescribed plan of care for the
therapy provided to a SNF resident
(§ 409.23) and that the plan must meet
the requirements of the regulations in
§ 409.17(b) through (d). We further
clarified that supporting medical record
documentation is needed so that SNFs
can verify that the plan of care is being
followed, and can identify when
significant changes in a patient’s
medical condition occur. In addition,
we stated that such supporting medical
record documentation has always been
required so that contractors can verify
medical necessity when they review
SNF claims (76 FR 26387). One example
of appropriate documentation would be
to use time stamps to indicate the exact
start and ending time of a therapy
session. These time stamps could be
tracked on a beneficiary’s record to
determine what discipline and mode of
therapy they received. If necessary,
these time stamps could be compared
with a therapist’s log in order to
streamline the medical review process.
We also clarified that providers should
ensure that skilled therapy services are
appropriate to the goals of a patient’s
individualized plan of care, and that it
should be clear, based on the patient’s
medical record, therapy notes, and/or
other related documentation, how the
prescribed skilled therapy services
contribute to the patient’s anticipated
progress toward the prescribed goals (76
FR 26388). We discussed the
relationship between this
documentation and the use of group
therapy, clarifying that group therapy is
not appropriate for every patient or for
all conditions. Accordingly, SNFs
should include justification for using
group therapy as part of the patient’s
plan of care, to permit verification of the
medical necessity and the
appropriateness of the prescribed
therapy plan (76 FR 26388). Finally, we
discussed the need to update the
patient’s plan of care when changes
occur that would affect the prescribed
therapy plan or patient’s condition, and
clarified that any such changes in the
therapy plan must be justified by
PO 00000
Frm 00028
Fmt 4701
Sfmt 4700
changes in the beneficiary’s underlying
health condition, and that the provider
is expected to describe in the plan of
care the reasons for deviating from the
original plan (76 FR 26388). We
received a number of comments on
these proposals and clarifications
which, along with our responses, appear
below.
Comment: Several commenters
expressed support for the proposed
change to allocate the group therapy
minutes. Many others had general
concerns about the allocation of group
therapy. One commenter believed that
during a group therapy session, every
patient benefits for the full time of the
session, rather than only one quarter of
the session as the allocation of group
time would suggest. Additionally,
several commenters have expressed that
there are psychosocial and functional
benefits of group therapy and are
concerned that residents will be
negatively affected by the allocation of
group therapy. We have received
multiple comments claiming that the
allocation of group therapy minutes will
disincentivize therapists from
performing group therapy in cases
where group therapy may be the
preferred mode of treatment, since their
payments will decrease if they continue
to provide the same volume of group
therapy. Several commenters stated that
planning and implementing group
therapy tasks is a very time-consuming
and challenging process, and that to
allocate the group therapy minutes
would mean that payment would not
accurately reflect the time spent
preparing for these therapy sessions and
the additional costs of providing group
therapy. One commenter stated it is
more expensive to provide group
therapy than individual or concurrent
therapy.
Response: As we noted in the
proposed rule (76 FR 26387), the
allocation of group therapy time is
based on accurately paying for the
therapist’s time, not the resident’s time.
During a one-hour group therapy
session with four patients, while all four
patients may receive a full hour of
benefit from the therapy session, this
still only constitutes one hour of the
therapist’s time. Given that the SNF PPS
is based on resource utilization and
cost, the payment for these services
should reflect the amount of the
therapist’s time that was utilized as part
of the therapy session.
As stated in our proposal, we agree
with the commenters that there are
unique benefits to group therapy. We do
not believe that the allocation of group
therapy minutes should be considered a
deterrent to having group therapy
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
sessions or should negatively affect
beneficiaries. Instead, allocation of
group therapy brings Medicare
payments in line with resource
utilization and cost for these services
and is intended to ensure that the
therapist’s time is being appropriately
counted and reimbursed. We would
expect therapists to continue to provide
the mode of therapy that is most
clinically appropriate for each patient.
Regarding the statement that the
preparation for group therapy is a highcost, time-consuming, and challenging
process requiring careful evaluation of
each patient, we agree that special care
should be taken to plan for the most
appropriate group therapy program for
the designated patients. However, we
expect that therapists will utilize highquality standards of practice that require
careful planning and documentation for
all modes of therapy.
Moreover, these costs were included
in the establishment of the per diem
base rate, and are already being
reimbursed as part of the SNF PPS.
Additionally, while some commenters
did maintain that group therapy costs
more to provide than individual or
concurrent therapy, other commenters
believed the opposite, with one
commenter stating the following
regarding the allocation policy, ‘‘The
policy would undercut efficiency, while
pushing patients into higher cost modes
of care.’’ We note that in allocating
group therapy minutes, we are not
dictating the mode of therapy that a SNF
should provide to its patients. Instead,
as discussed above, this policy brings
Medicare payments more in line with
resource utilization and cost for these
services. Determinations regarding the
appropriate mode of therapy should be
made by the therapist based on the
clinical needs of each patient.
Comment: Several commenters raised
concerns regarding the strict allocation
of group therapy minutes by four. The
most common question we received
from commenters was for clarification of
why four was chosen to be the divisor,
regardless of the number of participants
in the group. Some commenters stated
that using a hard divisor of four for
group therapy minutes, rather than
proposing to have facilities report the
number of participants in the group and
divide accordingly, contradicts CMS’s
reasoning that the allocation of group
therapy is based on resource cost and
utilization. These commenters also
inquired as to how the facility should
report the therapy time if four residents
were scheduled for a group therapy
session and one of the participants fell
ill and was unable to participate.
Several commenters asserted that we
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
created a financial incentive to provide
group therapy when we allocated
concurrent therapy and did not address
group therapy.
One commenter stated that as a rural
provider, it is very rare ever to have a
4-person group. Another commenter
discussed the ability of therapists to
transition patients from a concurrent
therapy environment to a group
environment, and indicated that
dividing by four makes it more difficult
for providers to transition patients
properly between concurrent and group
therapy. Several commenters
encouraged CMS to consult with
clinical experts and professional
therapy associations to determine the
most appropriate number of group
therapy participants based on clinical
standards.
Response: Contrary to commenters’
assertions, we did not propose to divide
group therapy minutes by four
regardless of the number of participants
in the group. We proposed to divide by
four in allocating group therapy minutes
because we had proposed a definition of
group therapy which requires four
participants. In the FY 2012 proposed
rule, we proposed to define group
therapy as therapy provided
simultaneously to four patients who are
performing the same or similar
activities. (76 FR 26387) Thus, based on
our proposed definition of group
therapy (which we are finalizing in this
rule), we expect group therapy to be a
structured, planned program with four
participants for whom group therapy
has been determined appropriate. As we
stated in the proposed rule, we
proposed ‘‘allocating group therapy
minutes among the four group therapy
participants’’ (76 FR 26387, emphasis
added). Thus, given this definition of
group therapy, dividing group therapy
minutes by four captures resource
utilization and cost associated with
providing this mode of therapy, as
under our proposed policy, groups
would be required to have four
participants. We note that, in situations
where the definition of group therapy is
not met, those minutes may not be
coded on the MDS as group therapy.
We recognize that in some situations,
one or more of the scheduled group
therapy participants may not be able to
attend a group session due to illness or
otherwise, or may be unable to finish
participating in the entire group session.
Based on our definition of group
therapy as finalized in this rule, we
expect group therapy to be a structured,
planned program with four participants.
However, if one or more of the four
participants are unexpectedly absent
from a session or cannot finish
PO 00000
Frm 00029
Fmt 4701
Sfmt 4700
48513
participating in the entire session, rather
than discontinuing payment or
requiring the session to be rescheduled,
we will continue to deem the therapy
session as meeting the definition of
group therapy as long as the therapy
program originally had been planned for
four patients. In this situation, we will
continue to assume that there are four
patients and, therefore, will divide the
therapy minutes by four in allocating
group therapy minutes among the group
therapy participants. As discussed
above, we believe the most appropriate
size for group therapy in a SNF setting
is four participants and, thus, we
believe dividing by four reflects the
resource utilization and cost associated
with group therapy as we have defined
it in this rule and as we expect it to be
structured based on this definition.
Commenters have suggested that we
recognize an alternative to allocating
group therapy by four and, instead,
divide the therapy minutes by the
number of patients in the group.
However, one commenter stated, ‘‘Such
an approach does not recognize the
additional burdens and costs associated
with the provision of group services,
however, nor the difficulty providers
and therapists would have in tracking
the number of people in a group at all
times and accurately counting minutes
when patients are dropping in and
dropping out throughout the session.’’
As we stated above and in the FY 2012
proposed rule (76 FR 26387), we believe
that most appropriate group therapy size
in a SNF setting is four participants and,
thus, we have defined group therapy
accordingly. Given this definition, we
believe that it is appropriate to allocate
group therapy minutes among the
participants by dividing by four. We
note that the apparent lack of structure
and discontinuity of the group
interventions, as noted by the
commenter, suggests that facilities may
need to reassess their methods of
providing group therapy services. In
addition, we agree with many
commenters that the implementation of
RUG–IV created a payment incentive to
provide group therapy and that the
increase in group therapy may have
been due to payment rather than clinical
considerations. We note that by
allocating group therapy among the four
group therapy participants, we are also
equalizing the reimbursement incentive
across the modes of therapy. We believe
this will once again encourage
clinicians to choose the mode of therapy
based on clinical rather than financial
reasons. Several commenters agreed
with this concept and one stated that
‘‘Payments for different modalities of
E:\FR\FM\08AUR3.SGM
08AUR3
48514
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
therapy (concurrent, group, and
individual) should reflect the different
costs to provide the services. Otherwise
providers will have financial incentives
to furnish one modality over another,
regardless of whether the modality is
the most clinically appropriate for the
patient.’’ It is also important to keep in
mind that every payment system has
multiple incentives, both positive and
negative. The management in each
facility is faced with making cost/
benefit choices on an almost daily basis.
However, these choices must keep
patient needs at the forefront of the
decision-making process, and the
existence of a payment incentive does
not in itself justify the provision of a
lower or less appropriate level of care
merely in order to reduce facility costs.
We continue to believe that the
provision of group therapy should be
initiated only after determining that
group therapy services are appropriate
for each patient who receives them and
that the group therapy provided is
appropriate to the individual plans of
care. As we noted in the proposed rule
(76 FR 26388),
srobinson on DSK4SPTVN1PROD with RULES3
It is incumbent upon providers to ensure
that skilled therapy services provided to a
given SNF resident are appropriate to the
goals of the patient’s individualized plan of
care * * * Because group therapy is not
appropriate for either all patients or all
conditions, and in order to verify that group
therapy is medically necessary and
appropriate to the needs of the beneficiary,
SNFs should include justification for the use
of group, rather than individual or
concurrent therapy. This description should
include, but need not be limited to, the
specific benefits to that particular patient of
including the documented type and amount
of group therapy; that is, how the prescribed
type and amount of group therapy will meet
the patient’s needs and assist the patient in
reaching the documented goals.
Therefore, we believe that to every
extent possible, group therapy sessions
should not fluctuate in size and
membership. As we stated above, we
believe the most appropriate group
therapy size in a SNF setting is four
participants, and thus we are defining
group therapy accordingly. Thus, as we
are defining group therapy as consisting
of four participants, we believe that
allocating the minutes among the four
participants best captures resource
utilization and cost.
As discussed above, one commenter
discussed the ability of therapists to
transition patients from a concurrent
therapy environment to a group
environment, and indicated that
dividing by four makes it more difficult
for providers to transition patients
properly between concurrent and group
therapy. Historically, prior to the
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
implementation of the RUG–IV system,
SNFs reported a low utilization of group
therapy. The limited use of group
therapy programs may well be related to
the logistical difficulties mentioned by
this commenter, such as transitioning
the patients properly between
concurrent and group therapy. However,
we do not see how allocating group
therapy minutes would make it more
difficult to transition patients from one
therapy mode to another, as such
transitions should be based on clinical
determinations. The purpose of our
allocation policy is to provide payment
that better reflects resource utilization
and cost, and we do not believe this
policy should affect clinical
determinations regarding the
appropriate mode of therapy provided
to a patient. We recognize the unique
challenges that rural facilities face, but
as we discussed above and in the FY
2012 proposed rule, we believe that the
most appropriate group therapy size for
a SNF setting is four. We believe that
group therapy should be used to
supplement individual therapy when
suitable. In facilities where fewer than
four patients are consistently being
treated with the same or similar
therapeutic interventions, group therapy
programs may not always be
appropriate. We expect all facilities to
make the best clinical decisions when
providing group therapy.
For the reasons discussed above and
in the FY 2012 proposed rule (76 FR
26386 through 26388), as proposed,
effective October 1, 2011, group therapy
will be defined as therapy provided
simultaneously to four patients who are
performing the same or similar
activities, and group therapy time will
be divided by four in determining the
reimbursable therapy minutes for each
group therapy participant and,
therefore, the appropriate RUG–IV
group.
As discussed above and in the FY
2012 proposed rule, we believe it is
appropriate to define group therapy as
consisting of four participants.
However, we will continue to monitor
group therapy utilization and will
continue to consult with clinical
experts, professional therapy
associations, and other stakeholders on
this issue.
Comment: Many commenters
questioned our choice of four as the
most appropriate number of participants
in a therapy group. Several commenters
disagreed that the optimal number for
patients in a group is four and stated
that there is no research data to support
this notion. Additionally, commenters
stated that there are many instances
when 2 or 3-person groups are more
PO 00000
Frm 00030
Fmt 4701
Sfmt 4700
effective than 4-person groups and that
in some specific instances, a 4-person
group might pose serious patient risks.
Many commenters stated that the choice
of four as the optimal number for group
therapy undermines the clinical
judgment of therapists, and that CMS
does not have the authority to dictate
the practice of therapy and, therefore,
cannot instruct therapists to allocate
group therapy.
Response: For the reasons discussed
above and in the FY 2012 proposed rule
(76 FR 26386 through 26387), we
believe the most appropriate size for
group therapy in a SNF setting is four
participants, which we believe is the
size that permits the therapy
participants to derive the maximum
benefit from the group therapy setting.
Although we conducted a literature
search and were unable to find research
data to support any prescribed number
of participants in a therapy group, for
the reasons stated above and in the FY
2012 proposed rule, we continue to
believe it is appropriate to establish a
standard that defines group therapy as
therapy provided simultaneously to four
participants performing the same or
similar therapy activities.
In defining group therapy as therapy
provided to four patients
simultaneously who are performing the
same or similar activities, we are not
attempting to dictate clinical practice.
Each therapist should use his or her best
clinical judgment in determining the
mode and manner in which to provide
therapy services to patients. We
understand that at times the therapist
may decide in his or her clinical
judgment to treat 2 or 3 patients
simultaneously, and we are not
prohibiting therapists from making this
clinical decision. However, for purposes
of Medicare payment policy, for the
reasons discussed above and in the FY
2012 proposed rule, we are defining
group therapy as therapy provided
simultaneously to four patients who are
performing the same or similar therapy
activities. Further, we are allocating
group therapy minutes by dividing the
total minutes by four, the number of
participants in a group therapy session
as defined above. Our goal in allocating
group therapy is to pay appropriately
based on resource utilization and cost,
not to dictate the practice of therapy.
Regarding the concept that groups of
4 may pose serious patient risks, we
conducted a literature review and did
not find any evidence that a group of 4
would pose any more of a patient risk
than treating any other specific number
of patients at a time. As discussed
above, we expect therapists to use their
best clinical judgment when choosing
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
which mode of therapy to use. If they
believe that a particular mode of therapy
would pose an increased degree of risk
to a patient, we would expect them not
to use that mode of therapy.
Comment: Several commenters stated
that with the implementation of RUG–
IV and its related policies, such as the
allocation of concurrent therapy, we
created a financial incentive for
facilities to shift patients receiving
concurrent therapy into group therapy,
as long as the patient’s therapy needs
were still being met. These commenters
stated that CMS should have expected
some shift in the modes of therapy
services provided. Additionally, these
commenters believed that the data we
used were inconclusive, since no data
were collected on the modality of
therapy delivered under MDS 2.0 and
RUG–III. Others have stated that CMS’
decision to use data from the STRIVE
study is unsound because the STRIVE
study was flawed. One commenter
suggested that CMS should not allocate
group therapy minutes until we have a
full year’s worth of data under the RUG–
IV and MDS 3.0 system.
Response: We agree that the decision
to allocate concurrent therapy
inadvertently created an inappropriate
financial incentive for facilities to
emphasize more group therapy and that
these incentives have resulted in excess
Medicare expenditures. Accordingly, to
fulfill our responsibilities to ensure
appropriate payment based on resource
utilization and cost, we proposed the
allocation of group therapy minutes,
which equalizes the reimbursement
incentives across modes of therapy.
The statement that no data were
collected to address the modality of
therapy delivered under MDS 2.0 and
RUG–III is incorrect. STRIVE collected
data from the MDS 2.0 and RUG–III to
examine the different modes of therapy
delivery. Regarding the statement that
the STRIVE study was flawed, we
addressed this general concern in the
FY 2010 final rule (74 FR 40304).
One commenter suggested that we
defer allocating group therapy minutes
until we have received more data.
However, we believe we do not need a
full year’s worth of data before making
changes to allocate group therapy.
Regardless of whether the initial trends
for utilization of group therapy
continue, we believe that the group
therapy allocation policy finalized in
this final rule will increase the accuracy
of our payments by more closely basing
payments on actual resource utilization
and cost and, thus, we believe that it is
appropriate to finalize our policy
regarding allocation of group therapy
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
minutes effective October 1, 2011, as
proposed.
Comment: Many commenters
recognized the need to make changes to
group therapy but suggested alternatives
to the allocation of group therapy.
Several commenters recommended that
to reduce the incentive to overutilize
group therapy, we should examine the
current 25 percent cap on group therapy
and make the necessary adjustments.
One commenter suggested that we limit
patients to one group therapy session
per week.
Response: We appreciate the
suggested alternatives to our proposal.
We should note that the 25 percent cap
for group therapy was designed to
ensure that group therapy is utilized as
an adjunct to individual (and
concurrent) therapy. Conversely, the
allocation of therapy minutes will be
used to pay accurately for the therapy
provided in a group therapy session
based on resource utilization and cost.
We also appreciate the suggestion to
limit patients to one group therapy
session per week and may explore this
alternative or similar alternatives in the
future in assessing the amounts of group
therapy that may be beneficial to SNF
patients.
Comment: Several commenters stated
that the allocation of group therapy will
cause operational inefficiencies in SNFs
and will cause SNFs to need to hire
more therapists in a field that currently
has a significant shortage of
professionals.
Response: We do not believe that the
allocation of group therapy would cause
operational inefficiencies or cause SNFs
to hire more therapists. We note that the
personnel decisions of SNFs are
essentially private business
arrangements that are outside the scope
of this rule. Moreover, the allocation of
group therapy does not require a change
in MDS reporting procedures. As we
stated in the FY 2012 proposed rule (76
FR 26387), as is currently the procedure,
the SNF would report the total
unallocated group therapy minutes on
the MDS 3.0 for each patient. Then this
total time would be automatically
divided among the four group therapy
participants to determine the
appropriate number of RTM, and thus
the RUG–IV classification and payment
level for each patient. Thus, the
allocation of group therapy will not
require extra work on the part of SNF
staff. Accordingly, we do not believe
that allocation of group therapy minutes
will cause operational inefficiencies in
SNFs.
Comment: In the proposed rule, we
solicited comments on types of patients
for whom group therapy might be
PO 00000
Frm 00031
Fmt 4701
Sfmt 4700
48515
appropriate. We received several
comments in response to this
solicitation, which included different
diagnoses (for example, aphasia) and
treatment types (for example, a
functional communication group). One
commenter stated that while there are
specific conditions that might prompt
the consideration for group therapy, it is
important for group therapy to be part
of an integrated plan of care established
under medical direction. Commenters
noted that not all patients would benefit
from group therapy, nor would all
conditions be appropriate to incorporate
into a group therapy program.
Response: We appreciate the
comments which suggested various
diagnoses and treatment types that
might benefit from group therapy. As we
stated in the proposed rule (76 FR
26387), group therapy is not appropriate
for either all patients or all conditions
and is primarily effective as a
supplement to individual therapy. We
agree with the comment noting that
while there are specific conditions that
might prompt the consideration of
group therapy, it is important for group
therapy to be part of an integrated plan
of care established under medical
direction. Additionally, we believe that
diagnoses and treatment techniques
(such as communication or feeding
groups) should not be the sole basis for
choosing to initiate group therapy.
Therapists should determine for each
resident, regardless of diagnosis or
condition, whether the resident is a
good candidate for group therapy based
on functional level and treatment
potential, and whether this particular
form of treatment is in the patient’s best
interest and within the goals of the
overall plan of care. We will take the
commenters’ suggestions under
consideration in assessing the
appropriate use of group therapy in
SNFs and may address this further in
future rulemaking.
Comment: One commenter requested
clarification of a sentence in the
proposed rule, which stated that ‘‘As is
currently the procedure, the SNF would
report the total unallocated group
therapy minutes on the MDS 3.0 (60
minutes in the scenario above) for each
patient’’ (76 FR 26387). The commenter
believed that the number of group
therapy minutes stated in the
parentheses of the above sentence, given
the scenario referred to in that sentence,
should be 120.
Response: After reviewing the
sentence quoted above from the
proposed rule (76 FR 26387), we agree
with this commenter and wish to clarify
that there is an error in this sentence. In
the above-quoted sentence from the FY
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
48516
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
2012 proposed rule, the minutes
referred to in the parentheses should
read 120 minutes rather than 60
minutes, given the immediately
preceding scenario to which it refers.
Thus, this sentence should have stated,
‘‘As is currently the procedure, the
SNFs would report the total unallocated
group therapy minutes on the MDS 3.0
(120 minutes in the scenario above) for
each patient.’’.
Comment: One commenter suggested
that an inconsistency of CMS’s
definition of group therapy between the
FY 2010 final rule (74 FR 40315) and
the MDS RAI Manual (Chapter 3,
Section O) may have led to the increase
in group therapy utilization. The
commenter specifically references the
words ‘‘same’’ versus ‘‘similar’’ as
regards to type of group therapy
services/activities. This commenter
recommended that CMS make the
definitions of group therapy consistent
between the regulations and the RAI
Manual.
Response: In the FY 2010 final rule
(76 FR 40315), we stated that group
therapy is therapy where a ‘‘therapist
provides the same services to everyone
in the group.’’ We note that later in the
preamble of the FY 2010 final rule (74
FR 40317), we define group therapy as
‘‘consisting of 2 to 4 patients (regardless
of payer source) who are performing
similar activities * * *’’ In the RAI
Manual (Chapter 3, Section O)], group
therapy is also defined as ‘‘the treatment
of 2 to 4 residents, regardless of payer
source, who are performing similar
activities, * * *.’’ We do not believe
that this inconsistency in the definition
may have led to the increase in group
therapy utilization as we are not aware
of evidence to support this claim.
Additionally, we provided extensive
training to providers both prior to and
after the implementation of MDS 3.0. At
the time of training, we did not receive
questions on this issue, suggesting that
there was not a significant amount of
confusion on this point. To clarify, from
this point forward, the definition of
group therapy will be consistent in
regulation and in the RAI manual. For
the purposes of coding group therapy
for Medicare Part A SNF payment, the
existing definition of group therapy has
been: 2–4 patients (regardless of payer
source) who are simultaneously
performing the same or similar activities
and are supervised by a therapist (or
assistant) who is not supervising any
other individuals. However, as
discussed in this final rule, beginning
October 1, 2011, this definition will be:
4 patients (regardless of payer source)
who are simultaneously performing the
same or similar activities and are
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
supervised by a therapist (or assistant)
who is not supervising any other
individuals. For purposes of coding
concurrent therapy for Medicare Part A
SNF payment, the definition of
concurrent therapy will remain: therapy
consisting of 2 patients who are not
performing the same or similar activity
(regardless of payer source), both of
whom must be in line-of-sight of the
treating therapist (or assistant).
Comment: Several commenters
supported the clarification of our
expectations for documenting group
therapy services. Some commenters
stated that rehabilitation professionals
need to support the work they do
through documentation, and that the
documentation should reflect the need
for skilled care as well as demonstrate
how the therapy provision will support
patients’ needs and goals. Further,
professional therapy associations
commented on the documentation
clarifications, stating that the
requirement for adequate
documentation to justify the use of each
mode of therapy is necessary and that
there should be no additional burden to
provide this documentation, as it should
be a standard part of any
documentation. Others expressed
concern that we proposed new and
stricter guidelines for documenting
group therapy. Some commenters stated
that requiring a therapist to document
why a specific mode of therapy was
chosen for a patient would create an
undue burden on the therapist. One
commenter stated that requiring an
additional, separate plan of care for
group therapy would not improve the
quality or efficacy of this mode of
therapy delivery, and that it would be
a disincentive for clinicians to perform
group therapy due to the increased
paperwork.
Response: We would like to clarify
that we did not propose new
documentation requirements for group
therapy provision. In fact, these
documentation requirements have been
in place all along, and the intent of the
discussion in the proposed rule was to
clarify our expectations. Contrary to the
commenter’s statement, we are not
requiring an additional, separate plan of
care for group therapy. The regulations
at § 409.17(c) and § 409.23(c) require
that, in order for Medicare to pay for
therapy in a SNF, a therapy plan of care
must be in place and that it must
include certain information. In the FY
2012 proposed rule (76 FR 26387
through 26388), and as discussed
previously, we simply clarified what we
expect to be included in the plan of care
and supporting medical record
PO 00000
Frm 00032
Fmt 4701
Sfmt 4700
documentation in cases where group
therapy is provided.
Therefore, as this discussion in the
proposed rule simply clarified existing
expectations, we do not agree that these
documentation guidelines will increase
or create undue burden on therapists, or
that these guidelines create a
disincentive for clinicians to perform
group therapy due to increased
paperwork. As the commenters above
suggested, there should be no additional
burden to provide this documentation,
as it should be a standard part of any
documentation. We agree with those
commenters who stated that
rehabilitation professionals need to
support the work they do through
documentation, and that the
documentation should reflect the need
for skilled care and the mode of therapy
provided, as well as demonstrate how
the therapy provision will support
patients’ needs and goals.
Comment: One commenter stated that
the clarification of CMS coverage and
documentation expectations included in
the proposed rule inappropriately
broadens the documentation
requirements of group therapy by
applying standards beyond those found
in the current law and regulations for
SNF care. Specifically, the commenter
indicated that the clarification
incorrectly applies hospital regulations
and inaccurately characterizes
guidelines set forth in program manuals
as binding for SNFs. This commenter
recommended that CMS clarify therapy
documentation requirements using only
SNF law and regulations.
Response: We do not agree with the
claim that the requirement to establish
structured and well-documented group
therapy programs applies to hospitals
but not to SNFs. We would note that
while it is the regulations themselves
from which legal authority derives, the
program manuals and other interpretive
guidelines can serve to clarify or
interpret the regulations set forth in the
Code of Federal Regulations (CFR). The
clarifications set forth in the FY 2012
proposed rule (76 FR 26387 through
26388) are based on regulations at
§ 409.17 and § 409.23, and interpretive
guidance in the RAI Manual, all of
which are applicable to SNFs. While the
cited regulations in the proposed rule,
specifically § 409.17(b) through (d), fall
within Part 409, Subpart B (Inpatient
Hospital Services and Inpatient Critical
Access Hospital Services), these
particular regulations also apply to
SNFs with regard to their patients’ plans
of care and for guidance on specific
documentation requirements.
Specifically, § 409.23, which is located
in Part 409, Subpart C (Posthospital SNF
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
Care), states that Medicare pays for SNF
therapy services if they are furnished,
among other things, in accordance with
a plan of care that meets the
requirements of § 409.17(b) through (d),
thereby making § 409.17(b) through (d)
applicable to SNFs. When we initially
revised the SNF therapy regulations at
§ 409.23(c) to incorporate these plan of
care requirements in the Medicare
Physician Fee Schedule final rule for
Calendar Year (CY) 2008 (72 FR 66331,
November 27, 2007), we noted our belief
that ‘‘* * * therapy services should be
provided according to the same
standards and policies in all settings, to
the extent possible and consistent with
statute.’’ Moreover, in the Medicare
Physician Fee Schedule final rule for CY
2011 (75 FR 73583, November 29, 2010),
we revised the hospital regulations at
§ 409.17(d) on therapy treatment
plans—to which the corresponding SNF
therapy regulations cross-refer—
specifically to clarify that those
particular hospital regulations also
apply to SNFs. Thus, our clarifications
do not exceed the current law and
regulations applicable to SNFs.
Further, we do not agree with the
commenter’s implicit assumption that
program guidelines are not relevant to
this process. We note that such
guidelines are based on the provisions
of the regulations, and are made
available to each provider to advise it of
those provisions as well as of CMS’s or
the surveyor’s expectations. While these
guidelines are disseminated to
providers, all providers are nevertheless
expected to comply fully with the
regulations on which the guidelines are
based.
For the reasons discussed in section
V.C of the FY 2012 proposed rule (76 FR
26386 through 26388), and for the
reasons discussed in this final rule
above, we are finalizing our proposed
policies related to group therapy
effective October 1, 2011. First, we are
defining group therapy as therapy
provided simultaneously to four
patients (regardless of payer source)
who are performing the same or similar
activities and are supervised by a
therapist (or assistant) who is not
supervising any other individuals (76
FR 26386 through 26387). In addition,
we are finalizing our proposed policies
related to the reporting and allocation of
group therapy minutes as discussed
above and in the FY 2012 proposed rule
(76 FR 26387). As is currently the
procedure, the SNF will report the total
unallocated group therapy minutes on
the MDS 3.0. In terms of RUG–IV
classification, this total time will be
allocated (that is, divided) among the
four group therapy participants to
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
determine the appropriate number of
RTM and, therefore, the appropriate
RUG–IV therapy group and payment
level, for each participant. In addition,
as discussed above, if one or more of the
four group therapy participants are
unexpectedly absent from a session or
cannot finish participating in the entire
group session, rather than discontinuing
payment or requiring the session to be
rescheduled, we will continue to deem
the therapy session as meeting the
definition of group therapy as long as
the therapy program originally had been
planned for four patients. In this
situation, we will continue to assume
that there are four patients, and
therefore will divide the therapy
minutes by four in allocating group
therapy minutes among the group
therapy participants.
4. Proposed Changes to the MDS 3.0
Assessment Schedule and Other
Medicare-Required Assessments
In the FY 2012 proposed rule (76 FR
26388 through 26393), we proposed to
make certain modifications to the MDS
assessment schedule and to the types of
assessments to be completed. To receive
proper payment for services provided
during Part A Medicare SNF stays, SNFs
must complete patient assessments in
accordance with the assessment
schedule established by CMS at
§ 413.343(b) and in the RAI Manual,
version 3.0, Chapter 2. As we explained
in the FY 2012 proposed rule (76 FR
26388 through 26389), we proposed to
modify the current Medicare-required
assessment schedule to incorporate new
assessment windows and grace days to
capture more appropriately the changes
in patients’ status and in services and
treatments provided over the course of
a stay, and to reduce the possibility that
information from the same days of the
patient’s stay may be used on different
scheduled MDS assessments. The
current MDS assessment schedule and
the proposed MDS assessment schedule
may be found in Tables 10A and 10B in
the proposed rule (76 FR 26389).
Additionally, regarding the
completion of unscheduled PPS
assessments, in the proposed rule (76
FR 26389 through 26390), we clarified
the End of Therapy (EOT) OMRA policy
(which first appeared in the FY 2010
final rule (74 FR 40347 through 40348))
by stating that the ARD for an EOT–
OMRA must be set for 1 to 3 days after
the discontinuation of all therapies,
regardless of the reason for the
discontinuation. Further, in determining
the ARD for the EOT OMRA, we
clarified that, as finalized in the FY
2010 final rule (74 FR 40348), currently
days are counted differently for facilities
PO 00000
Frm 00033
Fmt 4701
Sfmt 4700
48517
that regularly provide therapy services 5
days per week as compared to facilities
that regularly provide therapy services 7
days a week. Following the publication
of the FY 2010 final rule, some SNFs
expressed concern over the use of the
phrase ‘‘discontinuation of therapy
services,’’ as well as the distinction
between 5- and 7-day-a-week facilities
in determining the ARD for the EOT
OMRA. In the FY 2012 proposed rule
(76 FR 26389), we clarified that the term
‘‘discontinuation of therapy services’’
referred to both temporary, unplanned
and planned discontinuations of
therapy services. Accordingly, in the FY
2012 proposed rule (76 FR 26389
through 26390), we clarified that
providers must complete an EOT OMRA
for a patient classified in a RUG–IV
therapy group if the patient goes 3
consecutive days without therapy,
regardless of the reason for the
discontinuation. Moreover, to mitigate
confusion related to the distinction
between 5-day and 7-day-a-week
facilities, we proposed to eliminate the
distinction altogether. We proposed
that, effective October 1, 2011, an EOT
OMRA would be required for a patient
classified in a RUG–IV therapy group if
that patient is not furnished any therapy
services for 3 consecutive calendar days,
regardless of whether the facility is a 5day or 7-day facility. As we stated in the
FY 2012 proposed rule (76 FR 26390),
we believe that this policy appropriately
reflects that the frail and vulnerable
populations within SNFs require
consistent therapy without significant
breaks in services, and is consistent
with § 409.34(b) (which states that a
break of one or two days would not
necessarily result in a provider having
to complete an EOT OMRA).
In addition, in the proposed rule (76
FR 26390 through 26391), we addressed
suggestions that the completion of an
EOT OMRA and a subsequent Start-ofTherapy (SOT) OMRA may not be
necessary for all patients, particularly in
cases where therapy services resume at
the same mode and intensity as the
patient was receiving before the
discontinuation of therapy. Therefore,
for the reasons discussed in the
proposed rule (76 FR 26390 through
26391), we proposed that, effective for
services provided on or after October 1,
2011, when an EOT OMRA has been
completed and therapy subsequently
resumes, SNFs may complete an End-ofTherapy-Resumption (EOT–R) OMRA
rather than an SOT OMRA, in cases
where the resumption of therapy date is
no more than 5 consecutive calendar
days after the last day of therapy
provided, and the therapy services have
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
48518
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
resumed at the same RUG–IV
classification level that had been in
effect prior to the EOT OMRA. In the FY
2012 proposed rule, we stated that in
the situation where therapy services
have resumed within such a short
period of time at the same RUG–IV
classification level, we do not believe
that a new therapy evaluation and SOT
OMRA would be necessary to reclassify
the patient back into a RUG–IV therapy
group because, given that the therapy
resumed at the same RUG–IV
classification level, it is likely that the
patient’s clinical condition has not
changed.
In addition, as discussed in the
proposed rule (76 FR 26391), we have
found some cases where therapy
services recorded on a given PPS
assessment did not provide an accurate
account of the therapy provided to a
given resident outside the observation
window used for the most recent
assessment. We believe that when
service levels change, whether inside or
outside the observation period, such
changes should be based on medical
evidence. However, we believe that the
current range of PPS assessments may
not permit SNFs adequate flexibility to
report such changes in therapy services
outside the observation window. As
discussed in the FY 2012 proposed rule
(76 FR 26392), we believe that such
changes in resident status outside the
observation window do not always
generate an unscheduled assessment
because the changes, while significant
for payment, do not always rise to the
level of a significant change in clinical
status under § 483.20(b)(2)(ii).
Accordingly, we proposed (76 FR
26392) that, effective for services
provided on or after October 1, 2011,
SNFs would be required to complete a
Change of Therapy (COT) OMRA, for
patients classified into a RUG–IV
therapy group, whenever the intensity
of therapy (that is, the total
reimbursable therapy minutes, or RTM
delivered) changes to such a degree that
it would no longer reflect the RUG–IV
classification and payment assigned for
a given SNF resident based on that
resident’s most recent assessment used
for Medicare payment. The COT OMRA
would be a new type of required PPS
assessment. The ARD of the COT OMRA
would be set for Day 7 of a COT
observation period, which is a
successive 7-day window beginning on
the day following the ARD set for the
most recent scheduled or unscheduled
PPS assessment (or beginning the day
therapy resumes in cases where an
EOT–R OMRA is completed), and
ending every 7 calendar days thereafter.
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
We proposed that SNFs would be
required to complete a COT OMRA only
if a patient’s total RTM changes to such
an extent that the patient’s RUG
classification, based on their last PPS
assessment, is no longer an accurate
representation of their current level of
therapy.
We received a number of comments
on these proposals and clarifications
which, along with our responses, appear
below.
Comment: Many commenters
supported the changes to the MDS
assessment schedule and agreed that the
current assessment schedule does allow
providers to use information from the
same days of the patient’s stay on
different scheduled MDS assessments
intended to capture changes in the
patient’s condition over time.
Others suggested that CMS conduct a
detailed analysis to determine the
efficacy of the proposed changes prior to
implementation. These commenters
opposed changes to the assessment
schedule based on their belief that the
changes would not reduce the frequency
with which information from the same
days of the patient’s stay is used on
different scheduled MDS assessments.
Other commenters raised concerns that
the proposed changes to the assessment
schedule would limit flexibility in
scheduling assessments and would be
burdensome because the shorter
window for providers to set the ARD for
a scheduled PPS assessment would
reduce the SNF staff’s ability to stagger
MDS due dates among residents.
One commenter stated that the
proposed changes to the MDS schedule
and assessments will take the clinical
judgment away from licensed therapists.
This commenter stated that the use of
clinical judgment is crucial in ensuring
that the patients receive needed services
for which they qualify and that produce
a positive clinical outcome. One
commenter expressed concern that the
proposed changes to the MDS
assessments and schedules would
impose an additional burden on
software vendors, billing offices, and
medical records personnel.
Furthermore, the commenter stated that
the proposed changes would affect MDS
scheduling tools, calendars, billing
effective dates, budget, and billing
reports.
Response: We are pleased with the
comments received in support of the
proposed changes. Prior to proposing
changes to the assessment schedule, we
did conduct a detailed analysis on the
likely effect of the updated policies. For
this reason, we do not agree that the
proposed changes to the MDS
assessment schedule should be
PO 00000
Frm 00034
Fmt 4701
Sfmt 4700
withdrawn until another study is
completed. However, as with all new
and revised policies, we will monitor
the effects of the changes, and make any
necessary modifications through future
rulemaking. We recognize that, while
the proposed changes eliminated most
of the overlap in setting the observation
periods for Medicare-required
scheduled assessments, it is impossible
to eliminate totally the potential for
information from the same days of the
patient’s stay to be used on different
scheduled MDS assessments, since
changes in a beneficiary’s condition can
also require completion of several
different types of unscheduled
assessments (such as OMRAs, discharge
assessments, significant change
assessments, etc.) within short periods
of time. However, as discussed in the
proposed rule (76 FR 26388 through
26389), we believe by making the
proposed changes to the assessment
schedule (that is, by narrowing the
assessment and grace day windows), we
reduce the amount of information from
the same days of the patient’s stay that
may be used on different scheduled
MDS assessments while still allowing
providers some flexibility in setting the
ARD.
In terms of regular scheduled PPS
assessments, the 5-day and 14-day
scheduled Medicare assessments are
used to determine payment for the first
30 days of a SNF stay. Under the current
policy, it is possible that the clinical
characteristics of a resident on days 5
through 8 of the resident’s stay could be
used on both the 5-day and 14-day
assessments. In such a case, this
effectively reduces the number of days
that clinical information is collected
and used to observe changes in the
patient’s condition over time. In cases
where this overlap is used, payment is
established for the first 30 days of the
patient’s stay based on only 10 days of
service, with 4 days overlapping
between observation windows, rather
than the intended 14 days of service
with little to no overlap between
observation periods. We are confident
that the proposed changes allow
sufficient time to perform all required
assessments, allow for flexibility in
scheduling the assessments, and
provide a more accurate method for
determining payment across the entire
30-day period. As discussed above, we
believe that these changes are necessary
to reduce the possibility that
information from the same days of the
patient’s stay may be used on different
scheduled MDS assessments and to
allow us to capture more appropriately
the changes to patients’ status and in
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
services and treatments provided over
the course of a SNF stay and, as such,
these changes will allow us to reimburse
more accurately for SNF services.
Additionally, we do not agree that our
proposed changes to the MDS schedule
and assessments would take away
clinical judgment from therapists. As
discussed in the FY 2010 final rule, we
are responsible for determining
Medicare coverage and payment policy,
that is, ‘‘the scope of services that will
be paid for by the Medicare program
under the SNF PPS and the manner in
which those services will be reported
and paid’’ (74 FR 40316). It is true that
our proposed changes to the MDS
assessments and schedules will affect
the reporting and reimbursement of SNF
services, including therapy services;
however, we have not mandated the
manner of providing these services. We
agree that the licensed therapists are to
use their clinical judgment to treat the
patients in the most appropriate
manner, and to maintain professional
standards while providing all necessary
services.
With regard to commenters’ concern
related to the burden arising from
changes in the MDS assessment
schedule and assessments, we would
note that we gave draft specifications to
vendors as soon as possible after we
published the proposed rule. We
acknowledge that the proposed changes
to the MDS schedule and assessments
may affect items listed by the
commenter (scheduling tools, calendars,
billing effective dates, budget, and
billing reports), but believe that, for the
reasons outlined here and in the
proposed rule, such changes are
nevertheless necessary to provide
appropriate payment for services
provided to residents, to enhance the
reliability of the MDS, and to ensure the
stability of the SNF PPS.
Comment: One commenter stated that
in practice, by reducing the length of the
assessment windows, we have
minimized the usefulness of grace days
to providers, and suggested that we
officially eliminate the concept of grace
days. Other commenters requested that
we remove the grace days from the
assessment schedule completely, and
combine them with the ARD days. On
the other hand, several commenters
recommended expanding the
assessment window to allow providers
more flexibility in using grace days
when determining the observation
period. These commenters were
concerned that, as CMS has stated that
grace days should be used sparingly,
any claim which makes use of an
assessment where grace days are used
might be considered as potentially
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
inappropriate and subject to medical
audit.
Response: Grace days are a
longstanding part of the SNF PPS in
order to allow clinical flexibility when
setting the ARD dates of scheduled PPS
assessments. We agree that in practice,
there is no difference between regular
ARD windows and grace days and we
encourage the use of grace days if their
use will allow a facility more clinical
flexibility or will more accurately
capture therapy and other treatments.
Thus, we do not intend to penalize any
facility that chooses to use the grace
days for assessment scheduling or to
audit facilities based solely on their
regular use of grace days. We may
explore the option of incorporating the
grace days into the regular ARD window
in the future; nevertheless, we will
retain them as part of the assessment
schedule at the present time consistent
with the current policy and the new
assessment schedule proposed in the
proposed rule.
Comment: Many commenters
supported the proposed change to
consider all facilities 7-day facilities for
purposes of setting the ARD for the EOT
OMRA and the clarification that
facilities are required to complete an
EOT OMRA to classify residents into
non-therapy RUG categories when
therapy has been missed for 3
consecutive days. Others believed that
an EOT OMRA should only be required
if three scheduled days of therapy are
missed, rather than unscheduled days,
since it may be possible for a patient to
receive the required amount of weekly
therapy while still not being provided
with any therapy for 3 consecutive days.
Many commenters stated that it would
not be unusual for patients to have 3day lapses in therapy, especially if a
weekend were involved. The
commenters explained that it is
common for patients in the SNF
population to have brief episodes of
illness or refusals, doctor appointments,
or religious holidays that may cause a
missed therapy day on a Friday or
Monday, and that requiring an EOT
OMRA following 3 consecutive calendar
days of missed therapy is not logical, as
it will entail a provider burden of
additional paperwork.
Response: We are pleased that some
commenters supported the proposal to
eliminate the distinction between 5–day
and 7-day facilities and to apply a
uniform policy in setting the ARD for
the EOT OMRA. However, we do not
agree with comments that an EOT
OMRA should only be required if 3
scheduled days of therapy are missed,
rather than any three consecutive day
periods. As stated in § 409.31(b)(1), to
PO 00000
Frm 00035
Fmt 4701
Sfmt 4700
48519
meet the skilled level of care
requirement for coverage of posthospital SNF care, ‘‘the beneficiary must
require skilled nursing or skilled
rehabilitation services, or both, on a
daily basis.’’ Additionally, the criteria
for ‘‘daily basis’’ under § 409.34(a)(2)
state, ’’ As an exception, if skilled
rehabilitation services are not available
7 days a week those services must be
needed and provided at least 5 days a
week.’’ Therefore, according to these
regulations, while a facility may
determine that it does not have adequate
resources to provide therapy 7 days a
week, the facility is still required to
ensure that therapy is provided for at
least five days a week. In addition, the
policy requiring an EOT OMRA to be
completed when therapy has been
discontinued for 3 consecutive calendar
days is consistent with our discussion of
§ 409.34(b) in the FY 2010 final rule (74
FR 40348), in which we stated that a
break of 1 or 2 days would not
necessarily result in a provider having
to complete an EOT OMRA. As we
stated in the FY 2012 proposed rule (76
FR 26390), we believe that the policy of
requiring all SNFs to set the ARD for the
EOT OMRA by the third consecutive
calendar day after the last day of
therapy was provided appropriately
reflects that the frail and vulnerable
populations within SNFs require
consistent therapy without significant
breaks in service. Accordingly, we
believe that regardless of whether the
missed therapy day was scheduled, and
no matter what the reason was for the
missed therapy, if the resident missed 3
consecutive calendar days of therapy,
we believe an EOT OMRA should be
completed.
Commenters cited several specific
examples of situations that would cause
a resident to miss therapy. We realize
that there may be a variety of reasons
that therapy would be missed, whether
the reason for the missed therapy was
planned or unplanned. At the same
time, it is the facility’s responsibility to
ensure that patients receive ongoing,
rather than sporadic, care to promote
each patient reaching his or her full
potential. Thus, we emphasize that the
EOT OMRA should be completed if
therapy was missed for 3 consecutive
calendar days for any reason, planned or
unplanned. Additionally, the idea that a
resident can receive the required
amount of weekly therapy while still
not being provided therapy for 3
consecutive days, as suggested by the
commenter, assumes that there is a
prescribed ‘‘Medicare therapy week’’. It
should be noted, however, that there is
no prescribed ‘‘Medicare therapy week’’
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
48520
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
that spans across any specific days.
Therapy utilization is measured across a
rolling 7-day period as reported on the
MDS assessments. Thus, for the reasons
discussed above, the EOT OMRA should
always be completed when a resident
misses 3 consecutive calendar days of
therapy.
Comment: One commenter
recommended that CMS recalibrate the
therapy thresholds, specifically in the
Ultra High and Very High Rehabilitation
RUG categories to distribute minutes
more accurately and to establish more
realistic sub-categories.
Response: We appreciate the
commenter’s recommendation. We
intend to monitor these policies as well
as provider behavior and we may
consider such approaches in the future.
Comment: Several commenters
requested additional guidance and
clarification on the requirements for
providing a SNF Advance Beneficiary
Notice of Noncoverage (SNF ABN) or an
expedited determination notice, also
known as the Notice of Medicare NonCoverage (NOMNC) when a beneficiary
misses 3 consecutive days of skilled
therapy and will enter into a
noncovered stay because they will no
longer be receiving skilled services. One
commenter thought that CMS required a
SNF ABN to be issued 48 hours prior to
the delivery of noncovered care. The
commenter was concerned that this 48hour SNF ABN delivery ‘‘requirement’’
could not be met when a beneficiary
receives no therapy on a weekend and
refuses therapy on Monday.
Response: The SNF ABN is issued
prior to delivering services for which
Medicare might not pay because they
are not medically reasonable and
necessary and/or constitute custodial
care, and the beneficiary is expected to
receive these services and possibly
incur financial liability. The policy for
issuance of the SNF ABN has not
changed in light of the policies being
finalized in this rule. Please see the
current manual instructions for the SNF
ABN in the Medicare Claims Processing
Manual, IOM 100–04, Chapter 30,
Section 70, which can be accessed via
this link: https://www.cms.gov/Manuals/
IOM/list.asp.
There is no ‘‘48-hour notice’’
requirement associated with the SNF
ABN. However, the SNF ABN should be
given in a timely manner to provide the
beneficiary or the representative
sufficient time to make an informed
decision about whether to receive care
that may not be covered by Medicare,
and/or make other arrangements for
care. SNF providers should issue the
SNF ABN as soon as it is clear that the
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
beneficiary may enter into a noncovered stay.
We appreciate the commenters’
concerns regarding understanding the
requirements for the issuance of the
SNF ABN in light of this rule; however,
as noted previously, our policies related
to issuance of the SNF ABN remain
unchanged. Specifically, the timing of
SNF ABN delivery remains unchanged,
and as per current policy and as
discussed above, it should be given
prior to delivery of care for which
Medicare might not pay, allowing the
beneficiary or the representative a
reasonable amount of time to make an
informed decision about whether to
receive the care and/or make other
arrangements for care. Finally, we note
that where the beneficiary misses 3
consecutive days of skilled therapy and
will enter into a noncovered stay, either
because therapy is not offered on those
days or the beneficiary refuses or
declines therapy, or any combination of
the preceding, it is unlikely that a
provider will need to issue the NOMNC.
The NOMNC is a notice issued prior to
the termination of Medicare-covered
services, when the provider determines
that such services are no longer covered
based on Medicare coverage policies
(see 42 CFR §§ 405.1200 and 405.1202).
The NOMNC informs the beneficiary of
the right to appeal the discontinuation
of covered services. Our policies
regarding issuance of an NOMNC have
not changed in light of this rule.
Consistent with current policy, if SNF
covered services end solely because a
beneficiary fails to meet the consecutive
days of therapy requirement for the
reasons set forth above, the NOMNC
would not be issued. The NOMNC is a
provider notice of termination of
services and is not issued when a
beneficiary initiates the end of care. The
NOMNC is also not issued when care
ends for provider business reasons, such
as when a SNF does not offer therapy
on certain days. We intend to publish
guidance on NOMNC delivery in the
Medicare Claims Processing Manual in
the near future. We will also include
further clarification on NOMNC
delivery in other vehicles, such as CMS
Open Door Forums, as deemed
necessary.
Comment: Several commenters have
stated that the requirement of the EOT
OMRA after discontinuation of therapy
for 3 consecutive days inhibits facilities
from gradually reducing therapy
services as residents approach the end
of their SNF stay. The commenters
explained that it is common to reduce
the frequency and intensity of treatment
prior to facility discharge to assure the
resident will maintain their current
PO 00000
Frm 00036
Fmt 4701
Sfmt 4700
level of function without the need for
daily therapy.
Response: We do not agree that the
requirements to complete an EOT
OMRA following discontinuation of
therapy for three consecutive calendar
days discourages facilities from
gradually reducing therapy services
prior to discharge. The EOT OMRA
would only need to be completed if 3
consecutive calendar days of all three
therapy disciplines were missed. We
believe that it is likely to be inconsistent
with good clinical judgment for
practitioners to purposely not provide
any rehabilitation services in a 3-day
period prior to an imminent discharge,
especially given the frail and vulnerable
nature of SNF populations.
Comment: Several commenters
remarked that the requirement to
complete an EOT OMRA after 3
consecutive days of missed therapy will
negatively affect residents who are
classified into Low Rehabilitation RUG
groups. They stated that facilities might
be required to complete an EOT OMRA
on a weekly basis if these residents do
not receive therapy on a Monday or
Friday.
Response: Residents who fall into the
Rehabilitation Low RUG groups
continue to benefit from skilled therapy.
Even though their conditions indicate
that they only need to receive therapy
for a minimum of 45 minutes per week
over at least 3 days to be classified into
these RUG groups, we believe that a
significant break in therapy services
may still be detrimental to their therapy
goals and recovery. For example, if a
facility treats one of these residents on
a Monday, Tuesday, and Wednesday
and they do not have another treatment
session until the following Monday or
Tuesday, this resident will go for 4 or
5 consecutive calendar days without
therapy services. We believe that this
significant break in therapy may cause
this resident to regress from functional
gains made during therapy thus far. For
this reason, we require that an EOT
OMRA also be completed for residents
who are in the Rehabilitation Low RUG
groups, when therapy services have
been discontinued for 3 consecutive
calendar days.
Comment: We have received
numerous comments stating that
providing 7-day-a-week therapy for
rural facilities is very difficult. The
commenters stated that it is quite
possible that the EOT OMRA would be
triggered frequently by 3 missed days of
therapy over the weekend plus the
adjoining days. The commenters
suggested that the policy that requires
an EOT OMRA in the event of 3 missed
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
days of therapy should be revised to at
least 4 missed days.
Response: We recognize the concern
of the rural facilities. However, our
primary concern is that the SNF
residents receive daily skilled
rehabilitation as required under
§§ 409.31 and 409.34. We expect that
rural facilities and SNFs that cannot
meet the ‘‘daily basis’’ requirement
under § 409.34 will revisit their hiring
and staffing practices as well as
recruitment and retention options to
assure they have the appropriate
amount of staff to ensure that daily
skilled care can be provided.
Additionally, if facilities are having
difficulty meeting the daily skilled
needs of the residents in their care, they
should also revisit their admissions
policies and determine if they are
accepting patients for whom they have
the resources to provide the necessary
daily skilled therapy services.
We do not agree with the suggestion
to allow SNFs to discontinue therapy for
4 consecutive days prior to completing
the EOT OMRA. As stated above,
§ 409.34 requires skilled nursing and/or
rehabilitation services on a daily basis.
We have made limited allowances for
facilities that are unable to provide
therapy services 7 days a week based on
logistical constraints; however, we still
expect SNFs to provide an adequate
amount of skilled rehabilitation services
to meet the patient’s clinical needs.
Allowing 4 missed days of therapy prior
to completion of the EOT OMRA would
undermine this concept. As we stated
previously, the EOT OMRA policy we
proposed and are finalizing in this final
rule reflects that the frail and vulnerable
populations in SNFs require consistent
therapy without significant breaks in
service.
Comment: One commenter asked if it
is possible for computer software to
calculate the appropriate RUG when
therapy ends without another MDS
being completed.
Response: The information needed to
calculate a non-therapy RUG–IV group
when therapy is discontinued is only
reported on the MDS. The only option
for automating the recalculation of the
RUG–IV group would be to use a
previously-submitted MDS. Since that
assessment would reflect the
beneficiary’s condition in a prior period
rather than the patient’s condition when
therapy ended, there would be no way
to determine the most appropriate nontherapy RUG category for the patient
from that assessment.
Comment: Many commenters stated
that the proposed COT OMRA could
accommodate for the missed 3-day
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
treatment scenarios that necessitate EOT
OMRA completion.
Response: We do not agree that the
COT OMRA could address both changes
in therapy provision and missed therapy
days. The intent of the EOT OMRA is
to pay SNFs the per diem medical RUG
rate for the consecutive days that the
resident did not receive therapy
services. The COT OMRA addresses
changes in minutes of therapy provided,
not missed days.
Comment: Several commenters asked
us to define the term ‘‘treatment day’’
for purposes of the EOT OMRA. These
commenters asked us if a resident
received less than 15 minutes of therapy
a day, whether this time could still
count toward the definition of a
‘‘treatment day’’ rather than as a missed
therapy day.
Response: For purposes of
determining when an EOT OMRA must
be completed, a treatment day is defined
exactly the same way as in the RAI
Manual in Chapter 3, Section O, page
O–16: 15 minutes of therapy a day. If a
resident receives less than 15 minutes of
therapy in a day, it is not coded on the
MDS and it cannot be considered a day
of therapy.
Comment: Several commenters
expressed confusion about the process
of re-starting therapy after an EOT
OMRA was completed. Some were
unsure about when to complete an SOT
OMRA or an EOT–R OMRA. Others
asked whether a new therapy evaluation
is necessary in all cases of resumption.
Additionally, although many
commenters supported the proposal to
implement the optional EOT–R OMRA,
and approved of this option to lessen
the burden of SNFs when the need to
complete the EOT OMRA arose, many
others expressed confusion and/or
requested clarification as to whether the
EOT–R OMRA is a new assessment type
or a modification of an old assessment.
Response: As explained in the
proposed rule (76 FR 26389 through
26390), the ARD for the EOT OMRA
must be set 1 to 3 consecutive calendar
days following the last day of therapy.
Under current policy, if the patient was
discharged from therapy with no
expectation for it to continue or restart,
then the EOT OMRA would classify the
resident into a non-therapy RUG group
which would be the basis of payment
until the next PPS assessment. However,
even if the resident was not discharged
from therapy services and missed 3 or
more consecutive days of therapy, an
EOT OMRA still would have to be
completed to classify the resident into a
non-therapy RUG group for those days
of missed therapy.
PO 00000
Frm 00037
Fmt 4701
Sfmt 4700
48521
As explained in the FY 2012 proposed
rule (76 FR 26390 through 26391), we
recognize that the completion of an EOT
OMRA and subsequent SOT OMRA may
not be necessary for all patients. This
may be the case where therapy was
discontinued (for example, due to nonclinical reasons such as scheduling
conflicts), and resumes shortly
thereafter at the same RUG classification
level. Therefore, we proposed the option
to complete an EOT with Resumption or
an EOT–R OMRA, rather than an SOT
OMRA, in cases where the therapy
resumption date is no more than 5
consecutive calendar days following the
last day of therapy provided and the
therapy services have resumed at the
same RUG–IV classification level that
had been in effect prior to the
discontinuation of therapy services. As
we stated in the FY 2012 proposed rule
(76 FR 26390), in the situation where
therapy services have resumed within
such a short period of time at the same
RUG–IV classification level, we do not
believe that a new therapy evaluation
and SOT OMRA would be necessary to
reclassify the patient back into a RUG–
IV therapy group because, given that the
therapy resumed at the same RUG–IV
classification level, it is likely that the
patient’s clinical condition has not
changed. We appreciate the support for
the proposal of the EOT–R OMRA.
We would like to clarify that the
EOT–R OMRA is not a new assessment
type. As explained in the FY 2012
proposed rule (76 FR 26390), it is an
EOT OMRA with two additional items
(O0450A and O0450B) to indicate
whether therapy is expected to resume
and the date of resumption of therapy.
As stated above, an EOT–R OMRA may
be used when therapy has been missed
for at least 3 consecutive calendar days
and is expected to resume (and actually
does resume) within 5 calendar days
following the last day of therapy. For
example: Mr. A. received therapy every
day Monday through Friday. He missed
therapy on Saturday and Sunday
because the SNF he was in did not
provide therapy during the weekend.
On Monday, Mr. A.’s family came to
visit and he refused therapy. At this
point, Mr. A. missed three days of
therapy and an EOT OMRA would be
required. He also missed therapy on
Tuesday, due to a scheduled doctor’s
appointment. The interdisciplinary
team made the determination that Mr.
A.’s missed therapy did not result in a
change in clinical condition that would
make him tolerate less therapy and
change his RUG–IV classification.
Therefore, the facility completed an
EOT OMRA on Monday indicating that
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
48522
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
therapy had not occurred for at least
three days. Then, on Wednesday, the
EOT is modified into an EOT–R by
reporting the actual date of resumption,
which was Wednesday. In this case, a
new therapy evaluation was not
required and Mr. A resumed therapy on
Wednesday at the same RUG–IV
classification level.
If the reason for missed therapy was
clinical in nature (meaning there was a
possibility that the resident’s clinical
therapy status was affected by the
missed therapy), it may not be
appropriate for the facility to complete
an EOT–R OMRA. In cases where the
patient resumes therapy more than 5
consecutive calendar days after
discontinuation of therapy services or
where the patient resumes therapy at a
different RUG classification level (even
if it is no more than 5 consecutive
calendar days after the date the last
therapy service was furnished), an EOT–
R OMRA cannot be used. In this case,
the facility could either complete an
optional SOT–OMRA and new therapy
evaluation if therapy resumes, or wait
until the completion of the next
scheduled PPS assessment to classify
the resident into a RUG–IV group. If the
facility chooses not to complete an SOT
OMRA and if the next scheduled PPS
assessment is used to classify the
patient into a therapy RUG group, a new
therapy evaluation would also be
required. Thus, in situations where an
EOT OMRA was completed and therapy
subsequently resumes, a new therapy
evaluation is required when either an
SOT OMRA or a scheduled PPS
assessment is used to classify the
resident into a RUG–IV therapy group.
For example: Mr. B. received therapy
every day Wednesday through Monday.
On Tuesday, he felt ill and missed
therapy that day and Wednesday. He
then went to dialysis on Thursday and
missed therapy that day as well. He
missed a total of 3 days of therapy. Due
to his illness and dialysis, he could not
immediately resume therapy at the same
level he was receiving prior to the three
missed days. However, on Friday he felt
well enough to start therapy again. The
facility completed an EOT OMRA on
Thursday to classify Mr. B. into a nonrehabilitation RUG group and to get
paid the non-rehabilitation RUG rate for
Tuesday, Wednesday, and Thursday. As
Mr. B. could not resume therapy at the
same RUG–IV classification level, a new
therapy evaluation was completed by
each discipline (physical therapy,
occupational therapy, and/or speech
therapy) treating Mr. B. and then an
SOT OMRA was completed, and he was
placed back into a rehabilitation RUG
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
group. The facility was paid at the
rehabilitation RUG rate from the day
therapy restarted until the next PPS
assessment was completed.
Comment: One commenter
highlighted a potential error in an
example we provided on page 26392 of
the proposed rule, where we stated that
‘‘* * * paid for Days 36 through 39 at
the corresponding non-therapy rate,
based on the patient’s clinical condition
reported on the 30-day assessment
(because therapy services were
discontinued on Day 36 and an EOT
OMRA was completed) * * *’’ (76 FR
26392). According to this commenter,
the phrase ‘‘30-day assessment’’ should
be replaced by ‘‘EOT OMRA’’ because
the non-therapy RUG on the EOT
OMRA is used to establish the payment
for services during the period where no
therapy services are provided.
Response: After careful review of the
example in the proposed rule cited by
the commenter, we agree with the
commenter that we misstated the
relevant assessment that would
determine payment for Days 36 through
39 in the example provided. The text
quoted above on page 26392 of the
proposed rule should read ‘‘* * * paid
for Days 36 through 39 at the
corresponding non-therapy rate, based
on the patient’s clinical condition
reported on the EOT OMRA (because
therapy services were discontinued on
Day 36 and an EOT OMRA was
completed) * * *’’, as this accurately
reflects how the payment for this
resident would be calculated. We have
reviewed the remainder of the example
and found no additional errors.
Comment: Several commenters
questioned whether therapy service
changes outside of the MDS observation
window are a significant issue. One
commenter requested evidence that
there is a widespread instance of
misreporting therapy services. One
commenter suggested that if this were
such a major threat to the Medicare
program, they would assume CMS
would have involved the Recovery
Audit Contractors (RACs), the Medicare
Administrative Contractors (MACs), and
CMS surveyors in the medical review
process to address this issue.
Response: As we stated in the FY
2012 proposed rule (76 FR 26391), we
have found some cases where therapy
services recorded on a given PPS
assessment did not provide an accurate
account of the therapy provided to a
given SNF resident outside the
observation window for the most recent
assessment. While in some of these
cases, a patient’s clinical status may
have changed outside of the observation
window requiring an adjustment to the
PO 00000
Frm 00038
Fmt 4701
Sfmt 4700
intensity of therapy during that time, we
have also been presented with a
multitude of anecdotal evidence
claiming the misreporting of therapy
services. In addition, the Office of the
Inspector General (OIG) of the
Department of Health and Human
Services conducted an independent
study into questionable billing practices
in SNFs. Report No: OEI–02–09–00204
(available online at https://oig.hhs.gov/
oei/reports/oei-02-09-00204.asp)
demonstrates that the OIG concurs with
our statements in the FY 2012 proposed
rule and supports the changes we have
proposed to curb these practices. As
cited in the OIG Report (page 11),
‘‘Lastly, the data highlight the need for
further changes to make RUGs and
Medicare payments more consistent
with beneficiaries’ care and resource
needs. These changes could include
requiring SNFs to recalculate a
beneficiary’s RUG whenever his or her
level of therapy changes substantially,
as well as reducing the overlap that
occurs in assessment periods.’’ We agree
with the commenter that we should
utilize all of our available tools to
identify and correct abusive practices.
These issues have been referred to the
appropriate entities for more intensive
monitoring.
Comment: We received several
comments supporting the addition of
the COT OMRA. These commenters
agreed that the COT OMRA would
improve the accuracy of reimbursement
for therapy services and quality of care
to SNF patients. The commenters also
believed that the implementation of the
COT OMRA would help ensure that
Medicare payments more accurately
reflect the differences in resources
utilized for patient care. However, many
commenters stated that the COT OMRA
would create an undue burden for
facilities. Several commenters stated
that the COT OMRA would increase
supply costs associated with completing
the actual form and that the additional
paperwork required would affect the
‘‘green’’ efforts of many facilities. Some
commenters stated that the additional
assessments would reduce actual
patient care due to the amount of time
spent regulating and monitoring these
assessments during the SNF stay. Some
commenters expressed concern that the
COT OMRA would require facilities to
add new evaluation processes to
monitor RTM. One commenter stated
that the COT OMRA would increase
confusion about the MDS process. One
comment expressed concern that when
the COT OMRA causes a resident to
classify into a lower RUG category, this
would cause facility workloads to
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
increase without an increase in
personnel reimbursement.
Response: We would like to stress that
SNFs would be required to complete a
COT OMRA only if the intensity of
therapy changes to such an extent that
the patient’s RUG classification, based
on their last PPS assessment, is no
longer an accurate representation of the
patient’s current clinical condition.
Regarding the need for a new evaluation
process to monitor and count RTM, we
believe that facilities currently have
processes in place that monitor the total
amount of therapy minutes provided
over any given period of time.
Therefore, we do not agree that the
process of evaluating RTM will add a
significant time burden to facilities or
reduce actual patient care. We would
like to stress that if facilities tailor
treatment time to the needs of each
individual patient and continue to
provide that therapy outside of the
assessment window, facilities will be
less likely to be required to complete as
many COT OMRAs.
We cannot assess the accuracy of the
statement that the COT OMRA will
increase supply costs for form
completion and affect the green efforts
of facilities, as it depends on the facility
management and environmental efforts
of each specific facility. Nevertheless,
we believe the COT OMRA is an
appropriate measure to enhance the
accuracy of payments and patient care.
As we stated in the proposed rule (76
FR 26392), we believe the COT OMRA
will allow us to track changes in the
patient’s condition and in the provision
of therapy services more accurately,
allowing reimbursement to reflect
resource use more accurately, thereby
improving the accuracy of
reimbursement. Also, we believe that
the ability to track changes in the
patient’s condition and in the provision
of service more accurately will enhance
a SNF’s ability to provide quality care
to residents.
We do not believe that the COT
OMRA will increase confusion about
the MDS process. As we have done in
the past, we will update the RAI Manual
to incorporate the changes and
instructions for assessments and we will
provide training opportunities prior to
the October 1, 2011 implementation.
Finally, we do not agree with the
commenter who stated that when a COT
OMRA causes a resident to classify into
a lower RUG category, this will cause
facility workload to increase without an
increase in personnel reimbursement.
We note that RUG–IV classification is
based on resource utilization and cost.
If a patient is classified into a lower
therapy RUG category based on a change
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
to the therapy delivered during the COT
observation period, then the SNF would
appropriately be paid the lower rate
associated with that RUG category. The
SNF PPS rates are designed to cover the
costs of providing care, including
related administrative costs.
Comment: Several commenters have
asked whether the COT OMRA should
be completed in cases of an increase in
RTM to classify a resident into a higher
RUG category in addition to cases where
the resident would be classified into a
lower RUG category based on the
provision of RTM in the COT look-back
period. One commenter asked if a COT
OMRA would be required if there were
a scheduled decrease in therapy
provision (such as one that was caused
by the discontinuation of one therapy
discipline) or if the COT OMRA would
be required for any reason that would
cause a decrease in therapy.
Additionally, commenters have
questioned whether a resident’s ADL
score should be taken into account
when determining whether a COT
OMRA is required. One commenter
asked whether COT OMRA
requirements, including the COT
observation period requirement, would
apply if a resident was receiving therapy
but was classified into a nursing RUG
because of index maximization.
Response: As we stated in the FY
2012 proposed rule (76 FR 26392), a
COT OMRA would be completed for a
patient in a therapy RUG, if a patient’s
RTM has changed during the COT
observation period to such a degree that
the patient’s current RUG classification,
based on their last PPS assessment, is no
longer an accurate representation of the
patient’s clinical condition (and the
patient should be placed in a different
RUG category). This applies whether the
change in RTM is a scheduled change or
an unscheduled or unplanned change,
and whether the different RUG category
is higher or lower than the RUG
category in which the resident is
currently placed. In addition, in
response to the comment regarding
whether other therapy changes such as
the discontinuation of a particular
therapy discipline would be sufficient
to require a COT OMRA, upon further
consideration, we believe that a COT
OMRA should be required in any case
where there is a change in the provision
of therapy such that the patient’s
current RUG classification based on
their last PPS assessment, is no longer
an accurate representation of the
patient’s clinical condition and the
patient should be placed in a different
RUG–IV category. As we stated in the
proposed rule (76 FR 26392) and in this
final rule above, the purpose of the COT
PO 00000
Frm 00039
Fmt 4701
Sfmt 4700
48523
OMRA is to track changes in a patient’s
condition and in the provision of
therapy services more accurately to
ensure that the patient is placed in the
appropriate RUG category, thereby
improving the accuracy of
reimbursement. Based on comments
received in response to the proposed
rule, we will require that the COT
OMRA be completed where the
provision of therapy services has
changed in any manner as observed
during the COT observation period such
that the patient should be placed in a
different RUG category (not just in cases
where the RTM has changed). Therefore,
if a therapy discipline is discontinued
and this results in a patient no longer
meeting the required number of therapy
disciplines for the patient’s current RUG
category then a COT OMRA would be
required. In addition, if a patient fails to
receive the requisite number of days of
therapy required for classification into
the RUG category, then a COT OMRA
would be required to change the
patients’ RUG category as appropriate.
As discussed previously, the purpose of
the COT OMRA is to ensure that the
patient is placed in the appropriate
therapy RUG category based on therapy
services needed and received and to
ensure more accurate payment. For
example, a facility is evaluating whether
a COT OMRA is required for a resident
who was placed in a Very-High
Rehabilitation RUG group after the last
PPS assessment. Upon informal
evaluation at the end of the COT
observation period, the facility
determines that the resident has had
720 minutes of therapy during the COT
look-back period and meets all of the
other criteria for classification in an
Ultra-High Rehabilitation RUG group. A
COT OMRA would be completed to
place that resident into an Ultra High
Rehabilitation RUG group. In response
to the commenter’s question regarding
whether a resident’s ADL score should
be taken into account when determining
whether a COT OMRA is required, ADL
scores are not considered when
deciding whether a COT OMRA needs
to be completed as they are a refined
grouping within the RUG category.
However, when the COT OMRA is
completed, the ADL score will be used
in determining the appropriate RUG
group in the grouper.
Additionally, one commenter asked
whether a SNF would be required to
comply with the COT OMRA
requirements, including the COT
observation period requirement, in cases
where a resident is receiving therapy
but is classified into a nursing RUG
because of index maximization. Upon
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
48524
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
consideration of this comment, we
believe that the COT OMRA
requirements, including the COT
observation period requirement, should
also apply in cases where a resident is
receiving therapy but is classified into a
nursing RUG because of index
maximization. While this type of index
maximization will affect only a small
subset of beneficiaries receiving
therapy, because such patients are
receiving therapy services sufficient for
classification into a therapy RUG and
would be classified into a therapy RUG
if index maximization had not been
applied, we believe that it is appropriate
to apply the COT OMRA policy as
finalized in this rule to these patients as
well, so that any changes in the
intensity of therapy services delivered
to the patient may be captured. For
example, the evaluation performed at
the end of the COT observation period
for such a patient may indicate an
increase in RTM delivered, which may
necessitate placing the patient into a
rehabilitation RUG category. Therefore,
the COT OMRA policy, as finalized in
this rule, will also apply to patients who
are receiving a level of therapy
sufficient for classification into a
therapy RUG category, but are classified
into a nursing RUG because of index
maximization.
Comment: Many comments requested
clarification about the COT OMRA.
Specifically, several commenters asked
whether the COT OMRA could replace
or be combined with other scheduled
PPS assessments. Also, one commenter
asked us to clarify whether, if the ARD
for the COT OMRA were not set for Day
7, a missed or late assessment penalty
would be applied.
Response: As specified in Chapter 6,
Section 30.3 of the Medicare Claims
Processing Manual (CMS Pub. 100–04,
which is available online at https://
www.cms.gov/manuals/downloads/
clm104c06.pdf), special billing
requirements apply when there are
multiple assessments within one
Medicare-required assessment window.
Consistent with our current policy, if an
unscheduled PPS assessment (OMRA,
Significant Change in Status Assessment
(SCSA), or Significant Correction of a
Prior Assessment (SCPA)) is required
while in the assessment window of a
scheduled PPS assessment that has not
yet been completed, then facilities must
combine the scheduled and
unscheduled assessments by setting the
ARD of the scheduled assessment for
the same day that the unscheduled
assessment is required. In such cases,
facilities should provide the proper
response to A0310 items to indicate
which assessments are being combined,
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
as completion of the combined
assessment will be taken to fulfill the
requirements for both the scheduled and
unscheduled assessments. The purpose
of this policy is to minimize the number
of assessments required for SNF PPS
payment purposes and to ensure that
the assessments used for payment
provide the most accurate picture of the
patient’s clinical condition and service
needs. In practice, in cases where the
COT OMRA is combined with a
regularly scheduled assessment, the
facility would complete the scheduled
assessment, rather than the COT OMRA,
since the COT OMRA only includes a
subset of the required MDS data. This
single full MDS assessment is then used
to determine payment for both the COT
OMRA observation period and the
regular payment window for the
scheduled assessment. Thus, for
example, in cases where Day 7 of the
COT observation period falls within the
ARD window of the 30-day PPS
assessment, a provider would set the
ARD for the 30-day assessment on day
7 of the COT OMRA observation period,
and code the reasons for assessment as
both the 30-day and the COT OMRA
assessment (MDS items A0310(B) and
A0310(C)). Consistent with the COT
OMRA policy we proposed in the FY
2012 proposed rule (76 FR 26392), the
HIPPS code derived from the combined
COT OMRA and scheduled PPS
assessment would be effective starting
the first day of the COT observation
period (for example, for the first COT
observation period after the previous
assessment used for Medicare payment,
the first day of the COT observation
period is the day after the ARD of the
previous assessment used for Medicare
payment) and would remain in effect
until the end of the payment window
for the 30-day assessment (that is, day
60) or until a new unscheduled
assessment (an OMRA, SCSA, or SCPA)
is completed.
The ARD for the COT OMRA is Day
7 following the last scheduled or
unscheduled PPS assessment or Day 7
following the end of the last COT
observation period (in cases where
therapy had not changed sufficiently to
require a COT OMRA assessment to be
performed for the previous COT
observation period). If a COT OMRA is
required but is completed late, the
facility is still required to submit the
late COT OMRA to CMS. The facility
will be paid at the default rate for any
days not in compliance with the ARD
requirement. The ARD of the late COT
OMRA restarts the 7-day review period
for the next COT OMRA. Since SNFs are
only permitted to bill after the
PO 00000
Frm 00040
Fmt 4701
Sfmt 4700
appropriate assessment has been
accepted into the CMS data base, failure
to submit a required assessment while
continuing to bill for services that
would be covered by the assessment,
would subject the claim to denial.
Comment: Many commenters offered
suggestions and alternatives to the COT
OMRA. Several commenters offered the
general suggestion that CMS should
seek alternate, less burdensome options
to address the issue of therapy service
level changes outside of the MDS
observation windows. More specifically,
commenters recommended that if we
move forward with this proposal, we
should allow flexibility in the choice of
the ARD of the COT OMRA. One
commenter suggested that we do this by
allowing for grace days either at the
beginning or end of the 7-day window
for the COT observation period.
Similarly, one commenter suggested
that we incorporate the concept of
‘‘grace minutes’’ to offer facilities the
flexibility to allow for an unexpected
decrease in therapy minutes outside of
the assessment window. Additionally,
we received suggestions that the COT
OMRA should be required only after the
first 30 days of a patient’s SNF stay.
Response: We appreciate the
suggestions and alternatives offered.
However, we believe that allowing
flexibility in the choice of ARD by
adding grace days and by allowing grace
minutes, as suggested by the
commenter, would defeat the purpose
and intent of the COT OMRA, which is
to determine whether the therapy
provided during a successive 7-day
window of therapy following the ARD
of a scheduled or unscheduled PPS
assessment (the COT observation
period) corresponds to the resident’s
RUG–IV classification as reflected on
the most recent PPS assessment. Adding
grace days would allow facilities to
provide a count of therapy minutes that
may not be an accurate reflection of the
actual therapy minutes provided during
the successive 7-day period discussed
above, contrary to the intent of the COT
OMRA. Furthermore, we believe that
allowing grace minutes would allow the
facility to provide less therapy than
anticipated with the expectation that
CMS will reimburse the facility at a
higher rate than appropriate.
Additionally, the concept of ‘‘grace
minutes’’ would indicate that providers
are targeting a minimum threshold of
minutes to qualify for a specific RUG
category. We stress that there are not
‘‘minimum minutes’’ that should be met
when determining how much therapy a
resident will receive. We expect that
facilities are determining the therapy
minutes provided based on the needs of
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
each individual resident. Furthermore,
we do not agree that we should require
the COT OMRA only after the first 30
days of the SNF stay; instead, accurate
payment should occur throughout the
SNF stay. The majority of Medicare A
Part stays are an average of 30 days in
length, and thus, a COT OMRA that was
only completed after day 30 would not
adequately monitor for changes in
therapy services during the Medicare
Part A stay, which is the purpose of the
COT OMRA.
Comment: Several commenters stated
that the implementation of the COT
OMRA implies that SNF payment is no
longer prospective in nature. One
commenter suggested that the
retrospective nature of the COT OMRA
undermines the principles of risk
sharing inherent in a prospective
payment system. One commenter
suggested that rather than changing the
nature of the PPS, we should modify the
case-mix indexes (CMIs) and payment
rates associated with the Rehabilitation
RUG categories.
Response: As noted previously, we
believe that the SNF PPS payments
should reflect, as accurately as possible,
resource utilization and cost.
Classification of patients into therapy
RUGs and payment for therapy services
have always been based on the therapy
services provided and reported on the
MDS, and we do not view the COT
OMRA as changing this. In
implementing the COT OMRA, we are
attempting to ensure that the therapy
reported on the MDS and the therapy
regimen chosen for the patient are a
better reflection of the therapy needs of
the patient, thereby ensuring more
accurate payment. We appreciate the
suggestion regarding modifying the
CMIs and payment rates associated with
the Rehabilitation RUG categories, and
may consider this in the future to the
extent appropriate. As stated in the
proposed rule, CMS is considering a
number of possible future initiatives
that may help to ensure the long-term
stability of the SNF PPS and further
improve the accuracy of the rate-setting
process. A discussion of these possible
future initiatives is included in section
III.E.5 below.
Comment: Several commenters raised
concerns regarding the inability of the
COT OMRA to account for the natural
progression in a patient’s therapy
regimen. One commenter stated that as
patients approach the end of their
skilled therapy program, it is common
practice to taper therapy down to
prepare for discharge. Another
commenter alleged that the requirement
for the ARD of the COT OMRA to be set
on Day 7 is arbitrary and that during any
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
given payment period, clinical changes
occur daily, especially at the beginning
and end of the SNF stay. Other
commenters were concerned that
adhering to a strict 7-day evaluation
schedule could prompt a patient’s RUG
category to change for as little as one
lost minute of therapy.
Response: We believe that the COT
OMRA, while based on changes in a
therapy regimen, is primarily intended
to capture the patient’s appropriate RUG
classification and, therefore, the
payment level. Therapists should
exercise their professional discretion
with regard to the appropriate amount
and modality of the therapy provided to
a resident during a given SNF stay. We
acknowledge the natural progression of
a patient’s therapy needs throughout a
stay, and do not believe that the COT
OMRA precludes therapists from having
the freedom to tailor their provision of
therapy services to the individual
patient.
We do not agree that setting the ARD
of the COT OMRA on Day 7 following
the last PPS assessment or Day 7 of any
succeeding COT observation period is
arbitrary. The resident is placed in a
Rehabilitation or Rehabilitation Plus
Extensive Services RUG category
partially based the amount of therapy
that was received during a 7-day lookback period. One of the basic principles
underlying the SNF PPS is that an
assessment completed in one time
period can be used in accurately
calculating reimbursement for a future
period. While we realize that there will
be changes based on individual needs,
it is expected that, on average, residents
will receive approximately the same
amount of therapy within the next 7-day
period after a PPS assessment. The COT
OMRA is an instrument that will better
align payment with the amount of
therapy that a resident actually needs
and receives. Our analysis of therapy
utilization across Medicare Part A stays
indicates that patients tend to remain in
the same therapy groups for the first 30
days of care; that is, as reported on the
5-day and 14-day assessments. Since the
average length of stay is approximately
30 days, facilities that maintain a stable
therapy schedule should not see a large
volume of COT OMRAs. While it is
more common to see changes in therapy
and RUG–IV groups during longer stays,
the volume of patients receiving
Medicare Part A SNF care for stays
exceeding 30 days is much lower.
In response to the comment that a
strict 7-day evaluation schedule could
prompt a patient’s RUG category to
change for as little as one lost minute of
therapy, this is theoretically possible if
the plan of care is designed to provide
PO 00000
Frm 00041
Fmt 4701
Sfmt 4700
48525
only the minimum number of minutes
that qualify the patient for a specific
therapy category. As noted above, the
purpose of the COT OMRA is to
determine whether the therapy provided
during the 7 days of therapy following
the ARD of a scheduled or unscheduled
PPS assessment (and any succeeding
COT observation period) correspond to
the resident’s RUG–IV classification, as
reflected on the most recent PPS
assessment. Slight variations during the
7-day period are expected, and it is up
to the therapist to ensure that the
patient receives the amount of therapy
appropriate to his/her condition.
Accordingly, for the reasons
discussed in this final rule and in the
FY 2012 proposed rule (76 FR 26388
through 26393), we are finalizing our
proposed policies related to the MDS
Assessment Schedule, the EOT–OMRA,
the EOT–R OMRA, and the COT OMRA.
Specifically, effective October 1, 2011,
as discussed in the proposed rule and in
the final rule above, we are revising the
Medicare-required assessment schedule
in the manner set forth in Table 10B of
the proposed rule (76 FR 26389);
removing the distinction between 5-day
and 7-day facilities for purposes of
setting the ARD for the EOT OMRA, and
requiring all facilities to set the ARD for
the EOT ORMA by the third consecutive
calendar day after a patient’s therapy
services have been discontinued (76 FR
26390); and permitting providers the
option to complete an EOT–R OMRA
rather than the optional SOT OMRA, in
cases where the therapy resumption
date is no more than 5 consecutive
calendar days following the last day of
therapy provided, and therapy services
have resumed at the same RUG–IV
classification level that had been in
effect prior to the EOT OMRA (76 FR
26390 through 26391). In addition,
effective October 1, 2011, we are
requiring facilities to complete a COT
OMRA for patients classified into a
RUG–IV therapy category, whenever the
intensity of therapy (that is, the total
RTM delivered or other therapy category
qualifiers, such as the number of days
the patient received therapy during the
week or the number of therapy
disciplines) changes to such a degree
that it would no longer reflect the RUG–
IV classification and payment assigned
for a given SNF resident based on the
most recent assessment used for
Medicare payment (as proposed, the
need for a COT OMRA will be based on
therapy services delivered during the
COT observation period) (76 FR 26391
through 26393). In addition, as
proposed, the new RUG–IV group
resulting from the COT OMRA would be
E:\FR\FM\08AUR3.SGM
08AUR3
48526
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
billed starting the first day of the COT
observation period for which the COT
OMRA was completed, and would
remain at this level until a new
assessment is completed which changes
the patient’s RUG–IV classification.
Finally, as discussed above, the COT
OMRA policy, as finalized in this rule,
will also apply to patients who are
receiving a level of therapy sufficient for
classification into a therapy RUG, but
are classified into a nursing RUG
because of index maximization.
5. Discussion of Possible Future
Initiatives
In the FY 2012 proposed rule (76 FR
26393), we discussed some possible
future initiatives that may help to
ensure the long-term stability of the SNF
PPS and further improve the accuracy of
the rate-setting process. Specifically, we
discussed three possible future
initiatives. First, we discussed the
possibility of evolving the manner in
which we pay for therapy services
toward a model that has previously been
advocated by MedPAC, which would
base payments for therapy services on
the patient’s characteristics. Similarly,
we discussed the possibility of making
partial prospective payments for therapy
services, based on patient
characteristics, and then reconciling
payments after the services have been
verified. Lastly, we discussed the
possibility of annual recalibrations of
the CMIs to account for fluctuations in
provider practices, and MedPAC’s
analysis regarding the possibility of
rebasing the system. As we stated in the
FY 2012 proposed rule, we were not
proposing any new Medicare policy in
this discussion, as we recognized that
depending on how such modifications
are ultimately formulated, their
implementation may require new
statutory authority.
The comments we received related to
this discussion, along with our
responses, appear below.
Comment: We received a few general
comments related to this discussion, the
majority of which stated their support
for working with CMS in the future on
any future initiatives. We did not
receive any comments about any
specific initiatives discussed.
Response: We appreciate the support
we received from commenters for
considering these future initiatives and
will continue to work with stakeholders
on developing policies and programs
that we consider necessary and
appropriate to improve the SNF PPS.
F. The Skilled Nursing Facility Market
Basket Index
Section 1888(e)(5)(A) of the Act
requires us to establish a SNF market
basket index (input price index), that
reflects changes over time in the prices
of an appropriate mix of goods and
services included in the SNF PPS. In the
FY 2012 proposed rule, we stated that
the proposed rule incorporates the latest
available projections of the SNF market
basket. In this final rule, we are
updating projections based on the latest
available projections of the SNF market
basket index at the time of publication.
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.
Each year, we calculate a revised
labor-related share based on the relative
importance of labor-related cost
categories in the input price index.
Table 9 summarizes the updated laborrelated share for FY 2012.
TABLE 9—LABOR-RELATED RELATIVE IMPORTANCE, FY 2011 AND FY 2012
Relative importance, labor-related,
FY 2011
10:2 forecast *
Relative importance, labor-related,
FY 2012
11:2 forecast **
Wages and salaries .................................................................................................................................
Employee benefits ...................................................................................................................................
Nonmedical professional fees .................................................................................................................
Labor-intensive services ..........................................................................................................................
Capital-related (.391) ...............................................................................................................................
50.654
11.511
1.32
3.427
2.399
50.129
11.502
1.31
3.394
2.358
Total ..................................................................................................................................................
69.311
68.693
* Published in Federal Register; based on second quarter 2010 IHS Global Insight Inc. forecast.
** Based on the second quarter 2011 IHS Global Insight forecast, with historical data through the first quarter 2011.
srobinson on DSK4SPTVN1PROD with RULES3
1. Use of the Skilled Nursing Facility
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
average of the previous FY to the
average of the current FY. For the
Federal rates established in this final
rule, we use the percentage increase in
the SNF market basket index to compute
the update factor for FY 2012. This is
based on the IGI (formerly DRI–WEFA)
second quarter 2011 forecast (with
historical data through the first quarter
2011) of the FY 2012 percentage
increase in the FY 2004-based SNF
market basket index for routine,
ancillary, and capital-related expenses,
which is used to compute the update
VerDate Mar<15>2010
21:41 Aug 05, 2011
Jkt 223001
factor in this final rule. As discussed in
section III.F.3 of this final rule, this
market basket percentage change is
reduced by the MFP adjustment as
required by section 1888(e)(5)(B)(ii) of
the Act. Finally, as discussed in section
I.A of this final rule, we no longer
compute update factors to adjust a
facility-specific portion of the SNF PPS
rates, because the initial three-phase
transition period from facility-specific
to full Federal rates that started with
cost reporting periods beginning in July
1998 has expired.
2. Market Basket Forecast Error
Adjustment
As discussed in the June 10, 2003,
supplemental proposed rule (68 FR
34768) and finalized in the August 4,
PO 00000
Frm 00042
Fmt 4701
Sfmt 4700
2003, final rule (68 FR 46057 through
46059), the regulations at
§ 413.337(d)(2) provide for an
adjustment to account for market basket
forecast error. The initial adjustment
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.
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
whenever the difference between the
forecasted and actual change in the
market basket exceeds a specified
threshold. We originally used a 0.25
percentage point threshold for this
purpose; however, for the reasons
E:\FR\FM\08AUR3.SGM
08AUR3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
specified in the FY 2008 SNF PPS final
rule (72 FR 43425, August 3, 2007), we
adopted a 0.5 percentage point
threshold effective with FY 2008. As
discussed previously in section I.G.2 of
this final rule, as the difference between
the estimated and actual amounts of
increase in the market basket index for
FY 2010 (the most recently available FY
for which there is final data) does not
exceed the 0.5 percentage point
threshold, the payment rates for FY
2012 do not include a forecast error
adjustment.
Comment: Several commenters
suggested that CMS apply a cumulative
forecast error adjustment to account for
all of the variations in the market basket
forecasts since FY 2004. These
commenters stated that while the
industry has accepted the adjustment
process, the lack of any cumulative
adjustment in recent years violates the
precedent set by CMS in 2003 when the
last cumulative adjustment was made
and that the cumulative adjustment in
2003 demonstrated recognition by CMS
of the cumulatively erosive effect of
multi-year forecasting errors. The
commenters recommended that CMS
adopt a policy which recognizes the
cumulative effect of multi-year market
basket forecast errors and that
adjustment be made to account for the
cumulative errors, estimated at 0.7
percent, thus far.
Response: For FY 2004, we applied a
one-time, cumulative forecast error
correction of 3.26 percent (68 FR 46036,
46058). Since that time, the forecast
errors have been relatively small and
clustered near zero. As we stated in the
FY 2004 final rule, we believe the
forecast error correction should be
applied only when the degree of forecast
error in any given year is such that the
SNF base payment rate does not
adequately reflect the historical price
changes faced by SNFs. Accordingly, we
continue to believe that the forecast
error adjustment mechanism should
appropriately be reserved for the type of
major, unexpected change that initially
gave rise to this policy, rather than the
minor variances that are a routine and
inherent aspect of this type of statistical
measurement. Further, we note that all
of the Medicare prospective systems use
an annual market basket adjustment
factor to update rates to reflect inflation
in the prices of goods and services used
by providers.
3. Multifactor Productivity Adjustment
Section 3401(b) of the Affordable Care
Act 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) is to be reduced
annually by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II)
of the Act. As explained in the Senate
Finance Committee report that
accompanied S. 1796 (‘‘America’s
Healthy Future Act of 2009,’’ the
Senate’s initial version of the health
care reform legislation), the purpose of
this type of productivity adjustment is
to help ensure that the market basket
update, in accounting for changes in the
costs of goods and services used to
provide patient care, also reflects
‘‘* * * increases in provider
productivity that could reduce the
actual cost of providing services (such
48527
as through new technology, fewer
inputs, etc.)’’ (S. Rep. No. 111–89 at
261). Specifically, section 3401(a) of the
Affordable Care Act amends section
1886(b)(3)(B) of the Act to add clause
(xi)(II), which sets forth the definition of
this productivity adjustment. The
statute defines the productivity
adjustment to be equal to the 10-year
moving average of changes in annual
economy-wide private nonfarm business
multi-factor productivity (MFP) (as
projected by the Secretary for the 10year period ending with the applicable
fiscal year, year, cost reporting period,
or other annual period) (the ‘‘MFP
adjustment’’). The Bureau of Labor
Statistics (BLS) is the agency that
publishes the official measure of private
nonfarm business MFP. Please see
https://www.bls.gov/mfp to obtain the
BLS historical published MFP data. The
projection of MFP is currently produced
by IGI, an economic forecasting firm. To
generate a forecast of MFP, IGI
replicated the MFP measure calculated
by the BLS, using a series of proxy
variables derived from IGI’s U.S.
macroeconomic models. These models
take into account a very broad range of
factors that influence the total U.S.
economy. IGI forecasts the underlying
proxy components, such as Gross
Domestic Product (GDP), capital, and
labor inputs required to estimate MFP,
and then combines those projections
according to the BLS methodology. In
Table 10, we identify each of the major
MFP component series employed by the
BLS to measure MFP. We also provide
the corresponding concepts forecasted
by IGI and determined to be the best
available proxies for the BLS series.
TABLE 10—MULTIFACTOR PRODUCTIVITY COMPONENT SERIES EMPLOYED BY THE BUREAU OF LABOR STATISTICS AND
IHS GLOBAL INSIGHT
BLS series
IGI series
Real value-added output, constant 2005 dollars .....................................
Non-housing non-government non-farm real GDP, Billions of chained
2005 dollars—annual rate.
Hours of all persons in private nonfarm establishments, 2005 = 100.00,
adjusted for labor composition effects.
Real effective capital stock used for full employment GDP, Billions of
chained 2005 dollars.
Private non-farm business sector labor input; 2005 = 100.00 .................
srobinson on DSK4SPTVN1PROD with RULES3
Aggregate capital inputs; 2005 = 100.00 .................................................
IGI found that the historical growth
rates of the BLS components used to
calculate MFP and the IGI components
identified are consistent across all series
and, therefore, suitable proxies for
calculating MFP. We have included
below a more detailed description of the
methodology used by IGI to construct a
forecast of MFP, which is aligned
closely with the methodology employed
by the BLS. For more information
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
regarding the BLS method for estimating
productivity, please see the following
link: https://www.bls.gov/mfp/
mprtech.pdf.
At the time of this final rule, the BLS
has published a historical time series of
private nonfarm business MFP for 1987
through 2010, with 2010 being a
preliminary value. Using this historical
MFP series and the IGI forecasted series,
IGI developed a forecast of MFP for
2011 through 2021, as described below.
PO 00000
Frm 00043
Fmt 4701
Sfmt 4700
To create a forecast of BLS’ MFP
index, the forecasted annual growth
rates of the ‘‘non-housing,
nongovernment, non-farm, real GDP,’’
‘‘hours of all persons in private nonfarm
establishments adjusted for labor
composition,’’ and ‘‘real effective capital
stock’’ series (ranging from 2011 to
2021) are used to ‘‘grow’’ the levels of
the ‘‘real value-added output,’’ ‘‘private
non-farm business sector labor input,’’
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
48528
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
and ‘‘aggregate capital input’’ series
published by the BLS. Projections of the
‘‘hours of all persons’’ measure are
calculated using the difference between
the projected growth rates of real output
per hour and real GDP. This difference
is then adjusted to account for changes
in labor composition in the forecast
interval. Using these three key concepts,
MFP is derived by subtracting the
contribution of labor and capital inputs
from output growth. However, to
estimate MFP, we need to understand
the relative contributions of labor and
capital to total output growth.
Therefore, two additional measures are
needed to operationalize the estimation
of the IGI MFP projection: Labor
compensation and capital income. The
sum of labor compensation and capital
income represents total income. The
BLS calculates labor compensation and
capital income (in current dollar terms)
to derive the nominal values of labor
and capital inputs. IGI uses the
‘‘nongovernment total compensation’’
and ‘‘flow of capital services from the
total private non-residential capital
stock’’ series as proxies for the BLS’s
income measures. These two proxy
measures for income are divided by
total income to obtain the shares of
labor compensation and capital income
to total income. To estimate labor’s
contribution and capital’s contribution
to the growth in total output, the growth
rates of the proxy variables for labor and
capital inputs are multiplied by their
respective shares of total income. These
contributions of labor and capital to
output growth are subtracted from total
output growth to calculate the ‘‘change
in the growth rates of multifactor
productivity’’ using the following
formula:
MFP = Total output growth ¥; ((labor
input growth*labor compensation
share) + (capital input growth *
capital income share))
The change in the growth rates (also
referred to as the compound growth
rates) of the IGI MFP are multiplied by
100 to calculate the percent change in
growth rates (the percent change in
growth rates is published by the BLS for
its historical MFP measure). Finally, the
growth rates of the IGI MFP are
converted to index levels based to 2005
to be consistent with the BLS’
methodology. For benchmarking
purposes, the historical growth rates of
IGI’s proxy variables were used to
estimate a historical measure of MFP,
which was compared to the historical
MFP estimate published by the BLS.
The comparison revealed that the
growth rates of the components were
consistent across all series and,
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
therefore, validated the use of the proxy
variables in generating the IGI MFP
projections. The resulting MFP index
was then interpolated to a quarterly
frequency using the Bassie method for
temporal disaggregation. The Bassie
technique utilizes an indicator (pattern)
series for its calculations. IGI uses the
index of output per hour (published by
the BLS) as an indicator when
interpolating the MFP index.
a. Incorporating the Multifactor
Productivity Adjustment Into the
Market Basket Update
According to section 1888(e)(5)(A) of
the Act, the Secretary ‘‘shall establish a
skilled nursing facility market basket
index that reflects changes over time in
the prices of an appropriate mix of
goods and services included in covered
skilled nursing facility services.’’ As
described in section I.G.2 of this final
rule, we estimate the SNF PPS market
basket percentage for FY 2012 under
section 1888(e)(5)(B)(i) of the Act based
on the FY 2004-based SNF market
basket. Section 3401(b) of the Affordable
Care Act amends section 1888(e)(5)(B)
of the Act, in part, by adding a new
clause (ii), which 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)’’ (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 for a FY being less
than such payment rates for the
preceding FY. Thus, if the application of
the MFP adjustment to the market
basket percentage calculated under
section 1888(e)(5)(B)(i) 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) would be negative, and
such rates would decrease relative to the
prior FY.
We received the following comment
on the incorporation of the MFP
adjustment into the SNF market basket
which, along with our response, appears
below.
Comment: One commenter proposed
to remove the statutory language
requiring a multi-factor productivity
adjustment to the SNF market basket
increase and recommended an
PO 00000
Frm 00044
Fmt 4701
Sfmt 4700
alternative approach to measuring
productivity. The commenter
recommended that CMS achieve
productivity gains by implementing a
mechanism that recognizes that the
average length of stay in SNFs can be
reduced, potentially resulting in
aggregate savings.
Response: The commenter’s proposal
would require a change to the existing
statute governing the SNF PPS and,
therefore, the request is outside the
scope of rulemaking. As stated
previously, section 3401(b) of the
Affordable Care Act 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 productivity
adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act.
Accordingly, we are finalizing the
methodology for calculating the MFP
adjustment, and the incorporation of the
MFP adjustment into the SNF market
basket as discussed in this section of the
final rule, and in section VI.C of the FY
2012 proposed rule (76 FR 26394
through 26396).
To calculate the MFP-adjusted update
for the SNF PPS, we subtract the MFP
percentage adjustment from the FY 2012
market basket percentage calculated
using the FY 2004-based SNF market
basket. In the FY 2012 proposed rule (76
FR 26395), we proposed that the end of
the 10-year moving average of changes
in the MFP would coincide with the end
of the appropriate FY update period.
Since the market basket percentage is
reduced by the MFP adjustment to
determine the annual update for the
SNF PPS, we believe it is appropriate
for the numbers associated with both
components of the calculation (the
market basket percentage and the
productivity adjustment) to be projected
as of the same end date so that changes
in market conditions are aligned.
Therefore, for the FY 2012 update, the
MFP adjustment is calculated as the 10year moving average of changes in MFP
for the period ending September 30,
2012. We round the final annual
adjustment to the one-tenth of one
percentage point level up or down as
applicable according to conventional
rounding rules (that is, if the number we
are rounding is followed by 5, 6, 7, 8,
or 9, we round the number up; if the
number we are rounding is followed by
0, 1, 2, 3, or 4, we round the number
down).
In accordance with section
1888(e)(5)(B)(i) of the Act, the market
basket percentage for FY 2012 for the
SNF PPS is based on the 2nd quarter
2011 forecast of the FY 2004-based SNF
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
market basket update, which is
estimated to be 2.7 percent. In
accordance with section 1888(e)(5)(B)(ii)
of the Act (as added by section 3401(b)
of the Affordable Care Act), this market
basket percentage is then reduced by the
MFP adjustment (the 10-year moving
average of changes in MFP for the
period ending September 30, 2012) of
1.0 percent, which is calculated as
described above and based on IGI’s 2nd
quarter 2011 forecast. The resulting
MFP-adjusted market basket increase
factor is equal to 1.7 percent, or 2.7
percent less 1.0 percentage points.
Furthermore, we proposed that in
fiscal years where a forecast error
adjustment is applicable, we would first
apply the forecast error adjustment to
the market basket percentage, before
applying the MFP adjustment. As
discussed previously, in determining
whether a forecast error adjustment
should be applied, CMS compares the
forecasted market basket percentage
computed under section 1888(e)(5)(B)(i)
of the Act for the most recently available
fiscal year for which there is final data
to the actual market basket percentage
for that fiscal year. Because the forecast
error adjustment is intended to address
errors in the forecast of the market
basket percentage, we believe that this
adjustment is part of the establishment
of the appropriate market basket
percentage under section
1888(e)(5)(B)(i) of the Act. Section
1888(e)(5)(B)(ii) of the Act (as added by
section 3401(b) of the Affordable Care
Act) requires the MFP adjustment to be
applied ‘‘after determining the
percentage described in clause (i)’’.
Thus, we will apply the forecast error
adjustment (when applicable) to the
market basket percentage prior to
applying the MFP adjustment, to
determine the update to the unadjusted
Federal per diem rates for a fiscal year.
As discussed in the FY 2012 proposed
rule (76 FR 26396), we proposed to
revise § 413.337 to reflect the policies
discussed above and to conform the
regulations to the corresponding
statutory requirements at section
1888(e)(4)(E) of the Act. As we did not
receive any comments on our proposed
changes to § 413.337, we are finalizing
these changes as proposed in the FY
2012 proposed rule, subject to the
technical correction noted below.
Accordingly, as we proposed in the FY
2012 proposed rule, we are revising
§ 413.337 by adding a new paragraph
(d)(3) to require, for FY 2012 and each
subsequent FY, that the market basket
index percentage change (as modified
by any applicable forecast error
adjustment) be reduced by the MFP
adjustment described in section
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
1886(b)(3)(B)(xi)(II) of the Act in
determining the annual update of the
unadjusted Federal per diem rates.
Consistent with section 1888(e)(5)(B)(ii)
of the Act (as added by section 3401(b)
of the Affordable Care Act), as we
proposed, we are further revising
§ 413.337(d)(3) to state that the
reduction of the market basket index
percentage change by the MFP
adjustment may result in the market
basket index percentage change being
less than zero for a fiscal year, and may
result in the unadjusted Federal
payment rates for a fiscal year being less
than such payment rates for the
preceding fiscal year. We note that we
have made a technical correction to the
language we proposed for
§ 413.337(d)(3). In the last sentence, we
are replacing the term ‘‘market basket
percentage change’’ with ‘‘market basket
index percentage change’’ to be
consistent with the terminology used in
the first sentence of § 413.337(d)(3) and
in § 413.337(d)(1).
In addition, as we proposed, we are
revising existing paragraphs (d)(1) and
(d)(2) of § 413.337, as discussed below.
First, we are revising § 413.337(d)(1) so
that the text more accurately tracks the
corresponding statutory requirements at
section 1888(e)(4)(E) of the Act. As we
stated in the FY 2012 proposed rule (76
FR 26396), currently, § 413.337(d)(1)
does not reflect the amendments made
to section 1888(e)(4)(E)(ii) by section
311 of the BIPA (see section I.D of this
final rule). While we have always
updated the unadjusted Federal per
diem rates in accordance with the
requirements set forth in section
1888(e)(4)(E)(ii) of the Act as amended
by section 311 of the BIPA, we
inadvertently failed to update the
regulation text to conform with the
BIPA requirements. Therefore, we are
now revising § 413.337(d)(1) to conform
with the current statutory language in
section 1888(e)(4)(E) as amended by
section 311 of the BIPA. Second, as we
proposed, we are revising
§ 413.337(d)(2) to specify the existing
thresholds we employ in determining
whether a forecast error adjustment is
applicable.
b. Federal Rate Update Factor
Section 1888(e)(4)(E)(ii)(IV) of the Act
requires that the update factor used to
establish the FY 2012 unadjusted
Federal rates be at a level equal to the
market basket percentage change.
Accordingly, to establish the update
factor, we determined the total growth
from the average market basket level for
the period of October 1, 2010 through
September 30, 2011 to the average
market basket level for the period of
PO 00000
Frm 00045
Fmt 4701
Sfmt 4700
48529
October 1, 2011 through September 30,
2012. Using this process, the market
basket update factor for FY 2012 SNF
PPS unadjusted Federal rates is 2.7
percent. As required by section
1888(e)(5)(B) of the Act, this market
basket percentage is then reduced by the
MFP adjustment (the 10-year moving
average of changes in MFP for the
period ending September 30, 2012) of
1.0 percent as described in section
III.F.3. The resulting MFP-adjusted
market basket increase factor is equal to
1.7 percent, or 2.7 percent less 1.0
percentage point. We used this MFPadjusted market basket update factor to
compute the SNF PPS rate shown in
Tables 2 and 3.
G. Consolidated Billing
Section 4432(b) of the BBA
established a consolidated billing
requirement that places the Medicare
billing responsibility for virtually all of
the services that the SNF’s residents
receive with the SNF, except for a small
number of services that the statute
specifically identifies as being excluded
from this provision. As noted previously
in section I. of this final rule,
subsequent legislation enacted a number
of modifications in the consolidated
billing provision.
Specifically, section 103 of the BBRA
amended this provision by further
excluding a number of individual ‘‘highcost, low probability’’ services,
identified by the Healthcare Common
Procedure Coding System (HCPCS)
codes, within several broader categories
(chemotherapy and its administration,
radioisotope services, and customized
prosthetic devices) that otherwise
remained subject to the provision. We
discuss this BBRA amendment in
greater detail in the 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
https://www.cms.hhs.gov/transmittals/
downloads/ab001860.pdf.
Section 313 of the BIPA further
amended this provision by repealing its
Part B aspect; that is, its applicability to
services furnished to a resident during
a SNF stay that Medicare Part A does
not cover. (However, physical,
occupational, and speech-language
therapy remain subject to consolidated
billing, regardless of whether the
resident who receives these services is
in a covered Part A stay.) We discuss
this BIPA amendment in greater detail
in the proposed and final rules for FY
2002 (66 FR 24020 through 24021, May
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
48530
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
10, 2001, and 66 FR 39587 through
39588, July 31, 2001).
In addition, section 410 of the MMA
amended this provision by excluding
certain practitioner and other services
furnished to SNF residents by RHCs and
FQHCs. We discuss this MMA
amendment in greater detail in the
update notice for FY 2005 (69 FR
45818–45819, July 30, 2004), as well as
in Medicare Learning Network (MLN)
Matters article MM3575, issued
December 10, 2004, which is available
online at https://www.cms.gov/
MLNMattersArticles/downloads/
MM3575.pdf.
Further, while not substantively
revising the consolidated billing
requirement itself, a related provision
was enacted in the Medicare
Improvements for Patients and
Providers Act of 2008 (MIPPA) (Pub. L.
110–275, enacted July 15, 2008).
Specifically, section 149 of MIPPA
amended section 1834(m)(4)(C)(ii) of the
Act to create a new subclause (VII),
which adds SNFs (as defined in section
1819(a) of the Act) to the list of entities
that can serve as a telehealth
‘‘originating site’’ (that is, the location at
which an eligible individual can
receive, through the use of a
telecommunications system, services
furnished by a physician or other
practitioner who is located elsewhere at
a ‘‘distant site’’).
As explained in the Medicare
Physician Fee Schedule (PFS) final rule
for CY 2009 (73 FR 69726, 69879,
November 19, 2008), a telehealth
originating site receives a facility fee
which is always separately payable
under Part B outside of any other
payment methodology. Section 149(b) of
MIPPA amended section
1888(e)(2)(A)(ii) of the Act to exclude
telehealth services furnished under
section 1834(m)(4)(C)(ii)(VII) of the Act
from the definition of ‘‘covered skilled
nursing facility services’’ that are paid
under the SNF PPS. Thus, a SNF ‘‘* * *
can receive separate payment for a
telehealth originating site facility fee
even in those instances where it also
receives a bundled per diem payment
under the SNF PPS for a resident’s
covered Part A stay’’ (73 FR 69881). By
contrast, under section 1834(m)(2)(A) of
the Act, a telehealth distant site service
is payable under Part B to an eligible
physician or practitioner only to the
same extent that it would have been so
payable if furnished without the use of
a telecommunications system. Thus, as
explained in the CY 2009 PFS final rule,
eligible distant site physicians or
practitioners can receive payment for a
telehealth service that they furnish
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
* * * only if the service is separately
payable under the PFS when furnished in a
face-to-face encounter at that location. For
example, we pay distant site physicians or
practitioners for furnishing services via
telehealth only if such services are not
included in a bundled payment to the facility
that serves as the originating site (73 FR
69880).
This means that in those situations
where a SNF serves as the telehealth
originating site, the distant site
professional services would be
separately payable under Part B only to
the extent that they are not already
included in the SNF PPS bundled per
diem payment and subject to
consolidated billing. Thus, for a type of
practitioner whose services are not
otherwise excluded from consolidated
billing when furnished during a face-toface encounter, the use of a telehealth
distant site would not serve to unbundle
those services. In fact, consolidated
billing does exclude the professional
services of physicians, along with those
of most of the other types of telehealth
practitioners that the law specifies at
section 1842(b)(18)(C) of the Act, that is,
physician assistants, nurse practitioners,
clinical nurse specialists, certified
registered nurse anesthetists, certified
nurse midwives, and clinical
psychologists (see section
1888(e)(2)(A)(ii) of the Act and
§ 411.15(p)(2)). However, the services of
clinical social workers, registered
dietitians and nutrition professionals
remain subject to consolidated billing
when furnished to a SNF’s Part A
resident and, thus, cannot qualify for
separate Part B payment as telehealth
distant site services in this situation.
Additional information on this
provision appears in Program
Transmittal #1635 (Change Request
#6215), issued November 14, 2008,
which is available online at https://
www.cms.hhs.gov/transmittals/
downloads/R1635CP.pdf.
To date, the Congress has enacted no
further legislation affecting the
consolidated billing provision.
However, as noted above and explained
in the proposed rule for FY 2001 (65 FR
19232, April 10, 2000), the amendments
enacted in section 103 of the BBRA not
only identified for exclusion from this
provision a number of particular service
codes within four specified categories
(that is, chemotherapy items,
chemotherapy administration services,
radioisotope services, and customized
prosthetic devices), but also gave the
Secretary ‘‘* * * the authority to
designate additional, individual services
for exclusion within each of the
specified service categories.’’ In the
proposed rule for FY 2001, we also
PO 00000
Frm 00046
Fmt 4701
Sfmt 4700
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 ‘‘* * * highcost, low probability events that could
have devastating financial impacts
because their costs far exceed the
payment [SNFs] receive under the
prospective payment system * * *’’.
According to the conferees, section
103(a) ‘‘is an attempt to exclude from
the PPS certain services and costly
items that are provided infrequently in
SNFs. For example * * * specific
chemotherapy drugs * * * not typically
administered in a SNF, or * * *
requiring special staff expertise to
administer * * *.’’ By contrast, the
remaining services within those four
categories are not excluded (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, July 31,
2000), and as our longstanding policy,
any additional service codes that we
might designate for exclusion under our
discretionary authority must meet the
same statutory criteria used in
identifying the original codes excluded
from consolidated billing under section
103(a) of the BBRA: They must fall
within one of the four service categories
specified in the BBRA, and they also
must meet the same standards of high
cost and low probability in the SNF
setting, as discussed in the BBRA
Conference report. Accordingly, we
characterized this statutory authority to
identify additional service codes for
exclusion ‘‘* * * as essentially
affording the flexibility to revise the list
of excluded codes in response to
changes of major significance that may
occur over time (for example, the
development of new medical
technologies or other advances in the
state of medical practice)’’ (65 FR
46791). In the FY 2012 proposed rule,
we specifically invited public comments
identifying 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 (76 FR 26397). The
comments that we received on this
subject, and our responses, appear
below.
Comment: A review of the particular
codes that commenters submitted in
response to the proposed rule’s
solicitation for comment revealed that a
significant number were identical to
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
codes that had already been submitted
for consideration during the public
comment period on the FY 2010 SNF
PPS proposed rule or in earlier years,
and which we had already decided
previously not to exclude. These
included items such as hyperbaric
oxygen treatments, total parenteral
nutrition, wound care devices, blood
products, and ‘‘chemotherapy’’ drugs
that are actually used in treating
diseases other than cancer. Other codes
that commenters submitted did fall
within the particular service categories
that the BBRA authorizes for exclusion;
however, these were codes that were
already in existence as of the BBRA’s
enactment, but did not fall within the
specific statutory code ranges that the
BBRA designated for exclusion.
Examples would include customized
prosthetic device codes L5010 (‘‘partial
foot, molded socket, ankle height, with
toe filler’’), L5020 (‘‘partial foot, molded
socket, tibial tubercle height, with toe
filler’’), and L5987 (‘‘all lower extremity
prosthesis, shank foot system with
vertical loading pylon’’).
Response: As discussed in the
applicable prior final rules, we decline
to add to the exclusion list those
services submitted by commenters that
have already been considered and not
excluded in previous years based on
their being outside the particular service
categories that the statute authorizes for
exclusion. These services include
hyperbaric oxygen treatments as
discussed previously in the SNF PPS
final rules for FY 2001 (65 FR 46790–
91, July 31, 2000), FY 2002 (66 FR
39588, July 31, 2001), FY 2004 (68 FR
46060–62, August 4, 2003), FY 2006 (70
FR 45048–50, August 4, 2005), FY 2008
(72 FR 43430–32, August 3, 2007), FY
2009 (73 FR 46435–37, August 8, 2008),
and FY 2010 (74 FR 40353–56, August
11, 2009); total parenteral nutrition as
discussed previously in the SNF PPS
final rules for FY 2002, FY 2004, and FY
2006; and wound care devices as
discussed previously in the SNF PPS
final rules for FY 2004 and FY 2006. For
the same reason—that is, being outside
the particular service categories that the
statute authorizes for exclusion—we
decline to adopt the suggestion to
exclude certain blood products,
hemophilia clotting factor and
intravenous infusion of
immunoglobulin (IVIG). With respect to
the reiteration of previous requests to
exclude as chemotherapy drugs certain
medications that are actually used to
treat diseases other than cancer, we note
that as indicated previously in the FY
2010 SNF PPS final rule (74 FR 40354,
August 11, 2009), such medications do
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
not fall within the scope of
‘‘chemotherapy’’ drugs for purposes of
this exclusion. In addition, regarding
those particular codes (such as the three
L codes specified above) that were
already in existence as of the BBRA’s
enactment, we explained previously in
the FY 2010 SNF PPS final rule (74 FR
40354, August 11, 2009) that our
position has always been that the
BBRA’s discretionary authority to
exclude codes within certain designated
service categories applies solely to
codes that were created subsequent to
the BBRA’s enactment, and not to those
codes that were already in existence as
of July 1, 1999 (the date that the
legislation itself uses as the reference
point for identifying the codes that it
designates for exclusion). As we
explained in the FY 2010 final rule (74
FR 40354), this position reflects the
assumption that if a particular code was
already in existence as of that date but
not designated for exclusion, this meant
that it was intended to remain within
the SNF PPS bundle, subject to the
BBRA Conference Report’s provision for
a GAO review of the code set that was
conducted the following year (H.R. Rep.
No. 106–479 at 854 (1999) (Conf. Rep.)).
Accordingly, we decline to add these
codes to the exclusion list.
Comment: One commenter requested
us to consider a particular
chemotherapy drug, TREANDA®
(HCPCS code J9033), that the
commenter recommended as meeting
the BBRA’s ‘‘high-cost, low probability’’
criteria for exclusion.
Response: We note that in one
respect, this drug would appear to be
similar to the three L codes discussed in
the preceding comment, in that it falls
within one of the particular service
categories (that is, chemotherapy items)
that the BBRA authorizes for exclusion,
but the excluded code ranges specified
in the BBRA skip over the particular
code number to which it was assigned.
However, in contrast to those L codes,
code J9033 was not in use at the time
of the BBRA’s enactment; in fact, this
drug did not actually come into
existence until almost a decade later.
Accordingly, as there is no basis for
assuming at the outset that this
particular code’s omission from the
excluded ranges indicated an intent for
it to remain bundled, it then becomes
appropriate for us to consider the
possibility of excluding the drug from
consolidated billing. We have
determined that this drug does, in fact,
qualify for exclusion in that its cost is
comparable to other excluded
chemotherapy drugs and it is rarely
administered to SNF inpatients. Thus, it
meets the ‘‘high-cost, low probability’’
PO 00000
Frm 00047
Fmt 4701
Sfmt 4700
48531
standard in the SNF setting, as
discussed in the BBRA Conference
Report. Accordingly, this new exclusion
will appear in a forthcoming
consolidated billing update, with an
effective date of October 1, 2011.
Comment: Some commenters
suggested that we consider the
exclusion of PROVENGE® (SipuleucelT, HCPCS code Q2043), which is used
in treating certain cases of metastatic
prostate cancer. PROVENGE® is made
by selectively removing leukocytes
(white blood cells) from the patient’s
blood and sending them to a factory,
which adds a protein commonly found
in prostate cancer and an immune
stimulating agent to the leukocytes. All
three are mixed with lactated ringers
and then sent back to the physician to
administer to the patient. The
commenters cited this drug as meeting
the applicable standards for exclusion of
high cost and low probability.
Response: We note that in accordance
with the National Coverage
Determination that was released on June
30, 2011 (available online at https://
www.cms.gov/medicare-coveragedatabase/details/nca-decisionmemo.aspx?NCAId=247&fromdb=true),
PROVENGE® is not classified as a drug
for purposes of this particular coverage,
but rather, as a service that is furnished
as an incident to the physician’s
professional services. As such, it
remains subject to SNF consolidated
billing, consistent with the longstanding
policy that we first enunciated in the
May 12, 1998 interim final rule (63 FR
26297):
* * * while the SNF Consolidated Billing
provision does not apply to the professional
services that a physician or other exempt
practitioner performs personally, it does
apply to those services that are furnished to
an SNF resident by someone other than the
practitioner, as an incident to the
practitioner’s professional service. This
position is consistent with the approach that
has long been taken under the hospital
bundling requirement, as well as with section
1888(e)(2)(A)(ii) of the Act, which
specifically identifies ‘‘physicians’ services’’
themselves as the service category that is
excluded from SNF Consolidated Billing.
Physicians’ services, in turn, are covered by
Part B under section 1861(s)(1) of the Act and
are defined in section 1861(q) as being
performed by a physician, while ‘‘incident
to’’ services are covered under a separate
statutory authority (section 1861(s)(2)(A) of
the Act) and are, by definition, not performed
by a physician * * * We believe that to do
otherwise with regard to these ‘‘incident to’’
services would effectively create a loophole
through which a potentially broad and
diverse array of services could be unbundled,
merely by virtue of being furnished under the
general auspices of such practitioners. This,
in turn, would ultimately defeat the very
E:\FR\FM\08AUR3.SGM
08AUR3
48532
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
srobinson on DSK4SPTVN1PROD with RULES3
purpose of the SNF Consolidated Billing
provision—that is, to make the SNF itself
responsible for billing Medicare for
essentially all of its residents’ services, other
than those identified in a small number of
narrow and specifically delimited exclusions.
Further, as noted above, both the
Consolidated Billing and SNF PPS provisions
employ the same statutory list of excluded
services. Thus, the approach we are adopting
with regard to the limited range of services
that qualify for exclusion is essential not only
to safeguard the integrity of the Consolidated
Billing requirement, but also that of the SNF
PPS itself.
Comment: Some commenters
reiterated previous suggestions on
expanding the existing chemotherapy
exclusion to encompass related drugs
that are commonly administered in
conjunction with chemotherapy to
ameliorate the side effects of the
chemotherapy drugs, such as antiemetics (anti-nausea drugs).
Response: As we have noted
previously in this final rule and in
response to comments on this issue in
the past (most recently, in the August
11, 2009 SNF PPS final rule for FY 2010
(74 FR 40354)), the BBRA authorizes us
to identify additional service codes for
exclusion only within those particular
service categories—chemotherapy items;
chemotherapy administration services;
radioisotope services; and, customized
prosthetic devices—that it has
designated for this purpose, and does
not give us the authority to exclude
other services which, though they may
be related, fall outside of the specified
service categories themselves. Thus,
while anti-emetics, for example, are
commonly administered in conjunction
with chemotherapy, they are not
inherently chemotherapeutic in nature
(that is, they are not themselves
oncolytic drugs that actively destroy
cancer cells) and, consequently, do not
fall within the excluded chemotherapy
category designated in the BBRA.
Comment: One commenter repeated
calls from previous years to expand the
existing exclusion for certain highintensity outpatient hospital services to
encompass services furnished in other,
nonhospital settings, stating that such
nonhospital services may be cheaper
and more accessible in certain localities
(such as rural settings) than those
furnished by hospitals. In urging us to
expand the administrative exclusion in
this manner, the commenter also
advanced the view that the test of
service intensity under this exclusion
was intended to be applied
independently, regardless of whether
the service in question is actually being
furnished in the hospital setting.
Response: We have included in a
number of previous rules an explanation
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
of the setting-specific nature of the
exclusion for certain high-intensity
outpatient hospital services—most
recently, in the FY 2010 SNF PPS final
rule (74 FR 40355, August 11, 2009):
We believe the comments that reflect
previous suggestions for expanding this
administrative exclusion to encompass
services furnished in non-hospital settings
indicate a continued misunderstanding of the
underlying purpose of this provision. As we
have consistently noted in response to
comments on this issue in previous years
* * * and as also explained in Medicare
Learning Network (MLN) Matters article
SE0432 (available online at
www.cms.hhs.gov/MLNMattersArticles/
downloads/SE0432.pdf), the rationale for
establishing this exclusion was to address
those types of services that are so far beyond
the normal scope of SNF care that they
require the intensity of the hospital setting in
order to be furnished safely and effectively.
Moreover, we note that when the Congress
enacted the consolidated billing exclusion for
certain RHC and FQHC services in section
410 of the MMA, the accompanying
legislative history’s description of present
law acknowledged that the existing
exclusions for exceptionally intensive
outpatient services are specifically limited to
‘‘* * * certain outpatient services from a
Medicare-participating hospital or critical
access hospital * * *’’ (emphasis added).
(See the House Ways and Means Committee
Report (H. Rep. No. 108–178, Part 2 at 209),
and the Conference Report (H. Conf. Rep. No.
108–391 at 641).) Therefore, these services
are excluded from SNF consolidated billing
only when furnished in the outpatient
hospital or CAH setting, and not when
furnished in other, freestanding (non-hospital
or non-CAH) settings.
Further, the authority for us to establish
a categorical exclusion for these services
that would apply irrespective of the
setting in which they are furnished does
not exist in current law.
Finally, we do not agree with the
commenter’s analysis regarding the
applicable standard for determining
service intensity under this exclusion.
Contrary to that commenter’s statement,
when we originally established the
administrative exclusion for certain
designated categories of high-intensity
outpatient services, we did not envision
creating a separate standard of service
intensity that would exist
independently from the service’s
performance in the hospital setting. In
fact, the applicable discussion in the
May 12, 1998 interim final rule (63 FR
26298) clearly indicates that this
exclusion was created within the
specific context of the concurrent
development of a new PPS specifically
for outpatient hospital services,
reflecting the need ‘‘* * * to delineate
the respective areas of responsibility for
the SNF under the Consolidated Billing
provision, and for the hospital under the
PO 00000
Frm 00048
Fmt 4701
Sfmt 4700
outpatient bundling provision, with
regard to these services’’ (emphasis
added). This point was further
reinforced in the subsequent SNF PPS
final rule for FY 2000 (64 FR 41676, July
30, 1999), where we noted that
* * * a key concern underlying the
development of the consolidated billing
exclusion of certain outpatient hospital
services specifically involves the need to
distinguish those services that comprise the
SNF bundle from those that will become part
of the outpatient hospital bundle that is
currently being developed in connection
with the outpatient hospital PPS.
Accordingly, we are not extending the
outpatient hospital exclusion from
consolidated billing to encompass any other,
freestanding settings.
Comment: One commenter noted that
the administrative exclusion from
consolidated billing for certain
designated, highly intensive outpatient
hospital services (such as emergency
services) also serves to encompass an
associated, medically necessary
ambulance roundtrip from the SNF. The
commenter requested clarification on
whether this exclusion would still apply
to an ambulance trip returning to the
SNF following the receipt of emergency
services, even though the emergency
condition itself would have already
been stabilized by that point.
Response: The return ambulance trip
would still be excluded from
consolidated billing in this scenario. As
explained on page 3 of Medicare
Learning Network (MLN) Matters
Special Edition article #SE0433
(available online at https://www.cms.gov/
MLNMattersArticles/downloads/
SE0433.pdf),
Since a beneficiary’s departure from the
SNF to receive one of these excluded types
of outpatient hospital services is considered
to end the beneficiary’s status as an SNF
resident for CB [consolidated billing]
purposes with respect to those services, any
associated ambulance trips are, themselves,
excluded from CB as well. Therefore, an
ambulance trip from the SNF to the hospital
for the receipt of such services should be
billed separately under Part B by the outside
supplier. Moreover, once the beneficiary’s
SNF resident status has ended in this
situation, it does not resume until the point
at which the beneficiary actually arrives back
at the SNF; accordingly, the return
ambulance trip from the hospital to the SNF
would also be excluded from CB (emphasis
added).
Comment: One commenter requested
that all chemotherapy drugs and
customized prosthetic devices be
excluded from consolidated billing, as
well as transportation relating to the
receipt of excluded radiation therapy
services.
Response: As indicated previously in
this final rule, in creating a statutory
E:\FR\FM\08AUR3.SGM
08AUR3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
srobinson on DSK4SPTVN1PROD with RULES3
carve-out for several designated types of
services, the BBRA did not categorically
exclude all such services from SNF
consolidated billing. Instead, the
legislation specifically identified
individual excluded services within
designated categories, by Healthcare
Common Procedure Coding System
(HCPCS) code. The BBRA’s Conference
Report explained that this legislation
specifically targeted those ‘‘high-cost,
low probability’’ items and services that
‘‘* * * are not typically administered in
a SNF, or are exceptionally expensive,
or are given as infusions, thus requiring
special staff expertise to administer’’
(H.R. Conf. Rep. No. 106–479 at 854). By
contrast, other types of services within
those categories that ‘‘* * * are
relatively inexpensive and are
administered routinely in SNFs’’ remain
subject to SNF consolidated billing
under this legislation.
Regarding the comment concerning
transports related to radiation therapy,
we note that radiation therapy is one of
the administratively excluded categories
of high-intensity outpatient hospital
services. As indicated in the preceding
comment, this exclusion already
encompasses not only the service itself,
but also any associated, medically
necessary ambulance transportation
between the SNF and the hospital.
H. Application of the SNF PPS to SNF
Services Furnished by Swing-Bed
Hospitals
In accordance with section 1888(e)(7)
of the Act, as amended by section 203
of the BIPA, Part A pays critical access
hospitals (CAHs) on a reasonable cost
basis for SNF services furnished under
a swing-bed agreement. However,
effective with cost reporting periods
beginning on or after July 1, 2002, the
swing-bed services of non-CAH rural
hospitals are paid under the SNF PPS.
As explained in the final rule for FY
2002 (66 FR 39562, July 31, 2001), we
selected this effective date consistent
with the statutory provision to integrate
swing-bed rural hospitals into the SNF
PPS by the end of the SNF transition
period, June 30, 2002.
Accordingly, all non-CAH swing-bed
rural hospitals have come under the
SNF PPS as of June 30, 2003. Therefore,
all rates and wage indexes outlined in
earlier sections of this final rule for the
SNF PPS also apply to all non-CAH
swing-bed rural hospitals. A complete
discussion of assessment schedules, the
MDS and the transmission software
(RAVEN–SB for Swing Beds) appears in
the final rule for FY 2002 (66 FR 39562,
July 31, 2001) and in the final rule for
FY 2010 (74 FR 40288, August 11,
2009). As finalized in the FY 2010 SNF
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PPS final rule (74 FR 40356–57),
effective October 1, 2010, non-CAH
swing-bed rural hospitals are required to
complete an MDS 3.0 swing-bed
assessment which is limited to the
required demographic, payment, and
quality items. The latest changes in the
MDS for swing-bed rural hospitals
appear on the SNF PPS Web site, https://
www.cms.gov/snfpps. We received no
comments on this aspect of the
proposed rule.
IV. Analysis of and Responses to Public
Comments on the FY 2011 Update
Notice With Comment
In addition to responding to
comments received on the FY 2012
proposed rule, we are also taking the
opportunity to respond in this section to
those comments not addressed
elsewhere in this final rule that were
received on the FY 2011 notice with
comment period, as discussed in the FY
2012 proposed rule (76 FR 26368).
Comment: We received a number of
comments related to the delayed
implementation of RUG–IV, the
implementation of HR–III, and the
transition from RUG–IV to HR–III. Many
commenters asked for details on how
the transition would be done and how
claims would be reprocessed upon
successful implementation of HR–III.
One commenter requested further detail
on educational materials that would be
made available to providers to ease the
system transition once the HR–III
grouper has been developed. Some
commenters asked that CMS be as
transparent as possible in its
management of the transition to HR–III.
Response: As discussed in section I.F
of this final rule, section 202 of the
‘‘Medicare and Medicaid Extenders Act
of 2010’’ (Pub. L. 111–309), enacted
December 15, 2010, repealed section
10325 of the Affordable Care Act,
effectively leaving in place the RUG–IV
system as implemented on October 1,
2010. Therefore, HR–III is no longer
necessary and there will be no
reprocessing of claims related to HR–III.
Moreover, as we also noted previously
in the FY 2012 SNF PPS proposed rule
(76 FR 26368), the repeal of this
provision ‘‘* * * effectively renders
moot any further discussion of public
comments that we had invited on our
planned implementation’’ of the
transition to the HR–III system.
V. Provisions of the Final Rule
In this final rule, in addition to
accomplishing the required annual
update of the SNF PPS payment rates,
we are also finalizing the following
revisions to the regulation text:
PO 00000
Frm 00049
Fmt 4701
Sfmt 4700
48533
As discussed previously in section
III.F.3.a of this final rule, we are
implementing section 3401(b) of the
Affordable Care Act by revising
§ 413.337. We are adding a new
paragraph (d)(3) to that section to
require that, for FY 2012 and each
subsequent FY, the market basket index
percentage change (as modified by any
applicable forecast error adjustment) be
reduced by the MFP adjustment
described in section 1886(b)(3)(B)(xi)(II)
of the Act in determining the annual
update of the unadjusted Federal per
diem rates. In addition, consistent with
section 1888(e)(5)(B)(ii) of the Act (as
added by section 3401(b) of the
Affordable Care Act), revised
§ 413.337(d)(3) also states that the
reduction of the market basket index
percentage change by the MFP
adjustment may result in the market
basket index percentage change being
less than zero for a fiscal year, and may
result in the unadjusted Federal
payment rates for a fiscal year being less
than such payment rates for the
preceding fiscal year.
Further, as discussed in section
III.F.3, we are also revising existing
paragraphs (d)(1) and (d)(2) of § 413.337
so that the text more accurately tracks
the corresponding statutory
requirements at section 1888(e)(4)(E) of
the Act (§ 413.337(d)(1)), and to specify
the existing thresholds that we apply in
determining whether a forecast error
adjustment is appropriate
(§ 413.337(d)(2)).
VI. Collection of Information
Requirements
Under the Paperwork Reduction Act
of 1995 (PRA), we are required to
provide 30-day notice in the Federal
Register and solicit public comment
before a collection of information
requirement is submitted to the OMB for
review and approval. In order to fairly
evaluate whether an information
collection should be approved by OMB,
section 3506(c)(2)(A) of the PRA
requires that we solicit comment on the
following issues:
• Need for the information collection
and its usefulness in carrying out the
proper functions of our agency.
• Accuracy of our estimate of the
information collection burden.
• Quality, utility, and clarity of the
information to be collected.
• Recommendations to minimize the
information collection burden on the
affected public, including automated
collection techniques.
The information collection
requirements referenced in this final
rule with regard to resident assessment
information used to determine facility
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
48534
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
payments are currently approved under
OMB control number (OCN): 0938–
0739, which relates to the Medicare PPS
Assessment Form (MPAF) information
collection, and OCN: 0938–0872, which
relates to the Minimum Data Set for
Swing-Bed Hospitals. We note that this
final rule will not affect the burden
associated with either of those
collections.
Section III.E.4 of this final rule
contains a discussion of information
collections related to a new required
resident assessment, the COT OMRA.
The following is a discussion of this
new required PPS assessment.
As discussed previously in section
III.E.4 of this final rule, we are making
certain modifications in the existing
requirements for completing OMRAs.
We introduced a new COT OMRA, to be
completed whenever the intensity of
therapy changes to such an extent that
it would no longer reflect the RUG–IV
classification and payment assigned for
a given SNF resident, based on the
resident’s most recent assessment used
for Medicare payment. This will help to
ensure that the SNF’s payments
accurately reflect the amount of therapy
actually being provided.
SNFs are required to complete a COT
OMRA only when the intensity of
therapy actually being furnished
changes to such a degree that it would
no longer reflect the RUG–IV
classification and payment assigned for
a given SNF resident based on the most
recent assessment used for Medicare
payment. The burden associated with
this requirement is the time and effort
necessary to complete the COT OMRA,
coding the appropriate responses, and
data reporting timeframes. Because
providers currently are not required to
report therapy changes that occur
outside the observation window of a
given PPS assessment, we do not have
the relevant data to predict with
certainty the number of COT OMRAs
that may be required per year. However,
we have attempted to use the
administrative data currently available
as a reasonable proxy to determine
estimates of provider burden. We
estimate that, based on average burden
associated with the EOT OMRA, which
uses the same basic item set as the COT
OMRA, it will take 50 minutes (0.83
hours) to collect the information
necessary for coding a COT OMRA, 10
minutes (0.17 hours) to code the
responses, and 2 minutes (0.03 hours) to
transmit the results, or a total of 62
minutes (1.03 hours) to complete a
single COT OMRA. The estimated cost
per COT OMRA is $33.84, as discussed
below.
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
Based on information from the Bureau
of Labor Statistics of May, 2009, and a
30 percent benefits rate, we estimated
hourly wage rates for a Registered Nurse
(RN), and for a data operator. MDS
preparation costs were estimated using
RN hourly wage rates based on $56,060
per year, which amounts to $0.45 per
minute without consideration of
employee benefits, and $0.58 per
minute after increasing the rate by 30
percent to account for employee benefit
compensation. For coding functions, we
used a blended rate of $41,090; this was
the average for RNs ($56,060/year) and
data operators ($26,120/year). The
blended rate calculates to $0.33 per
minute without consideration of
employee benefits, and $0.43 per
minute after increasing the rate by 30
percent to account for employee benefit
compensation. The blended rate of RN
and data operator wages reflects that
SNF providers historically have used
both RN and support staff for the data
entry function. For transmission
personnel, we used data operator wages
of $26,120 per year, or $0.21 per minute
without consideration of employee
benefits, and $0.27 per minute after
increasing the rate by 30 percent to
account for employee benefit
compensation. The total amount of time
for a single COT OMRA is 62 minutes
(1.03 hours), consisting of 50 minutes
(0.8333 hours) of RN time for
preparation, 10 minutes (0.1667 hours)
of blended RN/data operator time for
coding, and 2 minutes (0.0333 hours) of
data operator time for transmission.
This results in an average estimated cost
per COT OMRA of $33.84.
The number of stays for 2009 was
approximately 2.26 million. Based on a
30-day average length of stay for RUG–
IV, we believe the average number of
times that a COT OMRA would need to
be completed due to a decrease in
therapy is once per stay. Based on our
review of the first eight months of FY
2011 data, we found that approximately
40 percent of the claims resulted in
assignment to a higher-than-projected
Rehabilitation RUG. A possible reason
for the difference between projected and
actual FY 2011 RUG–IV case-mix
utilization could involve instances
where the intensity of therapy actually
being furnished changed (that is,
decreased) within the payment period to
such a degree that it no longer reflected
the RUG–IV classification and payment
assigned for a given SNF resident based
on the most recent assessment used for
Medicare payment. As discussed
previously, if such changes or decreases
in therapy utilization occur outside the
observation window of a given PPS
PO 00000
Frm 00050
Fmt 4701
Sfmt 4700
assessment, such changes currently are
not captured on a resident assessment,
and the provider would continue to be
reimbursed under a higher-paying
Rehabilitation RUG until the next PPS
assessment.
For FY 2012, providers will be
required to complete a COT OMRA in
these situations. Although we believe
that only some of the 40 percent
difference is likely attributable to these
instances, the 40 percent would provide
a quantifiable maximum burden
estimate for these cases. At this time, we
are unable to determine other
quantifiable estimates for decreases in
therapy utilization necessitating a COT
OMRA. Using the percentage of claims
resulting in a higher-than-projected
Rehabilitation RUG as a way to estimate
the maximum number of times that a
therapy decrease could result in the
need for a COT OMRA, 40 percent or
813,074 stays could be affected. The
total number of estimated COT OMRAs
per SNF for FY 2011 would be 57.
In addition, the COT OMRA will also
be used when providers find that the
therapy provided a given resident
warrants the resident being classified
into a higher therapy RUG category. As
stated above, providers currently are not
required to report therapy changes that
occur outside the observation window
of a given PPS assessment; therefore, we
do not have the relevant data to predict
with certainty the number of COT
OMRAs that may be required per year
due to an increase in therapy. We have
used the historical data available at this
time to quantify situations where an
increase in therapy occurs. The Start-ofTherapy (SOT) OMRA represents
situations where therapy has increased
to a level significant enough to change
the RUG to a therapy RUG. The estimate
for the possible number of times that a
COT OMRA would be required due to
an increase in therapy uses the number
of SOT OMRAs as a proxy. Using the
number of SOT OMRAs completed in
the first eight months of FY 2011
projected for the entire year, we
estimate that the total COT OMRAs
required due to an increase in therapy
would be 71,330, or 5 times per facility
per year. Therefore, the estimated total
number of COT OMRAs per facility per
year is 62. The total annual hour burden
for completing COT OMRAs is
estimated to be 737,003 hours for
reporting, 147,401 hours for coding, and
29,480 hours for transmission, for a total
burden of 913,884 hours for all 14,266
SNFs. Based on an average estimated
cost per COT OMRA of $33.84, we
estimate that the additional annual cost
across all SNFs would be approximately
$29.93 million, or $2,097.87 per facility.
E:\FR\FM\08AUR3.SGM
08AUR3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
Further, we note that the completion
of an EOT–R OMRA, as discussed in
section III.E.4, would be entirely
voluntary on the part of the facility and,
thus, would not represent the
imposition of a mandatory burden.
VII. Economic Analyses
A. Regulatory Impact Analysis
1. Introduction
We have examined the impacts of this
final rule as required by Executive
Order 12866 on Regulatory Planning
and Review (September 30, 1993),
Executive Order 13563 on Improving
Regulation and Regulatory Review
(January 18, 2011), the Regulatory
Flexibility Act (RFA) (September 19,
1980, Pub. L. 96–354), section 1102(b) of
the Act, section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA,
March 22, 1995; Pub. L. 104–4),
Executive Order 13132 on Federalism
(August 4, 1999), and the Congressional
Review Act (5 U.S.C. 804(2)).
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 the Office of Management and
Budget.
srobinson on DSK4SPTVN1PROD with RULES3
2. Statement of Need
This final rule updates the SNF
prospective payment rates for fiscal year
2012 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 fiscal year, 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.
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
3. Overall Impacts
We estimate the aggregate impact of
the FY 2012 final rule would be a net
decrease of $3.87 billion in payments to
SNFs, resulting from a $600 million
increase from the update to the payment
rates and a $4.47 billion reduction from
the recalibration of the case-mix
adjustment. Accordingly, we have
prepared a RIA that, to the best of our
ability, presents the costs and benefits of
the rulemaking.
The update set forth in this final rule
applies to payments in FY 2012.
Accordingly, the analysis that follows
only describes the impact of this single
year. In accordance with the
requirements of the Act, we will publish
a 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
This final rule sets forth updates of
the SNF PPS rates contained in the
update notice for FY 2011 (75 FR 42886,
July 22, 2010) and the associated
correction notice (75 FR 55801,
September 14, 2010). Based on the
above, we estimate that the FY 2012
aggregate impact would be a net
decrease of $3.87 billion in payments to
SNFs, resulting from a $600 million
increase from the update to the payment
rates and a $4.47 billion reduction from
the recalibration of the case-mix
adjustment. The impact analysis of this
final rule represents the projected
effects of the changes in the SNF PPS
from FY 2011 to FY 2012. We assess the
effects by estimating payments while
holding all other payment-related
variables constant. Although the best
data available are utilized, there is no
attempt to predict behavioral responses
to these changes, or to make
adjustments for future changes in such
variables as days or case-mix.
Certain events may occur to limit the
scope or accuracy of our impact
analysis, as this analysis is futureoriented and, thus, very susceptible to
forecasting errors due to certain events
that may occur within the assessed
impact time period. Some examples of
possible events may include newly
legislated general Medicare program
funding changes by the Congress, or
changes specifically related to SNFs. In
addition, changes to the Medicare
program may continue to be made as a
result of previously enacted legislation,
or new statutory provisions. Although
these changes may not be specific to the
SNF PPS, the nature of the Medicare
program is that the changes may interact
and, thus, the complexity of the
PO 00000
Frm 00051
Fmt 4701
Sfmt 4700
48535
interaction of these changes could make
it difficult to predict accurately the full
scope of the impact upon SNFs.
In accordance with section
1888(e)(4)(E) and (e)(5) of the Act, we
update the FY 2011 payment rates by a
factor equal to the market basket index
percentage increase adjusted by the FY
2010 forecast error adjustment (if
applicable) and the MFP adjustment to
determine the payment rates for FY
2012. As discussed previously, for FY
2012 and each subsequent FY, as
required by section 1888(e)(5)(B) of the
Act as amended by section 3401(b) of
the Affordable Care Act, the market
basket percentage is reduced by the
MFP adjustment. The special AIDS addon established by section 511 of the
MMA remains in effect until ‘‘* * *
such date as the Secretary certifies that
there is an appropriate adjustment in
the case mix. * * *’’ We have not
provided a separate impact analysis for
the MMA provision. Our latest estimates
indicate that there are fewer than 3,500
beneficiaries who qualify for the AIDS
add-on payment. The impact to
Medicare is included in the ‘‘total’’
column of Table 11. In updating the
rates for FY 2012, we made a number of
standard annual revisions and
clarifications mentioned elsewhere in
this final rule (for example, the update
to the wage and market basket indexes
used for adjusting the Federal rates).
We estimate that the aggregate impact
for the FY 2012 updates discussed in
this final rule would be a net decrease
of $3.87 billion in payments to SNFs,
resulting from a $600 million increase
from the update to the payment rates
and a $4.47 billion reduction from the
recalibration of the case-mix
adjustment. The FY 2012 impacts are
presented in Table 11.
The breakdown of the various
categories of data in Table 11 is as
follows.
The first column shows the
breakdown of all SNFs by urban or rural
status, hospital-based or freestanding
status, and census region.
The ‘‘total’’ row shows the estimated
effects of the various changes on all
facilities. The next six rows show the
effects on facilities split by hospitalbased, freestanding, urban, and rural
categories. The urban and rural
designations are based on the location of
the facility under the CBSA designation.
The next 19 rows show the effects on
urban versus rural status by census
region. The last 3 rows show the effects
on ownership by government, profit and
non-profit status.
The second column in Table 11 shows
the number of facilities in the impact
database.
E:\FR\FM\08AUR3.SGM
08AUR3
48536
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
The third column in Table 11 shows
the effects of recalibrating the nursing
CMIs of the RUG–IV therapy groups. As
explained previously in section III.B.2
of this final rule, we are implementing
the recalibration so that the CMIs more
accurately reflect parity in expenditures
under the RUG–IV system introduced in
FY 2011 relative to payments under the
previous RUG–53 system, based on our
review of the initial eight months of FY
2011 claims and MDS data. The total
impact of this change is a decrease of
12.6 percent. We note that some
individual providers may experience
larger or smaller decreases in payment
than others due to case-mix utilization.
The fourth column of Table 11 shows
the effect of the annual update to the
wage index. This represents the effect of
using the most recent wage data
available. The total impact of this
change is zero percent; however, there
are distributional effects of the change.
The fifth column of Table 11 shows
the effect of all of the changes on the FY
2012 payments. The update of 1.7
percent, consisting of the market basket
increase of 2.7 percentage points,
reduced by the 1.0 percentage point
MFP adjustment is constant for all
providers and, though not shown
individually, is included in the total
column. It is projected that aggregate
payments will decrease by 11.1 percent,
assuming that facilities do not change
their care delivery and billing practices
in response.
As shown in Table 11, the combined
effects of all of the changes vary by
specific types of providers and by
location.
TABLE 11—RUG–IV PROJECTED IMPACT TO THE SNF PPS FOR FY 2012
Number of
facilities
Group:
Total ..........................................................................................
Urban ........................................................................................
Rural .........................................................................................
Hospital based urban ...............................................................
Freestanding urban ..................................................................
Hospital based rural .................................................................
Freestanding rural ....................................................................
Urban by region:
New England ............................................................................
Middle Atlantic ..........................................................................
South Atlantic ...........................................................................
East North Central ....................................................................
East South Central ...................................................................
West North Central ...................................................................
West South Central ..................................................................
Mountain ...................................................................................
Pacific .......................................................................................
Outlying .....................................................................................
Rural by region:
New England ............................................................................
Middle Atlantic ..........................................................................
South Atlantic ...........................................................................
East North Central ....................................................................
East South Central ...................................................................
West North Central ...................................................................
West South Central ..................................................................
Mountain ...................................................................................
Pacific .......................................................................................
Ownership:
Government ..............................................................................
Profit .........................................................................................
Non-profit ..................................................................................
Revised CMIs
percent
Update wage
data
Total FY 2012
change
(percent)
14,706
10,321
4,385
454
9,867
341
4,044
¥12.6
¥12.8
¥11.9
¥12.4
¥12.8
¥11.3
¥11.9
0.0
0.0
0.1
0.1
0.0
0.0
0.1
¥11.1
¥11.3
¥10.3
¥10.8
¥11.3
¥9.8
¥10.3
807
1,436
1,714
2,001
493
848
1,167
472
1,378
5
¥12.6
¥12.9
¥12.8
¥12.9
¥12.7
¥12.8
¥12.6
¥12.9
¥12.8
¥8.9
0.0
0.1
¥0.1
¥0.5
¥0.4
0.2
0.5
0.1
0.3
1.2
¥11.1
¥11.3
¥11.4
¥11.8
¥11.6
¥11.1
¥10.7
¥11.3
¥11.1
¥6.3
142
236
558
891
464
1,043
713
219
119
¥11.7
¥12.3
¥11.8
¥12.1
¥11.7
¥12.0
¥11.7
¥11.8
¥11.8
1.0
¥0.1
¥0.2
¥0.2
¥0.5
0.4
0.8
0.3
1.0
¥9.3
¥10.9
¥10.4
¥10.7
¥10.7
¥10.1
¥9.5
¥10.0
¥9.4
769
10,172
3,765
¥12.4
¥12.6
¥12.7
¥0.1
0.0
0.0
¥11.0
¥11.1
¥11.2
Note: The Total column includes the 2.7 percent market basket increase, reduced by the 1.0 percentage point MFP adjustment. Additionally,
we found no SNFs in rural outlying areas.
srobinson on DSK4SPTVN1PROD with RULES3
5. Alternatives Considered
As described above, the aggregate
impact for FY 2012 of the updates
discussed in this final rule would be a
net decrease of $3.87 billion in
payments to SNFs, resulting from a $600
million increase from the update to the
payment rates and a $4.47 billion
reduction from the recalibration of the
case-mix adjustment. In view of the
potential economic impact, we
considered the alternatives described
below.
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
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 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,
PO 00000
Frm 00052
Fmt 4701
Sfmt 4700
we also incorporated a number of
elements into the SNF PPS (for example,
case-mix classification methodology,
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 fiscal year. Accordingly, we are not
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
pursuing alternatives for the payment
methodology as discussed above.
Using our authority to establish an
appropriate adjustment for case mix
under section 1888(e)(4)(G)(i) of the Act,
this final rule finalizes a recalibration of
the adjustment to the nursing case-mix
indexes based on actual FY 2011 data.
In the FY 2010 SNF PPS final rule (74
FR 40339), we committed to monitoring
the accuracy and effectiveness of the
parity adjustment to maintain budget
neutrality. We believe that using actual
FY 2011 claims data to perform the
recalibration analysis results in casemix weights that better reflect the
resources used, produces more accurate
payment, and represents an appropriate
case-mix adjustment. Using FY 2011
data is consistent with our intent to
make the change from the RUG–53
model to the RUG–IV model in a budget
neutral manner.
In reviewing our initial projections,
we found that the disparity between
projected RUG–IV utilization for FY
2011 and actual RUG–IV utilization in
FY 2011, which formed the basis for our
considering a recalibration of the
nursing case-mix indexes, was at least
partially the result of a shift in the mode
of therapy provided to beneficiaries in
a Part A stay under RUG–IV. The
amount of concurrent therapy decreased
significantly from historical levels, with
a significant portion of the SNFs
reporting 0 minutes of concurrent
therapy for all MDS 3.0 assessments
submitted for FY 2011. Many of these
facilities reported large increases in the
amount of group therapy provided
during the same time period.
For the proposed rule, we used 3
months of data (first quarter FY 2011) to
calculate the initial parity adjustment
and stated that we would observe
utilization trends for a greater period of
FY 2011 to confirm our preliminary
assessment. We have now used 8
months of FY 2011 data as the basis for
the recalibration discussed in section
III.B.2 above and the data have
confirmed our preliminary assessment.
Therefore, as discussed in section III.B.2
of this final rule, we are implementing
a recalibration of the nursing CMIs of
the RUG–IV therapy groups based on
eight months of FY 2011 MDS and
claims data.
Both during development of the
proposed rule (76 FR 26372, 26404) and
in response to comments we received on
the proposed rule, as discussed in
section III.B.2 above, we considered
various alternatives for implementing a
recalibrated case-mix adjustment. Most
notably, as discussed in section III.B.2
of this final rule, we considered
applying the recalibration to all of the
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
nursing CMIs, rather than just the
nursing CMIs for the RUG–IV therapy
groups as we have finalized in this final
rule.
However, as noted in the proposed
rule (76 FR 26372, 26404), we found
that an across-the-board recalibration of
the nursing CMIs that included the
complex medical groups (approximately
8 percent of the total SNF Part A
population), would affect patients in
these complex medical groups
disproportionately and negatively.
Moreover, we are concerned that
reducing payment rates for both the
therapy and the complex medical
patients could inadvertently create an
access problem for beneficiaries with
complex medical care needs. The
increasing volume of therapy patients
during the past several years, in
combination with the increasing SNF
Medicare profit margins, suggests that
the care needs for therapy patients may
be more predictable and less costly than
those for beneficiaries with severe
medical conditions. In reviewing FY
2011 MDS assessment data, we found
that approximately 30 percent of the
SNF Part A patients did not have a
medical need that would qualify them
for coverage under the SNF PPS.
Reducing the rates paid for beneficiaries
with complex medical conditions at the
same time therapy rates are being
adjusted may create access problems for
patients with complex medical and
rehabilitation needs. Thus, while we
considered an across-the-board
recalibration of the nursing CMIs, we
decided it would be more prudent to
keep the payment levels for the lowvolume complex medical services at
their present levels for 2012. We plan to
reassess the adequacy of the complex
medical payment rates as part of the
development of the NTA component
discussed in section III.C.1 of this final
rule. We believe that applying the
recalibration to only the nursing CMIs of
the RUG–IV therapy groups will restore
the system to the intended budget
neutrality and ensure adequate access to
quality SNF care for the important
subset of Medicare beneficiaries needing
complex medical care.
As described in section III.B.2 of this
final rule and in sections XII.A.5 and
II.B.2 of the proposed rule, we also
considered how the recalibration might
be implemented so as to mitigate the
economic impact of the recalibration on
facilities. Specifically, we considered
mitigating the impact of the
recalibration by phasing in the negative
adjustments prospectively over multiple
years until parity was achieved.
However, as discussed elsewhere in this
preamble, we believe that in
PO 00000
Frm 00053
Fmt 4701
Sfmt 4700
48537
implementing RUG–IV, it is essential
that we stabilize the baseline as quickly
as possible without creating a
significant adverse effect on the
industry or to beneficiaries. For the
reasons discussed in section II.B.2 of
this final rule, we do not believe that
implementation of the full recalibration
in FY 2012 should negatively impact
facilities, beneficiaries or quality of care.
Moreover, implementing the
recalibration over a multi-year period
would continue the significant
overpayments observed in FY 2011 and
could further destabilize the SNF PPS.
We received a number of comments
on the impact analysis contained in the
proposed rule which, along with our
responses, appear below.
Comment: Several commenters
believed that CMS did not consider
adequately possible alternative
methodologies for applying or
implementing the recalibration of the
case-mix indexes. Specifically,
commenters believed that CMS should
consider a phase-in approach for the
recalibration, if it were to be finalized.
Response: We believe that the
discussion of alternatives in this section
above, in section III.B.2 above, as well
as in the FY 2012 proposed rule (76 FR
26372, 26403 through 26404) provides
sufficient consideration of alternatives
as well as appropriate justification for
our finalized changes. Regarding a
phase-in approach, we noted in section
III.B.2 above our belief that the 18.1
percent SNF profit margins for Medicare
even before the FY 2011 overpayments
occurred would justify a full
recalibration in FY 2012. It is also
important to note that this recalibration
would serve to remove an unintended
spike in payments rather than
decreasing an otherwise appropriate
payment amount; thus, we do not
believe that the recalibration should
negatively affect facilities, beneficiaries,
or quality of care, or create an undue
hardship on providers. In fact,
notwithstanding the recalibration, the
FY 2012 payment rates will actually be
3.4 percent higher than the rates
established for FY 2010, the last period
prior to the unintended spike in
payment levels. We continue to believe
that in implementing RUG–IV, it is
essential that we stabilize the baseline
as quickly as possible without creating
a significant adverse effect on the
industry or to beneficiaries. Utilizing a
phase-in approach would only add to,
rather than reduce, the cumulative
excess payments.
Comment: Several commenters
expressed concern that the impact
analysis presented in the proposed rule
did not account adequately for the total
E:\FR\FM\08AUR3.SGM
08AUR3
48538
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
economic impact of the policy changes
discussed in the FY 2012 proposed rule.
One commenter stated specifically that
the implementation of the proposed
changes could lead the U.S. economy
back into a deep recession.
Response: As indicated in Table 11
above, the changes due to the
recalibration of the CMIs (which is
arguably the only proposed change
which would have a definitive negative
impact on current facility payments) are
expected to result in a decrease in
Medicare payments to SNFs of 12.6
percent. We note that the recalibration
is only intended to restore budget
neutrality between the RUG–53 and
RUG–IV case-mix systems, which
effectively will align overall payments
under RUG–IV in FY 2012 with those
under RUG–III, not accounting for
subsequent increases associated with
the annual market basket increase.
Based on a comparative analysis of
the actual payment amounts reflected
on claims paid in FY 2010 and in FY
2011, payments to facilities increased in
FY 2011 by an average of approximately
$66 per day per resident for all
providers. Furthermore, as noted in
section III.B.2 of this final rule, the
aggregate Medicare margin for
freestanding SNFs in FY 2009, prior to
the implementation of the parity
adjustment in FY 2011 and the resulting
overpayments, was 18.1 percent, up
from 16.6 percent in 2008. Therefore,
given these high Medicare margins
coupled with the fact that Medicare
payments represent a small percentage
of aggregate facility revenues
(considering all payers), we do not
believe it can be concluded that a return
to the intended payment levels after the
FY 2011 short-term spike in payments
will result in a direct and significant
negative macroeconomic effect on the
U.S. economy. For these reasons, we
believe that the regulatory impact
analysis both in this final rule and in
the proposed rule adequately assesses
the economic impact of the changes to
the RUG–IV system.
6. Accounting Statement
As required by OMB Circular A–4
(available online at https://
www.whitehouse.gov/sites/default/files/
omb/assets/regulatory_matters_pdf/a4.pdf), in Table 12, we have prepared an
accounting statement showing the
classification of the expenditures
associated with the provisions of this
final rule. Tables 12 provides our best
estimate of the possible changes in
Medicare payments under the SNF PPS
as a result of the policies in this final
rule, based on the data for 14,706 SNFs
in our database. All expenditures are
classified as transfers to Medicare
providers (that is, SNFs).
TABLE 12—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM THE 2011 SNF PPS FISCAL
YEAR TO THE 2012 SNF PPS FISCAL YEAR
Category
Transfers
Annualized Monetized Transfers ..............................................................
From Whom To Whom? ...........................................................................
¥$3.87 billion.*
Federal Government to SNF Medicare Providers.
* The net decrease of $3.87 billion in transfer payments is a result of the decrease of $4.47 billion due to the recalibration of the case mix adjustment, together with the increase of $600 million due to the MFP-adjusted market basket update.
srobinson on DSK4SPTVN1PROD with RULES3
7. Conclusion
The overall estimated payments for
SNFs in FY 2012 are projected to
decrease by $3.87 billion, or 11.1
percent, compared with those in FY
2011. We estimate that under RUG–IV,
SNFs in urban and rural areas would
experience, on average, an 11.3 and 10.3
percent decrease, respectively, in
estimated payments compared with FY
2011. Providers in the urban East North
Central region would experience the
largest estimated decrease in payments
of approximately 11.8 percent. In order
to have achieved parity between the
RUG–53 and RUG–IV case-mix systems
in FY 2011, aggregated payments would
have had to have been 11.1 percent
lower. It should also be noted that the
FY 2012 payment rates, which remove
the unanticipated excess payments
resulting from the FY 2011 parity
adjustment, are still 3.4 percent higher
than the FY 2010 rates, the last fiscal
year before the introduction of RUG–IV.
B. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act (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
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
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 their non-profit status
or by having revenues of $13.5 million
or less in any 1 year. For purposes of the
RFA, approximately 91 percent of SNFs
are considered small businesses
according to the Small Business
Administration’s latest size standards,
with total revenues of $13.5 million or
less in any 1 year. (For details, see the
Small Business Administration’s Web
site at https://ecfr.gpoaccess.gov/cgi/t/
text/text-idx?c=ecfr&sid=2465b064ba
6965cc1fbd2eae60854b11&rgn=div8&
view=text&node=13:1.0.1.1.16.1.266.9&
idno=13). Individuals and States are not
included in the definition of a small
entity. In addition, approximately 21
percent of SNFs classified as small
entities are non-profit organizations.
Finally, the estimated number of small
business entities does not distinguish
provider establishments that are within
a single firm and, therefore, the number
of SNFs classified as small entities may
be higher than the estimate above.
This final rule updates the SNF PPS
rates published in the update notice for
FY 2011 (75 FR 42886, July 22, 2010)
PO 00000
Frm 00054
Fmt 4701
Sfmt 4700
and the associated correction notice (75
FR 55801, September 14, 2010). We
estimate that implementing the
recalibration discussed in section II.B.2
above would result in a net decrease of
$3.87 billion in payments to SNFs for
FY 2012. This reflects a $600 million
increase from the update to the payment
rates and a $4.47 billion reduction from
the recalibration of the case-mix
adjustment. As indicated in Table 11,
the estimated effect of the recalibration
on facilities for FY 2012 would be an
aggregate negative impact of 11.1
percent. While it is projected in Table
11 that all providers would experience
a net decrease in payments, we note that
some individual providers may
experience larger decreases in payments
than others due to the distributional
impact of the FY 2012 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. According to MedPAC, Medicare
covers approximately 12 percent of total
patient days in freestanding facilities
and 23 percent of facility revenue
(March 2011). However, it is worth
E:\FR\FM\08AUR3.SGM
08AUR3
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
noting that the distribution of days and
payments is highly variable. That is, the
majority of SNFs have significantly
lower Medicare utilization. As a result,
for most facilities, when all payers are
included in the revenue stream, the
overall impact effect to total revenues
should be substantially less than those
presented in Table 11. Therefore, the
Secretary has determined that this final
rule may have a significant impact on a
substantial number of small entities.
We offer an analysis of the
alternatives considered in section
VII.A.4 of this final rule. The analysis
above, together with the remainder of
this preamble, constitutes the final
regulatory flexibility analysis.
In addition, section 1102(b) of the
Social Security Act requires us to
prepare a regulatory impact analysis
(RIA) if a rule may have a significant
impact on the operations of a substantial
number of small rural hospitals. This
analysis must conform to the provisions
of section 603 of the RFA. For purposes
of section 1102(b) of the Act, we define
a small rural hospital as a hospital that
is located outside of a Metropolitan
Statistical Area and has fewer than 100
beds. This final rule will affect small
rural hospitals that (a) furnish SNF
services under a swing-bed agreement or
(b) have a hospital-based SNF. We
anticipate that the impact on small rural
hospitals would be similar to the impact
on SNF providers overall. Therefore, the
Secretary has determined that this final
rule may have a significant impact on
the operations of a substantial number
of small rural hospitals.
Comment: One commenter believed
that the RFA analysis and RIA discussed
in the proposed rule did not sufficiently
account for the impact of the proposed
changes, specifically the recalibration of
the case-mix indexes, on small entities.
Also, the commenter pointed out that
the portion of SNFs which may be
characterized properly as small entities
may, in fact, be higher than our
estimates. The commenter asserted that
in evaluating the effect of the proposed
changes on small entities ‘‘as a whole,’’
the analysis must necessarily consider
their effect on the entity’s overall
margins. This commenter also asserted
that CMS failed to provide sufficient
discussion of possible alternatives. The
commenter further suggested that the
RIA cannot also serve to meet the
requirements of the RFA.
Response: We do not agree with the
commenter’s assertion that the RFA or
RIA discussions in the proposed rule
were insufficient. First, we would note
that, as discussed above, approximately
91 percent of all SNFs may be classified
as small entities. As the commenter
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
pointed out, the portion of SNFs which
may be characterized properly as small
entities may, in fact, be higher than our
estimates. Therefore, any discussion of
impacts throughout the proposed rule,
as well as in this final rule, may be
directly characterized as an analysis of
the impact of the FY 2012 changes to
the SNF PPS on small entities.
Moreover, the focus on small entities in
this instance (a category that would
include the small rural hospitals that are
the subject of a RIA) also means that the
analyses required under the RIA and the
RFA are, in fact, directly interlinked in
this situation, as essentially the same
factors are being examined in both
contexts. Also, guidance issued by the
Department of Health and Human
Services on the proper assessment of the
impact on small entities in rulemakings,
utilizes a total cost or revenue impact of
3 to 5 percent as a significance
threshold under the RFA analysis and
not overall margins. As a result, the
addition of other (non-Medicare)
revenue streams effectively dilutes the
impact of any Medicare changes, as we
noted previously in this discussion as
well as in the proposed rule: ‘‘* * * for
most facilities, when all payers are
included in the revenue stream, the
overall impact effect [of the Medicare
changes] to total revenues should be
substantially less * * *’’ (76 FR 26405).
Furthermore, we would note that we
provided additional data on our Web
site on therapy utilization trends for the
different types of SNF providers (profit,
non-profit, and government), which are
available online at https://www.cms.gov/
SNFPPS/02_Spotlight.asp. This
additional data, as well as our impact
analysis in the proposed rule, illustrated
that all SNFs, including small entities
and non-profits, have experienced a
significant increase in payments in FY
2011. We do not believe that the
recalibration constitutes a rate cut but
instead represents a return to the
appropriate level of SNF payments,
which have been found to be more than
adequate for SNFs and small entities
within the SNF industry. This
information, as well as the discussion of
alternatives in section XII.A.5 of the
proposed rule, is sufficient to fulfill our
obligations under the RFA.
Finally, given our discussion of
alternatives in section VIII.D of this final
rule and elsewhere in this preamble,
and our analysis of the potential
impacts on the SNF industry as a whole,
we believe that the requirements under
the RFA for providing this final RFA
analysis have been properly addressed.
PO 00000
Frm 00055
Fmt 4701
Sfmt 4700
48539
C. Unfunded Mandates Reform Act
Analysis
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
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 2011, that
threshold is approximately $136
million. This final rule would not
impose spending costs on State, local, or
Tribal governments in the aggregate, or
by the private sector, of $136 million.
D. Federalism Analysis
Executive Order 13132 establishes
certain requirements that an agency
must meet when it promulgates a
proposed rule (and subsequent final
rule) that impose substantial direct
requirement costs on State and local
governments, preempts State law, or
otherwise has Federalism implications.
This final rule would have no
substantial direct effect on State and
local governments, preempt State law,
or otherwise have Federalism
implications.
List of Subjects in 42 CFR Part 413
Health facilities, Kidney diseases,
Medicare, Reporting and recordkeeping
requirements.
For the reasons set forth in the
preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR
chapter IV as set forth below:
PART 413—PRINCIPLES OF
REASONABLE COST
REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE
SERVICES; OPTIONAL
PROSPECTIVELY DETERMINED
PAYMENT RATES FOR SKILLED
NURSING FACILITIES
1. The authority citation for part 413
continues to read as follows:
■
Authority: Secs. 1102, 1812(d), 1814(b),
1815, 1833(a), (i), and (n), 1861(v), 1871,
1881, 1883, and 1886 of the Social Security
Act (42 U.S.C. 1302, 1395d(d), 1395f(b),
1395g, 1395l(a), (i), and (n), 1395x(v),
1395hh, 1395rr, 1395tt, and 1395ww); and
sec. 124 of Public Law 106–133 (113 Stat.
1501A–332).
Subpart J—Prospective Payment for
Skilled Nursing Facilities
2. Section 413.337 is amended by—
A. Revising paragraphs (d)(1) and
(d)(2).
■ B. Adding paragraph (d)(3).
The revisions and addition read as
follows:
■
■
E:\FR\FM\08AUR3.SGM
08AUR3
48540
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
§ 413.337 Methodology for calculating the
prospective payment rates.
*
*
*
*
(d) * * *
(1) Update formula. The unadjusted
Federal payment rate shall be updated
as follows:
(i) For the initial period beginning on
July 1, 1998, and ending on September
30, 1999, the unadjusted Federal
payment rate is equal to the rate
computed under paragraph (b)(5)(iii) of
this section increased by a factor equal
to the SNF market basket index
percentage change for such period
minus 1.0 percentage point.
(ii) For fiscal year 2000, the
unadjusted Federal payment rate is
equal to the rate computed for the initial
period described in paragraph (d)(1)(i)
of this section increased by a factor
equal to the SNF market basket index
percentage change for that period minus
1.0 percentage point.
(iii) For fiscal year 2001, the
unadjusted Federal payment rate is
equal to the rate computed for the
previous fiscal year increased by a factor
equal to the SNF market basket index
percentage change for the fiscal year.
(iv) For fiscal years 2002 and 2003,
the unadjusted Federal payment rate is
equal to the rate computed for the
previous fiscal year increased by a factor
equal to the SNF market basket index
percentage change for the fiscal year
involved minus 0.5 percentage points.
srobinson on DSK4SPTVN1PROD with RULES3
*
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
(v) For each subsequent fiscal year,
the unadjusted Federal payment rate is
equal to the rate computed for the
previous fiscal year increased by a factor
equal to the SNF market basket index
percentage change for the fiscal year
involved.
(2) Forecast error adjustment.
Beginning with fiscal year 2004, an
adjustment to the annual update of the
previous fiscal year’s rate will be
computed to account for forecast error.
The initial adjustment (in fiscal year
2004) to the update of the previous
fiscal year’s rate will take into account
the cumulative forecast error between
fiscal years 2000 and 2002. Subsequent
adjustments in succeeding fiscal years
will take into account the forecast error
from the most recently available fiscal
year for which there is final data. The
forecast error adjustment applies
whenever the difference between the
forecasted and actual percentage change
in the SNF market basket index exceeds
the following threshold:
(i) 0.25 percentage points for fiscal
years 2004 through 2007; and
(ii) 0.5 percentage points for fiscal
year 2008 and subsequent fiscal years.
(3) Multifactor productivity (MFP)
adjustment. For fiscal year 2012 and
each subsequent fiscal year, the SNF
market basket index percentage change
for the fiscal year (as modified by any
applicable forecast error adjustment
under paragraph (d)(2) of this section)
PO 00000
Frm 00056
Fmt 4701
Sfmt 4700
shall be reduced by the MFP adjustment
described in section 1886(b)(3)(B)(xi)(II)
of the Act. The reduction of the market
basket index percentage change by the
MFP adjustment may result in the
market basket index percentage change
being less than zero for a fiscal year, and
may result in the unadjusted Federal
payment rates for a fiscal year being less
than such payment rates for the
preceding fiscal year.
*
*
*
*
*
Authority: (Catalog of Federal Domestic
Assistance Program No. 93.773, Medicare—
Hospital Insurance; and Program No. 93.774,
Medicare—Supplementary Medical
Insurance Program)
Dated: July 21, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare &
Medicaid Services.
Approved: July 27, 2011.
Kathleen Sebelius,
Secretary, Department of Health and Human
Services.
Note: The following Addendum will not
appear in the Code of Federal Regulations.
Addendum—FY 2012 CBSA Wage
Index Tables
In this addendum, we provide the
wage index tables referred to in the
preamble to this final rule. Tables A and
B display the CBSA-based wage index
values for urban and rural providers.
BILLING CODE 4120–01–P
E:\FR\FM\08AUR3.SGM
08AUR3
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00057
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
48541
ER08AU11.015
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
VerDate Mar<15>2010
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00058
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
ER08AU11.016
srobinson on DSK4SPTVN1PROD with RULES3
48542
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00059
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
48543
ER08AU11.017
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
VerDate Mar<15>2010
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00060
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
ER08AU11.018
srobinson on DSK4SPTVN1PROD with RULES3
48544
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00061
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
48545
ER08AU11.019
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
VerDate Mar<15>2010
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00062
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
ER08AU11.020
srobinson on DSK4SPTVN1PROD with RULES3
48546
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00063
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
48547
ER08AU11.021
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
VerDate Mar<15>2010
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00064
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
ER08AU11.022
srobinson on DSK4SPTVN1PROD with RULES3
48548
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00065
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
48549
ER08AU11.023
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
VerDate Mar<15>2010
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00066
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
ER08AU11.024
srobinson on DSK4SPTVN1PROD with RULES3
48550
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00067
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
48551
ER08AU11.025
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
VerDate Mar<15>2010
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00068
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
ER08AU11.026
srobinson on DSK4SPTVN1PROD with RULES3
48552
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00069
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
48553
ER08AU11.027
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
VerDate Mar<15>2010
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00070
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
ER08AU11.028
srobinson on DSK4SPTVN1PROD with RULES3
48554
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00071
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
48555
ER08AU11.029
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
VerDate Mar<15>2010
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00072
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
ER08AU11.030
srobinson on DSK4SPTVN1PROD with RULES3
48556
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00073
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
48557
ER08AU11.031
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
VerDate Mar<15>2010
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00074
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
ER08AU11.032
srobinson on DSK4SPTVN1PROD with RULES3
48558
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00075
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
48559
ER08AU11.033
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
VerDate Mar<15>2010
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00076
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
ER08AU11.034
srobinson on DSK4SPTVN1PROD with RULES3
48560
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00077
Fmt 4701
Sfmt 4725
E:\FR\FM\08AUR3.SGM
08AUR3
48561
ER08AU11.035
srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules and Regulations
[FR Doc. 2011–19544 Filed 7–29–11; 4:15 pm]
BILLING CODE 4120–01–C
VerDate Mar<15>2010
20:38 Aug 05, 2011
Jkt 223001
PO 00000
Frm 00078
Fmt 4701
Sfmt 9990
E:\FR\FM\08AUR3.SGM
08AUR3
ER08AU11.036
srobinson on DSK4SPTVN1PROD with RULES3
48562
Agencies
[Federal Register Volume 76, Number 152 (Monday, August 8, 2011)]
[Rules and Regulations]
[Pages 48486-48562]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-19544]
[[Page 48485]]
Vol. 76
Monday,
No. 152
August 8, 2011
Part III
Department of Health and Human Services
-----------------------------------------------------------------------
Centers for Medicare & Medicaid Services
-----------------------------------------------------------------------
42 CFR Part 413
Medicare Program; Prospective Payment System and Consolidated Billing
for Skilled Nursing Facilities for FY 2012; Final Rule
Federal Register / Vol. 76 , No. 152 / Monday, August 8, 2011 / Rules
and Regulations
[[Page 48486]]
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 413
[CMS-1351-F]
RIN 0938-AQ29
Medicare Program; Prospective Payment System and Consolidated
Billing for Skilled Nursing Facilities for FY 2012
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule updates the payment rates used under the
prospective payment system for skilled nursing facilities (SNFs) for
fiscal year 2012. In addition, it recalibrates the case-mix indexes so
that they more accurately reflect parity in expenditures between RUG-IV
and the previous case-mix classification system. It also includes a
discussion of a Non-Therapy Ancillary component currently under
development within CMS. In addition, this final rule discusses the
impact of certain provisions of the Affordable Care Act, and reduces
the SNF market basket percentage by the multi-factor productivity
adjustment. This rule also implements certain changes relating to the
payment of group therapy services and implements new resident
assessment policies. Finally, this rule announces that the proposed
provisions regarding the ownership disclosure requirements set forth in
section 6101 of the Affordable Care Act will be finalized at a later
date.
DATES: Effective Date: This final rule is effective on October 1, 2011.
FOR FURTHER INFORMATION CONTACT:
Penny Gershman, (410) 786-6643 (for information related to clinical
issues).
John Kane, (410) 786-0557 (for information related to the development
of the payment rates and case-mix indexes).
Kia Sidbury, (410) 786-7816 (for information related to the wage
index).
Bill Ullman, (410) 786-5667 (for information related to level of care
determinations, consolidated billing, and general information).
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Current System for Payment of SNF Services Under Part A of
the Medicare Program
B. Requirements of the Balanced Budget Act of 1997 (BBA) for
Updating the Prospective Payment System for Skilled Nursing
Facilities
C. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement
Act of 1999 (BBRA)
D. The Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA)
E. The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA)
F. The Affordable Care Act
G. Skilled Nursing Facility Prospective Payment--General
Overview
1. Payment Provisions--Federal Rate
2. FY 2012 Rate Updates Using the Skilled Nursing Facility
Market Basket Index
II. Summary of the Provisions of the FY 2012 Proposed Rule
III. Analysis of and Responses to Public Comments on the FY 2012
Proposed Rule
A. General Comments on the FY 2012 Proposed Rule
B. FY 2012 Annual Update of Payment Rates under the Prospective
Payment System for Skilled Nursing Facilities
1. Federal Prospective Payment System
a. Costs and Services Covered by the Federal Rates
b. Methodology Used for the Calculation of the Federal Rates
2. Case-Mix Adjustments
a. Background
b. Development of Case-Mix Indexes
3. Wage Index Adjustment to Federal Rates
4. Updates to Federal Rates
5. Relationship of RUG-IV Case-Mix Classification System to
Existing Skilled Nursing Facility Level-of-Care Criteria
6. Example of Computation of Adjusted PPS Rates and SNF Payment
C. Resource Utilization Groups, Version 4 (RUG-IV)
1. Prospective Payment for SNF Non-Therapy Ancillary Costs
D. Ongoing Initiatives Under the Affordable Care Act
1. Value-Based Purchasing (Section 3006)
2. Payment Adjustment for Hospital-Acquired Conditions (Section
3008)
3. Nursing Home Transparency and Improvement (Section 6104)
E. Other Issues
1. Required Disclosure of Ownership and Additional Disclosable
Parties Information (Section 6101)
2. Therapy Student Supervision
3. Group Therapy and Therapy Documentation
4. Proposed Changes to the MDS 3.0 Assessment Schedule and Other
Medicare-Required Assessments
5. Discussion of Possible Future Initiatives
F. The Skilled Nursing Facility Market Basket Index
1. Use of the Skilled Nursing Facility Market Basket Percentage
2. Market Basket Forecast Error Adjustment
3. Multifactor Productivity Adjustment
a. Incorporating the Multifactor Productivity Adjustment Into
the Market Basket Update
b. Federal Rate Update Factor
G. Consolidated Billing
H. Application of the SNF PPS to SNF Services Furnished by
Swing-Bed Hospitals
IV. Analysis of and Responses to Public Comments on the FY 2011
Update Notice With Comment
V. Provisions of the Final Rule
VI. Collection of Information Requirements
VII. Economic Analyses
A. Regulatory Impact Analysis
1. Introduction
2. Statement of Need
3. Overall Impacts
4. Detailed Economic Analysis
5. Alternatives Considered
6. Accounting Statement
7. Conclusion
B. Regulatory Flexibility Act Analysis
C. Unfunded Mandates Reform Act Analysis
D. Federalism Analysis
Regulation Text
Addendum: FY 2012 CBSA-Based Wage Index Tables (Tables A & B)
Acronyms
In addition, because of the many terms to which we refer by acronym
in this final rule, we are listing these acronyms and their
corresponding terms in alphabetical order below:
ABN Advance Beneficiary Notice
AIDS Acquired Immune Deficiency Syndrome
ARD Assessment Reference Date
ASAP Assessment Submission and Processing
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999, Public Law 106-113
BIMS Brief Interview for Mental Status
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000, Public Law 106-554
CAH Critical Access Hospital
CBSA Core-Based Statistical Area
CCR Cost-to-Charge Ratio
CFR Code of Federal Regulations
CMI Case-Mix Index
CMS Centers for Medicare & Medicaid Services
COT Change of Therapy
EOT End of Therapy
EOT--R End of Therapy--Resumption
FQHC Federally Qualified Health Center
FR Federal Register
FY Fiscal Year
GAO Government Accountability Office
HAC Hospital-Acquired Condition
HCC Hierarchical Condition Category
HCPCS Healthcare Common Procedure Coding System
HIPAA Health Insurance Portability and Accountability Act of 1996
HR-III Hybrid Resource Utilization Groups, Version 3
IGI IHS (Information Handling Services) Global Insight, Inc.
MDS Minimum Data Set
MFP Multifactor Productivity
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Public Law 110-275
[[Page 48487]]
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Public Law 108-173
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public
Law 110-173
MPAF Medicare PPS Assessment Form
MSA Metropolitan Statistical Area
NTA Non-Therapy Ancillary
OMB Office of Management and Budget
OMRA Other Medicare-Required Assessment
ONTA Other Non-Therapy Ancillary
OSCAR Online Survey Certification and Reporting System
PAC-PRD Post Acute Care Payment Reform Demonstration
PECOS Medicare Provider Enrollment, Chain, and Ownership System
PPS Prospective Payment System
QIES Quality Improvement and Evaluation System
RAI Resident Assessment Instrument
RAVEN Resident Assessment Validation Entry
RFA Regulatory Flexibility Act, Public Law 96-354
RNP Routine NTA Bundled Payment
RHC Rural Health Clinic
RIA Regulatory Impact Analysis
RTM Reimbursable Therapy Minutes
RUG-III Resource Utilization Groups, Version 3
RUG-IV Resource Utilization Groups, Version 4
RUG-53 Refined 53--Group RUG-III Case-Mix Classification System
SCHIP State Children's Health Insurance Program
SCPA Significant Correction of a Prior Assessment
SCSA Significant Change in Status Assessment
SNF Skilled Nursing Facility
STM Staff Time Measurement
STRIVE Staff Time and Resource Intensity Verification
TNP Tiered Non-Routine NTA Payment
UMRA Unfunded Mandates Reform Act, Public Law 104-4
I. Background
In the May 6, 2011 Federal Register, we published a proposed rule
(76 FR 26364) (hereafter referred to as the FY 2012 proposed rule),
setting forth potential updates to the payment rates used under the
prospective payment system (PPS) for skilled nursing facilities (SNFs),
for fiscal year (FY) 2012. Annual updates to the PPS rates for (SNFs)
are required by section 1888(e) of the Social Security Act (the Act),
as added by section 4432 of the Balanced Budget Act of 1997 (BBA, Pub.
L. 105-33, enacted on August 5, 1997), and amended by subsequent
legislation as discussed elsewhere in this preamble. Our most recent
annual update occurred in an update notice with comment period (75 FR
42886, July 22, 2010) that set forth updates to the SNF PPS payment
rates for fiscal year (FY) 2011. We subsequently published a correction
notice (75 FR 55801, September 14, 2010) for those payment rate
updates. We respond to public comments which relate to the FY 2011
update notice, along with those relating to the FY 2012 proposed rule,
in this final rule.
A. Current System for Payment of Skilled Nursing Facility Services
Under Part A of the Medicare Program
Section 4432 of the BBA amended section 1888 of the Act to provide
for the implementation of a per diem PPS for SNFs, covering all costs
(routine, ancillary, and capital-related) of covered SNF services
furnished to beneficiaries under Part A of the Medicare program,
effective for cost reporting periods beginning on or after July 1,
1998. In this final rule, we are updating the per diem payment rates
for SNFs for FY 2012. Major elements of the SNF PPS include:
Rates. As discussed in section I.G.1. of this final rule,
we established per diem Federal rates for urban and rural areas using
allowable costs from FY 1995 cost reports. These rates also included a
``Part B add-on'' (an estimate of the cost of those services that,
before July 1, 1998, were paid under Part B but furnished to Medicare
beneficiaries in a SNF during a Part A covered stay). We adjust the
rates annually using a SNF market basket index, and we adjust them by
the hospital inpatient wage index to account for geographic variation
in wages. We also apply a case-mix adjustment to account for the
relative resource utilization of different patient types. As further
discussed in section I.G.1. of this final rule, for FY 2012 this
adjustment will utilize the Resource Utilization Groups, version 4
(RUG-IV) case-mix classification, and will use information obtained
from the required resident assessments using version 3.0 of the Minimum
Data Set (MDS 3.0). (The information collection burden associated with
the resident assessment is approved under OMB Control Number 0938-
0739.) Additionally, as noted elsewhere in this preamble, the payment
rates at various times have also reflected specific legislative
provisions for certain temporary adjustments.
Transition. 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 three 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 entirely on the adjusted Federal per diem rates, we no
longer include adjustment factors related to facility-specific rates
for the coming fiscal year.
Coverage. 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. As
further discussed in section III.B.5. of this final rule, this approach
includes an administrative presumption that utilizes a beneficiary's
initial classification in one of the upper 52 RUGs of the 66-group RUG-
IV case-mix classification system to assist in making certain SNF level
of care determinations. In 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 (see section III.B.5. of this final
rule for a more detailed discussion of the relationship between the
case-mix classification system and SNF level of care determinations).
Consolidated Billing. The SNF PPS includes a consolidated
billing provision that requires a SNF to submit consolidated Medicare
bills to its fiscal intermediary or Medicare Administrative Contractor
for almost all of the services that its residents receive during the
course of a covered Part A stay. In addition, this provision places
with the SNF the Medicare billing responsibility for physical therapy,
occupational therapy, and speech-language pathology services that the
resident receives during a noncovered stay. The statute excludes a
small list of services from the consolidated billing provision
(primarily those of physicians and certain other types of
practitioners), which remain separately billable under Part B when
furnished to a SNF's Part A resident. A more detailed discussion of
this provision appears in section III.G of this final rule.
Application of the SNF PPS to SNF services furnished by
swing-bed hospitals. Section 1883 of the Act permits certain small,
rural hospitals to enter into a Medicare swing-bed agreement, under
which the hospital can use its beds to provide either acute or SNF
care, as needed. For critical
[[Page 48488]]
access hospitals (CAHs), Part A pays on a reasonable cost basis for SNF
services furnished under a swing-bed agreement. However, in accordance
with section 1888(e)(7) of the Act, these 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. A more detailed
discussion of this provision appears in section III.H. of this final
rule.
B. Requirements of the Balanced Budget Act of 1997 (BBA) for Updating
the Prospective Payment System for Skilled Nursing Facilities
Section 1888(e)(4)(H) of the Act requires that we provide for
publication annually in the Federal Register:
(1) The unadjusted Federal per diem rates to be applied to days of
covered SNF services furnished during the upcoming FY.
(2) The case-mix classification system to be applied for these
services during the upcoming FY.
(3) 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 these required annual updates to the Federal rates.
C. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 (BBRA)
There were several provisions in the BBRA (Pub. L. 106-113, enacted
on November 29, 1999) that resulted in adjustments to the SNF PPS. We
described these provisions in detail in the SNF PPS final rule for FY
2001 (65 FR 46770, July 31, 2000). In particular, section 101(a) of the
BBRA provided for a temporary 20 percent increase in the per diem
adjusted payment rates for 15 specified groups in the original, 44-
group Resource Utilization Groups, version 3 (RUG-III) case-mix
classification system. In accordance with section 101(c)(2) of the
BBRA, this temporary payment adjustment expired on January 1, 2006,
upon the implementation of a refined, 53-group version of the RUG-III
system, RUG-53 (see section I.G.1. of this final rule). We included
further information on BBRA provisions that affected the SNF PPS in
Program Memoranda A-99-53 and A-99-61 (December 1999).
Also, section 103 of the BBRA designated certain additional
services for exclusion from the consolidated billing requirement, as
discussed in section III.G. of this final rule. Further, for swing-bed
hospitals with more than 49 (but less than 100) beds, section 408 of
the BBRA provided for the repeal of certain statutory restrictions on
length of stay and aggregate payment for patient days, effective with
the end of the SNF PPS transition period described in section
1888(e)(2)(E) of the Act. In the final rule for FY 2002 (66 FR 39562,
July 31, 2001), we made conforming changes to the regulations at Sec.
413.114(d), effective for services furnished in cost reporting periods
beginning on or after July 1, 2002, to reflect section 408 of the BBRA.
D. The Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA)
The BIPA (Pub. L. 106-554, enacted December 21, 2000) also included
several provisions that resulted in adjustments to the SNF PPS. We
described these provisions in detail in the final rule for FY 2002 (66
FR 39562, July 31, 2001). In particular:
Section 203 of the BIPA exempted CAH swing beds from the
SNF PPS. We included further information on this provision in Program
Memorandum A-01-09 (Change Request 1509), issued January 16,
2001, which is available online at https://www.cms.gov/transmittals/downloads/a0109.pdf.
Section 311 of the BIPA revised the statutory update
formula for the SNF market basket, and also directed us to conduct a
study of alternative case-mix classification systems for the SNF PPS.
In 2006, we submitted a report to the Congress on this study, which is
available online at https://www.cms.gov/SNFPPS/Downloads/RC_2006_PC-PPSSNF.pdf.
Section 312 of the BIPA provided for a temporary increase
of 16.66 percent in the nursing component of the case-mix adjusted
Federal rate for services furnished on or after April 1, 2001, and
before October 1, 2002; accordingly, this add-on is no longer in
effect. This section also directed the Government Accountability Office
(GAO) to conduct an audit of SNF nursing staff ratios and submit a
report to the Congress on whether the temporary increase in the nursing
component should be continued. The report (GAO-03-176), which GAO
issued in November 2002, is available online at https://www.gao.gov/new.items/d03176.pdf.
Section 313 of the BIPA repealed the consolidated billing
requirement for services (other than physical therapy, occupational
therapy, and speech-language pathology services) furnished to SNF
residents during noncovered stays, effective January 1, 2001. (A more
detailed discussion of this provision appears in section VII. of this
final rule.)
Section 314 of the BIPA corrected an anomaly involving
three of the RUGs that section 101(a) of the BBRA had designated to
receive the temporary payment adjustment discussed above in section
I.C. of this final rule. (As noted previously, in accordance with
section 101(c)(2) of the BBRA, this temporary payment adjustment
expired upon the implementation of case-mix refinements on January 1,
2006.)
Section 315 of the BIPA authorized us to establish a
geographic reclassification procedure that is specific to SNFs, but
only after collecting the data necessary to establish a SNF wage index
that is based on wage data from nursing homes. 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.
We included further information on several of the BIPA provisions
in Program Memorandum A-01-08 (Change Request 1510), issued
January 16, 2001, which is available online at https://www.cms.gov/transmittals/downloads/a0108.pdf.
E. The Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (MMA)
The MMA (Pub. L. 108-173, enacted on December 8, 2003) included a
provision that resulted in a further adjustment to the SNF PPS.
Specifically, section 511 of the MMA amended section 1888(e)(12) of the
Act, to provide for a temporary increase of 128 percent in the PPS per
diem payment for any SNF residents with Acquired Immune Deficiency
Syndrome (AIDS), effective with services furnished on or after October
1, 2004. This special AIDS add-on was to remain in effect until ``* * *
the Secretary certifies that there is an appropriate adjustment in the
case mix * * * to compensate for the increased costs associated with
[such] residents. * * *'' The AIDS add-on is also discussed in Program
Transmittal 160 (Change Request 3291), issued on
April 30, 2004, which is available online at https://www.cms.gov/transmittals/downloads/r160cp.pdf. In the SNF PPS final rule for FY
2010 (74 FR 40288, August 11, 2009), we did not address the
certification of the AIDS add-on in that final rule's implementation of
the case-mix refinements for RUG-IV, thus allowing the temporary add-on
payment created by section 511 of the MMA to remain in effect.
For the limited number of SNF residents that qualify for the AIDS
add-on, implementation of this provision
[[Page 48489]]
results in a significant increase in payment. For example, using FY
2009 data, we identified less than 3,500 SNF residents with a diagnosis
code of 042 (Human Immunodeficiency Virus (HIV) Infection). For FY
2012, an urban facility with a resident with AIDS in RUG-IV group
``HC2'' would have a case-mix adjusted payment of $401.48 (see Table 5)
before the application of the MMA adjustment. After an increase of 128
percent, this urban facility would receive a case-mix adjusted payment
of approximately $915.37.
In addition, section 410 of the MMA contained a provision that
excluded from consolidated billing certain services furnished to SNF
residents by rural health clinics (RHCs) and Federally Qualified Health
Centers (FQHCs). (Further information on this provision appears in
section III.G. of this final rule.)
F. The Affordable Care Act
On March 23, 2010, the Patient Protection and Affordable Care Act,
Public Law 111-148, was enacted. Following the enactment of Public Law
111-148, the Health Care and Education Reconciliation Act of 2010 (Pub.
L. 111-152, enacted on March 30, 2010) amended certain provisions of
Public Law 111-148 and certain sections of the Social Security Act and,
in certain instances, included ``freestanding'' provisions (Pub. L.
111-148 and Pub. L. 111-152 are collectively referred to in this final
rule as ``the Affordable Care Act''). Section 10325 of the Affordable
Care Act included a provision involving the SNF PPS. Section 10325
postponed the implementation of the RUG-IV case-mix classification
system published in the FY 2010 SNF PPS final rule (74 FR 40288, August
11, 2009), requiring that the Secretary not implement the RUG-IV case-
mix classification system before October 1, 2011. Notwithstanding this
postponement of overall RUG-IV implementation, section 10325 further
specified that the Secretary implement, effective October 1 2010, the
changes related to concurrent therapy and the look-back period that
were finalized as components of RUG-IV (see 74 FR 40315-19, 40322-24,
August 11, 2009). As we noted in the FY 2011 SNF PPS Notice with
Comment Period (75 FR 42889), implementing the particular combination
of RUG-III and RUG-IV features specified in section 10325 of the
Affordable Care Act would require developing a revised grouper,
something that could not be accomplished by that provision's effective
date (October 1, 2010) without risking serious disruption to providers,
suppliers, and State agencies. Accordingly, in the FY 2011 Notice with
Comment Period (75 FR 42889), we announced our intention to proceed on
an interim basis with implementation of the full RUG-IV case-mix
classification system as of October 1, 2010, followed by a retroactive
claims adjustment, using a hybrid RUG-III (HR-III) system reflecting
the Affordable Care Act configuration, once we had developed a revised
grouper that could accommodate it. In that Notice with Comment period,
we also invited public comment specifically on our plans for
implementing section 10325 of the Affordable Care Act in this manner.
However, section 202 of the Medicare and Medicaid Extenders Act of
2010 (Pub. L. 111-309, enacted December 15, 2010) repealed section
10325 of the Affordable Care Act. Therefore, we leave in place the
implementation of the full RUG-IV system as of FY 2011, as finalized in
the FY 2010 SNF PPS final rule (74 FR 40288). Moreover, as the repeal
of section 10325 of the Affordable Care Act eliminates the need for a
subsequent transition to the HR-III system, this renders moot any
further discussion of public comments that we had invited on our
planned implementation of that transition. In addition, we note that
implementation of version 3.0 of the Minimum Data Set (MDS 3.0) has
proceeded as originally scheduled, with an effective date of October 1,
2010. The MDS 3.0 RAI Manual and MDS 3.0 Item Set are published on the
MDS 3.0 Training Materials Web site, at https://www.cms.gov/NursingHomeQualityInits/45_NHQIMDS30TrainingMaterials.asp.
We note that a parity adjustment was applied to the RUG-53 nursing
case-mix weights when the RUG-III system was initially refined in 2006,
to ensure that the implementation of the refinements would not cause
any change in overall payment levels (70 FR 45031, August 4, 2005). A
detailed discussion of the parity adjustment in the specific context of
the RUG-IV payment rates appears in the FY 2010 SNF PPS proposed rule
(74 FR 22236-38, May 12, 2009) and final rule (74 FR 40338-40339,
August 11, 2009), in the FY 2011 Notice with Comment Period (75 FR
42892-42893), and in the FY 2012 proposed rule (76 FR 26370 through
26377).
Accordingly, as discussed above, effective October 1, 2010, we
implemented and paid claims under the RUG-IV system that was finalized
in the FY 2010 SNF PPS final rule. In section III.D. of this final
rule, we discuss certain ongoing Affordable Care Act initiatives that
relate to SNFs, and in section III.E.1, we discuss proposed revisions
involving section 6101 of the Affordable Care Act, regarding required
disclosure of ownership and additional disclosable parties information.
G. Skilled Nursing Facility Prospective Payment--General Overview
We implemented the Medicare SNF PPS effective with cost reporting
periods beginning on or after July 1, 1998. This methodology uses
prospective, case-mix adjusted per diem payment rates applicable to all
covered SNF services. These payment rates cover all costs of furnishing
covered skilled nursing services (routine, ancillary, and capital-
related costs) other than costs associated with approved educational
activities and bad debts. Covered SNF services include post-hospital
services for which benefits are provided under Part A, as well as those
items and services (other than physician and certain other services
specifically excluded under the BBA) which, before July 1, 1998, had
been paid under Part B but furnished to Medicare beneficiaries 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).
1. Payment Provisions--Federal Rate
The 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 an estimate of the amounts that
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 the
costs of facility differences in case mix and for geographic variations
in wages. In compiling the database used to compute the Federal payment
rates, we excluded those providers that received new provider
exemptions from the routine cost limits, as well as costs related to
payments for exceptions to the routine cost limits. Using the formula
that the BBA prescribed, we set the Federal rates at a level equal to
the weighted mean of freestanding costs plus 50 percent of the
difference between the freestanding mean and weighted mean of all SNF
[[Page 48490]]
costs (hospital-based and freestanding) combined. We computed and
applied separately the payment rates for facilities located in urban
and rural areas. In addition, we adjusted the portion of the Federal
rate attributable to wage-related costs by a wage index.
The Federal rate also incorporates adjustments to account for
facility case-mix, using a classification system that accounts for the
relative resource utilization of different patient types. The RUG-IV
classification system uses beneficiary assessment data from the MDS 3.0
completed by SNFs to assign beneficiaries to one of 66 RUG-IV groups.
The original RUG-III case-mix classification system used beneficiary
assessment data from the MDS, version 2.0 (MDS 2.0) completed by SNFs
to assign beneficiaries to one of 44 RUG-III groups. Then, under
incremental refinements that became effective on January 1, 2006, we
added nine new groups--comprising a new Rehabilitation plus Extensive
Services category--at the top of the RUG-III hierarchy. The May 12,
1998 interim final rule (63 FR 26252) included a detailed description
of the original 44-group RUG-III case-mix classification system. A
comprehensive description of the refined RUG-53 system appeared in the
proposed and final rules for FY 2006 (70 FR 29070, May 19, 2005, and 70
FR 45026, August 4, 2005), and a detailed description of the current
66-group RUG-IV system appeared in the proposed and final rules for FY
2010 (74 FR 22208, May 12, 2009, and 74 FR 40288, August 11, 2009).
Further, in accordance with sections 1888(e)(4)(E)(ii)(IV) and
(e)(5) of the Act, the Federal rates in this final rule reflect an
update to the rates that we published in the notice with comment period
for FY 2011 (75 FR 42886, July 22, 2010) and the associated correction
notice (75 FR 55801, September 14, 2010), equal to the full change in
the SNF market basket index, adjusted by the forecast error correction,
if applicable, and the Multifactor Productivity (MFP) adjustment for FY
2012. A more detailed discussion of the SNF market basket index and
related issues appears in sections I.G.2. and III.F. of this final
rule.
2. FY 2012 Rate Updates Using the Skilled Nursing Facility Market
Basket Index
Section 1888(e)(5) 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.
We use the SNF market basket index, adjusted in the manner described
below, to update the Federal rates on an annual basis. In the SNF PPS
final rule for FY 2008 (72 FR 43425 through 43430, August 3, 2007), we
revised and rebased the market basket, which included updating the base
year from FY 1997 to FY 2004. The FY 2012 market basket increase is 2.7
percent, which is based on IHS Global Insight, Inc. (IGI) second
quarter 2011 forecast with historical data through first quarter 2011.
In addition, as explained in the final rule for FY 2004 (66 FR
46058, August 4, 2003) and in section III.F.2. of this final rule, the
annual update of the payment rates includes, as appropriate, an
adjustment to account for market basket forecast error. As described in
the final rule for FY 2008, the threshold percentage that serves to
trigger an adjustment to account for market basket forecast error is
0.5 percentage point effective for FY 2008 and subsequent years. This
adjustment takes into account the forecast error from the most recently
available FY for which there is final data, and applies whenever the
difference between the forecasted and actual change in the market
basket exceeds a 0.5 percentage point threshold. For FY 2010 (the most
recently available FY for which there is final data), the estimated
increase in the market basket index was 2.2 percentage points, while
the actual increase was 2.0 percentage points, resulting in the actual
increase being 0.2 percentage point lower than the estimated increase.
Accordingly, as the difference between the estimated and actual amount
of change does not exceed the 0.5 percentage point threshold, the
payment rates for FY 2012 do not include a forecast error adjustment.
As we stated in the final rule for FY 2004 that first promulgated the
forecast error adjustment (68 FR 46058, August 4, 2003), the adjustment
will ``* * * reflect both upward and downward adjustments, as
appropriate.'' Table 1 shows the forecasted and actual market basket
amounts for FY 2010.
Table 1--Difference Between the Forecasted and Actual Market Basket Increases for FY 2010
----------------------------------------------------------------------------------------------------------------
Forecasted FY Actual FY 2010 FY 2010
Index 2010 increase * increase ** difference
----------------------------------------------------------------------------------------------------------------
SNF....................................................... 2.2 2.0 -0.2
----------------------------------------------------------------------------------------------------------------
* Published in Federal Register; based on second quarter 2009 IHS Global Insight Inc. forecast (2004-based
index).
** Based on the second quarter 2011 IHS Global Insight forecast, with historical data through the first quarter
2011 (2004-based index).
Furthermore, effective FY 2012, as required by section 3401(b) of
the Affordable Care Act, the market basket percentage is reduced by a
productivity adjustment 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 fiscal year, year, cost-reporting period or
other annual period)'' (the MFP adjustment). As discussed in greater
detail in section III.F.3 of this final rule, the MFP adjustment for FY
2012 is 1.0 percent.
II. Summary of the Provisions of the FY 2012 Proposed Rule
In the FY 2012 proposed rule (76 FR 26364), we presented two
options for updating the payment rates used under the prospective
payment system for skilled nursing facilities (SNFs), for fiscal year
2012. In this context, we examined recent changes in provider behavior
relating to the implementation of the Resource Utilization Groups,
version 4 (RUG-IV) case-mix classification system and considered a
possible recalibration of the case-mix indexes so that they more
accurately reflect parity in expenditures between RUG-IV and the
previous case-mix classification system. We also included a discussion
of a Non-Therapy Ancillary component and outlier research currently
under development within CMS. In addition, the proposed rule discussed
the impact of certain provisions of the Affordable Care Act. We
proposed to require for fiscal year 2012 and subsequent fiscal years
that the SNF market basket percentage change be reduced by the multi-
factor productivity adjustment. We also proposed to require Medicare
SNFs and Medicaid nursing facilities to disclose certain information to
the Secretary of
[[Page 48491]]
the United States Department of Health and Human Services (the
Secretary) and other entities regarding the ownership and
organizational structure of their facilities. Finally, we proposed
certain changes relating to the payment of group therapy services and
proposed new resident assessment policies.
III. Analysis of and Responses to Public Comments on the FY 2012
Proposed Rule
In response to the publication of the FY 2012 proposed rule, we
received over 170 timely public comments from individual 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 2012 Proposed Rule
In addition to the comments we received on the proposed rule's
discussion of specific aspects of the SNF PPS (which we address later
in this final rule), commenters also submitted the following, more
general observations on the payment system. We received many comments
expressing concern about the SNF PPS system as a whole and the MDS 3.0
and RUG-IV system.
Comment: We received a number of comments raising concerns about
the complexity of the MDS 3.0 that included several new assessment
types, the need to clarify the RAI manual, and the time required to
become trained on the new MDS 3.0 requirements.
Response: We appreciate these concerns and we recognize that the
transition to the MDS 3.0 was complex and labor-intensive. We provided
extensive training and opportunities to assist with questions about the
MDS 3.0 and RUG-IV models both prior to and after its October 1, 2010
implementation on audio conferences, at national training conferences,
in the form of the RAI Manual and subsequent clarification updates, and
postings to the MDS 3.0 and SNF PPS Web sites. We have also provided
support in response to oral and written inquiries, and issued
clarification during Open Door Forums, RAI Manual updates, and through
online and telephone technical assistance. We are committed to
continuing training on both the MDS 3.0 and RUG-IV systems. In fact, we
are developing training programs to assist providers to adapt to any
new policy changes introduced on and after October 1, 2011.
Additionally, as we receive provider input through these efforts, we
will continue to update and clarify the RAI manual to ensure that it
continues to provide accurate information and guidance on CMS policies.
Comment: One commenter recommended that we address the need for
stricter requirements for training and certification of food services
directors and staff. The commenter states that stricter guidelines will
improve patient health and safety.
Response: We appreciate this comment, but note that the specific
issues the commenter raised about the requirements for food services
staff relate to the certification standards for long-term care
facilities and, therefore, are beyond the scope of this final rule. We
have, however, shared these comments with CMS survey and certification
staff so that they can consider these suggestions as part of their
ongoing review and refinement of our policies.
B. FY 2012 Annual Update of Payment Rates Under the Prospective Payment
System for Skilled Nursing Facilities
1. Federal Prospective Payment System
This final rule sets forth a schedule of Federal prospective
payment rates applicable to Medicare Part A SNF services beginning
October 1, 2011. The schedule incorporates per diem Federal rates that
provide Part A payment for almost all costs of services furnished to a
beneficiary in a SNF during a Medicare-covered stay.
a. Costs and Services Covered by the Federal Rates
In accordance with section 1888(e)(2)(B) of the Act, the Federal
rates apply to all costs (routine, ancillary, and capital-related) of
covered SNF services other than costs associated with approved
educational activities as defined in Sec. 413.85. Under section
1888(e)(2)(A)(i) of the Act, covered SNF services include post-hospital
SNF services for which benefits are provided under Part A (the hospital
insurance program), as well as items and services (other than those
services excluded by statute) that, before July 1, 1998, were paid
under Part B (the supplementary medical insurance program) but
furnished to Medicare beneficiaries in a SNF during a Part A covered
stay. (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)).
b. Methodology Used for the Calculation of the Federal Rates
The FY 2012 rates reflect an update using the full amount of the
latest market basket index reduced by the MFP adjustment. The FY 2012
market basket increase factor is 2.7 percent which, as discussed in
section VI.C of this final rule, is reduced by a 1.0 percent MFP
adjustment, resulting in an MFP-adjusted market basket percentage of
1.7 percent. A complete description of the multi-step process used to
calculate Federal rates initially appeared in the May 12, 1998 interim
final rule (63 FR 26252), as further revised in subsequent rules. We
note that the temporary increase of 128 percent in the per diem
adjusted payment rates for SNF residents with AIDS, enacted by section
511 of the MMA (and discussed previously in section I.E of this final
rule), remains in effect.
We used the SNF update factor to adjust each per diem component of
the Federal rates forward to reflect cost increases occurring between
the midpoint of the Federal FY beginning October 1, 2010, and ending
September 30, 2011 (FY 2011), and the midpoint of the Federal FY
beginning October 1, 2011, and ending September 30, 2012 (FY 2012), to
which the payment rates apply. In accordance with section
1888(e)(4)(E)(ii)(IV) of the Act, we update the payment rates for FY
2012 by a factor equal to the full market basket index percentage
increase. As further explained in sections I.G.2 and III.F.2 of this
final rule, as applicable, we adjust the market basket index 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 change in the market basket exceeds a 0.5
percentage point threshold. In addition, as further explained in
sections I.G.2 and III.F.3 of this final rule, effective FY 2012 and
each subsequent fiscal year, we are required to reduce the market
basket percentage by the MFP adjustment. We further adjust the rates by
a wage index budget neutrality factor, described later in this section.
Tables 2 and 3 reflect the updated components of the unadjusted Federal
rates for FY 2012, prior to adjustment for case-mix.
[[Page 48492]]
Table 2--FY 2012 Unadjusted Federal Rate Per Diem Urban
----------------------------------------------------------------------------------------------------------------
Nursing-- case- Therapy-- case- Therapy-- non-
Rate component mix mix case-mix Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount......................... $160.62 $120.99 $15.94 $81.97
----------------------------------------------------------------------------------------------------------------
Table 3--FY 2012 Unadjusted Federal Rate Per Diem Rural
----------------------------------------------------------------------------------------------------------------
Nursing-- case- Therapy-- case- Therapy-- non-
Rate component mix mix case-mix Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount......................... $153.46 $139.51 $17.02 $83.49
----------------------------------------------------------------------------------------------------------------
2. Case-Mix Adjustments
a. Background
Section 1888(e)(4)(G)(i) of the Act requires the Secretary to make
an adjustment to account for case-mix. 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 and other data
that the Secretary considers appropriate. In first implementing the SNF
PPS (63 FR 26252, May 12, 1998), we developed the RUG-III case-mix
classification system, which tied the amount of payment to resident
resource use in combination with resident characteristic information.
Staff time measurement (STM) studies conducted in 1990, 1995, and 1997
provided information on resource use (time spent by staff members on
residents) and resident characteristics that enabled us not only to
establish RUG-III, but also to create case-mix indexes (CMIs).
Although the establishment of the SNF PPS did not change Medicare's
fundamental requirements for SNF coverage, payment levels under the PPS
vary based on the patient's anticipated care needs and resource
utilization. One of the elements affecting the SNF PPS per diem rates
is the case-mix adjustment derived from a classification system based
on comprehensive resident assessments using the MDS. Case-mix
classification is based, in part, on the beneficiary's need for skilled
nursing care and therapy. The case-mix classification system uses
clinical data from the MDS, and wage-adjusted staff time measurement
data, to assign a case-mix group to each patient record that is then
used to calculate a per diem payment under the SNF PPS. Because the MDS
is used as the basis for payment as well as a clinical document, we
have provided extensive training on proper coding and the time frames
for MDS completion in our Resident Assessment Instrument (RAI) Manual.
For an MDS to be considered valid for use in determining payment, the
MDS assessment must be completed in compliance with the instructions in
the RAI Manual in effect at the time the assessment is completed. For
payment and quality monitoring purposes, the RAI Manual consists of
both the Manual instructions and the interpretive guidance and policy
clarifications posted on the appropriate MDS Web site at https://www.cms.gov/NursingHomeQualityInits/25_NHQIMDS30.asp.
The original RUG-III grouper logic was based on clinical data
collected in 1990, 1995, and 1997. As discussed in the SNF PPS proposed
rule for FY 2010 (74 FR 22208, May 12, 2009), we subsequently conducted
a multi-year data collection and analysis under the Staff Time and
Resource Intensity Verification (STRIVE) project to update the case-mix
classification system for FY 2011. The resulting RUG-IV case-mix
classification system reflected the data collected in 2006-2007 during
the STRIVE project, and was finalized in the FY 2010 SNF PPS final rule
(74 FR 40288, August 11, 2009) to take effect in FY 2011 concurrently
with an updated new resident assessment instrument, the MDS 3.0, which
collects the clinical data used for case-mix classification under RUG-
IV.
Under the BBA, each update of the SNF PPS payment rates must
include the case-mix classification methodology applicable for the
coming Federal FY. As indicated in section I.G of this final rule, the
payment rates set forth herein reflect the use of the RUG-IV case-mix
classification system from October 1, 2011, through September 30, 2012.
b. Development of Case-Mix Indexes
In the FY 2012 proposed rule (76 FR 26370 through 36377), we
discussed the implementation of the RUG-IV classification system,
effective October 1, 2010. We also discussed the accompanying parity
adjustment that was intended to ensure that estimated total payments
under the RUG-IV model would be equal to those payments that would have
been made under the 53-group RUG-III model that it replaced. We then
explained that actual utilization patterns under the refined case-mix
system differed significantly from the initial projections, and as a
consequence, rather than achieving parity as intended, this adjustment
to the new RUG-IV system triggered a significant increase in overall
payment levels under the RUG-IV model, representing substantial
overpayments to SNFs.
Accordingly, the FY 2012 proposed rule included a discussion of two
options for updating the rates for FY 2012. The first option was to
recalibrate the parity adjustment (using the methodology discussed in
the FY 2012 proposed rule) to ensure that the adjustment actually
achieves its intended purpose, to make the transition from RUG-53 to
RUG-IV in a budget neutral manner, as discussed further below. Under
the second option, CMS reserved the option not to implement a
recalibration of the parity adjustment in FY 2012 if, as additional FY
2011 claims data became available, they indicated that utilization
patterns are more consistent with our projections and expenditures are
more in parity with those under the RUG-53 model. Under this second
option, we stated we would simply update the payment rates for FY 2012
by the FY 2012 market basket adjustment of 2.7 percent, reduced by the
MFP adjustment of 1.0 percent, for a net market basket increase factor
of 1.7 percent.
As discussed in the FY 2012 proposed rule, the recalibration of the
FY 2011 parity adjustment, which formed the basis of the first option
discussed above, was initially determined through an analysis of
utilization data from the first quarter of FY 2011. The methodology for
determining the parity adjustment necessary given utilization patterns
observed in the first quarter of FY 2011 is described in the FY 2012
proposed rule (76 FR 26370 through 26377) and follows the same basic
methodology described in the FY 2006 SNF PPS
[[Page 48493]]
proposed rule (70 FR 29077 through 29079), the FY 2009 SNF PPS proposed
rule (73 FR 25923) and the FY 2009 SNF PPS final rule (73 FR 46421-23).
In the FY 2012 proposed rule, we stated that this adjustment was
based on a set of data derived from first quarter FY 2011 claims and
MDS assessments. We further stated that we would continue to monitor
claims data and utilization patterns in FY 2011 to confirm our
preliminary assessment of the recalibration that would be necessary to
achieve parity between the RUG-53 and RUG-IV models, and would update
the parity adjustment accordingly. For this final rule, as further
discussed below, we have been able to update the recalibration of the
FY 2011 parity adjustment with a data set which includes claims and MDS
3.0 assessments for the first 8 months of FY 2011.
Using the same methodology for determining the recalibration
discussed in the FY 2012 proposed rule and approximately 2.2 million
claims matched to the MDS 3.0 assessment, representing 8 months (or
nearly 3 full quarters) of FY 2011 (from October 1, 2011 through May
31, 2011), we determined that the utilization patterns identified in
our analysis of the first quarter FY 2011 data continued throughout the
entire 8-month period (these data are available at https://www.cms.gov/SNFPPS/02_Spotlight.asp). We then repeated our recalibration
calculation using the full 8-month data set, which is available at
https://www.cms.gov/SNFPPS/02_Spotlight.asp. We found that, while
retaining the original 61 percent adjustment to the CMIs assigned to
each of the RUG-IV non-therapy groups, the necessary adjustment to the
nursing CMIs of the RUG-IV therapy groups would be 19.84 percent, a
difference of only .03 percent from the 19.81 percent adjustment
discussed in the proposed rule. We believe that this updated analysis
confirms our preliminary analysis, and demonstrates effectively that
the utilization patterns observed in the first quarter of FY 2011 were
not temporary aberrations or the result of a learning curve with
respect to the RUG-IV and MDS 3.0 transition, but instead represent a
new pattern of provider behavior that differs significantly from
expected utilization patterns that were the basis for the original
parity adjustment, and which resulted in significant increases in
overall payment levels under RUG-IV.
In addition, the increased expenditure levels due to the
implementation of the RUG-IV system have been validated by the Office
of the Inspector General (OIG) in a separate review of SNF payments
during the first 6 months of FY 2011. According to a preliminary
analysis by OIG, the utilization trends related to the shifts in the
modes of therapy and the classification of high percentages of SNF
beneficiaries into the highest-paying RUG-IV groups were even more
pronounced in the FY 2011 second quarter (January through April 2011)
than in the first quarter (October through December 2010) that was used
for the analyses included in the FY 2012 proposed rule (This OIG report
is available at https://oig.hhs.gov/oei/reports/oei-02-09-00204.asp.)
As we stated in the proposed rule (76 FR 26371), given that the
most notable differences between expected and actual utilization
patterns occurred within the therapy RUG categories, we believe that
rather than applying the new parity adjustment percentage to all
nursing CMIs, it is more appropriate to maintain the 61 percent
adjustment to the nursing CMIS for the RUG-IV non-therapy groups, and
reduce the 61 percent parity adjustment as it applied to the nursing
CMIs for the RUG-IV therapy groups.
In the proposed rule, we invited comments on the two options
discussed above. A discussion of these comments, including our
responses, appears below.
Comment: We received a variety of comments regarding the two
options presented in the proposed rule for updating the payment rates
for FY 2012. Most commenters were opposed to the option to recalibrate
the FY 2011 parity adjustment. Many of these commenters expressed their
belief that the recalibration considered in the proposed rule will have
a significantly negative impact on facilities and beneficiaries. These
commenters believed that the recalibration discussed in the proposed
rule should be either withdrawn or significantly reduced.
Response: In light of the previous recalibration of the SNF PPS
case-mix indexes in FY 2010, which addressed excess payments associated
with the RUG-53 implementation in FY 2006 but only after those excess
payments had persisted for several years, we believe it is imperative
that we act in a well-considered but expedient manner once excess
payments such as those in FY 2011 are identified. Allowing these
significant anomalies to persist and failing to take timely action to
correct the situation creates instability under the RUG-IV system, in
the SNF PPS, and the Medicare program generally, which ultimately
affects Medicare beneficiary access and quality of care. As we
explained in the FY 2012 proposed rule (76 FR 26370-26373), in
recalibrating the CMIs under the RUG-IV model, we expect to restore
payments to their appropriate level by correcting an inadvertent
increase in overall payments. Because the recalibration is removing an
unintended excess payment rather than decreasing an otherwise
appropriate payment amount, we do not believe that the recalibration
should negatively affect facilities, beneficiaries, or quality of care,
or create an undue hardship on providers.
Further, in its March 2011 report to the Congress (available at
https://www.medpac.gov/documents/Mar11_EntireReport.pdf), MedPAC
reports that average Medicare margins have increased for freestanding
SNFs since 2005. In 2009, the aggregate Medicare margin for
freestanding SNFs, which represent more than 90 percent of all SNF
facilities, was 18.1 percent, up from 16.6 percent in 2008 and
representing the ninth consecutive year where the aggregate Medicare
margin for freestanding SNFs was greater than 10 percent. For these
reasons, we believe that the parity adjustment should not be withdrawn
or reduced.
Comment: Several commenters asserted that the higher payments
observed in FY 2011 were, at least partially, the result of real acuity
changes which should be accounted for in the calculation of the parity
adjustment. These commenters stated that, as an alternative approach,
CMS should consider comparing data from FY 2010 and FY 2011 when
calculating the recalibration factor, to account for changes in patient
acuity.
Response: We disagree with this comment on the basis that, as
described in the FY 2012 proposed rule (76 FR 26371), the same FY 2011
claims and MDS information were used to determine both RUG-III payments
and RUG-IV payments. Using the same population for the same timeframe
serves to control for acuity level changes, as well as other factors,
such as patient volume, across the RUG-III and RUG-IV systems and
provide an appropriate comparison for our financial analysis.
We would also note, as discussed further below, that we did a
comparison of data from all of FY 2010 and from the first eight months
of FY 2011 that did not control for changes in patient acuity, and
found that it did not result in a significant difference in the
recalibration factor necessary to equalize RUG-IV payments and RUG-III
payments. In testing this alternative methodology, we did control for
volume by calculating the percentage of FY 2010 days of service for
each of the RUG-III groups, broken down by urban and rural days, and
then multiplied each
[[Page 48494]]
percentage by the total number of urban or rural FY 2011 days of
service, as appropriate, to determine the number of days of service for
each RUG-III group, relative to the total volume for the first eight
months of FY 2011. Therefore, even though the recalibration methodology
discussed in the proposed rule (76 FR 26370-73) controls for changes in
patient acuity, we note that the alternative approach above which was
suggested by commenters would not change the recalibration factor.
Comment: Some commenters asserted that CMS failed to provide
sufficient information for a third party to reproduce CMS's conclusions
with regard to the parity adjustment. A few commenters stated that the
lack of access to data, or the timeframe for when certain data were
released, limited the ability of stakeholders to develop substantive
comments on the recalibration considered in the proposed rule.
Additionally, a few commenters referred to specific requests that were
made by a few of the major nursing home trade associations for access
to claims and MDS data for the fourth quarter of FY 2010 and the first
quarter of FY 2011. They noted that we had declined to fulfill those
data requests, due to certain data disclosure requirements in the
privacy regulations that were promulgated under the Health Insurance
Portability and Accountability Act of 1996 (Pub. L. 104-191, enacted on
August 21, 1996) (HIPAA). These commenters asserted that CMS should
reconsider its data security policies in light of the use of more
``real-time'' data.
Response: We do not agree with assertions that CMS provided
inadequate data to evaluate and comment upon the proposals described in
our proposed rule. The methodology used to establish the case-mix
adjustments is the same as that described in detail in the FY 2006 SNF
PPS proposed rule (70 FR 29077 through 29079), the FY 2009 SNF PPS
proposed rule (73 FR 25923), and the FY 2009 SNF PPS final rule (73 FR
46421 through 46422), as updated in the FY 2012 proposed rule (76 FR
26370 through 26377). In addition, the data used to calculate the
adjustments are publicly available on the CMS Web site, as explained
below. We tested the ability to reproduce the parity adjustment
calculation using only information available on the CMS Web site as of
May 3, 2011, and in the proposed rule and were able to do so. We used
the first quarter FY 2011 days of service for the RUG-IV system and a
distribution of what those days would have looked like under RUG-III
(available in the Downloads section of our Web site at https://www.cms.gov/SNFPPS/02_Spotlight.asp). We multiplied the RUG-IV and
RUG-III days of service by the FY 2012 unadjusted Federal per diem
payment rate components, multiplied by the unadjusted case-mix indexes
(the unadjusted RUG-IV case-mix indexes can be calculated by dividing
the adjusted case-mix indexes, provided in the proposed rule in Tables
5A or 6A, by the adjustment factor of 1.1981) to establish expenditures
under the RUG-III and RUG-IV systems. The parity adjustment was
determined as the percentage increase necessary for the nursing CMIs of
the RUG-IV therapy groups to generate estimated expenditure levels
under the RUG-IV system that were equal to estimated expenditure levels
under the RUG-III system.
While this data alone would have been sufficient for a third party
to reproduce our results, in an effort to respond to data requests from
stakeholders and give the public as much information as possible to
evaluate the two parity adjustment options considered in the proposed
rule, we also made available on our Web site, as of June 16, 2011, a
distribution of paid days by provider number and by month for the
fourth quarter of FY 2010 under RUG-III and the first quarter of FY
2011 under RUG-III and RUG-IV. This data could be used to allow
stakeholders to analyze acuity trends and further evaluate the adequacy
of the data used to determine the appropriate recalibration. Finally,
we posted on our Web site a detailed memo which outlined how
stakeholders could use MDS 3.0 data to determine the appropriate RUG-
III group for a given RUG-IV patient, even though this information was
also already available to facilities on their final validation reports.
Thus, we provided stakeholders and their trade associations with
extensive data described earlier, so that they had multiple avenues for
analyzing the underlying data and verifying CMS's results. We believe
the additional information provided was beyond the information
necessary to replicate our calculation. In this way, we provided even
greater transparency of our methods and data analysis while fulfilling
our data security responsibilities under HIPAA.
Furthermore, with regard to the ability of stakeholders to provide
substantive comments, we do not agree with the commenter's statement
that the necessary data were released too late to allow for analyses
that would generate substantive comment on the proposed rule. As
illustrated above, the data provided on the CMS Web site and in the
proposed rule were more than sufficient for stakeholders to reproduce,
evaluate, and critique the recalibration methodolo