Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities; Updates to the Quality Reporting Program and Value-Based Purchasing Program for Federal Fiscal Year 2025, 23424-23495 [2024-06812]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 89, Number 65 (Wednesday, April 3, 2024)]
[Proposed Rules]
[Pages 23424-23495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06812]



[[Page 23423]]

Vol. 89

Wednesday,

No. 65

April 3, 2024

Part VII





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 413 and 488





Medicare Program; Prospective Payment System and Consolidated Billing 
for Skilled Nursing Facilities; Updates to the Quality Reporting 
Program and Value-Based Purchasing Program for Federal Fiscal Year 
2025; Proposed Rule

Federal Register / Vol. 89, No. 65 / Wednesday, April 3, 2024 / 
Proposed Rules

[[Page 23424]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 413 and 488

[CMS-1802-P]
RIN 0938-AV30


Medicare Program; Prospective Payment System and Consolidated 
Billing for Skilled Nursing Facilities; Updates to the Quality 
Reporting Program and Value-Based Purchasing Program for Federal Fiscal 
Year 2025

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of 
Health and Human Services (HHS).

ACTION: Proposed rule.

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SUMMARY: This rule proposes changes and updates to the policies and 
payment rates used under the Skilled Nursing Facility (SNF) Prospective 
Payment System (PPS) for FY 2025. First, we are proposing to rebase and 
revise the SNF market basket to reflect a 2022 base year. Next, we are 
proposing to update the wage index used under the SNF PPS to reflect 
data collected during the most recent decennial census. Additionally, 
we are proposing several technical revisions to the code mappings used 
to classify patients under the Patient Driven Payment Model (PDPM) to 
improve payment and coding accuracy. Finally, this proposed rule 
includes a Request for Information (RFI) on potential updates to the 
Non-Therapy Ancillary (NTA) component of PDPM. This rulemaking also 
proposes to update the requirements for the SNF Quality Reporting 
Program and the SNF Value-Based Purchasing Program. We are also 
proposing to expand CMS' enforcement authority for imposing civil money 
penalties (CMPs). Finally, this proposed rule includes proposals to 
strengthen nursing home enforcement requirements.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, by May 28, 2024.

ADDRESSES: In commenting, please refer to file code CMS-1802-P.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to https://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1802-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1802-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: [email protected] for issues related to 
the SNF PPS.
    Heidi Magladry, (410) 786-6034, for information related to the 
skilled nursing facility quality reporting program.
    Christopher Palmer, (410) 786-8025, for information related to the 
skilled nursing facility value-based purchasing program.
    Celeste Saunders, (410) 786-5603, for information related to 
Nursing Home.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following 
website as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that website to 
view public comments. CMS will not post on Regulations.gov public 
comments that make threats to individuals or institutions or suggest 
that the commenter will take actions to harm an individual. CMS 
continues to encourage individuals not to submit duplicative comments. 
We will post acceptable comments from multiple unique commenters even 
if the content is identical or nearly identical to other comments.
    Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a 
plain language summary of this rule may be found at https://www.regulations.gov/.

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

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

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of Major Provisions
    C. Summary of Cost and Benefits
    D. Advancing Health Information Exchange
II. Background on SNF PPS
    A. Statutory Basis and Scope
    B. Initial Transition for the SNF PPS
    C. Required Annual Rate Updates
III. Proposed SNF PPS Rate Setting Methodology and FY 2025 Update
    A. Federal Base Rates
    B. SNF Market Basket Update
    C. Case-Mix Adjustment
    D. Wage Index Adjustment
    E. SNF Value-Based Purchasing Program
    F. Adjusted Rate Computation Example
IV. Additional Aspects of the SNF PPS
    A. SNF Level of Care--Administrative Presumption
    B. Consolidated Billing
    C. Payment for SNF-Level Swing-Bed Services
V. Other SNF PPS Issues
    A. Rebasing and Revising the SNF Market Basket
    B. Proposed Changes to SNF PPS Wage Index
    C. Technical Updates to PDPM ICD-10 Mappings
    D. Request for Information: Update to PDPM Non-Therapy Ancillary 
Component
VI. Skilled Nursing Facility Quality Reporting Program (SNF QRP)
    A. Background and Statutory Authority
    B. General Considerations Used for the Selection of Measures for 
the SNF QRP
    C. Proposal To Collect Four Additional Items as Standardized 
Patient Assessment Data Elements and Modify One Item Collected as a 
Standardized Patient Assessment Data Element Beginning With the FY 
2027 SNF QRP
    D. SNF QRP Quality Measure Concepts Under Consideration for 
Future Years--Request for Information (RFI)
    E. Form, Manner, and Timing of Data Submission Under the SNF QRP
    F. Policies Regarding Public Display of Measure Data for the SNF 
QRP

[[Page 23425]]

VII. Skilled Nursing Facility Value-Based Purchasing (SNF VBP) 
Program
    A. Statutory Background
    B. Proposed Regulation Text Technical Updates
    C. SNF VBP Program Measures
    D. SNF VBP Performance Standards
    E. SNF VBP Performance Scoring Methodology
    F. Proposed Updates to the SNF VBP Review and Correction Process
    G. Proposed Updates to the SNF VBP Extraordinary Circumstances 
Exception Policy
VIII. Nursing Home Enforcement
    A. Background
    B. Provisions of the Proposed Regulations
IX. Collection of Information Requirements
X. Response to Comments
XI. Economic Analyses
    A. Regulatory Impact Analysis
    B. Regulatory Flexibility Act Analysis
    C. Unfunded Mandates Reform Act Analysis
    D. Federalism Analysis
    E. Regulatory Review Costs

I. Executive Summary

A. Purpose

    This proposed rule would update the SNF prospective payment rates 
for fiscal year (FY) 2025, as required under section 1888(e)(4)(E) of 
the Social Security Act (the Act). It also responds to section 
1888(e)(4)(H) of the Act, which requires the Secretary to provide for 
publication of certain specified information relating to the payment 
update (see section II.C. of this proposed rule) in the Federal 
Register before the August 1 that precedes the start of each FY. 
Additionally, in this proposed rule, we are proposing to rebase and 
revise the SNF market basket to reflect a 2022 base year. Next, we are 
proposing to update the wage index used under the SNF PPS to reflect 
data collected during the most recent decennial census. We are also 
proposing several technical revisions to the code mappings used to 
classify patients under the PDPM to improve payment and coding 
accuracy. This proposed rule includes an RFI on potential updates to 
the non-therapy ancillary (NTA) component of PDPM. This proposed rule 
proposes the collection of four new items as standardized patient 
assessment data elements and the modification of one item collected and 
submitted using the Minimum Data Set (MDS) beginning with the FY 2027 
SNF QRP. This proposed rule also proposes that SNFs, which participate 
in the SNF QRP, participate in a validation process beginning with the 
FY 2027 SNF QRP, and also includes a request for information on quality 
measure concepts under consideration for future SNF QRP program years. 
Finally, this proposed rule proposes new requirements for the Skilled 
Nursing Facility Value-Based Purchasing (SNF VBP) Program, including a 
proposed measure selection, retention, and removal policy, a proposed 
technical measure updates policy, a proposed measure minimum for FY 
2028 and subsequent years, proposed updates to the review and 
correction policy to include new measure data sources, proposed updates 
to the Extraordinary Circumstances Exception policy, and proposed SNF 
VBP regulation text updates. We are also proposing revisions to 
existing long-term care (LTC) enforcement regulations that would enable 
CMS and the States to impose civil money penalties to better reflect 
amounts that are more consistent with the type of noncompliance that 
occurred.

B. Summary of Major Provisions

    In accordance with sections 1888(e)(4)(E)(ii)(IV) and (e)(5) of the 
Act, the Federal rates in this proposed rule would update the annual 
rates that we published in the SNF PPS final rule for FY 2024 (88 FR 
53200, August 7, 2023). In addition, this proposed rule includes a 
forecast error adjustment for FY 2025. Additionally, in this proposed 
rule we are proposing to rebase and revise the SNF market basket to 
reflect a 2022 base year. Next, we are proposing to update the wage 
index used under the SNF PPS to reflect data collected during the most 
recent decennial census. We are also proposing several technical 
revisions to the code mappings used to classify patients under the PDPM 
to improve payment and coding accuracy. Finally, this proposed rule 
includes an RFI on potential updates to the NTA component of PDPM.
    We propose revisions to CMS' existing enforcement authority to 
expand the number of CMPs that can be imposed on LTC facilities. The 
proposed revisions will allow for more per-instance (PI) CMPs to be 
imposed in conjunction with per-day (PD) CMPs. This proposal will also 
expand our authority to impose multiple PI CMPs when the same type of 
noncompliance is identified on more than one day. CMS' current 
enforcement regulation does not allow for PI and PD CMPs to be imposed 
for the same survey and also makes it difficult for CMS to impose 
multiple PI CMPs for the same type of noncompliance. Lastly, the 
proposed revisions will enable CMS or the States to impose a CMP for 
the number of days of past noncompliance since the last three standard 
surveys to ensure that identified noncompliance that is subject to a 
penalty may receive one, if that is the remedy that is imposed.
    We are proposing several updates for the SNF VBP Program. We are 
proposing to adopt a measure selection, retention, and removal policy 
that aligns with policies we have adopted in other CMS quality 
programs. We are proposing a technical measure updates policy to allow 
us to update the numerical values of the performance standards for a 
program year if necessary to account for the implementation of non-
substantive technical updates to the measure specifications between the 
baseline period and the performance period. We are proposing to adopt 
the same measure minimum we previously finalized for the FY 2027 
program year for the FY 2028 program year and subsequent program years. 
We are proposing modifications to Phase One of our review and 
correction policy to account for measures that are calculated using 
Payroll-Based Journal (PBJ) and MDS measure data beginning with the FY 
2026 and FY 2027 program years, respectively. We are proposing to 
update the instructions for requesting an extraordinary circumstance 
exception (ECE) and to allow SNFs to request an ECE if the SNF can 
demonstrate that, as a result of the extraordinary circumstance, it 
cannot report SNF VBP data on one or more measures by the specified 
deadline. Lastly, we are proposing several updates to the SNF VBP 
regulation text to align with previously finalized definitions and 
policies.
    Beginning with the FY 2027 SNF QRP, we are proposing to require 
SNFs to collect and submit through the MDS four new items as 
standardized patient assessment data elements under the social 
determinants of health (SDOH) category: one item for Living Situation, 
two items for Food, and one item for Utilities. We are also proposing 
to modify the current Transportation item. We are also proposing to 
adopt a similar validation process for the SNF QRP that we adopted for 
the SNF VBP beginning with the FY 2027 SNF QRP. We are also proposing 
to amend regulation text at Sec.  413.360 to implement the validation 
process we propose. Finally, this proposed rule also includes a Request 
for Information (RFI) on quality measure concepts under consideration 
for future SNF QRP years.

C. Summary of Cost and Benefits

[[Page 23426]]



                  Table 1--Estimated Cost and Benefits
------------------------------------------------------------------------
             Proposals                 Estimated total transfers/costs
------------------------------------------------------------------------
FY 2025 SNF PPS payment rate        The overall economic impact of this
 update.                             proposed rule is an estimated
                                     increase of $1.3 billion in
                                     aggregate payments to SNFs during
                                     FY 2025.
FY 2027 SNF QRP changes...........  The overall economic impact of this
                                     proposed rule to SNFs is an
                                     estimated cost of $2,322,541.48
                                     annually to SNFs beginning with the
                                     FY 2027 SNF QRP.
FY 2026 Changes Due to Removal of   The overall economic impact of this
 MDS Items No Longer Needed for      proposed rule to SNFs is an
 Case-Mix Determination.             estimated savings of $14,128,696.47
                                     annually to SNFs beginning with FY
                                     2026.
FY 2027 Changes Due to Proposal     The overall economic impact of this
 for Participation in a Validation   proposed rule to SNFs is an
 Process.                            estimated cost of $813,067.95
                                     annually to SNFs beginning with the
                                     FY 2027 SNF QRP.
FY 2025 SNF VBP changes...........  The overall economic impact of the
                                     SNF VBP Program is an estimated
                                     reduction of $187.69 million in
                                     aggregate payments to SNFs during
                                     FY 2025.
FY 2025 Nursing Home Enforcement    The overall economic impact the
 changes.                            proposed changes to CMS'
                                     enforcement authority results in an
                                     estimated additional penalty amount
                                     totaling $25 million annually to
                                     long term care facilities, and
                                     $163,800 in annual administrative
                                     costs to CMS and states.
------------------------------------------------------------------------

II. Background on SNF PPS

A. Statutory Basis and Scope

    As amended by section 4432 of the Balanced Budget Act of 1997 (BBA 
1997) (Pub. L. 105-33, enacted August 5, 1997), section 1888(e) of the 
Act provides for the implementation of a PPS for SNFs. This methodology 
uses prospective, case-mix adjusted per diem payment rates applicable 
to all covered SNF services defined in section 1888(e)(2)(A) of the 
Act. The SNF PPS is effective for cost reporting periods beginning on 
or after July 1, 1998, and covers virtually all costs of furnishing 
covered SNF services (routine, ancillary, and capital-related costs) 
other than costs associated with approved educational activities and 
bad debts. Under section 1888(e)(2)(A)(i) of the Act, covered SNF 
services include post-hospital extended care services for which 
benefits are provided under Part A, as well as those items and services 
(other than a small number of excluded services, such as physicians' 
services) for which payment may otherwise be made under Part B and 
which are furnished to Medicare beneficiaries who are residents in a 
SNF during a covered Part A stay. A comprehensive discussion of these 
provisions appears in the May 12, 1998 interim final rule (63 FR 
26252). In addition, a detailed discussion of the legislative history 
of the SNF PPS is available online at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_2018-10-01.pdf.
    Section 215(a) of the Protecting Access to Medicare Act of 2014 
(PAMA) (Pub. L. 113-93, enacted April 1, 2014) added section 1888(g) to 
the Act, requiring the Secretary to specify an all-cause all-condition 
hospital readmission measure and an all-condition risk-adjusted 
potentially preventable hospital readmission measure for the SNF 
setting. Additionally, section 215(b) of PAMA added section 1888(h) to 
the Act requiring the Secretary to implement a VBP program for SNFs. In 
2014, section 2(c)(4) of the Improving Medicare Post-Acute Care 
Transformation (IMPACT) Act of 2014 (Pub. L. 113-185, enacted October 
6, 2014) amended section 1888(e)(6) of the Act, which requires the 
Secretary to implement a QRP for SNFs under which SNFs report data on 
measures and resident assessment data. Finally, section 111 of the 
Consolidated Appropriations Act, 2021 (CAA, 2021) (Pub. L. 116-260, 
enacted December 27, 2020) amended section 1888(h) of the Act, 
authorizing the Secretary to apply up to nine additional measures to 
the VBP program for SNFs.

B. Initial Transition for the SNF PPS

    Under sections 1888(e)(1)(A) and (e)(11) of the Act, the SNF PPS 
included an initial, three-phase transition that blended a facility-
specific rate (reflecting the individual facility's historical cost 
experience) with the Federal case-mix adjusted rate. The transition 
extended through the facility's first 3 cost reporting periods under 
the PPS, up to and including the one that began in FY 2001. Thus, the 
SNF PPS is no longer operating under the transition, as all facilities 
have been paid at the full Federal rate effective with cost reporting 
periods beginning in FY 2002. As we now base payments for SNFs entirely 
on the adjusted Federal per diem rates, we no longer include adjustment 
factors under the transition related to facility-specific rates for the 
upcoming FY.

C. Required Annual Rate Updates

    Section 1888(e)(4)(E) of the Act requires the SNF PPS payment rates 
to be updated annually. The most recent annual update occurred in a 
final rule that set forth updates to the SNF PPS payment rates for FY 
2024 (88 FR 53200, August 7, 2023), as amended by the subsequent 
correction notice (88 FR 68486, October 4, 2023).
    Section 1888(e)(4)(H) of the Act specifies that we provide for 
publication annually in the Federal Register the following:
     The unadjusted Federal per diem rates to be applied to 
days of covered SNF services furnished during the upcoming FY.
     The case-mix classification system to be applied for these 
services during the upcoming FY.
     The factors to be applied in making the area wage 
adjustment for these services.
    Along with other revisions discussed later in this preamble, this 
proposed rule would set out the required annual updates to the per diem 
payment rates for SNFs for FY 2025.

III. Proposed SNF PPS Rate Setting Methodology and FY 2025 Update

A. Federal Base Rates

    Under section 1888(e)(4) of the Act, the SNF PPS uses per diem 
Federal payment rates based on mean SNF costs in a base year (FY 1995) 
updated for inflation to the first effective period of the PPS. We 
developed the Federal payment rates using allowable costs from 
hospital-based and freestanding SNF cost reports for reporting periods 
beginning in FY 1995. The data used in developing the Federal rates 
also incorporated a Part B add-on, which is an estimate of the amounts 
that, prior to the SNF PPS, would be payable under Part B for covered 
SNF services furnished to individuals during the course of a covered 
Part A stay in a SNF.
    In developing the rates for the initial period, we updated costs to 
the first effective year of the PPS (the 15-month period beginning July 
1, 1998) using the SNF market basket, and then standardized for 
geographic variations

[[Page 23427]]

in wages and for the costs of facility differences in case-mix. In 
compiling the database used to compute the Federal payment rates, we 
excluded those providers that received new provider exemptions from the 
routine cost limits, as well as costs related to payments for 
exceptions to the routine cost limits. Using the formula that the BBA 
1997 prescribed, we set the Federal rates at a level equal to the 
weighted mean of freestanding costs plus 50 percent of the difference 
between the freestanding mean and weighted mean of all SNF costs 
(hospital-based and freestanding) combined. We computed and applied 
separately the payment rates for facilities located in urban and rural 
areas and adjusted the portion of the Federal rate attributable to 
wage-related costs by a wage index to reflect geographic variations in 
wages.

B. SNF Market Basket Update

1. SNF Market Basket
    Section 1888(e)(5)(A) of the Act requires us to establish a SNF 
market basket that reflects changes over time in the prices of an 
appropriate mix of goods and services included in covered SNF services. 
Accordingly, we have developed a SNF market basket that encompasses the 
most commonly used cost categories for SNF routine services, ancillary 
services, and capital-related expenses. In the SNF PPS final rule for 
FY 2022 (86 FR 42444 through 42463), we rebased and revised the SNF 
market basket, which included updating the base year from 2014 to 2018. 
In this proposed rule, we propose to update the base year from 2018 to 
2022.
    The SNF market basket is used to compute the market basket 
percentage increase that is used to update the SNF Federal rates on an 
annual basis, as required by section 1888(e)(4)(E)(ii)(IV) of the Act. 
This market basket percentage increase is adjusted by a forecast error 
adjustment, if applicable, and then further adjusted by the application 
of a productivity adjustment as required by section 1888(e)(5)(B)(ii) 
of the Act and described in section III.B.4. of this proposed rule.
    As outlined in this proposed rule, we propose a FY 2025 SNF market 
basket percentage increase of 2.8 percent based on IHS Global Inc.'s 
(IGI's) fourth quarter 2023 forecast of the proposed 2022-based SNF 
market basket (before application of the forecast error adjustment and 
productivity adjustment). We also propose that if more recent data 
subsequently become available (for example, a more recent estimate of 
the market basket and/or the productivity adjustment), we would use 
such data, if appropriate, to determine the FY 2025 SNF market basket 
percentage increase, labor-related share relative importance, forecast 
error adjustment, or productivity adjustment in the SNF PPS final rule.
2. Proposed Market Basket Update for FY 2025
    Section 1888(e)(5)(B) of the Act defines the SNF market basket 
percentage increase as the percentage change in the SNF market basket 
from the midpoint of the previous FY to the midpoint of the current FY. 
For the Federal rates outlined in this proposed rule, we use the 
percentage change in the SNF market basket to compute the update factor 
for FY 2025. This factor is based on the FY 2025 percentage increase in 
the proposed 2022-based SNF market basket reflecting routine, 
ancillary, and capital-related expenses. Sections 1888(e)(4)(E)(ii)(IV) 
and (e)(5)(B)(i) of the Act require that the update factor used to 
establish the FY 2025 unadjusted Federal rates be at a level equal to 
the SNF market basket percentage increase. Accordingly, we determined 
the total growth from the average market basket level for the period of 
October 1, 2023 through September 30, 2024 to the average market basket 
level for the period of October 1, 2024 through September 30, 2025. 
This process yields a percentage increase in the proposed 2022-based 
SNF market basket of 2.8 percent.
    As further explained in section III.B.3. of this proposed rule, as 
applicable, we adjust the percentage increase by the forecast error 
adjustment from the most recently available FY for which there is final 
data and apply this adjustment whenever the difference between the 
forecasted and actual percentage increase in the market basket exceeds 
a 0.5 percentage point threshold in absolute terms. Additionally, 
section 1888(e)(5)(B)(ii) of the Act requires us to reduce the market 
basket percentage increase by the productivity adjustment (the 10-year 
moving average of changes in annual economy-wide private nonfarm 
business total factor productivity (TFP) for the period ending 
September 30, 2025) which is estimated to be 0.4 percentage point, as 
described in section III.B.4. of this proposed rule.
    We also note that section 1888(e)(6)(A)(i) of the Act provides 
that, beginning with FY 2018, SNFs that fail to submit data, as 
applicable, in accordance with sections 1888(e)(6)(B)(i)(II) and (III) 
of the Act for a fiscal year will receive a 2.0 percentage point 
reduction to their market basket update for the fiscal year involved, 
after application of section 1888(e)(5)(B)(ii) of the Act (the 
productivity adjustment) and section 1888(e)(5)(B)(iii) of the Act (the 
market basket increase). In addition, section 1888(e)(6)(A)(ii) of the 
Act states that application of the 2.0 percentage point reduction 
(after application of section 1888(e)(5)(B)(ii) and (iii) of the Act) 
may result in the market basket percentage change being less than zero 
for a fiscal year and may result in payment rates for a fiscal year 
being less than such payment rates for the preceding fiscal year. 
Section 1888(e)(6)(A)(iii) of the Act further specifies that the 2.0 
percentage point reduction is applied in a noncumulative manner, so 
that any reduction made under section 1888(e)(6)(A)(i) of the Act 
applies only to the fiscal year involved, and that the reduction cannot 
be taken into account in computing the payment amount for a subsequent 
fiscal year.
3. Forecast Error Adjustment
    As discussed in the June 10, 2003 supplemental proposed rule (68 FR 
34768) and finalized in the August 4, 2003 final rule (68 FR 46057 
through 46059), Sec.  413.337(d)(2) provides for an adjustment to 
account for market basket forecast error. The initial adjustment for 
market basket forecast error applied to the update of the FY 2003 rate 
for FY 2004 and took into account the cumulative forecast error for the 
period from FY 2000 through FY 2002, resulting in an increase of 3.26 
percent to the FY 2004 update. Subsequent adjustments in succeeding FYs 
take into account the forecast error from the most recently available 
FY for which there is final data and apply the difference between the 
forecasted and actual change in the market basket when the difference 
exceeds a specified threshold. We originally used a 0.25 percentage 
point threshold for this purpose; however, for the reasons specified in 
the FY 2008 SNF PPS final rule (72 FR 43425), we adopted a 0.5 
percentage point threshold effective for FY 2008 and subsequent FYs. As 
we stated in the final rule for FY 2004 that first issued the market 
basket forecast error adjustment (68 FR 46058), the adjustment will 
reflect both upward and downward adjustments, as appropriate.
    For FY 2023 (the most recently available FY for which there is 
final data), the forecasted or estimated increase in the SNF market 
basket was 3.9 percent, and the actual increase for FY 2023 was 5.6 
percent, resulting in the actual increase being 1.7 percentage points 
higher than the estimated increase. Accordingly, as the difference 
between the estimated and actual amount of change in the market basket

[[Page 23428]]

exceeds the 0.5 percentage point threshold, under the policy previously 
described (comparing the forecasted and actual market basket percentage 
increase), the FY 2025 market basket percentage increase of 2.8 percent 
would be adjusted upward to account for the forecast error adjustment 
of 1.7 percentage points, resulting in a SNF market basket percentage 
increase of 4.5 percent, which is then reduced by the productivity 
adjustment of 0.4 percentage point, discussed in section III.B.4. of 
this proposed rule. This results in a proposed SNF market basket update 
for FY 2025 of 4.1 percent.
    Table 2 shows the forecasted and actual market basket increases for 
FY 2023.

            Table 2--Difference Between the Actual and Forecasted Market Basket Increases for FY 2023
----------------------------------------------------------------------------------------------------------------
                                               Forecasted FY 2023       Actual FY 2023
                   Index                           increase *            increase **         FY 2023 difference
----------------------------------------------------------------------------------------------------------------
SNF........................................                   3.9                    5.6                    1.7
----------------------------------------------------------------------------------------------------------------
* Published in Federal Register; based on second quarter 2022 IGI forecast (2018-based SNF market basket).
** Based on the fourth quarter 2023 IGI forecast (2018-based SNF market basket), with historical data through
  third quarter 2023.

4. Productivity Adjustment
    Section 1888(e)(5)(B)(ii) of the Act, as added by section 3401(b) 
of the Patient Protection and Affordable Care Act (Affordable Care Act) 
(Pub. L. 111-148, enacted March 23, 2010) requires that, in FY 2012 and 
in subsequent FYs, the market basket percentage under the SNF payment 
system (as described in section 1888(e)(5)(B)(i) of the Act) is to be 
reduced annually by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the 
Act, in turn, defines the productivity adjustment to be equal to the 
10-year moving average of changes in annual economy-wide, private 
nonfarm business multifactor productivity (MFP) (as projected by the 
Secretary for the 10-year period ending with the applicable FY, year, 
cost-reporting period, or other annual period).
    The U.S. Department of Labor's Bureau of Labor Statistics (BLS) 
publishes the official measure of productivity for the U.S. We note 
that previously the productivity measure referenced at section 
1886(b)(3)(B)(xi)(II) of the Act was published by BLS as private 
nonfarm business multifactor productivity. Beginning with the November 
18, 2021 release of productivity data, BLS replaced the term MFP with 
TFP. BLS noted that this is a change in terminology only and will not 
affect the data or methodology. As a result of the BLS name change, the 
productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the 
Act is now published by BLS as private nonfarm business total factor 
productivity. We refer readers to the BLS website at www.bls.gov for 
the BLS historical published TFP data. A complete description of the 
TFP projection methodology is available on our website at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch. In addition, in 
the FY 2022 SNF final rule (86 FR 42429) we noted that, effective with 
FY 2022 and forward, we changed the name of this adjustment to refer to 
it as the ``productivity adjustment,'' rather than the ``MFP 
adjustment.''
    Per section 1888(e)(5)(A) of the Act, the Secretary shall establish 
a SNF market basket that reflects changes over time in the prices of an 
appropriate mix of goods and services included in covered SNF services. 
Section 1888(e)(5)(B)(ii) of the Act, added by section 3401(b) of the 
Affordable Care Act, requires that for FY 2012 and each subsequent FY, 
after determining the market basket percentage described in section 
1888(e)(5)(B)(i) of the Act, the Secretary shall reduce such percentage 
by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act. Section 1888(e)(5)(B)(ii) of the Act 
further states that the reduction of the market basket percentage by 
the productivity adjustment may result in the market basket percentage 
being less than zero for a FY and may result in payment rates under 
section 1888(e) of the Act being less than such payment rates for the 
preceding fiscal year. Thus, if the application of the productivity 
adjustment to the market basket percentage calculated under section 
1888(e)(5)(B)(i) of the Act results in a productivity-adjusted market 
basket percentage that is less than zero, then the annual update to the 
unadjusted Federal per diem rates under section 1888(e)(4)(E)(ii) of 
the Act would be negative, and such rates would decrease relative to 
the prior FY.
    Based on the data available for this FY 2025 SNF PPS proposed rule, 
the proposed productivity adjustment (the 10-year moving average of 
changes in annual economy-wide private nonfarm business TFP for the 
period ending September 30, 2025) is projected to be 0.4 percentage 
point.
    Consistent with section 1888(e)(5)(B)(i) of the Act and Sec.  
413.337(d)(2), and as discussed previously in section III.B.1. of this 
proposed rule, the proposed market basket percentage increase for FY 
2025 for the SNF PPS is based on IGI's fourth quarter 2023 forecast of 
the SNF market basket percentage increase, which is estimated to be 2.8 
percent. This market basket percentage increase is then increased by 
1.7 percentage points, due to application of the forecast error 
adjustment discussed earlier in section III.B.3. of this proposed rule. 
Finally, as discussed earlier in section III.B.4. of this proposed 
rule, we are applying a 0.4 percentage point productivity adjustment to 
the FY 2025 SNF market basket percentage increase. Therefore, the 
resulting proposed productivity-adjusted FY 2025 SNF market basket 
update is equal to 4.1 percent, which reflects a market basket 
percentage increase of 2.8 percent, plus the 1.7 percentage points 
forecast error adjustment, and reduced by the 0.4 percentage point 
productivity adjustment. Thus, we propose to apply a net SNF market 
basket update factor of 4.1 percent in our determination of the FY 2025 
SNF PPS unadjusted Federal per diem rates.
5. Unadjusted Federal Per Diem Rates for FY 2024
    As discussed in the FY 2019 SNF PPS final rule (83 FR 39162), in FY 
2020 we implemented a new case-mix classification system to classify 
SNF patients under the SNF PPS, the PDPM. As discussed in section 
V.B.1. of that final rule (83 FR 39189), under PDPM, the unadjusted 
Federal per diem rates are divided into six components, five of which 
are case-mix adjusted components (Physical Therapy (PT), Occupational 
Therapy (OT), Speech-Language Pathology (SLP), Nursing, and Non-Therapy 
Ancillaries (NTA)), and one of which is a non-case-mix

[[Page 23429]]

component, as existed under the previous RUG-IV model. We propose to 
use the SNF market basket, adjusted as described previously in sections 
III.B.1. through III.B.4. of this proposed rule, to adjust each per 
diem component of the Federal rates forward to reflect the change in 
the average prices for FY 2024 from the average prices for FY 2023. We 
also propose to further adjust the rates by a wage index budget 
neutrality factor, described in section III.D. of this proposed rule.
    Further, in the past, we used the revised Office of Management and 
Budget (OMB) delineations adopted in the FY 2015 SNF PPS final rule (79 
FR 45632, 45634), with updates as reflected in OMB Bulletin Nos. 15-01 
and 17-01, to identify a facility's urban or rural status for the 
purpose of determining which set of rate tables would apply to the 
facility. As discussed in the FY 2021 SNF PPS proposed and final rules, 
we adopted the revised OMB delineations identified in OMB Bulletin No. 
18-04 (available at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf) to identify a facility's urban or rural status 
effective beginning with FY 2021. However, as further described in 
section V.A of this proposed rule, the current CBSAs are based on OMB 
standards contained in Bulletin 20-01, which is based on data collected 
during the 2010 Decennial Census. In this proposed rule, we are 
proposing to update the SNF PPS wage index using the CBSAs defined 
within Bulletin 23-01.
    Tables 3 and 4 reflect the proposed unadjusted Federal rates for FY 
2025, prior to adjustment for case-mix.

                                            Table 3--Proposed FY 2025 Unadjusted Federal Rate Per Diem--URBAN
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  Rate component                           PT               OT              SLP            Nursing            NTA          Non-case-mix
--------------------------------------------------------------------------------------------------------------------------------------------------------
Per Diem Amount...................................          $73.16           $68.10           $27.31          $127.52           $96.21          $114.20
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                              Table 4--Proposed FY 2025 Unadjusted Federal Rate Per Diem--R
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  Rate component                           PT               OT              SLP            Nursing            NTA          Non-case-mix
--------------------------------------------------------------------------------------------------------------------------------------------------------
Per Diem Amount...................................          $83.39           $76.59           $34.41          $121.83           $91.92          $116.31
--------------------------------------------------------------------------------------------------------------------------------------------------------

C. Case-Mix Adjustment

    Under section 1888(e)(4)(G)(i) of the Act, the Federal rate also 
incorporates an adjustment to account for facility case-mix, using a 
classification system that accounts for the relative resource 
utilization of different patient types. The statute specifies that the 
adjustment is to reflect both a resident classification system that the 
Secretary establishes to account for the relative resource use of 
different patient types, as well as resident assessment data and other 
data that the Secretary considers appropriate. In the FY 2019 final 
rule (83 FR 39162, August 8, 2018), we finalized a new case-mix 
classification model, the PDPM, which took effect beginning October 1, 
2019. The previous RUG-IV model classified most patients into a therapy 
payment group and primarily used the volume of therapy services 
provided to the patient as the basis for payment classification, thus 
creating an incentive for SNFs to furnish therapy regardless of the 
individual patient's unique characteristics, goals, or needs. PDPM 
eliminates this incentive and improves the overall accuracy and 
appropriateness of SNF payments by classifying patients into payment 
groups based on specific, data-driven patient characteristics, while 
simultaneously reducing the administrative burden on SNFs.
    The PDPM uses clinical data from the MDS to assign case-mix 
classifiers to each patient that are then used to calculate a per diem 
payment under the SNF PPS, consistent with the provisions of section 
1888(e)(4)(G)(i) of the Act. As discussed in section IV.A. of this 
proposed rule, the clinical orientation of the case-mix classification 
system supports the SNF PPS's use of an administrative presumption that 
considers a beneficiary's initial case-mix classification to assist in 
making certain SNF level of care determinations. Further, because the 
MDS is used as a basis for payment, as well as a clinical assessment, 
we have provided extensive training on proper coding and the timeframes 
for MDS completion in our Resident Assessment Instrument (RAI) Manual. 
As we have stated in prior rules, for an MDS to be considered valid for 
use in determining payment, the MDS assessment should be completed in 
compliance with the instructions in the RAI Manual in effect at the 
time the assessment is completed. For payment and quality monitoring 
purposes, the RAI Manual consists of both the Manual instructions and 
the interpretive guidance and policy clarifications posted on the 
appropriate MDS website at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/MDS30RAIManual.html.
    Under section 1888(e)(4)(H) of the Act, each update of the payment 
rates must include the case-mix classification methodology applicable 
for the upcoming FY. The proposed FY 2025 payment rates set forth in 
this proposed rule reflect the use of the PDPM case-mix classification 
system from October 1, 2023, through September 30, 2024. The proposed 
case-mix adjusted PDPM payment rates for FY 2025 are listed separately 
for urban and rural SNFs, in Tables A5 and A6 with corresponding case-
mix values.
    Given the differences between the previous RUG-IV model and PDPM in 
terms of patient classification and billing, it was important that the 
format of Tables A5 and A6 reflect these differences. More 
specifically, under both RUG-IV and PDPM, providers use a Health 
Insurance Prospective Payment System (HIPPS) code on a claim to bill 
for covered SNF services. Under RUG-IV, the HIPPS code included the 
three-character RUG-IV group into which the patient classified, as well 
as a two-character assessment indicator code that represented the 
assessment used to generate this code. Under PDPM, while providers 
still use a HIPPS code, the characters in that code represent different 
things. For example, the first character represents the PT and OT group 
into which the patient classifies. If the patient is classified into 
the PT and OT group ``TA'', then the first character in the patient's 
HIPPS code would be an A. Similarly, if the patient is classified into 
the SLP group ``SB'', then the second character in the patient's HIPPS 
code would be a B. The third character represents the Nursing group 
into which the patient classifies. The fourth character represents the 
NTA group into which the patient classifies.

[[Page 23430]]

Finally, the fifth character represents the assessment used to generate 
the HIPPS code.
    Tables 5 and 6 reflect the PDPM's structure. Accordingly, Column 1 
of Tables 5 and 6 represents the character in the HIPPS code associated 
with a given PDPM component. Columns 2 and 3 provide the case-mix index 
and associated case-mix adjusted component rate, respectively, for the 
relevant PT group. Columns 4 and 5 provide the case-mix index and 
associated case-mix adjusted component rate, respectively, for the 
relevant OT group. Columns 6 and 7 provide the case-mix index and 
associated case-mix adjusted component rate, respectively, for the 
relevant SLP group. Column 8 provides the nursing case-mix group (CMG) 
that is connected with a given PDPM HIPPS character. For example, if 
the patient qualified for the nursing group CBC1, then the third 
character in the patient's HIPPS code would be a ``P.'' Columns 9 and 
10 provide the case-mix index and associated case-mix adjusted 
component rate, respectively, for the relevant nursing group. Finally, 
columns 11 and 12 provide the case-mix index and associated case-mix 
adjusted component rate, respectively, for the relevant NTA group.
    Tables 5 and 6 do not reflect adjustments which may be made to the 
SNF PPS rates as a result of the SNF VBP Program, discussed in section 
VI. of this proposed rule, or other adjustments, such as the variable 
per diem adjustment.

                                       Table 5--PDPM Case-Mix Adjusted Federal Rates and Associated Indexes--Urban
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Nursing    Nursing    Nursing
          PDPM group              PT CMI    PT rate     OT CMI    OT rate    SLP CMI    SLP rate      CMG        CMI        rate     NTA CMI    NTA rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
A.............................       1.45    $106.08       1.41     $96.02       0.64     $17.48        ES3        3.84    $489.68       3.06    $294.40
B.............................       1.61     117.79       1.54     104.87       1.72      46.97        ES2        2.90     369.81       2.39     229.94
C.............................       1.78     130.22       1.60     108.96       2.52      68.82        ES1        2.77     353.23       1.74     167.41
D.............................       1.81     132.42       1.45      98.75       1.38      37.69       HDE2        2.27     289.47       1.26     121.22
E.............................       1.34      98.03       1.33      90.57       2.21      60.36       HDE1        1.88     239.74       0.91      87.55
F.............................       1.52     111.20       1.51     102.83       2.82      77.01         HBC2      2.12     270.34       0.68      65.42
G.............................       1.58     115.59       1.55     105.56       1.93      52.71         HBC1      1.76     224.44  .........  .........
H.............................       1.10      80.48       1.09      74.23        2.7      73.74       LDE2        1.97     251.21  .........  .........
I.............................       1.07      78.28       1.12      76.27       3.34      91.22       LDE1        1.64     209.13  .........  .........
J.............................       1.34      98.03       1.37      93.30       2.83      77.29         LBC2      1.63     207.86  .........  .........
K.............................       1.44     105.35       1.46      99.43       3.50      95.59         LBC1      1.35     172.15  .........  .........
L.............................       1.03      75.35       1.05      71.51       3.98     108.69           CDE2    1.77     225.71  .........  .........
M.............................       1.20      87.79       1.23      83.76  .........  .........           CDE1    1.53     195.11  .........  .........
N.............................       1.40     102.42       1.42      96.70  .........  .........           CBC2    1.47     187.45  .........  .........
O.............................       1.47     107.55       1.47     100.11  .........  .........           CA2     1.03     131.35  .........  .........
P.............................       1.02      74.62       1.03      70.14  .........  .........           CBC1    1.27     161.95  .........  .........
Q.............................  .........  .........  .........  .........  .........  .........           CA1     0.89     113.49  .........  .........
R.............................  .........  .........  .........  .........  .........  .........       BAB2        0.98     124.97  .........  .........
S.............................  .........  .........  .........  .........  .........  .........       BAB1        0.94     119.87  .........  .........
T.............................  .........  .........  .........  .........  .........  .........       PDE2        1.48     188.73  .........  .........
U.............................  .........  .........  .........  .........  .........  .........       PDE1        1.39     177.25  .........  .........
V.............................  .........  .........  .........  .........  .........  .........         PBC2      1.15     146.65  .........  .........
W.............................  .........  .........  .........  .........  .........  .........        PA2        0.67      85.44  .........  .........
X.............................  .........  .........  .........  .........  .........  .........         PBC1      1.07     136.45  .........  .........
Y.............................  .........  .........  .........  .........  .........  .........        PA1        0.62      79.06  .........  .........
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                       Table 6--PDPM Case-Mix Adjusted Federal Rates and Associated Indexes--RURAL
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Nursing    Nursing    Nursing
          PDPM group              PT CMI    PT rate     OT CMI    OT rate    SLP CMI    SLP rate      CMG        CMI        rate     NTA CMI    NTA rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
A.............................       1.45    $120.92       1.41    $107.99       0.64     $22.02        ES3        3.84    $467.83       3.06     281.28
B.............................       1.61     134.26       1.54     117.95       1.72      59.19        ES2        2.90     353.31       2.39     219.69
C.............................       1.78     148.43       1.60     122.54       2.52      86.71        ES1        2.77     337.47       1.74     159.94
D.............................       1.81     150.94       1.45     111.06       1.38      47.49       HDE2        2.27     276.55       1.26     115.82
E.............................       1.34     111.74       1.33     101.86       2.21      76.05       HDE1        1.88     229.04       0.91      83.65
F.............................       1.52     126.75       1.51     115.65       2.82      97.04         HBC2      2.12     258.28       0.68      62.51
G.............................       1.58     131.76       1.55     118.71       1.93      66.41         HBC1      1.76     214.42  .........  .........
H.............................       1.10      91.73       1.09      83.48        2.7      92.91       LDE2        1.97     240.01  .........  .........
I.............................       1.07      89.23       1.12      85.78       3.34     114.93       LDE1        1.64     199.80  .........  .........
J.............................       1.34     111.74       1.37     104.93       2.83      97.38         LBC2      1.63     198.58  .........  .........
K.............................       1.44     120.08       1.46     111.82       3.50     120.44         LBC1      1.35     164.47  .........  .........
L.............................       1.03      85.89       1.05      80.42       3.98     136.95           CDE2    1.77     215.64  .........  .........
M.............................       1.20     100.07       1.23      94.21  .........  .........           CDE1    1.53     186.40  .........  .........
N.............................       1.40     116.75       1.42     108.76  .........  .........           CBC2    1.47     179.09  .........  .........
O.............................       1.47     122.58       1.47     112.59  .........  .........           CA2     1.03     125.48  .........  .........
P.............................       1.02      85.06       1.03      78.89  .........  .........           CBC1    1.27     154.72  .........  .........
Q.............................  .........  .........  .........  .........  .........  .........           CA1     0.89     108.43  .........  .........
R.............................  .........  .........  .........  .........  .........  .........       BAB2        0.98     119.39  .........  .........
S.............................  .........  .........  .........  .........  .........  .........       BAB1        0.94     114.52  .........  .........
T.............................  .........  .........  .........  .........  .........  .........       PDE2        1.48     180.31  .........  .........
U.............................  .........  .........  .........  .........  .........  .........       PDE1        1.39     169.34  .........  .........
V.............................  .........  .........  .........  .........  .........  .........         PBC2      1.15     140.10  .........  .........
W.............................  .........  .........  .........  .........  .........  .........        PA2        0.67      81.63  .........  .........
X.............................  .........  .........  .........  .........  .........  .........         PBC1      1.07     130.36  .........  .........
Y.............................  .........  .........  .........  .........  .........  .........        PA1        0.62      75.53  .........  .........
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 23431]]

D. Wage Index Adjustment

    Section 1888(e)(4)(G)(ii) of the Act requires that we adjust the 
Federal rates to account for differences in area wage levels, using a 
wage index that the Secretary determines appropriate. Since the 
inception of the SNF PPS, we have used hospital inpatient wage data in 
developing a wage index to be applied to SNFs. We will continue this 
practice for FY 2025, as we continue to believe that in the absence of 
SNF-specific wage data, using the hospital inpatient wage index data is 
appropriate and reasonable for the SNF PPS. As explained in the update 
notice for FY 2005 (69 FR 45786), the SNF PPS does not use the hospital 
area wage index's occupational mix adjustment, as this adjustment 
serves specifically to define the occupational categories more clearly 
in a hospital setting; moreover, the collection of the occupational 
wage data under the inpatient prospective payment system (IPPS) also 
excludes any wage data related to SNFs. Therefore, we believe that 
using the updated wage data exclusive of the occupational mix 
adjustment continues to be appropriate for SNF payments. As in previous 
years, we would continue to use the pre-reclassified IPPS hospital wage 
data, without applying the occupational mix, rural floor, or 
outmigration adjustment, as the basis for the SNF PPS wage index. For 
FY 2025, the updated wage data are for hospital cost reporting periods 
beginning on or after October 1, 2020 and before October 1, 2021 (FY 
2021 cost report data).
    We note that section 315 of the Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-
554, enacted December 21, 2000) gave the Secretary the discretion to 
establish a geographic reclassification procedure specific to SNFs, but 
only after collecting the data necessary to establish a SNF PPS wage 
index that is based on wage data from nursing homes. 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 the data. More specifically, auditing all SNF 
cost reports, similar to the process used to audit inpatient hospital 
cost reports for purposes of the IPPS wage index, would place a burden 
on providers in terms of recordkeeping and completion of the cost 
report worksheet. Adopting such an approach would require a significant 
commitment of resources by CMS and the Medicare Administrative 
Contractors (MACs), potentially far in excess of those required under 
the IPPS, given that there are nearly five times as many SNFs as there 
are inpatient hospitals. While we do not believe this undertaking is 
feasible at this time, we will continue to explore implantation of a 
spot audit process to improve SNF cost reports, which is determined to 
be adequately accurate for cost development purposes, in such a manner 
as to permit us to establish a SNF-specific wage index in the future.
    In addition, we will continue to use the same methodology discussed 
in the SNF PPS final rule for FY 2008 (72 FR 43423) to address those 
geographic areas in which there are no hospitals, and thus, no hospital 
wage index data on which to base the calculation of the FY 2025 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 will continue using the average wage index from all 
contiguous Core-Based Statistical Areas (CBSAs) as a reasonable proxy. 
For FY 2025, the only rural area without wage index data available is 
North Dakota. We have determined that the borders of 18 rural counties 
are local and contiguous with 8 urban counties. Therefore, under this 
methodology, the wage indexes for the counties of Burleigh/Morton/
Oliver (CBSA 13900: 0.9020), Cass (CBSA 22020: 0.8763), Grand Forks 
(CBSA 24220: 0.7865), and McHenry/Renville/Ward (CBSA 33500: 0.7686) 
are averaged, resulting in an imputed rural wage index of 0.8334 for 
rural North Dakota for FY 2025. In past years for rural Puerto Rico, we 
did not apply this methodology due to the distinct economic 
circumstances there; due to the close proximity of almost all of Puerto 
Rico's various urban and non-urban areas, this methodology will produce 
a wage index for rural Puerto Rico that is higher than that in half of 
its urban areas. However, because rural Puerto Rico now has hospital 
wage index data on which to base an area wage adjustment, we will not 
apply this policy for FY 2025. For urban areas without specific 
hospital wage index data, we will continue using the average wage 
indexes of all urban areas within the State to serve as a reasonable 
proxy for the wage index of that urban CBSA. For FY 2025, the only 
urban area without wage index data available is CBSA 25980, Hinesville-
Fort Stewart, GA.
    In the SNF PPS final rule for FY 2006 (70 FR 45026, August 4, 
2005), we adopted the changes discussed in OMB Bulletin No. 03-04 (June 
6, 2003), which announced revised definitions for MSAs and the creation 
of micropolitan statistical areas and combined statistical areas. In 
adopting the CBSA geographic designations, we provided for a 1-year 
transition in FY 2006 with a blended wage index for all providers. For 
FY 2006, the wage index for each provider consisted of a blend of 50 
percent of the FY 2006 MSA-based wage index and 50 percent of the FY 
2006 CBSA-based wage index (both using FY 2002 hospital data). We 
referred to the blended wage index as the FY 2006 SNF PPS transition 
wage index. As discussed in the SNF PPS final rule for FY 2006 (70 FR 
45041), after the expiration of this 1-year transition on September 30, 
2006, we used the full CBSA-based wage index values.
    In the FY 2015 SNF PPS final rule (79 FR 45644 through 45646), we 
finalized changes to the SNF PPS wage index based on the newest OMB 
delineations, as described in OMB Bulletin No. 13-01, beginning in FY 
2015, including a 1-year transition with a blended wage index for FY 
2015. OMB Bulletin No. 13-01 established revised delineations for 
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and 
Combined Statistical Areas in the United States and Puerto Rico based 
on the 2010 Census and provided guidance on the use of the delineations 
of these statistical areas using standards published in the June 28, 
2010 Federal Register (75 FR 37246 through 37252). Subsequently, on 
July 15, 2015, OMB issued OMB Bulletin No. 15-01, which provided minor 
updates to and superseded OMB Bulletin No. 13-01 that was issued on 
February 28, 2013. The attachment to OMB Bulletin No. 15-01 provided 
detailed information on the update to statistical areas since February 
28, 2013. The updates provided in OMB Bulletin No. 15-01 were based on 
the application of the 2010 Standards for Delineating Metropolitan and 
Micropolitan Statistical Areas to Census Bureau population estimates 
for July 1, 2012 and July 1, 2013 and were adopted under the SNF PPS in 
the FY 2017 SNF PPS final rule (81 FR 51983, August 5, 2016). In 
addition, on August 15, 2017, OMB issued Bulletin No. 17-01 which 
announced a new urban CBSA, Twin Falls, Idaho (CBSA 46300) which was 
adopted in the SNF PPS final rule for FY 2019 (83 FR 39173, August 8, 
2018).
    As discussed in the FY 2021 SNF PPS final rule (85 FR 47594), we 
adopted the revised OMB delineations identified in OMB Bulletin No. 18-
04 (available at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf) beginning October 1, 2020, including a 1-year 
transition for FY 2021 under which we applied a 5

[[Page 23432]]

percent cap on any decrease in a hospital's wage index compared to its 
wage index for the prior fiscal year (FY 2020). The updated OMB 
delineations more accurately reflect the contemporary urban and rural 
nature of areas across the country, and the use of such delineations 
allows us to determine more accurately the appropriate wage index and 
rate tables to apply under the SNF PPS.
    In the FY 2023 SNF PPS final rule (87 FR 47521 through 47525), we 
finalized a policy to apply a permanent 5 percent cap on any decreases 
to a provider's wage index from its wage index in the prior year, 
regardless of the circumstances causing the decline. We amended the SNF 
PPS regulations at 42 CFR 413.337(b)(4)(ii) to reflect this permanent 
cap on wage index decreases. Additionally, we finalized a policy that a 
new SNF would be paid the wage index for the area in which it is 
geographically located for its first full or partial FY with no cap 
applied because a new SNF would not have a wage index in the prior FY. 
A full discussion of the adoption of this policy is found in the FY 
2023 SNF PPS final rule.
    As we previously stated in the FY 2008 SNF PPS proposed and final 
rules (72 FR 25538 through 25539, and 72 FR 43423), this and all 
subsequent SNF PPS rules and notices are considered to incorporate any 
updates and revisions set forth in the most recent OMB bulletin that 
applies to the hospital wage data used to determine the current SNF PPS 
wage index. OMB issued further revised CBSA delineations in OMB 
Bulletin No. 20-01, on March 6, 2020 (available on the web at https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf). 
However, we determined that the changes in OMB Bulletin No. 20-01 do 
not impact the CBSA-based labor market area delineations adopted in FY 
2021. Therefore, we did not propose to adopt the revised OMB 
delineations identified in OMB Bulletin No. 20-01 for FY 2022 through 
FY 2024.
    On July 21, 2023, OMB issued OMB Bulletin No. 23-01 which updates 
and supersedes OMB Bulletin No. 20-01 based on the decennial census. 
OMB Bulletin No. 23-01 revised delineations for CBSAs which are made up 
of counties and equivalent entities (e.g., boroughs, a city and 
borough, and a municipality in Alaska, planning regions in Connecticut, 
parishes in Louisiana, municipios in Puerto Rico, and independent 
cities in Maryland, Missouri, Nevada, and Virginia). For FY 2025, we 
propose to adopt the revised OMB delineations identified in OMB 
Bulletin No. 23-01 (available at https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf). The wage index applicable to 
FY 2025 is set forth in Table A available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.
    Once calculated, we will apply the wage index adjustment to the 
labor-related portion of the Federal rate. Each year, we calculate a 
labor-related share, based on the relative importance of labor-related 
cost categories (that is, those cost categories that are labor-
intensive and vary with the local labor market) in the input price 
index. In the SNF PPS final rule for FY 2022 (86 FR 42437), we 
finalized a proposal to revise the labor-related share to reflect the 
relative importance of the 2018-based SNF market basket cost weights 
for the following cost categories: Wages and Salaries; Employee 
Benefits; Professional Fees: Labor-Related; Administrative and 
Facilities Support Services; Installation, Maintenance, and Repair 
Services; All Other: Labor-Related Services; and a proportion of 
Capital-Related expenses. The methodology for calculating the labor-
related portion beginning in FY 2022 is discussed in detail in the FY 
2022 SNF PPS final rule (86 FR 42461 through 42463). As described later 
in section V.A. of this proposed rule, we are proposing to rebase and 
revise the labor-related share to reflect the relative importance of 
the proposed 2022-based SNF market basket cost weights for the 
following categories: Wages and Salaries; Employee Benefits; 
Professional Fees: Labor-Related; Administrative and Facilities Support 
Services; Installation, Maintenance, and Repair Services; All Other: 
Labor-Related Services; and a proportion of Capital-Related expenses.
    We calculate the proposed 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 2025. The price proxies that 
move the different cost categories in the market basket do not 
necessarily change at the same rate, and the relative importance 
captures these changes. Accordingly, the relative importance figure 
more closely reflects the cost share weights for FY 2025 than the base 
year weights from the SNF market basket. We calculate the labor-related 
relative importance for FY 2025 in four steps. First, we compute the FY 
2025 price index level for the total market basket and each cost 
category of the market basket. Second, we calculate a ratio for each 
cost category by dividing the FY 2025 price index level for that cost 
category by the total market basket price index level. Third, we 
determine the FY 2025 relative importance for each cost category by 
multiplying this ratio by the base year (2022) weight. Finally, we add 
the FY 2025 relative importance for each of the labor-related cost 
categories (Wages and Salaries; Employee Benefits; Professional Fees: 
Labor-Related; Administrative and Facilities Support Services; 
Installation, Maintenance, and Repair Services; All Other: Labor-
Related Services; and a portion of Capital-Related expenses) to produce 
the proposed FY 2025 labor-related relative importance.
    Table 7 summarizes the labor-related share for FY 2025, based on 
IGI's fourth quarter 2023 forecast of the proposed 2022-based SNF 
market basket, compared to the labor-related share that was used for 
the FY 2024 SNF PPS final rule.

                                Table 7--Labor-Related Share, FY 2024 and FY 2025
----------------------------------------------------------------------------------------------------------------
                                                                  Final FY 2024 labor-   Proposed FY 2025 labor-
                                                                 related share based on   related share based on
                                                                 2023q2 forecast of the   2023q4 forecast of the
                                                                 2018-based SNF market   proposed 2022-based SNF
                                                                       basket \1\           market basket \2\
----------------------------------------------------------------------------------------------------------------
Wages and salaries............................................                     52.5                     53.2
Employee benefits.............................................                      9.3                      9.1
Professional fees: Labor-related..............................                      3.4                      3.5
Administrative & facilities support services..................                      0.6                      0.4
Installation, maintenance & repair services...................                      0.4                      0.5

[[Page 23433]]

 
All other: Labor-related services.............................                      2.0                      2.0
Capital-related (.391)........................................                      2.9                      3.2
                                                               -------------------------------------------------
    Total.....................................................                     71.1                     71.9
----------------------------------------------------------------------------------------------------------------
\1\ Published in the Federal Register; Based on the second quarter 2023 IHS Global Inc. forecast of the 2018-
  based SNF market basket.
\2\ Based on the fourth quarter 2023 IHS Global Inc. forecast of the proposed 2022-based SNF market basket.

    To calculate the labor portion of the case-mix adjusted per diem 
rate, we will multiply the total case-mix adjusted per diem rate, which 
is the sum of all five case-mix adjusted components into which a 
patient classifies, and the non-case-mix component rate, by the 
proposed FY 2025 labor-related share percentage provided in Table 7. 
The remaining portion of the rate would be the non-labor portion. Under 
the previous RUG-IV model, we included tables which provided the case-
mix adjusted RUG-IV rates, by RUG-IV group, broken out by total rate, 
labor portion and non-labor portion, such as Table 9 of the FY 2019 SNF 
PPS final rule (83 FR 39175). However, as we discussed in the FY 2020 
final rule (84 FR 38738), under PDPM, as the total rate is calculated 
as a combination of six different component rates, five of which are 
case-mix adjusted, and given the sheer volume of possible combinations 
of these five case-mix adjusted components, it is not feasible to 
provide tables similar to those that existed in the prior rulemaking.
    Therefore, to aid interested parties in understanding the effect of 
the wage index on the calculation of the SNF per diem rate, we have 
included a hypothetical rate calculation in Table 9.
    Section 1888(e)(4)(G)(ii) of the Act also requires that we apply 
this wage index in a manner that does not result in aggregate payments 
under the SNF PPS that are greater or less than would otherwise be made 
if the wage adjustment had not been made. For FY 2025 (Federal rates 
effective October 1, 2023), 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 2025 to the weighted average wage adjustment 
factor for FY 2025. For this calculation, we will use the same FY 2023 
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 portion of the rate component multiplied by the wage index 
plus the non-labor portion of the rate component. The proposed budget 
neutrality factor for FY 2025 is 1.0002.
    We note that if more recent data become available (for example, 
revised wage data), we would use such data, if appropriate, to 
determine the wage index budget neutrality factor in the SNF PPS final 
rule.

E. SNF Value-Based Purchasing Program

    Beginning with payment for services furnished on October 1, 2018, 
section 1888(h) of the Act requires the Secretary to reduce the 
adjusted Federal per diem rate determined under section 1888(e)(4)(G) 
of the Act otherwise applicable to a SNF for services furnished during 
a fiscal year by 2 percent, and to adjust the resulting rate for a SNF 
by the value-based incentive payment amount earned by the SNF based on 
the SNF's performance score for that fiscal year under the SNF VBP 
Program. To implement these requirements, we finalized in the FY 2019 
SNF PPS final rule the addition of Sec.  413.337(f) to our regulations 
(83 FR 39178).
    Please see section VII. of this proposed rule for further 
discussion of the updates we are proposing for the SNF VBP Program.

F. Adjusted Rate Computation Example

    Tables 8 through 10 provide examples generally illustrating payment 
calculations during FY 2025 under PDPM for a hypothetical 30-day SNF 
stay, involving the hypothetical SNF XYZ, located in Frederick, MD 
(Urban CBSA 23224), for a hypothetical patient who is classified into 
such groups that the patient's HIPPS code is NHNC1. Table 8 shows the 
adjustments made to the Federal per diem rates (prior to application of 
any adjustments under the SNF VBP Program as discussed) to compute the 
provider's proposed case-mix adjusted per diem rate for FY 2025, based 
on the patient's PDPM classification, as well as how the variable per 
diem (VPD) adjustment factor affects calculation of the per diem rate 
for a given day of the stay. Table 9 shows the adjustments made to the 
case-mix adjusted per diem rate from Table 8 to account for the 
provider's wage index. The wage index used in this example is based on 
the FY 2025 SNF PPS wage index that appears in Table A available on the 
CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html. Finally, Table 10 provides the case-mix 
and wage index adjusted per-diem rate for this patient for each day of 
the 30-day stay, as well as the total payment for this stay. Table 10 
also includes the VPD adjustment factors for each day of the patient's 
stay, to clarify why the patient's per diem rate changes for certain 
days of the stay. As illustrated in Table 10, SNF XYZ's total PPS 
payment for this particular patient's stay would equal $23,073.54.

[[Page 23434]]



                            Table 8--PDPM Case-Mix Adjusted Rate Computation Example
----------------------------------------------------------------------------------------------------------------
                                            Per diem rate calculation
-----------------------------------------------------------------------------------------------------------------
                                                     Component                    VPD adjustment
                    Component                          group      Component rate      factor       VPD adj. rate
----------------------------------------------------------------------------------------------------------------
PT..............................................               N         $102.42            1.00          102.42
OT..............................................               N          $96.70            1.00           96.70
SLP.............................................               H          $73.74            1.00           73.74
Nursing.........................................               N         $187.45            1.00          187.45
NTA.............................................               C         $167.41            3.00          502.23
Non-Case-Mix....................................  ..............         $114.20  ..............          114.20
                                                                 -----------------------------------------------
    Total PDPM Case-Mix Adj. Per Diem...........  ..............  ..............  ..............        1,076.74
----------------------------------------------------------------------------------------------------------------


                                                  Table 9--Wage Index Adjusted Rate Computation Example
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         PDPM wage index adjustment calculation
---------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     PDPM case-mix                                                                        Total case mix
                    HIPPS code                        adjusted per    Labor portion      Wage index       Wage index       Non-labor      and wage index
                                                          diem                                          adjusted rate       portion         adj. rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
NHNC1.............................................       $1,076.74          $774.18           0.9918          $767.83          $302.56        $1,070.39
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                   Table 10--Adjusted Rate Computation Example
----------------------------------------------------------------------------------------------------------------
                                                                                                   Case mix and
                                                                      NTA VPD        PT/OT VPD      wage index
                           Day of stay                              adjustment      adjustment     adjusted per
                                                                      factor          factor         diem rate
----------------------------------------------------------------------------------------------------------------
1...............................................................             3.0             1.0       $1,070.39
2...............................................................             3.0             1.0        1,070.39
3...............................................................             3.0             1.0        1,070.39
4...............................................................             1.0             1.0          737.55
5...............................................................             1.0             1.0          737.55
6...............................................................             1.0             1.0          737.55
7...............................................................             1.0             1.0          737.55
8...............................................................             1.0             1.0          737.55
9...............................................................             1.0             1.0          737.55
10..............................................................             1.0             1.0          737.55
11..............................................................             1.0             1.0          737.55
12..............................................................             1.0             1.0          737.55
13..............................................................             1.0             1.0          737.55
14..............................................................             1.0             1.0          737.55
15..............................................................             1.0             1.0          737.55
16..............................................................             1.0             1.0          737.55
17..............................................................             1.0             1.0          737.55
18..............................................................             1.0             1.0          737.55
19..............................................................             1.0             1.0          737.55
20..............................................................             1.0             1.0          737.55
21..............................................................             1.0            0.98          733.59
22..............................................................             1.0            0.98          733.59
23..............................................................             1.0            0.98          733.59
24..............................................................             1.0            0.98          733.59
25..............................................................             1.0            0.98          733.59
26..............................................................             1.0            0.98          733.59
27..............................................................             1.0            0.98          733.59
28..............................................................             1.0            0.96          729.63
29..............................................................             1.0            0.96          729.63
30..............................................................             1.0            0.96          729.63
                                                                 -----------------------------------------------
    Total Payment...............................................  ..............  ..............       23,073.54
----------------------------------------------------------------------------------------------------------------

V. Additional Aspects of the SNF PPS

A. SNF Level of Care--Administrative Presumption

    The establishment of the SNF PPS did not change Medicare's 
fundamental requirements for SNF coverage. However, because the case-
mix classification is based, in part, on the beneficiary's need for 
skilled nursing care and therapy, we have attempted, where possible, to 
coordinate claims review procedures with the existing resident 
assessment process and case-mix classification system discussed in 
section III.C. of this proposed rule. This

[[Page 23435]]

approach includes an administrative presumption that utilizes a 
beneficiary's correct assignment, at the outset of the SNF stay, of one 
of the case-mix classifiers designated for this purpose to assist in 
making certain SNF level of care determinations.
    In accordance with Sec.  413.345, we include in each update of the 
Federal payment rates in the Federal Register a discussion of the 
resident classification system that provides the basis for case-mix 
adjustment. We also designate those specific classifiers under the 
case-mix classification system that represent the required SNF level of 
care, as provided in 42 CFR 409.30. This designation reflects an 
administrative presumption that those beneficiaries who are correctly 
assigned one of the designated case-mix classifiers on the initial 
Medicare assessment are automatically classified as meeting the SNF 
level of care definition up to and including the assessment reference 
date (ARD) for that assessment.
    A beneficiary who does not qualify for the presumption is not 
automatically classified as either meeting or not meeting the level of 
care definition, but instead receives an individual determination on 
this point using the existing administrative criteria. This presumption 
recognizes the strong likelihood that those beneficiaries who are 
correctly assigned one of the designated case-mix classifiers during 
the immediate post-hospital period would require a covered level of 
care, which would be less likely for other beneficiaries.
    In the July 30, 1999 final rule (64 FR 41670), we indicated that we 
would announce any changes to the guidelines for Medicare level of care 
determinations related to modifications in the case-mix classification 
structure. The FY 2018 final rule (82 FR 36544) further specified that 
we would henceforth disseminate the standard description of the 
administrative presumption's designated groups via the SNF PPS website 
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/ (where such designations appear in the paragraph 
entitled ``Case Mix Adjustment'') and would publish such designations 
in rulemaking only to the extent that we actually intend to propose 
changes in them. Under that approach, the set of case-mix classifiers 
designated for this purpose under PDPM was finalized in the FY 2019 SNF 
PPS final rule (83 FR 39253) and is posted on the SNF PPS website 
(https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/), in the paragraph entitled ``Case Mix Adjustment.''
    However, we note that this administrative presumption policy does 
not supersede the SNF's responsibility to ensure that its decisions 
relating to level of care are appropriate and timely, including a 
review to confirm that any services prompting the assignment of one of 
the designated case-mix classifiers (which, in turn, serves to trigger 
the administrative presumption) are themselves medically necessary. As 
we explained in the FY 2000 SNF PPS final rule (64 FR 41667), the 
administrative presumption is itself rebuttable in those individual 
cases in which the services actually received by the resident do not 
meet the basic statutory criterion of being reasonable and necessary to 
diagnose or treat a beneficiary's condition (according to section 
1862(a)(1) of the Act). Accordingly, the presumption would not apply, 
for example, in those situations where the sole classifier that 
triggers the presumption is itself assigned through the receipt of 
services that are subsequently determined to be not reasonable and 
necessary. Moreover, we want to stress the importance of careful 
monitoring for changes in each patient's condition to determine the 
continuing need for Part A SNF benefits after the Assessment Reference 
Date (ARD) of the initial Medicare assessment.

B. Consolidated Billing

    Sections 1842(b)(6)(E) and 1862(a)(18) of the Act (as added by 
section 4432(b) of the BBA 1997) require a SNF to submit consolidated 
Medicare bills to its Medicare Administrative Contractor (MAC) for 
almost all of the services that its residents receive during the course 
of a covered Part A stay. In addition, section 1862(a)(18) of the Act 
places the responsibility with the SNF for billing Medicare for 
physical therapy, occupational therapy, and speech-language pathology 
services that the resident receives during a noncovered stay. Section 
1888(e)(2)(A) of the Act excludes a small list of services from the 
consolidated billing provision (primarily those services furnished by 
physicians and certain other types of practitioners), which remain 
separately billable under Part B when furnished to a SNF's Part A 
resident. These excluded service categories are discussed in greater 
detail in section V.B.2. of the May 12, 1998 interim final rule (63 FR 
26295 through 26297). Effective with services furnished on or after 
January 1, 2024, section 4121(a)(4) of the Consolidated Appropriations 
Act, 2023 (CAA, 2023) (Pub. L. 117-328, enacted December 29, 2022) 
added marriage and family therapists and mental health counselors to 
the list of practitioners at section 1888(e)(2)(A)(ii) of the Act whose 
services are excluded from the consolidated billing provision.
    Section 103 of the Medicare, Medicaid, and SCHIP Balanced Budget 
Refinement Act of 1999 (BBRA 1999) (Pub. L. 106-113, enacted November 
29, 1999) amended section 1888(e)(2)(A)(iii) of the Act by further 
excluding a number of individual high-cost, low probability services, 
identified by HCPCS codes, within several broader categories 
(chemotherapy items, chemotherapy administration services, radioisotope 
services, and customized prosthetic devices) that otherwise remained 
subject to the provision. We discuss this BBRA 1999 amendment in 
greater detail in the SNF PPS proposed and final rules for FY 2001 (65 
FR 19231 through 19232, April 10, 2000, and 65 FR 46790 through 46795, 
July 31, 2000), as well as in Program Memorandum AB-00-18 (Change 
Request #1070), issued March 2000, which is available online at 
www.cms.gov/transmittals/downloads/ab001860.pdf.
    As explained in the FY 2001 proposed rule (65 FR 19232), the 
amendments enacted in section 103 of the BBRA 1999 not only identified 
for exclusion from this provision a number of particular service codes 
within four specified categories (that is, chemotherapy items, 
chemotherapy administration services, radioisotope services, and 
customized prosthetic devices), but also gave the Secretary the 
authority to designate additional, individual services for exclusion 
within each of these four specified service categories. In the proposed 
rule for FY 2001, we also noted that the BBRA 1999 Conference report 
(H.R. Conf. Rep. No. 106-479 at 854 (1999)) characterizes the 
individual services that this legislation targets for exclusion as 
high-cost, low probability events that could have devastating financial 
impacts because their costs far exceed the payment SNFs receive under 
the PPS. According to the conferees, section 103(a) of the BBRA 1999 is 
an attempt to exclude from the PPS certain services and costly items 
that are provided infrequently in SNFs. By contrast, the amendments 
enacted in section 103 of the BBRA 1999 do not designate for exclusion 
any of the remaining services within those four categories (thus, 
leaving all of those services subject to SNF consolidated billing), 
because they are relatively inexpensive and are furnished routinely in 
SNFs.
    Effective with items and services furnished on or after October 1, 
2021,

[[Page 23436]]

section 134 in Division CC of the CAA, 2021 established an additional 
fifth category of excluded codes in section 1888(e)(2)(A)(iii)(VI) of 
the Act, for certain blood clotting factors for the treatment of 
patients with hemophilia and other bleeding disorders along with items 
and services related to the furnishing of such factors under section 
1842(o)(5)(C) of the Act. Like the provisions enacted in the BBRA 1999, 
section 1888(e)(2)(A)(iii)(VI) of the Act gives the Secretary the 
authority to designate additional items and services for exclusion 
within the category of items and services related to blood clotting 
factors, as described in that section.
    A detailed discussion of the legislative history of the 
consolidated billing provision is available on the SNF PPS website at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_2018-10-01.pdf.
    As we further explained in the final rule for FY 2001 (65 FR 
46790), and as is consistent with our longstanding policy, any 
additional service codes that we might designate for exclusion under 
our discretionary authority must meet the same statutory criteria used 
in identifying the original codes excluded from consolidated billing 
under section 103(a) of the BBRA 1999: they must fall within one of the 
five service categories specified in the BBRA 1999 and CAA, 2021; and 
they also must meet the same standards of high cost and low probability 
in the SNF setting, as discussed in the BBRA 1999 Conference report. 
Accordingly, we characterized this statutory authority to identify 
additional service codes for exclusion as essentially affording the 
flexibility to revise the list of excluded codes in response to changes 
of major significance that may occur over time (for example, the 
development of new medical technologies or other advances in the state 
of medical practice) (65 FR 46791).
    In this proposed rule, we specifically solicit public comments 
identifying HCPCS codes in any of these five service categories 
(chemotherapy items, chemotherapy administration services, radioisotope 
services, customized prosthetic devices, and blood clotting factors) 
representing recent medical advances that might meet our criteria for 
exclusion from SNF consolidated billing. We may consider excluding a 
particular service if it meets our criteria for exclusion as specified 
previously. We request that commenters identify in their comments the 
specific HCPCS code that is associated with the service in question, as 
well as their rationale for requesting that the identified HCPCS 
code(s) be excluded.
    We note that the original BBRA amendment and the CAA, 2021 
identified a set of excluded items and services by means of specifying 
individual HCPCS codes within the designated categories that were in 
effect as of a particular date (in the case of the BBRA 1999, July 1, 
1999, and in the case of the CAA, 2021, July 1, 2020), as subsequently 
modified by the Secretary. In addition, as noted in this section of the 
preamble, the statute (sections 1888(e)(2)(A)(iii)(II) through (VI) of 
the Act) gives the Secretary authority to identify additional items and 
services for exclusion within the five specified categories of items 
and services described in the statute, which are also designated by 
HCPCS code. Designating the excluded services in this manner makes it 
possible for us to utilize program issuances as the vehicle for 
accomplishing routine updates to the excluded codes to reflect any 
minor revisions that might subsequently occur in the coding system 
itself, such as the assignment of a different code number to a service 
already designated as excluded, or the creation of a new code for a 
type of service that falls within one of the established exclusion 
categories and meets our criteria for exclusion.
    Accordingly, if we identify through the current rulemaking cycle 
any new services that meet the criteria for exclusion from SNF 
consolidated billing, we will identify these additional excluded 
services by means of the HCPCS codes that are in effect as of a 
specific date (in this case, October 1, 2024). By making any new 
exclusions in this manner, we can similarly accomplish routine future 
updates of these additional codes through the issuance of program 
instructions. The latest list of excluded codes can be found on the SNF 
Consolidated Billing website at https://www.cms.gov/Medicare/Billing/SNFConsolidatedBilling.

C. Payment for SNF-Level Swing-Bed Services

    Section 1883 of the Act permits certain small, rural hospitals to 
enter into a Medicare swing-bed agreement, under which the hospital can 
use its beds to provide either acute- or SNF-level care, as needed. For 
critical access hospitals (CAHs), Part A pays on a reasonable cost 
basis for SNF-level services furnished under a swing-bed agreement. 
However, in accordance with section 1888(e)(7) of the Act, SNF-level 
services furnished by non-CAH rural hospitals are paid under the SNF 
PPS, effective with cost reporting periods beginning on or after July 
1, 2002. As explained in the FY 2002 final rule (66 FR 39562), this 
effective date is consistent with the statutory provision to integrate 
swing-bed rural hospitals into the SNF PPS by the end of the transition 
period, June 30, 2002.
    Accordingly, all non-CAH swing-bed rural hospitals have now come 
under the SNF PPS. Therefore, all rates and wage indexes outlined in 
earlier sections of this proposed rule for the SNF PPS also apply to 
all non-CAH swing-bed rural hospitals. As finalized in the FY 2010 SNF 
PPS final rule (74 FR 40356 through 40357), effective October 1, 2010, 
non-CAH swing-bed rural hospitals are required to complete an MDS 3.0 
swing-bed assessment which is limited to the required demographic, 
payment, and quality items. As discussed in the FY 2019 SNF PPS final 
rule (83 FR 39235), revisions were made to the swing bed assessment to 
support implementation of PDPM, effective October 1, 2019. A discussion 
of the assessment schedule and the MDS effective beginning FY 2020 
appears in the FY 2019 SNF PPS final rule (83 FR 39229 through 39237). 
The latest changes in the MDS for swing-bed rural hospitals appear on 
the SNF PPS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/.

V. Other SNF PPS Issues

A. Rebasing and Revising the SNF Market Basket

    Section 1888(e)(5)(A) of the Act requires the Secretary to 
establish a market basket that reflects the changes over time in the 
prices of an appropriate mix of goods and services included in covered 
SNF services. Accordingly, we have developed a SNF market basket that 
encompasses the most commonly used cost categories for SNF routine 
services, ancillary services, and capital-related expenses.
    The SNF market basket is used to compute the market basket 
percentage increase that is used to update the SNF Federal rates on an 
annual basis, as required by section 1888(e)(4)(E)(ii)(IV) of the Act. 
This market basket percentage increase is adjusted by a forecast error 
adjustment, if applicable, and then further adjusted by the application 
of a productivity adjustment as required by section 1888(e)(5)(B)(ii) 
of the Act and described in section III.B.4. of this proposed rule. The 
SNF market basket is also used to determine the labor-related share on 
an annual basis.
    The SNF market basket is a fixed-weight, Laspeyres-type price 
index. A

[[Page 23437]]

Laspeyres price index measures the change in price, over time, of the 
same mix of goods and services purchased in the base period. Any 
changes in the quantity or mix of goods and services (that is, 
intensity) purchased over time relative to a base period are not 
measured.
    The index itself is constructed in three steps. First, a base 
period is selected (the proposed base period is 2022) and total base 
period costs are estimated for a set of mutually exclusive and 
exhaustive spending categories and the proportion of total costs that 
each category represents is calculated. These proportions are called 
cost weights. Second, each cost category is matched to an appropriate 
price or wage variable, referred to as a price proxy. In nearly every 
instance, these price proxies are derived from publicly available 
statistical series that are published on a consistent schedule 
(preferably at least on a quarterly basis). Finally, the cost weight 
for each cost category is multiplied by the level of its respective 
price proxy. The sum of these products (that is, the cost weights 
multiplied by their price levels) for all cost categories yields the 
composite index level of the market basket in a given period. Repeating 
this step for other periods produces a series of market basket levels 
over time. Dividing an index level for a given period by an index level 
for an earlier period produces a rate of growth in the input price 
index over that timeframe.
    Since the inception of the SNF PPS, the market basket used to 
update SNF PPS payments has been periodically rebased and revised. We 
last rebased and revised the market basket applicable to the SNF PPS in 
the FY 2022 SNF PPS final rule (86 FR 42444 through 42463) where we 
adopted a 2018-based SNF market basket. References to the historical 
market baskets used to update SNF PPS payments are listed in the FY 
2022 SNF PPS final rule (86 FR 42445).
    Effective for FY 2025 and subsequent fiscal years, we are proposing 
to rebase and revise the market basket to reflect 2022 Medicare-
allowable total cost data (routine, ancillary, and capital-related) 
from freestanding SNFs and to revise applicable cost categories and 
price proxies used to determine the market basket. Medicare-allowable 
costs are those costs that are eligible to be paid under the SNF PPS. 
For example, the SNF market basket excludes home health agency (HHA) 
costs as these costs would be paid under the HHA PPS, and therefore, 
these costs are not SNF PPS Medicare-allowable costs. We propose to 
maintain our policy of using data from freestanding SNFs, of which 
about 91 percent of SNFs that submitted a Medicare cost report for 2022 
are represented in our sample shown in Table 11. We believe using 
freestanding Medicare cost report data, as opposed to the hospital-
based SNF Medicare cost report data, for the cost weight calculation is 
most appropriate because of the complexity of hospital-based data and 
the representativeness of the freestanding data. Because hospital-based 
SNF expenses are embedded in the hospital cost report, any attempt to 
incorporate data from hospital-based facilities requires more complex 
calculations and assumptions regarding the ancillary costs related to 
the hospital-based SNF unit. We believe the use of freestanding SNF 
cost report data is technically appropriate for reflecting the cost 
structures of SNFs serving Medicare beneficiaries.
    We are proposing to use 2022 as the base year as we believe that 
the 2022 Medicare cost reports represent the most recent, complete set 
of Medicare cost report data available to develop cost weights for SNFs 
at the time of rulemaking. We believe it is important to regularly 
rebase and revise the SNF market basket to reflect more recent data. 
Historically, the cost weights change minimally from year to year as 
they represent percent of total costs rather than cost levels; however, 
given the COVID-19 Public Health Emergency (PHE), we have been 
monitoring the Medicare cost report data to see if a more frequent 
rebasing schedule is necessary than our recent historical precedent of 
about every 4 years. Accordingly, while it has been only three years 
since the last SNF rebasing, we are proposing to incorporate data that 
is more reflective of recent SNF expenses that have been impacted over 
the COVID-19 PHE period. The 2022 Medicare cost reports are for cost 
reporting periods beginning on and after October 1, 2021 and before 
October 1, 2022. While these dates appear to reflect fiscal year data, 
we note that a Medicare cost report that begins in this timeframe is 
generally classified as a ``2022 cost report''. For example, we found 
that of the available 2022 Medicare cost reports for SNFs, 
approximately 7 percent had an October 1, 2021 begin date, 
approximately 75 percent of the reports had a January 1, 2022 begin 
date, and approximately 12 percent had a July 1, 2022 begin date. For 
this reason, we are defining the base year of the market basket as 
``2022-based'' instead of ``FY 2022-based''.
    Specifically, we are proposing to develop cost category weights for 
the proposed 2022-based SNF market basket in two stages. The major 
types of costs underlying the proposed 2022-based SNF market basket are 
derived from the 2022 Medicare cost report data (CMS Form 2540-10, OMB 
NO. 0938-0463) for freestanding SNFs. Specifically, we use the Medicare 
cost reports for seven specific costs: Wages and Salaries; Employee 
Benefits; Contract Labor; Pharmaceuticals; Professional Liability 
Insurance; Home Office/Related Organization Contract Labor; and 
Capital-related. A residual ``All Other'' category is then estimated 
and reflects all remaining costs that are not captured in the seven 
types of costs identified above. The 2018-based SNF market basket 
similarly used 2018 Medicare cost report data. Second, we are proposing 
to divide the residual ``All Other'' cost category into more detailed 
subcategories, using U.S. Department of Commerce Bureau of Economic 
Analysis' (BEA) 2017 Benchmark Input-Output (I-O) ``The Use Table 
(Supply-Use Framework)'' for the Nursing and Community Care Facilities 
industry (NAICS 623A00) aged to 2022 using applicable price proxy 
growth for each category of costs. Furthermore, we are proposing to 
continue to use the same overall methodology as was used for the 2018-
based SNF market basket to develop the capital related cost weights of 
the proposed 2022-based SNF market basket.
1. Development of Cost Categories and Weights
a. Use of Medicare Cost Report Data To Develop Major Cost Weights
    In order to create a market basket that is representative of 
freestanding SNF providers serving Medicare patients and to help ensure 
accurate major cost weights (which is the percent of total Medicare-
allowable costs, as defined below), we propose to apply edits to remove 
reporting errors and outliers. Specifically, the SNF Medicare cost 
reports used to calculate the market basket cost weights exclude any 
providers that reported costs less than or equal to zero for the 
following categories: total facility costs (Worksheet B, part 1, column 
18, line 100); total operating costs (Worksheet B, part 1, column 18, 
line 100 less Worksheet B, part 2, column 18, line 100); Medicare 
general inpatient routine service costs (Worksheet D, part 1, column 1, 
line 1); and Medicare PPS payments (Worksheet E, part 3, column 1, line 
1). We also limited our sample to providers that had a Medicare cost 
report reporting period that was between 10 and 14 months. The final 
sample used included roughly 13,100

[[Page 23438]]

Medicare cost reports (about 90 percent of the universe of SNF Medicare 
cost reports for 2022). The sample of providers is representative of 
the national universe of providers by region (each region is 
represented within plus or minus 1 percentage point of universe 
distribution), by ownership-type (proprietary, nonprofit, and 
government) (within 0.8 percentage point of universe), and by urban/
rural status (within 0.1 percentage point of universe). Of the 
providers that were excluded from our final sample, 86 percent were due 
to having a cost reporting period less than 10 months or greater than 
14 months, 10 percent were due to total facility costs or total 
operating costs not being greater than zero, and 4 percent were due to 
Medicare general inpatient routine service costs or Medicare PPS 
payments not being greater than zero.
    Additionally, for all of the major cost weights, except Home 
Office/Related Organization Contract Labor costs, the data are trimmed 
to remove outliers (a standard statistical process) by: (1) requiring 
that major expenses (such as Wages and Salaries costs) and total 
Medicare-allowable costs are greater than zero; and (2) excluding the 
top and bottom 5 percent of the major cost weight (for example, Wages 
and Salaries costs as a percent of total Medicare-allowable costs). We 
note that missing values are assumed to be zero, consistent with the 
methodology for how missing values are treated in the 2018-based market 
basket methodology.
    For the Home Office/Related Organization Contract Labor cost 
weight, we propose to first exclude providers whose Home Office/Related 
Organization Contract Labor costs are greater than Medicare-allowable 
total costs and then apply a trim that excludes those reporters with a 
Home Office/Related Organization Contract Labor cost weight above the 
99th percentile. This allows providers with no Home Office/Related 
Organization Contract Labor costs to be included in the Home Office/
Related Organization Contract Labor cost weight calculation. If we were 
to trim the top and bottom Home Office/Related Organization Contract 
Labor cost weight, we would exclude providers with a cost weight of 
zero (84 percent of the sample) and the Medicare cost report data 
(Worksheet S-2 line 45) indicate that not all SNF providers have a home 
office. Providers without a home office would report administrative 
costs that might typically be associated with a home office in the 
Wages and Salaries and Employee Benefits cost weights, or in the 
residual ``All-Other'' cost weight if they purchased these types of 
services from external contractors. We believe the trimming methodology 
that excludes those who report Home Office/Related Organization 
Contract Labor costs above the 99th percentile is appropriate as it 
removes extreme outliers while also allowing providers with zero Home 
Office/Related Organization Contract Labor costs, which is the majority 
of providers, to be included in the Home Office/Related Organization 
Contract Labor cost weight calculation.
    The trimming process is done individually for each cost category so 
that providers excluded from one cost weight calculation are not 
automatically excluded from another cost weight calculation. We note 
that these trimming methods are the same types of edits performed for 
the 2018-based SNF market basket, as well as other PPS market baskets 
(including but not limited to the IPPS market basket and home health 
market basket). We believe this trimming process improves the accuracy 
of the data used to compute the major cost weights by removing possible 
data misreporting.
    The final weights of the proposed 2022-based SNF market basket are 
based on weighted means. For example, the aggregate Wages and Salaries 
cost weight, after trimming, is equal to the sum of total Medicare-
allowable wages and salaries (as defined in the ``Wages and Salaries'' 
section that follows) of all providers divided by the sum of total 
Medicare-allowable costs (as defined in the next paragraph) for all 
providers in the sample (as defined above in this section). This 
methodology is consistent with the methodology used to calculate the 
2018-based SNF market basket cost weights and other PPS market basket 
cost weights. We note that for each of the cost weights, we evaluated 
the distribution of providers and costs by region, by ownership-type, 
and by urban/rural status. For all of the cost weights, with the 
exception of the PLI (which is discussed in more detail later), the 
trimmed sample was nationally representative.
    For all of the cost weights, we use Medicare-allowable total costs 
as the denominator (for example, Wages and Salaries cost weight = Wages 
and Salaries costs divided by Medicare-allowable total costs). 
Medicare-allowable total costs were equal to total costs (after 
overhead allocation) from Worksheet B part I, column 18, for lines 30, 
40 through 49, 51, 52, and 71 plus estimated Medicaid drug costs, as 
defined below. We included estimated Medicaid drug costs in the 
pharmacy cost weight, as well as the denominator for total Medicare-
allowable costs. This is the same methodology used for the 2018-based 
SNF market basket. The inclusion of Medicaid drug costs was finalized 
in the FY 2008 SNF PPS final rule (72 FR 43425 through 43430), and for 
the same reasons set forth in that final rule, we are proposing to 
continue to use this methodology in the proposed 2022-based SNF market 
basket.
    We describe the detailed methodology for obtaining costs for each 
of the eight cost categories determined from the Medicare Cost Report 
below. The methodology used in the 2018-based SNF market basket can be 
found in the FY 2022 SNF PPS final rule (86 FR 42446 through 42452).
(1) Wages and Salaries
    To derive Wages and Salaries costs for the Medicare-allowable cost 
centers, we are proposing first to calculate total facility wages and 
salaries costs as reported on Worksheet S-3, part II, column 3, line 1. 
We then propose to remove the wages and salaries attributable to non-
Medicare-allowable cost centers (that is, excluded areas), as well as a 
portion of overhead wages and salaries attributable to these excluded 
areas. Excluded area wages and salaries are equal to wages and salaries 
as reported on Worksheet S-3, part II, column 3, lines 3, 4, and 7 
through 11 plus nursing facility and non-reimbursable salaries from 
Worksheet A, column 1, lines 31, 32, 50, and 60 through 63.
    Overhead wages and salaries are attributable to the entire SNF 
facility; therefore, we are proposing to include only the proportion 
attributable to the Medicare-allowable cost centers. We are proposing 
to estimate the proportion of overhead wages and salaries attributable 
to the non-Medicare-allowable costs centers in two steps. First, we 
propose to estimate the ratio of excluded area wages and salaries (as 
defined above) to non-overhead total facility wages and salaries (total 
facility wages and salaries (Worksheet S-3, part II, column 3, line 1) 
less total overhead wages and salaries (Worksheet S-3, Part III, column 
3, line 14)). Next, we propose to multiply total overhead wages and 
salaries by the ratio computed in step 1. We excluded providers whose 
excluded areas wages and salaries were greater than total facility 
wages and salaries and/or their excluded area overhead wages and 
salaries were greater than total facility wages and salaries (about 50 
providers). This is the same methodology used to derive Wages and 
Salaries costs in the 2018-based SNF market basket.

[[Page 23439]]

(2) Employee Benefits
    Medicare-allowable employee benefits are equal to total facility 
benefits as reported on Worksheet S-3, part II, column 3, lines 17 
through 19 minus non-Medicare-allowable (that is, excluded area) 
employee benefits and minus a portion of overhead benefits attributable 
to these excluded areas. Excluded area employee benefits are derived by 
multiplying total excluded area wages and salaries (as defined above in 
the `Wages and Salaries' section) times the ratio of total facility 
benefits to total facility wages and salaries. This ratio of benefits 
to wages and salaries is defined as total facility benefit costs to 
total facility wages and salary costs (as reported on Worksheet S-3, 
part II, column 3, line 1). Likewise, the portion of overhead benefits 
attributable to the excluded areas is derived by multiplying overhead 
wages and salaries attributable to the excluded areas (as defined in 
the `Wages and Salaries' section) times the ratio of total facility 
benefit costs to total facility wages and salary costs (as defined 
above). Similar to the Wages and Salaries costs, we excluded providers 
whose excluded areas benefits were greater than total facility benefits 
and/or their excluded area overhead benefits were greater than total 
facility benefits (zero providers were excluded because of this edit). 
This is the same methodology used to derive Employee Benefits costs in 
the 2018-based SNF market basket.
(3) Contract Labor
    We are proposing to derive Medicare-allowable contract labor costs 
from Worksheet S-3, part II, column 3, line 14, which reflects costs 
for contracted direct patient care services (that is, nursing, 
therapeutic, rehabilitative, or diagnostic services furnished under 
contract rather than by employees and management contract services). 
This is the same methodology used to derive the Contract Labor costs in 
the 2018-based SNF market basket.
(4) Pharmaceuticals
    We are proposing to calculate pharmaceuticals costs using the non-
salary costs from the Pharmacy cost center (Worksheet B, part I, column 
0, line 11 less Worksheet A, column 1, line 11) and the Drugs Charged 
to Patients' cost center (Worksheet B, part I, column 0, line 49 less 
Worksheet A, column 1, line 49). Since these drug costs were 
attributable to the entire SNF and not limited to Medicare-allowable 
services, we propose to adjust the drug costs by the ratio of Medicare-
allowable pharmacy total costs (Worksheet B, part I, column 11, for 
lines 30, 40 through 49, 51, 52, and 71) to total pharmacy costs from 
Worksheet B, part I, column 11, line 11. Worksheet B, part I allocates 
the general service cost centers, which are often referred to as 
``overhead costs'' (in which pharmacy costs are included) to the 
Medicare-allowable and non-Medicare-allowable cost centers. This 
adjustment was made for those providers who reported Pharmacy cost 
center expenses. Otherwise, we assumed the non-salary Drugs Charged to 
Patients costs were Medicare-allowable. Since drug costs for Medicare 
patients are included in the SNF PPS per diem rate, a provider with 
Medicare days should have also reported costs in the Drugs Charged to 
Patient cost center. We found a small number of providers (roughly 90) 
did not report Drugs Charged to Patients' costs despite reporting 
Medicare days (an average of about 2,000 Medicare days per provider), 
and therefore, these providers were excluded from the Pharmaceuticals 
cost weight calculations. This is the same methodology used for the 
2018-based SNF market basket.
    Second, as was done for the 2018-based SNF market basket, we 
propose to continue to adjust the drug expenses reported on the 
Medicare cost report to include an estimate of total Medicaid drug 
costs, which are not represented in the Medicare-allowable drug cost 
weight. As stated previously in this section, the proposed 2022-based 
SNF market basket reflects total Medicare-allowable costs (that is, 
total costs for all payers for those services reimbursable under the 
SNF PPS). For the FY 2006-based SNF market basket (72 FR 43426), 
commenters noted that the total pharmaceutical costs reported on the 
Medicare cost report did not include pharmaceutical costs for dual-
eligible Medicaid patients as these were directly reimbursed by 
Medicaid. Since all of the other cost category weights reflect expenses 
associated with treating Medicaid patients (including the compensation 
costs for dispensing these drugs), we made an adjustment to include 
these Medicaid drug expenses so the market basket cost weights would be 
calculated consistently.
    Similar to the 2018-based SNF market basket, we propose to estimate 
Medicaid drug costs based on data representing dual-eligible Medicaid 
beneficiaries. Medicaid drug costs are estimated by multiplying 
Medicaid dual-eligible drug costs per day times the number of Medicaid 
days as reported in the Medicare-allowable skilled nursing cost center 
(Worksheet S-3, part I, column 5, line 1) in the SNF Medicare cost 
report. Medicaid dual-eligible drug costs per day (where the day 
represents an unduplicated drug supply day) were estimated using 2022 
Part D claims for those dual-eligible beneficiaries who had a Medicare 
SNF stay during the year. The total drug costs per unduplicated day for 
2022 of $27.43 represented all drug costs (including the drug 
ingredient cost, the dispensing fee, vaccine administration fee and 
sales tax) incurred during the 2022 calendar year (CY) for those dual-
eligible beneficiaries who had a SNF Medicare stay during CY 2022. 
Therefore, they include drug costs incurred during a Medicaid SNF stay 
occurring in CY 2022. By comparison, the 2018-based SNF market basket 
also relied on data from the Part D claims, which yielded a dual-
eligible Medicaid drug cost per day of $24.48 for 2018.
    We continue to believe that Medicaid dual-eligible beneficiaries 
are a reasonable proxy for the estimated drug costs per day incurred by 
Medicaid patients staying in a skilled nursing unit under a Medicaid 
stay. The skilled nursing unit is the Medicare-allowable unit in a SNF, 
which encompasses more skilled nursing and rehabilitative care compared 
to a nursing facility or long-term care unit. We believe that Medicaid 
patients receiving this skilled nursing care would on average have 
similar drug costs per day to dual-eligible Medicare beneficiaries who 
have received Medicare skilled nursing care in the skilled nursing care 
unit during the year. We note that our previous analysis of the Part D 
claims data showed that Medicare beneficiaries with a SNF stay during 
the year have higher drug costs than Medicare patients without a SNF 
stay during the year. Also, in 2022, dual-eligible beneficiaries with a 
SNF stay during the year had drug costs per day of $27.43, which were 
approximately two times higher than the drug costs per day of $15.83 
for nondual-eligible beneficiaries with a SNF Part A stay during the 
year.
    The Pharmaceuticals cost weight using only 2022 Medicare cost 
report data (without the inclusion of the Medicaid dual-eligible drug 
costs) is 2.0 percent, compared to the proposed Pharmaceuticals cost 
weight (including the adjustment for Medicaid dual-eligible drug costs) 
of 6.4 percent. The 2018-based SNF market basket had a Pharmaceuticals 
cost weight using only 2018 Medicare cost report data without the 
inclusion of the Medicaid dual-eligible drug costs of 2.6 percent and a 
total Pharmaceuticals cost weight of 7.5 percent. Therefore, the 1.1 
percentage point decrease in the Pharmaceuticals

[[Page 23440]]

cost weight between 2018 and 2022 is a result of a 0.5-percentage point 
decrease in the Medicaid dual-eligible drug cost weight (reflecting the 
12 percent increase in the Medicaid dual-eligible drug costs per day, 
and a 14 percent decrease in Medicaid inpatient days between 2018 and 
2022) and a 0.6-percentage point decrease in the Medicare cost report 
drug cost weight. The decrease in the Medicare cost report drug cost 
weight was consistent, in aggregate, across urban and rural status 
SNFs, as well as across for-profit, government, and nonprofit ownership 
type SNFs.
(5) Professional Liability Insurance
    We are proposing to calculate the professional liability insurance 
(PLI) costs from Worksheet S-2 of the Medicare cost reports as the sum 
of premiums; paid losses; and self-insurance (Worksheet S-2, Part I, 
columns 1 through 3, line 41). This was the same methodology used to 
derive the Professional Liability costs for the 2018-based SNF market 
basket.
    About 60 percent of SNFs (about 7,700) reported professional 
liability costs. After trimming, about 6,900 (reflecting about 730,000 
Skilled Nursing unit beds) were included in the calculation of the PLI 
cost weight for the proposed 2022-based SNF market basket. These 
providers treated roughly 750,000 Medicare beneficiaries and had a 
Medicare length of stay (LOS) of 58 days, a skilled nursing unit 
occupancy rate of 72 percent, and an average skilled nursing unit bed 
size of 106 beds, which are all consistent with the national averages. 
We also verified that this sample of providers are representative of 
the national distribution of providers by ownership-type, urban/rural 
status, and region.
    We believe the Medicare cost report data continues to be the most 
appropriate data source to calculate the PLI cost weight for the 
proposed 2022-based SNF market basket as it is representative of SNFs 
serving Medicare beneficiaries and reflects PLI costs (premiums, paid 
losses, and self-insurance) incurred during the provider's cost 
reporting year. A fuller discussion of the Medicare cost report data on 
PLI costs compared to other sources is available in the FY 2022 SNF PPS 
final rule (86 FR 42448).
(6) Capital-Related
    We are proposing to derive the Medicare-allowable capital-related 
costs from Worksheet B, part II, column 18 for lines 30, 40 through 49, 
51, 52, and 71. This is the same methodology to derive capital-related 
costs used in the 2018-based SNF market basket.
(7) Home Office/Related Organization Contract Labor Costs
    We are proposing to calculate Medicare-allowable Home Office/
Related Organization Contract Labor costs to be equal to data reported 
on Worksheet S-3, part II, column 3, line 16. About 7,100 providers 
(about 54 percent) in 2022 reported having a home office (as reported 
on Worksheet S-2, part I, line 45) about the same share of providers as 
those in the 2018-based SNF market basket. As discussed in section 
V.A.1. of this proposed rule, providers without a home office can incur 
these expenses directly by having their own staff, for which the costs 
would be included in the Wages and Salaries and Employee Benefits cost 
weights. Alternatively, providers without a home office could also 
purchase related services from external contractors for which these 
expenses would be captured in the residual ``All-Other'' cost weight. 
For this reason, unlike the other major cost weights described 
previously, we did not exclude providers that did not report Home 
Office/Related Organization Contract Labor costs. This is the same 
methodology that was used in the 2018-based SNF market basket.
(8) All Other (Residual)
    The ``All Other'' cost weight is a residual, calculated by 
subtracting the major cost weights (Wages and Salaries, Employee 
Benefits, Contract Labor, Pharmaceuticals, Professional Liability 
Insurance, Capital-Related, and Home Office/Related Organization 
Contract Labor) from 100.
    Table 11 shows the major cost categories and their respective cost 
weights as derived from the 2022 Medicare cost reports.

   Table 11--Major Cost Categories Derived From the SNF Medicare Cost
                                Reports *
------------------------------------------------------------------------
                                          Proposed 2022-
          Major cost categories                based        2018-Based
------------------------------------------------------------------------
Wages and Salaries......................            43.3            44.1
Employee Benefits.......................             7.8             8.6
Contract Labor..........................            10.1             7.5
Pharmaceuticals.........................             6.4             7.5
Professional Liability Insurance........             1.3             1.1
Capital-Related.........................             8.3             8.2
Home Office/Related Organization                     0.6             0.7
 Contract Labor.........................
All other (residual)....................            22.2            22.3
------------------------------------------------------------------------
* Total may not sum to 100 due to rounding.

    As we did for the 2018-based SNF market basket (86 FR 42449), we 
are proposing to allocate contract labor costs to the Wages and 
Salaries and Employee Benefits cost weights based on their relative 
proportions under the assumption that contract labor costs are 
comprised of both wages and salaries and employee benefits. The 
contract labor allocation proportion for wages and salaries is equal to 
the Wages and Salaries cost weight as a percent of the sum of the Wages 
and Salaries cost weight and the Employee Benefits cost weight. Using 
the 2022 Medicare cost report data, this percentage is 85 percent (1 
percentage point higher than the percentage in the 2018-based SNF 
market basket); therefore, we are proposing to allocate approximately 
85 percent of the Contract Labor cost weight to the Wages and Salaries 
cost weight and 15 percent to the Employee Benefits cost weight.
    Table 12 shows the Wages and Salaries and Employee Benefits cost 
weights after contract labor allocation for the proposed 2022-based SNF 
market basket and the 2018-based SNF market basket.

[[Page 23441]]



  Table 12--Wages and Salaries and Employee Benefits Cost Weights After
                        Contract Labor Allocation
------------------------------------------------------------------------
                                          Proposed 2022-
          Major cost categories            based market     2018-Based
                                              basket       market basket
------------------------------------------------------------------------
Compensation............................            61.2            60.2
    Wages and Salaries..................            51.8            50.4
    Employee Benefits...................             9.3             9.9
------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For
  presentational purposes, we are displaying one decimal; therefore, the
  detailed compensation cost weights may not add to the total
  compensation cost weight due to rounding.

    Compared to the 2018-based SNF market basket, the Wages and 
Salaries cost weight and the Employee Benefits cost weight as 
calculated directly from the Medicare cost reports each decreased by 
0.8 percentage point. The Contract Labor cost weight increased 2.6 
percentage points and so in aggregate, the Compensation cost weight 
increased 1.0 percentage point from 60.2 percent to 61.2 percent.
b. Derivation of the Detailed Operating Cost Weights
    To further divide the ``All Other'' residual cost weight estimated 
from the 2022 Medicare cost report data into more detailed cost 
categories, we are proposing to use the 2017 Benchmark I-O ``The Use 
Table (Supply-Use Framework)'' for Nursing and Community Care 
Facilities industry (NAICS 623A00), published by the Census Bureau's, 
Bureau of Economic Analysis (BEA). These data are publicly available at 
https://www.bea.gov/industry/input-output-accounts-data. The BEA 
Benchmark I-O data are generally scheduled for publication every 5 
years with 2017 being the most recent year for which data are 
available. The 2017 Benchmark I-O data are derived from the 2017 
Economic Census and are the building blocks for BEA's economic 
accounts; therefore, they represent the most comprehensive and complete 
set of data on the economic processes or mechanisms by which output is 
produced and distributed.\1\ BEA also produces Annual I-O estimates. 
However, while based on a similar methodology, these estimates are less 
comprehensive and provide less detail than benchmark data. 
Additionally, the annual I-O data are subject to revision once 
benchmark data become available. For these reasons, we propose to 
inflate the 2017 Benchmark I-O data aged forward to 2022 by applying 
the annual price changes from the respective price proxies to the 
appropriate market basket cost categories that are obtained from the 
2017 Benchmark I-O data. Next, the relative shares of the cost shares 
that each cost category represents to the total residual I-O costs are 
calculated. These resulting 2022 cost shares of the I-O data are 
applied to the ``All Other'' residual cost weight to obtain detailed 
cost weights for the residual costs for the proposed 2022-based SNF 
market basket. For example, the cost for Food: Direct Purchases 
represents 12.8 percent of the sum of the ``All Other'' 2017 Benchmark 
I-O Expenditures inflated to 2022. Therefore, the Food: Direct 
Purchases cost weight is 2.8 percent of the proposed 2022-based SNF 
market basket (12.8 percent x 22.2 percent = 2.8 percent). For the 
2018-based SNF market basket (86 FR 42449), we used a similar 
methodology utilizing the 2012 Benchmark I-O data (aged to 2018).
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    \1\ https://www.bea.gov/resources/methodologies/concepts-methods-io-accounts.
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    Using this methodology, we are proposing to derive 19 detailed SNF 
market basket cost category weights from the proposed 2022-based SNF 
market basket ``All Other'' residual cost weight (22.2 percent). These 
categories are: (1) Fuel: Oil and Gas; (2) Electricity and Other Non-
Fuel Utilities; (3) Food: Direct Purchases; (4) Food: Contract 
Services; (5) Chemicals; (6) Medical Instruments and Supplies; (7) 
Rubber and Plastics; (8) Paper and Printing Products; (9) Apparel; (10) 
Machinery and Equipment; (11) Miscellaneous Products; (12) Professional 
Fees: Labor-Related; (13) Administrative and Facilities Support 
Services; (14) Installation, Maintenance, and Repair Services; (15) All 
Other: Labor-Related Services; (16) Professional Fees: Nonlabor-
Related; (17) Financial Services; (18) Telephone Services; and (19) All 
Other: Nonlabor-Related Services. These are the same detailed cost 
categories as those that were used in the 2018-based SNF market basket.
    We note that the machinery and equipment expenses are for equipment 
that is paid for in a given year and not depreciated over the asset's 
useful life. Depreciation expenses for movable equipment are accounted 
for in the capital component of the proposed 2022-based SNF market 
basket (described in section V.A.1.c. of this proposed rule).
c. Derivation of the Detailed Capital Cost Weights
    Similar to the 2018-based SNF market basket, we further divided the 
Capital-related cost weight into: Depreciation, Interest, Lease and 
Other Capital-related cost weights.
    We calculated the depreciation cost weight (that is, depreciation 
costs excluding leasing costs) using depreciation costs from Worksheet 
S-2, column 1, lines 20 and 21. Since the depreciation costs reflect 
the entire SNF facility (Medicare and non-Medicare-allowable units), we 
used total facility capital costs (Worksheet B, Part I, column 18, line 
100) as the denominator. This methodology assumes that the depreciation 
of an asset is the same regardless of whether the asset was used for 
Medicare or non-Medicare patients. This methodology yielded 
depreciation costs as a percent of capital costs of 22.6 percent for 
2022. We then apply this percentage to the proposed 2022-based SNF 
market basket Medicare-allowable Capital-related cost weight of 8.3 
percent, yielding a proposed Medicare-allowable depreciation cost 
weight (excluding leasing expenses, which is described in more detail 
below) of 1.9 percent for 2022. To further disaggregate the Medicare-
allowable depreciation cost weight into fixed and movable depreciation, 
we are proposing to use the 2022 SNF Medicare cost report data for end-
of-the-year capital asset balances as reported on Worksheet A-7. The 
2022 SNF Medicare cost report data showed a fixed/movable split of 86/
14. The 2018-based SNF market basket, which utilized the same data from 
the 2018 Medicare cost reports, also had a fixed/movable split of 86/
14.
    We derived the interest expense share of capital-related expenses 
from 2022 SNF Medicare cost report data, specifically from Worksheet A, 
column 2, line 81. Similar to the depreciation cost weight, we 
calculated the interest cost weight using total facility capital costs. 
This methodology yielded interest costs as a percent of capital costs 
of 17.7 percent for 2022. We then apply this percentage to the proposed 
2022-based

[[Page 23442]]

SNF market basket Medicare-allowable Capital-related cost weight of 8.3 
percent, yielding a Medicare-allowable interest cost weight (excluding 
leasing expenses) of 1.5 percent. As done with the last rebasing (86 FR 
42450), we are proposing to determine the split of interest expense 
between for-profit and not-for-profit facilities based on the 
distribution of long-term debt outstanding by type of SNF (for-profit 
or not-for-profit/government) from the 2022 SNF Medicare cost report 
data. We estimated the split between for-profit and not-for-profit 
interest expense to be 30/70 percent compared to the 2018-based SNF 
market basket with 25/75 percent.
    Because the detailed data were not available in the Medicare cost 
reports, we used the most recent 2021 Census Bureau Service Annual 
Survey (SAS) data to derive the capital-related expenses attributable 
to leasing and other capital-related expenses. The 2018-based SNF 
market basket used the 2017 SAS data.
    Based on the 2021 SAS data, we determined that leasing expenses are 
65 percent of total leasing and capital-related expenses costs. In the 
2018-based SNF market basket, leasing costs represent 62 percent of 
total leasing and capital-related expenses costs. We then apply this 
percentage to the proposed 2022-based SNF market basket residual 
Medicare-allowable capital costs of 4.9 percent derived from 
subtracting the Medicare-allowable depreciation cost weight and 
Medicare-allowable interest cost weight from the proposed 2022-based 
SNF market basket of total Medicare-allowable capital cost weight (8.3 
percent-1.9 percent-1.5 percent = 4.9 percent). This produces the 
proposed 2022-based SNF Medicare-allowable leasing cost weight of 3.2 
percent and all-other capital-related cost weight of 1.7 percent.
    Lease expenses are not broken out as a separate cost category in 
the SNF market basket, but are distributed among the cost categories of 
depreciation, interest, and other capital-related expenses, reflecting 
the assumption that the underlying cost structure and price movement of 
leasing expenses is similar to capital costs in general. As was done 
with past SNF market baskets and other PPS market baskets, we assumed 
10 percent of lease expenses are overhead and assigned them to the 
other capital-related expenses cost category. This is based on the 
assumption that leasing expenses include not only depreciation, 
interest, and other capital-related costs but also additional costs 
paid to the lessor. We distributed the remaining lease expenses to the 
three cost categories based on the proportion of depreciation, 
interest, and other capital-related expenses to total capital costs, 
excluding lease expenses.
    Table 13 shows the capital-related expense distribution (including 
expenses from leases) in the proposed 2022-based SNF market basket and 
the 2018-based SNF market basket.

 Table 13--Comparison of the Capital-Related Expense Distribution of the
   Proposed 2022-Based SNF Market Basket and the 2018-Based SNF Market
                                 Basket
------------------------------------------------------------------------
                                    Proposed 2022-
          Cost category            based SNF market     2018-Based SNF
                                        basket           market basket
------------------------------------------------------------------------
Capital-related Expenses........                 8.3                 8.2
Total Depreciation..............                 3.0                 3.0
Total Interest..................                 2.3                 2.7
Other Capital-related Expenses..                 3.0                 2.6
------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For
  presentational purposes, we are displaying one decimal; therefore, the
  detailed capital cost weights may not add to the total capital-related
  expenses cost weight due to rounding.

    Table 14 presents the proposed 2022-based SNF market basket and the 
2018-based SNF market basket cost categories and cost weights.

   Table 14--Proposed 2022-Based SNF Market Basket and 2018-Based SNF
             Market Basket Cost Categories and Cost Weights
------------------------------------------------------------------------
                                    Proposed 2022-
          Cost category            based SNF market     2018-Based SNF
                                        basket           market basket
------------------------------------------------------------------------
Total...........................               100.0               100.0
Compensation....................                61.2                60.2
    Wages and Salaries \1\......                51.8                50.4
    Employee Benefits \1\.......                 9.3                 9.9
Utilities.......................                 2.7                 1.5
    Electricity and Other Non-                   1.8                 1.0
     Fuel Utilities.............
        Fuel: Oil and Gas.......                 0.8                 0.4
Professional Liability Insurance                 1.3                 1.1
All Other.......................                26.5                29.0
    Other Products..............                16.1                17.6
        Pharmaceuticals.........                 6.4                 7.5
        Food: Direct Purchases..                 2.9                 2.5
        Food: Contract Services.                 3.4                 4.3
        Chemicals...............                 0.2                 0.2
        Medical Instruments and                  0.4                 0.6
         Supplies...............
        Rubber and Plastics.....                 1.0                 0.7
        Paper and Printing                       0.5                 0.5
         Products...............
        Apparel.................                 0.4                 0.5
        Machinery and Equipment.                 0.7                 0.5

[[Page 23443]]

 
        Miscellaneous Products..                 0.2                 0.3
All Other Services..............                10.5                11.5
    Labor-Related Services......                 6.5                 6.4
        Professional Fees: Labor-                3.6                 3.5
         Related................
        Installation,                            0.4                 0.6
         Maintenance, and Repair
         Services...............
        Administrative and                       0.5                 0.4
         Facilities Support.....
        All Other: Labor-Related                 2.0                 1.9
         Services...............
    Non Labor-Related Services..                 4.0                 5.1
        Professional Fees:                       1.8                 2.0
         Nonlabor-Related.......
        Financial Services......                 0.5                 1.3
        Telephone Services......                 0.4                 0.3
        All Other: Nonlabor-                     1.3                 1.5
         Related Services.......
Capital-Related Expenses........                 8.3                 8.2
    Total Depreciation..........                 3.0                 3.0
        Building and Fixed                       2.5                 2.5
         Equipment..............
        Movable Equipment.......                 0.4                 0.4
    Total Interest..............                 2.3                 2.7
        For-Profit SNFs.........                 0.7                 0.7
        Government and Nonprofit                 1.6                 2.0
         SNFs...................
    Other Capital-Related                        3.0                 2.6
     Expenses...................
------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For
  presentational purposes, we are displaying one decimal, and therefore,
  the detailed cost weights may not add to the aggregate cost weights or
  to 100.0 due to rounding.
\1\ Contract labor is distributed to wages and salaries and employee
  benefits based on the share of total compensation that each category
  represents.

2. Price Proxies Used To Measure Operating Cost Category Growth
    After developing the 27 cost weights for the proposed 2022-based 
SNF market basket, we selected the most appropriate wage and price 
proxies currently available to represent the rate of change for each 
cost category. With four exceptions (three for the capital-related 
expenses cost categories and one for PLI), we base the wage and price 
proxies on Bureau of Labor Statistics (BLS) data, and group them into 
one of the following BLS categories:
     Employment Cost Indexes. Employment Cost Indexes (ECIs) 
measure the rate of change in employment wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. ECIs are superior to Average Hourly Earnings (AHE) 
as price proxies for input price indexes because they are not affected 
by shifts in occupation or industry mix, and because they measure pure 
price change and are available by both occupational group and by 
industry. The industry ECIs are based on the NAICS and the occupational 
ECIs are based on the Standard Occupational Classification System 
(SOC).
     Producer Price Indexes. Producer Price Indexes (PPIs) 
measure the average change over time in the selling prices received by 
domestic producers for their output. The prices included in the PPI are 
from the first commercial transaction for many products and some 
services (https://www.bls.gov/ppi/).
     Consumer Price Indexes. Consumer Price Indexes (CPIs) 
measure the average change over time in the prices paid by urban 
consumers for a market basket of consumer goods and services (https://www.bls.gov/cpi/). CPIs are only used when the purchases are similar to 
those of retail consumers rather than purchases at the producer level, 
or if no appropriate PPIs are available.
    We evaluate the price proxies using the criteria of reliability, 
timeliness, availability, and relevance:
     Reliability. Reliability indicates that the index is based 
on valid statistical methods and has low sampling variability. Widely 
accepted statistical methods ensure that the data were collected and 
aggregated in a way that can be replicated. Low sampling variability is 
desirable because it indicates that the sample reflects the typical 
members of the population. (Sampling variability is variation that 
occurs by chance because only a sample was surveyed rather than the 
entire population.)
     Timeliness. Timeliness implies that the proxy is published 
regularly, preferably at least once a quarter. The market baskets are 
updated quarterly, and therefore, it is important for the underlying 
price proxies to be up-to-date, reflecting the most recent data 
available. We believe that using proxies that are published regularly 
(at least quarterly, whenever possible) helps to ensure that we are 
using the most recent data available to update the market basket. We 
strive to use publications that are disseminated frequently, because we 
believe that this is an optimal way to stay abreast of the most current 
data available.
     Availability. Availability means that the proxy is 
publicly available. We prefer that our proxies are publicly available 
because this will help ensure that our market basket updates are as 
transparent to the public as possible. In addition, this enables the 
public to be able to obtain the price proxy data on a regular basis.
     Relevance. Relevance means that the proxy is applicable 
and representative of the cost category weight to which it is applied.
    We believe that the CPIs, PPIs, and ECIs that we have selected meet 
these criteria. Therefore, we believe that they continue to be the best 
measure of price changes for the cost categories to which they would be 
applied.
    Table 19 lists all price proxies for the proposed 2022-based SNF 
market basket. Below is a detailed explanation of the price proxies we 
are proposing to use for each operating cost category.
a. Wages and Salaries
    We are proposing to use the ECI for Wages and Salaries for Private 
Industry Workers in Nursing Care Facilities

[[Page 23444]]

(NAICS 6231; BLS series code CIU2026231000000I) to measure price growth 
of this category. NAICS 623 includes facilities that provide a mix of 
health and social services, with many of the health services requiring 
some level of nursing services. Within NAICS 623 is NAICS 6231, which 
includes nursing care facilities primarily engaged in providing 
inpatient nursing and rehabilitative services. These facilities, which 
are most comparable to Medicare-certified SNFs, provide skilled nursing 
and continuous personal care services for an extended period of time, 
and, therefore, have a permanent core staff of registered or licensed 
practical nurses. This is the same index used in the 2018-based SNF 
market basket.
b. Employee Benefits
    We are proposing to use the ECI for Benefits for Nursing Care 
Facilities (NAICS 6231) to measure price growth of this category. The 
ECI for Benefits for Nursing Care Facilities is calculated using BLS's 
total compensation (BLS series ID CIU2016231000000I) for nursing care 
facilities series and the relative importance of wages and salaries 
within total compensation. We believe this constructed ECI series is 
technically appropriate for the reason stated above in the Wages and 
Salaries price proxy section. This is the same index used in the 2018-
based SNF market basket.
c. Electricity and Other Non-Fuel Utilities
    We are proposing to use the PPI Commodity for Commercial Electric 
Power (BLS series code WPU0542) to measure the price growth of this 
cost category as Electricity costs account for 93 percent of these 
expenses. This is the same index used for the Electricity cost category 
in the 2018-based SNF market basket.
d. Fuel: Oil and Gas
    We are proposing to use a blended proxy composed of the PPI 
Industry for Petroleum Refineries (NAICS 324110) (BLS series code 
PCU32411-32411), the PPI Commodity for Natural Gas (NAICS 221200)(BLS 
series code WPU0531), and the PPI for Other Petroleum and Coal Products 
manufacturing (NAICS 324190)(BLS series code PCU32419-32419).
    Our analysis of 2017 Benchmark I-O data for Nursing and Community 
Care Facilities found that these three NAICS industries account for 
approximately 93 percent of SNF Fuel: Oil and Gas expenses. The 
remaining 7 percent of SNF Fuel: Oil and Gas expenses are for two other 
incidental NAICS industries including Coal Mining and Petrochemical 
Manufacturing. We are proposing to create a blended index based on the 
three NAICS Fuel: Oil and Gas expenses listed above that account for 93 
percent of SNF Fuel: Oil and Gas expenses. We propose to create this 
blend based on each NAICS' expenses as a share of their sum. These 
expenses as a share of their sum are listed in Table 15.
    The 2018-based SNF market basket used a blended Fuel: Oil and Gas 
proxy that was based on 2012 Benchmark I-O data. We believe our 
proposed Fuel: Oil and Gas blended index for the proposed 2022-based 
SNF market basket is technically appropriate as it reflects more recent 
data on SNFs purchasing patterns. Table 16 provides the weights for the 
2022- and 2018-based blended Fuel: Oil and Gas index.

                                Table 15--Fuel: Oil and Gas Blended Index Weights
----------------------------------------------------------------------------------------------------------------
                                                                                  Proposed 2022-
                   NAICS                                 Price proxy                based index     2018-Based
                                                                                        (%)          index (%)
----------------------------------------------------------------------------------------------------------------
221200.....................................  PPI Commodity for Natural Gas......               7               7
324110.....................................  PPI Industry for Petroleum                       72              61
                                              Refineries.
324190.....................................  PPI for Other Petroleum and Coal                 21              32
                                              Products manufacturing.
                                                                                 -------------------------------
    Total..................................  ...................................             100             100
----------------------------------------------------------------------------------------------------------------

e. Professional Liability Insurance
    We are proposing to use the CMS Hospital Professional Liability 
Insurance Index to measure price growth of this category. We were 
unable to find a reliable data source that collects SNF-specific PLI 
data. Therefore, we propose to use the CMS Hospital Professional 
Liability Index, which tracks price changes for commercial insurance 
premiums for a fixed level of coverage, holding non-price factors 
constant (such as a change in the level of coverage). This is the same 
index used in the 2018-based SNF market basket. We believe this is an 
appropriate proxy to measure the price growth associated of SNF PLI as 
it captures the price inflation associated with other medical 
institutions that serve Medicare patients.
f. Pharmaceuticals
    We are proposing to use the PPI Commodity for Pharmaceuticals for 
Human Use, Prescription (BLS series code WPUSI07003) to measure the 
price growth of this cost category. This is the same index used in the 
2018-based SNF market basket.
g. Food: Direct Purchases
    We are proposing to use the PPI Commodity for Processed Foods and 
Feeds (BLS series code WPU02) to measure the price growth of this cost 
category. This is the same index used in the 2018-based SNF market 
basket.
h. Food: Contract Services
    We are proposing to use the CPI All Urban for Food Away From Home 
(All Urban Consumers) (BLS series code CUUR0000SEFV) to measure the 
price growth of this cost category. This is the same index used in the 
2018-based SNF market basket.
i. Chemicals
    For measuring price change in the Chemicals cost category, we are 
proposing to use a blended PPI composed of the Industry PPIs for Other 
Basic Organic Chemical Manufacturing (NAICS 325190) (BLS series code 
PCU32519-32519), Soap and Cleaning Compound Manufacturing (NAICS 
325610) (BLS series code PCU32561-32561), and All Other Chemical 
Product and Preparation Manufacturing (NAICS 3259A0) (BLS series code 
PCU325998325998).
    Using the 2017 Benchmark I-O data, we found that these three NAICS 
industries accounted for approximately 95 percent of SNF chemical 
expenses. The remaining 5 percent of SNF chemical expenses are for 
three other incidental NAICS chemicals industries

[[Page 23445]]

such as Paint and Coating Manufacturing. We are proposing to create a 
blended index based on the three NAICS chemical expenses listed above 
that account for 95 percent of SNF chemical expenses. We propose to 
create this blend based on each NAICS' expenses as a share of their 
sum. These expenses as a share of their sum are listed in Table 16.
    The 2018-based SNF market basket used a blended chemical proxy that 
was based on 2012 Benchmark I-O data. We believe our proposed chemical 
blended index for the proposed 2022-based SNF market basket is 
technically appropriate as it reflects more recent data on SNFs 
purchasing patterns. Table 16 provides the weights for the proposed 
2022-based blended chemical index and the 2018-based blended chemical 
index.

                                    Table 16--Chemical Blended Index Weights
----------------------------------------------------------------------------------------------------------------
                                                                                  Proposed 2022-
                   NAICS                                 Price proxy                based index     2018-Based
                                                                                        (%)          index (%)
----------------------------------------------------------------------------------------------------------------
325190.....................................  PPI for Other Basic Organic                      49              34
                                              Chemical Manufacturing.
325610.....................................  PPI for Soap and Cleaning Compound                9              21
                                              Manufacturing.
325998.....................................  PPI for Other Miscellaneous                      42              45
                                              Chemical Product Manufacturing.
                                                                                 -------------------------------
    Total..................................  ...................................             100             100
----------------------------------------------------------------------------------------------------------------

j. Medical Instruments and Supplies
    For measuring price change in the Medical Instruments and Supplies 
cost category, we are proposing to use a blended proxy. The 2017 
Benchmark I-O data shows 62 percent of medical instruments and supply 
costs are for Surgical and medical instrument manufacturing costs 
(NAICS 339112) and 38 percent are for Surgical appliance and supplies 
manufacturing costs (NAICS 339113). To proxy the price changes 
associated with NAICS 339112, we propose using the PPI--Commodity--
Surgical and medical instruments (BLS series code WPU1562). To proxy 
the price changes associated with NAICS 339113, we propose to use 50 
percent for the PPI--Commodity--Medical and surgical appliances and 
supplies (BLS series code WPU1563) and 50 percent for the PPI Commodity 
data for Miscellaneous products-Personal safety equipment and clothing 
(BLS series code WPU1571). The latter price proxy would reflect 
personal protective equipment including but not limited to face shields 
and protective clothing. The 2017 Benchmark I-O data does not provide 
specific expenses for personal protective equipment (which would be 
reflected in the NAICS 339113 expenses); however, we recognize that 
this category reflects costs faced by SNFs. In absence of any specific 
cost data on personal protective equipment, we propose to include the 
PPI Commodity data for Miscellaneous products-Personal safety equipment 
and clothing (BLS series code WPU1571) in the blended proxy for Medical 
Instruments and Supplies cost category with a weight of 19 percent 
(that is, 50 percent of the NAICS 339113 expenses as a percent of the 
sum of NAICS 339113 and NAICS 339112 expenses from the I-O).
    The 2018-based SNF market basket used a blended Medical Instruments 
and Supplies proxy that was based on 2012 Benchmark I-O data. We 
believe our proposed blended index for the proposed 2022-based SNF 
market basket is technically appropriate as it reflects more recent 
data on SNFs purchasing patterns. Table 17 provides the proposed 
Medical Instruments and Supplies cost weight blended price proxy.

                        Table 17--Medical Instruments and Supplies Blended Index Weights
----------------------------------------------------------------------------------------------------------------
                                                                                  Proposed 2022-
                     NAICS                                 Price proxy              based index     2018-Based
                                                                                        (%)          index (%)
----------------------------------------------------------------------------------------------------------------
339112........................................  PPI--Commodity--Surgical and                  62              46
                                                 medical instruments (WUI1562).
339113........................................  PPI--Commodity--Medical and                   19              27
                                                 surgical appliances and
                                                 supplies (WPU1563).
                                                PPI Commodity data for                        19              27
                                                 Miscellaneous products-Personal
                                                 safety equipment and clothing
                                                 (WPU1571).
                                                                                 -------------------------------
    Total.....................................  ................................             100             100
----------------------------------------------------------------------------------------------------------------

k. Rubber and Plastics
    We are proposing to use the PPI Commodity for Rubber and Plastic 
Products (BLS series code WPU07) to measure price growth of this cost 
category. This is the same index used in the 2018-based SNF market 
basket.
l. Paper and Printing Products
    We are proposing to use a 86/14 blend of the PPI Commodity for 
Converted Paper and Paperboard Products (BLS series code WPU0915) and 
the PPI Commodity for Publications Printed Matter and Printing Material 
(BLS Series Code WPU094) to measure the price growth of this cost 
category. The 2017 Benchmark I-O data shows that 86 percent of paper 
and printing expenses are for paper manufacturing (NAICS 322) and the 
remaining expenses are for Printing (NAICS 323110). The 2018-based SNF 
market basket used the PPI Commodity for Converted Paper and Paperboard 
Products (BLS series code WPU0915) to measure the price growth of this 
cost category.
m. Apparel
    We are proposing to use the PPI Commodity for Apparel (BLS series 
code WPU0381) to measure the price growth of this cost category. This 
is the same index used in the 2018-based SNF market basket.

[[Page 23446]]

n. Machinery and Equipment
    We are proposing to use the PPI Commodity for Machinery and 
Equipment (BLS series code WPU11) to measure the price growth of this 
cost category. This is the same index used in the 2018-based SNF market 
basket.
o. Miscellaneous Products
    For measuring price change in the Miscellaneous Products cost 
category, we are proposing to use the PPI Commodity for Finished Goods 
less Food and Energy (BLS series code WPUFD4131). Both food and energy 
are already adequately represented in separate cost categories and 
should not also be reflected in this cost category. This is the same 
index used in the 2018-based SNF market basket.
p. Professional Fees: Labor-Related
    We are proposing to use the ECI for Total Compensation for Private 
Industry Workers in Professional and Related (BLS series code 
CIU2010000120000I) to measure the price growth of this category. This 
is the same index used in the 2018-based SNF market basket.
q. Administrative and Facilities Support Services
    We are proposing to use the ECI for Total Compensation for Private 
Industry Workers in Office and Administrative Support (BLS series code 
CIU2010000220000I) to measure the price growth of this category. This 
is the same index used in the 2018-based SNF market basket.
r. Installation, Maintenance and Repair Services
    We are proposing to use the ECI for Total Compensation for All 
Civilian Workers in Installation, Maintenance, and Repair (BLS series 
code CIU1010000430000I) to measure the price growth of this new cost 
category. This is the same index used in the 2018-based SNF market 
basket.
s. All Other: Labor-Related Services
    We are proposing to use the ECI for Total Compensation for Private 
Industry Workers in Service Occupations (BLS series code 
CIU2010000300000I) to measure the price growth of this cost category. 
This is the same index used in the 2018-based SNF market basket.
t. Professional Fees: Non-Labor-Related
    We are proposing to use the ECI for Total Compensation for Private 
Industry Workers in Professional and Related (BLS series code 
CIU2010000120000I) to measure the price growth of this category. This 
is the same index used in the 2018-based SNF market basket.
u. Financial Services
    We are proposing to use the ECI for Total Compensation for Private 
Industry Workers in Financial Activities (BLS series code 
CIU201520A000000I) to measure the price growth of this cost category. 
This is the same index used in the 2018-based SNF market basket.
v. Telephone Services
    We are proposing to use the CPI All Urban for Telephone Services 
(BLS series code CUUR0000SEED) to measure the price growth of this cost 
category. This is the same index used in the 2018-based SNF market 
basket.
w. All Other: Non-Labor-Related Services
    We are proposing to use the CPI All Urban for All Items Less Food 
and Energy (BLS series code CUUR0000SA0L1E) to measure the price growth 
of this cost category. This is the same index used in the 2018-based 
SNF market basket.
3. Price Proxies Used To Measure Capital Cost Category Growth
    We are proposing to apply the same capital price proxies as were 
used in the 2018-based SNF market basket, and below is a detailed 
explanation of the price proxies used for each capital cost category. 
We are also proposing to continue to vintage weight the capital price 
proxies for Depreciation and Interest to capture the long-term 
consumption of capital. This vintage weighting method is the same 
method that was used for the 2018-based SNF market basket and is 
described below.
     Depreciation--Building and Fixed Equipment: We are 
proposing to use the BEA Chained Price Index for Private Fixed 
Investment in Structures, Nonresidential, Hospitals and Special Care 
(BEA Table 5.4.4. Price Indexes for Private Fixed Investment in 
Structures by Type). This BEA index is intended to capture prices for 
construction of facilities such as hospitals, nursing homes, hospices, 
and rehabilitation centers. This is the same index used in the 2018-
based SNF market basket.
     Depreciation--Movable Equipment: We are proposing to use 
the PPI Commodity for Machinery and Equipment (BLS series code WPU11). 
This price index reflects price inflation associated with a variety of 
machinery and equipment that would be utilized by SNFs, including but 
not limited to medical equipment, communication equipment, and 
computers. This is the same index used in the 2018-based SNF market 
basket.
     Nonprofit Interest: We are proposing to use the average 
yield on Municipal Bonds (Bond Buyer 20-bond index). This is the same 
index used in the 2018-based SNF market basket.
     For-Profit Interest: For the For-Profit Interest cost 
category, we are proposing to use the iBoxx AAA Corporate Bond Yield 
index. This is the same index used in the 2018-based SNF market basket.
     Other Capital: Since this category includes fees for 
insurances, taxes, and other capital-related costs, we are proposing to 
use the CPI for Rent of Primary Residence (BLS series code 
CUUS0000SEHA), which would reflect the price growth of these costs. 
This is the same index used in the 2018-based SNF market basket.
    We believe that these price proxies are the most appropriate 
proxies for SNF capital costs that meet our selection criteria of 
relevance, timeliness, availability, and reliability.
    As stated above, we are proposing to continue to vintage weight the 
capital price proxies for Depreciation and Interest to capture the 
long-term consumption of capital. To capture the long-term nature, the 
price proxies are vintage-weighted and the vintage weights are 
calculated using a two-step process. First, we determine the expected 
useful life of capital and debt instruments held by SNFs. Second, we 
identify the proportion of expenditures within a cost category that is 
attributable to each individual year over the useful life of the 
relevant capital assets, or the vintage weights.
    We rely on Bureau of Economic Analysis (BEA) fixed asset data to 
derive the useful lives of both fixed and movable capital, which is the 
same data source used to derive the useful lives for the 2018-based SNF 
market basket. The specifics of the data sources used are explained 
below.
a. Calculating Useful Lives for Movable and Fixed Assets
    Estimates of useful lives for movable and fixed assets for the 
proposed 2022-based SNF market basket are 9 and 27 years, respectively. 
These estimates are based on three data sources from the BEA: (1) 
current-cost average age; (2) historical-cost average age; and (3) 
industry-specific current cost net stocks of assets.
    BEA current-cost and historical-cost average age data by asset type 
are not available by industry but are published at the aggregate level 
for all industries. The BEA does publish current-cost net capital 
stocks at the detailed asset level for specific industries. There are 
64 detailed movable assets (including intellectual property) and there 
are 32 detailed fixed assets in the BEA

[[Page 23447]]

estimates. Since we seek aggregate useful life estimates applicable to 
SNFs, we developed a methodology to approximate movable and fixed asset 
ages for nursing and residential care services (NAICS 623) using the 
published BEA data. For the proposed 2022-based SNF market basket, we 
use the current-cost average age for each asset type from the BEA fixed 
assets Table 2.9 for all assets and weight them using current-cost net 
stock levels for each of these asset types in the nursing and 
residential care services industry, NAICS 6230. For example, nonelectro 
medical equipment current-cost net stock (accounting for about 29 
percent of total movable equipment current-cost net stock in 2022 is 
multiplied by an average age of 4.8 years for nonelectro medical 
equipment for all industries. Current-cost net stock levels are 
available for download from the BEA website at https://apps.bea.gov/iTable/index_FA.cfm. We then aggregate the ``weighted'' current-cost 
net stock levels (average age multiplied by current-cost net stock) 
into movable and fixed assets for NAICS 6230. We then adjust the 
average ages for movable and fixed assets by the ratio of historical-
cost average age (Table 2.10) to current-cost average age (Table 2.9).
    This produces historical cost average age data for fixed 
(structures) and movable (equipment and intellectual property) assets 
specific to NAICS 6230 of 13.6 and 4.4 years for 2022, respectively. 
This reflects the average age of an asset at a given point in time, 
whereas we want to estimate a useful life of the asset. To do this, we 
multiply each of the average age estimates by two to convert to average 
useful lives with the assumption that the average age reflects the 
midpoint of useful life and is normally distributed (about half of the 
assets are below the average at a given point in time, and half above 
the average at a given point in time). This produces estimates of 
likely useful lives of 27.2 and 8.8 years for fixed and movable assets, 
which we round to 27 and 9 years, respectively. We are proposing an 
interest vintage weight time span of 25 years, obtained by weighting 
the fixed and movable vintage weights (27 years and 9 years, 
respectively) by the fixed and movable split (86 percent and 14 
percent, respectively). This is the same methodology used for the 2018-
based SNF market basket, which had useful lives of 26 years and 9 years 
for fixed and movable assets, respectively.
b. Constructing Vintage Weights
    Given the expected useful life of capital (fixed and movable 
assets) and debt instruments, we must determine the proportion of 
capital expenditures attributable to each year of the expected useful 
life for each of the three asset types: building and fixed equipment, 
movable equipment, and interest. These proportions represent the 
vintage weights. We were not able to find a historical time series of 
capital expenditures by SNFs. Therefore, we approximated the capital 
expenditure patterns of SNFs over time using alternative SNF data 
sources. For building and fixed equipment, we used the stock of beds in 
nursing homes from the National Nursing Home Survey (NNHS) conducted by 
the National Center for Health Statistics (NCHS) for 1962 through 1999. 
For 2000 through 2018, we extrapolated the 1999 bed data forward using 
measurements of the moving average rate of growth in the number of beds 
as reported in SNF Medicare cost report data on Worksheet S-3, part I, 
column 1, line 8. A more detailed discussion of this methodology was 
published in the FY 2022 SNF final rule (86 FR 42457). We are proposing 
to continue this methodology for the proposed 2022-based SNF market 
basket by extrapolating the 2018 bed data forward using the average 
growth in the number of beds over the 2019 to 2022 time period. We then 
propose to use the change in the stock of beds each year to approximate 
building and fixed equipment purchases for that year. This procedure 
assumes that bed growth reflects the growth in capital-related costs in 
SNFs for building and fixed equipment. We believe that this assumption 
is reasonable because the number of beds reflects the size of a SNF, 
and as a SNF adds beds, it also likely adds fixed capital.
    As was done for the 2018-based SNF market basket (as well as prior 
market baskets), we are proposing to estimate movable equipment 
purchases based on the ratio of ancillary costs to routine costs. The 
time series of the ratio of ancillary costs to routine costs for SNFs 
measures changes in intensity in SNF services, which are assumed to be 
associated with movable equipment purchase patterns. The assumption 
here is that as ancillary costs increase compared to routine costs, the 
SNF caseload becomes more complex and would require more movable 
equipment. The lack of movable equipment purchase data for SNFs over 
time required us to use alternative SNF data sources. A more detailed 
discussion of this methodology was published in the FY 2008 SNF final 
rule (72 FR 43428). We believe the resulting two time series, 
determined from beds and the ratio of ancillary to routine costs, 
reflect real capital purchases of building and fixed equipment and 
movable equipment over time.
    To obtain nominal purchases, which are used to determine the 
vintage weights for interest, we converted the two real capital 
purchase series from 1963 through 2022 determined above to nominal 
capital purchase series using their respective price proxies (the BEA 
Chained Price Index for Nonresidential Construction for Hospitals & 
Special Care Facilities and the PPI for Machinery and Equipment). We 
then combined the two nominal series into one nominal capital purchase 
series for 1963 through 2022. Nominal capital purchases are needed for 
interest vintage weights to capture the value of debt instruments.
    Once we created these capital purchase time series for 1963 through 
2022, we averaged different periods to obtain an average capital 
purchase pattern over time: (1) for building and fixed equipment, we 
averaged 34, 27-year periods; (2) for movable equipment, we averaged 
52, 9-year periods; and (3) for interest, we averaged 36, 25-year 
periods. We calculate the vintage weight for a given year by dividing 
the capital purchase amount in any given year by the total amount of 
purchases during the expected useful life of the equipment or debt 
instrument.
    The vintage weights for the proposed 2022-based SNF market basket 
and the 2018-based SNF market basket are presented in Table 18.

[[Page 23448]]



                  Table 18--Proposed 2022-Based Vintage Weights and 2018-Based Vintage Weights
----------------------------------------------------------------------------------------------------------------
                                       Building and fixed         Movable equipment             Interest
                                            equipment        ---------------------------------------------------
                                   --------------------------
             Year \1\                 Proposed                  Proposed    2018-based    Proposed    2018-based
                                     2022-based   2018-based   2022-based    9 years     2022-based    24 years
                                      27 years     26 years     9 years                   25 years
----------------------------------------------------------------------------------------------------------------
1.................................        0.049        0.049        0.106        0.135        0.026        0.027
2.................................        0.048        0.050        0.121        0.140        0.027        0.028
3.................................        0.048        0.049        0.119        0.128        0.028        0.029
4.................................        0.046        0.047        0.103        0.112        0.030        0.031
5.................................        0.045        0.045        0.117        0.119        0.031        0.032
6.................................        0.043        0.043        0.124        0.111        0.033        0.034
7.................................        0.042        0.041        0.101        0.084        0.035        0.036
8.................................        0.042        0.040        0.093        0.080        0.038        0.037
9.................................        0.039        0.037        0.115        0.091        0.041        0.038
10................................        0.037        0.035  ...........  ...........        0.043        0.040
11................................        0.038        0.036  ...........  ...........        0.045        0.043
12................................        0.039        0.036  ...........  ...........        0.045        0.047
13................................        0.038        0.036  ...........  ...........        0.044        0.049
14................................        0.038        0.036  ...........  ...........        0.044        0.051
15................................        0.038        0.035  ...........  ...........        0.045        0.050
16................................        0.036        0.036  ...........  ...........        0.045        0.048
17................................        0.034        0.036  ...........  ...........        0.045        0.048
18................................        0.033        0.038  ...........  ...........        0.045        0.048
19................................        0.033        0.037  ...........  ...........        0.043        0.048
20................................        0.032        0.036  ...........  ...........        0.042        0.048
21................................        0.031        0.035  ...........  ...........        0.042        0.047
22................................        0.030        0.035  ...........  ...........        0.043        0.047
23................................        0.030        0.035  ...........  ...........        0.044        0.047
24................................        0.028        0.033  ...........  ...........        0.045        0.049
25................................        0.027        0.032  ...........  ...........        0.051  ...........
26................................        0.027        0.032  ...........  ...........  ...........  ...........
27................................        0.027  ...........  ...........  ...........  ...........  ...........
                                   -----------------------------------------------------------------------------
    Total.........................        1.000        1.000        1.000        1.000        1.000        1.000
----------------------------------------------------------------------------------------------------------------
Note: The vintage weights are calculated using thirteen decimals. For presentation purposes, we are displaying
  three decimals and therefore, the detail vintage weights may not add to 1.000 due to rounding.
\1\ Year 1 represents the vintage weight applied to the farthest year while the vintage weight for year 27, for
  example, would apply to the most recent year.

    The process of creating vintage-weighted price proxies requires 
applying the vintage weights to the price proxy index where the last 
applied vintage weight in Table 18 is applied to the most recent data 
point. We have provided on the CMS website an example of how the 
vintage weighting price proxies are calculated, using example vintage 
weights and example price indices. The example can be found at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html in the zip 
file titled ``Weight Calculations as described in the IPPS FY 2010 
Proposed Rule.''
    Table 19 shows all the price proxies for the proposed 2022-based 
SNF market basket.

  Table 19--Price Proxies for the Proposed 2022-Based SNF Market Basket
------------------------------------------------------------------------
         Cost category               Weight            Price proxy
------------------------------------------------------------------------
Total..........................           100.0
Compensation...................            61.2
    Wages and Salaries \1\.....            51.8  ECI for Wages and
                                                  Salaries for Private
                                                  Industry Workers in
                                                  Nursing Care
                                                  Facilities.
    Employee Benefits \1\......             9.3  ECI for Total Benefits
                                                  for Private Industry
                                                  Workers in Nursing
                                                  Care Facilities.
Utilities......................             2.7
    Electricity and Other Non-              1.8  PPI Commodity for
     Fuel Utilities.                              Commercial Electric
                                                  Power.
        Fuel: Oil and Gas......             0.8  Blend of PPIs.
Professional Liability                      1.3  CMS Professional
 Insurance.                                       Liability Insurance
                                                  Premium Index.
All Other......................            26.5
Other Products.................            16.1
        Pharmaceuticals........             6.4  PPI Commodity for
                                                  Pharmaceuticals for
                                                  Human Use,
                                                  Prescription.
        Food: Direct Purchase..             2.9  PPI Commodity for
                                                  Processed Foods and
                                                  Feeds.
        Food: Contract Purchase             3.4  CPI for Food Away From
                                                  Home (All Urban
                                                  Consumers).
        Chemicals..............             0.2  Blend of PPIs.
        Medical Instruments and             0.4  Blend of PPIs.
         Supplies.

[[Page 23449]]

 
        Rubber and Plastics....             1.0  PPI Commodity for
                                                  Rubber and Plastic
                                                  Products.
        Paper and Printing                  0.5  Blend of PPIs.
         Products.
        Apparel................             0.4  PPI Commodity for
                                                  Apparel.
        Machinery and Equipment             0.7  PPI Commodity for
                                                  Machinery and
                                                  Equipment.
        Miscellaneous Products.             0.2  PPI Commodity for
                                                  Finished Goods Less
                                                  Food and Energy.
All Other Services.............            10.5
    Labor-Related Services.....             6.5
        Professional Fees:                  3.6  ECI for Total
         Labor-Related.                           Compensation for
                                                  Private Industry
                                                  Workers in
                                                  Professional and
                                                  Related.
        Installation,                       0.4  ECI for Total
         Maintenance, and                         Compensation for All
         Repair Services.                         Civilian workers in
                                                  Installation,
                                                  Maintenance, and
                                                  Repair.
        Administrative and                  0.5  ECI for Total
         Facilities Support.                      Compensation for
                                                  Private Industry
                                                  Workers in Office and
                                                  Administrative
                                                  Support.
        All Other: Labor-                   2.0  ECI for Total
         Related Services.                        Compensation for
                                                  Private Industry
                                                  Workers in Service
                                                  Occupations.
    Non Labor-Related Services.             4.0
        Professional Fees:                  1.8  ECI for Total
         Nonlabor-Related.                        Compensation for
                                                  Private Industry
                                                  Workers in
                                                  Professional and
                                                  Related.
        Financial Services.....             0.5  ECI for Total
                                                  Compensation for
                                                  Private Industry
                                                  Workers in Financial
                                                  Activities.
        Telephone Services.....             0.4  CPI for Telephone
                                                  Services.
        All Other: Nonlabor-                1.3  CPI for All Items Less
         Related Services.                        Food and Energy.
Capital-Related Expenses.......             8.3
    Total Depreciation.........             3.0
        Building and Fixed                  2.5  BEA's Chained Price
         Equipment.                               Index for Private
                                                  Fixed Investment in
                                                  Structures,
                                                  Nonresidential,
                                                  Hospitals and Special
                                                  Care--vintage weighted
                                                  27 years.
        Movable Equipment......             0.4  PPI Commodity for
                                                  Machinery and
                                                  Equipment--vintage
                                                  weighted 9 years.
    Total Interest.............             2.3
        For-Profit SNFs........             0.7  iBoxx--Average yield on
                                                  Aaa bond--vintage
                                                  weighted 25 years.
Government and Nonprofit SNFs..             1.6  Bond Buyer--Average
                                                  yield on Domestic
                                                  Municipal Bonds--
                                                  vintage weighted 25
                                                  years.
Other Capital-Related Expenses.             3.0  CPI for Rent of Primary
                                                  Residence.
------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For
  presentation purposes, we are displaying one decimal, and therefore,
  the detailed cost weights may not add to the aggregate cost weights or
  to 100.0 due to rounding.
\1\ Contract labor is distributed to wages and salaries and employee
  benefits based on the share of total compensation that each category
  represents.

4. Labor-Related Share
    We define the labor-related share (LRS) as those expenses that are 
labor-intensive and vary with, or are influenced by, the local labor 
market. Each year, we calculate a revised labor-related share based on 
the relative importance of labor-related cost categories in the input 
price index. Effective for FY 2025, we are proposing to revise and 
update the labor-related share to reflect the relative importance of 
the proposed 2022-based SNF market basket cost categories that we 
believe are labor-intensive and vary with, or are influenced by, the 
local labor market. For the proposed 2022-based SNF market basket these 
are: (1) Wages and Salaries (including allocated contract labor costs 
as described above); (2) Employee Benefits (including allocated 
contract labor costs as described above); (3) Professional Fees: Labor-
Related; (4) Administrative and Facilities Support Services; (5) 
Installation, Maintenance, and Repair Services; (6) All Other: Labor-
Related Services; and (7) a proportion of capital-related expenses. We 
propose to continue to include a proportion of capital-related expenses 
because a portion of these expenses are deemed to be labor-intensive 
and vary with, or are influenced by, the local labor market. For 
example, a proportion of construction costs for a medical building 
would be attributable to local construction workers' compensation 
expenses.
    Consistent with previous SNF market basket revisions and rebasings, 
the All Other: Labor-related services cost category is mostly comprised 
of building maintenance and security services (including, but not 
limited to, landscaping services, janitorial services, waste management 
services services) and dry cleaning and laundry services. Because these 
services tend to be labor-intensive and are mostly performed at the SNF 
facility or in the local area (and therefore, unlikely to be purchased 
in the national market), we believe that they meet our definition of 
labor-related services.
    These are the same cost categories we have included in the LRS for 
the 2018-based SNF market basket rebasing (86 FR 42461), as well as the 
same categories included in the LRS for the 2021-based IRF market 
basket (88 FR 50984), and 2021-based IPF market basket (88 FR 51078).
    As discussed in the FY 2022 SNF PPS final rule (86 FR 42462), in an 
effort to determine more accurately the share of nonmedical 
professional fees (included in the proposed 2022-based SNF market 
basket Professional Fees cost categories) that should be included in 
the labor-related share, we surveyed SNFs regarding the proportion of 
those fees that are attributable to local firms and the proportion that 
are purchased from national firms. Based on these weighted results, we 
determined that SNFs purchase, on average, the following portions of 
contracted professional services inside their local labor market:
     78 percent of legal services.
     86 percent of accounting and auditing services.

[[Page 23450]]

     89 percent of architectural, engineering services.
     87 percent of management consulting services.
    Together, these four categories represent 3.6 percentage points of 
the total costs for the proposed 2022-based SNF market basket. We 
applied the percentages from this special survey to their respective 
SNF market basket weights to separate them into labor-related and 
nonlabor-related costs. As a result, we are designating 2.8 of the 3.6 
percentage points total to the labor-related share, with the remaining 
0.8 percentage point categorized as nonlabor-related.
    In addition to the professional services as previously listed, for 
the proposed 2022-based SNF market basket, we propose to allocate a 
proportion of the Home Office/Related Organization Contract Labor cost 
weight, calculated using the Medicare cost reports as previously 
stated, into the Professional Fees: Labor-Related and Professional 
Fees: Nonlabor-Related cost categories. We propose to classify these 
expenses as labor-related and nonlabor-related as many facilities are 
not located in the same geographic area as their home office, and, 
therefore, do not meet our definition for the labor-related share that 
requires the services to be purchased in the local labor market.
    Similar to the 2018-based SNF market basket, we propose for the 
proposed 2022-based SNF market basket to use the Medicare cost reports 
for SNFs to determine the home office labor-related percentages. The 
Medicare cost report requires a SNF to report information regarding its 
home office provider. Using information on the Medicare cost report, we 
compared the location of the SNF with the location of the SNF's home 
office. We propose to classify a SNF with a home office located in 
their respective labor market if the SNF and its home office are 
located in the same Metropolitan Statistical Area (MSA). Then we 
determine the proportion of the Home Office/Related Organization 
Contract Labor cost weight that should be allocated to the labor-
related share based on the percent of total Home Office/Related 
Organization Contract Labor costs for those SNFs that had home offices 
located in their respective local labor markets of total Home Office/
Related Organization Contract Labor costs for SNFs with a home office. 
We determined a SNF's and its home office's MSA using their zip code 
information from the Medicare cost report.
    Using this methodology, we determined that 25 percent of SNFs' Home 
Office/Related Organization Contract Labor costs were for home offices 
located in their respective local labor markets. Therefore, we propose 
to allocate 25 percent of the Home Office/Related Organization Contract 
Labor cost weight (0.1 percentage point = 0.6 percent x 25 percent) to 
the Professional Fees: Labor-Related cost weight and 75 percent of the 
Home Office/Related Organization Contract Labor cost weight to the 
Professional Fees: Nonlabor-Related cost weight (0.4 percentage point = 
0.6 percent x 75 percent). The 2018-based SNF market basket used a 
similar methodology for allocating the Home Office/Related Organization 
Contract Labor cost weight to the labor-related share.
    In summary, based on the two allocations mentioned earlier, we 
propose to apportion 2.9 percentage points into the Professional Fees: 
Labor-Related cost category consisting of the Professional Fees (2.8 
percentage points) and Home Office/Related Organization Contract Labor 
(0.1 percentage point) cost weights. This amount was added to the 
portion of professional fees that we already identified as labor-
related using the I-O data such as contracted advertising and marketing 
costs (approximately 0.6 percentage point of total costs) resulting in 
a Professional Fees: Labor-Related cost weight of 3.6 percent.
    Table 20 compares the FY 2025 labor-related share based on the 
proposed 2022-based SNF market basket relative importance and the FY 
2024 labor-related share based on the 2018-based SNF market basket 
relative importance as finalized in the FY 2024 SNF final rule (88 FR 
53213).

          Table 20--FY 2024 and FY 2025 SNF Labor-Related Share
------------------------------------------------------------------------
                                          Relative          Relative
                                         importance,       importance,
                                        labor-related     labor-related
                                       share, FY 2024    share, FY 2025
                                        23:2 forecast     23:4 forecast
                                             \1\               \2\
------------------------------------------------------------------------
Wages and Salaries \3\..............              52.5              53.2
Employee Benefits \3\...............               9.3               9.1
Professional Fees: Labor-Related....               3.4               3.5
Administrative & Facilities Support                0.6               0.4
 Services...........................
Installation, Maintenance & Repair                 0.4               0.5
 Services...........................
All other: Labor-Related services...               2.0               2.0
Capital-Related (.391)..............               2.9               3.2
                                     -----------------------------------
Total...............................              71.1              71.9
------------------------------------------------------------------------
\1\ Published in the Federal Register (88 FR 53213); based on the second
  quarter 2023 IHS Global Inc. forecast of the 2018-based SNF market
  basket, with historical data through first quarter 2023.
\2\ Based on the fourth quarter 2023 IHS Global Inc. forecast of the
  proposed 2022-based SNF market basket, with historical data through
  third quarter 2023.
\3\ The Wages and Salaries and Employee Benefits cost weight reflect
  contract labor costs as described above.

    The proposed FY 2025 SNF labor-related share is 0.8 percentage 
point higher than the FY 2024 SNF labor-related share (based on the 
2018-based SNF market basket). The higher labor-related share is 
primarily due to incorporating the 2022 Medicare cost report data, 
which resulted in a higher Compensation cost weight, as well as higher 
relative importance of the Capital cost category.
5. Market Basket Estimate for the FY 2025 SNF PPS Update
    As discussed previously in this proposed rule, beginning with the 
FY 2025 SNF PPS update, we are proposing to adopt the proposed 2022-
based SNF market basket as the appropriate market basket of goods and 
services for the SNF PPS. Consistent with historical practice, we 
estimate the market basket update for the SNF PPS based on IHS Global 
Inc.'s (IGI) forecast. IGI is a nationally

[[Page 23451]]

recognized economic and financial forecasting firm with which CMS 
contracts to forecast the components of the market baskets and total 
factor productivity (TFP).
    Based on IGI's fourth quarter 2023 forecast with historical data 
through the third quarter of 2023, the most recent estimate of the 
proposed 2022-based SNF market basket update for FY 2025 is 2.8 
percent--which is 0.1 percentage point lower than the FY 2025 percent 
change of the 2018-based SNF market basket. We are also proposing that 
if more recent data subsequently become available (for example, a more 
recent estimate of the market basket and/or the TFP), we would use such 
data, if appropriate, to determine the FY 2025 SNF market basket 
percentage change, labor-related share relative importance, forecast 
error adjustment, or productivity adjustment in the SNF PPS final rule.
    Table 21 compares the proposed 2022-based SNF market basket and the 
2018-based SNF market basket percent changes. While there are slight 
differences of up to 0.2 percentage point in certain years, there is no 
difference in the average growth rates between the two market baskets 
in either the historical (FY 2020-FY 2023) or forecast period (FY 2024-
FY 2026) when rounded to one decimal place.

   Table 21--Proposed 2022-Based SNF Market Basket and 2018-Based SNF
                Market Basket, Percent Changes: 2020-2026
------------------------------------------------------------------------
                                          Proposed 2022-
            Fiscal Year (FY)                 based SNF    2018-Based SNF
                                           market basket   market basket
------------------------------------------------------------------------
Historical data:
    FY 2020.............................             2.0             2.1
    FY 2021.............................             3.6             3.6
    FY 2022.............................             6.5             6.3
    FY 2023.............................             5.6             5.6
Average FY 2020-2023....................             4.4             4.4
Forecast:
    FY 2024.............................             3.7             3.7
    FY 2025.............................             2.8             2.9
    FY 2026.............................             2.7             2.7
Average FY 2024-2026....................             3.1             3.1
------------------------------------------------------------------------
Source: IHS Global, Inc. 4th quarter 2023 forecast with historical data
  through 3rd quarter 2023.

B. Proposed Changes to SNF PPS Wage Index

1. Core-Based Statistical Areas (CBSAs) for the FY 2025 SNF PPS Wage 
Index
a. Background
    Section 1888(e)(4)(G)(ii) of the Act requires that we adjust the 
federal rates to account for differences in area wage levels, using a 
wage index that the Secretary determines appropriate. Since the 
inception of the SNF PPS, we have used hospital inpatient wage data in 
developing a wage index to be applied to SNFs. We proposed to continue 
this practice for FY 2025, as we continue to believe that in the 
absence of SNF-specific wage data, using the hospital inpatient wage 
index data is appropriate and reasonable for the SNF PPS. As explained 
in the update notice for FY 2005 (69 FR 45786), the SNF PPS does not 
use the hospital area wage index's occupational mix adjustment, as this 
adjustment serves specifically to define the occupational categories 
more clearly in a hospital setting; moreover, the collection of the 
occupational wage data under the IPPS also excludes any wage data 
related to SNFs. Therefore, we believe that using the updated wage data 
exclusive of the occupational mix adjustment continues to be 
appropriate for SNF payments. As in previous years, we would continue 
to use, as the basis for the SNF PPS wage index, the IPPS hospital wage 
data, unadjusted for occupational mix, without taking into account 
geographic reclassifications under section 1886(d)(8) and (d)(10) of 
the Act, and without applying the rural floor under section 4410 of the 
BBA 1997 and the outmigration adjustment under section 1886(d)(13) of 
the Act. For FY 2025, the updated wage data are for hospital cost 
reporting periods beginning on or after October 1, 2020 and before 
October 1, 2021 (FY 2021 cost report data).
    The applicable SNF PPS wage index value is assigned to a SNF on the 
basis of the labor market area in which the SNF is geographically 
located. In the SNF PPS final rule for FY 2006 (70 FR 45026, August 4, 
2005), we adopted the changes discussed in OMB Bulletin No. 03-04 (June 
6, 2003), which announced revised definitions for Metropolitan 
Statistical Area (MSA) and the creation of micropolitan statistical 
areas and combined statistical areas. In adopting the Core-Based 
Statistical Areas (CBSA) geographic designations, we provided for a 1-
year transition in FY 2006 with a blended wage index for all providers. 
For FY 2006, the wage index for each provider consisted of a blend of 
50 percent of the FY 2006 MSA-based wage index and 50 percent of the FY 
2006 CBSA-based wage index (both using FY 2002 hospital data). We 
referred to the blended wage index as the FY 2006 SNF PPS transition 
wage index. As discussed in the SNF PPS final rule for FY 2006 (70 FR 
45041), since the expiration of this 1-year transition on September 30, 
2006, we have used the full CBSA-based wage index values.
    In the FY 2015 SNF PPS final rule (79 FR 45644 through 45646), we 
finalized changes to the SNF PPS wage index based on the newest OMB 
delineations, as described in OMB Bulletin No. 13-01, beginning in FY 
2015, including a 1-year transition with a blended wage index for FY 
2015. OMB Bulletin No. 13-01 established revised delineations for MSAs, 
Micropolitan Statistical Areas, and Combined Statistical Areas in the 
United States and Puerto Rico based on the 2010 Census, and provided 
guidance on the use of the delineations of these statistical areas 
using standards published in the June 28, 2010 Federal Register (75 FR 
37246 through 37252). Subsequently, on July 15, 2015, OMB issued OMB 
Bulletin No. 15-01, which provided minor updates to and superseded OMB 
Bulletin No. 13-01 that was issued on February 28, 2013. The attachment 
to OMB Bulletin No. 15-01 provided detailed information on the update 
to statistical areas since February 28, 2013. The updates provided in 
OMB Bulletin No. 15-01

[[Page 23452]]

were based on the application of the 2010 Standards for Delineating 
Metropolitan and Micropolitan Statistical Areas to Census Bureau 
population estimates for July 1, 2012 and July 1, 2013. In addition, on 
August 15, 2017, OMB issued Bulletin No. 17-01 which announced a new 
urban CBSA, Twin Falls, Idaho (CBSA 46300). As we previously stated in 
the FY 2008 SNF PPS proposed and final rules (72 FR 25538 through 
25539, and 72 FR 43423), and as we note in this proposed rule, this and 
all subsequent SNF PPS rules and notices are considered to incorporate 
any updates and revisions set forth in the most recent OMB bulletin 
that applies to the hospital wage data used to determine the current 
SNF PPS wage index.
    On April 10, 2018, OMB issued OMB Bulletin No. 18-03 which 
superseded the August 15, 2017 OMB Bulletin No. 17-01. Subsequently, on 
September 14, 2018, OMB issued OMB Bulletin No. 18-04, which superseded 
the April 10, 2018 OMB Bulletin No. 18-03. These bulletins established 
revised delineations for MSAs, Micropolitan Statistical Areas, and 
Combined Statistical Areas, and provided guidance on the use of the 
delineations of these statistical areas. A copy of bulletin No. 18-04, 
may be obtained at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf. While OMB Bulletin No. 18-04 is not based on new 
census data, it includes some material changes to the OMB statistical 
area delineations, including some new CBSAs, urban counties that would 
become rural, rural counties that would become urban, and existing 
CBSAs that would be split apart. OMB issued further revised CBSA 
delineations in OMB Bulletin No. 20-01, on March 6, 2020 (available on 
the web at https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf). However, we determined that the changes in OMB 
Bulletin No. 20-01 do not impact the CBSA-based labor market area 
delineations adopted in FY 2021. Therefore, CMS did not propose to 
adopt the revised OMB delineations identified in OMB Bulletin No. 20 01 
for FY 2022 through FY 2024.
    On July 21, 2023, OMB issued OMB Bulletin No. 23-01 (available at 
https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf) which updates and supersedes OMB Bulletin No. 20-01 based upon 
the 2020 Standards for Delineating Core Based Statistical Areas (``the 
2020 Standards'') published by the Office of Management and Budget 
(OMB) on July 16, 2021 (86 FR 37770). OMB Bulletin No. 23-01 revised 
CBSA delineations which are comprised of counties and equivalent 
entities (for example, boroughs, a city and borough, and a municipality 
in Alaska, planning regions in Connecticut, parishes in Louisiana, 
municipios in Puerto Rico, and independent cities in Maryland, 
Missouri, Nevada, and Virginia). For FY 2025, we propose to adopt the 
revised OMB delineations identified in OMB Bulletin No. 23-01.
    To implement these changes for the SNF PPS beginning in FY 2025, it 
is necessary to identify the revised labor market area delineation for 
each affected county and provider in the country. The revisions OMB 
published on July 21, 2023 contain a number of significant changes. For 
example, under the proposed revised OMB delineations, there would be 
new CBSAs, urban counties that would become rural, rural counties that 
would become urban, and existing CBSAs that would split apart. We 
discuss these changes in more detail later in this proposed rule.
b. Proposed Implementation of Revised Labor Market Area Delineations
    We typically delay implementing revised OMB labor market area 
delineations to allow for sufficient time to assess the new changes. 
For example, as discussed in the FY 2014 SNF PPS proposed rule (78 FR 
26448) and final rule (78 FR 47952), we delayed implementing the 
revised OMB statistical area delineations described in OMB Bulletin No. 
13-01 to allow for sufficient time to assess the new changes. We 
believe it is important for the SNF PPS to use the latest labor market 
area delineations available as soon as is reasonably possible to 
maintain a more accurate and up-to-date payment system that reflects 
the reality of population shifts and labor market conditions. We 
further believe that using the delineations reflected in OMB Bulletin 
No. 23-01 would increase the integrity of the SNF PPS wage index system 
by creating a more accurate representation of geographic variations in 
wage levels. We have reviewed our findings and impacts relating to the 
revised OMB delineations set forth in OMB Bulletin No. 23-01 and find 
no compelling reason to further delay implementation. Because we 
believe we have broad authority under section 1888(e)(4)(G)(ii) of the 
Act to determine the labor market areas used for the SNF PPS wage 
index, and because we believe the delineations reflected in OMB 
Bulletin No. 23-01 better reflect the local economies and wage levels 
of the areas in which hospitals are currently located, we are proposing 
to implement the revised OMB delineations as described in the July 21, 
2023 OMB Bulletin No. 23-01, for the SNF PPS wage index effective 
beginning in FY 2025. In addition, we will apply the permanent 5 
percent cap policy in FY 2025 on decreases in a hospital's wage index 
compared to its wage index for the prior fiscal year (FY 2024) to 
assist providers in adapting to the revised OMB delineations (if we 
finalize the implementation of such delineations for the SNF PPS wage 
index beginning in FY 2025). This policy is discussed in more detail 
later in this proposed rule. We invite comments on these proposals.
(1) Micropolitan Statistical Areas
    As discussed in the FY 2006 SNF PPS proposed rule (70 FR 29093 
through 29094) and final rule (70 FR 45041), we considered how to use 
the Micropolitan Statistical Area definitions in the calculation of the 
wage index. OMB defines a ``Micropolitan Statistical Area'' as a CBSA 
``associated with at least one urban cluster that has a population of 
at least 10,000, but less than 50,000'' (75 FR 37252). We refer to 
these as Micropolitan Areas. After extensive impact analysis, 
consistent with the treatment of these areas under the IPPS as 
discussed in the FY 2005 IPPS final rule (69 FR 49029 through 49032), 
we determined the best course of action would be to treat Micropolitan 
Areas as ``rural'' and include them in the calculation of each state's 
SNF PPS rural wage index (see 70 FR 29094 and 70 FR 45040 through 
45041)).
    Thus, the SNF PPS statewide rural wage index is determined using 
IPPS hospital data from hospitals located in non-MSA areas, and the 
statewide rural wage index is assigned to SNFs located in those areas. 
Because Micropolitan Areas tend to encompass smaller population centers 
and contain fewer hospitals than MSAs, we determined that if 
Micropolitan Areas were to be treated as separate labor market areas, 
the SNF PPS wage index would have included significantly more single-
provider labor market areas. As we explained in the FY 2006 SNF PPS 
proposed rule (70 FR 29094), recognizing Micropolitan Areas as 
independent labor markets would generally increase the potential for 
dramatic shifts in year-to-year wage index values because a single 
hospital (or group of hospitals) could have a disproportionate effect 
on the wage index of an area. Dramatic shifts in an area's wage index 
from year-to-year are problematic and create instability in the payment 
levels from year-to-year, which could make fiscal planning for SNFs 
difficult if we adopted this approach. For these reasons, we adopted a 
policy

[[Page 23453]]

to include Micropolitan Areas in the state's rural wage area for 
purposes of the SNF PPS wage index and have continued this policy 
through the present.
    We believe that the best course of action would be to continue the 
policy established in the FY 2006 SNF PPS final rule and include 
Micropolitan Areas in each state's rural wage index. These areas 
continue to be defined as having relatively small urban cores 
(populations of 10,000 to 49,999). We do not believe it would be 
appropriate to calculate a separate wage index for areas that typically 
may include only a few hospitals for the reasons discussed in the FY 
2006 SNF PPS proposed rule, and as discussed earlier. Therefore, in 
conjunction with our proposal to implement the revised OMB labor market 
delineations beginning in FY 2025 and consistent with the treatment of 
Micropolitan Areas under the IPPS, we are proposing to continue to 
treat Micropolitan Areas as ``rural'' and to include Micropolitan Areas 
in the calculation of the state's rural wage index.
(2) Urban Counties That Would Become Rural Under the Revised OMB 
Delineations
    As previously discussed, we are proposing to implement the new OMB 
statistical area delineations (based upon the 2020 decennial Census 
data) beginning in FY 2025 for the SNF PPS wage index. Our analysis 
shows that a total of 54 counties (and county equivalents) that are 
currently considered part of an urban CBSA would be considered located 
in a rural area, for SNF PPS payment beginning in FY 2025, if we adopt 
the new OMB delineations. Table 22 lists the 54 urban counties that 
would be rural if we finalize our proposal to implement the new OMB 
delineations.

                       Table 22--Counties That Would Transition From Urban to Rural Status
----------------------------------------------------------------------------------------------------------------
      FIPS county code            County name             State        Current CBSA        Current CBSA name
----------------------------------------------------------------------------------------------------------------
01129......................  Washington...........  AL                         33660  Mobile, AL.
05025......................  Cleveland............  AR                         38220  Pine Bluff, AR.
05047......................  Franklin.............  AR                         22900  Fort Smith, AR-OK.
05069......................  Jefferson............  AR                         38220  Pine Bluff, AR.
05079......................  Lincoln..............  AR                         38220  Pine Bluff, AR.
09015......................  Windham..............  CT                         49340  Worcester, MA-CT.
10005......................  Sussex...............  DE                         41540  Salisbury, MD-DE.
13171......................  Lamar................  GA                         12060  Atlanta-Sandy Springs-
                                                                                       Alpharetta, GA.
16077......................  Power................  ID                         38540  Pocatello, ID.
17057......................  Fulton...............  IL                         37900  Peoria, IL.
17077......................  Jackson..............  IL                         16060  Carbondale-Marion, IL.
17087......................  Johnson..............  IL                         16060  Carbondale-Marion, IL.
17183......................  Vermilion............  IL                         19180  Danville, IL.
17199......................  Williamson...........  IL                         16060  Carbondale-Marion, IL.
18121......................  Parke................  IN                         45460  Terre Haute, IN.
18133......................  Putnam...............  IN                         26900  Indianapolis-Carmel-
                                                                                       Anderson, IN.
18161......................  Union................  IN                         17140  Cincinnati, OH-KY-IN.
21091......................  Hancock..............  KY                         36980  Owensboro, KY.
21101......................  Henderson............  KY                         21780  Evansville, IN-KY.
22045......................  Iberia...............  LA                         29180  Lafayette, LA.
24001......................  Allegany.............  MD                         19060  Cumberland, MD-WV.
24047......................  Worcester............  MD                         41540  Salisbury, MD-DE.
25011......................  Franklin.............  MA                         44140  Springfield, MA.
26155......................  Shiawassee...........  MI                         29620  Lansing-East Lansing, MI.
27075......................  Lake.................  MN                         20260  Duluth, MN-WI.
28031......................  Covington............  MS                         25620  Hattiesburg, MS.
31051......................  Dixon................  NE                         43580  Sioux City, IA-NE-SD.
36123......................  Yates................  NY                         40380  Rochester, NY.
37049......................  Craven...............  NC                         35100  New Bern, NC.
37077......................  Granville............  NC                         20500  Durham-Chapel Hill, NC.
37085......................  Harnett..............  NC                         22180  Fayetteville, NC.
37087......................  Haywood..............  NC                         11700  Asheville, NC.
37103......................  Jones................  NC                         35100  New Bern, NC.
37137......................  Pamlico..............  NC                         35100  New Bern, NC.
42037......................  Columbia.............  PA                         14100  Bloomsburg-Berwick, PA.
42085......................  Mercer...............  PA                         49660  Youngstown-Warren-
                                                                                       Boardman, OH-PA.
42089......................  Monroe...............  PA                         20700  East Stroudsburg, PA.
42093......................  Montour..............  PA                         14100  Bloomsburg-Berwick, PA.
42103......................  Pike.................  PA                         35084  Newark, NJ-PA.
45027......................  Clarendon............  SC                         44940  Sumter, SC.
48431......................  Sterling.............  TX                         41660  San Angelo, TX.
49003......................  Box Elder............  UT                         36260  Ogden-Clearfield, UT.
51113......................  Madison..............  VA                         47894  Washington-Arlington-
                                                                                       Alexandria, DC-VA-MD-WV.
51175......................  Southampton..........  VA                         47260  Virginia Beach-Norfolk-
                                                                                       Newport News, VA-NC.
51620......................  Franklin City........  VA                         47260  Virginia Beach-Norfolk-
                                                                                       Newport News, VA-NC.
54035......................  Jackson..............  WV                         16620  Charleston, WV.
54043......................  Lincoln..............  WV                         16620  Charleston, WV.
54057......................  Mineral..............  WV                         19060  Cumberland, MD-WV.
55069......................  Lincoln..............  WI                         48140  Wausau-Weston, WI.
72001......................  Adjuntas.............  PR                         38660  Ponce, PR.
72055......................  Guanica..............  PR                         49500  Yauco, PR.

[[Page 23454]]

 
72081......................  Lares................  PR                         10380  Aguadilla-Isabela, PR.
72083......................  Las Marias...........  PR                         32420  Mayag[uuml]ez, PR.
72141......................  Utuado...............  PR                         10380  Aguadilla-Isabela, PR.
----------------------------------------------------------------------------------------------------------------

    We are proposing that, for purposes of determining the wage index 
under the SNF PPS, the wage data for all hospitals located in the 
counties listed in Table 22 would be considered rural when calculating 
their respective state's rural wage index under the SNF PPS. We 
recognize that rural areas typically have lower area wage index values 
than urban areas, and SNFs located in these counties may experience a 
negative impact in their SNF PPS payment due to the proposed adoption 
of the revised OMB delineations. Furthermore, for SNF providers 
currently located in an urban county that would be considered rural 
should this proposal be finalized, we would utilize the rural 
unadjusted per diem rates, found in Table 4, as the basis for 
determining payment rates for these facilities beginning on October 1, 
2024.
(3) Rural Counties That Would Become Urban Under the Revised OMB 
Delineations
    As previously discussed, we are proposing to implement the revised 
OMB statistical area delineations based upon OMB Bulletin No. 18-04 
beginning in FY 2025. Analysis of these OMB statistical area 
delineations shows that a total of 54 counties (and county equivalents) 
that are currently located in rural areas would be located in urban 
areas if we finalize our proposal to implement the revised OMB 
delineations.
    Table 23 lists the 54 rural counties that would be urban if we 
finalize this proposal.

                       Table 23--Counties That Would Transition From Rural to Urban Status
----------------------------------------------------------------------------------------------------------------
      FIPS county code               County               State        Proposed CBSA      Proposed CBSA name
----------------------------------------------------------------------------------------------------------------
01087......................  Macon................  AL                         12220  Auburn-Opelika, AL.
01127......................  Walker...............  AL                         13820  Birmingham, AL.
12133......................  Washington...........  FL                         37460  Panama City-Panama City
                                                                                       Beach, FL.
13187......................  Lumpkin..............  GA                         12054  Atlanta-Sandy Springs-
                                                                                       Roswell, GA.
15005......................  Kalawao..............  HI                         27980  Kahului-Wailuku, HI.
17053......................  Ford.................  IL                         16580  Champaign-Urbana, IL.
17127......................  Massac...............  IL                         37140  Paducah, KY-IL.
18159......................  Tipton...............  IN                         26900  Indianapolis-Carmel-
                                                                                       Greenwood, IN.
18179......................  Wells................  IN                         23060  Fort Wayne, IN.
20021......................  Cherokee.............  KS                         27900  Joplin, MO-KS.
21007......................  Ballard..............  KY                         37140  Paducah, KY-IL.
21039......................  Carlisle.............  KY                         37140  Paducah, KY-IL.
21127......................  Lawrence.............  KY                         26580  Huntington-Ashland, WV-KY-
                                                                                       OH.
21139......................  Livingston...........  KY                         37140  Paducah, KY-IL.
21145......................  Mc Cracken...........  KY                         37140  Paducah, KY-IL.
21179......................  Nelson...............  KY                         31140  Louisville/Jefferson
                                                                                       County, KY-IN.
22053......................  Jeffrson Davis.......  LA                         29340  Lake Charles, LA.
22083......................  Richland.............  LA                         33740  Monroe, LA.
26015......................  Barry................  MI                         24340  Grand Rapids-Wyoming-
                                                                                       Kentwood, MI.
26019......................  Benzie...............  MI                         45900  Traverse City, MI.
26055......................  Grand Traverse.......  MI                         45900  Traverse City, MI.
26079......................  Kalkaska.............  MI                         45900  Traverse City, MI.
26089......................  Leelanau.............  MI                         45900  Traverse City, MI.
27133......................  Rock.................  MN                         43620  Sioux Falls, SD-MN.
28009......................  Benton...............  MS                         32820  Memphis, TN-MS-AR.
28123......................  Scott................  MS                         27140  Jackson, MS.
30007......................  Broadwater...........  MT                         25740  Helena, MT.
30031......................  Gallatin.............  MT                         14580  Bozeman, MT.
30043......................  Jefferson............  MT                         25740  Helena, MT.
30049......................  Lewis And Clark......  MT                         25740  Helena, MT.
30061......................  Mineral..............  MT                         33540  Missoula, MT.
32019......................  Lyon.................  NV                         39900  Reno, NV.
37125......................  Moore................  NC                         38240  Pinehurst-Southern Pines,
                                                                                       NC.
38049......................  Mchenry..............  ND                         33500  Minot, ND.
38075......................  Renville.............  ND                         33500  Minot, ND.
38101......................  Ward.................  ND                         33500  Minot, ND.
39007......................  Ashtabula............  OH                         17410  Cleveland, OH.
39043......................  Erie.................  OH                         41780  Sandusky, OH.
41013......................  Crook................  OR                         13460  Bend, OR.
41031......................  Jefferson............  OR                         13460  Bend, OR.
42073......................  Lawrence.............  PA                         38300  Pittsburgh, PA.
45087......................  Union................  SC                         43900  Spartanburg, SC.
46033......................  Custer...............  SD                         39660  Rapid City, SD.
47081......................  Hickman..............  TN                         34980  Nashville-Davidson-
                                                                                       Murfreesboro-Franklin,
                                                                                       TN.

[[Page 23455]]

 
48007......................  Aransas..............  TX                         18580  Corpus Christi, TX.
48035......................  Bosque...............  TX                         47380  Waco, TX.
48079......................  Cochran..............  TX                         31180  Lubbock, TX.
48169......................  Garza................  TX                         31180  Lubbock, TX.
48219......................  Hockley..............  TX                         31180  Lubbock, TX.
48323......................  Maverick.............  TX                         20580  Eagle Pass, TX.
48407......................  San Jacinto..........  TX                         26420  Houston-Pasadena-The
                                                                                       Woodlands, TX.
51063......................  Floyd................  VA                         13980  Blacksburg-Christiansburg-
                                                                                       Radford, VA.
51181......................  Surry................  VA                         47260  Virginia Beach-Chesapeake-
                                                                                       Norfolk, VA-NC.
55123......................  Vernon...............  WI                         29100  La Crosse-Onalaska, WI-MN.
----------------------------------------------------------------------------------------------------------------

    We are proposing that, for purposes of calculating the area wage 
index under the SNF PPS, the wage data for hospitals located in the 
counties listed in Table 23 would be included in their new respective 
urban CBSAs. Typically, SNFs located in an urban area would receive a 
wage index value higher than or equal to SNFs located in their state's 
rural area. Furthermore, for SNFs currently located in a rural county 
that would be considered urban should this proposal be finalized, we 
would utilize the urban unadjusted per diem rates found in Table 3, as 
the basis for determining the payment rates for these facilities 
beginning October 1, 2024.
(4) Urban Counties That Would Move to a Different Urban CBSA Under the 
Revised OMB Delineations
    In addition to rural counties becoming urban and urban counties 
becoming rural, several urban counties would shift from one urban CBSA 
to another urban CBSA under our proposal to adopt the new OMB 
delineations. In other cases, if we adopt the new OMB delineations, 
counties would shift between existing and new CBSAs, changing the 
constituent makeup of the CBSAs.
    In one type of change, an entire CBSA would be subsumed by another 
CBSA. For example, CBSA 31460 (Madera, CA) currently is a single county 
(Madera, CA) CBSA. Madera County would be a part of CBSA 23420 (Fresno, 
CA) under the new OMB delineations.
    In another type of change, some CBSAs have counties that would 
split off to become part of, or to form, entirely new labor market 
areas. For example, CBSA 29404 (Lake County-Kenosha County, IL-WI) 
currently is comprised of two counties (Lake County, IL and Kenosha 
County, WI). Under the new OMB delineations, Kenosha county would split 
off and form the new CBSA 28450 (Kenosha, WI), while Lake county would 
remain in CBSA 29404.
    Finally, in some cases, a CBSA would lose counties to another 
existing CBSA if we adopt the new OMB delineations. For example, Meade 
County, KY, would move from CBSA 21060 (Elizabethtown-Fort Knox, KY) to 
CBSA 31140 (Louisville/Jefferson County, KY-IN). CBSA 21060 would still 
exist in the new labor market delineations with fewer constituent 
counties. Table 24 lists the urban counties that would move from one 
urban CBSA to another urban CBSA under the new OMB delineations.

                            Table 24--Counties That Would Change to a Different CBSA
----------------------------------------------------------------------------------------------------------------
         FIPS county code                 County name               State          Current CBSA    Proposed CBSA
----------------------------------------------------------------------------------------------------------------
06039............................  Madera..................  CA                            31460           23420
11001............................  The District............  DC                            47894           47764
12053............................  Hernando................  FL                            45300           45294
12057............................  Hillsborough............  FL                            45300           45294
12101............................  Pasco...................  FL                            45300           45294
12103............................  Pinellas................  FL                            45300           41304
12119............................  Sumter..................  FL                            45540           48680
13013............................  Barrow..................  GA                            12060           12054
13015............................  Bartow..................  GA                            12060           31924
13035............................  Butts...................  GA                            12060           12054
13045............................  Carroll.................  GA                            12060           12054
13057............................  Cherokee................  GA                            12060           31924
13063............................  Clayton.................  GA                            12060           12054
13067............................  Cobb....................  GA                            12060           31924
13077............................  Coweta..................  GA                            12060           12054
13085............................  Dawson..................  GA                            12060           12054
13089............................  De Kalb.................  GA                            12060           12054
13097............................  Douglas.................  GA                            12060           12054
13113............................  Fayette.................  GA                            12060           12054
13117............................  Forsyth.................  GA                            12060           12054
13121............................  Fulton..................  GA                            12060           12054
13135............................  Gwinnett................  GA                            12060           12054
13143............................  Haralson................  GA                            12060           31924
13149............................  Heard...................  GA                            12060           12054
13151............................  Henry...................  GA                            12060           12054
13159............................  Jasper..................  GA                            12060           12054
13199............................  Meriwether..............  GA                            12060           12054

[[Page 23456]]

 
13211............................  Morgan..................  GA                            12060           12054
13217............................  Newton..................  GA                            12060           12054
13223............................  Paulding................  GA                            12060           31924
13227............................  Pickens.................  GA                            12060           12054
13231............................  Pike....................  GA                            12060           12054
13247............................  Rockdale................  GA                            12060           12054
13255............................  Spalding................  GA                            12060           12054
13297............................  Walton..................  GA                            12060           12054
18073............................  Jasper..................  IN                            23844           29414
18089............................  Lake....................  IN                            23844           29414
18111............................  Newton..................  IN                            23844           29414
18127............................  Porter..................  IN                            23844           29414
21163............................  Meade...................  KY                            21060           31140
22103............................  St. Tammany.............  LA                            35380           43640
24009............................  Calvert.................  MD                            47894           30500
24017............................  Charles.................  MD                            47894           47764
24033............................  Prince Georges..........  MD                            47894           47764
24037............................  St. Marys...............  MD                            15680           30500
25015............................  Hampshire...............  MA                            44140           11200
34009............................  Cape May................  NJ                            36140           12100
34023............................  Middlesex...............  NJ                            35154           29484
34025............................  Monmouth................  NJ                            35154           29484
34029............................  Ocean...................  NJ                            35154           29484
34035............................  Somerset................  NJ                            35154           29484
36027............................  Dutchess................  NY                            39100           28880
36071............................  Orange..................  NY                            39100           28880
37019............................  Brunswick...............  NC                            34820           48900
39035............................  Cuyahoga................  OH                            17460           17410
39055............................  Geauga..................  OH                            17460           17410
39085............................  Lake....................  OH                            17460           17410
39093............................  Lorain..................  OH                            17460           17410
39103............................  Medina..................  OH                            17460           17410
39123............................  Ottawa..................  OH                            45780           41780
47057............................  Grainger................  TN                            34100           28940
51013............................  Arlington...............  VA                            47894           11694
51043............................  Clarke..................  VA                            47894           11694
51047............................  Culpeper................  VA                            47894           11694
51059............................  Fairfax.................  VA                            47894           11694
51061............................  Fauquier................  VA                            47894           11694
51107............................  Loudoun.................  VA                            47894           11694
51153............................  Prince William..........  VA                            47894           11694
51157............................  Rappahannock............  VA                            47894           11694
51177............................  Spotsylvania............  VA                            47894           11694
51179............................  Stafford................  VA                            47894           11694
51187............................  Warren..................  VA                            47894           11694
51510............................  Alexandria City.........  VA                            47894           11694
51600............................  Fairfax City............  VA                            47894           11694
51610............................  Falls Church City.......  VA                            47894           11694
51630............................  Fredericksburg City.....  VA                            47894           11694
51683............................  Manassas City...........  VA                            47894           11694
51685............................  Manassas Park City......  VA                            47894           11694
53061............................  Snohomish...............  WA                            42644           21794
54037............................  Jefferson...............  WV                            47894           11694
55059............................  Kenosha.................  WI                            29404           28450
72023............................  Cabo Rojo...............  PR                            41900           32420
72059............................  Guayanilla..............  PR                            49500           38660
72079............................  Lajas...................  PR                            41900           32420
72111............................  Penuelas................  PR                            49500           38660
72121............................  Sabana Grande...........  PR                            41900           32420
72125............................  San German..............  PR                            41900           32420
72153............................  Yauco...................  PR                            49500           38660
----------------------------------------------------------------------------------------------------------------

    If providers located in these counties move from one CBSA to 
another under the new OMB delineations, there may be impacts, both 
negative and positive, upon their specific wage index values.
    In other cases, adopting the revised OMB delineations would involve 
a change only in CBSA name and/or number, while the CBSA continues to 
encompass the same constituent counties. For example, CBSA 19430 
(Dayton-Kettering, OH) would experience a change to its name and become 
CBSA 19430 (Dayton-Kettering-Beavercreek, OH), while all of its three 
constituent counties would remain the same. We consider these proposed

[[Page 23457]]

changes (where only the CBSA name and/or number would change) to be 
inconsequential changes with respect to the SNF PPS wage index. Table 
25 sets forth a list of such CBSAs where there would be a change in 
CBSA name and/or number only if we adopt the revised OMB delineations.

                             Table 25--Urban CBSAs With Change to Name and/or Number
----------------------------------------------------------------------------------------------------------------
          Current CBSA                  Current CBSA name          Proposed CBSA        Proposed CBSA name
----------------------------------------------------------------------------------------------------------------
10380..........................  Aguadilla-Isabela, PR..........           10380  Aguadilla, PR.
10540..........................  Albany-Lebanon, OR.............           10540  Albany, OR.
12060..........................  Atlanta-Sandy Springs-                    12054  Atlanta-Sandy Springs-Roswell,
                                  Alpharetta, GA.                                  GA.
12060..........................  Atlanta-Sandy Springs-                    31924  Marietta, GA.
                                  Alpharetta, GA.
12420..........................  Austin-Round Rock-Georgetown,             12420  Austin-Round Rock-San Marcos,
                                  TX.                                              TX.
12540..........................  Bakersfield, CA................           12540  Bakersfield-Delano, CA.
13820..........................  Birmingham-Hoover, AL..........           13820  Birmingham, AL.
13980..........................  Blacksburg-Christiansburg, VA..           13980  Blacksburg-Christiansburg-
                                                                                   Radford, VA.
14860..........................  Bridgeport-Stamford-Norwalk, CT           14860  Bridgeport-Stamford-Danbury,
                                                                                   CT.
15260..........................  Brunswick, GA..................           15260  Brunswick-St. Simons, GA.
15680..........................  California-Lexington Park, MD..           30500  Lexington Park, MD.
16540..........................  Chambersburg-Waynesboro, PA....           16540  Chambersburg, PA.
16984..........................  Chicago-Naperville-Evanston, IL           16984  Chicago-Naperville-Schaumburg,
                                                                                   IL.
17460..........................  Cleveland-Elyria, OH...........           17410  Cleveland, OH.
19430..........................  Dayton-Kettering, OH...........           19430  Dayton-Kettering-Beavercreek,
                                                                                   OH.
19740..........................  Denver-Aurora-Lakewood, CO.....           19740  Denver-Aurora-Centennial, CO.
21060..........................  Elizabethtown-Fort Knox, KY....           21060  Elizabethtown, KY.
21060..........................  Elizabethtown-Fort Knox, KY....           31140  Louisville/Jefferson County,
                                                                                   KY-IN.
21780..........................  Evansville, IN-KY..............           21780  Evansville, IN.
21820..........................  Fairbanks, AK..................           21820  Fairbanks-College, AK.
22660..........................  Fort Collins, CO...............           22660  Fort Collins-Loveland, CO.
23224..........................  Frederick-Gaithersburg-                   23224  Frederick-Gaithersburg-
                                  Rockville, MD.                                   Bethesda, MD.
23844..........................  Gary, IN.......................           29414  Lake County-Porter County-
                                                                                   Jasper County, IN.
24340..........................  Grand Rapids-Kentwood, MI......           24340  Grand Rapids-Wyoming-Kentwood,
                                                                                   MI.
24860..........................  Greenville-Anderson, SC........           24860  Greenville-Anderson-Greer, SC.
25540..........................  Hartford-East Hartford-                   25540  Hartford-West Hartford-East
                                  Middletown, CT.                                  Hartford, CT.
25940..........................  Hilton Head Island-Bluffton, SC           25940  Hilton Head Island-Bluffton-
                                                                                   Port Royal, SC.
26380..........................  Houma-Thibodaux, LA............           26380  Houma-Bayou Cane-Thibodaux,
                                                                                   LA.
26420..........................  Houston-The Woodlands-Sugar               26420  Houston-Pasadena-The
                                  Land, TX.                                        Woodlands, TX.
26900..........................  Indianapolis-Carmel-Anderson,             26900  Indianapolis-Carmel-Greenwood,
                                  IN.                                              IN.
27900..........................  Joplin, MO.....................           27900  Joplin, MO-KS.
27980..........................  Kahului-Wailuku-Lahaina, HI....           27980  Kahului-Wailuku, HI.
29404..........................  Lake County-Kenosha County, IL-           28450  Kenosha, WI.
                                  WI.
29404..........................  Lake County-Kenosha County, IL-           29404  Lake County, IL.
                                  WI.
29820..........................  Las Vegas-Henderson-Paradise,             29820  Las Vegas-Henderson-North Las
                                  NV.                                              Vegas, NV.
31020..........................  Longview, WA...................           31020  Longview-Kelso, WA.
31460..........................  Madera, CA.....................           23420  Fresno, CA.
34100..........................  Morristown, TN.................           28940  Knoxville, TN.
34740..........................  Muskegon, MI...................           34740  Muskegon-Norton Shores, MI.
34820..........................  Myrtle Beach-Conway-North                 34820  Myrtle Beach-Conway-North
                                  Myrtle Beach, SC-NC.                             Myrtle Beach, SC.
34820..........................  Myrtle Beach-Conway-North                 48900  Wilmington, NC.
                                  Myrtle Beach, SC-NC.
35084..........................  Newark, NJ-PA..................           35084  Newark, NJ.
35154..........................  New Brunswick-Lakewood, NJ.....           29484  Lakewood-New Brunswick, NJ.
35300..........................  New Haven-Milford, CT..........           35300  New Haven, CT.
35380..........................  New Orleans-Metairie, LA.......           43640  Slidell-Mandeville-Covington,
                                                                                   LA.
35840..........................  North Port-Sarasota-Bradenton,            35840  North Port-Bradenton-Sarasota,
                                  FL.                                              FL.
35980..........................  Norwich-New London, CT.........           35980  Norwich-New London-
                                                                                   Willimantic, CT.
36084..........................  Oakland-Berkeley-Livermore, CA.           36084  Oakland-Fremont-Berkeley, CA.
36140..........................  Ocean City, NJ.................           12100  Atlantic City-Hammonton, NJ.
36260..........................  Ogden-Clearfield, UT...........           36260  Ogden, UT.
36540..........................  Omaha-Council Bluffs, NE-IA....           36540  Omaha, NE-IA.
37460..........................  Panama City, FL................           37460  Panama City-Panama City Beach,
                                                                                   FL.
39100..........................  Poughkeepsie-Newburgh-                    28880  Kiryas Joel-Poughkeepsie-
                                  Middletown, NY.                                  Newburgh, NY.
39340..........................  Provo-Orem, UT.................           39340  Provo-Orem-Lehi, UT.
39540..........................  Racine, WI.....................           39540  Racine-Mount Pleasant, WI.
41540..........................  Salisbury, MD-DE...............           41540  Salisbury, MD.
41620..........................  Salt Lake City, UT.............           41620  Salt Lake City-Murray, UT.
41900..........................  San Germ[aacute]n, PR..........           32420  Mayag[uuml]ez, PR.
42644..........................  Seattle-Bellevue-Kent, WA......           21794  Everett, WA.
42680..........................  Sebastian-Vero Beach, FL.......           42680  Sebastian-Vero Beach-West Vero
                                                                                   Corridor, FL.
42700..........................  Sebring-Avon Park, FL..........           42700  Sebring, FL.
43620..........................  Sioux Falls, SD................           43620  Sioux Falls, SD-MN.
44140..........................  Springfield, MA................           11200  Amherst Town-Northampton, MA.
44420..........................  Staunton, VA...................           44420  Staunton-Stuarts Draft, VA.
44700..........................  Stockton, CA...................           44700  Stockton-Lodi, CA.
45300..........................  Tampa-St. Petersburg-                     41304  St. Petersburg-Clearwater-
                                  Clearwater, FL.                                  Largo, FL.
45300..........................  Tampa-St. Petersburg-                     45294  Tampa, FL.
                                  Clearwater, FL.

[[Page 23458]]

 
45540..........................  The Villages, FL...............           48680  Wildwood-The Villages, FL.
45780..........................  Toledo, OH.....................           41780  Sandusky, OH.
47220..........................  Vineland-Bridgeton, NJ.........           47220  Vineland, NJ.
47260..........................  Virginia Beach-Norfolk-Newport            47260  Virginia Beach-Chesapeake-
                                  News, VA-NC.                                     Norfolk, VA-NC.
47894..........................  Washington-Arlington-                     11694  Arlington-Alexandria-Reston,
                                  Alexandria, DC-VA-MD-WV.                         VA-WV.
47894..........................  Washington-Arlington-                     30500  Lexington Park, MD.
                                  Alexandria, DC-VA-MD-WV.
47894..........................  Washington-Arlington-                     47764  Washington, DC-MD.
                                  Alexandria, DC-VA-MD-WV.
48140..........................  Wausau-Weston, WI..............           48140  Wausau, WI.
48300..........................  Wenatchee, WA..................           48300  Wenatchee-East Wenatchee, WA.
48424..........................  West Palm Beach-Boca Raton-               48424  West Palm Beach-Boca Raton-
                                  Boynton Beach, FL.                               Delray Beach, FL.
49340..........................  Worcester, MA-CT...............           49340  Worcester, MA.
49500..........................  Yauco, PR......................           38660  Ponce, PR.
49660..........................  Youngstown-Warren-Boardman, OH-           49660  Youngstown-Warren, OH.
                                  PA.
----------------------------------------------------------------------------------------------------------------

5. Change to County-Equivalents in the State of Connecticut
    The June 6, 2022 Census Bureau Notice (87 FR 34235-34240), OMB 
Bulletin No. 23-01 replaced the 8 counties in Connecticut with 9 new 
``Planning Regions.'' Planning regions now serve as county-equivalents 
within the CBSA system. We are proposing to adopt the planning regions 
as county equivalents for wage index purposes. We believe it is 
necessary to adopt this migration from counties to planning region 
county-equivalents in order to maintain consistency with OMB updates. 
We are providing the following crosswalk with the current and proposed 
FIPS county and county-equivalent codes and CBSA assignments.

                               Table 26--Connecticut Counties to Planning Regions
----------------------------------------------------------------------------------------------------------------
                                                                               Proposed planning
                                                                                  region area
          FIPS              Current county     Current CBSA    Proposed FIPS        (county        Proposed CBSA
                                                                                  equivalent)
----------------------------------------------------------------------------------------------------------------
9001....................  Fairfield.........           14860            9190  Western                      14860
                                                                               Connecticut.
9001....................  Fairfield.........           14860            9120  Greater Bridgeport           14860
9003....................  Hartford..........           25540            9110  Capitol...........           25540
9005....................  Litchfield........               7            9160  Northwest Hills...               7
9007....................  Middlesex.........           25540            9130  Lower Connecticut            25540
                                                                               River Valley.
9009....................  New Haven.........           35300            9170  South Central                35300
                                                                               Connecticut.
9009....................  New Haven.........           35300            9140  Naugatuck Valley..           47930
9011....................  New London........           35980            9180  Southeastern                 35980
                                                                               Connecticut.
9013....................  Tolland...........           25540            9110  Capitol...........           25540
9015....................  Windham...........           49340            9150  Northeastern                     7
                                                                               Connecticut.
----------------------------------------------------------------------------------------------------------------

2. Transition Policy for FY 2025 Wage Index Changes
    Overall, we believe that implementing the new OMB delineations 
would result in wage index values being more representative of the 
actual costs of labor in a given area. We recognize that some SNFs (43 
percent) would experience decreases in their area wage index values as 
a result of this proposal, though less than 1 percent of providers 
would experience a significant decrease (that is, greater than 5 
percent) in their area wage index value. We also realize that many SNFs 
(57 percent) would have higher area wage index values after adopting 
the revised OMB delineations.
    CMS recognizes that SNFs in certain areas may experience reduced 
payment due to the proposed adoption of the revised OMB delineations 
and has finalized transition policies to mitigate negative financial 
impacts and provide stability to year-to-year wage index variations. In 
FY 2023, the 5 percent cap policy was made permanent for all SNFs. This 
5 percent cap on reductions policy is discussed in further detail in FY 
2023 final rule at 87 FR 47521 through 47523. It is CMS's long held 
opinion that revised labor market delineations should be adopted as 
soon as is possible to maintain the integrity the wage index system. We 
believe the 5 percent cap policy will sufficiently mitigate significant 
disruptive financial impacts on SNFs negatively affected by the 
proposed adoption of the revised OMB delineations. We do not believe 
any additional transition is necessary considering that the current cap 
on wage index decreases, which was not in place when implementing prior 
decennial census updates in FY 2006 and FY 2015, ensures that a SNF's 
wage index would not be less than 95 percent of its final wage index 
for the prior year.
    Furthermore, consistent with the requirement at section 
1888(e)(4)(G)(ii) of the Act that wage index adjustments must be made 
in a budget neutral manner, the applied 5 percent cap on the decrease 
in an SNF's wage index would not result in any change in estimated 
aggregate SNF PPS payments by applying a budget neutrality factor to 
the unadjusted Federal per diem rates. The methodology for calculating 
this budget neutrality factor is discussed below in section III.D of 
this proposed rule.
    We invite comments on our proposed implementation of revised labor 
market area delineations. The proposed wage index applicable to FY 2025 
is set forth in Table A available on the CMS website at https://cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html. Table 
A provides a crosswalk between the FY 2024 wage index for a provider 
using the current OMB delineations in effect in FY 2024 and the FY 2025 
wage index using the proposed revised OMB delineations.

[[Page 23459]]

C. Technical Updates to the PDPM ICD-10 Mappings

1. Background
    In the FY 2019 SNF PPS final rule (83 FR 39162), we finalized the 
implementation of the Patient Driven Payment Model (PDPM), effective 
October 1, 2019. The PDPM utilizes the International Classification of 
Diseases, 10th Revision, Clinical Modification (ICD-10-CM, hereafter 
referred to as ICD-10) codes in several ways, including using the 
patient's primary diagnosis to assign patients to clinical categories 
under several PDPM components, specifically the PT, OT, SLP, and NTA 
components. While other ICD-10 codes may be reported as secondary 
diagnoses and designated as additional comorbidities, the PDPM does not 
use secondary diagnoses to assign patients to clinical categories. The 
PDPM ICD-10 code to clinical category mapping, ICD-10 code to SLP 
comorbidity mapping, and ICD-10 code to NTA comorbidity mapping 
(hereafter collectively referred to as the PDPM ICD-10 code mappings) 
are available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM.
    In the FY 2020 SNF PPS final rule (84 FR 38750), we outlined the 
process by which we maintain and update the PDPM ICD-10 code mappings, 
as well as the SNF Grouper software and other such products related to 
patient classification and billing, to ensure that they reflect the 
most up to date codes. Beginning with the updates for FY 2020, we apply 
non-substantive changes to the PDPM ICD-10 code mappings through a sub-
regulatory process consisting of posting the updated PDPM ICD-10 code 
mappings on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM. Such nonsubstantive changes are 
limited to those specific changes that are necessary to maintain 
consistency with the most current PDPM ICD-10 code mappings.
    On the other hand, substantive changes that go beyond the intention 
of maintaining consistency with the most current PDPM ICD-10 code 
mappings, such as changes to the assignment of a code to a clinical 
category or comorbidity list, would be through notice and comment 
rulemaking because they are changes that affect policy. We note that, 
in the case of any diagnoses that are either currently mapped to Return 
to Provider or that we are finalizing to classify into this category, 
this is not intended to reflect any judgment on the importance of 
recognizing and treating these conditions. Rather, we believe that 
there are more specific or appropriate diagnoses that would better 
serve as the primary diagnosis for a Part-A covered SNF stay.
2. Clinical Category Changes for New ICD-10 Codes for FY 2025
    Each year, we review the clinical category assigned to new ICD-10 
diagnosis codes and propose changing the assignment to another clinical 
category if warranted. This year, we are proposing changing the 
clinical category assignment for the following four new codes that were 
effective on October 1, 2023.
     E88.10 Metabolic Syndrome was initially mapped to the 
clinical category of Medical Management. The National Institutes of 
Health (NIH) as the presence of at least three of the following traits: 
Large waist, elevated triglyceride levels, reduced high-density 
lipoprotein (HDL) cholesterol, increased blood pressure, and/or 
elevated fasting blood glucose. Metabolic syndrome is a cluster of 
metabolic risk factors for cardiovascular diseases and type 2 diabetes 
mellitus. The root causes of metabolic syndrome are overweight/obesity, 
physical inactivity, and genetic factors. Given this, treatment for 
Metabolic Syndrome typically occurs outside of a Part A SNF stay and we 
do not believe it would serve appropriately as the primary diagnosis 
for a Part A-covered SNF stay. For this reason, we propose to change 
the mapping of this code from Medical Management to the clinical 
category of Return to Provider.
     E88.811 Insulin Resistance Syndrome, Type A was initially 
mapped to the clinical category of Medical Management. Type A insulin 
resistance syndrome (TAIRS) is a rare disorder characterized by severe 
insulin resistance due to defects in insulin receptor signaling and 
treatment typically occurs outside of a Part A SNF stay. For this 
reason, we propose to change the mapping of this code from Medical 
Management to the clinical category of Return to Provider.
     E88.818 Other Insulin Resistance was initially mapped to 
the clinical category of Medical Management. Other Insulin Resistance 
is used to specify a medical diagnosis of other insulin resistance such 
as Insulin resistance, Type B. Treatment typically occurs outside of a 
Part A SNF stay. For this reason, we propose to change the mapping of 
this code from Medical Management to the clinical category of Return to 
Provider.
     E88.819 Insulin Resistance, Unspecified was initially 
mapped to the clinical category of Medical Management and is utilized 
to indicate when a specific type of insulin resistance has not been 
specifically identified. Treatment typically occurs outside of a Part A 
SNF stay. For this reason, we propose to change the mapping of this 
code from Medical Management to the clinical category of Return to 
Provider.
    We solicit comments on the proposed substantive changes to the PDPM 
ICD-10 code mappings discussed in this section, as well as comments on 
additional substantive and non-substantive changes that commenters 
believe are necessary.

D. Request for Information: Update to PDPM Non-Therapy Ancillary 
Component

1. Background
    In the FY 2019 SNF PPS final rule (83 FR 39162), we finalized the 
implementation of the PDPM, effective October 1, 2019. Under the PDPM, 
payment is determined through the combination of six payment 
components. Five of the components (PT, OT, SLP, NTA, and nursing) are 
case-mix adjusted. Additionally, there is a non-case-mix adjusted 
component to cover utilization of SNF resources that do not vary 
according to patient characteristics.
    The NTA component utilizes a comorbidity score to assign the 
patient to an NTA component case-mix group, which is determined by the 
presence of conditions or the use of extensive services (henceforth 
also referred to as comorbidities) that were found to be correlated 
with increases in NTA costs for SNF patients. The presence of these 
conditions and extensive services is reported by providers on certain 
items of the Minimum Data Set (MDS) resident assessment, with some 
conditions and extensive services being identified by ICD-10-CM codes 
(hereafter referred to as ICD-10 codes) that are coded in Item I8000 of 
the MDS. MDS Item I8000 is an open-ended item on the MDS assessment 
where the provider can fill in additional active diagnoses for the 
patient that are either not explicitly on the MDS, or are more severe 
or specific diagnoses, in the form of ICD-10 codes. For conditions and 
extensive services where the source is indicated as MDS item I8000, CMS 
posts an NTA Comorbidity to ICD-10 Mapping, available at https://www.cms.gov/medicare/payment/prospective-payment-systems/skilled-nursing-facility-snf/patient-driven-model, that provides a crosswalk 
between the listed condition and the ICD-10 codes that may be coded to

[[Page 23460]]

qualify that condition to serve as part of the patient's NTA 
classification.
    During the development of PDPM, CMS identified a list of 50 
conditions and extensive services that were associated with increases 
in NTA costs. Each of the 50 comorbidities used under PDPM for NTA 
classification is assigned a certain number of points based on its 
relative costliness. To determine the patient's NTA comorbidity score, 
a provider would identify all the comorbidities for which a patient 
would qualify and then add the points for each comorbidity together. 
The resulting sum represents the patient's NTA comorbidity score, which 
is then used to classify the patient into an NTA component 
classification group. More information about the creation of the NTA 
component scoring method can be found in Section 3.7 of the SNF PDPM 
Technical Report, available at https://www.cms.gov/medicare/payment/prospective-payment-systems/skilled-nursing-facility-snf/pps-model-research.
    In response to stakeholder comments, CMS stated in the FY 2019 SNF 
PPS final rule that we would consider revisiting both the list of 
included NTA comorbidities and the points assigned to each condition or 
extensive service based on changes in the patient population and care 
practices over time (83 FR 39224). This request for information (RFI) 
solicits comment on the methodology CMS is currently considering for 
updating the NTA component.
2. Updates to the Study Population and Methodology
    We are considering several changes to the NTA study population as a 
foundation upon which to update the NTA component. First, we are 
considering updating the years used for data corresponding to Medicare 
Part A SNF stays, including claims, assessments, and cost reports. To 
develop PDPM, CMS used a study population of Medicare Part A SNF stays 
with admissions from FY 2014 through FY 2017 (see FY 2019 SNF PPS final 
rule, 83 FR 39220). This methodology is described in more detail in 
Section 3.2.1 of the SNF PDPM technical report, available at https://www.cms.gov/medicare/payment/prospective-payment-systems/skilled-nursing-facility-snf/pps-model-research. The updated study population 
will instead use Medicare Part A SNF stays with admissions from FY 2019 
through FY 2022. However, as discussed in the FY 2023 SNF PPS final 
rule (87 FR 47526 through 47528), data from much of this time period 
was affected by the national COVID-19 PHE with significant impacts on 
nursing homes. We are therefore considering using the same subset 
population used for the PDPM parity adjustment recalibration by 
excluding stays with either a COVID-19 diagnosis or stays using a 
COVID-19 PHE-related modification under section 1812(f) of the Act.
    Next, we are considering making certain methodological changes to 
reflect more accurate and reliable coding of NTA conditions and 
extensive services on SNF Part A claims and the MDS after PDPM 
implementation. We had taken a broad approach when creating the initial 
PDPM NTA list to predict what NTA coding practices would be after PDPM 
implementation, given the absence of analogous data in the previous 
Resource Utilization Groups, Version IV (RUG-IV) payment model. The NTA 
list was therefore created using data from a variety of different 
sources, including using Medicare inpatient, outpatient, and Part B 
claims to identify the presence of condition categories from the 
Medicare Parts C and D risk adjustment models (hereafter referred to as 
CCs and RxCCs, respectively). More information about this methodology 
can be found in Section 3.7 of the SNF PDPM Technical Report, available 
at https://www.cms.gov/medicare/payment/prospective-payment-systems/skilled-nursing-facility-snf/pps-model-research. Given that we now have 
several years of post-PDPM implementation data, we believe it would 
more accurately reflect the coding of conditions and extensive services 
under PDPM to rely exclusively upon SNF PPS Part A claims and the MDS. 
We are therefore considering updating the methodology to only utilize 
SNF Part A claims and the MDS, and not claim types from other Medicare 
settings.
    Additionally, we are considering modifying the overlap methodology 
to rely more upon the MDS items that use a checkbox to record the 
presence of conditions and extensive services whenever possible, while 
allowing for potentially more severe or specific diagnoses to be 
indicated on MDS item I8000 when it would be useful for more accurate 
patient classification under PDPM. During the development of the NTA 
component, CMS included both MDS items and ICD-10 diagnoses from the 
Medicare Part C CCs and Part D RxCCs. Because the CCs were developed to 
predict utilization of Medicare Part C services, while the RxCCs were 
developed to predict Medicare Part D drug costs, the largest component 
of NTA costs, we stated in the FY 2019 SNF PPS final rule that we 
believed using both sources allowed us to define the conditions and 
extensive services potentially associated with NTA utilization more 
comprehensively (83 FR 39220). In cases where there was considerable 
overlap between an MDS item and its CC or RxCC definition, to ensure 
accurate estimation of statistically significant regression results, we 
chose the CC or RxCC definition if it had higher average NTA cost per 
day than the MDS item before running the final regression analysis. 
More information about this methodology can be found in Section 3.7 of 
the SNF PDPM Technical Report, available at https://www.cms.gov/medicare/payment/prospective-payment-systems/skilled-nursing-facility-snf/pps-model-research.
    Since the implementation of PDPM, we believe patient conditions and 
extensive services are now more accurately and reliably reported by 
providers using MDS items. We are therefore considering prioritizing 
the reporting of conditions on the MDS by raising the cost threshold 
for selecting the overlapping CC or RxCC definitions from any 
additional cost to 5 dollars in average NTA cost per day, which is the 
amount that we observe to be generally associated with a 1-point NTA 
increase. Specifically, since any dollar amount less than 5 dollars 
would render the two options indistinguishable from each other in the 
point assignment when comparing relative costliness, choosing MDS items 
over CC/RxCCs will not lead to any loss of the most expensive 
representations of the conditions and services in the regression model.
3. Updates to Conditions and Extensive Services Used for NTA 
Classification
    Table 27 provides the list of conditions and extensive services 
that would be used for NTA classification following the various changes 
we are considering to the methodology outlined above. For each 
condition or extensive service, we have also included the frequency of 
stays, the average NTA cost per day, the ordinary least squares (OLS) 
estimate of its impact on NTA costs per day, and the assigned number of 
points based on its relative impact on a patient's NTA costs. 
Conditions and extensive services with a greater impact on NTA costs 
were assigned more points, while those with less of an impact were 
assigned fewer points. More information about this methodology can be 
found in Section 3.7 of the SNF PDPM Technical Report, available at 
https://www.cms.gov/medicare/payment/prospective-payment-systems/skilled-nursing-facility-snf/pps-model-research.

[[Page 23461]]



                     Table 27--Conditions and Extensive Services Used for NTA Classification
----------------------------------------------------------------------------------------------------------------
                 NTA comorbidity                    % of  stays   Avg NTA  costs   OLS  estimate   PDPM  points
----------------------------------------------------------------------------------------------------------------
DGN: HIV/AIDS...................................             0.3            $128          $71.01               7
RxCC: Lung Transplant Status....................             0.0             117           49.29               5
O0100H2: Special Treatments/Programs:                        8.6             105           46.99               5
 Intravenous Medication Post-admit Code.........
MDS: Parenteral IV feeding: Level high..........             0.3             120           46.27               5
RxCC: Cystic Fibrosis...........................             0.0              99           31.10               3
RxCC: Major Organ Transplant Status, Except Lung             0.5              85           21.66               2
CC: Cirrhosis of Liver..........................             2.0              77           18.92               2
RxCC: Chronic Myeloid Leukemia..................             0.1              75           17.81               2
DGN: Endocarditis...............................             0.5              97           17.46               2
RxCC: Opportunistic Infections..................             0.3              85           16.91               2
I2900: Active Diagnoses: Diabetes Mellitus (DM)             38.2              66           15.67               2
 Code...........................................
O0100I2: Special Treatments/Programs:                        0.2              80           14.65               1
 Transfusion Post-admit Code....................
MDS: Parenteral IV feeding: Level Low...........             0.0              82           14.26               1
CC: Bone/Joint/Muscle Infections/Necrosis--                  2.9              97           14.23               1
 Except: RxCC: Aseptic Necrosis of Bone.........
I6200: Active Diagnoses: Asthma COPD Chronic                29.2              66           13.72               1
 Lung Disease Code..............................
O0100D2: Special Treatments/Programs: Suctioning             0.8              86           13.11               1
 Post-admit Code................................
RxCC: Psoriatic Arthropathy and Systemic                     0.2              72           12.87               1
 Sclerosis......................................
RxCC: Chronic Pancreatitis......................             0.3              75           12.64               1
RxCC: Specified Hereditary Metabolic/Immune                  0.0              74           10.36               1
 Disorders......................................
I5200: Active Diagnoses: Multiple Sclerosis Code             0.9              63            9.84               1
O0100F2: Special Treatments/Programs: Ventilator             0.3              99            9.79               1
 Post-admit Code................................
RxCC: Pancreatic Disorders and Intestinal                    0.6              65            9.16               1
 Malabsorption, Except Pancreatitis.............
M1040B: Other Foot Skin Problems: Diabetic Foot              1.6              87            9.07               1
 Ulcer Code.....................................
RxCC: Narcolepsy and Cataplexy..................             0.1              68            9.01               1
RxCC: Venous Thromboembolism....................             4.4              64            8.86               1
B0100: Comatose.................................             0.0              87            8.64               1
M0300X1: Highest Stage of Unhealed Pressure                  1.6              80            8.48               1
 Ulcer--Stage 4.................................
I1300: Active Diagnoses: Ulcerative Colitis,                 2.3              63            7.77               1
 Crohn's Disease, or Inflammatory Bowel Disease.
RxCC: Atrial Arrhythmias........................            26.4              60            7.35               1
RxCC: Sickle Cell Anemia........................             0.0              65            7.27               1
RxCC: Myelodysplastic Syndromes and                          0.4              65            7.11               1
 Myelofibrosis..................................
I2500: Wound Infection Code.....................             2.1              84            6.96               1
RxCC: Rheumatoid Arthritis and Other                         2.5              62            6.94               1
 Inflammatory Polyarthropathy...................
RxCC: Myasthenia Gravis, Amyotrophic Lateral                 0.3              64            6.60               1
 Sclerosis and Other Motor Neuron Disease--
 Except: CC: Amyotrophic Lateral Sclerosis and
 Other Motor Neuron Disease.....................
CC: Complications of Specified Implanted Device              0.3              75            6.39               1
 or Graft.......................................
I6100: Active Diagnoses: Post Traumatic Stress               0.6              67            5.94               1
 Disorder.......................................
RxCC: Aplastic Anemia and Other Significant                  0.4              64            5.90               1
 Blood Disorders................................
O0100M2: Special Treatments/Programs: Isolation              2.0              68            5.77               1
 Post-admit Code................................
I0600: Active Diagnoses: Heart Failure..........            29.5              63            5.72               1
H0100D: Bladder and Bowel Appliances:                        0.8              59            5.39               1
 Intermittent catheterization...................
I6300: Active Diagnoses: Respiratory Failure....            12.5              67            5.10               1
RxCC: Morbid Obesity............................             6.7              69            5.02               1
I5700: Active Diagnoses: Anxiety Disorder.......            22.4              59            4.89               1
CC: Disorders of Immunity--Except: RxCC: Immune              0.9              65            4.76               1
 Disorders......................................
G0600D: Mobility Devices: Limb prosthesis.......             0.4              68            4.65               1
RxCC: Pituitary, Adrenal Gland, and Other                    2.4              61            4.62               1
 Endocrine and Metabolic Disorders..............
I1700: Active Diagnoses: Multi-Drug Resistant                2.7              84            4.57               1
 Organism (MDRO) Code...........................
M1040E: Other Skin Problems: Surgical Wound(s)              25.7              57            4.05               1
 Code...........................................
I5900: Active Diagnoses: Bipolar Disorder.......             3.5              61            4.02               1
RxCC: Chronic Viral Hepatitis, Except Hepatitis              0.1              71            3.90               1
 C..............................................
----------------------------------------------------------------------------------------------------------------

    We invite comments on the updates that we are considering for the 
NTA component of PDPM.

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

A. Background and Statutory Authority

    The Skilled Nursing Facility Quality Reporting Program (SNF QRP) is 
authorized by section 1888(e)(6) of the Act, and it applies to 
freestanding SNFs, SNFs affiliated with acute care facilities, and all 
non-critical access hospital (CAH) swing-bed rural hospitals. Section 
1888(e)(6)(A)(i) of the Act requires the Secretary to reduce by 2 
percentage points the annual market basket percentage increase 
described in section 1888(e)(5)(B)(i) of the Act applicable to a SNF 
for a fiscal year (FY), after application of section 1888(e)(5)(B)(ii) 
of the Act (the productivity adjustment) and section 1888(e)(5)(B)(iii) 
of the Act, in the case of a SNF that does not submit data in 
accordance with sections 1888(e)(6)(B)(i)(II) and (III) of the Act for 
that FY. Section 1890A of the Act requires that the Secretary establish 
and

[[Page 23462]]

follow a pre-rulemaking process, in coordination with the consensus-
based entity (CBE) with a contract under section 1890(a) of the Act, to 
solicit input from certain groups regarding the selection of quality 
and efficiency measures for the SNF QRP. We have codified our program 
requirements in our regulations at Sec.  413.360.
    We are proposing to require SNFs to collect and submit through the 
Minimum Data Set (MDS) four new items and modify one item on the MDS as 
described in section VI.C. of this proposed rule. In section VI.E.3. of 
this proposed rule, we are proposing to adopt a similar validation 
process for the SNF QRP that we adopted for the SNF VBP, and to amend 
regulation text at Sec.  413.360 to implement the validation process we 
propose. We are also seeking information on future measure concepts for 
the SNF QRP in section VI.D. of this proposed rule.

B. General Considerations Used for the Selection of Measures for the 
SNF QRP

    For a detailed discussion of the considerations we use for the 
selection of SNF QRP quality, resource use, or other measures, we refer 
readers to the FY 2016 SNF PPS final rule (80 FR 46429 through 46431).
1. Quality Measures Currently Adopted for the SNF QRP
    The SNF QRP currently has 15 adopted measures, which are listed in 
Table 28. For a discussion of the factors used to evaluate whether a 
measure should be removed from the SNF QRP, we refer readers to Sec.  
413.360(b)(2).

      Table 28--Quality Measures Currently Adopted for the SNF QRP
------------------------------------------------------------------------
               Short name                   Measure name & data source
------------------------------------------------------------------------
   Resident Assessment Instrument Minimum Data Set (Assessment-Based)
------------------------------------------------------------------------
Pressure Ulcer/Injury..................  Changes in Skin Integrity Post-
                                          Acute Care: Pressure Ulcer/
                                          Injury.
Application of Falls...................  Application of Percent of
                                          Residents Experiencing One or
                                          More Falls with Major Injury
                                          (Long Stay).
Discharge Mobility Score...............  Application of IRF Functional
                                          Outcome Measure: Discharge
                                          Mobility Score for Medical
                                          Rehabilitation Patients.
Discharge Self[dash]Care Score.........  Application of IRF Functional
                                          Outcome Measure: Discharge
                                          Self-Care Score for Medical
                                          Rehabilitation Patients.
DRR....................................  Drug Regimen Review Conducted
                                          With Follow-Up for Identified
                                          Issues-Post Acute Care (PAC)
                                          Skilled Nursing Facility (SNF)
                                          Quality Reporting Program
                                          (QRP).
TOH[dash]Provider......................  Transfer of Health (TOH)
                                          Information to the Provider
                                          Post[dash]Acute Care (PAC).
TOH[dash]Patient.......................  Transfer of Health (TOH)
                                          Information to the Patient
                                          Post[dash]Acute Care (PAC).
DC Function............................  Discharge Function Score.
Patient/Resident COVID-19 Vaccine......  COVID-19 Vaccine: Percent of
                                          Patients/Residents Who Are Up
                                          to Date.
------------------------------------------------------------------------
                              Claims-Based
------------------------------------------------------------------------
MSPB SNF...............................  Medicare Spending Per
                                          Beneficiary (MSPB)-Post Acute
                                          Care (PAC) Skilled Nursing
                                          Facility (SNF) Quality
                                          Reporting Program (QRP).
DTC....................................  Discharge to Community (DTC)-
                                          Post Acute Care (PAC) Skilled
                                          Nursing Facility (SNF) Quality
                                          Reporting Program (QRP).
PPR....................................  Potentially Preventable 30-Day
                                          Post-Discharge Readmission
                                          Measure for Skilled Nursing
                                          Facility (SNF) Quality
                                          Reporting Program (QRP).
SNF HAI................................  SNF Healthcare-Associated
                                          Infections (HAI) Requiring
                                          Hospitalization.
------------------------------------------------------------------------
                   National Healthcare Safety Network
------------------------------------------------------------------------
HCP COVID-19 Vaccine...................  COVID[dash]19 Vaccination
                                          Coverage among Healthcare
                                          Personnel (HCP).
HCP Influenza Vaccine..................  Influenza Vaccination Coverage
                                          among Healthcare Personnel
                                          (HCP).
------------------------------------------------------------------------

    We are not proposing to adopt any new measures for the SNF QRP.

C. Proposal To Collect Four New Items as Standardized Patient 
Assessment Data Elements and To Modify One Item Collected as a 
Standardized Patient Assessment Data Element Beginning With the FY 2027 
SNF QRP

    In this proposed rule, we are proposing to require SNFs to report 
the following four new items \2\ as standardized patient assessment 
data elements under the social determinants of health (SDOH) category: 
one item for Living Situation; two items for Food; and one item for 
Utilities. We are also proposing to modify one of the current items 
collected as a standardized patient assessment data element under the 
SDOH category (the Transportation item), as described in section 
VI.C.5. of this proposed rule.\3\
---------------------------------------------------------------------------

    \2\ Items may also be referred to as ``data elements.''
    \3\ As noted in section VI.C.3, hospitals are required to report 
whether they have screened patients for five standardized SDOH 
categories: housing instability, food insecurity, utility 
difficulties, transportation needs, and interpersonal safety.
---------------------------------------------------------------------------

1. Definition of Standardized Patient Assessment Data
    Section 1888(e)(6)(B)(i)(III) of the Act requires SNFs to submit 
standardized patient assessment data required under section 1899B(b)(1) 
of the Act. Section 1899B(b)(1)(A) of the Act requires post-acute care 
(PAC) providers to submit standardized patient assessment data under 
applicable reporting provisions (which, for SNFs, is the SNF QRP) with 
respect to the admission and discharge of an individual (and more 
frequently as the Secretary deems appropriate) using a standardized 
patient assessment instrument. Section 1899B(a)(1)(C) of the Act 
requires, in part, the Secretary to modify the PAC assessment 
instruments in order for PAC providers, including SNFs, to submit 
standardized patient assessment data under the Medicare program. SNFs 
are currently required to report standardized patient assessment data 
through the patient

[[Page 23463]]

assessment instrument, referred to as the MDS. Section 1899B(b)(1)(B) 
of the Act describes standardized patient assessment data as data 
required for at least the quality measures described in section 
1899B(c)(1) of the Act and that is with respect to the following 
categories: (1) functional status, such as mobility and self-care at 
admission to a PAC provider and before discharge from a PAC provider; 
(2) cognitive function, such as ability to express ideas and to 
understand, and mental status, such as depression and dementia; (3) 
special services, treatments, and interventions, such as need for 
ventilator use, dialysis, chemotherapy, central line placement, and 
total parenteral nutrition; (4) medical conditions and comorbidities, 
such as diabetes, congestive heart failure, and pressure ulcers; (5) 
impairments, such as incontinence and an impaired ability to hear, see, 
or swallow, and (6) other categories deemed necessary and appropriate 
by the Secretary.
2. Social Determinants of Health Collected as Standardized Patient 
Assessment Data Elements
    Section 1899B(b)(1)(B)(vi) of the Act authorizes the Secretary to 
collect standardized patient assessment data elements with respect to 
other categories deemed necessary and appropriate. Accordingly, we 
finalized the creation of the SDOH category of standardized patient 
assessment data elements in the FY 2020 SNF PPS final rule (84 FR 38805 
through 38817), and defined SDOH as the socioeconomic, cultural, and 
environmental circumstances in which individuals live that impact their 
health.\4\ According to the World Health Organization, research shows 
that the SDOH can be more important than health care or lifestyle 
choices in influencing health, accounting for between 30 to 55 percent 
of health outcomes.\5\ This is part of a growing body of research that 
highlights the importance of SDOH on health outcomes. Subsequent to the 
FY 2020 SNF PPS final rule, we expanded our definition of SDOH: SDOH 
are the conditions in the environments where people are born, live, 
learn, work, play, worship, and age that affect a wide range of health, 
functioning, and quality-of-life outcomes and risks.6 7 8 
This expanded definition aligns our definition of SDOH with the 
definition used by HHS agencies, including OASH, the Centers for 
Disease Control and Prevention (CDC) and the White House Office of 
Science and Technology Policy.9 10 We currently collect 
seven items in this SDOH category of standardized patient assessment 
data elements: ethnicity, race, preferred language, interpreter 
services, health literacy, transportation, and social isolation (84 FR 
38805 through 38817).\11\
---------------------------------------------------------------------------

    \4\ FY 2020 SNF PPS final rule (84 FR 38805).
    \5\ World Health Organization. Social determinants of health. 
Available at https://www.who.int/health-topics/social-determinants-of-health#tab=tab_1.
    \6\ Using Z Codes: The Social Determinants of Health (SDOH). 
Data Journey to Better Outcomes.
    \7\ Improving the Collection of Social Determinants of Health 
(SDOH) Data with ICD-10-CM Z Codes. https://www.cms.gov/files/document/cms-2023-omh-z-code-resource.pdf.
    \8\ CMS.gov. Measures Management System (MMS). CMS Focus on 
Health Equity. Health Equity Terminology and Quality Measures. 
https://mmshub.cms.gov/about-quality/quality-at-CMS/goals/cms-focus-on-health-equity/health-equity-terminology.
    \9\ Centers for Disease Control and Prevention. Social 
Determinants of Health (SDOH) and PLACES Data.
    \10\ ``U.S. Playbook To Address Social Determinants Of Health'' 
from the White House Office Of Science And Technology Policy 
(November 2023).
    \11\ These SDOH data are also collected for purposes outlined in 
section 2(d)(2)(B) of the Improving Medicare Post-Acute Care 
Transitions Act (IMPACT Act). For a detailed discussion on SDOH data 
collection under section 2(d)(2)(B) of the IMPACT Act, see the FY 
2020 SNF PPS final rule (84 FR 38805 through 38817).
---------------------------------------------------------------------------

    In accordance with our authority under section 1899B(b)(1)(B)(vi) 
of the Act, we similarly finalized the creation of the SDOH category of 
standardized patient assessment data elements for Inpatient 
Rehabilitation Facilities (IRFs) in the FY 2020 IRF PPS final rule (84 
FR 39149 through 39161), for Long-Term Care Hospitals (LTCHs) in the FY 
2020 Inpatient Prospective Payment System (IPPS)/LTCH PPS final rule 
(84 FR 42577 through 84 FR 42588), and for Home Health Agencies (HHAs) 
in the Calendar Year (CY) 2020 HH PPS final rule (84 60597 through 
60608). We also collect the same seven SDOH items in these PAC 
providers' respective patient assessment instruments (84 FR 39161, 84 
FR 42590, and 84 FR 60610, respectively).
    Access to standardized data relating to SDOH on a national level 
permits us to conduct periodic analyses, and to assess their 
appropriateness as risk adjustors or in future quality measures. Our 
ability to perform these analyses relies on existing data collection of 
SDOH items from PAC settings. We adopted these SDOH items using common 
standards and definitions across the four PAC providers to promote 
interoperable exchange of longitudinal information among these PAC 
providers, including SNFs, and other providers. We believe this 
information may facilitate coordinated care, continuity in care 
planning, and the discharge planning process from PAC settings.
    We noted in our FY 2020 SNF PPS final rule that each of the items 
we were adopting at that time was identified in the 2016 National 
Academies of Sciences, Engineering, and Medicine (NASEM) report as 
impacting care use, cost and outcomes for Medicare beneficiaries (84 FR 
38806). At that time, we acknowledged that other items may also be 
useful to understand. The SDOH items we are now proposing to adopt as 
standardized patient assessment data elements under the SDOH category 
in this proposed rule were also identified in the 2016 NASEM report 
\12\ or the 2020 NASEM report \13\ as impacting care use, cost and 
outcomes for Medicare beneficiaries. The items have the capacity to 
take into account treatment preferences and care goals of residents and 
their caregivers, to inform our understanding of resident complexity 
and SDOH that may affect care outcomes, and ensure that SNFs are in a 
position to impact them through the provision of services and supports, 
such as connecting residents and their caregivers with identified needs 
with social support programs.
---------------------------------------------------------------------------

    \12\ National Academies of Sciences, Engineering, and Medicine. 
2016. Accounting for Social Risk Factors in Medicare Payment: 
Identifying Social Risk Factors. Washington, DC: The National 
Academies Press. https://doi.org/10.17226/21858.
    \13\ National Academies of Sciences, Engineering, and Medicine. 
2020. Leading Health Indicators 2030: Advancing Health, Equity, and 
Well-Being. Washington, DC: The National Academies Press. https://doi.org/10.17226/25682.
---------------------------------------------------------------------------

    Health-related social needs (HRSNs) are individual-level, adverse 
social conditions that negatively impact a person's health or health 
care,\14\ and are the resulting effects of SDOH. Examples of HRSNs 
include lack of access to food, housing, or transportation, and have 
been associated with poorer health outcomes, greater use of emergency 
departments and hospitals, and higher health care costs.\15\ Certain 
HRSNs can directly influence an individual's physical, psychosocial, 
and functional status. This is particularly true for food

[[Page 23464]]

security, housing stability, utilities security, and access to 
transportation.\16\
---------------------------------------------------------------------------

    \14\ Centers for Medicare & Medicaid Services. ``A Guide to 
Using the Accountable Health Communities Health-Related Social Needs 
Screening Tool: Promising Practices and Key Insights.'' August 2022. 
Available at https://www.cms.gov/priorities/innovation/media/document/ahcm-screeningtool-companion.
    \15\ Berkowitz, S.A., T.P. Baggett, and S.T. Edwards, 
``Addressing Health-Related Social Needs: Value-Based Care or 
Values-Based Care?'' Journal of General Internal Medicine, vol. 34, 
no. 9, 2019, pp. 1916-1918, https://doi.org/10.1007/s11606-019-05087-3.
    \16\ Hugh Alderwick and Laura M. Gottlieb, ``Meanings and 
Misunderstandings: A Social Determinants of Health Lexicon for 
Health Care Systems: Milbank Quarterly,'' Milbank Memorial Fund, 
November 18, 2019, https://www.milbank.org/quarterly/articles/meanings-and-misunderstandings-a-social-determinants-of-health-lexicon-for-health-care-systems/.
---------------------------------------------------------------------------

    We are proposing to require SNFs to collect and submit four new 
items in the MDS as standardized patient assessment data elements under 
the SDOH category because these items would collect information not 
already captured by the current SDOH items. Specifically, we believe 
the ongoing identification of SDOH would have three significant 
benefits. First, promoting screening for these SDOH could serve as 
evidence-based building blocks for supporting healthcare providers in 
actualizing their commitment to address disparities that 
disproportionately impact underserved communities. Second, screening 
for SDOH improves health equity through identifying potential social 
needs so the SNF may address those with the resident, their caregivers, 
and community partners during the discharge planning process, if 
indicated.\17\ Third, these SDOH items could support our ongoing SNF 
QRP initiatives by providing data with which to stratify SNF's 
performance on measures and or in future quality measures.
---------------------------------------------------------------------------

    \17\ American Hospital Association. (2020). Health Equity, 
Diversity & Inclusion Measures for Hospitals and Health System 
Dashboards. December 2020. Accessed: January 18, 2022. Available at 
https://ifdhe.aha.org/system/files/media/file/2020/12/ifdhe_inclusion_dashboard.pdf.
---------------------------------------------------------------------------

    Additional collection of SDOH items would permit us to continue 
developing the statistical tools necessary to maximize the value of 
Medicare data and improve the quality of care for all beneficiaries. 
For example, we recently developed and released the Health Equity 
Confidential Feedback Reports, which provided data to SNFs on whether 
differences in quality measure outcomes are present for their residents 
by dual-enrollment status and race and ethnicity.\18\ We note that 
advancing health equity by addressing the health disparities that 
underlie the country's health system is one of our strategic pillars 
\19\ and a Biden-Harris Administration priority.\20\
---------------------------------------------------------------------------

    \18\ In October 2023, we released two new annual Health Equity 
Confidential Feedback Reports to SNFs: The Discharge to Community 
(DTC) Health Equity Confidential Feedback Report and the Medicare 
Spending Per Beneficiary (MSPB) Health Equity Confidential Feedback 
Report. The PAC Health Equity Confidential Feedback Reports 
stratified the DTC and MSPB measures by dual-enrollment status and 
race/ethnicity. For more information on the Health Equity 
Confidential Feedback Reports, please refer to the Education and 
Outreach materials available on the SNF QRP Training web page at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Skilled-Nursing-Facility-Quality-Reporting-Program/SNF-Quality-Reporting-Program-Training.
    \19\ Brooks-LaSure, C. (2021). My First 100 Days and Where We Go 
from Here: A Strategic Vision for CMS. Centers for Medicare & 
Medicaid. Available at https://www.cms.gov/blog/my-first-100-days-and-where-we-go-here-strategic-vision-cms.
    \20\ The Biden-Harris Administration's strategic approach to 
addressing health related social needs can be found in The U.S. 
Playbook to Address Social Determinants of Health (SDOH) (2023): 
https://www.whitehouse.gov/wp-content/uploads/2023/11/SDOH-Playbook-3.pdf.
---------------------------------------------------------------------------

3. Proposal To Collect Four New Items as Standardized Patient 
Assessment Data Elements Beginning With the FY 2027 SNF QRP
    We are proposing to require SNFs to collect and submit four new 
items as standardized patient assessment data elements under the SDOH 
category using the MDS: one item for Living Situation, as described in 
section VI.C.3.(a) of this proposed rule; two items for Food, as 
described in section VI.C.3.(b) of this proposed rule; and one item for 
Utilities, as described in section VI.C.3.(c) of this proposed rule.
    We selected the proposed SDOH items from the Accountable Health 
Communities (AHC) HRSN Screening Tool developed for the AHC Model. The 
AHC HRSN Screening Tool is a universal, comprehensive screening for 
HRSNs that addresses five core domains as follows: (1) housing 
instability (for example, homelessness, poor housing quality); (2) food 
insecurity; (3) transportation difficulties; (4) utility assistance 
needs; and (5) interpersonal safety concerns (for example, intimate-
partner violence, elder abuse, child maltreatment).\21\
---------------------------------------------------------------------------

    \21\ More information about the AHC HRSN Screening Tool is 
available on the website at https://innovation.cms.gov/Files/worksheets/ahcm-screeningtool.pdf.
---------------------------------------------------------------------------

    We believe that requiring SNFs to report the Living Situation, 
Food, Utilities, and Transportation items that are currently included 
in the AHC HRSN Screening Tool would further standardize the screening 
of SDOH across quality programs. For example, our proposal would align, 
in part, with the requirements of the Hospital Inpatient Quality 
Reporting (IQR) Program and the Inpatient Psychiatric Facility Quality 
Reporting (IPFQR) Program. As of January 2024, hospitals are required 
to report whether they have screened patients for the standardized SDOH 
categories of housing instability, food insecurity, utility 
difficulties, transportation needs, and interpersonal safety to meet 
the Hospital IQR Program requirements.\22\ Additionally, beginning 
January 2025, IPFs will also be required to report whether they have 
screened patients for the same set of SDOH categories.\23\ As we 
continue to standardize data collection across PAC settings, we believe 
using common standards and definitions for new items is important to 
promote interoperable exchange of longitudinal information between SNFs 
and other providers to facilitate coordinated care, continuity in care 
planning, and the discharge planning process.
---------------------------------------------------------------------------

    \22\ Centers for Medicare & Medicaid Services, FY2023 IPPS/LTCH 
PPS final rule (87 FR 49202 through 49215).
    \23\ Centers for Medicare & Medicaid Services, FY2024 Inpatient 
Psychiatric Prospective Payment System--Rate Update (88 FR 51107 
through 51121).
---------------------------------------------------------------------------

    Below we describe each of the four proposed items in more detail.
(a) Living Situation
    Healthy People 2030 prioritizes economic stability as a key SDOH, 
of which housing stability is a component.24 25 Lack of 
housing stability encompasses several challenges, such as having 
trouble paying rent, overcrowding, moving frequently, or spending the 
bulk of household income on housing.\26\ These experiences may 
negatively affect one's physical health and access to health care. 
Housing instability can also lead to homelessness, which is housing 
deprivation in its most severe form.\27\ On a single night in 2023, 
roughly 653,100 people, or 20 out of every 10,000 people in the United 
States, were experiencing homelessness.\28\ Studies also found that 
people who are homeless have an increased risk of

[[Page 23465]]

premature death and experience chronic disease more often than among 
the general population.\29\ We believe that SNFs can use information 
obtained from the Living Situation item during a resident's discharge 
planning. For example, SNFs could work in partnership with community 
care hubs and community-based organizations to establish new care 
transition workflows, including referral pathways, contracting 
mechanisms, data sharing strategies, and implementation training that 
can track HRSNs to ensure unmet needs, such as housing, are 
successfully addressed through closed loop referrals and follow-up.\30\ 
SNFs could also take action to help alleviate a resident's other 
related costs of living, like food, by referring the resident to 
community-based organizations that would allow the resident's 
additional resources to be allocated towards housing without 
sacrificing other needs.\31\ Finally, SNFs could use the information 
obtained from the Living Situation item to better coordinate with other 
healthcare providers, facilities, and agencies during transitions of 
care, so that referrals to address a resident's housing stability are 
not lost during vulnerable transition periods.
---------------------------------------------------------------------------

    \24\ Office of Disease Prevention and Health Promotion. (n.d.). 
Healthy People 2030 [verbar] Priority Areas: Social Determinants of 
Health. Retrieved from U.S. Department of Health and Human Services: 
https://health.gov/healthypeople/priority-areas/social-determinants-health.
    \25\ Healthy People 2030 is a long-term, evidence-based effort 
led by the U.S. Department of Health and Human Services (HHS) that 
aims to identify nationwide health improvement priorities and 
improve the health of all Americans.
    \26\ Kushel, M.B., Gupta, R., Gee, L., & Haas, J.S. (2006). 
Housing instability and food insecurity as barriers to health care 
among low-income Americans. Journal of General Internal Medicine, 
21(1), 71-77. doi: 10.1111/j.1525-1497.2005.00278.x.
    \27\ Homelessness is defined as ``lacking a regular nighttime 
residence or having a primary nighttime residence that is a 
temporary shelter or other place not designed for sleeping.'' 
Crowley, S. (2003). The affordable housing crisis: Residential 
mobility of poor families and school mobility of poor children. 
Journal of Negro Education, 72(1), 22-38. https://doi.org/10.2307/3211288.
    \28\ The 2023 Annual Homeless Assessment Report (AHAR) to 
Congress. The U.S. Department of Housing and Urban Development 2023. 
https://www.huduser.gov/portal/sites/default/files/pdf/2023-AHAR-Part-1.pdf.
    \29\ Baggett, T.P., Hwang, S.W., O'Connell, J.J., Porneala, 
B.C., Stringfellow, E.J., Orav, E.J., Singer, D.E., & Rigotti, N.A. 
(2013). Mortality among homeless adults in Boston: Shifts in causes 
of death over a 15-year period. JAMA Internal Medicine, 173(3), 189-
195. https://doi.org/10.1001/jamainternmed.2013.1604. Schanzer, B., 
Dominguez, B., Shrout, P.E., & Caton, C.L. (2007). Homelessness, 
health status, and health care use. American Journal of Public 
Health, 97(3), 464-469. doi: https://doi.org/10.2105/ajph.2005.076190.
    \30\ U.S. Department of Health & Human Services (HHS), Call to 
Action, ``Addressing Health Related Social Needs in Communities 
Across the Nation.'' November 2023. https://aspe.hhs.gov/sites/default/files/documents/3e2f6140d0087435cc6832bf8cf32618/hhs-call-to-action-health-related-social-needs.pdf.
    \31\ Henderson, K.A., Manian, N., Rog, D.J., Robison, E., Jorge, 
E., AlAbdulmunem, M. ``Addressing Homelessness Among Older Adults'' 
(Final Report). Washington, DC: Office of the Assistant Secretary 
for Planning and Evaluation, U.S. Department of Health and Human 
Services. October 26, 2023.
---------------------------------------------------------------------------

    Due to the potential negative impacts housing instability can have 
on a resident's health, we are proposing to adopt the Living Situation 
item as a new standardized patient assessment data element under the 
SDOH category. The proposed Living Situation item is based on the 
Living Situation item currently collected in the AHC HRSN Screening 
Tool,32 33 and was adapted from the Protocol for Responding 
to and Assessing Patients' Assets, Risks, and Experiences (PRAPARE) 
tool.\34\ The proposed Living Situation item asks, ``What is your 
living situation today?'' The proposed response options are: (0) I have 
a steady place to live; (1) I have a place to live today, but I am 
worried about losing it in the future; (2) I do not have a steady place 
to live; (7) Resident declines to respond; and (8) Resident unable to 
respond. A draft of the Living Situation item proposed as a 
standardized patient assessment data element under the SDOH category 
can be found in the Downloads section of the SNF QRP Measures and 
Technical Information web page at https://www.cms.gov/medicare/quality/snf-quality-reporting-program/measures-and-technical-information.
---------------------------------------------------------------------------

    \32\ More information about the AHC HRSN Screening Tool is 
available on the website at https://innovation.cms.gov/Files/worksheets/ahcm-screeningtool.pdf.
    \33\ The AHC HRSN Screening Tool Living Situation item includes 
two questions. In an effort to limit SNF burden, we are only 
proposing the first question.
    \34\ National Association of Community Health Centers and 
Partners, National Association of Community Health Centers, 
Association of Asian Pacific Community Health Organizations, 
Association OPC, Institute for Alternative Futures. ``PRAPARE.'' 
2017. https://prapare.org/the-prapare-screening-tool/.
---------------------------------------------------------------------------

(b) Food
    The U.S. Department of Agriculture, Economic Research Service 
defines a lack of food security as a household-level economic and 
social condition of limited or uncertain access to adequate food.\35\ 
Adults who are food insecure may be at an increased risk for a variety 
of negative health outcomes and health disparities. For example, a 
study found that food-insecure adults may be at an increased risk for 
obesity.\36\ Another study found that food-insecure adults have a 
significantly higher probability of death from any cause or 
cardiovascular disease in long-term follow-up care, in comparison to 
adults that are food secure.\37\
---------------------------------------------------------------------------

    \35\ U.S. Department of Agriculture, Economic Research Service. 
(n.d.). Definitions of food security. Retrieved March 10, 2022, from 
https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-u-s/definitions-of-food-security/.
    \36\ Hernandez, D.C., Reesor, L.M., & Murillo, R. (2017). Food 
insecurity and adult overweight/obesity: Gender and race/ethnic 
disparities. Appetite, 117, 373-378.
    \37\ Banerjee, S., Radak, T., Khubchandani, J., & Dunn, P. 
(2021). Food Insecurity and Mortality in American Adults: Results 
From the NHANES-Linked Mortality Study. Health promotion practice, 
22(2), 204-214. https://doi.org/10.1177/1524839920945927.
---------------------------------------------------------------------------

    While having enough food is one of many predictors for health 
outcomes, a diet low in nutritious foods is also a factor.\38\ The 
United States Department of Agriculture (USDA) defines nutrition 
security as ``consistent and equitable access to healthy, safe, 
affordable foods essential to optimal health and well-being.'' \36\ 
Nutrition security builds on and complements long standing efforts to 
advance food security. Studies have shown that older adults struggling 
with food insecurity consume fewer calories and nutrients and have 
lower overall dietary quality than those who are food secure, which can 
put them at nutritional risk.\39\ Older adults are also at a higher 
risk of developing malnutrition, which is considered a state of 
deficit, excess, or imbalance in protein, energy, or other nutrients 
that adversely impacts an individual's own body form, function, and 
clinical outcomes.\40\ About 50 percent of older adults are affected by 
malnutrition, which is further aggravated by a lack of food security 
and poverty.\41\ These facts highlight why the Biden-Harris 
Administration launched the White House Challenge to End Hunger and 
Build Health Communities.\42\
---------------------------------------------------------------------------

    \38\ National Center for Health Statistics. (2022, September 6). 
Exercise or Physical Activity. Retrieved from Centers for Disease 
Control and Prevention: https://www.cdc.gov/nchs/fastats/exercise.htm.
    \39\ Ziliak, J.P., & Gundersen, C. (2019). The State of Senior 
Hunger in America 2017: An Annual Report. Prepared for Feeding 
America. Available at https://www.feedingamerica.org/research/senior-hunger-research/senior.
    \40\ The Malnutrition Quality Collaborative. (2020). National 
Blueprint: Achieving Quality Malnutrition Care for Older Adults, 
2020 Update. Washington, DC: Avalere Health and Defeat Malnutrition 
Today. Available at https://defeatmalnutrition.today/advocacy/blueprint/.
    \41\ Food Research & Action Center (FRAC). ``Hunger is a Health 
Issue for Older Adults: Food Security, Health, and the Federal 
Nutrition Programs.'' December 2019. https://frac.org/wp-content/uploads/hunger-is-a-health-issue-for-older-adults-1.pdf.
    \42\ The White House Challenge to End Hunger and Build Health 
Communities (Challenge) was a nationwide call-to-action released on 
March 24, 2023 to stakeholders across all of society to make 
commitments to advance President Biden's goal to end hunger and 
reduce diet-related diseases by 2030--all while reducing 
disparities. More information on the White House Challenge to End 
Hunger and Build Health Communities can be found: https://www.whitehouse.gov/briefing-room/statements-releases/2023/03/24/fact-sheet-biden-harris-administration-launches-the-white-house-challenge-to-end-hunger-and-build-healthy-communities-announces-new-public-private-sector-actions-to-continue-momentum-from-hist/.
---------------------------------------------------------------------------

    We believe that adopting items to collect and analyze information 
about a resident's food security at home could provide additional 
insight to their health complexity and help facilitate coordination 
with other healthcare providers, facilities, and agencies during 
transitions of care, so that referrals to address a resident's food 
security are not lost during vulnerable transition periods. For 
example, a SNF's dietitian or other clinically qualified nutrition 
professional could work with the

[[Page 23466]]

resident and their caregiver to plan healthy, affordable food choices 
prior to discharge.\43\ SNFs could also refer a resident that indicates 
lack of food security to government initiatives such as the 
Supplemental Nutrition Assistance Program (SNAP) and food pharmacies 
(programs to increase access to healthful foods by making them 
affordable), two initiatives that have been associated with lower 
health care costs and reduced hospitalization and emergency department 
visits.\44\
---------------------------------------------------------------------------

    \43\ Schroeder K., Smaldone A. Food Insecurity: A Concept 
Analysis. Nurse Forum. 2015 Oct-Dec;50(4):274-84. doi: 10.1111/
nuf.12118. Epub 2015 Jan 21. PMID: 25612146; PMCID: PMC4510041.
    \44\ Tsega M., Lewis C., McCarthy D., Shah T., Coutts K. Review 
of Evidence for Health-Related Social Needs Interventions. July 
2019. The Commonwealth Fund. https://www.commwealthfund.org/sites/default/files/2019-07/ROI-evidence-review-final-version.pdf.
---------------------------------------------------------------------------

    We are proposing to adopt two Food items as new standardized 
patient assessment data elements under the SDOH category. These 
proposed items are based on the Food items currently collected in the 
AHC HRSN Screening Tool and were adapted from the USDA 18-item 
Household Food Security Survey (HFSS).\45\ The first proposed Food item 
states, ``Within the past 12 months, you worried that your food would 
run out before you got money to buy more.'' The second proposed Food 
item States, ``Within the past 12 months, the food you bought just 
didn't last and you didn't have money to get more.'' We propose the 
same response options for both items: (0) Often true; (1) Sometimes 
true; (2) Never True; (7) Resident to declines to respond; and (8) 
Resident unable to respond. A draft of the Food items proposed to be 
adopted as standardized patient assessment data elements under the SDOH 
category can be found in the Downloads section of the SNF QRP Measures 
and Technical Information web page at https://www.cms.gov/medicare/quality/snf-quality-reporting-program/measures-and-technical-information.
---------------------------------------------------------------------------

    \45\ More information about the HFSS tool can be found at 
https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-u-s/survey-tools/.
---------------------------------------------------------------------------

(c) Utilities
    A lack of energy (utility) security can be defined as an inability 
to adequately meet basic household energy needs.\46\ According to the 
United States Department of Energy, one in three households in the U.S. 
are unable to adequately meet basic household energy needs.\47\ The 
consequences associated with a lack of utility security are represented 
by three primary dimensions: economic; physical; and behavioral. 
Residents with low incomes are disproportionately affected by high 
energy costs, and they may be forced to prioritize paying for housing 
and food over utilities.\48\ Some residents may face limited housing 
options, and therefore, are at increased risk of living in lower-
quality physical conditions with malfunctioning heating and cooling 
systems, poor lighting, and outdated plumbing and electrical 
systems.\49\ Residents with a lack of utility security may use negative 
behavioral approaches to cope, such as using stoves and space heaters 
for heat.\50\ In addition, data from the Department of Energy's U.S. 
Energy Information Administration confirm that a lack of energy 
security disproportionately affects certain populations, such as low-
income and African American households.\51\ The effects of a lack of 
utility security include vulnerability to environmental exposures such 
as dampness, mold, and thermal discomfort in the home, which have a 
direct impact on a person's health.\52\ For example, research has shown 
associations between a lack of energy security and respiratory 
conditions as well as mental health-related disparities and poor sleep 
quality in vulnerable populations such as the elderly, children, the 
socioeconomically disadvantaged, and the medically vulnerable.\53\
---------------------------------------------------------------------------

    \46\ Hern[aacute]ndez D. Understanding `energy insecurity' and 
why it matters to health. Soc Sci Med. 2016 Oct; 167:1-10. doi: 
10.1016/j.socscimed.2016.08.029. Epub 2016 Aug 21. PMID: 27592003; 
PMCID: PMC5114037.
    \47\ US Energy Information Administration. ``One in Three U.S. 
Households Faced Challenges in Paying Energy Bills in 2015.'' 2017 
Oct 13. https://www.eia.gov/consumption/residential/reports/2015/energybills/.
    \48\ Hern[aacute]ndez D. ``Understanding `energy insecurity' and 
why it matters to health.'' Soc Sci Med. 2016; 167:1-10.
    \49\ Hern[aacute]ndez D. Understanding 'energy insecurity' and 
why it matters to health. Soc Sci Med. 2016 Oct;167:1-10. doi: 
10.1016/j.socscimed.2016.08.029. Epub 2016 Aug 21. PMID: 27592003; 
PMCID: PMC5114037.
    \50\ Hern[aacute]ndez D. ``What `Merle' Taught Me About Energy 
Insecurity and Health.'' Health Affairs, VOL.37, NO.3: Advancing 
Health Equity Narrative Matters. March 2018. https://doi.org/10.1377/hlthaff.2017.1413.
    \51\ US Energy Information Administration. ``One in Three U.S. 
Households Faced Challenges in Paying Energy Bills in 2015.'' 2017 
Oct 13. https://www.eia.gov/consumption/residential/reports/2015/energybills/.
    \52\ Hern[aacute]ndez D. Understanding `energy insecurity' and 
why it matters to health. Soc Sci Med. 2016 Oct;167:1-10. doi: 
10.1016/j.socscimed.2016.08.029. Epub 2016 Aug 21. PMID: 27592003; 
PMCID: PMC5114037.
    \53\ Hern[aacute]ndez D, Siegel E. Energy insecurity and its ill 
health effects: A community perspective on the energy-health nexus 
in New York City. Energy Res Soc Sci. 2019 Jan;47:78-83. doi: 
10.1016/j.erss.2018.08.011. Epub 2018 Sep 8. PMID: 32280598; PMCID: 
PMC7147484.
---------------------------------------------------------------------------

    We believe adopting an item to collect information about a 
resident's utility security would facilitate the identification of 
residents who may not have utility security and who may benefit from 
engagement efforts. For example, SNFs may be able to use the 
information on utility security to help connect some residents in need 
to programs that can help older adults pay for their home energy 
(heating/cooling) costs, like the Low-Income Home Energy Assistance 
Program (LIHEAP).\54\ SNFs may also be able to partner with community 
care hubs and community-based organizations to assist the resident in 
applying for these and other local utility assistance programs, as well 
as helping them navigate the enrollment process.\55\
---------------------------------------------------------------------------

    \54\ U.S. Department of Health & Human Services. Office of 
Community Services. Low Income Home Energy Assistance Program 
(LIHEAP). https://www.acf.hhs.gov/ocs/programs/liheap.
    \55\ National Council on Aging (NCOA). ``How to Make It Easier 
for Older Adults to Get Energy and Utility Assistance.'' Promising 
Practices Clearinghouse for Professionals. Jan 13, 2022. https://www.ncoa.org/article/how-to-make-it-easier-for-older-adults-to-get-energy-and-utility-assistance.
---------------------------------------------------------------------------

    We are proposing to adopt a new item, Utilities, as a new 
standardized patient assessment data element under the SDOH category. 
This proposed item is based on the Utilities item currently collected 
in the AHC HRSN Screening Tool, and was adapted from the Children's 
Sentinel Nutrition Assessment Program (C-SNAP) survey.\56\ The proposed 
Utilities item asks, ``In the past 12 months, has the electric, gas, 
oil, or water company threatened to shut off services in your home?'' 
The proposed response options are: (0) Yes; (1) No; (2) Already shut 
off; (7) Resident declines to respond; and (8) Resident unable to 
respond. A draft of the Utilities item proposed as a standardized 
patient assessment data element under the SDOH category can be found in 
the Downloads section of the SNF QRP Measures and Technical Information 
web page at https://www.cms.gov/medicare/quality/snf-quality-reporting-program/measures-and-technical-information.
---------------------------------------------------------------------------

    \56\ This validated survey was developed as a clinical indicator 
of household energy security among pediatric caregivers. Cook, J.T., 
D.A. Frank., P.H. Casey, R. Rose-Jacobs, M.M. Black, M. Chilton, S. 
Ettinger de Cuba, et al. ``A Brief Indicator of Household Energy 
Security: Associations with Food Security, Child Health, and Child 
Development in US Infants and Toddlers.'' Pediatrics, vol. 122, no. 
4, 2008, pp. e874-e875. https://doi.org/10.1542/peds.2008-0286.
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4. Interested Parties Input
    We developed our proposal to add these items after considering 
feedback we received in response to our request

[[Page 23467]]

for information (RFI) on Principles for Selecting and Prioritizing SNF 
QRP Quality Measures and Concepts Under Consideration for Future Years 
in the FY 2024 SNF PPS final rule (88 FR 53265 through 53267). This RFI 
sought to obtain input on a set of principles to identify SNF QRP 
measures, as well as additional thoughts about measurement gaps, and 
suitable measures for filling these gaps. In response to this 
solicitation, commenters stated that the inclusion of a malnutrition 
screening and intervention measures would promote both quality and 
health equity. Other measures and measurement concepts included health 
equity, psychosocial issues, and caregiver status. The FY 2024 SNF PPS 
final rule includes a summary of the public comments that we received 
in response to the RFI and our responses to those comments (88 FR 53265 
through 53267).
    We also considered comments received in response to our Health 
Equity Update in the FY 2024 SNF PPS final rule. Comments were 
generally supportive of CMS' efforts to develop ways to measure and 
mitigate health inequities. One commenter referenced their belief that 
collection of SDOH would enhance holistic care, call attention to 
impairments that might be mitigated or resolved, and facilitate clear 
communication between residents and SNFs. While there were commenters 
who urged CMS to balance reporting requirements so as not to create 
undue administrative burden, another commenter suggested CMS 
incentivize collection of data on SDOH such as housing stability and 
food security. The FY 2024 SNF PPS final rule (88 FR 53268 through 
53269) includes a summary of the public comments that we received in 
response to the Health Equity Update and our responses to those 
comments.
    Additionally, we considered feedback we received when we proposed 
the creation of the SDOH category of standardized patient assessment 
data elements in the FY 2020 SNF PPS proposed rule (84 FR 17671 through 
17679). Commenters were generally in favor of the concept of collecting 
SDOH items and stated that, if implemented appropriately, the data 
could be useful in identifying and addressing health care disparities, 
as well as refining the risk adjustment of outcome measures. The FY 
2020 SNF PPS final rule (84 FR 38805 through 38818) includes a summary 
of the public comments that we received and our responses to those 
comments. We incorporated this input into the development of this 
proposal.
    We invite comment on the proposal to adopt four new items as 
standardized patient assessment data elements under the SDOH category 
beginning with the FY 2027 SNF QRP: one Living Situation item; two Food 
items; and one Utilities item.
5. Proposal To Modify the Transportation Item Beginning With the FY 
2027 SNF QRP
    Beginning October 1, 2023, SNFs began collecting seven items 
adopted as standardized patient assessment data elements under the SDOH 
category on the MDS.\57\ One of these items, A1250. Transportation, 
collects data on whether a lack of transportation has kept a resident 
from getting to and from medical appointments, meetings, work, or from 
getting things they need for daily living. This item was adopted as a 
standardized patient assessment data element under the SDOH category in 
the FY 2020 SNF PPS final rule (84 FR 38805 through 38809). As we 
discussed in the FY 2020 SNF PPS final rule (84 FR 38814 through 
42588), we continue to believe that access to transportation for 
ongoing health care and medication access needs, particularly for those 
with chronic diseases, is essential to successful chronic disease 
management and that the collection of a Transportation item would 
facilitate the connection to programs that can address identified needs 
(84 FR 38815 through 42588).
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    \57\ The seven SDOH items are ethnicity, race, preferred 
language, interpreter services, health literacy, transportation, and 
social isolation (84 FR 38805 through 38818).
---------------------------------------------------------------------------

    As part of our routine item and measure monitoring work, we 
continually assess the implementation of the new SDOH items. We have 
identified an opportunity to improve the data collection for A1250. 
Transportation in the MDS by aligning it with the Transportation 
category collected in our other programs.\58\ Specifically, we are 
proposing to modify the current Transportation item in the MDS so that 
it aligns with a Transportation item collected on the AHC HRSN 
Screening Tool, one of the potential tools the IPFQR and Hospital IQR 
Programs may select for data collection.
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    \58\ Centers for Medicare & Medicaid Services, FY2024 Inpatient 
Psychiatric Prospective Payment System--Rate Update (88 FR 51107 
through 51121).
    \54\ Centers for Medicare & Medicaid Services, FY2023 IPPS/LTCH 
PPS final rule (87 FR 49202 through 49215).
---------------------------------------------------------------------------

    A1250. Transportation currently collected in the MDS asks: ``Has 
lack of transportation kept you from medical appointments, meetings, 
work, or from getting things needed for daily living?'' The response 
options are: (A) Yes, it has kept me from medical appointments or from 
getting my medications; (B) Yes, it has kept me from non-medical 
meetings, appointments, work, or from getting things that I need; (C) 
No; (X) Resident unable to respond; and (Y) Resident declines to 
respond. The Transportation item collected in the AHC HRSN Screening 
Tool asks, ``In the past 12 months, has lack of reliable transportation 
kept you from medical appointments, meetings, work or from getting 
things needed for daily living?'' The two response options are: Yes; 
and No. Consistent with the AHC HRSN Screening Tool and adapted from 
the PRAPARE tool, we are proposing to modify the A1250. Transportation 
item currently collected in the SNF MDS in two ways: (1) revise the 
look-back period for when the resident experienced lack of reliable 
transportation; and (2) simplify the response options.
    First, the proposed modification of the Transportation item would 
use a defined 12-month look back period, while the current 
Transportation item uses a look back period of six to 12 months. We 
believe the distinction of a 12-month look back period would reduce 
ambiguity for both residents and clinicians, and therefore, improve the 
validity of the data collected. Second, we are proposing to simplify 
the response options. Currently, SNFs separately collect information on 
whether a lack of transportation has kept the patient from medical 
appointments or from getting medications, and whether a lack of 
transportation has kept the resident from non-medical meetings, 
appointments, work, or from getting things they need. Although 
transportation barriers can directly affect a person's ability to 
attend medical appointments and obtain medications, a lack of 
transportation can also affect a person's health in other ways, 
including accessing goods and services, obtaining adequate food and 
clothing, and social activities.\59\ The proposed modified 
Transportation item would collect information on whether a lack of 
reliable transportation has kept the resident from medical 
appointments, meetings, work or from getting things needed for daily 
living, rather than collecting the information separately. As discussed 
previously, we believe reliable transportation services are fundamental 
to a person's overall

[[Page 23468]]

health, and as a result, the burden of collecting this information 
separately outweighs its potential benefit.
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    \59\ Victoria Transport Policy Institute. (2016, August 25). 
Basic access and basic mobility: Meeting society's most important 
transportation needs. Retrieved from https://www.vtpi.org/tdm/tdm103.htm.
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    For the reasons stated previously, we are proposing to modify 
A1250. Transportation based on the Transportation item adopted for use 
in the AHC HRSN Screening Tool and adapted from the PRAPARE tool. The 
proposed Transportation item asks, ``In the past 12 months, has a lack 
of reliable transportation kept you from medical appointments, 
meetings, work or from getting things needed for daily living?'' The 
proposed response options are: (0) Yes; (1) No; (7) Resident declines 
to respond; and (8) Resident unable to respond. A draft of the proposed 
modified Transportation item can be found in the Downloads section of 
the SNF QRP Measures and Technical Information web page at https://www.cms.gov/medicare/quality/snf-quality-reporting-program/measures-and-technical-information.
    We invite comment on the proposal to modify the current 
Transportation item previously adopted as a standardized patient 
assessment data element under the SDOH category beginning with the FY 
2027 SNF QRP.

D. SNF QRP Quality Measure Concepts Under Consideration for Future 
Years--Request for Information (RFI)

    We are seeking input on the importance, relevance, appropriateness, 
and applicability of each of the concepts under consideration listed in 
Table 29 for future years in the SNF QRP. In the FY 2024 SNF PPS 
proposed rule (88 FR 21353 through 21355), we published a request for 
information (RFI) on a set of principles for selecting and prioritizing 
SNF QRP measures, identifying measurement gaps, and suitable measures 
for filling these gaps. Within this proposed rule, we also sought input 
on data available to develop measures, approaches for data collection, 
perceived challenges or barriers, and approaches for addressing 
identified challenges. We refer readers to the FY 2024 SNF PPS final 
rule (88 FR 53265 through 53267) for a summary of the public comments 
we received in response to the RFI.
    Subsequently, our measure development contractor convened a 
Technical Expert Panel (TEP) on December 15, 2023 to obtain expert 
input on the future measure concepts that could fill the measurement 
gaps identified in our FY 2024 RFI.\60\ The TEP also discussed the 
alignment of PAC and Hospice measures with CMS' ``Universal 
Foundation'' of quality measures.\61\ The Universal Foundation aims to 
focus provider attention, reduce burden, identify disparities in care, 
prioritize development of interoperable, digital quality measures, 
allow for comparisons across programs, and help identify measurement 
gaps.
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    \60\ The Post-Acute Care (PAC) and Hospice Quality Reporting 
Program Cross-Setting TEP summary report will be published in early 
summer or as soon as technically feasible. SNFs can monitor the 
Partnership for Quality Measurement website at https://mmshub.cms.gov/get-involved/technical-expert-panel/updates for 
updates.
    \61\ Centers for Medicare & Medicaid Services. Aligning Quality 
Measures Across CMS--the Universal Foundation. November 17, 2023. 
https://www.cms.gov/aligning-quality-measures-across-cms-universal-foundation.
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    In consideration of the feedback we have received through these 
activities, we are seeking input on four concepts for the SNF QRP. One 
is a composite of vaccinations,\62\ which could represent overall 
immunization status of residents such as the Adult Immunization Status 
measure \63\ in the Universal Foundation. A second concept on which we 
are seeking feedback is the concept of depression for the SNF QRP, 
which may be similar to the Clinical Screening for Depression and 
Follow-up measure \64\ in the Universal Foundation. Finally, we are 
seeking feedback on the concepts of pain management and patient 
experience of care/patient satisfaction for the SNF QRP.
---------------------------------------------------------------------------

    \62\ A composite measure can summarize multiple measures through 
the use of one value or piece of information. More information can 
be found at https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/mms/downloads/composite-measures.pdf.
    \63\ CMS Measures Inventory Tool. Adult immunization status 
measure found at https://cmit.cms.gov/cmit/#/FamilyView?familyId=26.
    \64\ CMS Measures Inventory Tool. Clinical Depression Screening 
and Follow-Up measure found at https://cmit.cms.gov/cmit/#/FamilyView?familyId=672.

  Table 29--Future Measure Concepts Under Consideration for the SNF QRP
------------------------------------------------------------------------
                        Quality measure concepts
-------------------------------------------------------------------------
Vaccination Composite.
Pain Management.
Depression.
Patient Experience of Care/Patient Satisfaction.
------------------------------------------------------------------------

    While we will not be responding to specific comments in response to 
this RFI in the FY 2025 SNF PPS final rule, we intend to use this input 
to inform our future measure development efforts.

E. Form, Manner, and Timing of Data Submission Under the SNF QRP

1. Background
    We refer readers to the current regulatory text at Sec.  413.360(b) 
for information regarding the policies for reporting specified data for 
the SNF QRP.
2. Proposed Reporting Schedule for the Proposed New Standardized 
Patient Assessment Data Elements, and the Modified Transportation Data 
Element, Beginning October 1, 2025 for the FY 2027 SNF QRP
    As discussed in section VI.C.3. and VI.C.5. of this proposed rule, 
we are proposing to adopt four new items as standardized patient 
assessment data elements under the SDOH category (one Living Situation 
item, two Food items, and one Utilities item) and to modify the 
Transportation standardized patient assessment data element previously 
adopted under the SDOH category beginning with the FY 2027 SNF QRP.
    We are proposing that SNFs would be required to report these new 
items and the modified Transportation item using the MDS beginning with 
residents admitted on October 1, 2025 through December 31, 2025 for 
purposes of the FY 2027 SNF QRP. Starting in CY 2026, SNFs would be 
required to submit data for the entire calendar year for each program 
year.
    We are also proposing that SNFs that submit the Living Situation, 
Food, and Utilities items proposed for adoption as standardized patient 
assessment data elements under the SDOH category with respect to 
admission only would be deemed to have submitted those items with 
respect to both admission and discharge. We propose that SNFs would be 
required to submit these items at admission only (and not at discharge) 
because it is unlikely that the assessment of those items at admission 
would differ from the assessment of the same item at discharge. This 
would align the data collection for these proposed items with other 
SDOH items (that is, Race, Ethnicity, Preferred Language, and 
Interpreter Services) which are only collected at admission.\65\ A 
draft of the proposed items is available in the Downloads section of 
the SNF QRP Measures and Technical Information web page at https://www.cms.gov/medicare/quality/snf-quality-reporting-program/measures-and-technical-information.
---------------------------------------------------------------------------

    \65\ FY 2020 SNF PPS final rule (84 FR 38817 through 38818).
---------------------------------------------------------------------------

    As we noted in section VI.C.5 of this proposed rule, we continually 
assess the

[[Page 23469]]

implementation of the new SDOH items, including A1250. Transportation, 
as part of our routine item and measure monitoring work. We received 
feedback from interested parties in response to the FY 2020 SNF PPS 
proposed rule (84 FR 17676 through 17678) noting their concern with the 
burden of collecting the Transportation item at admission and 
discharge. Specifically, commenters stated that a resident's access to 
transportation is unlikely to change between admission and discharge. 
We analyzed the data SNFs reported from October 1, 2023 through 
December 31, 2023 (Quarter 4 of CY 2023) and found that residents' 
responses do not significantly change from admission to discharge.\66\ 
Specifically, the proportion of residents \67\ who responded ``Yes'' to 
the Transportation item at admission versus at discharge differed by 
only 0.60 percentage points during this period. We find these results 
convincing, and therefore are proposing to require SNFs to collect and 
submit the proposed modified standardized patient assessment data 
element, Transportation, at admission only.
---------------------------------------------------------------------------

    \66\ Due to data availability of SNF SDOH standardized patient 
assessment data elements, this is based on one quarter of 
Transportation data.
    \67\ The analysis is limited to residents who responded to the 
Transportation item at both admission and discharge.
---------------------------------------------------------------------------

    We invite public comment on our proposal to collect data on the 
following items proposed as standardized patient assessment data 
elements under the SDOH category at admission only beginning with 
October 1, 2025 SNF admissions: (1) Living Situation as described in 
section VI.C.3(a) of this proposed rule; (2) Food as described in 
section VI.C.3(b) of this proposed rule; and (3) Utilities as described 
in section VI.C.3(c) of this proposed rule. We also invite comment on 
our proposal to collect the proposed modified standardized patient 
assessment data element, Transportation, at admission only beginning 
with October 1, 2025 SNF admissions as described in section VI.C.5 of 
this proposed rule.
3. Proposal To Participate in a Validation Process Beginning With the 
FY 2027 SNF QRP
    Section 1888(h)(12)(A) of the Act (as added by section 111(a)(4) of 
Division CC of the Consolidated Appropriations Act, 2021 (Pub. L. 116-
260)) requires the Secretary to apply a process to validate data 
submitted under the SNF QRP. Accordingly, we are proposing to require 
SNFs to participate in a validation process that would apply to data 
submitted using the MDS and SNF Medicare fee-for-service claims as a 
SNF QRP requirement beginning with the FY 2027 SNF QRP. We are also 
proposing to amend the regulation text at Sec.  413.360.
    We are also considering additional validation methods that may be 
appropriate to include in the future for the current measures submitted 
through the National Healthcare Safety Network (NHSN), as well as for 
other new measures we may consider for the program. Any updates to 
specific program requirements related to the validation process would 
be addressed through separate and future notice-and-comment rulemaking, 
as necessary.
(a) Proposal To Participate in a Validation Process for Assessment-
Based Measures
    The MDS is a resident assessment instrument that SNFs must complete 
for all residents in a Medicare or Medicaid certified nursing facility, 
and for residents whose stay is covered under SNF PPS in a non-critical 
access hospital swing bed facility. The MDS includes the resident in 
the assessment process, and uses standard protocols used in other 
settings to improve clinical assessment and support the credibility of 
programs that rely on MDS, like the SNF QRP.\68\
---------------------------------------------------------------------------

    \68\ Centers for Medicare and Medicaid Services (CMS). (2023, 
March 29). Minimum Data Set (MDS) 3.0 for Nursing Homes and Swing 
Bed Providers. https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/nursinghomequalityinits/nhqimds30.
---------------------------------------------------------------------------

    We are proposing to adopt a similar validation process for the SNF 
QRP that we have adopted for the SNF Value-Based Purchasing (VBP) 
program in the FY 2024 SNF PPS final rule (88 FR 53323 through 53325) 
beginning with the FY 2027 SNF QRP. This method would closely align 
with the validation process we have adopted for the SNF VBP program and 
would have the following elements:
     We propose that our validation contractor would select, on 
an annual basis, up to 1,500 SNFs that submit at least one MDS record 
in the calendar year (CY) 3 years prior to the applicable FY SNF QRP. 
For example, for the FY 2027 SNF QRP, we would choose up to 1,500 SNFs 
that submitted at least one MDS record in CY 2024. We are also 
proposing that the SNFs that are selected to participate in the SNF QRP 
validation for a program year would be the same SNFs that are randomly 
selected to participate in the SNF VBP validation process for the 
corresponding SNF VBP program year.
     We propose that our validation contractor would request up 
to 10 medical records from each of the selected SNFs. Each SNF selected 
would only be required to submit records once in a fiscal year, for a 
maximum of 10 records for each SNF selected. To decrease the burden for 
the selected SNF, we are proposing that the validation contractor would 
request that the SNFs submit the same medical records, at the same 
time, that are required from the same SNFs for purposes of the SNF VBP 
validation.
     We propose that the selected SNFs would have the option to 
submit digital or paper copies of the requested medical records to the 
validation contractor and would be required to submit the medical 
records within 45 days of the date of the request (as documented on the 
request). If the validation contractor has not received the medical 
records within 30 days of the date of the request, the validation 
contractor would send the SNF a reminder in writing to inform the SNF 
that it must submit the requested medical records within 45 days of the 
date of the initial request.
    We propose that if a SNF does not submit the requested number of 
medical records within 45 days of the initial request, we would, under 
section 1888(e)(6)(A) of the Act, reduce the SNF's otherwise applicable 
annual market basket percentage update by 2 percent. The reduction 
would be applied to the payment update 2 fiscal years after the fiscal 
year for which the validation contractor requested records. For 
example, if the validation contractor requested records for FY 2027, 
and the SNF did not send them, we would reduce the SNF's otherwise 
applicable annual market basket percentage update by 2 percent for the 
FY 2029 SNF QRP.
    We also intend to propose in future rulemaking the process by which 
we would evaluate the submitted medical records against the MDS to 
determine the accuracy of the MDS data that the SNF reported and that 
CMS used to calculate the measure results. We invite public comment on 
what that process could include.
    We solicit public comments on our proposal to require SNFs who 
participate in the SNF QRP to participate in a validation process for 
assessment-based measures beginning with the FY 2027 SNF QRP.
(b) Proposal To Apply the Existing Validation Process for Claims-Based 
Measures Reported in the SNF QRP
    Beginning with the FY 2027 SNF QRP, we are proposing to apply the 
process we currently use to ensure the accuracy of the Medicare fee-
for-service claims to validate claims-based measures under the SNF QRP. 
Specifically, information reported

[[Page 23470]]

through Medicare Part A fee-for-service claims are validated for 
accuracy by Medicare Administrative Contractors (MACs) to ensure 
accurate Medicare payments. MACs use software to determine whether 
billed services are medically necessary and should be covered by 
Medicare, review claims to identify any ambiguities or irregularities, 
and use a quality assurance process to help ensure quality and 
consistency in claim review and processing. They conduct prepayment and 
post-payment audits of Medicare claims, using both random selection and 
targeted reviews based on analyses of claims data.
    We use data to calculate claims-based measures for the SNF QRP. We 
believe that adopting the MAC's existing process of validating claims 
for medical necessity through targeted and random audits would satisfy 
the statutory requirement to adopt a validation process for data 
submitted under the SNF QRP for claims-based measures at section 
1888(h)(12)(A) of the Act (as added by section 111(a)(4) of Division CC 
of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260)).
    We solicit public comment on our proposal to apply the MAC's 
existing validation process for the SNF QRP claims-based measures 
beginning with the FY 2027 program year.
(c) Proposal To Amend the Regulation Text at Sec.  413.360
    We propose to amend our regulation at Sec.  413.360 to reflect 
these proposed policies. Specifically, we propose to add (g) to our 
regulation at Sec.  413.360, which will incorporate the procedural 
requirements we are proposing for these validation processes for SNF 
QRP under these sections VI.E.3(a) and VI.E.3(b). We also propose to 
add paragraph (f)(1)(iv) to our regulation at Sec.  413.360 to 
establish that, if the SNF is selected for the validation process, the 
SNF must submit up to 10 medical records requested, in their entirety. 
Finally, we propose minor technical amendments for our regulation at 
Sec.  413.360(f)(3) to apply to all data completion thresholds 
implemented in Sec.  413.360(f)(1).
    We solicit public comments on our proposal to amend our regulation 
at Sec.  413.360.

F. Policies Regarding Public Display of Measure Data for the SNF QRP

    We are not proposing any new policies regarding the public display 
of measure data at this time. For a discussion about our policies 
regarding public display of SNF QRP measure data and procedures for the 
SNF's opportunity to review and correct data and information, we refer 
readers to the FY 2017 SNF PPS final rule (81 FR 52045 through 52048).

VII. Proposed Updates to the Skilled Nursing Facility Value-Based 
Purchasing (SNF VBP) Program

A. Statutory Background

    Through the Skilled Nursing Facility Value-Based Purchasing (SNF 
VBP) Program, we award incentive payments to SNFs to encourage 
improvements in the quality of care provided to Medicare beneficiaries. 
The SNF VBP Program is authorized by section 1888(h) of the Act, and it 
applies to freestanding SNFs, SNFs affiliated with acute care 
facilities, and all non-CAH swing bed rural hospitals. We believe the 
SNF VBP Program has helped to transform how Medicare payment is made 
for SNF care, moving increasingly towards rewarding better value and 
outcomes instead of merely rewarding volume. Our codified policies for 
the SNF VBP Program can be found in our regulations at 42 CFR 
413.337(f) and 413.338.
1. Spotlight on the CMS National Quality Strategy
    As part of the CMS National Quality Strategy,\69\ we are committed 
to aligning measures across our quality programs and ensuring we 
measure quality across the entire care continuum in a way that promotes 
the best, safest, and most equitable care for all individuals.
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    \69\ https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
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    We believe that improving alignment of measures across the CMS 
quality programs will reduce provider burden while also improving the 
effectiveness of quality programs. However, we also recognize that a 
one-size-fits-all approach would fail to capture important aspects of 
quality in our healthcare system across populations and care settings.
    To move towards a more streamlined approach that does not lose 
sight of important aspects of quality, we are implementing a building-
block approach: a ``Universal Foundation'' of quality measures across 
as many of our quality reporting and value-based care programs as 
possible, with additional measures added on depending on the population 
or setting (``add-on sets'').\70\
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    \70\ https://www.cms.gov/aligning-quality-measures-across-cms-universal-foundation.
---------------------------------------------------------------------------

    Our goal with the Universal Foundation is to focus provider 
attention on measures that are the most meaningful for patients and 
patient outcomes, reduce provider burden by streamlining and aligning 
measures, allow for consistent stratification of measures to identify 
disparities in care between and among populations, accelerate the 
transition to interoperable, digital quality measures, and allow for 
comparisons across quality and value-based care programs to better 
understand what drives quality improvement and what does not.
    We select measures for the Universal Foundation that are of high 
national impact, can be benchmarked nationally and globally, are 
applicable to multiple populations and settings, are appropriate for 
stratification to identify disparity gaps, have scientific 
acceptability, support the transition to digital measurement, and have 
no anticipated unintended consequences with widespread measure 
implementation.
    We believe that the creation of this Universal Foundation will 
result in higher quality care for the more than 150 million Americans 
covered by our programs and will serve as an alignment standard for the 
rest of the healthcare system. We continue to collect feedback from 
interested parties through listening sessions, requests for information 
and proposed rulemaking, and other interactions to refine our approach 
as we work to implement the Universal Foundation across our quality 
programs. As we continue building the SNF VBP measure set, we intend to 
align with the measures in the Universal Foundation, as well as the 
post-acute care add-on measure set, to the extent feasible.

B. Proposed Regulation Text Technical Updates

    We are proposing to make several technical updates to our 
regulation text. First, we are proposing to update Sec.  413.337(f) to 
correct the cross-references in that section to Sec.  413.338(a). 
Second, we are proposing to update the definition of ``SNF readmission 
measure'' in Sec.  413.338(a) by replacing the references to the 
Skilled Nursing Facility Potentially Preventable Readmissions (SNFPPR) 
measure with a reference to the Skilled Nursing Facility Within-Stay 
Potentially Preventable Readmission (SNF WS PPR) measure, by clarifying 
that we specified both measures under section 1888(g) of the Act, and 
by clarifying that the SNF readmission measure will be the SNF WS PPR 
beginning October 1, 2027.
    This change would align the definition of ``SNF readmission 
measure'' with policies we have previously finalized for SNF VBP, 
including that we will not use the SNFPPR and that we will replace the 
SNFRM with the SNF WS PPR beginning October 1, 2027. In addition,

[[Page 23471]]

we are proposing to redesignate the term ``performance score'' at Sec.  
413.338(a) with the term ``SNF performance score'' for consistency with 
the terminology we are now using in the Program, and to make conforming 
edits to the last sentence of Sec.  413.337(f). We are also proposing 
to replace the references to ``program year'' with ``fiscal year'' in 
the definitions of ``health equity adjustment (HEA) bonus points,'' 
``measure performance scaler'', ``top tier performing SNF'', and 
``underserved multiplier'' to align the terminology with that used in 
the remainder of that section.
    We are also proposing to update Sec.  413.338(f) to redesignate 
paragraphs (f)(1) through (4) as paragraphs (f)(2) through (5), 
respectively. We are also proposing to add a new paragraph (f)(1) and 
to revise the newly redesignated paragraphs (f)(2) and (3).
    In addition, we are proposing to update Sec.  413.338(j)(3) to 
include additional components of the MDS validation process that we 
finalized in the FY 2024 SNF PPS final rule (88 FR 53324). In 
particular, we are proposing to include the SNF selection, medical 
record request, and medical record submission processes for MDS 
validation.
    Further, we are proposing to remove Sec.  413.338(d)(5) from the 
regulation text because the only measure that will be in the SNF VBP 
Program until the FY 2026 program year is the SNFRM, and to add new 
paragraph (l)(1) which would state that the SNF VBP measure set for 
each year includes the statutorily-required SNF readmission measure, 
and beginning with the FY 2026 program year, up to nine additional 
measures specified by CMS.
    We welcome public comment on these proposed technical updates to 
our regulation text.

C. SNF VBP Program Measures

1. Background
    We refer readers to the FY 2024 SNF PPS final rule for background 
on the measures we have adopted for the SNF VBP Program (88 FR 53276 
through 53297).
    Table 30 lists the measures that have been adopted for the SNF VBP 
Program, along with their timeline for inclusion.

                  Table 30--SNF VBP Program Measures and Timeline for Inclusion in the Program
----------------------------------------------------------------------------------------------------------------
                                   FY 2025 program      FY 2026 program     FY 2027 program     FY 2028 program
            Measure                      year                year                year                year
----------------------------------------------------------------------------------------------------------------
Skilled Nursing Facility 30-Day  Included...........  Included..........  Included..........
 All-Cause Readmission Measure
 (SNFRM).
Skilled Nursing Facility         ...................  Included..........  Included..........  Included.
 Healthcare Associated
 Infections Requiring
 Hospitalization (SNF HAI)
 measure.
Total Nursing Hours per          ...................  Included..........  Included..........  Included.
 Resident Day (Total Nurse
 Staffing) measure.
Total Nursing Staff Turnover     ...................  Included..........  Included..........  Included.
 (Nursing Staff Turnover)
 measure.
Discharge to Community--Post-    ...................  ..................  Included..........  Included.
 Acute Care Measure for Skilled
 Nursing Facilities (DTC PAC
 SNF measure).
Percent of Residents             ...................  ..................  Included..........  Included.
 Experiencing One or More Falls
 with Major Injury (Long-Stay)
 (Falls with Major Injury (Long-
 Stay)) measure.
Discharge Function Score for     ...................  ..................  Included..........  Included.
 SNFs (DC Function Measure).
Number of Hospitalizations per   ...................  ..................  Included..........  Included.
 1,000 Long Stay Resident Days
 (Long Stay Hospitalization)
 measure.
Skilled Nursing Facility Within- ...................  ..................  ..................  Included.
 Stay Potentially Preventable
 Readmissions (SNF WS PPR)
 measure.
----------------------------------------------------------------------------------------------------------------

2. Proposal To Adopt a Measure Selection, Retention, and Removal Policy 
Beginning With the FY 2026 SNF VBP Program Year
    Section 1888(h)(2) of the Act requires the Secretary to apply the 
measure specified under subsection (g)(1) (currently the SNFRM) and 
replace that measure, as soon as practicable, with the measure 
specified under subsection (g)(2) (currently the SNF WS PPR measure). 
That section also allows the Secretary to apply, as appropriate, up to 
nine additional measures to the SNF VBP Program, in addition to the 
statutorily required SNF Readmission Measure. We have now adopted seven 
additional measures for the Program (see the FY 2023 SNF PPS final rule 
(87 FR 47564 through 47580) and the FY 2024 SNF PPS final rule (88 FR 
53280 through 53296)).
    Now that the SNF VBP Program includes measures in addition to the 
SNFRM (which will be replaced with the SNF WS PPR measure beginning 
with the FY 2028 program year), we believe it is appropriate to adopt a 
policy that governs the retention of measures in the Program, as well 
as criteria we would use to consider whether a measure should be 
removed from the Program. These policies would help ensure that the 
Program's measure set remains focused on the best and most appropriate 
metrics for assessing care quality in the SNF setting. We also believe 
that the measure removal policy, as described later in this section, 
would streamline the rulemaking process by providing a sub-regulatory 
process that we could utilize to remove measures from the Program that 
raise safety concerns while also providing sufficient opportunities for 
the public to consider, and provide input on, future proposals to 
remove a measure.
    Other CMS quality reporting programs, including the SNF QRP and 
Hospital Inpatient Quality Reporting (IQR) Program, have adopted 
similar policies. For example, in the FY 2016 SNF PPS final rule (80 FR 
46431 through 46432), the SNF QRP adopted 7 removal factors and, in the 
FY 2019 SNF PPS final rule (83 FR 39267 through 39269), the SNF QRP 
adopted an additional measure removal factor, such that a total of 
eight measure removal factors are now used to determine whether a 
measure should be removed. The SNF QRP also codified those factors at 
Sec.  413.360(b)(2).
    For the purposes of the SNF VBP Program, we are proposing to adopt 
the following measure selection, retention, and removal policy 
beginning with the FY 2026 SNF VBP program year. This proposed policy 
would apply to all SNF VBP measures except for the SNF readmission 
measure because we are statutorily required to retain that measure in 
the measure set.
    First, we are proposing that when we adopt a measure for the SNF 
VBP Program for a particular program year, that measure would be 
automatically retained for all subsequent program years unless we 
propose to remove or replace the measure. We believe that this policy 
would make clear that when we adopt a measure for the SNF VBP Program, 
we intend to include that measure in all subsequent program

[[Page 23472]]

years. This policy would also avoid the need to continuously propose a 
measure for subsequent program years.
    Second, we are proposing that we would use notice and comment 
rulemaking to remove or replace a measure in the SNF VBP Program to 
allow for public comment. We are also proposing that we would use the 
following measure removal factors to determine whether a measure should 
be considered for removal or replacement:
    (1) SNF performance on the measure is so high and unvarying that 
meaningful distinctions and improvements in performance can no longer 
be made;
    (2) Performance and improvement on a measure do not result in 
better resident outcomes;
    (3) A measure no longer aligns with current clinical guidelines or 
practices;
    (4) A more broadly applicable measure for the particular topic is 
available;
    (5) A measure that is more proximal in time to the desired resident 
outcomes for the particular topic is available;
    (6) A measure that is more strongly associated with the desired 
resident outcomes for the particular topic is available;
    (7) The collection or public reporting of a measure leads to 
negative unintended consequences other than resident harm; and
    (8) The costs associated with a measure outweigh the benefit of its 
continued use in the Program.
    Each of these measure removal factors represent instances where the 
continued use of a measure in the Program would not support the 
Program's objective, which is to incentivize improvements in quality of 
care by linking SNF payments to performance on quality measures. 
Therefore, we believe that these are appropriate criteria for 
determining whether a measure should be removed or replaced.
    Third, upon a determination by CMS that the continued requirement 
for SNFs to submit data on a measure raises specific resident safety 
concerns, we are proposing that we may elect to immediately remove the 
measure from the SNF VBP measure set. Upon removal of the measure, we 
would provide notice to SNFs and the public, along with a statement of 
the specific patient safety concerns that would be raised if SNFs 
continued to submit data on the measure. We would also provide notice 
of the removal in the Federal Register.
    We are proposing to codify this policy at Sec.  413.338(l)(2) and 
(l)(3) of our regulations.
    We invite public comment on the proposed measure selection, 
retention, and removal policy. We also invite public comment on our 
proposal to codify this policy at Sec.  413.338(l)(2) and (3).
3. Future Measure Considerations
    Section 1888(h)(2) of the Act allows the Secretary to apply, as 
appropriate, up to nine additional measures to the SNF VBP Program, in 
addition to the statutorily required SNF Readmission Measure. These 
measures may include measures of functional status, patient safety, 
care coordination, or patient experience.
    In the FY 2022 SNF PPS proposed rule (86 FR 20009 through 20011), 
we requested public comment on potential future measures to include in 
the expanded SNF VBP Program. After considering the public input we 
received, we adopted three new measures in the FY 2023 SNF PPS final 
rule (87 FR 47564 through 47580). Two of those measures will be scored 
beginning with the FY 2026 program year: SNF HAI and Total Nurse 
Staffing measures; and the third measure will be scored beginning with 
the FY 2027 program year: DTC PAC SNF measure. In the FY 2024 SNF PPS 
final rule (88 FR 53280 through 53296), we adopted four additional 
measures. One of those measures, the Nursing Staff Turnover measure, 
will be scored beginning with the FY 2026 program year, while the other 
three measures will be scored beginning with the FY 2027 program year: 
Falls with Major Injury (Long-Stay), DC Function, and Long Stay 
Hospitalizations measures.
    With the adoption of those seven measures, in addition to the 
statutorily-required SNF Readmission Measure, the SNF VBP Program will 
include eight measures that cover a range of quality measure topics 
important for assessing the quality of care in the SNF setting. 
Therefore, as permitted under section 1888(h)(2)(A)(ii) of the Act, we 
can add up to two additional measures in the Program.
    As part of our efforts to build a robust measure set for the SNF 
VBP Program, we are considering several options related to new measures 
and other measure set adjustments. First, we recognize that gaps remain 
in the current measure set and therefore, we are considering which 
measures are best suited to fill those gaps. Specifically, we are 
assessing several resident experience measures to determine their 
appropriateness and feasibility for inclusion in the Program. We are 
also testing the appropriateness of measures that address other CMS 
priorities, such as interoperability and health equity/social 
determinants of health.
    Beyond the adoption of new measures, we are also considering other 
measure set adjustments. For example, we are assessing the feasibility 
of a staffing composite measure that would combine the two previously 
adopted staffing measures. We are also considering whether measure 
domains and domain weighting are appropriate for the SNF VBP Program.
    While we are not proposing any new measures or measure set 
adjustments in this proposed rule, we will continue to assess and 
determine which, if any, of these options would help us maximize the 
impact of the SNF VBP Program measure set and further incentivize 
quality of care improvements in the SNF setting. We welcome commenters' 
continuing feedback on potential new measure topics and other measure 
set adjustments.

D. SNF VBP Performance Standards

1. Background
    We refer readers to the FY 2024 SNF PPS final rule (88 FR 53299 
through 53300) for a detailed history of our performance standards 
policies.
    In the FY 2024 SNF PPS final rule (88 FR 53300), we adopted the 
final numerical values for the FY 2026 performance standards and the 
final numerical values for the FY 2027 performance standards for the 
DTC PAC SNF measure.
2. Estimated Performance Standards for the FY 2027 Program Year
    In the FY 2024 SNF PPS final rule (88 FR 53300), we adopted the 
final numerical values for the FY 2027 performance standards for the 
DTC PAC SNF measure.
    To meet the requirements at section 1888(h)(3)(C) of the Act, we 
are providing estimated numerical performance standards for the 
remaining measures applicable for the FY 2027 program year: SNFRM, SNF 
HAI, Total Nurse Staffing, Nursing Staff Turnover, Falls with Major 
Injury (Long-Stay), Long Stay Hospitalization, and DC Function 
measures. In accordance with our previously finalized methodology for 
calculating performance standards (81 FR 51996 through 51998), the 
estimated numerical values for the FY 2027 program year performance 
standards are shown in Table 31.

[[Page 23473]]



    Table 31--Estimated FY 2027 SNF VBP Program Performance Standards
------------------------------------------------------------------------
                                            Achievement
           Measure short name                threshold       Benchmark
------------------------------------------------------------------------
SNFRM...................................         0.78800         0.82971
SNF HAI Measure.........................         0.92315         0.95004
Total Nurse Staffing Measure............         3.18523         5.70680
Nursing Staff Turnover Measure..........         0.35912         0.72343
Falls with Major Injury (Long-Stay)              0.95327         0.99956
 Measure................................
Long Stay Hospitalization Measure.......         0.99777         0.99964
DC Function Measure.....................         0.40000         0.79764
------------------------------------------------------------------------

3. Estimated Performance Standards for the FY 2028 Program Year
    In the FY 2024 SNF PPS final rule (88 FR 53280 through 53281), we 
finalized that the SNF WS PPR measure will replace the SNFRM beginning 
with the FY 2028 program year. In that final rule (88 FR 53299 through 
53300), we also finalized that the baseline and performance periods for 
the SNF WS PPR measure would each be 2 consecutive years, and that FY 
2025 and FY 2026 would be the performance period for the SNF WS PPR 
measure for the FY 2028 program year.
    To meet the requirements at section 1888(h)(3)(C) of the Act, we 
are providing estimated numerical performance standards for the FY 2028 
program year for the SNF WS PPR measure as well as the DTC PAC SNF 
measure. In accordance with our previously finalized methodology for 
calculating performance standards (81 FR 51996 through 51998), the 
estimated numerical values for the FY 2028 program year performance 
standards for the DTC PAC SNF and SNF WS PPR measures are shown in 
Table 32.
    We note that we will provide the estimated numerical performance 
standards values for the remaining measures applicable in the FY 2028 
program year in the FY 2026 SNF PPS proposed rule.

    Table 32--Estimated FY 2028 SNF VBP Program Performance Standards
------------------------------------------------------------------------
                                            Achievement
           Measure short name                threshold       Benchmark
------------------------------------------------------------------------
DTC PAC SNF Measure.....................         0.42946         0.66370
SNF WS PPR Measure......................         0.86756         0.92527
------------------------------------------------------------------------

4. Proposed Policy for Incorporating Technical Measure Updates Into 
Measure Specifications and for Subsequent Updates to SNF VBP 
Performance Standards Beginning With the FY 2025 Program Year
    We are required under section 1888(h)(3) of the Act to establish 
performance standards for SNF VBP measures for a performance period for 
a fiscal year. Under that section, we are also required to establish 
performance standards that include levels of achievement and 
improvement, the higher of which is used to calculate the SNF 
performance score, and to announce those performance standards no later 
than 60 days prior to the beginning of the performance period for the 
applicable fiscal year. We refer readers to the FY 2017 SNF PPS final 
rule (81 FR 51995 through 51998) for details on our previously 
finalized performance standards methodology.
    In the FY 2019 SNF PPS final rule (83 FR 39276 through 39277), we 
finalized a policy that allows us to update the numerical values of the 
performance standards for a fiscal year if we discover an error in the 
performance standards calculations. Under this policy, if we discover 
additional errors with respect to that fiscal year, we will not further 
update the numerical values for that fiscal year.
    In this proposed rule, we are proposing to adopt a policy that 
would allow us to update previously finalized SNF VBP measure 
specifications using subregulatory processes to incorporate technical 
measure updates. We are also proposing to use sub-regulatory processes 
to update the numerical values of the performance standards for a 
measure if that measure's specifications have been technically updated.
    We currently calculate performance standards for SNF VBP measures 
using baseline period data, which are then used, in conjunction with 
performance period data, to calculate performance scores for SNFs on 
each measure for the applicable program year. However, during the long 
interval between the time we finalize the performance standards for the 
measures and the time that we calculate the achievement and improvement 
scores for those measures based on actual SNF performance, one or more 
of the measures may have been technically updated in a way that 
inhibits our ability to ensure that we are making appropriate 
comparisons between the baseline and performance period. We believe 
that to calculate the most accurate achievement and improvement scores 
for a measure, we should calculate the performance standards, baseline 
period measure results, and performance period measure results using 
the same measure specifications.
    Therefore, we are proposing to incorporate technical measure 
updates into the measure specifications we have adopted for the SNF VBP 
Program so that these measures remain up-to-date and ensure that we can 
make fair comparisons between the baseline and performance periods that 
we adopt under the Program. Further, we are proposing that we would 
incorporate these technical measure updates in a sub-regulatory manner 
and that we would inform SNFs of any technical measure updates for any 
measure through postings on our SNF VBP website, listservs, and through 
other educational outreach efforts to SNFs. These types of technical 
measure updates do not substantively affect the measure rate 
calculation methodology. We also recognize that some updates to 
measures are substantive in nature and may not be appropriate to adopt 
without further rulemaking. In those instances, we would continue to 
use rulemaking to adopt substantive updates to SNF VBP measures.

[[Page 23474]]

    With respect to what constitutes substantive versus non-substantive 
(technical) measure changes, we would make this determination on a 
case-by-case basis. Examples of technical measure changes may include, 
but are not limited to, updates to the case-mix or risk adjustment 
methodology, changes in exclusion criteria, or updates required to 
accommodate changes in the content and availability of assessment data. 
Examples of changes that we might consider to be substantive would be 
those in which the changes are so significant that the measure is no 
longer the same measure.
    We are also proposing to expand our performance standards 
correction policy beginning with the FY 2025 program year such that we 
would be able to update the numerical values for the performance 
standards for a measure for a program year if a measure's 
specifications were technically updated between the time that we 
published the performance standards for a measure and the time that we 
calculate SNF performance on that measure at the conclusion of the 
applicable performance period. Any update we would make to the 
numerical values would be announced via the SNF VBP website, listservs, 
and through other educational outreach efforts to SNFs. In addition, 
this proposal would have the effect of superseding the performance 
standards that we establish prior to the start of the performance 
period for the affected measures, but we believe them to be necessary 
to ensure that the performance standards in the SNF VBP Program's 
scoring calculations enable the fairest comparison of measure 
performance between the baseline and performance period.
    We note that these proposals align with the Technical Updates 
Policy for Performance Standards that we adopted for the Hospital VBP 
Program in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50077 through 
50079).
    Further, we are proposing to codify these proposals in our 
regulations. Specifically, we are proposing to codify our proposed 
policy to incorporate technical measure updates into previously 
finalized SNF VBP measure specifications in a subregulatory manner by 
adding a new paragraph (l)(4) to our regulations at Sec.  413.338. Our 
current performance standards policies are codified at Sec.  
413.338(d)(6) of our regulations. However, we are proposing to 
redesignate that paragraph as new Sec.  413.338(n) of our regulations 
and to include in paragraph (n) both the existing performance standards 
policies and this newly proposed expansion of our performance standards 
correction policy.
    We invite public comment on these proposals.

E. SNF VBP Performance Scoring Methodology

1. Background
    We refer readers to the FY 2024 SNF PPS final rule (88 FR 53300 
through 53304) for a detailed history of our performance scoring 
methodology. Our performance scoring methodology is codified at 
Sec. Sec.  413.338(d) and (e) of our regulations. We have also codified 
the Health Equity Adjustment (HEA) at Sec.  413.338(k) of our 
regulations.
2. Proposed Measure Minimum Policies
a. Background
    We refer readers to the FY 2024 SNF PPS final rule (88 FR 53301 
through 53303) for details on our previously adopted case minimums and 
measure minimums. Our case minimum and measure minimum policies are 
also codified at Sec.  413.338(b) of our regulations. In this proposed 
rule, we are proposing to apply the previously finalized FY 2027 
measure minimum to the FY 2028 program year and subsequent years. We 
are not proposing any changes to our previously finalized case 
minimums.
b. Proposal To Apply the FY 2027 Measure Minimum to the FY 2028 SNF VBP 
Program Year and Subsequent Years
    In the FY 2024 SNF PPS final rule (88 FR 53301 through 53303), we 
adopted an updated measure minimum for the FY 2027 program year. 
Specifically, we finalized that for a SNF to receive a SNF performance 
score and value-based incentive payment for the FY 2027 program year, 
SNFs must report the minimum number of cases for four of the eight 
measures during the applicable performance period. As discussed below, 
we are proposing to apply this measure minimum to the FY 2028 program 
year and subsequent years, such that SNFs must report the minimum 
number of cases for at least four measures during the applicable 
performance period. SNFs that do not meet this measure minimum 
requirement would be excluded from the applicable program year and 
would receive their adjusted Federal per diem rate for that fiscal 
year.
    Based on our analyses for the FY 2028 program year, which are also 
applicable to subsequent program years for which we use the same 
measure set, we estimate that, under the proposed measure minimum, 
approximately 6 percent of SNFs would be excluded from the Program 
compared to the approximately 8 percent of SNFs that we estimate would 
be excluded from the Program in FY 2027. This represents fewer SNFs 
being excluded from the FY 2028 program year than our estimated number 
of SNFs that would be excluded from the FY 2027 program year, due to 
the SNF WS PPR measure replacing the SNFRM beginning in FY 2028. We 
also assessed the consistency of incentive payment multipliers (IPMs), 
or value-based incentive payment adjustment factors, between FY 2027 
and FY 2028 as a proxy for SNF performance score reliability. We found 
that applying the FY 2027 measure minimum to the FY 2028 program year 
would have minimal impact on the percentage of SNFs that would receive 
a net-positive IPM between those two fiscal years, which indicates that 
the reliability of the SNF performance score would be minimally 
impacted if we applied the FY 2027 measure minimum to the FY 2028 
program year. Based on these testing results for FY 2028, we believe 
that applying the FY 2027 measure minimum to the FY 2028 program year 
and subsequent years best balances SNF performance score reliability 
with our desire to ensure that as many SNFs as possible can receive a 
SNF performance score. We note that if we propose in future years to 
revise the total number of measures in the Program, we would reassess 
this measure minimum policy to ensure it continues to meet our 
previously stated goals. If needed, we would propose updates in future 
rulemaking.
    We invite public comment on our proposal to apply the FY 2027 
measure minimum in which SNFs must report the minimum number of cases 
for at least four measures during the performance period to the FY 2028 
SNF VBP program year and subsequent years.
3. Potential Next Steps for Health Equity in the SNF VBP Program
    In the FY 2024 SNF PPS final rule (88 FR 53304 through 53318), we 
adopted a Health Equity Adjustment (HEA) that allows SNFs that provide 
high quality care and care for high proportions of SNF residents who 
are underserved to earn bonus points. We refer readers to that final 
rule for an overview of our definition of health equity, current 
disparities in quality of care in the SNF setting, our commitment to 
advancing health equity, and the details of the HEA.
    In the FY 2024 SNF PPS proposed rule (88 FR 21393 through 21396), 
we also included a request for information

[[Page 23475]]

(RFI) entitled ``Health Equity Approaches Under Consideration for 
Future Program Years,'' where we noted that significant disparities in 
quality of care persist in the SNF setting. We stated that the goal of 
explicitly incorporating health equity-focused components into the 
Program was to both measure and incentivize equitable care in SNFs. 
Although the HEA rewards high performing SNFs that care for high 
proportions of SNF residents with underserved populations, it does not 
explicitly measure or reward high provider performance among the 
disadvantaged or underserved population. We remain committed to 
achieving equity in health outcomes for residents by promoting SNF 
accountability for addressing health disparities, supporting SNFs' 
quality improvement activities to reduce these disparities, and 
incentivizing better care for all residents. Through the RFI, we 
solicited public comment on possible health equity advancement 
approaches to incorporate into the Program in future program years that 
could supplement or replace the HEA. We refer readers to the FY 2024 
SNF PPS final rule (88 FR 53322) for a summary of the public comments 
we received in response to the health equity RFI. We are considering 
these comments as we continue to develop policies, quality measures, 
and measurement strategies on this important topic.
    We are currently exploring the feasibility of proposing future 
health equity-focused metrics for the Program. Specifically, we are 
considering different ways of measuring health equity that could be 
incorporated into the program as either a new measure, combined to form 
a composite measure, or as an opportunity for SNFs to earn bonus points 
on their SNF performance score. These performance metrics described in 
more detail later in this section of the proposed rule would utilize 
the existing SNF HAI, DC Function, DTC PAC SNF, and SNF WS PPR measures 
that we adopted in the Program. We are considering the development of 
health-equity-focused versions of these measures because they are 
either cross-setting or could be implemented in multiple programs. The 
health-equity focused measures or metrics for bonus points include:
     A high-social risk factor (SRF) measure that utilizes an 
existing Program measure where the denominator of the measure only 
includes residents with a given SRF, which would allow for comparisons 
of care for underserved populations across SNFs;
     A worst-performing group measure that utilizes an existing 
Program measure and compares the quality of care among residents with 
and without a given SRF on that measure and places greater weight on 
the performance of the worst-performing group with the goal of raising 
the quality floor at every facility; and
     A within-provider difference measure that assesses 
performance differences between residents (those with and without a 
given SRF) within a SNF on an existing Program measure, creating a new 
measure of disparities within SNFs.
    We are testing these various measure concepts to determine where 
current across- and within-provider disparities exist in performance, 
how we can best incentivize SNFs to improve their quality of care for 
all residents, including those who may be underserved, and the 
feasibility of incorporating a health equity-focused measure into the 
Program.
    As we explore these and other options, we are focusing on 
approaches that:
     Include as many SNFs as possible and are feasible to 
implement;
     Integrate feedback from interested parties;
     Encourage high quality performance for all SNFs among all 
residents and discourage low quality performance;
     Are simple enough for SNFs to understand and can be used 
to guide SNFs in improvement; and
     Meet the goal of incentivizing equitable care to ensure 
all residents in all SNFs receive high quality care.
    We are also exploring how constraints, such as sample size 
limitations, may impact our ability to effectively incorporate certain 
approaches into the Program. Lastly, we continue to explore 
opportunities to align with other CMS programs to minimize provider 
burden.

F. Proposed Updates to the SNF VBP Review and Correction Process

1. Background
    We refer readers to the FY 2024 SNF PPS final rule (88 FR 53325 
through 53326) and to Sec.  413.338(f) of our regulations for details 
on the SNF VBP Program's public reporting requirements and the two-
phase review and correction process that we have adopted for the 
Program. We also refer readers to the SNF VBP website (https://www.cms.gov/medicare/quality/nursing-home-improvement/value-based-purchasing/confidential-feedback-reporting-review-and-corrections) for 
additional details on our review and correction process. In Phase One 
of the review and correction process, we accept corrections for 30 days 
after distributing the following quarterly confidential feedback 
reports to SNFs: the two Full-Year Workbooks (one each for the baseline 
period and performance period), generally released in December and 
June, respectively. Corrections are limited to errors made by CMS or 
its contractors when calculating a measure rate. In the FY 2022 SNF PPS 
final rule (86 FR 42516 through 42517), we finalized that SNFs are not 
able to correct any of the underlying administrative claims data used 
to calculate a SNF's readmission measure rate during Phase One of the 
review and correction process. For corrections to the underlying 
administrative claims data to be reflected in the SNF VBP Program's 
quarterly confidential feedback reports, the SNF must submit the claims 
correction request to their MAC and the MAC must process the correction 
before the ``snapshot date.'' For the SNFRM, the quarterly confidential 
feedback reports will not reflect any claims corrections processed 
after the date of the claims snapshot, which is 3 months following the 
last index SNF admission in the applicable baseline period or 
performance period.
    In Phase Two of the review and correction process, SNFs may submit 
corrections to SNF performance scores and rankings only. We accept 
Phase Two corrections for 30 days after distributing the Performance 
Score Report that we generally release in August of each year.
    Under our current review and correction policy, the SNF must 
identify the error for which it is requesting correction, explain its 
reason for requesting the correction, and submit documentation or other 
evidence, if available, supporting the request. SNFs must submit 
correction requests to the SNF VBP Program Help Desk, which is 
currently available at [email protected], and the requests must contain:
     The SNF's CMS Certification Number (CCN),
     The SNF's name,
     The correction requested, and
     The reason for requesting the correction, including any 
available evidence to support the request.
    For all review and correction requests, we will review the requests 
and notify the requesting SNF of the final decision. We will also 
implement any approved corrections before the affected data becomes 
publicly available.
    We are proposing to apply our existing Phase One of the review and 
correction process to all measures

[[Page 23476]]

adopted in the Program regardless of the data source for a particular 
measure. We are also proposing ``snapshot dates'' for the new SNF VBP 
measures and to codify those snapshot dates in revised Sec.  
413.338(f)(1). We are also proposing to redesignate current Sec.  
413.338(f)(1) as 413.338(f)(2) and to revise that paragraph to state 
that the underlying data used to calculate measure rates cannot be 
corrected by SNFs during the SNF VBP review and correction process.
2. Proposal To Apply the Existing Phase One Review and Correction 
Policy to All Claims-based Measures Beginning With the FY 2026 Program 
Year and Proposed ``Snapshot Dates'' for Recently Adopted SNF VBP 
Claims-based Measures
    In the FY 2023 SNF PPS final rule, we adopted the SNF HAI measure 
beginning with the FY 2026 SNF VBP program year (87 FR 47564 through 
47570), and the DTC PAC SNF measure beginning with the FY 2027 SNF VBP 
program year (87 FR 47576 through 47580). In the FY 2024 SNF PPS final 
rule, we adopted the Long-Stay Hospitalization measure beginning with 
the FY 2027 SNF VBP program year (88 FR 53293 through 53296), as well 
as the SNF WS PPR measure beginning with the FY 2028 SNF VBP program 
year (88 FR 53277 through 53280). Each of these measures is calculated 
using claims data.
    We are proposing to apply our existing Phase One review and 
correction process to all SNF VBP Program measures calculated using 
claims data. That is, Phase One corrections for claims-based measures 
would be limited to errors made by CMS or its contractors when 
calculating the measure rates. For corrections to the underlying 
administrative claims data to be reflected in the SNF VBP Program's 
quarterly confidential feedback reports, the SNF must submit any claims 
correction requests to their MAC before the ``snapshot date'' to ensure 
that those corrections are reflected fully in measure calculations.
    For the SNF HAI, DTC PAC SNF, and SNF WS PPR measures, we propose 
to define the ``snapshot date'' as 3 months following the last SNF 
discharge in the applicable baseline period or performance period to 
align with the ``snapshot date'' we previously adopted for the 
Program's Phase One review and correction process. We refer readers to 
the FY 2022 SNF PPS final rule (86 FR 42516 through 42517) where we 
explain our rationale for selecting 3 months as the ``snapshot date.'' 
Any corrections made to claims following the ``snapshot date'' would 
not be reflected in our subsequent scoring calculations.
    For the Long Stay Hospitalization measure, we propose to define the 
``snapshot date'' as 3 months following the final quarter of the 
applicable baseline period or performance period. For example, for the 
FY 2027 SNF VBP program year, the performance period is FY 2025. The 
final quarter of the performance period is July 1 through September 30, 
2025. The ``snapshot date'' for this performance period would be 
December 31, 2025. Any corrections made to claims following the 
``snapshot date'' would not be reflected in our subsequent scoring 
calculations.
    We welcome public comment on this proposal.
3. Proposal To Apply the Existing Phase One Review and Correction 
Policy to PBJ-based Measures Beginning With the FY 2026 Program Year 
and Proposed ``Snapshot Dates'' for PBJ-Based Measures
    In the FY 2023 SNF PPS final rule (87 FR 47570 through 47576), we 
adopted the Total Nurse Staffing measure beginning with the FY 2026 SNF 
VBP program year. Additionally, in the FY 2024 SNF PPS final rule (88 
FR 53281 through 53286), we adopted the Nursing Staff Turnover measure 
beginning with the FY 2026 SNF VBP program year. Each of these measures 
is calculated using electronic staffing data submitted by each SNF for 
each quarter through the PBJ system, along with daily resident census 
information derived from MDS 3.0 standardized patient assessments in 
the case of the Total Nurse Staffing measure.
    We are proposing to apply our existing Phase One review and 
correction process to SNF VBP Program measures calculated using PBJ 
data. That is, Phase One corrections would be limited to errors made by 
CMS or its contractors when calculating the measure rates for the PBJ-
based measures applicable in the SNF VBP Program. For corrections to 
the underlying PBJ data to be reflected in the SNF VBP Program's 
quarterly confidential feedback reports, the SNF must make any 
corrections to the underlying data within the PBJ system before the 
``snapshot date.'' Any corrections made to PBJ data following the 
``snapshot date'' would not be reflected in our subsequent scoring 
calculations.
    For measures calculated using PBJ data, we propose to define the 
``snapshot date'' as 45 calendar days after the last day in each fiscal 
quarter. This deadline is consistent with the CMS Nursing Home Quality 
Improvement deadline, which requires that PBJ data submissions must be 
received by the end of the 45th calendar day (11:59 p.m. Eastern Time) 
after the last day in each fiscal quarter to be considered timely. We 
aim to align quality programs to the extent possible to reduce 
confusion and burden on providers. For more information about 
submitting PBJ data, we refer readers to the CMS Staffing Data 
Submission web page at https://www.cms.gov/medicare/quality/nursing-home-improvement/staffing-data-submission.
    We welcome public comment on this proposal.
4. Proposal To Apply the Existing Phase One Review and Correction 
Policy to MDS-Based Measures Beginning With the FY 2027 Program Year 
and Proposed ``Snapshot Dates'' for the Recently Adopted SNF VBP MDS-
Based Measures
    In the FY 2024 SNF PPS final rule (88 FR 53286 through 53293), we 
adopted the Falls with Major Injury (Long-Stay) and DC Function 
measures, both beginning with the FY 2027 SNF VBP program year. These 
two measures are calculated using data reported by SNFs on the MDS 3.0.
    We are proposing to apply our existing Phase One review and 
correction process to SNF VBP Program measures calculated using MDS 
data. That is, Phase One corrections would be limited to errors made by 
CMS or its contractors when calculating the measure rates for the MDS-
based measures applicable in the SNF VBP Program. For corrections to 
the underlying MDS data to be reflected in the SNF VBP Program's 
quarterly confidential feedback reports, the SNF must make any 
corrections to the underlying data via the internet Quality Improvement 
Evaluation System (iQIES) before the ``snapshot date.''
    For the DC Function and Falls with Major Injury (Long-Stay) 
measures, we propose that the ``snapshot date'' is the February 15th 
that is 4.5 months after the last day of the applicable baseline or 
performance period. However, if February 15th falls on a Friday, 
weekend, or Federal holiday, the data submission deadline is delayed 
until 11:59 p.m. ET on the next business day. For example, for the FY 
2027 SNF VBP program year, the performance period is FY 2025 (October 
1, 2024 through September 30, 2025). The ``snapshot date'' for this 
performance period would normally be February 15, 2026. However, since 
February 15, 2026 falls on a Sunday, the snapshot date would be 
extended until the next business day, which is Tuesday, February 17, 
2026,

[[Page 23477]]

due to Monday, February 16, 2026 being a Federal holiday. This is 
consistent with the SNF QRP QM User's Manual available at https://www.cms.gov/files/document/snf-qm-calculations-and-reporting-users-manual-v50.pdf-0. Any corrections made to the MDS data following the 
``snapshot date'' would not be reflected in our subsequent scoring 
calculations.
    We welcome public comment on this proposal.

G. Proposed Updates to the SNF VBP Extraordinary Circumstances 
Exception Policy

1. Background
    Our Extraordinary Circumstances Exception (ECE) policy, which 
allows SNFs to request an exception to the SNF VBP requirements for one 
or more calendar months when there are certain extraordinary 
circumstances beyond the control of the SNF, is currently codified at 
Sec.  413.338(d)(4) of our regulations. We are proposing to redesignate 
that paragraph as new Sec.  413.338(m) of our regulations to ensure the 
policy remains effective beyond FY 2025. We are also proposing to amend 
our existing ECE policy to include the proposed changes discussed later 
in this section, as well as to make other technical updates to enhance 
the clarity of the ECE policy in our regulations.
2. Proposal To Expand the Reasons a SNF May Submit an Extraordinary 
Circumstance Exception Request Beginning With the FY 2025 Program Year
    Paragraph (d)(4)(ii) of our regulations currently states that a SNF 
may request an ECE if the SNF is able to demonstrate that an 
extraordinary circumstance affected the care provided to its residents 
and subsequent measure performance. We are proposing to expand this 
policy to also allow a SNF to request an ECE if the SNF can demonstrate 
that, as a result of the extraordinary circumstance, it cannot report 
SNF VBP data on one or more measures by the specified deadline. This 
expanded policy would avoid penalizing SNFs due to circumstances out of 
their control, and would also align the SNF VBP ECE policy with the ECE 
policies we have adopted for the SNF QRP and Home Health QRP.
    If we grant an ECE to a SNF under the SNF VBP, we would, as 
previously finalized, calculate a SNF performance score that does not 
include the SNF's performance on the measure or measures during the 
months the SNF was affected by the extraordinary circumstance.
    We welcome public comment on this proposal.
3. Proposed Updates to the Instructions for Requesting an Extraordinary 
Circumstance Exception Beginning With the FY 2025 Program Year
    Under our current ECE policy, when a SNF requests an ECE, the SNF 
must complete an Extraordinary Circumstances Request form (available on 
https://qualitynet.cms.gov) and send the form, along with supporting 
documentation, to the SNF VBP Program Help Desk within 90 days of the 
date that the extraordinary circumstance occurred.
    The most recent version of the ECE Request Form no longer includes 
information related to the SNF VBP Program. Although the previous form 
is still available, once it is no longer available, SNFs will no longer 
able to use this new version of the form when submitting an ECE request 
for the SNF VBP Program. Accordingly, we are proposing to update our 
policy to align with the current SNF QRP ECE request submission 
process, which does not require the completion of a form and instead 
requires SNFs to submit specific information via email to a Help Desk. 
Under our proposal, beginning with the FY 2025 program year, a SNF may 
request an ECE by sending an email with the subject line ``SNF VBP 
Extraordinary Circumstances Exception Request'' to the SNF VBP Program 
Help Desk with the following information:
     The SNF's CMS Certification Number (CCN);
     The SNF's business name and business address;
     Contact information for the SNF's CEO or CEO-designated 
personnel, including all applicable names, email addresses, telephone 
numbers, and the SNF's physical mailing address (not a PO Box);
     A description of the event, including the dates and 
duration of the extraordinary circumstance;
     Available evidence of the impact of the extraordinary 
circumstance on the care the SNF provided to its residents or the SNF's 
ability to report SNF VBP measure data, including, but not limited to, 
photographs, media articles, and any other materials that would aid CMS 
in determining whether to grant the ECE;
     A date when the SNF believes it will again be able to 
fully comply with the SNF VBP Program's requirements and a 
justification for the proposed date.
    We welcome public comment on these proposed updates to the SNF VBP 
ECE policy.

VIII. Nursing Home Enforcement

A. Background

    The Biden-Harris Administration is committed to ensuring that all 
residents living in nursing homes receive safe, high-quality care. This 
includes making certain that all Americans, including older Americans 
and people with disabilities, live in a society that is accessible, 
inclusive, and equitable. To ensure that residents are receiving high 
quality, and safe care, long-term care facilities that participate in 
the Medicare or Medicaid program, or both must be certified as meeting 
Federal participation requirements. Long-term care facilities are 
certified as a skilled nursing facility in Medicare and nursing 
facility in Medicaid, or dually-certified in both programs, as 
specified in sections 1819 and 1919 of the Act, respectively, and in 
regulations at 42 CFR part 483, subpart B.
    Section 1864(a) of the Act authorizes the Secretary to enter into 
agreements with State survey agencies to conduct surveys (that is, 
inspections) to determine whether skilled nursing facilities meet the 
Federal participation requirements for Medicare. Section 1902(a)(33)(B) 
of the Act provides for state survey agencies to perform the same 
survey tasks for facilities participating or seeking to participate in 
the Medicaid program. The results of these surveys are used by CMS and 
the State Medicaid agency, respectively, as the basis for a decision to 
enter into, deny, or terminate a provider agreement with the facility. 
They are also used to determine whether one or more enforcement 
remedies should be imposed when noncompliance with requirements is 
identified. Surveyors observe the provision of care and services to 
residents, conduct interviews, and review facility and residents' 
documentation to determine compliance with federal requirements and 
ensure the residents' health and safety are adequately protected.
    Under sections 1819(f)(1) and 1919(f)(1) of the Act, the Secretary 
must ensure that the enforcement of compliance with the participation 
requirements is adequate to protect the health, safety, welfare, and 
rights of the residents and to promote the effective use of public 
money. Additionally, criteria must be specified as to when and how 
enforcement remedies are applied, the amounts of any fines, and the 
severity of each remedy imposed. Criteria must also be designed to 
minimize the time between the identification of violations and the 
final imposition of the remedies. Sections 1819(h)(2)(B) and 
1919(h)(3)(C) of the

[[Page 23478]]

Act. One of the Federal statutory enforcement remedies available to the 
Secretary and the States to address facility noncompliance with the 
requirements is a civil money penalty (CMP). Under sections 
1819(h)(2)(B)(ii)(I) and 1919(h)(3)(C)(ii)(I) of the Act, CMPs may be 
imposed to remedy noncompliance at amounts not to exceed $10,000 for 
each day of noncompliance (as annually adjusted by inflation by the 
Federal Civil Penalties Inflation Adjustment Act Improvements Act of 
2015). The statute additionally permits the Secretary and the States to 
impose a CMP for each day of noncompliance, even if a facility has 
since returned to substantial compliance as documented by an 
intervening standard survey (sections 1819(h)(2)(A) and 1919(h)(1) and 
(3) of the Act providing that if a facility is found to be in 
compliance with the requirements, ``. . . but, as of a previous period, 
did not meet such requirements, [the Secretary provide for] a civil 
money penalty . . . for the days in which he finds that the facility 
was not in compliance with such requirements''). The Secretary must 
follow the procedures set out in section 1128A of the Act in processing 
these CMP remedies.
    The regulations that govern the imposition of CMPs and other 
remedies authorized by the statute were published on November 10, 1994 
(59 FR 56116) and subsequently revised on September 28, 1995 (60 FR 
50118), March 18, 1999 (64 FR 13354 through 13360), March 18, 2011 (76 
FR 15106), and September 6, 2016 (81 FR 61538). The nursing home 
enforcement rules are set forth in 42 CFR part 488, subpart F, and the 
provisions directly affecting CMPs imposed for noncompliance with the 
requirements are set forth in Sec. Sec.  488.430 to 488.444. In 
general, the severity of an enforcement action is based on the extent 
and/or severity of harm or potential for more than minimal harm to 
residents that results from the cited noncompliance. This is intended 
to ensure prompt compliance, incentivizing the facility to take 
appropriate actions to permanently correct their noncompliance and 
protect residents' health and safety in the future. For example, if 
residents experienced serious harm due to noncompliance (including 
death), a less impactful enforcement remedy may not compel the facility 
to take the appropriate actions to prevent a similar event from 
occurring in the future, leaving residents at risk for serious harm, 
injury, or death.
    Under 42 CFR 488.438, the amount of CMPs increases based on the 
severity and/or extent of the harm, or potential for more than minimal 
harm that might result from noncompliance. Current regulations at Sec.  
488.408 allow for penalties to be assessed in the upper range for 
$3,050 to $10,000 per day (PD) or $1,000 to $10,000 per instance (PI), 
as annually adjusted for inflation, for noncompliance that constitutes 
immediate jeopardy (IJ) to resident health and safety, while penalties 
in the lower range of $50 to $3,000 PD or $1,000 to $10,000 PI of 
noncompliance, as annually adjusted for inflation, may be imposed where 
immediate jeopardy does not exist.
    Under the current regulations, the State and/or CMS must decide 
whether to select either a PD or PI CMP when considering whether a CMP 
will be used as a remedy. A PD CMP is an amount that may be imposed for 
each day a facility is not in compliance until the facility corrects 
the noncompliance and achieves substantial compliance. A PI CMP is an 
amount that is imposed for each instance that a facility is not in 
substantial compliance. The current enforcement regulations at 42 CFR 
part 488, subpart F do not authorize the use of both types of CMPs 
during the same survey, nor do they allow for multiple PI CMPs to be 
imposed for multiple instances within the same noncompliance deficiency 
that occurred on different days during a survey.
    While there is no statutory limitation of both a PI and PD being 
imposed on the same survey, we specified in the rulemaking that revised 
Sec.  488.430(a) (published on March 18, 1999 (64 FR 13360)), that we 
would not impose both PD and PI CMPs during a survey. Instead, the 1999 
rule required that, ``a concomitant decision must be made whether the 
civil money penalty will be based on a determination of per instance or 
per day'' (64 FR at 13356). Additionally, we noted that an ``instance'' 
means a singular event of noncompliance or single deficiency under a 
distinct regulatory area identified by an administrative ``F tag'' 
number used as reference on the CMS-2567, Statement of Deficiencies. 
(Id.) We are proposing revisions to this limitation to enable more 
types of CMPs to be imposed during a survey once a CMP remedy is 
selected, allowing for penalties to be better aligned with the 
noncompliance identified during the survey and for more consistency of 
CMP amount across the nation. PI CMPs are often imposed in certain 
circumstances, such as when noncompliance existed but was corrected 
prior to the survey, and for isolated instances of noncompliance 
unrelated to resident abuse. PI CMPs may also be imposed in cases where 
a deficiency is found, but the facility has not had any citations of 
actual or serious harm on any survey in the past three years. A PI CMP 
has typically not been imposed for findings of abuse or neglect, when 
there is continued noncompliance, or when the facility has a past 
history of the same type of noncompliance causing actual harm to 
residents. PD CMPs, however, are generally imposed when these scenarios 
do not exist and the facility has a history of similar noncompliance. 
For example, if a facility was found to be out of compliance with the 
requirements to prevent accidents where a resident was injured during a 
transfer from a wheelchair to the bed, and this was cited as an 
isolated instance of noncompliance that caused actual harm to a 
resident, a PI CMP may be imposed. We developed a Civil Money Penalty 
Analytic Tool to help determine CMP amounts when a CMP is one of the 
selected remedies, per section 1819(h)(2)(B)(ii) of the Act; 42 CFR 
488.404 and 488.438.
    The Biden-Harris Administration is committed to ensuring that all 
residents living in Medicare and Medicaid nursing homes receive safe, 
high-quality care. Specifically, In February 2022, alongside a suite of 
other reforms, CMS committed to expanding financial penalties and other 
enforcement sanctions to improve the safety and quality of care in the 
Nation's nursing homes.\68\ As part of this effort, CMS examined the 
use of PD and PI CMPs and CMP impositions across states from January 1, 
2022, to December 31, 2022. We found national variations in the length 
of time PD CMPs are imposed based on when the noncompliance occurred, 
when the survey was performed, and when the facility was found to have 
corrected the noncompliance. For example, from January 1, 2022-December 
31, 2022, the State with the shortest average number of average days 
for PD CMP imposition was 1 day, and the longest average number of days 
in a State was 43 days. This results in vastly differing PD CMP amounts 
across the States based on the number of days of noncompliance, as well 
as the date the survey was conducted, rather than being more focused on 
the potential or actual harm that a deficiency may cause to residents. 
In other words, the same type of noncompliance may exist in two 
facilities, yet the PD CMP amounts would be different simply due to the 
number of days between the identification of noncompliance by the 
Surveyor and the date of correction by the facility. We believe that 
this results

[[Page 23479]]

in at least two problems. First, it could create a perception of 
inequity in the total amount calculated for a CMP. Second, it prevents 
us from holding some facilities responsible for failing to adequately 
protect the health, safety, and well-being of residents. Take, for 
example, a survey that finds noncompliance with the requirements of 
participation that increases the likelihood of serious injury, harm, 
impairment, or death to residents--such as when residents are 
susceptible to falls while not being monitored (even when no resident 
actually fell as a result of the failure to monitor). If this is 
identified to have started 100 days prior to the survey, a PD CMP would 
accrue for each of the 100 days and each additional day until the 
facility corrected its noncompliance, resulting in a very high CMP. 
Conversely, another facility's similar noncompliance might result in 
serious harm to a resident, when two residents fall due to failures to 
monitor, resulting in serious injury. But, If these falls are 
identified to have occurred one and two days prior to the survey, a PD 
CMP would only accrue for 2 days and each additional day until the 
noncompliance was corrected, resulting in a relatively low CMP that may 
not encourage prompt or lasting compliance.
    These scenarios show how the timing of a survey can potentially 
result in a higher CMP for similar noncompliance that resulted in less 
harm to residents. As such, we want to ensure that CMS retains the 
authority to impose CMPs related to the nature of the harm that is 
caused by--or could be caused by--a facility's noncompliance and the 
length of such noncompliance, rather than the date that a standard 
survey was conducted or a finding of noncompliance was identified, even 
if the administration of imposing the CMP occurs after another survey 
has been conducted.
    Therefore, as discussed later in this section, we propose to expand 
and strengthen our enforcement process by revising the regulations to 
increase CMS's flexibility when a CMP is the selected remedy and allow 
for multiple PI CMPs to be imposed for the same type of noncompliance, 
allow for both PD and PI CMPs to be imposed for noncompliance findings 
in the same survey, as well as ensure that the amount of a CMP does not 
depend solely on the date that the most recent standard survey is 
conducted or the date that a finding of noncompliance was identified by 
surveyors. With these proposed revisions, in certain circumstances, CMS 
or the State may use the survey start date when imposing a PD CMP 
instead of the beginning date of the noncompliance, which maintains the 
benefit of fines accruing to incentivize swift correction to protect 
existing residents' safety, and as a deterrent for future noncompliance 
to protect future residents' safety. In other words, by creating the 
ability to impose a PI CMP and PD CMP on the same survey, CMS or the 
State could impose a PI CMP to address the noncompliance that occurred 
in the past or prior to the survey, and a PD CMP beginning at the start 
of the survey and continuing until the facility has corrected its 
noncompliance. Additionally, if multiple instances of noncompliance 
occurred prior to the survey, CMS or the State could impose multiple PI 
CMPs, as well as a PD CMP. This helps ensure that similar types of 
noncompliance receive similar CMPs regardless of how many days prior to 
the survey it occurred, and ensures facilities are motivated to correct 
their noncompliance as soon as possible after the surveyors identify 
it.
    These proposed revisions are not intended to expand the type of 
deficiencies that are subject to PD and PI CMPs. The States and CMS 
would continue to follow the existing criteria for imposing a PD CMP or 
PI CMP, including imposing a PD or PI CMP for noncompliance that 
occurred prior to the start of a survey. Rather, these proposed 
revisions would allow for more consistent CMP amounts imposed across 
the nation and expand the current enforcement to allow for additional 
CMPs that more closely align with the noncompliance that occurred. 
These actions will help to better ensure that compliance is quickly 
achieved and is lasting.

B. Provisions of the Proposed Regulations

1. Imposing Multiple per Instance Civil Money Penalties for the Same 
Type of Noncompliance
    Sections 1819(h)(2)(B)(ii) and 1919 (h)(3)(C)(ii) of the Act 
authorize the Secretary to impose a CMP for each day of noncompliance. 
Section 1128A(d) of the Act further states that the Secretary shall 
consider (1) the nature of claims and the circumstances under which 
they were presented, (2) the degree of culpability, history of prior 
offenses and financial condition of the person presenting the claims, 
and (3) such other matters as justice may require when determining the 
amount or scope of any penalty. The regulations at Sec.  488.454(d) 
state that, in the case of a CMP imposed for an instance of 
noncompliance, the remedy is the specific amount of the CMP imposed for 
the particular noncompliance deficiency. The meaning of an 
``instance,'' therefore, focuses on a single deficiency citation of the 
applicable requirements of part 483, subpart B referenced on the 
facility's statement of deficiencies (Form CMS-2567)) and, under the 
current regulations, only one type of CMP can be imposed per F tag 
deficiency.
    The statute grants the Secretary broad discretion to determine how 
appropriate CMPs should be enforced and only limits the imposition to a 
maximum daily amount. We propose to expand the circumstances in which a 
PI CMP can be imposed to allow for more than one PI CMP to be imposed 
when multiple occurrences, or ``instances'' of a specific noncompliance 
are identified during a survey, regardless of whether they are cited at 
the same regulatory deficiency tag number in the statement of 
deficiencies. For example, if a surveyor identifies during a survey 
several instances of noncompliance within a particular regulatory 
requirement (such as Sec.  483.25, identified as tag F684--quality of 
care,) that occurred on different days, CMS or the State survey agency 
would be able to impose a PI CMP for each occurrence of that 
noncompliance for those days, as long as the total facility CMP 
liability did not exceed the statutory and regulatory maximum amount on 
any given day.
    As previously mentioned, CMS imposes CMPs based on sections 
1819(h)(2)(B)(ii) and 1919 (h)(3)(C)(ii) of the Act, Sec. Sec.  
488.404, and 488.438 which provides the amount of penalty, the ranges, 
basis for penalty amount, increase/decrease of penalty amounts, and 
factors affecting the amount. While we may impose various enforcement 
remedies, CMPs are frequently imposed for deficiencies that result in 
serious injury, harm, impairment, or death to nursing home residents. 
Currently, we can only impose PI CMPs for different types of 
noncompliance identified on a survey, while other instances of the same 
noncompliance would not receive a CMP due to current regulatory 
limitations. Since the PI CMP is limited to one broad regulatory 
occurrence, the amount of the PI CMP often is not sufficient to 
encourage sustained compliance and deter future noncompliance with the 
requirements of participation.
    To strengthen our enforcement policies, we propose to revise Sec.  
488.401 to define ``instance'' or ``instance of noncompliance'' as a 
separate factual and temporal occurrence when a facility fails to meet 
a participation requirement. We further propose that

[[Page 23480]]

each instance of noncompliance would be sufficient to constitute a 
deficiency and that a deficiency may be comprised of multiple instances 
of noncompliance. This proposed revision will allow us and the States 
to impose multiple PI CMPs for the same type of noncompliance in a 
survey, thereby incentivizing facilities to take meaningful steps to 
permanently resolve their deficiencies. This proposed regulatory change 
would also provide more opportunities to impose CMPs in a manner that 
is consistent with the Congressional mandate to ensure that residents 
are protected from harm that often result in facilities with multiple 
occurrences of noncompliance. Because these changes focus more directly 
on the severity of noncompliance itself, we anticipate that, not only 
will they better protect nursing home residents and encourage lasting 
compliance, they will also create more consistency in the amount of 
imposed CMPs.
2. Imposing per Instance and per Day Civil Money Penalties on the Same 
Survey
    As we noted earlier, the Act does not limit the imposition of both 
a PD and a PI on the same survey but only limits the total amount a 
penalty may be imposed for any individual day. Section 
488.408(d)(2)(iii)-(iv) and Sec.  488.408(e)(1)(iii)-(iv) outline the 
type of remedies that may be imposed based on the severity of the 
noncompliance, however these regulations do not state the manner in 
which the remedies may be imposed.
    Because CMPs are designed to spur permanent resolution of 
deficiencies, We believe CMS and the States need flexibility to 
determine the range of CMPs that can be imposed on facilities that fail 
to meet the conditions of participation. For example, if a survey 
identifies isolated noncompliance that occurred prior to the start of 
the survey and also identifies separate noncompliance that began and 
continued to occur during the survey, we are currently unable to impose 
both a PI CMP and a PD CMP to address these two separate occurrences of 
noncompliance identified during the same survey. In other words, if a 
survey identified numerous instances of medication administration 
errors as well as systemic noncompliance with infection control 
policies, we believe imposing a PI CMP for the medication errors and a 
PD CMP for the infection control deficiencies, in this general example, 
could be a more effective enforcement response. Due to the additional 
instances of noncompliance identified, a PD CMP that covers the 
noncompliance with infection control requirements alone may not 
encourage the facility to sustain compliance. Without this type of 
flexibility, CMS cannot impose penalties that are sufficient to ensure 
that any systemic issues that caused the noncompliance are permanently 
corrected. Moreover, we have found that the failure of nursing homes to 
take the necessary steps to permanently resolve systemic problems 
increases the probability that deficiencies will continue, progressing 
to a higher scope and severity that ultimately results in harm or 
increased harm to residents.
    For the previously stated reasons, we propose to revise Sec. Sec.  
488.408(e)(2)(ii) and 488.430(a) to expand our authority to impose both 
a PI CMP and a PD CMP, not to exceed the statutory and regulatory 
maximum amount on any given day even when combined, when surveyors 
identify noncompliance. Specifically, in Sec.  488.408(e)(2)(ii), we 
propose that for each instance of noncompliance, CMS and the State may 
impose a PD CMP of $3,050 to $10,000 (as adjusted under 45 CFR part 
102), a PI CMP of $1,000 to $10,000 (as adjusted under 45 CFR part 
102), or both, in addition to the remedies specified in Sec.  
488.408(e)(2)(i). Additionally, we propose that when a survey contains 
multiple instances of noncompliance, CMS and the State may impose any 
combination of per instance or per day CMP for each instance of 
noncompliance within the same survey. Additionally, we propose to 
revise Sec.  488.430(a) to allow for each instance of noncompliance, a 
PD CMP, PI CMP, ``or both'' may be imposed, regardless of whether or 
not the deficiencies constitute immediate jeopardy. We also propose to 
add that when a survey contains multiple instances of noncompliance, a 
combination of per instance and per day CMPs for each instance of 
noncompliance may be imposed within the same survey. These proposed 
revisions will enable PI CMPs to be imposed for noncompliance that was 
previously not able to be addressed once a PD CMP was selected. This 
would also allow CMS or a State survey agency to impose multiple PI 
CMPs for noncompliance that occurred prior to the start of a survey and 
use the survey start date to begin the PD CMP, thereby enabling more 
consistent CMP amounts to be imposed while still incentivizing a swift 
return to compliance.
    Additionally, we propose to make conforming changes by revising 
Sec.  488.434(a)(2)(iii) to clarify that both PD and PI CMPs can be 
imposed on the same survey and thus is included in the penalty notice 
to the facility. Furthermore, we propose to revise Sec.  
488.434(a)(2)(v) to indicate that the date and instance of 
noncompliance is not a singular event, but rather can be multiple 
``date(s) of the instance(s) of noncompliance.'' Lastly, we propose to 
revise Sec.  488.440(a)(2) to remove the phrase, ``for that particular 
deficiency,'' and replace with, ``per instance,'' which will allow for 
more than one PI CMP to be imposed on the same type of noncompliance or 
``F tag'' citation. We seek public comment on these proposed revisions.
3. Timing of Enforcement
    Sections 1819(h)(2)(A) and 1919(h)(1) and (3) of the Act state that 
when a facility is found to be in compliance with the requirements but 
``. . . as of a previous period, did not meet such requirements,'' the 
Secretary and the State may impose a CMP for the days that the facility 
is found out of compliance with the requirements. The regulation at 
Sec.  488.430(b) states that ``CMS or the State may impose a civil 
money penalty for the number of days of past noncompliance since the 
last standard survey, including the number of days of immediate 
jeopardy.''
    Due to an increase in the number of complaint surveys being 
conducted, the current regulation may result in an unanticipated limit 
on CMS's authority to impose remedies to the noncompliance deficiencies 
identified when the last standard survey was performed. For example, 
since 2015, the percent of complaint surveys increased from 80 to 87 
percent of the total number of surveys conducted, resulting in more 
than 10,000 additional surveys. This increase in complaint survey 
activity has resulted in an increase in enforcement actions taken by 
the States and CMS. The increase in complaint surveys has resulted in 
more surveys being conducted within short timeframes of each other, 
which can create administrative difficulties. For example, one survey 
may be conducted shortly after another, not leaving enough time to 
impose a CMP for the first survey before the second survey is 
concluded. But, despite the fact that there are more surveys that 
identify additional deficiencies, the current regulations limit how far 
back CMS or the State may go when calculating a CMP amount: to the last 
standard survey.
    We propose to revise Sec.  488.430(b) by changing ``since the last 
standard survey'' to ``since the last three standard surveys.'' We 
believe this proposed revision aligns with the statutory mandate that 
the Secretary ensure that enforcement remedies adequately

[[Page 23481]]

protect the health and safety of nursing home residents in facilities 
where the Medicare and/or Medicaid programs pay for services. These 
proposed revisions are designed to enable CMS or State survey agencies 
to impose a variety of CMPs for noncompliance, particularly when 
surveyors have identified deficiencies that cannot be addressed 
because, for example, a subsequent survey has taken place. In these 
situations, it is important for CMS and the State to be able to impose 
a CMP (per day, per instance, or both), as warranted, to help ensure 
that the facility's compliance is permanent. Additionally, limiting 
review of past noncompliance to the last three standard surveys is more 
reflective of a facility's current compliance performance.
    A proposed three-standard survey lookback period is also consistent 
with current agency practices. For example, CMS posts the survey 
results for each facility for the last three standard surveys and last 
3 years of complaint surveys on the Medicare.gov Care Compare website 
to provide the public with information on the facility's compliance 
performance. This same timeframe is also used to calculate each 
facility's health inspection rating for the Five-Star Quality Rating 
System. We seek public comments on this proposal and also seek comments 
on an alternative look-back period that would also ensure CMPs are 
imposed in a manner that is not dependent on when the next standard 
survey is conducted.

IX. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The 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.
    We are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs):
    Using the following format describe the information collection 
requirements that are in each section].

A. Proposed Information Collection Requirements (ICRs)

1. ICRs Regarding the Skilled Nursing Facility Value-Based Purchasing 
Program
    We are not removing or adding any new or revised SNF VBP measure-
related requirements or burden in this rule. Consequently, this final 
rule does not set out any new SNF VBP-related collections of 
information that would be subject to OMB approval under the authority 
of the PRA.
2. ICRs Regarding the Skilled Nursing Facility Quality Reporting 
Program (SNF QRP)
    In accordance with section 1888(e)(6)(A)(i) of the Act, the 
Secretary must reduce by 2-percentage points the otherwise applicable 
annual payment update to a SNF for a fiscal year if the SNF does not 
comply with the requirements of the SNF QRP for that fiscal year.
    In section VI.C.3. of this proposed rule, we are proposing to adopt 
four new items as standardized patient assessment data elements under 
the SDOH category and modify one item collected as a standardized 
patient assessment data element under the SDOH category beginning with 
the FY 2027 SNF QRP. In section VI.E.3. of this proposed rule, we are 
also proposing that SNFs participating in the SNF QRP, be required to 
participate in a validation process. Specifically, we are proposing to 
adopt a similar validation process for the SNF QRP that we have adopted 
for the SNF VBP beginning with the FY 2027 SNF QRP.
    As stated in section VII.C.3. of this proposed rule, we are 
proposing to adopt four new items as standardized patient assessment 
data elements under the SDOH category and modify one item collected as 
a standardized patient assessment data element under the SDOH category 
beginning with the FY 2027 SNF QRP. The proposed new and modified items 
would be collected using the MDS. The MDS, in its current form, has 
been approved under OMB control number 0938-1140. Four items would need 
to be added to the MDS at admission to allow for collection of these 
data, and one would be modified. Additionally, as stated in section 
VI.E.2. of this proposed rule, we are proposing SNFs would submit the 
four proposed new items and one modified item at admission only. The 
net result of collecting four new items at admission, modifying one 
item currently collected at admission, and removing the collection of 
one item at discharge is an increase of 0.9 minutes or 0.015 hour of 
clinical staff time at admission [(4 items x 0.005 hour) minus (1 item 
x 0.005 hour)]. We identified the staff type based on past SNF burden 
calculations, and our assumptions are based on the categories generally 
necessary to perform an assessment. We believe that the proposed new 
and modified items would be completed equally by a Registered Nurse 
(RN) and Licensed Practical and Licensed Vocational Nurse (LPN/LVN). 
However, individual SNFs determine the staffing resources necessary.
    For the purposes of calculating the costs associated with the 
collection of information requirements, we obtained median hourly wages 
for these staff from the U.S. Bureau of Labor Statistics' (BLS) May 
2022 National Occupational Employment and Wage Estimates.\71\ To 
account for other indirect costs and fringe benefits, we doubled the 
hourly wage. These amounts are detailed in Table 33. We established a 
composite cost estimate using our adjusted wage estimates. The 
composite estimate of $65.31/hr was calculated by weighting each hourly 
wage equally [($78.10/hr x 0.5) plus ($52.52/hr x 0.5) = $65.31].
---------------------------------------------------------------------------

    \71\ U.S. Bureau of Labor Statistics' (BLS) May 2022 National 
Occupational Employment and Wage Estimates. https://www.bls.gov/oes/current/oes_nat.htm.

[[Page 23482]]



   Table 33--U.S. Bureau of Labor and Statistics' May 2022 National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
                                                                                 Other indirect      Adjusted
               Occupation title                  Occupation     Median hourly   costs and fringe  hourly wage ($/
                                                    code         wage ($/hr)     benefit ($/hr)         hr)
----------------------------------------------------------------------------------------------------------------
Registered Nurse (RN)........................         29-1141           39.05              39.05           78.10
Licensed Practical and Licensed Vocational            29-2061           26.26              26.26           52.52
 Nurse (LPN/LVN).............................
----------------------------------------------------------------------------------------------------------------

    We estimate that the burden and cost for SNFs for complying with 
requirements of the FY 2027 SNF QRP would increase under this proposal. 
Using FY 2023 data, we estimate a total of 1,966,662 admissions to and 
754,287 planned discharges from 15,393 SNFs annually for an increase of 
35,561.81 hours in burden for all SNFs [(1,966,662 admissions x 0.02 
hour) minus (754,287 planned discharges x 0.005 hour)]. Given 0.02 hour 
at $65.31 per hour to complete an average of 128 5-day PPS assessments 
per provider per year minus 0.005 at $65.31 per hour to complete an 
average of 49 Planned Discharge assessments, we estimate the total cost 
would be increased by $150.88 per SNF annually, or $2,322,541.48 for 
all SNFs annually. The proposed increase in burden would be accounted 
for in a revised information collection request under OMB control 
number (0938-1140). The required 60-day and 30-day notices would 
publish in the Federal Register and the comment periods would be 
separate from those associated with this rulemaking.
    In summary, under OMB control number (0938-1140), if the proposed 
policies in this proposed rule are finalized, we estimate the SNF QRP 
would result in an overall increase of 35,561.81 hours annually for 
15,393 SNFs. The total cost increase related to this information 
collection is approximately $2,322,541.48 and is summarized in Table 
34.

 Table 34--Proposed Estimated Burden Associated With OMB Control Number 0938-1140 (CMS-10387) Related to the SNF
                                                       QRP
----------------------------------------------------------------------------------------------------------------
                                                        Per SNF                           All SNFs
                                           ---------------------------------------------------------------------
                 Proposal                      Change in                       Change in
                                             annual burden     Change in     annual burden    Change in annual
                                                 hours        annual cost        hours              cost
----------------------------------------------------------------------------------------------------------------
Estimated Change in Burden associated with           +2.31        +$150.88      +35,561.81        +$2,322,541.48
 Proposal to Collect Four New Items as
 Standardized Patient Assessment Data
 Elements and Modify One Item Collected as
 a Standardized Patient Assessment Data
 Element beginning with the FY 2027 SNF
 QRP......................................
----------------------------------------------------------------------------------------------------------------

3. ICRs Regarding the Minimum Data Set (MDS) Beginning October 1, 2025
    The MDS is used for meeting the SNF Requirements of Participation, 
requirements under the SNF QRP, and for payment purposes under the SNF 
PPS. As outlined in the FY 2019 SNF PPS final rule (83 FR 39165 through 
39265), several MDS items are not needed in case-mix adjusting the per 
diem payment for PDPM. However, they were not accounted for in the FY 
2019 SNF PPS final rule. Therefore, we are removing these items from 
the 5-day Medicare-required assessment beginning October 1, 2025. We 
have provided an estimate of the reduction in burden here and in Table 
35. The items to be removed are:
     O0400.A.1. Speech-Language Pathology and Audiology 
Services; Individual minutes.
     O0400.A.2. Speech-Language Pathology and Audiology 
Services; Concurrent minutes.
     O0400.A.3. Speech-Language Pathology and Audiology 
Services; Group minutes.
     O0400.A.3A. Speech-Language Pathology and Audiology 
Services; Co-treatment minutes.
     O0400.A.4. Speech-Language Pathology and Audiology 
Services; Days.
     O0400.A.5. Speech-Language Pathology and Audiology 
Services; Therapy start date.
     O0400.A.6. Speech-Language Pathology and Audiology 
Services; Therapy end date.
     O0400.B.1. Occupational Therapy; Individual minutes.
     O0400.B.2. Occupational Therapy; Concurrent minutes.
     O0400.B.3. Occupational Therapy; Group minutes.
     O0400.B.3A. Occupational Therapy; Co-treatment minutes.
     O0400.B.4. Occupational Therapy; Days.
     O0400.B.5. Occupational Therapy; Therapy start date.
     O0400.B.6. Occupational Therapy; Therapy end date.
     O0400.C.1. Physical Therapy; Individual minutes.
     O0400.C.2. Physical Therapy; Concurrent minutes.
     O0400.C.3. Physical Therapy; Group minutes.
     O0400.C.3A. Physical Therapy; Co-treatment minutes.
     O0400.C.4. Physical Therapy; Days.
     O0400.C.5. Physical Therapy; Therapy start date.
     O0400.C.6. Physical Therapy; Therapy end date.
     O0400.E.2. Psychological Therapy; Days.
    The net result of removing the collection of these items is a 
decrease of 6.6 minutes of clinical staff time at admission. We believe 
that these items are completed equally by a RN and LPN/LVN. Individual 
SNFs determine the staffing resources necessary.
    For the purposes of calculating the costs associated with the 
collection of information requirements, we obtained median hourly wages 
for these staff from the BLS May 2022 National Occupational Employment 
and Wage Estimates.\72\ To account for other

[[Page 23483]]

indirect costs and fringe benefits, we have doubled the hourly wage. 
These amounts are detailed in Table 35. We established a composite cost 
estimate using our adjusted wage estimates. The composite estimate of 
$65.31/hr was calculated by weighting each hourly wage equally 
[($78.10/hr x 0.5) plus ($52.52/hr x 0.5) = $65.31].
---------------------------------------------------------------------------

    \72\ U.S. Bureau of Labor Statistics' (BLS) May 2022 National 
Occupational Employment and Wage Estimates. https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------

    Using FY 2023 data, we estimate a total of 1,966,662 admissions to 
15,393 SNFs annually. This equates to a decrease of 216,332.82 hours in 
burden for all SNFs. Given 0.11 hour at $65.31 per hour to complete an 
average of 128 5-day PPS assessments per provider per year, we estimate 
the total cost would be decreased by $917.87 per SNF annually, or 
$14,128,696.47 for all SNFs annually.

  Table 35--Proposed Estimated SNF Reduction in Burden Associated With Associated With OMB Control Number 0938-
                   1140 (CMS-10387) Related to the Minimum Data Set Collection and Submission
----------------------------------------------------------------------------------------------------------------
                                                     Per SNF                             All SNFs
                                       -------------------------------------------------------------------------
                                           Estimated                         Estimated
                                           change in        Estimated        change in      Estimated change in
                                         annual burden      change in      annual burden        annual cost
                                             hours         annual cost         hours
----------------------------------------------------------------------------------------------------------------
Estimated Change in Burden associated           -14.05         -$917.87      -216,332.82        -$14,128,696.47
 with Removal of MDS items O0400.A,
 O0400.B, O0400.C, and O0400.E
 effective October 1, 2025............
----------------------------------------------------------------------------------------------------------------

4. ICRs Regarding the Proposal for SNFs To Participate in a Validation 
Process
    In section VI.E.3 of this proposed rule, we are proposing to 
require SNFs to participate in a validation process beginning with the 
FY 2027 SNF QRP. We have provided an estimate of burden here, and in 
Table 36, and note that the increase in burden would be accounted for 
in a new information collection request.
    In section VI.E.3(a). of this proposed rule, we propose to require 
SNFs to participate in a validation process for assessment-based 
measures beginning with the FY 2027 SNF QRP. We identified the staff 
type based on past SNF burden calculations, and our assumptions are 
based on the categories generally necessary to perform an assessment. 
We believe that the medical records would be collected and submitted by 
a Medical Records and Health Information Technologist and Medical 
Registrar (HIT/MR). However, individual SNFs determine the staffing 
resources necessary. For the purposes of calculating the costs 
associated with the collection of information requirements, we obtained 
median hourly wages for these staff from the BLS May 2022 National 
Occupational Employment and Wage Estimates.\73\ To account for other 
indirect costs and fringe benefits, we have doubled the hourly wage to 
establish an adjusted wage estimate of $56.02/hr. These amounts are 
detailed in Table 36.
---------------------------------------------------------------------------

    \73\ https://www.bls.gov/oes/current/oes_nat.htm.

   Table 36--U.S. Bureau of Labor and Statistics' May 2022 National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
                                                                                 Other indirect
                                                                Median hourly      costs and     Adjusted hourly
              Occupation title                Occupation code    wage ($/hr)     fringe benefit    wage ($/hr)
                                                                                     ($/hr)
----------------------------------------------------------------------------------------------------------------
Medical Records and Health Information               29-9021            28.01            28.01            56.02
 Technologists and Medical Registrars (HIT/
 MR)........................................
----------------------------------------------------------------------------------------------------------------

    We are proposing that our validation contractor would select, on an 
annual basis, up to 1,500 SNFs and up to 10 medical records from each 
of the selected SNFs. We are proposing that the selected SNFs would 
have the option to submit digital or paper copies of the requested 
medical records to the validation contractor.
    For the purposes of burden estimation, we assume all of the 
activities associated with the validation process would be completed by 
a HIT/MR. For selected SNFs utilizing electronic health records (EHR), 
we anticipate an increase of 3 hours up to 7.5 hours of HIT/MR time per 
SNF to submit a sample of up to 10 records. For selected SNFs who do 
not utilize EHRs, we anticipate an increase of 5 hours up to 12.5 hours 
of HIT/MR time per SNF to submit a sample of up to 10 records. 
Additionally, SNFs who do not utilize EHRs may incur printing and 
shipping costs if they are unable to submit the records via an 
electronic portal, and for these SNFs, we estimate the cost to print 
and ship a sample of up to 10 records would range from $842.67 up to 
$4,114.35.
    We also anticipate that a sample of up to 10 medical records would 
consist of SNF stays that vary in length of stay. We estimate the 
length of stay for each of the selected medical records could range 
from 20 days (or less) up to or exceeding 366 days. For purposes of our 
burden estimate, we anticipate the average sample of up to 10 medical 
records would be distributed among the possible lengths of stay (that 
is, approximately 40 percent of stays or 4 stays would be 1 to 30 days, 
40 percent of stays or 4 stays would be 31 to 100 days, and 20 percent 
of stays or 2 stays would last 101 to 366 or more consecutive days). We 
also estimate that approximately 85 percent of nursing homes utilize 
some form of EHRs.\74\ Therefore, we estimate the total cost to submit 
up to 10 medical records would range between $335,699.85 and 
$477,368.10 for all 1,500 SNFs selected, depending on the length of 
stay of the

[[Page 23484]]

sample medical records and whether the SNFs use an EHR. We also 
estimate that total cost to submit up to 10 medical records would range 
between $263.29 [$335,699.85/(1,500 x 0.85 SNFs)] and $2,121.64 
[$477,368.10/(1,500 x 0.15 SNFs)] per SNF selected depending on the 
length of stay of the sample of medical records and whether the SNF 
uses an EHR. On average we estimate the total cost would be increased 
by $813,067.95 for all 1,500 selected SNFs [[($263.29 x (1,500 x 0.85)] 
plus [$2,121.64 x (1,500 x 0.15)]] and $542.05 per selected SNF 
($813,067.95/1,500 SNFs) annually.
---------------------------------------------------------------------------

    \74\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6591108/
#:~:text=In%20a%20nationwide%20sample%2C%20we,EHR%20adoption%20by%20n
ursing%20facilities.
---------------------------------------------------------------------------

    In section VI.E.3(b). of this proposed rule, we propose to require 
SNFs to participate in a validation process for Medicare fee-for-
service claims-based measures beginning with the FY 2027 SNF QRP. All 
Medicare fee-for-service claims-based measures are already reported to 
the Medicare program for payment purposes, and therefore there is no 
additional burden for providers.

                             Table 37--Proposed SNF Burden for a Validation Process
                                            [OMB 0938-TBD, CMS-#####]
----------------------------------------------------------------------------------------------------------------
                                                      Per selected SNF                  All selected SNFs
                                             -------------------------------------------------------------------
                                                 Estimated                         Estimated
                  Proposal                       change in        Estimated        change in        Estimated
                                               annual burden      change in      annual burden      change in
                                                   hours         annual cost         hours         annual cost
----------------------------------------------------------------------------------------------------------------
Estimated Change in Burden associated with             +5.12         +$542.05           +7,680     +$813,067.95
 Proposed Participation in a Validation
 Process....................................
----------------------------------------------------------------------------------------------------------------

    Comments must be received on/by June 3, 2024.
    If you comment on these information collection, that is, reporting, 
recordkeeping or third-party disclosure requirements, please submit 
your comments electronically as specified in the ADDRESSES section of 
this proposed rule.
    Comments must be received on/by June 3, 2024.

X. Response to Comments

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

XI. Economic Analyses

A. Regulatory Impact Analysis

1. Statement of Need
a. Statutory Provisions
    This rule updates the FY 2025 SNF prospective payment rates as 
required under section 1888(e)(4)(E) of the Act. It also responds to 
section 1888(e)(4)(H) of the Act, which requires the Secretary to 
provide for publication in the Federal Register before the August 1 
that precedes the start of each FY, the unadjusted Federal per diem 
rates, the case-mix classification system, and the factors to be 
applied in making the area wage adjustment. These are statutory 
provisions that prescribe a detailed methodology for calculating and 
disseminating payment rates under the SNF PPS, and we do not have the 
discretion to adopt an alternative approach on these issues.
    With respect to the SNF QRP, this proposed rule proposes updates 
beginning with the FY 2027 SNF QRP. Specifically, we propose to collect 
four new items as standardized patient assessment data elements under 
the SDOH category and modify one item collected as a standardized 
patient assessment data element under the SDOH category in the MDS 
beginning with the FY 2027 SNF QRP. We believe these proposals would 
advance the CMS National Quality Strategy Goals of equity and 
engagement by encouraging meaningful collaboration between healthcare 
providers, caregivers, and community-based organizations to address 
SDOH prior to discharge from the SNF. We propose to adopt a validation 
process for the SNF QRP beginning with the FY 2027 SNF QRP to satisfy 
section 111(a)(4) of Division CC of the Consolidated Appropriations 
Act, 2021 (Pub. L. 116-260) which requires that the measures and data 
submitted under the SNF QRP Program (section 1888(e)(6) of the Act) be 
subject to a validation process. To implement this proposed validation 
process for SNF QRP, we are also proposing conforming amendments to our 
regulation at Sec.  413.360.
    With respect to the SNF VBP Program, this rule proposes updates to 
the SNF VBP Program requirements for FY 2025 and subsequent years. 
Section 1888(h)(3) of the Act requires the Secretary to establish and 
announce performance standards for SNF VBP Program measures no later 
than 60 days before the performance period, and this proposed rule 
estimates numerical values of the performance standards for the FY 2027 
program year for the SNFRM, SNF HAI, Total Nurse Staffing, Nursing 
Staff Turnover, Falls with Major Injury (Long-Stay), DC Function, and 
Long Stay Hospitalization measures; and numerical values of the 
performance standards for the FY 2028 program year for the DTC PAC SNF 
and SNF WS PPR measures. We are also required under section 
1888(h)(1)(C) of the Act to establish a minimum number of measures that 
apply to a facility for the applicable performance period. Therefore, 
we are proposing to apply the same measure minimum we previously 
finalized for the FY 2027 program year (88 FR 53303) to the FY 2028 
program year and subsequent program years.
b. Discretionary Provisions
    In addition, this proposed rule includes the following 
discretionary provisions:
(1) SNF Market Basket Adjustment
    We are proposing to rebase and revise the SNF market basket to 
reflect a 2022 base year. Since the inception of the SNF PPS, the 
market basket used to update SNF PPS payments has been periodically 
rebased and revised to reflect more recent data. We last rebased and 
revised the market basket applicable to the SNF PPS in the FY 2022 SNF 
PPS final rule (86 FR 42444 through 42463) where we adopted a 2018-
based SNF market basket.
    Given changes to the industry in recent years and public comments 
about the timeliness of the weights, we have been monitoring the 
Medicare cost report data to determine if a more frequent rebasing 
schedule than our standard schedule (which has generally been about 
every 4 years). In light of this analysis, we are proposing to

[[Page 23485]]

incorporate data that is more reflective of recent SNF expenses.
(2) SNF Forecast Error Adjustment
    Each year, we evaluate the SNF market basket forecast error for the 
most recent year for which historical data is available. The forecast 
error is determined by comparing the projected SNF market basket 
increase each year with the actual SNF market basket increase in that 
year. In evaluating the data for FY 2023, we found that the forecast 
error for that year was 1.7 percentage points, exceeding the 0.5 
percentage point threshold we established in regulation for proposing 
adjustments to correct for forecast error. Given that the forecast 
error exceeds the 0.5 percentage point threshold, current regulations 
require that the SNF market basket percentage increase for FY 2025 be 
adjusted upward by 1.7 percentage points to account for forecasting 
error in the FY 2023 SNF market basket update.
(3) Technical Updates to ICD-10 Mappings
    In the FY 2019 SNF PPS final rule (83 FR 39162), we finalized the 
implementation of the PDPM, effective October 1, 2019. The PDPM 
utilizes ICD-10 codes in several ways, including using the patient's 
primary diagnosis to assign patients to clinical categories under 
several PDPM components, specifically the PT, OT, SLP and NTA 
components. In this rule, we finalize several substantive changes to 
the PDPM ICD-10 code mapping.
2. Introduction
    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), Executive Order 14094 entitled ``Modernizing 
Regulatory Review'' (April 6, 2023), 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).
    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). The 
Executive Order 14094 entitled ``Modernizing Regulatory Review'' 
(hereinafter, the Modernizing E.O.) amends section 3(f)(1) of Executive 
Order 12866 (Regulatory Planning and Review). The amended section 3(f) 
of Executive Order 12866 defines a ``significant regulatory action'' as 
an action that is likely to result in a rule: (1) having an annual 
effect on the economy of $200 million or more in any 1 year (adjusted 
every 3 years by the Administrator of OIRA for changes in gross 
domestic product), or adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, territorial, or 
tribal governments or communities; (2) creating a serious inconsistency 
or otherwise interfering with an action taken or planned by another 
agency; (3) materially altering the budgetary impacts of entitlement 
grants, user fees, or loan programs or the rights and obligations of 
recipients thereof; or (4) raise legal or policy issues for which 
centralized review would meaningfully further the President's 
priorities or the principles set forth in this Executive order, as 
specifically authorized in a timely manner by the Administrator of OIRA 
in each case.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with significant regulatory action/s and/or with significant effects as 
per section 3(f)(1) ($200 million or more in any 1 year). Based on our 
estimates, OMB's Office of Information and Regulatory Affairs has 
determined this rulemaking is significant per section 3(f)(1) as 
measured by the $200 million or more in any 1 year, and hence also a 
major rule under Subtitle E of the Small Business Regulatory 
Enforcement Fairness Act of 1996 (also known as the Congressional 
Review Act). Accordingly, we have prepared a Regulatory Impact Analysis 
that to the best of our ability presents the costs and benefits of the 
rulemaking. Therefore, OMB has reviewed these proposed regulations, and 
the Departments have provided the following assessment of their impact.
3. Overall Impacts
    This rule updates the SNF PPS rates contained in the SNF PPS final 
rule for FY 2024 (88 FR 53200). We estimate that the aggregate impact 
will be an increase of approximately $1.3 billion (4.1 percent) in Part 
A payments to SNFs in FY 2025. This reflects a $1.3 billion (4.1 
percent) increase from the update to the payment rates. We note in this 
proposed rule that these impact numbers do not incorporate the SNF VBP 
Program reductions that we estimate would total $187.69 million in FY 
2025. We note that events may occur to limit the scope or accuracy of 
our impact analysis, as this analysis is future-oriented, and thus, 
very susceptible to forecasting errors due to events that may occur 
within the assessed impact time period.
    In accordance with sections 1888(e)(4)(E) and (e)(5) of the Act and 
implementing regulations at Sec.  413.337(d), we are updating the FY 
2024 payment rates by a factor equal to the market basket percentage 
increase adjusted for the forecast error adjustment and reduced by the 
productivity adjustment to determine the payment rates for FY 2025. The 
impact to Medicare is included in the total column of Table 38. The 
annual update in this rule applies to SNF PPS payments in FY 2025. 
Accordingly, the analysis of the impact of the annual update that 
follows only describes the impact of this single year. Furthermore, in 
accordance with the requirements of the Act, we will publish a rule or 
notice for each subsequent FY that will provide for an update to the 
payment rates and include an associated impact analysis.
4. Detailed Economic Analysis
    The FY 2025 SNF PPS payment impacts appear in Table 38. Using the 
most recently available claims data, in this case FY 2022 we apply the 
current FY 2024 CMIs, wage index and labor-related share value to the 
number of payment days to simulate FY 2024 payments. Then, using the 
same FY 2022 claims data, we apply the FY 2025 CMIs, wage index and 
labor-related share value to simulate FY 2025 payments. We tabulate the 
resulting payments according to the classifications in Table 38 (for 
example, facility type, geographic region, facility ownership), and 
compare the simulated FY 2024 payments to the simulated FY 2025 
payments to determine the overall impact. The breakdown of the various 
categories of data in Table 38 is as follows:
     The first column shows the breakdown of all SNFs by urban 
or rural status, hospital-based or freestanding status, census region, 
and ownership.
     The first row of figures describes the estimated effects 
of the various changes contained in this proposed rule on all 
facilities. The next six rows show the effects on facilities split by 
hospital-based, freestanding, urban, and rural categories. The next 
nineteen rows show the effects on facilities by urban versus rural 
status by census region. The last three rows show the effects on 
facilities by ownership (that is, government, profit, and non-profit 
status).

[[Page 23486]]

     The second column shows the number of facilities in the 
impact database.
     The third column shows the effect of the proposed update 
to the SNF PPS wage index due to adopting the updated census data and 
revised CBSAs in OMB Bulletin 23-01. This represents the effect of only 
the proposed adoption of the revised CBSAs, independent of the effect 
of the annual update to the wage index.
     The fourth column shows the effect of the annual update to 
the wage index, including the proposed updates to the labor related-
share discussed in section V.A above. This represents the effect of 
using the most recent wage data available as well as accounts for the 5 
percent cap on wage index transitions. The total impact of this change 
is 0.0 percent; however, there are distributional effects of the 
change.
     The fifth column shows the effect of all of the changes on 
the FY 2025 payments. The update of 4.1 percent is constant for all 
providers and, though not shown individually, is included in the total 
column. It is projected that aggregate payments would increase by 4.1 
percent, assuming facilities do not change their care delivery and 
billing practices in response.
    As illustrated in Table 38, the combined effects of all of the 
changes vary by specific types of providers and by location. For 
example, due to changes in this proposed rule, rural providers would 
experience a 4.9 percent increase in FY 2025 total payments.

                                   Table 38--Impact to the SNF PPS for FY 2025
----------------------------------------------------------------------------------------------------------------
                                                     Number of      Census data     Update wage    Total change
                Impact categories                   facilities      update (%)       data (%)           (%)
----------------------------------------------------------------------------------------------------------------
                                                      Group
----------------------------------------------------------------------------------------------------------------
Total...........................................          15,393             0.0             0.0             4.1
Urban...........................................          11,151             0.0            -0.1             4.0
Rural...........................................           4,242            -0.1             0.9             4.9
Hospital-based urban............................             360             0.1            -1.0             3.2
Freestanding urban..............................          10,791             0.0            -0.1             4.0
Hospital-based rural............................             369            -0.1             0.8             4.8
Freestanding rural..............................           3,873            -0.1             0.9             4.9
----------------------------------------------------------------------------------------------------------------
                                                 Urban by region
----------------------------------------------------------------------------------------------------------------
New England.....................................             715            -0.3            -0.9             2.8
Middle Atlantic.................................           1,467            -1.0            -0.8             2.3
South Atlantic..................................           1,893             0.6             0.8             5.5
East North Central..............................           2,166             1.0            -0.6             4.4
East South Central..............................             566             0.4             2.1             6.7
West North Central..............................             950             0.0             0.6             4.7
West South Central..............................           1,454             0.2             1.0             5.3
Mountain........................................             539             0.1             1.6             5.8
Pacific.........................................           1,396            -0.1            -1.4             2.6
Outlying........................................               5             0.0            -2.3             1.7
----------------------------------------------------------------------------------------------------------------
                                                 Rural by region
----------------------------------------------------------------------------------------------------------------
New England.....................................             119             0.6            -1.3             3.4
Middle Atlantic.................................             226            -0.7             4.0             7.5
South Atlantic..................................             527            -0.1            -0.3             3.7
East North Central..............................             890            -0.1             0.2             4.2
East South Central..............................             471            -0.1             1.5             5.6
West North Central..............................             988             0.0             1.5             5.6
West South Central..............................             740            -0.1             1.2             5.2
Mountain........................................             193             0.0             2.1             6.2
Pacific.........................................              87             0.0            -0.6             3.4
Outlying........................................               1             0.0             0.0             4.1
----------------------------------------------------------------------------------------------------------------
                                                    Ownership
----------------------------------------------------------------------------------------------------------------
For profit......................................          10,893             0.0             0.0             4.0
Non-profit......................................           3,492             0.1             0.1             4.3
Government......................................           1,008            -0.1             0.6             4.7
----------------------------------------------------------------------------------------------------------------
Note: The Total column includes the FY 2025 4.1 percent market basket update. The values presented in Table 38
  may not sum due to rounding.

5. Impacts for the Skilled Nursing Facility Quality Reporting Program 
(SNF QRP) for FY 2027
    Estimated impacts for the SNF QRP are based on analysis discussed 
in section VI. of this proposed rule. In accordance with section 
1888(e)(6)(A)(i) of the Act, the Secretary must reduce by 2 percentage 
points the annual payment update applicable to a SNF for a fiscal year 
if the SNF does not comply with the requirements of the SNF QRP for 
that fiscal year.

[[Page 23487]]

    As discussed in section VI.C.3. of this proposed rule, we are 
proposing to adopt four new items as standardized patient assessment 
data elements under the SDOH category and modify the Transportation 
item collected as a standardized patient assessment data element under 
the SDOH category beginning with admission assessments completed on 
October 1, 2025. Although the proposed increase in burden will be 
accounted for in a revised information collection request under OMB 
control number (0938-1140), we are providing impact information. With 
1,966,662 admissions to and 754,287 planned discharges from 15,393 SNFs 
annually, we estimate an annual burden increase of 35,561.81 hours 
[(1,966,662 admissions x 0.02 hour) minus (754,287 planned discharges x 
0.005 hour)] and an increase of $2,322,541.48 (35,561.81 hours x 
$65.31/hr). For each SNF, we estimate an annual burden increase of 2.31 
hours (35,561.81 hours/15,393 SNFs) at an additional cost of $150.88 
($2,322,541.48 total burden/15,393 SNFs).
    As discussed in in section VI.E.3. of this proposed rule, we are 
also proposing to require SNFs to participate in a validation process 
that would apply to data submitted using the MDS and SNF Medicare fee-
for-service claims as a SNF QRP requirement. Specifically, we are 
proposing to adopt a similar validation process for the SNF QRP that we 
have adopted for the SNF VBP beginning with the FY 2027 SNF QRP. This 
proposal is in accordance with section 111(a)(4) of Division CC of the 
Consolidated Appropriations Act, 2021 (Pub. L. 116-260) which requires 
that the measures and data submitted under the SNF QRP Program (section 
1888(e)(6) of the Act) be subject to a validation process.
    In section VI.E.3(a). of this proposed rule, we propose to require 
SNFs to participate in a validation process for assessment-based 
measures beginning with the FY 2027 SNF QRP. We are proposing that our 
validation contractor would select, on an annual basis, up to 1,500 
SNFs and request that each SNF selected for the validation process 
submit up to 10 medical records. Although the proposed increase in 
burden will be accounted for in a new information collection request, 
we are providing impact information. We estimate the burden per 
selected SNF could range from 3 hours up to 7.5 hours for SNFs 
utilizing electronic health records and 5 hours up to 12.5 hours for 
SNFs who do not utilize electronic health records.
    We also anticipate that a sample of 10 medical records would 
consist of SNF stays that vary in length of stay. We estimate the 
length of stay for each of the selected medical records could range 
from 1 day up to or exceeding 366 days. We also estimate that 
approximately 85 percent of nursing homes utilize some form of 
electronic health records (EHR),\75\ and would not incur the costs of 
printing and shipping records. However, selected SNFs who do not 
utilize EHRs may incur printing and shipping costs if they are unable 
to submit the records via an electronic portal, and we estimate the 
cost to print and ship a sample of up to 10 records would range between 
$842.67 up to $4,114.35. Therefore, depending on the length of stay of 
the sample and whether the selected SNF uses an EHR, we estimate the 
total cost to submit medical records would range between $335,699.85 
and $477,368.10 for all 1,500 selected SNFs and $263.29 [$335,699.85/
(1,500 x 0.85 SNFs)] and $2,121.64 [$477,368.10/(1,500 x 0.15 SNFs)] 
per selected SNF. On average, we estimate the total cost would be 
increased by $813,067.95 for all 1,500 selected SNFs [[($263.29 x 
(1,500 x 0.85)] plus [$2,121.64 x (1,500 x 0.15)]] and $542.05 per 
selected SNF ($813,067.95/1,500 SNFs) annually.
    In section VI.E.3(b). of this proposed rule, we propose to require 
SNFs to participate in a validation process for Medicare fee-for-
service claims-based measures beginning with the FY 2027 SNF QRP. All 
Medicare fee-for-service claims-based measures are already reported to 
the Medicare program for payment purposes, and therefore there is no 
additional burden for providers.
    We invite public comments on the overall impact of the SNF QRP 
proposals for FY 2027 displayed in Table 39.

                               Table 39--Estimated Impacts for the FY 2027 SNF QRP
----------------------------------------------------------------------------------------------------------------
                                                        Per SNF                           All SNFs
                                           ---------------------------------------------------------------------
                                               Estimated                       Estimated
  Estimated burden for the FY2027 SNF QRP      change in       Estimated       change in     Estimated change in
                                             annual burden     change in     annual burden       annual cost
                                                 hours        annual cost        hours
----------------------------------------------------------------------------------------------------------------
Estimated Change in Burden associated with           +2.31        +$150.88      +35,561.81        +$2,322,541.48
 Proposal to Collect Four New SDOH
 Assessment Items and Modify One SDOH
 Assessment Item beginning with the FY
 2027 SNF QRP.............................
----------------------------------------------------------------------------------------------------------------
                                                   Per Selected SNF
                                                   All Selected SNFs
----------------------------------------------------------------------------------------------------------------
Estimated Change in Burden associated with           +5.12        +$542.05          +7,680          +$813,067.95
 Proposal to Adopt a Validation Process
 for SNFs Participating in the SNF QRP
 beginning with the FY 2027 SNF QRP.......
----------------------------------------------------------------------------------------------------------------

6. Impacts for the Minimum Data Set Beginning October 1, 2025
    As discussed in section IX.A.3. of this proposed rule, we are 
removing MDS items that are not needed for case-mix adjusting the SNF 
per diem payment for PDPM but were not accounted for in the FY 2019 SNF 
PPS final rule (83 FR 39165 through 39265). We are providing impact 
information here and in Table 40. With 1,966,662 admissions to 15,393 
SNFs annually, we estimate an annual burden decrease of 216,332.82 
hours (1,966,662 admissions x 0.11 hour) and a decrease of 
$14,128,696.47 (216,332.82 hours x $65.31/hr). For each SNF, we 
estimate an annual burden decrease of 14.05 hours (216,332.82 hours/
15,393 SNFs) for a reduction in cost of $917.87 ($14,128,696.47 total 
burden/15,393 SNFs).
---------------------------------------------------------------------------

    \75\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6591108/
#:~:text=In%20a%20nationwide%20sample%2C%20we,EHR%20adoption%20by%20n
ursing%20facilities.

[[Page 23488]]



  Table 40--Estimated Impacts for the Proposed Changes to the MDS Data Set Collection and Submission Beginning
                                                 October 1, 2025
----------------------------------------------------------------------------------------------------------------
                                                     Per SNF                             All SNFs
                                       -------------------------------------------------------------------------
Estimated change in burden for the MDS     Estimated                         Estimated
      removal of assessment items          change in        Estimated        change in      Estimated change in
                                         annual burden      change in      annual burden        annual cost
                                             hours         annual cost         hours
----------------------------------------------------------------------------------------------------------------
Estimated Change in Burden associated           -14.05         -$917.87      -216,332.82        -$14,128,696.47
 with Removal of MDS items O0400A,
 O0400B, O0400C, and O0400E effective
 October 1, 2025......................
----------------------------------------------------------------------------------------------------------------

7. Impacts for the SNF VBP Program
    The estimated impacts of the FY 2025 SNF VBP Program are based on 
historical data and appear in Table 41. We modeled SNF performance in 
the Program using SNFRM data from FY 2019 as the baseline period and FY 
2023 as the performance period. Additionally, we modeled a logistic 
exchange function with a payback percentage of 60 percent, as we 
finalized in the FY 2018 SNF PPS final rule (82 FR 36619 through 
36621).
    For the FY 2025 program year, we will reduce each SNFs adjusted 
Federal per diem rate by 2 percent. We will then redistribute 60 
percent of that 2 percent withhold to SNFs based on their measure 
performance. Additionally, in the FY 2023 SNF PPS final rule (87 FR 
47585 through 47587), we finalized a case minimum requirement for the 
SNFRM, as required by section 1888(h)(1)(C)(ii) of the Act. As a result 
of these provisions, SNFs that do not meet the case minimum specified 
for the SNFRM for the FY 2025 program year will be excluded from the 
Program and will receive their full Federal per diem rate for that 
fiscal year. As previously finalized, this policy will maintain the 
overall payback percentage at 60 percent for the FY 2025 program year. 
Based on the 60 percent payback percentage, we estimated that we would 
redistribute approximately $281.53 million (of the estimated $469.22 
million in withheld funds) in value-based incentive payments to SNFs in 
FY 2025, which means that the SNF VBP Program is estimated to result in 
approximately $187.69 million in savings to the Medicare Program in FY 
2025.
    Our detailed analysis of the impacts of the FY 2025 SNF VBP Program 
is shown in Table 41.

                             Table 41--Estimated SNF VBP Program Impacts for FY 2025
----------------------------------------------------------------------------------------------------------------
                                                    Mean risk-
                                                   standardized        Mean       Mean incentive
         Characteristic              Number of      readmission     performance       payment       Percent of
                                    facilities     rate (SNFRM)        score        multiplier     total payment
                                                        (%)
----------------------------------------------------------------------------------------------------------------
Group:
    Total *.....................          10,858           20.21         31.8725         0.99154          100.00
    Urban.......................           8,509           20.32         30.4525         0.99093           86.41
    Rural.......................           2,349           19.81         37.0163         0.99375           13.59
    Hospital-based urban **.....             181           19.64         41.4823         0.99545            1.51
    Freestanding urban **.......           8,319           20.33         30.1971         0.99082           84.88
    Hospital-based rural **.....              71           19.36         43.5091         0.99626            0.27
    Freestanding rural **.......           2,223           19.81         36.9289         0.99374           13.19
Urban by region:
    New England.................             610           20.31         30.3760         0.99108            5.59
    Middle Atlantic.............           1,259           20.03         34.4195         0.99264           19.04
    South Atlantic..............           1,662           20.58         27.9590         0.99001           16.85
    East North Central..........           1,543           20.63         25.7922         0.98890           11.47
    East South Central..........             448           20.33         30.6263         0.99112            3.26
    West North Central..........             573           19.86         36.0210         0.99327            3.82
    West South Central..........             894           20.92         21.0260         0.98683            6.72
    Mountain....................             385           19.62         40.0497         0.99492            3.70
    Pacific.....................           1,135           19.80         37.3699         0.99366           15.96
    Outlying....................               0  ..............  ..............  ..............  ..............
Rural by region:
    New England.................              69           18.64         56.1674         1.00285            0.52
    Middle Atlantic.............             159           19.23         46.9484         0.99845            1.06
    South Atlantic..............             340           20.32         29.8026         0.99065            2.01
    East North Central..........             566           19.66         38.5666         0.99422            3.29
    East South Central..........             371           19.98         34.4449         0.99282            2.06
    West North Central..........             345           19.67         37.5009         0.99383            1.52
    West South Central..........             332           20.65         24.5102         0.98828            1.84
    Mountain....................              97           18.88         51.9212         1.00002            0.57
    Pacific.....................              69           17.94         68.9668         1.00744            0.72
    Outlying....................               1           22.54          0.0000         0.98025            0.00
Ownership:
    Government..................             432           19.95         33.9489         0.99235            2.86
    Profit......................           8,065           20.31         30.2597         0.99085           78.39

[[Page 23489]]

 
    Non-Profit..................           2,361           19.88         37.0019         0.99376           18.74
----------------------------------------------------------------------------------------------------------------
* The total group category excludes 3,842 SNFs that did not meet the finalized measure minimum policy. The total
  group category includes 19 SNFs that did not have historical payment data used for this analysis.
** The group category which includes hospital-based/freestanding by urban/rural excludes 64 swing bed SNFs that
  satisfied the current measure minimum policy.

    In the FY 2024 SNF PPS final rule (88 FR 53324 through 53325), we 
adopted a validation process that applies to SNF VBP measures 
calculated using MDS data beginning with the FY 2027 program year. 
Specifically, we finalized that, on an annual basis, the validation 
contractor will randomly select up to 1,500 SNFs for validation and 
that for each SNF selected, the validation contractor will request up 
to 10 medical records. This new medical record submission requirement 
for the purposes of SNF VBP MDS validation would result in new burden 
on SNFs for the FY 2027 program year. We refer readers to the SNF QRP 
section at XI.A.5. of this proposed rule for details on the estimated 
annual burden increase that would result from this new chart submission 
requirement. We are not including additional details on burden in this 
section, to avoid double counting burden with the SNF QRP since the 
same charts will be utilized for both the SNF QRP and SNF VBP Program. 
We also note that this burden would be accounted for in the information 
collection request that is being developed and will be submitted to OMB 
for approval.
8. Impacts for Nursing Home Enforcement Revisions
    A nursing home certified to participate in the Medicare and 
Medicaid programs as a SNF and NF is expected to be in compliance with 
Federal requirements as a condition of receiving payment for services 
provided to beneficiaries. If a facility is determined to be out of 
compliance and an enforcement decision is reached to impose a CMP, the 
proposed regulatory revisions would take effect.
    We view the anticipated results of this rule as beneficial to 
nursing home residents. Specifically, we believe that additional 
flexibility to impose CMPs will allow us to better tailor the response 
to facility noncompliance in a way that assures that appropriate 
resident care occurs as well as lasting facility compliance is 
achieved. We also recognize that not all of the potential effects of 
this rule can be anticipated. It is difficult to quantify the full 
future effect of this rule on facilities' compliance activities or 
costs. If a facility is in substantial compliance, there is no basis to 
use any enforcement remedy. However, should a remedy be indicated, 
several alternative remedies may be considered in addition to a CMP. 
Since CMP amounts, once selected as an appropriate enforcement 
response, are based on when noncompliance occurred and the level of 
noncompliance, we are unable to predict the number or amount of CMPs 
that will be imposed. However, we do expect that the total amount of 
CMPs imposed would increase as a result of these proposals.
    In 2022, the number of facilities that had CMPs imposed was 6,113 
(41 percent). The average total amount of the CMPs imposed for each 
facility in 2022 was $17,775. The total dollar amount of PD CMPs 
imposed on facilities in 2022 was $186.4 million and the total dollar 
amount of PI CMPs was $40.6 million. Additionally, 45 percent of 
surveys in 2022 that had multiple findings of harm and were imposed a 
PI CMP as the remedy of choice only received one PI CMP. Under the 
proposed revisions, we anticipate an increased workload to CMS and 
States, and increased CMP amounts to providers when multiple instances 
of noncompliance resulting in harm or immediate jeopardy (IJ) are 
cited.
    We calculated the additional costs for providers, CMS, and states 
by analyzing the number of surveys in CY2022 that would have had 
additional PI CMPs imposed by identifying surveys with multiple 
citations of noncompliance resulting in harm or immediate jeopardy 
(IJ), but only one PI CMP was imposed, or a PD CMP was imposed. We then 
multiplied the number of these surveys by the average number of 
citations resulting in harm or IJ, and by the average PI CMP amount. 
This calculation resulted in a total of approximately $25 million for 
all nursing homes for CY2022. We estimate this will result in a total 
increased cost to CMS and the States of $163,800 per year.
9. Alternatives Considered
    As described in this section, we estimate that the aggregate impact 
of the provisions in this proposed rule will result in an increase of 
approximately $1.3 billion (4.1 percent) in Part A payments to SNFs in 
FY 2025. This reflects a $1.3 billion (4.1 percent) increase from the 
update to the payment rates.
    Section 1888(e) of the Act establishes the SNF PPS for the payment 
of Medicare SNF services for cost reporting periods beginning on or 
after July 1, 1998. This section of the statute prescribes a detailed 
formula for calculating base payment rates under the SNF PPS, and does 
not provide for the use of any alternative methodology. It specifies 
that the base year cost data to be used for computing the SNF PPS 
payment rates must be from FY 1995 (October 1, 1994, through September 
30, 1995). In accordance with the statute, we also incorporated a 
number of elements into the SNF PPS (for example, case-mix 
classification methodology, a market basket update, a wage index, and 
the urban and rural distinction used in the development or adjustment 
of the Federal rates). Further, section 1888(e)(4)(H) of the Act 
specifically requires us to disseminate the payment rates for each new 
FY through the Federal Register, and to do so before the August 1 that 
precedes the start of the new FY; accordingly, we are not pursuing 
alternatives for this process.
    With regard to the proposal to adopt four new items as standardized 
patient assessment data elements under the SDOH category and modify the 
Transportation standardized patient assessment data element in the SDOH 
category beginning with the FY 2027 SNF QRP, we believe these proposals 
advance the CMS National Quality Strategy Goals of equity and 
engagement. We considered the alternative of delaying the proposal to 
collect these items but given the fact they would encourage meaningful

[[Page 23490]]

collaboration between healthcare providers, residents, caregivers, and 
community-based organizations to address SDOH prior to discharge from 
the SNF, we believe further delay is unwarranted.
    With regard to the proposal to remove 22 items from the MDS 
beginning October 1, 2025, we routinely review the MDS for 
opportunities to simplify data submission requirements. We have 
identified that these items are no longer used in the calculation of 
the SNF per diem payment for PDPM but were not accounted for in the FY 
2019 SNF PPS final rule (83 FR 39165 through 39265), and therefore no 
alternatives were considered.
    With regard to the proposal to require SNFs participating in the 
SNF QRP to participate in a validation process beginning with the FY 
2027 SNF QRP, we are required to implement a process to satisfy Section 
1888(h)(12) of the Act (as added by Division CC, section 111(a)(4) of 
the Consolidated Appropriations Act, 2021 (Pub. L. 116-120)). Because 
the validation process is statutorily required, no alternatives were 
considered.
    With regard to the proposals for the SNF VBP Program, we discussed 
alternatives considered within those sections. In section VII.E.3. of 
the proposed rule, we discussed other approaches to incorporating 
health equity into the Program.
10. Accounting Statement
    As required by OMB Circular A-4 (available online at https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/), in Tables 42 
through 46, we have prepared an accounting statement showing the 
classification of the expenditures associated with the provisions of 
this proposed rule for FY 2025. Tables 38 and 42 provide our best 
estimate of the possible changes in Medicare payments under the SNF PPS 
as a result of the policies in this proposed rule, based on the data 
for 15,503 SNFs in our database. Tables 39, 43, and 44 provide our best 
estimate of the additional cost to SNFs to submit the data for the SNF 
QRP as a result of the policies in this proposed rule. Table 45 
provides our best estimate of the possible changes in Medicare payments 
under the SNF VBP as a result of the policies for this program. Table 
46 provides our best estimate of the Nursing Home Enforcement 
provisions.

       Table 42--Accounting Statement: Classification of Estimated
   Expenditures, From the 2024 SNF PPS Fiscal Year to the 2025 SNF PPS
                               Fiscal Year
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $1.3 billion.
From Whom To Whom?.....................  Federal Government to SNF
                                          Medicare Providers.
------------------------------------------------------------------------


Table 43--Accounting Statement: Classification of Estimated Expenditures
           for the Proposed Changes to the FY 2027 QRP Program
------------------------------------------------------------------------
                       Category                         Transfers/costs
------------------------------------------------------------------------
Estimated Costs to SNFs for Proposed Changes to the        $3,135,609.43
 FY 2027 QRP Program and to Selected SNFs for the
 Validation Process *................................
Estimated Costs to SNFs for Proposed Changes to the         2,322,541.48
 FY 2027 QRP Program Who Are Not Selected for the
 Validation Process..................................
------------------------------------------------------------------------
* Up to 1,500 SNFs would be selected for the Validation Process.


 Table 44--Accounting Statement: Classification of Estimated Savings for
the Removal of MDS Items No Longer Needed for Case-Mix Adjusting the Per
               Diem SNF Payment Beginning October 1, 2025
------------------------------------------------------------------------
                      Category                          Transfers/costs
------------------------------------------------------------------------
Savings to SNFs for Removing MDS Items..............   ($14,128,696.47)
------------------------------------------------------------------------


Table 45--Accounting Statement: Classification of Estimated Expenditures
                     for the FY 2025 SNF VBP Program
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $281.53 million.*
From Whom To Whom?.....................  Federal Government to SNF
                                          Medicare Providers.
------------------------------------------------------------------------
* This estimate does not include the 2 percent reduction to SNFs'
  Medicare payments (estimated to be $469.22 million) required by
  statute.


   Table 46--Accounting Statement: Nursing Home Enforcement Proposals
------------------------------------------------------------------------
                Category                       Transfers/penalties
------------------------------------------------------------------------
Estimated Increased Amount of Penalties  $25 million.*
From Whom To Whom?.....................  SNF Medicare Providers to
                                          Federal Government.
Estimated additional cost to CMS and     $163,800.
 State Survey Agencies.
------------------------------------------------------------------------
* This estimate includes the estimated increase in the amount of PI CMPs
  that may be imposed under these proposed revisions.


[[Page 23491]]

11. Conclusion
    This rule updates the SNF PPS rates contained in the SNF PPS final 
rule for FY 2024 (88 FR 53200). Based on the above, we estimate that 
the overall payments for SNFs under the SNF PPS in FY 2025 are 
projected to increase by approximately $1.3 billion, or 4.1 percent, 
compared with those in FY 2024. We estimate that in FY 2025, SNFs in 
urban and rural areas would experience, on average, a 4.0 percent 
increase and 4.9 percent increase, respectively, in estimated payments 
compared with FY 2024. Providers in the rural Middle Atlantic region 
would experience the largest estimated increase in payments of 
approximately 7.5 percent. Providers in the urban Outlying region would 
experience the smallest estimated increase in payments of 1.7 percent.

B. Regulatory Flexibility Act Analysis

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, non-profit organizations, and small 
governmental jurisdictions. Most SNFs and most other providers and 
suppliers are small entities, either by reason of their non-profit 
status or by having revenues of $30 million or less in any 1 year. We 
utilized the revenues of individual SNF providers (from recent Medicare 
Cost Reports) to classify a small business, and not the revenue of a 
larger firm with which they may be affiliated. As a result, for the 
purposes of the RFA, we estimate that almost all SNFs are small 
entities as that term is used in the RFA, according to the Small 
Business Administration's latest size standards (NAICS 623110), with 
total revenues of $34 million or less in any 1 year. (For details, see 
the Small Business Administration's website at https://www.sba.gov/category/navigation-structure/contracting/contracting-officials/eligibility-size-standards). In addition, approximately 20 percent of 
SNFs classified as small entities are non-profit organizations. 
Finally, individuals and states are not included in the definition of a 
small entity.
    This rule updates the SNF PPS rates contained in the SNF PPS final 
rule for FY 2024 (88 FR 53200). Based on the above, we estimate that 
the aggregate impact for FY 2025 will be an increase of $1.3 billion in 
payments to SNFs, resulting from the SNF market basket update to the 
payment rates. While it is projected in Table 38 that all providers 
would experience a net increase in payments, we note that some 
individual providers within the same region or group may experience 
different impacts on payments than others due to the distributional 
impact of the FY 2025 wage indexes and the degree of Medicare 
utilization.
    Guidance issued by the Department of Health and Human Services on 
the proper assessment of the impact on small entities in rulemakings, 
utilizes a cost or revenue impact of 3 to 5 percent as a significance 
threshold under the RFA. In their March 2023 Report to Congress 
(available at https://www.medpac.gov/wp-content/uploads/2023/03/Ch7_Mar23_MedPAC_Report_To_Congress_SEC.pdf), MedPAC states that 
Medicare covers approximately 10 percent of total patient days in 
freestanding facilities and 16 percent of facility revenue (March 2023 
MedPAC Report to Congress, 207). As indicated in Table 38, the effect 
on facilities is projected to be an aggregate positive impact of 4.1 
percent for FY 2025. As the overall impact on the industry as a whole, 
and thus on small entities specifically, meets the 3 to 5 percent 
threshold discussed previously, the Secretary has determined that this 
proposed rule will have a significant impact on a substantial number of 
small entities for FY 2025.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of an MSA and has fewer 
than 100 beds. This proposed rule will affect small rural hospitals 
that: (1) furnish SNF services under a swing-bed agreement or (2) have 
a hospital-based SNF. We anticipate that the impact on small rural 
hospitals would be similar to the impact on SNF providers overall. 
Moreover, as noted in previous SNF PPS final rules (most recently, the 
one for FY 2024 (88 FR 53200)), the category of small rural hospitals 
is included within the analysis of the impact of this proposed rule on 
small entities in general. As indicated in Table 38, the effect on 
facilities for FY 2025 is projected to be an aggregate positive impact 
of 4.1 percent. As the overall impact on the industry as a whole meets 
the 3 to 5 percent threshold discussed above, the Secretary has 
determined that this proposed rule will have a significant impact on a 
substantial number of small rural hospitals for FY 2025.

C. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2024, that 
threshold is approximately $183 million. This proposed rule will impose 
no mandates on State, local, or Tribal governments or on the private 
sector.

D. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a proposed rule (and subsequent final 
rule) that imposes substantial direct requirement costs on State and 
local governments, preempts State law, or otherwise has federalism 
implications. This proposed rule will have no substantial direct effect 
on State and local governments, preempt State law, or otherwise have 
federalism implications.

E. Regulatory Review Costs

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this proposed rule, we 
should estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of entities 
that will review the rule, we assume that the total number of unique 
commenters on this year's proposed rule will be the number of reviewers 
of last year's proposed rule. We acknowledge that this assumption may 
understate or overstate the costs of reviewing this rule. It is 
possible that not all commenters reviewed last year's proposed rule in 
detail, and it is also possible that some reviewers chose not to 
comment on that proposed rule. For these reasons, we believe that the 
number of commenters on this year's proposed rule is a fair estimate of 
the number of reviewers of last year's proposed rule.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of this proposed rule, 
and therefore, for the purposes of our estimate we assume that each 
reviewer reads approximately 50 percent of the rule.
    The mean wage rate for medical and health service manages (SOC 11-
9111) in BLS OEWS is $61.53, assuming benefits plus other overhead 
costs equal 100 percent of wage rate, we estimate that the cost of 
reviewing this rule is $123.06 per hour, including overhead

[[Page 23492]]

and fringe benefits https://www.bls.gov/oes/current/oes_nat.htm. 
Assuming an average reading speed, we estimate that it would take 
approximately 4 hours for the staff to review half of the proposed 
rule. For each SNF that reviews the rule, the estimated cost is $492.24 
(4 hours x $123.06). Therefore, we estimate that the total cost of 
reviewing this regulation is $39,871.44 ($460.88 x 81 reviewers).
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on March 25, 2024.

List of Subjects

42 CFR Part 413

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

42 CFR Part 488

    Administrative practice and procedure, Health facilities, Health 
professions, Medicare, Reporting and recordkeeping requirements.

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

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT 
RATES FOR SKILLED NURSING FACILITIES; PAYMENT FOR ACUTE KIDNEY 
INJURY DIALYSIS

0
1. The authority citation for part 413 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), 
(i), and (n), 1395m, 1395x(v), 1395x(kkk), 1395hh, 1395rr, 1395tt, 
and 1395ww.

0
2. Section 413.337 is amended by revising paragraph (f) to read as 
follows:


Sec.  413.337  Methodology for calculating the prospective payment 
rates.

* * * * *
    (f) Adjustments to payment rates under the SNF Value-Based 
Purchasing Program.
    Beginning with payment for services furnished on October 1, 2018, 
the adjusted Federal per diem rate (as defined in Sec.  413.338(a)) 
otherwise applicable to a SNF for the fiscal year is reduced by the 
applicable percent (as defined in Sec.  413.338(a)). The resulting 
amount is then adjusted by the value-based incentive payment amount (as 
defined in Sec.  413.338(a)) based on the SNF performance score 
calculated for the SNF for that fiscal year under Sec.  413.338 of this 
part.
0
3. Section 413.338 is amended--
0
a. In paragraph (a) by--
0
i. Revising the definitions of ``Health equity adjustment (HEA) bonus 
points'' and ``Measure performance scaler'';
0
ii. Removing the definition of ``Performance score'';
0
iii. Adding the definition of ``SNF performance score'';
0
iv. Revising the definitions of ``SNF readmission measure'', ``Top tier 
performing SNF'', and ``Underserved multiplier'';
0
b. Removing paragraphs (d)(4) through (6);
0
c. Redesignating paragraphs (f)(1) through (4) as paragraphs (f)(2) 
through (5);
0
d. Adding a new paragraph (f)(1) and revising paragraphs newly 
redesignated paragraphs (f)(2) and (3);
0
e. Revising paragraph (j)(3);
0
f. By adding paragraphs (l), (m), and (n).
    The revisions and additions read as follows:


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

    (a) * * *
* * * * *
    Health equity adjustment (HEA) bonus points means the points that a 
SNF can earn for a fiscal year based on its performance and proportion 
of SNF residents who are members of the underserved population.
* * * * *
    Measure performance scaler means, for a fiscal year, the sum of the 
points assigned to a SNF for each measure on which the SNF is a top 
tier performing SNF.
* * * * *
    SNF readmission measure means, prior to October 1, 2027, the SNF 
30-Day All-Cause Readmission Measure (SNFRM) specified under section 
1888(g)(1) of the Social Security Act. Beginning October 1, 2027, the 
term SNF readmission measure means the SNF Within-Stay Potentially 
Preventable Readmission (SNF WS PPR) Measure specified under section 
1888(g)(2) of the Social Security Act.
* * * * *
    Top tier performing SNF means a SNF whose performance on a measure 
during the applicable fiscal year meets or exceeds the 66.67th 
percentile of SNF performance on the measure during the same fiscal 
year.
    Underserved multiplier means the mathematical result of applying a 
logistic function to the number of SNF residents who are members of the 
underserved population out of the SNF's total Medicare population, as 
identified from the SNF's Part A claims, during the performance period 
that applies to the 1-year measures for the applicable fiscal year.
* * * * *
    (f) * * *
    (1) CMS will provide quarterly confidential feedback reports to 
SNFs on their performance on each measure specified for the fiscal 
year. Beginning with the baseline period and performance period quality 
measure quarterly reports issued on or after October 1, 2021, CMS 
calculates the measure rates included in those reports using data that 
are current as of a specified date as follows:
    (i) For the SNFRM, the specified date is 3 months after the last 
index SNF admission in the applicable baseline period or performance 
period.
    (ii) For the Skilled Nursing Facility Healthcare Associated 
Infections Requiring Hospitalization (``SNF HAI''), Discharge to 
Community--Post-Acute Care Measure for Skilled Nursing Facilities 
(``DTC PAC SNF''), and Skilled Nursing Facility Within-Stay Potentially 
Preventable Readmissions (``SNF WS PPR'') measure, the specified date 
is 3 months after the last SNF discharge in the applicable baseline 
period or performance period.
    (iii) For the Number of Hospitalizations per 1,000 Long Stay 
Residents (``Long Stay Hospitalization'') measure, the specified date 
is 3 months after the last day of the final quarter of the applicable 
baseline period or performance period.
    (iv) For the Total Nursing Hours per Resident Day Staffing (``Total 
Nurse Staffing'') measure and the Total Nursing Staff Turnover 
(``Nursing Staff Turnover'') measure, the specified date is 45 days 
after the last day of each quarter of the applicable baseline period or 
performance period.
    (v) For the Discharge Function Score for SNFs (``DC Function 
measure'') and Percent of Residents Experiencing One of More Falls with 
Major Injury (Long Stay) (``Falls with Major Injury (Long Stay)'') 
measure, the specified date is the February 15th that is approximately 
4.5 months after the last day of the applicable baseline period or 
performance period.
    (2) Beginning with the baseline period and performance period 
quality measure quarterly reports issued on or after October 1, 2021, 
which contain the

[[Page 23493]]

baseline period and performance period measure rates, respectively, 
SNFs will have 30 days following the date CMS provides each of these 
reports to review and submit corrections to the calculation of the 
measure rates contained in that report. The data used to calculate 
measure rates are not subject to review and correction under this 
paragraph. Any such correction requests must include:
    (i) The SNF's CMS Certification Number (CCN),
    (ii) The SNF's name,
    (iii) The correction requested, and
    (iv) The reason for requesting the correction, including any 
available evidence to support the request.
    (3) Beginning not later than 60 days prior to each fiscal year, CMS 
will provide reports to SNFs on their performance under the SNF VBP 
Program for a fiscal year. SNFs will have the opportunity to review and 
submit corrections to their SNF performance scores and ranking 
contained in these reports for 30 days following the date that CMS 
provides the reports. Any such correction requests must include:
    (i) The SNF's CMS Certification Number (CCN),
    (ii) The SNF's name,
    (iii) The correction requested, and
    (iv) The reason for requesting the correction, including any 
available evidence to support the request.
* * * * *
    (j) * * *
    (3) Beginning with the FY 2027 program year, for all measures that 
are calculated using Minimum Data Set (MDS) information, CMS will 
validate the accuracy of this information. CMS will request medical 
records as follows:
    (i) On an annual basis, a CMS contractor will randomly select up to 
1,500 SNFs for validation. A SNF is eligible for selection for a year 
if the SNF submitted at least one MDS record in the calendar year that 
is 3 years prior to the applicable fiscal year or was included in the 
SNF VBP Program in the year prior to the applicable fiscal year.
    (ii) For each SNF selected under paragraph (j)(3)(i) of this 
section, the CMS contractor will request in writing up to 10 medical 
records.
    (iii) A SNF that receives a request for medical records under 
paragraph (j)(3)(ii) of this section must submit a digital or paper 
copy of each of the requested medical records within 45 days of the 
date of the request as documented on the request.
* * * * *
    (l) Measure Selection, Retention, and Removal Policy. (1) The SNF 
VBP measure set for each fiscal year includes the SNF readmission 
measure CMS has specified under section 1888(g) of the Social Security 
Act for application in the SNF VBP Program.
    (2) Beginning with FY 2026, the SNF VBP measure set for each fiscal 
year may include up to nine additional measures specified by CMS. Each 
of these measures remains in the measure set unless CMS removes or 
replaces it based on one or more of the following factors:
    (i) SNF performance on the measure is so high and unvarying that 
meaningful distinctions and improvements in performance can no longer 
be made.
    (ii) Performance or improvement on a measure do not result in 
better resident outcomes.
    (iii) A measure no longer aligns with current clinical guidelines 
or practices.
    (iv) A more broadly applicable measure for the particular topic is 
available.
    (v) A measure that is more proximal in time to the desired resident 
outcomes for the particular topic is available.
    (vi) A measure that is more strongly associated with the desired 
resident outcomes for the particular topic is available.
    (vii) The collection or public reporting of a measure leads to 
negative unintended consequences other than resident harm.
    (viii) The costs associated with a measure outweigh the benefit of 
its continued use in the Program.
    (3) Upon a determination by CMS that the continued requirement for 
SNFs to submit data on a measure specified under paragraph (l)(2) of 
this section raises specific resident safety concerns, CMS may elect to 
immediately remove the measure from the SNF VBP Program. Upon removal 
of the measure, CMS will provide notice to SNFs and the public, along 
with a statement of the specific patient safety concern that would be 
raised if SNFs continued to submit data on the measure. CMS will also 
provide notice of the removal in the Federal Register.
    (4) CMS uses rulemaking to make substantive updates to the 
specifications of measures used in the SNF VBP Program. CMS makes 
technical measure specification updates in a sub-regulatory manner and 
informs SNFs of measure specification updates through postings on the 
CMS website, listservs, and other educational outreach efforts to SNFs.
    (m) Extraordinary Circumstances Exception Policy (1) A SNF may 
request and CMS may grant exceptions to the SNF Value-Based Purchasing 
Program's requirements under this section for one or more calendar 
months when there are certain extraordinary circumstances beyond the 
control of the SNF.
    (2) A SNF may request an exception within 90 days of the date that 
the extraordinary circumstances occurred. Prior to FY 2025, the request 
must be submitted in the form and manner specified by CMS on the SNF 
VBP website at https://www.cms.gov/Medicare/Quality/Nursing-Home-Improvement/Value-Based-Purchasing/Extraordinary-Circumstance-Exception 
and include a completed Extraordinary Circumstances Request form 
(available on https://qualitynet.cms.gov/) and any available evidence 
of the impact of the extraordinary circumstances on the care that the 
SNF furnished to patients including, but not limited to, photographs 
and media articles. Beginning with FY 2025, a SNF may request an 
extraordinary circumstances exception by sending an email with the 
subject line ``SNF VBP Extraordinary Circumstances Exception Request'' 
to the SNF VBP Program Help Desk with the following information:
    (i) The SNF's CMS Certification Number (CCN);
    (ii) The SNF's business name and business address;
    (iii) Contact information for the SNF's CEO or CEO-designated 
personnel, including all applicable names, email addresses, telephone 
numbers, and the SNF's physical mailing address (which cannot be a PO 
Box);
    (iv) A description of the event, including the dates and duration 
of the extraordinary circumstance;
    (v) Available evidence of the impact of the extraordinary 
circumstance on the care the
    SNF provided to its residents or the SNF's ability to report SNF 
VBP data, including, but not limited to, photographs, media articles, 
and any other materials that would aid CMS in determining whether to 
grant the exception;
    (vi) A date proposed by the SNF for when it will again be able to 
fully comply with the SNF VBP Program's requirements and a 
justification for the proposed date.
    (3) Except as provided in paragraph (m)(4) of this section, CMS 
will not consider an exception request unless the SNF requesting such 
exception has complied fully with the requirements in paragraph (m)(2) 
of this section.
    (4) CMS may grant exceptions to SNFs without a request if it 
determines that an extraordinary circumstance affected an entire region 
or locale.
    (5) CMS will calculate a SNF performance score for a fiscal year 
for a SNF for which it has granted an exception request that does not 
include

[[Page 23494]]

its performance on a quality measure during the calendar months 
affected by the extraordinary circumstance.
    (n) SNF VBP Performance Standards. (1) CMS announces the 
performance standards for each measure no later than 60 days prior to 
the start of the performance period that applies to the measure for the 
fiscal year.
    (2) Beginning with FY 2021, if CMS discovers an error in the 
performance standard calculations subsequent to publishing their 
numerical values for a fiscal year, CMS will update the numerical 
values to correct the error. If CMS subsequently discovers one or more 
other errors with respect to the fiscal year, CMS will not further 
update the numerical values for that fiscal year.
    (3) Beginning with FY 2025, CMS may update the numerical values of 
the performance standards for a measure if CMS incorporates non-
substantive technical updates made to the measure between the time that 
CMS first announces the performance standards for the measure for a 
fiscal year and the time that CMS calculates SNF performance on the 
measure at the conclusion of the performance period for that measure 
for a fiscal year.
0
4. Section 413.360 is amend by--
0
a. Revising paragraph (f)(1) introductory text;
0
b. Adding paragraph (f)(1)(iv);
0
c. Revising paragraph (f)(3); and
0
d. Adding paragraph (g).
    The additions and revision read as follows:


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

* * * * *
    (f) * * *
    (1) SNFs must meet or exceed the following data completeness 
thresholds with respect to a program year:
* * * * *
    (iv) If selected for the data validation process under paragraph 
(g), the threshold set at 100 percent submission of medical charts.
* * * * *
    (3) A SNF must meet or exceed each applicable threshold described 
in paragraph (f)(1) of this section to avoid receiving the applicable 
penalty for failure to report quality data set forth in Sec.  
413.337(d)(4) of this Part.
    (g) Data Validation Process. (1) Beginning with the FY 2027 payment 
year: for all measures that are calculated using Minimum Data Set (MDS) 
information, CMS will validate the accuracy of this information. The 
process by which CMS will request medical records and by which SNFs 
must submit the requested medical records is as follows:
    (i) On an annual basis, a CMS contractor will select up to 1,500 
SNFs for validation. A SNF is eligible for selection for a year if it 
submitted at least one MDS record to CMS in the calendar year 3 years 
prior to the applicable program year, and if the SNF has been randomly 
selected for a periodic audit for the same year under Sec.  413.338 of 
this part.
    (ii) For each SNF selected under paragraph (g)(1) of this section, 
the CMS contractor will request up to 10 medical records. Each SNF 
selected will only be required to submit records once in a fiscal year, 
for a maximum of 10 records for each SNF selected. Each requested 
medical record must be the same medical record that has been requested 
for submission by the SNF for the same year under Sec.  413.338 of this 
part. CMS will submit its request in writing to the selected SNF.
    (iii) A SNF that receives a request for medical records under 
paragraph (g)(2) of this section must submit a digital or paper copy of 
each of the requested medical records within 45 days of the date of the 
request.
    (2) Beginning with the FY 2027 payment year: the information 
reported through claims for all claims-based measures are validated for 
accuracy by Medicare Administrative Contractors (MACs).

PART 488--SURVEY, CERTIFICATION, AND ENFORCEMENT PROCEDURES

0
5. The authority citation for part 488 continues to read as follows:

    Authority: 42 U.S.C 1302 and 1395hh.
0
6. Section 488.401 is amended by adding the definition of ``Instance or 
instances of noncompliance'' in alphabetical order to read as follows:


Sec.  488.401  Definitions.

* * * * *
    Instance or instances of noncompliance means a factual and temporal 
occurrence(s) when a facility is not in substantial compliance with the 
requirements for participation. Each instance of noncompliance is 
sufficient to constitute a deficiency and a deficiency may comprise of 
multiple instances of noncompliance.
* * * * *
0
7. Section 488.408 is amended by revising paragraph (e)(2)(ii) to read 
as follows:


Sec.  488.408  Selection of remedies.

* * * * *
    (e) * * *
    (2) * * *
    (ii) For each instance of noncompliance, CMS and the State may 
impose a civil money penalty of $3,050-$10,000 (as adjusted annually 
under 45 CFR part 102) per day, $1,000-$10,000 (as adjusted annually 
under 45 CFR part 102) per instance of noncompliance, or both, in 
addition to imposing the remedies specified in paragraph (e)(2)(i) of 
this section. For multiple instances of noncompliance, CMS may impose 
any combination of per instance or per day civil money penalties for 
each instance within the same survey. The aggregate civil money penalty 
amount may not exceed $10,000 (as adjusted annually under 45 CFR part 
102) for each day of noncompliance.
* * * * *
0
8. Revise Sec.  488.430 to read as follows:


Sec.  488.430  Civil money penalties: Basis for imposing penalty.

    (a) CMS or the State may impose a civil money penalty for the 
number of days a facility is not in substantial compliance with one or 
more participation requirements or for each instance that a facility is 
not in substantial compliance, or both, regardless of whether or not 
the deficiencies constitute immediate jeopardy. When a survey contains 
multiple instances of noncompliance, CMS or the State may impose any 
combination of per instance or per day civil money penalties for each 
instance of noncompliance within the same survey.
    (b) CMS or the State may impose a civil money penalty for the 
number of days of past noncompliance, including the number of days of 
immediate jeopardy, since the last three standard surveys.
0
9. Section 488.434 is amended by revising paragraphs (a)(2)(iii) and 
(v) to read as follows:


Sec.  488.434  Civil money penalties: Notice of penalty.

    (a) * * *
    (2) * * *
    (iii) Either the amount of penalty per day of noncompliance or the 
amount of the penalty per instance of noncompliance or both;
* * * * *
    (v) The date(s) of the instance(s) of noncompliance or the date on 
which the penalty begins to accrue;
* * * * *

[[Page 23495]]

0
10. Section 488.440 is amended by revising paragraph (a)(2) to read as 
follows:


Sec.  488.440  Civil money penalties: Effective date and duration of 
penalty.

    (a) * * *
    (2) A civil money penalty for each instance of noncompliance is 
imposed in a specific amount per instance.
* * * * *

Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2024-06812 Filed 3-28-24; 4:15 pm]
BILLING CODE 4120-01-P