[Federal Register Volume 64, Number 146 (Friday, July 30, 1999)]
[Rules and Regulations]
[Pages 41644-41683]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19478]
[[Page 41643]]
_______________________________________________________________________
Part III
Department of Health and Human Services
_______________________________________________________________________
Health Care Financing Administration
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42 CFR Parts 409, 411, 413, and 489
Medicare Program; Prospective Payment System and Consolidated Billing
for Skilled Nursing Facilities--Update; Final Rule and Notice
Federal Register / Vol. 64, No. 146 / Friday, July 30, 1999 / Rules
and Regulations
[[Page 41644]]
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 409, 411, 413, and 489
[HCFA-1913-F]
RIN 0938-AI47
Medicare Program; Prospective Payment System and Consolidated
Billing for Skilled Nursing Facilities
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Final rule.
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SUMMARY: This final rule responds to comments submitted by the public
on our May 12, 1998 interim final rule, that implemented provisions in
section 4432 of the Balanced Budget Act of 1997 regarding Medicare
payment for skilled nursing facility services. This legislation
established a prospective payment system, a consolidated billing
provision, and a number of related changes.
EFFECTIVE DATE: These regulations are effective on September 28, 1999.
FOR FURTHER INFORMATION CONTACT:
Dana Burley, (410) 786-4547 (for information related to the case-mix
classification methodology).
John Davis, (410) 786-0008 (for information related to the Federal
rates).
Jackie Gordon, (410) 786-4517 (for information related to consolidated
billing).
Steve Raitzyk, (410) 786-4599 (for information related to the facility-
specific transition payment rates).
Bill Ullman, (410) 786-5667 (for information related to coverage and
level of care determinations).
Laurence Wilson, (410) 786-4603 (for general information).
SUPPLEMENTARY INFORMATION: To assist readers in referencing sections
contained in this preamble, we are providing the following table of
contents.
Table of Contents
I. Background
A. Payment Provisions--Federal Rate
B. Payment Provisions--Transition Period
C. Payment Provisions--Facility-Specific Rate
D. Consolidated Billing for Skilled Nursing Facilities
II. Provisions of the Interim Final Rule
III. Analysis of and Responses to Public Comments
A. Federal Rates--Outliers/Non-therapy ancillaries (NTAs)
B. Federal Rate Calculation
C. Federal Rates--Part B Add-on
D. Facility-specific Rates-Transition
E. Minimum Data Set (MDS) Assessments
1. Billing Issues
2. Corrections
3. Other Medicare Required Assessment (OMRA)
F. Certification and Recertification
G. MDS Scheduling Requirements
1. Grace Days
2. Completion and Locking
3. Discharge and Leave of Absence
H. Other Medicare MDS Requirements
I. Medical Review
J. Rehabilitation Therapy Services and PPS
K. RUG-III Groups
L. Nurse Staffing and the Staff Time Measurement Studies
M. SNF Coverage and Level of Care Determinations
N. SNF Consolidated Billing
O. Scope of Extended Care Benefits
P. Impact Analysis
IV. Provisions of the Final Regulations
V. Collection of Information Requirements
VI. Impact Analysis
A. Background
B. Impact of this Final Rule
C. Rural Hospital Impact Statement
D. Unfunded Mandates
In addition, because of the many terms to which we refer by acronym
in this rule, we are listing these acronyms and their corresponding
terms in alphabetical order below:
ADLs Activities of daily living
ASC Ambulatory Surgical Center
BBA Balanced Budget Act of 1997
CAH Critical access hospital
CBO Congressional Budget Office
CFR Code of Federal Regulations
CORF Comprehensive Outpatient Rehabilitation Facility
CPI Consumer Price Index
CPI-U Consumer Price Index for All Urban Consumers
CPT [Physicians'] Current Procedural Terminology
DME Durable medical equipment
ESRD End stage renal disease
FI Fiscal intermediary
GAO General Accounting Office
HCFA Health Care Financing Administration
HCPCS HCFA Common Procedure Coding System
HIPPS Health Insurance Prospective Payment System
ICD-9-CM International Classification of Diseases, Ninth Edition,
Clinical Modification
MDS Minimum Data Set
MEDPAR Medicare Provider Analysis and Review File
MGCRB Medicare Geographic Classification Review Board
MIM-3 Medicare Intermediary Manual, Part 3
MRI Magnetic Resonance Imaging
MSA Metropolitan Statistical Area
NHCMQD [Multistate] Nursing Home Case-mix and Quality Demonstration
OBRA 87 Omnibus Budget Reconciliation Act of 1987
OIG Office of the Inspector General
OMRA Other Medicare Required Assessment
PM Program Memorandum
PPS Prospective payment system
PRM Provider Reimbursement Manual
PRO Peer Review Organization
RAI Resident Assessment Instrument
RAPs Resident Assessment Protocols
RUG-III Resource Utilization Groups, version III
SNF Skilled nursing facility
SOM State Operations Manual
STM Staff time measure
I. Background
Section 4432 of the Balanced Budget Act of 1997 (BBA) (Public Law
105-33) mandated the implementation of a per diem prospective payment
system (PPS) for skilled nursing facilities (SNFs), covering all costs
(routine, ancillary, and capital) of covered SNF services furnished to
beneficiaries under Part A of the Medicare program, effective for cost
reporting periods beginning on or after July 1, 1998. Major elements of
the system include:
Rates: Per diem Federal rates are established for urban
and rural areas using allowable costs from fiscal year (FY) 1995 cost
reports. These rates also include an estimate of the cost of services
that, before July 1, 1998, had been paid under Part B but furnished to
SNF residents during a Part A covered stay. Rates are case-mix adjusted
using a resident classification system (Resource Utilization Groups,
version III (RUG-III)) based on resident assessments (using the Minimum
Data Set (MDS) 2.0). In addition, the Federal rates are adjusted by a
wage index to account for geographic variation in wages. Finally, the
rates will be adjusted annually using an SNF market basket index.
Transition: The SNF PPS includes a 3-year transition that
blends a facility-specific payment rate with the Federal case-mix
adjusted rate. The blend that is used changes each cost reporting
period after a facility migrates to the new system. For most
facilities, the facility-specific rate is based on allowable costs from
FY 1995.
Coverage: The PPS legislation did not change Medicare's
fundamental statutory requirements for SNF coverage. However, because
RUG-III classification is based, in part, on the resident's need for
skilled nursing care and therapy, we have attempted where possible to
adapt the existing claims review procedures to coordinate them with the
outputs of resident assessment and RUG-III classifying activities, as
discussed later in this preamble.
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Consolidated Billing: The statute includes a billing
provision that requires an SNF to submit consolidated Medicare bills
for its residents for virtually all services that are covered under
either Part A or Part B. The statute excludes a small list of services
(primarily those of physicians and certain other types of
practitioners). A related statutory provision requires SNFs to use HCFA
Common Procedure Coding System (HCPCS) coding on all Part B bills, and
specifies that they are to be paid an amount determined in accordance
with the otherwise applicable Part B fee schedule for the particular
item or service.
Effective Date: The SNF PPS is effective for cost
reporting periods beginning on or after July 1, 1998. The law provides
that the consolidated billing and coding requirements are effective for
services and items furnished on or after July 1, 1998.
An interim final rule implementing the SNF PPS was published in the
Federal Register on May 12, 1998 (63 FR 26252), and the comment period
was initially scheduled to close on July 13, 1998. A follow-up notice
(63 FR 37498, July 13, 1998) extended the public comment period for an
additional 60 days, and a second notice (63 FR 65561, November 27,
1998) reopened the comment period for another 30 days. In addition, a
correction notice (63 FR 53301, October 5, 1998) made a number of minor
technical and editorial corrections to the interim final rule. We have
also issued several Program Memorandums (PMs) on claims processing and
billing under the SNF PPS that are available on the SNF PPS home page
at the HCFA website on the Internet, at the following location:
<www.hcfa.gov/medicare/snfpps.htm>.
As described in the interim final rule, the BBA requires
implementation of a Medicare SNF PPS for cost reporting periods
beginning on or after July 1, 1998. Under the PPS, SNFs are no longer
paid under the previous, reasonable cost-based system, but rather
through per diem prospective case-mix adjusted payment rates applicable
to all covered SNF services. These payment rates cover all the costs of
furnishing covered skilled nursing services (that is, routine,
ancillary, and capital-related costs) other than costs associated with
approved educational activities. Covered SNF services include
posthospital SNF services for which benefits are provided under Part A
and all items and services that, prior to July 1, 1998, had been paid
under Part B (other than physician and certain other services
specifically excluded under the BBA), but furnished to SNF residents
during a Part A covered stay.
A. Payment Provisions--Federal Rate
The statute sets forth a fairly prescriptive methodology for
calculating the amount of payments under the SNF PPS. The PPS uses per
diem Federal payment rates based on mean SNF costs in a base year
updated for inflation to the first effective period of the system. We
developed the Federal payment rates using allowable costs from
hospital-based and freestanding SNF cost reports during the base year
(that is, for reporting periods that began in FY 1995). The data used
in developing the Federal rates also incorporate an estimate of the
amounts that were paid separately under Part B for covered SNF services
furnished during the base year to individuals who were residents of a
facility and receiving Part A covered services.
In developing the rates, we update costs to the first effective
year of the PPS (15-month period beginning July 1, 1998) using an SNF
market basket index, and standardize for facility differences in case-
mix and for geographic variations in wages. Providers that received
``new provider'' exemptions from the routine cost limits are excluded
from the data base used to compute the Federal payment rates. In
addition, costs related to payments for exceptions to the routine cost
limits are excluded from the data base used to compute the Federal
payment rates. In accordance with the formula prescribed in the BBA, we
set the Federal rates at a level equal to a weighted mean of
freestanding costs plus 50 percent of the difference between the
freestanding mean and a weighted mean of all SNF costs (hospital-based
and freestanding) combined. We compute and apply separately payment
rates for facilities located in urban and rural areas.
The Federal rate also incorporates adjustments to account for
facility case-mix using a resident classification system that accounts
for the relative resource utilization of different patient types. This
classification system, RUG-III, uses resident assessment data (from the
MDS) completed by SNFs to assign residents into one of 44 groups. SNFs
complete these assessments according to an assessment schedule
specifically designed for Medicare payment (that is, on the 5th, 14th,
30th, 60th, and 90th days after admission to the SNF).
For Medicare billing purposes, there are specific codes associated
with each of the 44 RUG-III groups, and each assessment applies to
specific days within a resident's SNF stay. SNFs that fail to perform
assessments timely are paid a default payment for the days of a
patient's care for which they are not in compliance with this schedule.
In addition, we adjust the portion of the Federal rate attributable to
wage-related costs by a wage index.
For the initial period of the PPS, beginning on July 1, 1998, and
ending on September 30, 1999, the payment rates were contained in the
interim final rule. For each succeeding fiscal year, we will publish
the rates in the Federal Register before August 1 of the year preceding
the affected Federal fiscal year. Pursuant to section 1888(e)(4)(E)(ii)
of the Social Security Act (the Act), for FY 2000 through 2002, we will
increase the rates each year by a factor equal to the SNF market basket
change minus one percentage point. For subsequent fiscal years, we will
increase the rates by the applicable SNF market basket change.
B. Payment Provisions--Transition Period
Beginning with a provider's first cost reporting period beginning
on or after July 1, 1998, there is a transition period covering three
cost reporting periods. During this transition phase, SNFs receive a
payment rate comprising a blend between the Federal rate and a
facility-specific rate based on each facility's FY 1995 cost report.
Under section 1888(e)(2)(E)(ii) of the Act, SNFs that received their
first payment from Medicare on or after October 1, 1995, receive
payment according to the Federal rates only.
For SNFs subject to the transition, the composition of the blended
rate varies depending on the year of the transition. For the first cost
reporting period beginning on or after July 1, 1998, we make payment
based on 75 percent of the facility-specific rate and 25 percent of the
Federal rate. In the next cost reporting period, the rate consists of
50 percent of the facility-specific rate and 50 percent of the Federal
rate. In the following cost reporting period, the rate consists of 25
percent of the facility-specific rate and 75 percent of the Federal
rate. For all subsequent cost reporting periods, we base payment
entirely on the Federal rate.
C. Payment Provisions--Facility-Specific Rate
For most facilities, we compute the facility-specific payment rate
used for the transition using the allowable costs of SNF services for
cost reporting periods that began in FY 1995 (cost reporting periods
beginning on or after October 1, 1994, and before October 1, 1995).
Included in the facility-specific per diem rate for most facilities is
an
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estimate of the amount that was paid separately under Part B for
covered SNF services furnished during the base year to individuals who
were residents of the facility and receiving Part A covered services.
Under section 1888(e)(3)(A) of the Act, the facility-specific rate (in
contrast to the Federal rates) includes amounts paid to SNFs for
exceptions to the routine cost limits. In addition, we also take into
account ``new provider'' exemptions from the routine cost limits, but
only to the extent that routine costs do not exceed 150 percent of the
routine cost limit.
We update the facility-specific rate for each cost reporting period
after FY 1995 to the first cost reporting period beginning on or after
July 1, 1998 (the initial period of the PPS) by a factor equal to the
SNF market basket percentage increase minus 1 percentage point. For the
FYs 1998 and 1999, we update this rate by a factor equal to the SNF
market basket increase minus 1 percentage point, and, for each
subsequent year, we update it by the applicable SNF market basket
increase.
D. Consolidated Billing for Skilled Nursing Facilities
Section 4432(b) of the BBA sets forth a consolidated billing
requirement applicable to all SNFs providing Medicare services. SNF
consolidated billing is a comprehensive billing requirement (similar to
the one that has been in effect for inpatient hospital services for
well over a decade), under which the SNF itself is responsible for
billing Medicare for virtually all of the services that its residents
receive. As with hospital bundling, the SNF consolidated billing
requirement does not apply to the services of physicians and certain
other types of medical practitioners. In a related provision, section
4432(b)(3) of the BBA requires the use of fee schedules and uniform
coding specified by the Secretary of Health and Human Services (the
Secretary) for SNF Part B bills. The law provides that these
requirements are effective for services furnished on or after July 1,
1998.
II. Provisions of the Interim Final Rule
In the interim final rule that was published on May 12, 1998, we
made a number of revisions in the regulations in order to implement
both the PPS and the SNF consolidated billing provision and its
conforming statutory changes:
With regard to payment, we revised the regulations in 42
CFR part 413, subpart A (that deal with Medicare payment to providers
of services) to reflect the replacement of the existing reasonable cost
reimbursement methodology for SNFs by the new SNF PPS.
We revised the regulations to provide that for SNF
residents who are in a covered Part A stay, Medicare makes payment
under the PPS described in new subpart J of part 413, effective with
cost reporting periods beginning on or after July 1, 1998.
For SNF residents who are not in a covered Part A stay, we
revised the regulations to provide that Medicare makes payment on the
basis of the otherwise applicable Part B fee schedule amounts,
effective for services furnished on or after July 1, 1998.
We made a conforming change in subpart B of part 483
(requirements for long term care facilities) to indicate that the
frequency of resident assessments is subject to the timeframes
prescribed under the SNF PPS in the new subpart J of part 413.
We made a number of revisions to implement the
consolidated billing provision, under which the SNF itself has the
Medicare billing responsibility for virtually all of the services that
its residents receive.
We revised the regulations in part 410 (payment of
benefits under Part B) to provide that Part B makes payment for these
services to the SNF rather than to the beneficiary. We also made
conforming changes with regard to Part B coverage of certain individual
medical and other health services.
We revised part 411 (exclusions from coverage) to exclude
from coverage any service furnished to an SNF resident (other than
certain specified service categories) when billed to Medicare by an
entity other than the SNF itself, and we added a definition of an SNF
``resident'' for purposes of this provision.
We revised the regulations in subpart B of part 489
(Medicare provider agreements) to add compliance with the consolidated
billing provision to the specific terms of an SNF's provider agreement.
We revised subpart C of part 424 (claims for payment) to
require the inclusion of an SNF's Medicare provider number on claims
for physician services furnished to an SNF resident, and the inclusion
of HCPCS coding on an SNF's Part B claims.
We made a number of conforming changes in subparts C, D,
and F of part 409 of the regulations which describe, respectively, the
scope of covered SNF benefits under Part A, the criteria for
determining a covered SNF level of care, and benefit period
determinations.
As noted previously, the PPS legislation did not change the basic
statutory definition of an SNF level of care. However, because RUG-III
classification is based, in part, on the resident's need for skilled
nursing care and therapy, our revisions in the level of care criteria
reflected an attempt where possible to coordinate claims review
procedures with the outputs of resident assessment and RUG-III
classifying activities. For example, we believe that an initial 5-day
assessment, properly completed, that places the resident in one of the
upper 26 RUG-III classifications provides the basis for us to assume
that the resident needed a covered level of SNF care upon admission and
at least up until the assessment reference date of the initial
Medicare-required 5-day assessment. We will, however, continue to make
individual review determinations for claims of individuals who classify
in the lower 18 RUG-III categories.
III. Analysis of and Responses to Public Comments
We received almost 500 comments on the SNF PPS interim final rule
published on May 12, 1998 (63 FR 26302). Comments were submitted by
nursing homes and other providers, suppliers and practitioners (both
individually, and through their respective trade associations), State
agencies, nursing home resident advocacy groups, elected officials,
health care consulting firms, and private citizens.
The comments basically fell into three broad areas. The first
involved the payment rates, including treatment of ``outlier''
situations and non-therapy ancillaries, calculation of the Federal
rates themselves and of the Part B add-on, and the transition from
facility-specific rates to the Federal rates. The second area concerned
the clinical aspects of the SNF PPS, including MDS assessment and
scheduling requirements, certification and recertification procedures,
medical review criteria, treatment of rehabilitation therapy under the
RUG-III classification system, nurse staffing and staff time
measurement studies, and coverage and level of care determinations. The
third broad area involved the consolidated billing requirement and the
scope of the extended care benefit.
As noted in the interim final rule, because of the large number of
items of correspondence we normally receive on Federal Register
documents published for comment, we are unable to acknowledge or
respond to them individually. In particular, a number of commenters on
the interim final rule raised extremely technical and detailed
questions regarding the MDS and the
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billing process. These questions are of a nature that would more
appropriately be addressed through manual instructions and other
issuances than in these regulations. In this final rule, we are
addressing the general concerns raised by the commenters. A summary of
the major issues and our responses follows:
A. Federal Rates--Outliers/Non-therapy Ancillaries (NTAs)
Comment: We received a number of comments expressing concern over
the ability of the PPS to provide adequate payment for certain outlier
or extraordinary cases. Several of the comments noted specific examples
of these cases, such as HIV-infected patients with significant drug
therapy needs, patients receiving intravenous (IV) drug therapy for
antibiotic-resistant infections, ventilator-dependent patients, or
simply patients with generally high costs. A number of commenters
recommended the adoption of an outlier payment process or exceptions
process to provide higher payments for these cases.
Other comments suggested use of a later base year (for example, FY
1997) or add-on to the rates in order to recognize changes made by
facilities after 1995, the year on which the rates are based. These
commenters argued that many facilities increased the scope of services
provided to beneficiaries and served a higher acuity resident
population after 1995 and, therefore, the costs associated with
providing this higher level of care were not reflected in the
calculation of the Federal rate.
Response: Section 1888(e)(4) of the Act provides specific
requirements related to the formula and cost data to be used in
computing the Federal rates. The statute provides that ``the amount of
the payment for all costs * * * of covered skilled nursing facility
services'' during the transition period is ``equal to'' a prescribed
blended payment, and after the transition period is ``equal to'' the
applicable adjusted Federal per diem rate. The statute does not provide
for additional payments over and above these prescribed amounts. While
the Act includes specific statutory authority for the application of
outlier policies in relation to the acute care hospital PPS (section
1886(d) through (f) of the Act), home health PPS (section 1895 of the
Act), and inpatient rehabilitation PPS (section 1886(j) of the Act), it
does not provide such explicit authority with regard to the SNF PPS.
However, we are concerned about this matter and are pursuing the basic
issue of the accuracy of payments through an examination of the case-
mix classification system.
In addition, the statute mandates use of the FY 1995 cost data in
the development of the payment rates. It should be noted that when the
rates were computed, the FY 1995 data were the latest available to
compute the rates. We believe the Congress took this into consideration
when developing the statutory language related to the computation of
the Federal rates as well as the specific impact of using the 1995 data
on the accumulation of Medicare savings, a key goal of the BBA.
We also note that while the Congress provided for Medicare
budgetary savings through the SNF PPS (which had an obvious downward
effect on the rates), there are numerous reports by the U.S. General
Accounting Office (GAO) and Office of the Inspector General (OIG)
suggesting Medicare payment for SNF ancillary services under cost
reimbursement was inappropriately inflated in the past. If correct,
this would mitigate the impact of the budgetary savings. The OIG
includes an expanded discussion of this concept in a 1998 report on the
SNF PPS titled ``Review of the Health Care Financing Administration's
Development of a Prospective Payment System for Skilled Nursing
Facilities'' (Number A-14-98-00350).
We understand the concerns expressed in the comments related to
this issue. As discussed in the impact analysis accompanying the
interim final rule, the SNF PPS will have a varying impact on
providers. Because ``prices'' are based on averages, SNFs should expect
that certain patients cost more than payments and others less. The
extent to which certain facilities can provide quality care, while
incorporating efficiencies in their purchasing of services and
operations, will affect how well they manage under this payment system,
which uses mean-based prices rather than reasonable costs. Financial
performance should, therefore, be determined by looking across each
facility's Medicare population, not on a patient specific comparison of
costs and the payment rate under which the rate would become
essentially a limit.
We will focus our efforts on ensuring that these prices are as
accurate as possible with respect to the resources used by Medicare
beneficiaries. The SNF PPS, through case-mix classification and
adjustment, currently reflects a full range of SNF patient types with
varying characteristics and degrees of resource intensity. Through
research and refinements to the PPS, we will try to ensure that the PPS
not only continues to account for a high level of resource intensity,
but improves in terms of its sensitivity to less common conditions or
patient types. This aspect of our plan is discussed later in the
context of the comments on payment for certain ancillary services.
Comment: There were a number of comments expressing concern with
the adequacy of the PPS rates to cover the costs of ancillary services
other than occupational, physical, and speech therapy (non-therapy
ancillaries), including such things as drugs, laboratory services,
respiratory therapy, and medical supplies. Prescription drugs or
medication therapy were frequently noted areas of concern due to their
potentially high cost for particular residents. Some commenters
suggested that the RUG-III case-mix classification methodology does not
adequately provide for payments that account for the variation in, or
the real costs of, these services provided to their residents. A number
of commenters stated their belief that the payment rates do not
generally reflect the costs of certain of these services (for example,
drugs or respiratory therapy).
Recommendations from commenters included removing all or some of
these services from the PPS rates and continuing to pay for them on a
cost basis, and making changes to the case-mix system and indices to
account for these services more accurately.
Response: We are aware of the challenges certain providers have
faced as they transition from a payment system based on reasonable
costs to one that uses mean-based prices such as the SNF PPS. In fact,
many of the same concerns raised in the comments to the interim final
rule were voiced by hospitals when we implemented the hospital PPS
system in the early 1980s. However, we believe this is an important
issue that calls for a broader discussion of the PPS itself, and
requires the clarification of certain technical issues related to the
PPS and to the statute.
Section 1888(e)(1) of the Act requires that the PPS provide payment
for ``all costs'' (including routine, ancillary, and capital related
costs) of covered SNF services. Consistent with the statute, the PPS
rates are based on 1995 allowable costs calculated from Medicare Part A
cost report data and applicable Part B allowable charges. Thus, a
facility's historical costs (from FY 1995) of drugs, laboratory
services, respiratory therapy, and other non-therapy ancillary services
were captured in these cost reports and reflected in both the Federal
and facility-specific transition rates.
In addition, many of these non-therapy ancillary services (for
example, respiratory therapy, IV medications, and
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IV feedings) are captured both directly and indirectly in the case-mix
methodology and result in higher payments for SNFs. The issue of
whether the nursing case-mix index adequately reflects the relative
costs of non-therapy ancillary services was one that was studied in the
development of the interim final rule and the associated payment rates.
As indicated in the preamble of that rule, using MDS assessments to
classify patients into RUG-III groups, we compared the relative charges
for non-therapy ancillaries to the nursing case-mix indices for each
RUG-III group. We found that the pattern of the two relative amounts
was similar across the RUG-III groups. That is, RUG-III groups with
high nursing weights also tended to have relatively high charges per
stay for non-therapy ancillaries.
Based on this comparison, we concluded that it was reasonable to
include non-therapy ancillary costs in the nursing component of the
rate. Accordingly, the idea that the PPS rates do not reflect the cost
of respiratory therapy, drugs, and other non-therapy ancillaries is
simply not accurate. Whether the accuracy of the rates can be enhanced
in this regard is a subject for research and development that we
discuss below.
The recommendation to remove or ``carve out'' these services as a
class from the PPS rates and continue to pay for them on a cost basis
raises some fundamental concerns related to both the statutory and
conceptual framework of the PPS. As discussed above, section
1888(e)(A)(1) of the Act requires that the PPS provide payment for
``all costs'' (including routine, ancillary, and capital related costs)
of covered SNF services. The conference report associated with section
4432 of the BBA explicitly states that under the SNF PPS, ``services
and supplies provided to residents will be included in pre-determined
per diem payment rates.''
Beyond the threshold issue of statutory language, the issue of
whether specific services should be identified and paid separately
appears to conflict with certain fundamental concepts embodied in a
PPS. Carried to its logical conclusion, this approach is antithetical
to the very concept of the SNF PPS itself, which is based on bundling
services for similar patients and paying an average, prospectively
determined amount for all services included in the bundle. The PPS rate
already recognizes differences between nursing, rehabilitation therapy,
and ancillary services, as well as non-case-mix components.
It is important to consider the budgetary impact of the commenters'
proposal to remove certain services from the PPS rates and to continue
paying for them on a cost basis. The budgetary impact would be
significant and would reduce the savings to Medicare associated with
the SNF PPS provisions of the BBA. Implementing the provision in a way
that would have a budget neutral impact on savings (for example, a
downward adjustment to the Federal rates) would penalize providers that
have made changes to their operations in order to provide services more
efficiently, and would benefit those that have not. Therefore, we
believe that further disaggregation of the payment rate would not be
consistent with the objectives of prospective payment from a
conceptual, statutory, or budgetary perspective.
Finally, we agree with the commenters' recommendation that we
explore the potential for refinements to the PPS and, more
specifically, the case-mix classification system (RUG-III) to ensure
that it continues to account more accurately for the services provided
to SNF residents. We consider the continuing adequacy of the PPS rates,
and the case-mix methodology in particular, to be a high priority. We
believe very strongly that the case-mix methodology should be
periodically evaluated to determine the appropriateness of the RUG-III
groups in relation to changes in patient care practices and the
Medicare population.
In addition, the conference report language associated with section
4432 of the BBA specifically recommended examining payment for
medication therapy in the context of the SNF PPS. Accordingly, we are
funding substantial research to examine the potential for refinements
to the case-mix methodology, including an examination of medication
therapy, medically complex patients, and other non-therapy ancillary
services.
We are currently funding two research contracts to determine the
potential for refinements to the RUG-III model. The first contract was
awarded in FY 1997 and provides preliminary analysis and alternatives
for refinements using a limited database. The next phase of the
research focuses on fully developing these options using more extensive
data. Completion of the research is targeted for January 1, 2000.
Potential refinements to the case-mix model may include the division of
the current 44 groups or the addition of new ones based on items
currently on the MDS 2.0 (for example, new extensive care groups
combining both medical ancillaries and rehabilitation).
In addition, a new payment index (or set of relative weights) based
on ancillary charges, rather than the current staff-time based indices,
is being explored for the non-therapy ancillary component of the PPS
rates. Any refinements to the RUG-III model and case-mix indices that
result from this research would have a distributional effect on
payments resulting in a new set of payment weights across the various
groups. If the research supports refinements, we anticipate their
implementation in conjunction with the October 1, 2000, update to the
PPS rates. This time line is dictated by the complexity of the research
and by operational and regulatory requirements, including publication
of a proposed rule.
It should be noted that the BBA provisions establishing the SNF PPS
provided for over $9 billion in savings to Medicare (in fee for
service) as a result of the statutory formula used for developing the
rates. Accordingly, an SNF's current costs may well exceed the PPS
rates if the SNF does not revise the historical purchasing and charging
practices that it followed under the preexisting cost-based payment
system.
B. Federal Rate Calculation
Section 4432(a) of the BBA amended section 1888 of the Act by
adding a new paragraph (e) that provides for the establishment of per
diem Federal payment rates under the SNF PPS. These rates encompass all
costs of furnishing covered skilled nursing services (that is, routine,
ancillary, and capital-related costs), other than costs associated with
approved educational activities. In the interim final rule, we
established a new subpart J in the regulations at 42 CFR part 413, that
describes this new payment methodology. In this section of the
preamble, we are providing responses to comments on a number of
important issues related to the Federal rates. These include payment
for non-rehabilitation ancillary services, outlier cases, and a variety
of issues related to the data and design of the Federal payment rates.
In addition, we are providing for a minor increase in the unadjusted
rates effective October 1, 1999, based on the recommendation of one
commenter.
Comment: We received a number of comments recommending that we
periodically recompute the PPS rates using the most recent data.
Reasons commonly mentioned include that rebasing would allow the PPS to
recognize changes over time in the intensity and scope of services
provided in SNFs, and that it would provide an opportunity for re-
standardization of the
[[Page 41649]]
payment rates using actual resident assessment (MDS) data.
Conversely, we received comments that recommended against rebasing
payment rates periodically. These commenters were concerned that
because the PPS provides incentives for SNFs to provide services more
efficiently and eliminate distinct parts (that would tend to lower
average SNF costs, as determined from Medicare cost reports), the
impact of rebasing the rates would be unfair, since it would tend to
penalize providers for being efficient.
Response: While we are not able to predict the absolute impact on
SNF costs of the incentive for SNFs to provide services more
efficiently or their continued desire to maintain distinct parts under
PPS, we have no doubt that the PPS will result in some downward
pressure on costs. Anecdotal evidence up to this point certainly
supports this conclusion.
Section 1888(e)(4)(A) of the Act requires a 1995 base year. Section
1888(e)(5)(A) of the Act specifically provides for the establishment of
an SNF market basket index, while section 1888(e)(4)(E) of the Act
requires that the SNF PPS rates be updated annually using that index.
As discussed in response to earlier comments, we believe that it is
appropriate to recognize changes over time in the Medicare population
or care delivery practices in SNFs in the context of case-mix
adjustments. Our periodic evaluation of the case-mix classification and
indices will provide an opportunity for making refinements to the PPS
that recognize changes in the intensity and scope of services provided
in SNFs.
Comment: We received several comments regarding certain costs that
were not included in the computation of the Federal rate. Specifically,
the commenters expressed concern that all SNFs receiving ``new''
provider exemptions from the routine cost limits and all allowable
costs associated with atypical services exceptions to the cost limits
have not been included in the data used for computation of the Federal
rates.
The commenters suggested that it is unfair to exclude the cost
associated with those providers that are providing atypical levels of
care. Further, they noted that these are the same providers that would
have a high case-mix in the new payment rates and, therefore, should be
included. Virtually all of these commenters suggested that the rates
are distorted due to the exclusion of many providers and costs of
furnishing atypical services.
Response: The statute is very specific regarding the exclusion of
providers that have received ``new'' provider exemptions from the
calculation of the Federal rates. Section 1888(e)(4)(A) of the Act
requires that cost data from SNFs ``that were subject to (and not
exempted from) the per diem limits'' be used in computing the payment
rates. Similarly, the statute specifically requires the exclusion of
allowable costs associated with exceptions granted in the FY 1995 base
year. Section 1888(e)(4)(A)(i) requires the use of the allowable costs
of SNF services ``excluding exceptions payments'' in calculating the
payment rates.
Comment: Several commenters were concerned that we eliminated
certain cost reports from the calculation of the Federal rates on the
basis of their duration. Cost reports in excess of 13 months or less
than 10 months in duration were eliminated from the rate computations.
In addition, concerns were expressed over the use of a geometric
outlier elimination process to remove SNF costs from the data.
Response: As we indicated in the interim final rule, we used only
those cost reports for periods of at least 10 months but not more than
13 months. We excluded those periods that fell outside these parameters
on the basis that those cost reports may not be reflective of a normal
cost reporting period and, therefore, may tend to distort the rate
computation. For example, providers entering or exiting the Medicare
program could have abnormally high or low costs due to fluctuations in
occupancy. This approach does not affect a large number of cost reports
and is consistent with our rate setting methodology in other areas of
Medicare.
Similarly, we believe the application of a geometric outlier
elimination process for the SNF costs used to calculate the payment
rates is an appropriate analytical approach consistent with rate
setting for payment systems in other areas of Medicare. We believe that
three standard deviations from the geometric mean of the log value for
each cost component is a fair level of tolerance that focuses on the
truly aberrant cost values. In addition, this process involved the
removal of both high cost and low cost aberrant values, resulting in a
more equitable and more meaningful computation of the rate components.
We would also add that we used all FY 1995 cost reports that were
available at the time of the development of the interim final rule and
associated payment rates. While some cost reports may not have been
available at that time, we constructed the rates based upon the best
available data and are confident it was more than adequate for
construction of the rates. Finally, a small number of cost reports were
eliminated from the computation of the rates due to faulty or missing
data on critical items.
Comment: Several commenters expressed concern with our methodology
related to the use of a MEDPAR analog in the standardization of the
Federal payment rates. They questioned whether the MEDPAR data were
sufficiently accurate for the purpose of developing payment rates and
referred to the 28 percent difference, reported in the interim final
rule (63 FR 26260), between the therapy index calculated from actual
MDS assessments and the MEDPAR analog-generated index. They noted
additional limitations of the analog, such as the lack of functional
status information and recommended that we use actual MDS data, when
available, to re-standardize the payment rates, possibly in conjunction
with a rebasing of the cost data.
Response: As noted in the interim final rule, an adequate national
sample of MDS data for use in standardizing the Federal payment rates
does not yet exist. In the absence of these data, we believe the MEDPAR
analog, adjusted by the case-mix adjustment factor, provides an
appropriate estimate of case-mix for the purpose of rate
standardization. Based on our comparison of actual MDS and MEDPAR data,
we concluded that limitations of the MEDPAR case-mix analog had no
effect on the nursing component of the rate. Whatever inaccuracy
existed in the MEDPAR analog data, the effect was limited to the
therapy component and tended to increase, not decrease, the payment
rate. The fact that the available MDS data yielded a therapy index
value 29 percent higher than the MEDPAR analog data for the same cases
demonstrates that use of the MEDPAR data alone would have made the
therapy component inappropriately high. That is the reason that the
correction factor was applied to the therapy component.
Comment: A few commenters expressed concern about the adjustment we
made to the cost report data in developing the Federal rates, to
account for providers with cost reports that were not settled. One
commenter indicated that all SNFs should not be penalized by this
adjustment. It was also suggested that the rates be redone in the
future to account for the actual change between the as-submitted cost
reports and the settled ones. In addition, one comment
[[Page 41650]]
addressed the methodological application of the adjustment in the
computation of the rates, suggesting an alternative where the
adjustment is applied to total Medicare routine costs as opposed to
only costs subject to the routine limit.
Response: As we indicated in the interim final rule, the adjustment
made pursuant to section 1888(e)(4)(A)(i) of the Act was applied to
unsettled cost reports and was based on the average ratio for all
providers in 1995, between their as-submitted and settled cost report.
This adjustment is only applied to the cost report data of providers
whose cost report was not settled as of the time we computed the rates.
It is an actuarial adjustment required under the law that affects how
the average SNF costs are determined and does not penalize other
providers with settled reports.
As we indicated in the interim final rule, these adjustment factors
were validated using data from three previous years, that showed this
ratio remains fairly constant. To update and change the rates in the
future based on revised cost reports is impractical. Revisions are
constantly being made to cost reports (for many years) and our
validation exercise indicates the ratios are accurate.
Finally, we have decided to incorporate the methodological
alternative described above and will adjust the unadjusted nursing
case-mix component of the urban and rural Federal rates by +$.32 and
+$.24, respectively. In addition, we will adjust the unadjusted non-
case-mix component of the urban and rural Federal rate by +$.25 and
+$.21, respectively. We believe this refinement in the application of
the adjustment factor may result in a more accurate estimate of the
routine costs of SNFs. This adjustment will be prospective and will be
effective at the next scheduled update of the SNF PPS rates on October
1, 1999. That is the earliest point at which we can implement changes
to the standard claims processing systems.
Comment: We received one comment asking why the issue of payments
for low-volume SNFs was not addressed in the interim final rule.
Response: The new Part A PPS established in section 1888(e) of the
Act applies to all SNFs, and does not include any special treatment for
low-volume SNFs. Section 1888(d) of the Act provided for a separate,
optional payment system for SNFs with less than 1500 days (that is,
low-volume SNFs) in their preceding cost reporting period. However,
according to current law, this special payment system for low-volume
SNFs is only in effect for cost reporting periods beginning before July
1, 1998.
Comment: Numerous comments were received from hospital-based
facilities and their representatives indicating that the rates are too
low and do not recognize the additional overhead incurred in a
hospital-based facility. The commenters pointed out that the Federal
rate uses a mean of the average for all freestanding providers and the
average for all freestanding and hospital-based providers. This
computation double counts freestanding providers, thus lowering the
rates. Some commenters suggested the rates should be redone, or an add-
on or separate rate for freestanding versus hospital-based providers be
established, similar to what was done for routine cost limits.
Response: As many of the commenters have already recognized, the
computation as described above is clearly mandated in the formula set
out in section 1888(e)(4) of the Act.
Comment: We received several comments regarding the wage index that
is used to standardize and adjust the rates. The commenters suggested
that the hospital wage index might not adequately represent wages paid
in SNFs. Many of the commenters pointed out that SNF wages and hours
are excluded from the hospital wage index computation, yet we are
applying it to SNF payments. Most commenters want the wage index
updated periodically and often to reflect the most recent changes in
wages. One commenter suggested that we make other changes to the method
for how the wage index is calculated by including costs that are now
excluded, such as physician salaries, and excluding items like interns'
and residents' salaries. There were also a few commenters who suggested
that any move to a wage index based on SNF wage data be done slowly to
ensure it is done accurately. Most commenters hope to see a wage index
based on SNF data soon. In addition, many commenters want us to use a
later wage index to reflect the recent mandated changes in the minimum
wages rates paid to some employees.
Response: As we indicated in the interim final rule, we are using
the hospital wage data since the SNF wage data have not been completed.
We used the latest completed hospital wage index that was available at
the time of publication. It is our intent to use the latest wage index
data that are complete and available when we publish rates or updates
to the rates in the future.
We have been unable to evaluate a wage index based on SNF wage
data, as not all SNF providers reported data via the worksheet S-3. Now
that we have a full year of wage data for both freestanding and
hospital-based facilities, we will begin to evaluate and analyze the
wage and hourly data from the SNF and hospital-based SNF cost reports.
We will analyze and develop these data to evaluate their accuracy and
validity. It is our intent, if the data are accurate, eventually to use
and publish a wage index based on SNF wage data. However, it has been
our experience in the past that when new wage data are used, they can
result in enormous and erratic shifts in the wage indexes; many
providers could be adversely affected while others experience a
windfall. Therefore, before we use any SNF wage data, we will perform
numerous edits to ensure quality. In addition, we will ask for public
comments once the wage index data are available. Since we have not yet
developed a wage index based on SNF wage data, we do not know the
impact of excluding or including any particular cost centers.
As discussed above and in the interim final rule, until an
appropriate wage index based on SNF data is available, we will use the
latest available hospital wage index data in making annual updates to
the payment rates. We believe that SNFs and hospitals compete in the
same labor market areas and, therefore, absent specific SNF wage data,
we continue to believe that the hospital wage data accurately reflect
the relative wage costs between labor areas. In making these annual
updates, section 1888(e)(4)(G)(ii) of the Act requires that the
application of this wage index be made in a manner that does not result
in aggregate payments which are greater or less than would otherwise be
made in the absence of the wage adjustment. For the initial period of
the SNF PPS, the adjustment required by this section was accounted for
through the standardization of the cost data that formed the basis for
the per diem rate components. By means of standardization, each rate
component was adjusted for wage index and case-mix differences so that
aggregate payments were unaffected by the presence of these payment
adjustors.
Since, for the second PPS year (Federal rates effective October 1,
1999), we plan to update the wage index applicable to SNF payments
using the most recent hospital wage data, it is necessary to ensure
that the aggregate payments in the second year are neither greater nor
less than they would be if we continued to use the wage index from the
initial year. This requirement, established pursuant to section
1888(e)(4)(F)(ii) of the Act, will be met by multiplying each of the
per diem rate components by the ratio of the volume
[[Page 41651]]
weighted mean wage adjustment factor (using the wage index from the
initial year) to the volume weighted mean wage adjustment factor, using
the wage index for the fiscal year beginning October 1, 1999. The same
volume weights are used in both the numerator and denominator and will
be derived from 1997 MedPAR data. The wage adjustment factor used in
this calculation is defined as the labor share of the rate component
multiplied by the wage index plus the non-labor share.
Comment: We received two comments suggesting that the rates should
have an add-on to account for the additional cost of completing
resident assessments and the administrative costs associated with
implementing this new payment system and other unfunded mandates.
Response: We recognize that the increased frequency of assessment
may result in additional costs for SNFs. However, as we indicated in
response to an earlier comment, the Congress mandated both the basic
formula and the fiscal year cost data that we are to use in developing
the rates. To the extent that any of these assessment costs are
included in the base year data, they are reflected in the rates. We
would note that, as we indicated in the interim final rules discussion
of the Paperwork Reduction Act, it was determined that the increased
assessments required and the time to transmit them has a minimal impact
on each individual facility. We recognize that providers will incur
additional costs associated with more frequent assessments but we
believe our current rate scheme is consistent with the law.
Comment: Several commenters suggested that capital should not be
part of the rate, suggesting that it be an add-on or pass-through to
recognize those facilities that were committed to large capital
expenditures incurred after 1995.
Response: In accordance with section 1888(e)(2)(B) of the Act, the
calculation of the Federal rates included the capital costs. We realize
that committed capital expenditures after 1995 may create some hardship
on some providers. However, we believe that the present rate scheme,
which includes capital, is consistent with the language and intent of
the statute. Further, we believe that the capital costs included in the
rates are adequate to cover capital costs that would be incurred for
providers over time.
Comment: We received numerous requests, particularly from rural
hospital-based facilities, suggesting that we allow providers to
reclassify to a nearby adjacent urban area to receive the urban wage
index or the rates applicable to the adjoining urban area, especially
in circumstances where the hospital has been reclassified because it is
in a county that was defined as urban under section 1886(d)(8)(B) of
the Act (sometimes referred to as a ``Lugar'' county) or as a result of
geographic reclassifications based on decisions of the Medicare
Geographical Classification Review Board (MGCRB) or the Secretary under
section 1886(d)(10) of the Act for purposes of the hospital PPS. These
commenters suggested that the SNFs are competing in the same market as
hospitals. One commenter suggested that a board similar to the MGCRB be
established to consider an SNF's request to be reclassified.
Response: While we have broad authority to develop an SNF wage
index, we continue to believe that the reclassifications permitted for
hospitals under sections 1886(d)(8)(B) and 1886(d)(10) of the Act are
specific to hospitals. The Congress could have chosen to extend this
provision to SNFs under section 1888(e) of the Act, but it did not. In
addition, it has been our longstanding policy not to allow or recognize
reclassification for SNFs for payment under the routine cost limits.
Since we hope eventually to develop a wage index specific to SNFs, the
possible effect of reclassification on the wage index is unclear and
might have unintended consequences.
Comment: Two comments were received asking that we consider an
adjustment for the non-labor portion for Alaska and Hawaii providers,
similar to what is done for routine cost limits for SNFs. These
commenters suggested that these areas experience a much higher cost
than those providers in the continental United States and, therefore,
are entitled to this adjustment.
Response: The hospital inpatient PPS does have an adjustment
similar to that requested by these commenters; however, it was mandated
by the statute governing the hospital PPS. By contrast, the Congress
did not provide for such an adjustment in the legislation for the SNF
PPS. Costs incurred by Alaska and Hawaii providers are, of course,
included in the base year computation.
Comment: One comment we received suggested that SNFs that were
subject to the low-volume rates should have been eliminated from the
calculation of the Federal rates. Furthermore, the commenter added that
these providers should be exempt from PPS and continue to be paid under
the low-volume rates.
Response: Section 1888(e)(4)(A) of the Act specifically included
low-volume facilities in the SNF PPS rate calculation.
C. Federal Rates--Part B Add-on
In describing the data to be used in developing the Federal rates,
section 1888(e)(4)(A)(ii) of the Act provides for including an estimate
of the amounts payable under Part B for covered SNF services furnished
during FY 1995 to individuals who were residents of a facility and
receiving Part A covered services. This estimate is also known as the
``Part B add-on.'' In this section of the preamble we are providing an
expanded discussion of the development of the add-on for Part B
services which is included in the Federal rates.
Comment: We received a number of comments questioning the accuracy
of our estimate of Medicare Part B allowable charges associated with
patients in Medicare Part A stays during the FY 1995 base year used for
determining both the Federal and facility-specific payment rates.
Certain commenters cited evidence of missing bills and charges
associated with individual providers for particular types of services
(for example, laboratory services or rehabilitation therapy). In
addition, several commenters suggested that we allow for an appeals
process related to the Part B estimate associated with facility-
specific rates.
Response: We took great care in both the methodological design and
construction of the data sources necessary for the development of this
estimate. We are aware of several independent industry efforts to
review this methodology which found no defects in the design. In this
final rule, we are providing the following, more detailed discussion of
the methodology used for the development of the Part B estimate with
the hope that doing so will clarify our process of determining this
estimate and respond to questions and concerns.
The facility-specific payment rate used for the transition is
computed using the allowable costs of SNF services for cost reporting
periods beginning in FY 1995 (cost reporting periods beginning on or
after October 1, 1994, and before October 1, 1995). Included in the
facility-specific per diem rate is an estimate of the amount payable
under Part B for covered SNF services furnished during cost reporting
periods beginning in FY 1995 to individuals who were residents of the
facility and receiving Part A covered services.
These estimates were developed using allowed charges (including
coinsurance and deductibles) from all Medicare Part
[[Page 41652]]
B claims actually submitted (other than those specifically excluded
from the consolidated billing requirements, such as physician services)
associated with SNF residents in a Part A stay during cost reporting
periods that began in FY 1995. Applying the methodology described
below, we provided the fiscal intermediaries (FIs) in May of 1998 with
the total aggregate amount payable under Part B. In addition, at the
request of the nursing home industry, we included a detailing of
certain components of that amount for informational purposes.
At that time, we instructed the FIs that only the item listed as
``Total Part B Add-on Amount'' should be incorporated in the
calculation of the facility-specific rates. We noted that, while the
total Part B amount was an accurate estimate based on the universe of
Part B claims, the assignment of allowed charges into the different
service components was only an approximation due to the level of
specificity of the codes and the variation in supplier billing and
coding practices. The following description details the methodology
used to determine the Part B add-on amounts:
1. Identify Cost Report Period
For each SNF, determined appropriate FY 1995 cost report period.
Used all FY 1995 cost reports on file as of January 30, 1998. If no FY
1995 cost report was available, estimated a FY 1995 period from the
latest cost report available.
2. Create List of Dates for SNF Stays for Each Beneficiary
For each SNF, identified all Part A SNF claims with the discharge
date on the claim falling within the cost report period. For each
beneficiary, identified the dates of each stay during the cost report
period.
3. Identify All Non-Physician Part B Claims
Obtained all Part B physician, supplier, DME claims for 1994, 1995,
and 1996. Omitted all professional services, defined as any service
associated with a physician specialty code. Obtained all Part B
outpatient department facility claims for 1994, 1995, and 1996.
4. Match List of Part A SNF Stays to Part B Claims
By beneficiary, matched list of Part A SNF stays to Part B claims.
Kept all non-physician services or facility claims falling on or
between dates of admit and discharge for each SNF stay.
5. Drop Claims for DME
For non-physician Part B claims, that is, not facility claims,
reviewed all alphanumeric HCPCS and identified and dropped obvious DME
codes, for example, wheelchairs, canes, transcutaneous electrical nerve
stimulation (TENS), glucose monitors, commodes, walkers, bath and
toilet aids, lifts, and oxygen equipment. Because coverage under the
Part B DME benefit is not allowed for beneficiaries in an SNF stay, we
believe that these codes probably occurred on either the day of
admission or the day of discharge or were associated with erroneous
payments.
6. Adjust Outpatient Claims to Reflect Costs
Adjusted total charges on Part B outpatient facility bills to
reflect total Medicare payments using a payment to charge ratio
calculated from FY 95 outpatient cost reports. If no FY 95 cost report
was available, used ratio from FY 94 or, if necessary, FY 93 cost
report. If a FY 93 cost report was not available, used the payment
amount associated with the claim.
7. Drop Outpatient Bills
Removed claims with home health and dialysis provider numbers.
Dropped Part B outpatient facility claims where the SNF provider number
matched the hospital outpatient provider number. Dropped bills with at
least one of the following revenue centers: surgery, emergency room
(ER), ambulatory surgical center (ASC), cardiac catheterization,
computerized axial tomography (CT) scan, and magnetic resonance imaging
(MRI). These outpatient hospital services are excluded from the
consolidated billing requirements.
8. Calculate Totals
Calculated total allowed charges for all non-physician Part B
claims. Calculated total payments for Part B outpatient facility
claims.
9. Create Descriptive Categories Within Totals
At request of certain members of the industry, created general
categories to describe the distribution of dollars among types of
services. Categories are not exact due to the lack of precision in
categories for HCPCS ranges, local codes, and the structure of facility
claims. For example, dollars for laboratory services could appear in
(a) the ``laboratory'' category for non-physician Part B, (b) the
``other'' category for non-physician Part B if the code was local, or
(c) the outpatient department's (OPD) ``other'' category for laboratory
tests conducted by an outpatient facility.
Created categories for non-physician Part B claims using HCPCS and
CPT ranges. Often, broad HCPCS categories capture some unrelated codes.
In addition, temporary local codes had to be placed into the ``other''
category.
The structure of the outpatient facility claims prevents
associating a code with a specific dollar amount. Created outpatient
therapy category by combining all claims from CORF hospitals and any
claim with only one physical therapy (PT), occupational therapy (OT),
or speech-language pathology (SLP) code. Left all remaining bills in
OPD category.
As discussed in the above description of our methodology, a number
of factors prevented us from disaggregating the total Part B allowable
charges precisely into distinct high level categories (for example,
laboratory services). However, we decided to attempt to provide an
approximate breakout by category to provide SNFs some notion of what
their Part B service mix may have looked like in the FY 1995 base year.
While we did note in the listing of Part B add-ons provided to FIs
that the categorization of charges was only an approximation, this
qualification may not have always been understood by providers. We
regret any confusion caused by this breakout. We would note that our
purpose in developing the total estimate of Part B allowable charges
did not go beyond providing an accurate account of the total allowed
charges to be included in the PPS rates, and we believe our estimate
accomplished this. However, even if our purpose had been to map every
charge and HCPCS code precisely to some broad category, once again, the
data and structure of Medicare's billing system would not have
permitted it.
Beyond issues related to the categorization of Part B charges, we
received no comments that contained substantiated evidence of
systematic defects in the methodology or data. We would note that
section 1888(e)(8)(B) of the Act limits administrative review of this
estimate.
Comment: We received numerous comments indicating that we should
publish, or otherwise make available to the public and the industry,
the complete and itemized data that were included in the computation of
the rates. Of particular concern was the percentage of the nursing
case-mix component of the rate that is attributable to nursing services
and non-therapy ancillary costs. Some commenters suggested that they
were
[[Page 41653]]
unable to replicate the rates we published with the data currently
available.
Response: Much of the data necessary to compute the rates have been
available for some time, including the 1995 SNF cost reports and the
MEDPAR files. We have also put data and information related to the
computation of the case-mix indices on our SNF PPS website, at:
<www.hcfa.gov/medicare/snfpps.htm>. A public use file containing the
most significant data items relating to the calculation of the
unadjusted Federal rates can also be found on the website. The
standardization and case-mix correction factors are included with the
public use data.
It is our understanding from conversations with a number of users
of the data that the public use file, along with the data that were
already available, has been quite helpful in understanding the
calculation of the rates. In addition, we have honored several requests
under the Freedom of Information Act for data associated with the rate
calculations, and have provided further information through data
release agreements.
Regarding the percentage of the nursing case-mix component of the
rate that is attributable to nursing services and social services and
non-therapy ancillary costs, we agreed with earlier comments to the
interim final rule that the public would benefit by knowing the
percentages for nursing and social services and non-therapy ancillary
services included in the rate. Accordingly, on November 27, 1998, we
published a notice in the Federal Register (63 FR 65561) to reopen
comments to the interim final rule. We also provided the public with a
percentage breakdown of the nursing case-mix component of the rates to
the extent feasible.
Comment: We received a number of comments concerning our discussion
in the interim final rule related to OIG's proposal to adjust the
Federal rates to account for costs in the 1995 base year cost data that
result from medically unnecessary services or improper payments. These
comments strongly recommended that we not proceed with such an
adjustment, citing the already significant downward impact on the
Federal rates of the BBA budgetary savings, the inadequate statistical
basis for pursuing such an adjustment, and insufficient statutory
authority for proceeding with an actuarial adjustment of this type to
the rates.
Response: We are concerned about the application of an adjustment
that would have a downward impact on the Federal rates in light of the
substantial reduction already incorporated into the calculation under
the BBA requirements. According to the impact analysis contained in the
interim final rule, this reduction is 17 percent on average. However,
there is a substantial body of evidence, in the form of OIG and GAO
studies, that at least suggests there were inappropriate services or
improper payments associated with SNF services during the 1995 base
year. Consequently, it could reasonably be argued that exclusion of the
costs of these services from the cost base used to compute the Federal
payment rates is appropriate.
However, we believe that in considering the level of budgetary
savings to incorporate into the statutory formula for establishing the
Federal rates, the Congress took into account the existing cost base
and aggregate SNF payment levels to determine an appropriate level of
budgetary savings. Our policy with regard to this issue will be not to
proceed with such an adjustment in the absence of specific statutory
direction from the Congress.
D. Facility-specific Rates-Transition
Section 1888(e)(2) of the Act provides, for most facilities, a
phased transition from facility-specific payment rates (which reflect
the individual facility's historical cost experience) to the Federal
rates. During such a facility's first three cost reporting periods
under the SNF PPS, it receives a blended payment rate, in which the
Federal portion initially represents 25 percent of the facility's total
payment rate, and then increases by 25 percent increments in each
succeeding period until the facility is paid at the full Federal rate.
In this section of the preamble, we are providing responses to
comments on a number of issues related to the PPS transition period and
the calculation of the facility-specific rates. These include issues
related to the eligibility of certain SNFs for the transition. In
addition, this section includes policy changes related to the
calculation of the Federal rates for certain SNFs with short cost
reporting periods and the eligibility for the transition of SNFs with
cost reporting periods beginning in FY 1994 but including the entire FY
1995 period.
Comment: We received several comments suggesting that we should
define a new SNF as one that first furnished patient care on or after
October 1, 1995, rather than one that first received payment on or
after October 1, 1995, as our present policy dictates.
Response: We understand that there are many concerns regarding the
issue of eligibility for the PPS transition. However, we believe
current policy is consistent with the statute. Section 1888(e)(2)(E) of
the Act specifically refers to the date an SNF first received payment
from Medicare on or after October 1, 1995, as the threshold date.
However, it is important to understand that the threshold for
determining eligibility for the transition period affects providers in
different ways, creating both winners and losers. Thus, while many
providers may want to receive PPS transition payments, many other
providers would rather be paid on the basis of the full Federal rate.
We do not see the benefit of a policy change that creates losers under
the system from winners and vice versa.
Comment: We received a number of comments recommending that we
modify our policy with regard to the PPS transition, to allow existing
SNFs to elect to bypass the transition and be paid 100 percent of the
Federal rate if they had experienced significant shifts in case-mix or
significant capital expenditures after the 1995 base year used for
determining the facility-specific rate. One commenter included a
detailed assessment of this proposed policy, including an estimate of
the aggregate costs to the Medicare program of its adoption.
Response: We understand the concern of SNFs that have operated
under the Medicare program since 1995 or earlier and yet find
themselves disadvantaged by the PPS transition due to changes in their
care delivery model or significant capital expenditures that occurred
after the 1995 base year used for computing the facility-specific rate.
However, we believe our present policy to be reasonable and consistent
with the plain language of the statute. Section 1888(e)(2)(E)(ii) of
the Act sets forth the requirements concerning whether a facility
receives payment under the PPS transition or solely according to the
Federal rates. This section provides that for SNFs that ``first
received Medicare payment for services under this title on or after
October 1, 1995, payment for such services shall be made under this
subsection as if all services were furnished after the transition
period.'' In our view, this language establishes clear criteria related
to provider eligibility for the transition and the appropriate basis
for Medicare payment. Accordingly, we have established a policy which
relies on the date an SNF first received payment (interim or otherwise)
from Medicare to determine the basis of their payment.
Comment: We received one comment asking us to reconsider our policy
regarding eligibility for the transition for providers that do not have
a cost
[[Page 41654]]
reporting period beginning in FY 1995, but whose period contains the
entire 1995 FY. Examples of these cost reporting periods include a 13-
month cost reporting period beginning September 1, 1994, and ending on
September 30, 1995 or reporting periods with a floating beginning date
(that is, tied to a specific day of the week) of September 27, 1994.
Response: In Transmittal 405 of the Provider Reimbursement Manual
(PRM, HCFA Pub. 15-1), we had initially required these providers to be
paid at the Federal rate without a transition period, since these
providers did not have a cost reporting period beginning in FY 1995
(the statutory basis for computing the facility-specific transition
rate). However, we have reconsidered our policy, because these
providers did receive their first payment from Medicare before October
1, 1995. These providers will now be eligible for the transition
period.
In addition, any provider that has been paid the full Federal rate
based on our original policy contained in Transmittal 405 of the
Provider Reimbursement Manual will be held harmless, since they have
already transitioned to the PPS. In short, this means that providers
with a cost reporting period beginning date in 1994 and whose period
contains the full 1995 fiscal year (that is, the 12 months beginning
October 1, 1994, through September 30, 1995), will be able to elect
either a PPS transition based payment or the full Federal rate.
Whichever rate the provider chooses must be used for all the years of
the transition period.
Comment: We received a number of comments regarding our policy on
changes of ownership and mergers as they relate to a provider's
eligibility for the PPS transition.
Response: As discussed earlier in this section, SNFs that first
received payment from Medicare on or after October 1, 1995 receive
payment based on the Federal rate only while SNFs that first received
payment from Medicare prior to October 1, 1995 are paid according to
the transition rate and are precluded from receiving payment solely
based on the Federal rate. In addition, our policy, as stated broadly
in transmittal 405 of the Provider Reimbursement Manual, requires that,
for purposes of determining a provider's eligibility for the
transition, Medicare makes its determination based on the date of first
Medicare payment (interim or otherwise) under the present provider
number.
For example, when an SNF undergoes a change in ownership, such as a
merger or a consolidation, the payment is determined by the payment
history of the surviving entity as indicated by the surviving SNF's
provider number. This conforms with longstanding reimbursement policy
and payment principles as applied under the former reasonable cost
payment system and provides administrative simplicity in addressing
complex transactions among SNFs, hospitals, and other entities.
Comment: We received several comments recommending that we adopt a
policy where SNFs would be allowed to elect to bypass the transition
period and receive payment based on the full Federal rate.
Response: Similar to our response to an earlier comment, we
understand how the transition payment methodology may disadvantage
certain providers. However, section 1888(e)(1) and (2)(E) of the Act
specifically addresses the issue of which providers are paid the full
Federal rate and which ones must receive transition payments. As we
discussed, the statute requires that SNFs that received their first
payment under Medicare before October 1, 1995, are to be paid based on
the transition payment methodology described in the interim final rule.
Comment: We received a number of comments related to the Part B
add-on and the methodology for computing facility-specific rates for
SNFs that participated in the Multistate Nursing Home Case-Mix and
Quality Demonstration (NHCMQD) in 1997. Under the interim final rule,
these facilities did not receive a Part B add-on as part of their
facility-specific rate. The commenters argued that a Part B add-on is
appropriate for these SNFs. Several commenters provided detailed
arguments asserting that a Part B add-on for these providers is legally
supportable under the statute.
Response: It appears to us that a Part B add-on to the facility-
specific rate for providers participating in the NHCMQD in 1997 could
well be an appropriate payment policy in light of the historical
circumstances.
During the NHCMQD, many Medicare Part A patients in these SNFs
received certain ancillary items or services provided by suppliers who
then billed Medicare directly under Part B. However, we find that the
statutory language at section 1888(e)(3)(B) of the Act, that provides
the formula for computing facility-specific rates for NHCMQD providers,
does not support this policy outcome.
Accordingly, we are maintaining the policy, set forth in the
interim final rule, of not including a Part B add-on in the calculation
of facility-specific rates for SNFs participating in the NHCMQD in
1997. We believe this policy is consistent with the statute. The
statute treats NHCMQD providers differently from other facilities. For
most facilities, the statute directs the Secretary to use a 1995 base
year and provides for a Part B ``add-on''; for NHCMQD facilities, the
statute directs the Secretary to use a later base year (1997) and does
not provide for a Part B ``add-on.'' Although a Part B add-on for
NHCMQD facilities might be appropriate as a conceptual matter, the
statute does not provide for a Part B add-on and we do not believe the
lack of a Part B add-on leads to an absurd result.
In our effort to ensure the appropriateness of the payment
methodology set forth in the interim final rule, we have decided to
make a modification to one aspect of the calculation of the facility
specific rates. This change only affects the methodology for
determining the inflation factor applied in the calculation of the
facility specific rates for certain providers with short cost reporting
periods (that is, less than 12 months).
There were three different types of short periods discussed in the
interim final rule:
a. A short period in the base year,
b. A short period in the initial period, and
c. A short period between the base year and the initial period.
The interim final rule included separate instructions on how to
determine which factor to use for an SNF having a short period. There
was, however, no discussion of how to determine which factor to use if
a SNF had more than one short period. For example, an SNF could have a
short period in the base year and a short period between the base year
and the initial period of the PPS.
We now believe that the instructions for item c should not be
applied to SNFs which have both a short period in the base year and a
short period between the base year and the initial period. If an SNF
has a short period in the base year and a short period between the base
year and the initial period, the instructions in section (a) should be
applied using the short period in the base year.
E. MDS Assessments
Under the SNF PPS, the Federal rate incorporates adjustments to
account for case-mix, using a resident classification system that
accounts for the relative resource utilization of different patient
types. This classification system, RUG-III, assigns beneficiaries into
one of 44
[[Page 41655]]
groups, using assessment data from the MDS that the SNF completes
according to an assessment schedule specifically designed for Medicare
payment.
In the interim final rule, we discussed issues relating to the use
of the RUG-III classification system under the SNF PPS, including
scheduling and other requirements pertaining to the MDS, use of the
RUG-III ``grouper'' software, and the use of an Other Medicare Required
Assessment (OMRA) in certain situations following the discontinuation
of rehabilitation therapy services.
In this section of the preamble, we are providing responses to
comments on a number of issues related to the use of the OMRA, grace
days, and the Health Insurance Prospective Payment System (HIPPS) codes
used to bill Medicare Part A covered SNF stays. We also address
comments and questions about the midnight rule and its effect on the
MDS schedule, and provide clarification regarding counting therapy
minutes on the MDS, as well as the requirements for the therapy plan of
treatment. In addition, we are responding to comments concerning
recognition of respiratory therapy and recreational therapy in the
payment rates and on the MDS.
Comment: We received numerous suggestions of ways to improve the
MDS instrument, the assessment schedule, and the classification system.
These comments included suggestions both to increase and decrease the
frequency of required MDS assessments, to improve the MDS staging of
pressure ulcers, ideas for modifications to individual RUG-III groups,
and commenters' requests that we be more directive in our rules about
how facilities are to spend the payments they receive from Medicare.
Response: We appreciate all of the suggestions and will consider
them in our future work in these areas. The comments were very specific
and too numerous to address in this context. Rather, the subject matter
and degree of specificity of some of these suggested changes would be
more appropriately addressed through manual issuances.
It is also worth noting that at this time, the SNF PPS has been in
effect in most facilities for less than 12 months. In the future, when
providers have achieved greater stability and familiarity with the
system, and we have additional data to guide our decisions, we can
consider making additional refinements such as those suggested by the
commenters.
1. Billing Issues
Comment: There were several questions submitted with the comments
regarding the HIPPS codes used for billing SNF PPS claims. The
questions focused on how to use these codes for billing as
distinguished from MDS coding instructions.
Response: Although these codes were not mentioned in the interim
final rule, we believe that it would be helpful and appropriate to
explain here what the HIPPS codes are as distinct from the MDS
information. The HIPPS codes are 5-character codes used solely for
billing the Medicare FI for the Part A SNF stay. The codes reflect the
RUG-III group into which the beneficiary classified and the reason for
the assessment used for determining the classification. The HIPPS code
does not appear anywhere on the MDS. The reason for assessment
reflected in the HIPPS code is based on information coded in items A8a
and A8b of the MDS, but is not a duplication of the data reported on
the MDS. Rather, a conversion must be made from the information on the
MDS to the reason for assessment identifier that comprises the last two
digits of the HIPPS code.
For instructions for billing on the Unified Billing Form 92 (UB-
92), see Transmittal 405 of the Provider Reimbursement Manual (PRM,
HCFA Pub. 15-1, 7/98) published on our website. These instructions are
sent to our FIs and are also available through them.
Further, in the context of billing procedures, we would also like
to use this opportunity to clarify our policy on Periodic Interim
Payments (PIP). Since the inception of the Medicare program, SNFs
reimbursed on the basis of reasonable costs received interim payments
during their cost reporting year for the cost of Part A services
provided to Medicare beneficiaries. For many years, SNFs have also been
permitted to receive PIP--interim payments paid in equal biweekly
amounts--for these services if they met the requirements in
Sec. 413.64(h) and received intermediary approval. Since July 1987, the
statutory authority for PIP for qualifying SNFs has been in section
1815(e)(2) of the Act. Section 1815(e)(1) of the Act was added to
include certain requirements, in addition to the requirements in
Sec. 413.64(h), specifically applicable to hospitals receiving
prospective payments under section 1886(d) of the Act in order for the
hospitals to receive PIP. Section 1815(e)(2) of the Act clarified that
the additional requirements applicable to those hospitals were not
applicable to other types of providers, including SNFs, entitled to
PIP. Accordingly, the regulations at Sec. 413.64(h) were revised to
provide for the continuing availability of PIP after July 1987 for
these other types of providers, including for Part A services provided
by SNFs.
Interim payments, including PIP, provide cost reimbursed providers
with estimated payments during the cost reporting year pending
submittal and subsequent settlement of a Medicare cost report. A
provider can submit its cost report to the intermediary as late as the
last day of the fifth month after the end of the cost reporting period.
Following submittal, the intermediary's determination of Medicare cost
reimbursement to the provider for services provided to beneficiaries
during the year cannot be made until the cost report is reviewed,
sometimes including audit of the provider's records. Because
determination of Medicare reimbursement takes place after the end of
the cost reporting year, interim payments are needed during the year
until this final payment can be determined.
Because a cost report is not required to calculate prospective
payments, interim payments are not necessary to a provider for services
paid on the basis of prospective payments. Nevertheless, with the
exception of special requirements for hospitals receiving prospective
payments under section 1886(d) of the Act, section 1815(e) currently
provides for the availability of PIP for certain services, including
Part A services provided by SNFs, if the requirements in Sec. 413.64(h)
are met. It does not prohibit PIP for SNFs receiving prospective
payments.
While the BBA eliminated PIP under the provisions mandating a PPS
for home health agencies (HHAs), the Congress made no such requirement
under the statutory provisions related to SNF PPS. This may be because,
like the preceding SNF payment system, the SNF PPS continues to rely on
a daily payment amount, while for the HHA PPS, changes in the unit of
payment were contemplated. However, at this time, we see no reason to
discontinue administratively our existing policy of allowing PIP for
qualified SNFs, though we may choose to evaluate its continuing need in
the future.
Therefore, we are permitting the continued availability of PIP for
services of SNFs paid under the PPS. For those services, PIP is based
on estimated prospective payments for the year rather than on estimated
cost reimbursement. An SNF receiving prospective payments, whether or
not it received PIP prior to receiving prospective payments, may
receive PIP if it meets the requirements in Sec. 413.64(h) and receives
approval by its intermediary. Likewise, if an intermediary determines
that an SNF which received PIP prior to
[[Page 41656]]
receiving prospective payments is no longer entitled to receive PIP, it
will remove the SNF from PIP. As provided in Sec. 413.64(h)(5),
intermediary approval of PIP is conditioned upon the intermediary's
best judgment as to whether payment can be made under the PIP method
without undue risk of its resulting in an overpayment to the provider.
An SNF can receive Medicare payment for the bad debts of Medicare
beneficiaries if it meets the requirements at Sec. 413.80 and
implementing instructions. Payment for these bad debts are not included
in the prospective payments but rather are claimed on the Medicare cost
report. Also, some SNFs may incur costs for an approved medical
education program or may incur other costs that are not included in the
prospective payment. Payment for these costs are determined based on
the completion of a Medicare cost report. Because final payment for
Medicare bad debts and for costs paid outside the prospective payment
system is not determined until the cost report is settled, it is
appropriate that SNFs which receive prospective payments should receive
estimated interim payments during the year for bad debts and for costs
paid outside the prospective payment system. Payments for these costs
are made in equal biweekly payments in the same manner as PIP. There is
no requirement for an SNF to meet in order to receive biweekly payments
for these costs because it is the only type of interim payment made for
them.
The new regulations providing for PIP for SNFs receiving
prospective payments and for biweekly interim payments for costs
outside the prospective payment system closely follow the regulations
at Sec. 412.116 which provide for PIP for hospitals receiving
prospective payments under section 1886(d) of the Act, as adjusted to
remove provisions specifically applicable to those hospitals. As with
Sec. 412.116 for hospitals and Sec. 413.64 for SNFs under the previous
cost-based system, these regulations for SNFs also provide for
accelerated payments in certain situations.
2. Corrections
Comment: We received several comments with questions and
suggestions regarding the policies governing the correction of MDS
errors and billing errors.
Response: The MDS corrections policy is set forth in the State
Operations Manual (SOM, HCFA Pub. 7) by HCFA's Center for Medicaid and
State Operations. The corrections policy applies to all users of the
MDS and, thus, is beyond the scope of this regulation. We address
issues and provide clarification of Medicare policy regarding how to
correct or adjust SNF Part A bills to the Medicare program in the
Provider Reimbursement Manual.
3. Other Medicare Required Assessment (OMRA)
Comment: There were a number of questions about the OMRA. These
included questions about when the OMRA is to be performed and whether
it is a full or comprehensive assessment.
Response: An OMRA is required 8 to 10 days after rehabilitation
therapy is discontinued for Medicare beneficiaries who have been
receiving rehabilitation therapy in the SNF. Specifically, there is
confusion regarding whether or not this assessment type is required in
certain circumstances. For example, when the beneficiary has no further
need for skilled care and has been moved out of the Medicare-certified
portion of the institution before the eighth day following the
cessation of rehabilitation services or when one or two of three
therapy services are discontinued. As stated in our corrections notice
to the interim final rule, published in the Federal Register on October
5, 1998 (63 FR 53301), the OMRA is not required to be a comprehensive
assessment. There are no PPS requirements for comprehensive assessments
(that is, those including Resident Assessment Protocols (RAPs)).
Comprehensive assessments are only required for clinical reasons, as
they have been since implementation of the nursing home reform
requirements enacted in the Omnibus Budget Reconciliation Act of 1987
(OBRA 87, Public Law 100-203).
An SNF must perform an OMRA only for those beneficiaries who
continue to have skilled care requirements after their rehabilitation
therapy services have been discontinued. For those beneficiaries who
are not ready for discharge from the facility, and who continue to
require a Medicare covered skilled level of care, an OMRA must be
performed in order to obtain an accurate classification into one of the
non-therapy RUG-III groups.
The assessment reference date of the OMRA must be set on day 8, 9,
or 10 after the last day any rehabilitation therapy services were
provided. This timing ensures that no therapy minutes will be captured
on the OMRA and that the beneficiary's new classification will be into
one of the non-therapy RUG-III groups. An OMRA will always result in
classification into a non-therapy RUG-III group. For the days between
the cessation of rehabilitation therapy and the assessment reference
date of the OMRA, the beneficiary continues to be covered at the
therapy RUG-III group level to which he or she was classified before
cessation.
We expect that there will be many cases in which the beneficiary
will be discharged from the facility shortly after rehabilitation
therapy services end. Before PPS, beneficiaries were often discharged
from the SNF immediately upon the discontinuation of rehabilitation
therapies. Likewise, many SNF residents who received rehabilitation
therapy services under Medicare Part A were moved to a non-Medicare
level of care following the cessation of therapy services. These same
patterns are expected to continue under the PPS.
In circumstances in which the beneficiary is discharged from the
facility (or from the Medicare-certified portion of a larger,
noncertified institution) before the eighth day following the end of
all rehabilitation therapy, there is no expectation by Medicare that an
OMRA will be performed. If the beneficiary remains in the Medicare-
certified facility through the eighth day following rehabilitation
therapy discontinuation, there must be some clinical reason for his or
her continuing skilled stay that is supported by documentation in the
medical record. We realize that there will be cases in which the
beneficiary stays in the SNF for a number of days after rehabilitation
therapy ends, in order for the facility staff to verify that his or her
status is stable and to assure that the plans for his or her next
destination are appropriate and in the best interests of the
beneficiary.
By contrast, always waiting to perform the OMRA to verify that the
beneficiary is stable and no longer in need of skilled nursing or
therapy services is not appropriate. A pattern of OMRA assessments
immediately preceding discharge from the facility, or from the Medicare
level of care within the facility, would indicate that perhaps the
facility is at times using those 8 to 10 days inappropriately. We
believe it is unfair to the beneficiary to use any of the 100 Medicare
SNF benefit days available in a benefit period unless he or she is
actually in need of skilled services. Likewise, it is an inappropriate
use of Medicare trust fund dollars for Medicare to pay for SNF days
that are not needed by the beneficiary.
The beneficiary should not be kept in a Medicare Part A stay if
skilled services are neither needed, nor being provided. We believe
that nursing homes' clinical staff should know when there are no
[[Page 41657]]
skilled services being provided to a beneficiary. Our guidelines
provided in the PRM (Transmittal 405) reinforce the expectation that
facilities may, and in fact are expected to, act in the best interest
of the beneficiary with regard to use of the beneficiary's limited SNF
benefit days, by ending Medicare Part A coverage appropriately. (See
also the discussion below regarding circumstances that serve to
discontinue a presumption that the SNF level of care requirement is met
by a beneficiary who has classified into one of the upper 26 RUG-III
groups.)
F. Certification and Recertification
Comment: We received a few comments regarding the statutory
requirement for initial certification and periodic recertification as
to level of care, as required under section 1814(a)(2) of the Act.
Response: The comments regarding this particular provision are
addressed later, in the discussion on coverage and level of care
determinations under the SNF PPS. However, we would like to take this
opportunity to clarify that the required certification and
recertification statements are not the same as any requirements
specifically related to the plan of treatment for therapy that is
required for purposes of coverage, or to the overall requirement for
the multidisciplinary plan of care required by the long-term care
facility requirements for participation at section 1819(b)(2) of the
Act.
G. MDS Scheduling Requirements
1. Grace Days
Comment: We received several comments asking about the appropriate
use of the 3-day grace period provided for the Medicare 5-day
assessment. There is some confusion about when use of the grace days
could result in the facility being at a high risk for an audit.
Response: Days six, seven, and eight, of the Medicare covered stay,
were provided as grace days for setting the assessment reference date
for the Medicare 5-day assessment. This assessment is to have an
assessment reference date (MDS 2.0 Item A3a) of any day one through
eight of the Medicare Part A stay. Days one through five are optimal
but days six through eight are also acceptable, and for some residents
may actually be more appropriate; for example, to allow maximum
flexibility for nurses to determine when to set the assessment
reference date for the beneficiary's MDS, and thereby lessen the burden
of the increased frequency of assessments that accompanied the PPS.
Thus, the resident can be assessed using any one of these first eight
days as the assessment reference date for the Medicare-required 5-day
assessment.
However, we discourage the routine use of grace days for assessing
every Medicare admission. We plan to identify patterns of inappropriate
use as we gain a better understanding of what facilities' practice
patterns are. When a facility routinely uses a grace day as the
assessment reference date for the 5-day assessment, it loses the
cushion that these days provide against performing the MDS later than
day eight and, thus, risks being faced with payment at the default
rate.
At this time our main interest is to encourage facilities to
perform assessments timely and to recognize the grace days as a cushion
and to use them as such, rather than as deadlines for setting each
beneficiary's assessment reference date. The grace days are also
provided to offset any incentive that facilities may have to initiate
therapy services before the beneficiary is able to tolerate that level
of activity.
Our discussion in the interim final rule about the possibility of
audits was intended to address the possible practice of routinely using
grace days for Medicare assessments. We were cognizant that the routine
use of a grace day for the 5-day assessment would pose a temptation to
back-date the assessment fraudulently when day eight was missed. We
believed that any facility that routinely used grace days for the
required assessments was liable to have assessments billed at the
default rate; and that the absence of default rate billings in the
facility's claims might indicate that some misrepresentation of the
assessment reference dates had occurred.
Unlike the routine use of grace days described above, we do expect
that many beneficiaries who classify into the rehabilitation category
will have 5-day assessment reference dates that fall on grace days.
There are many cases in which the beneficiary is not physically able to
begin therapy services until he or she has been in the facility for a
few days. Thus, for a beneficiary who does not begin receiving
rehabilitation therapy until the fifth, sixth, or seventh day of his or
her SNF stay, the assessment reference date may be set for one of the
grace days in order to capture an adequate number of days and minutes
in section P of the current version of the MDS to qualify the resident
for classification into one of the rehabilitation therapy RUG-III
groups.
Another reason for the provision of three grace days for the 5-day
assessment was to make it possible for beneficiaries to classify into
the two highest RUG-III rehabilitation sub-categories. Classification
into the Ultra High and Very High Rehabilitation sub-categories is not
possible unless the beneficiary receives the sub-category's minimum
level of services during the first seven days of the stay.
We also intended to minimize the incentive to facilities to provide
too high a level of rehabilitation therapy to newly admitted
beneficiaries. Having these extra few days allows time for those
beneficiaries who need it, to stabilize from the acute care setting and
be prepared for the beginning of rehabilitation in the SNF. We expect
facilities will not compromise any beneficiary's health by beginning
rehabilitation therapy prematurely or at a level that is too rigorous
for the individual's status. In summary, use of grace days is
acceptable and permitted for patients with any condition. However, a
facility that uses grace days routinely may be subject to audit to
determine that assessment reference dates are accurately reflected.
Comment: One commenter requested that we modify the statement at
section II.B.7 of the interim final rule that states SNFs ``must submit
the Resident Assessment Protocols (RAPs) with either the 5-day or the
14-day assessment'' to indicate that the SNFs must submit the completed
RAP Summary Form, section V of the MDS with either the 5-day or 14-day
assessment.
Response: This may be a helpful clarification for providers;
however, we want to be certain that providers fully understand this
requirement. We will take this opportunity to make clear that the RAPs
are not a PPS requirement. The requirements for completion of section V
and the care planning responsibilities of facility clinical staff are
unchanged by the PPS. We included the clinical requirement for RAPs in
the interim final rule in an effort to help providers to understand how
the Medicare required SNF PPS assessments coordinate with the required
clinical assessments.
The requirement for RAPs is entirely outside of the SNF PPS. In
fact, if the clinical initial admission assessment (item AA8a of the
MDS 2.0 = ``01'') was performed before the beneficiary started his
Medicare covered SNF stay, neither the Medicare required 5-day, nor the
Medicare 14-day assessment is required to have a completed section V.
There are no care planning requirements associated with any full MDS
assessment performed solely for the purpose of complying with the
Medicare assessment schedule for a Part
[[Page 41658]]
A Medicare beneficiary's SNF stay. The Medicare PPS requirements are
separate from the clinical requirements. However, we have designed the
Medicare requirements so that an SNF can coordinate the scheduling of
assessments to avoid duplication of effort.
2. Completion and Locking
For Medicare payment, we are requiring that any assessment,
including the 5-day, must be ``completed'' (that is, signed by all
members of the care team) within 14 days of the assessment reference
date (MDS item A3a). That is, the completion date at MDS item R2b, must
be a date that is within 14 days of the date at A3a. Then the
assessment must be ``locked'' within seven days of the date at R2b, and
transmitted to the State in which the SNF operates within 31 days of
the final lock date (State Operations Manual, HCFA Pub. 7).
However, there are other considerations to keep in mind. There is
still the clinical requirement that an Initial Admission Assessment
must be ``completed'' by the 14th day of the nursing home stay. This
means that for a Medicare beneficiary who is newly admitted to the SNF
for a covered Part A stay, the SNF must complete a comprehensive MDS by
day 14, regardless of the assessment reference dates on the Medicare-
required 5 day and 14 day assessments.
As has been the case since the OBRA 1987 requirements were
implemented, a comprehensive assessment (Initial Admission Assessment)
is due to be completed by the 14th day of the SNF stay. In addition,
for Medicare beneficiaries in the SNF for a covered Part A stay, a 5-
day assessment must be performed, with an assessment reference date on
any day one through eight of the Medicare Part A covered stay, and must
be completed within 14 days of the assessment reference date. Also, by
the end of the second week in the Medicare Part A covered stay, the
Medicare 14-day assessment must be performed. This assessment must have
an assessment reference date of any day 11 through 19 (including the 5-
day grace period provided for this assessment).
Given these requirements during the first weeks of the SNF stay,
and considering that Medicare Part A coverage often begins on the day
of admission, we believe that in many cases nursing homes will opt to
complete a single assessment to satisfy the requirements for both the
5-day (or 14-day) assessment and the Initial Admission Assessment. In
this example, the Medicare 5-day assessment, with an assessment
reference date of any day, one through eight of the stay, will be a
comprehensive assessment and will have to be completed within 14 days
of the start of the SNF stay. The day of admission is counted as day
one. The assessment must comply with the requirements for the Initial
Admission Assessment. That is, it must be a comprehensive assessment,
including the RAPs.
When the Medicare 5-day assessment is also used to fulfill the
requirement for the Initial Admission Assessment, the Medicare 14-day
assessment may be performed using any day 11 through 14 of the stay as
the assessment reference date (MDS item A3a) and, in addition, the SNF
may use the five available grace days (through day 19), if necessary.
The Medicare 14-day assessment must then be completed (dated at item
R2b) 14 days after the assessment reference date, locked in seven days,
and so forth. Keep in mind that there are no grace days for completion
of the Initial Admission Assessment. As always, the Initial Admission
Assessment must be completed by day 14. Another factor to consider in
timing completion and locking of assessments is that bills may only be
sent for assessments that have been locked.
3. Discharge and Leave of Absence
Comment: One commenter asked for a definition of ``leave of
absence'' as distinguished from a ``discharge.''
Response: Although this is not a distinction that is specific to
the PPS, we would like to define these terms in the context of
clarifying another somewhat misunderstood aspect of Medicare coverage,
the so-called ``midnight rule'' and the clinical requirements for
Discharge forms and Re-Entry Tracking forms. We received questions from
other commenters on how to handle cases in which the beneficiary is out
of the facility at the time of census-taking, midnight. These
activities are all interrelated and have generated many questions
during the initial phase of PPS implementation. There are a number of
reasons why a beneficiary may leave the SNF for a ``leave of absence.''
These include a temporary home visit, a temporary therapeutic leave, or
a hospital observational stay of less than 24 hours in which the
beneficiary is not formally admitted to the hospital and is not
discharged from the SNF. In each of these situations, there is no
requirement for the SNF to complete a Discharge or a Re-Entry Tracking
form.
When a beneficiary goes to an acute care hospital emergency room
(ER) during his or her SNF stay and is in the ER at midnight, there is
an additional aspect with regard to Medicare payment. According to
Medicare rules, the day preceding the midnight on which the beneficiary
was absent from the facility becomes a day for which the SNF may not
bill Part A of Medicare. This is known as the ``midnight rule.''
However, for clinical purposes, as long as the beneficiary returns to
the facility in less than 24 hours, was not admitted to the hospital,
and was not discharged from the SNF, this time in the ER is considered
a ``leave of absence'' and requires no discharge form.
Likewise, from the perspective of Medicare payment under PPS, there
is no requirement for any additional assessment. The day preceding the
midnight is not a covered Part A day and, therefore, the Medicare
assessment ``clock'' is altered by skipping that day in calculating
when the next Medicare assessment is due. From a clinical standpoint,
the leave of absence does not affect the ``clock'' for the clinical
assessments.
For example, if the beneficiary is due for his 30-day assessment on
March 30 (day 30 of his Medicare covered stay), but he spends midnight
of March 27 in the ER, day 30 of his Medicare Part A covered stay now
falls on March 31, as March 27 does not count as one of the
beneficiary's 100 days of Medicare SNF care. In other words, the count
of days in the Medicare covered stay changes when there is a noncovered
day because the facility cannot count that day as one of the
beneficiary's benefit days. Given the flexibility of the assessment
windows for the Medicare assessments, altering the count of days as
described here should have no more than a negligible effect on
assessment scheduling for facilities.
Of course, a beneficiary who is required to be in the ER at
midnight may well have experienced a significant change in clinical
status. In that case, the facility must comply with the clinical
requirement to complete a Significant Change in Status Assessment when
the beneficiary returns to the SNF. The Medicare payment requirements
and the midnight rule have no bearing on this requirement for
completion of a Significant Change in Status Assessment.
Alternatively, if the beneficiary is in the ER for more than 24
hours, or is actually admitted to the hospital or discharged from the
SNF, a Discharge Tracking form is required. In addition, when the
beneficiary returns to the SNF, a Re-Entry Tracking form is required,
and a Return/Readmission Assessment (MDS 2.0 item A8b=5) must be
performed to restart the Medicare assessment schedule. The Return/
[[Page 41659]]
Readmission Assessment fulfills the requirement for a Medicare 5-day
assessment in this situation, and the next required assessment would be
the Medicare 14-day assessment.
Finally, with regard to MDS scheduling requirements, we are taking
this opportunity to clarify the regulations text at Sec. 413.343(b),
which specifies the assessment schedule required under the SNF PPS. The
current language requires the performance of such assessments on the
5th, 14th, 30th, 60th, and 90th days ``following admission.'' However,
as indicated in the preceding discussion, it is not the admission date
per se that determines the start of the Medicare assessment schedule,
but rather, the commencement of Medicare-covered care in the SNF.
Although Medicare-covered posthospital SNF care often does begin
immediately upon a beneficiary's admission to the SNF, the existing
language fails to address those situations in which such care does not
commence until sometime after the day of admission. The Medicare
required assessment schedule is based only on those days in the
Medicare Part A covered stay and, thus, cannot be scheduled based on
the day of admission per se. Therefore, we are revising the language in
the regulations text to take into account the possibility that a
beneficiary's ``posthospital SNF care'' (that is, SNF care that is
covered under Medicare Part A) may begin subsequent to the day of his
or her actual admission to the facility. The Medicare required
assessments are to be performed so that, using the first day of
posthospital SNF care as day 1, there is a full MDS assessment on the
5th day, the 14th day, the 30th day, the 60th day and the 90th day of
the SNF stay.
H. Other Medicare MDS Requirements
In the interim final rule, we stated that collection of medication
information using a revised version of section U of the MDS would be
required under PPS, beginning October 1, 1999. The criteria we
established for this process anticipated that a refined section U would
be developed to facilitate streamlined data collection, maximize data
accuracy, and minimize burden to facilities. We have, to date, made
considerable progress in our work on the section U refinements.
However, due to systems constraints resulting from the need to achieve
Year 2000 (Y2K) compliance (see the further discussion of the Y2K issue
below in the context of the partial delay in SNF consolidated billing
implementation), we will not be able to implement the refined version
of section U until after the first months of the year 2000 have passed.
Therefore, we have determined that the most straightforward and least
burdensome approach is to defer section U implementation until October
1, 2000.
I. Medical Review
Comment: We received several comments requesting that we publish
the medical review criteria to be used now that PPS is in place. Also,
there were requests that we institute consistent medical review
policies across FIs.
Response: We are currently formalizing the medical review criteria
that will be used in the review of SNF PPS bills. Certainly, one of the
primary goals of the new policy is to provide reviewers with guidelines
that will facilitate consistent national medical review policy, one of
the initial goals of implementing the PPS. We recently published a PM
(PM transmittal No. A-99-20, May 1999) to instruct medical reviewers in
the new process. One aspect of the reviews of SNF PPS bills to be
performed by the FIs focuses on the MDS information and its consistency
with the documentation in the rest of the medical record. In addition,
the review process focuses on identification of instances in which
inappropriate services were provided or in which the beneficiary did
not meet the requirements for Medicare Part A coverage in an SNF.
Comment: There were questions about how the MDS information might
be matched to claims data to facilitate monitoring or auditing of SNF
reporting practices.
Response: The process for matching the bill to the MDS takes place
at HCFA. We use the bill data forwarded to us by the FIs to match to
the appropriate MDS from the HCFA MDS Repository. From these matched or
unmatched files, we generate various reports for use by HCFA and the
FIs in their audit functions.
Comment: We received a comment requesting that we instruct FIs to
give demand bills a high priority within the review process and to
process these submissions no later than 30 days from the date of the
request.
Response: The policy governing how demand bills will be processed
under the SNF PPS will be determined by considering the FIs' overall
workloads, of which the SNF PPS represents only a small portion.
Comment: A commenter requested that we generate and disseminate to
the nursing home industry and to the payers, the full process of
transmission of clinical Medicare Part A information and claims
submission requirements, including documentation requirements needed by
the fiscal intermediary for late assessment reference dates.
Response: The requirements for the transmission of all MDS
assessments can be found in the Federal Register published on December
23, 1997 (62 FR 67174). There are no separate requirements for Medicare
Part A information. The facility must submit the MDS to the State in
which it operates and the State transmits it to us. In contrast, the
SNF submits claims to the FI, as they did before PPS. Each claim is
transmitted to us by the FI after it has been paid, and we match the
claim to the appropriate MDS. The FI may request any information it
deems to be necessary to verify the level of services billed by the
facility.
Comment: We received one comment suggesting that we should exempt
from post-payment review or on-site audit, any 5-day assessment with an
assessment reference date on one of the grace days that results in the
beneficiary's classification into a Low Rehabilitation group.
Response: This comment reflects a misunderstanding of our policy
regarding grace days. As explained above in this final rule, the grace
days are available for use, without penalty. The reference to audits in
the interim final rule was not intended to preclude any appropriate use
of the grace days. Therefore, although the comment indicates that
beneficiaries who classify into one of the low rehabilitation groups
should be exempt from review (presumably because of the requirement for
six days of nursing rehabilitation services in order to qualify for
this RUG-III group), there is no reason for us to consider excluding
any type of Medicare SNF claims from post-payment review.
Comment: Several commenters cited the BBA mandate that we must
implement a quality monitoring system. Section 4432(c) of the BBA
requires the Secretary to establish a medical review process to examine
the effects of the SNF and PPS related provisions on the quality of SNF
services furnished to Medicare beneficiaries, with particular emphasis
on the quality of non-routine covered services and Medicare-covered
physician services.
Response: The quality of care provided to beneficiaries is
paramount in our view. We will use our existing survey and enforcement
activities (along with the new techniques and data that are now
becoming available with the advent of prospective payment) to ensure
the quality of SNF services provided to Medicare beneficiaries.
[[Page 41660]]
In addition to the more traditional medical review process we are
establishing, as described above, we have also begun work toward the
establishment of a quality medical review process that is specifically
designed to fulfill the BBA mandate. We have developed an SNF PPS
Quality Medical Review Pilot project that uses MDS and other data to
monitor and target quality and program integrity problems. This
monitoring will be accomplished by testing a more integrated and
cooperative approach to medical review of SNF services using several
pilot states to partner Peer Review Organizations (PROs), FIs, State
Survey Agencies, and Medicaid agencies to assess, monitor, and improve
the quality of Medicare SNF services under the PPS.
We are implementing a two-tier strategy using the PRO Special
Project process. This strategy is expected to strengthen program
integrity and quality review in SNFs, promote SNF quality improvement,
deter fraud and abuse, and enhance beneficiary protection. The first
tier is a statistical analysis PRO (StatPRO), that is testing a data
driven approach which analyzes MDS data to flag potential quality of
care and program integrity problems. The MDS data set will be linked
with other HCFA data sets (such as, Medicare Part A and B claims,
OSCAR-Online Survey Certification and Reporting System, HCIS-HCFA
Customer Information System, FI payment, and program integrity data) to
identify patterns and trends in care. The second tier of the project
pilot tests a data based approach using StatPRO and other data to
examine State trends and variations in SNF data and patient care
through the collaboration of quality medical review (QMR) teams
composed of the PRO, FI, and State survey agency in two States (NC and
CO) and in three States (AZ, MA, and MD) the Medicaid Agency is added.
The QMR pilots will field test an integrated model where they will work
together to better understand each other's program integrity and
quality review roles, develop collaborative approaches within their
regulatory authority, test a targeted clinical data driven intervention
strategy, target beneficiary protection, and deterrence of fraud and
abuse. Finally, we will use the vast data resources available from the
national MDS data repository to support our quality initiatives.
J. Rehabilitation Therapy Services and PPS
Comment: Many commenters questioned when rehabilitation therapy may
begin in the SNF stay.
Response: Although rehabilitation therapy may begin as early as day
one of the Medicare Part A SNF stay, we note that all of the
rehabilitation therapy services (PT, OT, and SLP) must meet each of the
following criteria in order to be coded in the MDS as minutes of
rehabilitation therapy:
The service must be ordered by a physician.
The therapy intervention must relate directly and
specifically to an active written treatment regimen established by the
physician after any needed consultation with the qualified
rehabilitation therapy professional and must be reasonable and
necessary to the treatment of the beneficiary's illness or injury
(section 230 of the Medicare Skilled Nursing Facility Manual, HCFA Pub.
12).
An appropriately licensed or certified individual must
provide or directly supervise the therapeutic service and coordinate
the intervention with nursing services.
Even though these three criteria are not new with PPS, the
establishment of a new payment system has heightened interest in
understanding and satisfying these standards. For instance, in addition
to the commenters' question about when rehabilitation therapy services
can begin, we have received many questions during the first year of PPS
implementation regarding standards for supervision of rehabilitation
therapy assistants and aides, and many questions regarding the
physician signature requirements for the rehabilitation therapy plan of
treatment. Accordingly, we will take this opportunity to provide
further clarification of those issues. The rehabilitation therapy
service must be ordered by a physician. The Medicare policy regarding
the requirement for the physician signature on the therapy plan of
treatment has not changed. As is stated in the SNF Manual,
rehabilitation therapy services provided to a beneficiary in a SNF must
be directly and specifically related to an active written treatment
plan established by the physician after any needed consultation with a
qualified therapist. Implementation of the PPS did nothing to alter
this guideline. We will, however, take this opportunity to clarify what
is required for coverage of rehabilitation therapy.
As stated in the language in the SNF Manual cited in the preceding
paragraph, Medicare requires the physician to make decisions regarding
the amount and intensity of rehabilitation therapy services provided to
Medicare beneficiaries in SNFs after consulting with the professional
therapist. This requirement is based on our commitment to ensuring
quality care for Medicare beneficiaries, and also reflects the
requirements for participation (at section 1819(b)(6)(A) of the Act),
which specify that the medical care of every SNF resident must be
provided under the supervision of a physician. Our policy has not
changed, and we are taking this opportunity to clarify that policy. The
physician's responsibility in the development of a rehabilitation
therapy plan of treatment ensures that the services to be provided will
not exceed the beneficiary's abilities as constrained by his clinical
status. In addition, we believe that the physician's clinical judgement
is an important aspect in preventing injuries that can result from the
provision of inappropriate rehabilitation therapy. For example, the
rehabilitation plan of treatment for a beneficiary with a hip fracture
should be developed with an awareness of his or her limitations due to
severe osteoporosis and emphysema. Unless the beneficiary's entire
clinical condition is taken into account, there is a significant risk
of injury and of a compromised medical status.
We expect that the same care will be taken by the physician and SNF
staff to document physician responsibility for developing the therapy
plan of treatment, including precautions, that is reasonably expected
to be taken for any other element of the medical record. We realize,
however, that in the SNF setting there may not be a physician on the
premises every day. Therefore, Medicare allows the professional
therapist to develop a suggested plan of treatment and to begin
providing services based on that plan prior to obtaining the
physician's signature on the plan. We continue to require that the plan
of treatment must be a physician's responsibility after any needed
consultation with a qualified therapist, and that the requirement for
physician verification of the suggested plan of treatment will be
obtained within a reasonable amount of time. However, a physician
signature must be obtained before the facility bills Medicare for
payment for the rehabilitation therapy services provided to the
beneficiary based on the plan of treatment he or she has approved. In
this way, the facility can be sure that the level of therapy for which
it bills Medicare is the level the physician deems to be medically
necessary. We expect that the type and intensity of therapy billed will
always match the type and intensity of therapy on the signed therapy
plan of treatment.
We understand that many physicians use the fax to participate
actively in the review of written plans of care and so
[[Page 41661]]
believe that it is appropriate to accept physicians' faxed signatures
for the plan of treatment. As always, whenever the plan of treatment is
altered in any way, the modification must be made in writing. If the
physician is not the person making the modification, the therapist who
is making the change must notify the physician timely, and the
physician must sign the change within a reasonable amount of time.
In addition to the issues discussed above, we would like to clarify
the requirements for the rehabilitation therapist's initial evaluation
of a Medicare beneficiary in a SNF stay and the requirements for
licensed therapist supervision of therapy assistants and therapy aides
when they provide therapy services to Medicare beneficiaries. The
initial evaluation, performed by the licensed therapist and necessary
for the development of the plan of treatment, must be performed during
the beneficiary's SNF stay. It is not acceptable to use an evaluation
that was performed for instance, in the acute care hospital or the
rehabilitation hospital setting as the evaluation of the beneficiary in
the SNF, because the beneficiary's status must be evaluated as he or
she presents in the SNF setting. The evaluation, and the resultant plan
of treatment, developed in the acute care hospital or rehabilitation
hospital is relevant to the specific type of setting and is not
interchangeable with an evaluation and plan of treatment developed for
the beneficiary in the SNF setting. The time that it takes for the
therapist to perform this evaluation may not be recorded as minutes of
therapy received by the beneficiary.
An appropriately licensed or certified individual must provide or
supervise the therapeutic service and coordinate the intervention with
nursing services. As stated above, Medicare expects that services will
be provided by, or supervised by, appropriately licensed or certified
professionals.
Physical and occupational therapy assistants may provide
rehabilitation therapy services under the supervision of the
professional therapist. A rehabilitation therapy assistant must be
under the general supervision of a professional therapist who is
accessible while the assistant is providing services to the
beneficiary. The therapy assistant cannot supervise a therapy aide. It
is up to the professional therapist to ensure that the assistant is
capable of performing therapy services without the more stringent
``line-of-sight'' level of supervision required by therapy aides.
A therapy aide must be supervised personally by the professional
therapist in such a way that the therapist has visual contact with the
aide at all times. Therapy aides are not to perform any services
without ``line-of-sight'' supervision. Similarly, a therapy aide must
never be responsible for provision of group therapy services, as this
is well beyond the scope of services that they are qualified to
provide.
A therapy student who is participating in field experience must
also be under the ``line-of-sight'' level of supervision of the
professional therapist. Even though these students may become licensed
therapists within months of the field training portion of their school
program, they are not licensed or certified for practice in an
unsupervised status. Further, none of the minutes of therapy services
provided by the students may be recorded on the MDS as minutes of
therapy received by the beneficiary. Medicare recognizes the costs
associated with approved educational activities as a pass-through (see
Sec. 413.85).
Comment: Many commenters had questions about the correct counting
and recording in the MDS of minutes of rehabilitation therapy.
Response: Section P of the current version of the MDS contains the
items that capture the amount of time each nursing home resident spends
receiving rehabilitation therapy. Thus, it is in section P that the
clinician records the number of days and minutes of rehabilitation
therapy (PT, OT, ST) received by the individual beneficiary during the
past seven days, or since admission to the SNF, whichever is shorter.
The directions for completion of section P instruct the assessor to
look back over the ``last 7 calendar days,'' counting only post
admission days and minutes of therapy, when counting the days and
minutes of rehabilitation therapy received by the beneficiary. The
number of minutes recorded here must be the actual number received by
the beneficiary. Seven calendar days are, by definition, consecutive
days.
In the case of a Medicare 5-day assessment, however, the nurse
assessor will choose as the assessment reference date (MDS item A3a),
any day one through eight of the covered stay, and will look back over
the prior seven calendar days (or over the days since admission if
there are fewer than seven days since admission) to count the number of
days upon which more than 15 minutes of therapy were received and the
number of minutes that were received by the beneficiary during those
days. It is irrelevant if there is a break in therapy (for example, for
a weekend or holiday) during that time. For example, if day five of the
stay is chosen as the assessment reference date, the assessor would
look back to admission to count the patient's PT, OT, and ST time. If
the beneficiary received PT for 50 minutes on both the second and fifth
days of the Part A covered stay, that would be recorded as two days of
PT and 100 total minutes of PT. The actual number (not rounded) of
minutes must be recorded on the MDS. Minutes cannot be rounded to
multiples of 10 or 15.
The rehabilitation therapy time reported on the MDS is a record of
the time the beneficiary spent receiving therapy services, not a record
of the therapist's time. As stated in the August 1996 publication, Long
Term Care Resident Assessment Instrument Questions and Answers, Version
2.0, the beneficiary's ``therapy time starts when he begins the first
treatment activity or task and ends when he finishes with the last
apparatus and the treatment is ended.''
Set-up time is included, as is time under the therapist's or
therapy assistant's direct supervision. PT, OT, and ST provided outside
the building may be counted and recorded on the MDS, as long as the
staff who provide therapy are qualified to provide the service. In the
State Operations Manual (SOM, HCFA Pub. 7) Transmittal #272, pp. R64,
``The therapy treatment may occur inside or outside the facility.''
This includes the time it takes for the therapist to take the
beneficiary to his or her home for a home visit before discharge as
long as the therapist uses the time in the car to teach or discuss the
beneficiary's treatment or treatment goals, and for family conferences
when the beneficiary is also present.
Whether the time spent evaluating the beneficiary is counted
depends on whether it is the formal initial evaluation or an evaluation
performed after the course of therapy has begun. The time it takes to
perform the formal initial evaluation and develop the treatment goals
and the plan of treatment may not be counted as minutes of therapy
received by the beneficiary. However, a reevaluation--that is, a hands-
on examination of the beneficiary and not simply an update to the
documentation and revision of the care plan--that is performed once a
therapy regimen is underway (for example, evaluating goal achievement
as part of the therapy session) may be counted as minutes of therapy
received.
This policy was established because we do not wish to provide an
incentive for facilities to perform initial evaluations for therapy
services for patients who have no need of those specialized services.
However, we
[[Page 41662]]
believe that the initial evaluation is an appropriate cost of doing
business. Therefore, the cost of the initial assessment is included in
the payment rates for all Medicare beneficiaries in covered Part A SNF
stays.
For beneficiaries who do not classify into one of the
Rehabilitation RUG-III groups, the therapy non-case-mix component is
part of the daily rate. The amount, $0.91, is reflected in the rate for
all of the non-therapy RUG-III groups.
The Long Term Care Resident Assessment Instrument Questions and
Answers Version 2.0, clarifies how to account for therapy provided to
an individual within a group setting. It states that if the group has
four or fewer participants per supervising therapist (or therapy
assistant under general supervision by the therapist) then it is
appropriate to report the full time as therapy for each patient. The
example used is that of a therapist working with three patients for 45
minutes on training to return to the community. Each patient's MDS
would reflect receipt of 45 minutes of therapy for this session.
Although we recognize that receiving PT, OT, or ST as part of a
group has clinical merit in select situations, we do not believe that
services received within a group setting should account for more than
25 percent of the Medicare resident's therapy regimen during the SNF
stay. For this reason, no more than 25 percent of the minutes reported
in the MDS may be provided within a group setting. This limit is to be
applied for each therapy discipline; that is, only 25 percent of the PT
minutes reported in the MDS may be minutes received in a group setting
and, similarly, only 25 percent of the OT, or the ST minutes reported
may be minutes received in a group setting.
To summarize, the minutes of therapy provided by at least one
supervising therapist (or therapy assistant under general supervision
by the therapist) within a group of four or fewer participants, may be
fully counted, provided that those minutes account for no more than 25
percent of the resident's weekly therapy in that discipline, as
reported in the MDS. The supervising therapist may not be supervising
any individuals other than the four or fewer individuals who are in the
group at the time of the therapy session. Naturally, provision of group
therapy time in excess of the 25 percent threshold is allowable, but
those minutes may not be counted in section P of the MDS for purposes
of RUG-III classification for Medicare Part A beneficiaries.
Under section 1814(a)(2)(B) of the Act, a covered SNF level of care
is defined in terms of those services that necessitate the involvement
of skilled personnel, are needed and received on a daily basis and, as
a practical matter, can be provided only in an SNF on an inpatient
basis. Additionally, the requirements for participation at section
1819(b)(4)(A) of the Act require an SNF to furnish the full range of
nursing and specialized rehabilitative services needed to attain or
maintain each resident's highest practicable state of well-being, in
accordance with the comprehensive plan of care. This means that there
are to be no limits placed on the services to be provided to the
beneficiary due to the facilities interpretations of how many minutes
are ``allowed'' by the given RUG-III group.
The RUG-III classification system uses minimum levels of minutes
per week as qualifiers for classification into the rehabilitation
therapy groups. These minutes are minimums and are not to be used as
upper limits for service provision. Similarly, there are instances in
which beneficiaries in the so-called ``clinical categories,'' Extensive
Services, Special Care and Clinically Complex, will need some limited
amounts of rehabilitation therapy services, which they should receive,
even though they may not require a level that would qualify them for
one of the rehabilitation groups. The SNF PPS is based on averages, and
a facility that continues to provide services as they are needed by its
beneficiaries should receive payments that, in the aggregate, are
adequate to pay for those services. Any policy of holding therapy to
the bare minimum, regardless of beneficiary need, is inconsistent with
the statutory requirements discussed above, and will result in poor
outcomes, longer lengths of stay, and a degradation in the facility's
quality of care.
Section T of the current version of the MDS must be included with
each Medicare PPS assessment, but in the case of a Medicare five day
assessment, the clinician captures minutes of therapy that are
anticipated for the beneficiary during the first two weeks of the
nursing home stay. This makes it possible for the beneficiary to
classify into the appropriate RUG-III rehabilitation group based on the
anticipated receipt of rehabilitation therapy, even though the
assessment is done during the first few days of the SNF stay.
Section T of the current version of the MDS contains three items,
T1b, T1c and T1d, in which the assessor is to record ``ordered
therapies.'' The T1b item asks, ``Has physician ordered any of the
following therapies to begin in FIRST 14 days of stay--PT, OT, or
speech pathology service?'' If the answer to this question is yes, then
the number of expected minutes and days is completed in items T1c and
T1d of the current version of the MDS. If the answer is no, then there
is nothing to report in T1c or T1d.
If the physician orders therapy for 10 days, the projected number
of days in section T will be 10 rather than 14; likewise, if the
physician does not order a limited number of days, the projection will
be based on the entire two weeks, assuming the beneficiary's continued
stay and receipt of services.
The RUG-III grouper takes into consideration both the days and
minutes already received by the beneficiary, as reported in section P
of the current version of the MDS, and the days and minutes expected to
be received in the first two weeks of the stay. The number of days and
minutes expected, as reported in section T, should include those
already received.
For example, the beneficiary received an hour of OT on both the
fourth and fifth days (a Monday and Tuesday) of the SNF stay. The
prescribed regimen calls for the beneficiary to receive an hour of OT
daily, Monday through Friday, during the first two weeks in the SNF.
The assessment reference date was set for the fifth day of the stay;
two days and 120 minutes were reported as having been received in
section P of the MDS, and 10 days and 600 minutes were reported as
anticipated in section T. The 10 days and 600 minutes recorded in
section T include the 2 days and 120 minutes already received, in
addition to the upcoming three days and 180 minutes expected to be
received in the first week, and the five days and 300 minutes of
therapy in the second week.
We realize that reporting therapy time that has not yet been
provided is a significant change for providers, but it is in compliance
with the grouper logic and allows the facility to provide the most
accurate representation of the services to be provided to the
beneficiary during the first assessment period.
K. RUG-III Groups
Comment: We received a few comments stating that the ``limits'' on
therapy minutes imposed by the RUG-III groups were too low, and that
more than 720 minutes should be allowed for beneficiaries in the
highest RUG-III groups.
Response: The RUG-III system does not impose limits on the services
a resident may receive; rather, it is used to determine how much
Medicare pays for the services that the resident
[[Page 41663]]
receives. The minutes used to classify beneficiaries into RUG-III
groups are in no way to be taken as upper limits. The 720-minute
threshold for the Ultra High sub-category is a minimum for purposes of
classifying residents. In fact, during the demonstration, there were
beneficiaries who were receiving more that 1,000 minutes per week, and
we expect that there will be similar instances during the national
implementation. All of the groups were created based on a continuum of
minutes being provided, including Ultra High. Just as we expect to see
beneficiaries in the High Rehabilitation sub-category receiving 450
minutes per week, we expect that as many minutes as are needed will be
provided to beneficiaries in the Ultra High groups.
Comment: We received a comment requesting that we explain how the
RUG-III grouper works. The commenter believed that we failed to explain
fully in the interim final rule the grouping logic that restricts
classification into the Rehabilitation Ultra High and Very High sub-
categories to beneficiaries who have a full week of therapy recorded in
section P of the MDS.
Response: The grouper software uses the minutes and days recorded
in sections P and T together to classify beneficiaries into the RUG-III
rehabilitation groups. However, in order for a beneficiary to classify
into the upper two sub-categories, Ultra High and Very High, he or she
must have received at least one full week (five days) of therapy at the
level that would qualify for these groups.
For example, suppose a beneficiary is admitted on Monday, May 1 and
begins PT and OT on May 4. The beneficiary receives 90 minutes of PT
and 60 minutes of OT on the 4th, 5th, 6th, 7th, and 8th of May. The
assessment reference date for the Medicare 5-day assessment is Monday,
May 8. The beneficiary will classify into the Ultra High sub-category
based on having received more than 720 minutes of therapy across at
least two disciplines during the past seven days, as recorded in
section P of the MDS. If, on the other hand, the beneficiary received
this level of therapy on only four of the first seven days in the SNF,
he or she would classify into the High Rehabilitation sub-category
since this is the highest level of classification that is possible when
a minimum of 500 minutes and five days of therapy have not been
provided.
We have posted a tool on our web site that allows the user to
follow the grouper logic manually. It walks through each step of the
grouping logic and we believe it is a useful learning tool. The website
address is:
<www.hcfa.gov/medicare/hsqb/mds20/>.
Comment: There were a few comments regarding the use of the
combination of physician visits and order changes to qualify
beneficiaries for the Clinically Complex RUG-III category. One of the
commenters argued that these criteria are unacceptable because an SNF
represents not a medical model but rather a nursing model; as such, the
physician's involvement and participation may be limited, or may result
from consultation sought by the facility's nursing staff due to changes
in a resident's condition or the need for specific services. Another
commenter inquired about the specific definition being used to define a
``physician order change.''
Response: These comments are representative of concerns that have
been expressed during the initial implementation of the SNF PPS. While
we are aware that many facilities operate using a nursing model as
opposed to a medical model of care delivery, the commenter's further
observation on why the nursing staff would consult with the physician
provides the explanation for why physician order changes and visits are
qualifiers for the RUG-III groups.
The RUG-III system uses clinical events, conditions, and services
as indicators of severity. The results of the research that is the
basis of the RUG-III system showed that an increased frequency of
physician visits and order changes are indicators of a beneficiary's
clinical instability. As in the commenter's example, the nursing staff
may consult with the physician due to changes in the beneficiary's
condition that require medical intervention or the need for specific
services that require a physician order.
We would also like to make clear what constitutes an order change.
The specific issues that have been raised include whether an order to
continue a specified treatment is a new order and, therefore, counts as
an order change; whether a sliding scale medication order counts as a
new order every time the clinician administers one of the different
dosages specified in the scale; whether orders written to clarify a
previous order count; and, whether all doctor's visits count in the
number of physician visits item.
A physician's order to continue or renew some specified treatment
or regimen would not be considered to be an order change, nor would an
order written solely to clarify an earlier order. As stated in the Long
Term Care RAI User's Manual, the definition of an order change does not
include admission orders, return admission orders, or renewal orders
without changes. Similarly, a sliding scale dosage schedule that is
written to cover different dosages depending on lab values, does not
count as an order change simply because a different dose is
administered based on the sliding scale guidelines. ``Physician
visits'' are also defined in the Long Term Care RAI User's Manual. The
physician is defined to include an ``MD, osteopath, podiatrist, or
dentist who is either the primary physician or consultant. Also include
an authorized physician assistant or nurse practitioner working in
collaboration with the physician.'' The visit is defined as a partial
or full exam at the facility or in the physician's office.
L. Nurse Staffing and the Staff Time Measurement Studies
Comment: We received a variety of questions related to the staff
time measurement (STM) studies performed in 1995 and 1997 that were
used to set the case-mix indices. These included questions about what
portion of the nurses' time was accounted for in the study, whether all
nursing minutes (resident specific and non-specific) were used, whether
medication aide time was counted, and what nurse staffing mix was used.
Also, the suggestion was made that we should conduct another STM study
after the PPS has been in place for a year.
Response: Before addressing the specific comments, we are taking
this opportunity to provide a brief background explanation of the STM
studies. As stated in the interim final rule, we conducted the STM
studies in 12 States across 154 SNFs and 3,900 residents. The 1997 STM
was performed to supplement the 1995 study to secure additional STM
data from SNFs identified as providing both high quality care and more
than an average level of rehabilitation therapy to patients on their
Medicare-certified nursing units, and to include a broad geographic
distribution of providers.
The STM data collection accounted for all nursing staff time during
the 48-hour collection period. This time included that of the
registered nurses (RNs), licensed practical nurses (LPNs), aides
(certified nursing assistants (CNAs)), and medication aides. The
resident-specific component counted all nursing time of 30 seconds or
more spent in an activity directly attributable to a specific resident.
The non-resident specific component included all time
[[Page 41664]]
not directly related to a specific resident, such as meetings, nursing
unit administration, and staff meal times. Also, if the nursing staff
member worked past the end of the shift, that time was counted as well.
The therapy staff time was collected over a 7-day period. All time
that the therapist, therapy assistant, and therapy aides spent working
in the certified nursing unit was accounted for and was apportioned
between resident specific and non-resident specific, following the same
methodology as was used in the nursing time allocation. All of these
collected time data were used in the development of the indices.
The staffing levels and the nurse staffing mix on the units
selected for the study met the OBRA 87 staffing requirements and
provided more than 110 minutes of daily resident specific nurse staff
time. Both freestanding and hospital-based facilities were used in the
study. Salaries were adjusted based on the American Health Care
Association's 1995 study of national nursing home salaries.
The nurse staffing mix found on the certified nursing units in the
study were determined per unit, based on the mix of residents on the
nursing unit at the time of the data collection. Based on a case-mix of
0.92, the average time across the two staff time studies was: 1.2 hours
per resident, per day of RN time; 0.7 hours per resident, per day of
LPN time; 2.6 hours per resident, per day of CNA time (including
medication aides). This adds up to 4.6 hours per resident, per day of
nursing time.
An important point to understand about the nursing time is how it
affects the rates. The nursing time associated with any one group in
the RUG-III hierarchy does not represent the nursing minutes that must
be provided (and that will be paid for by Medicare) to each of those
beneficiaries. Rather, the minutes are a distributional value--an
average for the RUG-III group--and were an important factor in the
development of the case-mix indices. The weight for each of the 44 RUG-
III groups represents the average resources (including, of course,
nursing) required to care for beneficiaries who classify to that group
relative to the average resources required to care for beneficiaries in
all of the other RUG-III groups. The RUG-III group with a value of 1.0
is identified and the weights for the other groups are calculated once
that has been done. The value of 1.0 indicates that the average
resources required to care for beneficiaries in that group are the
average compared to all of the other groups. Accordingly, the resource
requirements to care for beneficiaries in the other 43 RUG-III groups
are either higher or lower than for the group with the weight of 1.0.
Depending on the distribution of beneficiaries across the RUG-III
groups, the group with the relative value of 1.0 will vary. It is
important to bear this concept in mind, in order to avoid the
misconception that a RUG-III group with a relative weight that changes
from one year to the next has staffing requirements that have changed
from the original staff time measurement study. The RUG-III system does
not impose any new staffing requirements. The data are available from
the HCFA PPS website address:
<www.hcfa.gov/medicare/snfpps.htm.>
Comment: One commenter requested that we explain why the Behavior
Category is so low in the RUG-III hierarchy, even though beneficiaries
who classify into that group require intensive amounts of staffing
resources.
Response: The reason for this is that the RUG-III hierarchy is in
large part based on minutes of licensed nursing time and on the
clinical conditions that require the attention of licensed staff. This
is a result of early research findings that indicated that
beneficiaries who have the clinical characteristics that would classify
them into the medically complex categories, like Extensive Care,
generally require much more RN and LPN time than do beneficiaries who
classify into the groups in the lower end of the clinical scale.
Similarly, beneficiaries who classify into groups lower in the
hierarchy generally require less licensed nurse time but, as stated by
the commenter, may require intensive amounts of staffing resources.
Beneficiaries in the Behavior Category may not need much licensed
nurse time, but instead may require a large amount of certified nurse
assistant (CNA) time. Much of the care required in these lower-end RUG-
III groups is of the type provided by CNAs, such as assistance with
activities of daily living (ADLs) and other types of maintenance care.
In general, the need for CNA time is reflected in the beneficiaries'
ADL sum scores, whereas the need for licensed nurse time is predicted
by clinical complexity as reflected by the level in the hierarchy.
Thus, beneficiaries who classify into the Extensive Services category
where the ADL sum score is at least 7, have highly complex clinical
needs and require high levels of both licensed nurse (RN/LPN) and CNA
time. Beneficiaries in the lower-weighted RUG-III groups may also
require skilled nursing care, but generally not as much as required in
the higher groups.
Comment: Several commenters had concerns that the STM was collected
over too short a period, that too few facilities were used and that not
enough of them were hospital-based facilities, and that too few of the
facilities used were located in metropolitan statistical areas (MSAs)
with populations in excess of 500,000 people.
Response: We are confident that the methodology used for the STM
studies was valid and appropriate for the task. Three STM studies were
conducted. The first was in 1990, followed by another in 1995, and the
last in 1997. The staff time studies were conducted in 13 States, in
units of more than 300 nursing homes, representing care provided to
about 12,000 residents. The States included were California, Colorado,
Florida, Kansas, Maine, Maryland, Mississippi, Nebraska, New York,
Ohio, South Dakota, Texas, and Washington. These States are
geographically representative and include rural areas, as well as MSAs
with populations in excess of 500,000.
Within each of these States, the selection of SNFs was guided by
the research design that called for a sample that would adequately
represent units that provide high quality, high-acuity care. The
facilities in the combined 1995 and 1997 study sample were 55 percent
for-profit facilities, 45 percent non-profit, 22 percent hospital-based
facilities; 36 percent of the facilities had a head trauma unit, a
ventilator unit, a special rehabilitation therapy unit, or a dialysis
unit, or had been recommended as a high intensity unit by the Technical
Expert Panel. Although the amount of time spent collecting data on any
particular unit was short, the studies were conducted during different
years and each year's study was performed over a period of months. In
this way, the study was reflective of practice in the facilities in the
aggregate, if not precisely representative of any particular facility
over time.
Comment: One commenter argued that the staffing patterns (using
1995 as the base year) used in developing the rate structure lock SNFs
into historic staffing patterns. Another commenter asserted that since
there is no language in the regulation requiring SNFs to use a certain
proportion of the rate on direct care services, they will not do so,
and suggested that we adopt the staffing recommendations of the
Institute for Geriatric Nursing of the John A. Hartford Foundation.
Response: As indicated earlier, the RUG-III system does not impose
staffing requirements. We do not believe that our use of the 1995 base
year locks facilities into any particular level of nurse staffing,
either directly or indirectly. As stated above, the staffing
[[Page 41665]]
levels in the staff time studies were based on the unit's case-mix at
the time. The study used units that had a mix of payor types.
Nationally, of the 14,000 Medicare certified facilities, fewer than
4,000 have an average daily census of more than 10 Medicare
beneficiaries. We do not believe that it is appropriate to require
staffing standards based on the needs of such a small portion of the
facility's population, but this is an issue that is outside of this
regulation's scope. We will carefully review and consider the findings
of the National Academy of Sciences report (the report cited by the
commenter is part of this larger effort) when it becomes available.
Comment: One commenter suggested that we include speech language
pathology assistant times when we perform our next staff time
measurement study. The commenter recommended that we include the times
for these care providers in our update of the RUG-III case-mix indices.
Response: While we are not prepared to address the issue of when to
conduct another staff time measurement study within the context of this
final rule, we would note that services of speech language pathology
assistants are not recognized for separate coverage under Medicare. In
order for this class of providers to be eligible for Medicare payment,
they must first achieve licensure or some other standard credential
recognized at the national level. To date, these assistants have not
obtained this standing.
Comment: We received a number of comments regarding the treatment
of respiratory therapy services under the RUG-III. Several commenters
expressed concern that facilities would be using inappropriately
trained nurses rather than appropriately trained personnel to provide
respiratory therapy services.
Response: We share the commenters' concern with regard to the
quality of care. As stated in the SNF Manual at section 230.10.B.1,
Medicare requires that respiratory services must be provided by
respiratory therapists or technicians, physical therapists, nurses, or
other qualified personnel. We currently have no evidence that
unqualified personnel are administering respiratory treatments, but
note that the State surveyors monitor long-term care facilities for
such lapses in quality. The rules governing the provision of
respiratory treatment were not altered by the implementation of PPS but
certainly, in light of the PPS and its associated incentives, we are
determined to monitor closely the provision of SNF care, including
respiratory treatments. A key provision in implementing the new payment
system is to safeguard quality of care for nursing home residents, and
this issue warrants particular attention from our quality and
enforcement initiative.
Comment: Several commenters raised concerns with the manner in
which respiratory therapy is recognized in the SNF PPS.
Response: As discussed earlier in this preamble in the context of
the Federal PPS rates, the treatment of respiratory therapy services in
the SNF PPS was the result of careful consideration and extensive
analysis. The RUG-III case-mix classification system, which forms the
basis for the payment rates, does not include respiratory therapy in
the same category as the rehabilitation therapies (occupational,
speech, and physical therapy).
The primary reason for this was the difference in treatment
patterns between respiratory therapy and the rehabilitation therapies.
A secondary reason is that the costs of respiratory therapy services
are not always separately identifiable on SNF cost reports, since
trained nurses are qualified to provide these services, and often do
so. However, we note that all costs from the base year data associated
with respiratory therapy were captured in the computation of the
payment rates, and the provision of respiratory therapy, as indicated
on the resident assessment, can result in a higher payment in the non-
rehabilitation RUG-III groups.
We believe that the SNF PPS accounts for respiratory therapy
appropriately, and we do not believe that the RUG-III classification
system will discourage the provision of needed respiratory
rehabilitation. However, as discussed earlier, we are engaged in
research to determine the potential for making refinements to the
current case-mix model to improve accuracy of the payments. Ancillary
services, such as pharmacy and respiratory therapy, will be one focus
of the research.
Comment: One commenter noted that Medicare beneficiaries with more
than $1,000 in paid respiratory therapy claims account for only 18
percent of all Medicare beneficiaries who received respiratory therapy
services in 1996, and that the top four diagnoses (excluding a generic
category of ``other diseases of the lung'')--chronic bronchitis,
chronic airway obstruction, pneumonia due to solids or liquids, and
pneumonia--average between $75 and $100 per day in respiratory
services. The commenter added that this amount far exceeds the payment
amounts associated with the 42 RUG-III categories that do not have
respiratory adjustments, and that this warrants the development of an
outlier policy to insure adequate care for these beneficiaries.
Response: Please refer to the preamble discussion on the Federal
rates, in which we discuss ``outlier'' situations.
Comment: One commenter suggested that any future revisions to the
MDS 2.0 should include an expansion of data collection fields to
capture critical respiratory therapy diagnoses and medication
requirements, and that certain data items in the current MDS related to
respiratory care should be considered in revising the RUG-III
classifications, so that patient acuity and payment will be
appropriately recognized.
Response: These are important issues to consider as we revise the
MDS and implement new versions in the future; however, we will not be
making any changes to the MDS in this final rule.
Comment: Several commenters raised issues in connection with
recreational therapy. Some indicated that the definitions and language
within section T should accurately reflect and comply with the
recreational therapy profession's standards and practices. To provide
an accurate picture of the resident's rehabilitation needs, sections
T1c and T1d should include recreational therapy within the mix of
comprehensive rehabilitation services.
Response: Recreational therapy has long been among the services
that Medicare has recognized as related to patient care in SNFs;
however, it is not a therapy specifically identified for coverage in
the statute. For this reason, recreational therapy services are not
included in the RUG-III system in the same way as the rehabilitation
therapies.
Comment: One commenter expressed a belief that the RUG-III system
fails to reflect the importance of interdisciplinary comprehensive
rehabilitation services. The commenter argued that recreational therapy
is identified as a viable and recognized treatment option within all
rehabilitation treatment settings, and noted that within the present
RUG-III version, Recreation Therapy treatment minutes are not used in
identifying the RUG-III rehabilitation classification.
Response: To the extent recreational therapy services were
furnished in the SNF PPS base year, they are reflected in the SNF PPS
payments. Thus, the SNF PPS reflects the provision of recreational
therapy services to Medicare beneficiaries. Accordingly, we find no
evidence to support the notion that the RUG-III classification system
in any way prevents Medicare beneficiaries from receiving recreational
therapy services.
[[Page 41666]]
M. SNF Coverage and Level of Care Determinations
One of the prerequisites for coverage under the ``extended care''
(that is, Part A SNF) benefit is the beneficiary's need for and receipt
of an SNF level of care. In the preamble to the interim final rule (63
FR 26283-85), we designated the upper 26 of the 44 RUG-III groups as
representing an SNF level of care. We specified that a beneficiary's
assignment to one of the upper 26 RUG-III groups as the result of a
resident assessment would automatically classify the beneficiary as
meeting the SNF level of care definition. Beneficiaries assigned to one
of the lower 18 RUG-III groups would not automatically classify as
either meeting or not meeting the level of care definition, but would
instead receive an individual determination under the longstanding
level of care criteria in regulations at Part 409, subpart D.
As discussed below, in this final rule we are clarifying the role
played by a beneficiary's RUG-III assignment in the process of making
SNF level of care determinations, and we are also restoring portions of
the regulations text that appeared previously in Sec. 409.33(a) on
management and evaluation, observation and assessment, and patient
education, which were deleted by the interim final rule.
Comment: We received numerous comments regarding the procedures for
making SNF level of care determinations under the SNF PPS. Several
commenters were under the impression that, in view of the prospective
nature of the SNF PPS, and the interim final rule's designation of the
upper 26 RUG-III groups as representing an SNF level of care, a
resident assessment that triggers assignment to one of the upper 26
groups would result in automatic coverage that continues for the entire
duration of the period to which that assessment applies, regardless of
any changes in condition or services provided that might occur
subsequent to the completion of the assessment itself. This impression
was reinforced, in their view, by a table (Table 2.D) on the Medicare
Assessment Schedule, which appeared in the preamble of the interim
final rule (63 FR 26267), and which included a column entitled ``Number
of Days Authorized for Coverage and Payment.'' These commenters also
asserted that making coverage determinations for a predetermined block
of time was the approach that had been adopted under the NHCMQD, which
served as the forerunner of the SNF PPS.
Response: In order to understand the actual effect of an assignment
to one of the upper 26 RUG-III groups in making level of care
determinations under the SNF PPS, it is also necessary to consider how
SNF coverage determinations were made before the inception of the PPS.
Before the SNF PPS, when a beneficiary met the ``posthospital''
requirements for SNF coverage (that is, the timely initiation of SNF
care following the beneficiary's discharge from a qualifying hospital
stay), an individual level of care determination was made, using the
longstanding criteria that appear in regulations at Secs. 409.31
through 409.35, and manual instructions in the Medicare Intermediary
Manual, Part 3 (MIM-3, HCFA Pub. 13-3), sections 3132ff and the Skilled
Nursing Facility Manual, sections 214ff.
As discussed in the interim final rule, this determination entailed
a retrospective review by the Medicare FI, which focused primarily on a
beneficiary's need for and receipt of specific, individual skilled
services. Along with the posthospital and level of care requirements,
the SNF services also had to meet additional requirements that apply to
Medicare coverage generally; for example, the overall requirement that
a service must be reasonable and necessary to diagnose or treat the
beneficiary's condition (section 1862(a)(1) of the Act). Under this
system of retrospective review, it was possible for an FI to issue a
denial of coverage that was retroactive all the way back to--and even
including--the day of SNF admission itself. As noted in the interim
final rule, this situation made it extremely difficult for an SNF to
predict with any degree of certainty that a particular admission
ultimately would, in fact, be covered.
In the interim final rule, we designated a beneficiary's correct
assignment to one of the upper 26 RUG-III groups as representing an SNF
level of care in an effort to bring more predictability and certainty
to the process of making coverage determinations. However, this
designation was made specifically with respect to the SNF level of care
requirement itself, and was never intended to supersede any of the
other existing criteria for coverage under the SNF benefit, such as the
posthospital requirements, or the overall requirement for services to
be reasonable and necessary to diagnose or treat the beneficiary's
condition. Thus, under this approach, when the initial Medicare (that
is, 5-day) required assessment results in a beneficiary being correctly
assigned to one of the upper 26 RUG-III groups, this effectively
creates a presumption of coverage for the period from admission up to,
and including, the assessment reference date for that assessment, and
the coverage that arises from this presumption remains in effect for as
long thereafter as it continues to be supported by the actual facts of
the beneficiary's condition and care needs. Relative to the situation
that existed before the SNF PPS, we believe that this approach provides
the SNF with far greater confidence in coverage at the outset of a
resident's stay, and enables the SNF, once coverage is established, to
continue to bill for the resident's care for as long as the resident's
actual care needs continue to support coverage.
The use of this presumption at the outset of a resident's SNF stay
is supported by the SNF benefit's basic nature as a posthospital
benefit, which is a major factor in determining the typical course of
an SNF stay. In its July 1998 testimony before the House Ways and Means
Committee (GAO/T-HEHS-98-214), the GAO noted that SNF residents tend to
be relatively unstable and require fairly intensive skilled care during
the period immediately following admission from the prior
hospitalization, but that this tendency typically diminishes as they
get further on in the SNF stay. The GAO indicated that a policy which
continues to ``deem'' coverage for these individuals after they have
clearly reached the point where they no longer need a skilled level of
care would represent an unwarranted expansion in the SNF benefit.
We concur with the GAO's conclusion and, in view of the
misunderstanding expressed by commenters on this point, we believe it
is appropriate to clarify in this final rule that the initial
presumption of coverage that arises from a beneficiary's Medicare-
required 5-day assessment and his or her resulting RUG-III assignment
encompasses the period from admission through the assessment reference
date for the initial 5-day assessment, and is not intended to create an
opportunity for continued payment beyond the point where SNF care is no
longer reasonable and necessary; accordingly, the continuation of
coverage, once established by the RUG-III presumption, would depend
upon the subsequent course of the resident's actual condition and care
needs.
We also wish to clarify that this presumption does not arise in
connection with any of the subsequent assessments, but applies
specifically to the period ending with the assessment reference date
for the initial Medicare-required 5-day assessment that occurs shortly
after the beneficiary's admission
[[Page 41667]]
from the prior hospital stay. Accordingly, we are amending the
regulations text at Sec. 409.30 to clarify that this presumption is
valid up to and including the assessment reference date (that is, the
last day of the observation period, which must occur no later than the
eighth day of posthospital SNF care) for the initial Medicare-required
5-day assessment.
As the preceding discussion indicates, the course that SNF stays
characteristically take over time means, in effect, that the basis for
making any type of presumption with regard to coverage would tend to
become progressively less conclusive as a resident moves farther into
the SNF stay, and would be at its most conclusive at the very outset of
the stay, during the period immediately following the resident's
admission from the prior hospitalization. Accordingly, in situations in
which a resident's condition upon admission is such as to warrant
assignment to one of the upper 26 RUG-III groups, we regard this very
tendency of SNF stays to be at their most intensive and unstable
immediately following admission as justifying a presumption of coverage
at the very outset of the SNF stay, during the period leading up to the
assessment reference date for the initial Medicare-required 5-day
assessment. This initial portion of the SNF stay provides the
opportunity for the facility to initiate skilled nursing and
rehabilitation services, and to begin its complete assessment of the
beneficiary's clinical characteristics and care needs.
In addition, we believe that the use of the coverage presumption
during these first few days of a resident's stay may provide the
additional benefit of enabling medical review resources to be deployed
for maximum effectiveness: by combining the clinical criteria that are
captured in the upper 26 RUG-III groups with the tendency (as discussed
above) for the initial portion of an SNF stay to be the most intensive
and unstable, the presumption should provide a more reliable way of
identifying at the outset those residents who do, in fact, require a
covered SNF level of care. This, in turn, will enable medical reviewers
to focus their resources elsewhere, on other residents or other
portions of the SNF stay that are far more likely to involve the
provision of noncovered care.
The underlying principle at work in the use of this administrative
presumption at the outset of a covered stay is the fact that the RUG-
III groups themselves are expressions of a certain level of services--
skilled nursing care and skilled rehabilitation services, the need for
which represents the SNF level of care described in the statute at
section 1814(a)(2)(B) of the Act. We, therefore, believe that in
situations in which a beneficiary's initial, Medicare-required 5-day
assessment results in an accurate assignment to one of the highest 26
of the 44 RUG-III groups, this assignment (in combination with the
proximity to the prior qualifying hospital stay) makes it appropriate
to presume that the beneficiary meets the SNF level of care definition
at the outset of the stay. However, as is the case with all such
administrative presumptions, this presumption is itself rebuttable in
those individual cases in which the services actually received by the
resident do not meet the basic statutory criterion of being reasonable
and necessary to diagnose or treat a beneficiary's condition (according
to section 1862(a)(1) of the Act). Accordingly, the presumption would
not apply, for example, in those situations in which a resident's
assignment to one of the upper 26 RUG-III groups is itself based on the
receipt of services that are subsequently determined to be not
reasonable and necessary.
The role of this presumption in determining coverage is, in some
ways, similar to that performed by a physician who correctly certifies
that a beneficiary requires a covered level of care, in that both
activities serve to identify a beneficiary's initial need for covered
care. In this context, it is worth noting that the interim final rule
amended the physician certification regulations to reflect the use of
the RUG-III system specifically with regard to the initial
certification (Sec. 424.20(a)(1)(ii)), but not the subsequent
recertifications (Sec. 424.20(c)).
Further, we note that the process of providing appropriate resident
care in SNFs (which consists of a continuous loop of resident
assessment, care planning, implementing specific interventions, and
assessing the resident's response to and continued need for the
interventions) serves to keep the SNF apprised, on an ongoing basis, of
any changes in the resident's care needs. Thus, once the SNF determines
that skilled care is no longer required, it must acknowledge this
change in condition at that point and issue the appropriate written
notice of noncoverage to the beneficiary.
Under existing program policy, in situations involving a provider
that has acted in good faith but has nonetheless had a claim for
Medicare coverage denied, a separate statutory provision on limitation
of liability at section 1879 of the Act might permit payment to be made
on an exception basis. This provision specifically refers to denials
based on the general exclusion from coverage for care that is not
reasonable and necessary (section 1862(a)(1) of the Act), as well as
the exclusion for custodial care (section 1862(a)(9) of the Act). Taken
together, these provisions indicate that any presumption about the need
for covered care at the outset of the SNF stay is rebuttable by one of
these general coverage exclusions--and might be remediable by the
limitation of liability provision.
We do not agree with the commenters who argued that the prospective
nature of the SNF PPS should result in coverage being granted
prospectively for a predetermined block of time (that is, for the
entire duration of the assessment period). Rather, the SNF PPS is
prospective in the sense of paying a predetermined rate that
represents--in the aggregate--the cost of SNF care that would typically
be associated with a beneficiary who classifies to a particular RUG-III
group. However, we note that a basic feature of the SNF PPS (and one
that fundamentally distinguishes it from, for example, its inpatient
hospital counterpart) is that it makes payment on a per day rather than
a per episode basis. This means that while there may, in practice, be
some variation in resource intensity from one resident to another
within a particular RUG-III group (and even from one day to another
within a particular resident's stay), the SNF PPS per diem payments,
when taken in the aggregate, appropriately reflect the overall
intensity of resources associated with that particular RUG-III group.
Further, the per diem basis for payment recognizes that in practice,
the levels and types of services required and the duration of the
actual need for a covered SNF level of care may vary somewhat from one
resident to another.
The preamble discussion of the case-mix system in the interim final
rule (63 FR) 26261) notes that in the nursing home setting, ``* * * no
adequate models have been found for using length of stay or episode
cost to explain resource use. Thus, the RUG-III nursing home case-mix
system explains patient resource use on a daily basis.'' Accordingly,
the framework set forth in the interim final rule supports the concept
that the continuation of SNF coverage (once it has been initiated by
the RUG-III presumption) must be supported by the resident's actual
condition and care needs, and is not guaranteed for some predetermined
block of time. To determine otherwise would effectively create a
perverse incentive for SNFs to extend the length
[[Page 41668]]
of Medicare stays beyond the point where the provision of skilled care
ceases to be reasonable and necessary. Additionally, with regard to
dually-entitled residents, an SNF might have an additional incentive to
prolong the period during which it receives Medicare per diem payments,
in order to delay the change to a Medicaid payment that, in some
States, is lower.
Further, with regard to the comments on the NHCMQD, we note that in
contrast to the SNF PPS itself, we intentionally refrained from
conducting medical review under the demonstration, in order to observe
facility practices and care patterns in its absence. The resulting
facility activity under the demonstration did not appear to diverge
significantly from prior experience. With regard to duration of
coverage, it would appear that the primary factor in determining the
cessation of coverage under the demonstration was not the resident
assessment cycle but, rather, the interest of beneficiaries and their
families in keeping the length of SNF stays as short as possible--in
order to avoid or minimize their financial liability for the daily SNF
coinsurance that begins on the 21st day of Part A coverage, and to have
the beneficiary return home at the earliest possible moment (under the
demonstration, patients were only in the SNF long enough to have an
average of 2.5 Medicare-required assessments). Based on the
demonstration experience, as well as the nature of the coverage
presumption itself (that is, its validity up to the assessment
reference date for the initial Medicare-required 5-day assessment),
this presumption clearly is not designed to guarantee payment for the
entire duration of the assessment period.
Nevertheless, consistent with the averaging function of the PPS,
the payment rate, once established, is guaranteed for as long as the
beneficiary's care needs continue to fall within the range of covered
care, even if the specific acuity of the beneficiary's care needs
within this range decreases; thus, the SNF can continue to receive the
higher payment rate for such a beneficiary's covered care up to the
next assessment. Conversely, it is possible that a resident's acuity
may decrease to the point where it actually falls below a covered level
of care, even though it has not changed sufficiently to trigger a
Significant Change in Status Assessment. At that point, the ongoing
coverage is ended by Medicare's statutory coverage exclusion of
custodial care at section 1862(a)(9) of the Act, which provides that
``* * * [n]otwithstanding any other provision of this title, no payment
may be made for any expenses incurred for items or services * * * where
such expenses are for custodial care'' (emphasis added), and the SNF
would be required to issue a notice of noncoverage. Under the
implementing regulations at 42 CFR 411.15(g), this exclusion is invoked
whenever a beneficiary receives care that does not meet the
requirements for coverage as SNF care as set forth in Secs. 409.31
through 409.35. The qualifying language in the statute means that the
custodial care exclusion from coverage takes precedence over other
provisions of the program--including any presumptions made with regard
to coverage. Thus, under the SNF PPS, the introduction of the coverage
presumption based on a beneficiary's RUG-III group assignment was
intended to streamline and simplify the initial level of care
determination (which, along with the posthospital requirements, governs
access to coverage under the extended care benefit). However, once this
presumption has served to establish a beneficiary's initial access to
coverage under the extended care benefit, it does not in any way
supplant or invalidate the remainder of the basic and longstanding
process for determining the duration of that coverage. While we believe
that the use of this coverage presumption at the outset of the SNF stay
represents a significant advancement toward achieving greater
simplicity, predictability, and consistency in the coverage process, we
will continue to monitor coverage determinations under the SNF PPS with
a view toward the possibility of making further refinements and
improvements in the future.
Finally, with regard to Table 2.D (Medicare Assessment Schedule),
which appeared in the preamble to the interim final rule (63 FR 26267),
we note that the heading to column four, Number of Days Authorized for
Coverage and Payment, refers to the maximum period of coverage between
assessments, but was not intended to prescribe coverage of a
predetermined block of time consisting of a minimum number of days. In
order to resolve any confusion that publication of this table may
inadvertently have caused, we are now republishing the table below,
with that particular column omitted.
Table 2.D.--Medicare Assessment Schedule
----------------------------------------------------------------------------------------------------------------
Reason for
Medicare MDS assessment type assessment Assessment reference date Applicable medicare payment
(AA8b code) days
----------------------------------------------------------------------------------------------------------------
5 day......................... 1 Days 1--8*......................... 1 through 14.
14 day........................ 7 Days 11--14 **..................... 15 through 30.
30 day........................ 2 Days 21--29........................ 31 through 60.
60 day........................ 3 Days 50--59........................ 61 through 90.
90 day........................ 4 Days 80--89........................ 91 through 100.
----------------------------------------------------------------------------------------------------------------
* If a patient expires or transfers to another facility before day 8, the facility will still need to prepare an
MDS as completely as possible for the RUG-III classification and Medicare payment purposes. Otherwise the days
will be paid at the default rate.
** RAPs follow Federal rules.
Comment: One commenter questioned the appropriateness of using a
resident's assignment to one of the upper 26 RUG-III groups as a
determinant of a skilled level of care in situations in which the RUG-
III assignment is based solely on events that occurred during the
``look-back'' period (for example, IV medications within the past 14
days). The commenter noted that this could result in a resident being
covered even though the qualifying skilled services that triggered the
RUG-III assignment have themselves been discontinued before admission
to the SNF, and the resident is no longer actually receiving any
skilled care whatsoever by the time of the assessment itself.
Response: We note that the use of the ``look-back'' period in
making RUG-III assignments is essentially a clinical proxy that is
designed to serve as an indicator of situations that involve a high
probability of the need for skilled care. Thus, our expectation is that
the occurrence of one of the specified events during the ``look-back''
period,
[[Page 41669]]
when taken in combination with the characteristic tendency (as
discussed above) for an SNF resident's condition to be at its most
unstable and intensive state at the outset of the SNF stay, should make
this a reliable indicator of the need for skilled care upon SNF
admission in virtually all instances. In particular, residents in such
situations may need the types of services formerly listed in
Sec. 409.33(a) of the regulations, that are discussed more fully below.
If it should become evident in actual practice that this is not the
case, it may become appropriate at that point to reassess the validity
of the RUG-III system's use of the ``look back'' period in making
assignments.
Comment: In the interim final rule, we invited comments on the
feasibility of dispensing with the level of care criteria in existing
regulations, in favor of utilizing the RUG-III framework as the
exclusive means for making level of care determinations. One commenter
expressed support for this approach; however, many others supported the
continuation of individual level of care determinations under the
existing criteria for beneficiaries assigned to one of the lower 18
RUG-III groups. A few of these commenters suggested that we might
reassess this approach after the PPS has been in operation for a few
years; at that point, they suggested, it might be possible to identify
specific clusters of services within the lower 18 RUG-III groups that
could serve as reliable indicators of skilled care, and to incorporate
those indicators into the upper 26 RUG-III groups.
Response: As requested by most of the commenters, we are retaining
in the regulations the existing criteria with certain modifications, as
discussed elsewhere in this preamble. To the extent that our continuing
experience in implementing the SNF PPS may indicate at some future
point that further revisions in these criteria are warranted, we will
consider making appropriate refinements to them at that time.
Comment: We received a number of comments concerning certain
incremental adjustments that we made to the existing level of care
criteria in the interim final rule. We made these revisions in order to
achieve greater consistency with the general approach adopted under the
SNF PPS with the use of the RUG-III groups, and also to reflect the
significant advances in the state of long-term care practices that have
occurred during the quarter century since the current SNF level of care
regulations were first promulgated. Specifically, in view of changes in
medical practice over time, we deleted the previous references to
hypodermoclysis and subcutaneous injections as examples of skilled
nursing services. We retained enteral feeding as an example of a
skilled nursing service, but adopted specific qualifying criteria from
the RUG-III framework (that is, that the enteral feeding must comprise
at least 26 percent of daily calorie requirements and at least 501
milliliters of fluid per day). Further, we deleted the categories
previously listed in Sec. 409.33(a) of ``management and evaluation of a
care plan,'' ``observation and assessment'', and ``patient education''
as examples of skilled services, in the belief that these categories
were already effectively captured by the clinical proxies that have
been incorporated into the upper 26 RUG-III groups.
Additionally, in the preamble to the interim final rule (63 FR
26284), we indicated that it might well be desirable to delete the
insertion, irrigation, and replacement of urinary catheters as an
example of a skilled service, in order to avoid providing a perverse
incentive for their inappropriate use. However, we also invited
comments on the desirability of retaining this example specifically
with regard to suprapubic catheters.
Of the comments we received on these changes, the largest number
supported retaining suprapubic catheters as an example of a skilled
nursing service, noting that this procedure is a major vector for
infection that can be fatal if improperly performed, and that requires
a greater amount of skilled care than foley catheters. One commenter
favored deleting even suprapubic catheters from the examples of skilled
nursing services, while another favored retaining all types of
catheters in the examples. Several commenters advocated reinstating
observation and assessment, management and evaluation, and patient
education as explicit examples of skilled services in the SNF level of
care regulations (or, alternatively, amending the regulations governing
the home health benefit at Sec. 409.42(c)(1), which currently cross-
refer to the SNF regulations, to include them). A few commenters
suggested retaining subcutaneous injections as an example of a skilled
nursing service specifically with regard to those residents who, due to
cognitive impairments such as those associated with dementia, are
unable to self-administer the injections, and another favored retaining
hypodermoclysis.
Response: As noted above, our reason for deleting the explicit
references in the regulations to management and evaluation, observation
and assessment, and patient education was not that they no longer
represented appropriate examples of skilled care, but rather, because
we believed that these separate references were no longer necessary in
view of the clinical indicators that have been incorporated into the
upper 26 RUG-III groups. However, in order to avoid possible confusion
on this point, we are accepting the commenters' suggestion to reinstate
these categories as specific examples in the SNF level of care
regulations.
Further, while we continue to believe that it is inappropriate to
cite the use of a urinary catheter as an example of a skilled service
in most instances, we agree with the reasons advanced by the commenters
who favored specifically retaining suprapubic catheters in the list of
examples of skilled nursing services; accordingly, we are modifying the
example regarding catheters to refer exclusively to this particular
type of catheter. However, for the reasons discussed previously in the
preamble to the interim final rule, we are not reinstating
hypodermoclysis or subcutaneous injections as examples of skilled
nursing services. Regarding the latter, we do not believe that the
presence of a cognitive impairment in the person who receives the
injection would significantly affect the skills required on the part of
another person who actually administers it.
Finally, we are taking this opportunity to correct a technical
inaccuracy that appears in the regulations at Sec. 411.15(g), defining
the term ``custodial care,'' as well as in the introductory material
for Sec. 409.30. An earlier version of the custodial care definition
(which appeared at Sec. 405.310(g)) correctly described this term in
the SNF context as any care that does not meet the SNF level of care
criteria, which at that time appeared in Sec. 405.126 through
Sec. 405.128. When the SNF level of care criteria were redesignated as
Sec. 409.31 through Sec. 409.35 (48 FR 12534, March 25, 1983), a
conforming change was subsequently made to the cross-reference in the
custodial care regulations (50 FR 33031, August 16, 1985).
However, in addition to the level of care regulations at
redesignated Sec. 409.31 through Sec. 409.35, this conforming change
inadvertently revised the cross-reference erroneously to include the
SNF benefit's posthospital requirements at redesignated Sec. 409.30.
Since the posthospital requirements are not an element of the custodial
care definition, we are deleting that portion of the citation from the
cross-reference, which is revised to refer correctly to the SNF
[[Page 41670]]
level of care criteria at Sec. 409.31 through Sec. 409.35. Similarly,
we are revising the cross-reference in the second sentence of the
introductory material in Sec. 409.30 (regarding the use of the RUG-III
groups in making level of care determinations) to refer solely to the
level of care requirements in Sec. 409.31, and not to the posthospital
requirements set forth in the remainder of Sec. 409.30 itself.
Comment: Some comments reflected certain longstanding
misconceptions regarding the SNF level of care definition, in terms of
a beneficiary's need for and receipt of skilled services on a daily
basis which, as a practical matter, can be furnished only in an SNF on
an inpatient basis. One recurring misconception with regard to the
``daily basis'' requirement (which some of the commenters expressed as
well) is that Medicare coverage guidelines provide for specific breaks
in skilled therapy services for the observance of a prescribed list of
national holidays. Another longstanding misconception shared by some
commenters is that the cessation of therapy for so much as a single day
due, for example, to the beneficiary's temporary illness or fatigue,
would mandate an automatic discontinuance of coverage. The recurring
misconception with regard to the ``practical matter'' requirement is
that a beneficiary's ability to have even an occasional, brief absence
from the SNF in order to attend, for example, a holiday meal with
family or friends, would result in the loss of Medicare coverage. As
explained below, these interpretations of Medicare SNF coverage
requirements are incorrect.
Response: We note that the commenters' misunderstandings reflect
certain recurring misconceptions about the SNF level of care criteria
that long predate the SNF PPS. With regard to the ``practical matter''
requirement, it is true that a beneficiary's ability to have frequent
or prolonged absences from the facility may raise a question as to
whether the beneficiary, as a practical matter, can only receive the
care that he or she needs on an inpatient basis in the SNF. However,
this is not the case when a beneficiary is capable of having only
occasional, brief absences from the facility. As section 214.6.C. of
the Medicare SNF Manual indicates:
An SNF should * * * not interpret the ``practical matter''
criterion so strictly that it results in the automatic denial of
coverage for patients who have been meeting all of the SNF level of
care requirements but who have occasion to be away from the SNF for
a brief period of time. While most beneficiaries requiring an SNF
level of care find that they are unable to leave the facility for
even the briefest of time, the fact that a patient is granted an
outside pass, or short leave of absence, for the purpose of
attending a special religious service, holiday meal or family
occasion, for going on a ride or for a trial visit home, is not by
itself evidence that the individual no longer needs to be in an SNF
to receive required skilled care. Very often special arrangements,
not feasible on a daily basis, have had to be made to allow for
absence from the facility.
Thus, the requirement for daily skilled services should not be
applied so strictly that it would not be met merely because there is a
brief, isolated absence from the facility in a situation where
discharge from the facility would not be practical. It is also worth
noting that, in addition to the coverage guidelines discussed above,
the Medicare certification requirements for SNFs, at Sec. 483.15(d),
provide that each resident has the right to participate in social,
religious, and community activities that do not interfere with the
rights of other residents in the facility. Similarly, with regard to
the ``daily basis'' requirement, the Medicare program does not specify
in regulations or guidelines an official list of holidays or other
specific occasions that a facility may observe as breaks in
rehabilitation services, but recognizes that the resident's own
condition dictates the amount of service that is appropriate.
Accordingly, the facility itself must judge whether a brief, temporary
pause in the delivery of therapy services would adversely affect the
resident's condition.
Comment: A commenter asked whether the certification and
recertification statements for posthospital skilled nursing facility
services required under section 1814(a)(2) of the Act must be performed
only by a physician, or can be performed by an authorized facility
staff member. Another requested that we authorize a physician assistant
to perform certification and recertification statements (as nurse
practitioners and clinical nurse specialists already are under current
law). One commenter noted that the SNF benefit's requirement for a
physician to certify (and periodically recertify) that a beneficiary
needs an SNF level of care was waived under the NHCMQD, and argued that
this requirement is a needless burden that should be permanently
eliminated.
Response: Section 1814(a)(2) of the Act requires that a physician
(or a nurse practitioner or clinical nurse specialist who does not have
a direct or indirect employment relationship with the facility, but who
is working in collaboration with a physician) initially certifies, and
periodically recertifies, the need for a skilled level of care.
However, this provision does not currently authorize facility staff
members or physician assistants to perform this function. Section
424.20 sets forth the timing of the required certifications as follows:
the initial certification must occur at the time of admission or as
soon thereafter as is reasonable and practicable; the first
recertification is required no later than the 14th day of posthospital
SNF care; and, subsequent recertifications are required at least every
30 days after the first recertification.
Comment: One commenter noted that the upper 26 groups of RUG-III
are designated as representing a covered SNF level of care only in the
preamble to the interim final rule, and suggested that this designation
should also be made explicit in the regulations text itself.
Response: The reason that we declined to specify particular RUG-III
groups in the regulations text itself was not to expand or contract
coverage relative to the types of conditions that the upper 26 RUG-III
groups currently identify, but rather, to allow for the possibility
that the RUG-III groups themselves might be reconfigured in the future.
This gives us the necessary flexibility to designate (in the routine
annual update of Federal prospective rates described in regulations at
Sec. 413.345) those reconfigured RUG-III groups that would correspond
to the upper 26 groups under the current RUG-III configuration, without
having to go through the full rulemaking process in order to make
specific revisions in the regulations text itself. (Of course, any such
reconfiguration in the RUG-III groups would itself be effected through
rulemaking.)
N. SNF Consolidated Billing
The consolidated billing requirement (established by section
4432(b) of the BBA) places with the SNF itself the Medicare billing
responsibility for virtually the entire package of services furnished
to a resident of an SNF. In the interim final rule, we addressed both
the scope of services and the definition of an SNF ``resident'' that
apply for purposes of this provision. As discussed below, this final
rule provides additional clarification on implementation timeframes for
this provision and on the scope of services to which this provision
applies, including the role played by the SNF care planning process.
Comment: We received many comments regarding timeframes for
implementation of the SNF consolidated billing provision, particularly
with respect to those SNF residents who are
[[Page 41671]]
not in a covered Part A stay. Many expressed support for a delay in the
implementation of this aspect of the provision, and requested that
advance notification be given before implementing it.
Response: Section 4432(d) of the BBA provides that, unlike the
effective date for the PPS itself (which is tied to the start of the
individual SNF's first cost reporting period that begins on or after
July 1, 1998), the consolidated billing provision applies to items and
services furnished on or after July 1, 1998. In April 1998, we
published PM transmittal number AB-98-18, which contained operational
instructions for Medicare contractors on consolidated billing
implementation.
As noted in the preamble to the interim final rule, in order to
accommodate individual SNFs that lacked the capability to perform
consolidated billing as of the July 1, 1998, effective date, the PM
provided for a ``transition period,'' under which such a facility would
be required to begin consolidating its bills for items and services
furnished on or after the earlier of either (1) January 1, 1999 or, (2)
the facility's PPS start date.
However, this instruction was subsequently superseded by PM
transmittal number AB-98-35 (July 1998), which eliminated the
transition period described in PM transmittal number AB-98-18, and
provided instead that an SNF must consolidate its bills as of its PPS
start date, for those of its residents who are in a covered Part A
stay. For those SNF residents who are not in a covered Part A stay (for
example, who have exhausted their available days of coverage under the
Part A SNF benefit, or who do not meet that benefit's posthospital or
level of care requirements), the PM postponed implementation of
consolidated billing indefinitely. This was necessitated by systems
modification delays in connection with achieving Y2K compliance.
The Y2K problem arose because computer programming, which has
commonly employed only two digits to record the year in the date for
transactions and other entries, will not be able to distinguish the
year 2000 from the year 1900 without reprogramming. This problem must
be corrected on a timely basis in order to avoid the potential for
significant disruption of the automated systems that are essential to
administering the entire Medicare program. (For a more detailed
discussion of Medicare and the Y2K problem, please refer to the
preamble for the proposed rule on the outpatient hospital PPS, 63 FR
47605, September 8, 1998.) Making the necessary systems renovations to
correct this problem is an extensive and complex process that must be
given priority over other systems modifications.
Accordingly, consolidated billing implementation with regard to
those SNF residents who are in noncovered stays is being postponed at
present, because it will require systems modifications that are far
more extensive than those needed for the SNF PPS under Part A--
modifications of a magnitude that simply cannot be accomplished until
the current actions to achieve Y2K compliance have been completed. We
plan to publish a notice of the anticipated implementation date for
this aspect of consolidated billing in the Federal Register at least 90
days in advance.
Comment: Numerous commenters recommended a wide variety of items
and services that they believe should be categorically excluded from
the SNF consolidated billing requirement and paid separately from the
PPS. Some examples included: laboratory services, intravenous
medications, medications for patients with acquired immune deficiency
syndrome (AIDS), and various types of practitioner services. Some of
these commenters noted our discussion in the preamble to the interim
final rule regarding a technical amendment to section 1833(h)(5)(A) of
the Act (which would specifically authorize SNFs to receive Part B
payment for laboratory tests that they do not themselves either perform
or supervise), and advocated deferring the application of consolidated
billing to those services until after the actual enactment of this
legislation. Other commenters argued that since the consolidated
billing legislation specifically excludes several types of practitioner
services, the services of certain additional types of practitioners,
such as clinical social workers and audiologists, should similarly be
excluded. One commenter mistakenly understood the exclusion of
``physician services'' from consolidated billing to be the result of an
administrative decision by us, and expressed support for this decision;
another argued that the statute's categorical exclusion of ``physician
services'' from this provision mandates the exclusion not only of a
diagnostic test's professional component (representing the physician's
interpretation of the diagnostic test), but also of the technical
component (representing the test itself).
Response: The only types of services furnished to SNF residents
that are categorically excluded from the PPS and consolidated billing
provisions are the ones specified in a short list of statutory
exclusions at section 1888(e)(2)(A)(ii) of the Act, for which an
outside supplier can still bill Medicare directly and receive a
separate payment under Part B. All other services are subject to
consolidated billing when furnished to an SNF resident, and are
included in the PPS payment that Medicare makes to the SNF for a
covered Part A stay. In addition, we note that the issue of an SNF
receiving Part B payment for laboratory services under consolidated
billing does not arise at present since, as discussed previously, the
implementation of SNF consolidated billing is currently on hold for
those residents who are not in a covered Part A stay.
Further, we note that although the consolidated billing legislation
does exclude the services of psychiatrists and clinical psychologists,
it does not exclude the services of clinical social workers. (In this
context, it is worth noting that the SNF consolidated billing
requirement was modeled on the corresponding Medicare comprehensive
billing or ``bundling'' requirement for inpatient hospital services
(section 1862(a)(14) of the Act), which has been in effect for well
over a decade and similarly includes clinical social worker services,
while excluding the services of certain other types of mental health
professionals.) Similarly, section 1888(e)(2)(A)(ii) of the Act does
not exclude audiologists; in fact, it is quite explicit in specifying
that ``speech language therapy'' services are always subject to
consolidated billing, even when performed by a type of practitioner
(such as a physician) whose services would otherwise be categorically
excluded from this provision.
We note that the exclusion of physician services themselves from
consolidated billing is statutory rather than the result of an
administrative decision; further, the implementing regulations at
Sec. 411.15(p)(2)(i) define the excluded ``physician's services'' as
those meeting the criteria of Sec. 415.102(a), and the latter provision
specifies, in part, that this definition encompasses only those
services that are furnished personally by the physician. Thus, under
consolidated billing, only the professional component of a diagnostic
test (representing the interpretation that the physician performs
personally) is billed separately as a physician service, while the
technical component represents the diagnostic test itself, which must
be billed by the SNF.
[[Page 41672]]
Finally, in connection with further defining the bundle of services
subject to consolidated billing when furnished to an SNF resident, we
are taking this opportunity to make a conforming change in the
regulations governing Medicare provider agreements in subpart B of Part
489. The interim final rule amended this subpart by adding a new
paragraph (s) to Sec. 489.20 to implement section 1866(a)(1)(H)(ii) of
the Act, which makes compliance with the consolidated billing provision
a specific requirement under the terms of an SNF's Medicare provider
agreement. We are now adding a new paragraph (h) to Sec. 489.21, which
explicitly precludes an SNF from charging a resident for any items or
services that are subject to the Medicare consolidated billing
requirement. (We note that this new provision parallels the
longstanding provision in paragraph (f) of Sec. 489.21, which similarly
prohibits a hospital from charging its inpatient for any items or
services that are subject to the Medicare hospital bundling provision.)
Comment: Several commenters wrote regarding the provision in
section 4541 of the BBA, which imposes a $1500 annual per beneficiary
limit on Part B payments for outpatient PT services (including speech-
language therapy services) and a similar limit for outpatient OT
services, but specifically excepts services furnished by a hospital's
outpatient department from each of these annual limits. (This $1500
Part B payment limit does not affect SNF residents who are in a covered
Part A SNF stay, since the therapy services that they receive are
bundled to the SNF and included in the PPS payment made under Part A,
rather than being billed separately to Part B.)
The commenters objected to the interim final rule's exclusion of
beneficiaries who are considered SNF ``residents'' for consolidated
billing purposes from the outpatient hospital exception to the Part B
therapy payment limit (63 FR 26299). The commenters argued that this
decision results in a reduction of an SNF resident's available Part B
therapy benefits in relation to residents of a totally noncertified
nursing home (who would, by comparison, get a richer benefit package),
thus effectively depriving SNF residents of the ``escape hatch'' that
would otherwise be afforded by the exception of services furnished in
the outpatient hospital setting from the $1500 therapy payment limit.
Another commenter cited the discussion in Program Memorandum
transmittal number AB-98-63 (October 1998) of the $1500 limit on Part B
therapy payment, and asked whether the SNF billing and tracking
requirements for Part B therapy services described in the PM indicate
that the decision to postpone consolidated billing implementation for
residents in noncovered SNF stays has been reversed specifically with
regard to therapy services.
Response: As discussed in the preamble to the SNF PPS interim final
rule, we decided not to except services furnished to SNF residents in
the outpatient hospital setting from the Part B $1500 therapy payment
limit, specifically in order to avoid creating a perverse incentive to
have the hospital outpatient department furnish therapy services that
the resident could appropriately receive from the SNF itself. We note
that section 1819(a)(1) of the Act defines an SNF, in part, as an
institution that is primarily engaged in furnishing skilled
rehabilitation services to its residents. This means that the provision
of therapy services to its residents is an inherent and essential
function of this type of facility.
Moreover, the long-term care facility requirements for
participation (at section 1819(b)(4)(a)(i) of the Act) specifically
require an SNF to provide ``. . . specialized rehabilitative services
to attain or maintain the highest practicable physical, mental, and
psychosocial well-being of each resident . . .'' Thus, an SNF that
fails to provide medically necessary therapy services simply because a
resident had reached the $1500 annual Part B payment limit for these
services would be in violation of this requirement, and would be
subject to appropriate enforcement remedies.
In addition, we wish to clarify that the SNF billing and tracking
responsibilities described in PM AB-98-63 arise solely in the context
of implementing the $1500 Part B therapy payment limit, which
represents an entirely separate BBA provision (and statutory authority)
from SNF consolidated billing; as specified in PM AB-98-35 (July 1998),
the consolidated billing provision itself currently remains on hold for
all services furnished to SNF residents in noncovered stays.
Finally, in addition to the comments on the $1500 therapy cap
provision specifically as it affects SNF residents, several commenters
included more general observations about the nature of the provision
itself. However, these concerns are beyond the scope of this
regulation, and were addressed instead in the June 5, 1998, proposed
rule on Revisions to Payment Policies Under the Physician Fee Schedule
for Calendar Year 1999 (63 FR 30818), and in the final rule published
on November 2, 1998 (63 FR 58814).
Comment: One commenter noted that the regulation at Sec. 413.335(b)
concerning prospective payment for SNFs indicates that the PPS payment
represents payment in full for the costs associated with furnishing
inpatient SNF services to Medicare beneficiaries, but does not contain
language that specifically excepts those types of services (such as
physician services) that are categorically excluded by law.
Response: The qualifying language that the commenter requested is,
in fact, already contained in the regulations at Sec. 413.1(g)(2),
which specify that, for an SNF resident in a covered Part A stay, the
PPS determines the amounts paid for services furnished, ``other than
those described in Sec. 411.15(p)(2) of this chapter.'' The latter
provision lists the services that are categorically excluded from the
PPS bundle.
Comment: We received a large number of comments about the treatment
of ambulance services under the consolidated billing provision. Some
advocated exclusion of all ambulance services from the consolidated
billing provision. Others expressed concern that confusion over the
circumstances in which these services are subject to consolidated
billing could result in payment delays. Several commenters specifically
requested clarification on whether emergency and other outpatient trips
to a hospital via ambulance are subject to consolidated billing. Others
argued that the inclusion of ambulance services under consolidated
billing is inconsistent with the negotiated fee schedule provisions for
ambulance services in the BBA.
Response: As discussed previously, the only types of services
furnished to SNF residents that are categorically excluded from the PPS
and consolidated billing provisions are the ones specified in a short
list of statutory exclusions at section 1888(e)(2)(A)(ii) of the Act.
Since ambulance services do not appear on this statutory excluded list,
they are subject to consolidated billing when furnished to an SNF
resident and are included in the PPS payment that Medicare makes to the
SNF for a covered Part A stay.
The statute specifies that the consolidated billing provision
applies only to those services that are furnished to an SNF
``resident.'' Thus, as explained in the preamble to the interim final
rule, an ambulance trip is considered to be furnished to an SNF
resident (and, thus, subject to consolidated billing) if it occurs
during the course of an SNF stay, but not if it occurs at either the
very beginning or
[[Page 41673]]
end of the stay. (This policy is comparable to the one governing
ambulance services furnished in the inpatient hospital setting, which
has been subject to a similar comprehensive Medicare billing or
``bundling'' requirement for well over a decade.) Accordingly, the
initial ambulance trip that first brings a beneficiary to an SNF is not
subject to consolidated billing because the beneficiary has not yet
been admitted to the SNF as a resident at that point. Similarly, the
regulations at Sec. 411.15(p)(2)(x) provide that an ambulance trip that
conveys a beneficiary from the SNF is not subject to consolidated
billing when it occurs in connection with one of the events specified
in Secs. 411.15(p)(3) (i) through (iv) as ending the beneficiary's SNF
``resident'' status. The events are--
A trip for an inpatient admission to a Medicare-
participating hospital or critical access hospital (CAH), or to another
SNF.
A trip to the beneficiary's home to receive services from
a Medicare-participating home health agency under a plan of care.
A trip to a Medicare-participating hospital or CAH for the
specific purpose of receiving emergency services or certain other
intensive outpatient services that are not included in the SNF's
comprehensive care plan.
A formal discharge (or other departure) from the SNF that
is not followed within 24 hours by readmission to that or another SNF.
With regard to the third bullet above, Sec. 411.15(p)(3)(iii) of
the regulations excludes from consolidated billing those types of
outpatient hospital services ``. . . that are not furnished pursuant to
the [SNF's] comprehensive care plan.'' This outpatient hospital
exclusion (as discussed in greater detail below, in the context of the
SNF comprehensive plan of care) applies to a small number of
exceptionally intensive services that lie well beyond the scope of care
that SNFs would ordinarily furnish (and, thus, beyond the ordinary
scope of SNF care plans), as well as emergency services (which, by
their nature, cannot be anticipated and planned for in advance). This
means that when an outpatient visit to a hospital occurs for the
purpose of receiving one of these excluded types of services, the
individual receiving the services ceases to be a ``resident'' of the
SNF for consolidated billing purposes and, thus, the associated
ambulance transportation to the hospital is also excluded from
consolidated billing. We note that this exclusion applies to the return
trip from the hospital to the SNF as well, since the beneficiary's
status as an SNF ``resident'' for consolidated billing purposes (once
ended by the receipt of an excluded outpatient hospital service) does
not resume until he or she returns to the SNF.
With regard to the concerns about the negotiated fee schedule
provisions for ambulance services, section 4531 of the BBA--the same
provision that mandates the development of an ambulance fee schedule
through a negotiated rulemaking process--also prescribes an interim
payment methodology to be used until the ambulance fee schedule takes
effect. Under the interim payment methodology, Part B will continue to
pay for ambulance services that an SNF furnishes (either directly with
its own resources, or under arrangements made with an outside supplier)
on a reasonable cost basis, in which the cost per trip is limited to
the prior year's reasonable cost per trip, updated by an inflation
factor (that is, the consumer price index for all urban consumers (CPI-
U) minus one percentage point). We note that the Medicare contractors
have already received instructions (PM Number A-97-15 (November 1997)
and PM Number A-98-2 (February 1998)) that describe this payment
methodology in detail.
Comment: One commenter noted that the regulations at
Sec. 410.40(b)(4) require ambulance services furnished to an SNF
resident to be furnished by, or under arrangements made by, the SNF
itself. The commenter questioned whether this requirement is consistent
with our policy of allowing certain ambulance services (such as those
furnished in connection with the receipt of excluded outpatient
hospital services) to be excluded from consolidated billing.
Response: In discussing services furnished to an SNF resident,
Sec. 410.40(b)(4) includes a specific cross-reference to the SNF
``resident'' definition at Sec. 411.15(p)(3) which, in turn, specifies
certain circumstances (such as the receipt of excluded outpatient
hospital services) as ending a beneficiary's status as a ``resident''
of the SNF for consolidated billing purposes.
Comment: One commenter noted that our designation of certain
categories of outpatient hospital services as ending (for consolidated
billing purposes) a beneficiary's status as an SNF ``resident'' also
has the effect of unbundling ambulance transportation that is
associated with the beneficiary's receipt of those services. The
commenter then suggested that we should similarly designate a
beneficiary's receipt of excluded dialysis services at an offsite
location as ending his or her SNF resident status in order to permit
the associated ambulance transportation to be unbundled as well.
Response: We believe that this comment reflects a misunderstanding
of the underlying purpose of the outpatient hospital exclusion. This
exclusion from consolidated billing does not serve as a mechanism for
unbundling ambulance services per se. Rather, as discussed above, this
exclusion is intended to encompass those services--specific to the
outpatient hospital setting--that are so exceptionally intensive,
costly, or emergent as to lie well beyond the ordinary scope of SNF
care. The resulting unbundling of ambulance services associated with
these excluded outpatient hospital services occurs simply because the
bundling of ambulance services is itself tied to a beneficiary's status
as an SNF ``resident'' for consolidated billing purposes, which is
suspended by the beneficiary's receipt of these excluded types of
outpatient hospital services.
By contrast, the performance of dialysis--even if it occurs offsite
in the outpatient hospital setting--is a type of activity that clearly
falls well within the normal scope of SNF care. (As discussed below,
the effect of the exclusion of dialysis services from the SNF
consolidated billing provision is that an SNF is not itself required to
furnish--either directly or under arrangements--dialysis services to
its residents; however, if an SNF nonetheless elects to furnish these
services, they are included within the scope of the Part A extended
care benefit, as well as in the PPS per diem payment that Part A makes
to the SNF.) Accordingly, while the statute categorically excludes
dialysis services themselves from the requirement for SNF consolidated
billing, their receipt offsite does not have the effect of ending a
beneficiary's status as an SNF resident for purposes of this
requirement and, consequently, does not result in unbundling the
associated ambulance transportation.
We note, in addition, that the policy regarding ambulance services
in the SNF setting is also affected by a final rule on ambulance
services coverage that was published in the Federal Register on January
25, 1999 (64 FR 3637). Although this rule was published well after the
SNF PPS interim final rule, it has raised certain questions and
concerns about ambulance trips (and transportation generally) in the
SNF context.
In addition to the specific service categories listed in sections
1861(h)(1) through (6) of the Act, the extended care benefit includes
coverage of ``. . . such other services necessary to the health of the
patients as are generally provided
[[Page 41674]]
by, or under arrangements made by, skilled nursing facilities''
(section 1861(h)(7) of the Act). As explained in the interim final rule
on the SNF PPS (63 FR 26302), the medical and other health services
specified in section 1861(s) of the Act (which include ambulance
services) are considered to be ``generally furnished'' by SNFs and,
therefore, coverable under the Part A extended care benefit (see
regulations at Sec. 409.27(a)).
As discussed previously, under the SNF consolidated billing
provision, the SNF itself is responsible for billing Medicare for
virtually all of the services that a resident receives, except for a
short list of excluded service categories specified in the statute at
section 1888(e)(2)(A)(ii) of the Act. Since the Congress did not
specify ambulance services as one of the excluded categories, such
services must be billed to Medicare by the SNF when furnished to an SNF
resident. As explained above and in the interim final rule (63 FR
26298), the consolidated billing provision does not apply to an
ambulance trip that conveys a beneficiary to the SNF for the initial
admission, or from the SNF following a final discharge, but only to
ambulance transportation that is furnished during the period that the
beneficiary is actually an SNF resident.
Nevertheless, as noted in the interim final rule (63 FR 26296), it
is possible for particular service categories (such as preventive or
screening services) to be subject to the SNF consolidated billing
provision, and yet not be included within the scope of coverage under
the Part A SNF benefit. It has been suggested that this is also the
case with ambulance services, in view of instructions in the SNF Manual
at sections 260.2 and 262 that indicate ambulance services are covered
only under Part B. However, we note that these sections appear in a
portion of the instructions that deal exclusively with situations
involving SNF services covered under Part B when no payment under the
Part A SNF benefit is possible (Part A benefits exhausted, no prior
qualifying hospital stay, etc.); thus, the reference to ``ambulance
services'' in this context applies specifically to the Part B benefit
described in section 1861(s)(7) of the Act.
By contrast, for situations that do involve payment under the Part
A SNF benefit, the applicable SNF Manual instructions in this regard
appear at section 230.10.A. These instructions correspond to section
1861(h)(7) of the Act, which includes within the scope of the extended
care benefit those services--not otherwise specified in section
1861(h)--that are generally furnished by (or under arrangements made
by) SNFs. As explained in the preamble to the interim final rule (63 FR
26302), this provision is considered to include the full range of
medical and other health services described in section 1861(s) of the
Act, other than those particular service categories (such as preventive
and screening services) that, under the statute, lie specifically
beyond the scope of the extended care benefit. The remainder of the
medical and other health services described in section 1861(s) of the
Act are considered to be ``generally furnished'' by SNFs and,
therefore, within the scope of the extended care benefit when furnished
to a resident in a covered Part A stay.
Thus, when an SNF provides or makes arrangements for a resident's
transportation by ambulance during the course of a covered Part A stay,
such services are not considered Part B ambulance services under the
separate Part B benefit at section 1861(s)(7) of the Act, but Part A
extended care services that SNFs generally furnish under section
1861(h)(7) of the Act. This is essentially similar to the use of the
term ``durable medical equipment'' (DME), which refers exclusively to
the Part B benefit described in section 1861(s)(6) of the Act; however,
when an SNF furnishes the same types of items to a resident during the
course of a covered Part A stay, they are not covered as DME under the
separate Part B benefit, but rather, ``as supplies, appliances and
equipment'' under the Part A extended care benefit at section
1861(h)(5) of the Act. Further, section 1833(d) of the Act prohibits
Part B payment for any service that is payable under Part A.
In order to clarify that the Part A SNF benefit covers ambulance
transportation under the authority of section 1861(h)(7) of the Act, we
are relocating the ambulance provision from Sec. 409.20(a)(8) to a new
subparagraph of Sec. 409.27, the section of the regulations that
implements this particular portion of the statute. We are also
clarifying that the SNF benefit's coverage of ambulance transportation
is limited to those circumstances meeting the general medical necessity
requirements that would apply to Part B coverage under the separate
ambulance services benefit (as set forth in Sec. 410.40(d)(1)) if the
services were not covered under Part A--that is, those situations in
which a beneficiary's medical condition is such that other means of
transportation would be contraindicated.
We note that the ambulance rule's primary objective in revising the
extended care benefit regulations was to clarify that the scope of this
benefit specifically includes coverage of transportation via ambulance.
In the SNF PPS context, this effectively results in bundling the cost
of all ambulance trips made in connection with an individual who has
the status of an SNF resident, regardless of whether, prior to the PPS,
the SNF undertook to furnish these services itself as ``patient
transportation'' under Part A or, alternatively, allowed an outside
supplier to furnish them as ``ambulance services'' under Part B.
However, the ambulance rule's revision was made in a manner that
also raises the issue of coverage of transportation generally, by modes
other than ambulance. In the institutional context, the issue of non-
ambulance transportation arises mainly in the SNF setting, since this
particular institutional setting is one in which a facility may
routinely utilize offsite sources of services for its resident during
the course of his or her stay, under circumstances that do not
necessarily require the use of an ambulance.
Further, we note that unlike transportation via ambulance (which
involves a service that is precisely delineated in terms of vehicle
type, appropriate destinations, etc., and is recognized as a specific
benefit category), the concept of non-ambulance transportation is a
more generalized one that denotes the basic function of conveying an
individual from one place to another, rather than a particular benefit
or mode of conveyance. Under the long-term care facility requirements
for participation at Sec. 483.25, an SNF's essential obligation is to
provide each resident with those services that are necessary ``* * * to
attain or maintain the [resident's] highest practicable physical,
mental, and psychosocial well-being. * * *'' The SNF can meet this
obligation either by providing the needed services onsite at the SNF,
or by securing them at an offsite location. SNFs that pursue the latter
course have historically used a wide variety of means for conveying a
resident to receive offsite services. Some of these (like community
wheelchair transportation) were available at no cost and others
generally involved various non-Medicare funding sources (such as
Medicaid, or the resident's own family).
We note that, unlike transportation via ambulance, no separate
benefit category has ever existed under Part B of Medicare for coverage
of non-ambulance modes of transportation. Thus, prior to the inception
of the SNF PPS, non-ambulance transportation for SNF residents occurred
in a wide variety of ways that did not generally
[[Page 41675]]
involve any Medicare payment under either Part A or Part B. In making
the ambulance final rule's revision to the extended care benefit
regulations, it was not our intent to create an SNF benefit expansion
by establishing a new entitlement under the Medicare program that did
not heretofore exist in this setting; nor is it our intent to define as
part of the SNF PPS bundle any services for which the Medicare program
did not previously assume financial responsibility under either Part A
or Part B. Therefore, we are revising Sec. 409.27, as discussed above,
to refer specifically to ambulance transportation rather than to
transportation generally.
Comment: Several commenters requested clarification regarding the
status of dialysis services under consolidated billing. One commenter
suggested that Part B should pay for dialysis performed at the hospital
outpatient department or, alternatively, when furnished by a
freestanding dialysis center on the SNF's premises.
Response: Dialysis is one of the service categories that the BBA
specifically excludes from the SNF consolidated billing provision. Most
of the other excluded service categories are, by definition, outside
the scope of the Part A extended care benefit. For example, an SNF
cannot bill Part A for physician services, since section 1861(b)(4) of
the Act defines these services as being outside the scope of the
inpatient hospital benefit which, in turn, has the effect of excluding
them as well from the extended care benefit under section 1861(h) of
the Act (see the undesignated clause following section 1861(h)(7) of
the Act).
By contrast, dialysis services have always been included within the
scope of the Part A extended care benefit under section 1861(h)(7) of
the Act that provides for coverage of those services (not specified
elsewhere in section 1861(h)) that are generally furnished by, or under
arrangements made by, SNFs. Thus, the exclusion of dialysis from the
consolidated billing provision means that an SNF is not itself required
to furnish or make arrangements for this service. However, even though
the SNF is not required to furnish or make arrangements for dialysis
during the course of a covered Part A stay, if it nonetheless elects to
do so, the dialysis is included within the scope of the Part A extended
care benefit, as well as in the PPS per diem payment. Alternatively,
since the exclusion of dialysis services from the consolidated billing
provision allows the SNF the option of declining to furnish or make
arrangements for dialysis services, those services that meet the
following coverage requirements for the Part B dialysis benefit could
be furnished and billed to Medicare directly by an outside dialysis
supplier.
There are two situations under which dialysis services would be
considered a Part B service and billable by an end stage renal disease
(ESRD) facility or supplier when provided to an SNF resident. The first
is for institutional dialysis services received at a Medicare certified
ESRD facility. Institutional dialysis services must be provided by
entities that meet the ESRD conditions of coverage that are specified
in regulations at part 405, subpart U. These regulations limit
outpatient maintenance dialysis services to those services provided
``on the premises'' of the facility. Thus, it is not possible for Part
B institutional dialysis services to be provided at the site of a
nursing facility or SNF that does not itself meet the ESRD conditions
of coverage. The second situation involves Part B coverage of home
dialysis services for residents of nursing facilities or SNFs, as these
facilities may qualify as the residents' home for purposes of this
benefit.
In order for Medicare payment of home dialysis to be made, the
resident must elect to become a home dialysis patient and have
completed a training program provided by an approved ESRD facility.
Once a patient has completed the training, he or she must elect either
Method I, where an ESRD approved facility furnishes the dialysis
equipment and supplies, or Method II, where the patient elects a single
supplier other than the ESRD facility to furnish all of the dialysis
equipment and supplies, other than laboratory services and support
services which are provided by a certified ESRD facility. Each home
patient must have his or her own supplies and equipment. These cannot
be shared with other SNF residents. Also, home dialysis is intended to
be self-dialysis performed by the patient or the patient's family.
Therefore, Medicare does not cover the services of staff to assist with
the home dialysis services.
Comment: Many commenters requested clarification of the
relationship between the SNF comprehensive care plan and a
beneficiary's status as a ``resident'' of the SNF for consolidated
billing purposes. Section 1862(a)(18) of the Act defines the
applicability of the consolidated billing requirement in terms of
services that are furnished to an individual who is a ``resident'' of
an SNF. The implementing regulations at Sec. 411.15(p)(3) specify
several circumstances that have the effect of ending a beneficiary's
status as an SNF ``resident'' for consolidated billing purposes.
Section 411.15(p)(3)(iii) specifies as one such circumstance the
receipt of those types of outpatient hospital services ``. . . that are
not furnished pursuant to the [SNF's] comprehensive care plan.'' Many
commenters expressed confusion about the appropriate interpretation of
this provision, along with the erroneous belief that a given outpatient
hospital service is subject to the SNF consolidated billing provision
only if it is actually specified in the individual care plan of the
particular beneficiary to whom the service is furnished. Other
commenters suggested additional types of outpatient hospital services
for exclusion beyond the specific categories already identified in the
preamble to the interim final rule. Still others advocated extending
the exclusion to apply to services furnished in nonhospital settings as
well (for example, MRIs performed at freestanding imaging centers).
Response: The purpose of citing the SNF's comprehensive care plan
in the context of an outpatient hospital visit is to clarify that the
SNF retains the overall billing responsibility for essentially the
entire package of care furnished during the outpatient visit, other
than certain specifically excluded services. As explained in the
interim final rule (63 FR 26298), in the outpatient hospital context,
this exclusion applies to the small number of exceptionally intensive
services that lie well beyond the scope of care that SNFs would
ordinarily furnish (and, thus, beyond the ordinary scope of SNF care
plans), as well as emergency services (which, by their nature, cannot
be anticipated and planned for in advance).
In November 1998, we issued PM transmittal number A-98-37, which
provided additional clarification on the outpatient hospital exclusion,
as well as a list of the specific HCPCS codes that identify the
excluded services. The PM explains that this exclusion is not invoked
merely because a particular outpatient hospital service does not appear
in the individual SNF care plan of the person receiving the service;
rather, the exclusion applies only to those specified categories of
services that, by definition, lie well beyond the scope of SNF care
plans generally. Currently, only those services that are specifically
cited in the PM itself are excluded from consolidated billing on this
basis: cardiac catheterization; computerized axial tomography (CT)
scans; MRIs, ambulatory surgery involving the use of an operating room;
[[Page 41676]]
emergency room services; radiation therapy; angiography; and, lymphatic
and venous procedures. However, as indicated in the interim final rule,
we continue to consider further refinements in this policy as the new
PPS for outpatient hospital services is being developed, and any
further refinements would be made through future rulemaking.
In this context, we note that a key concern underlying the
development of the consolidated billing exclusion of certain outpatient
hospital services specifically involves the need to distinguish those
services that comprise the SNF bundle from those that will become part
of the outpatient hospital bundle that is currently being developed in
connection with the outpatient hospital PPS. Accordingly, we are not
extending the outpatient hospital exclusion from consolidated billing
to encompass any other, freestanding settings.
Finally, in order to resolve the confusion that commenters
expressed regarding the role of the comprehensive care plan, we are
revising the parenthetical in Sec. 411.15(p)(3)(iii) to read as
follows: ``. . .(but only with respect to those services that are
beyond the general scope of SNF comprehensive care plans, as required
under Sec. 483.20).'' This is to clarify that an outpatient hospital
service is not excluded from consolidated billing merely because it
does not appear in the particular care plan of the individual
beneficiary receiving the service; rather, consolidated billing
excludes only those types of outpatient hospital services that we
specifically identify as being beyond the scope of SNF care plans
generally. As indicated above, this exclusion currently encompasses
only those particular service categories that we have specifically
identified in PM A-98-37; however, as we continue to examine this
issue, we may make further modifications in future instructions.
Comment: Many commenters requested further clarification regarding
the definition of ``emergency'' outpatient hospital services in terms
of their exclusion from SNF consolidated billing. One commenter argued
that it is unreasonable to define an emergency as including only ``life
or death'' situations. Another commenter noted the interim final rule's
description of emergency outpatient hospital services as being beyond
the general scope of SNF care plans (since, by their nature, they
cannot be anticipated and planned for in advance), and questioned
whether this characterization would be appropriate in those instances
where ``emergency'' situations actually are addressed in a resident's
plan of care (for example, contingency plans that are based on risk
factors identified in the resident assessment). Another inquired as to
whether the exclusion of emergency services extends to other services
that are clearly unrelated to the emergency itself, but that happen to
be performed during the individual's visit to the emergency room.
Response: As noted in the preceding discussion of the relationship
between the outpatient hospital exclusion and the comprehensive care
plan, PM transmittal number A-98-37 (November 1998) provided additional
clarification on the exclusion of certain outpatient hospital services
from SNF consolidated billing. As the PM indicates, we are not
establishing a special definition of ``emergency'' services unique to
consolidated billing, but instead are incorporating the longstanding
definition contained in regulations at Sec. 424.101, ``services that
are necessary to prevent death or serious impairment of health and,
because of the danger to life or health, require use of the most
accessible hospital available and equipped to furnish those services.''
This definition is not limited to ``life or death'' situations, since
it specifically includes those that present a risk of ``serious
impairment of health'' as well. The PM also explains that emergency
services are excluded from consolidated billing by virtue of their
designation as being beyond the scope of SNF care plans generally,
which would be true regardless of whether the individual care plan of a
particular resident may occasionally address contingency plans in the
event of a medical emergency. The PM also clarifies that the exclusion
from consolidated billing is limited to, ``Those services and supplies
that are directly related and required to complete the procedure or
treat the emergency condition for which the beneficiary came to the
hospital, for example, anesthesia when used during ambulatory surgery
involving the use of an operating room.'' All other services and
supplies must be bundled back to the SNF and the hospital must look to
the SNF for payment.
Thus, for example, a laboratory test that is required to diagnose
the condition that occasioned the emergency visit would be excluded
from consolidated billing, and can be billed to Part B by the hospital.
By contrast, a routine diagnostic test that is unrelated to the
emergency condition itself would not be excluded from consolidated
billing merely because it happens to be performed during the
beneficiary's visit to the emergency room.
Comment: Two commenters noted that the outpatient hospital
exclusion of ambulatory surgery from SNF consolidated billing applies
specifically to those procedures that involve the use of an operating
room, and they requested clarification on whether this exclusion would
encompass the insertion and replacement of a percutaneous esophageal
gastrostomy (PEG) tube when performed in a hospital's gastrointestinal
(GI) suite or endoscopy suite rather than in an operating room.
Response: The procedure codes that specifically pertain to PEG
tubes are 43750 (percutaneous placement of gastrostomy tube) and 43760
(change of gastrostomy tube), both of which come under the general
exclusion from SNF consolidated billing for ambulatory surgery
involving the use of an operating room. The reason that the
instructions in PM A-98-37 restrict the outpatient hospital exclusion
for ambulatory surgery to those procedures that involve the use of an
operating room is to avoid encompassing procedures that are simple
enough to be performed at bedside in the SNF itself. Accordingly, with
respect to PEG tube procedures, we regard the use of a GI suite or an
endoscopy suite as equivalent to the use of an operating room for
purposes of this exclusion.
Comment: We received many comments on various aspects of an SNF's
relationship with its suppliers. In the interim final rule (63 FR
26300), we noted that section 1888(e)(9) of the Act provides that the
amount of Part B payment to an SNF shall be determined in accordance
with the applicable fee schedule for the particular service. We also
noted the concern that if an SNF were to arrange with an outside
supplier for the provision of a particular service for less than the
applicable fee schedule amount, allowing the SNF to retain the
difference could create a perverse incentive for the SNF to provide
unnecessary services.
We invited comments on possible ways to address this concern,
including pursuing legislation (to limit the SNF's Part B payment to
the lower of the applicable fee schedule amount or the amount that the
supplier actually charges the SNF) or, alternatively, to require the
SNF to pay its supplier the full fee schedule amount. A few commenters
expressed support for limiting the SNF's Part B payment to the lower of
the applicable fee schedule amount or the amount of the supplier's
actual charge to the SNF, but only if the SNF is required to pass this
entire
[[Page 41677]]
amount (as so limited) on to the supplier. A greater number supported
requiring the SNF to pass the full fee schedule amount on to the
supplier, regardless of the supplier's actual charge (some of these
commenters advocated permitting the SNF to retain a ``reasonable''
administrative charge).
By far the largest group of commenters, however, argued against
imposing any restrictions in this area, noting that transactions
between the SNF and its suppliers are a private contractual matter in
which we should not intervene. They maintained that the appropriate way
to address any abusive practices would be through more vigorous
enforcement of existing statutes and regulations (such as medical
review procedures), rather than to prescribe the specific terms of
payment between the SNF and its suppliers. Other commenters expressed
concerns about possible violations of the anti-kickback provisions at
section 1128B(b) of the Act, as well as more general concerns about the
timeliness and adequacy of the SNF's payment to its suppliers.
Response: We agree that, under current law, an SNF's relationship
with its supplier is essentially a private contractual matter, and the
terms of the supplier's payment by the SNF must be arrived at through
direct negotiations between the two parties themselves. Accordingly, we
believe that the most effective way for a supplier to address any
concerns that it may have about the adequacy or timeliness of the SNF's
payment would be for the supplier to ensure that any terms to which it
agrees in such negotiations satisfactorily address those concerns.
We remain concerned, however, over the potential for the provision
of unnecessary services, and will continue to evaluate possible
legislative and other approaches to addressing this concern. In
addition, we note that our discussion of the relationship between an
SNF and its suppliers should not be construed as addressing in any
manner the potential applicability of the statutory anti-kickback
provisions, since matters relating specifically to the enforcement of
these provisions lie exclusively within the purview of the Office of
the Inspector General.
O. Scope of Extended Care Benefits
Along with the promulgation of regulations specifically describing
the SNF PPS itself, the interim final rule also included a number of
conforming revisions in other portions of the regulations. One such
revision was a reorganization of subpart C of part 409 (describing the
scope of covered services under the Part A SNF benefit), which now
tracks more accurately the corresponding portion of the Medicare
statute at section 1861(h) of the Act.
Comment: One commenter requested us to clarify that the regulations
at Sec. 409.26(a) (coverage of transfer agreement hospital services)
provide for separate Part B payment for the medical services of an
intern or resident of the SNF's transfer agreement hospital.
Response: The commenter's understanding of the purpose of this
provision is incorrect. This section of the regulations implements
section 1861(h)(6)(A) of the Act, which describes the scope of services
included in the Part A extended care benefit. Accordingly, the medical
services of interns and residents described in Sec. 409.26(a) are
covered as SNF services under Part A, rather than being covered
separately as practitioner services under Part B.
P. Impact Analysis
As required by Executive Order 12866, the Unfunded Mandates Reform
Act of 1995, and the Regulatory Flexibility Act (RFA) (Public Law 96-
354), the interim final rule included a Regulatory Impact Statement, on
which we received numerous comments.
Comment: Many commenters were concerned about the budgetary savings
from the SNF PPS as indicated in the interim final rule, as compared
with CBO's estimate at the time of the BBA. Many of these commenters
felt that this ``extra'' money should be given back to the SNFs through
the calculation of the rates to be used in the PPS.
Response: CBO's estimate of savings of $9.2 billion over five years
only shows the effect on SNFs under Medicare fee for service and does
not include the indirect savings due to reduced managed care payments,
which are based on average fee for service payments by county. The
estimate of 5-year savings shown in the interim final rule (63 FR
26304) of $12.87 billion includes both the fee-for-service effect and
the managed care effect (which, as stated in the interim final rule, is
about 25 percent of the total). If savings attributable to managed care
are taken out, the result is very close to the $9.5 billion in savings
which CBO had estimated.
Comment: Many commenters were concerned about the behavioral offset
which was assumed in the savings estimate. Some argued that there
should have been no offset assumed whatsoever, and all believed that
the offset that actually was assumed was much too large. In addition,
many commenters expressed concern about the potential for nursing home
closures and diminished beneficiary access to needed care.
Response: The ``behavioral'' offset assumed for the impact analysis
is only used as a device to assess impact. It is not used to adjust the
payment rates. Along with the possible sources of this offset listed in
the interim final rule, there are probably many additional factors
which would also have the effect of offsetting the savings from this
provision.
We are aware and concerned about the statements being reported
about potential closures of nursing homes and the delay in patient
discharges from hospitals that are being attributed to the change in
payments resulting from implementation of the PPS for SNFs. At this
time, however, we do not have sufficient claims or MDS data either to
confirm or refute these statements. It will be several months before we
can establish a baseline and begin to assess the impact on access and
quality. As we accumulate data and learn more about the effects of the
new payment system, we will report the results.
Regarding the issue of beneficiary access to care, we note that in
terms of the impact analysis itself, if these beneficiaries had to
remain in higher cost care as opposed to moving to SNFs, this could
affect the budgetary savings to Medicare and, therefore, would be part
of this offset factor. The final result is that this behavioral offset
factor is only used to determine the total budget effect of a
provision. It is not meant to indicate abusive behavior by the
providers. The 45 percent factor that was used in our impact analysis
is in the typical range for offset factors related to a significant
payment system change like the SNF PPS. While little empirical data is
currently available to estimate the overall impact of the PPS and
consolidated billing on access to care in SNFs, this is an important
issue in the context of the payment system, certification requirements
and quality monitoring activities.
However, from a broader policy perspective, this issue involves not
only the payment characteristics of the PPS itself, but also a number
of related requirements regarding provider participation in the
Medicare program. Some commenters expressed concern that the payment
rates under the SNF PPS may be inadequate and could result in SNFs
withholding needed care and services from Medicare beneficiaries, or
even denying admission to them. We note that in order to be certified
for participation in the Medicare program as an SNF, a nursing home
must first meet a set of requirements for
[[Page 41678]]
participation designed to protect and promote resident health and
safety. These certification standards include the requirement to ``* *
* provide services to attain or maintain the highest practicable
physical, mental, and psychosocial well-being of each resident * * *''
(section 1819(b)(2) of the Act). Thus, an SNF that fails to provide or
make the necessary arrangements for the care and services that a
resident requires would jeopardize its program certification.
Further, the statutory provision regarding Medicare provider
agreements (section 1866(a)(1) of the Act) requires an SNF to accept
the Medicare payment for covered SNF services as payment in full. The
corresponding regulations at Sec. 489.53(a)(2) specify that one of the
grounds for terminating a provider agreement is when the provider `` *
* * places restrictions on the persons it will accept for treatment and
it fails either to exempt Medicare beneficiaries from those
restrictions or to apply them to Medicare beneficiaries the same as to
all other persons seeking care.'' In addition, longstanding program
guidelines in section 134 of the Medicare SNF Manual (HCFA Pub. 12)
indicate that, while a provider may restrict the types of health
conditions it accepts or may establish other criteria relating to the
admission of patients, if those restrictions apply to Medicare
beneficiaries, they must apply in the same manner to all other persons
seeking care and treatment by the provider.
Comment: One commenter felt that a 17 percent level of budgetary
savings cited in the interim final rule was significant for providers
of care.
Response: The 17 percent savings factor is an average based on the
Medicare business of a provider. When this factor is converted to a
total facility basis, it is estimated to be a 1.7 percent savings on
average. This does not meet the threshold of three percent which we
have used in the past to determine that an anticipated impact is
significant. We do realize that using average values does not totally
reflect each individual SNF's effect, which was acknowledged in the
impact analysis of the interim final rule. However, for many of the
factors included in the calculation, only averages existed. Specific
data were not available for each individual facility.
Comment: One commenter stated that the 17 percent savings would be
higher once the PPS was fully implemented. This factor only was for the
first year of implementation, when most facilities would be paid based
on 75 percent of their facility-specific rate and 25 percent of the
Federal rate.
Response: We agree with this comment that the estimated savings
will be greater in future years. The effect of a system that paid all
facilities entirely at the Federal rate as of the first year, instead
of having the transition, would be that it would save 21 percent on
average instead of 17 percent (see table IX.2). This effect would be
felt much more heavily by hospital-based facilities (33 percent
savings) as opposed to freestanding facilities (18 percent). This
result was not included in the original interim final rule because that
rule only deals with setting rates for the first year and not with what
will happen when it is fully implemented. The results listed here have
the same caveats as those done in the original impact analysis;
primarily, that averages have been used and the effects on individual
providers may differ. Future impacts will be shown as the rates are
developed and published in the future.
Comment: Several commenters stated that the 17 percent reduction
may be true on average but specific providers may have much larger
reductions (based on geographical characteristics).
Response: As was stated in the interim final rule, we do not know
the effect on individual providers. Some providers will have a greater
than 17 percent reduction in payments while others will have less than
that or even an increase. As more data becomes available through the
implementation of this system, we will be able to complete a much more
thorough analysis of the effects of this system on many of these
smaller groups of characteristics.
Comment: Several commenters asserted that the savings were
understated because they did not take into account the added costs of
implementing PPS for the facilities.
Response: It is true that the savings estimate shown in the interim
final rule in table IX.1 (63 FR 26304) does not include any additional
costs due to implementing PPS. This is because these savings are the
difference in payments to facilities under the PPS compared to the
previous payment system (either based on reasonable cost or the
optional low-volume PPS). In developing the impact analysis, the
previous system payments would not include the costs of implementing
PPS. Likewise, the estimates of the new PPS costs do not include the
implementation costs. Therefore, the differences between these costs or
the savings do not include any effect of this additional cost. On the
other hand, the savings estimates do not reflect the lower costs which
result from providing services more efficiently, which is a natural
outcome of implementing a PPS.
Comment: One commenter stated that the Congress had only intended
to reduce the rate of growth in SNF payments and not actually reduce
the level of payments.
Response: The statute prescribes the methodology for calculating
the payment rate. The statute specifies the base year and specifies the
updates to the base year costs. The legislation which implemented this
system called for only allowing a market basket minus 1 percentage
point increase going back to 1995. This amounted to a total of about
seven percent over the three years. In the meantime, costs on a per
diem basis had been increasing at a total of about 40 percent during
that same period. Some of that increase is due to an increase in case-
mix during that period, but as can easily be seen from these numbers, a
very stringent limit had been placed on facilities' rate of growth for
the last three years. Payments under this system are higher, on
average, when compared to 1995 payments, but when compared to 1996 and
1997 payments, could very well be lower.
In addition, due to the formula expressed in the statute, many
hospital-based facilities may face a reduction even in comparison to
1995 payments, because the formula for calculating the Federal rate is
more weighted to the freestanding average. Thus, because of the
statutory formula, most facilities may see a drop in payments in their
first year of PPS as opposed to their last year under the previous
payment system.
Comment: One commenter wished to know if we considered the
probability of units closing or decertifying because of reimbursement
levels. They wanted an estimate of the potential closings of small
rural facilities since they are usually the only such units in these
communities.
Response: We did consider the chance of some facilities closing due
to the implementation of PPS. As stated in the interim final rule, the
effect on individual SNFs will depend on their ability to adapt to the
incentives resulting from the new system. If a provider decides that it
cannot (or will not) adapt to the PPS, then that provider may decide to
drop out of the Medicare program. This certainly may be a consequence
of this provision but, as shown in the impact analysis of the interim
final rule, the effect of these provisions are fairly equitable across
urban and rural and hospital-based and freestanding ranges. Of course,
individual SNFs may be affected in very different ways and this may
prompt a variety of responses, including an election to drop out of the
program.
[[Page 41679]]
There is no way to estimate the number of facilities that will make the
election to leave the Medicare program. However, as part of the offset
factor development, this possibility was considered and, therefore,
some of that offset is due to the possibility that beneficiaries may be
required to stay in more expensive care settings in the absence of SNF
care being available. This was one of the reasons reflected in the
impact analysis to the interim final rule that budgetary savings from
this provision would be diminished.
Comment: Several commenters expressed concern that suppliers would
be significantly affected by the changes made in this system.
Response: The way suppliers do business will to some extent be
affected by these provisions. Since the suppliers will now have to
negotiate with facilities in order to receive payment for their
services, this will be different from the current process for suppliers
in situations involving an SNF that had not previously elected to do
the Medicare billing for its residents' supplies. However, we do not
anticipate that this change will be uniformly significant, even among
this subset of suppliers, since its effect will be limited primarily to
those particular areas that have an abundance of suppliers competing
for the business of a relatively small number of SNFs. By contrast, we
believe that in most situations suppliers should be able to negotiate a
fair amount of payment from the facilities and, thus, will not be
significantly affected economically by these provisions, as discussed
further in section VI below.
Comment: One commenter argued that since the interim final rule is
a major rule (savings over $100 million), it appears inconsistent to
state that an assessment of costs and benefits pursuant to the Unfunded
Mandates Reform Act was not needed since local governments and the
private sector would not be incurring costs of over $100 million. This
commenter felt that there would be cost shifting and these entities
would be picking up the amount of savings the Federal government was
realizing.
Response: The interim final rule implemented major changes in how
SNFs will be paid by Medicare. Other payers, being prudent purchasers
of health care services, will still be able to negotiate with the
providers to reach a fair and equitable payment for services rendered
to patients they cover. Because other payers are able to negotiate we
believe that if providers attempt to shift costs due to SNF PPS other
payers will quickly negotiate what they will pay to avoid being unduly
burdened with additional costs. Therefore, there is a great amount of
uncertainty regarding the amounts, if any, that other payers may have
to bear due to the payment changes as a result of SNF PPS. In previous
cases, what has occurred is that other payers have adjusted their
policies after we changed our payment policy.
The Unfunded Mandates Reform Act of 1995 requires that agencies
prepare an assessment of anticipated costs and benefits before issuing
any rule that may mandate an annual expenditure by State, local, or
tribal governments, in the aggregate, or by the private sector, of $100
million or more. We believe that this final rule will not mandate
expenditures in that amount. We do realize that using average values
does not totally reflect each individual SNF's effect, which was
acknowledged in the Impact section of the interim final rule, or the
segmented aggregate effect on State, local, or tribal governments, and
the private sector. However, for many of the factors in the calculation
only averages existed, and facility-specific data were not available
for each individual facility, not making such segmentation possible.
IV. Provisions of the Final Regulations
This final rule incorporates the provisions of the interim final
rule with the following revisions, as discussed previously in this
preamble:
We are amending the regulations text at Secs. 409.20 and
409.27 to clarify that transportation by ambulance that meets the
general medical necessity requirements set forth in Sec. 410.40(d)(1)
is covered under the Part A SNF benefit as services that are generally
furnished by (or under arrangements made by) SNFs.
We are amending the regulations text at Sec. 409.30 (Basic
requirements) to clarify that the initial presumption of coverage that
arises from a beneficiary's first Medicare assessment and his or her
resulting RUG-III assignment is valid as of the assessment reference
date (that is, the last day of the observation period) for the initial
5-day assessment. We are also correcting an erroneous cross-reference
that appears in the introductory material for Sec. 409.30, as well as
in the definition of custodial care at Sec. 411.15(g).
In Sec. 409.33 (Examples of skilled nursing and
rehabilitation services), we are restoring certain portions of the
regulations text that the interim final rule deleted, with regard to
the overall management and evaluation of the care plan; observation and
assessment of the patient's changing condition; and, patient education.
We are also clarifying that the use of insertion, sterile irrigation,
and replacement of catheters as an example of a skilled nursing service
applies solely with regard to suprapubic catheters.
In Sec. 411.15(p)(3)(iii) we are revising the
parenthetical phrase to clarify that our basis for determining that a
particular type of outpatient hospital service is subject to the SNF
consolidated billing provision is its inclusion within the customary
scope of SNF care plans generally, without regard to whether it appears
in the individual care plan of a particular beneficiary.
We are adding a new Sec. 413.350 that provides for making
periodic interim payments under the SNF PPS, and we are making a
conforming revision in Sec. 413.64(h)(2)(iii). We are also revising the
regulations text at Sec. 413.343(b), in order to clarify the language
that describes the required Medicare assessment schedule.
We are amending Sec. 489.21 by adding a new paragraph (h),
which specifically precludes charging an SNF resident for an item or
service that is subject to the consolidated billing requirement.
V. Collection of Information Requirements
The information collection requirements associated or referenced in
this rule, which are subject to the Paperwork Reduction Act, have been
approved by the Office of Management and Budget. The titles, approval
numbers and current expiration dates of the collection requirements are
as follows: ``Medicare Common Claim Form,'' 0938-0008, 08/31/99; ``SNF
Resident Assessment MDS Data,'' 0938-0739, 04/30/99.
VI. Impact Analysis
A. Background
Summary of the Interim Final Rule Regulatory Impact Statement
Section 1888(e) of the Act specifies that the base year for
computing the RUG payment rates is FY 1995 (that is, October 1, 1994,
through September 30, 1995.) Pursuant to the statute, we incorporated
several elements into the SNF PPS such as case-mix methodology, the MDS
assessment schedule, a market basket index, a wage index, the urban and
rural distinction used in the development or adjustment of the Federal
rates, and coverage requirements.
In the interim final rule, we stated that SNF PPS will result in
estimated annual savings over five years ranging from $30 million in
the first year to
[[Page 41680]]
$4.28 billion in the fifth year. Savings included both the savings from
Medicare fee-for-service and managed care payments. It was projected
that 8958 SNFs would experience a decrease in Medicare payments as a
result of the SNF PPS. The percentage reduction in payments was
estimated to be 17 percent.
However, because Medicare SNF payments account for only
approximately 10 percent on average of a SNF's total revenue the
revenue reduction of a SNF as a result of the interim final rule was
approximately 1.7 percent. These were average figures and we did not
(and do not) have data that would allow us to determine if a
substantial number of SNFs will experience revenue decreases greater
than the estimated average.
As stated in the interim final rule, we did not expect suppliers of
services to SNFs to be significantly affected by the consolidated
billing provisions. Total Medicare reimbursement to suppliers was
estimated in the interim final rule to be about $4 billion each year.
The reimbursement to suppliers for SNF services was estimated to be
about $60 million each year. Therefore, we believed that the
consolidated billing provisions related to the services provided to
patients in Part A SNF stays would generally have a minimal impact on
suppliers.
As stated in the interim final rule the majority of ancillary
services are provided directly by SNFs or under arrangements with
suppliers and are, therefore, already billed to Medicare by the SNFs.
While there was a possibility that, for those services being
consolidated as a result of the statute and the interim final rule, a
sizeable number of these suppliers might be reimbursed by SNFs at rates
lower than the rates at which they were reimbursed by Medicare under
the previous system, we believed that this was highly dependent on the
reaction each individual supplier had to the new payment system.
In addition, with regard to consolidated billing related to
services provided to SNF patients who are not in a Part A stay, to the
extent that these services have been necessary in the past, they will
still be required and provided to these patients by suppliers.
Accordingly, it was anticipated that the total impact on suppliers
would be minimal. However, determining the effect on individual
suppliers was not possible due to a lack of data. Therefore we were not
able to determine if the new SNF per diem rates would result in a
substantial number of suppliers experiencing significant decreases in
their total revenues.
B. Impact of This Final Rule
We have examined the impacts of this final rule as required by
Executive Order 12866, section 1102(b) of the Act, the Unfunded
Mandates Reform Act of 1995, and the Regulatory Flexibility Act (RFA)
(Public Law 96-354). Executive Order 12866 directs agencies to assess
all costs and benefits of available regulatory alternatives and, when
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more annually).
The purpose of this final rule is not to initiate significant
policy changes with regard to the SNF PPS but, rather, to clarify and
make minor modifications in the policies that were established in the
SNF PPS interim final rule published on May 12, 1998 (63 FR 26251).
Accordingly, we believe that the revisions and clarifications mentioned
elsewhere in the preamble (for example, the adjustment to the nursing
case-mix component of the urban and Federal rates) will have, at most,
only a negligible overall effect upon the regulatory impact estimate
specified in the interim final rule. As such, these revisions will not
represent an additional burden to the industry.
Columns A-C of Table IX.2 below, published in the interim final
rule (63 FR 26304) depicted the number of facilities that were
projected to experience a decrease in Medicare SNF payments under the
new SNF PPS rates and the percentage change for the type of facility.
Table IX.2.--Impact on SNFs by Type
----------------------------------------------------------------------------------------------------------------
Estimated
Estimated average
average percentage
Total number Number of SNFs percentage reduction in
Type of SNF of SNFs with lower reduction in payments for
payment payments for fully
first year implemented
transition PPS
(A) (B) (C) (D)
----------------------------------------------------------------------------------------------------------------
MSA Freestanding................................ 5617 5585 17 18
MSA Hospital Based.............................. 683 679 19 34
Non-MSA Freestanding............................ 2204 2189 17 18
Non-MSA Hospital Based.......................... 533 531 18 30
Total....................................... 9037 8984 17 21
---------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Specifically, column (A) of the table depicted the total number of
SNFs in the data base for FY 1995 cost reporting periods. Column (B)
depicted the number of SNFs whose payment rate for cost reporting
periods beginning July 1, 1998 would be lower than the payment they
would have received under the former cost-based methodology for cost
reporting periods beginning July 1, 1998.
As described in the interim final rule, the payments received under
SNF PPS would initially be based on a facility level case-mix score
developed using the case-mix indices and the MEDPAR analog. The
payments that would have been received under the former (pre-SNF PPS)
system were estimated by using the same average inflation factor from
the 1995 data for each facility. Column (C) depicts the estimated
reduction in payments on a percentage basis between the two payment
methodologies for the first year of transition. New column (D) depicts
the estimated reduction in payments on a percentage basis between the
two payment methodologies for the fully implemented SNF PPS.
The estimated effect of the fully implemented SNF PPS (if, instead
of having the transition, it paid all
[[Page 41681]]
facilities entirely at the Federal rate as of the first year) is that
it would save 21 percent on average instead of 17 percent. This effect
is felt much more heavily by hospital-based facilities (34 percent
savings) as opposed to freestanding facilities (18 percent).
As was stated in the interim final rule, the results listed in
Table IX.2 should be viewed with caution and as illustrative of broad
groupings of SNFs. Averages have been used and the effects on
individual SNFs may differ. Future impacts will be shown as the rates
are developed and published in the future.
As stated in the interim final rule, in developing the estimate, we
assumed each facility would increase costs at the national average
rate. This national average increase includes the higher costs of new
facilities entering the program. Therefore, this increase might be
slightly higher than the true amount for existing facilities. We do,
however, expect total payments to SNFs to decrease compared to payments
that would have occurred under the former cost-based methodology. The
effects of this decrease in payments to any individual SNF will depend
on that SNF's ability to operate under the new payment methodology and
on the proportion of its revenues that come from the Medicare program.
The RFA requires agencies to analyze options for regulatory relief
of small entities. The BBA mandates implementation of SNF PPS. For
purposes of the RFA, small entities include small businesses, nonprofit
organizations, and governmental agencies. Most SNFs and most other
providers and suppliers are small entities, either by nonprofit status
or by having revenues of $5 million or less annually. States and tribal
governments are not considered to be small entities, nor are
intermediaries or carriers.
Under the RFA, an economic impact is significant if the annual
total costs or revenues of a substantial number of entities will be
increased or decreased by at least 3 percent. Medicare payments
generally do not account for a high proportion of SNF revenue (about 10
percent on average) and the estimated average percentage reduction in
payments for the fully implemented SNF PPS reduces those payments by
approximately 21 percent on average. Therefore, total revenues for SNFs
will be reduced by about 2.1 percent. As stated above, we are unable to
determine the effects on individual SNFs and therefore are unable to
determine if the new SNF per diem rates will result in a substantial
number of SNFs experiencing significant decreases in their total
revenues.
C. Rural Hospital Impact Statement
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. Such an
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 50 beds. We are not preparing a
rural impact statement since we have determined, and the Secretary
certifies, that this rule will not have a significant economic impact
on the operations of a substantial number of small rural hospitals.
D. Unfunded Mandates
The Unfunded Mandates Reform Act of 1995 also requires (in section
202) that agencies prepare an assessment of anticipated costs and
benefits before issuing any rule that may mandate an annual expenditure
by State, local, or tribal governments, in the aggregate, or by the
private sector, of $100 million or more. We believe that this final
rule will not mandate expenditures in that amount.
List of Subjects
42 CFR Part 409
Health facilities, Medicare.
42 CFR Part 411
Kidney diseases, Medicare, Reporting and recordkeeping
requirements.
42 CFR Part 413
Health facilities, Kidney diseases, Medicare, Puerto Rico,
Reporting and recordkeeping requirements.
42 CFR Part 489
Health facilities, Medicare, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, 42 CFR chapter IV is
amended as follows:
PART 409--HOSPITAL INSURANCE BENEFITS
A. Part 409 is amended as set forth below:
1. The authority citation for part 409 is revised to read as
follows:
Authority: Sections 1102 and 1871 of the Social Security Act
(U.S.C. 1302 and 1395hh).
Subpart C--Posthospital SNF Care
2. In Sec. 409.20, remove paragraph (a)(8).
3. In Sec. 409.27, the word ``and'' is removed from the end of
paragraph (a), the period at the end of paragraph (b) is removed and a
semicolon followed by the word ``and'' is added in its place, and a new
paragraph (c) is added, to read as follows:
Sec. 409.27 Other services generally provided by (or under
arrangements made by) SNFs.
* * * * *
(c) Transportation by ambulance that meets the general medical
necessity requirements set forth in Sec. 410.40(d)(1) of this chapter.
Subpart D--Requirements for Coverage of Posthospital SNF Care
4. In Sec. 409.30, the second sentence in the introductory text is
removed and two sentences are added in its place to read as follows:
Sec. 409.30 Basic requirements.
* * * A beneficiary in an SNF is also considered to meet the level
of care requirements of Sec. 409.31 up to and including the assessment
reference date for the 5-day assessment prescribed in Sec. 413.343(b)
of this chapter, when assigned to one of the Resource Utilization
Groups that is designated (in the annual publication of Federal
prospective payment rates described in Sec. 413.345 of this chapter) as
representing the required level of care. For the purposes of this
section, the assessment reference date is defined in accordance with
Sec. 483.315(d) of this chapter, and must occur no later than the
eighth day of posthospital SNF care.
* * * * *
5. In Sec. 409.33, paragraphs (a), (b), and (c) are redesignated as
paragraphs (b), (c), and (d), respectively; a new paragraph (a) is
added; and newly designated paragraph (b)(4) is revised to read as
follows:
Sec. 409.33 Examples of skilled nursing and rehabilitation services.
(a) Services that could qualify as either skilled nursing or
skilled rehabilitation services. (1) Overall management and evaluation
of care plan. (i) When overall management and evaluation of care plan
constitute skilled services. The development, management, and
evaluation of a patient care plan based on the physician's orders
constitute skilled services when, because of the patient's physical or
mental condition, those activities require the involvement of technical
or professional personnel in order to meet the patient's needs, promote
recovery, and ensure medical safety. Those activities include the
management of a plan involving a variety of personal care services only
when, in light of the patient's condition, the aggregate of
[[Page 41682]]
those services requires the involvement of technical or professional
personnel.
(ii) Example. An aged patient with a history of diabetes mellitus
and angina pectoris who is recovering from an open reduction of a
fracture of the neck of the femur requires, among other services,
careful skin care, appropriate oral medications, a diabetic diet, an
exercise program to preserve muscle tone and body condition, and
observation to detect signs of deterioration in his or her condition or
complications resulting from restricted, but increasing, mobility.
Although any of the required services could be performed by a properly
instructed person, such a person would not have the ability to
understand the relationship between the services and evaluate the
ultimate effect of one service on the other. Since the nature of the
patient's condition, age, and immobility create a high potential for
serious complications, such an understanding is essential to ensure the
patient's recovery and safety. Under these circumstances, the
management of the plan of care would require the skills of a nurse even
though the individual services are not skilled. Skilled planning and
management activities are not always specifically identified in the
patient's clinical record. Therefore, if the patient's overall
condition supports a finding that recovery and safety can be ensured
only if the total care is planned, managed, and evaluated by technical
or professional personnel, it is appropriate to infer that skilled
services are being provided.
(2) Observation and assessment of the patient's changing condition.
(i) When observation and assessment constitute skilled services.
Observation and assessment constitute skilled services when the skills
of a technical or professional person are required to identify and
evaluate the patient's need for modification of treatment or for
additional medical procedures until his or her condition is stabilized.
(ii) Examples. A patient with congestive heart failure may require
continuous close observation to detect signs of decompensation,
abnormal fluid balance, or adverse effects resulting from prescribed
medication(s) that serve as indicators for adjusting therapeutic
measures. Similarly, surgical patients transferred from a hospital to
an SNF while in the complicated, unstabilized postoperative period, for
example, after hip prosthesis or cataract surgery, may need continued
close skilled monitoring for postoperative complications and adverse
reaction. Patients who, in addition to their physical problems, exhibit
acute psychological symptoms such as depression, anxiety, or agitation,
may also require skilled observation and assessment by technical or
professional personnel to ensure their safety or the safety of others,
that is, to observe for indications of suicidal or hostile behavior.
The need for services of this type must be documented by physicians'
orders or nursing or therapy notes.
(3) Patient education services. (i) When patient education services
constitute skilled services. Patient education services are skilled
services if the use of technical or professional personnel is necessary
to teach a patient self-maintenance.
(ii) Examples. A patient who has had a recent leg amputation needs
skilled rehabilitation services provided by technical or professional
personnel to provide gait training and to teach prosthesis care.
Similarly, a patient newly diagnosed with diabetes requires instruction
from technical or professional personnel to learn the self-
administration of insulin or foot-care precautions.
(b) * * *
(4) Insertion and sterile irrigation and replacement of suprapubic
catheters;
* * * * *
PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE
PAYMENT
B. Part 411 is amended as set forth below:
1. The authority citation for part 411 continues to read as
follows:
Authority: Sections 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart A--General Exclusions and Exclusion of Particular Services
Sec. 411.15 [Amended]
2. In Sec. 411.15:
a. In paragraph (g), remove the citation ``Secs. 409.30'' and add,
in its place ``Secs. 409.31''.
b. Paragraph (p)(3)(iii) is revised to read as follows:
Sec. 411.15 Particular services excluded from coverage.
* * * * *
(p) * * *
(3) * * *
(iii) The beneficiary receives outpatient services from a Medicare-
participating hospital or CAH (but only with respect to those services
that are beyond the general scope of SNF comprehensive care plans, as
required under Sec. 483.20 of this chapter); or
* * * * *
PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT
RATES FOR SKILLED NURSING FACILITIES
C. Part 413 is amended as set forth below:
1. The heading for part 413 is revised as set forth above.
2. The authority citation for part 413 is revised to read as
follows:
Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social
Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).
3. In Sec. 413.64, paragraph (h)(2)(iii) is revised to read as
follows:
Sec. 413.64 Payments to providers: Specific rules.
* * * * *
(h) * * *
(2) * * *
(iii) Part A SNF services furnished in cost reporting periods
beginning before July 1, 1998. (For services furnished in subsequent
cost reporting periods, see Sec. 413.350 regarding periodic interim
payments for skilled nursing facilities).
* * * * *
Sec. 413.343 [Amended]
4. In Sec. 413.343(b), remove the words ``following admission'' and
add, in their place, the words ``of posthospital SNF care''.
5. Add Sec. 413.350 to subpart J to read as follows:
Sec. 413.350 Periodic interim payments for skilled nursing facilities
receiving payment under the skilled nursing facility prospective
payment system for Part A services.
(a) General rule. Subject to the exceptions in paragraphs (b) and
(c) of this section, SNFs receiving payment under the PPS for Part A
services do not receive interim payments during the cost reporting
year, and receive payment only following submission of a bill.
Paragraph (d) of this section provides for accelerated payments in
certain circumstances.
(b) Periodic interim payments. (1) An SNF receiving payment under
the prospective payment system may receive periodic interim payments
(PIP) for Part A SNF services under the PIP method subject to the
provisions of Sec. 413.64(h). To be approved for PIP, the SNF must meet
the qualifying requirements in Sec. 413.64(h)(3). Moreover, as provided
in Sec. 413.64(h)(5), intermediary approval is conditioned upon the
intermediary's best judgment as to whether payment can be made
[[Page 41683]]
under the PIP method without undue risk of its resulting in an
overpayment to the provider.
(2) Frequency of payment. The intermediary estimates an SNF's
prospective payments net of estimated beneficiary coinsurance and makes
biweekly payments equal to \1/26\ of the total estimated amount of
payment for the year. If an SNF has payment experience under the
prospective payment system, the intermediary estimates PIP based on
that payment experience, adjusted for projected changes supported by
substantiated information for the current year. Each payment is made 2
weeks after the end of a biweekly period of service as described in
Sec. 413.64(h)(6). The interim payments are reviewed at least twice
during the reporting period and adjusted if necessary. Fewer reviews
may be necessary if an SNF receives interim payments for less than a
full reporting period. These payments are subject to final settlement.
(3) Termination of PIP. (i) Request by the SNF. An SNF receiving
PIP may convert to receiving prospective payments on a non-PIP basis at
any time.
(ii) Removal by the intermediary. An intermediary terminates PIP if
the SNF no longer meets the requirements of Sec. 413.64(h).
(c) Interim payments for Medicare bad debts and for Part A costs
not paid under the prospective payment system. For Medicare bad debts
and for costs of an approved education program and other costs paid
outside the prospective payment system, the intermediary determines the
interim payments by estimating the reimbursable amount for the year
based on the previous year's experience, adjusted for projected changes
supported by substantiated information for the current year, and makes
biweekly payments equal to \1/26\ of the total estimated amount. Each
payment is made 2 weeks after the end of a biweekly period of service
as described in Sec. 413.64(h)(6). The interim payments are reviewed at
least twice during the reporting period and adjusted if necessary.
Fewer reviews may be necessary if an SNF receives interim payments for
less than a full reporting period. These payments are subject to final
cost settlement.
(d) Accelerated payments. (1) General rule. Upon request, an
accelerated payment may be made to an SNF that is receiving payment
under the prospective payment system and is not receiving PIP under
paragraph (b) of this section if the SNF is experiencing financial
difficulties because of the following:
(i) There is a delay by the intermediary in making payment to the
SNF.
(ii) Due to an exceptional situation, there is a temporary delay in
the SNF's preparation and submittal of bills to the intermediary beyond
its normal billing cycle.
(2) Approval of payment. An SNF's request for an accelerated
payment must be approved by the intermediary and HCFA.
(3) Amount of payment. The amount of the accelerated payment is
computed as a percentage of the net payment for unbilled or unpaid
covered services.
(4) Recovery of payment. Recovery of the accelerated payment is
made by recoupment as SNF bills are processed or by direct payment by
the SNF.
PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL
D. Part 489 is amended as set forth below:
1. The authority citation for part 489 continues to read as
follows:
Authority: Secs. 1102, 1819, 1861, 1864(m), 1866, and 1871 of
the Social Security Act (42 U.S.C. 1302, 1395i-3, 1395x, 1395aa(m),
1395cc, and 1395hh).
2. In Sec. 489.21, a new paragraph (h) is added to read as follows:
Sec. 489.21 Specific limitations on charges.
* * * * *
(h) Items and services (other than those described in
Sec. 489.20(s)(1) through (11)) furnished to a resident (as defined in
Sec. 411.15(p)(3) of this chapter) of an SNF for which Medicare payment
would be made if furnished by the SNF or by other providers or
suppliers under arrangements made with them by the SNF. For this
purpose, a charge by another provider or supplier for such an item or
service is treated as a charge by the SNF for the item or service, and
is also prohibited.
(Catalog of Federal Domestic Assistance Program Number 93.773,
Medicare--Hospital Insurance; and Program Number 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: June 14, 1999.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
Dated: July 22, 1999.
Donna Shalala,
Secretary.
[FR Doc. 99-19478 Filed 7-29-99; 8:45 am]
BILLING CODE 4120-01-P