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From Health Law Daily, May 6, 2013

SNF Prospective Payment System 2014 update released by CMS, $500 million payment increase proposed

By Jenny M. Burke, JD, MS

CMS has released a proposed rule outlining fiscal year (FY) 2014 payment rate updates for the Skilled Nursing Facility (SNF) prospective payment system (PPS) (Proposed rule, 78 FR 26438, May 6, 2013). Included in the proposed rule is a 1.4 percent estimated SNF market basket update to FY 2014 payments, which CMS estimates would amount to a $500 million increase in FY 2014 aggregate payments. CMS also noted that providers were not negatively impacted by the FY 2012 allocation of group therapy minutes and implementation of the change of therapy.

SNF payments. CMS estimates that the proposed increase in payments is attributable to the 2.3 percent market basket increase, reduced by the 0.5 percentage point forecast error correction and further reduced by the 0.4 percentage point multi-factor productivity adjustment required by law. A forecast error correction is applied when the difference between the actual and projected market basket percentage change for a given year (the most recent available FY for which there is final data) exceeds the 0.5 percentage point threshold. CMS normally reports the forecast error to one significant digit, which makes it difficult to determine if the threshold has been exceeded in those instances where the difference between the projected and actual market basket percentage change rounds to 0.5 percentage point. Because of this issue, CMS proposes that when the forecast error rounds to 0.5, the difference to the second significant digit should also be reported. CMS indicated that the forecast error for the current year in review, FY 2012, is 0.51 percentage point. However, the proposed FY 2014 market basket update would include a downward adjustment of 0.5 percentage point because the projected market basket exceeded the actual market basket by an amount greater than the threshold.

Market basket. CMS is proposing to rebase and revise the SNF market basket for FY 2014 and subsequent years to reflect more recent data in the calculations. Currently, the SNF market basket reflects data from FY 2004. CMS is proposing to instead use data from 2010 by revise and update the SNF market basket. Additionally, CMS is proposing the addition of five cost categories to the components of the SNF market basket index, for a total of 29 cost categories and proposes to revise several price proxies.

RUG category clarification. The proposed rule would add Calendar Days of Therapy (item 00420) to the Minimum Data Set (MDS) to record the number of distinct calendar days of therapy provided by all the rehabilitation disciplines to a beneficiary over the seven-day look-back period. CMS is also proposing clarifications regarding the qualifying condition for certain Rehabilitation Resource Utilization Group (RUG) categories to ensure that SNFs are paid accurately for their patients. The RUG level is based on facility needs, nursing care, and therapy minutes provided per week, and it determines the amount of money per day that Medicare will pay for a patient's stay at a facility. CMS has clarified its classification criteria for the Rehabilitation RUG categories require the resident to receive the requisite number of distinct calendar days of therapy to be classified into the Rehabilitation RUG category. The qualifying condition for the Medium Rehab (RM) Category would require 5 distinct calendar days of therapy, and the qualifying condition for the Low Rehab (RL) Category would require 3 distinct calendar days. Currently, the number of days for each of the therapy disciplines reported on the MDS is calculated without regard to the number of separate and unique days per week the patient receives therapy, resulting in some patients receiving higher SNF payments for an RM or RL RUG when the patient actually does not meet the qualifying conditions for that RUG.

Monitoring of FY2012 policy changes. CMS has also provided a proposed update on its monitoring of certain 2012 policy changes, including: (1) Recalibration of the SNF parity adjustment; (2) allocation of group therapy time; and (3) changes to the MDS 3.0 patient assessment instrument, especially the new Change-of-Therapy (COT) Other Medicare Required Assessment (OMRA). CMS indicated that it found no evidence of the possible negative impacts on SNF providers cited in comments in the FY 2012 final rule. CMS would continue monitoring these issues and post information to its web site as appropriate.

Comment request. CMS invites suggestions to identify alternatives to current methods used to pay for therapy services under the SNF PPS, and require SNFs, beginning October 1, 2013, to record the number of distinct calendar days of therapy provided by all rehabilitation disciplines over the 7-day look-back period for the current assessment. Additionally, all comments on provisions of the proposed rule must be submitted by July 1, 2013.

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