42 C.F.R. Subpart J—Prospective Payment for Skilled Nursing Facilities
Title 42 - Public Health
Source: 63 FR 26309, May 12, 1998, unless otherwise noted.
(a) Basis. This subpart implements section 1888(e) of the Act, which provides for the implementation of a prospective payment system for SNFs for cost reporting periods beginning on or after July 1, 1998. (b) Scope. This subpart sets forth the framework for the prospective payment system for SNFs, including the methodology used for the development of payment rates and associated adjustments, the application of a transition phase, and related rules. As used in this subpart— Case-mix index means a scale that measures the relative difference in resource intensity among different groups in the resident classification system. Market basket index means an index that reflects changes over time in the prices of an appropriate mix of goods and services included in covered skilled nursing services. Resident classification system means a system for classifying SNF residents into mutually exclusive groups based on clinical, functional, and resource-based criteria. For purposes of this subpart, this term refers to the current version of the Resource Utilization Groups, as set forth in the annual publication of Federal prospective payment rates described in §413.345. Rural area means any area outside of an urban area. Urban area means a metropolitan statistical area (MSA) or New England County Metropolitan Area (NECMA), as defined by the Office of Management and Budget, or a New England county deemed to be an urban area, as listed in §412.62(f)(1)(ii)(B) of this chapter. [63 FR 26309, May 12, 1998; 63 FR 53307, Oct. 5, 1998] (a) Method of payment. Under the prospective payment system, SNFs receive a per diem payment of a predetermined rate for inpatient services furnished to Medicare beneficiaries. The per diem payments are made on the basis of the Federal payment rate described in §413.337 and, during a transition period, on the basis of a blend of the Federal rate and the facility-specific rate described in §413.340. These per diem payment rates are determined according to the methodology described in §413.337 and §413.340. (b) Payment in full. The payment rates represent payment in full (subject to applicable coinsurance as described in subpart G of part 409 of this chapter) for all costs (routine, ancillary, and capital-related) associated with furnishing inpatient SNF services to Medicare beneficiaries other than costs associated with operating approved educational activities as described in §413.85. (a) Data used. (1) To calculate the prospective payment rates, CMS uses— (i) Medicare data on allowable costs from freestanding and hospital-based SNFs for cost reporting periods beginning in fiscal year 1995. SNFs that received “new provider” exemptions under §413.30(e)(2) are excluded from the data base used to compute the Federal payment rates. In addition, allowable costs related to exceptions payments under §413.30(f) are excluded from the data base used to compute the Federal payment rates; (ii) An appropriate wage index to adjust for area wage differences; (iii) The most recent projections of increases in the costs from the SNF market basket index; (iv) Resident assessment and other data that account for the relative resource utilization of different resident types; and (v) Medicare Part B SNF claims data reflecting amounts payable under Part B for covered SNF services (other than those services described in §411.15(p)(2) of this chapter) furnished during SNF cost reporting periods beginning in fiscal year 1995 to individuals who were residents of SNFs and receiving Part A covered services. (b) Methodology for calculating the per diem Federal payment rates—(1) Determining SNF costs. In calculating the initial unadjusted Federal rates applicable for services provided during the period beginning July 1, 1998 through September 30, 1999, CMS determines each SNF's costs by summing its allowable costs for the cost reporting period beginning in fiscal year 1995 and its estimate of Part B payments (described in paragraphs (a)(1)(i) and (a)(1)(v) of this section). (2) Use of market basket index. The SNF market basket index is used to adjust the SNF cost data to reflect cost increases occurring between cost reporting periods represented in the data and the initial period (beginning July 1, 1998 and ending September 30, 1999) to which the payment rates apply. For each year, the cost data are updated by a factor equivalent to the annual market basket index percentage minus 1 percentage point. (3) Calculation of the per diem cost. For each SNF, the per diem cost is computed by dividing the cost data for each SNF by the corresponding number of Medicare days. (4) Standardization of data for variation in area wage levels and case-mix. The cost data described in paragraph (b)(2) of this section are standardized to remove the effects of geographic variation in wage levels and facility variation in case-mix. The cost data are standardized for geographic variation in wage levels using the wage index. The cost data are standardized for facility variation in case-mix using the case-mix indices and other data that indicate facility case-mix. (5) Calculation of unadjusted Federal payment rates. CMS calculates the national per diem unadjusted payment rates by urban and rural classification in the following manner: (i) By computing the average per diem standardized cost of freestanding SNFs weighted by Medicare days. (ii) By computing the average per diem standardized cost of freestanding and hospital-based SNFs combined weighted by Medicare days. (iii) By computing the average of the amounts determined under paragraphs (b)(5)(i) and (b)(5)(ii) of this section. (c) Calculation of adjusted Federal payment rates for case-mix and area wage levels. The Federal rate is adjusted to account for facility case-mix using a resident classification system and associated case-mix indices that account for the relative resource utilization of different patient types. This classification system utilizes the resident assessment instrument completed by SNFs as described at §483.20 of this chapter, according to the assessment schedule described in §413.343(b). The Federal rate is also adjusted to account for geographic differences in area wage levels using an appropriate wage index. (d) Annual updates of Federal unadjusted payment rates. CMS updates the unadjusted Federal payment rates on a fiscal year basis. (1) For fiscal years 2000 through 2002, the unadjusted Federal rate is equal to the rate for the previous period or fiscal year increased by a factor equal to the SNF market basket index percentage minus 1 percentage point. (2) For subsequent fiscal years, the unadjusted Federal rate is equal to the rate for the previous fiscal year increased by the applicable SNF market basket index amount. Beginning with fiscal year 2004, an adjustment to the annual update of the previous fiscal year's rate will be computed to account for forecast error. The initial adjustment (in fiscal year 2004) to the update of the previous fiscal year's rate will take into account the cumulative forecast error between fiscal years 2000 and 2002. Subsequent adjustments in succeeding fiscal years will take into account the forecast error from the most recently available fiscal year for which there is final data. (e) Pursuant to section 101 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) as revised by section 314 of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), using the best available data, the Secretary will issue a new regulation with a newly refined case-mix classification system to better account for medically complex patients. Upon issuance of the new regulation, the temporary increases in payment for certain high cost patients will no longer be applicable. [63 FR 26309, May 12, 1998, as amended at 66 FR 39600, July 31, 2001; 68 FR 46070, Aug. 4, 2003] (a) Duration of transition period and proportions for the blended transition rate. Beginning with an SNF'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 of the adjusted Federal rate and a facility-specific rate. For the first cost reporting period beginning on or after July 1, 1998, payment is based on 75 percent of the facility-specific rate and 25 percent of the Federal rate. For the subsequent cost reporting period, the rate is comprised of 50 percent of the facility-specific rate and 50 percent of the Federal rate. In the final cost reporting period of the transition, the rate is comprised of 25 percent of the facility-specific rate and 75 percent of the Federal rate. For all subsequent cost reporting periods, payment is based entirely on the Federal rate. (b) Calculation of facility-specific rate for the first cost reporting period. The facility-specific rate is computed based on the SNF's Medicare allowable costs from its fiscal year 1995 cost report plus an estimate of the amounts payable under Part B for covered SNF services (other than those services described in §411.15(p)(2) of this chapter) furnished during fiscal year 1995 to individuals who were residents of SNFs and receiving Part A covered services. Allowable costs associated with exceptions, as described in §413.30(f), are included in the calculation of the facility-specific rate. Allowable costs associated with exemptions, as described in §413.30(e)(2), are included in the calculation of the facility-specific rate but only to the extent that they do not exceed 150 percent of the routine cost limit. Low Medicare volume SNFs that were paid a prospectively determined rate under §413.300 for their cost reporting period beginning in fiscal year 1995 will utilize that rate as the basis for the allowable costs of routine (operating and capital-related) expenses in determining the facility-specific rate. Each SNF's allowable costs are updated to the first cost reporting period to which the payment rates apply using annual factors equal to the SNF market basket percentage minus 1 percentage point. (c) SNFs participating in the Multistate Nursing Home Case-Mix and Quality Demonstration. SNFs that participated in the Multistate Nursing Home Case-Mix and Quality Demonstration in a cost reporting period that began in calendar year 1997 will utilize their allowable costs from that cost reporting period, including prospective payment amounts determined under the demonstration payment methodology. (d) Update of facility-specific rates for subsequent cost reporting periods. The facility-specific rate for a cost reporting period that is subsequent to the first cost reporting period is equal to the facility-specific rate for the first cost reporting period (described in paragraph (a) of this section) updated by the market basket index. (1) For a subsequent cost reporting period beginning in fiscal years 1998 and 1999, the facility-specific rate is equal to the facility-specific rate for the previous cost reporting period updated by the applicable market basket index percentage minus one percentage point. (2) For a subsequent cost reporting period beginning in fiscal year 2000, the facility-specific rate is equal to the facility-specific rate for the previous cost reporting period updated by the applicable market basket index percentage. (e) SNFs excluded from the transition period. SNFs that received their first payment from Medicare, under present or previous ownership, on or after October 1, 1995, are excluded from the transition period, and payment is made according to the Federal rates only. (a) Submission of resident assessment data. SNFs are required to submit the resident assessment data described at §483.20 of this chapter in the manner necessary to administer the payment rate methodology described in §413.337. This provision includes the frequency, scope, and number of assessments required. (b) Assessment schedule. In accordance with the methodology described in §413.337(c) related to the adjustment of the Federal rates for case-mix, SNFs must submit assessments according to an assessment schedule. This schedule must include performance of patient assessments on the 5th, 14th, 30th, 60th, and 90th days of posthospital SNF care and such other assessments that are necessary to account for changes in patient care needs. (c) Noncompliance with assessment schedule. CMS pays a default rate for the Federal rate when a SNF fails to comply with the assessment schedule in paragraph (b) of this section. The default rate is paid for the days of a patient's care for which the SNF is not in compliance with the assessment schedule. [63 FR 26309, May 12, 1998, as amended at 64 FR 41682, July 30, 1999] CMS publishes information pertaining to each update of the Federal payment rates in the [60 FR 37594, July 21, 1995, as amended at 68 FR 46071, Aug. 4, 2003] Judicial or administrative review under sections 1869 or 1878 of the Act or otherwise is prohibited with regard to the establishment of the Federal rates. This prohibition includes the methodology used in the computation of the Federal standardized payment rates, the case-mix methodology, and the development and application of the wage index. This prohibition on judicial and administrative review also extends to the methodology used to establish the facility-specific rates but not to determinations related to reasonable cost in the fiscal year 1995 cost reporting period used as the basis for these rates. (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 §413.64(h). To be approved for PIP, the SNF must meet the qualifying requirements in §413.64(h)(3). Moreover, as provided in §413.64(h)(5), intermediary approval 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. (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 §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 §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 §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 CMS. (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. [64 FR 41682, July 30, 1999] An additional payment is made to a skilled nursing facility in accordance with §476.78 of this chapter for the costs of photocopying and mailing medical records requested by a QIO. [68 FR 67960, Dec. 5, 2003]
Title 42: Public Health
PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES
Subpart J—Prospective Payment for Skilled Nursing Facilities
§ 413.330 Basis and scope.
§ 413.333 Definitions.
§ 413.335 Basis of payment.
§ 413.337 Methodology for calculating the prospective payment rates.
§ 413.340 Transition period.
§ 413.343 Resident assessment data.
§ 413.345 Publication of Federal prospective payment rates.
§ 413.348 Limitation on review.
§ 413.350 Periodic interim payments for skilled nursing facilities receiving payment under the skilled nursing facility prospective payment system for Part A services.
§ 413.355 Additional payment: QIO photocopy and mailing costs.
