SNF PPS Proposed rule FY 2012

Medicare and Medicaid

SNF PPS Proposed rule FY 2012 CMS has proposed several changes to the skilled nursing facility (SNF) prospective payment system (PPS) for fiscal year (FY) 2012. The most significant issue faced by CMS regarding the SNF PPS FY 2012 is how to set the FY 2012 payments rates. CMS is considering two options, the first includes the possible recalibration of the case-mix indexes so that they accurately reflect parity in expenditures between the current Resource Group Utilization (RUG) IV and the previous case mix classification known as RUG III. The other option implements §3401(b) of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148)and the standard rate update methodology. CMS’ other significant proposals focus on group therapy and billing for group therapy, the supervision of therapy students, and the reporting of SNF ownership and organizational structure to HHS and other entities.
Proposed changes

A major concern for CMS is whether to recalibrate the parity adjustment of 61 percent used in the RUG IV nursing case mix indexes (CMIs) to achieve parity with the older RUG III model that was implemented for FY 2011. Since the October 1, 2010, the start of the RUG IV implementation, CMS has observed that providers assign a larger proportion of patients to the highest-paying RUG therapy categories, such as Ultra High Rehabilitation, which greatly exceeded CMS expectations. CMS attributed this change to a reduction in the use of concurrent therapy and an significant increase in individual and group therapy. CMS observed this change in first quarter FY 2011 RUG IV claims data that recently became available. CMS stated the parity adjustment inadvertently triggered a significant change in overall payments to SNFs. CMS is considering whether a recalibration of the parity adjustment may be necessary in the SNF PPS FY 2012 Final rule to ensure the transition from RUG III to RUG IV occurs in a budget neutral manner. Under this option CMS would reduce Medicare payments to SNFs by $3.94 billion or 11.3 percent lower than payments for FY 2011.

Under CMS’ second option, CMS may apply the standard update methodology for FY 2012 without recalibrating the parity CMIs until more FY 2011 claims data becomes available. CMS proposed the SNF market basket index for FY 2012 be increased by 2.7 percent to reflect changes in the prices of goods and services included in SNF covered services. As required by PPACA §3401(b), the market basket percentage would be reduced by a productivity adjustment equal to “the 10-year moving average of changes in annual economywide private nonfarm business multi-factor productivity (MFP) as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost-reporting period or other annual period.” CMS proposed for FY 2012 the MFP adjustment to be 1.2 percent. This update would provide an increase of $530 million or 1.5 percentage points in Medicare payments to providers. CMS solicited comments for both options.

Further, CMS proposed the following changes for the FY 2012 SNF PPS: (1) the implementation of PPACA §6101, that requires Medicare SNFs and Medicaid nursing facilities to disclose certain information to HHS and other entities, regarding ownership and organization structures of the facilities; (2) a revision to the definition of group therapy that defines group therapy as “therapy provided simultaneously to four patients who are performing similar therapy activities” and the allocation of group therapy minutes; (3) a revision of the current policy that requires supervision of therapy students be changed from the current method of “line-of-sight” to whatever supervision level the facility decides is best for its therapy students; (4) a revision to the current minimum data set (MDS) assessment schedule to incorporate new assessment windows and grace days; and (5) a new Medicare-required assessment that SNFs must complete when changes occur in the intensity of therapy a patient receives. Finally, CMS indicated that the SNF PPS will continue to implement the Acquired Immune Deficiency (AIDs) adjustment of 128 percent for FY 2012.
CMS Press Release , April 28, 2011.

For more information on this and related topics, consult the CCH® Medicare and Medicaid Guide.

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