Proposed Rule2024-06812
Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities; Updates to the Quality Reporting Program and Value-Based Purchasing Program for Federal Fiscal Year 2025
Primary source
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Published
April 3, 2024
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This rule proposes changes and updates to the policies and payment rates used under the Skilled Nursing Facility (SNF) Prospective Payment System (PPS) for FY 2025. First, we are proposing to rebase and revise the SNF market basket to reflect a 2022 base year. Next, we are proposing to update the wage index used under the SNF PPS to reflect data collected during the most recent decennial census. Additionally, we are proposing several technical revisions to the code mappings used to classify patients under the Patient Driven Payment Model (PDPM) to improve payment and coding accuracy. Finally, this proposed rule includes a Request for Information (RFI) on potential updates to the Non-Therapy Ancillary (NTA) component of PDPM. This rulemaking also proposes to update the requirements for the SNF Quality Reporting Program and the SNF Value-Based Purchasing Program. We are also proposing to expand CMS' enforcement authority for imposing civil money penalties (CMPs). Finally, this proposed rule includes proposals to strengthen nursing home enforcement requirements.
Full Text
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[Federal Register Volume 89, Number 65 (Wednesday, April 3, 2024)]
[Proposed Rules]
[Pages 23424-23495]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-06812]
[[Page 23423]]
Vol. 89
Wednesday,
No. 65
April 3, 2024
Part VII
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 413 and 488
Medicare Program; Prospective Payment System and Consolidated Billing
for Skilled Nursing Facilities; Updates to the Quality Reporting
Program and Value-Based Purchasing Program for Federal Fiscal Year
2025; Proposed Rule
Federal Register / Vol. 89, No. 65 / Wednesday, April 3, 2024 /
Proposed Rules
[[Page 23424]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 413 and 488
[CMS-1802-P]
RIN 0938-AV30
Medicare Program; Prospective Payment System and Consolidated
Billing for Skilled Nursing Facilities; Updates to the Quality
Reporting Program and Value-Based Purchasing Program for Federal Fiscal
Year 2025
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Proposed rule.
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SUMMARY: This rule proposes changes and updates to the policies and
payment rates used under the Skilled Nursing Facility (SNF) Prospective
Payment System (PPS) for FY 2025. First, we are proposing to rebase and
revise the SNF market basket to reflect a 2022 base year. Next, we are
proposing to update the wage index used under the SNF PPS to reflect
data collected during the most recent decennial census. Additionally,
we are proposing several technical revisions to the code mappings used
to classify patients under the Patient Driven Payment Model (PDPM) to
improve payment and coding accuracy. Finally, this proposed rule
includes a Request for Information (RFI) on potential updates to the
Non-Therapy Ancillary (NTA) component of PDPM. This rulemaking also
proposes to update the requirements for the SNF Quality Reporting
Program and the SNF Value-Based Purchasing Program. We are also
proposing to expand CMS' enforcement authority for imposing civil money
penalties (CMPs). Finally, this proposed rule includes proposals to
strengthen nursing home enforcement requirements.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, by May 28, 2024.
ADDRESSES: In commenting, please refer to file code CMS-1802-P.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1802-P, P.O. Box 8016,
Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-1802-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: <a href="/cdn-cgi/l/email-protection#a3f3e7f3eee3c0ced08dcbcbd08dc4ccd5"><span class="__cf_email__" data-cfemail="afffebffe2efccc2dc81c7c7dc81c8c0d9">[email protected]</span></a> for issues related to
the SNF PPS.
Heidi Magladry, (410) 786-6034, for information related to the
skilled nursing facility quality reporting program.
Christopher Palmer, (410) 786-8025, for information related to the
skilled nursing facility value-based purchasing program.
Celeste Saunders, (410) 786-5603, for information related to
Nursing Home.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the search instructions on that website to
view public comments. CMS will not post on <a href="http://Regulations.gov">Regulations.gov</a> public
comments that make threats to individuals or institutions or suggest
that the commenter will take actions to harm an individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to other comments.
Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a
plain language summary of this rule may be found at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>.
Availability of Certain Tables Exclusively Through the Internet on the
CMS Website
As discussed in the FY 2014 SNF PPS final rule (78 FR 47936),
tables setting forth the Wage Index for Urban Areas Based on CBSA Labor
Market Areas and the Wage Index Based on CBSA Labor Market Areas for
Rural Areas are no longer published in the Federal Register. Instead,
these tables are available exclusively through the internet on the CMS
website. The wage index tables for this proposed rule can be accessed
on the SNF PPS Wage Index home page, at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html</a>.
Readers who experience any problems accessing any of these online
SNF PPS wage index tables should contact Kia Burwell at (410) 786-7816.
To assist readers in referencing sections contained in this
document, we are providing the following Table of Contents.
Table of Contents
I. Executive Summary
A. Purpose
B. Summary of Major Provisions
C. Summary of Cost and Benefits
D. Advancing Health Information Exchange
II. Background on SNF PPS
A. Statutory Basis and Scope
B. Initial Transition for the SNF PPS
C. Required Annual Rate Updates
III. Proposed SNF PPS Rate Setting Methodology and FY 2025 Update
A. Federal Base Rates
B. SNF Market Basket Update
C. Case-Mix Adjustment
D. Wage Index Adjustment
E. SNF Value-Based Purchasing Program
F. Adjusted Rate Computation Example
IV. Additional Aspects of the SNF PPS
A. SNF Level of Care--Administrative Presumption
B. Consolidated Billing
C. Payment for SNF-Level Swing-Bed Services
V. Other SNF PPS Issues
A. Rebasing and Revising the SNF Market Basket
B. Proposed Changes to SNF PPS Wage Index
C. Technical Updates to PDPM ICD-10 Mappings
D. Request for Information: Update to PDPM Non-Therapy Ancillary
Component
VI. Skilled Nursing Facility Quality Reporting Program (SNF QRP)
A. Background and Statutory Authority
B. General Considerations Used for the Selection of Measures for
the SNF QRP
C. Proposal To Collect Four Additional Items as Standardized
Patient Assessment Data Elements and Modify One Item Collected as a
Standardized Patient Assessment Data Element Beginning With the FY
2027 SNF QRP
D. SNF QRP Quality Measure Concepts Under Consideration for
Future Years--Request for Information (RFI)
E. Form, Manner, and Timing of Data Submission Under the SNF QRP
F. Policies Regarding Public Display of Measure Data for the SNF
QRP
[[Page 23425]]
VII. Skilled Nursing Facility Value-Based Purchasing (SNF VBP)
Program
A. Statutory Background
B. Proposed Regulation Text Technical Updates
C. SNF VBP Program Measures
D. SNF VBP Performance Standards
E. SNF VBP Performance Scoring Methodology
F. Proposed Updates to the SNF VBP Review and Correction Process
G. Proposed Updates to the SNF VBP Extraordinary Circumstances
Exception Policy
VIII. Nursing Home Enforcement
A. Background
B. Provisions of the Proposed Regulations
IX. Collection of Information Requirements
X. Response to Comments
XI. Economic Analyses
A. Regulatory Impact Analysis
B. Regulatory Flexibility Act Analysis
C. Unfunded Mandates Reform Act Analysis
D. Federalism Analysis
E. Regulatory Review Costs
I. Executive Summary
A. Purpose
This proposed rule would update the SNF prospective payment rates
for fiscal year (FY) 2025, as required under section 1888(e)(4)(E) of
the Social Security Act (the Act). It also responds to section
1888(e)(4)(H) of the Act, which requires the Secretary to provide for
publication of certain specified information relating to the payment
update (see section II.C. of this proposed rule) in the Federal
Register before the August 1 that precedes the start of each FY.
Additionally, in this proposed rule, we are proposing to rebase and
revise the SNF market basket to reflect a 2022 base year. Next, we are
proposing to update the wage index used under the SNF PPS to reflect
data collected during the most recent decennial census. We are also
proposing several technical revisions to the code mappings used to
classify patients under the PDPM to improve payment and coding
accuracy. This proposed rule includes an RFI on potential updates to
the non-therapy ancillary (NTA) component of PDPM. This proposed rule
proposes the collection of four new items as standardized patient
assessment data elements and the modification of one item collected and
submitted using the Minimum Data Set (MDS) beginning with the FY 2027
SNF QRP. This proposed rule also proposes that SNFs, which participate
in the SNF QRP, participate in a validation process beginning with the
FY 2027 SNF QRP, and also includes a request for information on quality
measure concepts under consideration for future SNF QRP program years.
Finally, this proposed rule proposes new requirements for the Skilled
Nursing Facility Value-Based Purchasing (SNF VBP) Program, including a
proposed measure selection, retention, and removal policy, a proposed
technical measure updates policy, a proposed measure minimum for FY
2028 and subsequent years, proposed updates to the review and
correction policy to include new measure data sources, proposed updates
to the Extraordinary Circumstances Exception policy, and proposed SNF
VBP regulation text updates. We are also proposing revisions to
existing long-term care (LTC) enforcement regulations that would enable
CMS and the States to impose civil money penalties to better reflect
amounts that are more consistent with the type of noncompliance that
occurred.
B. Summary of Major Provisions
In accordance with sections 1888(e)(4)(E)(ii)(IV) and (e)(5) of the
Act, the Federal rates in this proposed rule would update the annual
rates that we published in the SNF PPS final rule for FY 2024 (88 FR
53200, August 7, 2023). In addition, this proposed rule includes a
forecast error adjustment for FY 2025. Additionally, in this proposed
rule we are proposing to rebase and revise the SNF market basket to
reflect a 2022 base year. Next, we are proposing to update the wage
index used under the SNF PPS to reflect data collected during the most
recent decennial census. We are also proposing several technical
revisions to the code mappings used to classify patients under the PDPM
to improve payment and coding accuracy. Finally, this proposed rule
includes an RFI on potential updates to the NTA component of PDPM.
We propose revisions to CMS' existing enforcement authority to
expand the number of CMPs that can be imposed on LTC facilities. The
proposed revisions will allow for more per-instance (PI) CMPs to be
imposed in conjunction with per-day (PD) CMPs. This proposal will also
expand our authority to impose multiple PI CMPs when the same type of
noncompliance is identified on more than one day. CMS' current
enforcement regulation does not allow for PI and PD CMPs to be imposed
for the same survey and also makes it difficult for CMS to impose
multiple PI CMPs for the same type of noncompliance. Lastly, the
proposed revisions will enable CMS or the States to impose a CMP for
the number of days of past noncompliance since the last three standard
surveys to ensure that identified noncompliance that is subject to a
penalty may receive one, if that is the remedy that is imposed.
We are proposing several updates for the SNF VBP Program. We are
proposing to adopt a measure selection, retention, and removal policy
that aligns with policies we have adopted in other CMS quality
programs. We are proposing a technical measure updates policy to allow
us to update the numerical values of the performance standards for a
program year if necessary to account for the implementation of non-
substantive technical updates to the measure specifications between the
baseline period and the performance period. We are proposing to adopt
the same measure minimum we previously finalized for the FY 2027
program year for the FY 2028 program year and subsequent program years.
We are proposing modifications to Phase One of our review and
correction policy to account for measures that are calculated using
Payroll-Based Journal (PBJ) and MDS measure data beginning with the FY
2026 and FY 2027 program years, respectively. We are proposing to
update the instructions for requesting an extraordinary circumstance
exception (ECE) and to allow SNFs to request an ECE if the SNF can
demonstrate that, as a result of the extraordinary circumstance, it
cannot report SNF VBP data on one or more measures by the specified
deadline. Lastly, we are proposing several updates to the SNF VBP
regulation text to align with previously finalized definitions and
policies.
Beginning with the FY 2027 SNF QRP, we are proposing to require
SNFs to collect and submit through the MDS four new items as
standardized patient assessment data elements under the social
determinants of health (SDOH) category: one item for Living Situation,
two items for Food, and one item for Utilities. We are also proposing
to modify the current Transportation item. We are also proposing to
adopt a similar validation process for the SNF QRP that we adopted for
the SNF VBP beginning with the FY 2027 SNF QRP. We are also proposing
to amend regulation text at Sec. 413.360 to implement the validation
process we propose. Finally, this proposed rule also includes a Request
for Information (RFI) on quality measure concepts under consideration
for future SNF QRP years.
C. Summary of Cost and Benefits
[[Page 23426]]
Table 1--Estimated Cost and Benefits
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Proposals Estimated total transfers/costs
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FY 2025 SNF PPS payment rate The overall economic impact of this
update. proposed rule is an estimated
increase of $1.3 billion in
aggregate payments to SNFs during
FY 2025.
FY 2027 SNF QRP changes........... The overall economic impact of this
proposed rule to SNFs is an
estimated cost of $2,322,541.48
annually to SNFs beginning with the
FY 2027 SNF QRP.
FY 2026 Changes Due to Removal of The overall economic impact of this
MDS Items No Longer Needed for proposed rule to SNFs is an
Case-Mix Determination. estimated savings of $14,128,696.47
annually to SNFs beginning with FY
2026.
FY 2027 Changes Due to Proposal The overall economic impact of this
for Participation in a Validation proposed rule to SNFs is an
Process. estimated cost of $813,067.95
annually to SNFs beginning with the
FY 2027 SNF QRP.
FY 2025 SNF VBP changes........... The overall economic impact of the
SNF VBP Program is an estimated
reduction of $187.69 million in
aggregate payments to SNFs during
FY 2025.
FY 2025 Nursing Home Enforcement The overall economic impact the
changes. proposed changes to CMS'
enforcement authority results in an
estimated additional penalty amount
totaling $25 million annually to
long term care facilities, and
$163,800 in annual administrative
costs to CMS and states.
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II. Background on SNF PPS
A. Statutory Basis and Scope
As amended by section 4432 of the Balanced Budget Act of 1997 (BBA
1997) (Pub. L. 105-33, enacted August 5, 1997), section 1888(e) of the
Act provides for the implementation of a PPS for SNFs. This methodology
uses prospective, case-mix adjusted per diem payment rates applicable
to all covered SNF services defined in section 1888(e)(2)(A) of the
Act. The SNF PPS is effective for cost reporting periods beginning on
or after July 1, 1998, and covers virtually all costs of furnishing
covered SNF services (routine, ancillary, and capital-related costs)
other than costs associated with approved educational activities and
bad debts. Under section 1888(e)(2)(A)(i) of the Act, covered SNF
services include post-hospital extended care services for which
benefits are provided under Part A, as well as those items and services
(other than a small number of excluded services, such as physicians'
services) for which payment may otherwise be made under Part B and
which are furnished to Medicare beneficiaries who are residents in a
SNF during a covered Part A stay. A comprehensive discussion of these
provisions appears in the May 12, 1998 interim final rule (63 FR
26252). In addition, a detailed discussion of the legislative history
of the SNF PPS is available online at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_2018-10-01.pdf">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_2018-10-01.pdf</a>.
Section 215(a) of the Protecting Access to Medicare Act of 2014
(PAMA) (Pub. L. 113-93, enacted April 1, 2014) added section 1888(g) to
the Act, requiring the Secretary to specify an all-cause all-condition
hospital readmission measure and an all-condition risk-adjusted
potentially preventable hospital readmission measure for the SNF
setting. Additionally, section 215(b) of PAMA added section 1888(h) to
the Act requiring the Secretary to implement a VBP program for SNFs. In
2014, section 2(c)(4) of the Improving Medicare Post-Acute Care
Transformation (IMPACT) Act of 2014 (Pub. L. 113-185, enacted October
6, 2014) amended section 1888(e)(6) of the Act, which requires the
Secretary to implement a QRP for SNFs under which SNFs report data on
measures and resident assessment data. Finally, section 111 of the
Consolidated Appropriations Act, 2021 (CAA, 2021) (Pub. L. 116-260,
enacted December 27, 2020) amended section 1888(h) of the Act,
authorizing the Secretary to apply up to nine additional measures to
the VBP program for SNFs.
B. Initial Transition for the SNF PPS
Under sections 1888(e)(1)(A) and (e)(11) of the Act, the SNF PPS
included an initial, three-phase transition that blended a facility-
specific rate (reflecting the individual facility's historical cost
experience) with the Federal case-mix adjusted rate. The transition
extended through the facility's first 3 cost reporting periods under
the PPS, up to and including the one that began in FY 2001. Thus, the
SNF PPS is no longer operating under the transition, as all facilities
have been paid at the full Federal rate effective with cost reporting
periods beginning in FY 2002. As we now base payments for SNFs entirely
on the adjusted Federal per diem rates, we no longer include adjustment
factors under the transition related to facility-specific rates for the
upcoming FY.
C. Required Annual Rate Updates
Section 1888(e)(4)(E) of the Act requires the SNF PPS payment rates
to be updated annually. The most recent annual update occurred in a
final rule that set forth updates to the SNF PPS payment rates for FY
2024 (88 FR 53200, August 7, 2023), as amended by the subsequent
correction notice (88 FR 68486, October 4, 2023).
Section 1888(e)(4)(H) of the Act specifies that we provide for
publication annually in the Federal Register the following:
<bullet> The unadjusted Federal per diem rates to be applied to
days of covered SNF services furnished during the upcoming FY.
<bullet> The case-mix classification system to be applied for these
services during the upcoming FY.
<bullet> The factors to be applied in making the area wage
adjustment for these services.
Along with other revisions discussed later in this preamble, this
proposed rule would set out the required annual updates to the per diem
payment rates for SNFs for FY 2025.
III. Proposed SNF PPS Rate Setting Methodology and FY 2025 Update
A. Federal Base Rates
Under section 1888(e)(4) of the Act, the SNF PPS uses per diem
Federal payment rates based on mean SNF costs in a base year (FY 1995)
updated for inflation to the first effective period of the PPS. We
developed the Federal payment rates using allowable costs from
hospital-based and freestanding SNF cost reports for reporting periods
beginning in FY 1995. The data used in developing the Federal rates
also incorporated a Part B add-on, which is an estimate of the amounts
that, prior to the SNF PPS, would be payable under Part B for covered
SNF services furnished to individuals during the course of a covered
Part A stay in a SNF.
In developing the rates for the initial period, we updated costs to
the first effective year of the PPS (the 15-month period beginning July
1, 1998) using the SNF market basket, and then standardized for
geographic variations
[[Page 23427]]
in wages and for the costs of facility differences in case-mix. In
compiling the database used to compute the Federal payment rates, we
excluded those providers that received new provider exemptions from the
routine cost limits, as well as costs related to payments for
exceptions to the routine cost limits. Using the formula that the BBA
1997 prescribed, we set the Federal rates at a level equal to the
weighted mean of freestanding costs plus 50 percent of the difference
between the freestanding mean and weighted mean of all SNF costs
(hospital-based and freestanding) combined. We computed and applied
separately the payment rates for facilities located in urban and rural
areas and adjusted the portion of the Federal rate attributable to
wage-related costs by a wage index to reflect geographic variations in
wages.
B. SNF Market Basket Update
1. SNF Market Basket
Section 1888(e)(5)(A) of the Act requires us to establish a SNF
market basket that reflects changes over time in the prices of an
appropriate mix of goods and services included in covered SNF services.
Accordingly, we have developed a SNF market basket that encompasses the
most commonly used cost categories for SNF routine services, ancillary
services, and capital-related expenses. In the SNF PPS final rule for
FY 2022 (86 FR 42444 through 42463), we rebased and revised the SNF
market basket, which included updating the base year from 2014 to 2018.
In this proposed rule, we propose to update the base year from 2018 to
2022.
The SNF market basket is used to compute the market basket
percentage increase that is used to update the SNF Federal rates on an
annual basis, as required by section 1888(e)(4)(E)(ii)(IV) of the Act.
This market basket percentage increase is adjusted by a forecast error
adjustment, if applicable, and then further adjusted by the application
of a productivity adjustment as required by section 1888(e)(5)(B)(ii)
of the Act and described in section III.B.4. of this proposed rule.
As outlined in this proposed rule, we propose a FY 2025 SNF market
basket percentage increase of 2.8 percent based on IHS Global Inc.'s
(IGI's) fourth quarter 2023 forecast of the proposed 2022-based SNF
market basket (before application of the forecast error adjustment and
productivity adjustment). We also propose that if more recent data
subsequently become available (for example, a more recent estimate of
the market basket and/or the productivity adjustment), we would use
such data, if appropriate, to determine the FY 2025 SNF market basket
percentage increase, labor-related share relative importance, forecast
error adjustment, or productivity adjustment in the SNF PPS final rule.
2. Proposed Market Basket Update for FY 2025
Section 1888(e)(5)(B) of the Act defines the SNF market basket
percentage increase as the percentage change in the SNF market basket
from the midpoint of the previous FY to the midpoint of the current FY.
For the Federal rates outlined in this proposed rule, we use the
percentage change in the SNF market basket to compute the update factor
for FY 2025. This factor is based on the FY 2025 percentage increase in
the proposed 2022-based SNF market basket reflecting routine,
ancillary, and capital-related expenses. Sections 1888(e)(4)(E)(ii)(IV)
and (e)(5)(B)(i) of the Act require that the update factor used to
establish the FY 2025 unadjusted Federal rates be at a level equal to
the SNF market basket percentage increase. Accordingly, we determined
the total growth from the average market basket level for the period of
October 1, 2023 through September 30, 2024 to the average market basket
level for the period of October 1, 2024 through September 30, 2025.
This process yields a percentage increase in the proposed 2022-based
SNF market basket of 2.8 percent.
As further explained in section III.B.3. of this proposed rule, as
applicable, we adjust the percentage increase by the forecast error
adjustment from the most recently available FY for which there is final
data and apply this adjustment whenever the difference between the
forecasted and actual percentage increase in the market basket exceeds
a 0.5 percentage point threshold in absolute terms. Additionally,
section 1888(e)(5)(B)(ii) of the Act requires us to reduce the market
basket percentage increase by the productivity adjustment (the 10-year
moving average of changes in annual economy-wide private nonfarm
business total factor productivity (TFP) for the period ending
September 30, 2025) which is estimated to be 0.4 percentage point, as
described in section III.B.4. of this proposed rule.
We also note that section 1888(e)(6)(A)(i) of the Act provides
that, beginning with FY 2018, SNFs that fail to submit data, as
applicable, in accordance with sections 1888(e)(6)(B)(i)(II) and (III)
of the Act for a fiscal year will receive a 2.0 percentage point
reduction to their market basket update for the fiscal year involved,
after application of section 1888(e)(5)(B)(ii) of the Act (the
productivity adjustment) and section 1888(e)(5)(B)(iii) of the Act (the
market basket increase). In addition, section 1888(e)(6)(A)(ii) of the
Act states that application of the 2.0 percentage point reduction
(after application of section 1888(e)(5)(B)(ii) and (iii) of the Act)
may result in the market basket percentage change being less than zero
for a fiscal year and may result in payment rates for a fiscal year
being less than such payment rates for the preceding fiscal year.
Section 1888(e)(6)(A)(iii) of the Act further specifies that the 2.0
percentage point reduction is applied in a noncumulative manner, so
that any reduction made under section 1888(e)(6)(A)(i) of the Act
applies only to the fiscal year involved, and that the reduction cannot
be taken into account in computing the payment amount for a subsequent
fiscal year.
3. Forecast Error Adjustment
As discussed in the June 10, 2003 supplemental proposed rule (68 FR
34768) and finalized in the August 4, 2003 final rule (68 FR 46057
through 46059), Sec. 413.337(d)(2) provides for an adjustment to
account for market basket forecast error. The initial adjustment for
market basket forecast error applied to the update of the FY 2003 rate
for FY 2004 and took into account the cumulative forecast error for the
period from FY 2000 through FY 2002, resulting in an increase of 3.26
percent to the FY 2004 update. Subsequent adjustments in succeeding FYs
take into account the forecast error from the most recently available
FY for which there is final data and apply the difference between the
forecasted and actual change in the market basket when the difference
exceeds a specified threshold. We originally used a 0.25 percentage
point threshold for this purpose; however, for the reasons specified in
the FY 2008 SNF PPS final rule (72 FR 43425), we adopted a 0.5
percentage point threshold effective for FY 2008 and subsequent FYs. As
we stated in the final rule for FY 2004 that first issued the market
basket forecast error adjustment (68 FR 46058), the adjustment will
reflect both upward and downward adjustments, as appropriate.
For FY 2023 (the most recently available FY for which there is
final data), the forecasted or estimated increase in the SNF market
basket was 3.9 percent, and the actual increase for FY 2023 was 5.6
percent, resulting in the actual increase being 1.7 percentage points
higher than the estimated increase. Accordingly, as the difference
between the estimated and actual amount of change in the market basket
[[Page 23428]]
exceeds the 0.5 percentage point threshold, under the policy previously
described (comparing the forecasted and actual market basket percentage
increase), the FY 2025 market basket percentage increase of 2.8 percent
would be adjusted upward to account for the forecast error adjustment
of 1.7 percentage points, resulting in a SNF market basket percentage
increase of 4.5 percent, which is then reduced by the productivity
adjustment of 0.4 percentage point, discussed in section III.B.4. of
this proposed rule. This results in a proposed SNF market basket update
for FY 2025 of 4.1 percent.
Table 2 shows the forecasted and actual market basket increases for
FY 2023.
Table 2--Difference Between the Actual and Forecasted Market Basket Increases for FY 2023
----------------------------------------------------------------------------------------------------------------
Forecasted FY 2023 Actual FY 2023
Index increase * increase ** FY 2023 difference
----------------------------------------------------------------------------------------------------------------
SNF........................................ 3.9 5.6 1.7
----------------------------------------------------------------------------------------------------------------
* Published in Federal Register; based on second quarter 2022 IGI forecast (2018-based SNF market basket).
** Based on the fourth quarter 2023 IGI forecast (2018-based SNF market basket), with historical data through
third quarter 2023.
4. Productivity Adjustment
Section 1888(e)(5)(B)(ii) of the Act, as added by section 3401(b)
of the Patient Protection and Affordable Care Act (Affordable Care Act)
(Pub. L. 111-148, enacted March 23, 2010) requires that, in FY 2012 and
in subsequent FYs, the market basket percentage under the SNF payment
system (as described in section 1888(e)(5)(B)(i) of the Act) is to be
reduced annually by the productivity adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the
Act, in turn, defines the productivity adjustment to be equal to the
10-year moving average of changes in annual economy-wide, private
nonfarm business multifactor productivity (MFP) (as projected by the
Secretary for the 10-year period ending with the applicable FY, year,
cost-reporting period, or other annual period).
The U.S. Department of Labor's Bureau of Labor Statistics (BLS)
publishes the official measure of productivity for the U.S. We note
that previously the productivity measure referenced at section
1886(b)(3)(B)(xi)(II) of the Act was published by BLS as private
nonfarm business multifactor productivity. Beginning with the November
18, 2021 release of productivity data, BLS replaced the term MFP with
TFP. BLS noted that this is a change in terminology only and will not
affect the data or methodology. As a result of the BLS name change, the
productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the
Act is now published by BLS as private nonfarm business total factor
productivity. We refer readers to the BLS website at <a href="http://www.bls.gov">www.bls.gov</a> for
the BLS historical published TFP data. A complete description of the
TFP projection methodology is available on our website at <a href="https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch">https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch</a>. In addition, in
the FY 2022 SNF final rule (86 FR 42429) we noted that, effective with
FY 2022 and forward, we changed the name of this adjustment to refer to
it as the ``productivity adjustment,'' rather than the ``MFP
adjustment.''
Per section 1888(e)(5)(A) of the Act, the Secretary shall establish
a SNF market basket that reflects changes over time in the prices of an
appropriate mix of goods and services included in covered SNF services.
Section 1888(e)(5)(B)(ii) of the Act, added by section 3401(b) of the
Affordable Care Act, requires that for FY 2012 and each subsequent FY,
after determining the market basket percentage described in section
1888(e)(5)(B)(i) of the Act, the Secretary shall reduce such percentage
by the productivity adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act. Section 1888(e)(5)(B)(ii) of the Act
further states that the reduction of the market basket percentage by
the productivity adjustment may result in the market basket percentage
being less than zero for a FY and may result in payment rates under
section 1888(e) of the Act being less than such payment rates for the
preceding fiscal year. Thus, if the application of the productivity
adjustment to the market basket percentage calculated under section
1888(e)(5)(B)(i) of the Act results in a productivity-adjusted market
basket percentage that is less than zero, then the annual update to the
unadjusted Federal per diem rates under section 1888(e)(4)(E)(ii) of
the Act would be negative, and such rates would decrease relative to
the prior FY.
Based on the data available for this FY 2025 SNF PPS proposed rule,
the proposed productivity adjustment (the 10-year moving average of
changes in annual economy-wide private nonfarm business TFP for the
period ending September 30, 2025) is projected to be 0.4 percentage
point.
Consistent with section 1888(e)(5)(B)(i) of the Act and Sec.
413.337(d)(2), and as discussed previously in section III.B.1. of this
proposed rule, the proposed market basket percentage increase for FY
2025 for the SNF PPS is based on IGI's fourth quarter 2023 forecast of
the SNF market basket percentage increase, which is estimated to be 2.8
percent. This market basket percentage increase is then increased by
1.7 percentage points, due to application of the forecast error
adjustment discussed earlier in section III.B.3. of this proposed rule.
Finally, as discussed earlier in section III.B.4. of this proposed
rule, we are applying a 0.4 percentage point productivity adjustment to
the FY 2025 SNF market basket percentage increase. Therefore, the
resulting proposed productivity-adjusted FY 2025 SNF market basket
update is equal to 4.1 percent, which reflects a market basket
percentage increase of 2.8 percent, plus the 1.7 percentage points
forecast error adjustment, and reduced by the 0.4 percentage point
productivity adjustment. Thus, we propose to apply a net SNF market
basket update factor of 4.1 percent in our determination of the FY 2025
SNF PPS unadjusted Federal per diem rates.
5. Unadjusted Federal Per Diem Rates for FY 2024
As discussed in the FY 2019 SNF PPS final rule (83 FR 39162), in FY
2020 we implemented a new case-mix classification system to classify
SNF patients under the SNF PPS, the PDPM. As discussed in section
V.B.1. of that final rule (83 FR 39189), under PDPM, the unadjusted
Federal per diem rates are divided into six components, five of which
are case-mix adjusted components (Physical Therapy (PT), Occupational
Therapy (OT), Speech-Language Pathology (SLP), Nursing, and Non-Therapy
Ancillaries (NTA)), and one of which is a non-case-mix
[[Page 23429]]
component, as existed under the previous RUG-IV model. We propose to
use the SNF market basket, adjusted as described previously in sections
III.B.1. through III.B.4. of this proposed rule, to adjust each per
diem component of the Federal rates forward to reflect the change in
the average prices for FY 2024 from the average prices for FY 2023. We
also propose to further adjust the rates by a wage index budget
neutrality factor, described in section III.D. of this proposed rule.
Further, in the past, we used the revised Office of Management and
Budget (OMB) delineations adopted in the FY 2015 SNF PPS final rule (79
FR 45632, 45634), with updates as reflected in OMB Bulletin Nos. 15-01
and 17-01, to identify a facility's urban or rural status for the
purpose of determining which set of rate tables would apply to the
facility. As discussed in the FY 2021 SNF PPS proposed and final rules,
we adopted the revised OMB delineations identified in OMB Bulletin No.
18-04 (available at <a href="https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf">https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf</a>) to identify a facility's urban or rural status
effective beginning with FY 2021. However, as further described in
section V.A of this proposed rule, the current CBSAs are based on OMB
standards contained in Bulletin 20-01, which is based on data collected
during the 2010 Decennial Census. In this proposed rule, we are
proposing to update the SNF PPS wage index using the CBSAs defined
within Bulletin 23-01.
Tables 3 and 4 reflect the proposed unadjusted Federal rates for FY
2025, prior to adjustment for case-mix.
Table 3--Proposed FY 2025 Unadjusted Federal Rate Per Diem--URBAN
--------------------------------------------------------------------------------------------------------------------------------------------------------
Rate component PT OT SLP Nursing NTA Non-case-mix
--------------------------------------------------------------------------------------------------------------------------------------------------------
Per Diem Amount................................... $73.16 $68.10 $27.31 $127.52 $96.21 $114.20
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 4--Proposed FY 2025 Unadjusted Federal Rate Per Diem--R
--------------------------------------------------------------------------------------------------------------------------------------------------------
Rate component PT OT SLP Nursing NTA Non-case-mix
--------------------------------------------------------------------------------------------------------------------------------------------------------
Per Diem Amount................................... $83.39 $76.59 $34.41 $121.83 $91.92 $116.31
--------------------------------------------------------------------------------------------------------------------------------------------------------
C. Case-Mix Adjustment
Under section 1888(e)(4)(G)(i) of the Act, the Federal rate also
incorporates an adjustment to account for facility case-mix, using a
classification system that accounts for the relative resource
utilization of different patient types. The statute specifies that the
adjustment is to reflect both a resident classification system that the
Secretary establishes to account for the relative resource use of
different patient types, as well as resident assessment data and other
data that the Secretary considers appropriate. In the FY 2019 final
rule (83 FR 39162, August 8, 2018), we finalized a new case-mix
classification model, the PDPM, which took effect beginning October 1,
2019. The previous RUG-IV model classified most patients into a therapy
payment group and primarily used the volume of therapy services
provided to the patient as the basis for payment classification, thus
creating an incentive for SNFs to furnish therapy regardless of the
individual patient's unique characteristics, goals, or needs. PDPM
eliminates this incentive and improves the overall accuracy and
appropriateness of SNF payments by classifying patients into payment
groups based on specific, data-driven patient characteristics, while
simultaneously reducing the administrative burden on SNFs.
The PDPM uses clinical data from the MDS to assign case-mix
classifiers to each patient that are then used to calculate a per diem
payment under the SNF PPS, consistent with the provisions of section
1888(e)(4)(G)(i) of the Act. As discussed in section IV.A. of this
proposed rule, the clinical orientation of the case-mix classification
system supports the SNF PPS's use of an administrative presumption that
considers a beneficiary's initial case-mix classification to assist in
making certain SNF level of care determinations. Further, because the
MDS is used as a basis for payment, as well as a clinical assessment,
we have provided extensive training on proper coding and the timeframes
for MDS completion in our Resident Assessment Instrument (RAI) Manual.
As we have stated in prior rules, for an MDS to be considered valid for
use in determining payment, the MDS assessment should be completed in
compliance with the instructions in the RAI Manual in effect at the
time the assessment is completed. For payment and quality monitoring
purposes, the RAI Manual consists of both the Manual instructions and
the interpretive guidance and policy clarifications posted on the
appropriate MDS website at <a href="https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/MDS30RAIManual.html">https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/MDS30RAIManual.html</a>.
Under section 1888(e)(4)(H) of the Act, each update of the payment
rates must include the case-mix classification methodology applicable
for the upcoming FY. The proposed FY 2025 payment rates set forth in
this proposed rule reflect the use of the PDPM case-mix classification
system from October 1, 2023, through September 30, 2024. The proposed
case-mix adjusted PDPM payment rates for FY 2025 are listed separately
for urban and rural SNFs, in Tables A5 and A6 with corresponding case-
mix values.
Given the differences between the previous RUG-IV model and PDPM in
terms of patient classification and billing, it was important that the
format of Tables A5 and A6 reflect these differences. More
specifically, under both RUG-IV and PDPM, providers use a Health
Insurance Prospective Payment System (HIPPS) code on a claim to bill
for covered SNF services. Under RUG-IV, the HIPPS code included the
three-character RUG-IV group into which the patient classified, as well
as a two-character assessment indicator code that represented the
assessment used to generate this code. Under PDPM, while providers
still use a HIPPS code, the characters in that code represent different
things. For example, the first character represents the PT and OT group
into which the patient classifies. If the patient is classified into
the PT and OT group ``TA'', then the first character in the patient's
HIPPS code would be an A. Similarly, if the patient is classified into
the SLP group ``SB'', then the second character in the patient's HIPPS
code would be a B. The third character represents the Nursing group
into which the patient classifies. The fourth character represents the
NTA group into which the patient classifies.
[[Page 23430]]
Finally, the fifth character represents the assessment used to generate
the HIPPS code.
Tables 5 and 6 reflect the PDPM's structure. Accordingly, Column 1
of Tables 5 and 6 represents the character in the HIPPS code associated
with a given PDPM component. Columns 2 and 3 provide the case-mix index
and associated case-mix adjusted component rate, respectively, for the
relevant PT group. Columns 4 and 5 provide the case-mix index and
associated case-mix adjusted component rate, respectively, for the
relevant OT group. Columns 6 and 7 provide the case-mix index and
associated case-mix adjusted component rate, respectively, for the
relevant SLP group. Column 8 provides the nursing case-mix group (CMG)
that is connected with a given PDPM HIPPS character. For example, if
the patient qualified for the nursing group CBC1, then the third
character in the patient's HIPPS code would be a ``P.'' Columns 9 and
10 provide the case-mix index and associated case-mix adjusted
component rate, respectively, for the relevant nursing group. Finally,
columns 11 and 12 provide the case-mix index and associated case-mix
adjusted component rate, respectively, for the relevant NTA group.
Tables 5 and 6 do not reflect adjustments which may be made to the
SNF PPS rates as a result of the SNF VBP Program, discussed in section
VI. of this proposed rule, or other adjustments, such as the variable
per diem adjustment.
Table 5--PDPM Case-Mix Adjusted Federal Rates and Associated Indexes--Urban
--------------------------------------------------------------------------------------------------------------------------------------------------------
Nursing Nursing Nursing
PDPM group PT CMI PT rate OT CMI OT rate SLP CMI SLP rate CMG CMI rate NTA CMI NTA rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
A............................. 1.45 $106.08 1.41 $96.02 0.64 $17.48 ES3 3.84 $489.68 3.06 $294.40
B............................. 1.61 117.79 1.54 104.87 1.72 46.97 ES2 2.90 369.81 2.39 229.94
C............................. 1.78 130.22 1.60 108.96 2.52 68.82 ES1 2.77 353.23 1.74 167.41
D............................. 1.81 132.42 1.45 98.75 1.38 37.69 HDE2 2.27 289.47 1.26 121.22
E............................. 1.34 98.03 1.33 90.57 2.21 60.36 HDE1 1.88 239.74 0.91 87.55
F............................. 1.52 111.20 1.51 102.83 2.82 77.01 HBC2 2.12 270.34 0.68 65.42
G............................. 1.58 115.59 1.55 105.56 1.93 52.71 HBC1 1.76 224.44 ......... .........
H............................. 1.10 80.48 1.09 74.23 2.7 73.74 LDE2 1.97 251.21 ......... .........
I............................. 1.07 78.28 1.12 76.27 3.34 91.22 LDE1 1.64 209.13 ......... .........
J............................. 1.34 98.03 1.37 93.30 2.83 77.29 LBC2 1.63 207.86 ......... .........
K............................. 1.44 105.35 1.46 99.43 3.50 95.59 LBC1 1.35 172.15 ......... .........
L............................. 1.03 75.35 1.05 71.51 3.98 108.69 CDE2 1.77 225.71 ......... .........
M............................. 1.20 87.79 1.23 83.76 ......... ......... CDE1 1.53 195.11 ......... .........
N............................. 1.40 102.42 1.42 96.70 ......... ......... CBC2 1.47 187.45 ......... .........
O............................. 1.47 107.55 1.47 100.11 ......... ......... CA2 1.03 131.35 ......... .........
P............................. 1.02 74.62 1.03 70.14 ......... ......... CBC1 1.27 161.95 ......... .........
Q............................. ......... ......... ......... ......... ......... ......... CA1 0.89 113.49 ......... .........
R............................. ......... ......... ......... ......... ......... ......... BAB2 0.98 124.97 ......... .........
S............................. ......... ......... ......... ......... ......... ......... BAB1 0.94 119.87 ......... .........
T............................. ......... ......... ......... ......... ......... ......... PDE2 1.48 188.73 ......... .........
U............................. ......... ......... ......... ......... ......... ......... PDE1 1.39 177.25 ......... .........
V............................. ......... ......... ......... ......... ......... ......... PBC2 1.15 146.65 ......... .........
W............................. ......... ......... ......... ......... ......... ......... PA2 0.67 85.44 ......... .........
X............................. ......... ......... ......... ......... ......... ......... PBC1 1.07 136.45 ......... .........
Y............................. ......... ......... ......... ......... ......... ......... PA1 0.62 79.06 ......... .........
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 6--PDPM Case-Mix Adjusted Federal Rates and Associated Indexes--RURAL
--------------------------------------------------------------------------------------------------------------------------------------------------------
Nursing Nursing Nursing
PDPM group PT CMI PT rate OT CMI OT rate SLP CMI SLP rate CMG CMI rate NTA CMI NTA rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
A............................. 1.45 $120.92 1.41 $107.99 0.64 $22.02 ES3 3.84 $467.83 3.06 281.28
B............................. 1.61 134.26 1.54 117.95 1.72 59.19 ES2 2.90 353.31 2.39 219.69
C............................. 1.78 148.43 1.60 122.54 2.52 86.71 ES1 2.77 337.47 1.74 159.94
D............................. 1.81 150.94 1.45 111.06 1.38 47.49 HDE2 2.27 276.55 1.26 115.82
E............................. 1.34 111.74 1.33 101.86 2.21 76.05 HDE1 1.88 229.04 0.91 83.65
F............................. 1.52 126.75 1.51 115.65 2.82 97.04 HBC2 2.12 258.28 0.68 62.51
G............................. 1.58 131.76 1.55 118.71 1.93 66.41 HBC1 1.76 214.42 ......... .........
H............................. 1.10 91.73 1.09 83.48 2.7 92.91 LDE2 1.97 240.01 ......... .........
I............................. 1.07 89.23 1.12 85.78 3.34 114.93 LDE1 1.64 199.80 ......... .........
J............................. 1.34 111.74 1.37 104.93 2.83 97.38 LBC2 1.63 198.58 ......... .........
K............................. 1.44 120.08 1.46 111.82 3.50 120.44 LBC1 1.35 164.47 ......... .........
L............................. 1.03 85.89 1.05 80.42 3.98 136.95 CDE2 1.77 215.64 ......... .........
M............................. 1.20 100.07 1.23 94.21 ......... ......... CDE1 1.53 186.40 ......... .........
N............................. 1.40 116.75 1.42 108.76 ......... ......... CBC2 1.47 179.09 ......... .........
O............................. 1.47 122.58 1.47 112.59 ......... ......... CA2 1.03 125.48 ......... .........
P............................. 1.02 85.06 1.03 78.89 ......... ......... CBC1 1.27 154.72 ......... .........
Q............................. ......... ......... ......... ......... ......... ......... CA1 0.89 108.43 ......... .........
R............................. ......... ......... ......... ......... ......... ......... BAB2 0.98 119.39 ......... .........
S............................. ......... ......... ......... ......... ......... ......... BAB1 0.94 114.52 ......... .........
T............................. ......... ......... ......... ......... ......... ......... PDE2 1.48 180.31 ......... .........
U............................. ......... ......... ......... ......... ......... ......... PDE1 1.39 169.34 ......... .........
V............................. ......... ......... ......... ......... ......... ......... PBC2 1.15 140.10 ......... .........
W............................. ......... ......... ......... ......... ......... ......... PA2 0.67 81.63 ......... .........
X............................. ......... ......... ......... ......... ......... ......... PBC1 1.07 130.36 ......... .........
Y............................. ......... ......... ......... ......... ......... ......... PA1 0.62 75.53 ......... .........
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 23431]]
D. Wage Index Adjustment
Section 1888(e)(4)(G)(ii) of the Act requires that we adjust the
Federal rates to account for differences in area wage levels, using a
wage index that the Secretary determines appropriate. Since the
inception of the SNF PPS, we have used hospital inpatient wage data in
developing a wage index to be applied to SNFs. We will continue this
practice for FY 2025, as we continue to believe that in the absence of
SNF-specific wage data, using the hospital inpatient wage index data is
appropriate and reasonable for the SNF PPS. As explained in the update
notice for FY 2005 (69 FR 45786), the SNF PPS does not use the hospital
area wage index's occupational mix adjustment, as this adjustment
serves specifically to define the occupational categories more clearly
in a hospital setting; moreover, the collection of the occupational
wage data under the inpatient prospective payment system (IPPS) also
excludes any wage data related to SNFs. Therefore, we believe that
using the updated wage data exclusive of the occupational mix
adjustment continues to be appropriate for SNF payments. As in previous
years, we would continue to use the pre-reclassified IPPS hospital wage
data, without applying the occupational mix, rural floor, or
outmigration adjustment, as the basis for the SNF PPS wage index. For
FY 2025, the updated wage data are for hospital cost reporting periods
beginning on or after October 1, 2020 and before October 1, 2021 (FY
2021 cost report data).
We note that section 315 of the Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-
554, enacted December 21, 2000) gave the Secretary the discretion to
establish a geographic reclassification procedure specific to SNFs, but
only after collecting the data necessary to establish a SNF PPS wage
index that is based on wage data from nursing homes. To date, this has
proven to be unfeasible due to the volatility of existing SNF wage data
and the significant amount of resources that would be required to
improve the quality of the data. More specifically, auditing all SNF
cost reports, similar to the process used to audit inpatient hospital
cost reports for purposes of the IPPS wage index, would place a burden
on providers in terms of recordkeeping and completion of the cost
report worksheet. Adopting such an approach would require a significant
commitment of resources by CMS and the Medicare Administrative
Contractors (MACs), potentially far in excess of those required under
the IPPS, given that there are nearly five times as many SNFs as there
are inpatient hospitals. While we do not believe this undertaking is
feasible at this time, we will continue to explore implantation of a
spot audit process to improve SNF cost reports, which is determined to
be adequately accurate for cost development purposes, in such a manner
as to permit us to establish a SNF-specific wage index in the future.
In addition, we will continue to use the same methodology discussed
in the SNF PPS final rule for FY 2008 (72 FR 43423) to address those
geographic areas in which there are no hospitals, and thus, no hospital
wage index data on which to base the calculation of the FY 2025 SNF PPS
wage index. For rural geographic areas that do not have hospitals and,
therefore, lack hospital wage data on which to base an area wage
adjustment, we will continue using the average wage index from all
contiguous Core-Based Statistical Areas (CBSAs) as a reasonable proxy.
For FY 2025, the only rural area without wage index data available is
North Dakota. We have determined that the borders of 18 rural counties
are local and contiguous with 8 urban counties. Therefore, under this
methodology, the wage indexes for the counties of Burleigh/Morton/
Oliver (CBSA 13900: 0.9020), Cass (CBSA 22020: 0.8763), Grand Forks
(CBSA 24220: 0.7865), and McHenry/Renville/Ward (CBSA 33500: 0.7686)
are averaged, resulting in an imputed rural wage index of 0.8334 for
rural North Dakota for FY 2025. In past years for rural Puerto Rico, we
did not apply this methodology due to the distinct economic
circumstances there; due to the close proximity of almost all of Puerto
Rico's various urban and non-urban areas, this methodology will produce
a wage index for rural Puerto Rico that is higher than that in half of
its urban areas. However, because rural Puerto Rico now has hospital
wage index data on which to base an area wage adjustment, we will not
apply this policy for FY 2025. For urban areas without specific
hospital wage index data, we will continue using the average wage
indexes of all urban areas within the State to serve as a reasonable
proxy for the wage index of that urban CBSA. For FY 2025, the only
urban area without wage index data available is CBSA 25980, Hinesville-
Fort Stewart, GA.
In the SNF PPS final rule for FY 2006 (70 FR 45026, August 4,
2005), we adopted the changes discussed in OMB Bulletin No. 03-04 (June
6, 2003), which announced revised definitions for MSAs and the creation
of micropolitan statistical areas and combined statistical areas. In
adopting the CBSA geographic designations, we provided for a 1-year
transition in FY 2006 with a blended wage index for all providers. For
FY 2006, the wage index for each provider consisted of a blend of 50
percent of the FY 2006 MSA-based wage index and 50 percent of the FY
2006 CBSA-based wage index (both using FY 2002 hospital data). We
referred to the blended wage index as the FY 2006 SNF PPS transition
wage index. As discussed in the SNF PPS final rule for FY 2006 (70 FR
45041), after the expiration of this 1-year transition on September 30,
2006, we used the full CBSA-based wage index values.
In the FY 2015 SNF PPS final rule (79 FR 45644 through 45646), we
finalized changes to the SNF PPS wage index based on the newest OMB
delineations, as described in OMB Bulletin No. 13-01, beginning in FY
2015, including a 1-year transition with a blended wage index for FY
2015. OMB Bulletin No. 13-01 established revised delineations for
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and
Combined Statistical Areas in the United States and Puerto Rico based
on the 2010 Census and provided guidance on the use of the delineations
of these statistical areas using standards published in the June 28,
2010 Federal Register (75 FR 37246 through 37252). Subsequently, on
July 15, 2015, OMB issued OMB Bulletin No. 15-01, which provided minor
updates to and superseded OMB Bulletin No. 13-01 that was issued on
February 28, 2013. The attachment to OMB Bulletin No. 15-01 provided
detailed information on the update to statistical areas since February
28, 2013. The updates provided in OMB Bulletin No. 15-01 were based on
the application of the 2010 Standards for Delineating Metropolitan and
Micropolitan Statistical Areas to Census Bureau population estimates
for July 1, 2012 and July 1, 2013 and were adopted under the SNF PPS in
the FY 2017 SNF PPS final rule (81 FR 51983, August 5, 2016). In
addition, on August 15, 2017, OMB issued Bulletin No. 17-01 which
announced a new urban CBSA, Twin Falls, Idaho (CBSA 46300) which was
adopted in the SNF PPS final rule for FY 2019 (83 FR 39173, August 8,
2018).
As discussed in the FY 2021 SNF PPS final rule (85 FR 47594), we
adopted the revised OMB delineations identified in OMB Bulletin No. 18-
04 (available at <a href="https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf">https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf</a>) beginning October 1, 2020, including a 1-year
transition for FY 2021 under which we applied a 5
[[Page 23432]]
percent cap on any decrease in a hospital's wage index compared to its
wage index for the prior fiscal year (FY 2020). The updated OMB
delineations more accurately reflect the contemporary urban and rural
nature of areas across the country, and the use of such delineations
allows us to determine more accurately the appropriate wage index and
rate tables to apply under the SNF PPS.
In the FY 2023 SNF PPS final rule (87 FR 47521 through 47525), we
finalized a policy to apply a permanent 5 percent cap on any decreases
to a provider's wage index from its wage index in the prior year,
regardless of the circumstances causing the decline. We amended the SNF
PPS regulations at 42 CFR 413.337(b)(4)(ii) to reflect this permanent
cap on wage index decreases. Additionally, we finalized a policy that a
new SNF would be paid the wage index for the area in which it is
geographically located for its first full or partial FY with no cap
applied because a new SNF would not have a wage index in the prior FY.
A full discussion of the adoption of this policy is found in the FY
2023 SNF PPS final rule.
As we previously stated in the FY 2008 SNF PPS proposed and final
rules (72 FR 25538 through 25539, and 72 FR 43423), this and all
subsequent SNF PPS rules and notices are considered to incorporate any
updates and revisions set forth in the most recent OMB bulletin that
applies to the hospital wage data used to determine the current SNF PPS
wage index. OMB issued further revised CBSA delineations in OMB
Bulletin No. 20-01, on March 6, 2020 (available on the web at <a href="https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf">https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf</a>).
However, we determined that the changes in OMB Bulletin No. 20-01 do
not impact the CBSA-based labor market area delineations adopted in FY
2021. Therefore, we did not propose to adopt the revised OMB
delineations identified in OMB Bulletin No. 20-01 for FY 2022 through
FY 2024.
On July 21, 2023, OMB issued OMB Bulletin No. 23-01 which updates
and supersedes OMB Bulletin No. 20-01 based on the decennial census.
OMB Bulletin No. 23-01 revised delineations for CBSAs which are made up
of counties and equivalent entities (e.g., boroughs, a city and
borough, and a municipality in Alaska, planning regions in Connecticut,
parishes in Louisiana, municipios in Puerto Rico, and independent
cities in Maryland, Missouri, Nevada, and Virginia). For FY 2025, we
propose to adopt the revised OMB delineations identified in OMB
Bulletin No. 23-01 (available at <a href="https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf">https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf</a>). The wage index applicable to
FY 2025 is set forth in Table A available on the CMS website at <a href="http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html">http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html</a>.
Once calculated, we will apply the wage index adjustment to the
labor-related portion of the Federal rate. Each year, we calculate a
labor-related share, based on the relative importance of labor-related
cost categories (that is, those cost categories that are labor-
intensive and vary with the local labor market) in the input price
index. In the SNF PPS final rule for FY 2022 (86 FR 42437), we
finalized a proposal to revise the labor-related share to reflect the
relative importance of the 2018-based SNF market basket cost weights
for the following cost categories: Wages and Salaries; Employee
Benefits; Professional Fees: Labor-Related; Administrative and
Facilities Support Services; Installation, Maintenance, and Repair
Services; All Other: Labor-Related Services; and a proportion of
Capital-Related expenses. The methodology for calculating the labor-
related portion beginning in FY 2022 is discussed in detail in the FY
2022 SNF PPS final rule (86 FR 42461 through 42463). As described later
in section V.A. of this proposed rule, we are proposing to rebase and
revise the labor-related share to reflect the relative importance of
the proposed 2022-based SNF market basket cost weights for the
following categories: Wages and Salaries; Employee Benefits;
Professional Fees: Labor-Related; Administrative and Facilities Support
Services; Installation, Maintenance, and Repair Services; All Other:
Labor-Related Services; and a proportion of Capital-Related expenses.
We calculate the proposed labor-related relative importance from
the SNF market basket, and it approximates the labor-related portion of
the total costs after taking into account historical and projected
price changes between the base year and FY 2025. The price proxies that
move the different cost categories in the market basket do not
necessarily change at the same rate, and the relative importance
captures these changes. Accordingly, the relative importance figure
more closely reflects the cost share weights for FY 2025 than the base
year weights from the SNF market basket. We calculate the labor-related
relative importance for FY 2025 in four steps. First, we compute the FY
2025 price index level for the total market basket and each cost
category of the market basket. Second, we calculate a ratio for each
cost category by dividing the FY 2025 price index level for that cost
category by the total market basket price index level. Third, we
determine the FY 2025 relative importance for each cost category by
multiplying this ratio by the base year (2022) weight. Finally, we add
the FY 2025 relative importance for each of the labor-related cost
categories (Wages and Salaries; Employee Benefits; Professional Fees:
Labor-Related; Administrative and Facilities Support Services;
Installation, Maintenance, and Repair Services; All Other: Labor-
Related Services; and a portion of Capital-Related expenses) to produce
the proposed FY 2025 labor-related relative importance.
Table 7 summarizes the labor-related share for FY 2025, based on
IGI's fourth quarter 2023 forecast of the proposed 2022-based SNF
market basket, compared to the labor-related share that was used for
the FY 2024 SNF PPS final rule.
Table 7--Labor-Related Share, FY 2024 and FY 2025
----------------------------------------------------------------------------------------------------------------
Final FY 2024 labor- Proposed FY 2025 labor-
related share based on related share based on
2023q2 forecast of the 2023q4 forecast of the
2018-based SNF market proposed 2022-based SNF
basket \1\ market basket \2\
----------------------------------------------------------------------------------------------------------------
Wages and salaries............................................ 52.5 53.2
Employee benefits............................................. 9.3 9.1
Professional fees: Labor-related.............................. 3.4 3.5
Administrative & facilities support services.................. 0.6 0.4
Installation, maintenance & repair services................... 0.4 0.5
[[Page 23433]]
All other: Labor-related services............................. 2.0 2.0
Capital-related (.391)........................................ 2.9 3.2
-------------------------------------------------
Total..................................................... 71.1 71.9
----------------------------------------------------------------------------------------------------------------
\1\ Published in the Federal Register; Based on the second quarter 2023 IHS Global Inc. forecast of the 2018-
based SNF market basket.
\2\ Based on the fourth quarter 2023 IHS Global Inc. forecast of the proposed 2022-based SNF market basket.
To calculate the labor portion of the case-mix adjusted per diem
rate, we will multiply the total case-mix adjusted per diem rate, which
is the sum of all five case-mix adjusted components into which a
patient classifies, and the non-case-mix component rate, by the
proposed FY 2025 labor-related share percentage provided in Table 7.
The remaining portion of the rate would be the non-labor portion. Under
the previous RUG-IV model, we included tables which provided the case-
mix adjusted RUG-IV rates, by RUG-IV group, broken out by total rate,
labor portion and non-labor portion, such as Table 9 of the FY 2019 SNF
PPS final rule (83 FR 39175). However, as we discussed in the FY 2020
final rule (84 FR 38738), under PDPM, as the total rate is calculated
as a combination of six different component rates, five of which are
case-mix adjusted, and given the sheer volume of possible combinations
of these five case-mix adjusted components, it is not feasible to
provide tables similar to those that existed in the prior rulemaking.
Therefore, to aid interested parties in understanding the effect of
the wage index on the calculation of the SNF per diem rate, we have
included a hypothetical rate calculation in Table 9.
Section 1888(e)(4)(G)(ii) of the Act also requires that we apply
this wage index in a manner that does not result in aggregate payments
under the SNF PPS that are greater or less than would otherwise be made
if the wage adjustment had not been made. For FY 2025 (Federal rates
effective October 1, 2023), we apply an adjustment to fulfill the
budget neutrality requirement. We meet this requirement by multiplying
each of the components of the unadjusted Federal rates by a budget
neutrality factor, equal to the ratio of the weighted average wage
adjustment factor for FY 2025 to the weighted average wage adjustment
factor for FY 2025. For this calculation, we will use the same FY 2023
claims utilization data for both the numerator and denominator of this
ratio. We define the wage adjustment factor used in this calculation as
the labor portion of the rate component multiplied by the wage index
plus the non-labor portion of the rate component. The proposed budget
neutrality factor for FY 2025 is 1.0002.
We note that if more recent data become available (for example,
revised wage data), we would use such data, if appropriate, to
determine the wage index budget neutrality factor in the SNF PPS final
rule.
E. SNF Value-Based Purchasing Program
Beginning with payment for services furnished on October 1, 2018,
section 1888(h) of the Act requires the Secretary to reduce the
adjusted Federal per diem rate determined under section 1888(e)(4)(G)
of the Act otherwise applicable to a SNF for services furnished during
a fiscal year by 2 percent, and to adjust the resulting rate for a SNF
by the value-based incentive payment amount earned by the SNF based on
the SNF's performance score for that fiscal year under the SNF VBP
Program. To implement these requirements, we finalized in the FY 2019
SNF PPS final rule the addition of Sec. 413.337(f) to our regulations
(83 FR 39178).
Please see section VII. of this proposed rule for further
discussion of the updates we are proposing for the SNF VBP Program.
F. Adjusted Rate Computation Example
Tables 8 through 10 provide examples generally illustrating payment
calculations during FY 2025 under PDPM for a hypothetical 30-day SNF
stay, involving the hypothetical SNF XYZ, located in Frederick, MD
(Urban CBSA 23224), for a hypothetical patient who is classified into
such groups that the patient's HIPPS code is NHNC1. Table 8 shows the
adjustments made to the Federal per diem rates (prior to application of
any adjustments under the SNF VBP Program as discussed) to compute the
provider's proposed case-mix adjusted per diem rate for FY 2025, based
on the patient's PDPM classification, as well as how the variable per
diem (VPD) adjustment factor affects calculation of the per diem rate
for a given day of the stay. Table 9 shows the adjustments made to the
case-mix adjusted per diem rate from Table 8 to account for the
provider's wage index. The wage index used in this example is based on
the FY 2025 SNF PPS wage index that appears in Table A available on the
CMS website at <a href="http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html">http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html</a>. Finally, Table 10 provides the case-mix
and wage index adjusted per-diem rate for this patient for each day of
the 30-day stay, as well as the total payment for this stay. Table 10
also includes the VPD adjustment factors for each day of the patient's
stay, to clarify why the patient's per diem rate changes for certain
days of the stay. As illustrated in Table 10, SNF XYZ's total PPS
payment for this particular patient's stay would equal $23,073.54.
[[Page 23434]]
Table 8--PDPM Case-Mix Adjusted Rate Computation Example
----------------------------------------------------------------------------------------------------------------
Per diem rate calculation
-----------------------------------------------------------------------------------------------------------------
Component VPD adjustment
Component group Component rate factor VPD adj. rate
----------------------------------------------------------------------------------------------------------------
PT.............................................. N $102.42 1.00 102.42
OT.............................................. N $96.70 1.00 96.70
SLP............................................. H $73.74 1.00 73.74
Nursing......................................... N $187.45 1.00 187.45
NTA............................................. C $167.41 3.00 502.23
Non-Case-Mix.................................... .............. $114.20 .............. 114.20
-----------------------------------------------
Total PDPM Case-Mix Adj. Per Diem........... .............. .............. .............. 1,076.74
----------------------------------------------------------------------------------------------------------------
Table 9--Wage Index Adjusted Rate Computation Example
--------------------------------------------------------------------------------------------------------------------------------------------------------
PDPM wage index adjustment calculation
---------------------------------------------------------------------------------------------------------------------------------------------------------
PDPM case-mix Total case mix
HIPPS code adjusted per Labor portion Wage index Wage index Non-labor and wage index
diem adjusted rate portion adj. rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
NHNC1............................................. $1,076.74 $774.18 0.9918 $767.83 $302.56 $1,070.39
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 10--Adjusted Rate Computation Example
----------------------------------------------------------------------------------------------------------------
Case mix and
NTA VPD PT/OT VPD wage index
Day of stay adjustment adjustment adjusted per
factor factor diem rate
----------------------------------------------------------------------------------------------------------------
1............................................................... 3.0 1.0 $1,070.39
2............................................................... 3.0 1.0 1,070.39
3............................................................... 3.0 1.0 1,070.39
4............................................................... 1.0 1.0 737.55
5............................................................... 1.0 1.0 737.55
6............................................................... 1.0 1.0 737.55
7............................................................... 1.0 1.0 737.55
8............................................................... 1.0 1.0 737.55
9............................................................... 1.0 1.0 737.55
10.............................................................. 1.0 1.0 737.55
11.............................................................. 1.0 1.0 737.55
12.............................................................. 1.0 1.0 737.55
13.............................................................. 1.0 1.0 737.55
14.............................................................. 1.0 1.0 737.55
15.............................................................. 1.0 1.0 737.55
16.............................................................. 1.0 1.0 737.55
17.............................................................. 1.0 1.0 737.55
18.............................................................. 1.0 1.0 737.55
19.............................................................. 1.0 1.0 737.55
20.............................................................. 1.0 1.0 737.55
21.............................................................. 1.0 0.98 733.59
22.............................................................. 1.0 0.98 733.59
23.............................................................. 1.0 0.98 733.59
24.............................................................. 1.0 0.98 733.59
25.............................................................. 1.0 0.98 733.59
26.............................................................. 1.0 0.98 733.59
27.............................................................. 1.0 0.98 733.59
28.............................................................. 1.0 0.96 729.63
29.............................................................. 1.0 0.96 729.63
30.............................................................. 1.0 0.96 729.63
-----------------------------------------------
Total Payment............................................... .............. .............. 23,073.54
----------------------------------------------------------------------------------------------------------------
V. Additional Aspects of the SNF PPS
A. SNF Level of Care--Administrative Presumption
The establishment of the SNF PPS did not change Medicare's
fundamental requirements for SNF coverage. However, because the case-
mix classification is based, in part, on the beneficiary's need for
skilled nursing care and therapy, we have attempted, where possible, to
coordinate claims review procedures with the existing resident
assessment process and case-mix classification system discussed in
section III.C. of this proposed rule. This
[[Page 23435]]
approach includes an administrative presumption that utilizes a
beneficiary's correct assignment, at the outset of the SNF stay, of one
of the case-mix classifiers designated for this purpose to assist in
making certain SNF level of care determinations.
In accordance with Sec. 413.345, we include in each update of the
Federal payment rates in the Federal Register a discussion of the
resident classification system that provides the basis for case-mix
adjustment. We also designate those specific classifiers under the
case-mix classification system that represent the required SNF level of
care, as provided in 42 CFR 409.30. This designation reflects an
administrative presumption that those beneficiaries who are correctly
assigned one of the designated case-mix classifiers on the initial
Medicare assessment are automatically classified as meeting the SNF
level of care definition up to and including the assessment reference
date (ARD) for that assessment.
A beneficiary who does not qualify for the presumption is not
automatically classified as either meeting or not meeting the level of
care definition, but instead receives an individual determination on
this point using the existing administrative criteria. This presumption
recognizes the strong likelihood that those beneficiaries who are
correctly assigned one of the designated case-mix classifiers during
the immediate post-hospital period would require a covered level of
care, which would be less likely for other beneficiaries.
In the July 30, 1999 final rule (64 FR 41670), we indicated that we
would announce any changes to the guidelines for Medicare level of care
determinations related to modifications in the case-mix classification
structure. The FY 2018 final rule (82 FR 36544) further specified that
we would henceforth disseminate the standard description of the
administrative presumption's designated groups via the SNF PPS website
at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html</a> (where such designations appear in the paragraph
entitled ``Case Mix Adjustment'') and would publish such designations
in rulemaking only to the extent that we actually intend to propose
changes in them. Under that approach, the set of case-mix classifiers
designated for this purpose under PDPM was finalized in the FY 2019 SNF
PPS final rule (83 FR 39253) and is posted on the SNF PPS website
(<a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html</a>), in the paragraph entitled ``Case Mix Adjustment.''
However, we note that this administrative presumption policy does
not supersede the SNF's responsibility to ensure that its decisions
relating to level of care are appropriate and timely, including a
review to confirm that any services prompting the assignment of one of
the designated case-mix classifiers (which, in turn, serves to trigger
the administrative presumption) are themselves medically necessary. As
we explained in the FY 2000 SNF PPS final rule (64 FR 41667), the
administrative presumption is itself rebuttable in those individual
cases in which the services actually received by the resident do not
meet the basic statutory criterion of being reasonable and necessary to
diagnose or treat a beneficiary's condition (according to section
1862(a)(1) of the Act). Accordingly, the presumption would not apply,
for example, in those situations where the sole classifier that
triggers the presumption is itself assigned through the receipt of
services that are subsequently determined to be not reasonable and
necessary. Moreover, we want to stress the importance of careful
monitoring for changes in each patient's condition to determine the
continuing need for Part A SNF benefits after the Assessment Reference
Date (ARD) of the initial Medicare assessment.
B. Consolidated Billing
Sections 1842(b)(6)(E) and 1862(a)(18) of the Act (as added by
section 4432(b) of the BBA 1997) require a SNF to submit consolidated
Medicare bills to its Medicare Administrative Contractor (MAC) for
almost all of the services that its residents receive during the course
of a covered Part A stay. In addition, section 1862(a)(18) of the Act
places the responsibility with the SNF for billing Medicare for
physical therapy, occupational therapy, and speech-language pathology
services that the resident receives during a noncovered stay. Section
1888(e)(2)(A) of the Act excludes a small list of services from the
consolidated billing provision (primarily those services furnished by
physicians and certain other types of practitioners), which remain
separately billable under Part B when furnished to a SNF's Part A
resident. These excluded service categories are discussed in greater
detail in section V.B.2. of the May 12, 1998 interim final rule (63 FR
26295 through 26297). Effective with services furnished on or after
January 1, 2024, section 4121(a)(4) of the Consolidated Appropriations
Act, 2023 (CAA, 2023) (Pub. L. 117-328, enacted December 29, 2022)
added marriage and family therapists and mental health counselors to
the list of practitioners at section 1888(e)(2)(A)(ii) of the Act whose
services are excluded from the consolidated billing provision.
Section 103 of the Medicare, Medicaid, and SCHIP Balanced Budget
Refinement Act of 1999 (BBRA 1999) (Pub. L. 106-113, enacted November
29, 1999) amended section 1888(e)(2)(A)(iii) of the Act by further
excluding a number of individual high-cost, low probability services,
identified by HCPCS codes, within several broader categories
(chemotherapy items, chemotherapy administration services, radioisotope
services, and customized prosthetic devices) that otherwise remained
subject to the provision. We discuss this BBRA 1999 amendment in
greater detail in the SNF PPS proposed and final rules for FY 2001 (65
FR 19231 through 19232, April 10, 2000, and 65 FR 46790 through 46795,
July 31, 2000), as well as in Program Memorandum AB-00-18 (Change
Request #1070), issued March 2000, which is available online at
<a href="http://www.cms.gov/transmittals/downloads/ab001860.pdf">www.cms.gov/transmittals/downloads/ab001860.pdf</a>.
As explained in the FY 2001 proposed rule (65 FR 19232), the
amendments enacted in section 103 of the BBRA 1999 not only identified
for exclusion from this provision a number of particular service codes
within four specified categories (that is, chemotherapy items,
chemotherapy administration services, radioisotope services, and
customized prosthetic devices), but also gave the Secretary the
authority to designate additional, individual services for exclusion
within each of these four specified service categories. In the proposed
rule for FY 2001, we also noted that the BBRA 1999 Conference report
(H.R. Conf. Rep. No. 106-479 at 854 (1999)) characterizes the
individual services that this legislation targets for exclusion as
high-cost, low probability events that could have devastating financial
impacts because their costs far exceed the payment SNFs receive under
the PPS. According to the conferees, section 103(a) of the BBRA 1999 is
an attempt to exclude from the PPS certain services and costly items
that are provided infrequently in SNFs. By contrast, the amendments
enacted in section 103 of the BBRA 1999 do not designate for exclusion
any of the remaining services within those four categories (thus,
leaving all of those services subject to SNF consolidated billing),
because they are relatively inexpensive and are furnished routinely in
SNFs.
Effective with items and services furnished on or after October 1,
2021,
[[Page 23436]]
section 134 in Division CC of the CAA, 2021 established an additional
fifth category of excluded codes in section 1888(e)(2)(A)(iii)(VI) of
the Act, for certain blood clotting factors for the treatment of
patients with hemophilia and other bleeding disorders along with items
and services related to the furnishing of such factors under section
1842(o)(5)(C) of the Act. Like the provisions enacted in the BBRA 1999,
section 1888(e)(2)(A)(iii)(VI) of the Act gives the Secretary the
authority to designate additional items and services for exclusion
within the category of items and services related to blood clotting
factors, as described in that section.
A detailed discussion of the legislative history of the
consolidated billing provision is available on the SNF PPS website at
<a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_2018-10-01.pdf">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_2018-10-01.pdf</a>.
As we further explained in the final rule for FY 2001 (65 FR
46790), and as is consistent with our longstanding policy, any
additional service codes that we might designate for exclusion under
our discretionary authority must meet the same statutory criteria used
in identifying the original codes excluded from consolidated billing
under section 103(a) of the BBRA 1999: they must fall within one of the
five service categories specified in the BBRA 1999 and CAA, 2021; and
they also must meet the same standards of high cost and low probability
in the SNF setting, as discussed in the BBRA 1999 Conference report.
Accordingly, we characterized this statutory authority to identify
additional service codes for exclusion as essentially affording the
flexibility to revise the list of excluded codes in response to changes
of major significance that may occur over time (for example, the
development of new medical technologies or other advances in the state
of medical practice) (65 FR 46791).
In this proposed rule, we specifically solicit public comments
identifying HCPCS codes in any of these five service categories
(chemotherapy items, chemotherapy administration services, radioisotope
services, customized prosthetic devices, and blood clotting factors)
representing recent medical advances that might meet our criteria for
exclusion from SNF consolidated billing. We may consider excluding a
particular service if it meets our criteria for exclusion as specified
previously. We request that commenters identify in their comments the
specific HCPCS code that is associated with the service in question, as
well as their rationale for requesting that the identified HCPCS
code(s) be excluded.
We note that the original BBRA amendment and the CAA, 2021
identified a set of excluded items and services by means of specifying
individual HCPCS codes within the designated categories that were in
effect as of a particular date (in the case of the BBRA 1999, July 1,
1999, and in the case of the CAA, 2021, July 1, 2020), as subsequently
modified by the Secretary. In addition, as noted in this section of the
preamble, the statute (sections 1888(e)(2)(A)(iii)(II) through (VI) of
the Act) gives the Secretary authority to identify additional items and
services for exclusion within the five specified categories of items
and services described in the statute, which are also designated by
HCPCS code. Designating the excluded services in this manner makes it
possible for us to utilize program issuances as the vehicle for
accomplishing routine updates to the excluded codes to reflect any
minor revisions that might subsequently occur in the coding system
itself, such as the assignment of a different code number to a service
already designated as excluded, or the creation of a new code for a
type of service that falls within one of the established exclusion
categories and meets our criteria for exclusion.
Accordingly, if we identify through the current rulemaking cycle
any new services that meet the criteria for exclusion from SNF
consolidated billing, we will identify these additional excluded
services by means of the HCPCS codes that are in effect as of a
specific date (in this case, October 1, 2024). By making any new
exclusions in this manner, we can similarly accomplish routine future
updates of these additional codes through the issuance of program
instructions. The latest list of excluded codes can be found on the SNF
Consolidated Billing website at <a href="https://www.cms.gov/Medicare/Billing/SNFConsolidatedBilling">https://www.cms.gov/Medicare/Billing/SNFConsolidatedBilling</a>.
C. Payment for SNF-Level Swing-Bed Services
Section 1883 of the Act permits certain small, rural hospitals to
enter into a Medicare swing-bed agreement, under which the hospital can
use its beds to provide either acute- or SNF-level care, as needed. For
critical access hospitals (CAHs), Part A pays on a reasonable cost
basis for SNF-level services furnished under a swing-bed agreement.
However, in accordance with section 1888(e)(7) of the Act, SNF-level
services furnished by non-CAH rural hospitals are paid under the SNF
PPS, effective with cost reporting periods beginning on or after July
1, 2002. As explained in the FY 2002 final rule (66 FR 39562), this
effective date is consistent with the statutory provision to integrate
swing-bed rural hospitals into the SNF PPS by the end of the transition
period, June 30, 2002.
Accordingly, all non-CAH swing-bed rural hospitals have now come
under the SNF PPS. Therefore, all rates and wage indexes outlined in
earlier sections of this proposed rule for the SNF PPS also apply to
all non-CAH swing-bed rural hospitals. As finalized in the FY 2010 SNF
PPS final rule (74 FR 40356 through 40357), effective October 1, 2010,
non-CAH swing-bed rural hospitals are required to complete an MDS 3.0
swing-bed assessment which is limited to the required demographic,
payment, and quality items. As discussed in the FY 2019 SNF PPS final
rule (83 FR 39235), revisions were made to the swing bed assessment to
support implementation of PDPM, effective October 1, 2019. A discussion
of the assessment schedule and the MDS effective beginning FY 2020
appears in the FY 2019 SNF PPS final rule (83 FR 39229 through 39237).
The latest changes in the MDS for swing-bed rural hospitals appear on
the SNF PPS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html</a>.
V. Other SNF PPS Issues
A. Rebasing and Revising the SNF Market Basket
Section 1888(e)(5)(A) of the Act requires the Secretary to
establish a market basket that reflects the changes over time in the
prices of an appropriate mix of goods and services included in covered
SNF services. Accordingly, we have developed a SNF market basket that
encompasses the most commonly used cost categories for SNF routine
services, ancillary services, and capital-related expenses.
The SNF market basket is used to compute the market basket
percentage increase that is used to update the SNF Federal rates on an
annual basis, as required by section 1888(e)(4)(E)(ii)(IV) of the Act.
This market basket percentage increase is adjusted by a forecast error
adjustment, if applicable, and then further adjusted by the application
of a productivity adjustment as required by section 1888(e)(5)(B)(ii)
of the Act and described in section III.B.4. of this proposed rule. The
SNF market basket is also used to determine the labor-related share on
an annual basis.
The SNF market basket is a fixed-weight, Laspeyres-type price
index. A
[[Page 23437]]
Laspeyres price index measures the change in price, over time, of the
same mix of goods and services purchased in the base period. Any
changes in the quantity or mix of goods and services (that is,
intensity) purchased over time relative to a base period are not
measured.
The index itself is constructed in three steps. First, a base
period is selected (the proposed base period is 2022) and total base
period costs are estimated for a set of mutually exclusive and
exhaustive spending categories and the proportion of total costs that
each category represents is calculated. These proportions are called
cost weights. Second, each cost category is matched to an appropriate
price or wage variable, referred to as a price proxy. In nearly every
instance, these price proxies are derived from publicly available
statistical series that are published on a consistent schedule
(preferably at least on a quarterly basis). Finally, the cost weight
for each cost category is multiplied by the level of its respective
price proxy. The sum of these products (that is, the cost weights
multiplied by their price levels) for all cost categories yields the
composite index level of the market basket in a given period. Repeating
this step for other periods produces a series of market basket levels
over time. Dividing an index level for a given period by an index level
for an earlier period produces a rate of growth in the input price
index over that timeframe.
Since the inception of the SNF PPS, the market basket used to
update SNF PPS payments has been periodically rebased and revised. We
last rebased and revised the market basket applicable to the SNF PPS in
the FY 2022 SNF PPS final rule (86 FR 42444 through 42463) where we
adopted a 2018-based SNF market basket. References to the historical
market baskets used to update SNF PPS payments are listed in the FY
2022 SNF PPS final rule (86 FR 42445).
Effective for FY 2025 and subsequent fiscal years, we are proposing
to rebase and revise the market basket to reflect 2022 Medicare-
allowable total cost data (routine, ancillary, and capital-related)
from freestanding SNFs and to revise applicable cost categories and
price proxies used to determine the market basket. Medicare-allowable
costs are those costs that are eligible to be paid under the SNF PPS.
For example, the SNF market basket excludes home health agency (HHA)
costs as these costs would be paid under the HHA PPS, and therefore,
these costs are not SNF PPS Medicare-allowable costs. We propose to
maintain our policy of using data from freestanding SNFs, of which
about 91 percent of SNFs that submitted a Medicare cost report for 2022
are represented in our sample shown in Table 11. We believe using
freestanding Medicare cost report data, as opposed to the hospital-
based SNF Medicare cost report data, for the cost weight calculation is
most appropriate because of the complexity of hospital-based data and
the representativeness of the freestanding data. Because hospital-based
SNF expenses are embedded in the hospital cost report, any attempt to
incorporate data from hospital-based facilities requires more complex
calculations and assumptions regarding the ancillary costs related to
the hospital-based SNF unit. We believe the use of freestanding SNF
cost report data is technically appropriate for reflecting the cost
structures of SNFs serving Medicare beneficiaries.
We are proposing to use 2022 as the base year as we believe that
the 2022 Medicare cost reports represent the most recent, complete set
of Medicare cost report data available to develop cost weights for SNFs
at the time of rulemaking. We believe it is important to regularly
rebase and revise the SNF market basket to reflect more recent data.
Historically, the cost weights change minimally from year to year as
they represent percent of total costs rather than cost levels; however,
given the COVID-19 Public Health Emergency (PHE), we have been
monitoring the Medicare cost report data to see if a more frequent
rebasing schedule is necessary than our recent historical precedent of
about every 4 years. Accordingly, while it has been only three years
since the last SNF rebasing, we are proposing to incorporate data that
is more reflective of recent SNF expenses that have been impacted over
the COVID-19 PHE period. The 2022 Medicare cost reports are for cost
reporting periods beginning on and after October 1, 2021 and before
October 1, 2022. While these dates appear to reflect fiscal year data,
we note that a Medicare cost report that begins in this timeframe is
generally classified as a ``2022 cost report''. For example, we found
that of the available 2022 Medicare cost reports for SNFs,
approximately 7 percent had an October 1, 2021 begin date,
approximately 75 percent of the reports had a January 1, 2022 begin
date, and approximately 12 percent had a July 1, 2022 begin date. For
this reason, we are defining the base year of the market basket as
``2022-based'' instead of ``FY 2022-based''.
Specifically, we are proposing to develop cost category weights for
the proposed 2022-based SNF market basket in two stages. The major
types of costs underlying the proposed 2022-based SNF market basket are
derived from the 2022 Medicare cost report data (CMS Form 2540-10, OMB
NO. 0938-0463) for freestanding SNFs. Specifically, we use the Medicare
cost reports for seven specific costs: Wages and Salaries; Employee
Benefits; Contract Labor; Pharmaceuticals; Professional Liability
Insurance; Home Office/Related Organization Contract Labor; and
Capital-related. A residual ``All Other'' category is then estimated
and reflects all remaining costs that are not captured in the seven
types of costs identified above. The 2018-based SNF market basket
similarly used 2018 Medicare cost report data. Second, we are proposing
to divide the residual ``All Other'' cost category into more detailed
subcategories, using U.S. Department of Commerce Bureau of Economic
Analysis' (BEA) 2017 Benchmark Input-Output (I-O) ``The Use Table
(Supply-Use Framework)'' for the Nursing and Community Care Facilities
industry (NAICS 623A00) aged to 2022 using applicable price proxy
growth for each category of costs. Furthermore, we are proposing to
continue to use the same overall methodology as was used for the 2018-
based SNF market basket to develop the capital related cost weights of
the proposed 2022-based SNF market basket.
1. Development of Cost Categories and Weights
a. Use of Medicare Cost Report Data To Develop Major Cost Weights
In order to create a market basket that is representative of
freestanding SNF providers serving Medicare patients and to help ensure
accurate major cost weights (which is the percent of total Medicare-
allowable costs, as defined below), we propose to apply edits to remove
reporting errors and outliers. Specifically, the SNF Medicare cost
reports used to calculate the market basket cost weights exclude any
providers that reported costs less than or equal to zero for the
following categories: total facility costs (Worksheet B, part 1, column
18, line 100); total operating costs (Worksheet B, part 1, column 18,
line 100 less Worksheet B, part 2, column 18, line 100); Medicare
general inpatient routine service costs (Worksheet D, part 1, column 1,
line 1); and Medicare PPS payments (Worksheet E, part 3, column 1, line
1). We also limited our sample to providers that had a Medicare cost
report reporting period that was between 10 and 14 months. The final
sample used included roughly 13,100
[[Page 23438]]
Medicare cost reports (about 90 percent of the universe of SNF Medicare
cost reports for 2022). The sample of providers is representative of
the national universe of providers by region (each region is
represented within plus or minus 1 percentage point of universe
distribution), by ownership-type (proprietary, nonprofit, and
government) (within 0.8 percentage point of universe), and by urban/
rural status (within 0.1 percentage point of universe). Of the
providers that were excluded from our final sample, 86 percent were due
to having a cost reporting period less than 10 months or greater than
14 months, 10 percent were due to total facility costs or total
operating costs not being greater than zero, and 4 percent were due to
Medicare general inpatient routine service costs or Medicare PPS
payments not being greater than zero.
Additionally, for all of the major cost weights, except Home
Office/Related Organization Contract Labor costs, the data are trimmed
to remove outliers (a standard statistical process) by: (1) requiring
that major expenses (such as Wages and Salaries costs) and total
Medicare-allowable costs are greater than zero; and (2) excluding the
top and bottom 5 percent of the major cost weight (for example, Wages
and Salaries costs as a percent of total Medicare-allowable costs). We
note that missing values are assumed to be zero, consistent with the
methodology for how missing values are treated in the 2018-based market
basket methodology.
For the Home Office/Related Organization Contract Labor cost
weight, we propose to first exclude providers whose Home Office/Related
Organization Contract Labor costs are greater than Medicare-allowable
total costs and then apply a trim that excludes those reporters with a
Home Office/Related Organization Contract Labor cost weight above the
99th percentile. This allows providers with no Home Office/Related
Organization Contract Labor costs to be included in the Home Office/
Related Organization Contract Labor cost weight calculation. If we were
to trim the top and bottom Home Office/Related Organization Contract
Labor cost weight, we would exclude providers with a cost weight of
zero (84 percent of the sample) and the Medicare cost report data
(Worksheet S-2 line 45) indicate that not all SNF providers have a home
office. Providers without a home office would report administrative
costs that might typically be associated with a home office in the
Wages and Salaries and Employee Benefits cost weights, or in the
residual ``All-Other'' cost weight if they purchased these types of
services from external contractors. We believe the trimming methodology
that excludes those who report Home Office/Related Organization
Contract Labor costs above the 99th percentile is appropriate as it
removes extreme outliers while also allowing providers with zero Home
Office/Related Organization Contract Labor costs, which is the majority
of providers, to be included in the Home Office/Related Organization
Contract Labor cost weight calculation.
The trimming process is done individually for each cost category so
that providers excluded from one cost weight calculation are not
automatically excluded from another cost weight calculation. We note
that these trimming methods are the same types of edits performed for
the 2018-based SNF market basket, as well as other PPS market baskets
(including but not limited to the IPPS market basket and home health
market basket). We believe this trimming process improves the accuracy
of the data used to compute the major cost weights by removing possible
data misreporting.
The final weights of the proposed 2022-based SNF market basket are
based on weighted means. For example, the aggregate Wages and Salaries
cost weight, after trimming, is equal to the sum of total Medicare-
allowable wages and salaries (as defined in the ``Wages and Salaries''
section that follows) of all providers divided by the sum of total
Medicare-allowable costs (as defined in the next paragraph) for all
providers in the sample (as defined above in this section). This
methodology is consistent with the methodology used to calculate the
2018-based SNF market basket cost weights and other PPS market basket
cost weights. We note that for each of the cost weights, we evaluated
the distribution of providers and costs by region, by ownership-type,
and by urban/rural status. For all of the cost weights, with the
exception of the PLI (which is discussed in more detail later), the
trimmed sample was nationally representative.
For all of the cost weights, we use Medicare-allowable total costs
as the denominator (for example, Wages and Salaries cost weight = Wages
and Salaries costs divided by Medicare-allowable total costs).
Medicare-allowable total costs were equal to total costs (after
overhead allocation) from Worksheet B part I, column 18, for lines 30,
40 through 49, 51, 52, and 71 plus estimated Medicaid drug costs, as
defined below. We included estimated Medicaid drug costs in the
pharmacy cost weight, as well as the denominator for total Medicare-
allowable costs. This is the same methodology used for the 2018-based
SNF market basket. The inclusion of Medicaid drug costs was finalized
in the FY 2008 SNF PPS final rule (72 FR 43425 through 43430), and for
the same reasons set forth in that final rule, we are proposing to
continue to use this methodology in the proposed 2022-based SNF market
basket.
We describe the detailed methodology for obtaining costs for each
of the eight cost categories determined from the Medicare Cost Report
below. The methodology used in the 2018-based SNF market basket can be
found in the FY 2022 SNF PPS final rule (86 FR 42446 through 42452).
(1) Wages and Salaries
To derive Wages and Salaries costs for the Medicare-allowable cost
centers, we are proposing first to calculate total facility wages and
salaries costs as reported on Worksheet S-3, part II, column 3, line 1.
We then propose to remove the wages and salaries attributable to non-
Medicare-allowable cost centers (that is, excluded areas), as well as a
portion of overhead wages and salaries attributable to these excluded
areas. Excluded area wages and salaries are equal to wages and salaries
as reported on Worksheet S-3, part II, column 3, lines 3, 4, and 7
through 11 plus nursing facility and non-reimbursable salaries from
Worksheet A, column 1, lines 31, 32, 50, and 60 through 63.
Overhead wages and salaries are attributable to the entire SNF
facility; therefore, we are proposing to include only the proportion
attributable to the Medicare-allowable cost centers. We are proposing
to estimate the proportion of overhead wages and salaries attributable
to the non-Medicare-allowable costs centers in two steps. First, we
propose to estimate the ratio of excluded area wages and salaries (as
defined above) to non-overhead total facility wages and salaries (total
facility wages and salaries (Worksheet S-3, part II, column 3, line 1)
less total overhead wages and salaries (Worksheet S-3, Part III, column
3, line 14)). Next, we propose to multiply total overhead wages and
salaries by the ratio computed in step 1. We excluded providers whose
excluded areas wages and salaries were greater than total facility
wages and salaries and/or their excluded area overhead wages and
salaries were greater than total facility wages and salaries (about 50
providers). This is the same methodology used to derive Wages and
Salaries costs in the 2018-based SNF market basket.
[[Page 23439]]
(2) Employee Benefits
Medicare-allowable employee benefits are equal to total facility
benefits as reported on Worksheet S-3, part II, column 3, lines 17
through 19 minus non-Medicare-allowable (that is, excluded area)
employee benefits and minus a portion of overhead benefits attributable
to these excluded areas. Excluded area employee benefits are derived by
multiplying total excluded area wages and salaries (as defined above in
the `Wages and Salaries' section) times the ratio of total facility
benefits to total facility wages and salaries. This ratio of benefits
to wages and salaries is defined as total facility benefit costs to
total facility wages and salary costs (as reported on Worksheet S-3,
part II, column 3, line 1). Likewise, the portion of overhead benefits
attributable to the excluded areas is derived by multiplying overhead
wages and salaries attributable to the excluded areas (as defined in
the `Wages and Salaries' section) times the ratio of total facility
benefit costs to total facility wages and salary costs (as defined
above). Similar to the Wages and Salaries costs, we excluded providers
whose excluded areas benefits were greater than total facility benefits
and/or their excluded area overhead benefits were greater than total
facility benefits (zero providers were excluded because of this edit).
This is the same methodology used to derive Employee Benefits costs in
the 2018-based SNF market basket.
(3) Contract Labor
We are proposing to derive Medicare-allowable contract labor costs
from Worksheet S-3, part II, column 3, line 14, which reflects costs
for contracted direct patient care services (that is, nursing,
therapeutic, rehabilitative, or diagnostic services furnished under
contract rather than by employees and management contract services).
This is the same methodology used to derive the Contract Labor costs in
the 2018-based SNF market basket.
(4) Pharmaceuticals
We are proposing to calculate pharmaceuticals costs using the non-
salary costs from the Pharmacy cost center (Worksheet B, part I, column
0, line 11 less Worksheet A, column 1, line 11) and the Drugs Charged
to Patients' cost center (Worksheet B, part I, column 0, line 49 less
Worksheet A, column 1, line 49). Since these drug costs were
attributable to the entire SNF and not limited to Medicare-allowable
services, we propose to adjust the drug costs by the ratio of Medicare-
allowable pharmacy total costs (Worksheet B, part I, column 11, for
lines 30, 40 through 49, 51, 52, and 71) to total pharmacy costs from
Worksheet B, part I, column 11, line 11. Worksheet B, part I allocates
the general service cost centers, which are often referred to as
``overhead costs'' (in which pharmacy costs are included) to the
Medicare-allowable and non-Medicare-allowable cost centers. This
adjustment was made for those providers who reported Pharmacy cost
center expenses. Otherwise, we assumed the non-salary Drugs Charged to
Patients costs were Medicare-allowable. Since drug costs for Medicare
patients are included in the SNF PPS per diem rate, a provider with
Medicare days should have also reported costs in the Drugs Charged to
Patient cost center. We found a small number of providers (roughly 90)
did not report Drugs Charged to Patients' costs despite reporting
Medicare days (an average of about 2,000 Medicare days per provider),
and therefore, these providers were excluded from the Pharmaceuticals
cost weight calculations. This is the same methodology used for the
2018-based SNF market basket.
Second, as was done for the 2018-based SNF market basket, we
propose to continue to adjust the drug expenses reported on the
Medicare cost report to include an estimate of total Medicaid drug
costs, which are not represented in the Medicare-allowable drug cost
weight. As stated previously in this section, the proposed 2022-based
SNF market basket reflects total Medicare-allowable costs (that is,
total costs for all payers for those services reimbursable under the
SNF PPS). For the FY 2006-based SNF market basket (72 FR 43426),
commenters noted that the total pharmaceutical costs reported on the
Medicare cost report did not include pharmaceutical costs for dual-
eligible Medicaid patients as these were directly reimbursed by
Medicaid. Since all of the other cost category weights reflect expenses
associated with treating Medicaid patients (including the compensation
costs for dispensing these drugs), we made an adjustment to include
these Medicaid drug expenses so the market basket cost weights would be
calculated consistently.
Similar to the 2018-based SNF market basket, we propose to estimate
Medicaid drug costs based on data representing dual-eligible Medicaid
beneficiaries. Medicaid drug costs are estimated by multiplying
Medicaid dual-eligible drug costs per day times the number of Medicaid
days as reported in the Medicare-allowable skilled nursing cost center
(Worksheet S-3, part I, column 5, line 1) in the SNF Medicare cost
report. Medicaid dual-eligible drug costs per day (where the day
represents an unduplicated drug supply day) were estimated using 2022
Part D claims for those dual-eligible beneficiaries who had a Medicare
SNF stay during the year. The total drug costs per unduplicated day for
2022 of $27.43 represented all drug costs (including the drug
ingredient cost, the dispensing fee, vaccine administration fee and
sales tax) incurred during the 2022 calendar year (CY) for those dual-
eligible beneficiaries who had a SNF Medicare stay during CY 2022.
Therefore, they include drug costs incurred during a Medicaid SNF stay
occurring in CY 2022. By comparison, the 2018-based SNF market basket
also relied on data from the Part D claims, which yielded a dual-
eligible Medicaid drug cost per day of $24.48 for 2018.
We continue to believe that Medicaid dual-eligible beneficiaries
are a reasonable proxy for the estimated drug costs per day incurred by
Medicaid patients staying in a skilled nursing unit under a Medicaid
stay. The skilled nursing unit is the Medicare-allowable unit in a SNF,
which encompasses more skilled nursing and rehabilitative care compared
to a nursing facility or long-term care unit. We believe that Medicaid
patients receiving this skilled nursing care would on average have
similar drug costs per day to dual-eligible Medicare beneficiaries who
have received Medicare skilled nursing care in the skilled nursing care
unit during the year. We note that our previous analysis of the Part D
claims data showed that Medicare beneficiaries with a SNF stay during
the year have higher drug costs than Medicare patients without a SNF
stay during the year. Also, in 2022, dual-eligible beneficiaries with a
SNF stay during the year had drug costs per day of $27.43, which were
approximately two times higher than the drug costs per day of $15.83
for nondual-eligible beneficiaries with a SNF Part A stay during the
year.
The Pharmaceuticals cost weight using only 2022 Medicare cost
report data (without the inclusion of the Medicaid dual-eligible drug
costs) is 2.0 percent, compared to the proposed Pharmaceuticals cost
weight (including the adjustment for Medicaid dual-eligible drug costs)
of 6.4 percent. The 2018-based SNF market basket had a Pharmaceuticals
cost weight using only 2018 Medicare cost report data without the
inclusion of the Medicaid dual-eligible drug costs of 2.6 percent and a
total Pharmaceuticals cost weight of 7.5 percent. Therefore, the 1.1
percentage point decrease in the Pharmaceuticals
[[Page 23440]]
cost weight between 2018 and 2022 is a result of a 0.5-percentage point
decrease in the Medicaid dual-eligible drug cost weight (reflecting the
12 percent increase in the Medicaid dual-eligible drug costs per day,
and a 14 percent decrease in Medicaid inpatient days between 2018 and
2022) and a 0.6-percentage point decrease in the Medicare cost report
drug cost weight. The decrease in the Medicare cost report drug cost
weight was consistent, in aggregate, across urban and rural status
SNFs, as well as across for-profit, government, and nonprofit ownership
type SNFs.
(5) Professional Liability Insurance
We are proposing to calculate the professional liability insurance
(PLI) costs from Worksheet S-2 of the Medicare cost reports as the sum
of premiums; paid losses; and self-insurance (Worksheet S-2, Part I,
columns 1 through 3, line 41). This was the same methodology used to
derive the Professional Liability costs for the 2018-based SNF market
basket.
About 60 percent of SNFs (about 7,700) reported professional
liability costs. After trimming, about 6,900 (reflecting about 730,000
Skilled Nursing unit beds) were included in the calculation of the PLI
cost weight for the proposed 2022-based SNF market basket. These
providers treated roughly 750,000 Medicare beneficiaries and had a
Medicare length of stay (LOS) of 58 days, a skilled nursing unit
occupancy rate of 72 percent, and an average skilled nursing unit bed
size of 106 beds, which are all consistent with the national averages.
We also verified that this sample of providers are representative of
the national distribution of providers by ownership-type, urban/rural
status, and region.
We believe the Medicare cost report data continues to be the most
appropriate data source to calculate the PLI cost weight for the
proposed 2022-based SNF market basket as it is representative of SNFs
serving Medicare beneficiaries and reflects PLI costs (premiums, paid
losses, and self-insurance) incurred during the provider's cost
reporting year. A fuller discussion of the Medicare cost report data on
PLI costs compared to other sources is available in the FY 2022 SNF PPS
final rule (86 FR 42448).
(6) Capital-Related
We are proposing to derive the Medicare-allowable capital-related
costs from Worksheet B, part II, column 18 for lines 30, 40 through 49,
51, 52, and 71. This is the same methodology to derive capital-related
costs used in the 2018-based SNF market basket.
(7) Home Office/Related Organization Contract Labor Costs
We are proposing to calculate Medicare-allowable Home Office/
Related Organization Contract Labor costs to be equal to data reported
on Worksheet S-3, part II, column 3, line 16. About 7,100 providers
(about 54 percent) in 2022 reported having a home office (as reported
on Worksheet S-2, part I, line 45) about the same share of providers as
those in the 2018-based SNF market basket. As discussed in section
V.A.1. of this proposed rule, providers without a home office can incur
these expenses directly by having their own staff, for which the costs
would be included in the Wages and Salaries and Employee Benefits cost
weights. Alternatively, providers without a home office could also
purchase related services from external contractors for which these
expenses would be captured in the residual ``All-Other'' cost weight.
For this reason, unlike the other major cost weights described
previously, we did not exclude providers that did not report Home
Office/Related Organization Contract Labor costs. This is the same
methodology that was used in the 2018-based SNF market basket.
(8) All Other (Residual)
The ``All Other'' cost weight is a residual, calculated by
subtracting the major cost weights (Wages and Salaries, Employee
Benefits, Contract Labor, Pharmaceuticals, Professional Liability
Insurance, Capital-Related, and Home Office/Related Organization
Contract Labor) from 100.
Table 11 shows the major cost categories and their respective cost
weights as derived from the 2022 Medicare cost reports.
Table 11--Major Cost Categories Derived From the SNF Medicare Cost
Reports *
------------------------------------------------------------------------
Proposed 2022-
Major cost categories based 2018-Based
------------------------------------------------------------------------
Wages and Salaries...................... 43.3 44.1
Employee Benefits....................... 7.8 8.6
Contract Labor.......................... 10.1 7.5
Pharmaceuticals......................... 6.4 7.5
Professional Liability Insurance........ 1.3 1.1
Capital-Related......................... 8.3 8.2
Home Office/Related Organization 0.6 0.7
Contract Labor.........................
All other (residual).................... 22.2 22.3
------------------------------------------------------------------------
* Total may not sum to 100 due to rounding.
As we did for the 2018-based SNF market basket (86 FR 42449), we
are proposing to allocate contract labor costs to the Wages and
Salaries and Employee Benefits cost weights based on their relative
proportions under the assumption that contract labor costs are
comprised of both wages and salaries and employee benefits. The
contract labor allocation proportion for wages and salaries is equal to
the Wages and Salaries cost weight as a percent of the sum of the Wages
and Salaries cost weight and the Employee Benefits cost weight. Using
the 2022 Medicare cost report data, this percentage is 85 percent (1
percentage point higher than the percentage in the 2018-based SNF
market basket); therefore, we are proposing to allocate approximately
85 percent of the Contract Labor cost weight to the Wages and Salaries
cost weight and 15 percent to the Employee Benefits cost weight.
Table 12 shows the Wages and Salaries and Employee Benefits cost
weights after contract labor allocation for the proposed 2022-based SNF
market basket and the 2018-based SNF market basket.
[[Page 23441]]
Table 12--Wages and Salaries and Employee Benefits Cost Weights After
Contract Labor Allocation
------------------------------------------------------------------------
Proposed 2022-
Major cost categories based market 2018-Based
basket market basket
------------------------------------------------------------------------
Compensation............................ 61.2 60.2
Wages and Salaries.................. 51.8 50.4
Employee Benefits................... 9.3 9.9
------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For
presentational purposes, we are displaying one decimal; therefore, the
detailed compensation cost weights may not add to the total
compensation cost weight due to rounding.
Compared to the 2018-based SNF market basket, the Wages and
Salaries cost weight and the Employee Benefits cost weight as
calculated directly from the Medicare cost reports each decreased by
0.8 percentage point. The Contract Labor cost weight increased 2.6
percentage points and so in aggregate, the Compensation cost weight
increased 1.0 percentage point from 60.2 percent to 61.2 percent.
b. Derivation of the Detailed Operating Cost Weights
To further divide the ``All Other'' residual cost weight estimated
from the 2022 Medicare cost report data into more detailed cost
categories, we are proposing to use the 2017 Benchmark I-O ``The Use
Table (Supply-Use Framework)'' for Nursing and Community Care
Facilities industry (NAICS 623A00), published by the Census Bureau's,
Bureau of Economic Analysis (BEA). These data are publicly available at
<a href="https://www.bea.gov/industry/input-output-accounts-data">https://www.bea.gov/industry/input-output-accounts-data</a>. The BEA
Benchmark I-O data are generally scheduled for publication every 5
years with 2017 being the most recent year for which data are
available. The 2017 Benchmark I-O data are derived from the 2017
Economic Census and are the building blocks for BEA's economic
accounts; therefore, they represent the most comprehensive and complete
set of data on the economic processes or mechanisms by which output is
produced and distributed.\1\ BEA also produces Annual I-O estimates.
However, while based on a similar methodology, these estimates are less
comprehensive and provide less detail than benchmark data.
Additionally, the annual I-O data are subject to revision once
benchmark data become available. For these reasons, we propose to
inflate the 2017 Benchmark I-O data aged forward to 2022 by applying
the annual price changes from the respective price proxies to the
appropriate market basket cost categories that are obtained from the
2017 Benchmark I-O data. Next, the relative shares of the cost shares
that each cost category represents to the total residual I-O costs are
calculated. These resulting 2022 cost shares of the I-O data are
applied to the ``All Other'' residual cost weight to obtain detailed
cost weights for the residual costs for the proposed 2022-based SNF
market basket. For example, the cost for Food: Direct Purchases
represents 12.8 percent of the sum of the ``All Other'' 2017 Benchmark
I-O Expenditures inflated to 2022. Therefore, the Food: Direct
Purchases cost weight is 2.8 percent of the proposed 2022-based SNF
market basket (12.8 percent x 22.2 percent = 2.8 percent). For the
2018-based SNF market basket (86 FR 42449), we used a similar
methodology utilizing the 2012 Benchmark I-O data (aged to 2018).
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\1\ <a href="https://www.bea.gov/resources/methodologies/concepts-methods-io-accounts">https://www.bea.gov/resources/methodologies/concepts-methods-io-accounts</a>.
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Using this methodology, we are proposing to derive 19 detailed SNF
market basket cost category weights from the proposed 2022-based SNF
market basket ``All Other'' residual cost weight (22.2 percent). These
categories are: (1) Fuel: Oil and Gas; (2) Electricity and Other Non-
Fuel Utilities; (3) Food: Direct Purchases; (4) Food: Contract
Services; (5) Chemicals; (6) Medical Instruments and Supplies; (7)
Rubber and Plastics; (8) Paper and Printing Products; (9) Apparel; (10)
Machinery and Equipment; (11) Miscellaneous Products; (12) Professional
Fees: Labor-Related; (13) Administrative and Facilities Support
Services; (14) Installation, Maintenance, and Repair Services; (15) All
Other: Labor-Related Services; (16) Professional Fees: Nonlabor-
Related; (17) Financial Services; (18) Telephone Services; and (19) All
Other: Nonlabor-Related Services. These are the same detailed cost
categories as those that were used in the 2018-based SNF market basket.
We note that the machinery and equipment expenses are for equipment
that is paid for in a given year and not depreciated over the asset's
useful life. Depreciation expenses for movable equipment are accounted
for in the capital component of the proposed 2022-based SNF market
basket (described in section V.A.1.c. of this proposed rule).
c. Derivation of the Detailed Capital Cost Weights
Similar to the 2018-based SNF market basket, we further divided the
Capital-related cost weight into: Depreciation, Interest, Lease and
Other Capital-related cost weights.
We calculated the depreciation cost weight (that is, depreciation
costs excluding leasing costs) using depreciation costs from Worksheet
S-2, column 1, lines 20 and 21. Since the depreciation costs reflect
the entire SNF facility (Medicare and non-Medicare-allowable units), we
used total facility capital costs (Worksheet B, Part I, column 18, line
100) as the denominator. This methodology assumes that the depreciation
of an asset is the same regardless of whether the asset was used for
Medicare or non-Medicare patients. This methodology yielded
depreciation costs as a percent of capital costs of 22.6 percent for
2022. We then apply this percentage to the proposed 2022-based SNF
market basket Medicare-allowable Capital-related cost weight of 8.3
percent, yielding a proposed Medicare-allowable depreciation cost
weight (excluding leasing expenses, which is described in more detail
below) of 1.9 percent for 2022. To further disaggregate the Medicare-
allowable depreciation cost weight into fixed and movable depreciation,
we are proposing to use the 2022 SNF Medicare cost report data for end-
of-the-year capital asset balances as reported on Worksheet A-7. The
2022 SNF Medicare cost report data showed a fixed/movable split of 86/
14. The 2018-based SNF market basket, which utilized the same data from
the 2018 Medicare cost reports, also had a fixed/movable split of 86/
14.
We derived the interest expense share of capital-related expenses
from 2022 SNF Medicare cost report data, specifically from Worksheet A,
column 2, line 81. Similar to the depreciation cost weight, we
calculated the interest cost weight using total facility capital costs.
This methodology yielded interest costs as a percent of capital costs
of 17.7 percent for 2022. We then apply this percentage to the proposed
2022-based
[[Page 23442]]
SNF market basket Medicare-allowable Capital-related cost weight of 8.3
percent, yielding a Medicare-allowable interest cost weight (excluding
leasing expenses) of 1.5 percent. As done with the last rebasing (86 FR
42450), we are proposing to determine the split of interest expense
between for-profit and not-for-profit facilities based on the
distribution of long-term debt outstanding by type of SNF (for-profit
or not-for-profit/government) from the 2022 SNF Medicare cost report
data. We estimated the split between for-profit and not-for-profit
interest expense to be 30/70 percent compared to the 2018-based SNF
market basket with 25/75 percent.
Because the detailed data were not available in the Medicare cost
reports, we used the most recent 2021 Census Bureau Service Annual
Survey (SAS) data to derive the capital-related expenses attributable
to leasing and other capital-related expenses. The 2018-based SNF
market basket used the 2017 SAS data.
Based on the 2021 SAS data, we determined that leasing expenses are
65 percent of total leasing and capital-related expenses costs. In the
2018-based SNF market basket, leasing costs represent 62 percent of
total leasing and capital-related expenses costs. We then apply this
percentage to the proposed 2022-based SNF market basket residual
Medicare-allowable capital costs of 4.9 percent derived from
subtracting the Medicare-allowable depreciation cost weight and
Medicare-allowable interest cost weight from the proposed 2022-based
SNF market basket of total Medicare-allowable capital cost weight (8.3
percent-1.9 percent-1.5 percent = 4.9 percent). This produces the
proposed 2022-based SNF Medicare-allowable leasing cost weight of 3.2
percent and all-other capital-related cost weight of 1.7 percent.
Lease expenses are not broken out as a separate cost category in
the SNF market basket, but are distributed among the cost categories of
depreciation, interest, and other capital-related expenses, reflecting
the assumption that the underlying cost structure and price movement of
leasing expenses is similar to capital costs in general. As was done
with past SNF market baskets and other PPS market baskets, we assumed
10 percent of lease expenses are overhead and assigned them to the
other capital-related expenses cost category. This is based on the
assumption that leasing expenses include not only depreciation,
interest, and other capital-related costs but also additional costs
paid to the lessor. We distributed the remaining lease expenses to the
three cost categories based on the proportion of depreciation,
interest, and other capital-related expenses to total capital costs,
excluding lease expenses.
Table 13 shows the capital-related expense distribution (including
expenses from leases) in the proposed 2022-based SNF market basket and
the 2018-based SNF market basket.
Table 13--Comparison of the Capital-Related Expense Distribution of the
Proposed 2022-Based SNF Market Basket and the 2018-Based SNF Market
Basket
------------------------------------------------------------------------
Proposed 2022-
Cost category based SNF market 2018-Based SNF
basket market basket
------------------------------------------------------------------------
Capital-related Expenses........ 8.3 8.2
Total Depreciation.............. 3.0 3.0
Total Interest.................. 2.3 2.7
Other Capital-related Expenses.. 3.0 2.6
------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For
presentational purposes, we are displaying one decimal; therefore, the
detailed capital cost weights may not add to the total capital-related
expenses cost weight due to rounding.
Table 14 presents the proposed 2022-based SNF market basket and the
2018-based SNF market basket cost categories and cost weights.
Table 14--Proposed 2022-Based SNF Market Basket and 2018-Based SNF
Market Basket Cost Categories and Cost Weights
------------------------------------------------------------------------
Proposed 2022-
Cost category based SNF market 2018-Based SNF
basket market basket
------------------------------------------------------------------------
Total........................... 100.0 100.0
Compensation.................... 61.2 60.2
Wages and Salaries \1\...... 51.8 50.4
Employee Benefits \1\....... 9.3 9.9
Utilities....................... 2.7 1.5
Electricity and Other Non- 1.8 1.0
Fuel Utilities.............
Fuel: Oil and Gas....... 0.8 0.4
Professional Liability Insurance 1.3 1.1
All Other....................... 26.5 29.0
Other Products.............. 16.1 17.6
Pharmaceuticals......... 6.4 7.5
Food: Direct Purchases.. 2.9 2.5
Food: Contract Services. 3.4 4.3
Chemicals............... 0.2 0.2
Medical Instruments and 0.4 0.6
Supplies...............
Rubber and Plastics..... 1.0 0.7
Paper and Printing 0.5 0.5
Products...............
Apparel................. 0.4 0.5
Machinery and Equipment. 0.7 0.5
[[Page 23443]]
Miscellaneous Products.. 0.2 0.3
All Other Services.............. 10.5 11.5
Labor-Related Services...... 6.5 6.4
Professional Fees: Labor- 3.6 3.5
Related................
Installation, 0.4 0.6
Maintenance, and Repair
Services...............
Administrative and 0.5 0.4
Facilities Support.....
All Other: Labor-Related 2.0 1.9
Services...............
Non Labor-Related Services.. 4.0 5.1
Professional Fees: 1.8 2.0
Nonlabor-Related.......
Financial Services...... 0.5 1.3
Telephone Services...... 0.4 0.3
All Other: Nonlabor- 1.3 1.5
Related Services.......
Capital-Related Expenses........ 8.3 8.2
Total Depreciation.......... 3.0 3.0
Building and Fixed 2.5 2.5
Equipment..............
Movable Equipment....... 0.4 0.4
Total Interest.............. 2.3 2.7
For-Profit SNFs......... 0.7 0.7
Government and Nonprofit 1.6 2.0
SNFs...................
Other Capital-Related 3.0 2.6
Expenses...................
------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For
presentational purposes, we are displaying one decimal, and therefore,
the detailed cost weights may not add to the aggregate cost weights or
to 100.0 due to rounding.
\1\ Contract labor is distributed to wages and salaries and employee
benefits based on the share of total compensation that each category
represents.
2. Price Proxies Used To Measure Operating Cost Category Growth
After developing the 27 cost weights for the proposed 2022-based
SNF market basket, we selected the most appropriate wage and price
proxies currently available to represent the rate of change for each
cost category. With four exceptions (three for the capital-related
expenses cost categories and one for PLI), we base the wage and price
proxies on Bureau of Labor Statistics (BLS) data, and group them into
one of the following BLS categories:
<bullet> Employment Cost Indexes. Employment Cost Indexes (ECIs)
measure the rate of change in employment wage rates and employer costs
for employee benefits per hour worked. These indexes are fixed-weight
indexes and strictly measure the change in wage rates and employee
benefits per hour. ECIs are superior to Average Hourly Earnings (AHE)
as price proxies for input price indexes because they are not affected
by shifts in occupation or industry mix, and because they measure pure
price change and are available by both occupational group and by
industry. The industry ECIs are based on the NAICS and the occupational
ECIs are based on the Standard Occupational Classification System
(SOC).
<bullet> Producer Price Indexes. Producer Price Indexes (PPIs)
measure the average change over time in the selling prices received by
domestic producers for their output. The prices included in the PPI are
from the first commercial transaction for many products and some
services (<a href="https://www.bls.gov/ppi/">https://www.bls.gov/ppi/</a>).
<bullet> Consumer Price Indexes. Consumer Price Indexes (CPIs)
measure the average change over time in the prices paid by urban
consumers for a market basket of consumer goods and services (<a href="https://www.bls.gov/cpi/">https://www.bls.gov/cpi/</a>). CPIs are only used when the purchases are similar to
those of retail consumers rather than purchases at the producer level,
or if no appropriate PPIs are available.
We evaluate the price proxies using the criteria of reliability,
timeliness, availability, and relevance:
<bullet> Reliability. Reliability indicates that the index is based
on valid statistical methods and has low sampling variability. Widely
accepted statistical methods ensure that the data were collected and
aggregated in a way that can be replicated. Low sampling variability is
desirable because it indicates that the sample reflects the typical
members of the population. (Sampling variability is variation that
occurs by chance because only a sample was surveyed rather than the
entire population.)
<bullet> Timeliness. Timeliness implies that the proxy is published
regularly, preferably at least once a quarter. The market baskets are
updated quarterly, and therefore, it is important for the underlying
price proxies to be up-to-date, reflecting the most recent data
available. We believe that using proxies that are published regularly
(at least quarterly, whenever possible) helps to ensure that we are
using the most recent data available to update the market basket. We
strive to use publications that are disseminated frequently, because we
believe that this is an optimal way to stay abreast of the most current
data available.
<bullet> Availability. Availability means that the proxy is
publicly available. We prefer that our proxies are publicly available
because this will help ensure that our market basket updates are as
transparent to the public as possible. In addition, this enables the
public to be able to obtain the price proxy data on a regular basis.
<bullet> Relevance. Relevance means that the proxy is applicable
and representative of the cost category weight to which it is applied.
We believe that the CPIs, PPIs, and ECIs that we have selected meet
these criteria. Therefore, we believe that they continue to be the best
measure of price changes for the cost categories to which they would be
applied.
Table 19 lists all price proxies for the proposed 2022-based SNF
market basket. Below is a detailed explanation of the price proxies we
are proposing to use for each operating cost category.
a. Wages and Salaries
We are proposing to use the ECI for Wages and Salaries for Private
Industry Workers in Nursing Care Facilities
[[Page 23444]]
(NAICS 6231; BLS series code CIU2026231000000I) to measure price growth
of this category. NAICS 623 includes facilities that provide a mix of
health and social services, with many of the health services requiring
some level of nursing services. Within NAICS 623 is NAICS 6231, which
includes nursing care facilities primarily engaged in providing
inpatient nursing and rehabilitative services. These facilities, which
are most comparable to Medicare-certified SNFs, provide skilled nursing
and continuous personal care services for an extended period of time,
and, therefore, have a permanent core staff of registered or licensed
practical nurses. This is the same index used in the 2018-based SNF
market basket.
b. Employee Benefits
We are proposing to use the ECI for Benefits for Nursing Care
Facilities (NAICS 6231) to measure price growth of this category. The
ECI for Benefits for Nursing Care Facilities is calculated using BLS's
total compensation (BLS series ID CIU2016231000000I) for nursing care
facilities series and the relative importance of wages and salaries
within total compensation. We believe this constructed ECI series is
technically appropriate for the reason stated above in the Wages and
Salaries price proxy section. This is the same index used in the 2018-
based SNF market basket.
c. Electricity and Other Non-Fuel Utilities
We are proposing to use the PPI Commodity for Commercial Electric
Power (BLS series code WPU0542) to measure the price growth of this
cost category as Electricity costs account for 93 percent of these
expenses. This is the same index used for the Electricity cost category
in the 2018-based SNF market basket.
d. Fuel: Oil and Gas
We are proposing to use a blended proxy composed of the PPI
Industry for Petroleum Refineries (NAICS 324110) (BLS series code
PCU32411-32411), the PPI Commodity for Natural Gas (NAICS 221200)(BLS
series code WPU0531), and the PPI for Other Petroleum and Coal Products
manufacturing (NAICS 324190)(BLS series code PCU32419-32419).
Our analysis of 2017 Benchmark I-O data for Nursing and Community
Care Facilities found that these three NAICS industries account for
approximately 93 percent of SNF Fuel: Oil and Gas expenses. The
remaining 7 percent of SNF Fuel: Oil and Gas expenses are for two other
incidental NAICS industries including Coal Mining and Petrochemical
Manufacturing. We are proposing to create a blended index based on the
three NAICS Fuel: Oil and Gas expenses listed above that account for 93
percent of SNF Fuel: Oil and Gas expenses. We propose to create this
blend based on each NAICS' expenses as a share of their sum. These
expenses as a share of their sum are listed in Table 15.
The 2018-based SNF market basket used a blended Fuel: Oil and Gas
proxy that was based on 2012 Benchmark I-O data. We believe our
proposed Fuel: Oil and Gas blended index for the proposed 2022-based
SNF market basket is technically appropriate as it reflects more recent
data on SNFs purchasing patterns. Table 16 provides the weights for the
2022- and 2018-based blended Fuel: Oil and Gas index.
Table 15--Fuel: Oil and Gas Blended Index Weights
----------------------------------------------------------------------------------------------------------------
Proposed 2022-
NAICS Price proxy based index 2018-Based
(%) index (%)
----------------------------------------------------------------------------------------------------------------
221200..................................... PPI Commodity for Natural Gas...... 7 7
324110..................................... PPI Industry for Petroleum 72 61
Refineries.
324190..................................... PPI for Other Petroleum and Coal 21 32
Products manufacturing.
-------------------------------
Total.................................. ................................... 100 100
----------------------------------------------------------------------------------------------------------------
e. Professional Liability Insurance
We are proposing to use the CMS Hospital Professional Liability
Insurance Index to measure price growth of this category. We were
unable to find a reliable data source that collects SNF-specific PLI
data. Therefore, we propose to use the CMS Hospital Professional
Liability Index, which tracks price changes for commercial insurance
premiums for a fixed level of coverage, holding non-price factors
constant (such as a change in the level of coverage). This is the same
index used in the 2018-based SNF market basket. We believe this is an
appropriate proxy to measure the price growth associated of SNF PLI as
it captures the price inflation associated with other medical
institutions that serve Medicare patients.
f. Pharmaceuticals
We are proposing to use the PPI Commodity for Pharmaceuticals for
Human Use, Prescription (BLS series code WPUSI07003) to measure the
price growth of this cost category. This is the same index used in the
2018-based SNF market basket.
g. Food: Direct Purchases
We are proposing to use the PPI Commodity for Processed Foods and
Feeds (BLS series code WPU02) to measure the price growth of this cost
category. This is the same index used in the 2018-based SNF market
basket.
h. Food: Contract Services
We are proposing to use the CPI All Urban for Food Away From Home
(All Urban Consumers) (BLS series code CUUR0000SEFV) to measure the
price growth of this cost category. This is the same index used in the
2018-based SNF market basket.
i. Chemicals
For measuring price change in the Chemicals cost category, we are
proposing to use a blended PPI composed of the Industry PPIs for Other
Basic Organic Chemical Manufacturing (NAICS 325190) (BLS series code
PCU32519-32519), Soap and Cleaning Compound Manufacturing (NAICS
325610) (BLS series code PCU32561-32561), and All Other Chemical
Product and Preparation Manufacturing (NAICS 3259A0) (BLS series code
PCU325998325998).
Using the 2017 Benchmark I-O data, we found that these three NAICS
industries accounted for approximately 95 percent of SNF chemical
expenses. The remaining 5 percent of SNF chemical expenses are for
three other incidental NAICS chemicals industries
[[Page 23445]]
such as Paint and Coating Manufacturing. We are proposing to create a
blended index based on the three NAICS chemical expenses listed above
that account for 95 percent of SNF chemical expenses. We propose to
create this blend based on each NAICS' expenses as a share of their
sum. These expenses as a share of their sum are listed in Table 16.
The 2018-based SNF market basket used a blended chemical proxy that
was based on 2012 Benchmark I-O data. We believe our proposed chemical
blended index for the proposed 2022-based SNF market basket is
technically appropriate as it reflects more recent data on SNFs
purchasing patterns. Table 16 provides the weights for the proposed
2022-based blended chemical index and the 2018-based blended chemical
index.
Table 16--Chemical Blended Index Weights
----------------------------------------------------------------------------------------------------------------
Proposed 2022-
NAICS Price proxy based index 2018-Based
(%) index (%)
----------------------------------------------------------------------------------------------------------------
325190..................................... PPI for Other Basic Organic 49 34
Chemical Manufacturing.
325610..................................... PPI for Soap and Cleaning Compound 9 21
Manufacturing.
325998..................................... PPI for Other Miscellaneous 42 45
Chemical Product Manufacturing.
-------------------------------
Total.................................. ................................... 100 100
----------------------------------------------------------------------------------------------------------------
j. Medical Instruments and Supplies
For measuring price change in the Medical Instruments and Supplies
cost category, we are proposing to use a blended proxy. The 2017
Benchmark I-O data shows 62 percent of medical instruments and supply
costs are for Surgical and medical instrument manufacturing costs
(NAICS 339112) and 38 percent are for Surgical appliance and supplies
manufacturing costs (NAICS 339113). To proxy the price changes
associated with NAICS 339112, we propose using the PPI--Commodity--
Surgical and medical instruments (BLS series code WPU1562). To proxy
the price changes associated with NAICS 339113, we propose to use 50
percent for the PPI--Commodity--Medical and surgical appliances and
supplies (BLS series code WPU1563) and 50 percent for the PPI Commodity
data for Miscellaneous products-Personal safety equipment and clothing
(BLS series code WPU1571). The latter price proxy would reflect
personal protective equipment including but not limited to face shields
and protective clothing. The 2017 Benchmark I-O data does not provide
specific expenses for personal protective equipment (which would be
reflected in the NAICS 339113 expenses); however, we recognize that
this category reflects costs faced by SNFs. In absence of any specific
cost data on personal protective equipment, we propose to include the
PPI Commodity data for Miscellaneous products-Personal safety equipment
and clothing (BLS series code WPU1571) in the blended proxy for Medical
Instruments and Supplies cost category with a weight of 19 percent
(that is, 50 percent of the NAICS 339113 expenses as a percent of the
sum of NAICS 339113 and NAICS 339112 expenses from the I-O).
The 2018-based SNF market basket used a blended Medical Instruments
and Supplies proxy that was based on 2012 Benchmark I-O data. We
believe our proposed blended index for the proposed 2022-based SNF
market basket is technically appropriate as it reflects more recent
data on SNFs purchasing patterns. Table 17 provides the proposed
Medical Instruments and Supplies cost weight blended price proxy.
Table 17--Medical Instruments and Supplies Blended Index Weights
----------------------------------------------------------------------------------------------------------------
Proposed 2022-
NAICS Price proxy based index 2018-Based
(%) index (%)
----------------------------------------------------------------------------------------------------------------
339112........................................ PPI--Commodity--Surgical and 62 46
medical instruments (WUI1562).
339113........................................ PPI--Commodity--Medical and 19 27
surgical appliances and
supplies (WPU1563).
PPI Commodity data for 19 27
Miscellaneous products-Personal
safety equipment and clothing
(WPU1571).
-------------------------------
Total..................................... ................................ 100 100
----------------------------------------------------------------------------------------------------------------
k. Rubber and Plastics
We are proposing to use the PPI Commodity for Rubber and Plastic
Products (BLS series code WPU07) to measure price growth of this cost
category. This is the same index used in the 2018-based SNF market
basket.
l. Paper and Printing Products
We are proposing to use a 86/14 blend of the PPI Commodity for
Converted Paper and Paperboard Products (BLS series code WPU0915) and
the PPI Commodity for Publications Printed Matter and Printing Material
(BLS Series Code WPU094) to measure the price growth of this cost
category. The 2017 Benchmark I-O data shows that 86 percent of paper
and printing expenses are for paper manufacturing (NAICS 322) and the
remaining expenses are for Printing (NAICS 323110). The 2018-based SNF
market basket used the PPI Commodity for Converted Paper and Paperboard
Products (BLS series code WPU0915) to measure the price growth of this
cost category.
m. Apparel
We are proposing to use the PPI Commodity for Apparel (BLS series
code WPU0381) to measure the price growth of this cost category. This
is the same index used in the 2018-based SNF market basket.
[[Page 23446]]
n. Machinery and Equipment
We are proposing to use the PPI Commodity for Machinery and
Equipment (BLS series code WPU11) to measure the price growth of this
cost category. This is the same index used in the 2018-based SNF market
basket.
o. Miscellaneous Products
For measuring price change in the Miscellaneous Products cost
category, we are proposing to use the PPI Commodity for Finished Goods
less Food and Energy (BLS series code WPUFD4131). Both food and energy
are already adequately represented in separate cost categories and
should not also be reflected in this cost category. This is the same
index used in the 2018-based SNF market basket.
p. Professional Fees: Labor-Related
We are proposing to use the ECI for Total Compensation for Private
Industry Workers in Professional and Related (BLS series code
CIU2010000120000I) to measure the price growth of this category. This
is the same index used in the 2018-based SNF market basket.
q. Administrative and Facilities Support Services
We are proposing to use the ECI for Total Compensation for Private
Industry Workers in Office and Administrative Support (BLS series code
CIU2010000220000I) to measure the price growth of this category. This
is the same index used in the 2018-based SNF market basket.
r. Installation, Maintenance and Repair Services
We are proposing to use the ECI for Total Compensation for All
Civilian Workers in Installation, Maintenance, and Repair (BLS series
code CIU1010000430000I) to measure the price growth of this new cost
category. This is the same index used in the 2018-based SNF market
basket.
s. All Other: Labor-Related Services
We are proposing to use the ECI for Total Compensation for Private
Industry Workers in Service Occupations (BLS series code
CIU2010000300000I) to measure the price growth of this cost category.
This is the same index used in the 2018-based SNF market basket.
t. Professional Fees: Non-Labor-Related
We are proposing to use the ECI for Total Compensation for Private
Industry Workers in Professional and Related (BLS series code
CIU2010000120000I) to measure the price growth of this category. This
is the same index used in the 2018-based SNF market basket.
u. Financial Services
We are proposing to use the ECI for Total Compensation for Private
Industry Workers in Financial Activities (BLS series code
CIU201520A000000I) to measure the price growth of this cost category.
This is the same index used in the 2018-based SNF market basket.
v. Telephone Services
We are proposing to use the CPI All Urban for Telephone Services
(BLS series code CUUR0000SEED) to measure the price growth of this cost
category. This is the same index used in the 2018-based SNF market
basket.
w. All Other: Non-Labor-Related Services
We are proposing to use the CPI All Urban for All Items Less Food
and Energy (BLS series code CUUR0000SA0L1E) to measure the price growth
of this cost category. This is the same index used in the 2018-based
SNF market basket.
3. Price Proxies Used To Measure Capital Cost Category Growth
We are proposing to apply the same capital price proxies as were
used in the 2018-based SNF market basket, and below is a detailed
explanation of the price proxies used for each capital cost category.
We are also proposing to continue to vintage weight the capital price
proxies for Depreciation and Interest to capture the long-term
consumption of capital. This vintage weighting method is the same
method that was used for the 2018-based SNF market basket and is
described below.
<bullet> Depreciation--Building and Fixed Equipment: We are
proposing to use the BEA Chained Price Index for Private Fixed
Investment in Structures, Nonresidential, Hospitals and Special Care
(BEA Table 5.4.4. Price Indexes for Private Fixed Investment in
Structures by Type). This BEA index is intended to capture prices for
construction of facilities such as hospitals, nursing homes, hospices,
and rehabilitation centers. This is the same index used in the 2018-
based SNF market basket.
<bullet> Depreciation--Movable Equipment: We are proposing to use
the PPI Commodity for Machinery and Equipment (BLS series code WPU11).
This price index reflects price inflation associated with a variety of
machinery and equipment that would be utilized by SNFs, including but
not limited to medical equipment, communication equipment, and
computers. This is the same index used in the 2018-based SNF market
basket.
<bullet> Nonprofit Interest: We are proposing to use the average
yield on Municipal Bonds (Bond Buyer 20-bond index). This is the same
index used in the 2018-based SNF market basket.
<bullet> For-Profit Interest: For the For-Profit Interest cost
category, we are proposing to use the iBoxx AAA Corporate Bond Yield
index. This is the same index used in the 2018-based SNF market basket.
<bullet> Other Capital: Since this category includes fees for
insurances, taxes, and other capital-related costs, we are proposing to
use the CPI for Rent of Primary Residence (BLS series code
CUUS0000SEHA), which would reflect the price growth of these costs.
This is the same index used in the 2018-based SNF market basket.
We believe that these price proxies are the most appropriate
proxies for SNF capital costs that meet our selection criteria of
relevance, timeliness, availability, and reliability.
As stated above, we are proposing to continue to vintage weight the
capital price proxies for Depreciation and Interest to capture the
long-term consumption of capital. To capture the long-term nature, the
price proxies are vintage-weighted and the vintage weights are
calculated using a two-step process. First, we determine the expected
useful life of capital and debt instruments held by SNFs. Second, we
identify the proportion of expenditures within a cost category that is
attributable to each individual year over the useful life of the
relevant capital assets, or the vintage weights.
We rely on Bureau of Economic Analysis (BEA) fixed asset data to
derive the useful lives of both fixed and movable capital, which is the
same data source used to derive the useful lives for the 2018-based SNF
market basket. The specifics of the data sources used are explained
below.
a. Calculating Useful Lives for Movable and Fixed Assets
Estimates of useful lives for movable and fixed assets for the
proposed 2022-based SNF market basket are 9 and 27 years, respectively.
These estimates are based on three data sources from the BEA: (1)
current-cost average age; (2) historical-cost average age; and (3)
industry-specific current cost net stocks of assets.
BEA current-cost and historical-cost average age data by asset type
are not available by industry but are published at the aggregate level
for all industries. The BEA does publish current-cost net capital
stocks at the detailed asset level for specific industries. There are
64 detailed movable assets (including intellectual property) and there
are 32 detailed fixed assets in the BEA
[[Page 23447]]
estimates. Since we seek aggregate useful life estimates applicable to
SNFs, we developed a methodology to approximate movable and fixed asset
ages for nursing and residential care services (NAICS 623) using the
published BEA data. For the proposed 2022-based SNF market basket, we
use the current-cost average age for each asset type from the BEA fixed
assets Table 2.9 for all assets and weight them using current-cost net
stock levels for each of these asset types in the nursing and
residential care services industry, NAICS 6230. For example, nonelectro
medical equipment current-cost net stock (accounting for about 29
percent of total movable equipment current-cost net stock in 2022 is
multiplied by an average age of 4.8 years for nonelectro medical
equipment for all industries. Current-cost net stock levels are
available for download from the BEA website at <a href="https://apps.bea.gov/iTable/index_FA.cfm">https://apps.bea.gov/iTable/index_FA.cfm</a>. We then aggregate the ``weighted'' current-cost
net stock levels (average age multiplied by current-cost net stock)
into movable and fixed assets for NAICS 6230. We then adjust the
average ages for movable and fixed assets by the ratio of historical-
cost average age (Table 2.10) to current-cost average age (Table 2.9).
This produces historical cost average age data for fixed
(structures) and movable (equipment and intellectual property) assets
specific to NAICS 6230 of 13.6 and 4.4 years for 2022, respectively.
This reflects the average age of an asset at a given point in time,
whereas we want to estimate a useful life of the asset. To do this, we
multiply each of the average age estimates by two to convert to average
useful lives with the assumption that the average age reflects the
midpoint of useful life and is normally distributed (about half of the
assets are below the average at a given point in time, and half above
the average at a given point in time). This produces estimates of
likely useful lives of 27.2 and 8.8 years for fixed and movable assets,
which we round to 27 and 9 years, respectively. We are proposing an
interest vintage weight time span of 25 years, obtained by weighting
the fixed and movable vintage weights (27 years and 9 years,
respectively) by the fixed and movable split (86 percent and 14
percent, respectively). This is the same methodology used for the 2018-
based SNF market basket, which had useful lives of 26 years and 9 years
for fixed and movable assets, respectively.
b. Constructing Vintage Weights
Given the expected useful life of capital (fixed and movable
assets) and debt instruments, we must determine the proportion of
capital expenditures attributable to each year of the expected useful
life for each of the three asset types: building and fixed equipment,
movable equipment, and interest. These proportions represent the
vintage weights. We were not able to find a historical time series of
capital expenditures by SNFs. Therefore, we approximated the capital
expenditure patterns of SNFs over time using alternative SNF data
sources. For building and fixed equipment, we used the stock of beds in
nursing homes from the National Nursing Home Survey (NNHS) conducted by
the National Center for Health Statistics (NCHS) for 1962 through 1999.
For 2000 through 2018, we extrapolated the 1999 bed data forward using
measurements of the moving average rate of growth in the number of beds
as reported in SNF Medicare cost report data on Worksheet S-3, part I,
column 1, line 8. A more detailed discussion of this methodology was
published in the FY 2022 SNF final rule (86 FR 42457). We are proposing
to continue this methodology for the proposed 2022-based SNF market
basket by extrapolating the 2018 bed data forward using the average
growth in the number of beds over the 2019 to 2022 time period. We then
propose to use the change in the stock of beds each year to approximate
building and fixed equipment purchases for that year. This procedure
assumes that bed growth reflects the growth in capital-related costs in
SNFs for building and fixed equipment. We believe that this assumption
is reasonable because the number of beds reflects the size of a SNF,
and as a SNF adds beds, it also likely adds fixed capital.
As was done for the 2018-based SNF market basket (as well as prior
market baskets), we are proposing to estimate movable equipment
purchases based on the ratio of ancillary costs to routine costs. The
time series of the ratio of ancillary costs to routine costs for SNFs
measures changes in intensity in SNF services, which are assumed to be
associated with movable equipment purchase patterns. The assumption
here is that as ancillary costs increase compared to routine costs, the
SNF caseload becomes more complex and would require more movable
equipment. The lack of movable equipment purchase data for SNFs over
time required us to use alternative SNF data sources. A more detailed
discussion of this methodology was published in the FY 2008 SNF final
rule (72 FR 43428). We believe the resulting two time series,
determined from beds and the ratio of ancillary to routine costs,
reflect real capital purchases of building and fixed equipment and
movable equipment over time.
To obtain nominal purchases, which are used to determine the
vintage weights for interest, we converted the two real capital
purchase series from 1963 through 2022 determined above to nominal
capital purchase series using their respective price proxies (the BEA
Chained Price Index for Nonresidential Construction for Hospitals &
Special Care Facilities and the PPI for Machinery and Equipment). We
then combined the two nominal series into one nominal capital purchase
series for 1963 through 2022. Nominal capital purchases are needed for
interest vintage weights to capture the value of debt instruments.
Once we created these capital purchase time series for 1963 through
2022, we averaged different periods to obtain an average capital
purchase pattern over time: (1) for building and fixed equipment, we
averaged 34, 27-year periods; (2) for movable equipment, we averaged
52, 9-year periods; and (3) for interest, we averaged 36, 25-year
periods. We calculate the vintage weight for a given year by dividing
the capital purchase amount in any given year by the total amount of
purchases during the expected useful life of the equipment or debt
instrument.
The vintage weights for the proposed 2022-based SNF market basket
and the 2018-based SNF market basket are presented in Table 18.
[[Page 23448]]
Table 18--Proposed 2022-Based Vintage Weights and 2018-Based Vintage Weights
----------------------------------------------------------------------------------------------------------------
Building and fixed Movable equipment Interest
equipment ---------------------------------------------------
--------------------------
Year \1\ Proposed Proposed 2018-based Proposed 2018-based
2022-based 2018-based 2022-based 9 years 2022-based 24 years
27 years 26 years 9 years 25 years
----------------------------------------------------------------------------------------------------------------
1................................. 0.049 0.049 0.106 0.135 0.026 0.027
2................................. 0.048 0.050 0.121 0.140 0.027 0.028
3................................. 0.048 0.049 0.119 0.128 0.028 0.029
4................................. 0.046 0.047 0.103 0.112 0.030 0.031
5................................. 0.045 0.045 0.117 0.119 0.031 0.032
6................................. 0.043 0.043 0.124 0.111 0.033 0.034
7................................. 0.042 0.041 0.101 0.084 0.035 0.036
8................................. 0.042 0.040 0.093 0.080 0.038 0.037
9................................. 0.039 0.037 0.115 0.091 0.041 0.038
10................................ 0.037 0.035 ........... ........... 0.043 0.040
11................................ 0.038 0.036 ........... ........... 0.045 0.043
12................................ 0.039 0.036 ........... ........... 0.045 0.047
13................................ 0.038 0.036 ........... ........... 0.044 0.049
14................................ 0.038 0.036 ........... ........... 0.044 0.051
15................................ 0.038 0.035 ........... ........... 0.045 0.050
16................................ 0.036 0.036 ........... ........... 0.045 0.048
17................................ 0.034 0.036 ........... ........... 0.045 0.048
18................................ 0.033 0.038 ........... ........... 0.045 0.048
19................................ 0.033 0.037 ........... ........... 0.043 0.048
20................................ 0.032 0.036 ........... ........... 0.042 0.048
21................................ 0.031 0.035 ........... ........... 0.042 0.047
22................................ 0.030 0.035 ........... ........... 0.043 0.047
23................................ 0.030 0.035 ........... ........... 0.044 0.047
24................................ 0.028 0.033 ........... ........... 0.045 0.049
25................................ 0.027 0.032 ........... ........... 0.051 ...........
26................................ 0.027 0.032 ........... ........... ........... ...........
27................................ 0.027 ........... ........... ........... ........... ...........
-----------------------------------------------------------------------------
Total......................... 1.000 1.000 1.000 1.000 1.000 1.000
----------------------------------------------------------------------------------------------------------------
Note: The vintage weights are calculated using thirteen decimals. For presentation purposes, we are displaying
three decimals and therefore, the detail vintage weights may not add to 1.000 due to rounding.
\1\ Year 1 represents the vintage weight applied to the farthest year while the vintage weight for year 27, for
example, would apply to the most recent year.
The process of creating vintage-weighted price proxies requires
applying the vintage weights to the price proxy index where the last
applied vintage weight in Table 18 is applied to the most recent data
point. We have provided on the CMS website an example of how the
vintage weighting price proxies are calculated, using example vintage
weights and example price indices. The example can be found at <a href="http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html">http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html</a> in the zip
file titled ``Weight Calculations as described in the IPPS FY 2010
Proposed Rule.''
Table 19 shows all the price proxies for the proposed 2022-based
SNF market basket.
Table 19--Price Proxies for the Proposed 2022-Based SNF Market Basket
------------------------------------------------------------------------
Cost category Weight Price proxy
------------------------------------------------------------------------
Total.......................... 100.0
Compensation................... 61.2
Wages and Salaries \1\..... 51.8 ECI for Wages and
Salaries for Private
Industry Workers in
Nursing Care
Facilities.
Employee Benefits \1\...... 9.3 ECI for Total Benefits
for Private Industry
Workers in Nursing
Care Facilities.
Utilities...................... 2.7
Electricity and Other Non- 1.8 PPI Commodity for
Fuel Utilities. Commercial Electric
Power.
Fuel: Oil and Gas...... 0.8 Blend of PPIs.
Professional Liability 1.3 CMS Professional
Insurance. Liability Insurance
Premium Index.
All Other...................... 26.5
Other Products................. 16.1
Pharmaceuticals........ 6.4 PPI Commodity for
Pharmaceuticals for
Human Use,
Prescription.
Food: Direct Purchase.. 2.9 PPI Commodity for
Processed Foods and
Feeds.
Food: Contract Purchase 3.4 CPI for Food Away From
Home (All Urban
Consumers).
Chemicals.............. 0.2 Blend of PPIs.
Medical Instruments and 0.4 Blend of PPIs.
Supplies.
[[Page 23449]]
Rubber and Plastics.... 1.0 PPI Commodity for
Rubber and Plastic
Products.
Paper and Printing 0.5 Blend of PPIs.
Products.
Apparel................ 0.4 PPI Commodity for
Apparel.
Machinery and Equipment 0.7 PPI Commodity for
Machinery and
Equipment.
Miscellaneous Products. 0.2 PPI Commodity for
Finished Goods Less
Food and Energy.
All Other Services............. 10.5
Labor-Related Services..... 6.5
Professional Fees: 3.6 ECI for Total
Labor-Related. Compensation for
Private Industry
Workers in
Professional and
Related.
Installation, 0.4 ECI for Total
Maintenance, and Compensation for All
Repair Services. Civilian workers in
Installation,
Maintenance, and
Repair.
Administrative and 0.5 ECI for Total
Facilities Support. Compensation for
Private Industry
Workers in Office and
Administrative
Support.
All Other: Labor- 2.0 ECI for Total
Related Services. Compensation for
Private Industry
Workers in Service
Occupations.
Non Labor-Related Services. 4.0
Professional Fees: 1.8 ECI for Total
Nonlabor-Related. Compensation for
Private Industry
Workers in
Professional and
Related.
Financial Services..... 0.5 ECI for Total
Compensation for
Private Industry
Workers in Financial
Activities.
Telephone Services..... 0.4 CPI for Telephone
Services.
All Other: Nonlabor- 1.3 CPI for All Items Less
Related Services. Food and Energy.
Capital-Related Expenses....... 8.3
Total Depreciation......... 3.0
Building and Fixed 2.5 BEA's Chained Price
Equipment. Index for Private
Fixed Investment in
Structures,
Nonresidential,
Hospitals and Special
Care--vintage weighted
27 years.
Movable Equipment...... 0.4 PPI Commodity for
Machinery and
Equipment--vintage
weighted 9 years.
Total Interest............. 2.3
For-Profit SNFs........ 0.7 iBoxx--Average yield on
Aaa bond--vintage
weighted 25 years.
Government and Nonprofit SNFs.. 1.6 Bond Buyer--Average
yield on Domestic
Municipal Bonds--
vintage weighted 25
years.
Other Capital-Related Expenses. 3.0 CPI for Rent of Primary
Residence.
------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For
presentation purposes, we are displaying one decimal, and therefore,
the detailed cost weights may not add to the aggregate cost weights or
to 100.0 due to rounding.
\1\ Contract labor is distributed to wages and salaries and employee
benefits based on the share of total compensation that each category
represents.
4. Labor-Related Share
We define the labor-related share (LRS) as those expenses that are
labor-intensive and vary with, or are influenced by, the local labor
market. Each year, we calculate a revised labor-related share based on
the relative importance of labor-related cost categories in the input
price index. Effective for FY 2025, we are proposing to revise and
update the labor-related share to reflect the relative importance of
the proposed 2022-based SNF market basket cost categories that we
believe are labor-intensive and vary with, or are influenced by, the
local labor market. For the proposed 2022-based SNF market basket these
are: (1) Wages and Salaries (including allocated contract labor costs
as described above); (2) Employee Benefits (including allocated
contract labor costs as described above); (3) Professional Fees: Labor-
Related; (4) Administrative and Facilities Support Services; (5)
Installation, Maintenance, and Repair Services; (6) All Other: Labor-
Related Services; and (7) a proportion of capital-related expenses. We
propose to continue to include a proportion of capital-related expenses
because a portion of these expenses are deemed to be labor-intensive
and vary with, or are influenced by, the local labor market. For
example, a proportion of construction costs for a medical building
would be attributable to local construction workers' compensation
expenses.
Consistent with previous SNF market basket revisions and rebasings,
the All Other: Labor-related services cost category is mostly comprised
of building maintenance and security services (including, but not
limited to, landscaping services, janitorial services, waste management
services services) and dry cleaning and laundry services. Because these
services tend to be labor-intensive and are mostly performed at the SNF
facility or in the local area (and therefore, unlikely to be purchased
in the national market), we believe that they meet our definition of
labor-related services.
These are the same cost categories we have included in the LRS for
the 2018-based SNF market basket rebasing (86 FR 42461), as well as the
same categories included in the LRS for the 2021-based IRF market
basket (88 FR 50984), and 2021-based IPF market basket (88 FR 51078).
As discussed in the FY 2022 SNF PPS final rule (86 FR 42462), in an
effort to determine more accurately the share of nonmedical
professional fees (included in the proposed 2022-based SNF market
basket Professional Fees cost categories) that should be included in
the labor-related share, we surveyed SNFs regarding the proportion of
those fees that are attributable to local firms and the proportion that
are purchased from national firms. Based on these weighted results, we
determined that SNFs purchase, on average, the following portions of
contracted professional services inside their local labor market:
<bullet> 78 percent of legal services.
<bullet> 86 percent of accounting and auditing services.
[[Page 23450]]
<bullet> 89 percent of architectural, engineering services.
<bullet> 87 percent of management consulting services.
Together, these four categories represent 3.6 percentage points of
the total costs for the proposed 2022-based SNF market basket. We
applied the percentages from this special survey to their respective
SNF market basket weights to separate them into labor-related and
nonlabor-related costs. As a result, we are designating 2.8 of the 3.6
percentage points total to the labor-related share, with the remaining
0.8 percentage point categorized as nonlabor-related.
In addition to the professional services as previously listed, for
the proposed 2022-based SNF market basket, we propose to allocate a
proportion of the Home Office/Related Organization Contract Labor cost
weight, calculated using the Medicare cost reports as previously
stated, into the Professional Fees: Labor-Related and Professional
Fees: Nonlabor-Related cost categories. We propose to classify these
expenses as labor-related and nonlabor-related as many facilities are
not located in the same geographic area as their home office, and,
therefore, do not meet our definition for the labor-related share that
requires the services to be purchased in the local labor market.
Similar to the 2018-based SNF market basket, we propose for the
proposed 2022-based SNF market basket to use the Medicare cost reports
for SNFs to determine the home office labor-related percentages. The
Medicare cost report requires a SNF to report information regarding its
home office provider. Using information on the Medicare cost report, we
compared the location of the SNF with the location of the SNF's home
office. We propose to classify a SNF with a home office located in
their respective labor market if the SNF and its home office are
located in the same Metropolitan Statistical Area (MSA). Then we
determine the proportion of the Home Office/Related Organization
Contract Labor cost weight that should be allocated to the labor-
related share based on the percent of total Home Office/Related
Organization Contract Labor costs for those SNFs that had home offices
located in their respective local labor markets of total Home Office/
Related Organization Contract Labor costs for SNFs with a home office.
We determined a SNF's and its home office's MSA using their zip code
information from the Medicare cost report.
Using this methodology, we determined that 25 percent of SNFs' Home
Office/Related Organization Contract Labor costs were for home offices
located in their respective local labor markets. Therefore, we propose
to allocate 25 percent of the Home Office/Related Organization Contract
Labor cost weight (0.1 percentage point = 0.6 percent x 25 percent) to
the Professional Fees: Labor-Related cost weight and 75 percent of the
Home Office/Related Organization Contract Labor cost weight to the
Professional Fees: Nonlabor-
[…truncated; see source link]Indexed from Federal Register on April 3, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.