DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Parts 413, 424, and 455 

[CMS-1351-P] 

RIN 0938-AQ29 

Medicare Program; Prospective Payment System and 

Consolidated Billing for Skilled Nursing Facilities; 

Disclosures of Ownership and Additional Disclosable Parties 

Information 

AGENCY: Centers for Medicare & Medicaid Services (CMS), 

HHS.

ACTION: Proposed rule. 

SUMMARY: This proposed rule presents two options for 

updating the payment rates used under the prospective 

payment system for skilled nursing facilities (SNFs), for 

fiscal year 2012. In this context, it examines recent 

changes in provider behavior relating to the implementation 

of the Resource Utilization Groups, version 4 (RUG-IV) 

case-mix classification system and considers a possible 

recalibration of the case-mix indexes so that they more 

accurately reflect parity in expenditures between RUG-IV 

and the previous case-mix classification system. It also 

includes a discussion of a Non-Therapy Ancillary component 

and outlier research currently under development within 

CMS. In addition, this proposed rule discusses the impact 
CMS-1351-P 2 

of certain provisions of the Affordable Care Act. It 

proposes to require for fiscal year 2012 and subsequent 

fiscal years that the SNF market basket percentage change 

be reduced by the multi-factor productivity adjustment. It 

also proposes to require Medicare SNFs and Medicaid nursing 

facilities to disclose certain information to the Secretary 

of the United States Department of Health and Human 

Services (the Secretary) and other entities regarding the 

ownership and organizational structure of their facilities. 

Finally, it proposes certain changes relating to the 

payment of group therapy services and proposes new resident 

assessment policies. 

DATES: To be assured consideration, comments must be 

received at one of the addresses provided below, no later 

than 5 p.m. on [OFR--insert date 60 days after the date of 

public display in the Office of the Federal Register]. 

ADDRESSES: In commenting, please refer to file code 

CMS-1351-P. Because of staff and resource limitations, we 

cannot accept comments by facsimile (FAX) transmission. 

 You may submit comments in one of four ways (please 

choose only one of the ways listed): 

 1. Electronically. You may submit electronic 

comments on this regulation to http://www.regulations.gov. 

Follow the instructions under the “More Search Options” 

tab. 
CMS-1351-P 3 

 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-1351-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-1351-P, 

 Mail Stop C4-26-05, 

 7500 Security Boulevard, 

 Baltimore, MD 21244-1850. 

 4. By hand or courier. If you prefer, you may 

deliver (by hand or courier) your written comments before 

the close of the comment period to either of the following 

addresses: 

 a. Centers for Medicare & Medicaid Services 

 Department of Health and Human Services 

 Room 445-G, Hubert H. Humphrey Building, 

 200 Independence Avenue, SW., 
CMS-1351-P 4 

 Washington, DC 20201 

 (Because access to the interior of the Hubert H. 

Humphrey Building is not readily available to persons 

without Federal Government identification, commenters are 

encouraged to leave their comments in the CMS drop slots 

located in the main lobby of the building. A stamp-in 

clock is available for persons wishing to retain a proof of 

filing by stamping in and retaining an extra copy of the 

comments being filed.) 

 b. Centers for Medicare & Medicaid Services 

 Department of Health and Human Services 

 7500 Security Boulevard, 

 Baltimore, MD 21244-1850. 

 If you intend to deliver your comments to the 

Baltimore address, please call telephone number 

(410) 786-7195 in advance to schedule your arrival with one 

of our staff members. 

 Comments mailed to the addresses indicated as 

appropriate for hand or courier delivery may be delayed and 

received after the comment period. 

 For information on viewing public comments, see the 

beginning of the "SUPPLEMENTARY INFORMATION" section. 

FOR FURTHER INFORMATION CONTACT: 
CMS-1351-P 5 

Sandra Bastinelli, (410) 786-3630 (for disclosure of 

ownership). 

Penny Gershman, (410) 786-6643 (for information related to 

clinical issues). 

John Kane, (410) 786-0557 (for information related to the 

development of the payment rates and case-mix indexes). 

Kia Sidbury, (410)786-7816 (for information related to the 

wage index). 

Bill Ullman, (410) 786-5667 (for information related to 

level of care determinations, consolidated billing, and 

general information). 

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 Web 

site as soon as possible after they have been received: 

http://www.regulations.gov. Follow the search instructions 

on that Web site to view public comments. 

Comments received timely will also be available for 

public inspection as they are received, generally beginning 

approximately 3 weeks after publication of a document, at 

the headquarters of the Centers for Medicare & Medicaid 
CMS-1351-P 6 

Services, 7500 Security Boulevard, Baltimore, Maryland 

21244, Monday through Friday of each week from 8:30 a.m. to 

4 p.m. To schedule an appointment to view public comments, 

phone 1-800-743-3951. 

To assist readers in referencing sections contained in 

this document, we are providing the following Table of 

Contents. 

Table of Contents 

I. Background 

A. Current System for Payment of SNF Services Under 

Part A of the Medicare Program 

B. Requirements of the Balanced Budget Act of 1997 (BBA) 

for Updating the Prospective Payment System for 

Skilled Nursing Facilities 

C. The Medicare, Medicaid, and SCHIP Balanced Budget 

Refinement Act of 1999 (BBRA) 

D. The Medicare, Medicaid, and SCHIP Benefits Improvement 

and Protection Act of 2000 (BIPA) 

E. The Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) 

F. The Affordable Care Act 

G. Skilled Nursing Facility Prospective Payment--General 

Overview 

1. Payment Provisions – Federal Rate 

2. FY 2012 Rate Updates Using the Skilled Nursing 
CMS-1351-P 7 

Facility Market Basket Index 

II. FY 2012 Annual Update of Payment Rates under the 

Prospective Payment System for Skilled Nursing 

Facilities 

A. Federal Prospective Payment System 

1. Costs and Services Covered by the Federal Rates 

2. Methodology Used for the Calculation of the Federal 

Rates 

B. Case-Mix Adjustments 

1. Background 

2. Parity Adjustment 

a. Option for Recalibration of the Parity Adjustment 

b. Option for Application of Standard Update for FY 2012 

Without Recalibration 

C. Wage Index Adjustment to Federal Rates 

D. Updates to Federal Rates 

E. Relationship of Case-Mix Classification System to 

Existing Skilled Nursing Facility Level-of-Care 

Criteria 

F. Example of Computation of Adjusted PPS Rates and SNF 

Payment 

III. Resource Utilization Groups, Version 4 (RUG-IV) 

A. Prospective Payment for SNF Non-therapy Ancillary Costs 

1. Previous Research 

2. Conceptual Analysis 
CMS-1351-P 8 

3. Analytic Sample 

4. Approach to Analysis 

5. Payment Methodology 

a. Routine Non-Therapy Ancillary Payment 

b. Tiered Non-Routine NTA Bundled Payment 

c. Non-Routine NTA Outlier Payment 

6. Temporary AIDS Add-On Payment Under Section 511 of the

 MMA 

IV. Ongoing Initiatives under the Affordable Care Act 

A. Value-Based Purchasing (Section 3006) 

B. Payment Adjustment for Hospital-Acquired Conditions 

(Section 3008) 

C. Nursing Home Transparency and Improvement (Section 

6104) 

V. Other Issues 

A. Required Disclosure of Ownership and Additional 

Disclosable Parties Information (Section 6101) 

B. Therapy Student Supervision 

C. Group Therapy and Therapy Documentation 

D. Proposed Changes to the MDS 3.0 Assessment Schedule 

and Other Medicare-Required Assessments 

E. Discussion of Possible Future Initiatives 

VI. The Skilled Nursing Facility Market Basket Index 

A. Use of the Skilled Nursing Facility Market Basket 

Percentage 
CMS-1351-P 9 

B. Market Basket Forecast Error Adjustment 

C. Multifactor Productivity Adjustment 

1. Incorporating the Multifactor Productivity Adjustment 

into the Market Basket Update 

D. Federal Rate Update Factor 

VII. Consolidated Billing 

VIII. Application of the SNF PPS to SNF Services Furnished 

by Swing-Bed Hospitals 

IX. Provisions of the Proposed Rule 

X. Collection of Information Requirements 

XI. Response to Comments 

XII. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

2. Statement of Need 

3. Overall Impacts 

4. Detailed Economic Analysis 

a. Impacts of Implementing the Recalibration Option for 

FY 2012 

b. Impacts of Not Implementing the Recalibration Option 

for FY 2012 

5. Alternatives Considered 

6. Accounting Statement 

7. Conclusion 

B. Regulatory Flexibility Act Analysis 
CMS-1351-P 10 

C. Unfunded Mandates Reform Act Analysis 

D. Federalism Analysis 

Regulation Text 

Addendum: 

FY 2012 CBSA-Based Wage Index Tables (Tables A & B) 

Abbreviations

 In addition, because of the many terms to which we 

refer by abbreviation in this proposed rule, we are listing 

these abbreviations and their corresponding terms in 

alphabetical order below: 

ABN Advance Beneficiary Notice 

AIDS Acquired Immune Deficiency Syndrome 

ARD Assessment Reference Date 

ASAP Assessment Submission and Processing 

BBA Balanced Budget Act of 1997, Pub. L. 105-33 

BBRA Medicare, Medicaid, and SCHIP Balanced Budget 

Refinement Act of 1999, Pub. L. 106-113 

BIMS Brief Interview for Mental Status 

BIPA Medicare, Medicaid, and SCHIP Benefits 

Improvement and Protection Act of 2000, 

Pub. L. 106-554 

CAH Critical Access Hospital 

CBSA Core-Based Statistical Area 

CCR Cost-to-Charge Ratio 

CFR Code of Federal Regulations 
CMS-1351-P 11 

CMI Case-Mix Index 

CMS Centers for Medicare & Medicaid Services 

COT Change of Therapy 

EOT End of Therapy 

EOT-R End of Therapy - Resumption 

FQHC Federally Qualified Health Center 

FR Federal Register 

FY Fiscal Year 

GAO Government Accountability Office 

HAC Hospital-Acquired Condition 

HCC Hierarchical Condition Category 

HCPCS Healthcare Common Procedure Coding System 

HR-III Hybrid Resource Utilization Groups, Version 3 

IGI IHS (Information Handling Services) Global 

Insight, Inc. 

MDS Minimum Data Set 

MFP Multifactor Productivity 

MIPPA Medicare Improvements for Patients and Providers 

Act of 2008, Pub. L. 110-275 

MMA Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003, Pub. L. 108-173 

MMSEA Medicare, Medicaid, and SCHIP Extension Act of 

2007, Pub. L. 110-173 

MPAF Medicare PPS Assessment Form 

MSA Metropolitan Statistical Area 
CMS-1351-P 12 

NTA Non-Therapy Ancillary 

OMB Office of Management and Budget 

OMRA Other Medicare-Required Assessment 

ONTA Other Non-Therapy Ancillary 

OSCAR Online Survey Certification and Reporting System 

PAC-PRD Post Acute Care Payment Reform Demonstration 

PECOS Medicare Provider Enrollment, Chain, and Ownership 

System 

PPS Prospective Payment System 

QIES Quality Improvement and Evaluation System 

RAI Resident Assessment Instrument 

RAVEN Resident Assessment Validation Entry 

RFA Regulatory Flexibility Act, Pub. L. 96-354 

RNP Routine NTA Bundled Payment 

RHC Rural Health Clinic 

RIA Regulatory Impact Analysis 

RTM Reimbursable Therapy Minutes 

RUG-III Resource Utilization Groups, Version 3 

RUG-IV Resource Utilization Groups, Version 4 

RUG-53 Refined 53-Group RUG-III Case-Mix Classification 

System 

SCHIP State Children's Health Insurance Program 

SNF Skilled Nursing Facility 

STM Staff Time Measurement 

STRIVE Staff Time and Resource Intensity Verification 
CMS-1351-P 13 

TNP Tiered Non-routine NTA Payment 

UMRA Unfunded Mandates Reform Act, Pub. L. 104-4 

I. Background 

 Annual updates to the prospective payment system (PPS) 

rates for skilled nursing facilities (SNFs) are required by 

section 1888(e) of the Social Security Act (the Act), as 

added by section 4432 of the Balanced Budget Act of 1997 

(BBA, Pub. L. 105-33, enacted on August 5, 1997), and 

amended by subsequent legislation as discussed elsewhere in 

this preamble. Our most recent annual update occurred in 

an update notice with comment period (75 FR 42886, 

July 22, 2010) that set forth updates to the SNF PPS 

payment rates for fiscal year (FY) 2011. We subsequently 

published a correction notice (75 FR 55801, 

September 14, 2010) with respect to those payment rate 

updates. We will respond to public comments which relate 

to the FY 2011 update notice, along with those relating to 

this current proposed rule, in the FY 2012 final rule. 

A. Current System for Payment of Skilled Nursing Facility 

Services Under Part A of the Medicare Program

 Section 4432 of the BBA amended section 1888 of the 

Act to provide for the implementation of a per diem PPS for 

SNFs, covering all costs (routine, ancillary, and 

capital-related) of covered SNF services furnished to 

beneficiaries under Part A of the Medicare program, 
CMS-1351-P 14 

effective for cost reporting periods beginning on or after 

July 1, 1998. In this proposed rule, we would update the 

per diem payment rates for SNFs for FY 2012. Major 

elements of the SNF PPS include: 

● Rates. As discussed in section I.G.1. of this 

proposed rule, we established per diem Federal rates for 

urban and rural areas using allowable costs from FY 1995 

cost reports. These rates also included a “Part B add-on” 

(an estimate of the cost of those services that, before 

July 1, 1998, were paid under Part B but furnished to 

Medicare beneficiaries in a SNF during a Part A covered 

stay). We adjust the rates annually using a SNF market 

basket index, and we adjust them by the hospital inpatient 

wage index to account for geographic variation in wages. 

We also apply a case-mix adjustment to account for the 

relative resource utilization of different patient types. 

As further discussed in section I.G.1. of this proposed 

rule, for FY 2012 this adjustment will utilize the Resource 

Utilization Groups, version 4 (RUG-IV) case-mix 

classification, and will use information obtained from the 

required resident assessments using version 3.0 of the 

Minimum Data Set (MDS 3.0). (The resident assessment is 

approved under OMB# 0938-0739.) Additionally, as noted 

elsewhere in this preamble, the payment rates at various 

times have also reflected specific legislative provisions 
CMS-1351-P 15 

for certain temporary adjustments. 

• Transition. Under sections 1888(e)(1)(A) and 

(e)(11) of the Act, the SNF PPS included an initial, threephase 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 three 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 

entirely on the adjusted Federal per diem rates, we no 

longer include adjustment factors related to 

facility-specific rates for the coming FY. 

● Coverage. 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. As further discussed in 

section II.E. of this proposed rule, in FY 2012, this 

approach includes an administrative presumption that 
CMS-1351-P 16 

utilizes a beneficiary’s initial classification in one of 

the upper 52 RUGs of the 66-group RUG-IV case-mix 

classification system to assist in making certain SNF level 

of care determinations. 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 (see section II.E. of this 

proposed rule for a more detailed discussion of the 

relationship between the case-mix classification system and 

SNF level of care determinations). 

• Consolidated Billing. The SNF PPS includes a 

consolidated billing provision that requires a SNF to 

submit consolidated Medicare bills to its fiscal 

intermediary or Medicare Administrative Contractor for 

almost all of the services that its residents receive 

during the course of a covered Part A stay. In addition, 

this provision places with the SNF the Medicare billing 

responsibility for physical therapy, occupational therapy, 

and speech-language pathology services that the resident 

receives during a noncovered stay. The statute excludes a 

small list of services from the consolidated billing 

provision (primarily those of physicians and certain other 

types of practitioners), which remain separately billable 

under Part B when furnished to a SNF’s Part A resident. A 
CMS-1351-P 17 

more detailed discussion of this provision appears in 

section VII. of this proposed rule. 

● Application of the SNF PPS to SNF services 

furnished by swing-bed hospitals. 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 care, as 

needed. For critical access hospitals (CAHs), Part A pays 

on a reasonable cost basis for SNF services furnished under 

a swing-bed agreement. However, in accordance with 

section 1888(e)(7) of the Act, these 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. A more detailed discussion of this provision 

appears in section VIII. of this proposed rule. 

B. Requirements of the Balanced Budget Act of 1997 (BBA) 

for Updating the Prospective Payment System for Skilled 

Nursing Facilities

 Section 1888(e)(4)(H) of the Act requires that we 

provide for publication annually in the Federal Register: 

1. The unadjusted Federal per diem rates to be 

applied to days of covered SNF services furnished during 

the upcoming FY. 

2. The case-mix classification system to be applied 

with respect to these services during the upcoming FY. 
CMS-1351-P 18 

3. The factors to be applied in making the area wage 

adjustment with respect to these services. 

Along with other revisions discussed later in this 

preamble, this proposed rule provides these required annual 

updates to the Federal rates. 

C. The Medicare, Medicaid, and SCHIP Balanced Budget 

Refinement Act of 1999 (BBRA)

 There were several provisions in the BBRA (Pub. L. 

106-113, enacted on November 29, 1999) that resulted in 

adjustments to the SNF PPS. We described these provisions 

in detail in the SNF PPS final rule for FY 2001 

(65 FR 46770, July 31, 2000). In particular, 

section 101(a) of the BBRA provided for a temporary 

20 percent increase in the per diem adjusted payment rates 

for 15 specified groups in the original, 44-group Resource 

Utilization Groups, version 3 (RUG-III) case-mix 

classification system. In accordance with section 

101(c)(2) of the BBRA, this temporary payment adjustment 

expired on January 1, 2006, upon the implementation of a 

refined, 53-group version of the RUG-III system, RUG-53 

(see section I.G.1. of this proposed rule). We included 

further information on BBRA provisions that affected the 

SNF PPS in Program Memoranda A-99-53 and A-99-61 (December 

1999). 
CMS-1351-P 19 

Also, section 103 of the BBRA designated certain 

additional services for exclusion from the consolidated 

billing requirement, as discussed in section VII. of this 

proposed rule. Further, for swing-bed hospitals with more 

than 49 (but less than 100) beds, section 408 of the BBRA 

provided for the repeal of certain statutory restrictions 

on length of stay and aggregate payment for patient days, 

effective with the end of the SNF PPS transition period 

described in section 1888(e)(2)(E) of the Act. In the 

final rule for FY 2002 (66 FR 39562, July 31, 2001), we 

made conforming changes to the regulations at §413.114(d), 

effective for services furnished in cost reporting periods 

beginning on or after July 1, 2002, to reflect section 408 

of the BBRA. 

D. The Medicare, Medicaid, and SCHIP Benefits Improvement 

and Protection Act of 2000 (BIPA)

 The BIPA (Pub. L. 106-554, enacted December 21, 2000) 

also included several provisions that resulted in 

adjustments to the SNF PPS. We described these provisions 

in detail in the final rule for FY 2002 (66 FR 39562, July 

31, 2001). In particular: 

● Section 203 of the BIPA exempted CAH swing beds 

from the SNF PPS. We included further information on this 

provision in Program Memorandum A-01-09 (Change Request 

#1509), issued January 16, 2001, which is available online 
CMS-1351-P 20 

at www.cms.gov/transmittals/downloads/a0109.pdf. 

● Section 311 of the BIPA revised the statutory 

update formula for the SNF market basket, and also directed 

us to conduct a study of alternative case-mix 

classification systems for the SNF PPS. In 2006, we 

submitted a report to the Congress on this study, which is 

available online at 

www.cms.gov/SNFPPS/Downloads/RC_2006_PC-PPSSNF.pdf. 

● Section 312 of the BIPA provided for a temporary 

increase of 16.66 percent in the nursing component of the 

case-mix adjusted Federal rate for services furnished on or 

after April 1, 2001, and before October 1, 2002; 

accordingly, this add-on is no longer in effect. This 

section also directed the Government Accountability Office 

(GAO) to conduct an audit of SNF nursing staff ratios and 

submit a report to the Congress on whether the temporary 

increase in the nursing component should be continued. The 

report (GAO-03-176), which GAO issued in November 2002, is 

available online at www.gao.gov/new.items/d03176.pdf. 

● Section 313 of the BIPA repealed the consolidated 

billing requirement for services (other than physical 

therapy, occupational therapy, and speech-language 

pathology services) furnished to SNF residents during 

noncovered stays, effective January 1, 2001. (A more 

detailed discussion of this provision appears in section 
CMS-1351-P 21 

VII. of this proposed rule.) 

● Section 314 of the BIPA corrected an anomaly 

involving three of the RUGs that section 101(a) of the BBRA 

had designated to receive the temporary payment adjustment 

discussed above in section I.C. of this proposed rule. (As 

noted previously, in accordance with section 101(c)(2) of 

the BBRA, this temporary payment adjustment expired upon 

the implementation of case-mix refinements on January 1, 

2006.) 

● Section 315 of the BIPA authorized us to 

establish a geographic reclassification procedure that is 

specific to SNFs, but only after collecting the data 

necessary to establish a SNF 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 that data. 

 We included further information on several of the BIPA 

provisions in Program Memorandum A-01-08 (Change Request 

#1510), issued January 16, 2001, which is available online 

at www.cms.gov/transmittals/downloads/a0108.pdf. 

E. The Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA)

 The MMA (Pub. L. 108-173, enacted on December 8, 2003) 

included a provision that resulted in a further adjustment 
CMS-1351-P 22 

to the SNF PPS. Specifically, section 511 of the MMA 

amended section 1888(e)(12) of the Act, to provide for a 

temporary increase of 128 percent in the PPS per diem 

payment for any SNF residents with Acquired Immune 

Deficiency Syndrome (AIDS), effective with services 

furnished on or after October 1, 2004. This special AIDS 

add-on was to remain in effect until “. . . the Secretary 

certifies that there is an appropriate adjustment in the 

case mix . . . to compensate for the increased costs 

associated with [such] residents . . . .” The AIDS add-on 

is also discussed in Program Transmittal #160 (Change 

Request #3291), issued on April 30, 2004, which is 

available online at 

www.cms.gov/transmittals/downloads/r160cp.pdf. In the SNF 

PPS final rule for FY 2010 (74 FR 40288, August 11, 2009), 

we did not address the certification of the AIDS add-on in 

that final rule’s implementation of the case-mix 

refinements for RUG-IV, thus allowing the temporary add-on 

payment created by section 511 of the MMA to remain in 

effect. 

For the limited number of SNF residents that qualify 

for the AIDS add-on, implementation of this provision 

results in a significant increase in payment. For example, 

using FY 2009 data, we identified less than 3,500 SNF 

residents with a diagnosis code of 042 (Human 
CMS-1351-P 23 

Immunodeficiency Virus (HIV) Infection). For FY 2012, an 

urban facility with a resident with AIDS in RUG-IV group 

“HC2” would have a case-mix adjusted payment of $400.01 

(see Table 5) before the application of the MMA adjustment. 

After an increase of 128 percent, this urban facility would 

receive a case-mix adjusted payment of approximately 

$912.02. 

In addition, section 410 of the MMA contained a 

provision that excluded from consolidated billing certain 

services furnished to SNF residents by rural health clinics 

(RHCs) and Federally Qualified Health Centers (FQHCs). 

(Further information on this provision appears in section 

VII. of this proposed rule.) 

F. The Affordable Care Act

 On March 23, 2010, the Patient Protection and 

Affordable Care Act, Pub. L. 111-148, was enacted. 

Following the enactment of Pub. L. 111-148, the Health Care 

and Education Reconciliation Act of 2010 (Pub. L. 111-152, 

enacted on March 30, 2010) amended certain provisions of 

Pub. L. 111-148 and certain sections of the Social Security 

Act and, in certain instances, included “freestanding” 

provisions (Pub. L. 111-148 and Pub. L. 111-152 are 

collectively referred to in this proposed rule as “the 

Affordable Care Act”). Section 10325 of the Affordable 

Care Act included a provision involving the SNF PPS. 
CMS-1351-P 24 

Section 10325 postponed the implementation of the RUG-IV 

case-mix classification system published in the FY 2010 SNF 

PPS final rule (74 FR 40288, August 11, 2009), requiring 

that the Secretary not implement the RUG-IV case-mix 

classification system before October 1, 2011. 

Notwithstanding this postponement of overall RUG-IV 

implementation, section 10325 further specified that the 

Secretary implement, effective October 1 2010, the changes 

related to concurrent therapy and the look-back period that 

were finalized as components of RUG-IV (see 74 FR 40315-19, 

40322-24, August 11, 2009). As we noted in the FY 2011 SNF 

PPS update notice (75 FR 42889), implementing the 

particular combination of RUG-III and RUG-IV features 

specified in section 10325 of the Affordable Care Act would 

require developing a revised grouper, something that could 

not be accomplished by that provision’s effective date 

(October 1, 2010) without risking serious disruption to 

providers, suppliers, and State agencies. Accordingly, in 

the FY 2011 update notice (75 FR 42889), we announced our 

intention to proceed on an interim basis with 

implementation of the full RUG-IV case-mix classification 

system as of October 1, 2010, followed by a retroactive 

claims adjustment, using a hybrid RUG-III (HR-III) system 

reflecting the Affordable Care Act configuration, once we 

had developed a revised grouper that could accommodate it. 
CMS-1351-P 25 

In that update notice, we also invited public comment 

specifically on our plans for implementing section 10325 of 

the Affordable Care Act in this manner. 

However, on December 15, 2010, the President signed 

H.R 4994, the “Medicare and Medicaid Extenders Act of 2010” 

(Pub. L. 111-309), in which section 202 repeals section 

10325 of the Affordable Care Act. We will, therefore, 

leave in place permanently the implementation of the full 

RUG-IV system as of FY 2011, as finalized in the FY 2010 

SNF PPS final rule (74 FR 40288). Moreover, as the repeal 

of section 10325 of the Affordable Care Act has now 

eliminated the need for a subsequent transition to the HRIII system, this also effectively renders moot any further 

discussion of public comments that we had invited on our 

planned implementation of that transition. In addition, we 

note that implementation of version 3.0 of the Minimum Data 

Set (MDS 3.0) has proceeded as originally scheduled, with 

an effective date of October 1, 2010. The MDS 3.0 RAI 

Manual and MDS 3.0 Item Set are published on the MDS 3.0 

Training Materials Web site, at 

http://www.cms.gov/NursingHomeQualityInits/45_NHQIMDS30Trai

ningMaterials.asp. 

We note that a parity adjustment was applied to the 

RUG-53 nursing case-mix weights when the RUG-III system was 

initially refined in 2006, in order to ensure that the 
CMS-1351-P 26 

implementation of the refinements would not cause any 

change in overall payment levels (70 FR 45031, 

August 4, 2005). A detailed discussion of the parity 

adjustment in the specific context of the RUG-IV payment 

rates appears in the FY 2010 SNF PPS proposed rule 

(74 FR 22236-38, May 12, 2009) and final rule (74 FR 40338-

40339, August 11, 2009), and in the FY 2011 update notice 

(75 FR 42892-42893). 

Accordingly, as discussed above, effective 

October 1, 2010, we implemented and paid claims under the 

RUG-IV system that was finalized in the FY 2010 SNF PPS 

final rule. In section IV. of this proposed rule, we 

discuss certain ongoing Affordable Care Act initiatives 

that relate to SNFs, and in section V.A, we discuss 

proposed revisions involving section 6101 of the Affordable 

Care Act, regarding required disclosure of ownership and 

additional disclosable parties information. 

G. Skilled Nursing Facility Prospective Payment --

General Overview

 We implemented the Medicare SNF PPS effective with 

cost reporting periods beginning on or after July 1, 1998. 

This methodology uses prospective, case-mix adjusted per 

diem payment rates applicable to all covered SNF services. 

These payment rates cover all costs of furnishing covered 

skilled nursing services (routine, ancillary, and 
CMS-1351-P 27 

capital-related costs) other than costs associated with 

approved educational activities and bad debts. Covered SNF 

services include post-hospital services for which benefits 

are provided under Part A, as well as those items and 

services (other than physician and certain other services 

specifically excluded under the BBA) which, before 

July 1, 1998, had been paid under Part B but furnished to 

Medicare beneficiaries 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). 

1. Payment Provisions - Federal Rate 

 The 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 an estimate 

of the amounts that 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 a SNF market 
CMS-1351-P 28 

basket index, and then standardized for the costs of 

facility differences in case mix and for geographic 

variations in wages. 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 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. In addition, we adjusted the portion of the Federal 

rate attributable to wage-related costs by a wage index. 

 The Federal rate also incorporates adjustments to 

account for facility case-mix, using a classification 

system that accounts for the relative resource utilization 

of different patient types. The RUG-IV classification 

system uses beneficiary assessment data from the MDS 3.0 

completed by SNFs to assign beneficiaries to one of 66 RUGIV groups. The original RUG-III case-mix classification 

system used beneficiary assessment data from the MDS, 

version 2.0 (MDS 2.0) completed by SNFs to assign 

beneficiaries to one of 44 RUG-III groups. Then, under 
CMS-1351-P 29 

incremental refinements that became effective on 

January 1, 2006, we added nine new groups--comprising a new 

Rehabilitation plus Extensive Services category--at the top 

of the RUG-III hierarchy. The May 12, 1998 interim final 

rule (63 FR 26252) included a detailed description of the 

original 44-group RUG-III case-mix classification system. 

A comprehensive description of the refined RUG-53 system 

appeared in the proposed and final rules for FY 2006 

(70 FR 29070, May 19, 2005, and 70 FR 45026, 

August 4, 2005), and a detailed description of the current 

66-group RUG-IV system appeared in the proposed and final 

rules for FY 2010 (74 FR 22208, May 12, 2009, and 74 FR 

40288, August 11, 2009). 

 Further, in accordance with sections 

1888(e)(4)(E)(ii)(IV) and (e)(5) of the Act, the Federal 

rates in this proposed rule reflect an update to the rates 

that we published in the update notice for FY 2011 (75 FR 

42886, July 22, 2010) and the associated correction notice 

(75 FR 55801, September 14, 2010), equal to the full change 

in the SNF market basket index, adjusted by the forecast 

error correction, if applicable, and the Multifactor 

Productivity (MFP) adjustment for FY 2012. A more detailed 

discussion of the SNF market basket index and related 

issues appears in sections I.G.2. and VI. of this proposed 

rule. 
CMS-1351-P 30 

2. FY 2012 Rate Updates Using the Skilled Nursing 

Facility Market Basket Index 

 Section 1888(e)(5) of the Act requires us to establish 

a SNF market basket index that reflects changes over time 

in the prices of an appropriate mix of goods and services 

included in covered SNF services. We use the SNF market 

basket index, adjusted in the manner described below, to 

update the Federal rates on an annual basis. In the SNF 

PPS final rule for FY 2008 (72 FR 43425 through 43430, 

August 3, 2007), we revised and rebased the market basket, 

which included updating the base year from FY 1997 to FY 

2004. The proposed FY 2012 market basket increase is 2.7 

percent, which is based on IHS Global Insight, Inc. (IGI) 

first quarter 2011 forecast with historical data through 

fourth quarter 2010. 

In addition, as explained in the final rule for 

FY 2004 (66 FR 46058, August 4, 2003) and in section VI.B. 

of this proposed rule, the annual update of the payment 

rates includes, as appropriate, an adjustment to account 

for market basket forecast error. As described in the 

final rule for FY 2008, the threshold percentage that 

serves to trigger an adjustment to account for market 

basket forecast error is 0.5 percentage point effective for 

FY 2008 and subsequent years. This adjustment takes into 

account the forecast error from the most recently available 
CMS-1351-P 31 

FY for which there is final data, and applies whenever the 

difference between the forecasted and actual change in the 

market basket exceeds a 0.5 percentage point threshold. 

For FY 2010 (the most recently available FY for which there 

is final data), the estimated increase in the market basket 

index was 2.2 percentage points, while the actual increase 

was 2.0 percentage points, resulting in the actual increase 

being 0.2 percentage point lower than the estimated 

increase. Accordingly, as the difference between the 

estimated and actual amount of change does not exceed the 

0.5 percentage point threshold, the payment rates for 

FY 2012 do not include a forecast error adjustment. As we 

stated in the final rule for FY 2004 that first promulgated 

the forecast error adjustment (68 FR 46058, August 4, 

2003), the adjustment will “. . . reflect both upward and 

downward adjustments, as appropriate.” Table 1 shows the 

forecasted and actual market basket amounts for FY 2010. 

TABLE 1: Difference Between the Forecasted and Actual 

Market Basket Increases for FY 2010 

Index Forecasted 

FY 2010 Increase* 

Actual 

FY 2010 Increase** FY 2010 Difference

SNF 2.2 2.0 -0.2 

*Published in Federal Register; based on second quarter 2009 IHS Global Insight Inc. forecast (2004-

based index). 

**Based on the first quarter 2011 IHS Global Insight forecast, with historical data through the fourth 

quarter 2010 (2004-based index). 

Furthermore, effective FY 2012, as required by section 

3401(b) of the Affordable Care Act, the market basket 
CMS-1351-P 32 

percentage is reduced by a productivity adjustment equal to 

“the 10-year moving average of changes in annual economywide private nonfarm business multi-factor productivity (as 

projected by the Secretary for the 10-year period ending 

with the applicable fiscal year, year, cost-reporting 

period or other annual period)” (the MFP adjustment). As 

discussed in greater detail in section VI.C of this 

proposed rule, the proposed MFP adjustment for FY 2012 is 

1.2 percent. 

II. FY 2012 Annual Update of Payment Rates under the 

Prospective Payment System for Skilled Nursing Facilities 

A. Federal Prospective Payment System

 This proposed rule sets forth a schedule of Federal 

prospective payment rates applicable to Medicare Part A SNF 

services beginning October 1, 2011. The schedule 

incorporates per diem Federal rates that provide Part A 

payment for almost all costs of services furnished to a 

beneficiary in a SNF during a Medicare-covered stay. 

1. Costs and Services Covered by the Federal Rates 

 In accordance with section 1888(e)(2)(B) of the Act, 

the Federal rates apply to all costs (routine, ancillary, 

and capital-related) of covered SNF services other than 

costs associated with approved educational activities as 

defined in §413.85. Under section 1888(e)(2)(A)(i) of the 

Act, covered SNF services include post-hospital SNF 
CMS-1351-P 33 

services for which benefits are provided under Part A (the 

hospital insurance program), as well as all items and 

services (other than those services excluded by statute) 

that, before July 1, 1998, were paid under Part B (the 

supplementary medical insurance program) but furnished to 

Medicare beneficiaries in a SNF during a Part A covered 

stay. (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)). 

2. Methodology Used for the Calculation of the Federal 

Rates 

 The FY 2012 rates reflect an update using the latest 

market basket index, reduced by the MFP adjustment. The FY 

2012 market basket increase factor is 2.7 percent, which as 

discussed in section VI.C of this proposed rule, is reduced 

by a 1.2 percent MFP adjustment. A complete description of 

the multi-step process used to calculate Federal rates 

initially appeared in the May 12, 1998 interim final rule 

(63 FR 26252), as further revised in subsequent rules. As 

explained above in section I.C of this proposed rule, under 

section 101(c)(2) of the BBRA, the previous temporary 

increases in the per diem adjusted payment rates for 

certain designated RUGs (as specified in section 101(a) of 

the BBRA and section 314 of the BIPA) are no longer in 

effect due to the implementation of case-mix refinements as 
CMS-1351-P 34 

of January 1, 2006. However, the temporary increase of 

128 percent in the per diem adjusted payment rates for SNF 

residents with AIDS, enacted by section 511 of the MMA, 

remains in effect. 

 We used the SNF market basket to adjust each per diem 

component of the Federal rates forward to reflect cost 

increases occurring between the midpoint of the Federal 

FY beginning October 1, 2010, and ending 

September 30, 2011, and the midpoint of the Federal FY 

beginning October 1, 2011, and ending September 30, 2012, 

to which the payment rates apply. In accordance with 

sections 1888(e)(4)(E)(ii)(IV) and (e)(5) of the Act, we 

update the payment rates for FY 2012 by a factor equal to 

the market basket index percentage increase, as discussed 

in sections I.G.2 and VI. of this proposed rule. As 

further explained in sections I.G.2 and VI. of this 

proposed rule, as applicable, we adjust the market basket 

index by the forecast error from the most recently 

available FY for which there is final data and apply this 

adjustment whenever the difference between the forecasted 

and actual change in the market basket exceeds a 

0.5 percentage point threshold. In addition, as further 

explained in sections I.G.2 and VI. of this proposed rule, 

effective FY 2012 and each subsequent fiscal year, we are 

required to reduce the market basket percentage by the MFP 
CMS-1351-P 35 

adjustment. We further adjust the rates by a wage index 

budget neutrality factor, described later in this section. 

Tables 2 and 3 reflect the updated components of the 

unadjusted Federal rates for FY 2012, prior to adjustment 

for case-mix. 

TABLE 2: FY 2012 Unadjusted Federal Rate Per Diem

Urban

Rate Component Nursing - Case-Mix

Therapy - CaseMix Therapy - NonCase-mix Non-Case-Mix 

Per Diem Amount $160.20 $120.68 $15.90 $81.76 

TABLE 3: FY 2012 Unadjusted Federal Rate Per Diem

Rural

Rate Component Nursing - Case-Mix

Therapy - CaseMix Therapy - NonCase-mix Non-Case-Mix 

Per Diem Amount $153.07 $139.15 $16.97 $83.28 

B. Case-Mix Adjustments 

1. Background 

Section 1888(e)(4)(G)(i) of the Act requires the 

Secretary to make an adjustment to account for case mix. 

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 and 

other data that the Secretary considers appropriate. In 

first implementing the SNF PPS (63 FR 26252, May 12, 1998), 

we developed the RUG-III case-mix classification system, 

which tied the amount of payment to resident resource use 

in combination with resident characteristic information. 
CMS-1351-P 36 

Staff time measurement (STM) studies conducted in 1990, 

1995, and 1997 provided information on resource use (time 

spent by staff members on residents) and resident 

characteristics that enabled us not only to establish 

RUG-III, but also to create case-mix indexes (CMIs). 

Although the establishment of the SNF PPS did not 

change Medicare's fundamental requirements for SNF 

coverage, there is a correlation between level of care and 

provider payment. One of the elements affecting the SNF 

PPS per diem rates is the case-mix adjustment derived from 

a classification system based on comprehensive resident 

assessments using the MDS. Case-mix classification is 

based, in part, on the beneficiary's need for skilled 

nursing care and therapy. The case-mix classification 

system uses clinical data from the MDS, and wage-adjusted 

staff time measurement data, to assign a case-mix group to 

each patient record that is then used to calculate a per 

diem payment under the SNF PPS. Because the MDS is a 

payment as well as a clinical document, we have provided 

extensive training on proper coding and the time frames for 

MDS completion in our Resident Assessment Instrument (RAI) 

Manual. For an MDS to be considered valid for use in 

determining payment, the MDS assessment must be completed 

in compliance with the instructions in the RAI Manual in 

effect at the time the assessment is completed. For 
CMS-1351-P 37 

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 web site at 

http://www.cms.gov/NursingHomeQualityInits/25_NHQIMDS30.asp

The original RUG-III grouper logic was based on 

clinical data collected in 1990, 1995, and 1997. As 

discussed in the SNF PPS proposed rule for FY 2010 (74 FR 

22208, May 12, 2009), we subsequently conducted a multiyear data collection and analysis under the Staff Time and 

Resource Intensity Verification (STRIVE) project to update 

the case-mix classification system for FY 2011. The 

resulting RUG-IV case-mix classification system reflected 

the data collected in 2006-2007 during the STRIVE project, 

and was finalized in the FY 2010 SNF PPS final rule (74 FR 

40288, August 11, 2009) to take effect in FY 2011 

concurrently with an updated new resident assessment 

instrument, the MDS 3.0, which collects the clinical data 

used for case-mix classification under RUG-IV. 

Under the BBA, each update of the SNF PPS payment 

rates must include the case-mix classification methodology 

applicable for the coming Federal FY. As indicated in 

section I.G of this proposed rule, the payment rates set 

forth herein reflect the use of the RUG-IV case-mix 

classification system from October 1, 2011, through 
CMS-1351-P 38 

September 30, 2012. 

2. Parity Adjustment 

As discussed further below, we are considering two 

options for the CMIs that would be applied to the FY 2012 

RUG-IV payment rates. 

a. Option for Recalibration of the Parity Adjustment

As explained in the FY 2011 SNF PPS notice with 

comment period (75 FR 42886, 42892, July 22, 2010), we 

applied an upward adjustment of 61 percent to the RUG-IV 

nursing CMIs to achieve parity between the RUG-53 and RUGIV models, based on an analysis using final FY 2009 claims 

data. Our calculation of the parity adjustment used the 

most recent data available to estimate RUG-IV utilization. 

As we stated in the FY 2010 SNF PPS final rule (74 FR 

40339), in the absence of actual RUG-IV utilization for FY 

2011, we believed the most recent data represented the best 

source available, by virtue of being the closest to the FY 

2011 timeframe. We also stated that as actual data for 

RUG-IV utilization became available, we intended to assess 

the effectiveness of the parity adjustment in maintaining 

budget neutrality and, if necessary, to recalibrate the 

adjustment in future years (see 74 FR 40339). 

Since the FY 2011 SNF PPS update notice was published, 

actual first quarter RUG-IV claims data became available. 

Our continued monitoring of recent claims data indicates 
CMS-1351-P 39 

that actual RUG-IV utilization patterns differ 

significantly from those we had projected using the FY 2009 

claims data. In particular, the proportion of patients 

grouped in the highest-paying RUG therapy categories, such 

as Ultra High Rehabilitation, greatly exceeded our 

expectations. This is likely due to the significant 

reduction in the use of concurrent therapy, which first 

quarter 2011 RUG-IV claims data suggest has been reduced to 

less than 5 percent of all therapy utilization. These 

first quarter 2011 RUG-IV claims also suggest a significant 

increase in the utilization of individual and group 

therapy, which, given current MDS coding instructions, may 

also account for the high proportion of SNF residents 

classified in the Ultra High Rehabilitation RUG categories. 

Based on this initial RUG-IV claims data, it would 

appear that rather than simply achieving parity, the FY 

2011 parity adjustment may have inadvertently triggered a 

significant increase in overall payment levels. We believe 

that if this preliminary assessment is confirmed as further 

FY 2011 RUG-IV claims data become available, a 

recalibration of the parity adjustment may become warranted 

in the FY 2012 final rule, in order to ensure that the 

adjustment continues to serve as intended to make the 

transition from RUG-53 to RUG-IV in a budget-neutral 

manner. As discussed in the FY 2010 SNF PPS final rule (74 
CMS-1351-P 40 

FR 40296), we believe that ensuring parity (that is, 

ensuring that the RUG-IV classification system is 

implemented as intended on a budget-neutral basis) is 

integral to the process of providing “for an appropriate 

adjustment to account for case mix” that is based upon 

appropriate data in accordance with section 

1888(e)(4)(G)(i) of the Act. Accordingly, in this proposed 

rule, we include the following analysis based on first 

quarter RUG-IV data in order to provide the public with 

information on the potential scope and impact of the 

recalibration we are considering for FY 2012. 

To determine a specific parity adjustment factor that, 

under the initial RUG-IV claims data currently available, 

would be needed to reestablish budget neutrality, we used 

approximately 920,000 first quarter 2011 claims (the most 

current data available at the time) to compare the 

distribution of payment days by RUG category under the 

original RUG-53 model with the distribution of payment days 

observed in the first quarter of 2011 under the RUG-IV 

model. Using a file which linked these 920,000 claims to 

the corresponding MDS assessments, we determined the 

appropriate RUG group for the patients covered by the 

aforementioned set of claims under RUG-53. This permitted 

a more precise comparison of the same patients under both 

systems, to control for potential variations in case-mix or 
CMS-1351-P 41 

patient volume. Given the RUG assignments for this set of 

SNF residents under both RUG-53 and RUG-IV, we were able to 

determine a distribution of RUG assignments. 

To determine the appropriate parity adjustment, 

consistent with the methodology described in the FY 2010 

SNF PPS final rule (74 FR 40296) and detailed in the FY 

2006 SNF PPS proposed rule (70 FR 29077 through 29079), we 

determined the total number of first quarter FY 2011 RUG-IV 

payment days, as well as the number of first quarter FY 

2011 payment days of each RUG-IV category based on the 

first quarter FY 2011 SNF PPS claims. By linking these FY 

2011 claims with the corresponding MDS 3.0 data, we were 

able to determine the appropriate RUG-53 category for each 

FY 2011 SNF resident represented in the sample of FY 2011 

claims. We multiplied the percentage of SNF residents in 

each RUG-IV and RUG-53 category by the total number of 

first quarter FY 2011 payment days of service in order to 

determine a distribution of RUG-IV and RUG-53 payment days, 

given the first quarter FY 2011 claims and linked MDS 3.0 

data. We then multiplied the projected RUG-IV and RUG-53 

days of service by the FY 2012 unadjusted Federal per diem 

payment rate components, multiplied by the unadjusted case 

mix indexes to establish expenditures under the RUG-53 and 

RUG-IV systems. The parity adjustment used to ensure that 

the transition between the two systems is budget-neutral 
CMS-1351-P 42 

and does not create, in and of itself, an increase in the 

amount of SNF expenditures, was determined as the percent 

increase necessary for the nursing CMIs to generate 

estimated expenditure levels under the RUG-IV system that 

were equal to those estimated under the RUG-53 system. 

Based on the first quarter FY 2011 RUG-IV claims data, we 

determined that the adjustment, which had originally 

produced an increase of 61 percent to the nursing CMIs as 

discussed in the FY 2011 SNF PPS update notice, would need 

to be decreased to 22.55 percent to achieve budget 

neutrality, if we were to apply the parity adjustment 

equally to all nursing CMIs as we have done in the past. 

However, given that the most notable differences between 

expected and actual utilization patterns occurred within 

the therapy RUG categories, we believe that rather than 

applying the new parity adjustment percentage to all the 

nursing CMIs, it would be more appropriate to achieve 

budget neutrality between the RUG-53 and RUG-IV systems by 

maintaining the 61 percent parity adjustment to the nursing 

CMIs for the RUG-IV non-therapy groups, and reducing the 61 

percent parity adjustment as it applied to the nursing CMIs 

for the RUG-IV therapy groups. Using this recalibration 

methodology described above, we found that the adjustment 

to the nursing CMIs of the RUG-IV therapy groups necessary 

to achieve parity, while maintaining the 61 percent parity 
CMS-1351-P 43 

adjustment for RUG-IV non-therapy groups, would be an 

updated adjustment of 19.81 percent. An analysis of recent 

utilization patterns is provided in Table 4. In this 

proposed rule, we are including Tables 5A and 6A, which 

illustrate the payment rates that would be derived from 

nursing CMIs reflecting this recalibration methodology. 

TABLE 4: FY 2011 Projected versus Actual RUG-IV 

Utilization Distribution as Percent of Total Days of 

Service 

RUG-IV Group Projected Actual 

RUX 0.18% 0.60% 

RUL 0.05% 0.75% 

RVX 0.36% 0.41% 

RVL 0.53% 0.56% 

RHX 0.43% 0.17% 

RHL 0.72% 0.19% 

RMX 0.76% 0.33% 

RML 0.79% 0.28% 

RLX 0.00% 0.01% 

RUC 3.56% 12.68% 

RUB 3.26% 16.19% 

RUA 2.12% 12.80% 

RVC 5.49% 7.82% 

RVB 7.17% 9.67% 

RVA 8.61% 9.13% 

RHC 6.34% 3.77% 

RHB 7.09% 3.54% 

RHA 11.41% 3.54% 

RMC 4.95% 3.06% 

RMB 6.84% 2.42% 

RMA 8.74% 2.41% 

RLB 0.21% 0.07% 

RLA 0.23% 0.06% 

ES3 0.52% 0.14% 

ES2 0.17% 0.14% 

ES1 0.35% 0.29% 

HE2 0.04% 0.10% 

HE1 1.40% 0.32% 

HD2 0.32% 0.09% 

HD1 1.30% 0.42% 

HC2 0.78% 0.06% 

HC1 1.33% 0.33% 

HB2 0.78% 0.07% 
CMS-1351-P 44 

RUG-IV Group Projected Actual 

HB1 0.61% 0.31% 

LE2 0.05% 0.12% 

LE1 0.70% 0.65% 

LD2 0.28% 0.12% 

LD1 1.31% 0.78% 

LC2 0.26% 0.07% 

LC1 0.60% 0.57% 

LB2 0.02% 0.04% 

LB1 0.34% 0.23% 

CE2 0.15% 0.04% 

CE1 0.21% 0.21% 

CD2 0.58% 0.07% 

CD1 0.70% 0.46% 

CC2 0.36% 0.07% 

CC1 0.67% 0.53% 

CB2 0.65% 0.05% 

CB1 0.53% 0.44% 

CA2 0.32% 0.07% 

CA1 1.41% 0.66% 

BB2 0.07% 0.02% 

BB1 0.27% 0.22% 

BA2 0.01% 0.01% 

BA1 0.26% 0.17% 

PE2 0.03% 0.02% 

PE1 0.07% 0.17% 

PD2 0.00% 0.03% 

PD1 0.38% 0.38% 

PC2 0.01% 0.05% 

PC1 1.26% 0.51% 

PB2 0.02% 0.01% 

PB1 0.59% 0.25% 

PA2 0.05% 0.01% 

PA1 0.40% 0.24% 

Note: Projected utilization data based on STRIVE study results. Actual utilization data based on 

first quarter 2011 claims data. 

We want to emphasize that any such recalibration would 

be implemented on a prospective basis only, which we 

believe would be the most equitable approach with regard to 

its potential impact on providers. For FY 2012, the 

aggregate impact of the recalibration described in this 

proposed rule would be the difference between the increase 
CMS-1351-P 45 

of 61 percent for all nursing CMIs (as set forth in the FY 

2011 update notice), and the recalibrated increase of 19.81 

percent for the nursing CMIs for the RUG-IV therapy groups 

(maintaining the 61 percent parity adjustment to the 

nursing CMIs for the RUG-IV non-therapy groups), or a 

negative $4.47 billion. We note that the negative $4.47 

billion would be partly offset by the FY 2012 market basket 

adjustment factor of 1.5 percent, or $530 million, with a 

net result of a negative $3.94 billion update for FY 2012 

(an aggregate negative impact of 11.3 percent). 

We note that as an alternative to the preceding 

recalibration methodology, we initially considered applying 

a recalibration to all nursing CMIs, irrespective of RUG 

category. However, we found that such a recalibration most 

drastically affected non-therapy RUG groups, such as the 

Extensive Services RUG-IV group, which seemed incongruent 

with the perceived reasons for differences between expected 

and actual utilization patterns, as noted in Table 4. In 

addition, we considered using an analytical approach that 

would reflect implementing partial adjustments to the casemix indexes over multiple years until parity is achieved. 

However, we believe that such an approach would continue to 

reimburse in amounts that significantly exceed our intended 

policy. Moreover, as we move forward with programs 

designed to enhance and restructure our post-acute care 
CMS-1351-P 46 

payment systems, we believe that payments under the SNF PPS 

should be established at their intended and most 

appropriate levels. We believe that stabilizing the 

baseline is a necessary first step toward properly 

implementing and maintaining the integrity of the RUG-IV 

classification methodology and the SNF PPS as a whole. 

 As explained above, in determining the parity 

adjustment in the FY 2011 update notice, we used CY 2009 

data as representing the most recent final claims data 

available at that time. However, we believe that it is 

appropriate to standardize the new model for the time 

period in which it is used, and we believe that using 

actual claims data under RUG-IV would allow us to calibrate 

the RUG-IV model more precisely. While, in the past, we 

have waited for a full year of claims data before 

recalibrating the CMIs, under the recalibration methodology 

discussed above, we are considering using partial FY 2011 

claims data (that is, FY 2011 RUG-IV claims data available 

at the time of the final rule) to recalibrate the CMIs for 

FY 2012 if our analysis of such data prior to the final 

rule confirms our initial assessment (based on first 

quarter FY 2011 claims data) that the parity adjustment 

implemented in the FY 2011 update notice has inadvertently 

triggered an increase in overall payments as discussed 

above. We believe it would be reasonable and appropriate 
CMS-1351-P 47 

to use actual RUG-IV claims data from FY 2011 to estimate 

utilization under RUG-IV, as we believe that it provides 

the most recent, clear evidence of utilization patterns and 

evolving provider behaviors under RUG-IV. Additionally, 

using FY 2010 claims data, we analyzed the quality of 

representation of the first quarter of FY 2010, in terms of 

both the volume of claims received and RUG distribution, 

for FY 2010 as a whole and found there to be no examples of 

seasonality which would affect predictions of SNF volume or 

utilization patterns. Given this analysis, we believe that 

using the partial FY 2011 claims data would provide a 

representative and reasonable sample from which to project 

FY 2011 utilization patterns and expenditures. We invite 

comments on the recalibration methodology considered above, 

as well as on potential alternative methodologies for 

recalibrating the parity adjustment in an accurate and 

equitable manner. 

We also note that any measures taken to achieve parity 

for RUG-IV may happen to coincide with the introduction of 

various revisions under the RUG-IV system (for example, the 

original RUG-IV parity adjustment took effect on October 1, 

2010, along with the allocation of concurrent therapy 

time). As noted in our discussion of the proposed 

allocation of group therapy time that appears later in this 

proposed rule in section V.C, preliminary data indicate a 
CMS-1351-P 48 

recent significant increase in the provision of individual 

and group therapy services, which have not, to date, been 

subject to the allocation requirement, and a corresponding 

decrease in the provision of concurrent therapy, which has 

been subject to the allocation requirement. We anticipate 

that imposing a similar allocation requirement for group 

therapy time (as discussed further in section V.C of this 

proposed rule) would eliminate an existing incentive to 

substitute such therapy for either concurrent or individual 

therapy. 

However, even if the distribution of therapy minutes 

between individual, concurrent, and group therapy changes, 

this does not mean that a reduction in the parity 

adjustment for the RUG-IV therapy groups would be 

inappropriate. As explained previously, the purpose of the 

parity adjustment is simply to ensure that the transition 

from the RUG-53 model to the RUG-IV model does not trigger, 

in and of itself, an increase or decrease in overall 

payment levels. Because the FY 2011 first quarter RUG-IV 

utilization trends indicated that the most notable 

differences between expected and actual RUG-IV utilization 

patterns occurred within the therapy RUG categories, we 

believe that focusing any recalibration on these groups 

would provide for budget neutrality in an equitable manner 

given the RUG-IV utilization. 
CMS-1351-P 49 

Moreover, even under the previous RUG-53 model, it is 

clear that the predominant mode of therapy that the payment 

rates were designed to address was individual therapy 

rather than concurrent or group therapy. As far back as 

the SNF PPS final rule for FY 2000, we specified that the 

minutes of group therapy received by the beneficiary may 

account for no more than 25 percent of the therapy (per 

discipline) received in a 7-day period (64 FR 41662, 

July 30, 1999). In addition, the SNF PPS rulemaking has on 

numerous occasions included discussions of concurrent 

therapy: in the FY 2002 proposed rule (66 FR 23991-23992, 

May 10, 2001) and final rule (66 FR 39567-68, 

July 31, 2001); in the FY 2006 proposed rule (70 FR 29082-

29083, May 19, 2005) and final rule (70 FR 45036-45037, 

August 4, 2005); and, most recently, in the FY 2010 

proposed rule (74 FR 22222-23, May 12, 2009) and final rule 

(74 FR 40315-19, August 11, 2009). These discussions 

clearly establish that we have always considered concurrent 

therapy as an infrequent exception rather than the norm. 

However, as discussed previously, the significant increase 

in individual and group therapy services and the reduction 

in concurrent therapy utilization reflected in the first 

quarter RUG-IV data indicate that actual RUG-IV utilization 

patterns differ significantly from those we had projected 

using FY 2009 claims data in calculating the parity 
CMS-1351-P 50 

adjustment. The resulting unintended and significant 

increase in overall payment levels has prompted the need to 

reexamine the parity adjustment. 

Thus, under the Medicare program, the standard of 

practice in the SNF setting has always been individual 

therapy, which is generally necessary to ensure that the 

services being delivered provide the high degree of 

individualized treatment and complex skill level required 

for Medicare coverage. We recognize that some SNFs may 

have actually used a less intensive combination of therapy 

modalities in the past year for some patients in response 

to the way in which therapy minutes were counted. However, 

the SNF PPS payment rates themselves have always reflected 

a standard of practice in which individual therapy is the 

predominant treatment modality. Further, because the 

overall payment rates under the previous RUG-III model were 

constructed to be sufficient to accommodate this level of 

resource intensity, we believe that the adequacy of those 

payment rates in this context would carry over to the 

payment rates under the current RUG-IV model, even if 

modified by an updated parity adjustment. 

Given the apparent magnitude of the recalibration that 

would be needed to restore parity based on the initial RUGIV claims data currently available (as discussed in the 

preceding analysis), we have provided in Tables 5A and 6A 
CMS-1351-P 51 

the case-mix adjusted RUG-IV payment rates which reflect 

the parity adjustment recalibration considered above based 

on our preliminary analysis using first quarter FY 2011 

claims data. As further FY 2011 RUG-IV data become 

available, before we publish the final rule, we would 

review such additional data to confirm our preliminary 

assessment of the recalibration that would be necessary to 

achieve parity between the RUG-53 and RUG-IV models and 

would revise the parity adjustment in the final rule as 

necessary based on this additional data. We believe that 

the very magnitude of the potential recalibration, based on 

first quarter FY 2011 data, would make it inappropriate for 

us merely to consider payment rates for FY 2012 that solely 

reflect the standard update methodology without regard to 

the need for maintaining parity, as such an approach 

ultimately could result in continuing to make overall 

payments that significantly exceed their intended levels 

for an indefinite period. 

b. Option for Application of Standard Update for FY 2012

Without Recalibration

Although our preliminary analysis of the RUG-IV data 

currently available suggests that recalibration of the 

parity adjustment would be needed to restore parity between 

the RUG-53 and RUG-IV models, in the circumstances 

discussed below, we are also considering not recalibrating 
CMS-1351-P 52 

the CMIs for FY 2012 and applying the standard update to 

the FY 2011 payment rates. As we observed in the preceding 

discussion of the recalibration option, it would appear 

from the currently available FY 2011 claims data that 

overall payments under the parity adjustment are 

significantly exceeding their intended levels. However, it 

is also possible that the apparent magnitude of the 

overpayments may itself represent a temporary aberrance 

resulting from the limited FY 2011 data that are available 

at this point in time. Moreover, we note that as with any 

significant programmatic change, the transition from the 

previous case-mix classification system to RUG-IV has been 

accompanied by a learning curve for providers, as they work 

to familiarize themselves with the requirements of the new 

system. As a consequence, it is possible that as 

additional FY 2011 claims data become available, they may 

indicate utilization patterns that are more consistent with 

our projections, and expenditures that are more in parity 

with those under the previous RUG-53 model. For this 

reason, we reserve the option to not implement in the final 

rule the type of recalibration discussed above, and instead 

to apply the standard update of the payment rates for FY 

2012 if we find that the additional RUG-IV claims data 

collected prior to publication of the final rule are 

consistent with parity in expenditures between the current 
CMS-1351-P 53 

RUG-IV and previous RUG-53 models. 

Accordingly, in this proposed rule, we are considering 

two separate options regarding the FY 2012 payment rates: 

one that incorporates the kind of recalibration discussed 

above which, based on the initial RUG-IV claims data 

currently available, may be necessary to restore overall 

payments under the parity adjustment to their intended 

levels (which recalibration may be adjusted based on 

further FY 2011 RUG-IV claims data that become available 

prior to publication of the final rule), and another that 

simply reflects the standard update to the FY 2011 payment 

rates without a recalibration of the FY 2011 parity 

adjustment. We solicit comments on these options as 

described above. 

We list the case-mix adjusted RUG-IV payment rates 

which would exist if we choose to move forward with the 

recalibration of the parity adjustment described throughout 

this section, provided separately for urban and rural SNFs 

in Tables 5A and 6A, with the corresponding case-mix values 

which reflect the parity adjustment recalibration discussed 

above. Similarly, the case-mix adjusted RUG-IV rates, 

which would occur in the absence of such a recalibration of 

the parity adjustment, are listed in Tables 5B and 6B. 

These tables do not reflect the AIDS add-on enacted by 

section 511 of the MMA, which we apply only after making 
CMS-1351-P 54 

all other adjustments (wage and case-mix). 

TABLE 5A: RUG-IV Case-Mix Adjusted Federal Rates and 

Associated Indexes (including Parity Adjustment 

Recalibration) 

URBAN 

RUG-IV Nursing Therapy Nursing Therapy 

Non-case 

Mix 

Non-case 

Mix Total 

Category Index Index Component Component 

Therapy 

Comp Component Rate 

RUX 2.67 1.87 $427.73 $225.67 $81.76 $735.16 

RUL 2.57 1.87 $411.71 $225.67 $81.76 $719.14 

RVX 2.61 1.28 $418.12 $154.47 $81.76 $654.35 

RVL 2.19 1.28 $350.84 $154.47 $81.76 $587.07 

RHX 2.55 0.85 $408.51 $102.58 $81.76 $592.85 

RHL 2.15 0.85 $344.43 $102.58 $81.76 $528.77 

RMX 2.47 0.55 $395.69 $66.37 $81.76 $543.82 

RML 2.19 0.55 $350.84 $66.37 $81.76 $498.97 

RLX 2.26 0.28 $362.05 $33.79 $81.76 $477.60 

RUC 1.56 1.87 $249.91 $225.67 $81.76 $557.34 

RUB 1.56 1.87 $249.91 $225.67 $81.76 $557.34 

RUA 0.99 1.87 $158.60 $225.67 $81.76 $466.03 

RVC 1.51 1.28 $241.90 $154.47 $81.76 $478.13 

RVB 1.11 1.28 $177.82 $154.47 $81.76 $414.05 

RVA 1.10 1.28 $176.22 $154.47 $81.76 $412.45 

RHC 1.45 0.85 $232.29 $102.58 $81.76 $416.63 

RHB 1.19 0.85 $190.64 $102.58 $81.76 $374.98 

RHA 0.91 0.85 $145.78 $102.58 $81.76 $330.12 

RMC 1.36 0.55 $217.87 $66.37 $81.76 $366.00 

RMB 1.22 0.55 $195.44 $66.37 $81.76 $343.57 

RMA 0.84 0.55 $134.57 $66.37 $81.76 $282.70 

RLB 1.50 0.28 $240.30 $33.79 $81.76 $355.85 

RLA 0.71 0.28 $113.74 $33.79 $81.76 $229.29 

ES3 3.58 $573.52 $15.90 $81.76 $671.18 

ES2 2.67 $427.73 $15.90 $81.76 $525.39 

ES1 2.32 $371.66 $15.90 $81.76 $469.32 

HE2 2.22 $355.64 $15.90 $81.76 $453.30 

HE1 1.74 $278.75 $15.90 $81.76 $376.41 

HD2 2.04 $326.81 $15.90 $81.76 $424.47 

HD1 1.60 $256.32 $15.90 $81.76 $353.98 

HC2 1.89 $302.78 $15.90 $81.76 $400.44 

HC1 1.48 $237.10 $15.90 $81.76 $334.76 

HB2 1.86 $297.97 $15.90 $81.76 $395.63 

HB1 1.46 $233.89 $15.90 $81.76 $331.55 

LE2 1.96 $313.99 $15.90 $81.76 $411.65 

LE1 1.54 $246.71 $15.90 $81.76 $344.37 

LD2 1.86 $297.97 $15.90 $81.76 $395.63 

LD1 1.46 $233.89 $15.90 $81.76 $331.55 
CMS-1351-P 55 

RUG-IV Nursing Therapy Nursing Therapy 

Non-case 

Mix 

Non-case 

Mix Total 

Category Index Index Component Component 

Therapy 

Comp Component Rate 

LC2 1.56 $249.91 $15.90 $81.76 $347.57 

LC1 1.22 $195.44 $15.90 $81.76 $293.10 

LB2 1.46 $233.89 $15.90 $81.76 $331.55 

LB1 1.14 $182.63 $15.90 $81.76 $280.29 

CE2 1.68 $269.14 $15.90 $81.76 $366.80 

CE1 1.50 $240.30 $15.90 $81.76 $337.96 

CD2 1.56 $249.91 $15.90 $81.76 $347.57 

CD1 1.38 $221.08 $15.90 $81.76 $318.74 

CC2 1.29 $206.66 $15.90 $81.76 $304.32 

CC1 1.15 $184.23 $15.90 $81.76 $281.89 

CB2 1.15 $184.23 $15.90 $81.76 $281.89 

CB1 1.02 $163.40 $15.90 $81.76 $261.06 

CA2 0.88 $140.98 $15.90 $81.76 $238.64 

CA1 0.78 $124.96 $15.90 $81.76 $222.62 

BB2 0.97 $155.39 $15.90 $81.76 $253.05 

BB1 0.90 $144.18 $15.90 $81.76 $241.84 

BA2 0.70 $112.14 $15.90 $81.76 $209.80 

BA1 0.64 $102.53 $15.90 $81.76 $200.19 

PE2 1.50 $240.30 $15.90 $81.76 $337.96 

PE1 1.40 $224.28 $15.90 $81.76 $321.94 

PD2 1.38 $221.08 $15.90 $81.76 $318.74 

PD1 1.28 $205.06 $15.90 $81.76 $302.72 

PC2 1.10 $176.22 $15.90 $81.76 $273.88 

PC1 1.02 $163.40 $15.90 $81.76 $261.06 

PB2 0.84 $134.57 $15.90 $81.76 $232.23 

PB1 0.78 $124.96 $15.90 $81.76 $222.62 

PA2 0.59 $94.52 $15.90 $81.76 $192.18 

PA1 0.54 $86.51 $15.90 $81.76 $184.17 

TABLE 5B: RUG-IV Case-Mix Adjusted Federal Rates and 

Associated Indexes (without Parity Adjustment 

Recalibration) 

URBAN 

RUG-IV Nursing Therapy Nursing Therapy 

Non-case 

Mix Non-case Mix Total 

Category Index Index Component Component 

Therapy 

Comp Component Rate 

RUX 3.59 1.87 $575.12 $225.67 $81.76 $882.55

RUL 3.45 1.87 $552.69 $225.67 $81.76 $860.12

RVX 3.51 1.28 $562.30 $154.47 $81.76 $798.53

RVL 2.95 1.28 $472.59 $154.47 $81.76 $708.82
CMS-1351-P 56 

RUG-IV Nursing Therapy Nursing Therapy 

Non-case 

Mix Non-case Mix Total 

Category Index Index Component Component 

Therapy 

Comp Component Rate 

RHX 3.43 0.85 $549.49 $102.58 $81.76 $733.83

RHL 2.89 0.85 $462.98 $102.58 $81.76 $647.32

RMX 3.31 0.55 $530.26 $66.37 $81.76 $678.39

RML 2.95 0.55 $472.59 $66.37 $81.76 $620.72

RLX 3.04 0.28 $487.01 $33.79 $81.76 $602.56

RUC 2.10 1.87 $336.42 $225.67 $81.76 $643.85

RUB 2.10 1.87 $336.42 $225.67 $81.76 $643.85

RUA 1.33 1.87 $213.07 $225.67 $81.76 $520.50

RVC 2.02 1.28 $323.60 $154.47 $81.76 $559.83

RVB 1.49 1.28 $238.70 $154.47 $81.76 $474.93

RVA 1.48 1.28 $237.10 $154.47 $81.76 $473.33

RHC 1.94 0.85 $310.79 $102.58 $81.76 $495.13

RHB 1.60 0.85 $256.32 $102.58 $81.76 $440.66

RHA 1.23 0.85 $197.05 $102.58 $81.76 $381.39

RMC 1.83 0.55 $293.17 $66.37 $81.76 $441.30

RMB 1.63 0.55 $261.13 $66.37 $81.76 $409.26

RMA 1.13 0.55 $181.03 $66.37 $81.76 $329.16

RLB 2.01 0.28 $322.00 $33.79 $81.76 $437.55

RLA 0.95 0.28 $152.19 $33.79 $81.76 $267.74

ES3 3.58 $573.52 $15.90 $81.76 $671.18

ES2 2.67 $427.73 $15.90 $81.76 $525.39

ES1 2.32 $371.66 $15.90 $81.76 $469.32

HE2 2.22 $355.64 $15.90 $81.76 $453.30

HE1 1.74 $278.75 $15.90 $81.76 $376.41

HD2 2.04 $326.81 $15.90 $81.76 $424.47

HD1 1.60 $256.32 $15.90 $81.76 $353.98

HC2 1.89 $302.78 $15.90 $81.76 $400.44

HC1 1.48 $237.10 $15.90 $81.76 $334.76

HB2 1.86 $297.97 $15.90 $81.76 $395.63

HB1 1.46 $233.89 $15.90 $81.76 $331.55

LE2 1.96 $313.99 $15.90 $81.76 $411.65

LE1 1.54 $246.71 $15.90 $81.76 $344.37

LD2 1.86 $297.97 $15.90 $81.76 $395.63

LD1 1.46 $233.89 $15.90 $81.76 $331.55

LC2 1.56 $249.91 $15.90 $81.76 $347.57

LC1 1.22 $195.44 $15.90 $81.76 $293.10
CMS-1351-P 57 

RUG-IV Nursing Therapy Nursing Therapy 

Non-case 

Mix Non-case Mix Total 

Category Index Index Component Component 

Therapy 

Comp Component Rate 

LB2 1.46 $233.89 $15.90 $81.76 $331.55

LB1 1.14 $182.63 $15.90 $81.76 $280.29

CE2 1.68 $269.14 $15.90 $81.76 $366.80

CE1 1.50 $240.30 $15.90 $81.76 $337.96

CD2 1.56 $249.91 $15.90 $81.76 $347.57

CD1 1.38 $221.08 $15.90 $81.76 $318.74

CC2 1.29 $206.66 $15.90 $81.76 $304.32

CC1 1.15 $184.23 $15.90 $81.76 $281.89

CB2 1.15 $184.23 $15.90 $81.76 $281.89

CB1 1.02 $163.40 $15.90 $81.76 $261.06

CA2 0.88 $140.98 $15.90 $81.76 $238.64

CA1 0.78 $124.96 $15.90 $81.76 $222.62

BB2 0.97 $155.39 $15.90 $81.76 $253.05

BB1 0.90 $144.18 $15.90 $81.76 $241.84

BA2 0.70 $112.14 $15.90 $81.76 $209.80

BA1 0.64 $102.53 $15.90 $81.76 $200.19

PE2 1.50 $240.30 $15.90 $81.76 $337.96

PE1 1.40 $224.28 $15.90 $81.76 $321.94

PD2 1.38 $221.08 $15.90 $81.76 $318.74

PD1 1.28 $205.06 $15.90 $81.76 $302.72

PC2 1.10 $176.22 $15.90 $81.76 $273.88

PC1 1.02 $163.40 $15.90 $81.76 $261.06

PB2 0.84 $134.57 $15.90 $81.76 $232.23

PB1 0.78 $124.96 $15.90 $81.76 $222.62

PA2 0.59 $94.52 $15.90 $81.76 $192.18

PA1 0.54 $86.51 $15.90 $81.76 $184.17

TABLE 6A: RUG-IV Case-Mix Adjusted Federal Rates and 

Associated Indexes (including Parity Adjustment 

Recalibration) 

RURAL 

RUG-IV Nursing Therapy Nursing Therapy 

Non-case 

Mix 

Non-case 

Mix Total 

Category Index Index Component Component 

Therapy 

Comp Component Rate 

RUX 2.67 1.87 $408.70 $260.21 $83.28 $752.19 

RUL 2.57 1.87 $393.39 $260.21 $83.28 $736.88 
CMS-1351-P 58 

RUG-IV Nursing Therapy Nursing Therapy 

Non-case 

Mix 

Non-case 

Mix Total 

RVX 2.61 1.28 $399.51 $178.11 $83.28 $660.90 

RVL 2.19 1.28 $335.22 $178.11 $83.28 $596.61 

RHX 2.55 0.85 $390.33 $118.28 $83.28 $591.89 

RHL 2.15 0.85 $329.10 $118.28 $83.28 $530.66 

RMX 2.47 0.55 $378.08 $76.53 $83.28 $537.89 

RML 2.19 0.55 $335.22 $76.53 $83.28 $495.03 

RLX 2.26 0.28 $345.94 $38.96 $83.28 $468.18 

RUC 1.56 1.87 $238.79 $260.21 $83.28 $582.28 

RUB 1.56 1.87 $238.79 $260.21 $83.28 $582.28 

RUA 0.99 1.87 $151.54 $260.21 $83.28 $495.03 

RVC 1.51 1.28 $231.14 $178.11 $83.28 $492.53 

RVB 1.11 1.28 $169.91 $178.11 $83.28 $431.30 

RVA 1.10 1.28 $168.38 $178.11 $83.28 $429.77 

RHC 1.45 0.85 $221.95 $118.28 $83.28 $423.51 

RHB 1.19 0.85 $182.15 $118.28 $83.28 $383.71 

RHA 0.91 0.85 $139.29 $118.28 $83.28 $340.85 

RMC 1.36 0.55 $208.18 $76.53 $83.28 $367.99 

RMB 1.22 0.55 $186.75 $76.53 $83.28 $346.56 

RMA 0.84 0.55 $128.58 $76.53 $83.28 $288.39 

RLB 1.50 0.28 $229.61 $38.96 $83.28 $351.85 

RLA 0.71 0.28 $108.68 $38.96 $83.28 $230.92 

ES3 3.58 $547.99 $16.97 $83.28 $648.24 

ES2 2.67 $408.70 $16.97 $83.28 $508.95 

ES1 2.32 $355.12 $16.97 $83.28 $455.37 

HE2 2.22 $339.82 $16.97 $83.28 $440.07 

HE1 1.74 $266.34 $16.97 $83.28 $366.59 

HD2 2.04 $312.26 $16.97 $83.28 $412.51 

HD1 1.60 $244.91 $16.97 $83.28 $345.16 

HC2 1.89 $289.30 $16.97 $83.28 $389.55 

HC1 1.48 $226.54 $16.97 $83.28 $326.79 

HB2 1.86 $284.71 $16.97 $83.28 $384.96 

HB1 1.46 $223.48 $16.97 $83.28 $323.73 

LE2 1.96 $300.02 $16.97 $83.28 $400.27 

LE1 1.54 $235.73 $16.97 $83.28 $335.98 

LD2 1.86 $284.71 $16.97 $83.28 $384.96 

LD1 1.46 $223.48 $16.97 $83.28 $323.73 

LC2 1.56 $238.79 $16.97 $83.28 $339.04 

LC1 1.22 $186.75 $16.97 $83.28 $287.00 

LB2 1.46 $223.48 $16.97 $83.28 $323.73 

LB1 1.14 $174.50 $16.97 $83.28 $274.75 

CE2 1.68 $257.16 $16.97 $83.28 $357.41 

CE1 1.50 $229.61 $16.97 $83.28 $329.86 

CD2 1.56 $238.79 $16.97 $83.28 $339.04 

CD1 1.38 $211.24 $16.97 $83.28 $311.49 

CC2 1.29 $197.46 $16.97 $83.28 $297.71 

CC1 1.15 $176.03 $16.97 $83.28 $276.28 

CB2 1.15 $176.03 $16.97 $83.28 $276.28 

CB1 1.02 $156.13 $16.97 $83.28 $256.38 
CMS-1351-P 59 

RUG-IV Nursing Therapy Nursing Therapy 

Non-case 

Mix 

Non-case 

Mix Total 

CA2 0.88 $134.70 $16.97 $83.28 $234.95 

CA1 0.78 $119.39 $16.97 $83.28 $219.64 

BB2 0.97 $148.48 $16.97 $83.28 $248.73 

BB1 0.90 $137.76 $16.97 $83.28 $238.01 

BA2 0.70 $107.15 $16.97 $83.28 $207.40 

BA1 0.64 $97.96 $16.97 $83.28 $198.21 

PE2 1.50 $229.61 $16.97 $83.28 $329.86 

PE1 1.40 $214.30 $16.97 $83.28 $314.55 

PD2 1.38 $211.24 $16.97 $83.28 $311.49 

PD1 1.28 $195.93 $16.97 $83.28 $296.18 

PC2 1.10 $168.38 $16.97 $83.28 $268.63 

PC1 1.02 $156.13 $16.97 $83.28 $256.38 

PB2 0.84 $128.58 $16.97 $83.28 $228.83 

PB1 0.78 $119.39 $16.97 $83.28 $219.64 

PA2 0.59 $90.31 $16.97 $83.28 $190.56 

PA1 0.54 82.66 16.97 83.28 182.91 

TABLE 6B: RUG-IV Case-Mix Adjusted Federal Rates and 

Associated Indexes (without Parity Adjustment 

Recalibration) 

RURAL 

RUG-IV Nursing Therapy Nursing Therapy 

Non-case 

Mix 

Non-case 

Mix Total 

Category Index Index Component Component

Therapy 

Comp Component Rate 

RUX 3.59 1.87 $549.52 $260.21 $83.28 $893.01

RUL 3.45 1.87 $528.09 $260.21 $83.28 $871.58

RVX 3.51 1.28 $537.28 $178.11 $83.28 $798.67

RVL 2.95 1.28 $451.56 $178.11 $83.28 $712.95

RHX 3.43 0.85 $525.03 $118.28 $83.28 $726.59

RHL 2.89 0.85 $442.37 $118.28 $83.28 $643.93

RMX 3.31 0.55 $506.66 $76.53 $83.28 $666.47

RML 2.95 0.55 $451.56 $76.53 $83.28 $611.37

RLX 3.04 0.28 $465.33 $38.96 $83.28 $587.57

RUC 2.10 1.87 $321.45 $260.21 $83.28 $664.94

RUB 2.10 1.87 $321.45 $260.21 $83.28 $664.94

RUA 1.33 1.87 $203.58 $260.21 $83.28 $547.07

RVC 2.02 1.28 $309.20 $178.11 $83.28 $570.59

RVB 1.49 1.28 $228.07 $178.11 $83.28 $489.46

RVA 1.48 1.28 $226.54 $178.11 $83.28 $487.93

RHC 1.94 0.85 $296.96 $118.28 $83.28 $498.52

RHB 1.60 0.85 $244.91 $118.28 $83.28 $446.47
CMS-1351-P 60 

RUG-IV Nursing Therapy Nursing Therapy 

Non-case 

Mix 

Non-case 

Mix Total 

Category Index Index Component Component

Therapy 

Comp Component Rate 

RHA 1.23 0.85 $188.28 $118.28 $83.28 $389.84

RMC 1.83 0.55 $280.12 $76.53 $83.28 $439.93

RMB 1.63 0.55 $249.50 $76.53 $83.28 $409.31

RMA 1.13 0.55 $172.97 $76.53 $83.28 $332.78

RLB 2.01 0.28 $307.67 $38.96 $83.28 $429.91

RLA 0.95 0.28 $145.42 $38.96 $83.28 $267.66

ES3 3.58 $547.99 $16.97 $83.28 $648.24

ES2 2.67 $408.70 $16.97 $83.28 $508.95

ES1 2.32 $355.12 $16.97 $83.28 $455.37

HE2 2.22 $339.82 $16.97 $83.28 $440.07

HE1 1.74 $266.34 $16.97 $83.28 $366.59

HD2 2.04 $312.26 $16.97 $83.28 $412.51

HD1 1.60 $244.91 $16.97 $83.28 $345.16

HC2 1.89 $289.30 $16.97 $83.28 $389.55

HC1 1.48 $226.54 $16.97 $83.28 $326.79

HB2 1.86 $284.71 $16.97 $83.28 $384.96

HB1 1.46 $223.48 $16.97 $83.28 $323.73

LE2 1.96 $300.02 $16.97 $83.28 $400.27

LE1 1.54 $235.73 $16.97 $83.28 $335.98

LD2 1.86 $284.71 $16.97 $83.28 $384.96

LD1 1.46 $223.48 $16.97 $83.28 $323.73

LC2 1.56 $238.79 $16.97 $83.28 $339.04

LC1 1.22 $186.75 $16.97 $83.28 $287.00

LB2 1.46 $223.48 $16.97 $83.28 $323.73

LB1 1.14 $174.50 $16.97 $83.28 $274.75

CE2 1.68 $257.16 $16.97 $83.28 $357.41

CE1 1.50 $229.61 $16.97 $83.28 $329.86

CD2 1.56 $238.79 $16.97 $83.28 $339.04

CD1 1.38 $211.24 $16.97 $83.28 $311.49

CC2 1.29 $197.46 $16.97 $83.28 $297.71

CC1 1.15 $176.03 $16.97 $83.28 $276.28

CB2 1.15 $176.03 $16.97 $83.28 $276.28

CB1 1.02 $156.13 $16.97 $83.28 $256.38

CA2 0.88 $134.70 $16.97 $83.28 $234.95

CA1 0.78 $119.39 $16.97 $83.28 $219.64

BB2 0.97 $148.48 $16.97 $83.28 $248.73

BB1 0.90 $137.76 $16.97 $83.28 $238.01
CMS-1351-P 61 

RUG-IV Nursing Therapy Nursing Therapy 

Non-case 

Mix 

Non-case 

Mix Total 

Category Index Index Component Component

Therapy 

Comp Component Rate 

BA2 0.70 $107.15 $16.97 $83.28 $207.40

BA1 0.64 $97.96 $16.97 $83.28 $198.21

PE2 1.50 $229.61 $16.97 $83.28 $329.86

PE1 1.40 $214.30 $16.97 $83.28 $314.55

PD2 1.38 $211.24 $16.97 $83.28 $311.49

PD1 1.28 $195.93 $16.97 $83.28 $296.18

PC2 1.10 $168.38 $16.97 $83.28 $268.63

PC1 1.02 $156.13 $16.97 $83.28 $256.38

PB2 0.84 $128.58 $16.97 $83.28 $228.83

PB1 0.78 $119.39 $16.97 $83.28 $219.64

PA2 0.59 $90.31 $16.97 $83.28 $190.56

PA1 0.54 $82.66 $16.97 $83.28 $182.91

C. Wage Index Adjustment to Federal Rates

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 we find appropriate. 

Since the inception of a PPS for SNFs, we have used 

hospital wage data in developing a wage index to be applied 

to SNFs. We are maintaining that practice for FY 2012, as 

we continue to believe that in the absence of SNF-specific 

wage data, using the hospital inpatient wage index is 

appropriate and reasonable for the SNF PPS. As explained 

in the update notice for FY 2005 (69 FR 45786, 

July 30, 2004), 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, 
CMS-1351-P 62 

the collection of the occupational wage data 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. 

Finally, we 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 2012 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 use the average 

wage index from all contiguous Core-Based Statistical Areas 

(CBSAs) as a reasonable proxy. This methodology was used 

to construct the wage index for rural Massachusetts for FY 

2011. However, there is now a rural hospital with wage 

data upon which to base an area wage index for rural 

Massachusetts. Therefore, it is not necessary to apply 

this methodology to rural Massachusetts for FY 2012. For 

rural Puerto Rico, we do not apply this methodology due to 

the distinct economic circumstances that exist there, but 

instead continue using the most recent wage index 

previously available for that area. For urban areas 

without specific hospital wage index data, we use the 
CMS-1351-P 63 

average wage indexes of all of the urban areas within the 

State to serve as a reasonable proxy for the wage index of 

that urban CBSA. For FY 2012, there is an additional urban 

area without hospital wage index data. Therefore, for FY 

2012, the two urban areas without wage index data available 

are CBSA 25980, Hinesville-Fort Stewart, GA, and CBSA 

49700, Yuba City, CA. 

To calculate the SNF PPS wage index adjustment, we 

apply the wage index adjustment to the labor-related 

portion of the Federal rate, which is 68.805 percent of the 

total rate. This percentage reflects the labor-related 

relative importance for FY 2012, using the revised and 

rebased FY 2004-based market basket. The labor-related 

relative importance for FY 2011 was 69.311, as shown in 

Table 11. We calculate the 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 2012. 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 2012 than the base year weights from 

the SNF market basket. 
CMS-1351-P 64 

 We calculate the labor-related relative importance for 

FY 2012 in four steps. First, we compute the FY 2012 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 2012 price 

index level for that cost category by the total market 

basket price index level. Third, we determine the FY 2012 

relative importance for each cost category by multiplying 

this ratio by the base year (FY 2004) weight. Finally, we 

add the FY 2012 relative importance for each of the 

labor-related cost categories (wages and salaries, employee 

benefits, non-medical professional fees, labor-intensive 

services, and a portion of capital-related expenses) to 

produce the FY 2012 labor-related relative importance. 

Tables 7A and 8A show the case-mix adjusted RUG-IV Federal 

rates by labor-related and non-labor-related components 

that would exist if we choose to move forward with the 

parity adjustment recalibration described in section 

II.B.2. Similarly, Tables 7B and 8B show the case-mix 

adjusted RUG-IV Federal rates by labor-related and nonlabor related components in the absence of such a parity 

adjustment recalibration. 
CMS-1351-P 65 

TABLE 7A: RUG-IV Case-Mix Adjusted Federal Rates for Urban 

SNFs 

by Labor and Non-Labor Component (including Parity 

Adjustment Recalibration) 

RUG-IV 

Category 

Total 

Rate 

Labor 

Portion 

Non-Labor 

Portion 

RUX 735.16 $505.83 $229.33 

RUL 719.14 $494.80 $224.34 

RVX 654.35 $450.23 $204.12 

RVL 587.07 $403.93 $183.14 

RHX 592.85 $407.91 $184.94 

RHL 528.77 $363.82 $164.95 

RMX 543.82 $374.18 $169.64 

RML 498.97 $343.32 $155.65 

RLX 477.60 $328.61 $148.99 

RUC 557.34 $383.48 $173.86 

RUB 557.34 $383.48 $173.86 

RUA 466.03 $320.65 $145.38 

RVC 478.13 $328.98 $149.15 

RVB 414.05 $284.89 $129.16 

RVA 412.45 $283.79 $128.66 

RHC 416.63 $286.66 $129.97 

RHB 374.98 $258.00 $116.98 

RHA 330.12 $227.14 $102.98 

RMC 366.00 $251.83 $114.17 

RMB 343.57 $236.39 $107.18 

RMA 282.70 $194.51 $88.19 

RLB 355.85 $244.84 $111.01 

RLA 229.29 $157.76 $71.53 

ES3 671.18 $461.81 $209.37 

ES2 525.39 $361.49 $163.90 

ES1 469.32 $322.92 $146.40 

HE2 453.30 $311.89 $141.41 

HE1 376.41 $258.99 $117.42 

HD2 424.47 $292.06 $132.41 

HD1 353.98 $243.56 $110.42 

HC2 400.44 $275.52 $124.92 

HC1 334.76 $230.33 $104.43 

HB2 395.63 $272.21 $123.42 

HB1 331.55 $228.12 $103.43 

LE2 411.65 $283.24 $128.41 

LE1 344.37 $236.94 $107.43 

LD2 395.63 $272.21 $123.42 

LD1 331.55 $228.12 $103.43 

LC2 347.57 $239.15 $108.42 

LC1 293.10 $201.67 $91.43 

LB2 331.55 $228.12 $103.43 

LB1 280.29 $192.85 $87.44 

CE2 366.80 $252.38 $114.42 

CE1 337.96 $232.53 $105.43 
CMS-1351-P 66 

RUG-IV 

Category 

Total 

Rate 

Labor 

Portion 

Non-Labor 

Portion 

CD2 347.57 $239.15 $108.42 

CD1 318.74 $219.31 $99.43 

CC2 304.32 $209.39 $94.93 

CC1 281.89 $193.95 $87.94 

CB2 281.89 $193.95 $87.94 

CB1 261.06 $179.62 $81.44 

CA2 238.64 $164.20 $74.44 

CA1 222.62 $153.17 $69.45 

BB2 253.05 $174.11 $78.94 

BB1 241.84 $166.40 $75.44 

BA2 209.80 $144.35 $65.45 

BA1 200.19 $137.74 $62.45 

PE2 337.96 $232.53 $105.43 

PE1 321.94 $221.51 $100.43 

PD2 318.74 $219.31 $99.43 

PD1 302.72 $208.29 $94.43 

PC2 273.88 $188.44 $85.44 

PC1 261.06 $179.62 $81.44 

PB2 232.23 $159.79 $72.44 

PB1 222.62 $153.17 $69.45 

PA2 192.18 $132.23 $59.95 

PA1 184.17 $126.72 $57.45 

TABLE 7B: RUG-IV Case-Mix Adjusted Federal Rates for Urban 

SNFs by Labor and Non-Labor Component (Without Parity 

Adjustment Recalibration) 

RUG-IV 

Category 

Total 

Rate 

Labor 

Portion 

Non-Labor 

Portion 

RUX 882.55 $607.24 $275.31 

RUL 860.12 $591.81 $268.31 

RVX 798.53 $549.43 $249.10 

RVL 708.82 $487.70 $221.12 

RHX 733.83 $504.91 $228.92 

RHL 647.32 $445.39 $201.93 

RMX 678.39 $466.77 $211.62 

RML 620.72 $427.09 $193.63 

RLX 602.56 $414.59 $187.97 

RUC 643.85 $443.00 $200.85 

RUB 643.85 $443.00 $200.85 

RUA 520.50 $358.13 $162.37 

RVC 559.83 $385.19 $174.64 

RVB 474.93 $326.78 $148.15 

RVA 473.33 $325.67 $147.66 

RHC 495.13 $340.67 $154.46 

RHB 440.66 $303.20 $137.46 

RHA 381.39 $262.42 $118.97 

RMC 441.30 $303.64 $137.66 

RMB 409.26 $281.59 $127.67 
CMS-1351-P 67 

RUG-IV 

Category 

Total 

Rate 

Labor 

Portion 

Non-Labor 

Portion 

RMA 329.16 $226.48 $102.68 

RLB 437.55 $301.06 $136.49 

RLA 267.74 $184.22 $83.52 

ES3 671.18 $461.81 $209.37 

ES2 525.39 $361.49 $163.90 

ES1 469.32 $322.92 $146.40 

HE2 453.30 $311.89 $141.41 

HE1 376.41 $258.99 $117.42 

HD2 424.47 $292.06 $132.41 

HD1 353.98 $243.56 $110.42 

HC2 400.44 $275.52 $124.92 

HC1 334.76 $230.33 $104.43 

HB2 395.63 $272.21 $123.42 

HB1 331.55 $228.12 $103.43 

LE2 411.65 $283.24 $128.41 

LE1 344.37 $236.94 $107.43 

LD2 395.63 $272.21 $123.42 

LD1 331.55 $228.12 $103.43 

LC2 347.57 $239.15 $108.42 

LC1 293.10 $201.67 $91.43 

LB2 331.55 $228.12 $103.43 

LB1 280.29 $192.85 $87.44 

CE2 366.80 $252.38 $114.42 

CE1 337.96 $232.53 $105.43 

CD2 347.57 $239.15 $108.42 

CD1 318.74 $219.31 $99.43 

CC2 304.32 $209.39 $94.93 

CC1 281.89 $193.95 $87.94 

CB2 281.89 $193.95 $87.94 

CB1 261.06 $179.62 $81.44 

CA2 238.64 $164.20 $74.44 

CA1 222.62 $153.17 $69.45 

BB2 253.05 $174.11 $78.94 

BB1 241.84 $166.40 $75.44 

BA2 209.80 $144.35 $65.45 

BA1 200.19 $137.74 $62.45 

PE2 337.96 $232.53 $105.43 

PE1 321.94 $221.51 $100.43 

PD2 318.74 $219.31 $99.43 

PD1 302.72 $208.29 $94.43 

PC2 273.88 $188.44 $85.44 

PC1 261.06 $179.62 $81.44 

PB2 232.23 $159.79 $72.44 

PB1 222.62 $153.17 $69.45 

PA2 192.18 $132.23 $59.95 

PA1 184.17 $126.72 $57.45 
CMS-1351-P 68 

TABLE 8A: RUG-IV Case-Mix Adjusted Federal Rates for Rural 

SNFs by Labor and Non-Labor Component (Including Parity 

Adjustment Recalibration) 

RUG-IV 

Category 

Total 

Rate 

Labor 

Portion 

Non-Labor 

Portion 

RUX 752.19 $517.54 $234.65 

RUL 736.88 $507.01 $229.87 

RVX 660.90 $454.73 $206.17 

RVL 596.61 $410.50 $186.11 

RHX 591.89 $407.25 $184.64 

RHL 530.66 $365.12 $165.54 

RMX 537.89 $370.10 $167.79 

RML 495.03 $340.61 $154.42 

RLX 468.18 $322.13 $146.05 

RUC 582.28 $400.64 $181.64 

RUB 582.28 $400.64 $181.64 

RUA 495.03 $340.61 $154.42 

RVC 492.53 $338.89 $153.64 

RVB 431.30 $296.76 $134.54 

RVA 429.77 $295.70 $134.07 

RHC 423.51 $291.40 $132.11 

RHB 383.71 $264.01 $119.70 

RHA 340.85 $234.52 $106.33 

RMC 367.99 $253.20 $114.79 

RMB 346.56 $238.45 $108.11 

RMA 288.39 $198.43 $89.96 

RLB 351.85 $242.09 $109.76 

RLA 230.92 $158.88 $72.04 

ES3 648.24 $446.02 $202.22 

ES2 508.95 $350.18 $158.77 

ES1 455.37 $313.32 $142.05 

HE2 440.07 $302.79 $137.28 

HE1 366.59 $252.23 $114.36 

HD2 412.51 $283.83 $128.68 

HD1 345.16 $237.49 $107.67 

HC2 389.55 $268.03 $121.52 

HC1 326.79 $224.85 $101.94 

HB2 384.96 $264.87 $120.09 

HB1 323.73 $222.74 $100.99 

LE2 400.27 $275.41 $124.86 

LE1 335.98 $231.17 $104.81 

LD2 384.96 $264.87 $120.09 

LD1 323.73 $222.74 $100.99 

LC2 339.04 $233.28 $105.76 

LC1 287.00 $197.47 $89.53 

LB2 323.73 $222.74 $100.99 

LB1 274.75 $189.04 $85.71 

CE2 357.41 $245.92 $111.49 

CE1 329.86 $226.96 $102.90 
CMS-1351-P 69 

RUG-IV 

Category 

Total 

Rate 

Labor 

Portion 

Non-Labor 

Portion 

CD2 339.04 $233.28 $105.76 

CD1 311.49 $214.32 $97.17 

CC2 297.71 $204.84 $92.87 

CC1 276.28 $190.09 $86.19 

CB2 276.28 $190.09 $86.19 

CB1 256.38 $176.40 $79.98 

CA2 234.95 $161.66 $73.29 

CA1 219.64 $151.12 $68.52 

BB2 248.73 $171.14 $77.59 

BB1 238.01 $163.76 $74.25 

BA2 207.40 $142.70 $64.70 

BA1 198.21 $136.38 $61.83 

PE2 329.86 $226.96 $102.90 

PE1 314.55 $216.43 $98.12 

PD2 311.49 $214.32 $97.17 

PD1 296.18 $203.79 $92.39 

PC2 268.63 $184.83 $83.80 

PC1 256.38 $176.40 $79.98 

PB2 228.83 $157.45 $71.38 

PB1 219.64 $151.12 $68.52 

PA2 190.56 $131.11 $59.45 

PA1 182.91 $125.85 $57.06 

TABLE 8B: RUG-IV Case-Mix Adjusted Federal Rates for Rural 

SNFs by Labor and Non-Labor Component (Without Parity 

Adjustment Recalibration)

RUG-IV 

Category 

Total 

Rate 

Labor 

Portion 

Non-Labor 

Portion 

RUX 893.01 $614.44 $278.57 

RUL 871.58 $599.69 $271.89 

RVX 798.67 $549.52 $249.15 

RVL 712.95 $490.55 $222.40 

RHX 726.59 $499.93 $226.66 

RHL 643.93 $443.06 $200.87 

RMX 666.47 $458.56 $207.91 

RML 611.37 $420.65 $190.72 

RLX 587.57 $404.28 $183.29 

RUC 664.94 $457.51 $207.43 

RUB 664.94 $457.51 $207.43 

RUA 547.07 $376.41 $170.66 

RVC 570.59 $392.59 $178.00 

RVB 489.46 $336.77 $152.69 

RVA 487.93 $335.72 $152.21 

RHC 498.52 $343.01 $155.51 

RHB 446.47 $307.19 $139.28 

RHA 389.84 $268.23 $121.61 

RMC 439.93 $302.69 $137.24 
CMS-1351-P 70 

RUG-IV 

Category 

Total 

Rate 

Labor 

Portion 

Non-Labor 

Portion 

RMB 409.31 $281.63 $127.68 

RMA 332.78 $228.97 $103.81 

RLB 429.91 $295.80 $134.11 

RLA 267.66 $184.16 $83.50 

ES3 648.24 $446.02 $202.22 

ES2 508.95 $350.18 $158.77 

ES1 455.37 $313.32 $142.05 

HE2 440.07 $302.79 $137.28 

HE1 366.59 $252.23 $114.36 

HD2 412.51 $283.83 $128.68 

HD1 345.16 $237.49 $107.67 

HC2 389.55 $268.03 $121.52 

HC1 326.79 $224.85 $101.94 

HB2 384.96 $264.87 $120.09 

HB1 323.73 $222.74 $100.99 

LE2 400.27 $275.41 $124.86 

LE1 335.98 $231.17 $104.81 

LD2 384.96 $264.87 $120.09 

LD1 323.73 $222.74 $100.99 

LC2 339.04 $233.28 $105.76 

LC1 287.00 $197.47 $89.53 

LB2 323.73 $222.74 $100.99 

LB1 274.75 $189.04 $85.71 

CE2 357.41 $245.92 $111.49 

CE1 329.86 $226.96 $102.90 

CD2 339.04 $233.28 $105.76 

CD1 311.49 $214.32 $97.17 

CC2 297.71 $204.84 $92.87 

CC1 276.28 $190.09 $86.19 

CB2 276.28 $190.09 $86.19 

CB1 256.38 $176.40 $79.98 

CA2 234.95 $161.66 $73.29 

CA1 219.64 $151.12 $68.52 

BB2 248.73 $171.14 $77.59 

BB1 238.01 $163.76 $74.25 

BA2 207.40 $142.70 $64.70 

BA1 198.21 $136.38 $61.83 

PE2 329.86 $226.96 $102.90 

PE1 314.55 $216.43 $98.12 

PD2 311.49 $214.32 $97.17 

PD1 296.18 $203.79 $92.39 

PC2 268.63 $184.83 $83.80 

PC1 256.38 $176.40 $79.98 

PB2 228.83 $157.45 $71.38 

PB1 219.64 $151.12 $68.52 

PA2 190.56 $131.11 $59.45 

PA1 182.91 $125.85 $57.06 
CMS-1351-P 71 

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 that are greater or less than 

would otherwise be made in the absence of the wage 

adjustment. For FY 2012 (Federal rates effective 

October 1, 2011), 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 2011 to the weighted average wage adjustment factor for 

FY 2012. For this calculation, we use the same 2010 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 share of the rate component 

multiplied by the wage index plus the non-labor share of 

the rate component. The budget neutrality factor for this 

year is 1.0001. The wage index applicable to FY 2012 is 

set forth in Tables A and B, which appear in the Addendum 

of this proposed rule. 

In the SNF PPS final rule for FY 2006 (70 FR 45026, 

August 4, 2005), we adopted the changes discussed in the 

Office of Management and Budget (OMB) Bulletin No. 03-04 

(June 6, 2003), available online at 

www.whitehouse.gov/omb/bulletins/b03-04.html, which 
CMS-1351-P 72 

announced revised definitions for Metropolitan Statistical 

Areas (MSAs), and the creation of Micropolitan Statistical 

Areas and Combined Statistical Areas. In addition, OMB 

published subsequent bulletins regarding CBSA changes, 

including changes in CBSA numbers and titles. As indicated 

in the FY 2008 SNF PPS final rule (72 FR 43423, 

August 3, 2007), this and all subsequent SNF PPS rules and 

notices are considered to incorporate the CBSA changes 

published in the most recent OMB bulletin that applies to 

the hospital wage data used to determine the current SNF 

PPS wage index. The OMB bulletins are available online at 

http://www.whitehouse.gov/omb/bulletins/index.html. 

In adopting the OMB CBSA geographic designations, we 

provided for a 1-year transition 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 CBSAbased 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), subsequent to the 

expiration of this 1-year transition on September 30, 2006, 

we used the full CBSA-based wage index values, as now 

presented in Tables A and B in the Addendum of this 

proposed rule. 
CMS-1351-P 73 

D. Updates to the Federal Rates

 In accordance with section 1888(e)(4)(E) of the Act as 

amended by section 311 of the BIPA, and section 

1888(e)(5)(B) of the Act as amended by section 3401(b) of 

the Affordable Care Act, the payment rates in this proposed 

rule reflect an update equal to the full SNF market basket, 

estimated at 2.7 percentage points, reduced by the MFP 

adjustment. As discussed in sections I.G.2 and VI.C of 

this proposed rule, the annual update includes a 1.2 

percentage point reduction to account for the MFP 

adjustment described in the latter section, for a net 

update of 1.5 percent for FY 2012. We continue to 

disseminate the rates, wage index, and case-mix 

classification methodology through the Federal Register

before the August 1 that precedes the start of each 

succeeding FY. 

E. Relationship of Case-Mix Classification System to 

Existing Skilled Nursing Facility Level-of-Care Criteria

 As discussed in §413.345, we include in each update of 

the Federal payment rates in the Federal Register the 

designation of those specific RUGs under the classification 

system that represent the required SNF level of care, as 

provided in §409.30. As set forth in the FY 2011 SNF PPS 

update notice (75 FR 42910, July 22, 2010), this 

designation reflects an administrative presumption under 
CMS-1351-P 74 

the 66-group RUG-IV system that beneficiaries who are 

correctly assigned to one of the upper 52 RUG-IV groups on 

the initial 5-day, Medicare-required assessment are 

automatically classified as meeting the SNF level of care 

definition up to and including the assessment reference 

date on the 5-day Medicare-required assessment. 

 A beneficiary assigned to any of the lower 14 RUG-IV 

groups is not automatically classified as either meeting or 

not meeting the definition, but instead receives an 

individual level of care determination using the existing 

administrative criteria. This presumption recognizes the 

strong likelihood that beneficiaries assigned to one of the 

upper 52 RUG-IV groups during the immediate post-hospital 

period require a covered level of care, which would be less 

likely for those beneficiaries assigned to one of the lower 

14 RUG-IV groups. 

In this proposed rule, we once again propose to 

designate the upper 52 RUG-IV groups for purposes of this 

administrative presumption, consisting of all groups 

encompassed by the following RUG-IV categories: 

• Rehabilitation plus Extensive Services; 

• Ultra High Rehabilitation; 

• Very High Rehabilitation; 

• High Rehabilitation; 
CMS-1351-P 75 

• Medium Rehabilitation; 

• Low Rehabilitation; 

• Extensive Services; 

• Special Care High; 

• Special Care Low; and, 

• Clinically Complex. 

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 

the services prompting the beneficiary’s assignment to one 

of the upper 52 RUG-IV groups (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, July 30, 1999), 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 in 

which a resident's assignment to one of the upper . . 
CMS-1351-P 76 

. groups is itself based on 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 of the 5-day assessment. 

F. Example of Computation of Adjusted PPS Rates and SNF 

Payment

 Using the hypothetical SNF XYZ described below, Tables 

9A and 9B show the adjustments made to the Federal per diem 

rates to compute the provider's actual per diem PPS payment 

under each of the described scenarios (that is, with a 

parity adjustment recalibration and without a parity 

adjustment recalibration). SNF XYZ’s 12-month cost 

reporting period begins October 1, 2011. As illustrated in 

Table 9A, SNF XYZ’s total PPS payment would equal 

$40,021.02 with the application of a parity adjustment 

recalibration (calculated using first quarter FY 2011 

data), as described in section II.B.2 above. SNF XYZ’s 

total PPS payment would equal $42,636.62 without the 

application of the parity adjustment recalibration 

considered in section II.B.2, as illustrated in Table 9B. 

We derive the Labor and Non-labor columns from Tables 7A 

and 7B. 
CMS-1351-P 77 

TABLE 9A: RUG-IV – Including Parity Adjustment 

Recalibration 

SNF XYZ: Located in Cedar Rapids, IA (Urban CBSA 16300) 

Wage Index: 0.8857 

RUG-IV 

Group Labor Wage Index 

Adjusted 

Labor 

NonLabor Adjusted 

Rate 

Percent 

Adjustment 

Medicare 

Days Payment 

RVX $450.23 0.8857 $398.77 $204.12 $602.89 $602.89 14 $8,440.46 

ES2 $361.49 0.8857 $320.17 $163.90 $484.07 $484.07 30 $14,522.10 

RHA $227.14 0.8857 $201.18 $102.98 $304.16 $304.16 16 $4,866.56 

CC2* $209.39 0.8857 $185.46 $94.93 $280.39 $639.29 10 $6,392.90 

BA2 $144.35 0.8857 $127.85 $65.45 $193.30 $193.30 30 $5,799.00 

 100 $40,021.02 

*Reflects a 128 percent adjustment from section 511 of the MMA. 

TABLE 9B: RUG-IV – Without Parity Adjustment Recalibration 

SNF XYZ: Located in Cedar Rapids, IA (Urban CBSA 16300) 

Wage Index: 0.8857 

RUG-IV 

Group Labor Wage Index 

Adjusted 

Labor 

NonLabor Adjusted 

Rate 

Percent 

Adjustment 

Medicare 

Days Payment 

RVX $549.43 0.8857 $486.63 $249.10 $735.73 $735.73 14 $10,300.22

ES2 $361.49 0.8857 $320.17 $163.90 $484.07 $484.07 30 $14,522.10

RHA $262.42 0.8857 $232.43 $118.97 $351.40 $351.40 16 $5,622.40

CC2* $209.39 0.8857 $185.46 $94.93 $280.39 $639.29 10 $6,392.90

BA2 $144.35 0.8857 $127.85 $65.45 $193.30 $193.30 30 $5,799.00

 100 $42,636.62

*Reflects a 128 percent adjustment from section 511 of the MMA.

III. Resource Utilization Groups, Version 4 (RUG-IV) 

A. Prospective Payment for SNF Non-therapy Ancillary 

Costs

1. Previous Research 

We have conducted several studies since 1999 to refine 

the reimbursement methodology for non-therapy ancillary 

(NTA) services covered by the SNF PPS. At the inception of 

the SNF PPS, payment for NTA services was included in the 

44-group RUG system of case-mix groups. Analysis showed 

that there was only a weak correlation between NTA services 
CMS-1351-P 78 

costs and the RUG-III classification group. As the current 

RUG-IV system, similar to the RUG-III system, has 

maintained NTA costs coverage as part of the nursing CMIs, 

we believe that the present methodology for case-mix 

adjusting the NTA payment amount may not be the most 

accurate predictor of NTA costs. We are particularly 

concerned that the present system could underestimate NTA 

costs for the patients with the highest NTA needs, which 

could lead to restricted access to care for those patients. 

As a result of research conducted in the late 1990s, 

one proposal included in the FY 2001 proposed rule was to 

modify the RUG system by adding 14 additional RUG groups 

(65 FR 19193-19194, 19203, April 10, 2000). These 

additional groups were designed to recognize that patients 

qualifying for both a Rehabilitation RUG and an Extensive 

Services RUG incurred NTA costs estimated to be as much as 

three times higher than those of patients who qualify 

solely for a Rehabilitation RUG. 

As noted in the 2006 Report to Congress on case-mix 

refinements (available online at 

http://www.cms.gov/SNFPPS/Downloads/RC_2006_PC-PPSSNF.pdf), 

additional research conducted by Abt Associates in the late 

1990s experimented with several mathematical models of NTA 

costs. Results from this work could have practical 

application as an ancillary “add-on” index based on the 
CMS-1351-P 79 

beneficiary’s predicted, per diem NTA costs. As discussed 

in the FY 2001 SNF PPS proposed rule (65 FR 19195, April 

10, 2000), NTA index models (both weighted and unweighted) 

were tested after exploring MDS variables that appeared to 

be predictive of NTA costs. In the unweighted model, cost 

predictions were based on counts of qualifying patient 

characteristics (characteristics such as respiratory 

infection or skin wounds). In the weighted models, a small 

set of payment groups were defined from “index models” that 

weighted the predictors where the weights were proportional 

to the marginal impact of a patient characteristic on 

estimated NTA costs. The array of predicted costs 

generated by the equation could be subdivided into ranges 

of costs, or intervals, in order to define a small number 

of payment groups. As discussed in the Technical Appendix 

to the FY 2001 proposed rule (65 FR 19240, 19248, April 10, 

2000), variations were created by applying the index models 

to alternative sets of RUG groups. As further discussed in 

the FY 2001 proposed rule (65 FR 19196), we proposed a 

separate unweighted NTA index to be applied to certain RUG 

categories based on clinical variables on the MDS. In 

addition, to facilitate the incorporation of this proposed 

refinement into the case-mix classification system, we 

proposed to create a new component of the payment rates for 

NTA services (65 FR 19192).
CMS-1351-P 80 

As explained in the FY 2001 SNF PPS final rule (65 FR 

46773, July 31, 2000), while the expanded RUG groups 

approach and the NTA index approach initially appeared to 

improve payment accuracy in comparison to the existing 

case-mix system, attempts to validate the results on a 

later national PPS data set did not confirm the initial 

findings. As a result, we did not finalize the proposals 

made in April 2000. 

We sponsored subsequent research by the Urban 

Institute using claims samples from 2001. This work led to 

the FY 2006 final rule (70 FR 45026, 45030-34, 

August 4, 2005), which essentially implemented a variation 

of the 58-group RUG proposal developed by Abt Associates 

discussed above. In that rule, we finalized a system 

composed of 53 groups, by augmenting the original 44-group 

system with nine additional groups identifying patients 

simultaneously qualifying for the Extensive Services and 

Rehabilitation groups. This incremental change to the 

grouping system was accompanied by an across-the-board 

increase in the case-mix weights for the payment component 

that includes NTA costs. Both of these modifications were 

intended to enable the original RUG-III payment model to 

account more accurately for variation in NTA costs. 

Using the 2001 data set, the Urban Institute also 

experimented with prediction models that were extensions of 
CMS-1351-P 81 

the original Abt Associates NTA index approaches. A small 

number of additional variables (for example, age) and 

improvements to the methodology used to measure independent 

variables in the data base led to potential improvements 

over the earlier model. The Urban Institute also explored 

substantially more complex models that incorporated 

variables derived from qualifying hospital stay claims; 

these models were estimated separately for patients after 

subdividing them into one of three groups: acute, chronic, 

or rehabilitation. 

In 2008, the Medicare Payment Advisory Commission 

(MedPAC) sponsored analyses by researchers from the Urban 

Institute extending some of the Institute’s earlier work. 

This led to a MedPAC proposal that was based on the most 

promising results of the Institute’s earlier work. The 

study used 2003 Medicare data. It resulted in a prediction 

equation for NTA services that used a large number of 

variables derived from the MDS assessments and hospital 

claims (for example, diagnosis), a measure of length of 

stay, as well as patient age (Bowen Garrett and Douglas A. 

Wissoker, “Modeling Alternative Designs for a Revised PPS 

for Skilled Nursing Facilities: A study conducted by staff 

from the Urban Institute for the Medicare Payment Advisory 

Commission,” June, 2008; available online at 

http://www.medpac.gov/documents/Jun08_SNF_PPS_CONTRACTOR_CC
CMS-1351-P 82 

.pdf). MedPAC did not propose a system of NTA case-mix 

groups based on the prediction equation. However, the 

basic equation could be used to generate an array of 

predictions in the population and to group the predictions 

into cost intervals for defining a smaller number of 

payment groups. This is the same approach that Abt 

Associates took with its index model. 

In a June 2010 memo to MedPAC (available online at 

http://www.medpac.gov/documents/Oct10_SNF_NonTherapyAncilla

ry_CONTRACTOR_CC.pdf), the Urban Institute described a 

series of refinements to MedPAC’s 2008 proposed model. 

Most importantly, with their 2010 model, the Urban 

Institute sought to reduce the number of indicators from 

nearly 70 and ensure that all indicators are derived from 

information based on available administrative data. 

Additionally, when the Urban Institute used 2007 SNF data 

files (as compared to the 2003 data files used to support 

the previous model), they found that the predictive ability 

of the model was reduced slightly from 23 percent to 21 

percent. 

After completing a revised statistical analysis and 

eliminating indicators for conditions that were either 

relatively rare or had little impact on NTA costs, the 

Urban Institute advanced a 20-variable “streamlined” model 

that maintained almost equivalent predictive accuracy to 
CMS-1351-P 83 

MedPAC’s 2008 proposed model described above. The 

streamlined model included many of the “high-impact” 

variables contained in the 69-variable model, such as IV 

medication use and respiratory services. Additionally, the 

streamlined model included variables suggested by CMS, such 

as the nursing case-mix index and the MDS diabetes 

diagnosis, which were also found to be strong indicators of 

anticipated NTA costs. 

2. Conceptual Analysis 

Based on our initial research, we continue to believe 

that an administratively feasible and equitable approach to 

prospective payments for NTA costs would incorporate the 

following criteria: 

● Uses information from available administrative data 

(data available on claims or on the MDS assessment); 

● Uses predictor variables that represent meaningful 

correlates of NTA services that are highly predictive, 

clinically sensible, sensitive to patient NTA variation, 

and do not promote undesirable incentives for providers; 

● Is developed by using the best and most recently 

available data sources, in order to assure that it reflects 

current care practices and resource utilization; 

● Results in a separate NTA component and index that 

uses a minimal number of payment groups, or tiers, to limit 

the complexity of the SNF PPS as a whole; and 
CMS-1351-P 84 

● Uses payment groups and predictor variables that 

are readily understandable and clinically intuitive. 

These criteria and our initial research intent were 

discussed in the FY 2010 SNF PPS proposed rule (74 FR 22238 

through 22241, May 12, 2009), and responses to comments on 

this initial research proposal were part of the FY 2010 SNF 

PPS final rule (74 FR 40341 through 40342, August 11, 

2009). These comments helped to guide our initial research 

to develop the conceptual model discussed in this proposed 

rule. 

In addition to the criteria specified above, our 

research is also guided by the results of multiple recent 

studies, such as those conducted by the Urban Institute, 

regarding the relationship between NTA utilization and 

resident condition. Most relevant to our work in this 

area, these studies suggest that the highest-cost ancillary 

services (such as respiratory services, enteral and 

parenteral feeding, and treatment of chronic conditions, 

such as AIDS) are used by a small subset of the SNF 

population, and that the high and varied cost of individual 

services or drugs by these populations--rather than the 

volume of NTA utilization--can at least partially explain 

the wide variance in NTA costs. 

To continue our analytic work for developing a payment 

methodology for NTA costs, we have utilized a large 
CMS-1351-P 85 

analytic data file that combines Medicare SNF claims, cost 

reports, and MDS assessments from FY 2007. The file has 

been used to study relationships between reported claims 

charges for NTA-related revenue centers and predictor 

variables defined from items on the MDS. We augmented the 

analytic file with diagnosis information from the patient’s 

qualifying hospital stay as a way of compensating for 

potentially incomplete diagnosis reporting on MDS and on 

SNF claims. (As noted earlier, it is not our intention to 

use hospital-assigned diagnoses directly in any tiered 

system we may propose.) Because three-quarters of the NTA 

costs are pharmacy-related, we have summarized the 

patient’s recent diagnoses using the diagnosis 

classification system CMS developed for Medicare Part D 

risk adjustment. This is known as the RxHCC system. The 

RxHCC system was developed from the Hierarchical Condition 

Categories (HCCs) used for risk-adjustment in Medicare Part 

C. We also continue to examine the performance of the 

diagnosis flags from Section I of the MDS. 

Now that more recent data are available, we are 

developing a similar file using FY 2009 data, which may be 

used to test our initial model formulas and monitor any 

recent changes to NTA utilization patterns. We solicit 

comment on the criteria specified above and the conceptual 

model discussed in the following sections. 
CMS-1351-P 86 

3. Analytic Sample 

To develop the analytic sample, we linked FY 2007 SNF 

cost reports with SNF Medicare Part A claims covering 

services delivered during the SNF’s cost reporting period. 

The actual cost of the NTA services is determined by 

adjusting claims charges for NTA services in accordance 

with cost-to-charge ratios (CCRs) from the cost report. 

The NTA costs are then used as the dependent variable in 

all subsequent analyses, while MDS items and claims 

diagnoses act as the independent variables. We collected 

all claims, and used only those claims submitted within the 

reporting period for the cost reports available. Requiring 

a matched cost report eliminated some SNFs represented in 

the 2007 National Claims History. The SNFs that do not 

meet this threshold tend to be smaller SNFs, though this 

requirement does not adversely affect the 

representativeness of the analytic sample. 

We have studied the same three general categories of 

NTAs as previous research has suggested: 

respiratory-related costs (for example, ventilator 

services), drug-related costs, and other non-therapy 

ancillary (ONTA) costs (for example, wound dressings). We 

derive category-specific CCRs for each facility’s cost 

report remaining in the sample. An additional requirement 

for an SNF to be in the sample is that it reports some drug 
CMS-1351-P 87 

and ONTA charges on the claims; otherwise, the facility’s 

data may not be accurate enough to be used in the sample. 

Positive respiratory charges are not necessary, as these 

types of charges are not always reported. One reason is 

that some respiratory charges, such as oxygen-related 

supplies, are reported as ONTAs, based on certain reporting 

standards. 

We trimmed the sample to eliminate facilities with 

extreme values for CCRs, as outlying CCRs could skew the 

results of our analysis. Finally, we compared the drug and 

ONTA charges on the claims to the SNF’s cost report drug 

and ONTA charges, since wide differences could be the 

result of incomplete or inaccurate reporting. Facilities 

that were found to exhibit such wide differences were 

dropped from the sample. For our analysis, accurate charge 

reporting is critical for the measurement of our dependentvariable, CCR-adjusted NTA charges. 

4. Approach to Analysis 

The dependent variable in our analysis is the NTA 

charges, adjusted by CCRs. The independent variables are 

diagnosis groupings and variables selected from the matched 

MDS assessments. With the recent implementation of the MDS 

3.0, we will monitor any changes in our selected set of 

variables and, based on research conducted as part of the 

Post Acute Care Payment Reform Demonstration (PAC-PRD), we 
CMS-1351-P 88 

may explore changes to the MDS assessment which would allow 

us to collect more detailed information on NTA costs and 

utilization. However, as our current analytic database is 

based on FY 2007 and FY 2009 data, our analysis still 

utilizes the MDS 2.0. The following sections of the MDS 

2.0 contribute variables to be tested for their predictive 

value: 

E: Mood and Behavior Problems 

G: Physical Functioning and Structural Problems 

H: Continence in Last 14 Days 

I: Disease Diagnoses 

J: Health Conditions 

K: Oral/Nutritional Status 

L: Oral/Dental Status 

M: Skin Condition 

O: Medications 

P: Special Treatments and Procedures 

 Our study of the ability of particular MDS items and 

diagnosis groupings to predict NTA costs builds on previous 

research discussed above and adheres to the criteria 

outlined earlier in this section. Now that we have 

completed the initial phase of this research, we are in a 

better position to understand the relationship between NTA 

costs and certain classes of illness. Understanding these 

relationships has led us to explore potential groupings of 
CMS-1351-P 89 

conditions, distinct from the RUG classification or 

qualifying hospital condition, which could suggest a 

feasible system for NTA payment tiers. 

5. Payment Methodology 

The payments associated with a new NTA component of 

the SNF PPS would be financed by reallocating that portion 

of the current nursing component which has been previously 

considered to account for NTA costs. Our intent in adding 

a separate NTA component, distinct from the nursing 

component, would be to provide greater predictive ability, 

promote more equitable NTA reimbursement, and achieve a 

more cost-effective payment structure for SNFs.

The NTA payment would be broken into two parts: a 

routine NTA bundled payment (RNP) and a tiered non-routine 

NTA payment (TNP). 

a. Routine Non-Therapy Ancillary Payment

The RNP would constitute a base payment for every 

patient day, distinct from the tiered NTA payment described 

below and separate from the nursing component, to cover the 

cost of routine NTA services (drugs, laboratory services, 

etc.) that are commonly given to a wide range of SNF 

patients. CMS is currently analyzing SNF claims data 

linked to specially collected data from Medicare research 

projects, such as the STRIVE study and the PAC-PRD project, 

to help determine the specific drugs and services that 
CMS-1351-P 90 

would be included in the RNP and an appropriate per diem 

amount to cover their purchase and administration. 

Examples of such routine NTAs could include high blood 

pressure medication, common analgesics, anti-infective 

agents, sleep aids, laxatives, and standard blood tests, 

among others. The RNP would help capture the daily cost of 

administering these types of routine NTAs, thereby allowing 

for a more clearly defined and appropriate tiered NTA 

bundled payment to cover non-routine NTA services, as well 

as a more transparent payment for such routine costs 

incurred by providers. We also believe that, in 

conjunction with a possible NTA outlier policy (discussed 

below), having an RNP component would limit the 

administrative burdens associated with reporting that might 

be required to administer outlier payments. 

As with the other components of the SNF PPS, the RNP 

piece of the NTA component would be updated annually to 

account for changes in the market basket and other relevant 

adjustments. It would operate in much the same way as the 

non-therapy non-case mix adjusted component of the current 

SNF PPS, in that it would constitute a flat amount added to 

the payment for all applicable SNF claims. 

b. Tiered Non-Routine NTA Bundled Payment

The TNP would operate as a variation of the model 

previously discussed in the FY 2001 SNF PPS proposed rule 
CMS-1351-P 91 

(65 FR 19188, April 10, 2000). Specifically, we are in the 

process of developing a tiered NTA bundled payment, where 

payment tiers track relative variations in NTA costs and 

utilization. The June 2008 Urban Institute report 

referenced above (Garrett and Wissoker, June 2008) 

suggested that average wage-adjusted per diem NTA costs 

were approximately $68, with a standard deviation of $94, 

which would support the use of multiple case-mix-adjusted 

tiers. 

The TNP is designed to capture the average cost of the 

drugs and services, given the patient’s clinical 

characteristics, excluding the drugs and services covered 

by the RNP or those already excluded from the SNF PPS 

altogether under the consolidated billing requirements. 

Such a cost schedule and tier structure is currently under 

development, using recent Medicare Part A claims data and 

data from the PAC-PRD. 

We have focused on developing an index model in which 

predictions are arrayed and then subdivided into fixed 

ranges of cost values to form distinct payment groups, or 

tiers, as we believe this type of approach is better 

equipped to handle the number of explanatory variables 

needed to predict NTA costs reasonably well. The tiers 

which constitute the TNP will be based on average NTA costs 

as measured from available administrative data. Generally, 
CMS-1351-P 92 

based on the resident’s case mix and the variables selected 

for predicting NTA costs, if the resident’s expected NTA 

costs exceed a particular threshold, then the facility 

would be paid a prospective amount, which would be added to 

the base RNP amount. 

c. Non-Routine NTA Outlier Payment

Though we currently lack explicit statutory authority 

to establish an SNF outlier policy, we are continuing to 

explore how such a policy could be implemented in the event 

that we receive statutory authority. Results of the STRIVE 

study suggest that it is the cost of individual high-cost 

pharmaceuticals and other NTAs, rather than a particular 

patient’s use of a high volume of NTA services, which 

creates high NTA costs. Given the effect of specific highcost items like prescription drugs or respiratory services, 

it is clear that any type of averaging system (such as the 

conceptual NTA model discussed here) will not in all cases 

account for the cost of such items. It will be 

insufficiently sensitive to high NTA costs deriving from 

variations among costs of individual medications and ONTAs. 

Accordingly, we are currently reviewing the available 

data to determine how an outlier approach could be designed 

to address patient-specific expenditures that exceed the 

routine and non-routine NTA payments that we would make, 

while allowing for an outlier threshold. While we have not 
CMS-1351-P 93 

yet fully simulated a potential SNF outlier payment policy, 

we believe it is appropriate to conduct analysis at the 

stay level, because NTA utilization can fluctuate 

significantly during a given SNF stay. Using a stay-level 

analysis of potential NTA cost outliers would help us to 

predict NTA costs more accurately over the course of a 

given SNF stay. Any further developments in this area will 

be discussed in future rulemaking. 

6. Temporary AIDS Add-On Payment under Section 511 of the 

MMA 

As discussed in section I.E of this proposed rule, 

section 511 of the MMA amended section 1888(e)(12) of the 

Act to provide for a temporary increase of 128 percent in 

the PPS per diem payment for any SNF residents with 

Acquired Immune Deficiency Syndrome (AIDS), effective for 

services furnished on or after October 1, 2004. This 

special AIDS add-on was to remain in effect until “ . . . 

the Secretary certifies that there is an appropriate 

adjustment in the case mix . . . to compensate for the 

increased costs associated with [such] residents . . . .” 

We know, as a result of the STRIVE study and a review of 

SNF cost data, that SNF residents with AIDS require much 

greater and more costly care than those without AIDS and 

that much of this additional cost is the result of NTAs, 

specifically high-cost medications. 
CMS-1351-P 94 

Accordingly, as we have not yet completed work on the NTA 

component or an SNF outlier policy, we cannot yet determine 

whether such policy changes would be sufficient to 

compensate facilities for the costs associated with the 

treatment of residents with AIDS, in accordance with 

section 511 of the MMA. We will continue to study the 

relationship between NTA costs and resource use as they 

pertain to this population in order to develop an 

“appropriate adjustment” to account for such costs, as 

envisioned in the MMA. 

IV. Ongoing Initiatives under the Affordable Care Act 

The Affordable Care Act contains a number of provisions 

that involve ongoing initiatives relating to SNFs. Here, 

we highlight several of these initiatives. 

A. Value-Based Purchasing (Section 3006)

Section 3006(a) of the Affordable Care Act directs the 

Secretary to develop a plan to implement a value-based 

purchasing program for SNFs, with a report to Congress due 

by October 1, 2011. As we discussed previously in the SNF 

PPS proposed rule (73 FR 25932, May 7, 2008) and final rule 

(73 FR 46431-32, August 8, 2008) for FY 2009, value-based 

purchasing programs are intended to tie payment to 

performance in such a way as to reduce inappropriate or 

poorly provided care and identify and reward those who 

provide effective and efficient patient care. 
CMS-1351-P 95 

We are in the process of developing the SNF 

value-based purchasing implementation plan and report. In 

accordance with section 3006(a) of the Affordable Care Act, 

we will be consulting with stakeholders in developing the 

implementation plan, as well as considering the outcomes of 

any recent demonstration projects related to value-based 

purchasing which we believe might be relevant to the SNF 

setting. We anticipate being able to provide further 

information on the progress of our efforts in future 

rulemaking. 

B. Payment Adjustment for Hospital-Acquired Conditions 

(Section 3008)

As we discussed previously in the SNF PPS proposed 

rule for FY 2009 (73 FR 25932, May 7, 2008), “The 

preventable hospital-acquired conditions (HAC) payment 

provision for IPPS hospitals is another of CMS’ value-based 

purchasing initiatives. The principal behind the HAC 

payment provision (Medicare not paying more for 

healthcare-associated conditions) could be applied to the 

Medicare payment systems for other settings of care.” 

Section 3008 of the Affordable Care Act amends section 1886 

of the Act by adding a new subsection (p) to establish a 

payment adjustment beginning in FY 2015 for subsection (d) 

hospitals that fall in the top quartile of national, riskadjusted HAC rates. For such hospitals, the payment amount 
CMS-1351-P 96 

under section 1886, section 1814(b)(3), or section 

1814(l)(4) of the Act for all discharges would be reduced 

by 1 percent. Section 3008(b) of the Affordable Care Act 

goes on to direct the Secretary to conduct a study on 

expanding the already-existing HAC policy found in section 

1886(d)(4)(D) of the Act to payments made in various postacute settings, including SNFs. In developing this study, 

the Secretary is directed to include the impact of 

expanding the HAC policy on patient care, safety, and 

overall payments. 

 In accordance with section 3008 of the Affordable Care 

Act, we are in the process of developing such a study, the 

outcomes of which are to be reported to Congress no later 

than January 1, 2012. As with the value-based purchasing 

program described above, we plan to consult with 

stakeholders in developing this study, and anticipate being 

able to provide information on our progress in future 

rulemaking. 

C. Nursing Home Transparency and Improvement (Section 

6104)

 This provision of the Affordable Care Act requires 

SNFs to report expenditures separately for direct care 

staff wages and benefits on the Medicare cost report, for 

cost reporting periods beginning on or after 2 years after 

its enactment. Not later than 1 year after enactment of 
CMS-1351-P 97 

this section of the Affordable Care Act, the Secretary must 

redesign the cost report after consultation with private 

sector accountants experienced with Medicare and Medicaid 

nursing facility home cost reports. Within 30 months of 

its enactment, the provision requires the Secretary, in 

consultation with the Medicare Payment Advisory Commission 

(MedPAC), the Medicaid and CHIP Payment and Access 

Commission, the Inspector General of the United States 

Department of Health and Human Services, and other expert 

parties the Secretary determines appropriate, to categorize 

expenditures for each SNF into specific functional accounts 

on an annual basis. The provision also requires the 

Secretary to establish procedures to make information on 

the expenditures available to interested parties upon 

request, subject to the requirements the Secretary may 

specify under such procedures. A discussion of the 

information collection requirements currently being 

proposed in connection with this provision appears in a 

notice that was published in the March 11, 2011 Federal 

Register (76 FR 13415 through 13418). 

V. Other Issues 

A. Required Disclosure of Ownership and Additional 

Disclosable Parties Information (Section 6101)

 Section 6101 of the Affordable Care Act was enacted in 

March 2010 to improve transparency of information in all 
CMS-1351-P 98 

Medicare SNFs and Medicaid nursing facilities. 

Specifically, it requires these facilities to make 

available on request by the Secretary and others certain 

information on ownership, including a description of the 

governing body and organizational structure of the relevant 

Medicare SNF or Medicaid nursing facility, and information 

regarding additional disclosable parties. Thus, we are 

proposing additional information that must be disclosed by 

Medicare SNFs and Medicaid nursing facilities in order for 

them to maintain their enrollment in Medicare and/or 

Medicaid. 

 According to nursing home quality data collected by 

CMS in 2008, about 1.5 million Americans reside in the 

Nation’s 16,000 nursing homes on any given day. More than 

3 million Americans rely on services provided by a nursing 

home at some point during the year. Those individuals, and 

an even larger number of their family members, friends, and 

relatives, must be able to count on nursing homes to 

provide reliable care of consistently high quality. 

 In 2007, the New York Times analyzed trends at nursing 

homes purchased by private investment groups. It 

subsequently reported that upon ownership by these private 

investment firms, the facilities’ managers quickly cut 

costs by significantly decreasing the number of registered 

nurses, budgets for nursing supplies, resident activities, 
CMS-1351-P 99 

and other services. CMS’s data revealed that of those homes 

bought by large private investment groups from 2000 to 2006, 

in 60 percent of those acquisitions, managers cut the number 

of clinical registered nurses far below levels required by 

the Medicare long-term care facility participation 

requirements under 42 CFR 483.30. Nursing homes owned by 

large private investment firms provided one clinical 

registered nurse for every 20 residents, which was 35 

percent below the national average. 

 In its 2010 report to Congress entitled "Nursing Homes: 

Complexity of Private Investment Purchases Demonstrates Need 

for CMS to Improve the Usability and Completeness of 

Ownership Data" (GAO-10-710, available online at 

http://www.gao.gov/new.items/d10710.pdf), the GAO reported 

similar findings. The GAO found that, although certain 

information on ownership was available to the public upon 

request, that information was not transparent because it did 

not establish the relationship of each owner to the nursing 

home and to one another. Also, it was found that the 

information was not being utilized by the State agencies for 

review purposes. 

 Hearings were conducted in November and December of 

2007 by the House Committee on Ways and Means, the United 

States Senate Special Committee on Aging, and the United 

States Senate Committee on Finance, seeking information on 

investor-owned nursing homes. Congress found through 

several hearings that legal schemes were being used by 

investment firms to shield themselves from liability and, in 
CMS-1351-P 100 

effect, to deny residents and their families legal remedy 

against the nursing home. Congress believed that these 

complex legal structures can also result in a lack of 

transparency regarding who is responsible for resident care 

and the operation of investor-owned nursing homes. 

 We currently collect ownership information on nursing 

homes using the Medicare Provider Enrollment, Chain, and 

Ownership System (PECOS). In addition, we currently capture 

ownership information on Medicaid nursing facilities using 

the Online Survey Certification and Reporting System 

(OSCAR). Nursing home providers, along with any other 

provider or supplier, must report information about any 

individual or entity with a 5 percent ownership interest. 

As discussed in section IX. of this proposed rule, we are 

hereby proposing to revise the reporting requirements that 

Medicare SNFs and Medicaid nursing facilities must disclose 

at the time of enrollment and when any change in ownership 

occurs, in order to implement section 6101 of the Affordable 

Care Act. 

B. Therapy Student Supervision

In this proposed rule, we are proposing to revise a 

policy that originally appeared in the SNF PPS final rule 

for FY 2000 (64 FR 41644, July 30, 1999). The preamble in 

that final rule had indicated (at 64 FR 41661) that a 

therapy student in the SNF setting must “. . . be under the 

‘line-of-sight’ level of supervision of the professional 

therapist.” We note that the corresponding standards for 
CMS-1351-P 101 

the other inpatient settings under Part A (such as acute 

care hospitals and inpatient rehabilitation facilities) are 

silent on the issue of therapy student supervision and 

currently do not impose this type of restriction, so that 

each provider is free to determine for itself the most 

appropriate manner of supervision in this context, 

consistent with applicable State and local laws and 

practice standards. Because we consider it inequitable for 

SNFs to be subject to a more restrictive set of standards 

in this regard than the other inpatient settings, we 

believe that line-of-sight supervision should no longer be 

required in the SNF setting. Instead, as with other 

inpatient settings, each SNF would determine for itself the 

appropriate manner of supervision of therapy students, 

consistent with applicable State and local laws and 

practice standards. Accordingly, we are proposing to 

revise our current policy regarding supervision of therapy 

students, such that a therapy student working in an SNF 

would no longer be required to be in the supervising 

therapist’s line of sight. We invite comments on our 

proposed revision to the supervision requirements for 

therapy students working in SNFs, and note that we plan to 

continue monitoring the provision of therapy services in 

the SNF setting. We also note that we may revisit this 

issue in the future; however, consistent with the aim of 
CMS-1351-P 102 

promoting greater uniformity across inpatient settings on 

this point, we believe that such an analysis would most 

appropriately take place in the broader context of therapy 

standards that pertain to inpatient settings generally. 

C. Group Therapy and Therapy Documentation

 When the original RUG-III model was developed, most 

therapy services were furnished on a one-to-one basis, and 

the minutes reported on the MDS served as a proxy for the 

staff resource time needed to provide the therapy care. 

However, the results of our multi-year STRIVE project 

showed that provider practice patterns had changed and that 

a significant amount of therapy was provided on a 

concurrent basis, which at that time was defined as 

simultaneous treatment of multiple patients who were 

receiving different types of therapy services. In the FY 

2010 final rule (74 FR 40315), we stated that as Medicare 

and Medicaid patients are among the frailest and most 

vulnerable populations in nursing homes, we believed the 

most appropriate mode of providing therapy would usually be 

individual therapy, not concurrent therapy. Further, we 

expressed concern that the method for reporting concurrent 

therapy on the MDS under RUG-III created an inappropriate 

payment incentive to perform concurrent therapy in place of 

individual therapy, because the method of reporting under 

RUG-III permitted concurrent therapy time to be counted in 
CMS-1351-P 103 

the same manner as individual therapy time. As we stated 

in the SNF PPS final rule for FY 2010 (74 FR 40315), the 

SNF PPS is based on resource allocation and costs. When a 

therapist treats two patients concurrently for an hour, it 

does not cost the SNF twice the amount (or 2 hours of the 

therapist’s salary) to provide those services. As a 

result, with the introduction of RUG-IV, we modified the 

way providers report and are reimbursed for concurrent 

therapy services such that allocated concurrent therapy 

minutes are used to assign patients to RUG-IV groups. 

Providers can no longer be reimbursed for one hour’s 

therapy time for each of the two Medicare beneficiaries 

treated concurrently for one hour. Effective October 1, 

2010, providers are required to report on the MDS 3.0 for 

each patient the total unallocated minutes of concurrent 

therapy and specify the mode as concurrent. We then divide 

the total concurrent therapy time (60 minutes in this case) 

between the two patients in determining each patient’s RUGIV payment level (74 FR 40315-19). As we stated in the FY 

2010 final rule (74 FR 40318), allocating concurrent 

therapy time reflects resource utilization more accurately 

for this type of therapy, and allows for more accurate RUG 

classification as well as the application of more 

appropriate CMIs. We note that in the FY 2010 final rule 

(74 FR 40317), we limited the number of concurrent therapy 
CMS-1351-P 104 

participants to two. 

In comparison, we also considered the treatment of 

group therapy in the FY 2010 final rule (74 FR 40318); that 

is, simultaneous treatment of no more than four individuals 

(regardless of payer source) doing similar activities 

directed by a single therapist. Our STRIVE data showed 

that group therapy was used sparingly, and that utilization 

had not changed significantly since the inception of the 

SNF PPS in 1998. Further, in the FY 2010 proposed rule (74 

FR 22223), we noted the difference between group and 

concurrent therapy. In group therapy, patients are 

performing similar activities, and by interacting with one 

another, group therapy patients observe and learn from each 

other and apply this new information to their own therapy 

program to progress and benefit from the group therapy 

setting. By contrast, in concurrent therapy, patients are 

not performing similar activities and often do not interact 

with each other. Because we had not proposed in the 

FY 2010 proposed rule to change the method in which group 

therapy minutes are used in RUG-IV classification, and the 

amount of group therapy being provided was low, in the FY 

2010 final rule (74 FR 40318), we retained the original SNF 

PPS policy for payment of group therapy services, that is, 

group therapy minutes were not allocated but were limited 

to no more than 25 percent of the total weekly minutes per 
CMS-1351-P 105 

discipline for a particular patient. However, in the FY 

2010 final rule (74 FR 40318), we discussed our intent “. . 

. to monitor therapy provided in the group setting, analyze 

data associated with group therapy, and, if needed, address 

any issues at a later time” in order to update these 

reporting requirements as necessary to maintain the 

accuracy and integrity of the RUG-IV payment system. 

Using our STRIVE data as a baseline, we have 

identified two very significant changes in provider 

behavior related to the provision of therapy services to 

Medicare beneficiaries in SNFs under RUG-IV. First, we saw 

a major decrease in the amount of concurrent therapy 

performed in SNFs. At the same time, we found a 

significant increase in the amount of group therapy 

services which are not subject to the allocation 

requirement. Given this increase in group therapy 

services, we are concerned that the current method for 

reporting group therapy on the MDS creates an inappropriate 

payment incentive to perform the less intensive group 

therapy in place of individual therapy, because the current 

method of reporting group therapy time does not require 

allocation among patients. In addition, the allocation of 

concurrent therapy minutes effective FY 2011 may have 

created an incentive to perform group therapy in place of 

concurrent therapy in situations where concurrent therapy 
CMS-1351-P 106 

may have otherwise been appropriate. After further 

reviewing data associated with group therapy, we are 

proposing to change our policies relating to group therapy 

as further discussed below. 

As noted above, we believe there are unique benefits 

to group therapy. In group therapy, patients are 

performing similar activities. Thus, in contrast to 

concurrent therapy, group therapy gives patients the 

opportunity to benefit from each other’s therapy regimen by 

observing and interacting with one another, and applying 

the lessons learned from others to one’s own therapy 

program in order to progress. Large groups, such as those 

of five or more participants, can make it difficult for the 

participants to engage with one another over the course of 

the session. In addition, we have long believed that 

therapists could not adequately supervise large groups, 

and, since the inception of the SNF PPS in July 1998, we 

have capped the number of residents at four. 

Furthermore, we believe that groups of fewer than four 

participants do not maximize the group therapy benefit for 

the participants. As discussed above, and in the FY 2010 

proposed rule (74 FR 22223), the unique benefit of group 

therapy comes from the interaction between multiple 

patients, which permits them to observe and learn from one 

another and apply the new information to their own program 
CMS-1351-P 107 

to progress and benefit from the group therapy setting. We 

believe that in groups of 2 or 3 participants, the 

opportunities for patients in the group to interact and 

learn from each other are significantly diminished given 

the small size of the group. Thus, we believe that groups 

of two or three participants, given their small size, 

significantly limit the ability of patients to derive the 

unique benefits associated with group therapy. In such 

small groups, these limitations become even more 

accentuated whenever one or two patients are absent from 

the therapy session (in fact, with groups of two 

participants, if one patient is absent from the session, 

there are no longer any patients with whom the remaining 

participant can interact, thereby eliminating any benefit 

that could be derived from participation in a group). 

Thus, for the reasons discussed above, we believe that the 

most appropriate group therapy size for the SNF setting is 

four, which we believe is the size that permits the therapy 

participants to derive the maximum benefit from the group 

therapy setting. 

As discussed in the FY 2010 final rule, we are 

responsible for determining Medicare coverage and payment 

policy, that is, “the scope of services that will be paid 

for by the Medicare program under the SNF PPS and the 

manner in which those services will be reported and paid” 
CMS-1351-P 108 

(74 FR 40316). Thus, for purposes of payment under the 

Medicare SNF PPS, for the reasons discussed above, we are 

proposing to establish a standard that defines group 

therapy as therapy provided simultaneously to four patients 

who are performing similar therapy activities. 

Furthermore, as we have stated previously, the SNF PPS 

is based on resource utilization and costs. We believe 

that when a therapist treats four patients in a group for 

an hour, it does not cost the SNF four times the amount (or 

four hours of a therapist’s salary) to provide those 

services. The therapist would appropriately receive one 

hour’s salary for the hour of therapy provided. 

Accordingly, we believe that allocating group therapy 

minutes among the four group therapy participants best 

captures the resource utilization associated with providing 

a maximally beneficial group therapy intervention. For 

therapists treating patients in a group setting, the full 

time spent by the therapist with these patients would be 

divided by 4 (the number of patients that comprise a 

group). For example, if a therapist spends 1 hour with 

four residents in a group therapy session, regardless of 

payer source, then the time used to determine the 

appropriate RUG-IV classification for each Medicare 

beneficiary receiving SNF care benefits as part of a 

qualified Part A stay will be 15 minutes, or 60 minutes of 
CMS-1351-P 109 

total therapist time divided by four. These 15 minutes, 

which may be referred to as the therapist’s “reimbursable 

therapy minutes” (RTM), are those minutes used to classify 

a patient for therapy purposes. For each of the RUG-IV 

categories, it is the number of reimbursable therapy 

minutes that is used to classify a given patient into a 

therapy RUG-IV group. For example, if a therapist provides 

400 minutes of individual therapy, 200 minutes of 

concurrent therapy, and 120 minutes of group therapy (given 

the proposed policy change to group therapy discussed 

here), then the therapist’s total RTM would be 530, or 400 

RTM for individual therapy, 100 RTM for concurrent therapy, 

and 30 RTM for group therapy. The total of 530 RTM is what 

would be used to determine the patient’s appropriate RUG-IV 

classification. We hope that defining this concept of a 

reimbursable therapy minute will help clarify the number of 

minutes necessary to reach certain RUG-IV categories, given 

the allocation policies discussed here and in the FY 2010 

proposed and final rules. 

As is currently the procedure, the SNF would report 

the total unallocated group therapy minutes on the MDS 3.0 

(60 minutes in the scenario above) for each patient. In 

terms of RUG-IV classification, this total time would be 

allocated (that is, divided) among the four group therapy 

participants to determine the appropriate number of RTM 
CMS-1351-P 110 

and, therefore, the appropriate RUG-IV therapy group and 

payment level, for each participant. The 25 percent cap on 

group therapy minutes, as defined in the July 30, 1999 

final rule (64 FR 41662) will remain in effect, as we 

continue to believe that group therapy should serve only as 

an adjunct to individual therapy. The 25 percent cap would 

be applied to the patient’s reimbursable group therapy 

minutes. In addition, consistent with our current policy 

(64 FR 41662), the supervising therapist may not be 

supervising any individuals other than the four individuals 

who are in the group at the time of the therapy session. 

We invite comments on our proposals to revise our group 

therapy policies as discussed above, including the proposal 

to establish a standard that defines group therapy as a 

service provided to four patients, and the proposal to 

allocate group therapy minutes. 

While we believe that group therapy can play an 

important role in SNF patient care, we note that group 

therapy is not appropriate for either all patients or for 

all conditions, and is primarily effective as a supplement 

to individual therapy, which we maintain should be 

considered the primary therapy mode and standard of care in 

therapy services provided to SNF residents. As evidenced 

by the application of a cap on the amount of group therapy 

services that may be provided to SNF residents, we do not 
CMS-1351-P 111 

believe that a SNF providing the preponderance of therapy 

in the form of group therapy would be demonstrating the 

intensity of therapy appropriate to this most frail and 

vulnerable nursing home population. Accordingly, we 

believe it is important to clarify our expectations 

regarding the clinical documentation needed to support each 

patient’s plan of care, including the patient’s prescribed 

group therapy interventions, as further discussed below. 

Additionally, we specifically solicit comments on the types 

of patients for which group therapy may be appropriate, and 

the specific amounts of group therapy that may be 

beneficial for these types of patients. We anticipate 

using this information to assess the appropriate use of 

group therapy in SNFs and may revise standards of group 

therapy care in SNFs accordingly. 

SNFs are currently required to prescribe the type, 

amount, frequency, and duration of physical therapy, 

occupational therapy, and speech-language pathology 

services in a patient’s plan of care. Under §409.23(c), 

Medicare pays for therapy services if they are furnished, 

among other things, in accordance with a plan that meets 

the requirements of §409.17(b) through (d). Section 

409.17(c)(1) states that the plan must prescribe “the type, 

amount, frequency, and duration of the physical therapy, 

occupational therapy, or speech-language pathology services 
CMS-1351-P 112 

to be furnished to the individual.” As evidenced by the 

discussion of care planning and the qualifications for 

skilled therapy services in Chapter 3, Section O of the RAI 

manual in relation to item O0400, SNFs are expected to 

include supporting documentation in each patient’s medical 

record on an ongoing basis. We further believe that such 

medical record documentation is needed so that SNFs can 

verify that the plan of care is being followed. In 

addition, we believe that such clinical documentation has 

always been necessary so that SNFs can identify when 

significant changes in a patient’s medical condition occur 

requiring an unscheduled assessment, such as a Significant 

Change in Status assessment. In fact, even when the 

clinical change is unrelated to the therapy program, these 

unscheduled assessments require completion of Section O, 

which reports therapy minutes by individual, concurrent, 

and group modes. Finally, we believe that such 

documentation has always been required so that contractors 

can verify medical necessity when they review SNF claims. 

Additionally, under §409.17(c)(2), SNFs must indicate 

“the diagnosis and anticipated goals” associated with the 

therapy services prescribed in accordance with 

§409.17(c)(1), as described above. It is incumbent upon 

providers to ensure that skilled therapy services provided 

to a given SNF resident are appropriate to the goals of the 
CMS-1351-P 113 

patient’s individualized plan of care. Thus, it should be 

clear, based on the patient’s medical record, therapy 

notes, and/or other related documentation, how the 

prescribed skilled therapy services contribute to the 

patient’s anticipated progression toward the prescribed 

goals. Because group therapy is not appropriate for either 

all patients or all conditions, and in order to verify that 

group therapy is medically necessary and appropriate to the 

needs of each beneficiary, SNFs should include in the 

patient’s plan of care an explicit justification for the 

use of group, rather than individual or concurrent, 

therapy. This description should include, but need not be 

limited to, the specific benefits to that particular 

patient of including the documented type and amount of 

group therapy; that is, how the prescribed type and amount 

of group therapy will meet the patient’s needs and assist 

the patient in reaching the documented goals. In addition, 

we believe that the above documentation is necessary to 

demonstrate that the SNF is providing services to attain or 

maintain the highest practicable physical, mental, and 

psychosocial well-being of each resident in accordance with 

section 1819(b)(2) of the Act. 

Should the actual utilization of therapy services 

deviate significantly from the patient’s plan of care, we 

expect the facility to update the plan of care to prescribe 
CMS-1351-P 114 

the new type, amount, frequency, and duration of physical 

therapy, occupational therapy, and speech-language 

pathology services. Furthermore, we believe that such 

changes to the mode and/or intensity of therapy must be 

justified by changes in the beneficiary’s underlying health 

condition; thus, in order to demonstrate that such changes 

are medically necessary, the provider should clearly 

describe in the plan of care the reasons for deviating from 

the original care plan. Consistent with §409.17(c), the 

revised care plan must outline the updated goals and the 

revised type (that is, mode), amount, frequency, and 

duration of physical therapy, occupational therapy, and 

speech-language pathology services to be furnished to the 

patient. 

In addition, with approximately 90 percent of the 

beneficiaries in Medicare stays receiving therapy, changes 

in the mode, amount, frequency, and/or duration of therapy 

services can have significant payment implications when 

such changes also result in a reclassification of the 

beneficiary’s case-mix group. Under §413.343(b), SNFs are 

required to perform assessments on the 5th, 14th, 30th, 60th, 

and 90th days of posthospital SNF care, “and such other 

assessments that are necessary to account for changes in 

patient care needs.” The unscheduled assessments exist to 

capture changes in a resident’s skilled nursing or therapy 
CMS-1351-P 115 

needs outside the observation window used for the scheduled 

PPS assessments. We expect that the data reported in these 

required assessments, both scheduled and unscheduled, 

provide an accurate representation of the skilled therapy 

and nursing needs of the patient. Thus, if providers find 

changes in clinical and therapy status which would affect 

the accuracy of a resident’s most recent assessment, then 

we would expect (as discussed above) that these changes 

would be recorded in the patient’s plan of care and medical 

record, as well as through the use of unscheduled 

assessments, to determine if a subsequent change in payment 

is necessary. However, based on the available data, we 

believe that changes in resident status outside the 

observation window do not always generate an unscheduled 

assessment, as the changes, while significant for payment, 

do not always rise to the level of a significant change in 

clinical status. Additionally, in some cases, changes in 

therapy utilization levels may even be unrelated to the 

patient’s clinical condition but may be caused by staffing 

constraints or facility practices. For these reasons, we 

are proposing alternative solutions which would help 

capture perceived changes in resident status, as discussed 

in section V.D below. 

D. Proposed Changes to the MDS 3.0 Assessment Schedule and 

Other Medicare-Required Assessments
CMS-1351-P 116 

 Under section 1888(e)(6) of the Act, SNFs are required 

to provide the Secretary, in a manner and within the 

timeframes prescribed by the Secretary, the resident 

assessment data necessary to develop and implement the 

payment rates. In order to receive proper payment for 

services provided during Part A Medicare SNF stays, SNFs 

must perform patient assessments in accordance with the 

assessment schedule outlined in the May 12, 1998 interim 

final rule (63 FR 26265-26268) and, under the discussion in 

that interim final rule, in accordance with the guidelines 

found in the RAI Manual, version 3.0. As discussed 

previously, the RAI Manual also includes the clarifications 

to the RAI Manual posted on the MDS website at 

http://www.cms.gov/NursingHomeQualityInits/25_NHQIMDS30.asp 

Following this schedule, SNFs must currently “perform 

patient assessments by the 5th day (although there is a 

grace period that allows performance by the 8th day) of the 

SNF stay, again by the 14th day, by the 30th day, and every 

30 days thereafter as long as the patient is in a Medicare 

Part A stay” (63 FR 26265) (though there is a 5-day grace 

period for each of the 14-, 30-, 60-, and 90-day 

assessments as reflected in sections 2.8 and 2.9 of the RAI 

Manual, version 3.0). The current assessment schedule is 

also described at §413.343(b). As set forth in sections 

2.8 and 2.9 of the RAI Manual, version 3.0, these Medicare-
CMS-1351-P 117 

required assessments must be performed based on an 

Assessment Reference Date (ARD) within the specified 

window, which is the end-point of the observation period 

for the relevant MDS assessment. 

 After further review of the MDS 3.0 assessment 

schedule, we believe that the combination of the current 

grace period allowance and observation period could cause 

MDS assessments to be performed in such a way that some of 

the information coded on a subsequent assessment is 

duplicative of the previous assessment. For example, if a 

5-day assessment is completed with an ARD of day 8 of the 

Part A stay, and the ARD for the 14-day assessment is set 

for day 11, then the patient’s status for four days of the 

stay will be coded twice for some items, that is, on the 5-

day Medicare-required assessment and the 14-day Medicarerequired assessment (because, given the 7-day lookback 

period for some items, days 5 through 8 would overlap 

between the two assessments). The intended purpose of the 

Medicare assessment schedule was to capture the changes in 

the patient’s status, especially during the first few weeks 

of the Medicare stay. However, because the observation 

periods overlap so closely, changes in the patient’s status 

are not reflected as originally intended. In addition, the 

ARD of the 30-day Medicare-required assessment may be set 

as early as day 21 of the Medicare Part A stay, in which 
CMS-1351-P 118 

case, for some items the first day of the observation 

period may be as early as day 15 (for items with a 7-day 

look back). For example, the patient may have the Brief 

Interview for Mental Status (BIMS) conducted on day 15 and 

thus coded on the 30-day Medicare-required assessment, 

which determines the RUG-IV group for payment days 31-60. 

Thus, the payment based on the assessment would not reflect 

the patient’s cognitive status near the 30th day of the 

stay, but instead would actually reflect that status at the 

15th day of the stay. 

Given the implications of these scenarios for both 

care quality and payment accuracy, we propose to modify the 

current Medicare-required assessment schedule (Table 10A) 

to incorporate new assessment windows and grace days, as 

indicated in Table 10B, with appropriate changes to be made 

in the RAI Manual. 

TABLE 10A: Current MDS 3.0 Assessment Schedule 

Medicare 

MDS 

Assessment 

type 

Reason for 

Assessment 

(A0310B code) 

Assessment 

Reference Date 

Window 

Assessment 

Reference 

Date Grace 

Days 

Applicable 

Medicare Payment 

Days 

5 day 01 Days 1 – 5 6 - 8 1 through 14 

14 day 02 Days 11 - 14 15 – 19 15 through 30 

30 day 03 Days 21 – 29 30 - 34 31 through 60 

60 day 04 Days 50 - 59 60 – 64 61 through 90 

90 day 05 Days 80 – 89 90 – 94 91 through 100 

TABLE 10B: Proposed MDS 3.0 Assessment Schedule 
CMS-1351-P 119 

Medicare 

MDS 

Assessment 

type 

Reason for 

Assessment 

(A0310B code) 

Assessment 

Reference Date 

Window 

Assessment 

Reference 

Date Grace 

Days 

Applicable 

Medicare Payment 

Days 

5 day* 01 Days 1 – 5 6 - 8 1 through 14 

14 day 02 Days 13 - 14 15 – 18 15 through 30 

30 day 03 Days 27 – 29 30 - 33 31 through 60 

60 day 04 Days 57 - 59 60 – 63 61 through 90 

90 day 05 Days 87 – 89 90 – 93 91 through 100 

*Changes would also apply to Readmission/Return Assessment (A0310B code = 06) 

We believe that these proposed changes to the Medicarerequired assessment schedule will result in less 

duplication of information coded on subsequent assessments, 

and will better capture the patient’s change in status, as 

well as the change in services/treatments, over the course 

of the stay without creating undue burden on providers. We 

also believe that ensuring the passage of a greater amount 

of time between assessments would improve patient and 

provider satisfaction and care quality, as it would not be 

necessary to repeat interview questions and assessment 

items required on the MDS assessments within such a short 

period of time. We solicit comments regarding these 

proposed changes to the current MDS 3.0 assessment 

schedule. 

In addition, with regard to the completion of 

unscheduled PPS assessments, we wish to clarify a policy 

which first appeared in the FY 2010 final rule (74 FR 40347 

through 40348). In the FY 2010 final rule (74 FR 40347 

through 40348), we finalized the policy that the ARD for an 
CMS-1351-P 120 

End-of-Therapy (EOT) OMRA must be set 1 to 3 days after the 

discontinuation of all therapies (speech-language pathology 

services and occupational and physical therapies). Based 

on this policy, the EOT OMRA must be completed, at the 

latest, when a patient has not received therapy for three 

consecutive days (although we note that, as finalized in 

the FY 2010 final rule (74 FR 40348), in determining the 

ARD, days currently are counted differently for facilities 

that provide therapy services 5 days per week as compared 

to facilities that provide therapy services 7 days per 

week, as further discussed below). Further, in the FY 2010 

final rule (74 FR 40348), we cite the “daily basis” 

criteria at §409.34(b) in order to clarify that a break in 

therapy of 1 or 2 days (such as may result from a brief 

illness or extreme fatigue), would not necessarily result 

in a provider having to complete an EOT OMRA. Thus, we are 

clarifying that, consistent with this policy and our policy 

regarding setting the ARD for the completion of an EOT 

OMRA, an EOT OMRA must be completed once such therapy 

services cease for three consecutive days, regardless of 

the reason. 

We note that some SNFs have expressed concern over the 

use of the phrase “discontinuation of therapy services.” 

Therefore, we wish to clarify what is meant by the phrase 

“discontinuation of therapy services” as it applies to our 
CMS-1351-P 121 

policies governing completion of PPS assessments. We 

recognize that there may be two types of “discontinuation 

of therapy services.” A discontinuation in therapy 

services may be temporary; for example, in cases of 

illness, patient refusal, or visits to a doctor’s office. 

Such breaks in therapy generally cannot be predicted in the 

plan of care and they may be characterized as an 

“unplanned” discontinuation of therapy services. These 

types of discontinuations usually reflect an expectation 

that therapy will resume at some point. Alternatively, a 

discontinuation of therapy services may be characterized as 

a “planned” discontinuation, that is, the discontinuation 

is consistent with the patient’s plan of care such as when 

the patient has reached the prescribed therapy goals. In 

the FY 2010 final rule, in finalizing our policy related to 

setting the ARD for an EOT OMRA at 1 to 3 days after 

discontinuation of therapy services, we did not distinguish 

between planned and temporary unplanned discontinuation of 

therapy. Thus, the ARD for the EOT OMRA must be set for 

Day 1 to 3 after the discontinuation, planned or unplanned, 

of all therapy services. Accordingly, we are clarifying 

that providers must complete an EOT OMRA for a patient 

classified in a RUG-IV therapy group if that patient goes 

three consecutive days without being furnished any therapy 

services, regardless of the reason for the discontinuation 
CMS-1351-P 122 

of therapy. We believe this clarification of the policy 

related to setting the ARD for the EOT OMRA, is consistent 

with the intent of this policy as expressed in the FY 2010 

proposed and final rules (that is, to allow for more 

accurate classification of patients based on services 

needed and provided to the patient) (74 FR 22246, 74 FR 

40347-48), the discussion of this policy found in section 

2.9.07 of the MDS 3.0 RAI Manual and MDS 3.0 training 

materials, which may be found at 

http://www.cms.gov/NursingHomeQualityInits/45_NHQIMDS30Trai

ningMaterials.asp, as well as with the criteria set forth 

in 42 CFR 409.34(b), as discussed above. 

Accordingly, providers are required to complete an EOT 

OMRA in cases where a resident who is currently assigned to 

a therapy RUG-IV group has not received any therapy 

services for three consecutive days. By completing the EOT 

OMRA, SNFs will be paid at the appropriate non-therapy RUGIV rate (starting the day following the last day that 

therapy services were furnished to the patient), depending 

on other relevant characteristics of the patient’s 

condition. If therapy resumes, the SNF may complete the 

optional Start-of-Therapy (SOT) OMRA, which can be used to 

reclassify the patient into a therapy RUG-IV group at any 

point during a resident’s Part A SNF stay until completion 

of the next regularly scheduled PPS assessment. 
CMS-1351-P 123 

 Following publication of the FY 2010 final rule, some 

SNFs have expressed concern regarding the difficulty in 

determining if a given facility should be considered a 5-

day or 7-day facility, for the purposes of setting the ARD 

for the EOT OMRA (that is, whether a facility should be 

considered as providing therapy services 5 days per week or 

7 days per week). In the FY 2010 final rule, we discussed 

the days to be counted toward the establishment of the ARD 

for the EOT OMRA. In that rule (74 FR 40348), we stated 

“when a facility only provides therapy 5 days a week...the 

weekend days would not be counted toward the establishment 

of the ARD for the end-of-therapy OMRA.” This policy has 

since caused significant confusion for providers who might 

use weekends to make up for therapy that was not provided 

during the week or who might only provide therapy on 

weekend days when a holiday falls on a weekday, as it is 

unclear to such providers whether they would be considered 

a 5-day facility or a 7-day facility. As such, to 

alleviate this confusion and add greater clarity and 

consistency to our policy regarding setting the ARD for the 

EOT OMRA as discussed above, we propose to eliminate the 

distinction between 5-day and 7-day facilities for purposes 

of setting the ARD for the EOT OMRA. Accordingly, we 

propose that, effective October 1, 2011, an EOT OMRA for a 

patient classified in a RUG-IV therapy group would be 
CMS-1351-P 124 

required if that patient goes three consecutive calendar 

days without being furnished any therapy services, 

regardless of whether the facility is a 5-day or 7-day 

facility or the reason for the discontinuation in therapy 

services. However, while the ARD for the EOT OMRA would be 

required to be set by the third consecutive calendar day 

after discontinuation of therapy services, as we discuss 

above and in the FY 2010 final rule, the SNF also has the 

option of setting the ARD for the EOT OMRA on day 1 or day 

2 after therapy services have been discontinued. Thus, if 

a facility (regardless of whether it is a 5-day or 7-day 

facility) discontinues therapy on a Friday, the ARD for the 

EOT OMRA would be required to be set for the immediately 

following Saturday, Sunday, or Monday, if the patient has 

not been provided therapy services in the interim. We 

believe that this proposed policy of requiring all SNFs to 

set the ARD for the EOT OMRA by the third consecutive 

calendar day after a patient’s therapy services have been 

discontinued, appropriately reflects that the frail and 

vulnerable populations within SNFs require consistent 

therapy without significant breaks in services. In 

addition, this policy is consistent with our discussion of 

42 CFR 409.34(b) in the FY 2010 final rule, in which a 

break of 1 or 2 days would not necessarily result in a 

provider having to complete an EOT OMRA. We invite 
CMS-1351-P 125 

comments on this proposed change to our policy related to 

setting the assessment ARD for the EOT OMRA. 

 In addition, some providers have suggested that the 

completion of an EOT OMRA and subsequent SOT OMRA may not 

be necessary for all patients, particularly in cases where 

therapy services resume at the same mode and intensity as 

the patient was receiving before the discontinuation of 

therapy service. We have considered this issue and we 

believe that, in some cases where an EOT OMRA has been 

completed and therapy resumes shortly thereafter, an SOT 

OMRA may not be necessary to establish the patient’s 

clinical condition, specifically where the RUG-IV 

classification level has not changed (as further discussed 

below). 

For the reasons discussed below, we propose that, 

effective for services provided on or after October 1, 

2011, when an EOT OMRA has been completed and therapy 

subsequently resumes, SNFs may complete an End-of-Therapy 

Resumption (EOT-R) OMRA, rather than an SOT OMRA, in cases 

where therapy services have ceased for a period of no more 

than 5 consecutive calendar days, and have resumed at the 

same RUG-IV classification level that had been in effect 

prior to the EOT OMRA. In the situation where therapy 

services have resumed within such a short period of time at 

the same RUG-IV classification level, we do not believe 
CMS-1351-P 126 

that a new therapy evaluation and SOT OMRA would be 

necessary to reclassify the patient back into a RUG-IV 

therapy group because, given that the therapy resumed at 

the same RUG-IV classification level, it is likely that the 

patient’s clinical condition has not changed. Instead, the 

EOT-R OMRA may be used if the resumption date is no more 

than 5 consecutive calendar days after the date of the last 

therapy service furnished prior to the temporary 

discontinuation of therapy service reported on the EOT 

OMRA. To allow resumption of therapy reporting, two new 

items, O0450A and O0450B (Resumption of Therapy), would be 

added to the EOT OMRA item set so that it may be used as an 

EOT-R OMRA to report a resumption of therapy. These two 

new items would only be completed on an EOT OMRA (A0310C = 

2 or 3) when therapy has resumed in the circumstances 

discussed above, for purposes of reporting the resumption 

of therapy services. As discussed above, we propose that 

the resumption of therapy must occur no more than 5 

calendar days after the date that all therapy ends in order 

for completion of an EOT-R ORMA to be appropriate. For 

example, if therapy services are discontinued on Day 35 of 

a stay, then therapy services must resume for that patient 

(at the same level as the patient’s RUG-IV classification 

prior to the discontinuation) by Day 39 of the stay in 

order for SNFs to have the option to complete an EOT-R OMRA 
CMS-1351-P 127 

for that patient. If therapy does not resume until Day 40 

or later, then the SNF may not choose to complete an EOT-R 

OMRA under these circumstances. The resumption of therapy 

date is reported on the EOT OMRA if that EOT OMRA has not 

been submitted and accepted in the Quality Improvement and 

Evaluation System (QIES) Assessment Submission and 

Processing (ASAP) system. If the EOT OMRA has already been 

accepted in the ASAP system without a resumption of therapy 

date, then the prior EOT OMRA record should be modified to 

add the resumption of therapy date. No other changes 

should be made with this modification. 

In cases where therapy resumes more than five 

consecutive calendar days from the discontinuation of 

therapy service, we believe it is likely that the patient’s 

clinical condition needs to be evaluated to identify 

changes in clinical and/or therapy needs. Thus, in this 

case, the SNF could either perform an optional SOT OMRA to 

classify the patient into a RUG-IV therapy group, or wait 

until the completion of the next regularly scheduled PPS 

assessment to classify the patient into a RUG-IV therapy 

group, if such a classification is clinically appropriate. 

In these situations, the therapist would be required to 

conduct a therapy evaluation and establish a new therapy 

care plan for the patient. 

As discussed above, SNFs would set the ARD for the EOT 
CMS-1351-P 128 

OMRA 1 to 3 calendar days after the discontinuation of all 

therapies (speech-language pathology services and 

occupational and physical therapies). The EOT-R OMRA would 

include the same items as the EOT OMRA with the addition of 

O0450A and O0450B as described above. We note that the 

EOT-R OMRA would be an optional assessment. If therapy 

resumes after completion of an EOT OMRA and the criteria 

are met for performance of an EOT-R OMRA (as discussed 

above), the SNF would have the option of performing the 

EOT-R OMRA, an SOT OMRA, or waiting until the next 

regularly scheduled PPS assessment to assess the patient’s 

clinical condition. We solicit comments on our proposal to 

allow providers the option to complete an EOT-R OMRA in the 

circumstances described above. 

 In accordance with section 2.9.07 of the RAI Manual, 

Version 3.0 (available online at 

https://www.cms.gov/NursingHomeQualityInits/45_NHQIMDS30Tra

iningMaterials.asp), completion of an EOT OMRA is required 

“. . . when the resident was classified in a RUG-IV 

Rehabilitation Plus Extensive Services or Rehabilitation 

group and continues to need Part A SNF-level services after

the discontinuation of all rehabilitation therapies” 

(emphasis added). Accordingly, we note that a SNF’s 

completion of an EOT OMRA does not automatically result in 

the immediate termination of Part A coverage. Typically, a 
CMS-1351-P 129 

resident in this situation will have ongoing medical 

conditions that are clearly of sufficient intensity to 

justify continued coverage under one of the non-therapy 

RUGs, based on the need for daily skilled nursing services. 

Even when it may not be readily apparent that this is, in 

fact, the case (for example, when a resident is assigned to 

one of the less intensive RUGs, such as one that would 

result in receiving an individual level of care 

determination under the administrative presumption 

described in section II.E of this proposed rule), there may 

still be a need for continued skilled services, as when 

skilled observation is indicated for a resident whose 

overall medical condition is precluding the resident from 

undergoing further therapy. 

Moreover, even in situations where skilled 

rehabilitation is the sole reason for the SNF stay, the 

temporary discontinuation of therapy may not in itself 

necessarily have the effect of terminating coverage, if it 

is followed shortly thereafter by a resumption of therapy. 

For example, in discussing the effect of a brief absence 

from the facility on a resident’s continued ability to meet 

the SNF level of care criterion of “daily” skilled 

rehabilitation, we noted in the FY 2000 final rule (64 FR 

41670, July 30, 1999) that “. . . the requirement for daily 

skilled services should not be applied so strictly that it 
CMS-1351-P 130 

would not be met merely because there is a brief, isolated 

absence from the facility in a situation where discharge 

from the facility would not be practical.” Similarly, a 

resident who does not leave the facility at all may 

nonetheless experience a temporary inability to undergo 

therapy for such a brief period that discharge from the 

facility would not be practical, as described in 42 CFR 

409.34(b). However, as discussed above, an EOT OMRA would 

need to be completed if the patient goes three consecutive 

calendar days without therapy services, regardless of the 

reason for the discontinuation of therapy services. 

A related point on which we have recently received 

inquiries is the manner in which these policies relate to 

the requirements for providing an Advance Beneficiary 

Notice of Noncoverage (ABN). As explained in §50.2.1 of 

the Medicare Claims Processing Manual, chapter 30 

(available online at 

http://www.cms.gov/manuals/downloads/clm104c30.pdf), an ABN 

serves to notify a beneficiary of the provider’s belief 

“. . . that an otherwise covered item or service may be 

denied either as not reasonable and necessary under 

§1862(a)(1) of the Act or because the item or service 

constitutes custodial care under §1862(a)(9) of the Act.” 

Section 70.2.3.1 describes the triggering events for 

issuance of an SNF ABN. 
CMS-1351-P 131 

In this context, it has been suggested by some 

providers that when a facility furnishes therapy only on 

weekdays, it should routinely issue an ABN every Friday 

afternoon in order to anticipate the possibility that a 

given resident might be unable or unwilling to undergo 

therapy on the following Monday, thereby triggering an EOT 

OMRA and potentially causing the patient to drop below a 

covered level of care in the SNF. 

We would note at the outset that under the current 

policy set forth in the FY 2010 final rule (74 FR 40348), a 

facility that provides therapy services 5 days per week 

would not count the weekend days in determining the ARD for 

the EOT OMRA and, thus, an EOT OMRA would not necessarily 

be triggered if the patient were to be unwilling or unable 

to undergo therapy on the following Monday. Nevertheless, 

we note that, as discussed above, we are proposing in this 

rule to eliminate the distinction between 5 and 7-day 

facilities for purposes of setting the ARD for the EOT 

OMRA. Even so, it is still important to bear in mind that, 

in this situation, the decision to issue an ABN is an 

individualized action, and should not be applied across the 

board to all patients. The ABN should not be provided 

merely because of the possibility that the patient might be 

unwilling or unable to participate in therapy the next day. 

There must be an actual discontinuation of therapy before 
CMS-1351-P 132 

the SNF can anticipate that the patient may enter into 

custodial care. In addition, it may not be the case for 

every patient that the continued SNF stay would become 

noncovered custodial care as a result of the cessation of 

therapy. Thus, it is not until that point has actually 

been reached that the issuance of an ABN would become 

appropriate. The ABN should inform the beneficiary of the 

provider’s belief that Medicare will no longer pay for the 

SNF stay because the patient is unwilling or unable to 

continue therapy and that therapy was the only reason the 

SNF stay was covered by Medicare. This information will 

help the patient make an informed decision about the 

potential consequences of failing to undergo the therapy 

session. 

However, we expect that these unplanned 

discontinuations in service will be relatively rare. If 

such unplanned discontinuations in service occur on a 

repeated basis, the provider should carefully evaluate 

whether or not the patient continues to meet Medicare 

coverage criteria. 

 Finally, as noted in section V.C above, we have found 

some cases where therapy services recorded on a given PPS 

assessment did not provide an accurate account of the 

therapy provided to a given resident outside the 

observation window used for the most recent assessment. We 
CMS-1351-P 133 

believe that when service levels change, whether inside or 

outside the observation period, such changes should be 

based on medical evidence. However, we have found that the 

current range of PPS assessments may not permit SNFs 

adequate flexibility to report such changes in therapy 

services outside the observation window. As discussed 

above, based on the available data, we believe that changes 

in resident status outside the observation window do not 

always generate an unscheduled assessment, because the 

changes, while significant for payment, do not always rise 

to the level of a significant change in clinical status 

under §483.20(b)(2)(ii). Additionally, in some cases, 

changes in therapy utilization levels may even be unrelated 

to the patient’s clinical condition but may be caused by 

staffing constraints or facility practices. 

Accordingly, we propose that, effective for services 

provided on or after October 1, 2011, SNFs would be 

required to complete a Change of Therapy (COT) OMRA, for 

patients classified into a RUG-IV therapy group, whenever 

the intensity of therapy (that is, the total RTM delivered) 

changes to such a degree that it would no longer reflect 

the RUG-IV classification and payment assigned for a given 

SNF resident based on the most recent assessment used for 

Medicare payment. The COT OMRA would be a new type of 

required PPS assessment, which would use the same item set 
CMS-1351-P 134 

as the current EOT OMRA. The ARD for the COT OMRA would be 

set for Day 7 of a COT observation period, which is a 

rolling 7-day window beginning on the day following the ARD 

set for the most recent scheduled or unscheduled PPS 

assessment (or beginning the day therapy resumes in cases 

where an EOT-R OMRA is completed, as further discussed 

below), and ending every 7 calendar days thereafter. For 

example, if a facility sets the ARD for its 14-day 

assessment to Day 14, then Day 1 for the purposes of the 

COT observation period would be Day 15 of the SNF stay, and 

the facility would be required to review its therapy 

minutes for the week consisting of Days 15 through 21. 

The ARD for the COT OMRA would then be set for Day 21, if 

the facility were to determine that the total RTM has 

changed such that the RUG classification found on the 14-

day assessment (assuming no intervening assessments) is no 

longer accurate. If the SNF were to determine that the 

total RTM has not changed to such an extent that the RUG 

classification on the 14-day assessment is no longer 

accurate (assuming no intervening assessments), then the 

COT OMRA would not be completed and the next evaluation of 

the patient’s total RTM, for the purposes of completing a 

COT OMRA, would occur on Day 28. We want to stress that 

SNFs would be required to complete a COT OMRA only if a 

patient’s total RTM changes to such an extent that the 
CMS-1351-P 135 

patient’s RUG classification, based on their last PPS 

assessment, is no longer an accurate representation of 

their current clinical condition. However, an evaluation 

of the necessity for a COT OMRA (that is, an evaluation of 

the patient’s total RTM) must be completed every seven 

calendar days starting from the day following the ARD set 

for the most recent scheduled or unscheduled PPS assessment 

(or in the case of an EOT-R OMRA, starting the day that 

therapy resumes, as discussed below). 

In cases when an unscheduled assessment must be 

completed within a COT observation period, then Day 1, for 

the purposes of setting the ARD for the COT OMRA would be 

the day after the ARD set for the intervening assessment 

or, in a case where the intervening assessment is an EOT-R 

OMRA, Day 1 would be the day that therapy resumed. For 

example, consider a patient for whom the ARD of the 30-day 

PPS assessment is set to Day 30 and is classified into a 

RUG-IV therapy group. The patient receives therapy on Days 

31 through 35, does not receive therapy on Days 36 through 

39, but is expected to resume therapy on Day 40. In this 

case, the SNF would have evaluated the patient’s total RTM 

on Day 37. Assuming that the patient’s total RTM is 

consistent with the patient’s RUG classification on the 30-

day assessment (most recent scheduled or unscheduled PPS 

assessment), then the next assessment that the SNF must 
CMS-1351-P 136 

complete, given the above scenario, would be an EOT OMRA 

with an ARD set for Day 36, Day 37, or Day 38 (given that 

therapy is expected to resume on Day 40, we would advise 

the SNF to hold off on submitting the EOT OMRA until after 

therapy has resumed, so that the EOT OMRA may be modified 

into an EOT-R OMRA with an accurate resumption date). 

Assuming therapy resumes on Day 40 at the same RUG 

classification level and an EOT-R OMRA is completed, the 

COT observation period for this patient would then begin on 

Day 40, and the next evaluation of the patient’s total RTM 

would be necessary on Day 46. In terms of payment for this 

patient, the SNF would be paid beginning Day 31 at the rate 

for the RUG-IV therapy group determined on the basis of the 

patient’s clinical condition reported on the 30-day 

assessment, paid for Days 36 through 39 at the 

corresponding non-therapy rate, based on the patient’s 

clinical condition reported on the 30-day assessment 

(because therapy services were discontinued on Day 36 and 

an EOT OMRA was completed) and, beginning Day 40, would 

resume payment at the previous therapy rate (because 

therapy services resumed at the same RUG classification 

level and an EOT-R OMRA was completed). Given this 

scenario, the next evaluation of the patient’s total RTM 

should occur on Day 46. 

It should be noted that this proposed policy regarding 
CMS-1351-P 137 

the COT observation period and setting the ARD for 

completion of the COT OMRA would be independent of the 

policy for setting the ARD for the EOT OMRA as described 

previously. That is, if a patient classified in a RUG-IV 

therapy group does not receive any therapy services for 

three consecutive calendar days, then the provider would be 

required to complete an EOT OMRA with an ARD not later than 

the third calendar day (in accordance with the proposed 

policy discussed previously for setting the ARD for an EOT 

OMRA), even if the provider completed a COT OMRA during the 

temporary discontinuation of therapy service. For example, 

in contrast to the previous scenario, if the evaluation of 

the patient’s total RTM on Day 37 reveals that the 

intensity of therapy provided to the patient has changed to 

such a degree that it no longer reflects the patient’s RUGIV classification as reported on the 30-day assessment, 

then the SNF would be required to complete a COT OMRA, with 

an ARD set for Day 37, which is the last day of that 

patient’s COT observation period. Assuming the patient is 

still classified into a RUG-IV therapy group after 

completion of the COT OMRA, and all other conditions of the 

above scenario remain the same, then the SNF would be paid 

at the revised therapy RUG-IV rate beginning Day 31, the 

corresponding non-therapy rate for Days 36 through 39, and 

would resume payment at the revised RUG-IV therapy group 
CMS-1351-P 138 

rate beginning Day 40 (assuming therapy resumes at the same 

RUG classification level as determined on the COT OMRA). 

As in the above scenario, the next evaluation of the 

patient’s total RTM would occur on Day 46. Thus, the new 

RUG-IV group resulting from the COT OMRA would be billed 

starting the first day of the COT observation period for 

which the COT OMRA was completed, and would remain at this 

level until a new assessment is completed which changes the 

patient’s RUG-IV classification. 

We believe that the COT OMRA would allow us to track 

changes in the patient’s condition and in the provision of 

therapy services more accurately, resulting in improving 

the accuracy of reimbursement for therapy services and 

enhancing the SNF’s ability to provide quality care to SNF 

residents. We invite comments on this proposal to require 

a COT OMRA when the total RTM changes to such a degree as 

to affect RUG-IV classification and payment. 

E. Discussion of Possible Future Initiatives

 We are considering a number of possible future 

initiatives that may help to ensure the long-term stability 

of the SNF PPS and further improve the accuracy of the 

rate-setting process. Along with our broad, ongoing 

objectives of ensuring stability and promoting accuracy of 

the SNF PPS, this analysis has been prompted in particular 

by our recent experience of needing to recalibrate the CMIs 
CMS-1351-P 139 

in 2 of the last 3 years. Accordingly, we have begun to 

consider a number of possible future modifications to 

certain aspects of the SNF PPS. We note that we are not 

proposing new Medicare policy in this discussion of 

possible future modifications, as we recognize that 

depending on how such modifications are ultimately 

formulated, their actual implementation may require new 

statutory authority. 

We note that previous research by the Urban Institute, 

as cited in Chapter 8 of MedPAC’s June 2007 Report to 

Congress entitled “Promoting Greater Efficiency in 

Medicare” (available online at 

http://www.medpac.gov/documents/jun07_entirereport.pdf), 

has recommended an approach to therapy reimbursement based 

on actual patient need. This approach would consider 

patient diagnosis and service needs to predict and 

reimburse prospectively for an appropriate level of 

therapy. While this methodology would eliminate reliance 

on the actual minutes of therapy provided, we are 

evaluating ways to verify utilization to prevent 

underutilization or overutilization of therapy services. 

We are also more closely examining certain 

methodologies that could make at least partial payment 

prospectively for therapy services based on anticipated 

patient need, rather than solely on actual service 
CMS-1351-P 140 

utilization. This could resemble the methodology already 

in use under the home health PPS, in which the projected 

number of therapy visits on the assessment completed at the 

start of the episode serves as the initial basis for 

payment, but that projection is subsequently verified 

against the actual visit information submitted in line-item 

detail on the claim (please refer to §10.1.19.1 in Chapter 

10 of the Medicare Claims Processing Manual, which is 

available online at 

http://www.cms.gov/manuals/downloads/clm104c10.pdf). 

The advantage of this type of approach is that it could 

target therapy payments and the intensity of therapy 

provided to patients with those diagnoses and conditions 

that are most likely to require such services. 

A third possible approach would be to consider 

recalibrating the CMIs every year in order to account for 

significant fluctuations and changes in provider practices. 

Such a practice would be consistent with findings in a 

December 2010 OIG report entitled “Questionable Billing by 

Skilled Nursing Facilities” (report no. OEI-02-09-00202, 

available online at http://oig.hhs.gov/oei/reports/oei-02-

09-00202.pdf), in which OIG noted a recent increase in 

questionable billings for higher-paying RUGs. In addition, 

we note that MedPAC recently cited plans to examine changes 

in SNF care costs and practice patterns as a possible 
CMS-1351-P 141 

prelude to considering the desirability of totally rebasing 

the system (please refer to page 10 of “Assessing Payment 

Adequacy: Skilled Nursing Facilities,” January 13, 2011, 

available online at 

http://www.medpac.gov/transcripts/SNF%20Jan%202011%20public

.pdf). Such an approach, while not a change in the payment 

methodology per se, would reestablish baseline expenditure 

levels using more recent data than the 1995 cost reports. 

VI. The Skilled Nursing Facility Market Basket Index 

 Section 1888(e)(5)(A) of the Act requires us to 

establish a SNF market basket index (input price index), 

that reflects changes over time in the prices of an 

appropriate mix of goods and services included in the SNF 

PPS. This proposed rule incorporates the latest available 

projections of the SNF market basket index. We will 

incorporate updated projections based on the latest 

available data when we publish the SNF final rule. 

Accordingly, we have developed a SNF market basket index 

that encompasses the most commonly used cost categories for 

SNF routine services, ancillary services, and capitalrelated expenses. 

 Each year, we calculate a revised labor-related share 

based on the relative importance of labor-related cost 

categories in the input price index. Table 11 summarizes 

the updated labor-related share for FY 2012. 
CMS-1351-P 142 

TABLE 11: Labor-related Relative Importance, 

FY 2011 and FY 2012 

Relative importance, 

labor-related, 

FY 2011 

10:2 forecast* 

Relative importance, 

labor-related, 

FY 2012 

11:1 forecast** 

Wages and salaries 50.654 50.231 

Employee benefits 11.511 11.514 

Nonmedical professional 

fees 

1.320 1.308 

Labor-intensive services 3.427 3.390 

Capital-related (.391) 2.399 2.362 

Total 69.311 68.805 

*Published in Federal Register; based on second quarter 2010 IHS Global Insight Inc. forecast. 

**Based on the first quarter 2011 IHS Global Insight forecast, with historical data through the fourth 

quarter 2010. 

A. Use of the Skilled Nursing Facility Market Basket 

Percentage

 Section 1888(e)(5)(B) of the Act defines the SNF 

market basket percentage as the percentage change in the 

SNF market basket index from the average of the previous FY 

to the average of the current FY. For the Federal rates 

established in this proposed rule, we use the percentage 

increase in the SNF market basket index to compute the 

update factor for FY 2012. This is based on the IGI 

(formerly DRI-WEFA) first quarter 2011 forecast (with 

historical data through the fourth quarter 2010) of the 

FY 2012 percentage increase in the FY 2004-based SNF market 

basket index for routine, ancillary, and capital-related 

expenses, which is used to compute the update factor in 

this proposed rule. As discussed in section VI.C of this 

proposed rule, this market basket percentage change is 
CMS-1351-P 143 

reduced by the MFP adjustment as required by section 

1888(e)(5)(B)(ii) of the Act. Finally, as discussed in 

section I.A of this proposed rule, we no longer compute 

update factors to adjust a facility-specific portion of the 

SNF PPS rates, because the initial 3-phase transition 

period from facility-specific to full Federal rates that 

started with cost reporting periods beginning in July 1998 

has expired. 

B. Market Basket 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), the 

regulations at §413.337(d)(2) provide for an adjustment to 

account for market basket forecast error. The initial 

adjustment 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. 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 whenever the 

difference between the forecasted and actual change in the 

market basket 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 
CMS-1351-P 144 

final rule (72 FR 43425, August 3, 2007), we adopted a 

0.5 percentage point threshold effective with FY 2008. As 

discussed previously in section I.G.2 of this proposed 

rule, as the difference between the estimated and actual 

amounts of increase in the market basket index for FY 2010 

(the most recently available FY for which there is final 

data) does not exceed the 0.5 percentage point threshold, 

the payment rates for FY 2012 do not include a forecast 

error adjustment. 

C. Multifactor Productivity Adjustment

Section 3401(b) of the Affordable Care Act 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) is to be reduced annually by the 

productivity adjustment described in section 

1886(b)(3)(B)(xi)(II) of the Act. As explained in the 

Senate Finance Committee report that accompanied S.1796 

(“America’s Healthy Future Act of 2009,” the Senate’s 

initial version of the health reform legislation), the 

purpose of this type of productivity adjustment is to help 

ensure that the market basket update, in accounting for 

changes in the costs of goods and services used to provide 

patient care, also reflects “. . . increases in provider 

productivity that could reduce the actual cost of providing 

services (such as through new technology, fewer inputs, 
CMS-1351-P 145 

etc.)” (S. Rep. No. 111-89 at 261). Specifically, 

section 3401(a) of the Affordable Care Act amends section 

1886(b)(3)(B) of the Act to add clause (xi)(II), which sets 

forth the definition of this productivity adjustment. The 

statute defines the productivity adjustment to be equal to 

the 10-year moving average of changes in annual 

economy-wide private nonfarm business multi-factor 

productivity (MFP) (as projected by the Secretary for the 

10-year period ending with the applicable fiscal year, 

year, cost reporting period, or other annual period) (the 

“MFP adjustment”). The Bureau of Labor Statistics (BLS) is 

the agency that publishes the official measure of private 

nonfarm business MFP. Please see http://www.bls.gov/mfp to 

obtain the BLS historical published MFP data. 

The projection of MFP is currently produced by IGI, an 

economic forecasting firm. In order to generate a forecast 

of MFP, IGI replicated the MFP measure calculated by the 

BLS, using a series of proxy variables derived from IGI’s 

U.S. macroeconomic models. These models take into account 

a very broad range of factors that influence the total U.S. 

economy. IGI forecasts the underlying proxy components, 

such as Gross Domestic Product (GDP), capital, and labor 

inputs required to estimate MFP, and then combines those 

projections according to the BLS methodology. In Table 12, 

we identify each of the major MFP component series employed 
CMS-1351-P 146 

by the BLS to measure MFP. We also provide the 

corresponding concepts forecasted by IGI and determined to 

be the best available proxies for the BLS series. 

TABLE 12—Multifactor Productivity Component Series Employed 

by the Bureau of Labor Statistics and IHS Global Insight

BLS series IGI series 

Real value-added output, constant 

2005 dollars 

Non-housing non-government non-farm real 

GDP, Billions of chained 2005 dollars – annual 

rate 

Private non-farm business sector labor 

input; 2005=100.00 

Hours of all persons in private nonfarm 

establishments, 2005 = 100.00, adjusted for labor 

composition effects 

Aggregate capital inputs; 2005=100.00 Real effective capital stock used for full 

employment GDP, Billions of chained 2005 

dollars 

IGI found that the historical growth rates of the BLS 

components used to calculate MFP and the IGI components 

identified are consistent across all series and, therefore, 

suitable proxies for calculating MFP. We have included 

below a more detailed description of the methodology used 

by IGI to construct a forecast of MFP, which is aligned 

closely with the methodology employed by the BLS. For more 

information regarding the BLS method for estimating 

productivity, please see the following link: 

http://www.bls.gov/mfp/mprtech.pdf. 

At the time of this proposed rule, the BLS has 

published a historical time series of private nonfarm 

business MFP for 1987 through 2009, with 2009 being a 

preliminary value. Using this historical MFP series and 
CMS-1351-P 147 

the IGI forecasted series, IGI has developed a forecast of 

MFP for 2010 through 2021, as described below. 

To create a forecast of BLS’ MFP index, the forecasted 

annual growth rates of the “non-housing, nongovernment, 

non-farm, real GDP,” “hours of all persons in private 

nonfarm establishments adjusted for labor composition,” and 

“real effective capital stock” series (ranging from 2010 to 

2021) are used to “grow” the levels of the “real valueadded output,” “private non-farm business sector labor 

input,” and “aggregate capital input” series published by 

the BLS. Projections of the “hours of all persons” measure 

are calculated using the difference between the projected 

growth rates of real output per hour and real GDP. This 

difference is then adjusted to account for changes in labor 

composition in the forecast interval. Using these three 

key concepts, MFP is derived by subtracting the 

contribution of labor and capital inputs from output 

growth. However, in order to estimate MFP, we need to 

understand the relative contributions of labor and capital 

to total output growth. Therefore, two additional measures 

are needed to operationalize the estimation of the IGI MFP 

projection: Labor compensation and capital income. The 

sum of labor compensation and capital income represents 

total income. The BLS calculates labor compensation and 

capital income (in current dollar terms) to derive the 
CMS-1351-P 148 

nominal values of labor and capital inputs. IGI uses the 

“nongovernment total compensation” and “flow of capital 

services from the total private non-residential capital 

stock” series as proxies for the BLS’s income measures. 

These two proxy measures for income are divided by total 

income to obtain the shares of labor compensation and 

capital income to total income. In order to estimate 

labor’s contribution and capital’s contribution to the 

growth in total output, the growth rates of the proxy 

variables for labor and capital inputs are multiplied by 

their respective shares of total income. These 

contributions of labor and capital to output growth are 

subtracted from total output growth to calculate the 

“change in the growth rates of multifactor productivity” 

using the following formula: 

MFP = Total output growth — ((labor input growth*labor 

compensation share) + (capital input growth * capital 

income share))

The change in the growth rates (also referred to as the 

compound growth rates) of the IGI MFP are multiplied by 100 

in order to calculate the percent change in growth rates 

(the percent change in growth rates is published by the BLS 

for its historical MFP measure). Finally, the growth rates 

of the IGI MFP are converted to index levels based to 2005 

to be consistent with the BLS’ methodology. For 
CMS-1351-P 149 

benchmarking purposes, the historical growth rates of IGI’s 

proxy variables were used to estimate a historical measure 

of MFP, which was compared to the historical MFP estimate 

published by the BLS. The comparison revealed that the 

growth rates of the components were consistent across all 

series and, therefore, validated the use of the proxy 

variables in generating the IGI MFP projections. The 

resulting MFP index was then interpolated to a quarterly 

frequency using the Bassie method for temporal 

disaggregation. The Bassie technique utilizes an indicator 

(pattern) series for its calculations. IGI uses the index 

of output per hour (published by the BLS) as an indicator 

when interpolating the MFP index. 

1. Incorporating the Multifactor Productivity Adjustment 

into the Market Basket Update 

According to section 1888(e)(5)(A) of the Act, the 

Secretary “shall establish a skilled nursing facility 

market basket index that reflects changes over time in the 

prices of an appropriate mix of goods and services included 

in covered skilled nursing facility services.” As 

described in section I.G.2 of this proposed rule, we are 

proposing to estimate the SNF PPS market basket percentage 

for FY 2012 under section 1888(e)(5)(B)(i) of the Act based 

on the FY 2004-based SNF market basket. Section 3401(b) of 

the Affordable Care Act amends section 1888(e)(5)(B) of the 
CMS-1351-P 150 

Act, in part, by adding a new clause (ii), which 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)” (which we refer to as the 

MFP adjustment). Section 1888(e)(5)(B)(ii) of the Act 

further states that the reduction of the market basket 

percentage by the MFP 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 

for a FY being less than such payment rates for the 

preceding FY. Thus, if the application of the MFP 

adjustment to the market basket percentage calculated under 

section 1888(e)(5)(B)(i) results in an MFP-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) would be negative, and such rates 

would decrease relative to the prior FY. 

To calculate the MFP-adjusted update for the SNF PPS, 

we propose that the MFP percentage adjustment will be 

subtracted from the FY 2012 market basket percentage 

calculated using the FY 2004-based SNF market basket. We 

propose that the end of the 10-year moving average of 

changes in the MFP should coincide with the end of the 
CMS-1351-P 151 

appropriate FY update period. Since the market basket 

percentage is reduced by the MFP adjustment to determine 

the annual update for the SNF PPS, we believe it is 

appropriate for the numbers associated with both components 

of the calculation (the market basket percentage and the 

productivity adjustment) to be projected as of the same end 

date so that changes in market conditions are aligned. 

Therefore, for the FY 2012 update, the MFP adjustment would 

be calculated as the 10-year moving average of changes in 

MFP for the period ending September 30, 2012. We propose 

to round the final annual adjustment to the one-tenth of 

one percentage point level up or down as applicable 

according to conventional rounding rules (that is, if the 

number we are rounding is followed by 5, 6, 7, 8, or 9, we 

will round the number up; if the number we are rounding is 

followed by 0, 1, 2, 3, or 4, we will round the number 

down). 

In accordance with section 1888(e)(5)(B)(i) of the 

Act, the market basket percentage for FY 2012 for the SNF 

PPS is based on the 1st quarter 2011 forecast of the FY 

2004-based SNF market basket update, which is estimated to 

be 2.7 percent. In accordance with section 

1888(e)(5)(B)(ii) of the Act (as added by section 3401(b) 

of the Affordable Care Act), this market basket percentage 

would then reduced by the MFP adjustment (the 10-year 
CMS-1351-P 152 

moving average of changes in MFP for the period ending 

September 30, 2012) of 1.2 percent, which is calculated as 

described above and based on IGI’s 1st quarter 2011 

forecast. The resulting MFP-adjusted market basket update 

would be equal to 1.5 percent, or 2.7 percent less 1.2 

percentage points. 

Furthermore, in fiscal years where a forecast error 

adjustment is applicable, we would first apply the forecast 

error adjustment to the market basket percentage, before 

applying the MFP adjustment. As discussed previously, in 

determining whether a forecast error adjustment should be 

applied, CMS compares the forecasted market basket 

percentage computed under section 1888(e)(5)(B)(i) of the 

Act for the most recently available fiscal year for which 

there is final data to the actual market basket percentage 

for that fiscal year. Because the forecast error 

adjustment is intended to address errors in the forecast of 

the market basket percentage, we believe that this 

adjustment is part of the establishment of the appropriate 

market basket percentage under section 1888(e)(5)(B)(i) of 

the Act. Section 1888(e)(5)(B)(ii) of the Act (as added by 

section 3401(b) of the Affordable Care Act) requires the 

MFP adjustment to be applied “after determining the 

percentage described in clause (i).” Thus, we would apply 

the forecast error adjustment (when applicable) to the 
CMS-1351-P 153 

market basket percentage prior to applying the MFP 

adjustment, to determine the update to the unadjusted 

Federal per diem rates for a fiscal year. 

Accordingly, we propose to revise §413.337 by adding a 

new paragraph (d)(3) to require, for FY 2012 and each 

subsequent FY, that the market basket index percentage 

change (as modified by any applicable forecast error 

adjustment) be reduced by the MFP adjustment described in 

section 1886(b)(3)(B)(xi)(II) of the Act in determining the 

annual update of the unadjusted Federal per diem rates. 

Consistent with section 1888(e)(5)(B)(ii) of the Act (as 

added by section 3401(b) of the Affordable Care Act), 

§413.337(d)(3) would also state that the reduction of the 

market basket percentage change by the MFP adjustment may 

result in the market basket percentage change being less 

than zero for a fiscal year, and may result in the 

unadjusted Federal payment rates for a fiscal year being 

less than such payment rates for the preceding fiscal year. 

In addition, we propose to revise existing paragraphs 

(d)(1) and (d)(2) of §413.337, as discussed below. First, 

we are proposing to revise §413.337(d)(1) so that the text 

more accurately tracks the corresponding statutory 

requirements at section 1888(e)(4)(E) of the Act. 

Currently, §413.337(d)(1) does not reflect the amendments 

made to section 1888(e)(4)(E)(ii) by section 311 of the 
CMS-1351-P 154 

BIPA (see section I.D of this proposed rule). While we 

have always updated the unadjusted Federal per diem rates 

in accordance with the requirements set forth in section 

1888(e)(4)(E)(ii) of the Act as amended by section 311 of 

the BIPA, we have inadvertently failed to update the 

regulation text to conform with the BIPA requirements. 

Therefore, we now propose to revise §413.337(d)(1) to 

conform with the current statutory language in section 

1888(e)(4)(E) as amended by section 311 of the BIPA. 

Second, we propose to revise §413.337(d)(2) to specify the 

existing thresholds we employ in determining whether a 

forecast error adjustment is applicable. 

D. Federal Rate Update Factor

Section 1888(e)(4)(E)(ii)(IV) of the Act requires that 

the update factor used to establish the FY 2011 unadjusted 

Federal rates be at a level equal to the market basket 

percentage change. Accordingly, to establish the update 

factor, we determined the total growth from the average 

market basket level for the period of October 1, 2010 

through September 30, 2011 to the average market basket 

level for the period of October 1, 2011 through 

September 30, 2012. Using this process, the market basket 

update factor for FY 2012 SNF PPS unadjusted Federal rates 

would be 2.7 percent. As required by section 1888(e)(5)(B) 

of the Act, this market basket percentage is then reduced
CMS-1351-P 155 

by the MFP adjustment (the 10-year moving average of 

changes in MFP for the period ending September 30, 2012) of 

1.2 percent as described in section VI.C. The resulting 

MFP-adjusted market basket update would be equal to 1.5 

percent, or 2.7 percent less 1.2 percentage points. We 

used this MFP-adjusted market basket update factor to 

compute the SNF PPS rate shown in Tables 2 and 3. 

VII. Consolidated Billing 

Section 4432(b) of the BBA established a consolidated 

billing requirement that places the Medicare billing 

responsibility for virtually all of the services that the 

SNF’s residents receive with the SNF, except for a small 

number of services that the statute specifically identifies 

as being excluded from this provision. As noted previously 

in section I. of this proposed rule, subsequent legislation 

enacted a number of modifications in the consolidated 

billing provision. 

Specifically, section 103 of the BBRA amended this 

provision by further excluding a number of individual 

“high-cost, low-probability” services, identified by the 

Healthcare Common Procedure Coding System (HCPCS) codes, 

within several broader categories (chemotherapy and its 

administration, radioisotope services, and customized 

prosthetic devices) that otherwise remained subject to the 

provision. We discuss this BBRA amendment in greater 
CMS-1351-P 156 

detail in the 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 

www.cms.gov/transmittals/downloads/ab001860.pdf. 

Section 313 of the BIPA further amended this provision 

by repealing its Part B aspect; that is, its applicability 

to services furnished to a resident during a SNF stay that 

Medicare Part A does not cover. (However, physical 

therapy, occupational therapy, and speech-language 

pathology services remain subject to consolidated billing, 

regardless of whether the resident who receives these 

services is in a covered Part A stay.) We discuss this 

BIPA amendment in greater detail in the proposed and final 

rules for FY 2002 (66 FR 24020 through 24021, May 10, 2001, 

and 66 FR 39587 through 39588, July 31, 2001). 

In addition, section 410 of the MMA amended this 

provision by excluding certain practitioner and other 

services furnished to SNF residents by RHCs and FQHCs. We 

discuss this MMA amendment in greater detail in the update 

notice for FY 2005 (69 FR 45818 through 45819, 

July 30, 2004), as well as in Medicare Learning Network 

(MLN) Matters article #MM3575, which is available online at 

http://www.cms.gov/MLNMattersArticles/downloads/MM3575.pdf. 
CMS-1351-P 157 

Further, while not substantively revising the 

consolidated billing requirement itself, a related 

provision was enacted in the Medicare Improvements for 

Patients and Providers Act of 2008 (MIPPA, 

Pub. L. 110-275). Specifically, section 149 of MIPPA 

amended section 1834(m)(4)(C)(ii) of the Act to add 

subclause (VII), which adds SNFs (as defined in section 

1819(a) of the Act) to the list of entities that can serve 

as a telehealth “originating site” (that is, the location 

at which an eligible individual can receive, through a 

telecommunications system, services of a physician or other 

practitioner who is located elsewhere at a “distant site”). 

As explained in the Medicare Physician Fee Schedule 

(PFS) final rule for calendar year (CY) 2009 (73 FR 69726, 

69879, November 19, 2008), a telehealth originating site 

receives a facility fee which is always separately payable 

under Part B outside of any other payment methodology. 

Section 149(b) of MIPPA amended section 1888(e)(2)(A)(ii) 

of the Act to exclude telehealth services furnished under 

section 1834(m)(4)(C)(ii)(VII) of the Act from the 

definition of “covered skilled nursing facility services” 

that are paid under the SNF PPS. Thus, a SNF “. . . can 

receive separate payment for a telehealth originating site 

facility fee even in those instances where it also receives 

a bundled per diem payment under the SNF PPS for a 
CMS-1351-P 158 

resident’s covered Part A stay” (73 FR 69881). By 

contrast, under section 1834(m)(2)(A) of the Act, a 

telehealth distant site service is payable under Part B to 

an eligible physician or practitioner only to the same 

extent that it would have been so payable if furnished 

without the use of a telecommunications system. Thus, as 

explained in the CY 2009 Physician Fee Schedule final rule 

(73 FR 69726), eligible distant site physicians or 

practitioners can receive payment for a telehealth service 

that they furnish 

. . . only if the service is separately payable under 

the PFS when furnished in a face-to-face encounter at 

that location. For example, we pay distant site 

physicians or practitioners for furnishing services 

via telehealth only if such services are not included 

in a bundled payment to the facility that serves as 

the originating site (73 FR 69880). 

This means that in those situations where a SNF serves as 

the telehealth originating site, the distant site 

professional services would be separately payable under 

Part B only to the extent that they are not already 

included in the SNF PPS bundled per diem payment and 

subject to consolidated billing. Thus, for a type of 

practitioner whose services are not otherwise excluded from 

consolidated billing when furnished during a face-to-face 
CMS-1351-P 159 

encounter, the use of a telehealth distant site would not 

serve to unbundle those services. In fact, consolidated 

billing does exclude the professional services of 

physicians, along with those of most of the other types of 

telehealth practitioners that the law specifies at section 

1842(b)(18)(C) of the Act; that is, physician assistants, 

nurse practitioners, clinical nurse specialists, certified 

registered nurse anesthetists, certified nurse midwives, 

and clinical psychologists (see section 1888(e)(2)(A)(ii) 

of the Act and 42 CFR 411.15(p)(2)). However, the services 

of clinical social workers, registered dietitians and 

nutrition professionals remain subject to consolidated 

billing when furnished to a SNF’s Part A resident and, 

thus, cannot qualify for separate Part B payment as 

telehealth distant site services in this situation. 

Additional information on this provision appears in MLN 

Matters article #MM6215, which is available online at 

http://www.cms.gov/MLNMattersArticles/downloads/MM6215.pdf. 

To date, the Congress has enacted no further 

legislation affecting the consolidated billing provision. 

However, as noted above and explained in the proposed rule 

for FY 2001 (65 FR 19232, April 10, 2000), the amendments 

enacted in section 103 of the BBRA not only identified for 

exclusion from this provision a number of particular 

service codes within four specified categories (that is, 
CMS-1351-P 160 

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 the specified service categories." In the 

proposed rule for FY 2001, we also noted that the BBRA 

Conference report (H.R. Rep. No. 106-479 at 854 (1999) 

(Conf. Rep.)) 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 prospective payment 

system. . .". According to the conferees, section 103(a) 

"is an attempt to exclude from the PPS certain services and 

costly items that are provided infrequently in SNFs. . . ." 

By contrast, we noted that the Congress declined to 

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.

As we further explained in the final rule for FY 2001 

(65 FR 46790, July 31, 2000), and as our longstanding 

policy, any additional service codes that we might 

designate for exclusion under our discretionary authority 
CMS-1351-P 161 

must meet the same statutory criteria used in identifying 

the original codes excluded from consolidated billing under 

section 103(a) of the BBRA: they must fall within one of 

the four service categories specified in the BBRA, and they 

also must meet the same standards of high cost and low 

probability in the SNF setting, as discussed in the BBRA 

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 invite public comments identifying codes in 

any of these four service categories (chemotherapy items, 

chemotherapy administration services, radioisotope 

services, and customized prosthetic devices) 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 above. Commenters should 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) 
CMS-1351-P 162 

be excluded. 

We note that the original BBRA legislation (as well as 

the implementing regulations) identified a set of excluded 

services by means of specifying HCPCS codes that were in 

effect as of a particular date (in that case, as of 

July 1, 1999). Identifying the excluded services in this 

manner made it possible for us to utilize program issuances 

as the vehicle for accomplishing routine updates of the 

excluded codes, in order to reflect any minor revisions 

that might subsequently occur in the coding system itself 

(for example, the assignment of a different code number to 

the same service). Accordingly, in the event that we 

identify through the current rulemaking cycle any new 

services that would actually represent a substantive change 

in the scope of the exclusions from SNF consolidated 

billing, we would identify these additional excluded 

services by means of the HCPCS codes that are in effect as 

of a specific date (in this case, as of October 1, 2011). 

By making any new exclusions in this manner, we could 

similarly accomplish routine future updates of these 

additional codes through the issuance of program 

instructions. 
CMS-1351-P 163 

VIII. Application of the SNF PPS to SNF Services Furnished 

by Swing-Bed Hospitals 

 In accordance with section 1888(e)(7) of the Act, as 

amended by section 203 of the BIPA, Part A pays critical 

access hospitals (CAHs) on a reasonable cost basis for SNF 

services furnished under a swing-bed agreement. However, 

effective with cost reporting periods beginning on or after 

July 1, 2002, the swing-bed services of non-CAH rural 

hospitals are paid under the SNF PPS. As explained in the 

final rule for FY 2002 (66 FR 39562, July 31, 2001), we 

selected this effective date consistent with the statutory 

provision to integrate swing-bed rural hospitals into the 

SNF PPS by the end of the SNF transition period, 

June 30, 2002. 

Accordingly, all non-CAH swing-bed rural hospitals 

have come under the SNF PPS as of June 30, 2003. 

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. A complete 

discussion of assessment schedules, the MDS and the 

transmission software (RAVEN-SB for Swing Beds) appears in 

the final rule for FY 2002 (66 FR 39562, July 31, 2001) and 

in the final rule for FY 2010 (74 FR 40288, 

August 11, 2009). As finalized in the FY 2010 SNF PPS 

final rule (74 FR 40356-57), effective October 1, 2010, 
CMS-1351-P 164 

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. The 

latest changes in the MDS for swing-bed rural hospitals 

appear on the SNF PPS Web site, www.cms.gov/snfpps. 

IX. Provisions of the Proposed Rule 

In this proposed rule, in addition to accomplishing 

the required annual update of the SNF PPS payment rates, we 

also propose making the following revisions to the 

regulation text: 

As discussed previously in section VI.C of this 

proposed rule, we are proposing to implement section 

3401(b) of the Affordable Care Act by revising §413.337. 

We would add a new paragraph (d)(3) to that section to 

require that, for FY 2012 and each subsequent FY, the 

market basket percentage change (as modified by any 

applicable forecast error adjustment) be reduced by the MFP 

adjustment described in section 1886(b)(3)(B)(xi)(II) of 

the Act in determining the annual update of the unadjusted 

Federal per diem rates. In addition, consistent with 

section 1888(e)(5)(B)(ii) of the Act (as added by section 

3401(b) of the Affordable Care Act), §413.337(d)(3) would 

also state that the reduction of the market basket 

percentage change by the MFP adjustment may result in the 

market basket percentage change being less than zero for a 
CMS-1351-P 165 

fiscal year, and may result in the unadjusted Federal 

payment rates for a fiscal year being less than such 

payment rates for the preceding fiscal year. 

Further, as discussed in section VI.C., we propose to 

revise existing paragraphs (d)(1) and (d)(2) of §413.337 so 

that the text more accurately tracks the corresponding 

statutory requirements at section 1888(e)(4)(E) of the Act 

(§413.337(d)(1)), and to specify the existing thresholds we 

apply in determining whether a forecast error adjustment is 

appropriate (§413.337(d)(2)). 

 In addition, to implement section 6101 of the 

Affordable Care Act as discussed previously in section V.A. 

of this proposed rule, we are proposing to revise the 

reporting requirements that Medicare SNFs and Medicaid 

nursing facilities must disclose at the time of enrollment 

and when any change in ownership occurs. These reporting 

requirements will occur in PECOS for Medicare SNFs, which 

will be revised to capture the additional requirements. We 

are proposing to add a definition for “additional 

disclosable party” and “organizational structure.” We also 

plan to require that these additional reporting 

requirements be included among the changes that must be 

reported in accordance with §424.516(e) and §455.104. 

Consistent with the requirements set forth in section 6101 

of the Affordable Care Act, we propose to define an 
CMS-1351-P 166 

“additional disclosable party” to mean, with respect to a 

Medicare SNF or Medicaid nursing facility, any person or 

entity (such as a contractor, full- and part-time employee 

or consultant) that exercises financial, operational, or 

managerial control over the facility (or a part thereof); 

provides policies or procedures for any of the operations 

of the facility, including policies or procedures that 

establish clinical decision making capabilities directly 

related to resident care; provides financial or cash 

management services to the facility; leases or subleases 

real property to the facility or owns a whole or part 

interest equal to or exceeding 5 percent of the total value 

of such real property; or provides management or 

administrative services, management or clinical consulting 

services, or accounting or financial services to the 

facility. Broadly defined, this proposed definition 

mirrors the statutory definition of “additional disclosable 

party,” which is set forth at section 1124(c)(5)(A) of the 

Act. Given the potentially broad nature of the term 

“additional disclosable parties,” we understand that it may 

be difficult for SNFs and Medicaid nursing facilities, 

under certain circumstances, to reasonably know without 

explicit guidance which parties and individuals associated 

with their facility are subject to the disclosure 

requirements discussed in this section. Therefore, we 
CMS-1351-P 167 

specifically solicit comment on how best to narrow the 

scope of the definition of this term to ensure that the 

additional reporting requirements described in this section 

apply only to those parties and individuals that are 

capable of exercising actual operational, financial, or 

managerial control over the given facility or performing 

any of the other functions specified in section 6101 of the 

Affordable Care Act. 

 In addition, our proposed definition for 

“organizational structure” mirrors the statutory definition 

for that term, which is set forth at section 1124(c)(5)(D) 

of the Act. With respect to the additional reporting 

requirements at §424.516(e) addressed by this proposed 

rule, for a Medicare SNF defined at section 1819(a) of the 

Act, we propose to define a “managing employee” to include 

consultants and any individual who directly or indirectly 

manages, advises or supervises any element of the 

practices, finances, or operations of the facility. 

 In §424.516, we are proposing to add new paragraphs 

(e)(4) and (e)(5). Paragraph (e)(4) includes the 

requirement that a Medicare SNF or Medicaid nursing 

facility must report the name, title, and period of service 

for each disclosable party. It observes that each Medicare 

SNF or Medicaid nursing facility must also report the 

organizational structure of each additional disclosable 
CMS-1351-P 168 

party of the facility and a description of each additional 

disclosable party’s relationship to the facility and to one 

another. Proposed paragraph (e)(5) states that Medicare 

SNFs (as defined in section 1819(a) of the Act) must 

certify as a condition of participation and payment under 

the program under Title XVIII of the Act that the 

information reported by the facility in accordance with 

these regulations is, to the best of the facility’s 

knowledge, accurate and correct. 

 While we propose (as discussed in the preceding 

paragraph) to collect the required information consistent 

with the requirements set forth in §424.516, we also seek 

comment on a potential alternative approach in which we 

would collect this information only upon revalidation 

consistent with the requirements set forth in §424.515. In 

accordance with §424.515, Medicare SNFs generally would be 

subject to revalidation requirements every 5 years. 

Paragraph (d) of §424.515, however, provides for off-cycle 

revalidations. We believe that an approach that requires a 

Medicare SNF to report the additional requirements covered 

by this rule at the same time CMS requires the Medicare SNF 

to revalidate with the Medicare program may not only allow 

us to satisfy the legislative intent of collecting the 

required additional information, but also may generally 

represent a decreased burden on Medicare SNFs. Thus, we 
CMS-1351-P 169 

seek comment on this approach. 

 We also propose to amend the definition of “managing 

employee” at §455.101, with respect to a Medicaid nursing 

facility as defined by section 1919(a) of the Act, to 

include a consultant who directly or indirectly manages, 

advises or supervises any element of the practices, 

finances, or operations of the facility. In addition, we 

propose to include at §455.101 definitions of “additional 

disclosable party” and “organizational structure.” 

Finally, we propose to add a requirement to §455.104 

regarding these new disclosure requirements by Medicaid 

nursing facilities, which includes a certification as a 

condition of participation and payment under the program 

under Title XIX of the Act that the information reported by 

the facility in accordance with these regulations is, to 

the best of the facility’s knowledge, accurate and correct. 

X. Collection of Information Requirements 

Under the Paperwork Reduction Act of 1995 (PRA), we 

are required to provide a 60-day notice in the Federal 

Register and solicit public comments before a collection of 

information requirement is submitted to OMB for review and 

approval. In order to evaluate fairly whether an 

information collection should be approved by OMB, 

section 3506(c)(2)(A) of the PRA requires that we solicit 

comments on the following issues: 
CMS-1351-P 170 

● Need for the information collection and its 

usefulness in carrying out the proper functions of our 

agency. 

● Accuracy of our estimate of the information 

collection burden. 

● Quality, utility, and clarity of the information to 

be collected. 

● Recommendations to minimize the information 

collection burden on the affected public, including 

automated collection techniques. 

The information collection requirements referenced in 

this proposed rule with regard to resident assessment 

information used to determine facility payments are 

currently approved under OMB# 0938-0739, which relates to 

the Medicare PPS Assessment Form (MPAF) information 

collection, and OMB# 0938-0872, which relates to the 

Minimum Data Set for Swing-Bed Hospitals. We note that 

this proposed rule will not affect the burden associated 

with either of those collections. 

With regard to the disclosure of information 

requirements included in section V.A of this rule, we 

currently require nursing home providers, including 

Medicare SNFs and Medicaid nursing facilities, to report 

information about any individual or entity with a 5 percent 

or greater ownership interest. As discussed in section IX. 
CMS-1351-P 171 

of this proposed rule, we are proposing to revise existing 

regulations to require that Medicare SNFs and Medicaid 

nursing facilities report the following at the time of 

enrollment and when any change in ownership occurs: 

● Each member of the governing body of the facility, 

including the name, title, and period of service of each 

such member;

● Each person or entity who is an officer, director, 

member, partner, trustee, or managing employee of the 

facility, including the name, title, and period of service 

of each such person or entity; and

● Each person or entity who is an additional 

disclosable party of the facility.

We are also requiring information on the organizational 

structure of each additional disclosable party of the 

facility and a description of the relationship of each such 

additional disclosable party to the facility and to one 

another. 

In connection with the proposed implementation of the 

disclosure of ownership provisions set forth in section 

6101 of the Affordable Care Act, we note that if a provider 

wants to enroll in Medicare or maintain its Medicare 

enrollment status, then the provider must complete the 

application for enrollment (Form CMS-855A) and submit it to 

the appropriate Medicare Administrative Contractor or 
CMS-1351-P 172 

Fiscal Intermediary. Form CMS-855A will be revised so that 

it collects the additional information required by this 

proposed rule from Medicare providers. (We are seeking OMB 

approval for the revisions under notice and comment periods 

separate from those associated with this proposed rule.) 

The burden associated with this requirement is the time and 

effort necessary to complete and submit the Form CMS-855A. 

While this requirement is subject to the PRA, the 

associated burden has been approved under OMB control 

number 0938-0685 with an expiration date of 1/31/2012. 

 Section V.D. of this proposed rule also contains a 

discussion of information collections related to a new 

required resident assessment, the COT OMRA. The following 

is a discussion of this new required PPS assessment. 

As discussed previously in section V.D of this 

proposed rule, we are proposing to make certain 

modifications in the existing requirements for completing 

OMRAs. We propose to introduce a new COT OMRA, to be 

completed whenever the intensity of therapy (that is, the 

total RTM) changes to such an extent that it would no 

longer reflect the RUG-IV classification and payment 

assigned for a given SNF resident, based on the resident’s 

most recent assessment used for Medicare payment. This 

will help to ensure that the SNF’s payments accurately 

reflect the amount of therapy actually being provided. We 
CMS-1351-P 173 

have submitted a copy of this proposed rule to OMB for its 

review and approval of the information collection 

requirements discussed herein. 

 SNFs would be required to complete a COT OMRA only when 

the intensity of therapy actually being furnished changes to 

such a degree that it would no longer reflect the RUG-IV 

classification and payment assigned for a given SNF resident 

based on the most recent assessment used for Medicare 

payment. The burden associated with this requirement is the 

time and effort necessary to complete the COT OMRA, coding 

the appropriate responses, and data reporting timeframes. 

Because providers currently are not required to report RTM 

that occur outside the observation window of a given PPS 

assessment, we do not have the relevant data to predict with 

certainty the number of COT OMRAs that may be required per 

year. However, we have attempted to use the administrative 

data currently available as a reasonable proxy to determine 

estimates of provider burden. We estimate that, based on 

average burden associated with the EOT OMRA, which uses the 

same basic item set as the proposed COT OMRA, it will take 

50 minutes (0.83 hours) to collect the information necessary 

for coding a COT OMRA, 10 minutes (0.17 hours) to code the 

responses, and 2 minutes (0.03 hours) to transmit the 

results, or a total of 62 minutes (1.03 hours) to complete a 

single COT OMRA. The estimated cost per COT OMRA is $33.84, 

as discussed below. 

Based on information from the Bureau of Labor 

Statistics of May, 2009 and a 30 percent benefits rate, we 
CMS-1351-P 174 

estimated hourly wage rates for a Registered Nurse (RN), and 

for a data operator. MDS preparation costs were estimated 

using RN hourly wage rates based on $56,060 per year, which 

amounts to $0.45 per minute without consideration of 

employee benefits, and $0.58 per minute after increasing 

the rate by 30 percent to account for employee benefit 

compensation. For coding functions, we used a blended rate 

of $41,090; this was the average for RNs ($56,060/year) and 

data operators ($26,120/year). The blended rate calculates 

to $0.33 per minute without consideration of employee 

benefits, and $0.43 per minute after increasing the rate by 

30 percent to account for employee benefit compensation. 

The blended rate of RN and data operator wages reflects 

that SNF providers historically have used both RN and 

support staff for the data entry function. For 

transmission personnel, we used data operator wages of 

$26,120 per year, or $0.21 per minute without consideration 

of employee benefits, and $0.27 per minute after increasing 

the rate by 30 percent to account for employee benefit 

compensation. The total amount of time for a single COT 

OMRA is 62 minutes (1.03 hours), consisting of 50 minutes 

(0.8333 hours) of RN time for preparation, 10 minutes 

(0.1667 hours) of blended RN/data operator time for coding, 

and 2 minutes (0.0333 hours) for data operator time for 

transmission. This results in an average estimated cost 
CMS-1351-P 175 

per COT OMRA of $33.84. 

The number of stays for 2009 was approximately 2.26 

million. Based on a 30-day average length of stay for RUGIV, we believe the average number of times that a COT OMRA 

would need to be completed due to a decrease in therapy is 

once per stay. Based on our review of FY 2011 first quarter 

data, we found that approximately 40 percent of the claims 

resulted in assignment to a higher-than-projected 

Rehabilitation RUG. A possible reason for the difference 

between projected and actual FY 2011 RUG-IV case-mix 

utilization could involve instances where the intensity of 

therapy actually being furnished changed (that is, 

decreased) within the payment period to such a degree that 

it no longer reflected the RUG-IV classification and payment 

assigned for a given SNF resident based on the most recent 

assessment used for Medicare payment. As discussed 

previously, if such changes or decreases in therapy 

utilization occur outside the observation window of a given 

PPS assessment, such changes currently are not captured on a 

resident assessment, and the provider would continue to be 

reimbursed under a higher-paying Rehabilitation RUG until 

the next PPS assessment. 

For FY 2012, providers would be required to complete a 

COT OMRA in these situations. Although we believe that only 

some of the 40 percent difference is likely attributable to 

these instances, the 40 percent would provide a quantifiable 

maximum burden estimate for these cases. At this time, we 

are unable to determine other quantifiable estimates for 
CMS-1351-P 176 

decreases in therapy utilization necessitating a COT OMRA. 

Using the percentage of claims resulting in a higher-thanprojected Rehabilitation RUG as a way to estimate the 

maximum number of times that a therapy decrease could result 

in the need for a COT OMRA, 40 percent or 813,074 stays 

could be affected. The total number of estimated COT OMRAs 

per SNF for FY 2011 would be 57. 

In addition, the COT OMRA can be used when providers 

increase the amount of therapy provided. The Start-ofTherapy (SOT) OMRA represents situations where therapy has 

increased to a level significant enough to change the RUG to 

a therapy RUG. The estimate for the possible number of 

times that a COT OMRA would be required due to an increase 

in therapy uses the number of SOT OMRAs as a proxy. Using 

the number of SOT OMRAs completed in the first quarter of FY 

2011 projected for the entire year, we estimate that the 

total COT OMRAs required due to an increase in therapy would 

be 142,660, or 10 times per facility per year. Therefore, 

the estimated total number of COT OMRAs per facility per 

year is 67. The total annual hour burden for completing COT 

OMRAs is estimated to be 796,414 hours for reporting, 

159,320 hours for coding, and 31,826 hours for transmission 

for a total burden of 987,560 hours for all 14,266 SNFs. 

Based on an average estimated cost per COT OMRA of $33.84, 

we estimate that the additional annual cost across all SNFs 

would be approximately $32.34 million, or $2,267.02 per 

facility. Further, we note that the completion of an EOT-R 

OMRA, as proposed in section V.D, would be entirely 
CMS-1351-P 177 

voluntary on the part of the facility and, thus, would not 

represent the imposition of a mandatory burden. 

 If you comment on these information collection and 

recordkeeping requirements, please do either of the 

following: 

Submit your comments electronically as specified in the 

ADDRESSES section of this proposed rule; or 

Mail copies to the address specified in the ADDRESSES 

section of this proposed rule and to the 

Office of Information and Regulatory Affairs 

Room 10235, New Executive Office Building 

Washington, DC 20503 

ATTN: CMS Desk Officer (CMS-1351-P) 

Fax: (202) 395-6974 

XI. Response to Comments

Because of the large number of public comments we 

normally receive on Federal Register documents, we are not 

able to acknowledge or respond to them individually. We 

will consider all comments we receive by the date and time 

specified in the "DATES" section of this preamble, and when 

we proceed with a subsequent document, we will respond to 

the comments in the preamble to that document.

XII. Economic Analyses 

A. Regulatory Impact Analysis

1. Introduction 

We have examined the impacts of this proposed rule as 
CMS-1351-P 178 

required by Executive Order 12866 on Regulatory Planning 

and Review (September 30, 1993), Executive Order 13563 on 

Improving Regulation and Regulatory Review (January 

18, 2011), the Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96-354), section 1102(b) of 

the Act, section 202 of the Unfunded Mandates Reform Act of 

1995 (UMRA, March 22, 1995; Pub. L. 104-4), Executive Order 

13132 on Federalism (August 4, 1999), and the Congressional 

Review Act (5 U.S.C. 804(2)). 

Executive Orders 12866 and 13563 direct agencies to assess 

all costs and benefits of available regulatory alternatives 

and, if regulation is necessary, to select regulatory 

approaches that maximize net benefits (including potential 

economic, environmental, public health and safety effects, 

distributive impacts, and equity). Executive Order 13563 

emphasizes the importance of quantifying both costs and 

benefits, of reducing costs, of harmonizing rules, and of 

promoting flexibility. This rule has been designated an 

economically significant rule, under section 3(f)(1) of 

Executive Order 12866. Accordingly, we have prepared a 

regulatory impact analysis (RIA) as further discussed 

below. Also, the rule has been reviewed by the Office of 

Management and Budget. 

2. Statement of Need 
CMS-1351-P 179 

 This proposed rule would update the SNF prospective 

payment rates for fiscal year 2012 as required under 

section 1888(e)(4)(E) of the Act. It also responds to 

section 1888(e)(4)(H) of the Act, which requires the 

Secretary to “provide for publication in the Federal 

Register” before the August 1 that precedes the start of 

each fiscal year, the unadjusted Federal per diem rates, 

the case-mix classification system, and the wage index 

values used in computing the prospective payment rates for 

that fiscal year. As these statutory provisions prescribe 

a detailed methodology for calculating and disseminating 

payment rates under the SNF PPS, we do not have the 

discretion to adopt an alternative approach.

3. Overall Impacts 

 If we implement the recalibration option in FY 2012, 

as described above in section II.B.2, we estimate the 

aggregate impact would be a net decrease of $3.94 billion 

in payments to SNFs, resulting from a $530 million increase 

from the update to the payment rates and a $4.47 billion 

reduction from the recalibration of the case-mix 

adjustment. However, if we implement the option of 

applying the standard update without a recalibration for FY 

2012, as described above in section II.B.2, we estimate the 

aggregate impact would be a net increase of $530 million in 

payments to SNFs, resulting from the update to the payment 
CMS-1351-P 180 

rates. Accordingly, we have prepared a RIA that, to the 

best of our ability, presents the costs and benefits of the 

rulemaking, with respect to the two options presented in 

section II.B.2. of this proposed rule 

The update set forth in this proposed rule applies to 

payments in FY 2012. Accordingly, the analysis that 

follows only describes the impact of this single year. In 

accordance with the requirements of the Act, we will 

publish a notice for each subsequent FY that will provide 

for an update to the payment rates and include an 

associated impact analysis. 

 The two options being considered regarding the 

recalibration of the case-mix indexes are presented in 

section II.B.2. A detailed economic impact analysis of 

these two options appears below. 

4. Detailed Economic Analysis 

This proposed rule sets forth updates of the SNF PPS 

rates contained in the update notice for FY 2011 

(75 FR 42886, July 22, 2010) and the associated correction 

notice (75 FR 55801, September 14, 2010). Based on the 

above, if we implement the recalibration option for FY 

2012, we estimate that the aggregate impact would be a net 

decrease of $3.94 billion in payments to SNFs, resulting 

from a $530 million increase from the update to the payment 

rates and a $4.47 billion reduction from the recalibration 
CMS-1351-P 181 

of the case-mix adjustment. If we do not recalibrate the 

CMIs for FY 2012, as discussed in section II.B.2, we 

estimate that the aggregate impact would be a net increase 

of $530 million in payments to SNFs, resulting primarily 

from the update to the payment rates. The impact analysis 

of this proposed rule represents the projected effects of 

the changes in the SNF PPS from FY 2011 to FY 2012 for each 

of these two possible options. We assess the effects by 

estimating payments under each of the two options while 

holding all other payment-related variables constant. 

Although the best data available are utilized, there is no 

attempt to predict behavioral responses to these changes, 

or to make adjustments for future changes in such variables 

as days or case-mix. 

 Certain events may occur to limit the scope or 

accuracy of our impact analysis, as this analysis is 

future-oriented and, thus, very susceptible to forecasting 

errors due to certain events that may occur within the 

assessed impact time period. Some examples of possible 

events may include newly legislated general Medicare 

program funding changes by the Congress, or changes 

specifically related to SNFs. In addition, changes to the 

Medicare program may continue to be made as a result of 

previously enacted legislation, or new statutory 

provisions. Although these changes may not be specific to 
CMS-1351-P 182 

the SNF PPS, the nature of the Medicare program is that the 

changes may interact and, thus, the complexity of the 

interaction of these changes could make it difficult to 

predict accurately the full scope of the impact upon SNFs. 

In accordance with section 1888(e)(4)(E) and (e)(5) of 

the Act, we update the payment rates for FY 2011 by a 

factor equal to the market basket index percentage increase 

adjusted by the FY 2010 forecast error adjustment (if 

applicable) and the MFP adjustment to determine the payment 

rates for FY 2012. As discussed previously, for FY 2012 

and each subsequent FY, as required by section 

1888(e)(5)(B) of the Act as amended by section 3401(b) of 

the Affordable Care Act, the market basket percentage is 

reduced by the MFP adjustment. The special AIDS add-on 

established by section 511 of the MMA remains in effect 

until “. . . such date as the Secretary certifies that 

there is an appropriate adjustment in the case mix . . . .” 

We have not provided a separate impact analysis for the MMA 

provision. Our latest estimates indicate that there are 

less than 3,500 beneficiaries who qualify for the AIDS 

add-on payment. The impact to Medicare is included in the 

“total” column of Tables 13A and 13B. In updating the 

rates for FY 2012, we made a number of standard annual 

revisions and clarifications mentioned elsewhere in this 

proposed rule (for example, the update to the wage and 
CMS-1351-P 183 

market basket indexes used for adjusting the Federal 

rates). 

 We estimate that if we were to implement the 

recalibration option for FY 2012, the aggregate impact 

would be a net decrease of $3.94 billion in payments to 

SNFs, resulting from a $530 million increase from the 

update to the payment rates and a $4.47 billion reduction 

from the recalibration of the case-mix adjustment. If we 

do not implement the recalibration option for FY 2012, we 

estimate that the aggregate impact would be a net increase 

of $530 million in payments to SNFs, resulting from the 

update to the payment rates. The FY 2012 impacts that 

would result from implementing the recalibration option in 

FY 2012 are presented in Table 13A. The FY 2012 impacts 

that would result from not implementing the recalibration 

of the case-mix indexes in FY 2012 are presented in 

Table 13B. 

a. Impacts of Implementing the Recalibration Option for 

FY 2012

The breakdown of the various categories of data in Table 

13A is as follows. 

 The first column shows the breakdown of all SNFs by 

urban or rural status, hospital-based or freestanding 

status, and census region. 

 The “total” row shows the estimated effects of the 
CMS-1351-P 184 

various changes on all facilities. The next six rows show 

the effects on facilities split by hospital-based, 

freestanding, urban, and rural categories. The urban and 

rural designations are based on the location of the 

facility under the CBSA designation. The next 19 rows show 

the effects on urban versus rural status by census region. 

The last 3 rows show the effects on ownership by 

government, profit and non-profit status. 

 The second column in Table 13A shows the number of 

facilities in the impact database. 

 The third column in Table 13A shows the effects of 

recalibrating the nursing CMIs of the RUG-IV therapy 

groups. As explained previously in section II.B.2 of this 

proposed rule, we are considering this recalibration so 

that the CMIs more accurately reflect parity in 

expenditures under the RUG-IV system introduced in FY 2011 

relative to payments under the previous RUG-53 system, 

based on our review of initial FY 2011 claims data. The 

total impact of this change is a decrease of 12.6 percent. 

We note that some individual providers may experience 

larger decreases in payment than others due to case-mix 

utilization. 

The fourth column of Table 13A shows the effect of the 

annual update to the wage index. This represents the 

effect of using the most recent wage data available. The 
CMS-1351-P 185 

total impact of this change is zero percent; however, there 

are distributional effects of the change. 

The fifth column of Table 13A shows the effect of all 

of the changes on the FY 2012 payments. The update of 

1.5 percent, consisting of the market basket increase of 

2.7 percentage points, reduced by the 1.2 percentage point 

MFP adjustment is constant for all providers and, though 

not shown individually, is included in the total column. 

It is projected that aggregate payments will decrease by 

11.3 percent, assuming that facilities do not change their 

care delivery and billing practices in response. 

As shown in Table 13A, the combined effects of all of 

the changes vary by specific types of providers and by 

location. 

TABLE 13A: RUG-IV Projected Impact to the SNF PPS for 

FY 2012 (Includes recalibration of the case-mix indexes) 

Number of 

Facilities

FY 2012 Revised CMIs

Update 

Wage 

Data

Total FY 

2012 

Change

Group 

Total 14,266 -12.6% 0.0% -11.3%

Urban 10,049 -12.8% 0.0% -11.5%

Rural 4,217 -11.9% 0.1% -10.5%

Hospital based 

urban 421 -12.4% 0.1% -11.1%

Freestanding urban 9,628 -12.8% 0.0% -11.5%

Hospital based 

rural 310 -11.4% 0.0% -10.2%

Freestanding rural 3,907 -11.9% 0.1% -10.5%

 

Urban by region

New England 792 -12.6% 0.0% -11.3%

Middle Atlantic 1,391 -12.9% 0.2% -11.5%

South Atlantic 1,682 -12.8% -0.3% -11.7%

East North Central 1,962 -12.9% -0.4% -11.9%
CMS-1351-P 186 

Number of 

Facilities

FY 2012 Revised CMIs

Update 

Wage 

Data

Total FY 

2012 

Change

East South Central 482 -12.7% -0.4% -11.8%

West North Central 819 -12.8% 0.3% -11.2%

West South Central 1,134 -12.7% 0.5% -10.9%

Mountain 459 -12.8% 0.2% -11.3%

Pacific 1,325 -12.8% 0.2% -11.3%

Outlying 3 -3.7% 1.1% -1.1%

 

Rural by region

New England 137 -11.7% 1.1% -9.4%

Middle Atlantic 233 -12.4% -0.1% -11.1%

South Atlantic 546 -11.8% -0.1% -10.6%

East North Central 867 -12.1% -0.1% -10.9%

East South Central 455 -11.8% -0.5% -10.9%

West North Central 984 -12.1% 0.4% -10.4%

West South Central 679 -11.7% 0.9% -9.6%

Mountain 204 -11.8% 0.4% -10.2%

Pacific 112 -11.8% -0.5% -11.0%

 

Ownership

Government 710 -12.5% -0.1% -11.3%

Profit 9,959 -12.6% 0.0% -11.3%

Non-profit 3,597 -12.7% 0.0% -11.4%

Note: The Total column includes the 2.7 percent market basket increase, reduced by the 1.2 percentage 

point MFP adjustment. Additionally,we found no SNFs in rural outlying areas. 

 

b. Impacts of Not Implementing the Recalibration Option 

for FY 2012

The first column of Table 13B shows the breakdown of 

all SNFs by urban or rural status, hospital-based or 

freestanding status, and census region. 

 The “total” row of Table 13B describes the estimated 

effects of the various changes on all facilities. The next 

six rows show the effects on facilities split by hospitalbased, freestanding, urban, and rural categories. The 

urban and rural designations are based on the location of 

the facility under the CBSA designation. The next 19 rows 
CMS-1351-P 187 

show the effects on urban versus rural status by census 

region. The last 3 rows show the effects on ownership by 

government, profit and non-profit status. 

 The second column in Table 13B shows the number of 

facilities in the impact database. 

 The third column in Table 13B shows the effect of the 

annual update to the wage index. This represents the 

effect of using the most recent wage data available. The 

total impact of this change is zero percent; however, there 

are distributional effects of the change. 

The fourth column of Table 13B shows the effect of all 

of the changes on the FY 2012 payments. The update of 

1.5 percent, consisting of the market basket increase of 

2.7 percentage points, reduced by the 1.2 percentage point 

MFP adjustment is constant for all providers and, though 

not shown individually, is included in the total column. 

It is projected that aggregate payments will increase by 

1.5 percent, assuming that facilities do not change their 

care delivery and billing practices in response. 

As shown in Table 13B, the combined effects of all of 

the changes vary by specific types of providers and by 

location. 

TABLE 13B: RUG-IV Projected Impact to the SNF PPS for 

FY 2012 (Does not include recalibration of the case-mix 

indexes) 

Number of 

Facilities

 Wage 

Index 

Total 

Impact 
CMS-1351-P 188 

Number of 

Facilities

 Wage 

Index 

Total 

Impact 

Group 

Total 14,266 0.0% 1.5% 

Urban 10,049 0.0% 1.5% 

Rural 4,217 0.1% 1.6% 

Hospital based urban 421 0.1% 1.6% 

Freestanding urban 9,628 0.0% 1.5% 

Hospital based rural 310 0.0% 1.5% 

Freestanding rural 3,907 0.1% 1.6% 

 

Urban by region 

New England 792 0.0% 1.5% 

Middle Atlantic 1,391 0.2% 1.7% 

South Atlantic 1,682 -0.3% 1.2% 

East North Central 1,962 -0.4% 1.1% 

East South Central 482 -0.4% 1.1% 

West North Central 819 0.3% 1.8% 

West South Central 1,134 0.5% 2.1% 

Mountain 459 0.2% 1.7% 

Pacific 1,325 0.2% 1.7% 

Outlying 3 1.1% 2.7% 

 

Rural by region 

New England 137 1.1% 2.6% 

Middle Atlantic 233 -0.1% 1.4% 

South Atlantic 546 -0.1% 1.4% 

East North Central 867 -0.1% 1.4% 

East South Central 455 -0.5% 1.0% 

West North Central 984 0.4% 1.9% 

West South Central 679 0.9% 2.4% 

Mountain 204 0.4% 1.9% 

Pacific 112 -0.5% 1.0% 

 

Ownership 

Government 710 -0.1% 1.4% 

Profit 9,959 0.0% 1.5% 

Non-profit 3,597 0.0% 1.5% 

 The proposed implementation of the disclosure of 

ownership requirements set forth in section 6101 of the 

Affordable Care Act (as discussed previously in section 

V.A. of this proposed rule) will affect all Medicaid 
CMS-1351-P 189 

nursing facilities and Medicare SNFs providing care to a 

Medicare and/or Medicaid beneficiary. Currently, these 

facilities are required to disclose information and 

maintain up-to-date information in PECOS and/or OSCAR. 

Thus, these new requirements are an extension of 

requirements to which the facility should already be 

accustomed to maintain compliance. Also, the proposed new 

disclosure requirements do not appear to impose any laboror system-intensive burden on the facilities. 

 We solicit comment on the economic impact analysis of 

the two options presented in section II.B.2 (that is, 

recalibration and no recalibration for FY 2012). 

5. Alternatives Considered 

As described above, if we implement the recalibration 

option for FY 2012, the aggregate impact would be a net 

decrease of $3.94 billion in payments to SNFs, resulting 

from a $530 million increase from the update to the payment 

rates and a $4.47 billion reduction from the recalibration 

of the case-mix adjustment. If we move forward with the 

option of applying the standard update without a 

recalibration for FY 2012, we estimate that the aggregate 

impact would be a net increase of $530 million in payments 

to SNFs, resulting from the update to the payment rates. 

In view of the potential economic impact, we considered the 

alternatives described below. 
CMS-1351-P 190 

Section 1888(e) of the Act establishes the SNF PPS for 

the payment of Medicare SNF services for cost reporting 

periods beginning on or after July 1, 1998. This section 

of the statute prescribes a detailed formula for 

calculating payment rates under the SNF PPS, and does not 

provide for the use of any alternative methodology. It 

specifies that the base year cost data to be used for 

computing the SNF PPS payment rates must be from FY 1995 

(October 1, 1994, through September 30, 1995). In 

accordance with the statute, we also incorporated a number 

of elements into the SNF PPS (for example, case-mix 

classification methodology, the MDS assessment schedule, a 

market basket index, a wage index, and the urban and rural 

distinction used in the development or adjustment of the 

Federal rates). Further, section 1888(e)(4)(H) of the Act 

specifically requires us to disseminate the payment rates 

for each new FY through the Federal Register, and to do so 

before the August 1 that precedes the start of the new FY. 

Accordingly, we are not pursuing alternatives with respect 

to the payment methodology as discussed above. 

Using our authority to establish an appropriate 

adjustment for case mix under section 1888(e)(4)(G)(i) of 

the Act, this proposed rule considers a recalibration of 

the adjustment to the nursing case-mix indexes based on 

actual FY 2011 data. In the FY 2010 SNF PPS final rule 
CMS-1351-P 191 

(74 FR 40339), we committed to monitoring the accuracy and 

effectiveness of the parity adjustment to maintain budget 

neutrality. We believe that using actual FY 2011 claims 

data to perform the recalibration analysis may result in 

case-mix weights that better reflect the resources used, 

produce more accurate payment, and represent an appropriate 

case-mix adjustment. Using FY 2011 data would be 

consistent with our intent to make the change from the RUG53 model to the RUG-IV model in a budget neutral manner, as 

described in the SNF PPS final rule for FY 2010 (74 FR 

40339). 

In reviewing our initial projections, we found that 

the disparity which formed the basis for our considering a 

recalibration of the nursing case-mix indexes was at least 

partially the result of a shift in the mode of therapy 

provided to beneficiaries in a Part A stay under RUG-IV. 

The amount of concurrent therapy decreased significantly 

from historical levels, with a portion of the SNFs 

reporting 0 minutes of concurrent therapy for all MDS 3.0s 

submitted during the FY 2011 sampling period. Many of 

these facilities reported large increases in the amount of 

group therapy provided during the same time period. During 

the period before we publish the final rule for FY 2012, we 

plan to continue to collect and analyze MDS 3.0 and SNF PPS 

claims data to confirm our preliminary assessment of the 
CMS-1351-P 192 

parity adjustment considered in this rule. Then, in the 

final rule, we would use the expanded FY 2011 MDS 3.0 data 

and SNF PPS claims data to decide whether or not to pursue 

the considered FY 2012 recalibration of the SNF PPS rates. 

We considered various alternatives for implementing a 

recalibrated case-mix adjustment. Most notably, as 

described previously in section II.B.2 of this proposed 

rule, we considered applying a recalibration to all nursing 

CMIs, irrespective of RUG category. However, we found that 

such a recalibration most drastically affected non-therapy 

RUG groups, which seemed incongruent with the perceived 

reasons for differences between expected and actual 

utilization patterns, as noted in Table 4. We will 

continue to monitor utilization trends in case such a 

methodology might become more viable in the future. 

In addition, we considered implementing partial 

adjustments to the case-mix indexes over multiple years 

until parity was achieved. However, we believe that this 

alternative would continue to reimburse in amounts that 

significantly exceed our intended policy. Moreover, as we 

move forward with programs designed to enhance and 

restructure our post-acute care payment systems, we believe 

that payments under the SNF PPS should be established at 

their intended and most appropriate levels. Stabilizing 

the baseline is a necessary first step toward properly 
CMS-1351-P 193 

implementing and maintaining the integrity of the RUG-IV 

classification methodology and the SNF PPS as a whole. 

Therefore, for FY 2012, we are considering only the two 

options described in section II.B.2 above. We solicit 

comment on the alternatives considered in this analysis. 

6. Accounting Statement 

 As required by OMB Circular A-4 (available online at 

www.whitehouse.gov/sites/default/files/omb/assets/regulator

y_matters_pdf/a-4.pdf), in Table 14, we have prepared an 

accounting statement showing the classification of the 

expenditures associated with the provisions of this 

proposed rule, based on whether or not we implement the 

recalibration of the case-mix indexes. Tables 14A and 14B 

provide our best estimate of the possible changes in 

Medicare payments under the SNF PPS as a result of the 

policies in this proposed rule, based on the data for 

14,266 SNFs in our database. All expenditures are 

classified as transfers to Medicare providers (that is, 

SNFs). 

TABLE 14A: Accounting Statement: Classification of 

Estimated Expenditures, from the 2011 SNF PPS Fiscal Year to 

the 2012 SNF PPS Fiscal Year (Including Recalibration of 

Case-Mix Indexes)

Category Transfers 

Annualized Monetized Transfers -$3.94 billion* 

From Whom To Whom? Federal Government to SNF Medicare Providers 

* The net decrease of $3.94 billion in transfer payments is a result of the decrease of $4.47 billion due to 

the proposed recalibration of the case mix adjustment, together with the proposed market basket increase of 

$530 million. 
CMS-1351-P 194 

TABLE 14B: Accounting Statement: Classification of 

Estimated Expenditures, from the 2011 SNF PPS Fiscal Year to 

the 2012 SNF PPS Fiscal Year (Without Recalibration of CaseMix Indexes)

Category Transfers 

Annualized Monetized Transfers $530 million* 

From Whom To Whom? Federal Government to SNF Medicare Providers 

* The net increase of $530 million in transfer payments is a result of the proposed market basket increase of 

1.5 percent 

7. Conclusion 

If we implement the recalibration of the case-mix 

indexes, the overall estimated payments for SNFs in FY 2012 

are projected to decrease by $3.94 billion, or 11.3 

percent, compared with those in FY 2011. With this option, 

we estimate that under RUG-IV, SNFs in urban and rural 

areas would experience, on average, an 11.5 and 

10.5 percent decrease, respectively, in estimated payments 

compared with FY 2011. Providers in the urban East North 

Central region would experience the largest estimated 

decrease in payments of approximately 11.9 percent. If we 

do not implement the recalibration of the case-mix indexes 

for FY 2012, the overall estimated payments for SNFs in FY 

2012 are projected to increase by $530 million, or 1.5 

percent, compared with FY 2011. We estimate that under 

this option, SNFs in urban and rural areas would 

experience, on average, a 1.5 and 1.6 percent increase, 

respectively, in estimated RUG-IV payments compared with FY 
CMS-1351-P 195 

2011. Outlying urban providers and providers in the rural 

New England region would experience the largest estimated 

increase in payments of 2.7 and 2.6 percent, respectively. 

The disclosure of ownership requirements in 

section 6101 of the Affordable Care Act that we now propose 

to implement involve necessary information that would 

provide the public with a greater assurance that there is 

transparency and, thus, improved oversight. We believe it 

was the intent of Congress to complement that information 

which is already being supplied by the facility. With that 

in mind, we propose specific disclosure information that 

would identify the unique business and operating structures 

of Medicare SNFs and Medicaid nursing facilities. By 

providing PECOS and OSCAR with this more detailed facility 

ownership information, this proposed revision would help 

ensure that program expenditures are made in the most 

efficient and appropriate manner. 

B. Regulatory Flexibility Act Analysis

The RFA requires agencies to analyze options for 

regulatory relief of small entities, if a rule has a 

significant impact on a substantial number of small 

entities. For purposes of the RFA, small entities include 

small businesses, non-profit organizations, and small 

governmental jurisdictions. Most SNFs and most other 

providers and suppliers are small entities, either by their 
CMS-1351-P 196 

non-profit status or by having revenues of $13.5 million or 

less in any 1 year. For purposes of the RFA, approximately 

91 percent of SNFs are considered small businesses 

according to the Small Business Administration's latest 

size standards, with total revenues of $13.5 million or 

less in any 1 year. (For details, see the Small Business 

Administration’s Web site at 

http://ecfr.gpoaccess.gov/cgi/t/text/textidx?c=ecfr&sid=2465b064ba6965cc1fbd2eae60854b11&rgn=div8&vie

w=text&node=13:1.0.1.1.16.1.266.9&idno=13). Individuals 

and States are not included in the definition of a small 

entity. In addition, approximately 21 percent of SNFs 

classified as small entities are non-profit organizations. 

Finally, the estimated number of small business entities 

does not distinguish provider establishments that are 

within a single firm and, therefore, the number of SNFs 

classified as small entities may be higher than the 

estimate above. We expect that the disclosure requirements 

discussed in section V.A of this proposed rule will aid us 

in determining which providers may be appropriately 

classified as small entities. 

This proposed rule updates the SNF PPS rates published 

in the update notice for FY 2011 (75 FR 42886, 

July 22, 2010) and the associated correction notice 

(75 FR 55801, September 14, 2010). We estimate that 
CMS-1351-P 197 

implementing the recalibration option considered under 

section II.B.2 above would result in a net decrease of 

$3.94 billion in payments to SNFs for FY 2012. This would 

reflect a $530 million increase from the update to the 

payment rates and a $4.47 billion reduction from the 

recalibration of the case-mix adjustment. As indicated in 

Table 13A, the estimated effect of this recalibration 

option on facilities for FY 2012 would be an aggregate 

negative impact of 11.3 percent. While it is projected in 

Table 13A that all providers would experience a net 

decrease in payments, we note that some individual 

providers may experience larger decreases in payments than 

others due to the distributional impact of the FY 2012 wage 

indexes and the degree of Medicare utilization. 

Alternatively, we estimate that not implementing the 

recalibration option considered under section II.B.2 above 

would result in a net increase of $530 million in payments 

to SNFs for FY 2012, reflecting the standard update to the 

payment rates. As indicated in Table 13B, the estimated 

effect of this option on facilities for FY 2012 would be an 

aggregate positive impact of 1.5 percent. While it is 

projected in Table 13B that all providers would experience 

a net increase in payments, we note that some individual 

providers may experience larger increases in payments than 

others due to the distributional impact of the FY 2012 wage 
CMS-1351-P 198 

indexes and the degree of Medicare utilization. 

Guidance issued by the Department of Health and Human 

Services on the proper assessment of the impact on small 

entities in rulemakings, utilizes a cost or revenue impact 

of 3 to 5 percent as a significance threshold under the 

RFA. According to MedPAC, Medicare covers approximately 12 

percent of total patient days in freestanding facilities 

and 23 percent of facility revenue (March 2011). However, 

it is worth noting that the distribution of days and 

payments is highly variable. That is, the majority of SNFs 

have significantly lower Medicare utilization. As a 

result, for most facilities, when all payers are included 

in the revenue stream, the overall impact effect to total 

revenues should be substantially less than those presented 

in Table 13A, which reflects the impacts of implementing 

the recalibration of the case-mix indexes. However, not 

implementing the recalibration of the case-mix indexes, as 

presented in Table 13B, yields an aggregate positive net 

impact of 1.5 percent on all SNF providers, with outlying 

urban providers and providers in the rural New England 

region experiencing the largest estimated increase in 

payments of 2.7 and 2.6 percent, respectively. Therefore, 

the Secretary has determined that this proposed rule may 

have a significant impact on a substantial number of small 

entities, depending on the option considered (that is, 
CMS-1351-P 199 

recalibration of the parity adjustment for FY 2012 or 

application of the standard update without recalibration 

for FY 2012). 

We offer an analysis of the alternatives considered in 

section XII.A.5 of this proposed rule. The analysis above, 

together with the remainder of this preamble, constitutes 

the initial regulatory flexibility analysis. We solicit 

comment on the RFA analysis. 

In addition, section 1102(b) of the Social Security 

Act requires us to prepare a regulatory impact analysis if 

a rule may have a significant impact on the operations of a 

substantial number of small rural hospitals. This analysis 

must conform to the provisions of section 603 of the RFA. 

For purposes of section 1102(b) of the Act, we define a 

small rural hospital as a hospital that is located outside 

of a Metropolitan Statistical Area and has fewer than 100 

beds. The proposed rule would affect small rural hospitals 

that (a) furnish SNF services under a swing-bed agreement 

or (b) have a hospital-based SNF. We anticipate that the 

impact on small rural hospitals would be similar to the 

impact on SNF providers overall. Therefore, the Secretary 

has determined that this proposed rule may have a 

significant impact on the operations of a substantial 

number of small rural hospitals, depending on the option 

considered, as discussed above (that is, recalibration of 
CMS-1351-P 200 

the parity adjustment for FY 2012 or application of the 

standard update without recalibration for FY 2012). 

C. Unfunded Mandates Reform Act Analysis

Section 202 of the Unfunded Mandates Reform Act of 

1995 (UMRA) also requires that agencies assess anticipated 

costs and benefits before issuing any rule whose mandates 

require spending in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. In 2011, that 

threshold is approximately $136 million. This proposed 

rule would not impose spending costs on State, local, or 

tribal governments in the aggregate, or by the private 

sector, of $136 million. 

D. Federalism Analysis

 Executive Order 13132 establishes certain requirements 

that an agency must meet when it promulgates a proposed 

rule (and subsequent final rule) that impose substantial 

direct requirement costs on State and local governments, 

preempts State law, or otherwise has Federalism 

implications. This proposed rule would have no substantial 

direct effect on State and local governments, preempt State 

law, or otherwise have Federalism implications. 
CMS-1351-P 201 

List of Subjects 

42 CFR Part 413

 Health facilities, Kidney diseases, Medicare, Reporting 

and recordkeeping requirements. 

42 CFR Part 424

 Emergency medical services, Health facilities, Health 

professions, Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 455

 Fraud, Grant programs—health, Health facilities, 

Health professions, Investigations, Medicaid, Reporting and 

recordkeeping requirements. 
CMS-1351-P 202 

 For the reasons set forth in the preamble, the Centers 

for Medicare & Medicaid Services proposes to amend 42 CFR 

chapter IV as set forth below: 

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; 

PAYMENT FOR END-STAGE RENAL DISEASE SERVICES; OPTIONAL 

PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING 

FACILITIES 

 1. The authority citation for part 413 continues to 

read as follows: 

Authority: Secs. 1102, 1812(d), 1814(b), 1815, 

1833(a), (i), and (n), 1861(v), 1871, 1881, 1883, and 1886 

of the Social Security Act (42 U.S.C. 1302, 1395d(d), 

1395f(b), 1395g, 1395l(a), (i), and (n), 1395x(v), 1395hh, 

1395rr, 1395tt, and 1395ww); and sec. 124 of Public Law 106-

133 (113 Stat. 1501A-332). 

Subpart J--Prospective Payment for Skilled Nursing 

Facilities 

 2. Section 413.337 is amended by— 

A. Revising paragraphs (d)(1) and (d)(2). 

B. Adding paragraph (d)(3). 

The revisions and addition read as follows: 

§413.337 Methodology for calculating the prospective 

payment rates.

* * * * * 

(d) * * * 

 (1) Update formula. The unadjusted Federal payment 

rate shall be updated as follows: 
CMS-1351-P 203 

 (i) For the initial period beginning on July 1, 1998, 

and ending on September 30, 1999, the unadjusted Federal 

payment rate is equal to the rate computed under paragraph 

(b)(5)(iii) of this section increased by a factor equal to 

the SNF market basket index percentage change for such 

period minus 1 percentage point. 

 (ii) For fiscal year 2000, the unadjusted Federal 

payment rate is equal to the rate computed for the initial 

period described in paragraph (d)(1)(i) of this section 

increased by a factor equal to the SNF market basket index 

percentage change for that period minus 1 percentage point. 

 (iii) For fiscal year 2001, the unadjusted Federal 

payment rate is equal to the rate computed for the previous 

fiscal year increased by a factor equal to the SNF market 

basket index percentage change for the fiscal year. 

 (iv) For fiscal years 2002 and 2003, the unadjusted 

Federal payment rate is equal to the rate computed for the 

previous fiscal year increased by a factor equal to the SNF 

market basket index percentage change for the fiscal year 

involved minus 0.5 percentage points. 

 (v) For each subsequent fiscal year, the unadjusted 

Federal payment rate is equal to the rate computed for the 

previous fiscal year increased by a factor equal to the SNF 

market basket index percentage change for the fiscal year 

involved. 

 (2) Forecast error adjustment. Beginning with fiscal 

year 2004, an adjustment to the annual update of the 

previous fiscal year’s rate will be computed to account for 
CMS-1351-P 204 

forecast error. The initial adjustment (in fiscal year 

2004) to the update of the previous fiscal year’s rate will 

take into account the cumulative forecast error between 

fiscal years 2000 and 2002. Subsequent adjustments in 

succeeding fiscal years will take into account the forecast 

error from the most recently available fiscal year for which 

there is final data. The forecast error adjustment applies 

whenever the difference between the forecasted and actual 

percentage change in the SNF market basket index exceeds the 

following threshold: 

 (i) 0.25 percentage points for fiscal years 2004 

through 2007; and 

 (ii) 0.5 percentage points for fiscal year 2008 and 

subsequent fiscal years. 

 (3) Multifactor productivity (MFP) adjustment. For 

fiscal year 2012 and each subsequent fiscal year, the SNF 

market basket index percentage change for the fiscal year 

(as modified by any applicable forecast error adjustment 

under paragraph (d)(2) of this section) shall be reduced by 

the MFP adjustment described in section 

1886(b)(3)(B)(xi)(II) of the Act. The reduction of the 

market basket percentage change by the MFP adjustment may 

result in the market basket percentage change being less 

than zero for a fiscal year, and may result in the 

unadjusted Federal payment rates for a fiscal year being 

less than such payment rates for the preceding fiscal year. 

* * * * * 
CMS-1351-P 205 

PART 424--CONDITIONS FOR MEDICARE PAYMENT. 

3. The authority citation for part 424 continues to 

read as follows: 

Authority: Secs. 1102 and 1871 of the Social Security 

Act (42 U.S.C 1302 and 1395hh). 

Subpart P--Requirements for Establishing and Maintaining 

Medicare Billing Privileges 

4. Section 424.502 is amended by-- 

A. Adding the definitions of “Additional disclosable 

party” and “Organizational structure” in alphabetical 

order. 

B. Revising the definition of “Managing employee”. 

The revision and additions read as follows: 

§424.502 Definitions. 

* * * * * 

Additional disclosable party means, with respect to a 

skilled nursing facility defined at section 1819(a) of the 

Act, any person or entity who— 

(1) Exercises operational, financial, or managerial 

control over the facility or a part thereof, or provides 

policies or procedures for any of the operations of the 

facility, or provides financial or cash management services 

to the facility; 
CMS-1351-P 206 

(2) Leases or subleases real property to the facility, 

or owns a whole or part interest equal to or exceeding 5 

percent of the total value of such real property; or 

(3) Provides management or administrative services, 

management or clinical consulting services, or accounting 

or financial services to the facility. 

* * * * * 

Managing employee means a general manager, business 

manager, administrator, director, or other individual that 

exercises operational or managerial control over, or who 

directly or indirectly conducts, the day-to-day operation 

of the provider or supplier, either under contract or 

through some other arrangement, whether or not the 

individual is a W-2 employee of the provider or supplier. 

With respect to the additional requirements at §424.516(e) 

of this chapter for a skilled nursing facility defined at 

section 1819(a) of the Act, a “managing employee” means an 

individual, including a general manager, business manager, 

administrator, director, or consultant, who directly or 

indirectly manages, advises, or supervises any element of 

the practices, finances, or operations of the facility. 

* * * * * 

Organizational structure means, with respect to a 

skilled nursing facility defined at section 1819(a) of the 

Act, in the case of-– 
CMS-1351-P 207 

(1) A corporation, the officers, directors, and 

shareholders of the corporation who have an ownership 

interest in the corporation which is equal to or exceeds 5 

percent; 

(2) A limited liability company, the members and 

managers of the limited liability company including, as 

applicable, what percentage each member and manager has of 

the ownership interest in the limited liability company; 

(3) A general partnership, the partners of the general 

partnership; 

(4) A limited partnership, the general partners and 

any limited partners of the limited partnership who have an 

ownership interest in the limited partnership which is 

equal to or exceeds 10 percent; 

(5) A trust, the trustees of the trust; and 

(6) An individual, contact information for the 

individual. 

* * * * * 

6. Section 424.516 is amended by adding paragraphs 

(e)(4) and (e)(5) to read as follows: 

§424.516 Additional provider and supplier requirements for 

enrolling and maintaining active enrollment status in the 

Medicare program. 

* * * * * 

(e) * * * 
CMS-1351-P 208 

(4) In addition, a skilled nursing facility (as 

defined by section 1819(a) of the Act) must report upon 

enrollment and within 30 days of any change to the 

following information: 

(i) The identity of and information on all of the 

following: 

(A) Each member of the governing body of the facility, 

including the name, title, and period of service for each 

member. 

(B) Each person or entity who is an officer, director, 

member, partner, trustee, or managing employee (as defined 

in §424.502) of the facility, including the name, title, 

and period of service of each such person or entity. 

(C) Each person or entity who is an additional 

disclosable party of the facility, as defined in §424.502. 

(ii) The organizational structure (as defined in 

§424.502 of this chapter) of each additional disclosable 

party of the facility and a description of the relationship 

of each such additional disclosable party to the facility 

and to one another. 

(5) A skilled nursing facility (as defined by section 

1819(a) of the Act) must certify as a condition of 

participation and payment under the program under Title 

XVIII of the Act that the information reported by the 
CMS-1351-P 209 

facility in accordance with these regulations is, to the 

best of the facility’s knowledge, accurate and current. 

* * * * *

PART 455--PROGRAM INTEGRITY: MEDICAID 

 7. The authority citation for part 455 continues to 

read as follows: 

 Authority: Sec. 1102 of the Social Security Act (42 

U.S.C. 1302) 

Subpart B--Disclosure of Information by Providers and 

Fiscal Agents 

8. Section 455.101 is amended by-- 

A. Adding the definitions of “Additional disclosable 

party” and “Organizational structure” in alphabetical 

order. 

B. Revising the definition of “Managing employee”. 

The revision and additions read as follows: 

§455.101 Definitions. 

 Additional disclosable party means any person or 

entity who— 

 (1) Exercises operational, financial, or managerial 

control over the facility or a part thereof, or provides 

policies or procedures for any of the operations of the 

facility, or provides financial or cash management services 

to the facility; 

 (2) Leases or subleases real property to the facility, 
CMS-1351-P 210 

or owns a whole or part interest equal to or exceeding 5 

percent of the total value of such real property; or 

 (3) Provides management or administrative services, 

management or clinical consulting services, or accounting 

or financial services to the facility.

* * * * * 

Managing employee means a general manager, business 

manager, administrator, director, or other individual who 

exercises operational or managerial control over, or who 

directly or indirectly controls the day-to-day operation of 

an institution, organization, or agency. With respect to 

nursing facilities defined by section 1919(a) of the Act, a 

“managing employee” means an individual, including a 

general manager, business manager, administrator, director, 

or consultant who directly or indirectly manages, advises, 

or supervises any element of the practices, finances, or 

operations of the facility. 

Organizational structure means, in the case of – 

(1) A corporation, the officers, directors, and 

shareholders of the corporation who have an ownership 

interest in the corporation which is equal to or exceeds 5 

percent; 

(2) A limited liability company, the members and 

managers of the limited liability company including, as 
CMS-1351-P 211 

applicable, what percentage each member and manager has of 

the ownership interest in the limited liability company; 

(3) A general partnership, the partners of the general 

partnership; 

(4) A limited partnership, the general partners and 

any limited partners of the limited partnership who have an 

ownership interest in the limited partnership which is 

equal to or exceeds 10 percent; 

(5) A trust, the trustees of the trust; and 

(6) An individual, contact information for the 

individual. 

* * * * *

9. Section 455.104 is amended by-- 

A. Redesignating paragraph (e) as paragraph (f). 

B. Adding a new paragraph (e). 

The addition reads as follows: 

§455.104 Disclosure by Medicaid providers and fiscal 

agents: Information on ownership and control. 

* * * * *

(e) Disclosures from Medicaid nursing facilities. (1) 

What disclosures must be provided. Medicaid nursing 

facilities must provide all disclosures required for 

disclosing entities, above. In addition, Medicaid nursing 

facilities (as defined by section 1919(a) of the Act) must 

provide disclosures regarding additional disclosable 
CMS-1351-P 212 

parties, organizational structure, and managing employees 

of the Medicaid nursing facility, as defined in §455.101 of 

this part. 

(i) These disclosures must include the identity of 

and information on all of the following: 

(A) Each member of the governing body of the facility, 

including the name, title, and period of service for each 

member. 

(B) Each person or entity who is an officer, director, 

member, partner, trustee, or managing employee (as defined 

in §455.101) of the facility, including the name, title, 

and period of service of each such person or entity. 

(C) Each person or entity who is an additional 

disclosable party (as defined in §455.101) of the facility. 

(ii) The organizational structure (as defined in 

§455.101) of each additional disclosable party of the 

facility and a description of the relationship of each such 

additional disclosable party to the facility and to one 

another. 

(2) When the disclosures must be provided. Medicaid 

nursing facilities must provide all the disclosures to the 

State Medicaid agency upon enrollment; on an annual basis 

to be determined by the State Medicaid agency; and within 

30 days after any change to any of the above disclosures. 
CMS-1351-P 213 

(3) Medicaid nursing facility’s certification. 

Nursing facilities (as defined by section 1919(a) of the 

Act) must certify as a condition of participation and 

payment under the program under Title XIX of the Act that 

the information reported by the facility in accordance with 

these regulations is, to the best of the facility’s 

knowledge, accurate and current. 

* * * * * 
CMS-1351-P 

Authority: (Catalog of Federal Domestic Assistance Program 

No. 93.773, Medicare--Hospital Insurance; and Program 

No. 93.774, Medicare--Supplementary Medical Insurance 

Program) 

Dated: March 24, 2011. 

 _______________________________

Donald M. Berwick, 

Administrator, Centers for 

Medicare & Medicaid Services.

Approved: April 26, 2011 

 __________________________________ 

Kathleen Sebelius, 

Secretary. 

BILLING CODE 4120-01-P 
CMS-1338-P 215 

[Note: The following Addendum will not appear in the Code 

of Federal Regulations] 

Addendum – FY 2012 CBSA Wage Index Tables 

In this addendum, we provide the wage index tables 

referred to in the preamble to this proposed rule. Tables A 

and B display the CBSA-based wage index values for urban and 

rural providers. 

TABLE A: FY 2012 WAGE INDEX FOR URBAN AREAS BASED ON CBSA 

LABOR MARKET AREAS 

CBSA 

Code 

Urban Area 

(Constituent Counties) Wage 

Index

10180 Abilene, TX 

Callahan County, TX 

Jones County, TX 

Taylor County, TX 0.8470

10380 Aguadilla-Isabela-San Sebastián, PR 

Aguada Municipio, PR 

Aguadilla Municipio, PR 

Añasco Municipio, PR 

Isabela Municipio, PR 

Lares Municipio, PR 

Moca Municipio, PR 

Rincón Municipio, PR 

San Sebastián Municipio, PR 0.3622

10420 Akron, OH 

Portage County, OH 

Summit County, OH 0.8840

10500 Albany, GA 

Baker County, GA 

Dougherty County, GA 

Lee County, GA 

Terrell County, GA 

Worth County, GA 0.8643
CMS-1351-P 216 

10580 Albany-Schenectady-Troy, NY 

Albany County, NY 

Rensselaer County, NY 

Saratoga County, NY 

Schenectady County, NY 

Schoharie County, NY 0.8706

10740 Albuquerque, NM 

Bernalillo County, NM 

Sandoval County, NM 

Torrance County, NM 

Valencia County, NM 0.9579

10780 Alexandria, LA 

Grant Parish, LA 

Rapides Parish, LA 0.8051

10900 Allentown-Bethlehem-Easton, PA-NJ 

Warren County, NJ 

Carbon County, PA 

Lehigh County, PA 

Northampton County, PA 0.9285

11020 Altoona, PA 

Blair County, PA 0.8943

11100 Amarillo, TX 

Armstrong County, TX 

Carson County, TX 

Potter County, TX 

Randall County, TX 0.8741

11180 Ames, IA 

Story County, IA 1.0039

11260 Anchorage, AK 

Anchorage Municipality, AK 

Matanuska-Susitna Borough, AK 1.2170

11300 Anderson, IN 

Madison County, IN 0.9280

11340 Anderson, SC 

Anderson County, SC 0.8513

11460 Ann Arbor, MI 

Washtenaw County, MI 1.0158

11500 Anniston-Oxford, AL 

Calhoun County, AL 0.7987
CMS-1351-P 217 

11540 Appleton, WI 

Calumet County, WI 

Outagamie County, WI 0.9253

11700 Asheville, NC 

Buncombe County, NC 

Haywood County, NC 

Henderson County, NC 

Madison County, NC 0.8926

12020 Athens-Clarke County, GA 

Clarke County, GA 

Madison County, GA 

Oconee County, GA 

Oglethorpe County, GA 0.9671

12060 Atlanta-Sandy Springs-Marietta, GA 

Barrow County, GA 

Bartow County, GA 

Butts County, GA 

Carroll County, GA 

Cherokee County, GA 

Clayton County, GA 

Cobb County, GA 

Coweta County, GA 

Dawson County, GA 

DeKalb County, GA 

Douglas County, GA 

Fayette County, GA 

Forsyth County, GA 

Fulton County, GA 

Gwinnett County, GA 

Haralson County, GA 

Heard County, GA 

Henry County, GA 

Jasper County, GA 

Lamar County, GA 

Meriwether County, GA 

Newton County, GA 

Paulding County, GA 

Pickens County, GA 

Pike County, GA 

Rockdale County, GA 

Spalding County, GA 

Walton County, GA 0.8992

12100 Atlantic City-Hammonton, NJ 

Atlantic County, NJ 1.1067
CMS-1351-P 218 

12220 Auburn-Opelika, AL 

Lee County, AL 0.8061

12260 Augusta-Richmond County, GA-SC 

Burke County, GA 

Columbia County, GA 

McDuffie County, GA 

Richmond County, GA 

Aiken County, SC 

Edgefield County, SC 0.9556

12420 Austin-Round Rock, TX 

Bastrop County, TX 

Caldwell County, TX 

Hays County, TX 

Travis County, TX 

Williamson County, TX 0.9557

12540 Bakersfield, CA 

Kern County, CA 1.1786

12580 Baltimore-Towson, MD 

Anne Arundel County, MD 

Baltimore County, MD 

Carroll County, MD 

Harford County, MD 

Howard County, MD 

Queen Anne's County, MD 

Baltimore City, MD 1.0182

12620 Bangor, ME 

Penobscot County, ME 1.0009

12700 Barnstable Town, MA 

Barnstable County, MA 1.2876

12940 Baton Rouge, LA 

Ascension Parish, LA 

East Baton Rouge Parish, LA 

East Feliciana Parish, LA 

Iberville Parish, LA 

Livingston Parish, LA 

Pointe Coupee Parish, LA 

St. Helena Parish, LA 

West Baton Rouge Parish, LA 

West Feliciana Parish, LA 0.8549

12980 Battle Creek, MI 

Calhoun County, MI 0.9891
CMS-1351-P 219 

13020 Bay City, MI 

Bay County, MI 0.8954

13140 Beaumont-Port Arthur, TX 

Hardin County, TX 

Jefferson County, TX 

Orange County, TX 0.8749

13380 Bellingham, WA 

Whatcom County, WA 1.1784

13460 Bend, OR 

Deschutes County, OR 1.1429

13644 Bethesda-Frederick-Gaithersburg, MD 

Frederick County, MD 

Montgomery County, MD 1.0335

13740 Billings, MT 

Carbon County, MT 

Yellowstone County, MT 0.8602

13780 Binghamton, NY 

Broome County, NY 

Tioga County, NY 0.8757

13820 Birmingham-Hoover, AL 

Bibb County, AL 

Blount County, AL 

Chilton County, AL 

Jefferson County, AL 

St. Clair County, AL 

Shelby County, AL 

Walker County, AL 0.8453

13900 Bismarck, ND 

Burleigh County, ND 

Morton County, ND 0.7254

13980 Blacksburg-Christiansburg-Radford, VA 

Giles County, VA 

Montgomery County, VA 

Pulaski County, VA 

Radford City, VA 0.8290

14020 Bloomington, IN 

Greene County, IN 

Monroe County, IN 

Owen County, IN 0.8751

14060 Bloomington-Normal, IL 

McLean County, IL 0.9506
CMS-1351-P 220 

14260 Boise City-Nampa, ID 

Ada County, ID 

Boise County, ID 

Canyon County, ID 

Gem County, ID 

Owyhee County, ID 0.9298

14484 Boston-Quincy, MA 

Norfolk County, MA 

Plymouth County, MA 

Suffolk County, MA 1.2313

14500 Boulder, CO 

Boulder County, CO 1.0116

14540 Bowling Green, KY 

Edmonson County, KY 

Warren County, KY 0.8625

14740 Bremerton-Silverdale, WA 

Kitsap County, WA 1.1321

14860 Bridgeport-Stamford-Norwalk, CT 

Fairfield County, CT 1.2920

15180 Brownsville-Harlingen, TX 

Cameron County, TX 0.9211

15260 Brunswick, GA 

Brantley County, GA 

Glynn County, GA 

McIntosh County, GA 0.8484

15380 Buffalo-Niagara Falls, NY 

Erie County, NY 

Niagara County, NY 0.9617

15500 Burlington, NC 

Alamance County, NC 0.8691

15540 Burlington-South Burlington, VT 

Chittenden County, VT 

Franklin County, VT 

Grand Isle County, VT 1.0051

15764 Cambridge-Newton-Framingham, MA 

Middlesex County, MA 1.1208

15804 Camden, NJ 

Burlington County, NJ 

Camden County, NJ 

Gloucester County, NJ 1.0215
CMS-1351-P 221 

15940 Canton-Massillon, OH 

Carroll County, OH 

Stark County, OH 0.8966

15980 Cape Coral-Fort Myers, FL 

Lee County, FL 0.9369

16020 Cape Girardeau-Jackson, MO-IL 

Alexander County, IL 

Bollinger County, MO 

Cape Girardeau County, MO 0.8698

16180 Carson City, NV 

Carson City, NV 1.0628

16220 Casper, WY 

Natrona County, WY 1.0147

16300 Cedar Rapids, IA 

Benton County, IA 

Jones County, IA 

Linn County, IA 0.8857

16580 Champaign-Urbana, IL 

Champaign County, IL 

Ford County, IL 

Piatt County, IL 0.9911

16620 Charleston, WV 

Boone County, WV 

Clay County, WV 

Kanawha County, WV 

Lincoln County, WV 

Putnam County, WV 0.8195

16700 Charleston-North Charleston-Summerville, SC 

Berkeley County, SC 

Charleston County, SC 

Dorchester County, SC 0.9090

16740 Charlotte-Gastonia-Concord, NC-SC 

Anson County, NC 

Cabarrus County, NC 

Gaston County, NC 

Mecklenburg County, NC 

Union County, NC 

York County, SC 0.9311
CMS-1351-P 222 

16820 Charlottesville, VA 

Albemarle County, VA 

Fluvanna County, VA 

Greene County, VA 

Nelson County, VA 

Charlottesville City, VA 0.9215

16860 Chattanooga, TN-GA 

Catoosa County, GA 

Dade County, GA 

Walker County, GA 

Hamilton County, TN 

Marion County, TN 

Sequatchie County, TN 0.8763

16940 Cheyenne, WY 

Laramie County, WY 0.9873

16974 Chicago-Naperville-Joliet, IL 

Cook County, IL 

DeKalb County, IL 

DuPage County, IL 

Grundy County, IL 

Kane County, IL 

Kendall County, IL 

McHenry County, IL 

Will County, IL 1.0632

17020 Chico, CA 

Butte County, CA 1.1345

17140 Cincinnati-Middletown, OH-KY-IN 

Dearborn County, IN 

Franklin County, IN 

Ohio County, IN 

Boone County, KY 

Bracken County, KY 

Campbell County, KY 

Gallatin County, KY 

Grant County, KY 

Kenton County, KY 

Pendleton County, KY 

Brown County, OH 

Butler County, OH 

Clermont County, OH 

Hamilton County, OH 

Warren County, OH 0.9453
CMS-1351-P 223 

17300 Clarksville, TN-KY 

Christian County, KY 

Trigg County, KY 

Montgomery County, TN 

Stewart County, TN 0.8216

17420 Cleveland, TN 

Bradley County, TN 

Polk County, TN 0.7697

17460 Cleveland-Elyria-Mentor, OH 

Cuyahoga County, OH 

Geauga County, OH 

Lake County, OH 

Lorain County, OH 

Medina County, OH 0.8967

17660 Coeur d'Alene, ID 

Kootenai County, ID 0.9395

17780 College Station-Bryan, TX 

Brazos County, TX 

Burleson County, TX 

Robertson County, TX 0.9719

17820 Colorado Springs, CO 

El Paso County, CO 

Teller County, CO 0.9877

17860 Columbia, MO 

Boone County, MO 

Howard County, MO 0.8130

17900 Columbia, SC 

Calhoun County, SC 

Fairfield County, SC 

Kershaw County, SC 

Lexington County, SC 

Richland County, SC 

Saluda County, SC 0.8760

17980 Columbus, GA-AL 

Russell County, AL 

Chattahoochee County, GA 

Harris County, GA 

Marion County, GA 

Muscogee County, GA 0.8989

18020 Columbus, IN 

Bartholomew County, IN 0.9752
CMS-1351-P 224 

18140 Columbus, OH 

Delaware County, OH 

Fairfield County, OH 

Franklin County, OH 

Licking County, OH 

Madison County, OH 

Morrow County, OH 

Pickaway County, OH 

Union County, OH 1.0024

18580 Corpus Christi, TX 

Aransas County, TX 

Nueces County, TX 

San Patricio County, TX 0.8703

18700 Corvallis, OR 

Benton County, OR 1.0930

18880 Crestview-Fort Walton Beach-Destin, FL 

Okaloosa County, FL 0.8988

19060 Cumberland, MD-WV 

Allegany County, MD 

Mineral County, WV 0.7849

19124 Dallas-Plano-Irving, TX 

Collin County, TX 

Dallas County, TX 

Delta County, TX 

Denton County, TX 

Ellis County, TX 

Hunt County, TX 

Kaufman County, TX 

Rockwall County, TX 0.9874

19140 Dalton, GA 

Murray County, GA 

Whitfield County, GA 0.8399

19180 Danville, IL 

Vermilion County, IL 0.9862

19260 Danville, VA 

Pittsylvania County, VA 

Danville City, VA 0.7919

19340 Davenport-Moline-Rock Island, IA-IL 

Henry County, IL 

Mercer County, IL 

Rock Island County, IL 

Scott County, IA 0.9084
CMS-1351-P 225 

19380 Dayton, OH 

Greene County, OH 

Miami County, OH 

Montgomery County, OH 

Preble County, OH 0.9309

19460 Decatur, AL 

Lawrence County, AL 

Morgan County, AL 0.7356

19500 Decatur, IL 

Macon County, IL 0.8032

19660 Deltona-Daytona Beach-Ormond Beach, FL 

Volusia County, FL 0.8892

19740 Denver-Aurora-Broomfield, CO 

Adams County, CO 

Arapahoe County, CO 

Broomfield County, CO 

Clear Creek County, CO 

Denver County, CO 

Douglas County, CO 

Elbert County, CO 

Gilpin County, CO 

Jefferson County, CO 

Park County, CO 1.0679

19780 Des Moines-West Des Moines, IA 

Dallas County, IA 

Guthrie County, IA 

Madison County, IA 

Polk County, IA 

Warren County, IA 0.9812

19804 Detroit-Livonia-Dearborn, MI 

Wayne County, MI 0.9561

20020 Dothan, AL 

Geneva County, AL 

Henry County, AL 

Houston County, AL 

 0.6944

20100 Dover, DE 

Kent County, DE 0.9939

20220 Dubuque, IA 

Dubuque County, IA 0.8724
CMS-1351-P 226 

20260 Duluth, MN-WI 

Carlton County, MN 

St. Louis County, MN 

Douglas County, WI 1.0366

20500 Durham-Chapel Hill, NC 

Chatham County, NC 

Durham County, NC 

Orange County, NC 

Person County, NC 0.9663

20740 Eau Claire, WI 

Chippewa County, WI 

Eau Claire County, WI 0.9626

20764 Edison-New Brunswick, NJ 

Middlesex County, NJ 

Monmouth County, NJ 

Ocean County, NJ 

Somerset County, NJ 1.0892

20940 El Centro, CA 

Imperial County, CA 0.9630

21060 Elizabethtown, KY 

Hardin County, KY 

Larue County, KY 0.8745

21140 Elkhart-Goshen, IN 

Elkhart County, IN 0.9433

21300 Elmira, NY 

Chemung County, NY 0.8547

21340 El Paso, TX 

El Paso County, TX 0.8541

21500 Erie, PA 

Erie County, PA 0.8171

21660 Eugene-Springfield, OR 

Lane County, OR 1.1621

21780 Evansville, IN-KY 

Gibson County, IN 

Posey County, IN 

Vanderburgh County, IN 

Warrick County, IN 

Henderson County, KY 

Webster County, KY 0.8697

21820 Fairbanks, AK 

Fairbanks North Star Borough, AK 1.1356
CMS-1351-P 227 

21940 Fajardo, PR 

Ceiba Municipio, PR 

Fajardo Municipio, PR 

Luquillo Municipio, PR 0.3834

22020 Fargo, ND-MN 

Cass County, ND 

Clay County, MN 0.8161

22140 Farmington, NM 

San Juan County, NM 0.9825

22180 Fayetteville, NC 

Cumberland County, NC 

Hoke County, NC 0.9464

22220 Fayetteville-Springdale-Rogers, AR-MO 

Benton County, AR 

Madison County, AR 

Washington County, AR 

McDonald County, MO 0.9291

22380 Flagstaff, AZ 

Coconino County, AZ 1.2464

22420 Flint, MI 

Genesee County, MI 1.1150

22500 Florence, SC 

Darlington County, SC 

Florence County, SC 

 0.8235

22520 Florence-Muscle Shoals, AL 

Colbert County, AL 

Lauderdale County, AL 0.7752

22540 Fond du Lac, WI 

Fond du Lac County, WI 0.9319

22660 Fort Collins-Loveland, CO 

Larimer County, CO 0.9906

22744 Fort Lauderdale-Pompano Beach-Deerfield Beach, FL 

Broward County, FL 1.0190

22900 Fort Smith, AR-OK 

Crawford County, AR 

Franklin County, AR 

Sebastian County, AR 

Le Flore County, OK 

Sequoyah County, OK 0.7084
CMS-1351-P 228 

23060 Fort Wayne, IN 

Allen County, IN 

Wells County, IN 

Whitley County, IN 0.9396

23104 Fort Worth-Arlington, TX 

Johnson County, TX 

Parker County, TX 

Tarrant County, TX 

Wise County, TX 0.9558

23420 Fresno, CA 

Fresno County, CA 1.1128

23460 Gadsden, AL 

Etowah County, AL 0.8125

23540 Gainesville, FL 

Alachua County, FL 

Gilchrist County, FL 0.9403

23580 Gainesville, GA 

Hall County, GA 0.9029

23844 Gary, IN 

Jasper County, IN 

Lake County, IN 

Newton County, IN 

Porter County, IN 0.9220

24020 Glens Falls, NY 

Warren County, NY 

Washington County, NY 0.8530

24140 Goldsboro, NC 

Wayne County, NC 0.8713

24220 Grand Forks, ND-MN 

Polk County, MN 

Grand Forks County, ND 0.7595

24300 Grand Junction, CO 

Mesa County, CO 0.9422

24340 Grand Rapids-Wyoming, MI 

Barry County, MI 

Ionia County, MI 

Kent County, MI 

Newaygo County, MI 0.9172

24500 Great Falls, MT 

Cascade County, MT 0.8488
CMS-1351-P 229 

24540 Greeley, CO 

Weld County, CO 0.9582

24580 Green Bay, WI 

Brown County, WI 

Kewaunee County, WI 

Oconto County, WI 0.9694

24660 Greensboro-High Point, NC 

Guilford County, NC 

Randolph County, NC 

Rockingham County, NC 0.8784

24780 Greenville, NC 

Greene County, NC 

Pitt County, NC 0.9665

24860 Greenville-Mauldin-Easley, SC 

Greenville County, SC 

Laurens County, SC 

Pickens County, SC 0.9465

25020 Guayama, PR 

Arroyo Municipio, PR 

Guayama Municipio, PR 

Patillas Municipio, PR 0.3742

25060 Gulfport-Biloxi, MS 

Hancock County, MS 

Harrison County, MS 

Stone County, MS 0.8531

25180 Hagerstown-Martinsburg, MD-WV 

Washington County, MD 

Berkeley County, WV 

Morgan County, WV 0.9196

25260 Hanford-Corcoran, CA 

Kings County, CA 1.0732

25420 Harrisburg-Carlisle, PA 

Cumberland County, PA 

Dauphin County, PA 

Perry County, PA 0.9428

25500 Harrisonburg, VA 

Rockingham County, VA 

Harrisonburg City, VA 0.8800

25540 Hartford-West Hartford-East Hartford, CT 

Hartford County, CT 

Middlesex County, CT 

Tolland County, CT 1.0716
CMS-1351-P 230 

25620 Hattiesburg, MS 

Forrest County, MS 

Lamar County, MS 

Perry County, MS 0.7956

25860 Hickory-Lenoir-Morganton, NC 

Alexander County, NC 

Burke County, NC 

Caldwell County, NC 

Catawba County, NC 0.8881

25980 Hinesville-Fort Stewart, GA1

Liberty County, GA 

Long County, GA 0.8817

26100 Holland-Grand Haven, MI 

Ottawa County, MI 0.8548

26180 Honolulu, HI 

Honolulu County, HI 1.1610

26300 Hot Springs, AR 

Garland County, AR 0.9103

26380 Houma-Bayou Cane-Thibodaux, LA 

Lafourche Parish, LA 

Terrebonne Parish, LA 0.7864

26420 Houston-Sugar Land-Baytown, TX 

Austin County, TX 

Brazoria County, TX 

Chambers County, TX 

Fort Bend County, TX 

Galveston County, TX 

Harris County, TX 

Liberty County, TX 

Montgomery County, TX 

San Jacinto County, TX 

Waller County, TX 0.9976

26580 Huntington-Ashland, WV-KY-OH 

Boyd County, KY 

Greenup County, KY 

Lawrence County, OH 

Cabell County, WV 

Wayne County, WV 0.8919

26620 Huntsville, AL 

Limestone County, AL 

Madison County, AL 0.9022
CMS-1351-P 231 

26820 Idaho Falls, ID 

Bonneville County, ID 

Jefferson County, ID 0.9364

26900 Indianapolis-Carmel, IN 

Boone County, IN 

Brown County, IN 

Hamilton County, IN 

Hancock County, IN 

Hendricks County, IN 

Johnson County, IN 

Marion County, IN 

Morgan County, IN 

Putnam County, IN 

Shelby County, IN 0.9689

26980 Iowa City, IA 

Johnson County, IA 

Washington County, IA 1.0100

27060 Ithaca, NY 

Tompkins County, NY 0.8845

27100 Jackson, MI 

Jackson County, MI 0.8965

27140 Jackson, MS 

Copiah County, MS 

Hinds County, MS 

Madison County, MS 

Rankin County, MS 

Simpson County, MS 0.8197

27180 Jackson, TN 

Chester County, TN 

Madison County, TN 0.7996

27260 Jacksonville, FL 

Baker County, FL 

Clay County, FL 

Duval County, FL 

Nassau County, FL 

St. Johns County, FL 0.8905

27340 Jacksonville, NC 

Onslow County, NC 0.8011

27500 Janesville, WI 

Rock County, WI 0.9262
CMS-1351-P 232 

27620 Jefferson City, MO 

Callaway County, MO 

Cole County, MO 

Moniteau County, MO 

Osage County, MO 0.8247

27740 Johnson City, TN 

Carter County, TN 

Unicoi County, TN 

Washington County, TN 0.7839

27780 Johnstown, PA 

Cambria County, PA 0.8741

27860 Jonesboro, AR 

Craighead County, AR 

Poinsett County, AR 0.7680

27900 Joplin, MO 

Jasper County, MO 

Newton County, MO 0.8214

28020 Kalamazoo-Portage, MI 

Kalamazoo County, MI 

Van Buren County, MI 0.9939

28100 Kankakee-Bradley, IL 

Kankakee County, IL 0.9837

28140 Kansas City, MO-KS 

Franklin County, KS 

Johnson County, KS 

Leavenworth County, KS 

Linn County, KS 

Miami County, KS 

Wyandotte County, KS 

Bates County, MO 

Caldwell County, MO 

Cass County, MO 

Clay County, MO 

Clinton County, MO 

Jackson County, MO 

Lafayette County, MO 

Platte County, MO 

Ray County, MO 0.9663

28420 Kennewick-Pasco-Richland, WA 

Benton County, WA 

Franklin County, WA 0.9611
CMS-1351-P 233 

28660 Killeen-Temple-Fort Hood, TX 

Bell County, TX 

Coryell County, TX 

Lampasas County, TX 0.9529

28700 Kingsport-Bristol-Bristol, TN-VA 

Hawkins County, TN 

Sullivan County, TN 

Bristol City, VA 

Scott County, VA 

Washington County, VA 0.7421

28740 Kingston, NY 

Ulster County, NY 0.9198

28940 Knoxville, TN 

Anderson County, TN 

Blount County, TN 

Knox County, TN 

Loudon County, TN 

Union County, TN 0.7863

29020 Kokomo, IN 

Howard County, IN 

Tipton County, IN 0.9214

29100 La Crosse, WI-MN 

Houston County, MN 

La Crosse County, WI 0.9714

29140 Lafayette, IN 

Benton County, IN 

Carroll County, IN 

Tippecanoe County, IN 0.9536

29180 Lafayette, LA 

Lafayette Parish, LA 

St. Martin Parish, LA 0.8335

29340 Lake Charles, LA 

Calcasieu Parish, LA 

Cameron Parish, LA 0.8022

29404 Lake County-Kenosha County, IL-WI 

Lake County, IL 

Kenosha County, WI 1.0338

29420 Lake Havasu City-Kingman, AZ 

Mohave County, AZ 0.9997

29460 Lakeland-Winter Haven, FL 

Polk County, FL 0.8457
CMS-1351-P 234 

29540 Lancaster, PA 

Lancaster County, PA 0.9467

29620 Lansing-East Lansing, MI 

Clinton County, MI 

Eaton County, MI 

Ingham County, MI 1.0497

29700 Laredo, TX 

Webb County, TX 0.7753

29740 Las Cruces, NM 

Dona Ana County, NM 0.9133

29820 Las Vegas-Paradise, NV 

Clark County, NV 1.2083

29940 Lawrence, KS 

Douglas County, KS 0.8879

30020 Lawton, OK 

Comanche County, OK 0.8571

30140 Lebanon, PA 

Lebanon County, PA 0.8066

30300 Lewiston, ID-WA 

Nez Perce County, ID 

Asotin County, WA 0.9088

30340 Lewiston-Auburn, ME 

Androscoggin County, ME 0.9065

30460 Lexington-Fayette, KY 

Bourbon County, KY 

Clark County, KY 

Fayette County, KY 

Jessamine County, KY 

Scott County, KY 

Woodford County, KY 0.8860

30620 Lima, OH 

Allen County, OH 0.9399

30700 Lincoln, NE 

Lancaster County, NE 

Seward County, NE 0.9638
CMS-1351-P 235 

30780 Little Rock-North Little Rock-Conway, AR 

Faulkner County, AR 

Grant County, AR 

Lonoke County, AR 

Perry County, AR 

Pulaski County, AR 

Saline County, AR 0.8571

30860 Logan, UT-ID 

Franklin County, ID 

Cache County, UT 0.8617

30980 Longview, TX 

Gregg County, TX 

Rusk County, TX 

Upshur County, TX 0.8556

31020 Longview, WA 

Cowlitz County, WA 1.0019

31084 Los Angeles-Long Beach-Glendale, CA 

Los Angeles County, CA 1.2305

31140 Louisville-Jefferson County, KY-IN 

Clark County, IN 

Floyd County, IN 

Harrison County, IN 

Washington County, IN 

Bullitt County, KY 

Henry County, KY 

Meade County, KY 

Nelson County, KY 

Oldham County, KY 

Shelby County, KY 

Spencer County, KY 

Trimble County, KY 0.8927

31180 Lubbock, TX 

Crosby County, TX 

Lubbock County, TX 0.8820

31340 Lynchburg, VA 

Amherst County, VA 

Appomattox County, VA 

Bedford County, VA 

Campbell County, VA 

Bedford City, VA 

Lynchburg City, VA 0.8792
CMS-1351-P 236 

31420 Macon, GA 

Bibb County, GA 

Crawford County, GA 

Jones County, GA 

Monroe County, GA 

Twiggs County, GA 0.9082

31460 Madera-Chowchilla, CA 

Madera County, CA 0.8139

31540 Madison, WI 

Columbia County, WI 

Dane County, WI 

Iowa County, WI 1.1267

31700 Manchester-Nashua, NH 

Hillsborough County, NH 1.0050

31740 Manhattan, KS 

Geary County, KS 

Pottawatomie County, KS 

Riley County, KS 0.7936

31860 Mankato-North Mankato, MN 

Blue Earth County, MN 

Nicollet County, MN 0.9374

31900 Mansfield, OH 

Richland County, OH 0.9242

32420 Mayagüez, PR 

Hormigueros Municipio, PR 

Mayagüez Municipio, PR 0.3687

32580 McAllen-Edinburg-Mission, TX 

Hidalgo County, TX 0.8904

32780 Medford, OR 

Jackson County, OR 1.0349

32820 Memphis, TN-MS-AR 

Crittenden County, AR 

DeSoto County, MS 

Marshall County, MS 

Tate County, MS 

Tunica County, MS 

Fayette County, TN 

Shelby County, TN 

Tipton County, TN 0.9247

32900 Merced, CA 

Merced County, CA 1.2451
CMS-1351-P 237 

33124 Miami-Miami Beach-Kendall, FL 

Miami-Dade County, FL 1.0116

33140 Michigan City-La Porte, IN 

LaPorte County, IN 0.9386

33260 Midland, TX 

Midland County, TX 1.0546

33340 Milwaukee-Waukesha-West Allis, WI 

Milwaukee County, WI 

Ozaukee County, WI 

Washington County, WI 

Waukesha County, WI 0.9954

33460 Minneapolis-St. Paul-Bloomington, MN-WI 

Anoka County, MN 

Carver County, MN 

Chisago County, MN 

Dakota County, MN 

Hennepin County, MN 

Isanti County, MN 

Ramsey County, MN 

Scott County, MN 

Sherburne County, MN 

Washington County, MN 

Wright County, MN 

Pierce County, WI 

St. Croix County, WI 1.1173

33540 Missoula, MT 

Missoula County, MT 0.9181

33660 Mobile, AL 

Mobile County, AL 0.7986

33700 Modesto, CA 

Stanislaus County, CA 1.2678

33740 Monroe, LA 

Ouachita Parish, LA 

Union Parish, LA 0.7939

33780 Monroe, MI 

Monroe County, MI 0.8754

33860 Montgomery, AL 

Autauga County, AL 

Elmore County, AL 

Lowndes County, AL 

Montgomery County, AL 0.8119
CMS-1351-P 238 

34060 Morgantown, WV 

Monongalia County, WV 

Preston County, WV 0.8222

34100 Morristown, TN 

Grainger County, TN 

Hamblen County, TN 

Jefferson County, TN 0.6977

34580 Mount Vernon-Anacortes, WA 

Skagit County, WA 1.0266

34620 Muncie, IN 

Delaware County, IN 0.7841

34740 Muskegon-Norton Shores, MI 

Muskegon County, MI 0.9997

34820 Myrtle Beach-North Myrtle Beach-Conway, SC 

Horry County, SC 0.8669

34900 Napa, CA 

Napa County, CA 1.4739

34940 Naples-Marco Island, FL 

Collier County, FL 0.9769

34980 Nashville-Davidson—Murfreesboro-Franklin, TN 

Cannon County, TN 

Cheatham County, TN 

Davidson County, TN 

Dickson County, TN 

Hickman County, TN 

Macon County, TN 

Robertson County, TN 

Rutherford County, TN 

Smith County, TN 

Sumner County, TN 

Trousdale County, TN 

Williamson County, TN 

Wilson County, TN 0.9239

35004 Nassau-Suffolk, NY 

Nassau County, NY 

Suffolk County, NY 1.2450
CMS-1351-P 239 

35084 Newark-Union, NJ-PA 

Essex County, NJ 

Hunterdon County, NJ 

Morris County, NJ 

Sussex County, NJ 

Union County, NJ 

Pike County, PA 1.1346

35300 New Haven-Milford, CT 

New Haven County, CT 1.1591

35380 New Orleans-Metairie-Kenner, LA 

Jefferson Parish, LA 

Orleans Parish, LA 

Plaquemines Parish, LA 

St. Bernard Parish, LA 

St. Charles Parish, LA 

St. John the Baptist Parish, LA 

St. Tammany Parish, LA 0.9053

35644 New York-White Plains-Wayne, NY-NJ 

Bergen County, NJ 

Hudson County, NJ 

Passaic County, NJ 

Bronx County, NY 

Kings County, NY 

New York County, NY 

Putnam County, NY 

Queens County, NY 

Richmond County, NY 

Rockland County, NY 

Westchester County, NY 1.3063

35660 Niles-Benton Harbor, MI 

Berrien County, MI 0.8654

35840 North Port-Bradenton-Sarasota-Venice, FL 

Manatee County, FL 

Sarasota County, FL 0.9464

35980 Norwich-New London, CT 

New London County, CT 1.1261

36084 Oakland-Fremont-Hayward, CA 

Alameda County, CA 

Contra Costa County, CA 1.6090

36100 Ocala, FL 

Marion County, FL 0.8475
CMS-1351-P 240 

36140 Ocean City, NJ 

Cape May County, NJ 1.0673

36220 Odessa, TX 

Ector County, TX 0.9839

36260 Ogden-Clearfield, UT 

Davis County, UT 

Morgan County, UT 

Weber County, UT 0.9248

36420 Oklahoma City, OK 

Canadian County, OK 

Cleveland County, OK 

Grady County, OK 

Lincoln County, OK 

Logan County, OK 

McClain County, OK 

Oklahoma County, OK 0.8960

36500 Olympia, WA 

Thurston County, WA 1.1373

36540 Omaha-Council Bluffs, NE-IA 

Harrison County, IA 

Mills County, IA 

Pottawattamie County, IA 

Cass County, NE 

Douglas County, NE 

Sarpy County, NE 

Saunders County, NE 

Washington County, NE 0.9894

36740 Orlando-Kissimmee, FL 

Lake County, FL 

Orange County, FL 

Osceola County, FL 

Seminole County, FL 0.9155

36780 Oshkosh-Neenah, WI 

Winnebago County, WI 0.9342

36980 Owensboro, KY 

Daviess County, KY 

Hancock County, KY 

McLean County, KY 0.8226

37100 Oxnard-Thousand Oaks-Ventura, CA 

Ventura County, CA 1.2841
CMS-1351-P 241 

37340 Palm Bay-Melbourne-Titusville, FL 

Brevard County, FL 0.9069

37380 Palm Coast, FL 

Flagler County, FL 0.9402

37460 Panama City-Lynn Haven-Panama City Beach, FL 

Bay County, FL 0.8413

37620 Parkersburg-Marietta-Vienna, WV-OH 

Washington County, OH 

Pleasants County, WV 

Wirt County, WV 

Wood County, WV 0.7670

37700 Pascagoula, MS 

George County, MS 

Jackson County, MS 0.7909

37764 Peabody, MA 

Essex County, MA 1.0481

37860 Pensacola-Ferry Pass-Brent, FL 

Escambia County, FL 

Santa Rosa County, FL 0.8037

37900 Peoria, IL 

Marshall County, IL 

Peoria County, IL 

Stark County, IL 

Tazewell County, IL 

Woodford County, IL 0.8856

37964 Philadelphia, PA 

Bucks County, PA 

Chester County, PA 

Delaware County, PA 

Montgomery County, PA 

Philadelphia County, PA 1.0786

38060 Phoenix-Mesa-Scottsdale, AZ 

Maricopa County, AZ 

Pinal County, AZ 1.0595

38220 Pine Bluff, AR 

Cleveland County, AR 

Jefferson County, AR 

Lincoln County, AR 0.7723
CMS-1351-P 242 

38300 Pittsburgh, PA 

Allegheny County, PA 

Armstrong County, PA 

Beaver County, PA 

Butler County, PA 

Fayette County, PA 

Washington County, PA 

Westmoreland County, PA 0.8695

38340 Pittsfield, MA 

Berkshire County, MA 1.0648

38540 Pocatello, ID 

Bannock County, ID 

Power County, ID 0.9455

38660 Ponce, PR 

Juana Díaz Municipio, PR 

Ponce Municipio, PR 

Villalba Municipio, PR 0.4188

38860 Portland-South Portland-Biddeford, ME 

Cumberland County, ME 

Sagadahoc County, ME 

York County, ME 0.9690

38900 Portland-Vancouver-Beaverton, OR-WA 

Clackamas County, OR 

Columbia County, OR 

Multnomah County, OR 

Washington County, OR 

Yamhill County, OR 

Clark County, WA 

Skamania County, WA 1.1489

38940 Port St. Lucie, FL 

Martin County, FL 

St. Lucie County, FL 0.9814

39100 Poughkeepsie-Newburgh-Middletown, NY 

Dutchess County, NY 

Orange County, NY 1.1361

39140 Prescott, AZ 

Yavapai County, AZ 1.2298
CMS-1351-P 243 

39300 Providence-New Bedford-Fall River, RI-MA 

Bristol County, MA 

Bristol County, RI 

Kent County, RI 

Newport County, RI 

Providence County, RI 

Washington County, RI 1.0666

39340 Provo-Orem, UT 

Juab County, UT 

Utah County, UT 0.9432

39380 Pueblo, CO 

Pueblo County, CO 0.8697

39460 Punta Gorda, FL 

Charlotte County, FL 0.8827

39540 Racine, WI 

Racine County, WI 0.8651

39580 Raleigh-Cary, NC 

Franklin County, NC 

Johnston County, NC 

Wake County, NC 0.9626

39660 Rapid City, SD 

Meade County, SD 

Pennington County, SD 1.0233

39740 Reading, PA 

Berks County, PA 0.9240

39820 Redding, CA 

Shasta County, CA 1.5023

39900 Reno-Sparks, NV 

Storey County, NV 

Washoe County, NV 1.0623
CMS-1351-P 244 

40060 Richmond, VA 

Amelia County, VA 

Caroline County, VA 

Charles City County, VA 

Chesterfield County, VA 

Cumberland County, VA 

Dinwiddie County, VA 

Goochland County, VA 

Hanover County, VA 

Henrico County, VA 

King and Queen County, VA 

King William County, VA 

Louisa County, VA 

New Kent County, VA 

Powhatan County, VA 

Prince George County, VA 

Sussex County, VA 

Colonial Heights City, VA 

Hopewell City, VA 

Petersburg City, VA 

Richmond City, VA 0.9824

40140 Riverside-San Bernardino-Ontario, CA 

Riverside County, CA 

San Bernardino County, CA 1.1434

40220 Roanoke, VA 

Botetourt County, VA 

Craig County, VA 

Franklin County, VA 

Roanoke County, VA 

Roanoke City, VA 

Salem City, VA 0.9169

40340 Rochester, MN 

Dodge County, MN 

Olmsted County, MN 

Wabasha County, MN 1.0834

40380 Rochester, NY 

Livingston County, NY 

Monroe County, NY 

Ontario County, NY 

Orleans County, NY 

Wayne County, NY 0.8627

40420 Rockford, IL 

Boone County, IL 

Winnebago County, IL 0.9968
CMS-1351-P 245 

40484 Rockingham County-Strafford County, NH 

Rockingham County, NH 

Strafford County, NH 1.0216

40580 Rocky Mount, NC 

Edgecombe County, NC 

Nash County, NC 0.9125

40660 Rome, GA 

Floyd County, GA 0.8854

40900 Sacramento-Arden-Arcade-Roseville, CA 

El Dorado County, CA 

Placer County, CA 

Sacramento County, CA 

Yolo County, CA 1.3786

40980 Saginaw-Saginaw Township North, MI 

Saginaw County, MI 0.8519

41060 St. Cloud, MN 

Benton County, MN 

Stearns County, MN 1.0757

41100 St. George, UT 

Washington County, UT 0.9097

41140 St. Joseph, MO-KS 

Doniphan County, KS 

Andrew County, MO 

Buchanan County, MO 

DeKalb County, MO 1.0286

41180 St. Louis, MO-IL 

Bond County, IL 

Calhoun County, IL 

Clinton County, IL 

Jersey County, IL 

Macoupin County, IL 

Madison County, IL 

Monroe County, IL 

St. Clair County, IL 

Crawford County, MO 

Franklin County, MO 

Jefferson County, MO 

Lincoln County, MO 

St. Charles County, MO 

St. Louis County, MO 

Warren County, MO 

Washington County, MO 

St. Louis City, MO 0.9172
CMS-1351-P 246 

41420 Salem, OR 

Marion County, OR 

Polk County, OR 1.1258

41500 Salinas, CA 

Monterey County, CA 1.5650

41540 Salisbury, MD 

Somerset County, MD 

Wicomico County, MD 0.9254

41620 Salt Lake City, UT 

Salt Lake County, UT 

Summit County, UT 

Tooele County, UT 0.9444

41660 San Angelo, TX 

Irion County, TX 

Tom Green County, TX 0.8293

41700 San Antonio, TX 

Atascosa County, TX 

Bandera County, TX 

Bexar County, TX 

Comal County, TX 

Guadalupe County, TX 

Kendall County, TX 

Medina County, TX 

Wilson County, TX 0.9028

41740 San Diego-Carlsbad-San Marcos, CA 

San Diego County, CA 1.1951

41780 Sandusky, OH 

Erie County, OH 0.8192

41884 San Francisco-San Mateo-Redwood City, CA 

Marin County, CA 

San Francisco County, CA 

San Mateo County, CA 1.5813

41900 San Germán-Cabo Rojo, PR 

Cabo Rojo Municipio, PR 

Lajas Municipio, PR 

Sabana Grande Municipio, PR 

San Germán Municipio, PR 0.4626

41940 San Jose-Sunnyvale-Santa Clara, CA 

San Benito County, CA 

Santa Clara County, CA 1.6826
CMS-1351-P 247 

41980 San Juan-Caguas-Guaynabo, PR 

Aguas Buenas Municipio, PR 

Aibonito Municipio, PR 

Arecibo Municipio, PR 

Barceloneta Municipio, PR 

Barranquitas Municipio, PR 

Bayamón Municipio, PR 

Caguas Municipio, PR 

Camuy Municipio, PR 

Canóvanas Municipio, PR 

Carolina Municipio, PR 

Cataño Municipio, PR 

Cayey Municipio, PR 

Ciales Municipio, PR 

Cidra Municipio, PR 

Comerío Municipio, PR 

Corozal Municipio, PR 

Dorado Municipio, PR 

Florida Municipio, PR 

Guaynabo Municipio, PR 

Gurabo Municipio, PR 

Hatillo Municipio, PR 

Humacao Municipio, PR 

Juncos Municipio, PR 

Las Piedras Municipio, PR 

Loíza Municipio, PR 

Manatí Municipio, PR 

Maunabo Municipio, PR 

Morovis Municipio, PR 

Naguabo Municipio, PR 

Naranjito Municipio, PR 

Orocovis Municipio, PR 

Quebradillas Municipio, PR 

Río Grande Municipio, PR 

San Juan Municipio, PR 

San Lorenzo Municipio, PR 

Toa Alta Municipio, PR 

Toa Baja Municipio, PR 

Trujillo Alto Municipio, PR 

Vega Alta Municipio, PR 

Vega Baja Municipio, PR 

Yabucoa Municipio, PR 0.4353

42020 San Luis Obispo-Paso Robles, CA 

San Luis Obispo County, CA 1.3106
CMS-1351-P 248 

42044 Santa Ana-Anaheim-Irvine, CA 

Orange County, CA 1.2034

42060 Santa Barbara-Santa Maria-Goleta, CA 

Santa Barbara County, CA 1.2279

42100 Santa Cruz-Watsonville, CA 

Santa Cruz County, CA 1.6910

42140 Santa Fe, NM 

Santa Fe County, NM 1.0692

42220 Santa Rosa-Petaluma, CA 

Sonoma County, CA 1.5837

42340 Savannah, GA 

Bryan County, GA 

Chatham County, GA 

Effingham County, GA 0.9007

42540 Scranton--Wilkes-Barre, PA 

Lackawanna County, PA 

Luzerne County, PA 

Wyoming County, PA 0.8353

42644 Seattle-Bellevue-Everett, WA 

King County, WA 

Snohomish County, WA 1.1575

42680 Sebastian-Vero Beach, FL 

Indian River County, FL 0.9059

43100 Sheboygan, WI 

Sheboygan County, WI 0.9222

43300 Sherman-Denison, TX 

Grayson County, TX 0.8035

43340 Shreveport-Bossier City, LA 

Bossier Parish, LA 

Caddo Parish, LA 

De Soto Parish, LA 0.8530

43580 Sioux City, IA-NE-SD 

Woodbury County, IA 

Dakota County, NE 

Dixon County, NE 

Union County, SD 0.9566
CMS-1351-P 249 

43620 Sioux Falls, SD 

Lincoln County, SD 

McCook County, SD 

Minnehaha County, SD 

Turner County, SD 0.9181

43780 South Bend-Mishawaka, IN-MI 

St. Joseph County, IN 

Cass County, MI 0.9454

43900 Spartanburg, SC 

Spartanburg County, SC 0.9353

44060 Spokane, WA 

Spokane County, WA 1.0541

44100 Springfield, IL 

Menard County, IL 

Sangamon County, IL 0.8987

44140 Springfield, MA 

Franklin County, MA 

Hampden County, MA 

Hampshire County, MA 1.0270

44180 Springfield, MO 

Christian County, MO 

Dallas County, MO 

Greene County, MO 

Polk County, MO 

Webster County, MO 0.8706

44220 Springfield, OH 

Clark County, OH 0.9008

44300 State College, PA 

Centre County, PA 0.9279

44600 Steubenville-Weirton, OH-WV 

Jefferson County, OH 

Brooke County, WV 

Hancock County, WV 0.7075

44700 Stockton, CA 

San Joaquin County, CA 1.3087

44940 Sumter, SC 

Sumter County, SC 0.7573

45060 Syracuse, NY 

Madison County, NY 

Onondaga County, NY 

Oswego County, NY 0.9806
CMS-1351-P 250 

45104 Tacoma, WA 

Pierce County, WA 1.1411

45220 Tallahassee, FL 

Gadsden County, FL 

Jefferson County, FL 

Leon County, FL 

Wakulla County, FL 0.8619

45300 Tampa-St. Petersburg-Clearwater, FL 

Hernando County, FL 

Hillsborough County, FL 

Pasco County, FL 

Pinellas County, FL 0.9099

45460 Terre Haute, IN 

Clay County, IN 

Sullivan County, IN 

Vermillion County, IN 

Vigo County, IN 0.9237

45500 Texarkana, TX-Texarkana, AR 

Miller County, AR 

Bowie County, TX 0.7961

45780 Toledo, OH 

Fulton County, OH 

Lucas County, OH 

Ottawa County, OH 

Wood County, OH 0.9175

45820 Topeka, KS 

Jackson County, KS 

Jefferson County, KS 

Osage County, KS 

Shawnee County, KS 

Wabaunsee County, KS 0.8844

45940 Trenton-Ewing, NJ 

Mercer County, NJ 1.0092

46060 Tucson, AZ 

Pima County, AZ 0.9346

46140 Tulsa, OK 

Creek County, OK 

Okmulgee County, OK 

Osage County, OK 

Pawnee County, OK 

Rogers County, OK 

Tulsa County, OK 

Wagoner County, OK 0.8387
CMS-1351-P 251 

46220 Tuscaloosa, AL 

Greene County, AL 

Hale County, AL 

Tuscaloosa County, AL 0.8691

46340 Tyler, TX 

Smith County, TX 0.8361

46540 Utica-Rome, NY 

Herkimer County, NY 

Oneida County, NY 0.8437

46660 Valdosta, GA 

Brooks County, GA 

Echols County, GA 

Lanier County, GA 

Lowndes County, GA 0.7846

46700 Vallejo-Fairfield, CA 

Solano County, CA 1.4680

47020 Victoria, TX 

Calhoun County, TX 

Goliad County, TX 

Victoria County, TX 0.8460

47220 Vineland-Millville-Bridgeton, NJ 

Cumberland County, NJ 1.0253

47260 Virginia Beach-Norfolk-Newport News, VA-NC 

Currituck County, NC 

Gloucester County, VA 

Isle of Wight County, VA 

James City County, VA 

Mathews County, VA 

Surry County, VA 

York County, VA 

Chesapeake City, VA 

Hampton City, VA 

Newport News City, VA 

Norfolk City, VA 

Poquoson City, VA 

Portsmouth City, VA 

Suffolk City, VA 

Virginia Beach City, VA 

Williamsburg City, VA 0.9028

47300 Visalia-Porterville, CA 

Tulare County, CA 1.0310
CMS-1351-P 252 

47380 Waco, TX 

McLennan County, TX 0.8584

47580 Warner Robins, GA 

Houston County, GA 0.8129

47644 Warren-Troy-Farmington Hills, MI 

Lapeer County, MI 

Livingston County, MI 

Macomb County, MI 

Oakland County, MI 

St. Clair County, MI 0.9633

47894 Washington-Arlington-Alexandria, DC-VA-MD-WV 

District of Columbia, DC 

Calvert County, MD 

Charles County, MD 

Prince George's County, MD 

Arlington County, VA 

Clarke County, VA 

Fairfax County, VA 

Fauquier County, VA 

Loudoun County, VA 

Prince William County, VA 

Spotsylvania County, VA 

Stafford County, VA 

Warren County, VA 

Alexandria City, VA 

Fairfax City, VA 

Falls Church City, VA 

Fredericksburg City, VA 

Manassas City, VA 

Manassas Park City, VA 

Jefferson County, WV 1.0839

47940 Waterloo-Cedar Falls, IA 

Black Hawk County, IA 

Bremer County, IA 

Grundy County, IA 0.8391

48140 Wausau, WI 

Marathon County, WI 0.8989

48300 Wenatchee-East Wenatchee, WA 

Chelan County, WA 

Douglas County, WA 1.0199

48424 West Palm Beach-Boca Raton-Boynton Beach, FL 

Palm Beach County, FL 0.9853
CMS-1351-P 253 

48540 Wheeling, WV-OH 

Belmont County, OH 

Marshall County, WV 

Ohio County, WV 0.6755

48620 Wichita, KS 

Butler County, KS 

Harvey County, KS 

Sedgwick County, KS 

Sumner County, KS 0.8673

48660 Wichita Falls, TX 

Archer County, TX 

Clay County, TX 

Wichita County, TX 1.0128

48700 Williamsport, PA 

Lycoming County, PA 0.8108

48864 Wilmington, DE-MD-NJ 

New Castle County, DE 

Cecil County, MD 

Salem County, NJ 1.0694

48900 Wilmington, NC 

Brunswick County, NC 

New Hanover County, NC 

Pender County, NC 0.9120

49020 Winchester, VA-WV 

Frederick County, VA 

Winchester City, VA 

Hampshire County, WV 0.9134

49180 Winston-Salem, NC 

Davie County, NC 

Forsyth County, NC 

Stokes County, NC 

Yadkin County, NC 0.8317

49340 Worcester, MA 

Worcester County, MA 1.1027

49420 Yakima, WA 

Yakima County, WA 1.0464

49500 Yauco, PR 

Guánica Municipio, PR 

Guayanilla Municipio, PR 

Peñuelas Municipio, PR 

Yauco Municipio, PR 0.3768
CMS-1351-P 254 

1 At this time, there are no hospitals located in this urban area on which to base a wage index. 

TABLE B: FY 2012 WAGE INDEX BASED ON CBSA LABOR MARKET 

AREAS FOR RURAL AREAS 

State Code Nonurban Area Wage 

Index 

1 Alabama 0.7249 

2 Alaska 1.2885 

3 Arizona 0.8853 

4 Arkansas 0.7215 

5 California 1.1428 

6 Colorado 1.0136 

7 Connecticut 1.1317 

8 Delaware 1.0038 

10 Florida 0.8386 

11 Georgia 0.7566 

12 Hawaii 1.1003 

13 Idaho 0.7553 

14 Illinois 0.8450 

15 Indiana 0.8570 

16 Iowa 0.8644 

17 Kansas 0.8079 

18 Kentucky 0.7846 

19 Louisiana 0.7787 

20 Maine 0.8601 

49620 York-Hanover, PA 

York County, PA 0.9704

49660 Youngstown-Warren-Boardman, OH-PA 

Mahoning County, OH 

Trumbull County, OH 

Mercer County, PA 0.8360

49700 Yuba City, CA1 

Sutter County, CA 

Yuba County, CA 1.2783

49740 Yuma, AZ 

Yuma County, AZ 0.9378
CMS-1351-P 255 

State Code Nonurban Area Wage 

Index 

21 Maryland 0.9319 

22 Massachusetts 1.4004 

23 Michigan 0.8320 

24 Minnesota 0.9037 

25 Mississippi 0.7549 

26 Missouri 0.7699 

27 Montana 0.8641 

28 Nebraska 0.8898 

29 Nevada 0.9672 

30 New Hampshire 1.0473 

31 New Jersey1

----- 

32 New Mexico 0.8905 

33 New York 0.8176 

34 North Carolina 0.8291 

35 North Dakota 0.7317 

36 Ohio 0.8480 

37 Oklahoma 0.7869 

38 Oregon 1.0308 

39 Pennsylvania 0.8456 

40 Puerto Rico1

0.4047 

41 Rhode Island1

----- 

42 South Carolina 0.8313 

43 South Dakota 0.8324 

44 Tennessee 0.7744 

45 Texas 0.7946 

46 Utah 0.8745 

47 Vermont 0.9738 

48 Virgin Islands 0.7528 

49 Virginia 0.7841 

50 Washington 1.0234 

51 West Virginia 0.7393 

52 Wisconsin 0.8997 
CMS-1351-P 256 

State Code Nonurban Area Wage 

Index 

53 Wyoming 0.9422 

65 Guam 0.9611 1

 All counties within the State are classified as urban, with the exception of Puerto Rico. Puerto Rico has 

areas designated as rural; however, no short-term, acute care hospitals are located in the area(s) for FY 

2012. The Puerto Rico wage index is the same as FY 2011. 

[FR Doc. 2011-10555 Filed 04/28/2011 at 4:15 pm; Publication Date: 05/06/2011]