GAO-03-1087R 

United States General Accounting Office

Washington, DC 20548 

B-292673 

August 8, 2003 

The Honorable Charles Grassley 

Chairman 

The Honorable Max Baucus 

Ranking Minority Member 

Committee on Finance 

United States Senate 

The Honorable W.J. “Billy” Tauzin 

Chairman 

The Honorable John D. Dingell 

Ranking Minority Member 

Committee on Energy and Commerce 

House of Representatives 

The Honorable William Thomas 

Chairman 

The Honorable Charles B. Rangel 

Ranking Minority Member 

Committee on Ways and Means 

House of Representatives 

Subject: Department of Health and Human Services, Centers for Medicare and 

Medicaid Services: Medicare Program; Prospective Payment System and 

Consolidated Billing for Skilled Nursing Facilities--Update

Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a 

major rule promulgated by the Department of Health and Human Services, Centers 

for Medicare and Medicaid Services (CMS), entitled “Medicare Program; Prospective 

Payment System and Consolidated Billing for Skilled Nursing Facilities--Update” 

(RIN: 0938-AL90). We received the rule on July 31, 2003. It was published in the 

Federal Register as a final rule on August 4, 2003. 68 Fed. Reg. 46036. 

The final rule updates the payment rates used under the prospective payment system 

for skilled nursing facilities (SNFs) for fiscal year 2004. 

Enclosed is our assessment of the CMS’s compliance with the procedural steps 

required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule. 

Our review indicates that the CMS complied with the applicable requirements. 
Page 2 GAO-03-1087R 

If you have any questions about this report, please contact James W. Vickers, 

Assistant General Counsel, at (202) 512-8210. The official responsible for GAO 

evaluation work relating to the subject matter of the rule is William Scanlon, 

Managing Director, Health Care. Mr. Scanlon can be reached at (202) 512-7114. 

 signed 

Kathleen E. Wannisky 

Managing Associate General Counsel 

Enclosure 

cc: Ann Stallion 

Regulations Coordinator 

Department of Health and 

 Human Services 
GAO-03-1087R 

ENCLOSURE 

ANALYSIS UNDER 5 U.S.C. § 801(a)(1)(B)(i)-(iv) OF A MAJOR RULE 

ISSUED BY THE 

DEPARTMENT OF HEALTH AND HUMAN SERVICES, 

CENTERS FOR MEDICARE AND MEDICAID SERVICES 

ENTITLED 

"MEDICARE PROGRAM; PROSPECTIVE PAYMENT SYSTEM 

AND CONSOLIDATED BILLING FOR 

SKILLED NURSING FACILITIES--UPDATE" 

(RIN: 0938-AL90) 

(i) Cost-benefit analysis

The Centers for Medicare and Medicaid Services estimates that the impact of the 

standard update will increase payments to SNFs by approximately $400 million. In 

addition, CMS has adjusted the FY 2003 rates to reflect the 3.26 percent cumulative 

forecast error since the start of the SNF prospective payment system on July 1, 1998. 

This adjustment increases payments by an additional $450 million, for a total 

increase of $850 million. 

(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C. §§ 603-605, 

607, and 609

Since the overall impact of the final rule is positive for the industry as a whole, it will 

not have a significant economic impact on a substantial number of small entities. 

(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform 

Act of 1995, 2 U.S.C. §§ 1532-1535

The final rule does not contain either an intergovernmental or private sector 

mandate, as defined in title II, of more than $100 million in any one year. 

(iv) Other relevant information or requirements under acts and executive orders

Administrative Procedure Act, 5 U.S.C. §§ 551 et seq. 

The final rule was issued using the notice and comment procedures found at 5 U.S.C. 

553. On May 16, 2003, CMS published a Notice of Proposed Rulemaking in the 

Federal Register. 68 Fed. Reg. 26758. On June 10, 2003, a Supplemental Notice of 

Proposed Rulemaking was also published. 68 Fed. Reg. 34768. Over 400 comments 

were received in response to the two proposed rules and the comments are 

discussed in the preamble to the final rule. 
Page 2 GAO-03-1087R 

Paperwork Reduction Act, 44 U.S.C. §§ 3501-3520 

The final rule does not contain any information collections that are subject to review 

by the Office of Management and Budget (OMB) under the Paperwork Reduction 

Act. 

Statutory authorization for the rule 

The final rule is promulgated under the authority contained in section 1888(e) of the 

Social Security Act. 

Executive Order No. 12866 

The final rule was reviewed by OMB and found to be an “economically significant”

regulatory action under the order. 

Executive Order No. 13132 (Federalism) 

The final rule will not impact on the rights or responsibilities of state, local, or tribal 

governments.