DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Parts 413 and 424 

[CMS-1446-P] 

RIN 0938-AR65 

Medicare Program; Prospective Payment System and Consolidated Billing for 

Skilled Nursing Facilities for FY 2014 

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

ACTION: Proposed rule. 

SUMMARY: This proposed rule would update the payment rates used under the 

prospective payment system (PPS) for skilled nursing facilities (SNFs) for fiscal year 

(FY) 2014, would revise and rebase the SNF market basket, and would make certain 

technical and conforming revisions in the regulations text. This proposed rule also 

includes a proposed policy for reporting the SNF market basket forecast error correction 

in certain limited circumstances and a proposed new item for the Minimum Data Set 

(MDS), Version 3.0.

DATES: To be assured consideration, comments must be received at one of the 

addresses provided below, no later than 5 p.m. on July 1, 2013. 

ADDRESSES: In commenting, please refer to file code CMS-1446-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 "Submit a comment" instructions. 
 2 

 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-1446-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-1446-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, S.W., 
 3 

 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: 

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. 
 4 

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All 

comments received before the close of the comment period are available for viewing by 

the public, including any personally identifiable or confidential business information that 

is included in a comment. We post all comments received before the close of the 

comment period on the following website as soon as possible after they have been 

received: http://www.regulations.gov. Follow the search instructions on that website 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 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. 

Availability of Certain Information Exclusively Through the Internet on the CMS 

Website

 The Wage Index for Urban Areas Based on CBSA Labor Market Areas (Table A) 

and the Wage Index Based on CBSA Labor Market Areas for Rural Areas (Table B) are 

published in the Federal Register as an Addendum to the annual SNF PPS rulemaking 

(that is, the SNF PPS proposed and final rules or, when applicable, the current update 

notice). However, as of FY 2012, a number of other Medicare payment systems adopted 

an approach in which such tables are no longer published in the Federal Register in this 

manner, and instead are made available exclusively through the Internet; see, for 

example, the FY 2012 Hospital Inpatient PPS (IPPS) final rule (76 FR 51476). To be 

consistent with these other Medicare payment systems and streamline the published 
 5 

content to focus on policy discussion, we now propose to adopt a similar approach for the 

SNF PPS as well. As discussed in greater detail in section VI. of this proposed rule, we 

would revise the applicable regulations text at §413.345 to accommodate this approach, 

consistent with the wording of the corresponding statutory authority at section 

1888(e)(4)(H)(iii) of the Social Security Act (the Act). Under this approach, effective 

October 1, 2013, the individual wage index values displayed in Tables A and B of this 

rule would no longer be published in the Federal Register as part of the annual SNF PPS 

rulemaking, and instead would be made available exclusively through the Internet on 

CMS’s SNF PPS website at http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/SNFPPS/WageIndex.html. Consistent with the provisions of section 

1888(e)(4)(H)(iii) of the Act, we would continue to publish in the Federal Register the 

specific “factors to be applied in making the area wage adjustment” (for example, the 

SNF prospective payment system’s use of the hospital wage index exclusive of its 

occupational mix adjustment) as part of our annual SNF PPS rulemaking process, but that 

document would no longer include a listing of the individual wage index values 

themselves, which would instead be made available exclusively through the Internet on 

the CMS website. 

 In addition, we note that in previous years, each rule or update notice issued under 

the annual SNF PPS rulemaking cycle has included a detailed reiteration of the various 

individual legislative provisions that have affected the SNF PPS over the years, a number 

of which represented temporary measures that have long since expired. That discussion, 

along with detailed background information on various other aspects of the SNF PPS, 

will now be made available exclusively on the CMS website as well, at 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html. 
 6 

In connection with this change, this proposed rule is presented in a revised format that 

also serves to consolidate material on the individual rate components that had previously 

appeared redundantly in several different portions of the preamble. The revised format 

also reorders the preamble discussion to achieve a more logical presentation, by 

systematically discussing each of the various rate components in the actual order in 

which it is applied to the SNF payment rates. For ease of reference, we are including the 

following crosswalk between this proposed rule’s reordered preamble discussion and the 

material that was presented in last year’s SNF PPS update notice for FY 2013 (77 FR 

46214, August 2, 2012). 

Crosswalk to FY 2013 Update Notice 

FY 2014 Proposed Rule FY 2013 Update Notice

I. Executive Summary...........................................................................I. 

II.A Statutory Basis and Scope .............................................................II.A 

II.B Initial Transition ............................................................................II.A 

II.C Required Annual Rate Updates .....................................................II.B, III.D 

III.A Federal Base Rates.......................................................................II.A, II.G.1, III.A.1 

III.B.1 SNF Market Basket Index.........................................................II.G.2, V 

III.B.2 Use of the SNF Market Basket Percentage ...............................II.G.2, V.A 

III.B.3 Forecast Error Adjustment ........................................................II.G.2, V.B 

III.B.4 Multifactor Productivity Adjustment (MFP).............................II.G.2, V.C 

III.B.4.1 Incorporating the MFP into the Market Basket Update .........V.C.1 

III.B.5 Market Basket Update Factor for FY 2014...............................V.D 

III.C Case-Mix (C-M) Adjustment .......................................................II.G.1, III.A.2, III.B 

III.D Wage Index Adjustment...............................................................III.C 
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III.E Adjusted Rate Computation Example ..........................................III.F 

IV.A SNF Level of Care--Administrative Presumption .......................II.A, III.E 

IV.B Consolidated Billing ....................................................................II.A, VI 

IV.C Payment for SNF-Level Swing-Bed Services..............................II.A, VII 

V.A Revising and Rebasing the SNF Market Basket Index .................N/A 

V.B Monitoring Impact of FY 2012 Policy Changes ...........................IV 

V.C Ensuring Accuracy in Grouping to Rehabilitation Categories......N/A 

V.D SNF Therapy Research Project .....................................................N/A 

VI. Provisions of the Proposed Rule and Technical Correction ...........N/A 

VII. Collection of Information Requirements.......................................VIII. 

VIII. Response to Comments................................................................N/A 

IX. Economic Analyses ........................................................................X. 

Table 1 Diff. Bet. Forecasted, Actual Market Basket Increases...........Table 1 

Table 2 Unadjusted Federal Rate Per Diem (Urban)............................Table 2 

Table 3 Unadjusted Federal Rate Per Diem (Rural) .............................Table 3 

Table 4 C-M Adjusted Federal Rates, Indexes (Urban) .......................Table 4 

Table 5 C-M Adjusted Federal Rates, Indexes (Rural).........................Table 5 

Table 6 C-M Adj. Fed. Rates (Urban), Lab./Non-Lab. Components ...Table 6 

Table 7 C-M Adj. Fed. Rates (Rural), Lab./Non-Lab. Components ....Table 7 

Table 8 Rate Computation Example.....................................................Table 8 

Tables 9 through 16 Revising & Rebasing SNF Market Basket ..........N/A 

Table 17 Labor-Related Relative Importance.......................................Table 13 

Table 18 C-M Distributions by Major RUG-IV Category....................Table 9 

Table 19 C-M Distribution for Therapy RUG-IV Groups....................Table 10 
 8 

Table 20 Mode of Therapy Provision ...................................................Table 11 

Table 21 Distribution of MDS Assessment Types ...............................Table 12 

Table 22 Projected Impact ....................................................................Table 14 

Table 23 Accounting Statement............................................................Table 15 

To assist readers in referencing sections contained in this document, we are 

providing the following Table of Contents.

Table of Contents 

I. Executive Summary 

A. Purpose 

B. Summary of Major Provisions 

C. Summary of Cost and Benefits 

II. Background 

A. Statutory Basis and Scope 

B. Initial Transition 

C. Required Annual Rate Updates 

III. SNF PPS Rate Setting Methodology and FY 2014 Update 

A. Federal Base Rates 

B. SNF Market Basket Update 

1. SNF Market Basket Index 

2. Use of the SNF Market Basket Percentage 

3. Forecast Error Adjustment 

4. Multifactor Productivity Adjustment 

5. Market Basket Update Factor for FY 2014 

C. Case-Mix Adjustment 
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D. Wage Index Adjustment 

E. Adjusted Rate Computation Example 

IV. Additional Aspects of the SNF PPS 

A. SNF Level of Care--Administrative Presumption 

B. Consolidated Billing 

C. Payment for SNF-Level Swing-Bed Services 

V. Other Issues 

A. Revising and Rebasing the SNF Market Basket Index 

1. Background 

2. Revising and Rebasing the SNF Market Basket 

3. Price Proxies Used to Measure Cost Category Growth 

4. Proposed Market Basket Estimate for the FY 2014 SNF PPS Update 

5. Labor-Related Share 

B. Monitoring Impact of FY 2012 Policy Changes 

1. RUG Distributions 

2. Group Therapy Allocation 

3. MDS 3.0 Changes 

4. Conclusion 

C. Ensuring Accuracy in Grouping to Rehabilitation RUG-IV Categories 

D. SNF Therapy Research Project 

VI. Provisions of the Proposed Rule and Technical Correction 

VII. Collection of Information Requirements 

VIII. Response to Comments 

IX. Economic Analyses
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Regulation Text 

Acronyms

 In addition, because of the many terms to which we refer by acronym in this 

proposed rule, we are listing these abbreviations and their corresponding terms in 

alphabetical order below: 

AIDS Acquired Immune Deficiency Syndrome 

ARD Assessment reference date 

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 

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 

CFR Code of Federal Regulations 

CMI Case-mix index 

CMS Centers for Medicare & Medicaid Services 

COT Change of therapy 

ECI Employment Cost Index 

EOT End of therapy 

EOT-R End of therapy - resumption 

FQHC Federally qualified health center 

FR Federal Register 

FY Fiscal year 
 11 

GAO Government Accountability Office 

HCPCS Healthcare Common Procedure Coding System 

HOMER Home office Medicare records 

IGI IHS (Information Handling Services) Global Insight, Inc. 

MDS Minimum data set 

MFP Multifactor productivity 

MMA Medicare Prescription Drug, Improvement, and Modernization Act of 

2003, Pub. L. 108-173 

MSA Metropolitan statistical area 

NAICS North American Industrial Classification System 

OMB Office of Management and Budget 

OMRA Other Medicare Required Assessment 

PPS Prospective Payment System 

RAI Resident assessment instrument 

RAVEN Resident assessment validation entry 

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

RHC Rural health clinic 

RIA Regulatory impact analysis 

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 
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STRIVE Staff time and resource intensity verification 

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

I. Executive Summary 

A. Purpose

 This proposed rule would update the SNF prospective payment rates for FY 2014 

as required under section 1888(e)(4)(E) of the Act. It would also respond 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 factors to 

be applied in making the area wage adjustment used in computing the prospective 

payment rates for that fiscal year.

B. Summary of Major Provisions

 In accordance with sections 1888(e)(4)(E)(ii)(IV) and 1888(e)(5) of the Act, the 

federal rates in this proposed rule would reflect an update to the rates that we published in 

the SNF PPS update notice for FY 2013 (77 FR 46214) which reflects the SNF market 

basket index, adjusted by the forecast error correction, if applicable, and the multifactor 

productivity adjustment for FY 2014. 

C. Summary of Cost and Benefits

Provision Description Total Transfers 

Proposed FY 2014 SNF PPS 

payment rate update. 

The overall economic impact of this proposed rule 

would be an estimated increase of $500 million in 

aggregate payments to SNFs during FY 2014. 

II. Background 

A. Statutory Basis and Scope
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As amended by section 4432 of the Balanced Budget Act of 1997 (BBA, Pub. L.

105-33, enacted on August 5, 1997), section 1888(e) of the Act provides for the 

implementation of a PPS for SNFs. This methodology uses prospective, case-mix 

adjusted per diem payment rates applicable to all covered SNF services defined in section 

1888(e)(2)(A) of the Act. The SNF PPS is effective for cost reporting periods beginning 

on or after July 1, 1998, and covers all costs of furnishing covered SNF services (routine, 

ancillary, and capital-related costs) other than costs associated with approved educational 

activities and bad debts. Under section 1888(e)(2)(A)(i) of the Act, covered SNF 

services include post-hospital extended care services for which benefits are provided 

under Part A, as well as those items and services (other than a small number of excluded 

services, such as physician services) for which payment may otherwise be made under 

Part B and which are furnished to Medicare beneficiaries who are residents in a SNF 

during a covered Part A stay. A comprehensive discussion of these provisions appears in 

the May 12, 1998 interim final rule (63 FR 26252). 

B. Initial Transition

Under sections 1888(e)(1)(A) and 1888(e)(11) of the Act, the SNF PPS included 

an initial, three-phase transition that blended a facility-specific rate (reflecting the 

individual facility’s historical cost experience) with the federal case-mix adjusted rate. 

The transition extended through the facility’s first 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 

for SNFs entirely on the adjusted federal per diem rates, we no longer include adjustment 

factors under the transition related to facility-specific rates for the upcoming FY. 
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C. Required Annual Rate Updates 

Section 1888(e)(4)(E) of the Act requires the SNF PPS payment rates to be 

updated annually. The most recent annual update occurred in an update notice that set 

forth updates to the SNF PPS payment rates for FY 2013 (77 FR 46214). 

Under this requirement, section 1888(e)(4)(H) of the Act specifies that we provide 

for publication annually in the Federal Register of the following: 

● The unadjusted federal per diem rates to be applied to days of covered SNF 

services furnished during the upcoming FY. 

● The case-mix classification system to be applied with respect to these services 

during the upcoming FY. 

● 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 

would provide the required annual updates to the per diem payment rates for SNFs for 

FY 2014. 

III. SNF PPS Rate Setting Methodology and FY 2014 Update 

A. Federal Base Rates

Under section 1888(e)(4) of the Act, the SNF PPS uses per diem federal payment 

rates based on mean SNF costs in a base year (FY 1995) updated for inflation to the first 

effective period of the PPS. We developed the federal payment rates using allowable 

costs from hospital-based and freestanding SNF cost reports for reporting periods 

beginning in FY 1995. The data used in developing the federal rates also incorporated a 

“Part B add-on,” which is an estimate of the amounts that, prior to the SNF PPS, would 
 15 

have been 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 basket 

index, and then standardized for geographic variations in wages and for the costs of 

facility differences in case mix. In compiling the database used to compute the federal 

payment rates, we excluded those providers that received new provider exemptions from 

the routine cost limits, as well as costs related to payments for exceptions to the routine 

cost limits. Using the formula that the BBA prescribed, we set the federal rates at a level 

equal to the weighted mean of freestanding costs plus 50 percent of the difference 

between the freestanding mean and weighted mean of all SNF costs (hospital-based and 

freestanding) combined. We computed and applied separately the payment rates for 

facilities located in urban and rural areas, and adjusted the portion of the federal rate 

attributable to wage-related costs by a wage index to reflect geographic variations in 

wages. 

B. SNF Market Basket Update

1. SNF Market Basket Index 

Section 1888(e)(5)(A) 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. Accordingly, we have developed a SNF 

market basket index that encompasses the most commonly used cost categories for SNF 

routine services, ancillary services, and capital-related expenses. 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), we 
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revised and rebased the market basket, which included updating the base year from FY 

1997 to FY 2004. For FY 2014, we propose to revise and rebase the market basket to 

reflect FY 2010 total cost data, as detailed in section V.A. of this proposed rule. 

We are also proposing to determine the FY 2014 market basket increase based on 

the percent increase in the revised and rebased FY 2010-based SNF market basket. For 

the FY 2014 proposed rule, the FY 2010-based SNF market basket growth rate is 

estimated to be 2.3 percent, which is based on the Information Handling Services (IHS) 

Global Insight, Inc. (IGI) first quarter 2013 forecast with historical data through fourth 

quarter 2012. In section III.B.5 of this proposed rule, we discuss the specific application 

of this adjustment to the forthcoming annual update of the SNF PPS payment rates. 

2. Use of the SNF 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 midpoint of the previous FY 

to the midpoint of the current FY. For the federal rates set forth in this proposed rule, we 

use the percentage change in the SNF market basket index to compute the update factor 

for FY 2014. This is based on the IGI first quarter 2013 forecast (with historical data 

through the fourth quarter 2012) of the FY 2014 percentage increase in the 

FY 2010-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 sections III.B.3. and III.B.4. of this proposed rule, this market basket percentage 

change would be reduced by the forecast error correction (§413.337(d)(2)), and by the 

MFP adjustment as required by section 1888(e)(5)(B)(ii) of the Act. Finally, as discussed 

in section II.B. 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 
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period from facility-specific to full federal rates that started with cost reporting periods 

beginning in July 1998 has expired. 

3. Forecast Error Adjustment 

As discussed in the June 10, 2003 supplemental proposed rule (68 FR 34768) and 

finalized in the August 4, 2003, final rule (68 FR 46057 through 46059), the regulations 

at §413.337(d)(2) provide for an adjustment to account for market basket forecast error. 

The initial adjustment for market basket forecast error applied to the update of the 

FY 2003 rate for FY 2004, and took into account the cumulative forecast error for the 

period from FY 2000 through FY 2002, resulting in an increase of 3.26 percent to the FY 

2004 update. Subsequent adjustments in succeeding FYs take into account the forecast 

error from the most recently available FY for which there is final data, and apply the 

difference between the forecasted and actual change in the market basket when the 

difference exceeds a specified threshold. We originally used a 0.25 percentage point 

threshold for this purpose; however, for the reasons specified in the FY 2008 SNF PPS 

final rule (72 FR 43425, August 3, 2007), we adopted a 0.5 percentage point threshold 

effective for FY 2008 and subsequent fiscal years. As we stated in the final rule for 

FY 2004 that first issued the market basket forecast error adjustment (68 FR 46058, 

August 4, 2003), the adjustment will “. . . reflect both upward and downward 

adjustments, as appropriate.” 

For FY 2012 (the most recently available FY for which there is final data), the 

estimated increase in the market basket index was 2.7 percentage points, while the actual 

increase was 2.2 percentage points, resulting in the actual increase being 0.5 percentage 

point lower than the estimated increase. As the forecast error calculation in this instance 

does not permit one to determine definitively if the forecast error adjustment threshold 
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has been exceeded, we are proposing a policy that would be applied in instances, and 

only those instances, where the forecast error calculation is equal to 0.5 percentage point, 

when rounded to one significant digit (otherwise referred to as a tenth of a percentage 

point), as further discussed below. When the forecast error, rounded to one significant 

digit, is equal to 0.5 percentage point, we propose to report the forecast error to two 

significant digits (otherwise referred to as a hundredth of a percentage point) so that we 

may determine whether the forecast error correction threshold has been exceeded and 

whether the forecast error adjustment should be applied under §413.337(d)(2). This 

policy would apply only in those instances where the forecast error, when rounded to one 

significant digit, is 0.5 percentage point. For example, if the forecast error is calculated 

to be 0.4 percentage point when rounded to one significant digit, then no further 

determinations are necessary, the forecast error will be reported as 0.4 percentage point, 

and a forecast error adjustment will not be applied. Likewise, if the forecast error is 

determined to be 0.6 percentage point when rounded to one significant digit, then no 

further determination is necessary, the forecast error will be reported as 0.6 percentage 

point, and a forecast error adjustment will be applied. 

We propose that when the forecast error is determined to be 0.5 percentage point, 

when rounded to one significant digit, the determination of whether or not the threshold 

has been exceeded would be made by rounding the forecast error calculation to the 

second significant digit. We believe this approach is necessary and appropriate to ensure 

that the necessity for a forecast error adjustment is accurately determined in accordance 

with §413.337(d)(2), which enables us to identify those instances where the difference 

between the actual and projected market basket becomes sufficiently significant to 

indicate that the historical price changes are not being adequately reflected. This 
 19 

proposed policy would enable us to distinguish between cases where the difference 

carried out to the second decimal place is less than the 0.5 threshold but rounds to 0.5 

(0.45 to 0.49) and cases where the difference carried out to the second decimal place is 

greater than the 0.5 threshold but rounds to 0.5 (0.51 to 0.54). We would apply the 

proposed policy when the difference between the actual and projected market basket is 

either positive or negative 0.5 percentage point. 

As stated earlier, the forecast error calculation for FY 2012 is equal to 0.5 

percentage point, rounded to one significant digit, or a tenth of a percentage point. 

Therefore, following the proposed policy outlined above, we would determine the 

forecast error for FY 2012 to the second significant digit, or the hundredth of a 

percentage point. The forecasted FY 2012 SNF market basket percentage change was 2.7 

percent. When rounded to the second significant digit, it was 2.69 percent. This would 

be subtracted from the actual FY 2012 SNF market basket percentage change, rounded to 

the second significant digit, of 2.18 percent to yield a negative forecast error correction of 

0.51 percentage point. As the forecast error correction, when rounded to two significant 

digits, exceeds 0.5 percentage point, a forecast error adjustment would be warranted 

under the policy outlined in the FY 2008 SNF PPS final rule (72 FR 43425) (see 

§413.337(d)(2)). 

Consistent with prior applications of the forecast error adjustment since 

establishing the 0.5 percentage point threshold, and consistent with our applications of 

both the market basket adjustment and productivity adjustment described below, once we 

have determined that a forecast error adjustment is warranted, we will continue to apply 

the adjustment itself at one significant digit (otherwise referred to as a tenth of a 

percentage point). Therefore, because the forecasted FY 2012 SNF market basket 
 20 

percentage change exceeded the actual SNF market basket percentage change for 

FY 2012 (the most recently available FY for which there is final data) by 0.51 percentage 

point, the FY 2014 SNF market basket percentage change of 2.3 percent would be 

adjusted downward by the forecast error correction of 0.5 percentage point, resulting in a 

net SNF market basket increase factor of 1.8 percent. Table 1 shows the forecasted and 

actual market basket amounts for FY 2012. 

TABLE 1: Difference Between the Forecasted and Actual Market Basket Increases 

for FY 2012 

Index Forecasted 

FY 2012 Increase* 

Actual 

FY 2012 

Increase** 

FY 2012 

Difference

SNF (rounded to one 

significant digit) 2.7 2.2 -0.5 

SNF (rounded to two 

significant digits) 2.69 2.18 -0.51 

*Published in Federal Register; based on second quarter 2011 IGI forecast (2004-based index). 

**Based on the first quarter 2013 IHS Global Insight forecast, with historical data through the fourth 

quarter 2012 (2004-based index). 

4. 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) of the Act is to be reduced annually by the 

productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 

1886(b)(3)(B)(xi)(II) of the Act, added by section 3401(a) of the Affordable Care Act, 

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 (as projected by the 

Secretary for the 10-year period ending with the applicable fiscal year, year, costreporting 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 
 21 

business multifactor productivity (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. 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. 

This process is described in greater detail in section III.F.3 of the FY 2012 SNF PPS final 

rule (76 FR 48527 through 48529). 

a. 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 III.B.1. of this proposed rule, we propose to estimate 

the SNF PPS market basket percentage for FY 2014 under section 1888(e)(5)(B)(i) of the 

Act based on the proposed FY 2010-based SNF market basket. Section 1888(e)(5)(B)(ii) 

of the Act, added by section 3401(b) of the Affordable Care Act, requires that for FY 

2012 and each subsequent FY, after determining the market basket percentage described 

in section 1888(e)(5)(B)(i) of the Act, “the Secretary shall reduce such percentage by the 

productivity adjustment described in section 1886(b)(3)(B)(xi)(II)” (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 
 22 

percentage calculated under section 1888(e)(5)(B)(i) of the Act results in an MFPadjusted market basket percentage that is less than zero, then the annual update to the 

unadjusted federal per diem rates under section 1888(e)(4)(E)(ii) of the Act would be 

negative, and such rates would decrease relative to the prior FY. 

For the FY 2014 update, the MFP adjustment is calculated as the 10-year moving 

average of changes in MFP for the period ending September 30, 2014. In accordance 

with section 1888(e)(5)(B)(i) of the Act and §413.337(d)(2) of the regulations, the market 

basket percentage for FY 2014 for the SNF PPS is based on IGI’s first quarter 2013 

forecast of the proposed FY 2010-based SNF market basket update, as adjusted by the 

forecast error adjustment, and is estimated to be 1.8 percent. In accordance with section 

1888(e)(5)(B)(ii) of the Act (as added by section 3401(b) of the Affordable Care Act) and 

§413.337(d)(3), this market basket percentage is then reduced by the MFP adjustment 

(the 10-year moving average of changes in MFP for the period ending September 30, 

2014) of 0.4 percent, which is calculated as described above and based on IGI’sfirst 

quarter 2013 forecast. The resulting MFP-adjusted SNF market basket update is equal to 

1.4 percent, or 1.8 percent less 0.4 percentage point. 

5. Market Basket Update Factor for FY 2014 

 Sections 1888(e)(4)(E)(ii)(IV) and 1888(e)(5)(i) of the Act require that the update 

factor used to establish the FY 2014 unadjusted federal rates be at a level equal to the 

market basket index percentage change. Accordingly, we determined the total growth 

from the average market basket level for the period of October 1, 2012 through 

September 30, 2013 to the average market basket level for the period of October 1, 2013 

through September 30, 2014. This process yields an update factor of 2.3 percent. As 

further explained in section III.B.3 of this proposed rule, as applicable, we adjust the 
 23 

market basket update factor 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 percentage change in the market basket exceeds a 0.5 percentage 

point threshold. Since the forecasted FY 2012 SNF market basket percentage change 

exceeded the actual FY 2012 SNF market basket percentage change (FY 2012 is the most 

recently available FY for which there is final data) by more than 0.5 percentage point, the 

FY 2014 market basket of 2.3 percent would be adjusted downward by the applicable 

difference, in this case of 0.5 percentage points, which reduces the FY 2014 market 

basket update factor to 1.8 percent. In addition, for FY 2014, section 1888(e)(5)(B) of 

the Act requires us to reduce the market basket percentage by the MFP adjustment (the 

10-year moving average of changes in MFP for the period ending September 30, 2014) of 

0.4 percent, as described in section III.B.4. of this proposed rule. The resulting MFPadjusted SNF market basket update would be equal to 1.4 percent, or 1.8 percent less 

0.4 percentage point. We are proposing that if more recent data become available (for 

example, a more recent estimate of the FY 2010-based SNF market basket, MFP 

adjustment, and/or FY 2004-based SNF market basket used for the forecast error 

calculation), we would use such data, if appropriate, to determine the FY 2014 SNF 

market basket update, FY 2014 labor-related share relative importance, and MFP 

adjustment in the FY 2014 SNF PPS final rule. We used the SNF market basket, adjusted 

as described above, to adjust each per diem component of the federal rates forward to 

reflect the change in the average prices for FY 2014 from average prices for FY 2013. 

We would 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 2014, prior to adjustment for case-mix. 
 24 

TABLE 2: FY 2014 Unadjusted Federal Rate Per Diem

Urban

Rate Component Nursing - Case-Mix

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

Per Diem Amount $165.92 $124.98 $16.46 $84.67 

TABLE 3: FY 2014 Unadjusted Federal Rate Per Diem

Rural

Rate Component Nursing - Case-Mix

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

Per Diem Amount $158.52 $144.11 $17.58 $86.25 

C. Case-Mix Adjustment

Under section 1888(e)(4)(G)(i) of the Act, the federal rate also incorporates an 

adjustment to account for facility case-mix, using a classification system that accounts for 

the relative resource utilization of different patient types. The statute specifies that the 

adjustment is to reflect both a resident classification system that the Secretary establishes 

to account for the relative resource use of different patient types, as well as resident 

assessment data and other data that the Secretary considers appropriate. In the interim 

final rule with comment period that initially implemented 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. 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). 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), we subsequently conducted a multi-year data collection and 

analysis under the Staff Time and Resource Intensity Verification (STRIVE) project to 
 25 

update the case-mix classification system for FY 2011. The resulting Resource 

Utilization Groups, Version 4 (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) to take effect in FY 2011 concurrently with an updated 

new resident assessment instrument, version 3.0 of the Minimum Data Set (MDS 3.0), 

which collects the clinical data used for case-mix classification under RUG-IV. 

We note that case-mix classification is based, in part, on the beneficiary's need for 

skilled nursing care and therapy services. The case-mix classification system uses 

clinical data from the MDS to assign a case-mix group to each patient that is then used to 

calculate a per diem payment under the SNF PPS. As discussed in section IV.A of this 

proposed rule, the clinical orientation of the case-mix classification system supports the 

SNF PPS’s use of an administrative presumption that considers a beneficiary’s initial 

case-mix classification to assist in making certain SNF level of care determinations. 

Further, because the MDS is used as a basis for payment, as well as a clinical assessment, 

we have provided extensive training on proper coding and the 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 payment and quality monitoring purposes, the RAI Manual 

consists of both the Manual instructions and the interpretive guidance and policy 

clarifications posted on the appropriate MDS website at 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/NursingHomeQualityInits/MDS30RAIManual.html.

In addition, we note that section 511 of the Medicare Prescription Drug, 
 26 

Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173, enacted 

December 8, 2003) 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 add-on for SNF residents with AIDS 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 

add-on for SNF residents with AIDS 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), we did not address the certification of the add-on for SNF residents 

with AIDS in that final rule’s implementation of the case-mix refinements for RUG-IV, 

thus allowing the add-on payment required by section 511 of the MMA to remain in 

effect. For the limited number of SNF residents that qualify for this add-on, there is a 

significant increase in payments. For example, using FY 2011 data, we identified fewer 

than 4,100 SNF residents with a diagnosis code of 042 (Human Immunodeficiency Virus 

(HIV) Infection). For FY 2014, an urban facility with a resident with AIDS in RUG-IV 

group “HC2” would have a case-mix adjusted payment of $414.72 (see Table 4) 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 $945.56. 

Currently, we use the ICD-9-CM code 042 to identify those residents for whom it 

is appropriate to apply the AIDS add-on established by section 511 of the MMA. In this 

context, we note that, in accordance with the requirements of the final rule published in 

the September 5, 2012 Federal Register (77 FR 54664), we will be discontinuing our 
 27 

current use of the International Classification of Diseases, 9th revision, Clinical 

Modification (ICD-9-CM), effective with the compliance date for using the International 

Classification of Diseases, 10th revision, Clinical Modification (ICD-10-CM) of October 

1, 2014. Regarding the above-referenced ICD-9-CM diagnosis code of 042, we propose 

to transition to the equivalent ICD-10-CM diagnosis code of B20 upon the October 1, 

2014 implementation date for conversion to ICD-10-CM, and we invite public comment 

on this proposal. We note that both ICD-9-CM diagnosis code 042 and ICD-10-CM 

diagnosis code B20 include AIDS, AIDS-related complex (ARC), and HIV infection, 

symptomatic, but ICD-9-CM diagnosis code 042 additionally includes AIDS-like 

syndrome whereas ICD-10-CM diagnosis code B20 does not. The term “AIDS-like 

syndrome” denotes a condition other than AIDS that has symptoms resembling those of 

AIDS, but a different etiology from the human immunodeficiency virus that causes 

AIDS. Accordingly, we believe that in omitting the category of AIDS-like syndrome, 

ICD-10-CM diagnosis code B20 actually reflects more accurately than its predecessor 

ICD-9-CM code the intended scope of the statutory provision, which is directed 

specifically at those residents who are “. . . afflicted with acquired immune deficiency 

syndrome (AIDS)” (see section 1888(e)(12)(A) of the Act, as amended by section 511 of 

the MMA). 

Under section 1888(e)(4)(H), each update of the payment rates must include the 

case-mix classification methodology applicable for the coming FY. The payment rates 

set forth in this proposed rule reflect the use of the RUG-IV case-mix classification 

system from October 1, 2013, through September 30, 2014. We list the case-mix 

adjusted RUG-IV payment rates, provided separately for urban and rural SNFs, in 

Tables 4 and 5 with corresponding case-mix values. These tables do not reflect the add-
 28 

on for SNF residents with AIDS enacted by section 511 of the MMA, which we apply 

only after making all other adjustments (such as wage and case-mix). 

TABLE 4: RUG-IV Case-Mix Adjusted Federal Rates and Associated Indexes 

URBAN 

RUG-IV 

Category 

 Nursing 

 Index 

 Therapy 

 Index 

Nursing 

Component 

Therapy 

Component 

Non-case 

Mix 

Therapy 

Comp 

Non-case 

Mix 

Component 

Total 

Rate 

RUX 2.67 1.87 $443.01 $233.71 $84.67 $761.39 

RUL 2.57 1.87 $426.41 $233.71 $84.67 $744.79 

RVX 2.61 1.28 $433.05 $159.97 $84.67 $677.69 

RVL 2.19 1.28 $363.36 $159.97 $84.67 $608.00 

RHX 2.55 0.85 $423.10 $106.23 $84.67 $614.00 

RHL 2.15 0.85 $356.73 $106.23 $84.67 $547.63 

RMX 2.47 0.55 $409.82 $68.74 $84.67 $563.23 

RML 2.19 0.55 $363.36 $68.74 $84.67 $516.77 

RLX 2.26 0.28 $374.98 $34.99 $84.67 $494.64 

RUC 1.56 1.87 $258.84 $233.71 $84.67 $577.22 

RUB 1.56 1.87 $258.84 $233.71 $84.67 $577.22 

RUA 0.99 1.87 $164.26 $233.71 $84.67 $482.64 

RVC 1.51 1.28 $250.54 $159.97 $84.67 $495.18 

RVB 1.11 1.28 $184.17 $159.97 $84.67 $428.81 

RVA 1.10 1.28 $182.51 $159.97 $84.67 $427.15 

RHC 1.45 0.85 $240.58 $106.23 $84.67 $431.48 

RHB 1.19 0.85 $197.44 $106.23 $84.67 $388.34 

RHA 0.91 0.85 $150.99 $106.23 $84.67 $341.89 

RMC 1.36 0.55 $225.65 $68.74 $84.67 $379.06 

RMB 1.22 0.55 $202.42 $68.74 $84.67 $355.83 

RMA 0.84 0.55 $139.37 $68.74 $84.67 $292.78 

RLB 1.50 0.28 $248.88 $34.99 $84.67 $368.54 

RLA 0.71 0.28 $117.80 $34.99 $84.67 $237.46 

ES3 3.58 $593.99 $16.46 $84.67 $695.12 

ES2 2.67 $443.01 $16.46 $84.67 $544.14 

ES1 2.32 $384.93 $16.46 $84.67 $486.06 

HE2 2.22 $368.34 $16.46 $84.67 $469.47 

HE1 1.74 $288.70 $16.46 $84.67 $389.83 

HD2 2.04 $338.48 $16.46 $84.67 $439.61 

HD1 1.60 $265.47 $16.46 $84.67 $366.60 

HC2 1.89 $313.59 $16.46 $84.67 $414.72 

HC1 1.48 $245.56 $16.46 $84.67 $346.69 

HB2 1.86 $308.61 $16.46 $84.67 $409.74 

HB1 1.46 $242.24 $16.46 $84.67 $343.37 

LE2 1.96 $325.20 $16.46 $84.67 $426.33 

LE1 1.54 $255.52 $16.46 $84.67 $356.65 

LD2 1.86 $308.61 $16.46 $84.67 $409.74 

LD1 1.46 $242.24 $16.46 $84.67 $343.37 
 29 

RUG-IV 

Category 

 Nursing 

 Index 

 Therapy 

 Index 

Nursing 

Component 

Therapy 

Component 

Non-case 

Mix 

Therapy 

Comp 

Non-case 

Mix 

Component 

Total 

Rate 

LC2 1.56 $258.84 $16.46 $84.67 $359.97 

LC1 1.22 $202.42 $16.46 $84.67 $303.55 

LB2 1.45 $240.58 $16.46 $84.67 $341.71 

LB1 1.14 $189.15 $16.46 $84.67 $290.28 

CE2 1.68 $278.75 $16.46 $84.67 $379.88 

CE1 1.50 $248.88 $16.46 $84.67 $350.01 

CD2 1.56 $258.84 $16.46 $84.67 $359.97 

CD1 1.38 $228.97 $16.46 $84.67 $330.10 

CC2 1.29 $214.04 $16.46 $84.67 $315.17 

CC1 1.15 $190.81 $16.46 $84.67 $291.94 

CB2 1.15 $190.81 $16.46 $84.67 $291.94 

CB1 1.02 $169.24 $16.46 $84.67 $270.37 

CA2 0.88 $146.01 $16.46 $84.67 $247.14 

CA1 0.78 $129.42 $16.46 $84.67 $230.55 

BB2 0.97 $160.94 $16.46 $84.67 $262.07 

BB1 0.90 $149.33 $16.46 $84.67 $250.46 

BA2 0.70 $116.14 $16.46 $84.67 $217.27 

BA1 0.64 $106.19 $16.46 $84.67 $207.32 

PE2 1.50 $248.88 $16.46 $84.67 $350.01 

PE1 1.40 $232.29 $16.46 $84.67 $333.42 

PD2 1.38 $228.97 $16.46 $84.67 $330.10 

PD1 1.28 $212.38 $16.46 $84.67 $313.51 

PC2 1.10 $182.51 $16.46 $84.67 $283.64 

PC1 1.02 $169.24 $16.46 $84.67 $270.37 

PB2 0.84 $139.37 $16.46 $84.67 $240.50 

PB1 0.78 $129.42 $16.46 $84.67 $230.55 

PA2 0.59 $97.89 $16.46 $84.67 $199.02 

PA1 0.54 $89.60 $16.46 $84.67 $190.73 

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

RURAL 

RUG-IV 

Category 

 Nursing 

 Index 

 Therapy 

 Index 

Nursing 

Component 

Therapy 

Component 

Non-case 

Mix 

Therapy 

Comp 

Non-case 

Mix 

Component 

Total 

Rate 

RUX 2.67 1.87 $423.25 $269.49 $86.25 $778.99 

RUL 2.57 1.87 $407.40 $269.49 $86.25 $763.14 

RVX 2.61 1.28 $413.74 $184.46 $86.25 $684.45 

RVL 2.19 1.28 $347.16 $184.46 $86.25 $617.87 

RHX 2.55 0.85 $404.23 $122.49 $86.25 $612.97 

RHL 2.15 0.85 $340.82 $122.49 $86.25 $549.56 

RMX 2.47 0.55 $391.54 $79.26 $86.25 $557.05 

RML 2.19 0.55 $347.16 $79.26 $86.25 $512.67 

RLX 2.26 0.28 $358.26 $40.35 $86.25 $484.86 

RUC 1.56 1.87 $247.29 $269.49 $86.25 $603.03 
 30 

RUG-IV 

Category 

 Nursing 

 Index 

 Therapy 

 Index 

Nursing 

Component 

Therapy 

Component 

Non-case 

Mix 

Therapy 

Comp 

Non-case 

Mix 

Component 

Total 

Rate 

RUB 1.56 1.87 $247.29 $269.49 $86.25 $603.03 

RUA 0.99 1.87 $156.93 $269.49 $86.25 $512.67 

RVC 1.51 1.28 $239.37 $184.46 $86.25 $510.08 

RVB 1.11 1.28 $175.96 $184.46 $86.25 $446.67 

RVA 1.10 1.28 $174.37 $184.46 $86.25 $445.08 

RHC 1.45 0.85 $229.85 $122.49 $86.25 $438.59 

RHB 1.19 0.85 $188.64 $122.49 $86.25 $397.38 

RHA 0.91 0.85 $144.25 $122.49 $86.25 $352.99 

RMC 1.36 0.55 $215.59 $79.26 $86.25 $381.10 

RMB 1.22 0.55 $193.39 $79.26 $86.25 $358.90 

RMA 0.84 0.55 $133.16 $79.26 $86.25 $298.67 

RLB 1.50 0.28 $237.78 $40.35 $86.25 $364.38 

RLA 0.71 0.28 $112.55 $40.35 $86.25 $239.15 

ES3 3.58 $567.50 $17.58 $86.25 $671.33 

ES2 2.67 $423.25 $17.58 $86.25 $527.08 

ES1 2.32 $367.77 $17.58 $86.25 $471.60 

HE2 2.22 $351.91 $17.58 $86.25 $455.74 

HE1 1.74 $275.82 $17.58 $86.25 $379.65 

HD2 2.04 $323.38 $17.58 $86.25 $427.21 

HD1 1.60 $253.63 $17.58 $86.25 $357.46 

HC2 1.89 $299.60 $17.58 $86.25 $403.43 

HC1 1.48 $234.61 $17.58 $86.25 $338.44 

HB2 1.86 $294.85 $17.58 $86.25 $398.68 

HB1 1.46 $231.44 $17.58 $86.25 $335.27 

LE2 1.96 $310.70 $17.58 $86.25 $414.53 

LE1 1.54 $244.12 $17.58 $86.25 $347.95 

LD2 1.86 $294.85 $17.58 $86.25 $398.68 

LD1 1.46 $231.44 $17.58 $86.25 $335.27 

LC2 1.56 $247.29 $17.58 $86.25 $351.12 

LC1 1.22 $193.39 $17.58 $86.25 $297.22 

LB2 1.45 $229.85 $17.58 $86.25 $333.68 

LB1 1.14 $180.71 $17.58 $86.25 $284.54 

CE2 1.68 $266.31 $17.58 $86.25 $370.14 

CE1 1.50 $237.78 $17.58 $86.25 $341.61 

CD2 1.56 $247.29 $17.58 $86.25 $351.12 

CD1 1.38 $218.76 $17.58 $86.25 $322.59 

CC2 1.29 $204.49 $17.58 $86.25 $308.32 

CC1 1.15 $182.30 $17.58 $86.25 $286.13 

CB2 1.15 $182.30 $17.58 $86.25 $286.13 

CB1 1.02 $161.69 $17.58 $86.25 $265.52 

CA2 0.88 $139.50 $17.58 $86.25 $243.33 

CA1 0.78 $123.65 $17.58 $86.25 $227.48 

BB2 0.97 $153.76 $17.58 $86.25 $257.59 

BB1 0.90 $142.67 $17.58 $86.25 $246.50 

BA2 0.70 $110.96 $17.58 $86.25 $214.79 

BA1 0.64 $101.45 $17.58 $86.25 $205.28 

PE2 1.50 $237.78 $17.58 $86.25 $341.61 
 31 

RUG-IV 

Category 

 Nursing 

 Index 

 Therapy 

 Index 

Nursing 

Component 

Therapy 

Component 

Non-case 

Mix 

Therapy 

Comp 

Non-case 

Mix 

Component 

Total 

Rate 

PE1 1.40 $221.93 $17.58 $86.25 $325.76 

PD2 1.38 $218.76 $17.58 $86.25 $322.59 

PD1 1.28 $202.91 $17.58 $86.25 $306.74 

PC2 1.10 $174.37 $17.58 $86.25 $278.20 

PC1 1.02 $161.69 $17.58 $86.25 $265.52 

PB2 0.84 $133.16 $17.58 $86.25 $236.99 

PB1 0.78 $123.65 $17.58 $86.25 $227.48 

PA2 0.59 $93.53 $17.58 $86.25 $197.36 

PA1 0.54 $85.60 $17.58 $86.25 $189.43 

D. Wage Index Adjustment

Section 1888(e)(4)(G)(ii) of the Act requires that we adjust the federal rates to 

account for differences in area wage levels, using a wage index that the Secretary 

determines appropriate. Since the inception of the SNF PPS, we have used hospital 

inpatient wage data in developing a wage index to be applied to SNFs. We propose to 

continue this practice for FY 2014, as we continue to believe that in the absence of SNFspecific 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), the SNF 

PPS does not use the hospital area wage index’s occupational mix adjustment, as this 

adjustment serves specifically to define the occupational categories more clearly in a 

hospital setting; moreover, the collection of the occupational wage data 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. For FY 2014, the updated wage data are for hospital cost reporting periods 

beginning on or after October 1, 2009 and before October 1, 2010 (FY 2010 cost report 

data). 

Finally, we propose to continue to use the same methodology discussed in the 
 32 

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 2014 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 would use the average wage index from all contiguous Core-Based 

Statistical Areas (CBSAs) as a reasonable proxy. For FY 2014, there are no rural 

geographic areas that do not have hospitals, and thus, this methodology would not be 

applied. For rural Puerto Rico, we would not apply this methodology due to the distinct 

economic circumstances that exist there (for example, due to the close proximity to one 

another of almost all of Puerto Rico’s various urban and non-urban areas, this 

methodology would produce a wage index for rural Puerto Rico that is inappropriately 

higher than that in half of its urban areas); instead, we would continue to use the most 

recent wage index previously available for that area. For urban areas without specific 

hospital wage index data, we would use the 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 2014, the only urban area without wage index data available is CBSA 

25980, Hinesville-Fort Stewart, GA. 

In addition, we note that section 315 of the Medicare, Medicaid, and SCHIP 

Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554, enacted on 

December 21, 2000) 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. However, 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. 
 33 

Once calculated, we would apply the wage index adjustment to the labor-related 

portion of the federal rate. Each year, we calculate a revised labor-related share, based on 

the relative importance of labor-related cost categories (that is, those cost categories that 

are sensitive to local area wage costs) in the input price index. For the FY 2014 SNF PPS 

update, we are proposing to revise the labor-related share to reflect the relative 

importance of the revised FY 2010-based SNF market basket cost weights for the 

following cost categories (as discussed further in section V.A. of this proposed rule): 

wages and salaries; employee benefits; contract labor; the labor-related portion of 

nonmedical professional fees; administrative and facilities support services; all other: 

labor-related services (previously referred to in the FY 2004-based SNF market basket as 

labor-intensive); and a proportion of capital-related expenses. 

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 2014. 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 2014 than the base year weights from the SNF market basket. 

 We calculate the labor-related relative importance for FY 2014 in four steps. 

First, we compute the FY 2014 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 2014 price index level for that cost category by the total market basket 

price index level. Third, we determine the FY 2014 relative importance for each cost 

category by multiplying this ratio by the base year (FY 2010) weight. Finally, we add the 
 34 

FY 2014 relative importance for each of the labor-related cost categories (wages and 

salaries, employee benefits, the labor-related portion of non-medical professional fees, 

administrative and facilities support services, all other: labor-related services (previously 

referred to in the FY 2004-based SNF market basket as labor-intensive services), and a 

portion of capital-related expenses) to produce the FY 2014 labor-related relative 

importance. Tables 6 and 7 show the RUG-IV case-mix adjusted federal rates by laborrelated and non-labor-related components. In section V. of this proposed rule, Table 17 

provides the FY 2014 labor-related share components based on the revised and rebased 

FY 2010-based SNF market basket. 

TABLE 6: RUG-IV Case-Mix Adjusted Federal Rates for Urban SNFs 

By Labor and Non-Labor Component 

RUG-IV 

Category 

Total 

Rate 

Labor 

Portion 

Non-Labor 

Portion 

RUX 761.39 $531.18 $230.21 

RUL 744.79 $519.60 $225.19 

RVX 677.69 $472.78 $204.91 

RVL 608.00 $424.17 $183.83 

RHX 614.00 $428.35 $185.65 

RHL 547.63 $382.05 $165.58 

RMX 563.23 $392.93 $170.30 

RML 516.77 $360.52 $156.25 

RLX 494.64 $345.08 $149.56 

RUC 577.22 $402.69 $174.53 

RUB 577.22 $402.69 $174.53 

RUA 482.64 $336.71 $145.93 

RVC 495.18 $345.46 $149.72 

RVB 428.81 $299.16 $129.65 

RVA 427.15 $298.00 $129.15 

RHC 431.48 $301.02 $130.46 

RHB 388.34 $270.92 $117.42 

RHA 341.89 $238.52 $103.37 

RMC 379.06 $264.45 $114.61 

RMB 355.83 $248.24 $107.59 

RMA 292.78 $204.26 $88.52 

RLB 368.54 $257.11 $111.43 

RLA 237.46 $165.66 $71.80 

ES3 695.12 $484.94 $210.18 

ES2 544.14 $379.61 $164.53 

ES1 486.06 $339.09 $146.97 

HE2 469.47 $327.52 $141.95 

HE1 389.83 $271.96 $117.87 
 35 

RUG-IV 

Category 

Total 

Rate 

Labor 

Portion 

Non-Labor 

Portion 

HD2 439.61 $306.69 $132.92 

HD1 366.60 $255.75 $110.85 

HC2 414.72 $289.33 $125.39 

HC1 346.69 $241.86 $104.83 

HB2 409.74 $285.85 $123.89 

HB1 343.37 $239.55 $103.82 

LE2 426.33 $297.42 $128.91 

LE1 356.65 $248.81 $107.84 

LD2 409.74 $285.85 $123.89 

LD1 343.37 $239.55 $103.82 

LC2 359.97 $251.13 $108.84 

LC1 303.55 $211.77 $91.78 

LB2 341.71 $238.39 $103.32 

LB1 290.28 $202.51 $87.77 

CE2 379.88 $265.02 $114.86 

CE1 350.01 $244.18 $105.83 

CD2 359.97 $251.13 $108.84 

CD1 330.10 $230.29 $99.81 

CC2 315.17 $219.88 $95.29 

CC1 291.94 $203.67 $88.27 

CB2 291.94 $203.67 $88.27 

CB1 270.37 $188.62 $81.75 

CA2 247.14 $172.41 $74.73 

CA1 230.55 $160.84 $69.71 

BB2 262.07 $182.83 $79.24 

BB1 250.46 $174.73 $75.73 

BA2 217.27 $151.58 $65.69 

BA1 207.32 $144.63 $62.69 

PE2 350.01 $244.18 $105.83 

PE1 333.42 $232.61 $100.81 

PD2 330.10 $230.29 $99.81 

PD1 313.51 $218.72 $94.79 

PC2 283.64 $197.88 $85.76 

PC1 270.37 $188.62 $81.75 

PB2 240.50 $167.78 $72.72 

PB1 230.55 $160.84 $69.71 

PA2 199.02 $138.84 $60.18 

PA1 190.73 $133.06 $57.67 

TABLE 7: RUG-IV Case-Mix Adjusted Federal Rates for Rural SNFs by Labor 

and Non-Labor Component 

RUG-IV 

Category 

Total 

Rate 

Labor 

Portion 

Non-Labor 

Portion 

RUX 778.99 $543.45 $235.54 

RUL 763.14 $532.40 $230.74 

RVX 684.45 $477.50 $206.95 

RVL 617.87 $431.05 $186.82 
 36 

RUG-IV 

Category 

Total 

Rate 

Labor 

Portion 

Non-Labor 

Portion 

RHX 612.97 $427.63 $185.34 

RHL 549.56 $383.40 $166.16 

RMX 557.05 $388.62 $168.43 

RML 512.67 $357.66 $155.01 

RLX 484.86 $338.26 $146.60 

RUC 603.03 $420.70 $182.33 

RUB 603.03 $420.70 $182.33 

RUA 512.67 $357.66 $155.01 

RVC 510.08 $355.85 $154.23 

RVB 446.67 $311.61 $135.06 

RVA 445.08 $310.51 $134.57 

RHC 438.59 $305.98 $132.61 

RHB 397.38 $277.23 $120.15 

RHA 352.99 $246.26 $106.73 

RMC 381.10 $265.87 $115.23 

RMB 358.90 $250.38 $108.52 

RMA 298.67 $208.36 $90.31 

RLB 364.38 $254.21 $110.17 

RLA 239.15 $166.84 $72.31 

ES3 671.33 $468.35 $202.98 

ES2 527.08 $367.71 $159.37 

ES1 471.60 $329.01 $142.59 

HE2 455.74 $317.94 $137.80 

HE1 379.65 $264.86 $114.79 

HD2 427.21 $298.04 $129.17 

HD1 357.46 $249.38 $108.08 

HC2 403.43 $281.45 $121.98 

HC1 338.44 $236.11 $102.33 

HB2 398.68 $278.14 $120.54 

HB1 335.27 $233.90 $101.37 

LE2 414.53 $289.19 $125.34 

LE1 347.95 $242.74 $105.21 

LD2 398.68 $278.14 $120.54 

LD1 335.27 $233.90 $101.37 

LC2 351.12 $244.96 $106.16 

LC1 297.22 $207.35 $89.87 

LB2 333.68 $232.79 $100.89 

LB1 284.54 $198.51 $86.03 

CE2 370.14 $258.22 $111.92 

CE1 341.61 $238.32 $103.29 

CD2 351.12 $244.96 $106.16 

CD1 322.59 $225.05 $97.54 

CC2 308.32 $215.10 $93.22 

CC1 286.13 $199.62 $86.51 

CB2 286.13 $199.62 $86.51 

CB1 265.52 $185.24 $80.28 

CA2 243.33 $169.76 $73.57 

CA1 227.48 $158.70 $68.78 
 37 

RUG-IV 

Category 

Total 

Rate 

Labor 

Portion 

Non-Labor 

Portion 

BB2 257.59 $179.71 $77.88 

BB1 246.50 $171.97 $74.53 

BA2 214.79 $149.85 $64.94 

BA1 205.28 $143.21 $62.07 

PE2 341.61 $238.32 $103.29 

PE1 325.76 $227.26 $98.50 

PD2 322.59 $225.05 $97.54 

PD1 306.74 $213.99 $92.75 

PC2 278.20 $194.08 $84.12 

PC1 265.52 $185.24 $80.28 

PB2 236.99 $165.33 $71.66 

PB1 227.48 $158.70 $68.78 

PA2 197.36 $137.69 $59.67 

PA1 189.43 $132.15 $57.28 

Section 1888(e)(4)(G)(ii) of the Act also requires that we apply this wage index in 

a manner that does not result in aggregate payments under the SNF PPS that are greater 

or less than would otherwise be made if the wage adjustment had not been made. For FY 

2014 (federal rates effective October 1, 2013), 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 2013 to the weighted average 

wage adjustment factor for FY 2014. For this calculation, we use the same 2012 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 FY 2014 is 1.0003. The wage index applicable to FY 2014 is set 

forth in Tables A and B, which appear in the Addendum of this proposed rule, and is also 

available on the CMS website at http://cms.gov/Medicare/Medicare-Fee-for-ServicePayment/SNFPPS/WageIndex.html.

In the SNF PPS final rule for FY 2006 (70 FR 45026, August 4, 2005), we 
 38 

adopted the changes discussed in the OMB Bulletin No. 03-04 (June 6, 2003), available 

online at http://www.whitehouse.gov/omb/bulletins/b03-04.html, which 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. We indicated in the FY 2008 SNF PPS final rule (72 FR 43423), that 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 CBSA geographic designations, we provided for a 1-year 

transition in FY 2006 with a blended wage index for all providers. For FY 2006, the 

wage index for each provider consisted of a blend of 50 percent of the FY 2006 MSAbased wage index and 50 percent of the FY 2006 CBSA-based wage index (both using 

FY 2002 hospital data). We referred to the blended wage index as the FY 2006 SNF PPS 

transition wage index. As discussed in the SNF PPS final rule for FY 2006 

(70 FR 45041), 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. 

On February 28, 2013, OMB issued OMB Bulletin No. 13-01, announcing 

revisions to the delineation of Metropolitan Statistical Areas, Micropolitian Statistical 

Areas, and Combined Statistical Areas, and guidance on uses of the delineation of these 

areas. A copy of this bulletin may be obtained at 

http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. This 
 39 

bulletin states that it provides the delineations of all Metropolitan Statistical Areas, 

Metropolitan Divisions, Micropolitan Statistical Areas, Combined Statistical Areas, and 

New England City and Town Areas in the United States and Puerto Rico based on the 

standards published in the June 28, 2010 Federal Register (75 FR 37246-37252) and 

Census Bureau data. 

 While the revisions OMB published on February 28, 2013 are not as sweeping as 

the changes made when we adopted the CBSA geographic designations for FY 2006, the 

February 28, 2013 bulletin does contain a number of significant changes. For example, 

there are new CBSAs, urban counties that become rural, rural counties that become 

urban, and existing CBSAs that are being split apart. 

 The changes made by the bulletin and their ramifications must be extensively 

reviewed and assessed by CMS before using them for the SNF PPS wage index. Because 

the bulletin was not issued until February 28, 2013, we were unable to undertake such a 

lengthy process before publication of this FY 2014 proposed rule. By the time the 

bulletin was issued, the FY 2014 SNF PPS proposed rule was in the advanced stages of 

development. We had already developed the FY 2014 proposed wage index based on the 

previous OMB definitions. To allow for sufficient time to assess the new changes and 

their ramifications, we intend to propose changes to the wage index based on the newest 

CBSA changes in the FY 2015 SNF PPS proposed rule. Thus, we would continue to use 

the previous OMB definitions (that is, those used for the FY 2013 SNF PPS update 

notice) for the FY 2014 SNF PPS wage index. 

E. Adjusted Rate Computation Example

 Using the hypothetical SNF XYZ described below, Table 8 shows the adjustments 

made to the federal per diem rates to compute the provider's actual per diem PPS 
 40 

payment under the described scenario. We derive the Labor and Non-labor columns from 

Table 6. As illustrated in Table 8, SNF XYZ’s total PPS payment would equal 

$41,917.80. 

TABLE 8: Adjusted Rate Computation Example 

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

Wage Index: 0.9001 

RUG-IV 

Group Labor 

Wage 

Index 

Adjusted 

Labor 

NonLabor Adjusted 

Rate 

Percent 

Adjustment 

Medicare 

Days Payment 

RVX $472.78 0.9001 $425.55 $204.91 $630.46 $630.46 14 $8,826.44 

ES2 $379.61 0.9001 $341.69 $164.53 $506.22 $506.22 30 $15,186.60 

RHA $238.52 0.9001 $214.69 $103.37 $318.06 $318.06 16 $5,088.96 

CC2* $219.88 0.9001 $197.91 $95.29 $293.20 $668.50 10 $6,685.00 

BA2 $151.58 0.9001 $136.44 $65.69 $202.13 $202.13 30 $6,063.90 

 100 $41,850.90 

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

IV. Additional Aspects of the SNF PPS 

A. SNF Level of Care--Administrative Presumption

The establishment of the SNF PPS did not change Medicare's fundamental 

requirements for SNF coverage. However, because the case-mix classification is based, 

in part, on the beneficiary’s need for skilled nursing care and therapy, we have attempted, 

where possible, to coordinate claims review procedures with the existing resident 

assessment process and case-mix classification system discussed in section III.C of this 

proposed rule. This approach includes an administrative presumption that 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 accordance with section 1888(e)(4)(H)(ii) of the Act and the regulations at 

§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 
 41 

update notice (75 FR 42910), this designation reflects an administrative presumption 

under 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 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. In this proposed rule, we would 

continue 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; 

• Medium Rehabilitation; 

• Low Rehabilitation; 

• Extensive Services; 
 42 

• 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), 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 . . . 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. 

B. Consolidated Billing

Sections 1842(b)(6)(E) and 1862(a)(18) of the Act (as added by section 4432(b) 

of the BBA) require a SNF to submit consolidated Medicare bills to its fiscal 

intermediary or Medicare Administrative Contractor for almost all of the services that its 
 43 

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

1862(a)(18) places the responsibility with the SNF for billing Medicare for physical 

therapy, occupational therapy, and speech-language pathology services that the resident 

receives during a noncovered stay. Section 1888(e)(2)(A) of the Act excludes a small list 

of services from the consolidated billing provision (primarily those services furnished by 

physicians and certain other types of practitioners), which remain separately billable 

under Part B when furnished to a SNF’s Part A resident. These excluded service 

categories are discussed in greater detail in section V.B.2. of the May 12, 1998 interim 

final rule (63 FR 26295 through 26297). 

We note that section 103 of the Medicare, Medicaid, and SCHIP Balanced Budget 

Refinement Act of 1999 (BBRA) (Pub. L. 106-113, enacted on November 29, 1999) 

amended this provision (section 1888(e)(2)(A) of the Act) by further excluding a number 

of individual “high-cost, low-probability” services, identified by Healthcare Common 

Procedure Coding System (HCPCS) codes, within several broader categories 

(chemotherapy items, chemotherapy administration services, radioisotope services, and 

customized prosthetic devices) that otherwise remained subject to the provision. We 

discuss this BBRA amendment in greater detail in the SNF PPS proposed and final rules 

for FY 2001 (65 FR 19231 through 19232, April 10, 2000, and 65 FR 46790 through 

46795, July 31, 2000), as well as in Program Memorandum AB-00-18 (Change Request 

#1070), issued March 2000, which is available online at 

www.cms.gov/transmittals/downloads/ab001860.pdf. 

As explained in the FY 2001 proposed rule (65 FR 19232), 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, 
 44 

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) of the BBRA “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), and as our 

longstanding policy, any additional service codes that we might designate for exclusion 

under our discretionary authority must meet the same statutory criteria used in identifying 

the original codes excluded from consolidated billing under section 103(a) of the BBRA: 

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 
 45 

proposed rule, we specifically invite public comments identifying HCPCS 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) be excluded. 

We note that the original BBRA amendment (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, 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, 2013). 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. 

C. Payment for SNF-Level Swing-Bed Services
 46 

Section 1883 of the Act permits certain small, rural hospitals to enter into a 

Medicare swing-bed agreement, under which the hospital can use its beds to provide 

either acute- or SNF-level care, as needed. For critical access hospitals (CAHs), Part A 

pays on a reasonable cost basis for SNF-level services furnished under a swing-bed 

agreement. However, in accordance with section 1888(e)(7) of the Act, 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. As explained in the FY 2002 final 

rule (66 FR 39562), this effective date is consistent with the statutory provision to 

integrate swing-bed rural hospitals into the SNF PPS by the end of the transition period, 

June 30, 2002. 

Accordingly, all non-CAH swing-bed rural hospitals have now come under the 

SNF PPS. Therefore, all rates and wage indexes outlined in earlier sections of this 

proposed rule for the SNF PPS also apply to all non-CAH swing-bed rural hospitals. A 

complete discussion of assessment schedules, the MDS, and the transmission software 

(RAVEN-SB for Swing Beds) appears in the FY 2002 final rule (66 FR 39562) and in the 

FY 2010 final rule (74 FR 40288). As finalized in the FY 2010 SNF PPS final rule 

(74 FR 40356-57), effective October 1, 2010, non-CAH swing-bed rural hospitals are 

required to complete an MDS 3.0 swing-bed assessment which is limited to the required 

demographic, payment, and quality items. The latest changes in the MDS for swing-bed 

rural hospitals appear on the SNF PPS website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html. 

V. Other Issues 

A. Revising and Rebasing the SNF Market Basket Index
 47 

1. Background 

 Section 1888(e)(5)(A) of the Act requires the Secretary to establish a market 

basket index that reflects the changes over time in the prices of an appropriate mix of 

goods and services included in the SNF PPS. Effective for cost reporting periods 

beginning on or after July 1, 1998, we revised and rebased our 1977 routine costs input 

price index and adopted a total expenses SNF input price index using FY 1992 as the 

base year. In the FY 2002 SNF PPS final rule (66 FR 39582), we rebased and revised the 

market basket to a base year of FY 1997. We last rebased and revised the market basket 

to a base year of FY 2004 in the FY 2008 SNF PPS final rule (72 FR 43425). In this FY 

2014 SNF PPS proposed rule, we are proposing to revise and rebase the SNF market 

basket to a base year of FY 2010. 

 The term “market basket” refers to the mix of goods and services needed to 

produce SNF care, and is also commonly used to denote the input price index that 

includes both weights (mix of goods and services) and price factors. The term “market 

basket” and “market basket index” used in this proposed rule refers to the SNF input 

price index. 

 The proposed FY 2010-based SNF market basket represents routine costs, costs of 

ancillary services, and capital-related costs. The percentage change in the market basket 

reflects the average change in the price of a fixed set of goods and services purchased by 

SNFs to furnish all services. For further background information, see the May 12, 1998 

interim final rule with comment period (63 FR 26289), the FY 2002 final rule (66 FR 

39582), and the FY 2008 final rule (72 FR 43425). 

 For purposes of the SNF PPS, the SNF market basket is a fixed-weight 

(Laspeyres-type) price index. A Laspeyres-type index compares the cost of purchasing a 
 48 

specified mix of goods and services in a selected base period to the cost of purchasing 

that same group of goods and services at current prices. 

We construct the market basket in three steps. The first step is to select a base 

period and estimate total base period expenditure shares for mutually exclusive and 

exhaustive spending categories. We use total costs for routine services, ancillary 

services, and capital. These shares are called “cost” or “expenditure” weights. The 

second step is to match each expenditure category to a price/wage variable, called a price 

proxy. We draw these price proxy variables from publicly available statistical series 

published on a consistent schedule, preferably at least quarterly. The final step involves 

multiplying the price level for each spending category by the cost weight for that 

category. The sum of these products (that is, weights multiplied by proxy index levels) 

for all cost categories yields the composite index level of the market basket for a given 

quarter or year. Repeating the third step for other quarters and years produces a time 

series of market basket index levels, from which we can calculate rates of growth. 

 The market basket represents a fixed-weight index because it answers the 

question of how much more or less it would cost, at a later time, to purchase the same 

mix of goods and services that was purchased in the base period. The effects on total 

expenditures resulting from changes in the quantity or mix of goods and services 

purchased subsequent or prior to the base period are, by design, not considered. 

 Consistent with our discussion in the May 12, 1998 interim final rule with 

comment period (63 FR 26252), the FY 2002 final rule (66 FR 39582), and the FY 2008 

proposed rule (72 FR 25541), and as further discussed below, to implement section 

1888(e)(5)(A) of the Act we propose to revise and rebase the market basket so the cost 
 49 

weights and price proxies reflect the mix of goods and services that underlie Medicare 

allowable SNF costs (routine, ancillary, and capital-related) for FY 2010. 

2. Revising and Rebasing the Skilled Nursing Facility Market Basket 

The terms “rebasing” and “revising,” while often used interchangeably, actually 

denote different activities. Rebasing means shifting the base year for the structure of 

costs of the input price index (for example, for this proposed rule, we propose to shift the 

base year cost structure from FY 2004 to FY 2010). Revising means changing data 

sources, cost categories, price proxies, and/or methodology used in developing the input 

price index. 

We are proposing both to rebase and revise the SNF market basket to reflect FY 

2010 Medicare allowable total cost data (routine, ancillary, and capital-related). 

Medicare allowable costs are costs that are eligible for inclusion under the SNF PPS 

payments. For example, the SNF market basket excludes home health aide costs as these 

costs would be reimbursed under the Home Health PPS. We last rebased and revised the 

SNF market basket in the FY 2008 PPS final rule (72 FR 43425), reflecting data from FY 

2004 Medicare allowable total costs. 

We selected FY 2010 as the new base year because 2010 is the most recent year 

for which relatively complete Medicare cost report (MCR) data are available. In 

developing the proposed market basket, we reviewed SNF expenditure data from SNF 

MCRs (CMS Form 2540-96) for FY 2010 for each freestanding SNF that reported 

Medicare expenses and payments. The FY 2010 cost reports are those with cost 

reporting periods beginning after September 30, 2009, and before October 1, 2010. We 

propose to maintain our policy of using data from freestanding SNFs because 

freestanding SNF data reflect the actual cost structure faced by the SNF itself. In 
 50 

contrast, expense data for a hospital-based SNF reflect the allocation of overhead over the 

entire institution. Due to this method of allocation, total expenses will be correct, but the 

individual components’ expenses may be skewed. 

We developed cost category weights for the proposed FY 2010-based SNF market 

basket in two stages. First, we derived base weights for seven major categories (wages 

and salaries, employee benefits, contract labor, pharmaceuticals, professional liability 

insurance, capital-related, and a residual “all other”) from the SNF MCRs. Second, we 

are proposing to divide the residual “all other” cost category (21.534 percent) into 

subcategories, using U.S. Department of Commerce Bureau of Economic Analysis’ 

(BEA) 2002 Benchmark Input-Output (I-O) tables for the nursing home industry aged 

forward using price changes. The methodology we propose to use to age the data 

forward involves applying the annual price changes from the respective price proxies to 

the appropriate cost categories. We repeat this practice for each year. We then apply the 

resulting 2010 distributions to the aggregate 2010 “all other” cost weight of 21.534 

percent to yield the detailed 2010 all other cost weights. This is similar to the 

methodology we used to revise and rebase the SNF market basket to reflect FY 2004 data 

in the FY 2008 SNF final rule. 

The BEA Benchmark I-O data are generally scheduled for publication every 5 

years, with the most recent data available being 2002. The 2007 BEA Benchmark I-O 

data are expected to be released in the summer of 2013. We are proposing that if more 

recent BEA Benchmark I-O data for 2007 are released between the proposed and final 

rule with sufficient time to incorporate such data into the final rule that we would 

incorporate these data, as appropriate, into the FY 2010-based SNF PPS market basket 

for the final rule, so that the SNF market basket reflects the most recent BEA data 
 51 

available. We note that the FY 2004-based SNF market basket used the 1997 BEA 

Benchmark I-O data to disaggregate the “all other” (residual) cost category – the data 

available at the time of the rebasing. The 2002 BEA Benchmark I-O data (and the 

forthcoming 2007 BEA Benchmark I-O data) are updates of the 1997 BEA Benchmark IO data. 

For this SNF market basket revision and rebasing, we are proposing to include a 

total of 29 detailed cost categories for the proposed FY 2010-based SNF market basket, 

which is six more cost categories than the FY 2004-based SNF market basket. We are 

proposing to include five new cost categories in the proposed FY 2010-based SNF 

market basket: (1) Medical Instruments and Supplies; (2) Apparel; (3) Machinery and 

Equipment; (4) Administrative and Facilities Support Services; and (5) Financial 

Services. Having separate categories for these costs enables them to be proxied more 

precisely. We are also proposing to divide the Nonmedical Professional Fees cost 

category into Nonmedical Professional Fees: Labor-Related and Nonmedical 

Professional Fees: Nonlabor-Related. In addition, we are proposing to revise our labels 

for the Labor-Intensive Services and Nonlabor-Intensive Services cost categories to All 

Other: Labor-Related Services and All Other: Nonlabor-Related Services, respectively. 

A more thorough discussion of our proposals is provided below. 

 The capital-related portion of the FY 2010-based SNF market basket employs the 

same overall methodology used to develop the capital-related portion of the FY 1997-

based SNF market basket, described in the FY 2002 SNF PPS final rule (66 FR 39582) 

and the FY 2004-based SNF market basket, described in the FY 2008 SNF PPS final rule 

(72 FR 43425). It is a similar methodology as is used for the inpatient hospital capital 

input price index described in the FY 1997 Hospital IPPS proposed rule (61 FR 27466), 
 52 

the FY 1997 Hospital IPPS final rule (61 FR 46196), the FY 2006 Hospital IPPS final 

rule (70 FR 47407), and the FY 2010 Hospital IPPS final rule (74 FR 43857). The 

strength of this methodology is that it reflects the vintage nature of capital, which 

represents the acquisition and use of capital over time. We explain this methodology in 

more detail below. 

 Table 9 presents the FY 2010-based and FY 2004-based SNF market basket major 

cost weights. Following the table, we describe the sources of the major category weights 

and their subcategories in the FY 2010-based SNF market basket. 

TABLE 9: FY 2010-based SNF Market Basket Major Cost Weights 

Cost Category 

Proposed FY 2010-

based SNF Market 

Basket 

FY 2004-based SNF 

Market Basket 

Wages and Salaries 46.057 48.105 

Employee Benefits 10.491 10.699 

Contract Labor 5.545 3.951 

Pharmaceuticals 7.872 7.894 

Professional Liability 

Insurance 1.141 1.717 

Capital-related Expenses 7.360 7.207 

All Other (residual) 21.534 20.427 

● Wages and Salaries: We derived the wages and salaries cost category using the 

FY 2010 SNF MCRs. We determined the share using Medicare allowable wages and 

salaries from Worksheet S-3, part II and total expenses from Worksheet B, part I. 

Medicare allowable wages and salaries are equal to total wages and salaries minus: (1) 

excluded salaries from worksheet S-3, part II; and (2) nursing facility and nonreimbursable salaries from worksheet A, lines 18, 34 through 36, and 58 through 63. 

Medicare allowable total expenses are equal to total expenses from Worksheet B, lines 

16, 21 through 30, 32, 33, 48, and 52 through 54. This share represents the wage and 

salary share of costs for employees for the SNF, and does not include the wages and 
 53 

salaries from contract labor, which are allocated to wages and salaries in a later step. The 

same cost report methodology was used to derive the wages and salaries cost weight of 

the FY 2004-based SNF market basket. 

● Employee Benefits: We determined the weight for employee benefits using 

FY 2010 SNF MCR data. We derived the share using Medicare allowable benefit costs 

from Worksheet S-3, part II and total expenses from Worksheet B. Medicare allowable 

benefits are equal to total benefits from Worksheet S-3, part II, minus excluded (nonMedicare allowable) benefits. Non-Medicare allowable benefits are derived by 

multiplying non-Medicare allowable salaries times the ratio of total benefit costs for the 

SNF to the total wage costs for the SNF. The same cost report methodology was used to 

derive the benefits cost weight of the FY 2004-based SNF market basket. 

● Contract Labor: We determined the weight for contract labor using 2010 SNF 

MCR data. We derived the share using Medicare allowable contract labor costs from 

Worksheet S-3, part II line 17 minus nursing facility (NF) contract labor costs, and 

Medicare allowable total costs from Worksheet B. (Worksheet S-3, part II line 17 only 

includes direct patient care contract labor attributable to SNF and NF services.) 

NF contract labor costs, which are not reimbursable under Medicare, are derived by 

multiplying total contract labor costs by the ratio of NF wages and salaries to the sum of 

NF and SNF wages and salaries. 

As we did for the FY 2004-based SNF market basket, we propose to allocate 

contract labor costs to the wages and salaries and employee benefits cost weights based 

on their relative proportion, under the assumption that contract costs are similarly 

distributed and likely to change at the same rate as direct labor costs even though unit 

labor cost levels may be different. The contract labor allocation proportion for wages and 
 54 

salaries is equal to the wages and salaries cost weight as a percent of the sum of the 

wages and salaries cost weight and the employee benefits cost weight. Using the FY 

2010 MCR data, this percentage is approximately 81 percent; therefore, we propose to 

allocate approximately 81 percent of the contract labor cost weight to the wages and 

salaries cost weight. The remaining proportion of the contract labor cost weight is 

allocated to the employee benefits cost weight. Table 10 shows the wages and salaries 

and employee benefit cost weights after contract labor allocation for both the FY 2004-

based SNF market basket and the proposed FY 2010-based SNF market basket. 

TABLE 10: Wages and Salaries and Employee Benefits Cost Weights after 

Contract Labor Allocation 

Major Cost Categories 

Proposed FY 

2010-Based SNF 

Market Basket 

FY 2004-Based 

SNF Market 

Basket 

Wages and salaries 50.573 51.337 

Employee benefits 11.520 11.418 

Prior to contract labor allocation, the proposed FY 2010-based SNF market basket 

wages and salaries cost weight was about 2 percentage points lower than the FY 2004-

based SNF market basket wages and salaries cost weight while the proposed FY 2010-

based employee benefit cost weight was 0.2 percentage point lower than the FY 2004-

based employee benefit cost weight. After the allocation of contract labor, the proposed 

FY 2010-based wages and salaries cost weight is about 0.7 percentage point lower than 

the FY 2004-based wages and salaries cost weight while the proposed FY 2010-based 

employee benefits cost weight is about 0.1 percentage point higher than the FY 2004-

based employee benefit cost weight. This is due to the increase in the FY 2010-based 

SNF market basket contract labor cost weight from the FY 2004-based SNF market 

basket contract labor cost weight, of which 81 percent of this increase is applied to the 
 55 

wages and salaries cost weight and 19 percent is applied to the employee benefit cost 

weight, offsetting the actual decrease in the wages and salaries and employee benefit cost 

weights prior to the contract labor allocation. 

● Pharmaceuticals: We derive the cost weight for pharmaceuticals in two steps 

using the FY 2010 SNF MCR and Medicare claims data. 

First, we calculated pharmaceutical costs using the non-salary costs from the 

Pharmacy cost center and the Drugs Charged to Patients’ cost center, both found on 

Worksheet B of the SNF MCRs. Since these drug costs were attributable to the entire 

SNF and not limited to Medicare allowable services, we adjusted the drug costs by the 

ratio of Medicare allowable pharmacy total costs to total pharmacy costs from Worksheet 

B, part I, column 11. Worksheet B, part I allocates the general service cost centers, 

which are often referred to as “overhead costs” (in which pharmacy costs are included) to 

the Medicare allowable and non-Medicare allowable cost centers. This resulted in a 

proposed FY 2010-based SNF market basket drug cost weight of 3.1 percent compared to 

the FY 2004-based SNF market basket drug cost weight, which was 3.2 percent using the 

same methodology. This drug cost share does not include the drug expenses associated 

with Medicaid patients. The methodology for including the Medicaid drug expenditures 

is explained in detail below. This Medicaid drug add-on increases the drug expenditure 

weight to over seven percent, and is consistent with the Medicaid drug add-on method 

that was used in the FY 2004-based SNF market basket. 

 Second, for the FY 2010-based SNF market basket, we are proposing to continue 

to adjust the drug expenses reported on the MCR to include an estimate of total Medicaid 

drug costs, which are not represented in the Medicare-allowable drug cost weight. Similar 

to the last rebasing, we are estimating Medicaid drug costs based on data representing 
 56 

dual-eligible Medicaid beneficiaries. Medicaid drug costs are estimated by multiplying 

Medicaid dual eligible drug costs per day times the number of Medicaid days as reported 

in the Medicare allowable skilled nursing cost center in the SNF MCR. Medicaid dual 

eligible drug costs per day (where the day represents an unduplicated drug supply day) 

were estimated using a sample of 2010 Part D claims for those dual-eligible beneficiaries 

who had a Medicare SNF stay during the year. Medicaid dual-eligible beneficiaries 

would receive their drugs through the Medicare Part D benefit, which would work 

directly with the pharmacy, and therefore, these costs would not be represented in the 

Medicare SNF MCRs. A random 20 percent sample of Medicare Part D claims data 

yielded a Medicaid drug cost per day of $17.39. We note that the FY 2004-based SNF 

market basket relied on data from the Medicaid Statistical Information System, which 

yielded a dual eligible Medicaid drug cost per day of $13.65 for 2004. For the revised 

and rebased FY 2010-based SNF market basket, we propose to use Part D claims to 

estimate total Medicaid drug costs as this provides drug expenditure data for dual-eligible 

beneficiaries for 2010. The Medicaid Statistical Information System is no longer a 

comprehensive database for dual-eligible beneficiaries’ drug costs. 

The proposed adjusted FY 2010-based SNF market basket drug cost weight, 

representing all drug expenditures including those we estimated for Medicaid, is 7.872 

percent. The FY 2004-based SNF market basket pharmaceutical cost weight was 7.894 

percent. 

● Professional Liability Insurance: We calculated the professional liability 

insurance cost weight using costs from Worksheet S-2 of the MCRs as the sum of 

premiums, paid losses, and self-insurance. To derive the professional liability insurance 

cost weight for the proposed FY 2010-based SNF market basket, we used the same cost 
 57 

report methodology that was used to derive the cost weight of the FY 2004-based SNF 

market basket (see 72 FR 25543-25544). For the proposed FY 2010-based SNF market 

basket, the professional liability weight is 1.141 percent, which is slightly lower than the 

1.717 weight for the FY 2004-based SNF market basket. 

● Capital-Related: We derived the weight for overall capital-related expenses 

using the FY 2010 SNF MCRs. We calculated the Medicare allowable capital-related 

cost weight from Worksheet B, part II. In determining the subcategory weights for 

capital, we used information from the FY 2010 SNF MCR and the 2010 Bureau of 

Census’ Service Annual Survey (SAS) data. For the FY 2004-based SNF market basket, 

we relied on the Bureau of Census Business Expenditure Survey (BES). The SAS data is 

a replacement/extension of the BES data, reflecting more recent data. 

We calculated the depreciation cost weight (that is, depreciation costs excluding 

leasing costs) using depreciation costs from Worksheet S-2. Since the depreciation costs 

reflect the entire SNF facility (Medicare and non-Medicare allowable units) we used total 

facility costs as the denominator. This methodology assumes that the depreciation of an 

asset is the same regardless of whether the asset was used for Medicare or non-Medicare 

patients. This methodology yielded a FY 2010-based SNF market basket depreciation 

cost weight of 2.301 percent. This depreciation cost weight is further adjusted to account 

for a proportion of leasing expenses, which is described in more detail below. We 

determined the distribution between building and fixed equipment and movable 

equipment depreciation from the FY 2010 SNF MCR, as well. The FY 2010 SNF MCR 

data showed a fixed/moveable depreciation split of 85/15, which is the same split used in 

the FY 2004-based SNF market basket. 

 We also derived the interest expense share of capital-related expenses from 
 58 

Worksheet A from the FY 2010 SNF MCRs. Similar to the depreciation cost weight, we 

calculated the interest cost weight using total facility costs. As done with the last 

rebasing, we determined the split of interest expense between for-profit and not-for-profit 

facilities based on the distribution of long-term debt outstanding by type of SNF (forprofit or not-for-profit) from the FY 2010 SNF MCRs. We estimated the split between 

for-profit and not-for-profit interest expense to be 41/59 percent. 

Because the data were not available in the MCRs, we used the most recent 2010 

SAS data to derive the capital-related expenses attributable to leasing and other capitalrelated expenses. Based on the 2010 SAS data, we determined the leasing costs to be 30 

percent of total capital-related expenses, while we determined the other capital-related 

costs (insurance, taxes, licenses, other) to be 18 percent of total capital-related expenses. 

In the FY 2004-based SNF market basket, leasing costs represent 21 percent of total 

capital-related expenses while other capital-related costs represent 13 percent of total 

capital-related expenses. 

Lease expenses are not broken out as a separate cost category, but are distributed 

among the cost categories of depreciation, interest, and other capital, reflecting the 

assumption that the underlying cost structure and price movement of leasing expenses is 

similar to capital costs in general. As was done in previous rebasings, we assumed 10 

percent of lease expenses are overhead and assigned them to the other capital expenses 

cost category. We distributed the remaining lease expenses to the three cost categories 

based on the proportion of depreciation, interest, and other capital expenses to total 

capital costs, excluding lease expenses. 
 59 

Table 11 shows the capital-related expense distribution (including expenses from 

leases) in the proposed FY 2010-based SNF market basket and the FY 2004-based SNF 

market basket. 

TABLE 11: Comparison of the Capital-related Expense Distribution of the FY 

2010-based SNF market basket and the FY 2004-based SNF market basket 

Cost Category 

Proposed FY 2010-

based SNF Market 

Basket 

FY 2004-based SNF 

Market Basket 

Capital-related Expenses 7.360 7.207 

 Total Depreciation 3.180 2.858 

 Total Interest 2.096 3.037 

 Other Capital-related Expenses 2.084 1.312 

 Our methodology for determining the price change of capital-related expenses 

accounts for the vintage nature of capital, which is the acquisition and use of capital over 

time. To capture this vintage nature, the price proxies must be vintage-weighted. The 

determination of these vintage weights occurs in two steps. First, we must determine the 

expected useful life of capital and debt instruments held by SNFs. Second, we must 

identify the proportion of expenditures within a cost category that is attributable to each 

individual year over the useful life of the relevant capital assets, or the vintage weights. 

We rely on Bureau of Economic Analysis (BEA) fixed asset data to derive the useful 

lives of both fixed and movable capital, which is the same data source used to derive the 

useful lives during the last rebasing. The specifics of the data sources used are explained 

below. 

Estimates of useful lives for movable and fixed assets for the proposed FY 2010-

based SNF market basket are 6 and 25 years, respectively. These estimates are based on 

several data sources from the BEA, which publishes various useful life-related statistics, 

including asset service lives and current-cost average age, historical cost average age, and 
 60 

industry-specific current cost net stocks of assets. While SNF-specific data are not 

available, we can use the BEA data to develop estimates of useful life that are 

approximates of SNF capital purchases. 

 There are two major issues we must address in using the BEA service life data to 

develop SNF-specific estimates. First, these data are published at a detailed asset level 

and not at an aggregate level, such as movable and fixed assets. There are 43 detailed 

movable assets in the BEA estimates. Some examples include computer software (34 

months service life), electromedical equipment (9 years), medical instruments and related 

equipment (12 years), communication equipment (15 years), and office equipment (8 

years). There are 23 detailed fixed assets in the BEA estimates. Some examples of 

detailed fixed assets are medical office buildings (36 years), hospitals and special care 

buildings (48 years), and lodging (32 years). Again, there are no service life estimates at 

an aggregate level, such as movable and fixed assets. The second reason BEA service 

life data are not directly applicable to SNFs is that service lives are not industry-specific; 

they apply to many different industries and, in most cases, to all industries in the 

economy. We seek estimates applicable to nursing homes for our SNF-specific 

estimates. BEA also publishes average asset age estimates. Average age estimates are 

updated more regularly than service lives data but reflect an average age rather than a 

service life. To get an estimate of the available service life of an asset, the average age is 

multiplied by 2 to reflect that some assets are retired prior to the useful life being 

exhausted. Average age data are available by detailed and aggregate asset levels for the 

overall economy and were last published in 2012. 

 We developed a methodology to approximate movable and fixed asset ages for 

nursing and residential care services (NAICS 623) using the published BEA data. For the 
 61 

proposed FY 2010 SNF market basket, we use the average age for each asset type from 

the BEA fixed assets Table 2.9 for all assets (not SNF-specific) and weight them using 

current cost net stock levels for each of these asset types in the nursing and residential 

care services industry. Current cost net stock levels are available for download from the 

BEA website at http://www.bea.gov/national/FA2004/Details/Index.html.

These detailed current cost net stock estimates are not published in the Survey of 

Current Business, a U.S. Department of Commerce monthly publication that provides 

data on U.S. businesses. Historical cost average age estimates for all industries are 

published in the BEA fixed assets Table 2.10; there are no industry-specific estimates for 

historical cost average age. Industry-specific historical cost average ages for NAICS 

6230 is estimated by multiplying the industry specific current cost average age by the 

ratio of historical cost to current cost average age for all industries. This produces 

historical cost average age data for movable and fixed assets specific to NAICS 6230 of 

3.2 and 12.2 years, respectively. Since averages are measures of central tendency, we 

multiply each of these estimates by two to produce estimates of likely useful lives of 6.4 

and 24.5 years for movable and fixed assets, which we round to 6 and 25 years, 

respectively. We are proposing an interest vintage weight time span of 22 years, obtained 

by weighting the fixed and movable vintage weights (25 years and 6 years, respectively) 

by the fixed and movable split (85 percent and 15 percent, respectively). 

 Given the expected useful life of capital and debt instruments, we must determine 

the proportion of capital expenditures attributable to each year of the expected useful life 

by cost category. These proportions represent the vintage weights. We were not able to 

find a historical time series of capital expenditures by SNFs. Therefore, we 

approximated the capital expenditure patterns of SNFs over time, using alternative SNF 
 62 

data sources. For building and fixed equipment, we used the stock of beds in nursing 

homes from the National Nursing Home Survey (NNHS) conducted by the National 

Center for Health Statistics (NCHS) for 1962 through 1999. For 2000 through 2010, we 

extrapolated the 1999 bed data forward using a 10-year moving average of growth in the 

number of beds from the SNF MCR data. We then used the change in the stock of beds 

each year to approximate building and fixed equipment purchases for that year. This 

procedure assumes that bed growth reflects the growth in capital-related costs in SNFs 

for building and fixed equipment. We believe that this assumption is reasonable because 

the number of beds reflects the size of a SNF, and as a SNF adds beds, it also likely adds 

fixed capital. 

 For movable equipment, we used available SNF data to capture the changes in 

intensity of SNF services that would likely be accompanied by the purchase of movable 

equipment. We used the same methodology to estimate the change in intensity as 

published in the FY 2008 SNF final rule for the period from 1962 through 2004. For 

more details of the methodology, see the FY 2008 SNF PPS final rule (72 FR 43428). 

We propose to use the same methodology to estimate the ratio of ancillary to routine 

costs for 2005 through 2010 from the SNF MCR. The time series of the ratio of ancillary 

costs to routine costs for SNFs measures changes in intensity in SNF services, which are 

assumed to be associated with movable equipment purchase patterns. The assumption 

here is that as ancillary costs increase compared to routine costs, the SNF caseload 

becomes more complex and would require more movable equipment. Again, the lack of 

movable equipment purchase data for SNFs over time required us to use alternative SNF 

data sources. We believe the resulting two time series, determined from beds and the 
 63 

ratio of ancillary to routine costs, reflect real capital purchases of building and fixed 

equipment and movable equipment over time. 

 To obtain nominal purchases, which are used to determine the vintage weights for 

interest, we converted the two real capital purchase series from 1963 through 2010 

determined above to nominal capital purchase series using their respective price proxies 

(the BEA chained price index for nonresidential construction for hospitals & special care 

facilities and the PPI for Machinery and Equipment). We then combined the two 

nominal series into one nominal capital purchase series for 1963 through 2010. Nominal 

capital purchases are needed for interest vintage weights to capture the value of debt 

instruments. 

 Once we created these capital purchase time series for 1963 through 2010, we 

averaged different periods to obtain an average capital purchase pattern over time: (1) for 

building and fixed equipment, we averaged 24, 25-year periods; (2) for movable 

equipment, we averaged 43, 6-year periods; and (3) for interest, we averaged 27, 22-year 

periods. We calculate the vintage weight for a given year by dividing the capital 

purchase amount in any given year by the total amount of purchases during the expected 

useful life of the equipment or debt instrument. Following publication of the FY 2010 

IPPS/Rate Year 2010 LTCH PPS proposed rule, and to provide greater transparency, we 

posted on the CMS market basket website at http://www.cms.gov/Research-StatisticsData-and-Systems/Statistics-Trends-andReports/MedicareProgramRatesStats/MarketBasketResearch.html, an illustrative 

spreadsheet that contains an example of how the vintage-weighted price indexes are 

calculated. 

Table 12 shows the resulting vintage weights for each of these cost categories. 
 64 

TABLE 12: Vintage Weights for Proposed FY 2010-Based SNF PPS 

Capital-Related Price Proxies 

Year1 Building and Fixed 

Equipment 

Movable 

Equipment Interest 

1 .061 .165 .030 

2 .059 .160 .030 

3 .053 .167 .032 

4 .050 .167 .033 

5 .046 .169 .035 

6 .043 .171 .037 

7 .041 .039 

8 .039 .040 

9 .036 .041 

10 .034 .043 

11 .034 .045 

12 .034 .047 

13 .033 .048 

14 .032 .048 

15 .031 .050 

16 .031 .052 

17 .032 .055 

18 .034 .058 

19 .035 .060 

20 .036 .060 

21 .038 .058 

22 .039 .058 

23 .042 

24 .043 

25 .044 

Total 1.000* 1.000* 1.000* 

SOURCES: 2010 SNF MCRs; CMS, 

NOTE: Totals may not sum to 1.000 due to rounding. 

1 Year 1 represents the vintage weight applied to the farthest year while the vintage weight for year 25, for 

example, would apply to the most recent year. 

● All Other (residual): We divided the residual “all other” cost category into 
 65 

subcategories, using the BEA’s Benchmark Input-Output Tables for the nursing home 

industry aged to 2010 using relative price changes. (The methodology we used to age the 

data involves applying the annual price changes from the price proxies to the appropriate 

cost categories. We repeat this practice for each year. We then apply the resulting 2010 

distributions to the aggregate 2010 “all other” cost weight of 21.534 percent to yield the 

detailed 2010 all other cost weights.) 

For the FY 2010-based SNF market basket, we are proposing to include five new 

cost categories compared to the FY 2004-based SNF market basket, as discussed further 

below. We are also proposing to revise the labels for the labor-intensive and nonlaborintensive cost categories; the new labels would be “all other: labor-related”, and “all 

other: nonlabor-related”. As discussed in more detail below, we classify a cost category 

as labor-related and include it in the labor-related share if the cost category is determined 

to be labor-intensive and its cost varies with the local labor market. In previous 

regulations, we grouped cost categories that met both of these criteria into labor-intensive 

services. We believe the new labels more accurately reflect the concepts that they are 

intended to convey. We are not proposing a change to our definition of the labor-related 

share, since we continue to classify a cost category as labor-related if the costs are laborintensive and vary with the local labor market. 

For nonmedical professional fees, we are proposing to create two separate cost 

categories: (1) nonmedical professional fees: labor-related, and (2) nonmedical 

professional fees: nonlabor-related. We discuss the distinction between these two 

categories in more detail below in the discussion of the labor-related share. 

Table 13 compares the proposed FY 2010-based SNF market basket cost weights 

with the FY 2004-based SNF market basket cost weights. 
 66 

TABLE 13: Comparison of the Proposed FY 2010-based SNF Market Basket Cost 

Weights and the FY 2004-based SNF Market Basket Cost Weights 

Cost Category 

Proposed FY 

2010-based 

SNF Market 

Basket 

Weights 

FY 2004-

based SNF 

Market 

Basket 

Weights 

Total 100.000 100.000 

 Compensation 62.093 62.755 

 Wages and Salaries 50.573 51.337 

 Employee Benefits 11.520 11.418 

 Nonmedical Professional Fees(1) - 1.322 

 Nonmedical Professional Fees - 1.322 

 Utilities 2.223 1.551 

 Electricity 1.411 0.919 

 Fuels, Non-highway 0.667 0.453 

 Water and Sewerage 0.145 0.179 

 Professional Liability Insurance 1.141 1.717 

 Professional Liability Insurance 1.141 1.717 

 All Other 27.183 25.448 

 All Other Products 16.148 19.03 

 Pharmaceuticals 7.872 7.894 

 Food, Wholesale Purchase 3.661 2.906 

 Food, Retail Purchase 1.190 3.151 

 Chemicals 0.166 0.589 

 Medical Instruments and Supplies(2) 0.764 - 

 Rubber and Plastics 0.981 1.513 

 Paper and Printing Products 0.838 1.394 

 Apparel (2) 0.195 - 

 Machinery and Equipment (2) 0.190 - 

 Miscellaneous Products 0.291 1.582 

 All Other Services 11.035 6.418 

 Labor-Related Services 6.227 

 Nonmedical Professional Fees: Laborrelated (1) 3.427 - 

 Administrative and Facilities Support (3) 0.497 - 

 All Other: Labor-Related Services(4) 2.303 3.521 

 NonLabor-Related Services 4.808 - 

 Nonmedical Professional Fees: 

Nonlabor-related (1) 2.042 - 

 Financial Services (5) 0.899 - 

 Telephone Services 0.572 0.434 

 Postage 0.240 0.454 
 67 

Cost Category 

Proposed FY 

2010-based 

SNF Market 

Basket 

Weights 

FY 2004-

based SNF 

Market 

Basket 

Weights 

 All Other: Nonlabor-related Services (4) 1.055 2.008 

 Capital-related Expenses 7.360 7.207 

 Total Depreciation 3.180 2.858 

 Building and Fixed Equipment 2.701 2.437 

 Movable Equipment 0.479 0.421 

 Total Interest 2.096 3.037 

 For-Profit SNFs 0.869 1.197 

 Non-profit SNFs 1.227 1.84 

 Other Capital-related Expenses 2.084 1.312 

 Other 2.084 1.312 

(1) For the FY 2010-based SNF Market basket, we are proposing to divide this category into 

nonmedical professional fees: labor-related and nonmedical professional fees: nonlaborrelated. 

(2) For the FY 2010-based SNF Market basket, we are proposing to create a separate cost category for 

these expenses to proxy the price growth by a more specific index. These expenses were 

previously classified under miscellaneous products in the FY 2004-based SNF market basket. 

(3) For the FY 2010-based SNF Market basket, we are proposing to create a separate cost category for 

these expenses to proxy the price growth by a more specific index. These expenses were 

previously classified under labor intensive services cost weight in the FY 2004-based SNF 

market basket. 

(4) For the FY 2010-based SNF market basket, we are proposing to revise the labels for the laborintensive and nonlabor-intensive cost categories to be all other: labor-related and all other: 

nonlabor-related. 

(5) For the FY 2010-based SNF market basket, we are proposing to create a separate cost category for 

these expenses to proxy the price growth by a more specific index. These expenses were 

previously classified under nonlabor intensive services cost weight in the FY 2004-based SNF 

market basket. 

3. Price Proxies Used To Measure Cost Category Growth 

After developing the 29 cost weights for the proposed FY 2010-based SNF 

market basket, we selected the most appropriate wage and price proxies currently 

available to represent the rate of change for each expenditure category. With four 

exceptions (three for the capital-related expenses cost categories and one for Professional 

Liability Insurance (PLI)), we base the wage and price proxies on Bureau of Labor 

Statistics (BLS) data, and group them into one of the following BLS categories: 
 68 

• Employment Cost Indexes. Employment Cost Indexes (ECIs) measure the 

rate of change in employment wage rates and employer costs for employee benefits per 

hour worked. These indexes are fixed-weight indexes and strictly measure the change in 

wage rates and employee benefits per hour. ECIs are superior to Average Hourly 

Earnings (AHE) as price proxies for input price indexes because they are not affected by 

shifts in occupation or industry mix, and because they measure pure price change and are 

available by both occupational group and by industry. The industry ECIs are based on 

the 2004 North American Industry Classification System (NAICS). 

• Producer Price Indexes. Producer Price Indexes (PPIs) measure price changes 

for goods sold in other than retail markets. PPIs are used when the purchases of goods or 

services are made at the wholesale level. 

• Consumer Price Indexes. Consumer Price Indexes (CPIs) measure change in 

the prices of final goods and services bought by consumers. CPIs are only used when the 

purchases are similar to those of retail consumers rather than purchases at the wholesale 

level, or if no appropriate PPI were available. 

We evaluated the price proxies using the criteria of reliability, timeliness, 

availability, and relevance. Reliability indicates that the index is based on valid statistical 

methods and has low sampling variability. Widely accepted statistical methods ensure 

that the data were collected and aggregated in a way that can be replicated. Low 

sampling variability is desirable because it indicates that the sample reflects the typical 

members of the population. (Sampling variability is variation that occurs by chance 

because only a sample was surveyed rather than the entire population.) Timeliness 

implies that the proxy is published regularly, preferably at least once a quarter. The 

market baskets are updated quarterly, and therefore, it is important for the underlying 
 69 

price proxies to be up-to-date, reflecting the most recent data available. We believe that 

using proxies that are published regularly (at least quarterly, whenever possible) helps to 

ensure that we are using the most recent data available to update the market basket. We 

strive to use publications that are disseminated frequently, because we believe that this is 

an optimal way to stay abreast of the most current data available. Availability means that 

the proxy is publicly available. We prefer that our proxies are publicly available because 

this will help ensure that our market basket updates are as transparent to the public as 

possible. In addition, this enables the public to be able to obtain the price proxy data on a 

regular basis. Finally, relevance means that the proxy is applicable and representative of 

the cost category weight to which it is applied. The CPIs, PPIs, and ECIs that we have 

selected to propose in this regulation meet these criteria. Therefore, we believe that they 

continue to be the best measure of price changes for the cost categories to which they 

would be applied. 

As discussed above, we propose that if the 2007 Benchmark I-O data become 

available between the proposed and final rule with sufficient time to incorporate such 

data into the final rule, we would incorporate these data, as appropriate, into the FY 

2010-based SNF market basket for the final rule. In addition, we propose that to the 

extent the incorporation of the 2007 Benchmark I-O data results in a different 

composition of costs included in a particular cost category, we would revise that specific 

price proxy, as appropriate, to ensure that the costs included in each detailed cost 

category are aligned with the most appropriate price proxy. Table 15 lists all price 

proxies for the proposed revised and rebased SNF market basket. Below is a detailed 

explanation of the price proxies used for each cost category weight. 
 70 

• Wages and Salaries: We are proposing to use the ECI for Wages and Salaries for 

Nursing Care Facilities (Private Industry) (NAICS 6231; BLS series code CIU2026231000000I) 

to measure price growth of this category. The FY 2004-based SNF market basket used a blended 

index based on 50 percent of the ECI for wages and salaries for nursing and residential care 

facilities (NAICS 623) and 50 percent of the ECI for wages and salaries for hospital workers 

(NAICS 622). For the FY 2010-based SNF market basket, we are proposing to use the Nursing 

Care Facilities ECI, as we believe this ECI better reflects wage trends consistent with services 

provided by Medicare-certified SNFs.

NAICS 623 includes facilities that provide a mix of health and social services, 

with many of the health services being largely some level of nursing services. Within 

NAICS 623 is NAICS 6231, which includes nursing care facilities primarily engaged in 

providing inpatient nursing and rehabilitative services. These facilities, which are most 

comparable to Medicare-certified SNFs, provide skilled nursing and continuous personal 

care services for an extended period of time, and therefore, have a permanent core staff of 

registered or licensed practical nurses. At the time of the last rebasing, BLS had just 

begun publishing ECI data for the more detailed nursing care facilities (NAICS 6231), 

and therefore, IGI, the economic forecasting firm, was unable to forecast this price proxy. 

 BLS has now published over six years of historical data for the ECI for Nursing 

Care Facilities (NAICS 6231), which allows IGI to create a forecast for this detailed 

index. Additionally, in analyzing the historical trends, we believe this ECI is the most 

technically appropriate wage concept to use for the proposed revised and rebased 2010-

based SNF market basket as it is most comparable to Medicare-certified SNFs, which are 

engaged in providing inpatient nursing and rehabilitative services. 

• Employee Benefits: We are proposing to use the ECI for Benefits for Nursing Care 

Facilities (NAICS 6231) to measure price growth of this category. The ECI for Benefits for 
 71 

Nursing Care Facilities is calculated using BLS’s total compensation (BLS series ID 

CIU2016231000000I) for nursing care facilities series and the relative importance of wages and 

salaries within total compensation. We believe this ECI and constructed series is technically 

appropriate for the reason stated above in the wages and salaries price proxy section. We used a 

blended benefits index in the FY 2004-based SNF market basket. 

• Electricity: We are proposing to use the PPI for Commercial Electric Power 

(BLS series code WPU0542) to measure the price growth of this cost category. We used 

the same index in the FY 2004-based SNF market basket. 

• Fuels, nonhighway: We are proposing to use the PPI for Commercial Natural 

Gas (BLS series code WPU0552) to measure the price growth of this cost category. We 

used the same index in the FY 2004-based SNF market basket. 

• Water and Sewerage: We are proposing to use the CPI for Water and 

Sewerage Maintenance (All Urban Consumers) (BLS series code CUUR0000SEHG01) 

to measure the price growth of this cost category. We used the same index in the FY 

2004-based SNF market basket. 

• Professional Liability Insurance: We are proposing to use the CMS Hospital 

Professional Liability Insurance Index to measure price growth of this category. In the 

FY 2008 proposed rule (72 FR 25552), we stated our difficulties associated with pricing 

malpractice costs experienced in all healthcare sectors, including hospitals and 

physicians. We also stated our intent to research alternative data sources, such as 

obtaining the data directly from the individual states’ Departments of Insurance. We 

were unable to find a reliable data source that collects SNF-specific PLI data. Therefore, 

we are proposing to use the CMS Hospital Professional Liability Index, which tracks 

price changes for commercial insurance premiums for a fixed level of coverage, holding 

nonprice factors constant (such as a change in the level of coverage). We used the same 
 72 

index in the FY 2004-based SNF market basket. We believe this is an appropriate proxy 

to measure the price growth associated with SNF professional liability insurance, as it 

captures the price inflation associated with other medical institutions that serve Medicare 

patients. 

• Pharmaceuticals: We are proposing to use the PPI for Pharmaceuticals for 

Human Use, Prescription (BLS series code WPUSI07003) to measure the price growth of 

this cost category. This is the same proxy that was used in the FY 2004-based SNF 

market basket, though BLS has since changed the naming convention of this series. 

• Food: Wholesale Purchases: We are proposing to use the PPI for Processed 

Foods and Feeds (BLS series code WPU02) to measure the price growth of this cost 

category. We used the same index in the FY 2004-based SNF market basket. 

• Food: Retail Purchase: We are proposing to use the CPI for Food Away From 

Home (All Urban Consumers) (BLS series code CUUR0000SEFV) to measure the price 

growth of this cost category. We used the same index in the FY 2004-based SNF market 

basket. 

• Chemicals: For measuring price change in the Chemicals cost category, we are 

proposing to use a blended PPI composed of the PPIs for Other Basic Organic Chemical 

Manufacturing (NAICS 325190) (BLS series code PCU32519–32519), Paint and Coating 

Manufacturing (NAICS 325510) (BLS series code PCU32551-32551), Soap and 

Cleaning Compound Manufacturing (NAICS 325610) (BLS series code PCU32561–

32561), and All Other Chemical Product and Preparation Manufacturing (NAICS 

3259A0) (BLS series code PCU3259—3259). 

Using the 2002 Benchmark I-O data, we found that these four NAICS industries 

accounted for approximately 95 percent of SNF chemical expenses. The remaining 5 
 73 

percent of SNF chemical expenses are for five other incidental NAICS chemicals 

industries, such as Alkalies and Chlorine Manufacturing. We are proposing to create a 

blended index based on those four NAICS chemical expenses listed above that account 

for 95 percent of SNF chemical expenses. We are proposing to create a blend based on 

each NAICS’ expenses as a share of their sum. As stated above, we propose that if the 

2007 Benchmark I-O data become available between the proposed and final rule with 

sufficient time to incorporate such data into the final rule, we would incorporate these 

data, as appropriate, into the FY 2010-based SNF market basket for the final rule. In 

addition, we propose that to the extent the incorporation of the 2007 Benchmark I-O data 

results in a different composition of chemical costs, we may revise, as appropriate, the 

blended chemical index set forth above to reflect these more recent data on SNF chemical 

purchases, to better align the costs with its price proxy. Table 14 below provides the 

weights for the blended chemical index. 

TABLE 14: Proposed Chemical Blended Index Weights 

NAICS Industry Description Weights

325190 Other basic organic chemical manufacturing 7% 

325510 Paint and coating manufacturing 12% 

325610 Soap and cleaning compound manufacturing 49% 

3259A0 

All other chemical product and preparation 

manufacturing 32% 

100% 

The FY 2004-based SNF market basket also used a blended chemical proxy that was 

based on 1997 Benchmark I-O data. We believe our proposed chemical blended index 

for the FY 2010-based SNF market basket is technically appropriate, as it reflects more 

recent data on SNFs’ purchasing patterns. 

• Medical Instruments and Supplies: We are proposing to use the PPI for 

Medical, Surgical, and Personal Aid Devices (BLS series code WPU156) to measure the 
 74 

price growth of this cost category. The FY 2004-based SNF market basket did not 

include a separate cost category for these expenses. Rather, these expenses were 

classified in the miscellaneous products cost category and proxied by the PPI for Finished 

Goods less Food and Energy (BLS series code WPUSOP3500). As stated above, we are 

proposing to break-out this cost category to proxy these expenses by a more specific price 

index that better reflects the price growth of medical instruments and supplies. 

• Rubber and Plastics: We are proposing to use the PPI for Rubber and Plastic 

Products (BLS series code WPU07) to measure price growth of this cost category. We 

used the same index in the FY 2004-based SNF market basket. 

• Paper and Printing Products: We are proposing to use the PPI for Converted 

Paper and Paperboard Products (BLS series code WPU0915) to measure the price growth 

of this cost category. We used the same index in the FY 2004-based SNF market basket. 

• Apparel: We are proposing to use the PPI for Apparel (BLS series code 

WPU0381) to measure the price growth of this cost category. The FY 2004-based SNF 

market basket did not have a separate cost category for these expenses. Rather, these 

expenses were classified in the miscellaneous products cost category and proxied by the 

PPI for Finished Goods less Food and Energy. As stated above, we are proposing to 

break-out this cost category to proxy these expenses by a more specific price index that 

better reflects the price growth of apparel products. 

• Machinery and Equipment: We are proposing to use the PPI for Machinery 

and Equipment (BLS series code WPU11) to measure the price growth of this cost 

category. The 2004-based index did not have a separate cost category for these expenses. 

Rather, these expenses were classified in the miscellaneous products cost category and 

proxied by the PPI for Finished Goods less Food and Energy (BLS series code 
 75 

WPUSOP3500). As stated above, we are proposing to break-out this cost category to 

proxy these expenses by a more specific price index that reflects the price growth of 

machinery and equipment. 

• Miscellaneous Products: For measuring price change in the Miscellaneous 

Products cost category, we are proposing to use the PPI for Finished Goods less Food and 

Energy (BLS series code WPUSOP3500). Both food and energy are already adequately 

represented in separate cost categories and should not also be reflected in this cost 

category. We used the same index in the FY 2004-based SNF market basket. 

• Nonmedical Professional Fees: Labor-Related and Nonmedical Professional 

Fees: Nonlabor-Related: We are proposing to use the ECI for Total Compensation for 

Professional and Related Occupations (Private Industry) (BLS series code 

CIU2010000120000I) to measure the price growth of these categories. As described in 

more detail below, for this revising and rebasing of the SNF market basket we are 

proposing to divide the nonmedical professional fees cost category into two separate 

cost categories: (1) nonmedical professional fees: labor-related; and (2) nonmedical 

professional fees: nonlabor-related. By separating these two categories we are able to 

identify more precisely which categories are to be included in the labor-related share, 

which is used in applying the SNF PPS geographic adjustment factor. We are proposing 

to proxy both of these cost categories by the ECI for Total Compensation for 

Professional and Related Occupations (Private Industry). This is the same proxy that 

was used in the FY 2004-based SNF market basket. 

• Administrative and Facilities Support Services: We are proposing to use the 

ECI for Total Compensation for Office and Administrative Support Services (Private 

Industry) (BLS series code CIU2010000220000I) to measure the price growth of this 
 76 

category. The FY 2004-based SNF market basket did not have a separate cost category 

for these expenses. Rather, these expenses were classified under labor intensive services 

and proxied by the ECI for Compensation for Service Occupations (Private Industry). As 

stated above, we are proposing to create a separate cost category for these expenses to 

reflect the specific price changes associated with these services. 

• All Other: Labor-Related Services: We are proposing to use the ECI for Total 

Compensation for Service Occupations (Private Industry) (BLS series code 

CIU2010000300000I) to measure the price growth of this cost category (previously 

referred to as the labor-intensive cost category in the FY 2004-based SNF market basket 

index). We used the same index in the FY 2004-based SNF market basket. As explained 

above, for this revising and rebasing of the SNF market basket, we are proposing to 

revise our label for the labor-intensive services to the all other: labor-related services. 

• Financial Services: We are proposing to use the ECI for Total Compensation 

for Financial Activities (Private Industry) (BLS series code CIU201520A000000I) to 

measure the price growth of this cost category. The FY 2004-based SNF market basket 

did not have a separate cost category for these expenses. Rather, these expenses were 

classified under nonlabor intensive services cost category and proxied by the CPI for All 

Items (Urban). As stated above, we are proposing to create a separate cost category for 

these expenses to reflect the specific price changes associated with these services. 

• Telephone Services: We are proposing to use the CPI for Telephone Services 

(Urban) (BLS series code CUUR0000SEED) to measure the price growth of this cost 

category. We used the same index in the FY 2004-based SNF market basket. 
 77 

• Postage: We are proposing to use the CPI for Postage and Delivery Services 

(Urban) (BLS series code CUUR0000SEEC) to measure the price growth of this cost 

category. We used the same index in the FY 2004-based SNF market basket. 

• All Other: NonLabor-Related Services: We are proposing to use the CPI for 

All Items Less Food and Energy (BLS series code CUUR0000SA0L1E) to measure the 

price growth of this cost category (previously referred to as the nonlabor-intensive cost 

category in the FY 2004-based SNF market basket index). Previously these costs were 

proxied by the CPI for All Items (Urban). We believe that using the CPI for All Items 

Less Food and Energy (BLS series code CUUR0000SA0L1E) will remove any doublecounting of food and energy prices, which are already captured elsewhere in the market 

basket. Consequently, we believe that the incorporation of this proxy represents a 

technical improvement to the market basket. 

• Capital-Related Expenses: For the capital price proxies (with the exception of 

the price proxy for the other capital-related cost category weight), we calculate vintage 

weighted price proxies. The methodology used to derive the vintage weights was 

described above. Below, we describe the price proxies for the SNF capital-related 

expenses: 

• Depreciation--Building and Fixed Equipment: For measuring price change in 

this cost category, we are proposing to use BEA’s chained price index for nonresidential 

construction for hospital and special care facilities. This is a publicly available price 

index used by BEA to deflate current-dollar private fixed investment for hospitals and 

special care facilities. The 2004-based index used the Boeckh Institutional Construction 

Index, which is not publicly available. We compared the BEA index with the Boeckh 

Institutional Construction Index and found that the average growth rates in the two series 
 78 

were similar over the historical time period. We are proposing to use the BEA price 

index in the FY 2010-based SNF market basket as this index is a publicly available index 

that reflects the price inflation associated with nonresidential construction, such as the 

construction of hospitals and special care facilities. As stated above, we prefer that our 

proxies are publicly available because this will help ensure that our market basket 

updates are as transparent to the public as possible. 

• Depreciation--Movable Equipment: For measuring price change in this cost 

category, we are proposing to use the PPI for Machinery and Equipment (BLS series 

code WPU11). The same price proxy was used in the FY 2004-based SNF market basket 

index. 

• Interest--Government and Nonprofit SNFs: For measuring price change in this 

cost category, we are proposing to use the Average Yield for Municipal Bonds from the 

Bond Buyer Index of 20 bonds. CMS input price indexes, including this proposed 

rebased and revised SNF market basket, appropriately reflect the rate of change in the 

price proxy and not the level of the price proxy. While SNFs may face different interest 

rate levels than those included in the Bond Buyer Index, the rate of change between the 

two is not significantly different. The same price proxy was used in the FY 2004-based 

SNF market basket index. 

• Interest--For-profit SNFs: For measuring price change in this cost category, 

we are proposing to use the Average Yield for Moody's AAA Corporate Bonds. Again, 

the proposed revised and rebased SNF market basket index focuses on the rate of change 

in this interest rate, not on the level of the interest rate. The same price proxy was used in 

the FY 2004-based SNF market basket index. 
 79 

• Other Capital-related Expenses: For measuring price change in this cost 

category, we are proposing the CPI-U for Rent of Primary Residence (BLS series ID 

CUUR0000SEHA). The same price proxy was used in the FY2004-based SNF market 

basket index, though the naming convention is slightly different as we have provided the 

full BLS naming convention. 

 Table 15 shows the proposed price proxies for the FY 2010-based SNF Market 

Basket. 

TABLE 15: Proposed Price Proxies for the FY 2010-based SNF Market Basket 

Cost Category Weight Proposed Price Proxy 

Compensation 62.093 

 Wages and Salaries 50.573 ECI for Wages and Salaries for Nursing 

Care Facilities 

 Employee Benefits 11.520 ECI for Benefits for Nursing Care 

Facilities 

Utilities 2.223 

 Electricity 1.411 PPI for Commercial Electric Power 

 Fuels, Nonhighway 0.667 PPI for Commercial Natural Gas 

 Water and Sewerage 0.145 CPI - U for Water and Sewerage 

Maintenance 

Professional Liability Insurance 1.141 CMS Hospital Professional Liability 

Insurance Index 

All Other 27.183 

 Other Products 16.148 

 Pharmaceuticals 7.872 PPI for Pharmaceuticals for Human 

Use, Prescription 

 Food, Wholesale Purchase 3.661 PPI for Processed Foods and Feeds 

 Food, Retail Purchases 1.190 CPI- U for Food Away From Home 

 Chemicals 0.166 Blend of Chemical PPIs 

 Medical Instruments and 

Supplies 0.764 PPI for Medical, Surgical, and Personal Aid Devices 

 Rubber and Plastics 0.981 PPI for Rubber and Plastic Products 

 Paper and Printing Products 0.838 PPI for Converted Paper and 

Paperboard Products 

 Apparel 0.195 PPI for Apparel 

 Machinery and Equipment 0.190 PPI for Machinery and Equipment 

 Miscellaneous Products 0.291 PPI for Finished Goods Less Food and 

Energy 

 All Other Services 11.035 
 80 

Cost Category Weight Proposed Price Proxy 

 Labor-Related Services 6.227 

 Nonmedical Professional Fees: 

Labor-related 3.427 ECI for Total Compensation for Professional and Related Occupations 

 Administrative and Facilities 

Support 0.497 ECI for Total Compensation for Office and Administrative Support 

 All Other: Labor-Related 

Services 2.303 ECI for Total Compensation for Service Occupations 

 Non Labor-Related Services 4.808 

 Nonmedical Professional Fees: 

Non Labor-Related 2.042 ECI for Total Compensation for Professional and Related Occupations 

 Financial Services 0.899 ECI for Total Compensation for 

Financial Activities 

 Telephone Services 0.572 CPI - U for Telephone Services 

 Postage 0.240 CPI - U for Postage and Delivery 

Services 

 All Other: Nonlabor-Related 

Services 1.055 CPI - U for All Items Less Food and Energy 

Capital-Related Expenses 7.360 

 Total Depreciation 3.180 

 Building and Fixed Equipment 2.701 

BEA chained price index for 

nonresidential construction for hospitals 

and special care facilities - vintage 

weighted (25 years) 

 Movable Equipment 0.479 PPI for Machinery and Equipment - 

vintage weighted (6 years) 

 Total Interest 2.096 

 For-Profit SNFs 0.869 

Average yield on municipal bonds 

(Bond Buyer Index 20 bonds) - vintage 

weighted (22 years) 

 Government and Nonprofit 

SNFs 1.227 

Average yield on Moody's AAA 

corporate bonds - vintage weighted (22 

years) 

 Other Capital-Related Expenses 2.084 CPI -U for Rent of Primary Residence 

Total 100.000 

4. Proposed Market Basket Estimate for the FY 2014 SNF PPS Update 

As discussed previously in this proposed rule, beginning with the FY 2014 SNF 

PPS update, we are proposing to adopt the FY 2010-based SNF market basket as the 

appropriate market basket of goods and services for the SNF PPS. 

Based on IGI’s first quarter 2013 forecast with history through the fourth quarter 
 81 

of 2012, the most recent estimate of the proposed FY 2010-based SNF market basket for 

FY 2014 is 2.3 percent. IGI is a nationally recognized economic and financial 

forecasting firm that contracts with CMS to forecast the components of CMS’ market 

baskets. Based on IGI’s first quarter 2013 forecast with history through the fourth 

quarter of 2012, the estimate of the current FY 2004-based SNF market basket for FY 

2014 is 2.5 percent. 

Table 16 compares the proposed FY 2010-based SNF market basket and the FY 

2004-based SNF market basket percent changes. For the historical period between FY 

2008 and FY 2012, the average difference between the two market baskets is -0.3 

percentage point. This is primarily the result of lower compensation price increases in 

the FY 2010-based market basket compared to the FY 2004-based SNF market basket. 

For the forecasted period between FY 2013 and FY 2015, the difference in the market 

basket forecasts is similar. 

TABLE 16: Proposed FY 2010-based SNF Market Basket and FY 2004-based SNF 

Market Basket, Percent Changes: 2008-2015 

Fiscal Year (FY) 

Proposed Rebased FY 

2010-based SNF Market 

Basket 

FY 2004-based SNF 

Basket 

Historical data: 

FY 2008 3.5 3.6 

FY 2009 2.4 2.8 

FY 2010 1.8 2.0 

FY 2011 2.0 2.2 

FY 2012 1.8 2.2 

Average FY 2008-2012 2.3 2.6 

Forecast: 

FY 2013 1.9 2.3 

FY 2014 2.3 2.5 

FY 2015 2.4 2.6 

Average FY 2013-2015 2.2 2.5 

Source: IHS Global Insight, Inc. 1st quarter 2013 forecast with historical data through 4th quarter 2012 

5. Labor-related Share 
 82 

We define the labor-related share (LRS) as those expenses that are labor-intensive 

and vary with, or are influenced by, the local labor market. Each year, we calculate a 

revised labor-related share based on the relative importance of labor-related cost 

categories in the input price index. In this FY 2014 SNF PPS proposed rule, we are 

proposing to revise the labor-related share to reflect the relative importance of the 

following proposed FY 2010-based SNF market basket cost weights that we believe are 

labor-intensive and vary with, or are influenced by, the local labor market: (1) wages and 

salaries; (2) employee benefits; (3) contract labor; (4) the labor-related portion of 

nonmedical professional fees; (5) administrative and facilities support services; (6) all 

other: labor-related services (previously referred to in the FY 2004-based SNF market 

basket as labor-intensive); and (7) a proportion of capital-related expenses. We are 

proposing to continue to include a proportion of capital-related expenses because a 

portion of these expenses are deemed to be labor-intensive and vary with, or are 

influenced by, the local labor market. For example, a proportion of construction costs for 

a medical building would be attributable to local construction workers’ compensation 

expenses. 

Consistent with previous SNF market basket revisions and rebasings, the “all 

other: labor-related services” cost category is mostly comprised of building maintenance 

and security services (including, but not limited to, commercial and industrial machinery 

and equipment repair, nonresidential maintenance and repair, and investigation and 

security services). Because these services tend to be labor-intensive and are mostly 

performed at the SNF facility (and therefore, unlikely to be purchased in the national 

market), we believe that they meet our definition of labor-related services. 

For the proposed FY 2010-based SNF market basket, the proposed inclusion of 
 83 

the administrative and facilities support services cost category into the labor-related share 

remains consistent with the current labor-related share, since this cost category was 

previously included in the FY 2004-based SNF market basket labor-intensive cost 

category. As previously stated, we are proposing to establish a separate administrative 

and facilities support services cost category so that we can use the ECI for Total 

Compensation for Office and Administrative Support Services to reflect the specific price 

changes associated with these services. 

For the FY 2004-based SNF market basket, we assumed that all nonmedical 

professional services (including accounting and auditing services, engineering services, 

legal services, and management and consulting services) were purchased in the local 

labor market and, thus, all of their associated fees varied with the local labor market. As 

a result, we previously included 100 percent of these costs in the labor-related share. In 

an effort to determine more accurately the share of nonmedical professional fees that 

should be included in the labor-related share, we surveyed SNFs regarding the proportion 

of those fees that are attributable to local firms and the proportion that are purchased 

from national firms. We notified the public of our intent to conduct this survey on 

December 9, 2005 (70 FR 73250) and received no comments (71 FR 8588). 

With approval from OMB, we reached out to the industry and received responses 

to our survey from 141 SNFs. Using data on full-time equivalents to allocate responding 

SNFs across strata (region of the country and urban/rural status), post-stratification 

weights were calculated. Based on these weighted results, we determined that SNFs 

purchase, on average, the following portions of contracted professional services inside

their local labor market: 

● 86 percent of accounting and auditing services. 
 84 

● 89 percent of architectural, engineering services. 

● 78 percent of legal services. 

● 87 percent of management consulting services. 

Together, these four categories represent 2.672 percentage points of the total costs 

for the proposed FY 2010-based SNF market basket. We applied the percentages from 

this special survey to their respective SNF market basket weights to separate them into 

labor-related and nonlabor-related costs. As a result, we are designating 2.285 of the 

2.672 total to the labor-related share, with the remaining 0.387 categorized as nonlaborrelated. 

In addition to the professional services listed above, we also classified expenses 

under NAICS 55, Management of Companies and Enterprises, into the nonmedical 

professional fees cost category. The NAICS 55 data are mostly comprised of corporate, 

subsidiary, and regional managing offices, or otherwise referred to as home offices. 

Formerly, all of the expenses within this category were considered to vary with, or be 

influenced by, the local labor market, and thus, were included in the labor-related share. 

Because many SNFs are not located in the same geographic area as their home office, we 

analyzed data from a variety of sources to determine what proportion of these costs 

should be appropriately included in the labor-related share. 

Our proposed methodology is based on data from the MCRs, as well as a CMS 

database of Home Office Medicare Records (HOMER) (a database that provides city and 

state information (addresses) for home offices). The MCR requires SNFs to report their 

home office compensation costs. Using the HOMER database to determine the home 

office location for each home office provider number, we compared the location of the 

SNF with the location of the SNF’s home office. We propose to determine the proportion 
 85 

of NAICS 55 costs that should be allocated to the labor-related share based on the percent 

of SNF home office compensation attributable to SNFs that had home offices located in 

their respective local labor markets--defined as being in the same MSA. We determined 

a SNF’s MSA using its Zip Code information from the MCR, while a home office MSA 

was determined using the Medicare HOMER Database, which provided a home office 

Zip Code, as well. 

 As stated above, we are proposing to determine the proportion of NAICS 55 costs 

that should be allocated to the labor-related share based on the percent of SNF home 

office compensation attributable to those SNFs that had home offices located in their 

respective labor markets. Using this proposed methodology, we determined that 32 

percent of SNF home office compensation costs were for SNFs that had home offices 

located in their respective local labor markets; therefore, we propose to allocate 32 

percent of NAICS 55 expenses to the labor-related share. We believe that this 

methodology provides a reasonable estimate of the NAICS 55 expenses that are 

appropriately allocated to the labor-related share, because we primarily rely on data on 

home office compensation costs as provided by SNFs on Medicare cost reports. By 

combining these data with the specific MSAs for the SNF and their associated home 

office, we believe we have a reasonable estimate of the proportion of SNF’s home office 

costs that would be incurred in the local labor market. 

 In the proposed FY 2010-based SNF market basket, NAICS 55 expenses that 

were subject to allocation based on the home office allocation methodology represent 

1.833 percent of the total costs. Based on the home office results, we are apportioning 

0.587 percentage point of the 1.833 percentage points figure into the labor-related share 

and designating the remaining 1.247 percentage points as nonlabor-related. 
 86 

The Benchmark I-O data contains other smaller cost categories that we allocate 

fully to either “nonmedical professional fees: labor-related” or “nonmedical professional 

fees: nonlabor-related.” Together, the sum of these smaller cost categories, the four 

nonmedical professional fees cost categories where survey results were available, and the 

NAICS 55 expenses represent all nonmedical professional fees, or 5.469 percent of total 

costs in the SNF market basket. Of the 5.469 percentage points, 3.427 percentage points 

represent professional fees: labor-related while 2.042 percentage points represent 

nonmedical professional fees: nonlabor-related. 

Each year, we calculate a revised labor-related share based on the relative 

importance of labor-related cost categories in the SNF market basket. Table 17 

summarizes the proposed updated labor-related share for FY 2014, which is based on the 

proposed rebased and revised FY 2010-based SNF market basket, compared to the laborrelated share that was used for the FY 2013 SNF PPS update. 

TABLE 17: Labor-related Relative Importance, FY 2013 and FY 2014 

Relative importance, 

labor-related, 

FY 2013 (FY 2004-based 

index) 

12:2 forecast 

Relative importance, 

labor-related, 

FY 2014 (FY 2010-based 

index) 

13:1 forecast 

Wages and salaries1 49.847 49.204 

Employee benefits 11.532 11.546 

Nonmedical Professional 

fees: labor-related 

1.307 3.451 

Administrative and facilities 

support services 

N/A 0.501 

All Other: Labor-related 

services2 

3.364 2.292 

Capital-related (.391) 2.333 2.770 

Total 68.383 69.764 1

 As discussed above in section V.A.2 in this preamble, the wages and salaries and employee benefits cost 

weight reflect contract labor costs. 

2

 Previously referred to as labor-intensive services cost category in the FY 2004-based SNF market basket. 

B. Monitoring Impact of FY 2012 Policy Changes
 87 

In the FY 2012 SNF PPS final rule, we stated we would monitor the impact of 

certain FY 2012 policy changes on various aspects of the SNF PPS (76 FR 48498). 

Specifically, we have been monitoring the impact of the following FY 2012 policy 

changes: 

• Recalibration of the FY 2011 SNF parity adjustment to align overall payments 

under RUG-IV with those under RUG-III. 

• Allocation of group therapy time to pay more appropriately for group therapy 

services based on resource utilization and cost. 

• Implementation of changes to the MDS 3.0 patient assessment instrument, 

most notably the introduction of the Change-of-Therapy (COT) Other Medicare Required 

Assessment (OMRA). 

We have posted quarterly memos to the SNF PPS website which highlight some 

of the trends we have observed over a given time period. These memos may be accessed 

through the SNF PPS website at http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/SNFPPS/Downloads/SNF_Monitoring.zip.

Below, we provide a summary of the results derived from this monitoring effort. 

1. RUG Distributions 

As stated in the FY 2012 SNF PPS final rule (76 FR 48493), the recalibration of 

the FY 2011 parity adjustment used 8 months of FY 2011 data as the basis for the 

recalibration. We observed that case-mix utilization patterns continued to be consistent 

over the final 4 months of FY 2011 and would not have resulted in a significant 

difference in the calculated amount of the recalibrated parity adjustment. We have posted 

data illustrating the RUG-IV distribution of days for the entirety of FY 2011, as 

compared to the days distribution used to calculate the parity adjustment in the FY 2012 
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final rule, and the distribution of days for FY 2012, all of which may be found at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/SNFPPS/Downloads/SNF_Monitoring.zip.

Additionally, case-mix utilization observed during FY 2012 has not shown 

unanticipated changes in patient classification. Overall patient case mix is not 

significantly different from that observed in FY 2011. Table 18 illustrates a breakdown 

of the SNF case-mix distribution of service days by the major RUG classification 

categories for FY 2011 and FY 2012. 

TABLE 18: SNF Case-Mix Distributions by Major RUG-IV Category 

FY 2011 FY 2012

Rehabilitation Plus Extensive Services 2.5% 1.8%

Rehabilitation 87.9% 88.8%

Extensive Services 0.6% 0.7%

Special Care 4.6% 4.9%

Clinically Complex 2.5% 2.2%

Behavioral Symptoms and Cognitive Performance 0.4% 0.3%

Reduced Physical Function 1.5% 1.4%

 

As illustrated in Table 18, there has been a decrease in the Rehabilitation Plus 

Extensive Services category and increases in some of the medically-based RUG 

categories, specifically Special Care and Extensive Services. 

It should be noted that the recalibration of the parity adjustment applied only to 

those RUG-IV groups with a therapy component (Rehabilitation Plus Extensive Services 

and Rehabilitation). This caused a shift in the hierarchy of nursing case-mix weights 

among the various RUG-IV groups. Since SNFs are permitted to “index maximize” 

when determining a resident’s RUG classification (that is, of those RUGs for which the 

resident qualifies, SNFs are permitted to choose the one with the highest per diem 

payment), it is possible that the aforementioned case-mix distribution shifts reflect 
 89 

residents that had previously been classified into therapy groups but now index maximize 

into nursing groups instead. 

Looking specifically at the case-mix distribution for Rehabilitation RUGs only, 

the data show an increase in the percentage of service days at the highest therapy level 

(Ultra High Rehabilitation) in FY 2012. This is illustrated in Table 19. 

TABLE 19: SNF Case-Mix Distribution for Therapy RUG-IV Groups, by Minor 

RUG-IV Therapy Categories 

FY 2011 FY 2012 

Ultra-High Rehabilitation (≥ 720 minutes of therapy per week) 44.8% 48.6%

Very-High Rehabilitation (500 – 719 minutes of therapy per week) 26.9% 25.6%

High Rehabilitation (325 – 499 minutes of therapy per week) 10.8% 10.1%

Medium Rehabilitation (150 – 324 minutes of therapy per week) 7.6% 6.2%

Low Rehabilitation (45 – 149 minutes of therapy per week) 0.1% 0.1%

Although the decreases in the percentage of service days which classify into the VeryHigh, High, and Medium Rehabilitation RUG-IV therapy categories may be explained by 

the increased utilization of the Ultra-High Rehabilitation RUG-IV therapy category, some 

of the decrease may be due to index maximization into the Special Care RUG-IV 

category. 

2. Group Therapy Allocation 

To account more accurately for resource utilization and cost and to equalize the 

payment incentives across therapy modes, we allocated group therapy time beginning in 

FY 2012. We anticipated that this policy would result in some change to the type of 

therapy mode (that is, individual, concurrent, or group) used for SNF residents. As noted 

in the section above, we have not observed any significant difference in patient case mix. 

However, as illustrated in Table 20, providers have significantly changed the mode of 

therapy since our STRIVE study (2006-2007). 

TABLE 20: Mode of Therapy Provision 
 90 

STRIVE FY 2011 FY 2012 

Individual 74% 91.8% 99.5% 

Concurrent 25% 0.8% 0.4% 

Group <1% 7.4% 0.1% 

In the FY 2010 final rule (74 FR 40288, 40315-40319), we established a policy that, 

beginning in FY 2011, we would allocate concurrent therapy without the allocation of 

group therapy and, as a result, providers shifted from concurrent therapy to group 

therapy. In the FY 2012 SNF PPS final rule (76 FR 48486, 48511-48517), we 

established a policy that would allocate group therapy, and data from FY 2012 indicate 

that facilities are providing individual therapy almost exclusively. 

3. MDS 3.0 Changes 

In the FY 2012 SNF PPS final rule, we introduced a new assessment called the 

COT OMRA to capture more accurately the therapy services provided to SNF residents. 

Effective for services provided on or after October 1, 2011, SNFs are required to 

complete a COT OMRA for patients classified into a RUG-IV therapy category (and for 

patients receiving therapy services who are classified into a nursing RUG because of 

index maximization), whenever the intensity of therapy changes to such a degree that it 

would no longer reflect the RUG-IV classification and payment assigned for the patient 

based on the most recent assessment used for Medicare payment (76 FR 48525). An 

evaluation of the necessity for a COT OMRA must be completed at the end of each COT 

observation period, which is a successive 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), and ending 

every seven calendar days thereafter. In cases where the resident’s therapy has changed 

to such a degree that it is no longer consistent with the resident’s current RUG-IV 
 91 

classification, then the SNF must complete a COT OMRA to reclassify the resident into 

the appropriate RUG-IV category. The new RUG-IV group resulting from the COT 

OMRA is billed starting the first day of the 7-day COT observation period for which the 

COT OMRA was completed and remains at this level until a new assessment is done that 

changes the patient’s RUG-IV classification. Table 21 shows the distribution of all MDS 

assessment types as a percentage of all MDS assessments. 

TABLE 21: Distribution of MDS Assessment Types 

FY 2011 FY 2012

Scheduled PPS assessment 95% 84% 

Start-of-Therapy (SOT) OMRA 2% 2% 

End-of-Therapy (EOT) OMRA (w/o Resumption) 3% 3% 

Combined SOT/EOT OMRA 0% 0% 

End-of-Therapy OMRA (w/ Resumption) (EOT-R OMRA) N/A 0% 

Combined SOT/EOT-R OMRA N/A 0% 

Change-of-Therapy (COT) OMRA N/A 11% 

Prior to the implementation of the COT OMRA, scheduled PPS assessments comprised 

the vast majority of completed assessments. With the implementation of the COT 

OMRA for FY 2012, scheduled PPS assessments still comprise the vast majority of 

completed MDS assessments, though the COT OMRA is the most frequently completed 

OMRA. 

4. Conclusion 

 Information related to our monitoring activities is posted on the SNF PPS website 

at http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/SNFPPS/Downloads/SNF_Monitoring.zip. Based on the data reviewed thus 

far, we have found no evidence of the possible negative impacts on SNF providers cited 

in comments in the FY 2012 final rule (see 76 FR 48497-98, 48537), particularly 

references to a potential “double hit” from the combined impact of the recalibration of the 
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FY 2011 SNF parity adjustment and the FY 2012 policy changes (for example, allocation 

of group therapy time and introduction of the COT OMRA). As noted in the data 

provided in this section, overall case mix has not been affected significantly, which 

suggests that the aforementioned changes, while ensuring more accurate payment, have 

been absorbed into facility practices in such a manner that facilities continue to maintain 

historical trends in terms of patient case mix. Therefore, while we will continue our SNF 

monitoring efforts, we will post information to the aforementioned website only as 

appropriate. 

C. Ensuring Accuracy in Grouping to Rehabilitation RUG-IV Categories

As noted in section III.C of this proposed rule, under section 1888(e)(4)(G)(i) of 

the Act, the federal rate incorporates an adjustment to account for facility case mix, using 

a classification system that accounts for the relative resource utilization of different 

patient types. As part of the Nursing Home Case-Mix and Quality demonstration project, 

Version III of the Resource Utilization Groups (RUG-III) case-mix classification system 

was developed to capture resource use of nursing home patients and to provide an 

improved method of tracking the quality of their care. In 1998, the first version of RUGIII was a 44-group model for classifying SNF patients into homogeneous groups 

according to their clinical characteristics and the amount and type of resources they use 

as measured by the Resident Assessment Instrument, the Minimum Data Set (MDS). A 

detailed description of the RUG-III groups appears in the interim final rule with comment 

period from May 12, 1998 (63 FR 26262-26263). The RUG-III groups were the basis for 

the case mix indexes used to establish equitable prospective payment levels for patients 

with different service use. 

In FY 2006, the RUG-III classification system was refined to include 53 groups 
 93 

for case-mix classification that continued to be based on patient data collected on the 

MDS 2.0. This reflected the addition of 9 new RUG groups comprising a new Extensive 

Services plus Rehabilitation payment category, to account for the higher cost of 

beneficiaries requiring both rehabilitation and certain high-intensity medical services. A 

detailed explanation of the RUG-III refinement appears in the FY 2006 proposed rule (70 

FR 29076-29079, May 19, 2005). 

In FY 2011, the RUG-IV classification system was implemented and included 66 

groups for case-mix classification based on patient data collected on the newest version 

of the Resident Assessment Instrument, MDS 3.0. A detailed explanation of the RUG-IV 

model appears in the FY 2010 proposed rule (74 FR 22220-22238, May 12, 2009). 

In the May 12, 1998 interim final rule with comment period (63 FR 26252, 

26256), we explained how the RUG-III system was used to place SNF patients into one 

of 44 patient groups or subcategories used for payment. The RUG category of Medium 

Rehabilitation (Medium Rehab) was explained in conjunction with the RUG categories of 

High and Very High Rehabilitation. Among other requirements specific to each 

category, “all three require at least 5 days per week of skilled rehabilitative therapy, but 

they are split according to weekly treatment time” (63 FR 26258). To qualify for 

Medium Rehab, a patient also needs to receive at least 150 minutes of therapy of any 

combination of the three rehabilitation disciplines: physical therapy, occupational 

therapy, and speech therapy. 

Subsequently, across all iterations of the SNF PPS (including the RUG refinement 

in FY 2006 and the transition from RUG-III to RUG–IV in FY 2011), the criteria for 

classification into the Medium Rehab category remained the same. As set forth in the FY 

2010 final rule (74 FR 40389), to be classified into the Medium Rehab category under 
 94 

RUG III or RUG IV, the resident must receive “5 days any combination of 3 

rehabilitation disciplines.” In order for the SNF resident to qualify for the Medium 

Rehab or Medium Rehab plus Extensive Services category, he or she must receive five 

distinct calendar days of therapy within a 7-day time period (and at least 150 minutes of 

therapy across that time as well). This reflects the SNF level of care requirement under 

§409.31(b)(1) that skilled services must be needed and received on a daily basis, and the 

provision at §409.34(a)(2) which specifies that the “daily basis” criterion can be met by 

skilled rehabilitation services that are needed and provided at least 5 days per week. 

Further, the payment rates for these RUG groups were based on staff time over the 

requisite number of distinct therapy days. For example, the policy would be 

implemented correctly if a patient received a total of 150 minutes of therapy in the form 

of physical therapy on Monday and Wednesday, occupational therapy on Sunday and 

Tuesday, and speech therapy on Friday. In this example, therapy services are being 

provided over a separate and distinct 5-day period (Sunday, Monday, Tuesday, 

Wednesday, and Friday). Similarly, 5 distinct calendar days of therapy are required to 

classify into the High, Very High, and Ultra High Rehabilitation categories. The amount 

of therapy provided over the 7-day look-back period is currently recorded on the MDS 

3.0 in section O, item O0400A, O0400B, and O0400C. 

Medium Rehab and Medium Rehab Plus Extensive Services qualifiers remained 

the same under the SNF PPS from 1998 until the present; however, the MDS did not 

contain the appropriate items to permit providers to report the number of distinct calendar 

days of therapy that a particular resident receives during a given week, inadvertently 

allowing residents who do not meet the Medium Rehab and Medium Rehab Plus 

Extensive Services qualifiers (under the intended policy as discussed above) to classify 
 95 

inappropriately into those RUG categories. For example, a resident receives 150 minutes 

of therapy in the form of physical therapy and occupational therapy on Monday (one 

session of physical therapy and one session of occupational therapy) and Wednesday (one 

session of physical therapy and one session of occupational therapy) and speech therapy 

on Friday. The intent of the Medium Rehab classification criteria is for such a resident 

not to classify into the Medium Rehab RUG category, since he or she only received 

therapy on 3 days (Monday, Wednesday, and Friday) during the 7-day look-back period 

for this PPS assessment. However, the MDS item set only requires the SNF to record the 

number of days therapy was received by each therapy discipline during that 7-day lookback period, without distinguishing between distinct calendar days. Thus, in the example 

above, the SNF would record on the MDS: 2 days of physical therapy, 2 days of 

occupational therapy, and 1 day of speech therapy. Currently, the RUG grouper adds 

these days together, allowing the resident described above to be classified into the 

Medium Rehab category even though the resident did not actually receive 5 distinct 

calendar days of therapy as required by the criteria. This resident would not meet the 

classification criteria for the Medium Rehab category as they were intended to be applied. 

In rare instances, the same issue can occur with the Low Rehabilitation (Low 

Rehab) and Low Rehab Plus Extensive Services categories, which require rehabilitation 

services for at least 45 minutes a week with three days of any combination of the three 

rehabilitation disciplines (and restorative nursing 6 days per week). Similar to the 

Medium Rehab classification criteria, the intent here, as well, is to require distinct 

calendar days of therapy during the 7-day look-back period (in this case, 3 distinct 

calendar days of therapy). For example, this policy would be implemented correctly if a 

resident received a total of 90 minutes of therapy in the form of physical therapy on 
 96 

Monday and Wednesday, occupational therapy on Wednesday and Friday, and speech 

therapy on Friday. In this example, therapy services are being provided over 3 distinct 

calendar days (Monday, Wednesday, and Friday). However, as with the Medium Rehab 

category, it is possible for certain residents who do not meet the Low Rehab qualifiers 

under the intended policy to classify inappropriately into the Low Rehab category. For 

example, if a resident were to receive 90 minutes of therapy in the form of physical 

therapy and occupational therapy on Monday, and physical therapy and speech therapy 

on Tuesday, this patient would only have received therapy for 2 distinct days in that 7-

day look-back period; however, based on the information currently recorded on the MDS, 

the patient would still be classified in a Low Rehab RUG. 

As explained above, we are clarifying that our classification criteria for the 

Rehabilitation RUG categories require that the resident receive the requisite number of 

distinct calendar days of therapy to be classified into the Rehabilitation RUG category. 

However, the MDS item set currently does not contain an item that permits SNFs to 

report the total number of distinct calendar days of therapy provided by all rehabilitation 

disciplines, allowing some residents to be classified into Rehabilitation RUG categories 

when they do not actually meet our classification criteria. To permit facilities to report 

the number of distinct calendar days that a resident receives therapy, and to permit 

implementation of our Rehabilitation RUG classification criteria as intended, we propose 

to add item O0420 to the MDS Item Set, Distinct Calendar Days of Therapy. Effective 

October 1, 2013, facilities would be required to record under this item the number of 

distinct calendar days of therapy provided by all the rehabilitation disciplines over the 7-

day look-back period for the current assessment, which would be used to classify the 

resident into the correct Rehabilitation RUG category. We invite comments on our 
 97 

proposal to add this item to the MDS Item Set so that we may properly implement our 

Rehabilitation RUG classification criteria based on the number of distinct calendar days 

of therapy a patient received, as described above. 

D. SNF Therapy Research Project

Currently, the therapy payment rate component of the SNF PPS is based solely on 

the amount of therapy provided to a patient during the 7-day look-back period, regardless 

of the specific patient characteristics. The amount of therapy a patient receives is used to 

classify the resident into a RUG category, which then determines the per diem payment 

for that resident. CMS has contracted with Acumen, LLC and the Brookings Institution 

to identify potential alternatives to the existing methodology used to pay for therapy 

services received under the SNF PPS. 

As an initial step, the project will review past research studies and policy issues 

related to SNF PPS therapy payment and options for improving or replacing the current 

system of paying for SNF therapy services received. We welcome comments and ideas 

on the existing methodology used to pay for therapy services under the SNF PPS. 

Comments may be included as part of comments on this proposed rule. We are also 

soliciting comments outside the comment period and these comments should be sent via 

email to SNFTherapyPayments@cms.hhs.gov. We will also regularly update the public 

on the progress of this project on the project website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/SNFPPS/therapyresearch.html.

VI. Provisions of the Proposed Rule and Technical Correction 

 As discussed in section III. of this proposed rule, this proposed rule would update 

the payment rates under the SNF PPS for FY 2014 as required by section 
 98 

1888(e)(4)(E)(ii). Also, as discussed in section III.B.3. of this proposed rule, we propose 

that when the forecast error, rounded to one significant digit, is 0.5 percentage point, we 

would calculate the forecast error to 2 significant digits in order to determine whether the 

forecast error threshold has been exceeded. Further, as discussed in section III.C. of this 

proposed rule, we propose that upon the conversion to ICD-10-CM effective October 1, 

2014, we would use the ICD-10-CM code B20 (in place of the ICD-9-CM code 042) to 

identify those residents for whom it is appropriate to apply the AIDS add-on established 

under section 511 of the MMA. In addition, as discussed in section III.D. of this 

proposed rule, to allow for sufficient time to assess the February 28, 2013 OMB changes 

to the statistical area delineations and their ramifications, we intend to propose changes to 

the wage index based on the newest CBSA changes in the FY 2015 SNF PPS proposed 

rule. Thus, we would continue to use the previous OMB definitions (that is, those used 

for the FY 2013 SNF PPS update notice) for the FY 2014 SNF PPS wage index. 

 As discussed previously in section V.A of this proposed rule, we propose to revise 

and rebase the SNF market basket index to reflect a base year of FY 2010, and to use this 

revised and rebased market basket to determine the SNF market basket percentage 

increase for 2014. In addition, we propose to revise the labor-related share to reflect the 

relative importance of the labor-related cost weights in the proposed FY 2010-based SNF 

market basket. Also, as discussed in section V.C. of this proposed rule, to help ensure 

accuracy in grouping to the rehabilitation RUG categories, we propose to add item O0420 

to the MDS Item Set, which would require facilities to record the number of distinct 

calendar days of therapy provided by all the rehabilitation disciplines over the 7-day 

look-back period for the current assessment. 

 In addition, as discussed earlier in this proposed rule, we are proposing to adopt 
 99 

an approach already being followed by other Medicare payment systems, under which the 

lengthy wage index tables that are currently published in the Federal Register as part of 

the annual SNF PPS rulemaking, would instead be made available exclusively through 

the Internet on the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/SNFPPS/WageIndex.html. To adopt this approach, we propose to 

revise §413.345. Currently, §413.345 states that CMS publishes the wage index in the 

Federal Register. We propose to revise this language, consistent with the language of 

the corresponding statutory authority at section 1888(e)(4)(H)(iii), to state that CMS 

publishes in the Federal Register “the factors to be applied in making the area wage 

adjustment.” Accordingly, while the annual Federal Register publication would 

continue to include a discussion of the various applicable “factors” applied in making the 

area wage adjustment (for example, the SNF PPS’s use of the hospital wage index 

exclusive of its occupational mix adjustment), effective October 1, 2013, it would no 

longer include a listing of the individual wage index values themselves, which would 

instead be made available exclusively through the Internet on the CMS website. 

 Further, we propose to make a minor technical correction in the regulations text at 

§424.11(e)(4), regarding the types of practitioners (in addition to physicians) that can 

sign the required SNF level of care certification and recertifications. In the calendar year 

(CY) 2011 Medicare Physician Fee Schedule (MPFS) final rule with comment period (75 

FR 73387, 73602, 73626-27), we revised the regulations at §424.20(e)(2) to implement 

section 3108 of the Affordable Care Act, which amended section 1814(a)(2) of the Act, 

by adding physician assistants to the provision authorizing nurse practitioners and clinical 

nurse specialists to perform this function. However, we inadvertently neglected to make 

a conforming revision in the regulations text at §424.11(e)(4), an omission that we now 
 100 

propose to rectify.

VII. 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 the Office of Management and Budget (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: 

● The need for the information collection and its usefulness in carrying out the 

proper functions of our agency. 

● The accuracy of our estimate of the information collection burden. 

● The 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. 

 We are soliciting public comment on each of the section 3506(c)(2)(A)-required 

issues for the following information collection requirements (ICRs): 

ICRs Regarding Nursing Home and Swing Bed PPS Item Sets

Under sections 4204(b) and 4214(d) of the Omnibus Budget Reconciliation Act of 

1987 (OBRA 1987, Pub. L. 100-203 enacted on December 22, 1987), the submission and 

retention of resident assessment data for purposes of carrying out OBRA 1987 are not 

subject to the PRA. While certain data items that are collected under the SNF resident 

assessment instrument (or MDS 3.0) fall under the OBRA 1987 exemption, MDS 3.0’s 

PPS-related item sets are outside the scope of OBRA 1987 and require PRA 

consideration. 
 101 

As discussed in section V.C. of the preamble, this rule proposes to add PPSrelated Item O0420 to the MDS 3.0 form to capture the number of distinct calendar days 

a SNF resident has received therapy in a seven-day look-back period. The Item would be 

added to allow the RUG-IV grouper software to calculate more accurately the number of 

therapy days a SNF resident has received in order to place him or her into the correct 

RUG-IV payment group. The Item would not be added as the result of any change in 

statute or policy; rather, it would be added to ensure that our existing Rehabilitation RUG 

classification policies are properly implemented as intended. 

While we are proposing to add Item O0420 to the MDS 3.0 form, we do not 

believe this action will cause any measurable adjustments to our burden estimates. 

Consequently, we are not revising the burden estimates that have been approved under 

OCN 0938-1140 (CMS-R-250) for the Nursing Home and Swing Bed PPS Item Sets. 

Submission of PRA-Related Comments

 We have submitted a copy of this proposed rule to OMB for its review of the 

rule’s information collection and recordkeeping requirements. These requirements are 

not effective until they have been approved by the OMB. 

 To obtain copies of the supporting statement and any related forms for the 

proposed paperwork collection referenced above, access CMS’ website at 

http://www.cms.hhs.gov/PaperworkReductionActof1995, or email your request, 

including your address, phone number, OMB number, and CMS document identifier, to

Paperwork@cms.hhs.gov, or call the Reports Clearance Office on (410) 786–1326.

 We invite public comments on this proposed information collection and 

recordkeeping requirement. If you comment on this proposed information collection and 

recordkeeping requirement, please do either of the following: 
 102 

 1. Submit your comments electronically as specified in the ADDRESSES section 

of this proposed rule; or 

 2. Submit your comments to the Office of Information and Regulatory Affairs, 

Office of Management and Budget, Attention: CMS Desk Officer, (CMS–1446–P) Fax: 

(202) 395–6974; or E-mail: OIRA_submission@omb.eop.gov. 

VIII. 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. 

IX. Economic Analyses 

A. Regulatory Impact Analysis

1. Introduction 

We have examined the impacts of this proposed rule as 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, 
 103 

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 OMB. 

2. Statement of Need 

 This proposed rule would update the SNF prospective payment rates for FY 2014 

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, of the 

unadjusted federal per diem rates, the case-mix classification system, and the factors to 

be applied in making the area wage adjustment. 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 

This proposed rule sets forth proposed updates of the SNF PPS rates contained in 

the update notice for FY 2013 (77 FR 46214). Based on the above, we estimate that the 

aggregate impact would be an increase of $500 million in payments to SNFs, resulting 

from the SNF market basket update to the payment rates, as adjusted by the MFP 

adjustment and forecast error correction. The impact analysis of this proposed rule 

represents the projected effects of the changes in the SNF PPS from FY 2013 to FY 2014. 

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 
 104 

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 the SNF 

PPS, the nature of the Medicare program is such 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 sections 1888(e)(4)(E) and 1888(e)(5) of the Act, we update 

the FY 2013 payment rates by a factor equal to the market basket index percentage 

change adjusted by the FY 2012 forecast error adjustment (if applicable) and the MFP 

adjustment to determine the payment rates for FY 2014. 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 fewer than 

4,100 beneficiaries who qualify for the add-on payment for residents with AIDS. The 

impact to Medicare is included in the “total” column of Table 22. In updating the SNF 

rates for FY 2014, we made a number of standard annual revisions and clarifications 
 105 

mentioned elsewhere in this proposed rule (for example, the update to the wage and 

market basket indexes used for adjusting the federal rates). 

The annual update set forth in this proposed rule applies to SNF payments in FY 

2014. 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 or rule for 

each subsequent FY that will provide for an update to the SNF payment rates and include 

an associated impact analysis. 

4. Detailed Economic Analysis 

 The FY 2014 impacts appear in Table 22. Using the most recently available data, 

in this case FY 2012, we apply the current FY 2013 wage index and labor-related share 

value to the number of payment days to simulate FY 2013 payments. Then, using the 

same FY 2012 data, we apply the FY 2014 wage index and labor-related share value to 

simulate FY 2014 payments. We tabulate the resulting payments according to the 

classifications in Table 22, e.g. facility type, geographic region, facility ownership, and 

compare the difference between current and proposed payments to determine the overall 

impact. The breakdown of the various categories of data in the table follows. 

 The first column shows the breakdown of all SNFs by urban or rural status, 

hospital-based or freestanding status, census region, and ownership. 

 The first row of figures describes the estimated effects of the 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 nineteen rows show the 

effects on facilities by urban versus rural status by census region. The last three rows 

show the effects on facilities by ownership (that is, government, profit, and non-profit 
 106 

status). 

 The second column in the table shows the number of facilities in the impact 

database. 

 The third column of the table 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 shows the effect of all of the changes on the FY 2014 

payments. The update of 1.4 percent (consisting of the market basket increase of 

2.3 percentage points, reduced by the 0.5 percentage point forecast error correction and 

further reduced by the 0.4 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 1.4 percent, assuming facilities do not change their 

care delivery and billing practices in response. 

As illustrated in Table 22, the combined effects of all of the changes vary by 

specific types of providers and by location. Though all facilities would experience 

payment increases, the projected impact on providers for FY 2014 varies due to the 

impact of the wage index update. For example, due to changes from updating the wage 

index, providers in the rural Pacific region would experience a 2.5 percent increase in FY 

2014 total payments and providers in the urban East South Central region would 

experience a 0.7 percent increase in FY 2014 total payments. 

TABLE 22: RUG-IV Projected Impact to the SNF PPS for FY 2014 

Number of 

Facilities

FY 2014

Update 

Wage 

Data

Total FY 

2014 

Change

Group 

Total 15,376 0.0% 1.4% 
 107 

Number of 

Facilities

FY 2014

Update 

Wage 

Data

Total FY 

2014 

Change

Urban 10,578 0.1% 1.5% 

Rural 4,798 -0.3% 1.1% 

Hospital based 

urban 757 0.2% 1.6% 

Freestanding urban 9,821 0.1% 1.5% 

Hospital based 

rural 402 -0.3% 1.1% 

Freestanding rural 4,396 -0.3% 1.1% 

 

Urban by region 

New England 804 0.6% 2.0% 

Middle Atlantic 1,452 0.9% 2.3% 

South Atlantic 1,740 -0.5% 0.8% 

East North Central 2,048 -0.3% 1.1% 

East South Central 525 -0.7% 0.7% 

West North Central 868 -0.6% 0.8% 

West South Central 1,240 -0.2% 1.2% 

Mountain 490 0.2% 1.6% 

Pacific 1,405 0.8% 2.2% 

Outlying 6 0.1% 1.5% 

 

Rural by region 

New England 153 0.4% 1.8% 

Middle Atlantic 262 -0.2% 1.2% 

South Atlantic 608 -0.5% 0.9% 

East North Central 928 -0.8% 0.6% 

East South Central 551 -0.7% 0.7% 

West North Central 1,114 0.6% 2.0% 

West South Central 813 -0.8% 0.6% 

Mountain 246 0.3% 1.7% 

Pacific 123 1.0% 2.5% 

 

Ownership 

Government 830 0.2% 1.6% 

Profit 10,722 0.0% 1.4% 

Non-profit 3,824 0.0% 1.4% 

Note: The Total column includes the 2.3 percent market basket increase, reduced by the 0.5 percentage 

point forecast error correction and further reduced by the 0.4 percentage point MFP adjustment. 

Additionally, we found no SNFs in rural outlying areas. 

 

5. Alternatives Considered 

As described above, we estimate that the aggregate impact for FY 2014 would be 

an increase of $500 million in payments to SNFs, resulting from the SNF market basket 

update to the payment rates, as adjusted by the forecast error correction and the MFP 
 108 

adjustment. 

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, casemix classification methodology, 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. 

6. Accounting Statement 

 As required by OMB Circular A-4 (available online at 

www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf), in 

Table 23, we have prepared an accounting statement showing the classification of the 

expenditures associated with the provisions of this proposed rule. Table 23 provides 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 15,376 SNFs in our 

database. All expenditures are classified as transfers to Medicare providers (that is, 

SNFs). 
 109 

TABLE 23: Accounting Statement: Classification of Estimated Expenditures, from 

the 2013 SNF PPS Fiscal Year to the 2014 SNF PPS Fiscal Year 

Category Transfers 

Annualized Monetized Transfers $500 million* 

From Whom To Whom? Federal Government to SNF Medicare Providers 

* The net increase of $500 million in transfer payments is a result of the MFP-adjusted market basket 

increase of $500 million. 

7. Conclusion 

This proposed rule sets forth updates of the SNF PPS rates contained in the update 

notice for FY 2013 (77 FR 46214). Based on the above, we estimate the overall 

estimated payments for SNFs in FY 2014 are projected to increase by $500 million, or 

1.4 percent, compared with those in FY 2013. We estimate that in FY 2014 under 

RUG-IV, SNFs in urban and rural areas would experience, on average, a 1.5 and 

1.1 percent increase, respectively, in estimated payments compared with FY 2013. 

Providers in the rural Pacific region would experience the largest estimated increase in 

payments of approximately 2.5 percent. Providers in the rural West South Central region 

would experience the smallest increase in payments of 0.6 percent. 

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 non-profit status or by having revenues of $25.5 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 (NAICS 623110), with total revenues of $25.5 million or less in any 1 year. 
 110 

 (For details, see the Small Business Administration’s website at 

http://www.sba.gov/category/navigation-structure/contracting/contractingofficials/eligibility-size-standards). Individuals and States are not included in the 

definition of a small entity. In addition, approximately 25 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. 

This proposed rule sets forth updates of the SNF PPS rates contained in the update 

notice for FY 2013 (77 FR 46214). Based on the above, we estimate that the aggregate 

impact would be an increase of $500 million in payments to SNFs, resulting from the 

SNF market basket update to the payment rates, as adjusted by the forecast error 

correction and the MFP adjustment. While it is projected in Table 22 that all providers 

would experience a net increase in payments, we note that some individual providers 

within the same region or group may experience different impacts on payments than 

others due to the distributional impact of the FY 2014 wage 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 (Report to the Congress: Medicare Payment 

Policy, March 2013, available at 

http://www.medpac.gov/documents/Mar13_EntireReport.pdf). However, it is worth 
 111 

noting that the distribution of days and payments is highly variable. That is, the majority 

of SNFs have significantly lower Medicare utilization (Report to the Congress: Medicare 

Payment Policy, March 2013, available at 

http://www.medpac.gov/documents/Mar13_EntireReport.pdf). As a result, for most 

facilities, when all payers are included in the revenue stream, the overall impact on total 

revenues should be substantially less than those impacts presented in Table 22. As 

indicated in Table 22, the effect on facilities is projected to be an aggregate positive 

impact of 1.4 percent. As the overall impact on the industry as a whole, and thus on 

small entities specifically, is less than the 3 to 5 percent threshold discussed above, the 

Secretary has determined that this proposed rule would not have a significant impact on a 

substantial number of small entities. 

In addition, section 1102(b) of the 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. This 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. 

Moreover, as noted in the FY 2012 final rule (76 FR 48539), the category of small rural 

hospitals would be included within the analysis of the impact of this proposed rule on 

small entities in general. As indicated in Table 22, the effect on facilities is projected to 

be an aggregate positive impact of 1.4 percent. As the overall impact on the industry as a 

whole is less than the 3 to 5 percent threshold discussed above, the Secretary has 
 112 

determined that this proposed rule would not have a significant impact on a substantial 

number of small rural hospitals. 

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 2013, that threshold is approximately $141 million. This 

proposed rule would not impose spending costs on State, local, or tribal governments in 

the aggregate, or by the private sector, of $141 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. 
 113 

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. 

 
 114 

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); 

sec. 124 of Pub. L. 106-133 (113 Stat. 1501A-332) and sec. 3201 of Pub. L. 112-96 (126 

Stat. 156). 

2. Section 413.345 is revised to read as follows: 

§413.345 Publication of Federal prospective payment rates.

CMS publishes information pertaining to each update of the Federal payment 

rates in the Federal Register. This information includes the standardized Federal rates, 

the resident classification system that provides the basis for case-mix adjustment 

(including the designation of those specific Resource Utilization Groups under the 

resident classification system that represent the required SNF level of care, as provided in 

§409.30 of this chapter), and the factors to be applied in making the area wage 

adjustment. This information is published before May 1 for the fiscal year 1998 and 

before August 1 for the fiscal years 1999 and after. 

PART 424--CONDITIONS FOR MEDICARE PAYMENT 

 3. The authority citation for part 424 continues to read as follows: 
 115 

Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 

1395hh). 

 4. Section 424.11 is amended by revising paragraph (e)(4) to read as follows: 

§424.11 General procedures. 

* * * * * 

(e) * * * 

(4) A nurse practitioner or clinical nurse specialist as defined in paragraph (e)(5) 

or (e)(6) of this section, or a physician assistant as defined in section 1861(aa)(5) of the 

Act, in the circumstances specified in §424.20(e). 

* * * * *
CMS-1446-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: April 4, 2013. 

 ______________________________ 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare & 

Medicaid Services.

Approved: April 25, 2013 

 __________________________________ 

Kathleen Sebelius, 

Secretary. 

BILLING CODE 4120-01-P 
 117 

Note: The following addendum will not appear in the Code of Federal Regulations. 

Addendum – FY 2014 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. As noted previously in this proposed rule, we are currently 

proposing to take an approach already being followed by other Medicare payment 

systems, whereby for SNF PPS rules and notices published on or after October 1, 2013, 

these wage index tables would henceforth be made available exclusively through the 

Internet on the CMS website rather than being published in the Federal Register as part 

of the annual SNF PPS rulemaking. 

TABLE A: FY 2014 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 

0.8260 

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 

0.3662 

10420 Akron, OH 

Portage County, OH 

Summit County, OH 

0.8485 
 118 

10500 Albany, GA 

Baker County, GA 

Dougherty County, GA 

Lee County, GA 

Terrell County, GA 

Worth County, GA 

0.8750 

10580 Albany-Schenectady-Troy, NY 

Albany County, NY 

Rensselaer County, NY 

Saratoga County, NY 

Schenectady County, NY 

Schoharie County, NY 

0.8636 

10740 Albuquerque, NM 

Bernalillo County, NM 

Sandoval County, NM 

Torrance County, NM 

Valencia County, NM 

0.9704 

10780 Alexandria, LA 

Grant Parish, LA 

Rapides Parish, LA 

0.7821 

10900 Allentown-Bethlehem-Easton, PA-NJ 

Warren County, NJ 

Carbon County, PA 

Lehigh County, PA 

Northampton County, PA 

0.9208 

11020 Altoona, PA 

Blair County, PA 

0.9140 

11100 Amarillo, TX 

Armstrong County, TX 

Carson County, TX 

Potter County, TX 

Randall County, TX 

0.8993 

11180 Ames, IA 

Story County, IA 

0.9465 

11260 Anchorage, AK 

Anchorage Municipality, AK 

Matanuska-Susitna Borough, AK 

1.2259 

11300 Anderson, IN 

Madison County, IN 

0.9694 

11340 Anderson, SC 

Anderson County, SC 

0.8803 
 119 

11460 Arbor, MI 

Washtenaw County, MI 

1.0125 

11500 Anniston-Oxford, AL 

Calhoun County, AL 

0.7369 

11540 Appleton, WI 

Calumet County, WI 

Outagamie County, WI 

0.9485 

11700 Asheville, NC 

Buncombe County, NC 

Haywood County, NC 

Henderson County, NC 

Madison County, NC 

0.8508 

12020 Athens-Clarke County, GA 

Clarke County, GA 

Madison County, GA 

Oconee County, GA 

Oglethorpe County, GA 

0.9284 
 120 

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 

0.9465 

12100 Atlantic City-Hammonton, NJ 

Atlantic County, NJ 

1.2310 

12220 Auburn-Opelika, AL 

Lee County, AL 

0.7802 

12260 Augusta-Richmond County, GA-SC 

Burke County, GA 

Columbia County, GA 

McDuffie County, GA 

Richmond County, GA 

Aiken County, SC 

Edgefield County, SC 

0.9189 
 121 

12420 Austin-Round Rock, TX 

Bastrop County, TX 

Caldwell County, TX 

Hays County, TX 

Travis County, TX 

Williamson County, TX 

0.9616 

12540 Bakersfield, CA 

Kern County, CA 

1.1730 

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 

0.9916 

12620 Bangor, ME 

Penobscot County, ME 

0.9751 

12700 Barnstable Town, MA 

Barnstable County, MA 

1.3062 

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 

0.8050 

12980 Battle Creek, MI 

Calhoun County, MI 

0.9763 

13020 Bay City, MI 

Bay County, MI 

0.9526 

13140 Beaumont-Port Arthur, TX 

Hardin County, TX 

Jefferson County, TX 

Orange County, TX 

0.8634 

13380 Bellingham, WA 

Whatcom County, WA 

1.1940 
 122 

13460 Bend, OR 

Deschutes County, OR 

1.1857 

13644 Bethesda-Frederick-Gaithersburg, MD 

Frederick County, MD 

Montgomery County, MD 

1.0348 

13740 Billings, MT 

Carbon County, MT 

Yellowstone County, MT 

0.8727 

13780 Binghamton, NY 

Broome County, NY 

Tioga County, NY 

0.7863 

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 

0.8395 

13900 Bismarck, ND 

Burleigh County, ND 

Morton County, ND 

0.7312 

13980 Blacksburg-Christiansburg-Radford, VA 

Giles County, VA 

Montgomery County, VA 

Pulaski County, VA 

Radford City, VA 

0.8354 

14020 Bloomington, IN 

Greene County, IN 

Monroe County, IN 

Owen County, IN 

0.9343 

14060 Bloomington-Normal, IL 

McLean County, IL 

0.9349 

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 

1.2505 
 123 

14500 Boulder, CO 

Boulder County, CO 

0.9891 

14540 Bowling Green, KY 

Edmonson County, KY 

Warren County, KY 

0.8314 

14740 Bremerton-Silverdale, WA 

Kitsap County, WA 

1.0311 

14860 Bridgeport-Stamford-Norwalk, CT 

Fairfield County, CT 

1.3287 

15180 Brownsville-Harlingen, TX 

Cameron County, TX 

0.8213 

15260 Brunswick, GA 

Brantley County, GA 

Glynn County, GA 

McIntosh County, GA 

0.7716 

15380 Buffalo-Niagara Falls, NY 

Erie County, NY 

Niagara County, NY 

1.0048 

15500 Burlington, NC 

Alamance County, NC 

0.8552 

15540 Burlington-South Burlington, VT 

Chittenden County, VT 

Franklin County, VT 

Grand Isle County, VT 

1.0173 

15764 Cambridge-Newton-Framingham, MA 

Middlesex County, MA 

1.1201 

15804 Camden, NJ 

Burlington County, NJ 

Camden County, NJ 

Gloucester County, NJ 

1.0297 

15940 Canton-Massillon, OH 

Carroll County, OH 

Stark County, OH 

0.8729 

15980 Cape Coral-Fort Myers, FL 

Lee County, FL 

0.8720 

16020 Cape Girardeau-Jackson, MO-IL 

Alexander County, IL 

Bollinger County, MO 

Cape Girardeau County, MO 

0.9213 
 124 

16180 Carson City, NV 

Carson City, NV 

1.0767 

16220 Casper, WY 

Natrona County, WY 

1.0154 

16300 Cedar Rapids, IA 

Benton County, IA 

Jones County, IA 

Linn County, IA 

0.9001 

16580 Champaign-Urbana, IL 

Champaign County, IL 

Ford County, IL 

Piatt County, IL 

0.9450 

16620 Charleston, WV 

Boone County, WV 

Clay County, WV 

Kanawha County, WV 

Lincoln County, WV 

Putnam County, WV 

0.8147 

16700 Charleston-North Charleston-Summerville, SC 

Berkeley County, SC 

Charleston County, SC 

Dorchester County, SC 

0.9013 

16740 Charlotte-Gastonia-Concord, NC-SC 

Anson County, NC 

Cabarrus County, NC 

Gaston County, NC 

Mecklenburg County, NC 

Union County, NC 

York County, SC 

0.9479 

16820 Charlottesville, VA 

Albemarle County, VA 

Fluvanna County, VA 

Greene County, VA 

Nelson County, VA 

Charlottesville City, VA 

0.8443 

16860 Chattanooga, TN-GA 

Catoosa County, GA 

Dade County, GA 

Walker County, GA 

Hamilton County, TN 

Marion County, TN 

Sequatchie County, TN 

0.8499 
 125 

16940 Cheyenne, WY 

Laramie County, WY 

0.9534 

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 

1.0446 

17020 Chico, CA 

Butte County, CA 

1.1637 

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 

0.9382 

17300 Clarksville, TN-KY 

Christian County, KY 

Trigg County, KY 

Montgomery County, TN 

Stewart County, TN 

0.7376 

17420 Cleveland, TN 

Bradley County, TN 

Polk County, TN 

0.7528 

17460 Cleveland-Elyria-Mentor, OH 

Cuyahoga County, OH 

Geauga County, OH 

Lake County, OH 

Lorain County, OH 

Medina County, OH 

0.9306 
 126 

17660 Coeur d'Alene, ID 

Kootenai County, ID 

0.9102 

17780 College Station-Bryan, TX 

Brazos County, TX 

Burleson County, TX 

Robertson County, TX 

0.9537 

17820 Colorado Springs, CO 

El Paso County, CO 

Teller County, CO 

0.9321 

17860 Columbia, MO 

Boone County, MO 

Howard County, MO 

0.8231 

17900 Columbia, SC 

Calhoun County, SC 

Fairfield County, SC 

Kershaw County, SC 

Lexington County, SC 

Richland County, SC 

Saluda County, SC 

0.8680 

17980 Columbus, GA-AL 

Russell County, AL 

Chattahoochee County, GA 

Harris County, GA 

Marion County, GA 

Muscogee County, GA 

0.7896 

18020 Columbus, IN 

Bartholomew County, IN 

0.9860 

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 

0.9700 

18580 Corpus Christi, TX 

Aransas County, TX 

Nueces County, TX 

San Patricio County, TX 

0.8469 

18700 Corvallis, OR 

Benton County, OR 

1.0641 
 127 

18880 Crestview-Fort Walton Beach-Destin, FL 

Okaloosa County, FL 

0.8948 

19060 Cumberland, MD-WV 

Allegany County, MD 

Mineral County, WV 

0.8088 

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 

0.9872 

19140 Dalton, GA 

Murray County, GA 

Whitfield County, GA 

0.8662 

19180 Danville, IL 

Vermilion County, IL 

0.9500 

19260 Danville, VA 

Pittsylvania County, VA 

Danville City, VA 

0.7921 

19340 Davenport-Moline-Rock Island, IA-IL 

Henry County, IL 

Mercer County, IL 

Rock Island County, IL 

Scott County, IA 

0.9345 

19380 Dayton, OH 

Greene County, OH 

Miami County, OH 

Montgomery County, OH 

Preble County, OH 

0.8941 

19460 Decatur, AL 

Lawrence County, AL 

Morgan County, AL 

0.7195 

19500 Decatur, IL 

Macon County, IL 

0.7946 

19660 Deltona-Daytona Beach-Ormond Beach, FL 

Volusia County, FL 

0.8596 
 128 

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 

1.0461 

19780 Des Moines-West Des Moines, IA 

Dallas County, IA 

Guthrie County, IA 

Madison County, IA 

Polk County, IA 

Warren County, IA 

0.9433 

19804 Detroit-Livonia-Dearborn, MI 

Wayne County, MI 

0.9256 

20020 Dothan, AL 

Geneva County, AL 

Henry County, AL 

Houston County, AL 

0.7136 

20100 Dover, DE 

Kent County, DE 

0.9981 

20220 Dubuque, IA 

Dubuque County, IA 

0.8828 

20260 Duluth, MN-WI 

Carlton County, MN 

St. Louis County, MN 

Douglas County, WI 

0.9351 

20500 Durham-Chapel Hill, NC 

Chatham County, NC 

Durham County, NC 

Orange County, NC 

Person County, NC 

0.9707 

20740 Eau Claire, WI 

Chippewa County, WI 

Eau Claire County, WI 

1.0174 
 129 

20764 Edison-New Brunswick, NJ 

Middlesex County, NJ 

Monmouth County, NJ 

Ocean County, NJ 

Somerset County, NJ 

1.0956 

20940 El Centro, CA 

Imperial County, CA 

0.8885 

21060 Elizabethtown, KY 

Hardin County, KY 

Larue County, KY 

0.7928 

21140 Elkhart-Goshen, IN 

Elkhart County, IN 

0.9369 

21300 Elmira, NY 

Chemung County, NY 

0.8396 

21340 El Paso, TX 

El Paso County, TX 

0.8441 

21500 Erie, PA 

Erie County, PA 

0.7973 

21660 Eugene-Springfield, OR 

Lane County, OR 

1.1773 

21780 Evansville, IN-KY 

Gibson County, IN 

Posey County, IN 

Vanderburgh County, IN 

Warrick County, IN 

Henderson County, KY 

Webster County, KY 

0.8367 

21820 Fairbanks, AK 

Fairbanks North Star Borough, AK 

1.1043 

21940 Fajardo, PR 

Ceiba Municipio, PR 

Fajardo Municipio, PR 

Luquillo Municipio, PR 

0.3744 

22020 Fargo, ND-MN 

Cass County, ND 

Clay County, MN 

0.7835 

22140 Farmington, NM 

San Juan County, NM 

0.9776 
 130 

22180 Fayetteville, NC 

Cumberland County, NC 

Hoke County, NC 

0.8460 

22220 Fayetteville-Springdale-Rogers, AR-MO 

Benton County, AR 

Madison County, AR 

Washington County, AR 

McDonald County, MO 

0.8993 

22380 Flagstaff, AZ 

Coconino County, AZ 

1.2840 

22420 Flint, MI 

Genesee County, MI 

1.1303 

22500 Florence, SC 

Darlington County, SC 

Florence County, SC 

0.7968 

22520 Florence-Muscle Shoals, AL 

Colbert County, AL 

Lauderdale County, AL 

0.7553 

22540 Fond du Lac, WI 

Fond du Lac County, WI 

0.9517 

22660 Fort Collins-Loveland, CO 

Larimer County, CO 

0.9743 

22744 Fort Lauderdale-Pompano Beach-Deerfield Beach, FL 

Broward County, FL 

1.0422 

22900 Fort Smith, AR-OK 

Crawford County, AR 

Franklin County, AR 

Sebastian County, AR 

Le Flore County, OK 

Sequoyah County, OK 

0.7588 

23060 Fort Wayne, IN 

Allen County, IN 

Wells County, IN 

Whitley County, IN 

0.9048 

23104 Fort Worth-Arlington, TX 

Johnson County, TX 

Parker County, TX 

Tarrant County, TX 

Wise County, TX 

0.9552 
 131 

23420 Fresno, CA 

Fresno County, CA 

1.1817 

23460 Gadsden, AL 

Etowah County, AL 

0.8017 

23540 Gainesville, FL 

Alachua County, FL 

Gilchrist County, FL 

0.9751 

23580 Gainesville, GA 

Hall County, GA 

0.9292 

23844 Gary, IN 

Jasper County, IN 

Lake County, IN 

Newton County, IN 

Porter County, IN 

0.9440 

24020 Glens Falls, NY 

Warren County, NY 

Washington County, NY 

0.8402 

24140 Goldsboro, NC 

Wayne County, NC 

0.8316 

24220 Grand Forks, ND-MN 

Polk County, MN 

Grand Forks County, ND 

0.7321 

24300 Grand Junction, CO 

Mesa County, CO 

0.9347 

24340 Grand Rapids-Wyoming, MI 

Barry County, MI 

Ionia County, MI 

Kent County, MI 

Newaygo County, MI 

0.9129 

24500 Great Falls, MT 

Cascade County, MT 

0.9274 

24540 Greeley, CO 

Weld County, CO 

0.9694 

24580 Green Bay, WI 

Brown County, WI 

Kewaunee County, WI 

Oconto County, WI 

0.9627 
 132 

24660 Greensboro-High Point, NC 

Guilford County, NC 

Randolph County, NC 

Rockingham County, NC 

0.8288 

24780 Greenville, NC 

Greene County, NC 

Pitt County, NC 

0.9382 

24860 Greenville-Mauldin-Easley, SC 

Greenville County, SC 

Laurens County, SC 

Pickens County, SC 

0.9611 

25020 Guayama, PR 

Arroyo Municipio, PR 

Guayama Municipio, PR 

Patillas Municipio, PR 

0.3723 

25060 Gulfport-Biloxi, MS 

Hancock County, MS 

Harrison County, MS 

Stone County, MS 

0.8610 

25180 Hagerstown-Martinsburg, MD-WV 

Washington County, MD 

Berkeley County, WV 

Morgan County, WV 

0.9273 

25260 Hanford-Corcoran, CA 

Kings County, CA 

1.1171 

25420 Harrisburg-Carlisle, PA 

Cumberland County, PA 

Dauphin County, PA 

Perry County, PA 

0.9515 

25500 Harrisonburg, VA 

Rockingham County, VA 

Harrisonburg City, VA 

0.9128 

25540 Hartford-West Hartford-East Hartford, CT 

Hartford County, CT 

Middlesex County, CT 

Tolland County, CT 

1.1056 

25620 Hattiesburg, MS 

Forrest County, MS 

Lamar County, MS 

Perry County, MS 

0.7972 
 133 

25860 Hickory-Lenoir-Morganton, NC 

Alexander County, NC 

Burke County, NC 

Caldwell County, NC 

Catawba County, NC 

0.8383 

25980 Hinesville-Fort Stewart, GA1

Liberty County, GA 

Long County, GA 

0.8602 

26100 Holland-Grand Haven, MI 

Ottawa County, MI 

0.8050 

26180 Honolulu, HI 

Honolulu County, HI 

1.2109 

26300 Hot Springs, AR 

Garland County, AR 

0.8510 

26380 Houma-Bayou Cane-Thibodaux, LA 

Lafourche Parish, LA 

Terrebonne Parish, LA 

0.7556 

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 

0.9945 

26580 Huntington-Ashland, WV-KY-OH 

Boyd County, KY 

Greenup County, KY 

Lawrence County, OH 

Cabell County, WV 

Wayne County, WV 

0.8858 

26620 Huntsville, AL 

Limestone County, AL 

Madison County, AL 

0.8199 

26820 Idaho Falls, ID 

Bonneville County, ID 

Jefferson County, ID 

0.9351 
 134 

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 

1.0151 

26980 Iowa City, IA 

Johnson County, IA 

Washington County, IA 

0.9896 

27060 Ithaca, NY 

Tompkins County, NY 

0.9366 

27100 Jackson, MI 

Jackson County, MI 

0.8981 

27140 Jackson, MS 

Copiah County, MS 

Hinds County, MS 

Madison County, MS 

Rankin County, MS 

Simpson County, MS 

0.8196 

27180 Jackson, TN 

Chester County, TN 

Madison County, TN 

0.7720 

27260 Jacksonville, FL 

Baker County, FL 

Clay County, FL 

Duval County, FL 

Nassau County, FL 

St. Johns County, FL 

0.8987 

27340 Jacksonville, NC 

Onslow County, NC 

0.7894 

27500 Janesville, WI 

Rock County, WI 

0.9110 

27620 Jefferson City, MO 

Callaway County, MO 

Cole County, MO 

Moniteau County, MO 

Osage County, MO 

0.8501 
 135 

27740 Johnson City, TN 

Carter County, TN 

Unicoi County, TN 

Washington County, TN 

0.7257 

27780 Johnstown, PA 

Cambria County, PA 

0.8486 

27860 Jonesboro, AR 

Craighead County, AR 

Poinsett County, AR 

0.8017 

27900 Joplin, MO 

Jasper County, MO 

Newton County, MO 

0.8016 

28020 Kalamazoo-Portage, MI 

Kalamazoo County, MI 

Van Buren County, MI 

1.0001 

28100 Kankakee-Bradley, IL 

Kankakee County, IL 

0.9698 

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 

0.9487 

28420 Kennewick-Pasco-Richland, WA 

Benton County, WA 

Franklin County, WA 

0.9499 

28660 Killeen-Temple-Fort Hood, TX 

Bell County, TX 

Coryell County, TX 

Lampasas County, TX 

0.8963 
 136 

28700 Kingsport-Bristol-Bristol, TN-VA 

Hawkins County, TN 

Sullivan County, TN 

Bristol City, VA 

Scott County, VA 

Washington County, VA 

0.7223 

28740 Kingston, NY 

Ulster County, NY 

0.9104 

28940 Knoxville, TN 

Anderson County, TN 

Blount County, TN 

Knox County, TN 

Loudon County, TN 

Union County, TN 

0.7484 

29020 Kokomo, IN 

Howard County, IN 

Tipton County, IN 

0.9099 

29100 La Crosse, WI-MN 

Houston County, MN 

La Crosse County, WI 

1.0248 

29140 Lafayette, IN 

Benton County, IN 

Carroll County, IN 

Tippecanoe County, IN 

0.9996 

29180 Lafayette, LA 

Lafayette Parish, LA 

St. Martin Parish, LA 

0.8266 

29340 Lake Charles, LA 

Calcasieu Parish, LA 

Cameron Parish, LA 

0.7798 

29404 Lake County-Kenosha County, IL-WI 

Lake County, IL 

Kenosha County, WI 

1.0249 

29420 Lake Havasu City-Kingman, AZ 

Mohave County, AZ 

0.9953 

29460 Lakeland-Winter Haven, FL 

Polk County, FL 

0.8316 

29540 Lancaster, PA 

Lancaster County, PA 

0.9704 
 137 

29620 Lansing-East Lansing, MI 

Clinton County, MI 

Eaton County, MI 

Ingham County, MI 

1.0663 

29700 Laredo, TX 

Webb County, TX 

0.7618 

29740 Las Cruces, NM 

Dona Ana County, NM 

0.9210 

29820 Las Vegas-Paradise, NV 

Clark County, NV 

1.1682 

29940 Lawrence, KS 

Douglas County, KS 

0.8700 

30020 Lawton, OK 

Comanche County, OK 

0.7926 

30140 Lebanon, PA 

Lebanon County, PA 

0.8192 

30300 Lewiston, ID-WA 

Nez Perce County, ID 

Asotin County, WA 

0.9254 

30340 Lewiston-Auburn, ME 

Androscoggin County, ME 

0.9086 

30460 Lexington-Fayette, KY 

Bourbon County, KY 

Clark County, KY 

Fayette County, KY 

Jessamine County, KY 

Scott County, KY 

Woodford County, KY 

0.8850 

30620 Lima, OH 

Allen County, OH 

0.9170 

30700 Lincoln, NE 

Lancaster County, NE 

Seward County, NE 

0.9505 

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 

0.8661 
 138 

30860 Logan, UT-ID 

Franklin County, ID 

Cache County, UT 

0.8791 

30980 Longview, TX 

Gregg County, TX 

Rusk County, TX 

Upshur County, TX 

0.8971 

31020 Longview, WA 

Cowlitz County, WA 

1.0504 

31084 Los Angeles-Long Beach-Glendale, CA 

Los Angeles County, CA 

1.2315 

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 

0.8892 

31180 Lubbock, TX 

Crosby County, TX 

Lubbock County, TX 

0.8994 

31340 Lynchburg, VA 

Amherst County, VA 

Appomattox County, VA 

Bedford County, VA 

Campbell County, VA 

Bedford City, VA 

Lynchburg City, VA 

0.8808 

31420 Macon, GA 

Bibb County, GA 

Crawford County, GA 

Jones County, GA 

Monroe County, GA 

Twiggs County, GA 

0.8860 

31460 Madera-Chowchilla, CA 

Madera County, CA 

0.8352 
 139 

31540 Madison, WI 

Columbia County, WI 

Dane County, WI 

Iowa County, WI 

1.1463 

31700 Manchester-Nashua, NH 

Hillsborough County, NH 

1.0099 

31740 Manhattan, KS 

Geary County, KS 

Pottawatomie County, KS 

Riley County, KS 

0.7876 

31860 Mankato-North Mankato, MN 

Blue Earth County, MN 

Nicollet County, MN 

0.9316 

31900 Mansfield, OH 

Richland County, OH 

0.8448 

32420 Mayagüez, PR 

Hormigueros Municipio, PR 

Mayagüez Municipio, PR 

0.3769 

32580 McAllen-Edinburg-Mission, TX 

Hidalgo County, TX 

0.8429 

32780 Medford, OR 

Jackson County, OR 

1.0735 

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 

0.9075 

32900 Merced, CA 

Merced County, CA 

1.2788 

33124 Miami-Miami Beach-Kendall, FL 

Miami-Dade County, FL 

0.9912 

33140 Michigan City-La Porte, IN 

LaPorte County, IN 

0.9255 

33260 Midland, TX 

Midland County, TX 

1.0092 
 140 

33340 Milwaukee-Waukesha-West Allis, WI 

Milwaukee County, WI 

Ozaukee County, WI 

Washington County, WI 

Waukesha County, WI 

0.9868 

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 

1.1260 

33540 Missoula, MT 

Missoula County, MT 

0.9100 

33660 Mobile, AL 

Mobile County, AL 

0.7475 

33700 Modesto, CA 

Stanislaus County, CA 

1.3641 

33740 Monroe, LA 

Ouachita Parish, LA 

Union Parish, LA 

0.7550 

33780 Monroe, MI 

Monroe County, MI 

0.8755 

33860 Montgomery, AL 

Autauga County, AL 

Elmore County, AL 

Lowndes County, AL 

Montgomery County, AL 

0.7507 

34060 Morgantown, WV 

Monongalia County, WV 

Preston County, WV 

0.8267 

34100 Morristown, TN 

Grainger County, TN 

Hamblen County, TN 

Jefferson County, TN 

0.6884 
 141 

34580 Mount Vernon-Anacortes, WA 

Skagit County, WA 

1.0697 

34620 Muncie, IN 

Delaware County, IN 

0.8780 

34740 Muskegon-Norton Shores, MI 

Muskegon County, MI 

0.9625 

34820 Myrtle Beach-North Myrtle Beach-Conway, SC 

Horry County, SC 

0.8663 

34900 Napa, CA 

Napa County, CA 

1.5354 

34940 Naples-Marco Island, FL 

Collier County, FL 

0.9147 

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 

0.9174 

35004 Nassau-Suffolk, NY 

Nassau County, NY 

Suffolk County, NY 

1.2764 

35084 Newark-Union, NJ-PA 

Essex County, NJ 

Hunterdon County, NJ 

Morris County, NJ 

Sussex County, NJ 

Union County, NJ 

Pike County, PA 

1.1273 

35300 New Haven-Milford, CT 

New Haven County, CT 

1.1933 
 142 

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 

0.8789 

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 

1.3117 

35660 Niles-Benton Harbor, MI 

Berrien County, MI 

0.8479 

35840 North Port-Bradenton-Sarasota-Venice, FL 

Manatee County, FL 

Sarasota County, FL 

0.9468 

35980 Norwich-New London, CT 

New London County, CT 

1.1871 

36084 Oakland-Fremont-Hayward, CA 

Alameda County, CA 

Contra Costa County, CA 

1.7061 

36100 Ocala, FL 

Marion County, FL 

0.8461 

36140 Ocean City, NJ 

Cape May County, NJ 

1.0628 

36220 Odessa, TX 

Ector County, TX 

0.9702 

36260 Ogden-Clearfield, UT 

Davis County, UT 

Morgan County, UT 

Weber County, UT 

0.9209 
 143 

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 

0.8896 

36500 Olympia, WA 

Thurston County, WA 

1.1650 

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 

0.9797 

36740 Orlando-Kissimmee, FL 

Lake County, FL 

Orange County, FL 

Osceola County, FL 

Seminole County, FL 

0.9101 

36780 Oshkosh-Neenah, WI 

Winnebago County, WI 

0.9438 

36980 Owensboro, KY 

Daviess County, KY 

Hancock County, KY 

McLean County, KY 

0.7823 

37100 Oxnard-Thousand Oaks-Ventura, CA 

Ventura County, CA 

1.3132 

37340 Palm Bay-Melbourne-Titusville, FL 

Brevard County, FL 

0.8707 

37380 Palm Coast, FL 

Flagler County, FL 

0.8209 

37460 Panama City-Lynn Haven-Panama City Beach, FL 

Bay County, FL 

0.7909 
 144 

37620 Parkersburg-Marietta-Vienna, WV-OH 

Washington County, OH 

Pleasants County, WV 

Wirt County, WV 

Wood County, WV 

0.7576 

37700 Pascagoula, MS 

George County, MS 

Jackson County, MS 

0.7574 

37764 Peabody, MA 

Essex County, MA 

1.0571 

37860 Pensacola-Ferry Pass-Brent, FL 

Escambia County, FL 

Santa Rosa County, FL 

0.7800 

37900 Peoria, IL 

Marshall County, IL 

Peoria County, IL 

Stark County, IL 

Tazewell County, IL 

Woodford County, IL 

0.8290 

37964 Philadelphia, PA 

Bucks County, PA 

Chester County, PA 

Delaware County, PA 

Montgomery County, PA 

Philadelphia County, PA 

1.0926 

38060 Phoenix-Mesa-Scottsdale, AZ 

Maricopa County, AZ 

Pinal County, AZ 

1.0505 

38220 Pine Bluff, AR 

Cleveland County, AR 

Jefferson County, AR 

Lincoln County, AR 

0.8103 

38300 Pittsburgh, PA 

Allegheny County, PA 

Armstrong County, PA 

Beaver County, PA 

Butler County, PA 

Fayette County, PA 

Washington County, PA 

Westmoreland County, PA 

0.8713 

38340 Pittsfield, MA 

Berkshire County, MA 

1.0966 
 145 

38540 Pocatello, ID 

Bannock County, ID 

Power County, ID 

0.9795 

38660 Ponce, PR 

Juana Díaz Municipio, PR 

Ponce Municipio, PR 

Villalba Municipio, PR 

0.4614 

38860 Portland-South Portland-Biddeford, ME 

Cumberland County, ME 

Sagadahoc County, ME 

York County, ME 

1.0023 

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 

1.1848 

38940 Port St. Lucie, FL 

Martin County, FL 

St. Lucie County, FL 

0.9391 

39100 Poughkeepsie-Newburgh-Middletown, NY 

Dutchess County, NY 

Orange County, NY 

1.1593 

39140 Prescott, AZ 

Yavapai County, AZ 

1.0199 

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 

1.0579 

39340 Provo-Orem, UT 

Juab County, UT 

Utah County, UT 

0.9501 

39380 Pueblo, CO 

Pueblo County, CO 

0.8250 

39460 Punta Gorda, FL 

Charlotte County, FL 

0.8771 
 146 

39540 Racine, WI 

Racine County, WI 

0.9352 

39580 Raleigh-Cary, NC 

Franklin County, NC 

Johnston County, NC 

Wake County, NC 

0.9286 

39660 Rapid City, SD 

Meade County, SD 

Pennington County, SD 

0.9608 

39740 Reading, PA 

Berks County, PA 

0.9105 

39820 Redding, CA 

Shasta County, CA 

1.5053 

39900 Reno-Sparks, NV 

Storey County, NV 

Washoe County, NV 

1.0369 

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 

0.9723 

40140 Riverside-San Bernardino-Ontario, CA 

Riverside County, CA 

San Bernardino County, CA 

1.1492 
 147 

40220 Roanoke, VA 

Botetourt County, VA 

Craig County, VA 

Franklin County, VA 

Roanoke County, VA 

Roanoke City, VA 

Salem City, VA 

0.9233 

40340 Rochester, MN 

Dodge County, MN 

Olmsted County, MN 

Wabasha County, MN 

1.1712 

40380 Rochester, NY 

Livingston County, NY 

Monroe County, NY 

Ontario County, NY 

Orleans County, NY 

Wayne County, NY 

0.8770 

40420 Rockford, IL 

Boone County, IL 

Winnebago County, IL 

0.9792 

40484 Rockingham County-Strafford County, NH 

Rockingham County, NH 

Strafford County, NH 

1.0215 

40580 Rocky Mount, NC 

Edgecombe County, NC 

Nash County, NC 

0.8786 

40660 Rome, GA 

Floyd County, GA 

0.8962 

40900 Sacramento-Arden-Arcade-Roseville, CA 

El Dorado County, CA 

Placer County, CA 

Sacramento County, CA 

Yolo County, CA 

1.5211 

40980 Saginaw-Saginaw Township North, MI 

Saginaw County, MI 

0.8886 

41060 St. Cloud, MN 

Benton County, MN 

Stearns County, MN 

1.0703 

41100 St. George, UT 

Washington County, UT 

0.9385 
 148 

41140 St. Joseph, MO-KS 

Doniphan County, KS 

Andrew County, MO 

Buchanan County, MO 

DeKalb County, MO 

0.9876 

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 

0.9373 

41420 Salem, OR 

Marion County, OR 

Polk County, OR 

1.1195 

41500 Salinas, CA 

Monterey County, CA 

1.5626 

41540 Salisbury, MD 

Somerset County, MD 

Wicomico County, MD 

0.8986 

41620 Salt Lake City, UT 

Salt Lake County, UT 

Summit County, UT 

Tooele County, UT 

0.9396 

41660 San Angelo, TX 

Irion County, TX 

Tom Green County, TX 

0.8053 
 149 

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 

0.8939 

41740 San Diego-Carlsbad-San Marcos, CA 

San Diego County, CA 

1.2104 

41780 Sandusky, OH 

Erie County, OH 

0.7821 

41884 San Francisco-San Mateo-Redwood City, CA 

Marin County, CA 

San Francisco County, CA 

San Mateo County, CA 

1.6200 

41900 San Germán-Cabo Rojo, PR 

Cabo Rojo Municipio, PR 

Lajas Municipio, PR 

Sabana Grande Municipio, PR 

San Germán Municipio, PR 

0.4569 

41940 San Jose-Sunnyvale-Santa Clara, CA 

San Benito County, CA 

Santa Clara County, CA 

1.6761 
 150 

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 

0.4374 

42020 San Luis Obispo-Paso Robles, CA 

San Luis Obispo County, CA 

1.3089 
 151 

42044 Santa Ana-Anaheim-Irvine, CA 

Orange County, CA 

1.2036 

42060 Santa Barbara-Santa Maria-Goleta, CA 

Santa Barbara County, CA 

1.3165 

42100 Santa Cruz-Watsonville, CA 

Santa Cruz County, CA 

1.7835 

42140 Santa Fe, NM 

Santa Fe County, NM 

1.0179 

42220 Santa Rosa-Petaluma, CA 

Sonoma County, CA 

1.6743 

42340 Savannah, GA 

Bryan County, GA 

Chatham County, GA 

Effingham County, GA 

0.8572 

42540 Scranton--Wilkes-Barre, PA 

Lackawanna County, PA 

Luzerne County, PA 

Wyoming County, PA 

0.8283 

42644 Seattle-Bellevue-Everett, WA 

King County, WA 

Snohomish County, WA 

1.1784 

42680 Sebastian-Vero Beach, FL 

Indian River County, FL 

0.8797 

43100 Sheboygan, WI 

Sheboygan County, WI 

0.9242 

43300 Sherman-Denison, TX 

Grayson County, TX 

0.8760 

43340 Shreveport-Bossier City, LA 

Bossier Parish, LA 

Caddo Parish, LA 

De Soto Parish, LA 

0.8297 

43580 Sioux City, IA-NE-SD 

Woodbury County, IA 

Dakota County, NE 

Dixon County, NE 

Union County, SD 

0.9202 
 152 

43620 Sioux Falls, SD 

Lincoln County, SD 

McCook County, SD 

Minnehaha County, SD 

Turner County, SD 

0.8310 

43780 South Bend-Mishawaka, IN-MI 

St. Joseph County, IN 

Cass County, MI 

0.9465 

43900 Spartanburg, SC 

Spartanburg County, SC 

0.8797 

44060 Spokane, WA 

Spokane County, WA 

1.1221 

44100 Springfield, IL 

Menard County, IL 

Sangamon County, IL 

0.9204 

44140 Springfield, MA 

Franklin County, MA 

Hampden County, MA 

Hampshire County, MA 

1.0422 

44180 Springfield, MO 

Christian County, MO 

Dallas County, MO 

Greene County, MO 

Polk County, MO 

Webster County, MO 

0.8476 

44220 Springfield, OH 

Clark County, OH 

0.8483 

44300 State College, PA 

Centre County, PA 

0.9615 

44600 Steubenville-Weirton, OH-WV 

Jefferson County, OH 

Brooke County, WV 

Hancock County, WV 

0.7415 

44700 Stockton, CA 

San Joaquin County, CA 

1.3792 

44940 Sumter, SC 

Sumter County, SC 

0.7626 

45060 Syracuse, NY 

Madison County, NY 

Onondaga County, NY 

Oswego County, NY 

0.9937 
 153 

45104 Tacoma, WA 

Pierce County, WA 

1.1623 

45220 Tallahassee, FL 

Gadsden County, FL 

Jefferson County, FL 

Leon County, FL 

Wakulla County, FL 

0.8602 

45300 Tampa-St. Petersburg-Clearwater, FL 

Hernando County, FL 

Hillsborough County, FL 

Pasco County, FL 

Pinellas County, FL 

0.9114 

45460 Terre Haute, IN 

Clay County, IN 

Sullivan County, IN 

Vermillion County, IN 

Vigo County, IN 

0.9747 

45500 Texarkana, TX-Texarkana, AR 

Miller County, AR 

Bowie County, TX 

0.7459 

45780 Toledo, OH 

Fulton County, OH 

Lucas County, OH 

Ottawa County, OH 

Wood County, OH 

0.8854 

45820 Topeka, KS 

Jackson County, KS 

Jefferson County, KS 

Osage County, KS 

Shawnee County, KS 

Wabaunsee County, KS 

0.9012 

45940 Trenton-Ewing, NJ 

Mercer County, NJ 

1.0622 

46060 Tucson, AZ 

Pima County, AZ 

0.8991 
 154 

46140 Tulsa, OK 

Creek County, OK 

Okmulgee County, OK 

Osage County, OK 

Pawnee County, OK 

Rogers County, OK 

Tulsa County, OK 

Wagoner County, OK 

0.8179 

46220 Tuscaloosa, AL 

Greene County, AL 

Hale County, AL 

Tuscaloosa County, AL 

0.8498 

46340 Tyler, TX 

Smith County, TX 

0.8562 

46540 Utica-Rome, NY 

Herkimer County, NY 

Oneida County, NY 

0.8806 

46660 Valdosta, GA 

Brooks County, GA 

Echols County, GA 

Lanier County, GA 

Lowndes County, GA 

0.7558 

46700 Vallejo-Fairfield, CA 

Solano County, CA 

1.6355 

47020 Victoria, TX 

Calhoun County, TX 

Goliad County, TX 

Victoria County, TX 

0.8986 

47220 Vineland-Millville-Bridgeton, NJ 

Cumberland County, NJ 

1.0674 
 155 

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 

0.8928 

47300 Visalia-Porterville, CA 

Tulare County, CA 

0.9989 

47380 Waco, TX 

McLennan County, TX 

0.8248 

47580 Warner Robins, GA 

Houston County, GA 

0.7718 

47644 Warren-Troy-Farmington Hills, MI 

Lapeer County, MI 

Livingston County, MI 

Macomb County, MI 

Oakland County, MI 

St. Clair County, MI 

0.9464 
 156 

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 

1.0570 

47940 Waterloo-Cedar Falls, IA 

Black Hawk County, IA 

Bremer County, IA 

Grundy County, IA 

0.8366 

48140 Wausau, WI 

Marathon County, WI 

0.8652 

48300 Wenatchee-East Wenatchee, WA 

Chelan County, WA 

Douglas County, WA 

1.0151 

48424 West Palm Beach-Boca Raton-Boynton Beach, FL 

Palm Beach County, FL 

0.9637 

48540 Wheeling, WV-OH 

Belmont County, OH 

Marshall County, WV 

Ohio County, WV 

0.6702 

48620 Wichita, KS 

Butler County, KS 

Harvey County, KS 

Sedgwick County, KS 

Sumner County, KS 

0.8710 
 157 

48660 Wichita Falls, TX 

Archer County, TX 

Clay County, TX 

Wichita County, TX 

0.9578 

48700 Williamsport, PA 

Lycoming County, PA 

0.8303 

48864 Wilmington, DE-MD-NJ 

New Castle County, DE 

Cecil County, MD 

Salem County, NJ 

1.0632 

48900 Wilmington, NC 

Brunswick County, NC 

New Hanover County, NC 

Pender County, NC 

0.8900 

49020 Winchester, VA-WV 

Frederick County, VA 

Winchester City, VA 

Hampshire County, WV 

0.9072 

49180 Winston-Salem, NC 

Davie County, NC 

Forsyth County, NC 

Stokes County, NC 

Yadkin County, NC 

0.8373 

49340 Worcester, MA 

Worcester County, MA 

1.1632 

49420 Yakima, WA 

Yakima County, WA 

1.0399 

49500 Yauco, PR 

Guánica Municipio, PR 

Guayanilla Municipio, PR 

Peñuelas Municipio, PR 

Yauco Municipio, PR 

0.3798 

49620 York-Hanover, PA 

York County, PA 

0.9580 

49660 Youngstown-Warren-Boardman, OH-PA 

Mahoning County, OH 

Trumbull County, OH 

Mercer County, PA 

0.8406 

49700 Yuba City, CA1 

Sutter County, CA 

Yuba County, CA 

1.1809 
 158 

1 At this time, there are no hospitals located in this urban area on which to base a wage index. 

TABLE B: FY 2014 WAGE INDEX BASED ON CBSA LABOR MARKET 

AREAS FOR RURAL AREAS 

State Code Nonurban Area Wage 

Index 

1 Alabama 0.7175 

2 Alaska 1.3720 

3 Arizona 0.9205 

4 Arkansas 0.7374 

5 California 1.2697 

6 Colorado 0.9844 

7 Connecticut 1.1356 

8 Delaware 1.0116 

10 Florida 0.8009 

11 Georgia 0.7482 

12 Hawaii 0.9919 

13 Idaho 0.7637 

14 Illinois 0.8392 

15 Indiana 0.8547 

16 Iowa 0.8470 

17 Kansas 0.7963 

18 Kentucky 0.7726 

19 Louisiana 0.7610 

20 Maine 0.8273 

21 Maryland 0.8733 

22 Massachusetts 1.3671 

23 Michigan 0.8308 

24 Minnesota 0.9140 

25 Mississippi 0.7610 

26 Missouri 0.7780 

27 Montana 0.9136 

49740 Yuma, AZ 

Yuma County, AZ 

0.9715 
 159 

State Code Nonurban Area Wage 

Index 

28 Nebraska 0.8893 

29 Nevada 0.9822 

30 New Hampshire 1.0381 

31 New Jersey1

- 

32 New Mexico 0.8843 

33 New York 0.8235 

34 North Carolina 0.8118 

35 North Dakota 0.6814 

36 Ohio 0.8281 

37 Oklahoma 0.7712 

38 Oregon 0.9437 

39 Pennsylvania 0.8350 

40 Puerto Rico1

0.4047 

41 Rhode Island1

- 

42 South Carolina 0.8337 

43 South Dakota 0.8199 

44 Tennessee 0.7458 

45 Texas 0.7889 

46 Utah 0.8769 

47 Vermont 0.9782 

48 Virgin Islands 0.7089 

49 Virginia 0.7802 

50 Washington 1.0574 

51 West Virginia 0.7398 

52 Wisconsin 0.8934 

53 Wyoming 0.9280 

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 

2014. The Puerto Rico wage index is the same as FY 2013. 

[FR Doc. 2013-10558 Filed 05/01/2013 at 4:15 pm; Publication Date: 05/06/2013]