Vol. 79 Tuesday, 

No. 150 August 5, 2014 

Part III 

Department of Health and Human Services 

Center for Medicare & Medicaid Services 

42 CFR Part 488 

Medicare Program; Prospective Payment System and Consolidated Billing 

for Skilled Nursing Facilities for FY 2015; Final Rule 


emcdonald on DSK67QTVN1PROD with RULES2
45628 Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 488 

[CMS–1605–F] 

RIN 0938–AS07 

Medicare Program; Prospective 

Payment System and Consolidated 

Billing for Skilled Nursing Facilities for 

FY 2015 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule updates the 

payment rates used under the 

prospective payment system (PPS) for 

skilled nursing facilities (SNFs) for 

fiscal year (FY) 2015. In addition, it 

adopts the most recent Office of 

Management and Budget (OMB) 

statistical area delineations to identify a 

facility’s urban or rural status for the 

purpose of determining which set of rate 

tables will apply to the facility, and to 

determine the SNF PPS wage index 

including a 1-year transition with a 

blended wage index for all providers for 

FY 2015. This final rule also contains a 

revision to policies related to the 

Change of Therapy (COT) Other 

Medicare Required Assessment 

(OMRA). This final rule includes a 

discussion of a provision related to the 

Affordable Care Act involving Civil 

Money Penalties. Finally, this final rule 

discusses the SNF therapy payment 

research currently underway within 

CMS, observed trends related to therapy 

utilization among SNF providers, and 

the agency’s commitment to accelerating 

health information exchange in SNFs. 

DATES: Effective Date: This final rule is 

effective on October 1, 2014. 

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. 

Karen Tritz, (410) 786–8021, for 

information related to Civil Money 

Penalties. 

Bill Ullman, (410) 786–5667, for 

information related to level of care 

determinations, consolidated billing, 

and general information. 

SUPPLEMENTARY INFORMATION: 

Availability of Certain Tables 

Exclusively Through the Internet on the 

CMS Web Site 

In the past, tables setting forth the 

Wage Index for Urban Areas Based on 

CBSA Labor Market Areas and the Wage 

Index Based on CBSA Labor Market 

Areas for Rural Areas were 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 finalized in the FY 

2014 SNF PPS final rule (78 FR 47936, 

47964), beginning in FY 2015, these 

wage index tables are no longer 

published in the Federal Register. 

Instead, these tables will be available 

exclusively through the Internet. The 

wage index tables for this final rule are 

available exclusively through the 

Internet on the CMS Web site at http:// 

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/SNFPPS/

WageIndex.html. 

Readers who experience any problems 

accessing any of the tables that are 

posted on the CMS Web site identified 

above should contact Kia Sidbury at 

(410) 786–7816. 

To assist readers in referencing 

sections contained in this document, we 

are providing the following Table of 

Contents. 

Table of Contents 

I. Executive Summary 

A. Purpose 

B. Summary of Major Provisions 

C. Summary of Impacts 

II. Background 

A. Statutory Basis and Scope 

B. Initial Transition 

C. Required Annual Rate Updates 

III. Summary of the Provisions of the FY 2015 

SNF PPS Proposed Rule 

IV. Analysis of and Responses to Public 

Comments on the FY 2015 SNF PPS 

Proposed Rule 

A. General Comments on the FY 2015 SNF 

PPS Proposed Rule 

B. SNF PPS Rate Setting Methodology and 

FY 2015 Update 

1. Federal Base Rates 

2. SNF Market Basket Update 

a. SNF Market Basket Index 

b. Use of the SNF Market Basket Percentage 

c. Forecast Error Adjustment 

d. Multifactor Productivity Adjustment 

i. Incorporating the Multifactor 

Productivity Adjustment Into the Market 

Basket Update 

e. Market Basket Update Factor for FY 2015 

3. Case-Mix Adjustment 

4. Wage Index Adjustment 

5. Adjusted Rate Computation Example 

C. Additional Aspects of the SNF PPS 

1. SNF Level of Care—Administrative 

Presumption 

2. Consolidated Billing 

3. Payment for SNF-Level Swing-Bed 

Services 

D. Other Issues 

1. Changes to the SNF PPS Wage Index 

a. Labor-Related Share 

2. SNF Therapy Research Project 

3. Revisions to Policies Related to the 

Change of Therapy (COT) Other 

Medicare Required Assessment (OMRA) 

4. Civil Money Penalties (section 6111 of 

the Affordable Care Act) 

5. Observations on Therapy Utilization 

Trends 

6. Accelerating Health Information 

Exchange in the SNF PPS 

7. SNF Value Based Purchasing 

V. Provisions of the Final Rule; Regulations 

Text 

VI. Collection of Information Requirements 

VII. Economic Analyses 

Regulations Text 

Acronyms 

In addition, because of the many 

terms to which we refer by acronym in 

this final 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, Public 

Law 105–33 

BBRA Medicare, Medicaid, and SCHIP 

Balanced Budget Refinement Act of 1999, 

Public Law 106–113 

BIPA Medicare, Medicaid, and SCHIP 

Benefits Improvement and Protection Act 

of 2000, Public Law 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 

EHR Electronic health record 

EOT End of therapy 

FQHC Federally qualified health center 

FR Federal Register 

FY Fiscal year 

GAO Government Accountability Office 

HCPCS Healthcare Common Procedure 

Coding System 

HIE Health information exchange 

HOMER Home office Medicare records 

ICR Information Collection Requirements 

IGI IHS (Information Handling Services) 

Global Insight, Inc. 

IPPS Inpatient Prospective Payment System 

MDS Minimum data set 

MFP Multifactor productivity 

MMA Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003, Public Law 108–173 

MSA Metropolitan statistical area 

NAICS North American Industrial 

Classification System 

NF Nursing facility 

OMB Office of Management and Budget 

OMRA Other Medicare Required 

Assessment 

PAMA Protecting Access to Medicare Act of 

2014, Public Law 113–93 

PPS Prospective Payment System 

RAI Resident assessment instrument 

RAVEN Resident assessment validation 

entry 


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RFA Regulatory Flexibility Act, Public Law 

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 CaseMix Classification System 

SCHIP State Children’s Health Insurance 

Program 

SNF Skilled nursing facility 

STM Staff time measurement 

STRIVE Staff time and resource intensity 

verification 

UMRA Unfunded Mandates Reform Act, 

Public Law 104–4 

I. Executive Summary 

A. Purpose 

This final rule updates the SNF 

prospective payment rates for FY 2015 

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, certain specified information 

relating to the payment update (see 

section II.C.). 

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 final 

rule reflect an update to the rates that 

we published in the SNF PPS final rule 

for FY 2014 (78 FR 47936) which 

reflects the SNF market basket index, 

adjusted by the forecast error correction, 

if applicable, and the multifactor 

productivity adjustment for FY 2015. 

C. Summary of Impacts 

Provision 

description Total transfers 

FY 2015 SNF PPS payment rate update .......... The overall economic impact of this final rule is an estimated increase of $750 million in aggregate payments to SNFs during FY 2015. 

II. Background 

A. Statutory Basis and Scope 

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). In 

addition, a detailed discussion of the 

legislative history of the SNF PPS is 

available online at http://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/SNFPPS/Downloads/

Legislative_History_07302013.pdf. 

As noted in section I.F. of that 

legislative history, on March 23, 2010, 

the Patient Protection and Affordable 

Care Act (Pub. L. 111–148) was enacted. 

Then, the Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152, enacted on March 30, 2010) 

amended certain provisions of Public 

Law 111–148 and certain sections of the 

Social Security Act and, in certain 

instances, included ‘‘freestanding’’ 

provisions. In this final rule, Public Law 

111–148 and Public Law 111–152 are 

collectively referred to as the 

‘‘Affordable Care Act.’’ In section IV.D.4 

of this final rule, we discuss one 

specific provision related to the 

Affordable Care Act involving Civil 

Money Penalties. 

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 facilityspecific rates for the upcoming FY. 

C. Required Annual Rate Updates 

Section 1888(e)(4)(E) of the Act 

requires the SNF PPS payment rates to 

be updated annually. The most recent 

annual update occurred in a final rule 

that set forth updates to the SNF PPS 

payment rates for FY 2014 (78 FR 

47936, August 6, 2013). We 

subsequently published two correction 

notices (78 FR 61202, October 3, 2013, 

and 79 FR 63, January 2, 2014) with 

respect to that final rule, as well as a 

notice that made corrections to the 

January 2, 2014 correction notice (79 FR 

1742, January 10, 2014). 

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 for these services during 

the upcoming FY. 

• The factors to be applied in making 

the area wage adjustment for these 

services. 

Along with other revisions discussed 

later in this preamble, this final rule 

provides the required annual updates to 

the per diem payment rates for SNFs for 

FY 2015. 

III. Summary of the Provisions of the 

FY 2015 SNF PPS Proposed Rule 

In the FY 2014 SNF PPS proposed 

rule (79 FR 25767), we proposed an 

update to the payment rates used under 

the PPS for SNFs for FY 2015. In 

addition, we proposed to adopt the most 

recent OMB statistical area delineations 

to identify a facility’s urban or rural 

status for the purpose of determining 

which set of rate tables would apply to 

the facility, and to determine the SNF 

PPS wage index including a proposed 1- 

year transition with a blended wage 

index for all providers for FY 2015. It 

also included a discussion of the SNF 

therapy payment research currently 

underway within CMS. The proposed 

rule also proposed a revision to policies 


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45630 Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Rules and Regulations 

related to the COT OMRA. The 

proposed rule included a discussion of 

a provision related to the Affordable 

Care Act involving Civil Money 

Penalties. Finally, the proposed rule 

included a discussion of observed 

trends related to therapy utilization 

among SNF providers and a discussion 

of accelerating health information 

exchange in SNFs. 

IV. Analysis of and Responses to Public 

Comments on the FY 2015 SNF PPS 

Proposed Rule 

In response to the publication of the 

FY 2015 SNF PPS proposed rule, we 

received 26 timely public comments 

from individuals, providers, 

corporations, government agencies, 

private citizens, trade associations, and 

major organizations. The following are 

brief summaries of each proposed 

provision, a summary of the public 

comments that we received related to 

that proposal, and our responses to the 

comments. 

A. General Comments on the FY 2015 

SNF PPS Proposed Rule 

In addition to the comments we 

received on the proposed rule’s 

discussion of specific aspects of the SNF 

PPS (which we address later in this final 

rule), commenters also submitted the 

following, more general observations on 

the payment system. A discussion of 

these comments, along with our 

responses, appears below. 

Comment: We received a few 

comments about the operational aspects 

of updating the subregulatory guidance 

contained in the MDS RAI manual, 

including the frequency of updates and 

process for announcing revisions. These 

commenters stated that CMS has made 

major revisions to the RAI manual with 

little or no notice to providers and 

without meaningful consultation with 

stakeholders. These commenters further 

stated that CMS should utilize a more 

formal process for announcing revisions 

and reinterpretations of the RAI manual. 

Response: We appreciate the 

commenters’ suggestions and we 

recognize that the MDS 3.0 is a complex 

assessment tool. We have provided 

education, clarification and training 

associated with the MDS 3.0, as well as 

discussion of potential revisions and 

updates to the RAI manual, at national 

training conferences, and postings to the 

MDS 3.0 and SNF PPS Web site. We 

also provide support to and consult 

with stakeholders through oral and 

written inquiries and, most notably, 

through our regular and special Open 

Door Forums. We are committed to 

continuing training on the MDS 3.0 and 

to ensuring that the update process is 

predictable for providers and gives 

providers sufficient notice of and time 

to discuss, incorporate and train on any 

revisions to the manual which may 

occur. We will take the commenters’ 

suggestions into consideration for future 

operational enhancements. 

Comment: Several commenters raised 

concerns regarding the compensation 

for Non-Therapy Ancillaries (NTAs), 

specifically for hospital-based SNFs 

within the SNF PPS. These commenters 

urged CMS to expedite the research 

necessary to develop a new model for 

NTA payment and to implement such a 

model shortly thereafter. 

Response: We appreciate the 

comments on this topic and the broad 

support for our research efforts on the 

development of a new NTA payment 

model. Furthermore, the comments we 

received provided a number of 

interesting and creative ideas for future 

consideration. We look forward to 

working with providers and 

stakeholders in the future as we 

continue to research possible 

refinements to address concerns with 

the SNF PPS, such as the SNF therapy 

research work discussed in section 

IV.D.2 of this final rule. 

Comment: One commenter 

recommended that we address the need 

for CMS to broaden the categories of 

healthcare professionals who may order 

patient diets. The commenter stated that 

such a change will improve patient 

health and allows SNFs to respond more 

quickly to resident nutritional needs. 

Response: We appreciate this 

comment, but note that the specific 

issues the commenter raised about who, 

within a SNF, may prescribe resident 

diets relate to the certification standards 

for long-term care facilities, and 

therefore, are beyond the scope of this 

final rule. We have, however, shared 

this comment with CMS’s survey and 

certification staff so that they can 

consider these suggestions as part of 

their ongoing review and refinement of 

our policies. 

Comment: One commenter supported 

CMS’s proposal to include several new 

outcomes measures as part of the FY 

2017 Hospital Value-Based Purchasing 

program. 

Response: We appreciate this 

comment, but note that this comment 

does not relate to the SNF PPS and 

involves a program that does not apply 

to SNFs. We have, however, shared this 

comment with CMS staff who work 

more closely with the Hospital ValueBased Purchasing program to consider 

as part of their ongoing review and 

refinement of their proposed policies. 

B. SNF PPS Rate Setting Methodology 

and FY 2015 Update 

In the FY 2015 SNF PPS proposed 

rule (79 FR 25770 through 25779), we 

outlined the basic methodology used to 

set the rates for the SNF PPS. We also 

discussed a proposal associated with 

our rate setting methodology, 

specifically a proposal to adopt the most 

recent Office of Management and 

Budget (OMB) statistical area 

delineations to identify a facility’s urban 

or rural status for the purpose of 

determining which set of rate tables 

would apply to the facility. Our 

discussion of the rate setting 

methodology, our proposed changes 

associated with this methodology, and 

the comments, along with our 

responses, on these proposals appear 

below. 

1. 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 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 


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Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Rules and Regulations 45631 

costs by a wage index to reflect 

geographic variations in wages. 

2. SNF Market Basket Update 

a. 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 2014 (78 

FR 47939 through 47946), we revised 

and rebased the market basket, which 

included updating the base year from 

FY 2004 to FY 2010. 

For the FY 2015 final rule, the FY 

2010-based SNF market basket growth 

rate is estimated to be 2.5 percent, 

which is based on the IHS Global 

Insight, Inc. (IGI) second quarter 2014 

forecast with historical data through 

first quarter 2014. In section IV.B.2.e. of 

this final rule, we discuss the specific 

application of this adjustment to the 

forthcoming annual update of the SNF 

PPS payment rates. 

b. 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 final rule, 

we use the percentage change in the 

SNF market basket index to compute the 

update factor for FY 2015. This is based 

on the IGI second quarter 2014 forecast 

(with historical data through the first 

quarter 2014) of the FY 2015 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 final rule. As discussed in 

sections IV.B.2.c. and IV.B.2.d. of this 

final rule, this market basket percentage 

change would be reduced by the 

forecast error correction (as described in 

§ 413.337(d)(2)) if applicable, and by the 

multifactor productivity adjustment as 

required by section 1888(e)(5)(B)(ii) of 

the Act. Finally, as discussed in section 

II.B. of this final rule, we no longer 

compute update factors to adjust a 

facility-specific portion of the SNF PPS 

rates, because the initial three-phase 

transition period from facility-specific 

to full federal rates that started with cost 

reporting periods beginning in July 1998 

has expired. 

c. 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 2013 (the most recently 

available FY for which there is final 

data), the estimated increase in the 

market basket index was 2.5 percentage 

points, while the actual increase for FY 

2013 was 2.2 percentage points, 

resulting in the actual increase being 0.3 

percentage point lower than the 

estimated increase. Accordingly, as the 

difference between the estimated and 

actual amount of change in the market 

basket index does not exceed the 0.5 

percentage point threshold, the payment 

rates for FY 2015 do not include a 

forecast error adjustment. Table 1 shows 

the forecasted and actual market basket 

amounts for FY 2013. 

TABLE 1—DIFFERENCE BETWEEN THE FORECASTED AND ACTUAL MARKET BASKET INCREASES FOR FY 2013 

Index 

Forecasted 

FY 2013 

increase * 

Actual 

FY 2013 

increase ** 

FY 2013 

difference 

SNF .................................................................................................................................. 2.5 2.2 ¥0.3 

* Published in Federal Register; based on second quarter 2012 IGI forecast (2004-based index). 

** Based on the second quarter 2014 IHS Global Insight forecast, with historical data through the first quarter 2014 (2004-based index). 

d. 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, 

cost-reporting period, or other annual 

period)’’ (the MFP adjustment). The 

Bureau of Labor Statistics (BLS) is the 

agency that publishes the official 

measure of private nonfarm business 

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). 


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i. 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.’’ 

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 percentage calculated under 

section 1888(e)(5)(B)(i) of the Act results 

in an MFP-adjusted market basket 

percentage that is less than zero, then 

the annual update to the unadjusted 

federal per diem rates under section 

1888(e)(4)(E)(ii) of the Act would be 

negative, and such rates would decrease 

relative to the prior FY. 

For the FY 2015 update, the MFP 

adjustment is calculated as the 10-year 

moving average of changes in MFP for 

the period ending September 30, 2015, 

which is 0.5 percent. Consistent with 

section 1888(e)(5)(B)(i) of the Act and 

§ 413.337(d)(2) of the regulations, the 

market basket percentage for FY 2015 

for the SNF PPS is based on IGI’s second 

quarter 2014 forecast of the SNF market 

basket update, and is estimated to be 2.5 

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, 2015) of 

0.5 percentage point, which is 

calculated as described above and based 

on IGI’s second quarter 2014 forecast. 

The resulting MFP-adjusted SNF market 

basket update is equal to 2.0 percent, or 

2.5 percent less 0.5 percentage point. 

e. Market Basket Update Factor for FY 

2015 

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 

2015 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, 2013 through 

September 30, 2014 to the average 

market basket level for the period of 

October 1, 2014 through September 30, 

2015. This process yields an update 

factor of 2.5 percent. As further 

explained in section IV.B.2.c. of this 

final rule, as applicable, we adjust the 

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. For FY 2013 

(the most recently available FY for 

which there is final data), the difference 

between the forecasted SNF market 

basket percentage change and the actual 

SNF market basket percentage change 

does not exceed 0.5 percentage point, so 

the FY 2015 market basket of 2.5 

percent would not be adjusted by the 

applicable difference. In addition, for 

FY 2015, section 1888(e)(5)(B)(ii) 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, 2015) of 0.5 percentage 

point, as described in section IV.B.2.d. 

of this final rule. The resulting MFPadjusted SNF market basket update is 

equal to 2.0 percent, or 2.5 percent less 

0.5 percentage point. 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 2015 from average prices 

for FY 2014. 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 2015, prior to 

adjustment for case-mix. 

We proposed in the FY 2015 SNF PPS 

proposed rule (79 FR 25772) that while 

we would continue to compute and 

apply separate federal per diem rates for 

SNFs located in urban and rural areas as 

we have in the past, beginning on 

October 1, 2014 we would use the 

revised OMB statistical area 

delineations discussed in section IV.D.1 

of this final rule to identify a facility’s 

urban or rural status for the purpose of 

determining which set of rate tables 

would apply to a facility. As noted in 

that discussion, we believe that the most 

current OMB delineations more 

accurately reflect the contemporary 

urban and rural nature of areas across 

the country, and that use of such 

delineations allows us to determine 

more accurately the appropriate rate 

tables to apply under the SNF PPS. 

Thus, we believe it is appropriate to use 

the most current OMB delineations for 

this purpose, in order to enhance the 

accuracy of payments under the SNF 

PPS. We did not receive any comments 

on this proposal. Therefore, for the 

reasons discussed above, we are 

finalizing our proposal to use the 

revised OMB delineations discussed in 

section IV.D.1 of this final rule to 

identify a facility’s urban or rural status 

for the purpose of determining which 

set of rate tables will apply to a facility 

beginning on October 1, 2014. 

TABLE 2—FY 2015 UNADJUSTED FEDERAL RATE PER DIEM URBAN

Rate component Nursing— 

case-mix 

Therapy— 

case-mix 

Therapy—noncase-mix Non-case-mix 

Per Diem Amount ............................................................................................ $169.28 $127.51 $16.79 $86.39 

TABLE 3—FY 2015 UNADJUSTED FEDERAL RATE PER DIEM RURAL

Rate component Nursing— 

case-mix 

Therapy— 

case-mix 

Therapy—noncase-mix Non-case-mix 

Per Diem Amount ............................................................................................ $161.72 $147.02 $17.94 $87.99 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Rules and Regulations 45633 

3. Case-Mix Adjustment 

Under section 1888(e)(4)(G)(i) of the 

Act, the federal rate also incorporates an 

adjustment to account for facility casemix, 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 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.C.1. of this 

final 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 Web site 

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, 

Improvement, and Modernization Act of 

2003 (MMA, Pub. L. 108–173) 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 2012 

data, we identified fewer than 4,355 

SNF residents with a diagnosis code of 

042 (Human Immunodeficiency Virus 

(HIV) Infection). For FY 2015, an urban 

facility with a resident with AIDS in 

RUG–IV group ‘‘HC2’’ would have a 

case-mix adjusted per diem payment of 

$423.12 (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 per diem payment of 

approximately $964.71. 

Currently, we use the International 

Classification of Diseases, 9th revision, 

Clinical Modification (ICD–9–CM) code 

042 to identify those residents for whom 

it is appropriate to apply the AIDS addon established by section 511 of the 

MMA. In this context, we note that the 

Department published a final rule in the 

September 5, 2012 Federal Register (77 

FR 54664) which requires us to stop 

using ICD–9–CM on September 30, 

2014, and begin using the International 

Classification of Diseases, 10th revision, 

Clinical Modification (ICD–10–CM), on 

October 1, 2014. Regarding the abovereferenced ICD–9–CM diagnosis code of 

042, in the FY 2014 SNF PPS proposed 

rule (78 FR 26444, May 6, 2013), we 

proposed to transition to the equivalent 

ICD–10–CM diagnosis code of B20 upon 

the overall conversion to ICD–10–CM on 

October 1, 2014, and we subsequently 

finalized that proposal in the FY 2014 

SNF PPS final rule (78 FR 47951 

through 47952). 

However, on April 1, 2014, the 

Protecting Access to Medicare Act of 

2014 (PAMA) (Pub. L. 113–93) was 

enacted. Section 212 of PAMA, titled 

‘‘Delay in Transition from ICD–9 to 

ICD–10 Code Sets,’’ provides that ‘‘[t]he 

Secretary of Health and Human Services 

may not, prior to October 1, 2015, adopt 

ICD–10 code sets as the standard for 

code sets under section 1173(c) of the 

Social Security Act (42 U.S.C. 1320d– 

2(c)) and section 162.1002 of title 45, 

Code of Federal Regulations.’’ In light of 

PAMA, in the FY 2015 SNF PPS 

proposed rule, we stated that the 

effective date of the change from ICD– 

9–CM code 042 to ICD–10–CM code B20 

for purposes of applying the AIDS addon would be the date when ICD–10–CM 

becomes the required medical data code 

set for use on Medicare SNF claims and 

that, until that time, we would continue 

to use ICD–9–CM code 042 for this 

purpose. On May 1, 2014, the 

Department announced that, in light of 

section 212 of PAMA, ‘‘the U.S. 

Department of Health and Human 

Services expects to release an interim 

final rule in the near future that will 

include a new compliance date that 

would require the use of ICD–10 

beginning October 1, 2015. The rule will 

also require HIPAA covered entities to 

continue to use ICD–9–CM through 

September 30, 2015.’’ The Department 

has not yet published the interim final 

rule, however, we are proceeding in 

accordance with the announcement. 

Therefore, the effective date of the 

change from ICD–9–CM code 042 to 

ICD–10–CM code B20 for purposes of 

applying the AIDS add-on is October 1, 

2015. Until that time, we will continue 

to use ICD–9–CM code 042 for this 

purpose. 


emcdonald on DSK67QTVN1PROD with RULES2
45634 Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Rules and Regulations 

Under section 1888(e)(4)(H), each 

update of the payment rates must 

include the case-mix classification 

methodology applicable for the 

upcoming FY. The payment rates set 

forth in this final rule reflect the use of 

the RUG–IV case-mix classification 

system from October 1, 2014, through 

September 30, 2015. We list the casemix adjusted RUG–IV payment rates, 

provided separately for urban and rural 

SNFs, in Tables 4 and 5 with 

corresponding case-mix values. As 

discussed above, we will use the revised 

OMB delineations in order to identify a 

facility’s urban or rural status for the 

purpose of determining which set of rate 

tables will apply to the facility 

beginning on October 1, 2014. These 

tables do not reflect the add-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 index 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 $451.98 $238.44 ........................ $86.39 $776.81 

RUL .............................. 2.57 1.87 435.05 238.44 ........................ 86.39 759.88 

RVX .............................. 2.61 1.28 441.82 163.21 ........................ 86.39 691.42 

RVL .............................. 2.19 1.28 370.72 163.21 ........................ 86.39 620.32 

RHX .............................. 2.55 0.85 431.66 108.38 ........................ 86.39 626.43 

RHL .............................. 2.15 0.85 363.95 108.38 ........................ 86.39 558.72 

RMX ............................. 2.47 0.55 418.12 70.13 ........................ 86.39 574.64 

RML .............................. 2.19 0.55 370.72 70.13 ........................ 86.39 527.24 

RLX .............................. 2.26 0.28 382.57 35.70 ........................ 86.39 504.66 

RUC ............................. 1.56 1.87 264.08 238.44 ........................ 86.39 588.91 

RUB .............................. 1.56 1.87 264.08 238.44 ........................ 86.39 588.91 

RUA .............................. 0.99 1.87 167.59 238.44 ........................ 86.39 492.42 

RVC .............................. 1.51 1.28 255.61 163.21 ........................ 86.39 505.21 

RVB .............................. 1.11 1.28 187.90 163.21 ........................ 86.39 437.50 

RVA .............................. 1.10 1.28 186.21 163.21 ........................ 86.39 435.81 

RHC ............................. 1.45 0.85 245.46 108.38 ........................ 86.39 440.23 

RHB .............................. 1.19 0.85 201.44 108.38 ........................ 86.39 396.21 

RHA .............................. 0.91 0.85 154.04 108.38 ........................ 86.39 348.81 

RMC ............................. 1.36 0.55 230.22 70.13 ........................ 86.39 386.74 

RMB ............................. 1.22 0.55 206.52 70.13 ........................ 86.39 363.04 

RMA ............................. 0.84 0.55 142.20 70.13 ........................ 86.39 298.72 

RLB .............................. 1.50 0.28 253.92 35.70 ........................ 86.39 376.01 

RLA .............................. 0.71 0.28 120.19 35.70 ........................ 86.39 242.28 

ES3 .............................. 3.58 ........................ 606.02 ........................ $16.79 86.39 709.20 

ES2 .............................. 2.67 ........................ 451.98 ........................ 16.79 86.39 555.16 

ES1 .............................. 2.32 ........................ 392.73 ........................ 16.79 86.39 495.91 

HE2 .............................. 2.22 ........................ 375.80 ........................ 16.79 86.39 478.98 

HE1 .............................. 1.74 ........................ 294.55 ........................ 16.79 86.39 397.73 

HD2 .............................. 2.04 ........................ 345.33 ........................ 16.79 86.39 448.51 

HD1 .............................. 1.60 ........................ 270.85 ........................ 16.79 86.39 374.03 

HC2 .............................. 1.89 ........................ 319.94 ........................ 16.79 86.39 423.12 

HC1 .............................. 1.48 ........................ 250.53 ........................ 16.79 86.39 353.71 

HB2 .............................. 1.86 ........................ 314.86 ........................ 16.79 86.39 418.04 

HB1 .............................. 1.46 ........................ 247.15 ........................ 16.79 86.39 350.33 

LE2 ............................... 1.96 ........................ 331.79 ........................ 16.79 86.39 434.97 

LE1 ............................... 1.54 ........................ 260.69 ........................ 16.79 86.39 363.87 

LD2 ............................... 1.86 ........................ 314.86 ........................ 16.79 86.39 418.04 

LD1 ............................... 1.46 ........................ 247.15 ........................ 16.79 86.39 350.33 

LC2 ............................... 1.56 ........................ 264.08 ........................ 16.79 86.39 367.26 

LC1 ............................... 1.22 ........................ 206.52 ........................ 16.79 86.39 309.70 

LB2 ............................... 1.45 ........................ 245.46 ........................ 16.79 86.39 348.64 

LB1 ............................... 1.14 ........................ 192.98 ........................ 16.79 86.39 296.16 

CE2 .............................. 1.68 ........................ 284.39 ........................ 16.79 86.39 387.57 

CE1 .............................. 1.50 ........................ 253.92 ........................ 16.79 86.39 357.10 

CD2 .............................. 1.56 ........................ 264.08 ........................ 16.79 86.39 367.26 

CD1 .............................. 1.38 ........................ 233.61 ........................ 16.79 86.39 336.79 

CC2 .............................. 1.29 ........................ 218.37 ........................ 16.79 86.39 321.55 

CC1 .............................. 1.15 ........................ 194.67 ........................ 16.79 86.39 297.85 

CB2 .............................. 1.15 ........................ 194.67 ........................ 16.79 86.39 297.85 

CB1 .............................. 1.02 ........................ 172.67 ........................ 16.79 86.39 275.85 

CA2 .............................. 0.88 ........................ 148.97 ........................ 16.79 86.39 252.15 

CA1 .............................. 0.78 ........................ 132.04 ........................ 16.79 86.39 235.22 

BB2 .............................. 0.97 ........................ 164.20 ........................ 16.79 86.39 267.38 

BB1 .............................. 0.90 ........................ 152.35 ........................ 16.79 86.39 255.53 

BA2 .............................. 0.70 ........................ 118.50 ........................ 16.79 86.39 221.68 

BA1 .............................. 0.64 ........................ 108.34 ........................ 16.79 86.39 211.52 

PE2 .............................. 1.50 ........................ 253.92 ........................ 16.79 86.39 357.10 

PE1 .............................. 1.40 ........................ 236.99 ........................ 16.79 86.39 340.17 

PD2 .............................. 1.38 ........................ 233.61 ........................ 16.79 86.39 336.79 

PD1 .............................. 1.28 ........................ 216.68 ........................ 16.79 86.39 319.86 

PC2 .............................. 1.10 ........................ 186.21 ........................ 16.79 86.39 289.39 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Rules and Regulations 45635 

TABLE 4—RUG–IV CASE-MIX ADJUSTED FEDERAL RATES AND ASSOCIATED INDEXES URBAN—Continued 

RUG–IV category Nursing 

index 

Therapy 

index 

Nursing 

component 

Therapy 

component 

Non-case mix 

therapy comp 

Non-case mix 

component 

Total 

rate 

PC1 .............................. 1.02 ........................ 172.67 ........................ 16.79 86.39 275.85 

PB2 .............................. 0.84 ........................ 142.20 ........................ 16.79 86.39 245.38 

PB1 .............................. 0.78 ........................ 132.04 ........................ 16.79 86.39 235.22 

PA2 .............................. 0.59 ........................ 99.88 ........................ 16.79 86.39 203.06 

PA1 .............................. 0.54 ........................ 91.41 ........................ 16.79 86.39 194.59 

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 $431.79 $274.93 ........................ $87.99 $794.71 

RUL .............................. 2.57 1.87 415.62 274.93 ........................ 87.99 778.54 

RVX .............................. 2.61 1.28 422.09 188.19 ........................ 87.99 698.27 

RVL .............................. 2.19 1.28 354.17 188.19 ........................ 87.99 630.35 

RHX .............................. 2.55 0.85 412.39 124.97 ........................ 87.99 625.35 

RHL .............................. 2.15 0.85 347.70 124.97 ........................ 87.99 560.66 

RMX ............................. 2.47 0.55 399.45 80.86 ........................ 87.99 568.30 

RML .............................. 2.19 0.55 354.17 80.86 ........................ 87.99 523.02 

RLX .............................. 2.26 0.28 365.49 41.17 ........................ 87.99 494.65 

RUC ............................. 1.56 1.87 252.28 274.93 ........................ 87.99 615.20 

RUB .............................. 1.56 1.87 252.28 274.93 ........................ 87.99 615.20 

RUA .............................. 0.99 1.87 160.10 274.93 ........................ 87.99 523.02 

RVC .............................. 1.51 1.28 244.20 188.19 ........................ 87.99 520.38 

RVB .............................. 1.11 1.28 179.51 188.19 ........................ 87.99 455.69 

RVA .............................. 1.10 1.28 177.89 188.19 ........................ 87.99 454.07 

RHC ............................. 1.45 0.85 234.49 124.97 ........................ 87.99 447.45 

RHB .............................. 1.19 0.85 192.45 124.97 ........................ 87.99 405.41 

RHA .............................. 0.91 0.85 147.17 124.97 ........................ 87.99 360.13 

RMC ............................. 1.36 0.55 219.94 80.86 ........................ 87.99 388.79 

RMB ............................. 1.22 0.55 197.30 80.86 ........................ 87.99 366.15 

RMA ............................. 0.84 0.55 135.84 80.86 ........................ 87.99 304.69 

RLB .............................. 1.50 0.28 242.58 41.17 ........................ 87.99 371.74 

RLA .............................. 0.71 0.28 114.82 41.17 ........................ 87.99 243.98 

ES3 .............................. 3.58 ........................ 578.96 ........................ 17.94 87.99 684.89 

ES2 .............................. 2.67 ........................ 431.79 ........................ 17.94 87.99 537.72 

ES1 .............................. 2.32 ........................ 375.19 ........................ 17.94 87.99 481.12 

HE2 .............................. 2.22 ........................ 359.02 ........................ 17.94 87.99 464.95 

HE1 .............................. 1.74 ........................ 281.39 ........................ 17.94 87.99 387.32 

HD2 .............................. 2.04 ........................ 329.91 ........................ 17.94 87.99 435.84 

HD1 .............................. 1.60 ........................ 258.75 ........................ 17.94 87.99 364.68 

HC2 .............................. 1.89 ........................ 305.65 ........................ 17.94 87.99 411.58 

HC1 .............................. 1.48 ........................ 239.35 ........................ 17.94 87.99 345.28 

HB2 .............................. 1.86 ........................ 300.80 ........................ 17.94 87.99 406.73 

HB1 .............................. 1.46 ........................ 236.11 ........................ 17.94 87.99 342.04 

LE2 ............................... 1.96 ........................ 316.97 ........................ 17.94 87.99 422.90 

LE1 ............................... 1.54 ........................ 249.05 ........................ 17.94 87.99 354.98 

LD2 ............................... 1.86 ........................ 300.80 ........................ 17.94 87.99 406.73 

LD1 ............................... 1.46 ........................ 236.11 ........................ 17.94 87.99 342.04 

LC2 ............................... 1.56 ........................ 252.28 ........................ 17.94 87.99 358.21 

LC1 ............................... 1.22 ........................ 197.30 ........................ 17.94 87.99 303.23 

LB2 ............................... 1.45 ........................ 234.49 ........................ 17.94 87.99 340.42 

LB1 ............................... 1.14 ........................ 184.36 ........................ 17.94 87.99 290.29 

CE2 .............................. 1.68 ........................ 271.69 ........................ 17.94 87.99 377.62 

CE1 .............................. 1.50 ........................ 242.58 ........................ 17.94 87.99 348.51 

CD2 .............................. 1.56 ........................ 252.28 ........................ 17.94 87.99 358.21 

CD1 .............................. 1.38 ........................ 223.17 ........................ 17.94 87.99 329.10 

CC2 .............................. 1.29 ........................ 208.62 ........................ 17.94 87.99 314.55 

CC1 .............................. 1.15 ........................ 185.98 ........................ 17.94 87.99 291.91 

CB2 .............................. 1.15 ........................ 185.98 ........................ 17.94 87.99 291.91 

CB1 .............................. 1.02 ........................ 164.95 ........................ 17.94 87.99 270.88 

CA2 .............................. 0.88 ........................ 142.31 ........................ 17.94 87.99 248.24 

CA1 .............................. 0.78 ........................ 126.14 ........................ 17.94 87.99 232.07 

BB2 .............................. 0.97 ........................ 156.87 ........................ 17.94 87.99 262.80 

BB1 .............................. 0.90 ........................ 145.55 ........................ 17.94 87.99 251.48 

BA2 .............................. 0.70 ........................ 113.20 ........................ 17.94 87.99 219.13 

BA1 .............................. 0.64 ........................ 103.50 ........................ 17.94 87.99 209.43 

PE2 .............................. 1.50 ........................ 242.58 ........................ 17.94 87.99 348.51 

PE1 .............................. 1.40 ........................ 226.41 ........................ 17.94 87.99 332.34 

PD2 .............................. 1.38 ........................ 223.17 ........................ 17.94 87.99 329.10 


emcdonald on DSK67QTVN1PROD with RULES2
45636 Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Rules and Regulations 

TABLE 5—RUG–IV CASE-MIX ADJUSTED FEDERAL RATES AND ASSOCIATED INDEXES RURAL—Continued 

RUG–IV 

category 

Nursing 

index 

Therapy 

index 

Nursing 

component 

Therapy 

component 

Non-case mix 

therapy comp 

Non-case mix 

component 

Total 

rate 

PD1 .............................. 1.28 ........................ 207.00 ........................ 17.94 87.99 312.93 

PC2 .............................. 1.10 ........................ 177.89 ........................ 17.94 87.99 283.82 

PC1 .............................. 1.02 ........................ 164.95 ........................ 17.94 87.99 270.88 

PB2 .............................. 0.84 ........................ 135.84 ........................ 17.94 87.99 241.77 

PB1 .............................. 0.78 ........................ 126.14 ........................ 17.94 87.99 232.07 

PA2 .............................. 0.59 ........................ 95.41 ........................ 17.94 87.99 201.34 

PA1 .............................. 0.54 ........................ 87.33 ........................ 17.94 87.99 193.26 

4. 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. In the FY 2015 SNF PPS 

proposed rule (79 FR 25775), we 

proposed to continue this practice for 

FY 2015, as we continue to believe that 

in the absence of SNF-specific wage 

data, using the hospital inpatient wage 

index data is appropriate and reasonable 

for the SNF PPS. As explained in the 

update notice for FY 2005 (69 FR 

45786), the SNF PPS does not use the 

hospital area wage index’s occupational 

mix adjustment, as this adjustment 

serves specifically to define the 

occupational categories more clearly in 

a hospital setting; moreover, the 

collection of the occupational wage data 

also excludes any wage data related to 

SNFs. Therefore, we believe that using 

the updated hospital inpatient wage 

data exclusive of the occupational mix 

adjustment continues to be appropriate 

for SNF payments. For FY 2015, the 

updated wage data are for hospital cost 

reporting periods beginning on or after 

October 1, 2010 and before October 1, 

2011 (FY 2011 cost report data). 

We note that section 315 of the 

Medicare, Medicaid, and SCHIP 

Benefits Improvement and Protection 

Act of 2000 (BIPA) (Pub. L. 106–554, 

enacted 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. 

In the FY 2015 SNF PPS proposed 

rule (79 FR 25775 through 25776), we 

also proposed to continue to use the 

same methodology discussed in the SNF 

PPS final rule for FY 2008 (72 FR 43423) 

to address those geographic areas in 

which there are no hospitals, and thus, 

no hospital wage index data on which 

to base the calculation of the FY 2015 

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 2015, there 

are no rural geographic areas without 

hospitals for which we would apply this 

policy. 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 nonurban areas, this methodology would 

produce a wage index for rural Puerto 

Rico that is 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 2015, the 

only urban area without wage index 

data available is CBSA 25980, 

Hinesville-Fort Stewart, GA. We did not 

receive any comments on these 

proposals, and thus we will continue to 

use the same methodology discussed in 

the SNF PPS final rule for FY 2008 (72 

FR 43423) to address those geographic 

areas in which there are no hospitals, 

and thus, no hospital wage index data 

on which to base the calculation of the 

FY 2015 SNF PPS wage index. 

A discussion of the general comments 

that we received on the wage index 

adjustment to the federal rates, and our 

responses to those comments, appears 

below. Comments on the specific 

proposal to use revised OMB 

delineations as part of the wage index 

are discussed in section IV.D.1. of this 

final rule. 

Comment: Several commenters stated 

that hospital cost data may not be the 

most reliable resource when 

determining geographical differences in 

salary structure for skilled nursing 

facilities. These commenters also stated 

that, if CMS plans to continue using 

hospital cost data as the basis of SNF 

wage index adjustments, then CMS 

should consider adopting certain wage 

index policies in use under the IPPS, 

such as reclassification, because SNFs 

compete in a similar labor pool as acute 

care hospitals. Commenters stated that 

even if reclassification is not 

permissible, CMS should consider using 

the post-reclassification hospital wage 

data to influence SNF PPS wage index 

policy decisions. In addition, a few 

commenters recommended that CMS 

develop a SNF-specific wage index. 

Finally, a few commenters 

recommended that CMS attempt to 

smooth out the perceived volatility of 

annual wage index changes by 

implementing a floor and ceiling for 

annual changes to the wage index that 

are above or below a certain level. 

Response: Consistent with our 

previous responses to these recurring 

comments (most recently published in 

the FY 2014 SNF PPS final rule (78 FR 

47952)), developing a wage index that 

utilizes data specific to SNFs would 

require us to engage in a resourceintensive audit process. Also, we note 

that section 315 of BIPA authorized us 

to establish a geographic reclassification 

procedure that is specific to SNFs, but 

only after collecting the data necessary 

to establish a SNF-specific 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. Furthermore, we 

believe the collection of SNF-specific 

wage data would place a significant 

amount of additional burden on SNFs. 

As discussed above, we continue to 

believe that in the absence of SNFspecific wage data, using the prereclassified hospital inpatient wage data 


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(without the occupational mix 

adjustment) is appropriate and 

reasonable for the SNF PPS. 

Additionally, we believe that using 

post-reclassification inpatient hospital 

wage data to influence SNF PPS wage 

index policy decisions, as suggested by 

commenters, would not be appropriate 

as such reclassification data are specific 

to those hospitals making that request, 

which may or may not apply to a given 

SNF in a given instance. 

Furthermore, we do not believe it 

would be appropriate to establish a floor 

and ceiling for annual wage index 

changes which are above or below a 

given level. Any perceived volatility in 

the wage index would be based upon 

volatility in actual wages in that area, 

which is something outside of CMS’s 

control. As stated above, under section 

1888(e)(4)(G)(ii) of the Act and 

§ 413.337(a)(1)(ii) of the regulations, we 

adjust the SNF PPS rates to account for 

differences in area wage levels. We 

believe that applying a ceiling or floor 

to annual wage index changes would 

make the area wage index less reflective 

of the area wage levels. Additionally, we 

note that establishing an artificial 

ceiling for annual changes in the wage 

index could not only result in a wage 

index that does not accurately reflect 

the wage levels in the area, but would 

also have an adverse impact on those 

providers that would otherwise 

experience a larger increase in their 

wage index absent a ceiling. 

After considering the comments 

received, for the reasons discussed 

above and in the FY 2015 SNF PPS 

proposed rule (79 FR 25775), we are 

finalizing our proposal to continue to 

use the updated hospital inpatient wage 

data, exclusive of the occupational mix 

adjustment, to develop the SNF PPS 

wage index. For FY 2015, the updated 

wage data are for hospital cost reporting 

periods beginning on or after October 1, 

2010 and before October 1, 2011 (FY 

2011 cost report data). 

Once calculated, we apply the wage 

index adjustment to the labor-related 

portion of the federal rate, which is 

69.180 percent of the total rate. This 

percentage reflects the labor-related 

relative importance for FY 2015, using 

the FY 2010-based SNF market basket. 

Each year, we calculate a revised laborrelated 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. As 

discussed in section IV.B.2 of this final 

rule, for the FY 2014 SNF PPS update, 

we revised 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: Wages and salaries; 

employee benefits; 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 laborintensive); and a proportion of capitalrelated 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 2015. 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 2015 than the base 

year weights from the SNF market 

basket. 

We calculate the labor-related relative 

importance for FY 2015 in four steps. 

First, we compute the FY 2015 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 

2015 price index level for that cost 

category by the total market basket price 

index level. Third, we determine the FY 

2015 relative importance for each cost 

category by multiplying this ratio by the 

base year (FY 2010) weight. Finally, we 

add the FY 2015 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, and a portion of 

capital-related expenses) to produce the 

FY 2015 labor-related relative 

importance. Tables 6 and 7 show the 

RUG–IV case-mix adjusted federal rates 

by labor-related and non-labor-related 

components. As discussed previously, 

the new OMB delineations will be used 

to identify a facility’s urban or rural 

status for the purpose of determining 

which set of rate tables will apply to 

them beginning on October 1, 2014. 

Table 12 in section IV.D.1.c provides the 

FY 2015 labor-related share components 

based on the 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 ............................................................................................................................................. 776.81 $537.40 $239.41 

RUL .............................................................................................................................................. 759.88 525.68 234.20 

RVX .............................................................................................................................................. 691.42 478.32 213.10 

RVL .............................................................................................................................................. 620.32 429.14 191.18 

RHX ............................................................................................................................................. 626.43 433.36 193.07 

RHL .............................................................................................................................................. 558.72 386.52 172.20 

RMX ............................................................................................................................................. 574.64 397.54 177.10 

RML ............................................................................................................................................. 527.24 364.74 162.50 

RLX .............................................................................................................................................. 504.66 349.12 155.54 

RUC ............................................................................................................................................. 588.91 407.41 181.50 

RUB ............................................................................................................................................. 588.91 407.41 181.50 

RUA ............................................................................................................................................. 492.42 340.66 151.76 

RVC ............................................................................................................................................. 505.21 349.50 155.71 

RVB .............................................................................................................................................. 437.50 302.66 134.84 

RVA .............................................................................................................................................. 435.81 301.49 134.32 

RHC ............................................................................................................................................. 440.23 304.55 135.68 

RHB ............................................................................................................................................. 396.21 274.10 122.11 

RHA ............................................................................................................................................. 348.81 241.31 107.50 

RMC ............................................................................................................................................. 386.74 267.55 119.19 

RMB ............................................................................................................................................. 363.04 251.15 111.89 

RMA ............................................................................................................................................. 298.72 206.65 92.07 

RLB .............................................................................................................................................. 376.01 260.12 115.89 


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TABLE 6—RUG–IV CASE-MIX ADJUSTED FEDERAL RATES FOR URBAN SNFS BY LABOR AND NON-LABOR COMPONENT— 

Continued 

RUG–IV category Total 

rate 

Labor 

portion 

Non-labor 

portion 

RLA .............................................................................................................................................. 242.28 167.61 74.67 

ES3 .............................................................................................................................................. 709.20 490.62 218.58 

ES2 .............................................................................................................................................. 555.16 384.06 171.10 

ES1 .............................................................................................................................................. 495.91 343.07 152.84 

HE2 .............................................................................................................................................. 478.98 331.36 147.62 

HE1 .............................................................................................................................................. 397.73 275.15 122.58 

HD2 .............................................................................................................................................. 448.51 310.28 138.23 

HD1 .............................................................................................................................................. 374.03 258.75 115.28 

HC2 .............................................................................................................................................. 423.12 292.71 130.41 

HC1 .............................................................................................................................................. 353.71 244.70 109.01 

HB2 .............................................................................................................................................. 418.04 289.20 128.84 

HB1 .............................................................................................................................................. 350.33 242.36 107.97 

LE2 ............................................................................................................................................... 434.97 300.91 134.06 

LE1 ............................................................................................................................................... 363.87 251.73 112.14 

LD2 .............................................................................................................................................. 418.04 289.20 128.84 

LD1 .............................................................................................................................................. 350.33 242.36 107.97 

LC2 .............................................................................................................................................. 367.26 254.07 113.19 

LC1 .............................................................................................................................................. 309.70 214.25 95.45 

LB2 ............................................................................................................................................... 348.64 241.19 107.45 

LB1 ............................................................................................................................................... 296.16 204.88 91.28 

CE2 .............................................................................................................................................. 387.57 268.12 119.45 

CE1 .............................................................................................................................................. 357.10 247.04 110.06 

CD2 .............................................................................................................................................. 367.26 254.07 113.19 

CD1 .............................................................................................................................................. 336.79 232.99 103.80 

CC2 .............................................................................................................................................. 321.55 222.45 99.10 

CC1 .............................................................................................................................................. 297.85 206.05 91.80 

CB2 .............................................................................................................................................. 297.85 206.05 91.80 

CB1 .............................................................................................................................................. 275.85 190.83 85.02 

CA2 .............................................................................................................................................. 252.15 174.44 77.71 

CA1 .............................................................................................................................................. 235.22 162.73 72.49 

BB2 .............................................................................................................................................. 267.38 184.97 82.41 

BB1 .............................................................................................................................................. 255.53 176.78 78.75 

BA2 .............................................................................................................................................. 221.68 153.36 68.32 

BA1 .............................................................................................................................................. 211.52 146.33 65.19 

PE2 .............................................................................................................................................. 357.10 247.04 110.06 

PE1 .............................................................................................................................................. 340.17 235.33 104.84 

PD2 .............................................................................................................................................. 336.79 232.99 103.80 

PD1 .............................................................................................................................................. 319.86 221.28 98.58 

PC2 .............................................................................................................................................. 289.39 200.20 89.19 

PC1 .............................................................................................................................................. 275.85 190.83 85.02 

PB2 .............................................................................................................................................. 245.38 169.75 75.63 

PB1 .............................................................................................................................................. 235.22 162.73 72.49 

PA2 .............................................................................................................................................. 203.06 140.48 62.58 

PA1 .............................................................................................................................................. 194.59 134.62 59.97 

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 ............................................................................................................................................. 794.71 $549.78 $244.93 

RUL .............................................................................................................................................. 778.54 538.59 239.95 

RVX .............................................................................................................................................. 698.27 483.06 215.21 

RVL .............................................................................................................................................. 630.35 436.08 194.27 

RHX ............................................................................................................................................. 625.35 432.62 192.73 

RHL .............................................................................................................................................. 560.66 387.86 172.80 

RMX ............................................................................................................................................. 568.30 393.15 175.15 

RML ............................................................................................................................................. 523.02 361.83 161.19 

RLX .............................................................................................................................................. 494.65 342.20 152.45 

RUC ............................................................................................................................................. 615.20 425.60 189.60 

RUB ............................................................................................................................................. 615.20 425.60 189.60 

RUA ............................................................................................................................................. 523.02 361.83 161.19 

RVC ............................................................................................................................................. 520.38 360.00 160.38 

RVB .............................................................................................................................................. 455.69 315.25 140.44 

RVA .............................................................................................................................................. 454.07 314.13 139.94 

RHC ............................................................................................................................................. 447.45 309.55 137.90 

RHB ............................................................................................................................................. 405.41 280.46 124.95 

RHA ............................................................................................................................................. 360.13 249.14 110.99 

RMC ............................................................................................................................................. 388.79 268.96 119.83 


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TABLE 7—RUG–IV CASE-MIX ADJUSTED FEDERAL RATES FOR RURAL SNFS BY LABOR AND NON-LABOR COMPONENT— 

Continued 

RUG–IV category Total 

rate 

Labor 

portion 

Non-labor 

portion 

RMB ............................................................................................................................................. 366.15 253.30 112.85 

RMA ............................................................................................................................................. 304.69 210.78 93.91 

RLB .............................................................................................................................................. 371.74 257.17 114.57 

RLA .............................................................................................................................................. 243.98 168.79 75.19 

ES3 .............................................................................................................................................. 684.89 473.81 211.08 

ES2 .............................................................................................................................................. 537.72 371.99 165.73 

ES1 .............................................................................................................................................. 481.12 332.84 148.28 

HE2 .............................................................................................................................................. 464.95 321.65 143.30 

HE1 .............................................................................................................................................. 387.32 267.95 119.37 

HD2 .............................................................................................................................................. 435.84 301.51 134.33 

HD1 .............................................................................................................................................. 364.68 252.29 112.39 

HC2 .............................................................................................................................................. 411.58 284.73 126.85 

HC1 .............................................................................................................................................. 345.28 238.86 106.42 

HB2 .............................................................................................................................................. 406.73 281.38 125.35 

HB1 .............................................................................................................................................. 342.04 236.62 105.42 

LE2 ............................................................................................................................................... 422.90 292.56 130.34 

LE1 ............................................................................................................................................... 354.98 245.58 109.40 

LD2 .............................................................................................................................................. 406.73 281.38 125.35 

LD1 .............................................................................................................................................. 342.04 236.62 105.42 

LC2 .............................................................................................................................................. 358.21 247.81 110.40 

LC1 .............................................................................................................................................. 303.23 209.77 93.46 

LB2 ............................................................................................................................................... 340.42 235.50 104.92 

LB1 ............................................................................................................................................... 290.29 200.82 89.47 

CE2 .............................................................................................................................................. 377.62 261.24 116.38 

CE1 .............................................................................................................................................. 348.51 241.10 107.41 

CD2 .............................................................................................................................................. 358.21 247.81 110.40 

CD1 .............................................................................................................................................. 329.10 227.67 101.43 

CC2 .............................................................................................................................................. 314.55 217.61 96.94 

CC1 .............................................................................................................................................. 291.91 201.94 89.97 

CB2 .............................................................................................................................................. 291.91 201.94 89.97 

CB1 .............................................................................................................................................. 270.88 187.39 83.49 

CA2 .............................................................................................................................................. 248.24 171.73 76.51 

CA1 .............................................................................................................................................. 232.07 160.55 71.52 

BB2 .............................................................................................................................................. 262.80 181.81 80.99 

BB1 .............................................................................................................................................. 251.48 173.97 77.51 

BA2 .............................................................................................................................................. 219.13 151.59 67.54 

BA1 .............................................................................................................................................. 209.43 144.88 64.55 

PE2 .............................................................................................................................................. 348.51 241.10 107.41 

PE1 .............................................................................................................................................. 332.34 229.91 102.43 

PD2 .............................................................................................................................................. 329.10 227.67 101.43 

PD1 .............................................................................................................................................. 312.93 216.48 96.45 

PC2 .............................................................................................................................................. 283.82 196.35 87.47 

PC1 .............................................................................................................................................. 270.88 187.39 83.49 

PB2 .............................................................................................................................................. 241.77 167.26 74.51 

PB1 .............................................................................................................................................. 232.07 160.55 71.52 

PA2 .............................................................................................................................................. 201.34 139.29 62.05 

PA1 .............................................................................................................................................. 193.26 133.70 59.56 

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 what 

would otherwise be made if the wage 

adjustment had not been made. For FY 

2015 (federal rates effective October 1, 

2014), 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 2014 to the weighted 

average wage adjustment factor for FY 

2015, based on the blended wage index 

for FY 2015 as discussed later in this 

final rule. For this calculation, we use 

the same FY 2013 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 2015 is 1.0009. 

In the SNF PPS final rule for FY 2006 

(70 FR 45026, August 4, 2005), we 

adopted the changes discussed in the 

OMB Bulletin No. 03–04 (June 6, 2003), 

available online at 

www.whitehouse.gov/omb/bulletins/

b03-04.html, which announced revised 

definitions for MSAs, and the creation 

of micropolitan statistical areas and 

combined statistical areas. 

In adopting the CBSA geographic 

designations, we provided for a 1-year 

transition in FY 2006 with a blended 

wage index for all providers. For FY 

2006, the wage index for each provider 

consisted of a blend of 50 percent of the 

FY 2006 MSA-based wage index and 50 

percent of the FY 2006 CBSA-based 

wage index (both using FY 2002 

hospital data). We referred to the 

blended wage index as the FY 2006 SNF 

PPS transition wage index. As discussed 

in the SNF PPS final rule for FY 2006 

(70 FR 45041), since the expiration of 

this 1-year transition on September 30, 


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2006, we have used the full CBSA-based 

wage index values. 

On February 28, 2013, OMB issued 

OMB Bulletin No. 13–01, announcing 

revisions to the delineation of MSAs, 

Micropolitan Statistical Areas, and 

Combined Statistical Areas, and 

guidance on uses of the delineation of 

these areas. A copy of this bulletin is 

available online at http://

www.whitehouse.gov/sites/default/files/

omb/bulletins/2013/b-13-01.pdf. This 

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 on June 28, 

2010, in the 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. 

As discussed in the SNF PPS 

proposed rule for FY 2014 (78 FR 

26448), the changes made by the 

bulletin and their ramifications required 

extensive review by CMS before using 

them for the SNF PPS wage index. 

Having completed our assessment, in 

the FY 2015 SNF PPS proposed rule (79 

FR 25779 through 25786), we proposed 

changes to the SNF PPS wage index 

based on the newest OMB delineations, 

as described in OMB Bulletin No. 13– 

01, beginning in FY 2015, including a 

proposed 1-year transition with a 

blended wage index for FY 2015. These 

changes, and associated comments, are 

discussed further in section IV.D.1. of 

this final rule. The wage index 

applicable to FY 2015 is set forth in 

Table A available on the CMS Web site 

at http://cms.gov/Medicare/MedicareFee-for-Service-Payment/SNFPPS/

WageIndex.html. Table A provides a 

crosswalk between the FY 2015 wage 

index for a provider using the current 

OMB delineations in effect in FY 2014 

and the FY 2015 wage index using the 

revised OMB delineations, as well as the 

transition wage index values that will be 

in effect in FY 2015. 

5. 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 payment. We 

derive the Labor and Non-labor columns 

from Table 6. The wage index used in 

this example is based on the transition 

wage index, which may be found in 

Table A as referenced above. As 

illustrated in Table 8, SNF XYZ’s total 

PPS payment would equal $42,299.26. 

TABLE 8—ADJUSTED RATE COMPUTATION EXAMPLE SNF XYZ: LOCATED IN CEDAR RAPIDS, IA (URBAN CBSA 16300) 

WAGE INDEX: 0.8850 

[See Transition Wage Index in Table A] 1

RUG–IV group Labor Wage index Adjusted 

labor Non-labor Adjusted rate 

Percent 

adjustment 

Medicare 

days Payment 

RVX .................................. $478.32 0.885 $423.31 $213.10 $636.41 $636.41 14 $8,909.74 

ES2 .................................. 384.06 0.885 339.89 171.10 510.99 510.99 30 15,329.70 

RHA .................................. 241.31 0.885 213.56 107.50 321.06 321.06 16 5,136.96 

CC2 * ................................ 222.45 0.885 196.87 99.10 295.97 674.81 10 6,748.10 

BA2 .................................. 153.36 0.885 135.72 68.32 204.04 204.04 30 6,121.20 

100 $42,245.70 

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

1Available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html. 

C. Additional Aspects of the SNF PPS 

1. 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 casemix classification system discussed in 

section IV.B.3 of this final 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 casemix 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 2010 

SNF PPS final rule (74 FR 40341), 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 five-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 five-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 final 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; 


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• Very High Rehabilitation; 

• High Rehabilitation; 

• Medium Rehabilitation; 

• Low Rehabilitation; 

• Extensive Services; 

• Special Care High; 

• Special Care Low; and, 

• Clinically Complex. 

However, we note that this 

administrative presumption policy does 

not supersede the SNF’s responsibility 

to ensure that its decisions relating to 

level of care are appropriate and timely, 

including a review to confirm that the 

services prompting the beneficiary’s 

assignment to one of the upper 52 RUG– 

IV groups (which, in turn, serves to 

trigger the administrative presumption) 

are themselves medically necessary. As 

we explained in the FY 2000 SNF PPS 

final rule (64 FR 41667), 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. 

2. 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 

Medicare Administrative Contractor for 

almost all of the services that its 

residents receive during the course of a 

covered Part A stay. In addition, section 

1862(a)(18) 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). 

A detailed discussion of the 

legislative history of the consolidated 

billing provision is available on the SNF 

PPS Web site at http://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/SNFPPS/Downloads/

Legislative_History_07302013.pdf. In 

particular, 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 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, 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), and since that time, we have 

periodically invited the public to submit 

comments identifying codes that might 

meet the criteria for exclusion. In the FY 

2015 SNF PPS proposed rule (79 FR 

25779), we specifically invited 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, and we requested commenters to 

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. 

A discussion of the public comments 

received on this topic, along with our 

responses, appears below. 

Comment: One commenter 

recommended four particular 

chemotherapy drugs for exclusion. As 

described by Healthcare Common 

Procedure Coding System (HCPCS) code 

J8562, the first drug (fludarabine 

phosphate, 10 mg) is administered 

orally, but this same drug is already 

excluded under code J9185 when 

administered in a 50 mg dosage via 

intravenous injection. The commenter 

incorrectly characterized the second 

recommended drug, Revlimid 

(lenalidomide), as being assigned to 

code J3590 (whose descriptor is actually 

‘‘unclassified biologic’’); in fact, that 

drug, along with the commenter’s third 

recommended drug, Zytiga (Abiraterone 

acetate), is not assigned a specific code 


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of its own, but instead comes under the 

heading of one of the broader, ‘‘not 

otherwise specified’’ (NOS) codes, J8999 

(‘‘Prescription drug, oral, 

chemotherapeutic, NOS’’). The fourth 

chemotherapy drug that the commenter 

recommended for exclusion was code 

J9219 (Leuprolide acetate implant, 65 

mg). 

Response: Regarding the first drug 

that the commenter cited (code J8562), 

the only oral fludarabine product is 

Oforta®, which was withdrawn from the 

market in September 2011. In addition, 

Oforta® is marked as discontinued on 

the drugs@FDA Web site (see http://

www.accessdata.fda.gov/scripts/cder/

drugsatfda/index.cfm?fuseaction=

Search.Set_Current_Drug&ApplNo=

022273&DrugName=OFORTA&

ActiveIngred=FLUDARABINE%20

PHOSPHATE&SponsorApplicant=

SANOFI%20AVENTIS%20US&Product

MktStatus=3&goto=Search.DrugDetails), 

and there are no generics listed for the 

oral form. 

Regarding the comment involving two 

chemotherapy drugs that have not been 

assigned their own specific HCPCS 

codes, we note that the assignment of 

such a code has been an essential 

element of identifying certain 

chemotherapy drugs for exclusion ever 

since the BBRA first created the 

statutory exclusion list in 1999, as 

reflected in the drafting of the statutory 

provision itself as well as in our 

periodic solicitation of ‘‘codes’’ that 

might meet the criteria for exclusion. 

When the Congress previously enacted 

the original consolidated billing 

legislation in section 4432(b) of the 

BBA, chemotherapy drugs did not 

appear in the initial set of exclusions 

from this provision. Accordingly, all 

chemotherapy drugs were originally 

subject to consolidated billing, and none 

were separately billable under Part B 

when furnished to an SNF’s Part A 

resident. Then, in section 103 of the 

BBRA, the Congress excluded certain 

items and services involving 

chemotherapy and its administration 

from the SNF consolidated billing 

requirement, effective with items and 

services furnished on or after April 1, 

2000. However, this legislation did not 

categorically exclude all chemotherapy 

drugs from SNF consolidated billing; 

rather, as explained in the BBRA’s 

Conference Report, it specifically 

targeted those ‘‘high-cost, low 

probability’’ drugs that ‘‘. . . are not 

typically administered in a SNF, or are 

exceptionally expensive, or are given as 

infusions, thus requiring special staff 

expertise to administer’’ (H.R. Conf. 

Rep. No. 106–479 at 854). By contrast, 

other types of chemotherapy drugs that 

‘‘. . . are relatively inexpensive and are 

administered routinely in SNFs’’ were 

to remain subject to SNF consolidated 

billing. The approach that the Congress 

adopted to identify the individual 

chemotherapy drugs being designated 

for exclusion consisted of listing them 

by HCPCS code in the statute itself. 

Thus, a chemotherapy drug’s 

assignment to its own specific code has 

always served as the mechanism of 

designating that drug for exclusion, as 

well as the means by which the claims 

processing system is able to recognize 

that exclusion. This means that an NOS 

code such as J8999, which is broadly 

comprised of miscellaneous 

chemotherapy drugs ‘‘not otherwise 

specified’’ in the coding system, would 

be unsuitable for this function, as such 

a code would not allow for 

distinguishing the particular 

chemotherapy drug that is intended for 

exclusion from the various other, nonexcluded chemotherapy drugs also 

encompassed by that same code. 

Regarding code J9219 (Leuprolide 

acetate implant, 65 mg), we have noted 

previously in the FY 2008 SNF PPS 

final rule (72 FR 43431, August 3, 2007) 

that this drug 

. . . is a hormonal agent which is clinically 

analogous to other existing codes that have 

not been designated for exclusion; moreover, 

as this drug is used in treating the 

commonly-occurring condition of prostate 

cancer, we believe that it is unlikely to meet 

the criterion of ‘‘low probability’’ specified in 

the BBRA. 

Comment: One commenter reiterated 

recommendations that commenters had 

repeatedly urged us to adopt in previous 

years, by expanding the existing 

chemotherapy exclusion to encompass 

related drugs that are commonly 

administered in conjunction with 

chemotherapy to ameliorate the side 

effects of the chemotherapy drugs, and 

by excluding certain additional 

categories of services beyond those 

specified in the BBRA, such as the 

antibiotic drug, Vancomycin. Another 

commenter cited previously-expressed 

objections from numerous prior public 

comment periods regarding the limited 

scope of the existing administrative 

exclusion for certain specified types of 

high-intensity outpatient services 

(which applies only when such services 

are furnished in the outpatient hospital 

setting and not when furnished in other, 

freestanding settings), and stated that 

this exclusion should focus on the 

nature of the excluded service itself 

rather than on the location in which the 

service is furnished. 

Response: Regarding the exclusion of 

chemotherapy-related drugs, we have 

noted repeatedly in this and previous 

final rules—such as the FY 2014 SNF 

PPS final rule (78 FR 47958–59, August 

6, 2013)—that the BBRA authorizes us 

to identify additional service codes for 

exclusion only within those particular 

service categories (chemotherapy items; 

chemotherapy administration services; 

radioisotope services; and, customized 

prosthetic devices) that it has 

designated for this purpose, and does 

not give us the authority to exclude 

additional services which, though they 

may be related to one of the categories 

designated for exclusion, fall outside of 

the specified service categories 

themselves. Thus, while such drugs as 

anti-emetics (anti-nausea drugs) and 

drugs that stimulate the body’s 

production of blood cells to replace 

those destroyed by chemotherapy are 

commonly administered in conjunction 

with chemotherapy, they are not 

inherently chemotherapeutic in nature 

(that is, they do not actively destroy 

cancer cells) and, consequently, do not 

fall within the excluded chemotherapy 

category designated in the BBRA. 

Regarding the exclusion of the antibiotic 

drug Vancomycin, we noted in the FY 

2012 SNF PPS final rule that ‘‘. . . we 

decline to add to the exclusion list those 

services submitted by commenters that 

have already been considered and not 

excluded in previous years based on 

their being outside the particular service 

categories that the statute authorizes for 

exclusion’’ (76 FR 48531, August 8, 

2011). Such services would include 

antibiotics, as discussed previously in 

the FY 2004 SNF PPS final rule (68 FR 

46060, August 4, 2003). The statute does 

not provide the Secretary the authority 

to create additional categories of 

excluded services beyond those 

specified in the law. Finally, we note 

that the administrative exclusion for 

certain designated types of outpatient 

services does indeed consider the 

exceptionally intensive nature of the 

excluded services themselves, and in 

fact, as we have explained on numerous 

occasions (including, most recently, in 

the FY 2014 SNF PPS final rule (78 FR 

47957–58, August 6, 2013)), this is 

precisely the reason for limiting this 

exclusion to the outpatient hospital 

setting: 

. . . as we initially noted in the FY 2009 SNF 

PPS final rule (73 FR 46436, August 8, 2008) 

and then reiterated in a number of 

subsequent final rules, the repeated calls to 

expand the administrative exclusion for highintensity outpatient services in this manner 

would appear to reflect . . . a continued 

misunderstanding of the underlying purpose 

of this provision. As we have consistently 

noted in response to comments on this issue 

in previous years . . . and as also explained 

in MLN Matters article SE0432 . . . the 


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rationale for establishing this exclusion was 

to address those types of services that are so 

far beyond the normal scope of SNF care that 

they require the intensity of the hospital 

setting in order to be furnished safely and 

effectively. 

Moreover, we note that when the 

Congress enacted the consolidated 

billing exclusion for certain RHC and 

FQHC services in section 410 of the 

MMA, the accompanying legislative 

history’s description of present law 

acknowledged that the existing 

exclusions for exceptionally intensive 

outpatient services are specifically 

limited to ‘. . . certain outpatient 

services from a Medicare-participating 

hospital or critical access hospital . . .’ 

(emphasis added). (See the House Ways 

and Means Committee Report (H. Rep. 

No. 108–178, Part 2 at 209), and the 

Conference Report (H. Conf. Rep. No. 

108–391 at 641)). Therefore, these 

services are excluded from SNF 

consolidated billing only when 

furnished in the outpatient hospital or 

CAH setting, and not when furnished in 

other, freestanding (non-hospital or nonCAH) settings. 

Comment: One commenter reiterated 

the recurring objections to excluding 

certain high-intensity outpatient 

services only when furnished in the 

hospital setting, specifically in the 

context of radiation therapy. However, 

in addition to restating the same 

positions on this point that had already 

been advanced and addressed 

repeatedly in prior rules—most recently, 

in the FY 2014 SNF PPS final rule (78 

FR 47957–58, August 6, 2013)—the 

commenter also presented a new line of 

reasoning, stating that radiation therapy 

is, in fact, already encompassed by the 

existing exclusion for radioisotope 

services at section 1888(e)(2)(A)(iii)(IV) 

of the Act (which, as a statutory 

exclusion, is not restricted to only those 

services furnished in the outpatient 

hospital setting). The commenter 

explained that, of the three types of 

radiation treatment, two can involve the 

use of radioisotopes: Systemic 

radioisotopes administered through 

infusion or oral ingestion (which are 

already addressed in the 79000-series 

codes currently set forth in the statutory 

exclusion) and brachytherapy (sealed 

source radiation placed precisely in the 

area under treatment, as identified in a 

number of 77000-series codes). (The 

commenter noted in passing that the 

third type, external beam radiation 

therapy, at one time also utilized a 

radioisotope (Cobalt 60) as well, but 

added that this particular application is 

now ‘‘very rarely used,’’ as it ‘‘. . . 

poses increased radiation risk, 

decreased accuracy, and unfavorable 

treatment beam characteristics’’). In 

addition to the relatively narrow range 

of 79000-series codes that the statute 

currently excludes as radioisotope 

services, the commenter recommended 

excluding a substantially broader range 

of radiation oncology codes (primarily 

in the 77000 series), including a number 

of supplemental clinical treatment and 

planning codes that can be furnished 

not only in connection with a 

radioisotope procedure, but also more 

generally with various other forms of 

radiation treatment as well. In this 

context, the commenter cited our own 

characterization of the BBRA legislation 

as conferring on the Secretary ‘‘. . . the 

authority to designate additional, 

individual services for exclusion within 

each of the specified service categories’’ 

(emphasis added), and stated that the 

particular ‘‘specified service category’’ 

at issue here is actually the Part B 

benefit category at section 1861(s)(4) of 

the Act, which encompasses ‘‘X-ray, 

radium, and radioactive isotope therapy, 

including materials and services of 

technicians.’’ As a consequence, the 

commenter asserted that the existing 

statutory exclusion of ‘‘radioisotope 

services’’ should be considered to 

encompass every type of radiation 

treatment described in section 

1861(s)(4) of the Act, even in those 

instances where no actual use of 

radioisotopes is involved. 

Response: We note that two of the 

specific codes (79300 and 79403) that 

the commenter recommended adding to 

the list of excluded radioisotope 

services already appear as such in Major 

Category III.C (‘‘Radioisotopes and their 

Administration’’) of the online 

exclusion list, which is available in the 

2014 Part A MAC Update at http://

www.cms.gov/Medicare/Billing/

SNFConsolidatedBilling/2014-Part-AMAC-Update.html. Beyond that, we 

agree that the statutory exclusion of 

radioisotope services at section 

1888(e)(2)(A)(iii)(IV) of the Act is not 

confined to the fairly narrow range of 

79000-series codes specified in the law 

itself (identifying systemic radioisotopes 

administered through infusion or oral 

ingestion), but rather, is intended to 

encompass all of the ‘‘high-cost, low 

probability’’ forms of radiation 

treatment that actually involve the use 

of radioisotope services (which can 

include brachytherapy as well). 

Accordingly, we will make appropriate 

revisions in Major Category III.C to 

reflect this, by adding the 

brachytherapy-related code 77014 

(computed tomography guidance for 

placement of radiation therapy fields for 

brachytherapy), as well as the clinical 

brachytherapy code range of 77750 to 

77799. However, we are not adding 

external beam radiation therapy to this 

category of the exclusion list (even 

when it involves the use of the 

radioisotope Cobalt 60) in view of the 

commenter’s characterization of this 

particular radioisotope application in 

terms that would raise questions about 

whether it continues to be used as well 

as inherent questions about its safety 

and efficacy in this context. In our 

discussion of the statutory exclusion for 

chemotherapy services in the FY 2014 

SNF PPS final rule, we noted that ‘‘. . . 

when an otherwise excluded 

chemotherapy drug is prescribed for a 

use that does not involve treating 

cancer, the drug would not qualify as an 

excluded ‘chemotherapy’ drug in that 

instance’’ (78 FR 47958). Similarly, we 

note that to the extent any of the 

additional brachytherapy codes we now 

specify for exclusion as ‘‘radioisotope 

services’’ under section 

1888(e)(2)(A)(iii)(IV) of the Act could 

serve to identify non-radioisotope, as 

well as radioisotope procedures, the 

radioisotope exclusion under Major 

Category III.C would apply only in those 

particular instances that actually 

involve the use of radioisotopes. (Of 

course, even when associated with a 

non-radioisotope procedure, a particular 

code that also appears in Major Category 

I.D (‘‘Radiation Therapy’’) of the online 

exclusion list could still qualify for 

exclusion on that basis when furnished 

in the outpatient hospital setting.) 

We are also not adopting the 

commenter’s recommendation to 

exclude a number of supplemental but 

more generic clinical treatment and 

planning codes beyond those that 

specifically identify the actual 

performance of the radioisotope 

procedure itself. We decline to exclude 

such codes, not because these 

supplemental activities would never 

occur in connection with a radioisotope 

procedure (as this is indeed possible in 

certain instances), but rather, because 

they are unlikely in themselves to meet 

the ‘‘high-cost, low probability’’ 

threshold which determines those 

specific radioisotope services that 

qualify for exclusion under this 

provision. We believe that for 

treatments involving the use of 

radioisotope services, it is the actual 

performance of the radioisotope 

procedure itself (rather than any 

associated preparatory and planning 

activities) that would account for the 

preponderance of the cost, so that those 

separate, supplemental codes would be 

unlikely in themselves to meet the 

‘‘high-cost’’ threshold for exclusion. 


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Similarly, we do not believe that these 

supplemental codes would meet the 

‘‘low probability’’ criterion, as they are 

associated not just with radioisotope 

procedures alone, but also more 

generally with various other, more 

commonly used forms of radiation 

treatment. 

Moreover, we do not share the 

commenter’s view that the ‘‘specified 

service category’’ at issue here is the 

Part B benefit category at section 

1861(s)(4) of the Act, which provides for 

broader coverage of radiation treatment 

beyond just that involving the use of 

radioisotope services. We note that the 

statutory exclusion for ‘‘radioisotope 

services’’ at section 1888(e)(2)(A)(iii)(IV) 

of the Act stands in marked contrast, for 

example, to the ones for dialysis and 

erythropoietin (EPO) at section 

1888(e)(2)(A)(ii) of the Act, which 

consist of—and, in fact, are defined by— 

explicit cross-references to the 

corresponding Part B benefit categories 

appearing in sections 1861(s)(2)(F) and 

1861(s)(2)(O) of the Act, respectively. 

Conversely, the statutory exclusion at 

section 1888(e)(2)(A)(iii)(IV) of the Act 

does not contain such a cross-reference 

to the Part B benefit category at section 

1861(s)(4) of the Act for general 

coverage of radiation treatments, and 

thus, applies specifically to 

‘‘radioisotope services’’ alone. 

3. Payment for SNF-Level Swing-Bed 

Services 

Section 1883 of the Act permits 

certain small, rural hospitals to enter 

into a Medicare swing-bed agreement, 

under which the hospital can use its 

beds to provide either acute- or SNFlevel 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 this final rule 

for the SNF PPS also apply to all nonCAH 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 through 40357), 

effective October 1, 2010, non-CAH 

swing-bed rural hospitals are required to 

complete an MDS 3.0 swing-bed 

assessment which is limited to the 

required demographic, payment, and 

quality items. The latest changes in the 

MDS for swing-bed rural hospitals 

appear on the SNF PPS Web site at 

http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/index.html. We received no 

comments on this aspect of the 

proposed rule. 

D. Other Issues 

1. Proposed Changes to the SNF PPS 

Wage Index 

a. Background 

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, 

exclusive of the occupational mix 

adjustment, in developing a wage index 

to be applied to SNFs. As noted 

previously in section IV.B.4. of this final 

rule, we will continue that practice for 

FY 2015. The wage index used for the 

SNF PPS is calculated using the 

Inpatient Prospective Payment System 

(IPPS) wage index data on the basis of 

the labor market area in which the acute 

care hospital is located, but without 

taking into account geographic 

reclassifications under section 

1886(d)(8) and (d)(10) of the Act, and 

without applying the IPPS rural floor 

under section 4410 of the BBA, the IPPS 

imputed rural floor under 42 CFR 

412.64(h), the frontier state floor under 

section 1886(d)(3)(E)(iii) of the Act, and 

the outmigration adjustment under 

section 1886(d)(13) (see the FY 2006 

SNF PPS proposed rule (70 FR 29090 

through 29095)). The applicable SNF 

wage index value is assigned to a SNF 

on the basis of the labor market area in 

which the SNF is geographically 

located. Under section 1888(e)(4)(G)(ii) 

of the Act, beginning with FY 2006, we 

delineate labor market areas based on 

the Core-Based Statistical Areas 

(CBSAs) established by the Office of 

Management and Budget (OMB). The 

current statistical areas used in FY 2014 

are based on OMB standards published 

on December 27, 2000 (65 FR 82228) 

and Census 2000 data and Census 

Bureau population estimates for 2007 

and 2008 (OMB Bulletin No. 10–02). For 

a discussion of OMB’s delineations of 

CBSAs and our implementation of the 

CBSA definitions, we refer readers to 

the preambles of the FY 2006 SNF PPS 

proposed rule (70 FR 29090 through 

29096) and final rule (70 FR 45040 

through 45041). As stated in the FY 

2014 SNF PPS proposed rule (78 FR 

26448) and final rule (78 FR 47952), on 

February 28, 2013, OMB issued OMB 

Bulletin No. 13–01, which established 

revised delineations for Metropolitan 

Statistical Areas, Micropolitan 

Statistical Areas, and Combined 

Statistical Areas, and provided guidance 

on the use of the delineations of these 

statistical areas. A copy of this bulletin 

may be obtained at http://

www.whitehouse.gov/sites/default/files/

omb/bulletins/2013/b-13-01.pdf. 

According to OMB, ‘‘[t]his bulletin 

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 

on June 28, 2010, in the 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 OMB bulletin does contain a 

number of significant changes. For 

example, there are new CBSAs, urban 

counties that have become rural, rural 

counties that have become urban, and 

existing CBSAs that have been split 

apart. However, because the bulletin 

was not issued until February 28, 2013, 

with supporting data not available until 

later, and because the changes made by 

the bulletin and their ramifications 

needed to be extensively reviewed and 

verified, we were unable to undertake 

such a lengthy process before 

publication of the FY 2014 SNF PPS 

proposed rule and, thus, did not 

implement changes to the wage index 

for FY 2014 based on these new OMB 

delineations. In the FY 2014 SNF PPS 

final rule (78 FR 47952), we stated that 

we intended to propose changes to the 

wage index based on the most current 

OMB delineations in the FY 2015 SNF 

PPS proposed rule. As discussed in the 

FY 2015 SNF PPS proposed rule (79 FR 

25779 through 25786), we proposed to 

implement the new OMB delineations 

as described in the February 28, 2013 

OMB Bulletin No. 13–01, for the SNF 

PPS wage index beginning in FY 2015, 

because we believe it is important for 

the SNF PPS to use the latest OMB 

delineations available in order to 


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maintain a more accurate and up-to-date 

payment system that reflects the reality 

of population shifts and labor market 

conditions. While CMS and other 

stakeholders have explored potential 

alternatives to the current CBSA-based 

labor market system (we refer readers to 

the CMS Web site at www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/WageIndex-Reform.html), no consensus has 

been achieved regarding how best to 

implement a replacement system. As 

discussed in the FY 2005 IPPS final rule 

(69 FR 49027), ‘‘While we recognize that 

MSAs are not designed specifically to 

define labor market areas, we believe 

they do represent a useful proxy for this 

purpose.’’ We further believe that using 

the most current OMB delineations 

would increase the integrity of the SNF 

PPS wage index by creating a more 

accurate representation of geographic 

variation in wage levels. As noted in the 

FY 2015 SNF PPS proposed rule, we 

have reviewed our findings and impacts 

relating to the new OMB delineations, 

and have concluded that there is no 

compelling reason to further delay 

implementation (79 FR 25780). Because 

we believe that we have broad authority 

under section 1888(e)(4)(G)(ii) to 

determine the labor market areas used 

for the SNF PPS wage index, and 

because we also believe that the most 

current OMB delineations accurately 

reflect the local economies and wage 

levels of the areas in which hospitals are 

currently located, we proposed to 

implement the new OMB delineations 

as described in the February 28, 2013 

OMB Bulletin No. 13–01, for the SNF 

PPS wage index beginning in FY 2015. 

Further, we proposed a transition period 

of 1 year, during which a 50/50 blended 

wage index would be used for all 

providers in FY 2015, in order to 

mitigate the resulting short-term 

instability and negative impacts on 

certain providers and to provide time 

for providers to adjust to their new labor 

market delineations. Under this 

proposal, providers would receive 50 

percent of their FY 2015 wage index 

based on the new OMB delineations and 

50 percent of their FY 2015 wage index 

based on the labor market delineations 

for FY 2014 (both using FY 2011 

hospital wage data). In addition, we 

proposed to continue to treat 

Micropolitan Statistical Areas (referred 

to here as Micropolitan Areas) as rural 

and to include such areas in the 

calculation of the state’s rural wage 

index. As we explained in the FY 2015 

SNF PPS proposed rule (79 FR 25780), 

because Micropolitan Areas tend to 

encompass smaller population centers 

and contain fewer hospitals than MSAs, 

if Micropolitan Areas were to be treated 

as separate labor market areas, the SNF 

PPS wage index would include 

significantly more single-provider labor 

market areas. We further explained that 

recognizing Micropolitan Areas as 

independent labor markets would 

generally increase the potential for 

dramatic shifts in year-to-year wage 

index values because a single hospital 

(or group of hospitals) could have a 

disproportionate effect on the wage 

index of an area. Dramatic shifts in an 

area’s wage index from year to year are 

problematic and create instability in the 

payment levels from year to year, which 

could make fiscal planning for SNFs 

difficult if we adopted this approach. 

For a full discussion of our proposals 

and associated rationale related to the 

implementation of the new OMB 

delineations, we refer readers to the FY 

2015 SNF PPS proposed rule (79 FR 

25779 through 25786). The comments 

we received on the proposed changes to 

the wage index, including those 

comments on our proposed transition 

methodology, as well as responses to 

these comments, appear below. 

Comment: We received a few 

comments on the proposed 

implementation of the new OMB 

delineations for the SNF PPS wage 

index, primarily focused on how such 

changes would be implemented. 

Specifically, one commenter requested a 

2-year phase-in (rather than our 

proposed 1-year transition) for the 

proposed wage index changes. Other 

commenters stated that CMS should 

utilize similar implementation policies 

for the SNF wage index changes as were 

proposed for hospital providers in the 

FY 2015 Inpatient Prospective Payment 

System (IPPS) proposed rule (79 FR 

27978). More specifically, these 

commenters urged CMS to establish a 

three-year transition policy (similar to 

that proposed under IPPS) for urban 

SNFs that would become rural under 

the new OMB delineations. 

Response: As noted in the FY 2015 

SNF PPS proposed rule (79 FR 25785), 

we considered proposing a multi-year 

transition approach, whether it be 2, 3, 

or some other number of years, in order 

minimize the impact of the proposed 

wage index changes in a given year. 

However, we also believe this must be 

balanced against the need to ensure the 

most accurate payments possible based 

on the most current geographic 

delineations, which supports the use of 

a shorter transition to the revised OMB 

delineations. As discussed in the FY 

2015 SNF PPS proposed rule (79 FR 

25785), we believe that using the most 

current OMB delineations would 

increase the integrity of the SNF PPS 

wage index by creating a more accurate 

representation of geographic variation in 

wage levels. As such, we believe that 

utilizing a 1-year (rather than a 

multiple-year) transition with a blended 

wage index in FY 2015 would strike the 

best balance. 

It should also be noted that the 

implementation of the revised OMB 

delineations, which we are finalizing in 

this rule, sets SNF payments at a level 

that more accurately reflects the costs of 

labor in a SNF’s geographic area. 

Accordingly, under this policy, SNFs 

will experience a decrease from their 

current wage index value only to the 

extent that their current wage index 

value actually exceeds what the latest 

area wage data warrants using the 

revised OMB delineations, and they will 

experience an increase from their 

current wage index value to the extent 

that their current wage index value is 

less than what the latest area wage data 

warrants using the revised OMB 

delineations. We believe that pursuing a 

longer transition period would 

advantage the former group by delaying 

implementation of the full decrease in 

their wage index values under the new 

OMB delineations, at the further 

expense of the latter group which would 

experience an extended delay in 

implementation of the full increase in 

their wage index values. We believe that 

utilizing a 1-year (rather than a 

multiple-year) transition with a blended 

wage index in FY 2015 strikes an 

appropriate balance between the 

interests of these two groups of 

providers. 

Commenters also suggested that CMS 

consider a 3-year transition 

methodology similar to that proposed in 

the FY 2015 IPPS proposed rule. In the 

FY 2015 IPPS proposed rule, CMS 

proposed a 3-year transition for those 

hospitals that are currently in urban 

areas that would become rural under the 

new OMB delineations, under which 

such hospitals would receive the urban 

wage index of the CBSA in which they 

are currently located for FY 2014 for a 

period of three fiscal years (see the FY 

2015 IPPS proposed rule, 79 FR 28060). 

However, there are important 

differences between the IPPS and SNF 

PPS which give rise to different 

implementation and impact 

considerations. Most notably, IPPS 

hospital providers are subject to the 

rural floor, which requires that the wage 

index applicable to any hospital located 

in an urban area of a state not be less 

than the rural wage index of the state 

(see the FY 2015 IPPS proposed rule, 79 

FR 28068). This guarantees that the 

wage index for rural hospitals is not 


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greater than the wage index of any 

urban hospitals in the same state. As a 

result, hospitals moving from urban to 

rural status under the new OMB 

delineations are more likely to 

experience a decrease in their wage 

index, while hospitals moving from 

rural to urban status under the new 

OMB delineations are more likely to 

experience an increase in their wage 

index. This is not the case in the SNF 

PPS, where the rural floor is not applied 

and such differential impacts on urban 

and rural providers do not exist. Under 

the SNF PPS, the subsets of providers 

that will experience increases and 

decreases in wage index due to 

implementation of the new OMB 

delineations are quite varied. For 

example, 22 SNFs changing from urban 

to rural status under the new OMB 

delineations will have a higher wage 

index than they had in their urban 

CBSA. This would be less likely to 

occur if the rural floor were applied 

under the SNF PPS. Given the impacts 

discussed above, we believe that the 3- 

year transition policy proposed in the 

FY 2015 IPPS proposed rule and 

discussed above is not necessary or 

appropriate to address the impacts on 

SNF providers. By contrast, under the 

IPPS, hospitals currently located in 

urban areas that would become rural 

under the revised OMB delineations are 

more likely to experience a wage index 

decrease as discussed above, raising 

concerns over the potential adverse 

impact of the new OMB delineations on 

those hospitals that are specific to the 

IPPS. Therefore, we do not agree with 

the commenter that a 3-year transition 

policy, similar to that proposed under 

the IPPS, should be applied to those 

SNFs changing from urban to rural 

status under the new OMB delineations. 

To further address commenters’ 

general suggestion that we utilize 

similar implementation policies as were 

proposed for hospital providers in the 

FY 2015 IPPS proposed rule, we also 

considered whether it would 

appropriate to apply a variation of the 

3-year transition discussed above, 

pursuant to which SNFs that would 

experience a decrease in their wage 

index under the new OMB delineations 

would receive the wage index of the 

CBSA in which they are currently 

located for FY 2014 for a period of three 

fiscal years. This would involve 

applying a different transition policy for 

this subset of SNFs (allowing them to 

maintain the wage index of the CBSA in 

which they are currently located for 

three fiscal years) than would be 

applied to other SNFs. However, 

because revisions in the SNF PPS wage 

index must be made in a budget neutral 

manner, as required by section 

1888(e)(4)(G)(ii) of the Act, if such a 3- 

year transition policy were to be applied 

to this subset of providers, the resulting 

budget neutrality adjustment would 

reduce the base payment rates for all 

SNFs in FY 2015, as well as potentially 

reduce base rates for each of the two 

additional years during which this 

transition policy would be in effect. In 

terms of the overall impact on SNFs, 

pursuing this type of transition policy 

would, in effect, aid the 21 percent of 

SNFs experiencing a decrease in their 

wage index due to the new OMB 

delineations (who would nevertheless 

also experience a decrease in their base 

rates under this alternative) at the 

expense the remaining 79 percent of 

SNFs, all of which would experience a 

decrease in their base rates due to the 

budget neutrality adjustment (including 

those SNFs experiencing either no 

change or an increase in their wage 

index under the new OMB 

delineations). As we stated in the FY 

2015 SNF PPS proposed rule (79 FR 

25785), we looked for a transition 

approach that would provide relief to 

the largest percentage of adversely 

affected SNFs with the least impact to 

the rest of facilities. As discussed in the 

FY 2015 SNF PPS proposed rule (79 FR 

25785–25786), we believe that the 

application of a one-year transition 

blended wage index for all providers 

best achieves this goal, as it mitigates 

the negative payment impacts of the 

new OMB delineations for adversely 

affected SNFs, without reducing the 

base rates for all providers. 

Furthermore, as discussed above, we do 

not believe a multi-year transition 

approach would be appropriate, given 

the need to ensure the most accurate 

payments possible based on the most 

current geographic delineations. 

While we understand the concern 

raised by these commenters regarding 

the potential impact on the subset of 

SNFs that would experience a decrease 

in their wage index, we believe this 

must be weighed against the interests of 

and impact on all SNFs. As discussed 

above, and in the SNF PPS proposed 

rule (79 FR 25785), we believe that our 

proposed 1-year transition policy with a 

50/50 blended wage index for all SNFs 

appropriately mitigates the negative 

payment impacts on SNFs that will 

experience a wage index decrease due to 

implementation of the new OMB 

delineations, while having the least 

impact on the rest of the facilities. 

Accordingly, for the reasons specified 

in this final rule and in the FY 2015 

SNF PPS proposed rule (79 FR 25779 

through 25786), we are finalizing, 

without modification, our proposal to 

implement the new OMB delineations 

as described in the February 28, 2013 

OMB Bulletin No. 13–01, for the SNF 

PPS wage index beginning in FY 2015. 

Under this policy, as proposed, we will 

continue to treat Micropolitan Areas as 

rural and to include such areas in the 

calculation of the state’s rural wage 

index. Further, as proposed in the FY 

2015 SNF PPS proposed rule, we are 

finalizing a transition period of 1 year, 

during which a 50/50 blended wage 

index will be used for all providers in 

FY 2015. In FY 2015, SNFs will receive 

50 percent of their FY 2015 wage index 

based on the new OMB delineations and 

50 percent of their FY 2015 wage index 

based on the OMB delineations in effect 

for FY 2014 (both using FY 2011 

hospital wage data). Beginning October 

1, 2015, the wage index for all SNFs will 

be fully based on the new OMB 

delineations. 

The wage index applicable to FY 2015 

is set forth in Table A available on the 

CMS Web site at http://cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/SNFPPS/WageIndex.html. 

Table A provides a crosswalk between 

the FY 2015 wage index for a provider 

using the current OMB delineations in 

effect in FY 2014 and the FY 2015 wage 

index using the revised OMB 

delineations, as well as the transition 

wage index values that will be in effect 

in FY 2015. 

a. Labor-Related Share 

Each year, we calculate a revised 

labor-related share based on the relative 

importance of labor-related cost 

categories in the SNF market basket as 

discussed in section IV.B.4 of this final 

rule. Table 12 summarizes the updated 

labor-related share for FY 2015, 

compared to the labor-related share that 

was used for the FY 2014 SNF PPS final 

rule. 


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TABLE 12—LABOR-RELATED RELATIVE IMPORTANCE, FY 2014 AND FY 2015 

Relative 

importance, 

labor-related, 

FY 2014 

13:2 forecast 1

Relative 

importance, 

labor-related, 

FY 2015 

14:2 forecast 2

Wages and salaries ................................................................................................................................................. 49.118 48.816 

Employee benefits ................................................................................................................................................... 11.423 11.365 

Nonmedical Professional fees: Labor-related ......................................................................................................... 3.446 3.450 

Administrative and facilities support services .......................................................................................................... 0.499 0.502 

All Other: Labor-related services ............................................................................................................................. 2.287 2.276 

Capital-related (.391) ............................................................................................................................................... 2.772 2.771 

Total .................................................................................................................................................................. 69.545 69.180. 

1Published in the Federal Register; based on second quarter 2013 IGI forecast. 2Based on second quarter 2014 IGI forecast, with historical data through first quarter 2014. 

2. SNF Therapy Research Project 

As discussed in the FY 2014 SNF PPS 

proposed rule (78 FR 26466, May 6, 

2013), CMS 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. Under the current payment model, 

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. In the FY 2014 SNF 

PPS proposed rule (78 FR 26466, May 

6, 2013), we invited public comment on 

this project. In the FY 2014 SNF PPS 

final rule (78 FR 47963, August 6, 2013), 

we discussed the comments we received 

on this project, all of which supported 

the overall goals and objective of the 

project, and a few highlighted the 

importance of maintaining contact with 

the stakeholder community. 

In the FY 2015 SNF PPS proposed 

rule (79 FR 25786), we provided an 

update on the current state of this 

project and invited public comments on 

this project. The comments we received 

on this topic, with their responses, 

appear below. 

Comment: All of the comments we 

received on this work supported CMS’s 

research effort in developing a new 

methodology for paying for therapy 

services received in the SNF. Most 

commenters urged CMS to expedite the 

research necessary to develop a new 

therapy payment model, with one 

commenter expressing disappointment 

that CMS has not implemented a model 

to date. A few commenters stated that 

CMS should seek input from 

stakeholders on how best to revise the 

current therapy payment model. 

Response: We appreciate the broad 

support for this research initiative and 

understand the importance of 

completing this work in both a timely 

and efficient manner. We also recognize 

the importance of seeking input from 

stakeholders on how best to revise the 

current therapy payment model, which 

is why one of our central focuses in 

leading this research effort has been to 

solicit stakeholder feedback through 

listening sessions and through the 

creation of a SNF therapy research email 

box at SNFTherapyPayments@

cms.hhs.gov. Stakeholders can send 

input on a revised therapy payment 

model to this email box at any time, and 

every email is read and considered by 

both CMS staff and contractors. We also 

plan to solicit feedback through more 

formal avenues such as a technical 

expert panel in the near future. 

Currently, we are closely examining 

all of the models that have been 

suggested for improving SNF therapy 

payment, including but not limited to 

models developed by MedPAC and the 

Urban Institute. We will carefully 

consider suggested models such as these 

by using their best attributes, combined 

with all of the stakeholder feedback and 

ideas we are receiving, and intend to 

develop a payment model that will pay 

accurately and appropriately for SNF 

therapy services, while also 

incentivizing the most appropriate 

treatment for the individual patient’s 

care needs. Additional considerations 

for a revised SNF therapy payment 

approach go beyond existing research 

and will also need to include 

implementation strategies for the 

revised therapy payment methodology, 

along with the incorporation of the 

revised therapy payment approach into 

a single payment system that also 

includes payment for nursing services. 

In terms of the timeframe for 

completing this work and implementing 

a new payment model, we believe it 

would be premature at this time to 

speculate on when a new model will be 

ready to be implemented. As many of 

the comments on this issue indicate, it 

is very important to ensure that any 

change to the current therapy payment 

model addresses any concerns with the 

existing model, provides the proper 

incentives to treat patients in the most 

appropriate and efficient way, and 

provides sufficient time for providers to 

understand and prepare for 

implementation of such a model. 

Comments on this topic may still be 

provided outside the rulemaking 

process, and these comments should be 

sent via email to 

SNFTherapyPayments@cms.hhs.gov. 

Information regarding this project can 

be found on the project Web site at 

http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html. 

3. Proposed Revisions to Policies 

Related to the Change of Therapy (COT) 

Other Medicare Required Assessment 

(OMRA) 

In the FY 2015 SNF PPS proposed 

rule (79 FR 25786 through 25788), we 

discussed proposed changes to the 

existing COT OMRA policy which 

would permit providers to complete a 

COT OMRA for a resident who is not 

currently classified into a RUG–IV 

therapy group or receiving a level of 

therapy sufficient for classification into 

a RUG–IV therapy group, but only in 

those rare cases where the resident had 

qualified for a RUG–IV therapy group on 

a prior assessment during the resident’s 

current Medicare Part A stay, and had 

no discontinuation of therapy services 

between Day 1 of the COT observation 

period for the COT OMRA that 

classified the resident into his/her 

current non-therapy RUG–IV group and 

the ARD of the COT OMRA that 

reclassified the patient into a RUG–IV 

therapy group. The comments we 


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received on this proposal, along with 

our responses, appear below. 

Comment: All of the comments we 

received on this topic supported the 

proposed revision to the existing COT 

OMRA policies. One commenter stated 

that this proposal is not necessary, 

stating that the current COT OMRA 

policy already allows for providers to 

complete a COT OMRA in the 

circumstances proposed in the FY 2015 

SNF PPS proposed rule. 

Response: We appreciate the broad 

support we received on this proposal. 

With regard to the comment that this 

proposal is not necessary, we would 

note that the FY 2012 SNF PPS final 

rule (78 FR 48525 through 48526) and 

section 2.9 of the MDS RAI manual 

(available at http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/

NursingHomeQualityInits/

MDS30RAIManual.html) clearly state 

that the COT OMRA is to be used in 

those cases where the patient is 

classified into a RUG–IV therapy 

category, or where the patient is 

receiving a level of therapy sufficient for 

classification into a therapy RUG (but is 

classified into a nursing RUG because of 

index maximization). That providers 

may have misinterpreted the rules and 

are currently using the COT OMRA in 

a manner that is inconsistent with these 

guidelines does not affect how the 

policy was finalized and implemented. 

We would encourage providers to 

examine their current COT OMRA 

completion protocols to ensure they are 

aligned with existing COT OMRA 

guidelines, as provided in the 

aforementioned references, and 

immediately address any assessments 

that were completed inappropriately. 

Comment: Several commenters 

highlighted an issue in the second 

example that begins on page 25787 of 

the FY 2015 SNF PPS proposed rule. 

Specifically, these commenters pointed 

out that because the resident is no 

longer in a RUG–IV therapy group, an 

End of Therapy (EOT) OMRA would not 

be completed on this resident when the 

discontinuation of therapy occurs as 

this would violate the rules associated 

with the EOT OMRA, which require that 

the resident be in a RUG–IV therapy 

group for this assessment to be 

completed. These commenters 

requested that an additional example be 

added here to clarify this second 

example and the scope of this proposed 

revision. Finally, a few commenters 

requested that CMS provide as much 

detail as possible in this final rule 

regarding how this policy will be 

implemented and how this revision to 

the COT OMRA policy may affect other 

OMRAs. 

Response: We agree with the 

commenters that the reference to 

completing an EOT OMRA in the 

second example on page 25787 of the 

FY 2015 SNF PPS proposed rule is 

incorrect. To address this issue, below 

we provide a new example that is 

intended to clarify the scope of this 

proposed revision to the COT OMRA 

policy. 

Assume Mr. A is classified into the 

RUG group RUA on his 30-day 

assessment with an ARD set for Day 30 

of his stay. On Day 37, the facility 

checks the amount of therapy that was 

provided to Mr. A and finds that while 

Mr. A did receive the requisite number 

of therapy minutes to qualify for this 

RUG category, he only received therapy 

on 4 distinct calendar days, which 

would make it impossible for him to 

qualify for an Ultra-High Rehabilitation 

RUG group. Moreover, due to the lack 

of 5 distinct calendar days of therapy 

and the lack of any restorative nursing 

services, Mr. A does not qualify for any 

therapy RUG group. As a result, the 

facility must complete a COT OMRA for 

Mr. A, on which he may only classify 

for a non-therapy RUG group. However, 

as opposed to the first example found 

on page 25787 of the FY 2015 SNF PPS 

proposed rule, where the resident’s 

therapy continued during the week 

following the COT OMRA, let us assume 

the facility decides to discontinue his 

therapy services, with Day 39 

representing the last day that Mr. A is 

provided therapy. The facility 

subsequently decides to provide Mr. A 

with therapy services due to observing 

Mr. A’s deteriorating condition, with the 

first day of new therapy services being 

Day 48. On Day 54 (7 days following the 

day therapy began on Day 48, including 

Day 48) the facility reviews the therapy 

services provided to Mr. A during the 

prior week and finds that Mr. A would 

qualify for the RUG group RUA. 

As intended in the second example in 

the FY 2015 SNF PPS proposed rule (79 

FR 25787), this example represents a 

scenario where, under both the current 

and proposed COT OMRA policies, a 

COT OMRA may not be completed. This 

is because a discontinuation of therapy 

services occurred. To clarify our 

example and the scope of the proposed 

revision to the COT OMRA policy, we 

note that ‘‘discontinuation of therapy 

services’’ is defined in a manner 

consistent with how this phrase is 

described in the FY 2010 SNF PPS final 

rule (76 FR 40346 through 40349), the 

FY 2012 SNF PPS final rule (78 FR 

48517 through 48522), and Chapter 2, 

Section 2.9, of the MDS RAI manual. 

Consistent with what constitutes a 

discontinuation of therapy more 

globally within the SNF PPS, a 

‘‘discontinuation of therapy’’ here refers 

to the planned or unplanned 

discontinuation of all rehabilitation 

therapies for 3 or more consecutive 

days. This was the actual intent of the 

erroneous reference to the EOT OMRA 

in the FY 2015 SNF PPS proposed rule, 

as noted by these commenters. In 

essence, the same criteria used to 

determine the need for an EOT OMRA 

(which is that the resident does not 

receive therapy services for 3 

consecutive calendar days) will be used 

under our revised COT OMRA policy to 

determine whether there has been a 

discontinuation of therapy services and 

thus whether a COT OMRA may be 

completed for a given resident. In the 

above example, since the resident did 

not receive therapy services for 8 days, 

this would represent a discontinuation 

of therapy services as defined above and 

the COT OMRA that was planned with 

an ARD of Day 54 would not be 

permissible, both under our current 

policy and under our proposed revised 

COT OMRA policy. 

With regard to comments on how this 

revision would affect other OMRAs, the 

answer is that it does not have any 

impact on the other OMRAs within the 

SNF PPS. The rules and policies 

associated with all other assessment 

types remain the same. We also plan to 

provide additional details on the 

operation of this revised policy in a 

forthcoming MDS RAI manual revision, 

which would be effective October 1, 

2014. 

Accordingly, for the reasons specified 

in this final rule and in the FY 2015 

SNF PPS proposed rule (79 FR 25786 

through 25788), we are finalizing our 

proposal to permit providers, in certain 

circumstances (discussed below), to 

complete a COT OMRA for a resident 

who is not currently classified into a 

RUG–IV therapy group, or receiving a 

level of therapy sufficient for 

classification into a RUG–IV therapy 

group. As discussed above, this would 

be allowed only in those rare cases 

where the resident had qualified for a 

RUG–IV therapy group on a prior 

assessment during the resident’s current 

Medicare Part A stay, and had no 

discontinuation of therapy services 

between Day 1 of the COT observation 

period for the COT OMRA that 

classified the resident into his/her 

current non-therapy RUG–IV group and 

the ARD of the COT OMRA that 

reclassified the patient into a RUG–IV 

therapy group. This change in policy 

will be effective October 1, 2014, with 

further details on how this policy will 


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be implemented to be provided in a 

forthcoming MDS RAI manual revision 

and other guidance, consistent with the 

way we have provided implementation 

details for other MDS RAI policy 

revisions (for example, see Transition 

for Implementation of FY 2014 SNF PPS 

MDS 3.0 Policy Changes, available at 

http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/Spotlight.html). 

4. Civil Money Penalties (section 6111 

of the Affordable Care Act) 

In the FY 2015 SNF PPS proposed 

rule (79 FR 25788 through 25789), we 

discussed clarifications related to 

statutory requirements as specified in 

section 6111 of the Affordable Care Act 

regarding the approval and use of civil 

money penalties imposed by CMS. 

Further, we proposed changes to the 

CMS enforcement regulations at 

§ 488.433 to clarify and strengthen these 

provisions to provide more specific 

instructions to states regarding the use 

of civil money penalties and the 

approval process, and to permit an 

opportunity for greater transparency and 

accountability of civil money penalty 

monies utilized by states. Finally, we 

invited public comment on our 

proposed changes as well as on CMS’s 

proposed methods to ensure compliance 

with these requirements. The comments 

received on this topic, along with our 

responses, appear below. 

Comment: A few commenters 

requested that we specify the 

requirements and CMS’s expectations 

for soliciting civil money penalty funds 

and tracking approved civil money 

penalty projects. One commenter 

suggested that we establish a formula to 

determine how much is appropriate for 

a state to keep in reserve each year. 

Several commenters suggested that CMS 

should specify how information should 

be made public by the state, including 

the availability of grants, approved 

projects funded to date and the 

outcomes of previously funded projects. 

One commenter states that the proposed 

rule lacks clarity regarding what 

constitutes an ‘‘acceptable’’ state plan 

and how CMS would make such a 

determination. 

Response: Specific operational details 

regarding our expectations for the state 

are not appropriate for inclusion in 

regulation. We plan to issue subsequent 

guidance regarding these operational 

details and publish this guidance in the 

State Operations manual. 

Comment: One commenter asked if 

states will be required to share their 

acceptable plan for the effective use of 

civil money penalty funds with CMS. 

One commenter recommends formal 

CMS approval of all plans and public 

disclosure once the plan is approved. 

One commenter asked if CMS will 

require the acceptable plan be posted on 

some Web site. 

Response: We will require states to 

submit their plans to their respective 

CMS Regional Offices for formal 

approval. We have revised § 488.433(e) 

to specify that the plan must be 

approved by CMS. Public reporting of 

particular information related to survey 

and certification information is 

addressed specifically in Sections 

1819(g)(5) and 1819(i) of the Act (as 

amended by section 6103 of the 

Affordable Care Act) and directs CMS to 

publish relevant enforcement 

information. 

Comment: One commenter asked if 

CMS has any plans to publicly report 

the amount of civil money penalty 

funds collected and returned to the 

states. Another commenter stated that 

CMS should publish a link to 

information on state’s civil money 

penalty account balances on Nursing 

Home Compare. One commenter asked 

if the solicitation, acceptance and 

monitoring information of approved 

projects utilizing civil money penalty 

funds would be required to be posted on 

some Web site for transparency 

purposes. Several commenters 

suggested that CMS require information 

regarding state’s use of civil money 

penalties to be posted online and 

updated annually. One commenter 

recommended that we include in the 

regulatory language at § 488.433(e)(2) 

that the information be publicly 

available at all times and updated, at 

least annually. One commenter 

requested that a link to information on 

state’s use of civil money penalties be 

included on the Nursing Home Compare 

Web site. One commenter asked CMS to 

specify what the reporting timeframe 

would be. This commenter also asked if 

State Medicaid Web sites would be an 

acceptable place to post civil money 

penalty information on, what the 

duration of the posting would be, and 

finally, if states would be required to 

post previously approved civil money 

penalty projects prior to the effective 

date of this ruling. 

Response: We will make key 

information publicly available regarding 

approved projects, CMP grant awards, 

and CMP funds disbursed to states. We 

will explore appropriate methods to 

present information in a manner that 

will be accessible and meaningful to the 

public. Currently, all projects that a 

state is recommending for approval are 

submitted to the CMS Regional Office 

for final approval. The CMS Regional 

Office is tracking all approved projects 

and submits this information to the 

CMS Central Office at least annually. 

Additionally, we will prepare an annual 

transparency report on approved civil 

money penalty projects. We will be 

posting this annual report on the CMS 

Web site. We expect the states to 

provide information in their plans for 

utilizing CMP funds to CMS on an 

annual basis to permit CMS to make a 

national report available on an annual 

basis; preferably aligning with the 

current civil money penalty uses 

transparency report which is compiled 

on a calendar year basis. The additional 

information required as a result of this 

rule would apply to all projects 

approved after the rule’s effective date. 

In response to these comments, we 

will consider issuing guidance to states 

regarding making the information about 

their state plans for civil money 

penalties as well as approved civil 

money penalty projects publicly 

available, as required in this final rule, 

by posting on a state Web site and 

making sure that this information is 

updated on an annual basis. As to the 

length of time of the posting, we would 

anticipate that states would post a new 

report about the use of penalty funds on 

an annual basis that would include 

currently funded projects as well as 

information, or links to the information, 

for projects funded after this regulation 

even if the projects have ended. 

Comment: One commenter asked us 

to clarify what the terms ‘‘results of 

projects’’ and ‘‘other key information’’ 

would involve when we proposed that 

states ‘‘make information about the use 

of civil money penalty funds publicly 

available, including about the dollar 

amount awarded for approved projects, 

the grantee or contract recipients, the 

results of projects, and other key 

information.’’ 

Response: We expect that states track 

the results of approved projects. Projects 

funded with civil money penalty 

monies should have clear goals and 

methodologies to achieve those goals. 

States will be required to make 

information available about the outcome 

or results of completed projects. These 

results should include the grant 

recipient, amount and duration of the 

grant, purpose and goals of the project, 

results of the project (for example, 

whether or not the project was 

successful), lessons learned, and similar 

key information, such as whether 

improvements have been 

institutionalized as a result of the 

project. Most importantly, we hope that 

the publicly-shared information would 

help others to gain insight into the 

methodologies to achieve important 

quality of care or quality of life goals, 


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even if the project was not successful in 

achieving such goals within the time 

period of the civil money penalty grant. 

Comment: One state asked that if 

there is a year when a state does not 

receive civil money penalty proposals 

that meet the CMS criteria, what would 

be the required next steps for a state to 

take. 

Response: If there is a year that a state 

has actively solicited for proposals and 

still receives no proposals that meet the 

CMS criteria for approval, then we 

would work with the state to explore 

opportunities to fund worthwhile 

projects that would benefit nursing 

home residents. We would do this by 

looking at the state’s solicitation 

process, using successful projects that 

have been funded by other states as a 

model, and offering any guidance 

necessary to ensure that civil money 

penalty funds are being utilized for their 

intended purpose. 

Comment: We received several 

comments regarding the language at 

§ 488.433(b)(4), specifically on the 

potential that civil money penalty funds 

could be used for technical assistance 

for facilities implementing quality 

assurance and performance 

improvement (QAPI) programs. 

Commenters stated that quality 

assurance and performance 

improvement is a facility’s 

responsibility and it will also soon be a 

requirement of participation. They 

stressed that civil money penalty funds 

should not be given to facilities to 

perform activities that they are already 

required and paid to perform under 

federal law. They noted that while 

language at § 6111 of the Affordable 

Care Act authorizes the use of civil 

money penalties for ‘‘technical 

assistance for facilities implementing 

quality assurance programs;’’ general 

language about quality assurance should 

not be interpreted to include QAPI. 

Response: We agree that civil money 

penalty funds should not be used to pay 

for activities, functions, or products that 

nursing homes are required to provide. 

At the same time, we believe there is a 

tremendous need for knowledge and 

sharing of important ways to provide 

care and achieve results that may 

transcend the basic requirements in our 

regulations. Because there is a challenge 

to providing technical assistance while 

avoiding any supplanting of nursing 

home responsibilities, we require that 

proposed projects be approved by CMS 

and publicly reported. We expect, over 

time, that we will learn more about the 

projects that achieve the appropriate 

balance between providing effective 

technical assistance that advances the 

quality of care and quality of life for 

residents without supplanting what 

nursing homes are already required to 

do. At the present time we have already 

identified in CMS published guidance a 

variety of uses that are prohibited, and 

believe that the identified prohibitions 

are sufficient for now. With regard to 

QAPI in particular, section 1128I(c) of 

the Act directs CMS to provide 

technical assistance to facilities on the 

development of best practices in order 

to meet CMS’ established QAPI 

standards. We expect most of the 

technical assistance will be done by the 

Quality Improvement Organizations 

(QIOs), but do not rule out the use of 

CMP funds for very targeted purposes 

that the QIOs are not able to 

accomplish, especially for nursing 

homes that have a high reliance on 

Medicaid funding or are among the 

lowest-performing facilities. Further, at 

the present time there is no federal 

requirement for nursing homes to have 

a QAPI system, so there is little 

potential for supplanting facility 

compliance with a current expectation. 

Under section 1128I(c), following 

promulgation of regulations, all 

facilities will be required to develop and 

implement a QAPI program in the 

future, and we plan to administer the 

CMP funds in a manner that avoids 

supplanting of facility responsibilities 

when those rules become effective. 

Comment: While the proposed 

language at § 488.433(b)(5) addresses 

and expands the appropriate use of civil 

money penalties for the infrastructure of 

the temporary management remedy, one 

commenter does not feel this provision 

will help as facilities cannot afford the 

temporary manager salary. This 

commenter urges CMS to allow facilities 

to use civil money penalties to pay the 

salaries of temporary managers when 

the alternative is decertification of the 

facility. 

Response: At § 488.433(b)(5), we 

proposed to clarify in a new paragraph 

that in extraordinary situations 

involving closure of a facility, civil 

money penalty funds may be used to 

pay the salary of a temporary manager. 

Such a circumstance is very narrowly 

construed to situations where CMS 

concludes that it is otherwise infeasible 

to ensure timely payment for such a 

manager by the facility and CMS 

determines that extraordinary action is 

necessary in order to protect the 

residents until relocation efforts are 

successful. However, as specified in 

§ 488.415(c), in all other circumstances 

a temporary manager’s salary must be 

paid by the facility. We do not propose 

to change this basic responsibility of a 

nursing home to pay the salary of the 

temporary manager. 

Comment: One commenter stated that 

they did not support the use of civil 

money penalty funds for the joint 

training of facility staff and surveyors 

and suggested that this use be a low 

level priority, be limited, and include 

other interested parties, such as 

consumers, ombudsman and advocates. 

This commenter also urged CMS to 

restore the language at the end of 

proposed § 488.433(b)(4) which is 

included in current regulations, ‘‘. . . 

when such facilities have been cited by 

CMS for deficiencies in the applicable 

requirements.’’ 

Response: We believe that there are 

benefits for joint training between State 

survey agencies and nursing home 

providers to improve understanding of 

federal requirements and to 

communicate specific policies and 

procedures. In fact, we have sponsored 

such joint trainings on a national basis 

dating back to the implementation of the 

nursing home reform provisions of 

Omnibus Budget Reconciliation Act of 

1987 (OBRA ’87) to train both states and 

providers in the new health and safety 

requirements and enforcement rules. To 

provide optimum flexibility of such 

training, we do not propose to limit or 

to require other stakeholders in joint 

trainings nor do we propose to limit the 

facilities that may utilize civil money 

penalty funds for joint training to only 

those facilities that have been cited by 

CMS for deficiencies under the 

applicable requirements. However, we 

do agree that this is a lower-priority use 

of CMP funds and ought to be limited 

to special situations. We will further 

address this issue in CMS guidance. 

Comment: One commenter suggested 

that CMS should not limit itself to only 

withholding future civil money penalty 

disbursements in cases where states 

routinely failed to comply with the 

acceptable use of civil money penalty 

funds. They suggested referral to the 

Office of the Inspector General, or the 

recoupment of such funds. Another 

commenter recommended that we 

require states that failed to comply to 

submit an acceptable plan of correction 

within 30 days. They further suggested 

that, until an acceptable plan of 

correction had been submitted and 

approved by CMS, that CMS continue to 

award these civil money penalty funds 

to entities whose applications for use of 

such funds met CMS criteria. It was also 

suggested that a statement that CMS is 

withholding funds due to a state’s noncompliance be posted clearly and 

visibly on the state survey agency’s Web 

site. Additionally, it was urged that 

CMS monitor a withheld state’s civil 

money penalty activity on a quarterly 


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basis for at least one year after funds are 

once again distributed. 

Response: Specific operational details 

regarding the withholding of future civil 

money penalty disbursements to a state 

are not appropriate for inclusion in 

regulation. We plan to issue subsequent 

guidance regarding these operational 

details and publish this guidance in the 

State Operations Manual. While we 

appreciate the suggestions offered for 

further enforcement action when states 

are not complying with the acceptable 

uses of civil money penalty funds as 

specified in § 488.433, we are optimistic 

that the possibility of funds being 

withheld will be incentive enough for 

states to comply with this regulation. 

While we do not rule out the idea of 

posting public information about a state 

that has had funds withheld, we expect 

that any withholding would be shortlived. We will take under advisement 

the additional suggestions offered by 

commenters for future consideration. 

Comment: Several commenters 

suggested that CMS develop a 

standardized application for use of civil 

money penalty funds. This application 

should clearly articulate how the 

proposed use is not duplicative of 

statutorily mandated services, including 

those related to quality of care or quality 

of life, and how residents, families, long 

term care ombudsman and consumer 

representatives were included in the 

development of the proposed use and 

how they will be engaged in the project 

activities. 

Response: We agree, and will develop 

a standardized application that states 

may make available to any entities 

seeking to submit proposals for projects 

to be funded with civil money penalties. 

We expect that such a template should 

be completed by early CY 2015. 

Comment: One commenter suggested 

that CMS allow states more autonomy to 

award civil money penalty funds to 

applicants consistent with CMSprescribed guidelines. They further 

noted that because states vary in their 

specific needs, they are more 

knowledgeable about how to best meet 

their needs in order to best serve the 

beneficiaries and residents/patients of 

nursing centers within the state. 

Response: We will consider ways in 

which states may gain more autonomy 

over time, as we learn more about 

projects that are successful, are able to 

fully implement the additional 

processes in this regulation, and work 

with stakeholders. We recognize the 

critical role that states play and wish to 

bolster state ability to use civil money 

penalty funds effectively. Under the 

arrangements already in place, 

proposals for projects utilizing civil 

money penalty funds are submitted 

directly to the state survey agency. The 

state conducts the initial review of all 

proposals and forwards those that meet 

CMS criteria and that they are 

recommending for final approval to the 

CMS regional office. We believe the 

regulations we are finalizing here will 

make the entire state civil money 

penalty program more coherent, more 

transparent, and more effective. 

Comment: One commenter 

recommends that states be allowed to 

align their civil money penalty grant 

process with their fiscal year in order to 

coordinate existing state grant process 

timeframes. 

Response: We have no objections to 

states aligning their civil money penalty 

grant process with their fiscal year. 

5. Observations on Therapy Utilization 

Trends 

In the FY 2015 SNF PPS proposed 

rule, we discussed recent observed 

trends related to therapy service 

provision under the SNF Part A benefit, 

specifically with regard to overall 

therapy case-mix distribution trending 

toward more residents classifying into 

the Ultra-High Rehabilitation groups, 

and therapy being reported on the MDS 

in amounts that are just enough to 

surpass the relevant therapy minute 

threshold for a given therapy RUG 

category. We also posted a memo on the 

SNF PPS Web site (available at http:// 

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/SNFPPS/

Spotlight.html) which discussed these 

trends in greater depth. Finally, we 

invited comment on the data presented 

in the proposed rule (and associated 

memo) and the discussion of observed 

trends. The comments we received on 

this topic, as well as our responses, 

appear below. 

Comment: We received a number of 

comments on the discussion of observed 

therapy trends. All of the commenters 

supported CMS in monitoring these 

trends, with a few offering their own 

data analytics surrounding the same 

issues raised in the memo referenced 

above. A few commenters highlighted 

the lack of current medical evidence 

related to how much therapy a given 

resident should receive. One commenter 

recommended that CMS ensure that 

access to specialty populations be 

accounted for in our monitoring efforts. 

Another commenter highlighted that the 

trends memo provides evidence of 

concerns and issues of which they have 

become aware related to therapy minute 

demands on practitioners, shortened 

evaluation times, and pressure to reduce 

services inappropriately. This 

commenter also noted that the 

minimum minutes for a RUG level are 

often perceived as maximum minutes 

and that some providers may implement 

internal rules that prohibit clinicians, 

against their own professional judgment 

from providing therapy above the RUG 

levels. 

Response: We appreciate the support 

for our continued monitoring efforts. As 

always, we appreciate any assistance 

that stakeholders may wish to provide 

in terms of understanding existing 

trends and data. 

With regard to the comments which 

highlight the lack of existing medical 

evidence for how much therapy a given 

resident should receive, we would note 

that the trends memo was not intended 

to address such an issue. The memo was 

merely intended to highlight a trend 

indicating that, the current state of 

medical evidence on this point 

notwithstanding, the number of therapy 

minutes provided to SNF residents 

within certain therapy RUG categories 

is, in fact, clustered around the 

minimum thresholds for a given therapy 

RUG category. However, given the 

comments highlighting the lack of 

medical evidence related to the 

appropriate amount of therapy in a 

given situation, it is all the more 

concerning that practice patterns would 

appear to be as homogenized as the data 

would suggest. 

With regard to the comment on 

specialty populations, we agree with the 

commenter that access must be 

preserved for all categories of SNF 

residents, particularly those with 

complex medical and nursing needs. As 

appropriate, we will examine our 

current monitoring efforts to identify 

any revisions which may be necessary 

to account appropriately for these 

populations. 

With regard to the comment which 

highlighted potential explanatory 

factors for the observed trends, such as 

internal pressure within SNFs that 

would override clinical judgment, we 

find these potential explanatory factors 

troubling and entirely inconsistent with 

the intended use of the SNF benefit. 

Specifically, the minimum therapy 

minute thresholds for each therapy RUG 

category are certainly not intended as 

ceilings or targets for therapy provision. 

As discussed in Chapter 8, Section 30 of 

the Medicare Benefit Policy Manual 

(Pub. 100–02), to be covered, the 

services provided to a SNF resident 

must be ‘‘reasonable and necessary for 

the treatment of a patient’s illness or 

injury, that is, are consistent with the 

nature and severity of the individual’s 

illness or injury, the individual’s 

particular medical needs, and accepted 

standards of medical practice.’’ 


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(emphasis added) Therefore, services 

which are not specifically tailored to 

meet the individualized needs and goals 

of the resident, based on the resident’s 

condition and the evaluation and 

judgment of the resident’s clinicians, 

may not meet this aspect of the 

definition for covered SNF care, and we 

believe that internal provider rules 

should not seek to circumvent the 

Medicare statute, regulations and 

policies, or the professional judgment of 

clinicians. 

6. Accelerating Health Information 

Exchange in SNFs 

In the FY 2015 SNF PPS proposed 

rule, we included a discussion of our 

commitment to accelerating Health 

Information Exchange (HIE) in SNFs. 

Specifically, we noted that the 

Department is committed to accelerating 

HIE through the use of electronic health 

records (EHRs) and other types of health 

information technology across the 

broader care continuum through a 

number of initiatives including: (1) 

Alignment of incentives and payment 

adjustments to encourage provider 

adoption and optimization of health 

information technology and HIE 

services through Medicare and 

Medicaid payment policies; (2) adoption 

of common standards and certification 

requirements for interoperable health 

information technology; (3) support for 

privacy and security of patient 

information across all HIE-focused 

initiatives; and (4) governance of health 

information networks. A discussion of 

the comments received on this topic, 

with our response, appears below. 

Comment: All of the comments 

received on this topic supported the 

overall agency goal to accelerate HIE 

within SNFs, and among post-acute care 

providers generally. A few commenters 

urged CMS to consider potential barriers 

to HIE for certain providers, such as 

those within mountainous or rural areas 

where connectivity may be an issue. 

Other commenters also asked that CMS 

continue to coordinate with the Office 

of the National Coordinator for Health 

Information Technology. One 

commenter asked CMS to consider 

providing a financial incentive for 

providers to adopt health information 

technology. 

Response: We appreciate the broad 

support for this initiative and the 

helpful suggestions provided by the 

commenters. We will share these 

comments with the appropriate CMS 

staff and other governmental agencies to 

ensure they are taken into account as we 

continue to encourage adoption of 

health information technology. 

7. SNF Value Based Purchasing 

As noted above, on April 1, 2014, 

PAMA (Pub. L. 113–93) was enacted. 

Section 215 of PAMA, titled ‘‘Skilled 

nursing facility value-based 

purchasing,’’ amended section 1888 of 

the Social Security Act (42 U.S.C. 

1395yy) to create new subsections (g) 

and (h). The provisions of PAMA, 

including section 215, may be viewed at 

http://www.gpo.gov/fdsys/pkg/BILLS113hr4302enr/pdf/BILLS113hr4302enr.pdf. We will engage in 

future rulemaking, as appropriate, to 

implement this section of PAMA. 

V. Provisions of the Final Rule; 

Regulations Text 

As discussed in section IV.B. of this 

final rule, we are updating the payment 

rates under the SNF PPS for FY 2015 as 

required by section 1888(e)(4)(E)(ii) of 

the Act. In addition, we will use the 

most current OMB delineations 

(discussed in section IV.D.1) to identify 

a facility’s urban or rural status for the 

purpose of determining which set of rate 

tables will apply to the facility. Also, 

effective October 1, 2015, we will use 

ICD–10–CM code B20 (in place of ICD– 

9–CM code 042) to identify those 

residents for whom it is appropriate to 

apply the AIDS add-on. Further, as 

discussed in section IV.D.1 of this final 

rule, we are finalizing changes to the 

wage index based on the most current 

OMB delineations, including a 1-year 

transition with a blended wage index for 

all SNFs for FY 2015; revising the policy 

governing use of the COT OMRA 

(section IV.D.3); and finalizing changes 

to the enforcement regulations related to 

civil money penalties utilized by states 

(section IV.D.4.). 

With reference to the civil money 

penalty provisions discussed in section 

IV.D.4. of this final rule, as proposed we 

are modifying current CMS regulations 

to provide further clarification to states 

and the public regarding prior approval 

and appropriate use of these federallyimposed civil money penalty funds. 

At § 488.433, civil money penalties: 

Uses and approval of civil money 

penalties imposed by CMS, we will 

amend the regulation to specify that 

civil money penalties may not be used 

for state management operations except 

for the reasonable costs that are 

consistent with managing the projects 

utilizing civil money penalty funds; 

specify that all activities utilizing civil 

money penalty funds must be approved 

in advance by CMS; outline specific 

requirements that must be included in 

proposals submitted for CMS approval; 

specify that CMP funds may not be used 

for projects that have not been approved 

by CMS; specify that states are 

responsible for soliciting, accepting, 

monitoring and tracking the results of 

all approved activities utilizing civil 

money penalties and making this 

information publicly available on at 

least an annual basis; specify that state 

plans must ensure that a core amount of 

civil money penalty funds will be held 

in reserve for emergencies, such as 

relocation of residents in the event of 

involuntary termination from Medicare 

and Medicaid; and, specify steps CMS 

will take if civil money penalty funds 

are being used for disapproved purposes 

or not being used at all, in other words, 

that CMS has authority to take 

appropriate steps to ensure that these 

funds are used for their intended 

purpose, such as withholding future 

disbursements of CMP amounts. 

The revised CMS regulations will 

explicitly clarify the intended use of 

these civil money penalty funds 

(including the processes for prior 

approval of all activities using civil 

money penalty funds by CMS) and how 

CMS will address a state’s use of civil 

money penalty funds for activities that 

have been disapproved by CMS or used 

by states for activities other than those 

explicitly specified in statute or 

regulations. 

At § 488.433(a), we clarify that 

approved projects may work to improve 

residents’ quality of life and not just 

quality of care. We also clarify that 

while states may not use funds for 

survey and certification operations or 

state expenses, they may use a 

reasonable amount of civil money 

penalty funds for the actual 

administration of grant awards, 

including the tracking, monitoring, and 

evaluating of approved projects. Some 

states have maintained that effective use 

and management of the civil money 

penalty funds requires more state 

oversight and planning than they are 

able to provide currently, and that an 

allowance for such management would 

remove a barrier to the effective use of 

these funds. We did not propose a 

monetary or numeric limit on what 

might be considered reasonable, 

although one to three percent of 

available funds might be considered 

reasonable for an established fund. 

At § 488.433(b)(5), we clarify in a new 

paragraph that in extraordinary 

situations involving closure of a facility, 

civil money penalty funds may be used 

to pay the salary of a temporary manager 

when CMS concludes that it is 

infeasible to ensure timely payment for 

such a manager by the facility. We have 

encountered situations, for example, in 

which a facility is in bankruptcy and the 

court has frozen all funds at the very 


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time that residents are being relocated 

and closure is proceeding. In another 

situation involving involuntary 

termination from Medicare and 

impending closure of the facility, the 

facility was not making payments for 

staff or for its utilities, and residents 

were at risk due to the imminent 

departure of staff and the absence of a 

manager. While § 489.55 permits 

Medicare and Medicaid payments to a 

facility to continue for up to 30 days 

after the effective date of a facility’s 

termination or possibly longer (or 

shorter) if a facility has submitted a 

notification of closure under § 483.75(r) 

in order to promote the orderly and safe 

relocation of residents, if the continued 

Medicare and Medicaid payments are 

being used to pay for facility operations 

during the relocation period but are 

being diverted elsewhere by the facility, 

then residents may be placed at 

increased risk. The change at 

§ 488.433(b)(5) clarifies not only that 

CMS places a priority on resident 

protection and protection of the Trust 

Fund and allows such emergency use of 

civil money funds, but that CMS also 

intends to stop or suspend the payments 

to the facility under § 489.55 when such 

a situation occurs. 

At new § 488.433(c), we specify the 

requirements for all civil money penalty 

fund proposals being submitted to CMS 

for approval. 

At new § 488.433(d), we provide that 

civil money penalty funds may not be 

used for activities that have been 

disapproved by CMS. 

At new § 488.433(e), we provide that 

states must maintain an acceptable plan 

(approved by CMS) for the effective use 

of civil money penalty funds, including 

a description of methods by which the 

state will solicit, accept, monitor, and 

track approved projects funded by civil 

money penalty amounts and make key 

information publicly available. 

Examples of information that must be 

publicly available would include 

information on the projects that have 

been approved by CMS, the grantee and 

project recipients, the dollar amounts of 

projects approved, and the results of the 

projects. We also clarify that these plans 

provide for a core amount of funds that 

will generally be held in reserve for 

emergencies such as unplanned 

relocation of residents pursuant to an 

involuntary termination from Medicare 

and Medicaid, unless the state’s plan 

demonstrates the availability of other 

funds to cover emergency situations, 

and a reasonable aggregate amount of 

civil money penalty funds, beyond the 

emergency reserve amount, that the 

state expects to disburse each year for 

grants or contracts of projects that 

benefit residents and are consistent with 

the statute and CMS regulations. We 

appreciate that states may wish to 

develop a multi-year plan and provide 

an approximate range of total amount 

that the state plans to disburse. The 

intent is to ensure there is an acceptable 

plan, and that a state is prepared to 

respond to emergencies while at the 

same time is not maintaining a large 

unused amount of civil money penalty 

funds. 

In § 488.433(f), we provide that CMS 

may withhold future disbursement of 

collected civil money penalty funds to 

a state if CMS finds that the state has not 

spent such funds in accordance with the 

statute and regulations, fails to make use 

of funds to benefit the quality of care or 

life of residents, or fails to maintain an 

acceptable plan approved by CMS. 

VI. Collection of Information 

Requirements 

In the May 6, 2014, proposed rule (79 

FR 25767) we solicited public comment 

on that rule’s information collection 

requirements. While PRA-related 

comments were received, the proposed 

rule (and this final rule) does not 

contain any new or revised 

recordkeeping, reporting, or third-party 

disclosure requirements. Consequently, 

this rule does not require additional 

OMB review/approval under the 

authority of the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501 et seq.). A 

summary of the comments and our 

response can be found in section IV.D.4. 

of this preamble under, ‘‘Civil Money 

Penalties (section 6111 of the Affordable 

Care Act).’’ 

VII. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

We have examined the impacts of this 

final 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, 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 and a major rule 

under the Congressional Review Act. 

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 final rule updates the SNF 

prospective payment rates for FY 2015 

as required under section 1888(e)(4)(E) 

of the Act. It also responds to section 

1888(e)(4)(H) of the Act, which requires 

the Secretary to ‘‘provide for publication 

in the Federal Register’’ before the 

August 1 that precedes the start of each 

fiscal year, the unadjusted federal per 

diem rates, the case-mix classification 

system, and the 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. In addition, this final rule 

clarifies statutory requirements and 

intent as specified in section 6111 of the 

Affordable Care Act regarding the 

approval and use of civil money 

penalties imposed by CMS. 

3. Overall Impacts 

This final rule sets forth updates of 

the SNF PPS rates contained in the SNF 

PPS final rule for FY 2014 (78 FR 

47936). Based on the above, we estimate 

that the aggregate impact would be an 

increase of $750 million in payments to 

SNFs, resulting from the SNF market 

basket update to the payment rates, as 

adjusted by the MFP adjustment. The 

impact analysis of this final rule 

represents the projected effects of the 

changes in the SNF PPS from FY 2014 

to FY 2015. Although the best data 

available are utilized, there is no 

attempt to predict behavioral responses 

to these changes, or to make 

adjustments for future changes in such 

variables as days or case-mix. 

Certain events may occur to limit the 

scope or accuracy of our impact 

analysis, as this analysis is futureoriented 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 newlylegislated general Medicare program 


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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 2014 payment rates 

by a factor equal to the market basket 

index percentage change adjusted by the 

FY 2013 forecast error adjustment (if 

applicable) and the MFP adjustment to 

determine the payment rates for FY 

2015. 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 addon 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 4,355 

beneficiaries who qualify for the add-on 

payment for residents with AIDS. The 

impact to Medicare is included in the 

‘‘total’’ column of Table 13. In updating 

the SNF PPS rates for FY 2015, we made 

a number of standard annual revisions 

and clarifications mentioned elsewhere 

in this final 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 

final rule applies to SNF PPS payments 

in FY 2015. 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 PPS payment rates and include an 

associated impact analysis. 

As discussed in section IV.D.4 of this 

final rule, we also clarify statutory 

requirements and intent as specified in 

section 6111 of the Affordable Care Act 

regarding the approval and use of civil 

money penalties imposed by CMS. 

There would be no impact to states 

unless they failed to follow the new 

regulations regarding the approval and 

use of civil money penalty funds. In FY 

2011, the approximate total amount of 

civil money penalties returned to the 

states was $28 million. In FY 2012, the 

approximate total amount of civil 

money penalties returned to the states 

was $32 million. In FY 2013, the 

approximate total amount of civil 

money penalties returned to the states 

was $35 million. The estimated amount 

that we expect to be returned to the 

states in FY2015, based on data from 

previous years, is approximately $33 

million. These payments to the states 

would only be withheld in the event 

that states did not spend civil money 

penalty funds in accordance with the 

statute and this regulation, or failed to 

make use of funds to benefit the quality 

of care or life of residents, or failed to 

maintain an acceptable plan for the use 

of these funds. Even if civil money 

penalty funds are withheld from a state, 

we expect that the state would 

eventually come into compliance and 

that the state would later again be 

eligible to receive civil money penalty 

funds. 

4. Detailed Economic Analysis 

The FY 2015 impacts appear in Table 

13. Using the most recently available 

data, in this case FY 2013, we apply the 

current FY 2014 wage index and laborrelated share value to the number of 

payment days to simulate FY 2014 

payments. Then, using the same FY 

2013 data, we apply the FY 2015 wage 

index, as discussed in section IV.D.1 of 

this final rule, and labor-related share 

value to simulate FY 2015 payments. 

We tabulate the resulting payments 

according to the classifications in Table 

13 (for example, 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 hospitalbased, freestanding, urban, and rural 

categories. The urban and rural 

designations are based on the location of 

the facility under the new OMB 

delineations that we are implementing 

beginning in FY 2015. Facilities should 

use these OMB delineations to identify 

their urban or rural status for purposes 

of identifying what areas of the impact 

table would apply to them beginning on 

October 1, 2014. 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 

status). 

The second column shows the 

number of facilities in the impact 

database. 

The third column shows the effect of 

the annual update to the wage index. 

This represents the effect of using the 

most recent wage data available, 

without taking into account the revised 

OMB delineations. That is, the impact 

represented in this column is solely that 

of updating from the FY 2014 wage 

index to the FY 2015 wage index 

without any changes to the OMB 

delineations. The total impact of this 

change is zero percent; however, there 

are distributional effects of the change. 

The fourth column shows the effect of 

adopting the updated OMB delineations 

(as set forth in OMB Bulletin No. 13–01) 

for wage index purposes for FY 2015, 

independent of the effect of using the 

most recent wage data available, 

captured in Column 3. That is, the 

impact represented in this column is 

that of using the revised OMB 

delineations, and utilizing the blended 

wage index finalized in section 

IV.D.1.b.v above. The total impact of 

this change is zero percent; however, 

there are distributional effects of the 

change. 

The fifth column shows the effect of 

all of the changes on the FY 2015 

payments. The update of 2.0 percent 

(consisting of the market basket increase 

of 2.5 percentage points, reduced by the 

0.5 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 2.0 

percent, assuming facilities do not 

change their care delivery and billing 

practices in response. 

As illustrated in Table 13, the 

combined effects of all of the changes 

vary by specific types of providers and 

by location. For example, due to 

changes in this rule, providers in the 

rural Pacific region would experience a 

4.8 percent increase in FY 2015 total 

payments. 


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TABLE 13—RUG–IV PROJECTED IMPACT TO THE SNF PPS FOR FY 2015 

Number of 

facilities 

FY 2015 

Update wage 

data 

(percent) 

Update OMB 

delineations 

(percent) 

Total change 

(percent) 

Group: 

Total .......................................................................................................... 15,399 0.0 0.0 2.0 

Urban ........................................................................................................ 10,862 0.0 0.0 2.0

Rural ......................................................................................................... 4,537 0.2 ¥0.2 1.9 

Hospital based urban ............................................................................... 574 0.1 0.0 2.1 

Freestanding urban .................................................................................. 10,288 0.0 0.0 2.0 

Hospital based rural ................................................................................. 640 0.2 ¥0.3 1.9 

Freestanding rural .................................................................................... 3,897 0.2 ¥0.2 1.9 

Urban by region: 

New England ............................................................................................ 803 0.7 0.0 2.7 

Middle Atlantic .......................................................................................... 1,490 0.0 0.2 2.1 

South Atlantic ........................................................................................... 1,853 ¥0.3 0.0 1.7 

East North Central .................................................................................... 2,054 0.0 0.0 2.0 

East South Central ................................................................................... 544 ¥0.7 0.1 1.3 

West North Central ................................................................................... 889 ¥0.1 0.1 2.0 

West South Central .................................................................................. 1,293 ¥0.7 0.0 1.3 

Mountain ................................................................................................... 501 0.2 0.0 2.2 

Pacific ....................................................................................................... 1,429 0.5 0.0 2.5

Outlying ..................................................................................................... 6 0.8 ¥0.1 2.6 

Rural by region: 

New England ............................................................................................ 144 0.5 0.1 2.6 

Middle Atlantic .......................................................................................... 228 1.6 ¥1.6 2.0 

South Atlantic ........................................................................................... 504 ¥0.2 ¥0.2 1.6 

East North Central .................................................................................... 925 ¥0.1 0.0 2.0 

East South Central ................................................................................... 533 ¥0.3 ¥0.2 1.5 

West North Central ................................................................................... 1,093 0.2 ¥0.1 2.1 

West South Central .................................................................................. 770 0.2 ¥0.4 1.8 

Mountain ................................................................................................... 235 ¥0.6 0.0 1.4 

Pacific ....................................................................................................... 105 2.8 ¥0.1 4.8 

Outlying ..................................................................................................... 0 0.0 0.0 2.1 

Ownership: 

Government .............................................................................................. 852 0.1 ¥0.1 2.0 

Profit ......................................................................................................... 10,784 0.0 ¥0.1 1.9 

Non-profit .................................................................................................. 3,763 0.1 ¥0.1 1.9 

Note: The Total column includes the 2.5 percent market basket increase, reduced by the 0.5 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 2015 would 

be an increase of $750 million in 

payments to SNFs, resulting from the 

SNF market basket update to the 

payment rates, as adjusted by the MFP 

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, 

case-mix 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. 

With regard to our implementation of 

the revised OMB delineations discussed 

in section IV.D.1 above, we considered 

a number of potential alternatives in the 

FY 2015 SNF PPS proposed rule (79 FR 

25793 through 25795), which we also 

address here. 

We considered having no transition 

period and fully implementing the new 

OMB delineations beginning in FY 

2015. This would mean that we would 

adopt the revised OMB delineations for 

all providers on October 1, 2014. 

However, this would not provide any 

time for providers to adapt to the new 

OMB delineations. As discussed above, 

more providers will experience a 

decrease in wage index due to 

implementation of the new OMB 

delineations than will experience an 

increase. Thus, we believe that it is 

appropriate to provide for a transition 

period to mitigate the resulting shortterm instability and negative impact on 

these providers, and to provide time for 

providers to adjust to their new labor 

market area delineations. Furthermore, 

in light of the comments received 

during the FY 2006 rulemaking cycle on 

our proposal in the FY 2006 SNF PPS 

proposed rule (70 FR 29094 through 

29095) to adopt the new CBSA 

definitions without a transition period, 

we anticipated that providers would 

have similar concerns with not having 

a transition period for the new OMB 

delineations. Therefore, similar to the 

policy adopted in the FY 2006 SNF PPS 

final rule (70 FR 45041) when we first 

adopted OMB’s CBSA definitions for 

purposes of the SNF PPS wage index, 

we are implementing a 1-year transition 

blended wage index for all SNFs to 

assist providers in adapting to the new 

OMB delineations. In determining an 

appropriate transition methodology, 


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consistent with the objectives set forth 

in the FY 2006 SNF PPS final rule (70 

FR 45041), we looked for approaches 

that would provide relief to the largest 

percentage of adversely-affected SNFs 

with the least impact to the rest of the 

facilities. 

First, we considered transitioning the 

wage index to the revised OMB 

delineations over a number of years in 

order minimize the impact of the wage 

index changes in a given year. However, 

we also believe this must be balanced 

against the need to ensure the most 

accurate payments possible, which 

supports the use of a shorter transition 

to the revised OMB delineations. As 

discussed above in section IV.D.1 of this 

final rule, we believe that using the 

most current OMB delineations will 

increase the integrity of the SNF PPS 

wage index by creating a more accurate 

representation of geographic variation in 

wage levels. As such, we believe that 

utilizing a 1-year (rather than a multiple 

year) transition with a blended wage 

index in FY 2015 strikes the best 

balance. 

Second, we considered what type of 

blend would be appropriate for 

purposes of the transition wage index. 

We proposed that providers would 

receive a 1-year blended wage index 

using 50 percent of their FY 2015 wage 

index based on the proposed new OMB 

delineations and 50 percent of their FY 

2015 wage index based on the FY 2014 

OMB delineations. We believe that a 50/ 

50 blend best mitigates the negative 

payment impacts associated with the 

implementation of the new OMB 

delineations. While we considered 

alternatives to the 50/50 blend, we 

believe this type of split balances the 

increases and decreases in wage index 

values associated with the transition, as 

well as provides a readily 

understandable calculation for 

providers. 

Next, we considered whether or not 

the blended wage index should be used 

for all providers or for only a subset of 

providers, such as those providers that 

would experience a decrease in their 

respective wage index values due to 

implementation of the revised OMB 

delineations. As required in Section 

1888(e)(4)(G)(ii) of the Act, the wage 

index adjustment must be implemented 

in a budget neutral manner. As such, as 

discussed in the FY 2015 SNF PPS 

proposed rule (79 FR 25785), if we were 

to apply the blended wage index only to 

those providers that would experience a 

decrease in their respective wage index 

values due to the implementation of the 

revised OMB delineations, the budget 

neutrality factor calculated based on 

this approach would reduce the base 

rates for all providers. Pursuing this 

type of transition policy would, in 

effect, aid the 21 percent of SNFs 

experiencing a decrease in their wage 

index due to the new OMB delineations 

(who would nevertheless also 

experience a decrease in their base rates 

under this alternative) at the expense 

the remaining 79 percent of SNFs, all of 

which would experience a decrease in 

their base rates due to the budget 

neutrality adjustment (including those 

SNFs experiencing either no change or 

an increase in their wage index under 

the new OMB delineations). However, 

as discussed in the FY 2015 SNF PPS 

proposed rule (79 FR 25785), if we 

apply the blended wage index to all 

providers, the resulting budget 

neutrality factor would not reduce the 

base rates for any provider. As 

discussed in the FY 2015 SNF PPS 

proposed rule, our goal in implementing 

a transition is to provide relief to the 

largest percentage of adversely affected 

SNFs with the least impact to the rest 

of facilities. We believe that the 

application of a one-year transition 

blended wage index for all providers 

best achieves this goal, as it mitigates 

the negative payment impacts of the 

new OMB delineations for adversely 

affected SNFs, without reducing the 

base rates for all providers. 

As discussed in section IV.D.1 above, 

some commenters also suggested that 

CMS consider a 3-year transition 

methodology similar to that proposed in 

the FY 2015 IPPS proposed rule. In the 

FY 2015 IPPS proposed rule, CMS 

proposed a 3-year transition for those 

hospitals that are currently in urban 

areas that would become rural under the 

new OMB delineations, under which 

such hospitals would receive the urban 

wage index of the CBSA in which they 

are currently located for FY 2014 for a 

period of three fiscal years (see the FY 

2015 IPPS proposed rule, 79 FR 28060). 

However, there are important 

differences between the IPPS and SNF 

PPS which give rise to different 

implementation and impact 

considerations. Most notably, IPPS 

hospital providers are subject to the 

rural floor, which requires that the wage 

index applicable to any hospital located 

in an urban area of a state not be less 

than the rural wage index of the state 

(see the FY 2015 IPPS proposed rule, 79 

FR 28068). This guarantees that the 

wage index for rural hospitals is not 

greater than the wage index of any 

urban hospitals in the same state. As a 

result, hospitals moving from urban to 

rural status under the new OMB 

delineations are more likely to 

experience a decrease in their wage 

index, while hospitals moving from 

rural to urban status under the new 

OMB delineations are more likely to 

experience an increase in their wage 

index. This is not the case in the SNF 

PPS, where the rural floor is not applied 

and such differential impacts on urban 

and rural providers do not exist. Under 

the SNF PPS, the subsets of providers 

that will experience increases and 

decreases in wage index due to 

implementation of the new OMB 

delineations are quite varied. For 

example, 22 SNFs changing from urban 

to rural status under the new OMB 

delineations will have a higher wage 

index than they had in their urban 

CBSA. This would be less likely to 

occur if the rural floor were applied 

under the SNF PPS. Given the impacts 

discussed above, we believe that the 3- 

year transition policy proposed in the 

FY 2015 IPPS proposed rule and 

discussed above is not necessary or 

appropriate to address the impacts on 

SNF providers. By contrast, under the 

IPPS, hospitals currently located in 

urban areas that would become rural 

under the revised OMB delineations are 

more likely to experience a wage index 

decrease as discussed above, raising 

concerns over the potential adverse 

impact of the new OMB delineations on 

those hospitals that are specific to the 

IPPS. Therefore, we do not agree with 

the commenter that a 3-year transition 

policy, similar to that proposed under 

the IPPS, should be applied to those 

SNFs changing from urban to rural 

status under the new OMB delineations. 

To further address commenters’ 

general suggestion that we utilize 

similar implementation policies as were 

proposed for hospital providers in the 

FY 2015 IPPS proposed rule, we also 

considered whether it would 

appropriate to apply a variation of the 

3-year transition discussed above, 

pursuant to which all SNFs that would 

experience a decrease in their wage 

index under the new OMB delineations 

would receive the wage index of the 

CBSA in which they are currently 

located for FY 2014 for a period of three 

fiscal years. This would involve 

applying a different transition policy for 

this subset of SNFs (allowing them to 

maintain the wage index of the CBSA in 

which they are currently located for 

three fiscal years) than would be 

applied to other SNFs. However, 

because revisions in the SNF PPS wage 

index must be made in a budget neutral 

manner, as required by section 

1888(e)(4)(G)(ii) of the Act, if such a 3- 

year transition policy were to be applied 

to this subset of providers, the resulting 

budget neutrality adjustment would 


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reduce the base payment rates for all 

SNFs in FY 2015, as well as potentially 

reduce base rates for each of the two 

additional years during which this 

transition policy would be in effect. In 

terms of the overall impact on SNFs, 

pursuing this type of transition policy 

would, in effect, aid the 21 percent of 

SNFs experiencing a decrease in their 

wage index due to the new OMB 

delineations (who would nevertheless 

also experience a decrease in their base 

rates under this alternative) at the 

expense the remaining 79 percent of 

SNFs, all of which would experience a 

decrease in their base rates due to the 

budget neutrality adjustment (including 

those SNFs experiencing either no 

change or an increase in their wage 

index under the new OMB 

delineations). As we stated in the FY 

2015 SNF PPS proposed rule (79 FR 

25785), we looked for a transition 

approach that would provide relief to 

the largest percentage of adversely 

affected SNFs with the least impact to 

the rest of facilities. As discussed above, 

we believe that the application of a oneyear transition blended wage index for 

all providers best achieves this goal, as 

it mitigates the negative payment 

impacts of the new OMB delineations 

for adversely affected SNFs, without 

reducing the base rates for all providers. 

Furthermore, as discussed above, we do 

not believe a multi-year transition 

approach would be appropriate, given 

the need to ensure the most accurate 

payments possible based on the most 

current geographic delineations. 

While we understand the concern 

raised by these commenters regarding 

the potential impact on the subset of 

SNFs that would experience a decrease 

in their wage index, we believe this 

must be weighed against the interests of 

and impact on all SNFs. As discussed 

above, and in the SNF PPS proposed 

rule (79 FR 25785), we believe that our 

proposed 1-year transition policy with a 

50/50 blended wage index for all SNFs 

appropriately mitigates the negative 

payment impacts on SNFs that will 

experience a wage index decrease due to 

implementation of the new OMB 

delineations, while having the least 

impact on the rest of the facilities. 

We received a comment on the 

potential impact of finalizing the 

proposals in the FY 2015 SNF PPS 

proposed rule, which is not otherwise 

addressed in prior sections of this final 

rule. A discussion of this comment, and 

our response, appears below. 

Comment: In their March 2014 report 

(available at: http://www.medpac.gov/

documents/Mar14_entirereport.pdf), 

and in their comment on this proposed 

rule, MedPAC recommended that CMS 

eliminate the market basket update for 

SNFs and rebase payments for the SNF 

PPS, beginning with a 4 percent 

reduction in the base payment rates. 

Response: With regard to MedPAC’s 

proposals to eliminate the market basket 

update for SNFs and to implement a 4 

percent reduction to the SNF PPS rates, 

we would note that CMS does not have 

the statutory authority to act on either 

one of these proposals at the current 

time. 

6. Accounting Statement 

As required by OMB Circular A–4 

(available online at 

www.whitehouse.gov/sites/default/files/

omb/assets/regulatory_matters_pdf/a4.pdf), in Table 14, we have prepared an 

accounting statement showing the 

classification of the expenditures 

associated with the provisions of this 

final rule. Table 14 provides our best 

estimate of the possible changes in 

Medicare payments under the SNF PPS 

as a result of the policies in this final 

rule, based on the data for 15,399 SNFs 

in our database. All expenditures are 

classified as transfers to Medicare 

providers (that is, SNFs). 

TABLE 14—ACCOUNTING STATEMENT: 

CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM THE 2014 SNF 

PPS FISCAL YEAR TO THE 2015 

SNF PPS FISCAL YEAR

Category Transfers 

Annualized Monetized Transfers.$750 million.* 

From Whom to 

Whom? 

Federal Government to 

SNF Medicare Providers. 

* The net increase of $750 million in transfer 

payments is a result of the MFP-adjusted market basket increase of $750 million. 

7. Conclusion 

This final rule sets forth updates of 

the SNF PPS rates contained in the SNF 

PPS final rule for FY 2014 (78 FR 

47936). Based on the above, we estimate 

the overall estimated payments for SNFs 

in FY 2015 are projected to increase by 

$750 million, or 2.0 percent, compared 

with those in FY 2014. We estimate that 

in FY 2015 under RUG–IV, SNFs in 

urban and rural areas would experience, 

on average, a 2.0 and 1.9 percent 

increase, respectively, in estimated 

payments compared with FY 2014. 

Providers in the rural Pacific region 

would experience the largest estimated 

increase in payments of approximately 

4.8 percent. Providers in the urban East 

South Central and West South Central 

regions would experience the smallest 

increase in payments of 1.3 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, 

nonprofit organizations, and small 

governmental jurisdictions. Most SNFs 

and most other providers and suppliers 

are small entities, either by their nonprofit status or by having revenues of 

$25.5 million or less in any 1 year. We 

utilized the revenues of individual SNF 

providers (from recent Medicare Cost 

Reports) to classify a small business, 

and not the revenue of a larger firm with 

which they may be affiliated. As a 

result, we estimate 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. (For details, see the Small 

Business Administration’s Web site at 

http://www.sba.gov/category/

navigation-structure/contracting/

contracting-officials/eligibility-sizestandards). In addition, approximately 

25 percent of SNFs classified as small 

entities are non-profit organizations. 

Finally, individuals and states are not 

included in the definition of a small 

entity. 

This final rule sets forth updates of 

the SNF PPS rates contained in the SNF 

PPS final rule for FY 2014 (78 FR 

47936). Based on the above, we estimate 

that the aggregate impact would be an 

increase of $750 million in payments to 

SNFs, resulting from the SNF market 

basket update to the payment rates, as 

adjusted by the MFP adjustment. While 

it is projected in Table 13 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 2015 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 11 percent of total 

patient days in freestanding facilities 

and 22 percent of facility revenue 

(Report to the Congress: Medicare 

Payment Policy, March 2014, available 

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

Mar14_EntireReport.pdf). However, it is 

worth noting that the distribution of 


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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 2014, available 

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

Mar14_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 13. As indicated in 

Table 13, the effect on facilities is 

projected to be an aggregate positive 

impact of 2.0 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 final 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 604 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 final rule 

would affect small rural hospitals that 

(1) furnish SNF services under a swingbed agreement or (2) have a hospitalbased SNF. We anticipate that the 

impact on small rural hospitals would 

be similar to the impact on SNF 

providers overall. Moreover, as noted in 

previous SNF PPS final rules (most 

recently the one for FY 2014 (78 FR 

47968)), the category of small rural 

hospitals would be included within the 

analysis of the impact of this final rule 

on small entities in general. As 

indicated in Table 13, the effect on 

facilities is projected to be an aggregate 

positive impact of 2.0 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 determined that this final 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 2014, that 

threshold is approximately $141 

million. This final 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 final rule would have no 

substantial direct effect on state and 

local governments, preempt state law, or 

otherwise have federalism implications. 

List of Subjects in 42 CFR Part 488 

Administrative practice and 

procedure, Health facilities, Medicare, 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 488—SURVEY, CERTIFICATION, 

AND ENFORCEMENT PROCEDURES 

■ 1. The authority citation for part 488 

continues to read as follows: 

Authority: Secs. 1102, 1128I and 1871 of 

the Social Security Act, unless otherwise 

noted (42 U.S.C. 1302, 1320a–7j, and 

1395hh); Pub. L. 110–149, 121 Stat. 1819. 

■ 2. Section 488.433 is revised to read 

as follows: 

§ 488.433 Civil money penalties: Uses and 

approval of civil money penalties imposed 

by CMS. 

(a) Ten percent of the collected civil 

money penalty funds that are required 

to be held in escrow pursuant to 

§ 488.431 and that remain after a final 

administrative decision will be 

deposited with the Department of the 

Treasury in accordance with 

§ 488.442(f). The remaining ninety 

percent of the collected civil money 

penalty funds that are required to be 

held in escrow pursuant to § 488.431 

and that remain after a final 

administrative decision must be used 

entirely for activities that protect or 

improve the quality of care or quality of 

life for residents consistent with 

paragraph (b) of this section and may 

not be used for survey and certification 

operations or State expenses, except that 

reasonable expenses necessary to 

administer, monitor, or evaluate the 

effectiveness of projects utilizing civil 

money penalty funds may be permitted. 

(b) All activities and plans for 

utilizing civil money penalty funds, 

including any expense used to 

administer grants utilizing civil money 

penalty funds, must be approved in 

advance by CMS and may include, but 

are not limited to: 

(1) Support and protection of 

residents of a facility that closes 

(voluntarily or involuntarily). 

(2) Time-limited expenses incurred in 

the process of relocating residents to 

home and community-based settings or 

another facility when a facility is closed 

(voluntarily or involuntarily) or 

downsized pursuant to an agreement 

with the State Medicaid agency. 

(3) Projects that support resident and 

family councils and other consumer 

involvement in assuring quality care in 

facilities. 

(4) Facility improvement initiatives, 

such as joint training of facility staff and 

surveyors or technical assistance for 

facilities implementing quality 

assurance and performance 

improvement programs. 

(5) Development and maintenance of 

temporary management or receivership 

capability such as but not limited to, 

recruitment, training, retention or other 

system infrastructure expenses. 

However, as specified in § 488.415(c), a 

temporary manager’s salary must be 

paid by the facility. In rare situations, if 

the facility is closing, CMS plans to stop 

or suspend continued payments to the 

facility under § 489.55 of this chapter 

during the temporary manager’s duty 

period, and CMS determines that 

extraordinary action is necessary to 

protect the residents until relocation 

efforts are successful, civil money 

penalty funds may be used to pay the 

manager’s salary. 

(c) At a minimum, proposed activities 

submitted to CMS for prior approval 

must include a description of the 

intended outcomes, deliverables, and 

sustainability; and a description of the 

methods by which the activity results 

will be assessed, including specific 

measures. 

(d) Civil money penalty funds may 

not be used for activities that have been 

disapproved by CMS. 

(e) The State must maintain an 

acceptable plan, approved by CMS, for 

the effective use of civil money funds, 

including a description of methods by 

which the State will: 

(1) Solicit, accept, monitor, and track 

projects utilizing civil money penalty 

funds including any funds used for state 

administration. 

(2) Make information about the use of 

civil money penalty funds publicly 

available, including about the dollar 

amount awarded for approved projects, 

the grantee or contract recipients, the 


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results of projects, and other key 

information. 

(3) Ensure that: 

(i) A core amount of civil money 

penalty funds will be held in reserve for 

emergencies, such as relocation of 

residents pursuant to an involuntary 

termination from Medicare and 

Medicaid. 

(ii) A reasonable amount of funds, 

beyond those held in reserve under 

paragraph (e)(3)(i) of this section, will 

be awarded or contracted each year for 

the purposes specified in this section. 

(f) If CMS finds that a State has not 

spent civil money penalty funds in 

accordance with this section, or fails to 

make use of funds to benefit the quality 

of care or life of residents, or fails to 

maintain an acceptable plan for the use 

of funds that is approved by CMS, then 

CMS may withhold future 

disbursements of civil money penalty 

funds to the State until the State has 

submitted an acceptable plan to comply 

with this section. 

Dated: July 24, 2014. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: July 30, 2014. 

Sylvia M. Burwell, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2014–18335 Filed 7–31–14; 4:15 pm] 

BILLING CODE 4120–01–P 


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