39162 Federal Register / Vol. 83, No. 153 / Wednesday, August 8, 2018 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 411, 413, and 424 

[CMS–1696–F] 

RIN 0938–AT24 

Medicare Program; Prospective 

Payment System and Consolidated 

Billing for Skilled Nursing Facilities 

(SNF) Final Rule for FY 2019, SNF 

Value-Based Purchasing Program, and 

SNF Quality Reporting Program 

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) 2019. This final rule also 

replaces the existing case-mix 

classification methodology, the 

Resource Utilization Groups, Version IV 

(RUG–IV) model, with a revised casemix methodology called the PatientDriven Payment Model (PDPM) 

beginning on October 1, 2019. The rule 

finalizes revisions to the regulation text 

that describes a beneficiary’s SNF 

‘‘resident’’ status under the consolidated 

billing provision and the required 

content of the SNF level of care 

certification. The rule also finalizes 

updates to the SNF Quality Reporting 

Program (QRP) and the Skilled Nursing 

Facility Value-Based Purchasing (VBP) 

Program. 

DATES:

Effective Date: This final rule is 

effective October 1, 2018. 

Implementation Date: The 

implementation date for revised casemix methodology, PDPM, and 

associated policies discussed in section 

V. is October 1, 2019. 

FOR FURTHER INFORMATION CONTACT:

Penny Gershman, (410) 786–6643, for 

information related to SNF PPS clinical 

issues. 

John Kane, (410) 786–0557, for 

information related to the development 

of the payment rates and case-mix 

indexes, and general information. 

Kia Sidbury, (410) 786–7816, for 

information related to the wage index. 

Bill Ullman, (410) 786–5667, for 

information related to level of care 

determinations, and consolidated 

billing. 

Mary Pratt, (410) 786–6867, for 

information related to the skilled 

nursing facility quality reporting 

program. 

Celeste Bostic, (410) 786–5603, for 

information related to the skilled 

nursing facility value-based purchasing 

program. 

SUPPLEMENTARY INFORMATION: 

Availability of Certain Tables 

Exclusively Through the Internet on the 

CMS Website 

As discussed in the FY 2014 SNF PPS 

final rule (78 FR 47936), tables setting 

forth the Wage Index for Urban Areas 

Based on CBSA Labor Market Areas and 

the Wage Index Based on CBSA Labor 

Market Areas for Rural Areas are no 

longer published in the Federal 

Register. Instead, these tables are 

available exclusively through the 

internet on the CMS website. The wage 

index tables for this final rule can be 

accessed on the SNF PPS Wage Index 

home page, at http://www.cms.gov/

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

Readers who experience any problems 

accessing any of these online SNF PPS 

wage index tables 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 Cost and Benefits 

D. Improving Patient Outcomes and 

Reducing Burden Through Meaningful 

Measures 

E. Advancing Health Information Exchange 

II. Background on SNF PPS 

A. Statutory Basis and Scope 

B. Initial Transition for the SNF PPS 

C. Required Annual Rate Updates 

III. Analysis and Responses to Public 

Comments on the FY 2019 SNF PPS 

Proposed Rule 

A. General Comments on the FY 2019 SNF 

PPS Proposed Rule 

B. SNF PPS Rate Setting Methodology and 

FY 2019 Update 

1. Federal Base Rates 

2. SNF Market Basket Update 

3. Case-Mix Adjustment 

4. Wage Index Adjustment 

5. SNF Value-Based Purchasing Program 

6. Adjusted Rate Computation Example 

IV. Additional Aspects of the SNF PPS 

A. SNF Level of Care—Administrative 

Presumption 

B. Consolidated Billing 

C. Payment for SNF-Level Swing-Bed 

Services 

V. Revisions to SNF PPS Case-Mix 

Classification Methodology 

A. Background and General Comments 

B. Revisions to SNF PPS Federal Base 

Payment Rate Components 

C. Design and Methodology for Case-Mix 

Adjustment of Federal Rates 

D. Use of the Resident Assessment 

Instrument—Minimum Data Set, 

Version 3 

E. Revisions to Therapy Provision Policies 

Under the SNF PPS 

F. Interrupted Stay Policy 

G. Relationship of PDPM to Existing 

Skilled Nursing Facility Level of Care 

Criteria 

H. Effect of PDPM on Temporary AIDS 

Add-On Payment 

I. Potential Impacts of Implementing the 

PDPM and Parity Adjustment 

VI. Other Issues 

A. Other Revisions to the Regulation Text 

B. Skilled Nursing Facility (SNF) Quality 

Reporting Program (QRP) 

C. Skilled Nursing Facility Value-Based 

Purchasing Program (SNF VBP) 

D. Request for Information on Promoting 

Interoperability and Electronic 

Healthcare Information Exchange 

Through Possible Revisions to the CMS 

Patient Health and Safety Requirements 

for Hospitals and Other Medicare- and 

Medicaid-Participating Providers and 

Suppliers 

VII. Collection of Information Requirements 

VIII. Economic Analyses 

A. Regulatory Impact Analysis 

B. Regulatory Flexibility Act Analysis 

C. Unfunded Mandates Reform Act 

Analysis 

D. Federalism Analysis 

E. Congressional Review Act 

F. Regulatory Review Costs 

I. Executive Summary 

A. Purpose 

This final rule updates the SNF 

prospective payment rates for FY 2019 

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

of the Social Security Act (the Act). It 

will also respond to section 

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

the Secretary to provide for publication 

in the Federal Register, before the 

August 1 that precedes the start of each 

fiscal year (FY), certain specified 

information relating to the payment 

update (see section II.C. of this final 

rule). This final rule also replaces the 

existing case-mix classification 

methodology, the Resource Utilization 

Groups, Version IV (RUG–IV) model, 

with a revised case-mix methodology 

called the Patient-Driven Payment 

Model (PDPM) effective October 1, 

2019. This rule also finalizes updates to 

the Skilled Nursing Facility Quality 

Reporting Program (SNF QRP) and 

Skilled Nursing Facility Value-Based 

Purchasing Program (SNF VBP). 

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 will reflect an update to the rates 

that we published in the SNF PPS final 


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1Meaningful Measures web page: https:/ 

www.cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/QualityInitativesGenIndo/ 

MMF/General-info-Sub-Page.html. 

2See Remarks by Administrator Seema Verma at 

the Health Care Payment Learning and Action 

Network (LAN) Fall Summit, as prepared for 

delivery on October 30, 2017 https://www.cms.gov/ 

Newsroom/MediaReleaseDatabase/Fact-sheets/

2017-Fact-Sheet-items/2017-10-30.html 

rule for FY 2018 (82 FR 36530), as 

corrected in the FY 2018 SNF PPS 

correction notice (82 FR 46163), which 

reflects the SNF market basket update 

for FY 2019, as required by section 

1888(e)(5)(B)(iv) of the Act (as added by 

section 53111 of the Bipartisan Budget 

Act of 2018). This final rule also 

replaces the existing case-mix 

classification methodology, the 

Resource Utilization Groups, Version IV 

(RUG–IV) model, with a revised casemix methodology called the PatientDriven Payment Model (PDPM). It also 

finalizes revisions at 42 CFR 

411.15(p)(3)(iv), which describes a 

beneficiary’s SNF ‘‘resident’’ status 

under the consolidated billing 

provision, and 42 CFR 424.20(a)(1)(i), 

which describes the required content of 

the SNF level of care certification. 

Furthermore, in accordance with section 

1888(h) of the Act, this final rule, 

beginning October 1, 2018, will reduce 

the adjusted federal per diem rate 

determined under section 1888(e)(4)(G) 

of the Act by 2 percent, and adjust the 

resulting rate by the value-based 

incentive payment amount earned by 

the SNF for that fiscal year under the 

SNF VBP Program. Additionally, this 

final rule updates policies for the SNF 

VBP, including requirements that apply 

beginning with the FY 2021 SNF VBP 

program year, changes to the SNF VBP 

scoring methodology, and the adoption 

of an Extraordinary Circumstances 

Exception policy. Finally, this rule 

updates requirements for the SNF QRP, 

including adopting a new quality 

measure removal factor and codifying in 

our regulations a number of 

requirements. 

C. Summary of Cost and Benefits 

TABLE 1—COST AND BENEFITS

Provision description Total transfers 

FY 2019 SNF PPS payment rate update\ ............................... The overall economic impact of this final rule is an estimated increase of $820 

million in aggregate payments to SNFs during FY 2019. 

FY 2019 SNF VBP changes .................................................... The overall economic impact of the SNF VBP Program is an estimated reduction 

of $211 million in aggregate payments to SNFs during FY 2019. 

D. Improving Patient Outcomes and 

Reducing Burden Through Meaningful 

Measures 

Regulatory reform and reducing 

regulatory burden are high priorities for 

us. To reduce the regulatory burden on 

the healthcare industry, lower health 

care costs, and enhance patient care, in 

October 2017, we launched the 

Meaningful Measures Initiative.1 This 

initiative is one component of our 

agency-wide Patients Over Paperwork 

Initiative,2 which is aimed at evaluating 

and streamlining regulations with a goal 

to reduce unnecessary cost and burden, 

increase efficiencies, and improve 

beneficiary experience. The Meaningful 

Measures Initiative is aimed at 

identifying the highest priority areas for 

quality measurement and quality 

improvement in order to assess the core 

quality of care issues that are most vital 

to advancing our work to improve 

patient outcomes. The Meaningful 

Measures Initiative represents a new 

approach to quality measures that 

fosters operational efficiencies, and will 

reduce costs including the collection 

and reporting burden while producing 

quality measurement that is more 

focused on meaningful outcomes. 

The Meaningful Measures Framework 

has the following objectives: 

• Address high-impact measure areas 

that safeguard public health; 

• Patient-centered and meaningful to 

patients; 

• Outcome-based where possible; 

• Fulfill each program’s statutory 

requirements; 

• Minimize the level of burden for 

health care providers (for example, 

through a preference for EHR-based 

measures where possible, such as 

electronic clinical quality measures); 

• Significant opportunity for 

improvement; 

• Address measure needs for 

population based payment through 

alternative payment models; and 

• Align across programs and/or with 

other payers. 

In order to achieve these objectives, 

we have identified 19 Meaningful 

Measures areas and mapped them to six 

overarching quality priorities as shown 

in Table 2. 

TABLE 2—MEANINGFUL MEASURES FRAMEWORK DOMAINS AND MEASURE AREAS

Quality priority Meaningful measure area 

Making Care Safer by Reducing Harm Caused in the Delivery of Care ....... Healthcare-Associated Infections. 

Preventable Healthcare Harm. 

Strengthen Person and Family Engagement as Partners in Their Care ....... Care is Personalized and Aligned with Patient’s Goals. 

End of Life Care according to Preferences. 

Patient’s Experience of Care 

Patient Reported Functional Outcomes. 

Promote Effective Communication and Coordination of Care ....................... Medication Management. 

Admissions and Readmissions to Hospitals. 

Transfer of Health Information and Interoperability. 

Promote Effective Prevention and Treatment of Chronic Disease ................ Preventive Care. 

Management of Chronic Conditions. 

Prevention, Treatment, and Management of Mental Health. 

Prevention and Treatment of Opioid and Substance Use Disorders. 

Risk Adjusted Mortality. 

Work with Communities to Promote Best Practices of Healthy Living .......... Equity of Care. 

Community Engagement. 


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TABLE 2—MEANINGFUL MEASURES FRAMEWORK DOMAINS AND MEASURE AREAS—Continued 

Quality priority Meaningful measure area 

Make Care Affordable .................................................................................... Appropriate Use of Healthcare. 

Patient-focused Episode of Care. 

Risk Adjusted Total Cost of Care. 

By including Meaningful Measures in 

our programs, we believe that we can 

also address the following cross-cutting 

measure criteria: 

• Eliminating disparities; 

• Tracking measurable outcomes and 

impact; 

• Safeguarding public health; 

• Achieving cost savings; 

• Improving access for rural 

communities; and 

• Reducing burden. 

We believe that the Meaningful 

Measures Initiative will improve 

outcomes for patients, their families, 

and health care providers while 

reducing burden and costs for clinicians 

and providers and promoting 

operational efficiencies. 

Comment: We received numerous 

comments from stakeholders regarding 

the Meaningful Measures Initiative and 

the impact of its implementation in 

CMS’ quality programs. Many of these 

comments pertained to specific program 

proposals, and are discussed in the 

appropriate program-specific sections of 

this final rule. However, commenters 

also provided insights and 

recommendations for the ongoing 

development of the Meaningful 

Measures Initiative generally, including: 

ensuring transparency in public 

reporting and usability of publicly 

reported data; evaluating the benefit of 

individual measures to patients via use 

in quality programs weighed against the 

burden to providers of collecting and 

reporting that measure data; and 

identifying additional opportunities for 

alignment across CMS quality programs. 

Response: We will continue to work 

with stakeholders to refine and further 

implement the Meaningful Measures 

Initiative, and will take commenters’ 

insights and recommendations into 

account moving forward. 

E. Advancing Health Information 

Exchange 

The Department of Health and Human 

Services (HHS) has a number of 

initiatives designed to encourage and 

support the adoption of interoperable 

health information technology and to 

promote nationwide health information 

exchange to improve health care. The 

Office of the National Coordinator for 

Health Information Technology (ONC) 

and CMS work collaboratively to 

advance interoperability across settings 

of care, including post-acute care. 

The Improving Medicare Post-Acute 

Care Transformation Act of 2015 

(IMPACT Act, Pub. L. 113–185) requires 

assessment data to be standardized and 

interoperable to allow for exchange of 

the data among post-acute providers and 

other providers. To further 

interoperability in post-acute care, CMS 

has developed a Data Element Library to 

serve as a publicly available centralized, 

authoritative resource for standardized 

data elements and their associated 

mappings to health IT standards. These 

interoperable data elements can reduce 

provider burden by allowing the use 

and reuse of healthcare data, support 

provider exchange of electronic health 

information for care coordination, 

person-centered care, and support realtime, data driven, clinical decision 

making. Standards in the Data Element 

Library (https://del.cms.gov/) can be 

referenced on the CMS website and in 

the ONC Interoperability Standards 

Advisory (ISA). The 2018 

Interoperability Standards Advisory 

(ISA) is available at https://

www.healthit.gov/isa. 

Most recently, the 21st Century Cures 

Act (Pub. L. 114–255), enacted in late 

2016, requires HHS to take new steps to 

enable the electronic sharing of health 

information ensuring interoperability 

for providers and settings across the 

care continuum. Specifically, Congress 

directed ONC to ‘‘develop or support a 

trusted exchange framework, including 

a common agreement among health 

information networks nationally.’’ This 

framework (https://beta.healthit.gov/

topic/interoperability/trusted-exchangeframework-and-common-agreement) 

outlines a common set of principles for 

trusted exchange and minimum terms 

and conditions for trusted exchange in 

order to enable interoperability across 

disparate health information networks. 

In another important provision, 

Congress defined ‘‘information 

blocking’’ as practices likely to interfere 

with, prevent, or materially discourage 

access, exchange, or use of electronic 

health information, and established new 

authority for HHS to discourage these 

practices. 

We invite providers to learn more 

about these important developments 

and how they are likely to affect SNFs. 

II. Background on SNF PPS 

A. Statutory Basis and Scope 

As amended by section 4432 of the 

Balanced Budget Act of 1997 (BBA 

1997, Pub. L. 105–33, enacted 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 

physicians’ services) for which payment 

may otherwise be made under Part B 

and which are furnished to Medicare 

beneficiaries who are residents in a SNF 

during a covered Part A stay. A 

comprehensive discussion of these 

provisions appears in the May 12, 1998 

interim final rule (63 FR 26252). In 

addition, a detailed discussion of the 

legislative history of the SNF PPS is 

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

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

Legislative_History_04152015.pdf. 

Section 215(a) of the Protecting 

Access to Medicare Act of 2014 (PAMA) 

(Pub. L. 113–93, enacted on April 1, 

2014) added section 1888(g) to the Act 

requiring the Secretary to specify an allcause all-condition hospital readmission 

measure and an all-condition riskadjusted potentially preventable 

hospital readmission measure for the 

SNF setting. Additionally, section 

215(b) of PAMA added section 1888(h) 

to the Act requiring the Secretary to 

implement a VBP program for SNFs. 

Finally, section 2(c)(4) of the IMPACT 

Act added section 1888(e)(6) to the Act, 

which requires the Secretary to 

implement a quality reporting program 

for SNFs under which SNFs report data 

on measures and resident assessment 

data. 


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B. Initial Transition for the SNF PPS 

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 3 cost reporting periods 

under the PPS, up to and including the 

one that began in FY 2001. Thus, the 

SNF PPS is no longer operating under 

the transition, as all facilities have been 

paid at the full federal rate effective 

with cost reporting periods beginning in 

FY 2002. As we now base payments for 

SNFs entirely on the adjusted federal 

per diem rates, we no longer include 

adjustment factors under the transition 

related to facility-specific rates for the 

upcoming FY. 

C. Required Annual Rate Updates 

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

requires the SNF PPS payment rates to 

be updated annually. The most recent 

annual update occurred in a final rule 

that set forth updates to the SNF PPS 

payment rates for FY 2018 (82 FR 

36530), as corrected in the FY 2018 SNF 

PPS correction notice (82 FR 46163). 

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 

will provide the required annual 

updates to the per diem payment rates 

for SNFs for FY 2019. 

III. Analysis and Responses to Public 

Comments on the FY 2019 SNF PPS 

Proposed Rule 

In response to the publication of the 

FY 2019 SNF PPS proposed rule, we 

received 290 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 2019 

SNF PPS Proposed Rule 

In addition to the comments we 

received on specific proposals 

contained within the proposed rule 

(which we address later in this final 

rule), commenters also submitted the 

following, more general, observations on 

the SNF PPS and SNF care generally. A 

discussion of these comments, along 

with our responses, appears below. 

Comment: A few commenters 

requested clarification of how a SNF 

may comply with the coverage 

requirement to provide skilled services 

on a daily basis and communicate 

intended compliance with such policy 

when skilled rehabilitative services are 

halted temporarily due to a holiday or 

patient illness, and the only skilled 

service required is rehabilitation 

services. 

Response: As stated in the FY 2000 

SNF PPS final rule (64 FR 41670), the 

requirement for daily skilled services 

should not be applied so strictly that it 

would not be met merely because there 

is a brief, isolated absence from the 

facility in a situation where discharge 

from the facility would not be practical. 

With regard to the ‘‘daily basis’’ 

requirement, the Medicare program does 

not specify in regulations or guidelines 

an official list of holidays of other 

specific occasions that a facility may 

observe as breaks in rehabilitation 

services, but recognizes that the 

resident’s own condition dictates the 

amount of service that is appropriate. 

Accordingly, the facility itself must 

judge whether a brief, temporary pause 

in the delivery of therapy services 

would adversely affect the resident’s 

condition. 

This policy is also discussed at 

§ 409.34(b), where the paragraph states 

that a break of 1 or 2 days in the 

furnishing of rehabilitation services will 

not preclude coverage if discharge 

would not be practical for the 1 or 2 

days during which, for instance, the 

physician has suspended the therapy 

sessions because the patient exhibited 

extreme fatigue. 

Comment: One commenter requested 

that CMS allow the addition of 

advanced registered nurse practitioners 

(ARNPs) to the rehabilitation team to 

meet regulatory requirements and deal 

with a shortage of rehabilitation 

physicians. 

Response: We appreciate the 

comment. While ARNPs are eligible to 

enroll and participate in Medicare, it is 

unclear what federal regulatory 

requirements the commenter is 

concerned about that would prevent 

ARNPs from participating in 

rehabilitation team activities. 

B. SNF PPS Rate Setting Methodology 

and FY 2019 Update 

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 be payable under 

Part B for covered SNF services 

furnished to individuals during the 

course of a covered Part A stay in a SNF. 

In developing the rates for the initial 

period, we updated costs to the first 

effective year of the PPS (the 15-month 

period beginning July 1, 1998) using a 

SNF market 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 1997 prescribed, we set the federal 

rates at a level equal to the weighted 

mean of freestanding costs plus 50 

percent of the difference between the 

freestanding mean and weighted mean 

of all SNF costs (hospital-based and 

freestanding) combined. We computed 

and applied separately the payment 

rates for facilities located in urban and 

rural areas, and adjusted the portion of 

the federal rate attributable to wagerelated 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. In the SNF PPS 

final rule for FY 2018 (82 FR 36548 

through 36566), we revised and rebased 

the market basket index, which 


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included updating the base year from 

FY 2010 to 2014. 

The SNF market basket index is used 

to compute the market basket 

percentage change that is used to update 

the SNF federal rates on an annual 

basis, as required by section 

1888(e)(4)(E)(ii)(IV) of the Act. This 

market basket percentage update is 

adjusted by a forecast error correction, 

if applicable, and then further adjusted 

by the application of a productivity 

adjustment as required by section 

1888(e)(5)(B)(ii) of the Act and 

described in section III.B.2.d of this 

final rule. For FY 2019, the growth rate 

of the 2014-based SNF market basket in 

the proposed rule was estimated to be 

2.7 percent, based on the IHS Global 

Insight, Inc. (IGI) first quarter 2018 

forecast with historical data through 

fourth quarter 2017, before the 

multifactor productivity adjustment is 

applied. Using IGIs most recent forecast, 

the second quarter 2018 forecast with 

historical data through first quarter 

2018, we calculate a growth rate of the 

2014-based SNF market basket of 2.8 

percent. 

However, we note that section 53111 

of the Bipartisan Budget Act of 2018 

(BBA 2018) (Pub. L. 115–123, enacted 

on February 9, 2018) amended section 

1888(e) of the Act to add section 

1888(e)(5)(B)(iv) of the Act. Section 

1888(e)(5)(B)(iv) of the Act establishes a 

special rule for FY 2019 that requires 

the market basket percentage, after the 

application of the productivity 

adjustment, to be 2.4 percent. In 

accordance with section 

1888(e)(5)(B)(iv) of the Act, we will use 

a market basket percentage of 2.4 

percent to update the federal rates set 

forth in this final rule. We proposed to 

revise § 413.337(d) to reflect this 

statutorily required 2.4 percent market 

basket percentage for FY 2019. In 

addition, to conform with section 

1888(e)(5)(B)(iii) of the Act, we 

proposed to update the regulations to 

reflect the 1 percent market basket 

percentage required for FY 2018 (as 

discussed in the FY 2018 SNF PPS final 

rule, 82 FR 36533). Accordingly, we 

proposed to revise paragraph (d)(1) of 

§ 413.337, which sets forth the market 

basket update formula, by revising 

paragraph (d)(1)(v), and by adding 

paragraphs (d)(1)(vi) and (d)(1)(vii). The 

revision to add paragraph (d)(1)(vi) 

reflects section 1888(e)(5)(B)(iii) of the 

Act (as added by section 411(a) of the 

Medicare Access and CHIP 

Reauthorization Act of 2015 (MACRA) 

(Pub. L. 114–10)), which, as discussed 

above, establishes a special rule for FY 

2018 that requires the market basket 

percentage, after the application of the 

productivity adjustment, to be 1.0 

percent. The revision to add paragraph 

(d)(1)(vii) reflects section 

1888(e)(5)(B)(iv) of the Act (as added by 

section 53111 of BBA 2018), which 

establishes a special rule for FY 2019 

that requires the market basket 

percentage, after the application of the 

productivity adjustment, to be 2.4 

percent. These statutory provisions are 

self-implementing and do not require 

the exercise of discretion by the 

Secretary. In section III.B.2.e. of this 

final rule, we discuss the specific 

application of the BBA 2018-specified 

market basket adjustment to the 

forthcoming annual update of the SNF 

PPS payment rates. In addition, we also 

discuss in that section the 2 percent 

reduction applied to the market basket 

update for those SNFs that fail to submit 

measures data as required by section 

1888(e)(6)(A) of the Act. 

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. Absent the 

addition of section 1888(e)(5)(B)(iv) of 

the Act, added by section 53111 of BBA 

2018, we would have used the 

percentage change in the SNF market 

basket index to compute the update 

factor for FY 2019. This factor is based 

on the FY 2019 percentage increase in 

the 2014-based SNF market basket index 

reflecting routine, ancillary, and capitalrelated expenses. In the proposed rule, 

the SNF market basket percentage was 

estimated to be 2.7 percent for FY 2019 

based on IGI’s first quarter 2018 forecast 

(with historical data through fourth 

quarter 2017). In this final rule, we are 

using IGI’s more recent second quarter 

2018 forecast (with historical data 

through first quarter 2018) and we 

calculate a SNF market basket 

percentage increase of 2.8 percent. As 

discussed in sections III.B.2.c and 

III.B.2.d of this final rule, this market 

basket percentage change would have 

been reduced by the applicable forecast 

error correction (as described in 

§ 413.337(d)(2)) and by the MFP 

adjustment as required by section 

1888(e)(5)(B)(ii) of the Act. As noted 

previously, section 1888(e)(5)(B)(iv) of 

the Act, added by section 53111 of the 

BBA 2018, requires us to update the 

SNF PPS rates for FY 2019 using a 2.4 

percent SNF market basket percentage 

change, instead of the estimated 2.8 

percent market basket percentage 

change adjusted by the multifactor 

productivity adjustment as described 

below. Additionally, 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 threephase transition period from facilityspecific 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), § 413.337(d)(2) provides for an 

adjustment to account for market basket 

forecast error. The initial adjustment for 

market basket forecast error applied to 

the update of the FY 2003 rate for FY 

2004, and took into account the 

cumulative forecast error for the period 

from FY 2000 through FY 2002, 

resulting in an increase of 3.26 percent 

to the FY 2004 update. Subsequent 

adjustments in succeeding FYs take into 

account the forecast error from the most 

recently available FY for which there is 

final data, and apply the difference 

between the forecasted and actual 

change in the market basket when the 

difference exceeds a specified threshold. 

We originally used a 0.25 percentage 

point threshold for this purpose; 

however, for the reasons specified in the 

FY 2008 SNF PPS final rule (72 FR 

43425, August 3, 2007), we adopted a 

0.5 percentage point threshold effective 

for FY 2008 and subsequent FYs. As we 

stated in the final rule for FY 2004 that 

first issued the market basket forecast 

error adjustment (68 FR 46058, August 

4, 2003), the adjustment will reflect both 

upward and downward adjustments, as 

appropriate. 

For FY 2017 (the most recently 

available FY for which there is final 

data), the estimated increase in the 

market basket index was 2.7 percentage 

points, while the actual increase for FY 

2017 was 2.7 percentage points, 

resulting in the actual increase being the 

same as 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 FY 2019 market basket 

percentage change of 2.7 percent would 

not have been adjusted to account for 

the forecast error correction. Table 3 

shows the forecasted and actual market 

basket amounts for FY 2017. 


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TABLE 3—DIFFERENCE BETWEEN THE FORECASTED AND ACTUAL MARKET BASKET INCREASES FOR FY 2017 

Index 

Forecasted 

FY 2017 

increase * 

Actual 

FY 2017 

increase ** 

FY 2017 

difference 

SNF .............................................................................................................................................. 2.7 2.7 0.0 

* Published in Federal Register; based on second quarter 2016 IGI forecast (2010-based index). 

** Based on the second quarter 2018 IGI forecast, with historical data through the first quarter 2018 (2010-based index). 

d. Multifactor Productivity Adjustment 

Section 1888(e)(5)(B)(ii) of the Act, as 

added by section 3401(b) of the Patient 

Protection and Affordable Care Act 

(Affordable Care Act) (Pub. L. 111–148, 

enacted on March 23, 2010) requires 

that, in FY 2012 and in subsequent FYs, 

the market basket percentage under the 

SNF payment system (as described in 

section 1888(e)(5)(B)(i) of the Act) is to 

be reduced annually by the multifactor 

productivity (MFP) adjustment 

described in section 1886(b)(3)(B)(xi)(II) 

of the Act. Section 1886(b)(3)(B)(xi)(II) 

of the Act, in turn, defines the MFP 

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 FY, year, 

cost-reporting period, or other annual 

period). The Bureau of Labor Statistics 

(BLS) is the agency that publishes the 

official measure of private nonfarm 

business MFP. We refer readers to the 

BLS website at http://www.bls.gov/mfp 

for the BLS historical published MFP 

data. 

MFP is derived by subtracting the 

contribution of labor and capital inputs 

growth from output growth. The 

projections of the components of MFP 

are currently produced by IGI, a 

nationally recognized economic 

forecasting firm with which CMS 

contracts to forecast the components of 

the market baskets and MFP. To 

generate a forecast of MFP, IGI 

replicates the MFP measure calculated 

by the BLS, using a series of proxy 

variables derived from IGI’s U.S. 

macroeconomic models. For a 

discussion of the MFP projection 

methodology, we refer readers to the FY 

2012 SNF PPS final rule (76 FR 48527 

through 48529) and the FY 2016 SNF 

PPS final rule (80 FR 46395). A 

complete description of the MFP 

projection methodology is available on 

our website at http://www.cms.gov/

Research-Statistics-Data-and-Systems/

Statistics-Trends-and-Reports/

MedicareProgramRatesStats/

MarketBasketResearch.html. 

1. Incorporating the MFP Adjustment 

Into the Market Basket Update 

Per section 1888(e)(5)(A) of the Act, 

the Secretary shall 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. 

Section 1888(e)(5)(B)(ii) of the Act, 

added by section 3401(b) of the 

Affordable Care Act, requires that for FY 

2012 and each subsequent FY, after 

determining the market basket 

percentage described in section 

1888(e)(5)(B)(i) of the Act, the Secretary 

shall reduce such percentage by the 

productivity adjustment described in 

section 1886(b)(3)(B)(xi)(II) of the Act 

(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 being less than such payment 

rates for the preceding fiscal year. 

The MFP adjustment, calculated as 

the 10-year moving average of changes 

in MFP for the period ending September 

30, 2019, is estimated to be 0.8 percent 

based on IGI’s second quarter 2018 

forecast. Also, consistent with section 

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

§ 413.337(d)(2), the market basket 

percentage for FY 2019 for the SNF PPS 

is based on IGI’s second quarter 2018 

forecast of the SNF market basket 

percentage, which is estimated to be 2.8 

percent. The proposed rule reflected a 

market basket percentage for FY 2019 of 

2.7 percent and an MFP adjustment of 

0.8 percent based on IGI’s first quarter 

2018 forecast. 

If not for the enactment of section 

53111 of the BBA 2018, the FY 2019 

update would have been calculated in 

accordance with section 1888(e)(5)(B)(i) 

and (ii) of the Act, pursuant to which 

the market basket percentage 

determined under section 

1888(e)(5)(B)(i) of the Act (that is, 2.8 

percent) would have been reduced by 

the MFP adjustment (the 10-year 

moving average of changes in MFP for 

the period ending September 30, 2019) 

of 0.8 percent, which would have been 

calculated as described above and based 

on IGI’s second quarter 2018 forecast. 

Absent the enactment of section 53111 

of the BBA 2018, the resulting MFPadjusted SNF market basket update 

would have been equal to 2.0 percent, 

or 2.8 percent less 0.8 percentage point. 

However, as discussed above, section 

1888(e)(5)(B)(iv) of the Act, added by 

section 53111 of the BBA 2018, requires 

us to apply a 2.4 percent market basket 

percentage increase in determining the 

FY 2019 SNF payment rates set forth in 

this final rule (without regard to the 

MFP adjustment described above). 

e. Market Basket Update Factor for FY 

2019 

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 

2019 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, 2017, through 

September 30, 2018 to the average 

market basket level for the period of 

October 1, 2018, through September 30, 

2019. This process yields a percentage 

change in the 2014-based SNF market 

basket of 2.8 percent. 

As further explained in section 

III.B.2.c. of this final rule, as applicable, 

we adjust the market basket percentage 

change by the forecast error from the 

most recently available FY for which 

there is final data and apply this 

adjustment whenever the difference 

between the forecasted and actual 

percentage change in the market basket 

exceeds a 0.5 percentage point 

threshold. Since the difference between 

the forecasted FY 2017 SNF market 

basket percentage change and the actual 

FY 2017 SNF market basket percentage 

change (FY 2017 is the most recently 

available FY for which there is 

historical data) did not exceed the 0.5 

percentage point threshold, the FY 2019 

market basket percentage change of 2.8 

percent would not be adjusted by the 

forecast error correction. 

If not for the enactment of section 

53111 of the BBA 2018, the SNF market 

basket for FY 2019 would have been 

determined in accordance with section 


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1888(e)(5)(B)(ii) of the Act, which 

requires us to reduce the market basket 

percentage change by the MFP 

adjustment (the 10-year moving average 

of changes in MFP for the period ending 

September 30, 2019) of 0.8 percent, as 

described in section III.B.2.d.1. of this 

final rule. Thus, absent the enactment of 

the BBA 2018, the resulting net SNF 

market basket update would have been 

equal to 2.0 percent, or 2.8 percent less 

the 0.8 percentage point MFP 

adjustment. We note that our policy has 

been that, if more recent data become 

available (for example, a more recent 

estimate of the SNF market basket and/ 

or MFP adjustment), we would use such 

data, if appropriate, to determine the 

SNF market basket percentage change, 

labor-related share relative importance, 

forecast error adjustment, and MFP 

adjustment in the SNF PPS final rule. 

Historically, we have 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 from one year to the next. 

However, section 1888(e)(5)(B)(iv) of the 

Act, as added by section 53111 of the 

BBA 2018, requires us to use a market 

basket percentage of 2.4 percent, after 

application of the MFP to adjust the 

federal rates for FY 2019. Under section 

1888(e)(5)(B)(iv) of the Act, the market 

basket percentage increase used to 

determine the federal rates set forth in 

Table 4 and 5 in this final rule will be 

2.4 percent for FY 2019. 

In addition, we note that section 

1888(e)(6)(A)(i) of the Act provides that, 

beginning with FY 2018, SNFs that fail 

to submit data, as applicable, in 

accordance with sections 

1888(e)(6)(B)(i)(II) and (III) of the Act for 

a fiscal year will receive a 2.0 

percentage point reduction to their 

market basket update for the fiscal year 

involved, after application of section 

1888(e)(5)(B)(ii) of the Act (the MFP 

adjustment) and section 

1888(e)(5)(B)(iii) of the Act (the 1 

percent market basket increase for FY 

2018). In addition, section 

1888(e)(6)(A)(ii) of the Act states that 

application of the 2.0 percentage point 

reduction (after application of section 

1888(e)(5)(B)(ii) and (iii) of the Act) may 

result in the market basket index 

percentage change being less than 0.0 

for a fiscal year, and may result in 

payment rates for a fiscal year being less 

than such payment rates for the 

preceding fiscal year. Section 

1888(e)(6)(A)(iii) of the Act further 

specifies that the 2.0 percentage point 

reduction is applied in a noncumulative 

manner, so that any reduction made 

under section 1888(e)(6)(A)(i) of the Act 

applies only with respect to the fiscal 

year involved, and that the reduction 

cannot be taken into account in 

computing the payment amount for a 

subsequent fiscal year. 

Accordingly, we proposed that for 

SNFs that do not satisfy the reporting 

requirements for the FY 2019 SNF QRP, 

we would apply a 2.0 percentage point 

reduction to the SNF market basket 

percentage change for that fiscal year, 

after application of any applicable 

forecast error adjustment as specified in 

§ 413.337(d)(2) and the MFP adjustment 

as specified in § 413.337(d)(3). In the FY 

2019 SNF PPS proposed rule (83 FR 

21024), we proposed that, for FY 2019, 

the application of this reduction to 

SNFs that have not met the 

requirements for the FY 2019 SNF QRP 

would result in a market basket index 

percentage change for FY 2019 that is 

less than zero (specifically, a net update 

of negative 0.1 percentage point, derived 

by subtracting 2 percent from the MFPadjusted market basket update of 1.9 

percent), and would also result in FY 

2019 payment rates that are less than 

such payment rates for the preceding 

FY. However, we inadvertently applied 

the 2.0 percent reduction to the market 

basket adjustment factor that would 

have applied were it not for the 

application of the BBA 2018 stipulated 

market basket update factor rather than 

to the BBA 2018 stipulated market 

basket update factor of 2.4 percent. 

Therefore, when properly applied, the 

net update for providers that fail to meet 

the requirements for the FY 2019 SNF 

QRP will be 0.4 percent, rather than the 

negative 0.1 percent discussed in the 

proposed rule. We invited comments on 

these proposals. 

Commenters submitted the following 

comments related to the proposed rule’s 

discussion of the Market Basket Update 

Factor for FY 2019. A discussion of 

these comments, along with our 

responses, appears below. 

Comment: We received a number of 

comments in relation to applying the FY 

2019 market basket update factor in the 

determination of the FY 2019 

unadjusted federal per diem rates, with 

some commenters supporting its 

application in determining the FY 2019 

unadjusted per diem rates, while others 

opposed its application. In their March 

2018 report (available at http://

www.medpac.gov/docs/default-source/

reports/mar18_medpac_ch8_sec.pdf) 

and in their comment on the FY 2019 

SNF PPS proposed rule, MedPAC 

recommended that we eliminate the 

market basket update for SNFs 

altogether for FY 2019 and FY 2020 and 

implement revisions to the SNF PPS. 

Response: We appreciate all of the 

comments received on the proposed 

market basket update for FY 2019. In 

response to those comments opposing 

the application of the FY 2019 market 

basket update factor in determining the 

FY 2019 unadjusted federal per diem 

rates, specifically MedPAC’s proposal to 

eliminate the market basket update for 

SNFs, we are required to update the 

unadjusted Federal per diem rates for 

FY 2019 by 2.4 percent under section 

1888(e)(4)(E)(ii)(IV) and (e)(5)(B) of the 

Act. as amended by section 53111 of the 

BBA 2018. 

Comment: A few commenters 

expressed concern with regard to CMS 

applying the 2.0 percentage point 

reduction to the market basket increase 

to the standard market basket 

adjustment of 1.9 percent, rather than to 

the market basket required as a result of 

the BBA 2018. These commenters 

requested that CMS reconsider this 

decision and to apply the QRP-related 

market basket reduction to the BBA 

2018-stipulated market basket. 

Response: We appreciate the 

comments on this issue. Further, we 

agree with commenters that the QRPrelated reduction to the market basket 

should be applied to the BBA 2018- 

stipulated market basket. Therefore, the 

market basket update factor that would 

be applied in cases where a provider has 

not met the requirements of the FY 2019 

SNF QRP would be a positive 0.4 

percent, rather than the negative 0.1 

percent discussed in the FY 2019 SNF 

PPS proposed rule. 

Accordingly, for the reasons specified 

in this final rule and in the FY 2019 

SNF PPS proposed rule (83 FR 21021 

through 21024), we are applying the FY 

2019 SNF market basket increase factor 

of 2.4 percent, as stipulated by the BBA 

2018, in our determination of the FY 

2019 SNF PPS unadjusted federal per 

diem rates. As described in this section, 

we are adjusting each per diem 

component of the federal rates forward 

to reflect the BBA 2018 stipulated 

update factor for FY 2019. 

Tables 4 and 5 reflect the updated 

components of the unadjusted federal 

rates for FY 2019, prior to adjustment 

for case-mix. 


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TABLE 4—FY 2019 UNADJUSTED FEDERAL RATE PER DIEM—URBAN

Rate component Nursing— 

case-mix 

Therapy— 

case-mix 

Therapy— 

non-case-mix Non-case-mix 

Per Diem Amount ............................................................................................ $181.44 $136.67 $18.00 $92.60 

TABLE 5—FY 2019 UNADJUSTED FEDERAL RATE PER DIEM—RURAL

Rate component Nursing— 

case-mix 

Therapy— 

case-mix 

Therapy— 

Non-case-mix Non-case-mix 

Per Diem Amount ............................................................................................ $173.34 $157.60 $19.23 $94.31 

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 

through 2007 during the STRIVE 

project, and was finalized in the FY 

2010 SNF PPS final rule (74 FR 40288) 

to take effect in FY 2011 concurrently 

with an updated new resident 

assessment instrument, version 3.0 of 

the Minimum Data Set (MDS 3.0), 

which collects the clinical data used for 

case-mix classification under RUG–IV. 

We note that case-mix classification is 

based, in part, on the beneficiary’s need 

for skilled nursing care and therapy 

services. The case-mix classification 

system uses clinical data from the MDS 

to assign a case-mix group to each 

patient that is then used to calculate a 

per diem payment under the SNF PPS. 

As discussed in section IV.A. of this 

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 

timeframes for MDS completion in our 

Resident Assessment Instrument (RAI) 

Manual. For an MDS to be considered 

valid for use in determining payment, 

the MDS assessment must be completed 

in compliance with the instructions in 

the RAI Manual in effect at the time the 

assessment is completed. For payment 

and quality monitoring purposes, the 

RAI Manual consists of both the Manual 

instructions and the interpretive 

guidance and policy clarifications 

posted on the appropriate MDS website 

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

Quality-Initiatives-Patient-AssessmentInstruments/NursingHomeQualityInits/

MDS30RAIManual.html. 

In addition, we note that section 511 

of the Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (MMA, Pub. L. 108–173, enacted 

December 8, 2003) amended section 

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

temporary increase of 128 percent in the 

PPS per diem payment for any SNF 

residents with Acquired Immune 

Deficiency Syndrome (AIDS), effective 

with services furnished on or after 

October 1, 2004. This special add-on for 

SNF residents with AIDS was to remain 

in effect only 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 

MMA 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 this 

certification 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 time being. (We discuss in section 

V.H. of this final rule the specific 

payment adjustments that we proposed 

under the proposed PDPM to provide 

for an appropriate adjustment in the 

case mix to compensate for the 

increased costs associated with such 

residents.) 

For the limited number of SNF 

residents that qualify for the MMA addon, there is a significant increase in 

payments. As explained in the FY 2016 

SNF PPS final rule (80 FR 46397 

through 46398), on October 1, 2015 

(consistent with section 212 of PAMA), 

we converted from using ICD–9–CM 

code 042 to ICD–10–CM code B20 for 

identifying those residents for whom it 

is appropriate to apply the AIDS add-on 

established by section 511 of the MMA. 

For FY 2019, an urban facility with a 

resident with AIDS in RUG–IV group 

‘‘HC2’’ would have a case-mix adjusted 

per diem payment of $453.52 (see Table 

6) 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 $1,034.03. 

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 FY 2019 payment 

rates set forth in this final rule reflect 

the use of the RUG–IV case-mix 

classification system from October 1, 

2018, through September 30, 2019. We 

list the final case-mix adjusted RUG–IV 

payment rates for FY 2019, provided 

separately for urban and rural SNFs, in 


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Tables 6 and 7 with corresponding casemix values. We use the revised OMB 

delineations adopted in the FY 2015 

SNF PPS final rule (79 FR 45632, 45634) 

to identify a facility’s urban or rural 

status for the purpose of determining 

which set of rate tables would apply to 

the facility. Tables 6 and 7 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). Additionally, Tables 6 

and 7 do not reflect adjustments which 

may be made to the SNF PPS rates as 

a result of either the SNF QRP, 

discussed in section VI.B of this final 

rule, or the SNF VBP program, 

discussed in sections III.B.5 and VI.C of 

this final rule. 

TABLE 6—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 $484.44 $255.57 ........................ $92.60 $832.89 

RUL .............................. 2.57 1.87 466.30 255.57 ........................ 92.60 814.74 

RVX .............................. 2.61 1.28 473.56 174.94 ........................ 92.60 741.34 

RVL .............................. 2.19 1.28 397.35 174.94 ........................ 92.60 665.11 

RHX .............................. 2.55 0.85 462.67 116.17 ........................ 92.60 671.66 

RHL .............................. 2.15 0.85 390.10 116.17 ........................ 92.60 599.06 

RMX ............................. 2.47 0.55 448.16 75.17 ........................ 92.60 616.13 

RML .............................. 2.19 0.55 397.35 75.17 ........................ 92.60 565.31 

RLX .............................. 2.26 0.28 410.05 38.27 ........................ 92.60 541.10 

RUC ............................. 1.56 1.87 283.05 255.57 ........................ 92.60 631.42 

RUB .............................. 1.56 1.87 283.05 255.57 ........................ 92.60 631.42 

RUA .............................. 0.99 1.87 179.63 255.57 ........................ 92.60 527.97 

RVC .............................. 1.51 1.28 273.97 174.94 ........................ 92.60 541.69 

RVB .............................. 1.11 1.28 201.40 174.94 ........................ 92.60 469.09 

RVA .............................. 1.10 1.28 199.58 174.94 ........................ 92.60 467.27 

RHC ............................. 1.45 0.85 263.09 116.17 ........................ 92.60 472.01 

RHB .............................. 1.19 0.85 215.91 116.17 ........................ 92.60 424.82 

RHA .............................. 0.91 0.85 165.11 116.17 ........................ 92.60 374.00 

RMC ............................. 1.36 0.55 246.76 75.17 ........................ 92.60 414.66 

RMB ............................. 1.22 0.55 221.36 75.17 ........................ 92.60 389.25 

RMA ............................. 0.84 0.55 152.41 75.17 ........................ 92.60 320.28 

RLB .............................. 1.50 0.28 272.16 38.27 ........................ 92.60 403.16 

RLA .............................. 0.71 0.28 128.82 38.27 ........................ 92.60 259.78 

ES3 .............................. 3.58 ........................ 649.56 ........................ 18.00 92.60 760.41 

ES2 .............................. 2.67 ........................ 484.44 ........................ 18.00 92.60 595.25 

ES1 .............................. 2.32 ........................ 420.94 ........................ 18.00 92.60 531.72 

HE2 .............................. 2.22 ........................ 402.80 ........................ 18.00 92.60 513.57 

HE1 .............................. 1.74 ........................ 315.71 ........................ 18.00 92.60 426.45 

HD2 .............................. 2.04 ........................ 370.14 ........................ 18.00 92.60 480.90 

HD1 .............................. 1.60 ........................ 290.30 ........................ 18.00 92.60 401.04 

HC2 .............................. 1.89 ........................ 342.92 ........................ 18.00 92.60 453.68 

HC1 .............................. 1.48 ........................ 268.53 ........................ 18.00 92.60 379.26 

HB2 .............................. 1.86 ........................ 337.48 ........................ 18.00 92.60 448.23 

HB1 .............................. 1.46 ........................ 264.90 ........................ 18.00 92.60 375.63 

LE2 ............................... 1.96 ........................ 355.62 ........................ 18.00 92.60 466.38 

LE1 ............................... 1.54 ........................ 279.42 ........................ 18.00 92.60 390.15 

LD2 ............................... 1.86 ........................ 337.48 ........................ 18.00 92.60 448.23 

LD1 ............................... 1.46 ........................ 264.90 ........................ 18.00 92.60 375.63 

LC2 ............................... 1.56 ........................ 283.05 ........................ 18.00 92.60 393.78 

LC1 ............................... 1.22 ........................ 221.36 ........................ 18.00 92.60 332.07 

LB2 ............................... 1.45 ........................ 263.09 ........................ 18.00 92.60 373.82 

LB1 ............................... 1.14 ........................ 206.84 ........................ 18.00 92.60 317.55 

CE2 .............................. 1.68 ........................ 304.82 ........................ 18.00 92.60 415.56 

CE1 .............................. 1.50 ........................ 272.16 ........................ 18.00 92.60 382.89 

CD2 .............................. 1.56 ........................ 283.05 ........................ 18.00 92.60 393.78 

CD1 .............................. 1.38 ........................ 250.39 ........................ 18.00 92.60 361.11 

CC2 .............................. 1.29 ........................ 234.06 ........................ 18.00 92.60 344.78 

CC1 .............................. 1.15 ........................ 208.66 ........................ 18.00 92.60 319.37 

CB2 .............................. 1.15 ........................ 208.66 ........................ 18.00 92.60 319.37 

CB1 .............................. 1.02 ........................ 185.07 ........................ 18.00 92.60 295.77 

CA2 .............................. 0.88 ........................ 159.67 ........................ 18.00 92.60 270.36 

CA1 .............................. 0.78 ........................ 141.52 ........................ 18.00 92.60 252.21 

BB2 .............................. 0.97 ........................ 176.00 ........................ 18.00 92.60 286.70 

BB1 .............................. 0.90 ........................ 163.30 ........................ 18.00 92.60 273.99 

BA2 .............................. 0.70 ........................ 127.01 ........................ 18.00 92.60 237.69 

BA1 .............................. 0.64 ........................ 116.12 ........................ 18.00 92.60 226.80 

PE2 .............................. 1.50 ........................ 272.16 ........................ 18.00 92.60 382.89 

PE1 .............................. 1.40 ........................ 254.02 ........................ 18.00 92.60 364.74 

PD2 .............................. 1.38 ........................ 250.39 ........................ 18.00 92.60 361.11 

PD1 .............................. 1.28 ........................ 232.24 ........................ 18.00 92.60 342.96 

PC2 .............................. 1.10 ........................ 199.58 ........................ 18.00 92.60 310.29 

PC1 .............................. 1.02 ........................ 185.07 ........................ 18.00 92.60 295.77 

PB2 .............................. 0.84 ........................ 152.41 ........................ 18.00 92.60 263.10 


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TABLE 6—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 

PB1 .............................. 0.78 ........................ 141.52 ........................ 18.00 92.60 252.21 

PA2 .............................. 0.59 ........................ 107.05 ........................ 18.00 92.60 217.73 

PA1 .............................. 0.54 ........................ 97.98 ........................ 18.00 92.60 208.65 

TABLE 7—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 $462.82 $294.71 ........................ $94.31 $852.10 

RUL .............................. 2.57 1.87 445.48 294.71 ........................ 94.31 834.76 

RVX .............................. 2.61 1.28 452.42 201.73 ........................ 94.31 748.68 

RVL .............................. 2.19 1.28 379.61 201.73 ........................ 94.31 675.85 

RHX .............................. 2.55 0.85 442.02 133.96 ........................ 94.31 670.48 

RHL .............................. 2.15 0.85 372.68 133.96 ........................ 94.31 601.13 

RMX ............................. 2.47 0.55 428.15 86.68 ........................ 94.31 609.32 

RML .............................. 2.19 0.55 379.61 86.68 ........................ 94.31 560.77 

RLX .............................. 2.26 0.28 391.75 44.13 ........................ 94.31 530.34 

RUC ............................. 1.56 1.87 270.41 294.71 ........................ 94.31 659.64 

RUB .............................. 1.56 1.87 270.41 294.71 ........................ 94.31 659.64 

RUA .............................. 0.99 1.87 171.61 294.71 ........................ 94.31 560.81 

RVC .............................. 1.51 1.28 261.74 201.73 ........................ 94.31 557.95 

RVB .............................. 1.11 1.28 192.41 201.73 ........................ 94.31 488.59 

RVA .............................. 1.10 1.28 190.67 201.73 ........................ 94.31 486.86 

RHC ............................. 1.45 0.85 251.34 133.96 ........................ 94.31 479.76 

RHB .............................. 1.19 0.85 206.27 133.96 ........................ 94.31 434.67 

RHA .............................. 0.91 0.85 157.74 133.96 ........................ 94.31 386.12 

RMC ............................. 1.36 0.55 235.74 86.68 ........................ 94.31 416.86 

RMB ............................. 1.22 0.55 211.47 86.68 ........................ 94.31 392.59 

RMA ............................. 0.84 0.55 145.61 86.68 ........................ 94.31 326.70 

RLB .............................. 1.50 0.28 260.01 44.13 ........................ 94.31 398.57 

RLA .............................. 0.71 0.28 123.07 44.13 ........................ 94.31 261.59 

ES3 .............................. 3.58 ........................ 620.56 ........................ 19.23 94.31 734.31 

ES2 .............................. 2.67 ........................ 462.82 ........................ 19.23 94.31 576.52 

ES1 .............................. 2.32 ........................ 402.15 ........................ 19.23 94.31 515.83 

HE2 .............................. 2.22 ........................ 384.81 ........................ 19.23 94.31 498.50 

HE1 .............................. 1.74 ........................ 301.61 ........................ 19.23 94.31 415.27 

HD2 .............................. 2.04 ........................ 353.61 ........................ 19.23 94.31 467.29 

HD1 .............................. 1.60 ........................ 277.34 ........................ 19.23 94.31 390.99 

HC2 .............................. 1.89 ........................ 327.61 ........................ 19.23 94.31 441.28 

HC1 .............................. 1.48 ........................ 256.54 ........................ 19.23 94.31 370.19 

HB2 .............................. 1.86 ........................ 322.41 ........................ 19.23 94.31 436.08 

HB1 .............................. 1.46 ........................ 253.08 ........................ 19.23 94.31 366.72 

LE2 ............................... 1.96 ........................ 339.75 ........................ 19.23 94.31 453.41 

LE1 ............................... 1.54 ........................ 266.94 ........................ 19.23 94.31 380.59 

LD2 ............................... 1.86 ........................ 322.41 ........................ 19.23 94.31 436.08 

LD1 ............................... 1.46 ........................ 253.08 ........................ 19.23 94.31 366.72 

LC2 ............................... 1.56 ........................ 270.41 ........................ 19.23 94.31 384.06 

LC1 ............................... 1.22 ........................ 211.47 ........................ 19.23 94.31 325.11 

LB2 ............................... 1.45 ........................ 251.34 ........................ 19.23 94.31 364.99 

LB1 ............................... 1.14 ........................ 197.61 ........................ 19.23 94.31 311.23 

CE2 .............................. 1.68 ........................ 291.21 ........................ 19.23 94.31 404.87 

CE1 .............................. 1.50 ........................ 260.01 ........................ 19.23 94.31 373.66 

CD2 .............................. 1.56 ........................ 270.41 ........................ 19.23 94.31 384.06 

CD1 .............................. 1.38 ........................ 239.21 ........................ 19.23 94.31 352.85 

CC2 .............................. 1.29 ........................ 223.61 ........................ 19.23 94.31 337.24 

CC1 .............................. 1.15 ........................ 199.34 ........................ 19.23 94.31 312.97 

CB2 .............................. 1.15 ........................ 199.34 ........................ 19.23 94.31 312.97 

CB1 .............................. 1.02 ........................ 176.81 ........................ 19.23 94.31 290.43 

CA2 .............................. 0.88 ........................ 152.54 ........................ 19.23 94.31 266.15 

CA1 .............................. 0.78 ........................ 135.21 ........................ 19.23 94.31 248.81 

BB2 .............................. 0.97 ........................ 168.14 ........................ 19.23 94.31 281.76 

BB1 .............................. 0.90 ........................ 156.01 ........................ 19.23 94.31 269.62 

BA2 .............................. 0.70 ........................ 121.34 ........................ 19.23 94.31 234.94 

BA1 .............................. 0.64 ........................ 110.94 ........................ 19.23 94.31 224.54 

PE2 .............................. 1.50 ........................ 260.01 ........................ 19.23 94.31 373.66 

PE1 .............................. 1.40 ........................ 242.68 ........................ 19.23 94.31 356.32 

PD2 .............................. 1.38 ........................ 239.21 ........................ 19.23 94.31 352.85 

PD1 .............................. 1.28 ........................ 221.88 ........................ 19.23 94.31 335.51 

PC2 .............................. 1.10 ........................ 190.67 ........................ 19.23 94.31 304.30 


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TABLE 7—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 

PC1 .............................. 1.02 ........................ 176.81 ........................ 19.23 94.31 290.43 

PB2 .............................. 0.84 ........................ 145.61 ........................ 19.23 94.31 259.22 

PB1 .............................. 0.78 ........................ 135.21 ........................ 19.23 94.31 248.81 

PA2 .............................. 0.59 ........................ 102.27 ........................ 19.23 94.31 215.87 

PA1 .............................. 0.54 ........................ 93.60 ........................ 19.23 94.31 207.20 

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. We proposed to continue this 

practice for FY 2019, as we continue to 

believe that in the absence of SNFspecific 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 wage data exclusive of the 

occupational mix adjustment continues 

to be appropriate for SNF payments. For 

FY 2019, the updated wage data are for 

hospital cost reporting periods 

beginning on or after October 1, 2014 

and before October 1, 2015 (FY 2015 

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. More 

specifically, auditing all SNF cost 

reports, similar to the process used to 

audit inpatient hospital cost reports for 

purposes of the Inpatient Prospective 

Payment System (IPPS) wage index, 

would place a burden on providers in 

terms of recordkeeping and completion 

of the cost report worksheet. As 

discussed in greater detail later in this 

section, adopting such an approach 

would require a significant commitment 

of resources by CMS and the Medicare 

Administrative Contractors, potentially 

far in excess of those required under the 

IPPS given that there are nearly five 

times as many SNFs as there are 

inpatient hospitals. Therefore, while we 

continue to believe that the 

development of such an audit process 

could improve SNF cost reports in such 

a manner as to permit us to establish a 

SNF-specific wage index, we do not 

regard an undertaking of this magnitude 

as being feasible within the current level 

of programmatic resources. 

In addition, we 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 2019 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 2019, there are 

no rural geographic areas that do not 

have hospitals, and thus, this 

methodology would not be applied. For 

rural Puerto Rico, we would not apply 

this methodology due to the distinct 

economic circumstances that exist there 

(for example, due to the close proximity 

to one another of almost all of Puerto 

Rico’s various urban and non-urban 

areas, this methodology would produce 

a wage index for rural Puerto Rico that 

is 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 2019, the only 

urban area without wage index data 

available is CBSA 25980, HinesvilleFort Stewart, GA. The final wage index 

applicable to FY 2019 is set forth in 

Tables A and B available on the CMS 

website at http://www.cms.gov/

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

In the SNF PPS final rule for FY 2006 

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

adopted the changes discussed in OMB 

Bulletin No. 03–04 (June 6, 2003), 

which announced revised definitions 

for MSAs and the creation of 

micropolitan statistical areas and 

combined statistical areas. In adopting 

the CBSA geographic designations, we 

provided for a 1-year transition in FY 

2006 with a blended wage index for all 

providers. For FY 2006, the wage index 

for each provider consisted of a blend of 

50 percent of the FY 2006 MSA-based 

wage index and 50 percent of the FY 

2006 CBSA-based wage index (both 

using FY 2002 hospital data). We 

referred to the blended wage index as 

the FY 2006 SNF PPS transition wage 

index. As discussed in the SNF PPS 

final rule for FY 2006 (70 FR 45041), 

since the expiration of this 1-year 

transition on September 30, 2006, we 

have used the full CBSA-based wage 

index values. 

In the FY 2015 SNF PPS final rule (79 

FR 45644 through 45646), we finalized 

changes to the SNF PPS wage index 

based on the newest OMB delineations, 

as described in OMB Bulletin No. 13– 

01, beginning in FY 2015, including a 1- 

year transition with a blended wage 

index for FY 2015. OMB Bulletin No. 

13–01 established revised delineations 

for Metropolitan Statistical Areas, 

Micropolitan Statistical Areas, and 

Combined Statistical Areas in the 

United States and Puerto Rico based on 

the 2010 Census, and provided guidance 

on the use of the delineations of these 

statistical areas using standards 

published on June 28, 2010 in the 

Federal Register (75 FR 37246 through 

37252). Subsequently, on July 15, 2015, 

OMB issued OMB Bulletin No. 15–01, 

which provides minor updates to and 

supersedes OMB Bulletin No. 13–01 

that was issued on February 28, 2013. 

The attachment to OMB Bulletin No. 

15–01 provides detailed information on 

the update to statistical areas since 

February 28, 2013. The updates 


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provided in OMB Bulletin No. 15–01 are 

based on the application of the 2010 

Standards for Delineating Metropolitan 

and Micropolitan Statistical Areas to 

Census Bureau population estimates for 

July 1, 2012 and July 1, 2013. As we 

previously stated in the FY 2008 SNF 

PPS proposed and final rules (72 FR 

25538 through 25539, and 72 FR 43423), 

we wish to note that this and all 

subsequent SNF PPS rules and notices 

are considered to incorporate any 

updates and revisions set forth in the 

most recent OMB bulletin that applies 

to the hospital wage data used to 

determine the current SNF PPS wage 

index. 

On August 15, 2017, OMB announced 

that one Micropolitan Statistical Area 

now qualifies as a Metropolitan 

Statistical Area (OMB Bulletin No. 17– 

01). The new urban CBSA is as follows: 

• Twin Falls, Idaho (CBSA 46300). 

This CBSA is comprised of the principal 

city of Twin Falls, Idaho in Jerome 

County, Idaho and Twin Falls County, 

Idaho. 

The OMB bulletin is available on the 

OMB website at https://

www.whitehouse.gov/sites/

whitehouse.gov/files/omb/bulletins/

2017/b-17-01.pdf. As we stated in the 

proposed rule (83 FR 21028), we did not 

have sufficient time to include this 

change in the computation of the 

proposed FY 2019 wage index, rate 

setting, and tables. We also stated that 

this new CBSA may affect the budget 

neutrality factor and wage indexes, 

depending on the impact of the overall 

payments of the hospital located in this 

new CBSA. In the proposed rule, we 

provided an estimate of this new area’s 

wage index based on the average hourly 

wage, unadjusted for occupational mix, 

for new CBSA 46300 and the national 

average hourly wages from the wage 

data for the proposed FY 2019 wage 

index. Currently, provider 130002 is the 

only hospital located in Twin Falls 

County, Idaho, and there are no 

hospitals located in Jerome County, 

Idaho. Thus, the wage index for CBSA 

46300 is calculated using the average 

hourly wage data for one provider 

(provider 130002). In this final rule, we 

are providing below this new area’s 

wage index based on the updated 

average hourly wage, unadjusted for 

occupational mix, for new CBSA 46300 

and the updated national average hourly 

wages from the wage data for the FY 

2019 wage index, and we are 

incorporating this change into the final 

FY 2019 wage index, rate setting and 

tables. Taking the unadjusted average 

hourly wage of $35.8336 of new CBSA 

46300 and dividing by the national 

average hourly wage of $42.955567020 

results in the FY 2019 wage index of 

0.8334 for CBSA 46300. 

In the proposed rule, we stated that in 

the final rule, we would incorporate this 

change into the final FY 2019 wage 

index, rate setting and tables. We did 

not receive any comments on this issue. 

Thus, in this final rule, we have 

incorporated this change into the final 

FY 2019 wage index, rate setting and 

tables. As we proposed, for FY 2019, we 

will use the OMB delineations that were 

adopted beginning with FY 2015 to 

calculate the area wage indexes, with 

updates as reflected in OMB Bulletin 

Nos. 15–01 and 17–01. As noted above, 

the wage index applicable to FY 2019 

(with the CBSA update from OMB 

Bulletin No. 17–01 specified above) is 

set forth in Tables A and B available on 

the CMS website at http://www.cms.gov/ 

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

Once calculated, we stated in the 

proposed rule that we would apply the 

wage index adjustment to the laborrelated portion of the federal rate. 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 labor-intensive and vary with 

the local labor market) in the input price 

index. In the SNF PPS final rule for FY 

2018 (82 FR 36548 through 36566), we 

finalized a proposal to revise the laborrelated share to reflect the relative 

importance of the 2014-based SNF 

market basket cost weights for the 

following cost categories: Wages and 

Salaries; Employee Benefits; 

Professional Fees: Labor-Related; 

Administrative and Facilities Support 

Services; Installation, Maintenance, and 

Repair Services; All Other: LaborRelated Services; and a proportion of 

Capital-Related expenses. 

We calculate the labor-related relative 

importance from the SNF market basket, 

and it approximates the labor-related 

portion of the total costs after taking 

into account historical and projected 

price changes between the base year and 

FY 2019. 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 2019 than the base 

year weights from the SNF market 

basket. 

We calculate the labor-related relative 

importance for FY 2019 in four steps. 

First, we compute the FY 2019 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 

2019 price index level for that cost 

category by the total market basket price 

index level. Third, we determine the FY 

2019 relative importance for each cost 

category by multiplying this ratio by the 

base year (2014) weight. Finally, we add 

the FY 2019 relative importance for 

each of the labor-related cost categories 

(Wages and Salaries, Employee Benefits, 

Professional Fees: Labor-Related, 

Administrative and Facilities Support 

Services, Installation, Maintenance, and 

Repair Services, All Other: Labor-related 

services, and a portion of CapitalRelated expenses) to produce the FY 

2019 labor-related relative importance. 

Table 8 summarizes the updated laborrelated share for FY 2019, based on IGI’s 

second quarter 2018 forecast with 

historical data through first quarter 

2018, compared to the labor-related 

share that was used for the FY 2018 SNF 

PPS final rule. In the FY 2019 proposed 

rule, we presented the FY 2019 laborrelated share based on IGI’s first quarter 

2018 forecast and further stated that if 

more recent data became available (for 

example, a more recent estimate of the 

SNF market basket and/or MFP 

adjustment), we would use such data, if 

appropriate, to determine the SNF 

market basket percentage change, laborrelated share relative importance, 

forecast error adjustment, and MFP 

adjustment in the SNF PPS final rule. 


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TABLE 8—LABOR-RELATED RELATIVE IMPORTANCE, FY 2018 AND FY 2019 

Relative 

importance, 

labor-related, 

FY 2018 

17:2 forecast 1

Relative 

importance, 

labor-related, 

FY 2019 

18:2 forecast 2

Wages and salaries ......................................................................................................................................... 50.3 50.2 

Employee benefits ........................................................................................................................................... 10.2 10.1 

Professional Fees: Labor-Related ................................................................................................................... 3.7 3.7 

Administrative and facilities support services .................................................................................................. 0.5 0.5 

Installation, Maintenance and Repair Services ............................................................................................... 0.6 0.6 

All Other: Labor Related Services ................................................................................................................... 2.5 2.5 

Capital-related (.391) ....................................................................................................................................... 3.0 2.9 

Total .......................................................................................................................................................... 70.8 70.5 

1Published in the Federal Register; based on second quarter 2017 IGI forecast. 2Based on second quarter 2018 IGI forecast, with historical data through first quarter 2018. 

Tables 9 and 10 show the RUG–IV 

case-mix adjusted federal rates for FY 

2019 by labor-related and non-laborrelated components. Tables 9 and 10 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). Additionally, 

Tables 9 and 10 do not reflect 

adjustments which may be made to the 

SNF PPS rates as a result of either the 

SNF QRP, discussed in section VI.B. of 

this final rule, or the SNF VBP program, 

discussed in sections III.B.5. and VI.C. 

of this final rule. 

BILLING CODE 4120–01–P 


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amozie on DSK3GDR082PROD with RULES2ER08AU18.000</GPH>

TABLE 9: RUG-IV Case-Mix Adjusted Federal Rates for Urban SNFs 

By Labor and Non-Labor Component 

RUG-IV Total Labor Non-Labor I 

Category Rate Portion Portion 

RUG-IV Total Labor Non-Labor I 

Category Rate Portion Portion 

RUX $832.61 $586.99 $245.62 LEI $390.02 $274.96 $115.06 

RUL $814.47 $574.20 $240.27 LD2 $448.08 $315.90 $132.18 

RVX $741.10 $522.48 $218.62 LDl $375.50 $264.73 $110.77 

RVL $664.89 $468.75 $196.14 LC2 $393.65 $277.52 $116.13 

RHX $671.44 $473.37 $198.07 LCl $331.96 $234.03 $97.93 

RHL $598.87 $422.20 $176.67 LB2 $373.69 $263.45 $110.24 

RMX $615.93 $434.23 $181.70 LBl $317.44 $223.80 $93.64 

RML $565.12 $398.41 $166.71 CE2 $415.42 $292.87 $122.55 

RLX $540.92 $381.35 $159.57 CEl $382.76 $269.85 $112.91 

RUC $631.22 $445.01 $186.21 CD2 $393.65 $277.52 $116.13 

RUB $631.22 $445.01 $186.21 CDl $360.99 $254.50 $106.49 

RUA $527.80 $372.10 $155.70 CC2 $344.66 $242.99 $101.67 

RVC $541.51 $381.76 $159.75 CCI $319.26 $225.08 $94.18 

RVB $468.94 $330.60 $138.34 CB2 $319.26 $225.08 $94.18 

RVA $467.12 $329.32 $137.80 CBl $295.67 $208.45 $87.22 

RHC $471.86 $332.66 $139.20 CA2 $270.27 $190.54 $79.73 

RHB $424.68 $299.40 $125.28 CAl $252.12 $177.74 $74.38 

RHA $373.88 $263.59 $110.29 BB2 $286.60 $202.05 $84.55 

RMC $414.53 $292.24 $122.29 BBl $273.90 $193.10 $80.80 

RMB $389.13 $274.34 $114.79 BA2 $237.61 $167.52 $70.09 

RMA $320.18 $225.73 $94.45 BAl $226.72 $159.84 $66.88 

RLB $403.03 $284.14 $118.89 PE2 $382.76 $269.85 $112.91 

RLA $259.69 $183.08 $76.61 PEl $364.62 $257.06 $107.56 

ES3 $760.16 $535.91 $224.25 PD2 $360.99 $254.50 $106.49 

ES2 $595.04 $419.50 $175.54 PDl $342.84 $241.70 $101.14 

ESl $531.54 $374.74 $156.80 PC2 $310.18 $218.68 $91.50 

HE2 $513.40 $361.95 $151.45 PCl $295.67 $208.45 $87.22 

HEl $426.31 $300.55 $125.76 PB2 $263.01 $185.42 $77.59 

HD2 $480.74 $338.92 $141.82 PBl $252.12 $177.74 $74.38 

HDl $400.90 $282.63 $118.27 PA2 $217.65 $153.44 $64.21 

HC2 $453.52 $319.73 $133.79 PAl $208.58 $147.05 $61.53 

HCl $379.13 $267.29 $111.84 

HB2 $448.08 $315.90 $132.18 

HBl $375.50 $264.73 $110.77 

LE2 $466.22 $328.69 $137.53 
39176 Federal Register / Vol. 83, No. 153 / Wednesday, August 8, 2018 / Rules and Regulations 

BILLING CODE 4120–01–C 

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

also requires that we apply this wage 

index in a manner that does not result 

in aggregate payments under the SNF 

PPS that are greater or less than would 

otherwise be made if the wage 

adjustment had not been made. For FY 

2019 (federal rates effective October 1, 

2018), we stated in the proposed rule 

that we would apply an adjustment to 

fulfill the budget neutrality requirement. 

We stated we would 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 2018 to 

the weighted average wage adjustment 

factor for FY 2019. For this calculation, 

we stated we would use the same FY 

2017 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. 

We did not receive any comments 

regarding our proposed budget 

neutrality factor calculation. Thus, we 

are finalizing the budget neutrality 

methodology as proposed. The final 

budget neutrality factor for FY 2019 is 

0.9999. We note that this is different 

from the budget neutrality factor 

(1.0002) provided in the FY 2018 SNF 

PPS proposed rule (83 FR 21031) due to 

an updated wage index file and updated 


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claims file used to calculate the budget 

neutrality factor. 

As discussed above, we have 

historically used, and propose to 

continue using, pre-reclassified IPPS 

hospital wage data, unadjusted for 

occupational mix and the rural and 

imputed floors, as the basis for the SNF 

wage index. That being said, in the 

proposed rule, we noted that we have 

received recurring comments in prior 

rulemaking (most recently in the FY 

2018 SNF PPS final rule (82 FR 36539 

through 36541)) regarding the 

development of a SNF-specific wage 

index. It has been suggested that we 

develop a SNF-specific wage index 

utilizing SNF cost report wage data 

instead of hospital wage data. We have 

noted, in response that developing such 

a wage index would require a resourceintensive audit process similar to that 

used for IPPS hospital data, to improve 

the quality of the SNF cost report data 

in order for it to be used as part of this 

analysis. This audit process is quite 

extensive in the case of approximately 

3,300 hospitals, and it would be 

significantly more so in the case of 

approximately 15,000 SNFs. As 

discussed previously in this rule, we 

believe auditing all SNF cost reports, 

similar to the process used to audit 

inpatient hospital cost reports for 

purposes of the IPPS wage index, would 

place a burden on providers in terms of 

recordkeeping and completion of the 

cost report worksheet. We also believe 

that adopting such an approach would 

require a significant commitment of 

resources by CMS and the Medicare 

Administrative Contractors, potentially 

far in excess of those required under the 

IPPS given that there are nearly five 

times as many SNFs as there are 

hospitals. Therefore, while we continue 

to review all available data and 

contemplate the potential 

methodological approaches for a SNFspecific wage index in the future, we 

continue to believe that in the absence 

of the appropriate SNF-specific wage 

data, using the pre-reclassified, pre-rural 

and imputed floor hospital inpatient 

wage data (without the occupational 

mix adjustment) is appropriate and 

reasonable for the SNF PPS. 

As an alternative to a SNF-specific 

wage index, it has also been suggested 

that we consider adopting certain wage 

index policies in use under the IPPS, 

such as geographic reclassification or 

rural floor. Although we have the 

authority under section 315 of BIPA to 

establish a geographic reclassification 

procedure specific to SNFs under 

certain conditions, as discussed 

previously, under BIPA, we cannot 

adopt a reclassification policy until we 

have collected the data necessary to 

establish a SNF-specific wage index. 

Thus, we cannot adopt a reclassification 

procedure at this time. With regard to 

adopting a rural floor policy, as we 

stated in the FY 2017 SNF PPS final rule 

(82 FR 36540), MedPAC has 

recommended eliminating the rural 

floor policy (which actually sets a floor 

for urban hospitals) from the calculation 

of the IPPS wage index (see, for 

example, Chapter 3 of MedPAC’s March 

2013 Report to Congress on Medicare 

Payment Policy, available at http://

medpac.gov/docs/default-source/

reports/mar13_ch03.pdf, which notes 

on page 65 that in 2007, MedPAC had 

‘‘. . . recommended eliminating these 

special wage index adjustments and 

adopting a new wage index system to 

avoid geographic inequities that can 

occur due to current wage index 

policies (Medicare Payment Advisory 

Commission 2007b.’’). As we stated in 

the FY 2017 SNF PPS final rule, if we 

were to adopt the rural floor under the 

SNF PPS, we believe that the SNF PPS 

wage index could become vulnerable to 

problems similar to those that MedPAC 

identified in its March 2013 Report to 

Congress. 

Given the perennial nature of these 

comments and responses on the SNF 

PPS wage index policy, in the proposed 

rule (89 FR 21032) we invited further 

comments on the issues discussed 

above. Specifically, we requested 

comment on how a SNF-specific wage 

index may be developed without 

creating significant administrative 

burdens for providers, CMS, or its 

contractors. Further, we requested 

comments on specific alternatives we 

may consider in future rulemaking 

which could be implemented in 

advance of, or in lieu of, a SNF-specific 

wage index. A discussion of the 

comments we received, along with our 

responses, appear below. 

Comment: One commenter 

encouraged CMS to continue using 

hospital wage data when determining 

the SNF wage index, since it did not 

have a proposal for how to obtain a 

SNF-specific wage index in a manner 

that does not cause burden on 

providers. 

Response: We appreciate the 

commenter’s encouragement to continue 

using hospital wage data as a proxy for 

a SNF wage index. 

Comment: Several commenters 

recommend that CMS pursue the 

establishment of a SNF-specific wage 

index. These commenters proposed 

phased-in recommendations to trim 

hospital wage data (as an interim step), 

to reflect positions staffed in nursing 

homes, allow for a reclassification 

system, account for occupational mix 

differences between hospitals and each 

post-acute care (PAC) setting using 

published BLS data, and apply a rural 

floor. Further, if determining a SNF 

wage index using SNF cost report data 

is too administratively complex, it was 

recommended that Payroll-based 

Journal (PBJ) data be used. Finally, the 

commenters recommended 

communicating with hospitals through 

Medicare Learning Network (MLN) 

transmittals for education and technical 

support. 

Response: We appreciate the 

commenter’s recommendation for 

collecting SNF cost report wage data to 

establish a SNF-specific wage index. We 

note that, consistent with the preceding 

discussion in this final rule as well as 

our previous responses to these 

recurring comments (most recently 

published in the FY 2018 SNF PPS final 

rule (82 FR 36540 through 36541)), 

developing such a wage index would 

require a resource-intensive audit 

process similar to that used for IPPS 

hospital data, to improve the quality of 

the SNF cost report data in order for it 

to be used as part of this analysis. 

Further, we appreciate these 

commenters’ suggestion that we modify 

the current hospital wage data used to 

construct the SNF PPS wage index to 

reflect the SNF environment more 

accurately by trimming hospital wage 

data to reflect positions staffed in 

nursing homes, weighing it by 

occupational mix data published by the 

BLS, and using PBJ data. While we 

consider whether or not such an 

approach may constitute an interim step 

in the process of developing a SNFspecific wage index, we would note that 

other provider types also use the 

hospital wage index as the basis for 

their associated wage index. As such, 

we believe that such a recommendation 

should be part of a broader discussion 

on wage index reform across Medicare 

payment systems. With regard to the PBJ 

recommendation, we will pass this 

comment to our colleagues managing 

that initiative for further consideration. 

With regard to reclassification and 

rural floor, as discussed above, section 

315 of BIPA authorized us to establish 

a geographic reclassification procedure 

that is specific to SNFs, only after 

collecting the data necessary to establish 

a SNF-specific wage index that is based 

on data from nursing homes. However, 

to date this has been infeasible 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 do 

not believe that using hospital 

reclassification data would be 


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appropriate as this data is specific to the 

requesting hospitals and it may or may 

not apply to a given SNF in a given 

instance. With regard to implementing a 

rural floor, we do not believe it would 

be prudent at this time to adopt such a 

policy, because MedPAC has 

recommended eliminating the rural 

floor policy from the calculation of the 

IPPS wage index (see, for example, 

Chapter 3 of MedPAC’s March 2013 

Report to Congress on Medicare 

Payment Policy, available at http://

medpac.gov/documents/reports/mar13_

entirereport.pdf, which notes on page 65 

that in 2007, MedPAC had 

‘‘. . . recommended eliminating these 

special wage index adjustments and 

adopting a new wage index system to 

avoid geographic inequities that can 

occur due to current wage index 

policies (Medicare Payment Advisory 

Commission 2007b.’’) If we adopted the 

rural floor at this time under the SNF 

PPS, we believe that, the SNF PPS wage 

index could become vulnerable to 

problems similar to those that MedPAC 

identified in its March 2013 Report to 

Congress. 

While we continue to review all 

available data and contemplate the 

potential methodological approaches for 

a SNF-specific wage index in the future, 

we continue to believe that in the 

absence of the appropriate SNF-specific 

wage data, using the pre-reclassified, 

pre-rural and imputed floor hospital 

inpatient wage data (without the 

occupational mix adjustment) is 

appropriate and reasonable for the SNF 

PPS. We believe the commenters’ 

recommendations should be part of a 

broader discussion of wage index reform 

across Medicare payment systems. In 

the event that a SNF-specific wage 

index is implemented in the future, 

CMS will provide education and 

support in a manner it deems 

appropriate, which may include MLN 

transmittals. We will continue to 

monitor closely research efforts 

surrounding the development of an 

alternative hospital wage index for the 

IPPS and the potential impact or 

influence of that research on the SNF 

PPS. 

5. SNF Value-Based Purchasing Program 

Beginning with payment for services 

furnished on October 1, 2018, section 

1888(h) of the Act requires the Secretary 

to reduce the adjusted Federal per diem 

rate determined under section 

1888(e)(4)(G) of the Act otherwise 

applicable to a SNF for services 

furnished during a fiscal year by 2 

percent, and to adjust the resulting rate 

for a SNF by the value-based incentive 

payment amount earned by the SNF 

based on the SNF’s performance score 

for that fiscal year under the SNF VBP 

Program. To implement these 

requirements, we proposed to add a new 

paragraph (f) to § 413.337. We did not 

receive any public comments regarding 

this proposal. Therefore, we are 

finalizing the addition of paragraph (f) 

to § 413.337 as proposed, without 

modification. 

Please see section VI.C. of this final 

rule for further information regarding 

the SNF VBP Program, including a 

discussion of the methodology we will 

use to make the payment adjustments. 

6. Adjusted Rate Computation Example 

Using the hypothetical SNF XYZ, 

Table 11 shows the adjustments made to 

the federal per diem rates (prior to 

application of any adjustments under 

the SNF QRP and SNF VBP programs as 

discussed above) to compute the 

provider’s actual per diem PPS payment 

for FY 2019. We derive the Labor and 

Non-labor columns from Table 9. The 

wage index used in this example is 

based on the FY 2019 SNF PPS wage 

index that appears in Table A available 

on the CMS website at http://

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

WageIndex.html. As illustrated in Table 

11, SNF XYZ’s total PPS payment for FY 

2019 would equal $48,779.14. 

TABLE 11—ADJUSTED RATE COMPUTATION EXAMPLE SNF XYZ: LOCATED IN FREDERICK, MD (URBAN CBSA 43524), 

WAGE INDEX: 0.9880 

[See wage index in Table A] 1

RUG–IV group Labor Wage 

index 

Adjusted 

labor Non-labor Adjusted rate 

Percent 

adjustment 

Medicare 

days Payment 

RVX .................................................. $522.48 0.9880 $516.21 $218.62 $734.83 $734.83 14 $10,287.62 

ES2 .................................................. 419.50 0.9880 414.47 175.54 590.01 590.01 30 17,700.30 

RHA .................................................. 263.59 0.9880 260.43 110.29 370.72 370.72 16 5,931.52 

CC2 2 ................................................ 242.99 0.9880 240.07 101.67 341.74 779.17 10 7,791.70 

BA2 .................................................. 167.52 0.9880 165.51 70.09 235.60 235.60 30 7,068.00 

.................. .................. .................. .................. .................. .................. 100 48,779.14 

1Available on the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html. 2 Reflects a 128 percent adjustment from section 511 of the MMA. 

IV. Additional Aspects of the SNF PPS 

A. SNF Level of Care—Administrative 

Presumption 

The establishment of the SNF PPS did 

not change Medicare’s fundamental 

requirements for SNF coverage. 

However, because the case-mix 

classification is based, in part, on the 

beneficiary’s need for skilled nursing 

care and therapy, we have attempted, 

where possible, to coordinate claims 

review procedures with the existing 

resident assessment process and casemix classification system discussed in 

section III.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 current 66-group RUG– 

IV case-mix classification system to 

assist in making certain SNF level of 

care determinations. 

In accordance with the regulations at 

§ 413.345, we include in each update of 

the federal payment rates in the Federal 

Register a discussion of the resident 

classification system that provides the 

basis for case-mix adjustment. Under 

that discussion, we designate those 

specific classifiers under the case-mix 

classification system that represent the 

required SNF level of care, as provided 

in § 409.30. As set forth in the FY 2011 

SNF PPS update notice (75 FR 42910), 

this designation reflects an 

administrative presumption under the 

66-group RUG–IV system that 

beneficiaries who are correctly assigned 

to one of the upper 52 RUG–IV groups 

on the initial 5-day, Medicare-required 

assessment are automatically classified 

as meeting the SNF level of care 

definition up to and including the 

assessment reference date (ARD) on the 

5-day Medicare-required assessment. 


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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. 

The FY 2018 final rule (82 FR 36544) 

further specified that we would 

henceforth disseminate the standard 

description of the administrative 

presumption’s designated groups via the 

SNF PPS website at https://

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

index.html (where such designations 

appear in the paragraph entitled ‘‘Case 

Mix Adjustment’’), and would publish 

such designations in rulemaking only to 

the extent that we actually intend to 

make changes in them. (We discuss in 

section V.G. of this final rule the 

modifications to the administrative level 

of care presumption that we are 

finalizing in order to accommodate the 

PDPM case-mix classification system.) 

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 assignment of 

one of the designated case-mix 

classifiers (which, in turn, serves to 

trigger the administrative presumption) 

are themselves medically necessary. As 

we explained in the FY 2000 SNF PPS 

final rule (64 FR 41667), the 

administrative presumption is itself 

rebuttable in those individual cases in 

which the services actually received by 

the resident do not meet the basic 

statutory criterion of being reasonable 

and necessary to diagnose or treat a 

beneficiary’s condition (according to 

section 1862(a)(1) of the Act). 

Accordingly, the presumption would 

not apply, for example, in those 

situations 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 ARD of the 5-day assessment. 

B. Consolidated Billing 

Sections 1842(b)(6)(E) and 1862(a)(18) 

of the Act (as added by section 4432(b) 

of the BBA 1997) require a SNF to 

submit consolidated Medicare bills to 

its Medicare Administrative Contractor 

(MAC) for almost all of the services that 

its residents receive during the course of 

a covered Part A stay. In addition, 

section 1862(a)(18) of the Act places the 

responsibility with the SNF for billing 

Medicare for physical therapy, 

occupational therapy, and speechlanguage pathology services that the 

resident receives during a noncovered 

stay. (Please refer to section VI.A. of this 

final rule for a discussion of a revision 

to the regulation text that describes a 

beneficiary’s status as a SNF ‘‘resident’’ 

for consolidated billing purposes.) 

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 website at http://www.cms.gov/

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

Legislative_History_04152015.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 

PPS. 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, the 

amendments enacted in section 103 of 

the BBRA do not designate for exclusion 

any of the remaining services within 

those four categories (thus, leaving all of 

those services subject to SNF 

consolidated billing), because they are 

relatively inexpensive and are furnished 

routinely in SNFs. 

As we further explained in the final 

rule for FY 2001 (65 FR 46790), and as 

is consistent with our longstanding 

policy, any additional service codes that 

we might designate for exclusion under 

our discretionary authority must meet 

the same statutory criteria used in 

identifying the original codes excluded 

from consolidated billing under section 

103(a) of the BBRA: they must fall 

within one of the four service categories 

specified in the BBRA; and they also 

must meet the same standards of high 

cost and low probability in the SNF 

setting, as discussed in the BBRA 

Conference report. Accordingly, we 

characterized this statutory authority to 

identify additional service codes for 

exclusion as essentially affording the 

flexibility to revise the list of excluded 

codes in response to changes of major 

significance that may occur over time 

(for example, the development of new 

medical technologies or other advances 

in the state of medical practice) (65 FR 

46791). In the proposed rule (83 FR 

21033), 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 


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devices) representing recent medical 

advances that might meet our criteria for 

exclusion from SNF consolidated 

billing. We stated that we may consider 

excluding a particular service if it met 

our criteria for exclusion as specified 

above. We further stated that 

commenters should identify in their 

comments the specific HCPCS code that 

is associated with the service in 

question, as well as their rationale for 

requesting that the identified HCPCS 

code(s) be excluded. 

We note that the original BBRA 

amendment (as well as the 

implementing regulations) identified a 

set of excluded services by means of 

specifying HCPCS codes that were in 

effect as of a particular date (in that 

case, as of July 1, 1999). Identifying the 

excluded services in this manner made 

it possible for us to utilize program 

issuances as the vehicle for 

accomplishing routine updates of the 

excluded codes, to reflect any minor 

revisions that might subsequently occur 

in the coding system itself (for example, 

the assignment of a different code 

number to the same service). 

Accordingly, we stated in the proposed 

rule that, in the event that we identify 

through the current rulemaking cycle 

any new services that would actually 

represent a substantive change in the 

scope of the exclusions from SNF 

consolidated billing, we would identify 

these additional excluded services by 

means of the HCPCS codes that are in 

effect as of a specific date (in this case, 

as of October 1, 2018). By making any 

new exclusions in this manner, we 

could similarly accomplish routine 

future updates of these additional codes 

through the issuance of program 

instructions. 

Commenters submitted the following 

comments related to the proposed rule’s 

discussion of the consolidated billing 

aspects of the SNF PPS. A discussion of 

these comments, along with our 

responses, appears below. 

Comment: Some commenters 

reiterated previous recommendations 

regarding the exclusion of certain drugs 

from consolidated billing that had been 

submitted and addressed repeatedly in 

a number of prior rulemaking cycles. 

One such recommendation involved 

excluding the commonly used prostate 

cancer drug Lupron® (leuprolide 

acetate). Other commenters once again 

raised the issue of nursing home 

residents bringing their own 

medications, as a means of minimizing 

the nursing home’s cost of caring for the 

resident. Still another reiterated 

previous recommendations to exclude a 

broader range of expensive drugs 

beyond the category of chemotherapy 

alone, citing anecdotal evidence that 

leaving such drugs within the SNF PPS 

bundle may, among other things, create 

a disincentive for admitting those 

patients who require them. 

Response: For the reasons discussed 

previously in prior rulemaking, the 

particular drugs cited in these 

comments remain subject to 

consolidated billing. In the case of 

leuprolide acetate, the most recent 

discussion appears in the SNF PPS final 

rule for FY 2015 (79 FR 45642, August 

5, 2014), which explained that this drug 

is unlikely to meet the criterion of ‘‘low 

probability’’ specified in the BBRA. 

Regarding the issue of nursing homes 

having residents supply their own 

medications, the SNF PPS final rule for 

FY 2018 (82 FR 36548, August 4, 2017) 

explained that the applicable terms of 

the SNF’s provider agreement would 

preclude this practice, in that they 

require the SNF to accept Medicare’s 

payment for covered services as 

payment in full. Finally, the issue of 

establishing a broader exclusion that 

would encompass expensive nonchemotherapy drugs was addressed in 

the SNF PPS final rule for FY 2017 (81 

FR 51985, August 5, 2016), which 

explained that existing law does not 

provide for such an expansion. In 

addition, it is worth noting in this 

context that in accounting more 

accurately for the costs of NTA services 

such as drugs, the PDPM model has the 

potential to ameliorate some of the 

concerns cited in these comments. 

Comment: One commenter urged us 

to expand the scope of the 

chemotherapy exclusion, advancing an 

interpretation of the Secretary’s 

authority under section 

1888(e)(2)(A)(iii)(II) of the Act to 

designate ‘‘additional’’ chemotherapy 

items for exclusion as not actually being 

restricted to the types of ‘‘high-cost, low 

probability’’ chemotherapy items and 

services described elsewhere in that 

provision, and further suggesting that 

identifying a given item or service as 

either ‘‘high-cost’’ or ‘‘low probability’’ 

alone should be sufficient grounds for 

its exclusion. The commenter also 

submitted well over 100 codes that it 

suggested should be added to the 

chemotherapy portion of the exclusion 

list. The commenter reiterated previous 

recommendations to expand the existing 

chemotherapy exclusion to encompass 

related drugs such as anti-emetics (antinausea drugs)—which, while they do 

not in themselves fight cancer, are 

commonly administered along with the 

chemotherapy drug to ameliorate its 

side effects. While we have, in fact, 

already addressed such 

recommendations repeatedly in 

previous rulemaking (most recently, in 

the FY 2015 SNF PPS final rule (79 FR 

45642, August 5, 2014)), the commenter 

cited in further support of its position 

the similarity between the 

recommended approach and the 

existing policy under the dialysis 

exclusion from consolidated billing, in 

which the exclusion encompasses 

related services along with the dialysis 

itself. In addition, the commenter 

reiterated previous concerns about the 

complexity of the existing set of 

consolidated billing exclusions, 

suggesting that it should be streamlined 

and simplified. 

Response: Approximately two-thirds 

of the codes that the commenter 

submitted already appear on the 

chemotherapy exclusion list. Of the 

remaining codes, several were already 

in existence in 1999 when the BBRA 

enacted the statutory ranges of excluded 

codes, but were skipped over by those 

ranges; as discussed repeatedly in 

previous rulemaking—most recently, in 

the FY 2018 SNF PPS final rule (82 FR 

36547, August 4, 2017)—this action 

indicates that such drugs were intended 

to remain within the SNF PPS bundle, 

subject to the BBRA Conference Report’s 

provision for a GAO review of the code 

set that was conducted the following 

year. Still others were codes such as 

those for anti-emetic (anti-nausea) 

drugs, which serve to address the 

chemotherapy drug’s side effects rather 

than actually fighting the cancer itself; 

as we have noted repeatedly in prior 

rulemaking (most recently, in the FY 

2015 SNF PPS final rule, 79 FR 45642, 

August 5, 2014), such drugs do not, in 

fact, represent ‘‘chemotherapy’’ (that is, 

cancer-fighting) drugs within the 

meaning of this exclusion. Further, the 

commenter’s proposed interpretation 

suggesting that the exclusion is not 

restricted to ‘‘high-cost, low 

probability’’ chemotherapy services, or 

that a given chemotherapy service need 

only be either ‘‘high-cost’’ or ‘‘low 

probability’’ alone in order to qualify for 

exclusion would not be consistent with 

Congress’ stated intent with respect to 

this provision. In fact, in the above-cited 

BBRA Conference Report (H.R. Rep. 

106–479 at 854 (1999) (Conf. Rep.)), the 

Congress clearly specified the overall 

purpose of this provision: ‘‘This 

provision is an attempt to exclude from 

the PPS certain services and costly items 

that are provided infrequently in SNFs’’ 

(emphasis added); thus, any 

‘‘additional’’ chemotherapy services that 

the Secretary might designate for 

exclusion under this authority, like 

those already excluded, would remain 

subject to both the ‘‘high-cost’’ and ‘‘low 


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probability’’ thresholds. Regarding the 

commenter’s further suggestion that the 

dialysis exclusion might serve as a 

possible precedent for broadening the 

chemotherapy exclusion to include 

related services, we note that as one of 

the BBA 1997’s original set of 

consolidated billing exclusions enacted 

in clause (ii) of section 1888(e)(2)(A) of 

the Act, the dialysis exclusion 

fundamentally differs from the BBRA’s 

subsequent, more targeted set of 

exclusions in clause (iii) of that section 

(such as the one for chemotherapy) in 

that the BBA 1997 excluded entire 

service categories from consolidated 

billing, whereas the BBRA focused more 

narrowly on excluding certain 

designated ‘‘high-cost, low probability’’ 

services, identified by HCPCS code, 

within several broader categories that 

otherwise remained subject to the 

provision. In the FY 2015 SNF PPS final 

rule (79 FR 45644, August 5, 2014), we 

specifically contrasted the relatively 

broad exclusions enacted in the BBA 

1997 with the more narrowly targeted 

BBRA exclusions, in the context of 

another one of the latter exclusions that 

involves radioisotope services. In that 

context, we noted 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. 

Under this framework, the scope of the 

consolidated billing provision’s dialysis 

exclusion is effectively defined by the 

scope of coverage under the separate 

Part B dialysis benefit at section 

1861(s)(2)(F) of the Act, which would 

encompass dialysis-related services 

along with the dialysis itself. By 

contrast, the more targeted BBRA 

exclusions in areas such as 

chemotherapy and radioisotope services 

focus specifically on those particular 

services that are directly designated as 

in themselves meeting the applicable 

criteria for exclusion. 

Finally, regarding the comment about 

the complexity of this provision, in the 

FY 2010 SNF PPS final rule (74 FR 

40355, August 11, 2009), we noted in 

response to a previous, similar comment 

that while the commenter’s interest in 

promoting improved ease of 

administration is understandable, 

current law contains no authority to 

effect a comprehensive overhaul of the 

existing requirements administratively. 

However, we would also note in this 

context that we continue to conduct an 

active educational and training 

initiative on the consolidated billing 

provision that includes the following: 

• A recently updated and expanded 

set of consolidated billing instructions 

in Chapter 6 of the Medicare Claims 

Processing Manual (available online at 

https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/

Downloads/clm104c06.pdf), at §§ 10– 

20.6; 

• Addressing questions that arise on 

this topic during CMS’s recurring 

nationwide SNF/Long-Term Care Open 

Door Forums (https://www.cms.gov/

Outreach-and-Education/Outreach/

OpenDoorForums/ODF_SNFLTC.html); 

• Development of sample model 

agreements between SNFs and their 

suppliers, which are posted online for 

review at our ‘‘Best Practices’’ website 

(at https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/BestPractices.html); and 

• Creation of a web-based training 

(WBT) module accessible from the 

Medicare Learning Network (MLN) 

website at https://www.cms.gov/

Outreach-and-Education/MedicareLearning-Network-MLN/MLNProducts/

WebBasedTraining.html, which offers 

interactive online training on 

consolidated billing. 

Comment: One commenter 

recommended for exclusion a pair of 

oral chemotherapy drugs, ZYTIGA® 

(abiraterone acetate) and ERLEADA® 

(apalutamide), which are used in 

treating certain uncommon and 

otherwise resistant forms of prostate 

cancer. The commenter acknowledged 

our previous discussion of oral drugs in 

this context in the FY 2017 SNF PPS 

final rule (81 FR 51985, August 5, 2016), 

which described them as not reasonably 

characterized as meeting the BBRA’s 

chemotherapy exclusion criterion of 

‘‘requiring special staff expertise to 

administer.’’ However, the commenter 

then went on to point out that the 

accompanying Conference Report 

language (H. Conf. Rep. No. 106–479 at 

854), in discussing the statutory 

exclusion of ‘‘high-cost, low 

probability’’ chemotherapy items, lists 

as examples those 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’’ 

(emphasis added). Thus, the commenter 

suggested that while the Conference 

Report language itself specifies ‘‘highcost, low probability’’ as the applicable 

standard for the chemotherapy 

exclusion, its use of the word ‘‘or’’ in 

the specific context of ‘‘requiring special 

staff expertise to administer’’ identifies 

this particular criterion as merely an 

illustrative example that is not an 

absolute prerequisite for meeting the 

standard in all cases. The commenter 

also acknowledged our explanation in 

the FY 2015 SNF PPS final rule (79 FR 

45642, August 5, 2014) in connection 

with a previous comment regarding 

ZYTIGA® and another oral 

chemotherapy drug, REVLIMID® 

(lenalidomide), that it would not be 

operationally feasible to utilize a 

miscellaneous ‘‘not otherwise specified’’ 

(NOS) code such as J8999 to effect such 

an exclusion, and then urged us to 

consider other options, such as 

establishing a separate code or modifier 

for the particular drugs in question, or 

utilizing the already-existing National 

Drug Codes (NDCs) that are specific to 

those drugs. Other commenters 

similarly recommended the oral 

chemotherapy drugs REVLIMID® and 

GLEEVEC® (imatinib mesylate) for 

exclusion. 

Response: We believe that the 

commenter’s point that an oral 

chemotherapy drug which does not 

require ‘‘special staff expertise to 

administer’’ can nonetheless qualify for 

exclusion as long as it can otherwise 

meet the ‘‘high-cost, low probability’’ 

standard merits further consideration. 

However, we note that the four oral 

chemotherapy drugs at issue here differ 

from previously-excluded, non-oral 

chemotherapy drugs in that they are not 

covered under Part B. We note that 

while Part B would authorize coverage 

for drugs (including those 

chemotherapy drugs that are excluded 

from consolidated billing under section 

1888(e)(2)(A)(iii)(II) of the Act) as either 

an incident to a physician’s professional 

services (under section 1861(s)(2)(A) of 

the Act) or as an outpatient hospital 

service (under section 1861(s)(2)(B) of 

the Act), this authority is specifically 

limited in both cases to those drugs 

‘‘that are not usually self-administered 

by the patient,’’ thus effectively 

excluding oral drugs as a class. Further, 

while Part B does, in fact, include a 

specific benefit category for oral 

chemotherapy drugs (at section 

1861(s)(2)(Q) of the Act), that benefit is 

restricted to those with the same 

indication and active ingredient(s) as a 

covered non-oral anti-cancer drug, 

which is not the case for the specific 

four drugs in question. 

Because the drugs at issue here would 

not be covered under Part B, we believe 

that the applicable provisions at section 

1888(e)(2)(A) may not provide a basis 

for excluding them from consolidated 

billing. Accordingly, because of the 

need for further consideration of this 


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issue, we are unable to adopt the 

commenters’ recommendations at this 

time. 

Comment: A few commenters 

reiterated previous recommendations to 

expand the existing exclusion for 

certain high-intensity outpatient 

hospital services to encompass nonhospital settings as well. 

Response: Similar concerns have been 

raised and addressed repeatedly in prior 

rulemaking (most recently, in the FY 

2018 SNF PPS final rule (82 FR 36547, 

August 4, 2017)), as follows: 

• As noted in numerous previous 

rules, as well as in Medicare Learning 

Network (MLN) Matters article SE0432 

(available online at https://

www.cms.gov/Outreach-and-Education/

Medicare-Learning-Network-MLN/

MLNMattersArticles/Downloads/

SE0432.pdf), the 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, 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 

directly acknowledged the hospitalspecific nature of this exclusion. 

• Ever since its inception, this 

exclusion was intended to be hospitalspecific; as explained in the original 

SNF PPS interim final rule (63 FR 

26298, May 12, 1998), this exclusion 

was created within the context of the 

concurrent development of a new PPS 

specifically for outpatient hospital 

services, reflecting the need to delineate 

the respective areas of responsibility for 

the SNF under the consolidated billing 

provision, and for the hospital under the 

outpatient bundling provision, with 

regard to these services. This point was 

further reinforced in the subsequent 

final rule for FY 2000 (64 FR 41676, July 

30, 1999), in which we explained that 

a key concern underlying the 

development of the consolidated billing 

exclusion of certain outpatient hospital 

services specifically involved the need 

to distinguish those services that 

comprise the SNF bundle from those 

that will become part of the outpatient 

hospital bundle that is currently being 

developed in connection with the 

outpatient hospital PPS. Accordingly, 

we noted at that time that we would not 

be extending the outpatient hospital 

exclusion from consolidated billing to 

encompass any other, freestanding 

settings. 

• Finally, the FY 2010 final rule (74 

FR 40355, August 11, 2009), while 

acknowledging that advances in medical 

technology over time may make it 

feasible to perform such high-intensity 

outpatient services more widely in 

nonhospital settings, then went on to 

cite the FY 2006 final rule (70 FR 45049, 

August 4, 2005) in noting that such a 

development would not argue in favor 

of excluding the nonhospital 

performance of the service from 

consolidated billing, but rather, would 

call into question whether the service 

should continue to be excluded from 

consolidated billing at all, even when 

performed in the hospital setting. 

Comment: Several commenters 

reiterated comments submitted 

previously during the FY 2016 

rulemaking cycle in the context of the 

SNF VBP provision, in which they had 

sought to portray a portable x-ray 

service’s transportation and setup as a 

separately billable ‘‘physician’’ service 

by suggesting that such activities should 

appropriately be regarded as part of the 

diagnostic test’s professional component 

(PC) for interpreting the test results 

rather than the technical component 

(TC) for performing the test itself. They 

now reiterated those same comments in 

the context of the PDPM, and 

additionally indicated that allowing 

these services to be paid separately 

outside of the Part A bundle would be 

consistent with the proration policy that 

applies under Part B when a single 

portable x-ray visit serves multiple 

patients, under which the trip itself is 

allocated among all of the patients 

served (regardless of payment source) in 

order to calculate the prorated payment 

amount that applies specifically to each 

of the Part B patients. Some of the 

commenters also cited certain HCPCS 

codes, such as R0076 (‘‘transportation of 

portable EKG to facility or location, per 

patient’’), and suggested that all of the 

‘‘medical and other health services’’ 

enumerated in section 1861(s) of the 

Act—including the diagnostic test 

benefit at section 1861(s)(3) of the Act— 

should be regarded as excluded 

‘‘physician’’ services. 

Response: As we explained 

previously in the FY 2016 SNF PPS 

final rule (80 FR 46408, August 4, 2015), 

we do not share the view of those 

commenters who would categorize a 

portable x-ray service’s transportation 

and setup as part of the separately 

billable PC. In that discussion, we cited 

§ 90.5 of the Medicare Claims 

Processing Manual, Chapter 13 

(available online at https://

www.cms.gov/Regulations-andGuidance/Guidance/Manuals/

Downloads/clm104c13.pdf), which 

states that the bundled TC (to which 

consolidated billing applies) specifically 

includes ‘‘any associated transportation 

and setup costs.’’ As indicated in the FY 

2016 SNF PPS final rule (80 FR 46408, 

August 4, 2015), to be considered a 

separately billable ‘‘physician’’ service 

in this context, a given service must not 

only be furnished personally by a 

physician, but must actually be a type 

of service that ordinarily requires such 

performance; we further noted that a 

portable x-ray service’s transportation 

and setup would never meet these 

criteria, as the service’s excluded PC 

relates solely to reading the x-ray rather 

than taking it, and the physician’s 

personal performance clearly would not 

be required for activities such as driving 

the supplier’s vehicle to the SNF, or 

setting up the equipment once it arrives 

there. 

Further, we believe the comments that 

cited the proration policy in this context 

(which involves a single portable x-ray 

trip that serves multiple patients) may 

reflect a certain amount of 

misunderstanding about the proration 

policy’s actual nature and purpose. As 

explained in the Medicare Physician 

Fee Schedule (MPFS) final rule for 

calendar year (CY) 2016 (80 FR 70886, 

November 16, 2015), the reason for 

allocating such a trip among all of the 

patients served is to ensure that 

Medicare Part B should not pay for more 

than its share of the transportation costs 

for portable x-ray services (80 FR 71068 

through 71069). However, while all of 

the patients served (both the Part B and 

non-Part B patients) would be included 

in calculating the proration itself, the 

resulting prorated amount would be 

payable only for the Part B patients. By 

contrast, for any Part A SNF residents 

served by the same trip, the 

transportation cost associated with the 

portable x-ray service would be 

subsumed in the SNF’s payment to the 

supplier for the bundled TC, as 

discussed above. In terms of Part A 

payment, that bundled TC, in turn, 

would be included (along with all other 

bundled services) within the global PPS 

per diem that the SNF receives for the 

covered Part A stay itself. Moreover, the 

SNF’s actual payment amount to its 

supplier in this scenario would not be 

tied to the prorated payment amount 

made for the Part B patients served on 

the same trip; as explained in § 70.4 of 

the Medicare Benefit Policy Manual, 

Chapter 8 (available online at https://

www.cms.gov/Regulations-andGuidance/Guidance/Manuals/

Downloads/bp102c08.pdf), for a 

bundled service, the specific details of 

the ensuing payment arrangement 

between the SNF and the outside 

supplier (such as the actual payment 


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amount and timeframe) represent a 

private, ‘‘marketplace’’ transaction that 

is negotiated between the parties 

themselves. 

Regarding the suggestion that all of 

the Part B ‘‘medical and other health 

services’’ specified in section 1861(s) of 

the Act (including diagnostic tests such 

as portable x-ray services) should be 

considered physician services, we note 

that the physician services benefit at 

section 1861(s)(1) of the Act actually 

represents only a small subset of the 

overall ‘‘medical and other health 

services’’ enumerated throughout 

section 1861(s) of the Act, and that the 

diagnostic test benefit at section 

1861(s)(3) of the Act (which would 

encompass the TC for a portable x-ray 

service) is, in fact, a separate and 

distinct benefit category from the one at 

section 1861(s)(1) of the Act for 

physician services. Finally, regarding 

the comments on certain HCPCS codes, 

we acknowledge that among the various 

consolidated billing exclusions listed in 

section 1888(e)(2)(A)(ii) of the Act are 

‘‘transportation costs of 

electrocardiogram equipment for 

electrocardiogram test services (HCPCS 

code R0076).’’ However, that portion of 

the law additionally specifies that this 

particular exclusion is in effect ‘‘only 

with respect to services furnished 

during 1998;’’ accordingly, the statutory 

exclusion for these particular services 

has long since expired. 

C. Payment for SNF-Level Swing-Bed 

Services 

Section 1883 of the Act permits 

certain small, rural hospitals to enter 

into a Medicare swing-bed agreement, 

under which the hospital can use its 

beds to provide either acute- or 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, SNFlevel services furnished by non-CAH 

rural hospitals are paid under the SNF 

PPS, effective with cost reporting 

periods beginning on or after July 1, 

2002. As explained in the FY 2002 final 

rule (66 FR 39562), this effective date is 

consistent with the statutory provision 

to integrate swing-bed rural hospitals 

into the SNF PPS by the end of the 

transition period, June 30, 2002. 

Accordingly, all non-CAH swing-bed 

rural hospitals have now come under 

the SNF PPS. Therefore, all rates and 

wage indexes outlined in earlier 

sections of this final rule for the SNF 

PPS also apply to all non-CAH swingbed 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, nonCAH swing-bed rural hospitals are 

required to complete an MDS 3.0 swingbed assessment which is limited to the 

required demographic, payment, and 

quality items. The latest changes in the 

MDS for swing-bed rural hospitals 

appear on the SNF PPS website at 

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

Medicare-Fee-for-Service-Payment/

SNFPPS/index.html. We refer readers to 

section V.D.2. of this final rule for a 

discussion of the revisions we are 

finalizing to the MDS 3.0 swing-bed 

assessment effective October 1, 2019. 

V. Revisions to SNF PPS Case-Mix 

Classification Methodology 

A. Background and General Comments 

In the FY 2019 SNF PPS proposed 

rule, we discussed our proposed 

changes to the SNF PPS, specifically the 

proposed comprehensive revisions to 

the SNF PPS case-mix classification 

system whereby we proposed to replace 

the current RUG–IV system with the 

Patient Driven Payment Model (PDPM) 

effective October 1, 2019. In section V.A 

of the FY 2019 SNF PPS proposed rule 

(83 FR 21034–21036), we discuss the 

basis for the proposed PDPM and our 

reasons for proposing to replace the 

existing case-mix classification system 

with the PDPM, effective October 1, 

2019. 

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

requires the Secretary to make an 

adjustment to the per diem rates to 

account for case-mix. The statute 

specifies that the adjustment is to be 

based on both a resident classification 

system that the Secretary establishes 

that accounts for the relative resource 

use of different resident types, as well 

as resident assessment and other data 

that the Secretary considers appropriate. 

In general, the case-mix classification 

system currently used under the SNF 

PPS classifies residents into payment 

classification groups, called RUGs, 

based on various resident characteristics 

and the type and intensity of therapy 

services provided to the resident. Under 

the existing SNF PPS methodology, 

there are two case-mix-adjusted 

components of payment: Nursing and 

therapy. Each RUG is assigned a CMI for 

each payment component to reflect 

relative differences in cost and resource 

intensity. The higher the CMI, the 

higher the expected resource utilization 

and cost associated with residents 

assigned to that RUG. The case-mixadjusted nursing component of payment 

reflects relative differences in a 

resident’s associated nursing and nontherapy ancillary (NTA) costs, based on 

various resident characteristics, such as 

resident comorbidities, and treatments. 

The case-mix-adjusted therapy 

component of payment reflects relative 

differences in a resident’s associated 

therapy costs, which is based on a 

combination of PT, OT, and SLP 

services. Resident classification under 

the existing therapy component is based 

primarily on the amount of therapy the 

SNF chooses to provide to a SNF 

resident. Under the RUG–IV model, 

residents are classified into 

rehabilitation groups, where payment is 

determined primarily based on the 

intensity of therapy services received by 

the resident, and into nursing groups, 

based on the intensity of nursing 

services received by the resident and 

other aspects of the resident’s care and 

condition. However, only the higher 

paying of these groups is used for 

payment purposes. For example, if a 

resident is classified into a both the 

RUA (Rehabilitation) and PA1 (Nursing) 

RUG–IV groups, where RUA has a 

higher per-diem payment rate than PA1, 

the RUA group is used for payment 

purposes. It should be noted that the 

vast majority of Part A covered SNF 

days (over 90 percent) are paid using a 

rehabilitation RUG. A variety of 

concerns have been raised with the 

current SNF PPS, specifically the RUG– 

IV model, which we discuss below. 

When the SNF PPS was first 

implemented in 1998 (63 FR 26252), we 

developed the RUG–III case-mix 

classification model, 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 CMIs. This initial RUG–III model 

was refined by changes finalized in the 

FY 2006 SNF PPS final rule (70 FR 

45032), which included adding nine 

case-mix groups to the top of the 

original 44-group RUG–III hierarchy, 

which created the RUG–53 case-mix 

model. 

In the FY 2010 SNF PPS proposed 

rule (74 FR 22208), we proposed the 

RUG–IV model based on, among other 

reasons, concerns that incentives in the 

SNF PPS had changed the relative 

amount of nursing resources required to 

treat SNF residents (74 FR 22220). 

These concerns led us to conduct a new 


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Staff Time Measurement (STM) study, 

the Staff Time and Resource Intensity 

Verification (STRIVE) project, which 

served as the basis for developing the 

current SNF PPS case-mix classification 

model, RUG–IV, which became effective 

in FY 2011. At that time, we considered 

alternative case mix models, including 

predictive models of therapy payment 

based on resident characteristics; 

however, we had a great deal of concern 

that by separating payment from the 

actual provision of services, the system, 

and more importantly, the beneficiaries 

would be vulnerable to underutilization 

(74 FR 22220). Other options considered 

at the time included a non-therapy 

ancillary (NTA) payment model based 

on resident characteristics (74 FR 

22238) and a DRG-based payment model 

that relied on information from the prior 

inpatient stay (74 FR 22220); these and 

other options are discussed in detail in 

a CMS Report to Congress issued in 

December 2006 (available at https://

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

Downloads/RC_2006_PC-PPSSNF.pdf). 

As we explained in the proposed rule 

(83 FR 21034), in the years since we 

implemented the SNF PPS, finalized 

RUG–IV, and made statements regarding 

our concerns about underutilization of 

services in previously considered 

models, we have witnessed a significant 

trend that has caused us to reconsider 

these concerns. More specifically, as 

discussed in section V.E. of the FY 2015 

SNF PPS proposed rule (79 FR 25767), 

we documented and discussed trends 

observed in therapy utilization in a 

memo entitled ‘‘Observations on 

Therapy Utilization Trends’’ (which 

may be accessed at https://

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

Downloads/Therapy_Trends_Memo_

04212014.pdf). The two most notable 

trends discussed in that memo were that 

the percentage of residents classifying 

into the Ultra-High therapy category has 

increased steadily and, of greater 

concern, that the percentage of residents 

receiving just enough therapy to surpass 

the Ultra-High and Very-High therapy 

thresholds has also increased. In that 

memo, we state ‘‘the percentage of 

claims-matched MDS assessments in the 

range of 720 minutes to 739 minutes, 

which is just enough to surpass the 720 

minute threshold for RU groups, has 

increased from 5 percent in FY 2005 to 

33 percent in FY 2013’’ and this trend 

has continued since that time. We stated 

in the proposed rule (83 FR 21035) that 

while it might be possible to attribute 

the increasing share of residents in the 

Ultra-High therapy category to 

increasing acuity within the SNF 

population, we believe the increase in 

‘‘thresholding’’ (that is, of providing just 

enough therapy for residents to surpass 

the relevant therapy thresholds) is a 

strong indication of service provision 

predicated on financial considerations 

rather than resident need. We discussed 

this issue in response to comments in 

the FY 2015 SNF PPS final rule. In that 

rule, in response to comments regarding 

the lack of ‘‘current medical evidence 

related to how much therapy a given 

resident should receive,’’ we stated that 

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 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. We further stated that 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. (79 FR 45651). 

In response to comments which 

highlighted potential explanatory 

factors for the observed trends, such as 

internal pressure within SNFs that 

would override clinical judgment, we 

stated that we found 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.’’ Therefore, we stated that 

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 stated we believe that 

internal provider rules should not seek 

to circumvent the Medicare statute, 

regulations and policies, or the 

professional judgment of clinicians. (79 

FR 45651 through 45652). 

In addition to this discussion of 

observed trends, we noted in the 

proposed rule (83 FR 21035) that others 

have also identified potential areas of 

concern within the current SNF PPS. 

The two most notable sources are the 

Office of the Inspector General (OIG) 

and the Medicare Payment Advisory 

Commission (MedPAC). 

For the OIG, three recent OIG reports 

describe the OIG’s concerns with the 

current SNF PPS. In December 2010, the 

OIG released a report entitled 

‘‘Questionable Billing by Skilled 

Nursing Facilities’’ (which may be 

accessed at https://oig.hhs.gov/oei/

reports/oei-02-09-00202.pdf). In this 

report, among its findings, the OIG 

found that ‘‘from 2006 to 2008, SNFs 

increasingly billed for higher paying 

RUGs, even though beneficiary 

characteristics remained largely 

unchanged’’ (OEI–02–09–00202, ii), and 

among other things, recommended that 

we should ‘‘consider several options to 

ensure that the amount of therapy paid 

for by Medicare accurately reflects 

beneficiaries’ needs’’ (OEI–02–09– 

00202, iii). Further, in November 2012, 

the OIG released a report entitled 

‘‘Inappropriate Payments to Skilled 

Nursing Facilities Cost Medicare More 

Than a Billion Dollars in 2009’’ (which 

may be accessed at https://oig.hhs.gov/ 

oei/reports/oei-02-09-00200.pdf). In this 

report, the OIG found that ‘‘SNFs billed 

one-quarter of all claims in error in 

2009’’ and that the ‘‘majority of the 

claims in error were upcoded; many of 

these claims were for ultrahigh 

therapy.’’ (OEI–02–09–00200, Executive 

Summary). Among its 

recommendations, the OIG stated that 

‘‘the findings of this report provide 

further evidence that CMS needs to 

change how it pays for therapy’’ (OEI– 

02–09–00200, 15). Finally, in September 

2015, the OIG released a report entitled 

‘‘The Medicare Payment System for 

Skilled Nursing Facilities Needs to be 

Reevaluated’’ (which may be accessed at 

https://oig.hhs.gov/oei/reports/oei-02- 

13-00610.pdf). Among its findings, the 

OIG found that ‘‘Medicare payments for 

therapy greatly exceed SNFs’ costs for 

therapy,’’ further noting that ‘‘the 

difference between Medicare payments 

and SNFs’ costs for therapy, combined 

with the current payment method, 

creates an incentive for SNFs to bill for 

higher levels of therapy than necessary’’ 

(OEI–02–13–00610, 7). Among its 

recommendations, the OIG stated that 

CMS should ‘‘change the method of 

paying for therapy’’, further stating that 

‘‘CMS should accelerate its efforts to 

develop and implement a new method 

of paying for therapy that relies on 


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beneficiary characteristics or care 

needs.’’ (OEI–02–13–00610, 12). 

For MedPAC’s recommendations in 

this area, Chapter 8 of MedPAC’s March 

2017 Report to Congress (available at 

http://www.medpac.gov/docs/defaultsource/reports/mar17_medpac_ch8.pdf) 

includes the following recommendation: 

‘‘The Congress should . . . direct the 

Secretary to revise the prospective 

payment system (PPS) for skilled 

nursing facilities’’ and ‘‘. . . make any 

additional adjustments to payments 

needed to more closely align payment 

with costs.’’ (March 2017 MedPAC 

Report to Congress, 220). This 

recommendation is seemingly 

predicated on MedPAC’s own analysis 

of the current SNF PPS, where they state 

that ‘‘almost since its inception the SNF 

PPS has been criticized for encouraging 

the provision of excessive rehabilitation 

therapy services and not accurately 

targeting payments for nontherapy 

ancillaries’’ (March 2017 MedPAC 

Report to Congress, 202). Finally, with 

regard to the possibility of changing the 

existing SNF payment system, MedPAC 

stated that ‘‘since 2015, [CMS] has 

gathered four expert panels to receive 

input on aspects of possible design 

features before it proposes a revised 

PPS’’ and further that ‘‘the designs 

under consideration are consistent with 

those recommended by the 

Commission’’ (March 2017 MedPAC 

Report to Congress, 203). 

As we discussed in the proposed rule 

(83 FR 21035), the combination of the 

observed trends in the current SNF PPS 

discussed above (which strongly suggest 

that providers may be basing service 

provision on financial reasons rather 

than resident need), the issues raised in 

the OIG reports discussed above, and 

the issues raised by MedPAC, has 

caused us to consider significant 

revisions to the existing SNF PPS, in 

keeping with our overall responsibility 

to ensure that payments under the SNF 

PPS accurately reflect both resident 

needs and resource utilization. 

We explained in the proposed rule (83 

FR 20135 through 21036) that under the 

RUG–IV system, therapy service 

provision determines not only therapy 

payments but also nursing payments. 

This is because, as noted above, 

payment is based on the highest RUG 

category that the resident could be 

assigned to, so only one of a resident’s 

assigned RUG groups, rehabilitation or 

nursing, is used for payment purposes. 

Each rehabilitation group is assigned a 

nursing CMI to reflect relative 

differences in nursing costs for residents 

in those rehabilitation groups, which is 

less specifically tailored to the 

individual nursing costs for a given 

resident than the nursing CMIs assigned 

for the nursing RUGs. We explained 

that, as mentioned above, because most 

resident days are paid using a 

rehabilitation RUG, and since 

assignment into a rehabilitation RUG is 

based on therapy service provision, this 

means that therapy service provision 

effectively determines nursing payments 

for those residents who are assigned to 

a rehabilitation RUG. Thus, we stated 

that we believe any attempts to revise 

the SNF PPS payment methodology to 

better account for therapy service 

provision under the SNF PPS would 

need to be comprehensive and affect 

both the therapy and nursing case-mix 

components. Moreover, we noted that in 

the FY 2015 SNF PPS final rule, in 

response to comments regarding access 

for certain ‘‘specialty’’ populations 

(such as those with complex nursing 

needs), that we agreed with the 

commenter that access must be 

preserved for all categories of SNF 

residents, particularly those with 

complex medical and nursing needs. We 

stated that, as appropriate, we would 

examine our current monitoring efforts 

to identify any revisions which may be 

necessary to account appropriately for 

these populations. (79 FR 45651). 

In addition, MedPAC, in its March 

2017 Report to Congress, stated that it 

has previously recommended that we 

revise the current SNF PPS to ‘‘base 

therapy payments on patient 

characteristics (not service provision), 

remove payments for NTA services from 

the nursing component, [and] establish 

a separate component within the PPS 

that adjusts payments for NTA services’’ 

(March 2017 MedPAC Report to 

Congress, 202). Accordingly, included 

among the proposed revisions we 

discussed in the proposed rule were 

revisions to the SNF PPS to address 

longstanding concerns regarding the 

ability of the RUG–IV system to account 

for variation in nursing and NTA 

services. 

In May 2017, CMS released an 

Advance Notice of Proposed 

Rulemaking with comment (82 FR 

20980) (the ANPRM), in which we 

discussed the history of and analyses 

conducted during the SNF Payment 

Models Research (PMR) project, which 

sought to address these concerns with 

the RUG–IV model, and sought 

comments on a possible replacement to 

the current RUG–IV model, which we 

called the Resident Classification 

System, Version I (RCS–I). As we stated 

in the proposed rule (83 FR 21036), this 

model was intended as an improvement 

over the RUG–IV model because it 

would better account for resident 

characteristics and care needs, thus 

better aligning SNF PPS payments with 

resource use and eliminating therapy 

provision-related financial incentives 

inherent in the current payment model 

used in the SNF PPS. We received many 

comments from stakeholders on a wide 

variety of aspects of the RCS–I model. 

After considering these comments, we 

made significant revisions to the RCS– 

I model to account for the concerns or 

questions raised by stakeholders, 

resulting in a revised case-mix 

classification model which we proposed 

in the FY 2019 SNF PPS proposed rule 

(83 FR 21018). To make clear the 

purpose and intent of replacing the 

existing RUG–IV system, the model we 

proposed is called the Patient-Driven 

Payment Model (PDPM). We refer 

readers to the FY 2019 SNF PPS 

proposed rule (83 FR 21036) for a 

discussion of the SNF PMR project, and 

the resulting SNF PMR technical report 

which contains supporting language and 

documentation related to the RCS–I 

model (available at https://

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

Downloads/SNF_Payment_Models_

Research_Technical_Report201704.pdf), 

and the SNF PDPM technical report 

which presents analyses and results that 

were used to develop the proposed 

PDPM (available at https://

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

Downloads/PDPM_Technical_

Report_508.pdf). We invited comments 

on any and all aspects of the proposed 

PDPM, including the research analyses 

described in the proposed rule, the SNF 

PDPM technical report and the SNF 

PMR technical report. 

As further detailed below, and as we 

stated in the proposed rule (83 FR 

21036), we believe that the PDPM 

represents an improvement over the 

RUG–IV model and the RCS–I model 

because it would better account for 

resident characteristics and care needs 

while reducing both systemic and 

administrative complexity. To better 

ensure that resident care decisions 

appropriately reflect each resident’s 

actual care needs, we believe it is 

important to remove, to the extent 

possible, service-based metrics from the 

SNF PPS and derive payment from 

verifiable resident characteristics. In the 

sections that follow, we describe the 

comprehensive revisions we are 

implementing to the SNF PPS through 

the PDPM. Additionally, we discuss the 

comments we received on each of the 

proposed policies, our responses to 

these comments and the PDPM-related 

policies we are finalizing in this rule. 

Before moving into the specific policy 

areas, we first discuss general comments 


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we received on the PDPM, along with 

our responses. 

Comment: Many commenters 

expressed support for the goals of the 

proposed PDPM, acknowledging that 

changes must be made to the current 

payment system. Many commenters also 

expressed concerns regarding the 

potential impacts on patient care which 

could result from implementing PDPM, 

specifically that PDPM will introduce 

new incentives into SNF payment that 

will have a negative impact on patient 

care. Some commenters believe that 

SNF providers could stint on care, most 

notably therapy services, and that such 

providers will be overcompensated for 

care that is not being delivered. Some 

commenters urged CMS to monitor the 

impacts on patient care of implementing 

PDPM and take action upon evidence of 

adverse trends. One commenter noted 

that PDPM does not correct the 

problems in the existing reimbursement 

model, assigning too few resources to 

nursing and NTAs. 

Response: We appreciate the support 

we have received for PDPM and its 

goals. With respect to the concerns 

raised by commenters with regard to the 

potential impact of PDPM on patient 

care, specifically the possibility that 

some providers may stint on care or 

provide fewer services to patients, we 

plan to monitor closely service 

utilization, payment, and quality trends 

which may change as a result of 

implementing PDPM. If changes in 

practice and/or coding patterns arise, 

then we may take further action, which 

may include administrative action 

against providers as appropriate and/or 

proposing changes in policy (for 

example, system recalibration, rebasing 

case-mix weights, case mix creep 

adjustment) to address any concerns. 

We will also continue to work with the 

HHS Office of Inspector General, should 

any specific provider behavior be 

identified which may justify a referral 

for additional action. 

With regard to the comment that 

PDPM does not correct the issues with 

the current reimbursement model and 

assigns too few resources to nursing and 

NTAs, we would refer the commenter to 

the impact analysis presented in Table 

37, which indicates that the broadest 

shifts in payment are to those patients 

with high nursing and NTA needs. 

Comment: Several commenters raised 

concerns regarding the use of historical 

data as the basis for developing PDPM. 

One commenter stated that PDPM is 

overly complex and that the majority of 

patient days are captured in a small 

number of case-mix groups. One 

commenter stated that because PDPM is 

based on historical utilization, it does 

not sufficiently reflect current best 

practices or high quality care. 

Response: Historical data are the only 

form of data that can be used for any 

data analysis, so it is not clear what 

other data, that are not historical, CMS 

could have used to develop PDPM. 

Further, as these data are reported by 

SNFs, we believe that these data should 

be best reflective of SNF costs and 

patient needs. With regard to the 

comment that the majority of patient 

days are captured in a small number of 

case-mix groups, we agree with this 

comment and believe that this is 

precisely part of the motivation for 

implementing a new case-mix 

classification model. The current casemix model has caused a homogenization 

in patient classification such that the 

current payment model does not 

adequately reflect differences among 

SNF patients. We believe that PDPM is 

a significant improvement in this 

regard, better reflecting the myriad 

differences between SNF patients in 

terms of their characteristics, care 

needs, and goals. 

With regard to the comment that the 

historical data do not sufficiently reflect 

current best practices or high quality 

care, while we are concerned about this 

assertion from a patient care 

perspective, we do not believe that this 

would affect the accuracy of the 

reported data in terms of reflecting 

relative differences in costs, which is all 

that is necessary for developing accurate 

case-mix groups. 

Comment: Several commenters 

requested clarification on the effect of 

implementing PDPM on the 

development of a unified Post-Acute 

Care (PAC) PPS and how PDPM would 

interact with a PAC PPS. One 

commenter requested that CMS 

establish a panel to advise on payment 

system changes across the PAC 

continuum. 

Response: As a PAC PPS has not been 

established, we cannot provide 

guidance as to how the PDPM would 

interact with such a system, once 

developed. However, given that PDPM 

shifts away from the current case-mix 

model that utilizes service-based 

metrics as the primary determinant of 

payment for most days paid under the 

SNF Part A benefit to a model that 

utilizes patient characteristics as the 

basis for payment, and that most other 

PAC payment systems already rely more 

heavily on patient characteristics within 

their payment model, we believe that 

PDPM will better align the SNF PPS for 

this eventual transition to a PAC PPS as 

it brings the SNF PPS closer to those 

other PAC payment systems. We will 

consider the commenter’s 

recommendation to establish a panel on 

payment system changes across the PAC 

continuum, particularly as we work to 

develop a PAC PPS. 

Comment: Some commenters 

suggested that CMS consider including 

quality measures of effective 

rehabilitation services when evaluating 

the impact of PDPM. 

Response: We appreciate these 

commenters’ suggestion. In monitoring 

the impact of the PDPM, we will 

consider including measures for a 

variety of service areas as a component 

of our planned monitoring efforts. 

Comment: Several commenters 

suggested that CMS should establish a 

plan to recalibrate the system to address 

any unanticipated impacts. More 

specifically, these commenters 

requested that CMS provide more 

details on plans to recalibrate the 

system in case of unanticipated service 

and performance changes, as well as 

plans to recalibrate the payment weights 

associated with the revised payment 

model. 

Response: We appreciate the 

suggestions made by these commenters 

with regard to CMS providing plans for 

recalibrating the payment system after 

implementing PDPM. However, such 

recalibrations will depend largely on the 

results of our monitoring efforts and 

could take various forms. For example, 

in the FY 2012 SNF PPS final rule (76 

FR 48486), we recalibrated the parity 

adjustment that was intended to ensure 

that SNF payments under RUG–IV 

matched those that would have been 

made under RUG–III, similar to how the 

parity adjustment discussed below for 

PDPM is intended to ensure that SNF 

payments under PDPM mirror those that 

would have been made under RUG–IV. 

As discussed in that rule, our 

assumptions regarding case-mix 

distribution that were used to calculate 

the RUG–IV parity adjustment 

subsequently proved to be inaccurate, 

which caused us to recalculate the 

RUG–IV parity adjustment in the 

following year. We anticipate similarly 

monitoring PDPM implementation 

closely and may propose adjustments as 

appropriate if we discover evidence that 

payments are either higher or lower 

than anticipated, or if provider costs 

change in such a manner that the 

current relationship between provider 

costs and provider payments changes 

from that currently observed. 

Comment: One commenter raised the 

concern that the PDPM model has low 

explanatory power and lacks an 

objective threshold for inclusion of 

various components in the model. This 

commenter suggested that if CMS 

intends to update this model with new 


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data over time to reflect changes in 

clinical practice and resource 

utilization, there is a need for a 

systematic determination of the 

minimum acceptable R-squared values 

for the model features. Model 

components currently excluded may 

increase in predictive power over time 

and merit inclusion in future versions of 

PDPM. In addition, current model 

components may decrease in predictive 

power such that they should be 

removed from the model. 

Response: Setting an absolute 

minimum threshold would not only be 

arbitrary but also deviates from the 

practical use of the R-squared metric, 

which is to evaluate the proportion of 

variance explained and compare models 

with the same dependent variable 

vector. Additionally, R-squared is not 

the only measure we use to evaluate 

PDPM. In fact, because the current 

system is heavily based on service 

provision and most residents are 

classified into the Ultra-High therapy 

category, we are dealing with a dataset 

with little explainable variance. Each of 

the PDPM case-mix groups meets 

clinical expectations, which is a 

convincing validation of the model 

given the data available. We note that 

with the change to a patient driven 

model, we expect more variation will 

appear in therapy costs. This will allow 

for future development of models with 

higher explanatory power. 

Comment: Several commenters 

requested clarification on how PDPM 

would interact with other CMS 

initiatives, such as the SNF Quality 

Reporting Program (QRP), Value-Based 

Purchasing (VBP) program, revised 

conditions of participation and other 

such initiatives. A few commenters also 

requested clarification on how PDPM 

accounts for or would interact with the 

Jimmo v Sebelius settlement 

surrounding the provision of 

maintenance therapy. These 

commenters requested clarification on 

how CMS would track maintenance 

therapy services, as compared to other 

forms of therapy. Several commenters 

requested clarification on how 

Comprehensive Person-Centered Plan 

maintenance services, new 

Requirements of Participation and other 

CMS initiatives will be factored into 

CMS burden estimates and that CMS 

should revise existing burden estimates 

to incorporate these changes. 

Response: We anticipate that PDPM 

will only serve to strengthen the various 

quality and payment reform initiatives 

throughout CMS, by shifting payment 

away from the current service-driven 

model that has produced nearly 

homogenized care for SNF beneficiaries, 

to a more resident-centered model that 

focuses more on the individual patient’s 

needs and characteristics. We also 

believe that through the use of 

standardized assessment items (as 

discussed in section V.D. of this final 

rule) and changes to the assessment 

schedule to mirror that of other PAC 

settings that use a similar admission/

discharge assessment model (as 

discussed in section V.E. of this final 

rule), the PDPM would better align with 

the current direction of PAC reform and 

standardization efforts supported by the 

IMPACT Act. 

With regard to the comment about 

tracking maintenance services, we do 

not believe it is necessary at this time 

to track maintenance services 

separately. Such tracking would be 

burdensome and it would be difficult to 

do so accurately, as it is possible that 

many patients have both maintenance 

and restorative goals, and allocating 

therapy minutes among these varied 

goals would be particularly complicated 

for providers. 

With regard to the burden of the 

Comprehensive Person-Centered Plan, 

new requirements of participation, and 

other CMS initiatives, the burdens 

estimated in relation to PDPM are only 

those in relation to implementation of 

the PDPM and its related policies. As 

the Comprehensive Person-Centered 

Plan and other issues mentioned are 

outside of these PDPM related policies, 

we do not address the potential burden 

of such issues in this section. 

Comment: Several commenters 

expressed concerns regarding the 

potential impact of implementing PDPM 

on Medicaid programs. A few 

commenters raised concerns regarding 

the impact of PDPM on calculating the 

Upper Payment Limit (UPL), which is 

utilized as part of calculating Medicaid 

payment rates. One commenter 

questioned if states would be permitted 

to still use RUG–IV as the basis for 

estimating the UPL. One commenter 

requested clarification on if any changes 

would be necessary for Medicaid claims 

systems. One commenter stated that 

Medicaid providers will have less 

incentive to provide therapy and 

Medicaid beneficiaries will have lower 

nursing case-mix scores under PDPM, 

thereby incentivizing states to transition 

to PDPM in order to reduce Medicaid 

spending. Commenters suggested that 

CMS work closely with states, who may 

wish to transition to PDPM, to ensure a 

smooth transition. Some commenters 

also stated that, should certain states not 

transition to PDPM, this would mean 

operating two different payment 

systems. A few commenters requested 

clarification on if CMS would continue 

to support previous payment systems 

for states that do not make the transition 

to PDPM or have access to MDS data for 

Medicaid rate-setting purposes. These 

commenters also requested if CMS 

could provide a further breakdown of 

certain cost categories, such as NTA 

costs, in a manner that would be more 

helpful to states in conducting UPL 

calculations. 

Response: We appreciate the 

commenters’ concerns with the 

potential impact of PDPM on Medicaid 

programs. We agree with the 

commenters that this is an area that 

deserves significant attention in terms of 

education and training, and we plan to 

work with states to ensure a smooth 

transition between the current RUG–IV 

model and PDPM. With regard to 

questions on how PDPM may relate to 

UPL calculations, these calculations are 

based on how Medicare pays for 

services under Part A and not based on 

a prior payment system. Therefore, UPL 

calculations, after PDPM has been 

implemented, would need to be based 

on the payments made under PDPM. 

That being said, we expect that, because 

PDPM bases payment on patient 

characteristics and not service 

utilization, payments made under 

PDPM will more accurately reflect 

patient needs and goals, which should 

also improve the basis for Medicaid 

payments which may be related to 

Medicare payments. With regard to 

having the data necessary for such UPL 

calculations, whether in regard to 

specific rate components (for example, 

NTA costs) or more generally, we will 

work with states to help ensure that 

they have the necessary information so 

PDPM implementation does not 

negatively impact on their ability to 

manage their Medicaid programs. 

With regard to the comment that 

states may have more of an incentive to 

transition to PDPM in order to reduce 

Medicaid spending, we believe that the 

primary reason that Medicaid programs 

may adopt PDPM is due to its focus on 

patient characteristics and goals, rather 

than on service utilization. Given the 

improvements in Medicare payment 

that this transition represents, we would 

expect a similar improvement in 

Medicaid payments in states that make 

this transition. 

With regard to the comment that 

Medicaid providers will be incentivized 

to provide less therapy or that Medicaid 

beneficiaries will have lower nursing 

case-mix scores, we would encourage 

states that decide to transition to PDPM 

to ensure they are monitoring the 

impacts of such a change on their 

beneficiaries and the care they receive. 


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In terms of those states that opt not to 

transition to PDPM and instead use 

some form of legacy payment system, 

we would note that a number of states 

use systems quite distinct from the 

existing RUG–IV model and we are not 

aware of any difficulties or complexities 

for providers or states in managing these 

systems concurrently. These states still 

have access to MDS data for ratesetting 

purposes and nothing associated with 

PDPM implementation, in and of itself, 

would affect state access to MDS data. 

That being said, we would likely need 

to evaluate the costs and benefits of 

continued support for certain legacy 

payment systems, most notably any 

RUG–III based payment models. 

Comment: One commenter requested 

that CMS consider the possibility that 

some Medicare Advantage plans could 

reform their payment models to mirror 

PDPM, while others may maintain their 

existing payment models, which could 

include models that resemble RUG–IV. 

The commenter requested that CMS 

consider working with those plans that 

opt to modify their payment models to 

resemble PDPM and consider the impact 

of having multiple payment models that 

providers must operate under 

simultaneously. 

Response: We acknowledge that some 

Medicare Advantage plans could change 

their payment models to mirror PDPM, 

while others may not change their 

payment models in relation to the 

changes finalized in this rule. We would 

note, however, that, as private plans, 

Medicare Advantage plans currently 

take a wide variety of forms, with some 

already approximating the structure of 

PDPM, using patient characteristics 

rather than service utilization as the 

basis for payment. We will work 

generally with stakeholders, including 

these private plans, to help ensure that 

adequate education and resources are 

available for all parties. 

Comment: One commenter requested 

clarification on how CMS will track and 

reconcile patient diagnosis and 

classification information reported at 

admission with such information at 

discharge, expressing concern regarding 

what might occur in the case that the 

information from these two points is 

different, as well as diagnosis or 

procedural information from the 

preceding hospital stay, noting that 

some information for SNF payment 

comes from the hospital, and how these 

issues could affect provider risk of 

alleged improper billing and recovery 

efforts. 

Response: We plan to develop a 

robust monitoring program that utilizes 

data from many sources, such as 

assessments, claims, cost reports and 

other data that would prove valuable in 

assessing both the impact of 

implementing PDPM, as well as identify 

any provider level issues related to 

PDPM payments. While the vast 

majority of information related to PDPM 

classification and payment is derived 

from the SNF, there is one area (surgical 

procedural information) which may 

come from the preceding hospital stay. 

However, nothing in PDPM should 

change the relationship or need for 

information between the hospital and 

SNF, given that the information that 

PDPM requires is no more information 

than the SNF would need simply for 

basic care planning purposes. As such, 

there should be no impact on improper 

billing or recovery efforts that derive 

from the implementation of PDPM. 

Comment: One commenter requested 

clarification on how PDPM will address 

the number of face-to-face hours the 

registered therapist spends treating the 

patients. This commenter states they 

have observed nursing staff instructed to 

complete certain activities with patients 

who are receiving therapy. 

Response: PDPM does not address the 

specific number of face-to-face hours 

that therapists spend with their patients. 

The expectations for what is considered 

skilled therapy and reasonable and 

necessary care found in Chapter 8 of the 

Medicare Benefit Policy Manual 

(https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/

downloads/bp102c08.pdf) and the MDS 

3.0 RAI manual (https://

downloads.cms.gov/files/MDS-30-RAIManual-v115-October-2017.pdf) will not 

change under PDPM. We continue to 

expect that patients will receive high 

quality skilled rehabilitation services 

based on their individual needs and we 

do not believe that patients should have 

any nursing care that they require 

reduced because they happen to be 

receiving therapy. If a patient requires 

nursing care (including restorative 

nursing), the SNF should provide that 

nursing care as medically necessary. 

Similarly, if a patient requires therapy, 

the SNF should provide the therapy as 

medically necessary. One should not 

impact the other and PDPM does not 

affect this either. 

Comment: Several commenters 

requested clarification about how SNFs 

are expected to comply with Medicare 

and Medicaid Conditions of 

Participation and whether SNFs will 

continue to be required to complete the 

discharge assessments required by the 

Omnibus Budget Reconciliation Act 

(OBRA), as well as the end of therapyrelated assessments. 

Response: PDPM is not intended to 

affect any of the Medicare and Medicaid 

Conditions of Participation for SNFs. 

Facilities should continue to follow 

these regulations as they always have. 

Additionally, even though under PDPM, 

the majority of PPS assessments will 

now be removed (as discussed later in 

this final rule), all OBRA assessments 

will still be required. PDPM will not 

affect the OBRA requirements. With 

regard to existing therapy-related 

assessments (the Start of Therapy, End 

of Therapy, and Change of Therapy 

assessments), these assessments would 

no longer exist under PDPM. 

Comment: Several commenters 

expressed concern that PDPM may not 

fully account for mild cognitive 

impairment and encouraged CMS to 

collect more sensitive data, in line with 

the IMPACT Act, to ensure necessary 

attention to cognition. 

Response: We appreciate these 

commenters’ concerns and also believe 

that attention should be paid to 

cognition as an area for potential future 

system refinements. However, as the 

only change in the proposed use of 

cognition as a factor in payment 

classification is under the SLP 

component, and because for this 

component, we proposed to use even 

mild cognitive impairment as the basis 

for a payment classification, we believe 

that PDPM does adequately account for 

mild cognitive impairment. We will 

consider the commenter’s concerns as 

we continue to evaluate potential 

refinements to our assessment tools. 

Comment: One commenter expressed 

concern that PDPM does not incorporate 

incentives for quality improvement. 

Response: PDPM, as a case-mix 

classification system, is intended to 

classify SNF patients for purposes of 

reimbursement based on the resource 

utilization associated with treating those 

patients. However, there do exist 

programs, such as the SNF VBP 

program, that is a part of the SNF PPS 

which does incentivize quality 

improvement. Therefore, while we agree 

that PDPM, in and of itself, does not 

include incentives for quality 

improvement, other aspects of the SNF 

PPS do include such incentives. 

Comment: Some commenters 

requested clarification about the appeals 

process that will be available to help 

patients in case of shortcomings in their 

care and coverage, including any 

inaccurate assignments to payment 

classifications. 

Response: We appreciate this 

comment, but would note that nothing 

associated with PDPM implementation 

would affect existing patient appeal 

rights or processes. 

Comment: One commenter requested 

clarification on how items Z0100A and 


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Z0150A on the MDS would be 

populated and how the classifications 

would translate to a billable claim code. 

Response: We will provide detail on 

how these MDS items, which relate to 

patient billing codes, will be populated 

as part of our updates to the MDS 

manual. 

Comment: One commenter requested 

clarification on how a patient’s voice 

would be heard in a care design driven 

by medical information. 

Response: While patient case-mix 

classification, for purposes of payment, 

would be driven by medical 

information, as occurs under the current 

payment system, care design should be 

driven by patient goals and needs, as 

well as discussions with the patient and 

his or her family. Further, while under 

the current payment model over 90 

percent of patient days are paid for 

using a therapy RUG, which utilizes 

only therapy minutes and ADLs as the 

basis for payment, PDPM provides a 

more holistic approach to payment 

classifications. More specifically, by 

separately adjusting for the nursing 

component, which utilizes patient 

interviews as a major component of 

patient classification, we believe that 

this achieves the commenter’s goal of 

elevating the patient’s voice. 

Comment: Some commenters 

requested that CMS consider adopting 

an outlier policy as part of the SNF PPS 

to account for patients whose costs far 

exceed the cost of typical patients. 

These commenters stated that a SNF 

outlier policy would ensure access to 

clinically complex patients and align 

with other PAC systems. 

Response: Under the current statutory 

provisions governing the SNF PPS, there 

is no specific statutory authority for an 

outlier payment as part of the SNF PPS. 

B. Revisions to SNF PPS Federal Base 

Payment Rate Components 

1. Background on SNF PPS Federal Base 

Payment Rates and Components 

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

that the SNF PPS per diem federal 

payment rates be based on FY 1995 

costs, updated for inflation to the first 

effective period of the PPS. These base 

rates are then required to be adjusted to 

reflect differences among facilities in 

patient case-mix and in average wage 

levels by area. In keeping with this 

statutory requirement, the base per diem 

payment rates were set in 1998 and 

reflect average SNF costs in a base year 

(FY 1995), updated for inflation to the 

first period of the SNF PPS, which was 

the 15-month period beginning on July 

1, 1998. The federal base payment rates 

were calculated separately for urban and 

rural facilities and based on allowable 

costs from the FY 1995 cost reports of 

hospital-based and freestanding SNFs, 

where allowable costs included all 

routine, ancillary, and capital-related 

costs (excluding those related to 

approved educational activities) 

associated with SNF services provided 

under Part A, and all services and items 

for which payment could be made 

under Part B prior to July 1, 1998. 

In general, routine costs are those 

included by SNFs in a daily service 

charge and include regular room, 

dietary, and nursing services, medical 

social services and psychiatric social 

services, as well as the use of certain 

facilities and equipment for which a 

separate charge is not made. Ancillary 

costs are directly identifiable to 

residents and cover specialized services, 

including therapy, drugs, and laboratory 

services. Lastly, capital-related costs 

include the costs of land, building, and 

equipment and the interest incurred in 

financing the acquisition of such items 

(63 FR 26253). 

There are four federal base payment 

rate components which may factor into 

SNF PPS payment. Two of these 

components, ‘‘nursing case-mix’’ and 

‘‘therapy case-mix,’’ are case-mix 

adjusted components, while the 

remaining two components, ‘‘therapy 

non-case-mix’’ and ‘‘non-case-mix,’’ are 

not case-mix adjusted. While we 

discussed the details of the proposed 

PDPM and justifications for certain 

associated policies we proposed 

throughout section V of the FY 2019 

SNF PPS proposed rule, we note that, as 

part of the PDPM case-mix model, we 

proposed to bifurcate the ‘‘nursing casemix’’ component of the federal base 

payment rate into two case-mix adjusted 

components and separate the ‘‘therapy 

case-mix’’ component of the federal base 

payment rate into three case-mix 

adjusted components, thereby creating 

five case-mix adjusted components of 

the federal base per diem rate. More 

specifically, we proposed to separate the 

‘‘therapy case-mix’’ rate component into 

a ‘‘Physical Therapy’’ (PT) component, 

an ‘‘Occupational Therapy’’ (OT) 

component, and a ‘‘Speech-Language 

Pathology’’ (SLP) component. Our 

rationale for separating the therapy casemix component in this manner is 

presented in section V.D.3.b. of the 

proposed rule. Based on the results of 

the SNF PMR, we also proposed to 

separate the ‘‘nursing case-mix’’ rate 

component into a ‘‘Nursing’’ component 

and a ‘‘Non-Therapy Ancillary’’ (NTA) 

component. Our rationale for proposing 

to bifurcate the nursing case-mix 

component in this manner is presented 

in section V.D.3.d. of the proposed rule. 

Given that all SNF residents under 

PDPM would be assigned to a 

classification group for each of the three 

proposed therapy-related case-mix 

adjusted components as further 

discussed below, we proposed 

eliminating the ‘‘therapy non-case-mix’’ 

rate component under PDPM and stated 

that we would distribute the dollars 

associated with this current rate 

component amongst the proposed 

PDPM therapy components. We also 

stated in the proposed rule (83 FR 

21038) that the existing non-case-mix 

component would be maintained as it is 

currently constituted under the existing 

SNF PPS. We explained that although 

the case-mix components of the 

proposed PDPM case-mix classification 

system would address costs associated 

with individual resident care based on 

an individual’s specific needs and 

characteristics, the non-case-mix 

component addresses consistent costs 

that are incurred for all residents, such 

as room and board and various capitalrelated expenses. As these costs are not 

likely to change, regardless of what 

changes we might make to the SNF PPS, 

we proposed to maintain the non-casemix component as it is currently used. 

In the next section, we discuss the 

methodology used to create the 

proposed PDPM case-mix adjusted 

components, as well as the data sources 

used in this calculation. As we stated in 

the proposed rule (83 FR 21038), the 

proposed methodology does not 

calculate new federal base payment 

rates but simply proposes to modify the 

existing base rate case-mix components 

for therapy and nursing. The 

methodology and data used in this 

calculation are based on the data and 

methodology used in the calculation of 

the original federal payment rates in 

1998, as further discussed below. 

2. Data Sources Utilized for Revision of 

Federal Base Payment Rate Components 

Section II.A.2. of the interim final rule 

with comment period that initially 

implemented the SNF PPS (63 FR 26256 

through 26260) provides a detailed 

discussion of the data sources used to 

calculate the original federal base 

payment rates in 1998. Except as 

discussed below, we proposed to use 

the same data sources (that is, cost 

information from FY 1995 cost reports) 

to determine the portion of the therapy 

case-mix component base rate that 

would be assigned to each of the 

proposed therapy component base rates 

(PT, OT, and SLP). As we stated in the 

proposed rule (83 FR 21038), we believe 

that using the same data sources, to the 

extent possible, that were used to 

calculate the original federal base 


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payment rates in 1998 results in base 

rates for the components that resemble 

as closely as possible what they would 

have been had these components 

initially been established in 1998. The 

portion of the nursing component base 

rate that corresponds to NTA costs was 

already calculated using the same data 

source used to calculate the federal base 

payment rates in 1998. As explained 

below and in the proposed rule (83 FR 

21038), we used the previously 

calculated percentage of the nursing 

component base rate corresponding to 

NTA costs to set the NTA base rate and 

verified this calculation with the 

analysis described in section V.C.3. of 

the FY 2019 SNF PPS proposed rule. 

Therefore, the steps described below 

address the calculations performed to 

separate out the therapy base rates 

alone. 

As discussed in the proposed rule (83 

FR 21038), the percentage of the current 

therapy case-mix component of the 

federal base payment rates that would 

be assigned to the three proposed 

therapy components (PT, OT, and SLP) 

of the federal base payment rates was 

determined using cost information from 

FY 1995 cost reports, after making the 

following exclusions and adjustments: 

First, only settled and as-submitted cost 

reports for hospital-based and 

freestanding SNFs for periods beginning 

in FY 1995 and spanning 10 to 13 

months were included. This set of 

restrictions replicates the restrictions 

used to derive the original federal base 

payment rates as set forth in the 1998 

interim final rule with comment period 

(63 FR 26256). Following the 

methodology used to derive the SNF 

PPS base rates, routine and ancillary 

costs from as-submitted cost reports 

were adjusted down by 1.31 and 3.26 

percent, respectively. As discussed in 

the 1998 interim final rule with 

comment period, the specific 

adjustment factors were chosen to 

reflect average adjustments resulting 

from cost report settlement and were 

based on a comparison of as-submitted 

and settled reports from FY 1992 to FY 

1994 (63 FR 26256); these adjustments 

are in accordance with section 

1888(e)(4)(A)(i) of the Act. We used 

similar data, exclusions, and 

adjustments as in the original base rates 

calculation so the resulting base rates 

for the components would resemble as 

closely as possible what they would 

have been had they been established in 

1998. However, as we discussed in the 

proposed rule, there were two ways in 

which the PT, OT, and SLP percentage 

calculations deviate from the 1998 base 

rates calculation. First, the 1998 

calculation of the base rates excluded 

reports for facilities exempted from cost 

limits in the base year. The available 

data do not identify which facilities 

were exempted from cost limits in the 

base year, so this restriction was not 

implemented. As we stated in the 

proposed rule, we do not believe this 

had a notable impact on our estimate of 

the PT, OT, and SLP percentages, 

because only a small fraction of 

facilities were exempted from cost 

limits. Consistent with the 1998 base 

rates calculation, we excluded facilities 

with per diem costs more than three 

standard deviations higher than the 

geometric mean across facilities. 

Therefore, facilities with unusually high 

costs did not influence our estimate. 

Second, the 1998 calculation of the base 

rates excluded costs related to 

exceptions payments and costs related 

to approved educational activities. The 

available cost report data did not 

identify costs related to exceptions 

payments nor indicate what percentage 

of overall therapy costs or costs by 

therapy discipline were related to 

approved educational activities, so these 

costs are not excluded from the PT, OT, 

and SLP percentage calculations. We 

stated in the proposed rule that because 

exceptions were only granted for routine 

costs, we believe the inability to exclude 

these costs should not affect our 

estimate of the PT, OT, and SLP 

percentages as exceptions would not 

apply to therapy costs. Additionally, the 

data indicate that educational costs 

made up less than one-hundredth of 1 

percent of overall SNF costs. Therefore, 

we stated that we believe the inability 

to exclude educational costs should 

have a negligible impact on our 

estimates. 

In addition to Part A costs from the 

cost report data, the 1998 federal base 

rates calculation incorporated estimates 

of amounts payable under Part B for 

covered SNF services provided to Part A 

SNF residents, as required by section 

1888(e)(4)(A)(ii) of the Act. We stated in 

the proposed rule (83 FR 21038) that in 

calculating the PT, OT, and SLP 

percentages, we also estimated the 

amounts payable under Part B for 

covered SNF services provided to Part A 

residents. All Part B claims associated 

with Part A SNF claims overlapping 

with FY 1995 cost reports were matched 

to the corresponding facility’s cost 

report. For each cost center (PT, OT, and 

SLP) in each cost report, a ratio was 

calculated to determine the amount by 

which Part A costs needed to be 

increased to account for the portion of 

costs payable under Part B. This ratio 

for each cost center was determined by 

dividing the total charges from the 

matched Part B claims by the total 

charges from the Part A SNF claims 

overlapping with the cost report. The 

1998 interim final rule (63 FR 26256) 

states that to estimate the amounts 

payable under Part B for covered SNF 

services provided to Part A SNF 

residents, CMS (then known as HCFA) 

matched 100 percent of Part B claims 

associated with Part A covered SNF 

stays to the corresponding facility’s cost 

report. Part B allowable charges were 

then incorporated at the facility level by 

the appropriate cost report center. 

Although the interim final rule does not 

provide further detail on how Part B 

allowable charges were incorporated at 

the facility level, we stated in the 

proposed rule that we believe our 

methodology reasonably approximates 

the methodology described in the 

interim final rule, and provides a 

reasonable estimate of the amounts 

payable under Part B for covered SNF 

services provided to Part A residents for 

purposes of calculating the PT, OT, and 

SLP percentages. Therefore, we stated 

that we believe it is reasonable to use 

this methodology to calculate the PT, 

OT, and SLP percentages of the therapy 

case-mix component. 

Finally, the 1998 federal base rates 

calculation standardized the cost data 

for each facility to control for the effects 

of case-mix and geographic-related wage 

differences, as required by section 

1888(e)(4)(C) of the Act. As we stated in 

the proposed rule, when calculating the 

PT, OT and SLP shares of the current 

therapy base rate, we replicated the 

method used in 1998 to standardize for 

wage differences, as described in the 

1998 interim final rule with comment 

period (63 FR 26259 through 26260). We 

applied a hospital wage index to the 

labor-related share of costs, estimated at 

75.888 percent, and used an index 

composed of hospital wages from FY 

1994. We noted in the proposed rule 

that the PT, OT, and SLP percentage 

calculations did not include the casemix adjustment used in the 1998 

calculation because the 1998 adjustment 

relied on the obsolete RUG–III 

classification system. In the 1998 federal 

base rates calculation, information from 

SNF and inpatient claims was mapped 

to RUG–III clinical categories at the 

resident level to case-mix adjust facility 

per diem costs. However, the 1998 

interim final rule did not document this 

mapping, and the data used as the basis 

for this adjustment are no longer 

available, and therefore, this step could 

not be replicated. We stated in the 

proposed rule that we believe the 

inability to apply the case-mix 


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adjustment likely has a small impact on 

our estimate of the PT, OT, and SLP 

percentages. The 1998 interim final rule 

indicates that the case-mix adjustment 

was applied by dividing facility per 

diem costs for a given component by 

average facility case mix for that 

component; in other words, multiplying 

by the inverse of average facility case 

mix. As we discussed in the proposed 

rule, as long as average facility case-mix 

values are within a relatively narrow 

range, adjustment for facility case mix 

should not have a large impact on the 

estimated PT, OT, and SLP percentages. 

Because the RUG–III case-mix indexes 

shown in the 1998 interim final rule are 

within a relatively narrow range (for 

example, therapy indexes range from 

0.43 to 2.25), we stated that we do not 

expect the inability to apply the casemix adjustment to facility per diem 

costs to have a large influence on the 

estimated PT, OT, and SLP percentages. 

These data sources are described in 

more detail in section 3.10. of the SNF 

PDPM technical report, available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html. 

We invited comments on the data 

sources used to determine the PT, OT, 

and SLP rate components, as discussed 

above. 

Commenters submitted the following 

comments related to the proposed rule’s 

discussion of the Data Sources Utilized 

for Proposed Revision of Federal Base 

Payment Rate Components. A 

discussion of these comments, along 

with our responses, appears below. 

Comment: One commenter requested 

additional information on the data 

sources used to develop PDPM. 

Specifically, the commenter requested 

that CMS clarify which year of claims 

and cost report data was used to 

develop PDPM. 

Response: As detailed in section 3.1 

of the SNF PDPM technical report and 

FY 2019 SNF PPS proposed rule (83 FR 

21041), we used data, including claims 

and assessments, corresponding to 

Medicare Part A SNF stays with 

admissions in FY 2017. This was the 

most complete year of data available 

when PDPM was developed and 

continues to be the most complete year 

of data available as of the FY 2019 final 

rule. Foundational analyses—for 

example, those discussed throughout 

the SNF PMR technical report that 

accompanied the 2017 ANPRM—used 

FY 2014 data, as that was the most 

recent complete year of data available 

when those analyses were completed. 

Finally, based on suggestions from 

commenters responding to the 2017 

ANPRM, the analysis that established 

the list of comorbidities used for 

payment in the PDPM NTA component 

and the points associated with each 

comorbid condition used multiple years 

of data to generate more robust results. 

Specifically, resource utilization and 

assessment data from FYs 2014–2017 

were used to determine the comorbid 

conditions associated with high NTA 

utilization and estimate the specific 

resource utilization associated with 

each condition for the purpose of 

assigning points and payment to these 

conditions under PDPM. This 

methodology is discussed in further 

detail in section 3.7 of the SNF PDPM 

technical report and in the FY 2019 SNF 

PPS proposed rule (83 FR 21056). In 

terms of cost reports, since providers 

have their own fiscal year and reporting 

schedule, we used the cost report 

closest to the stay window among the 

cost reports of that provider recorded in 

the database as of November 2017. 

Comment: Some commenters 

questioned whether it is appropriate to 

use the same data sources and 

methodology from 1998 (that is, 1995 

cost reports) to set base rates given 

updated technology and changes in SNF 

care practices since then. Particularly, a 

few commenters stated that the 

estimated share of the nursing base rate 

attributed to NTA services (43 percent) 

is outdated and not representative of the 

proportion of the nursing base rate that 

corresponds to NTA services. These 

commenters requested that we consider 

recalculating SNF base rates using more 

recent data on SNF costs. 

Response: We appreciate the 

commenters’ suggestion to use more 

recent data in calculating the SNF base 

rates. However, in accordance with 

section 1888(e)(4)(A) of the Act, the 

federal per diem rates used for SNF 

payment are based on the FY 1995 cost 

reports. Therefore, we cannot consider 

recalculating the SNF base rates using 

more recent data. Additionally, given 

this statutory requirement, we believed 

that it was appropriate to use these cost 

reports to set the base rates for the 

proposed new components to reflect as 

closely as possible what the base rates 

would have been for these components 

if they had been separately established 

in 1998. Finally, while it may be the 

case that, as the commenter stated, 

changes in SNF care practices may have 

occurred, such changes would more 

likely be reflected in differences in the 

relative costs of treating different types 

of patients and these types of changes in 

relative costs are reflected in the revised 

case-mix weights under PDPM, which 

does use more recent data than FY 1995. 

Specifically, as discussed in section 3.1 

of the SNF PDPM technical report and 

FY 2019 SNP PPS proposed rule (83 FR 

21041), we developed PDPM using data, 

including claims and assessments, 

corresponding to Medicare Part A SNF 

stays with admissions in FY 2017. 

Comment: One commenter 

recommends that CMS treat respiratory 

therapy as ‘‘therapy’’ and not ‘‘nursing’’ 

for purpose of payment, and 

recommends CMS consider 

incorporating an add-on payment for 

respiratory therapy to ensure it is 

reimbursed appropriately to safeguard 

the continuation of these therapy 

services. 

Response: Under Chapter 8 of the 

Medicare Benefit Policy manual, section 

30.4, ‘‘skilled therapy services’’ includes 

physical therapy, occupational therapy, 

and speech-language pathology therapy 

(reflecting the regulations at 42 CFR 

409.23). Respiratory therapy, on the 

other hand, is treated as a separate 

service category in section 50.8.2 of the 

same chapter (reflecting the regulations 

at § 409.27(b)). As such, respiratory 

therapy is distinct from other forms of 

therapy and is not included among the 

other therapy components. 

Additionally, therapy services, as 

defined in § 409.33 make specific 

reference to skilled therapy services 

provided by physical and occupational 

therapists and speech-language 

pathologists. Finally, while respiratory 

therapists have specialized training in 

addressing respiratory issues, much of 

the work conducted by respiratory 

therapists falls within the scope of 

practice for nurses, which further 

supports the closer relationship between 

respiratory therapy and nursing, rather 

than with the three therapy disciplines. 

With regard to developing an add-on 

payment for respiratory therapy, given 

that such services are currently captured 

through the global per diem payment, 

we do not believe that an add-on 

payment would be warranted. 

3. Methodology Used for the Calculation 

of Federal Base Payment Rate 

Components 

As discussed previously in this 

section, we proposed to separate the 

current therapy components into a PT 

component, an OT component, and an 

SLP component. To do this, we 

calculated the percentage of the current 

therapy component of the federal base 

rate that corresponds to each of the 

three proposed PDPM therapy 

components (PT, OT, and SLP) in 

accordance with the methodology set 

forth below and in the FY 2019 SNF 

PPS proposed rule (83 FR 21039). 

The data described in section V.C.2. 

of the proposed rule (primarily, cost 

information from FY 1995 cost reports) 


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provides cost estimates for the Medicare 

Part A SNF population for each cost 

report that met the inclusion criteria. 

Cost reports stratify costs by a number 

of cost centers that indicate different 

types of services. For instance, costs are 

reported separately for each of the three 

therapy disciplines (PT, OT, and SLP). 

Cost reports also include the number of 

Medicare Part A utilization days during 

the cost reporting period. As we stated 

in the proposed rule, this allows us to 

calculate both average total therapy 

costs per day and average therapy costs 

by discipline in the facility during the 

cost reporting period. Therapy costs are 

defined as the sum of costs for the three 

therapy disciplines. 

As explained in the proposed rule (83 

FR 21039), the goal of this methodology 

is to estimate the proportion of therapy 

costs that corresponds to each of the 

three therapy disciplines. We use the 

facility-level per-diem costs developed 

from 1995 cost reports to derive average 

per diem amounts for both total therapy 

costs and for PT, OT, and SLP costs 

separately. To do this, we followed the 

methodology outlined in section II.A.3. 

of the 1998 interim final rule with 

comment period (63 FR 26260), which 

was used by CMS (then known as 

HCFA) to create the federal base 

payment rates: 

(1) For each of the four measures of 

cost (PT, OT, SLP, and total therapy 

costs per day), we computed the mean 

based on data from freestanding SNFs 

only. This mean was weighted by the 

total number of Medicare days of the 

facility. 

(2) For each of the four measures of 

cost (PT, OT, SLP, and total therapy 

costs per day), we computed the mean 

based on data from both hospital-based 

and freestanding SNFs. This mean was 

weighted by the total number of 

Medicare days of the facility. 

(3) For each of the four measures of 

cost (PT, OT, SLP, and total therapy 

costs per day), we calculated the 

arithmetic mean of the amounts 

determined under steps (1) and (2) 

above. 

In section 3.10.3. of the SNF PDPM 

technical report (available at https://

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

research.html), we show the results of 

these calculations. 

The three steps outlined above 

produce a measure of costs per day by 

therapy discipline and a measure of 

total therapy costs per day. We divided 

the discipline-specific (PT, OT, SLP) 

cost measure by the total therapy cost 

measure to obtain the percentage of the 

therapy component that corresponds to 

each therapy discipline. As we 

discussed in the proposed rule (83 FR 

21039), we believe that following a 

methodology to derive the disciplinespecific therapy percentages that is 

consistent with the methodology used to 

determine the base rates in the 1998 

interim final rule with comment period 

is appropriate because a consistent 

methodology helps to ensure that the 

resulting base rates for the components 

resemble what they would be had they 

been established in 1998. We found that 

PT, OT, and SLP costs correspond to 

43.4 percent, 40.4 percent, and 16.2 

percent of the therapy component of the 

federal per diem rate for urban SNFs, 

and 42.9 percent, 39.4 percent, and 17.7 

percent of the therapy component of the 

federal per diem rate for rural SNFs. 

Under the proposed PDPM, we stated 

that the current therapy case-mix 

component would be separated into a 

Physical Therapy component, an 

Occupational Therapy component, and 

a Speech-Language Pathology 

component using the percentages 

derived above. We stated that this 

process would be done separately for 

urban and for rural facilities. In the 

appendix of the SNF PDPM technical 

report (available at https://

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

research.html) we provided the specific 

cost centers used to identify PT, OT, 

and SLP costs. 

In addition, we proposed to separate 

the current nursing case-mix component 

into a nursing case-mix component and 

an NTA component. Similar to the 

therapy component, we calculated the 

percentage of the current nursing 

component of the federal base rates that 

corresponds to each of the two proposed 

PDPM components (NTA and nursing). 

The 1998 reopening of the comment 

period for the interim final rule (63 FR 

65561, November 27, 1998) states that 

NTA costs comprise 43.4 percent of the 

current nursing component of the urban 

federal base rate, and the remaining 56.6 

percent accounts for nursing and social 

services salary costs. These percentages 

for the nursing component of the federal 

base rate for rural facilities are 42.7 

percent and 57.3 percent, respectively 

(63 FR 65561). Therefore, we proposed 

to assign 43 percent of the current 

nursing component of the federal base 

rates to the new NTA component of the 

federal base rates and assign the 

remaining 57 percent to the new nursing 

component of the federal base rates to 

reflect what the base rates would have 

been for these components if they had 

been separately established in 1998. 

As discussed in the proposed rule (83 

FR 21040), we verified the 1998 

calculation of the percentages of the 

nursing component federal base rates 

that correspond to NTA costs by 

developing a measure of NTA costs per 

day for urban and rural facilities. We 

used the same data (that is, cost 

information from 1995 cost reports) and 

followed the same methodology 

described above to develop measures of 

PT, OT, and SLP costs per day and total 

therapy costs per day. The measure of 

NTA costs per day produced by this 

analysis was $47.70 for urban facilities 

and $47.30 for rural facilities. The 

original 1998 federal base rates for the 

nursing component, which relied on a 

similar methodology, were $109.48 for 

urban facilities and $104.88 for rural 

facilities. Therefore, our measure of 

NTA costs in urban facilities was 

equivalent to 43.6 percent of the urban 

1998 federal nursing base rate, and our 

measure of NTA costs in rural facilities 

was equivalent to 45.1 percent of the 

rural 1998 federal nursing base rate. 

These results are similar to the estimates 

published in the 1998 reopening of the 

comment period for the interim final 

rule (63 FR 65561, November 27, 1998), 

which we stated we believe supports the 

validity of the 43 percent figure stated 

above. 

For illustration purposes, Tables 12 

and 13 set forth what we stated the 

unadjusted federal per diem rates would 

be for each of the case-mix adjusted 

components if we were to apply the 

proposed PDPM to the FY 2019 base 

rates given in Tables 4 and 5. These 

were derived by dividing the FY 2019 

SNF PPS base rates according to the 

percentages described above. Tables 12 

and 13 also show what the unadjusted 

federal per diem rates for the non-casemix component would be, which are not 

affected by the change in case-mix 

methodology from RUG–IV to PDPM. 

We used these unadjusted federal per 

diem rates in calculating the impact 

analysis discussed in section V.J. of the 

proposed rule. 


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TABLE 12—FY 2019 PDPM UNADJUSTED FEDERAL RATE PER DIEM—URBAN 1

Rate component Nursing NTA PT OT SLP Non-case-mix 

Per Diem Amount .................................... $103.46 $78.05 $59.33 $55.23 $22.15 $92.63 

1The rates shown in Tables 12 and 13 illustrate what the adjusted federal per diem rates would be for each of the case-mix adjusted components if we were to apply the proposed PDPM to the proposed FY 2019 base rates given in Tables 4 and 5. 

TABLE 13—FY 2019 PDPM UNADJUSTED FEDERAL RATE PER DIEM—RURAL

Rate component Nursing NTA PT OT SLP Non-case-mix 

Per Diem Amount .................................... $98.83 $74.56 $67.63 $62.11 $27.90 $94.34 

We invited comments on the 

proposed data sources and proposed 

methodology for calculating the 

unadjusted federal per diem rates that 

would be used in conjunction with the 

proposed PDPM effective October 1, 

2019. 

Commenters submitted the following 

comments related to the proposed rule’s 

discussion of the Methodology Used for 

the Calculation of Federal Base Payment 

Rate Components. A discussion of these 

comments, along with our responses, 

appears below. 

Comment: Some commenters 

supported the proposed changes to the 

SNF PPS base rates. One commenter 

specifically highlighted their support for 

including an NTA component. Some 

commenters sought clarification 

regarding how CMS intends to 

distribute system resources currently 

associated with the ‘‘therapy non-casemix’’ base rate. Specifically, they stated 

that the FY 2019 SNF proposed rule and 

the SNF PDPM technical report that 

accompanied the proposed rule appear 

to be inconsistent in describing how 

resources associated with this payment 

component will be distributed under the 

new payment model. Commenters note 

that the proposed rule stated that 

resources associated with the ‘‘therapy 

non-case-mix’’ base rate will be 

redistributed among the three PDPM 

case-mix therapy components, while the 

SNF PDPM technical report states that 

the ‘‘therapy non-case-mix’’ payment 

component is dropped from the 

payment model under PDPM. 

Response: We appreciate the support 

for our proposed changes. As stated in 

the proposed rule, we believe it is 

appropriate to eliminate the non-casemix therapy base rate because facilities 

will be compensated for residents who 

receive nominal amounts of therapy (for 

example, therapy evaluations) through 

the three PDPM base rates 

corresponding to the three disciplines of 

therapy provided in the SNF setting (PT, 

OT, and SLP) under the new payment 

model. In other words, whereas under 

the existing RUG–IV reimbursement 

model, facilities receive a non-case-mix 

therapy payment for residents who 

receive nominal amounts of therapy, 

under PDPM facilities would receive 

payment for these residents through the 

PT, OT, and SLP payment components. 

Additionally, in setting component 

base rates under PDPM, we sought to 

replicate the methodology used to 

estimate the SNF PPS original base rates 

in 1998 as closely as possible. This is 

consistent with the requirements of 

section 1888(e)(4) of the Act, which 

requires that SNF PPS per diem federal 

payment rates be based on FY 1995 

costs reports. Therefore, to ensure that 

the PDPM base rates resembled as 

closely as possible what they would 

have been had these components been 

established in 1998, we used FY 1995 

cost reports to determine the share of 

therapy costs accounted for by PT, OT, 

and SLP. As described in the proposed 

rule (83 FR 21038 through 21039) and 

in section 3.10 of the SNF PDPM 

technical report, we then used the 

percentage of costs associated with each 

of these disciplines to calculate the 

corresponding base rates for the PT, OT, 

and SLP components under PDPM. 

Finally, as further discussed in 

section 3.11 of the SNF PDPM technical 

report, we adjusted CMIs for each of the 

five case-mix-adjusted components of 

PDPM to ensure budget neutrality 

between RUG–IV and PDPM. In doing 

so, we applied a multiplier to CMIs for 

all five case-mix-adjusted PDPM 

payment components so that total 

estimated payments under PDPM are 

budget neutral relative to RUG–IV. This 

procedure effectively distributes 

resources that are currently associated 

with the ‘‘therapy non-case-mix’’ 

component of RUG–IV across all five 

case-mix components of PDPM. We 

acknowledge that the proposed rule 

inadvertently stated that the resources 

associated with the therapy non-case 

mix component were distributed across 

only the three PDPM case-mix therapy 

components. Thus, we are clarifying 

that, while we did eliminate the therapy 

non-case mix component from the 

model, we redistributed resources 

associated with this component across 

the five PDPM case-mix components as 

described in section 3.11 of the PDPM 

technical report. 

Comment: Many commenters 

expressed concern regarding the base 

rate for the SLP component, specifically 

that it is much lower than that of the 

other therapy base rates. Commenters 

suggested that this may be taken to 

devalue SLP services and that low 

reimbursement will lead to a decrease in 

the utilization of SLP services. Some 

commenters further suggested that such 

low reimbursement rates could lead to 

layoffs among SLPs and believe that 

PDPM should pay equally for all three 

therapy disciplines. 

Response: We appreciate the concerns 

raised by these commenters regarding 

the potential impact on SLP services 

resulting from the payment policies in 

relation to SLP services discussed in the 

proposed rule. With regard to the 

comment about the SLP component base 

rate, as described above, we utilized the 

proportion of the current therapy base 

rate corresponding to each therapy 

discipline as the basis for allocating the 

therapy base rate as the basis for 

allocating the therapy base rate among 

each of the individual components. As 

SLP services represented approximately 

17 percent, on average, of overall 

therapy costs, we believed it was 

appropriate to allocate this percentage 

as the base rate for the SLP component. 

If we were to make all three components 

equal, as one commenter had suggested, 

then this would overinflate SLP 

payment in relation to SLP costs. We 

would note, however, that while the 

base rate for the SLP component is 

lower than the other therapy component 

base rates, the case-mix weights for this 

component, as described in section 

V.B.3.c. of this final rule, are far greater 

for the SLP component than for either 

of the PT or OT components. This 

reflects that when SLP services are 


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predicted to be necessary, there is 

adequate reimbursement for these 

services. Therefore, we expect that 

utilization of and access to SLP services 

should not be adversely affected merely 

because the base rate is lower for this 

component. 

Accordingly, after considering the 

comments received, for the reasons 

specified in the FY 2019 SNF PPS 

proposed rule and in this final rule, we 

are finalizing, effective October 1, 2019, 

our proposals related to the calculation 

of the federal base payment rate 

components, as described in this 

section, with the following clarification. 

As discussed above, we are clarifying 

that, while we did eliminate the therapy 

non-case mix component from the 

model, we redistributed resources 

associated with this component across 

the five PDPM case-mix components as 

described in the PDPM technical report. 

4. Updates and Wage Adjustments of 

Revised Federal Base Payment Rate 

Components 

In section III.B. of the proposed rule, 

we described the process used to update 

the federal per diem rates each year. 

Additionally, as discussed in section 

III.B.4 of the proposed rule, SNF PPS 

rates are adjusted for geographic 

differences in wages using the most 

recent hospital wage index data. Under 

PDPM, we proposed to continue to 

update the federal base payment rates 

and adjust for geographic differences in 

wages following the current 

methodology used for such updates and 

wage index adjustments under the SNF 

PPS (83 FR 21040). Specifically, we 

proposed to continue the practice of 

using the SNF market basket, adjusted 

as described in section III.B. of the 

proposed rule to update the federal base 

payment rates and to adjust for 

geographic differences in wages as 

described in section III.B.4. of the 

proposed rule. 

We received comments on the 

proposed methodology for updating the 

federal base payment rates and adjusting 

the per diem rates for geographic 

differences in wages under the PDPM. 

Those comments, and our responses, 

appear below. 

Comment: Most commenters agreed 

with using the standard rate update 

policy and the existing wage index 

policy as the basis for updating the 

payment rates and adjusting the rates for 

geographic variation. One commenter 

stated that the lack of separate laborshare adjustment for each component 

may lead to provision of fewer services 

as each component would not be 

appropriately wage adjusted. This 

commenter stated that because CMS has 

already calculated payment amounts for 

each component and because cost 

reports contain all the information 

necessary to determine the labor share 

for each component, it would be 

appropriate for CMS to make separate 

wage adjustment calculations for each 

PDPM component. 

Response: We appreciate the support 

for this proposal. With regard to the 

comment that CMS should separately 

wage adjust each PDPM component, the 

labor-related share reflects the facility 

Medicare-allowable costs (including all 

of the PDPM components) that are laborintensive and vary with the local labor 

market. Specifically, it is equal to the 

following cost categories from the 2014- 

based SNF market basket: Wages and 

Salaries; Employee Benefits; 

Professional Fees: Labor-Related; 

Administrative and Facilities Support 

Services; Installation, Maintenance, and 

Repair Services; All Other: LaborRelated Services; and a proportion of 

Capital-Related expenses. The majority 

of these labor-related costs are derived 

using the MCR data; however, a notable 

portion is based on other government 

data sources. A complete description of 

the methodology used to derive the 

2014-based SNF market basket is 

available in the FY 2018 final rule (82 

FR 36548 through 36566). Given that 

these categories cut across PDPM 

components, to wage adjust for each 

component separately would require a 

substantial increase in the specificity of 

reporting these MCR data items, as well 

as developing a methodology for 

accurately assigning these costs to each 

component. We believe that the 

additional reporting burden associated 

with implementing this suggestion 

would not justify the increased 

specificity of applying the wage index 

adjustment to each component under 

PDPM. 

Accordingly, after considering the 

comments received, for the reasons 

specified in the FY 2019 SNF PPS 

proposed rule (83 FR 21040) and 

discussed in this section, we are 

finalizing our proposal, without 

modification, for updating the federal 

base payment rates and for adjusting the 

per diem rates for geographic 

differences in wages under the PDPM, 

effective October 1, 2019. 

C. Design and Methodology for Case-Mix 

Adjustment of Federal Rates 

1. Background on PDPM 

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

requires that the Secretary provide an 

appropriate adjustment to account for 

case mix and that such an adjustment 

shall be based on a resident 

classification system that accounts for 

the relative resource utilization of 

different patient types. The current casemix classification system uses a 

combination of resident characteristics 

and service intensity metrics (for 

example, therapy minutes) to assign 

residents to one of 66 RUGs, each of 

which corresponds to a therapy CMI 

and a nursing CMI, which are indicative 

of the relative cost to a SNF of treating 

residents within that classification 

category. However, as noted in section 

V.A. of the proposed rule, incorporating 

service-based metrics into the payment 

system can incentivize the provision of 

services based on a facility’s financial 

considerations rather than resident 

needs. To better ensure that resident 

care decisions appropriately reflect each 

resident’s actual care needs, we stated 

in the proposed rule (83 FR 21040) that 

we believe it is important to remove, to 

the extent possible, service-based 

metrics from the SNF PPS and derive 

payment from verifiable resident 

characteristics that are patient, and not 

facility, centered. To that end, as we 

stated in the proposed rule, the 

proposed PDPM was developed to be a 

payment model which derives payment 

classifications almost exclusively from 

verifiable resident characteristics. 

Additionally, the current RUG–IV 

case-mix classification system reduces 

the varied needs and characteristics of 

a resident into a single RUG–IV group 

that is used for payment. As of FY 2017, 

of the 66 possible RUG classifications, 

over 90 percent of covered SNF PPS 

days are billed using one of the 23 

Rehabilitation RUGs, with over 60 

percent of covered SNF PPS days billed 

using one of the three Ultra-High 

Rehabilitation RUGs. As we stated in 

the proposed rule (83 FR 21040), the 

implication of this pattern is that more 

than half of the days billed under the 

SNF PPS effectively utilize only a 

resident’s therapy minutes and 

Activities of Daily Living (ADL) score to 

determine the appropriate payment for 

all aspects of a resident’s care. Both of 

these metrics, more notably a resident’s 

therapy minutes, may not derive so 

much from the resident’s own 

characteristics, but rather, from the type 

and amount of care the SNF decides to 

provide to the resident. We stated that 

even assuming that the facility takes the 

resident’s needs and unique 

characteristics into account in making 

these service decisions, the focus of 

payment remains centered, to a 

potentially great extent, on the facility’s 

own decision making and not on the 

resident’s needs. 

We explained in the proposed rule (83 

FR 21041) that while the RUG–IV model 


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utilizes a host of service-based metrics 

(type and amount of care the SNF 

decides to provide) to classify the 

resident into a single RUG–IV group, the 

proposed PDPM would separately 

identify and adjust for the varied needs 

and characteristics of a resident’s care 

and combine this information together 

to determine payment. We stated we 

believe the proposed PDPM would 

improve the SNF PPS by basing 

payments predominantly on clinical 

characteristics rather than service 

provision, thereby enhancing payment 

accuracy and strengthening incentives 

for appropriate care. For these reasons, 

we proposed that, effective October 1, 

2019, SNF residents would be classified 

using the PDPM, as further discussed 

below. As discussed in the proposed 

rule and in section V.I. of this final rule, 

we proposed to implement the PDPM on 

October 1, 2019 to allow all 

stakeholders adequate time for systems 

updates and staff training needed to 

assure smooth implementation. 

2. Data Sources Utilized for Developing 

PDPM 

To understand, research, and analyze 

the costs of providing Part A services to 

SNF residents, we utilized a variety of 

data sources in the course of research. 

In the proposed rule (83 FR 21041) and 

in this section, we discuss these sources 

and how they were used in the SNF 

PMR in developing the proposed PDPM. 

A more thorough discussion of the data 

sources used during the SNF PMR is 

available in section 3.1. of the SNF 

PDPM technical report (available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html). 

a. Medicare Enrollment Data 

Beneficiary enrollment and 

demographic information was extracted 

from the CMS enrollment database 

(EDB) and Common Medicare 

Environment (CME). Beneficiaries’ 

Medicare enrollment was used to apply 

restrictions to create a study population 

for analysis. For example, beneficiaries 

were required to have continuous 

Medicare Part A enrollment during a 

SNF stay. Demographic characteristics 

(for example, age) were incorporated as 

being predictive of resource use. 

Furthermore, enrollment and 

demographic information from these 

data sources were used to assess the 

impact of the proposed PDPM on 

subpopulations of interest. In particular, 

the EDB and CME include indicators for 

potentially vulnerable subpopulations, 

such as those dually-enrolled in 

Medicaid and Medicare. 

b. Medicare Claims Data 

Medicare Parts A and B claims from 

the CMS Common Working File (CWF) 

were used to conduct claims analyses as 

part of the SNF PMR. SNF claims 

(CMS–1450 form, OMB control number 

0938–0997), including type of bill (TOB) 

21x (SNF Inpatient Part A) and 18x 

(hospital swing bed), were used to 

identify Medicare Part A stays paid 

under the SNF PPS. Part A stays were 

constructed by linking claims that share 

the same beneficiary, facility CMS 

Certification Number (CCN), and 

admission date. Stays created from SNF 

claims were linked to other claims data 

and assessment data via beneficiary 

identifiers. 

Acute care hospital stays that 

qualified the beneficiary for the SNF 

benefit were identified using Medicare 

inpatient hospital claims. The dates of 

the qualifying hospital stay listed in the 

span codes of the SNF claim were used 

to connect inpatient claims with those 

dates listed as the admission and 

discharge dates. Although there are 

exceptions, the claims from the 

preceding inpatient hospitalization 

commonly contain clinical and service 

information relevant to the care 

administered during a SNF stay. 

Components of this information were 

used in the regression models predicting 

therapy and NTA costs and to better 

understand patterns of post-acute care 

(PAC) referrals for patients requiring 

SNF services. Additionally, the most 

recent hospital stay was matched to the 

SNF stay, which often (though not 

always) was the same as the preceding 

inpatient hospitalization, and used in 

the regression models. 

Other Medicare claims, including 

outpatient hospital, physician, home 

health, hospice, durable medical 

equipment, and drug prescriptions, 

were incorporated, as necessary, into 

the analysis in one of three ways: (1) To 

verify information found on assessments 

or on SNF or inpatient claims; (2) to 

provide additional resident 

characteristics to test outside of those 

found in assessment and SNF and 

inpatient claims data; and (3) to stratify 

modeling results to identify effects of 

the system on beneficiary 

subpopulations. These claims were 

linked to SNF claims using beneficiary 

identifiers. 

c. Assessment Data 

Minimum Data Set (MDS) 

assessments were the primary source of 

resident characteristic information used 

to explain resource utilization in the 

SNF setting. The data repositories 

include MDS assessments submitted by 

SNFs and swing-bed hospitals. MDS 

version 2.0 assessments were submitted 

until October 2010, at which point MDS 

version 3.0 assessments began. MDS 

data were extracted from the Quality 

Improvement Evaluation System (QIES). 

MDS assessments were then matched to 

SNF claims data using the beneficiary 

identifier, assessment indicator, 

assessment date, and Resource 

Utilization Group (RUG). 

d. Facility Data 

Facility characteristics, while not 

considered as explanatory variables 

when modeling service use, were used 

for impact analyses. By incorporating 

this facility-level information, we could 

identify any disproportionate effects of 

the proposed case-mix classification 

system on different types of facilities. 

Facility-level characteristics were 

taken from the Certification and Survey 

Provider Enhanced Reports (CASPER). 

From CASPER, we draw facility-level 

characteristics such as ownership, 

location, facility size, and facility type. 

CASPER data were supplemented with 

information from publicly available data 

sources. The principal data sources that 

are publicly available include the 

Medicare Cost Reports (Form 2540–10, 

2540–96, and 2540–92) extracted from 

the Healthcare Cost Report Information 

System (HCRIS) files, Provider-Specific 

Files (PSF), Provider of Service files 

(POS), and Nursing Home Compare 

(NHC). These data sources have 

information on facility costs, payment, 

and characteristics that directly affect 

PPS calculations. 

We received comments from 

stakeholders regarding the data used to 

develop PDPM, though we address these 

comments later in this section in 

relation to the specific PDPM 

component to which the comments 

were addressed. 

3. Resident Classification Under PDPM 

a. Background 

As noted above, section 

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

the Secretary provide for an appropriate 

adjustment to account for case mix and 

that such an adjustment shall be based 

on a resident classification system that 

accounts for the relative resource 

utilization of different patient types. As 

we stated in the proposed rule (83 FR 

21040), the proposed PDPM was 

developed to be a payment model which 

derives almost exclusively from resident 

characteristics. We stated that the 

proposed PDPM would separately 

identify and adjust five different casemix components for the varied needs 

and characteristics of a resident’s care 


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and then combine these together with 

the non-case-mix component to form the 

full SNF PPS per diem rate for that 

resident. 

We stated in the proposed rule (83 FR 

21041 through 21042) that, as with any 

case-mix classification system based on 

resident characteristics, the proposed 

predictors that would be part of casemix classification under PDPM are those 

which our analysis identified as 

associated with variation in costs for the 

given case-mix component. We 

explained that the proposed federal per 

diem rates discussed above serve as 

‘‘base rates’’ specifically because they 

set the basic average cost of treating a 

typical SNF resident. Based on the 

presence of certain needs or 

characteristics, caring for certain 

residents may cost more or less than 

that average cost. We explained that a 

case-mix system identifies certain 

aspects of a resident or of a resident’s 

care which, when present, lead to 

average costs for that group being higher 

or lower than the average cost of treating 

a typical SNF resident. For example, if 

we found that therapy costs were the 

same for two residents regardless of 

having a particular condition, then that 

condition will not be relevant in 

predicting increases in therapy costs. If, 

however, we found that, holding all else 

constant, the presence of a given 

condition was correlated with an 

increase in therapy costs for residents 

with that condition over those without 

that condition, then this could mean 

that this condition is indicative, or 

predictive, of increased costs relative to 

the average cost of treating SNF 

residents generally. 

In the subsections that follow, we 

describe each of the five case-mix 

adjusted components under the 

proposed PDPM and the basis for each 

of the predictors that we stated would 

be used within the PDPM to classify 

residents for payment purposes. 

b. Physical and Occupational Therapy 

Case-Mix Classification 

As we stated in the proposed rule (83 

FR 21042), a fundamental aspect of the 

proposed PDPM is to use resident 

characteristics to predict the costs of 

furnishing similarly situated residents 

with SNF care. Costs derived from the 

charges on claims and cost-to-charge 

ratios (CCRs) on facility cost reports 

were used as the measure of resource 

use to develop the proposed PDPM. We 

explained that costs better reflect 

differences in the relative resource use 

of residents as opposed to charges, 

which partly reflect decisions made by 

providers about how much to charge 

payers for certain services. We further 

explained that costs derived from 

charges are reflective of therapy 

utilization as they are correlated to the 

therapy minutes recorded for each 

therapy discipline. Under the current 

RUG–IV case-mix model, therapy 

minutes for all three therapy disciplines 

(PT, OT, SLP) are added together to 

determine the appropriate case-mix 

classification for the resident. However, 

as shown in section 3.3.1. of the SNF 

PDPM technical report (available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html), and as 

explained in the proposed rule, when 

we began to investigate resident 

characteristics predictive of therapy 

costs for each therapy discipline, we 

found that PT and OT costs per day are 

only weakly correlated with SLP costs 

per day (correlation coefficient of 0.04). 

The set of resident characteristics from 

the MDS that predicted PT and OT 

utilization was different than the set of 

characteristics predicting SLP 

utilization. Additionally, many 

predictors of high PT and OT costs per 

day predicted lower SLP costs per day, 

and vice versa. For example, we found 

that residents with cognitive 

impairments receive less physical and 

occupational therapy but receive more 

speech-language pathology. As a result 

of this analysis, as we explained in the 

proposed rule, we found that basing 

case-mix classification on total therapy 

costs per day obscured differences in 

the determinants of PT, OT, and SLP 

utilization. 

In contrast, we stated in the proposed 

rule (83 FR 21042) that the correlation 

coefficient between PT and OT costs per 

day was high (0.62). Additionally, 

regression analyses found that 

predictors of high PT costs per day were 

also predictive of high OT costs per day. 

For example, the analyses found that 

late-loss ADLs are strong predictors of 

both PT and OT costs per day. We then 

used a range of resident characteristics 

to predict PT and OT costs per day 

separately and we found that the 

coefficients in both models followed 

similar patterns. Finally, we noted that 

resident characteristics were found to be 

better predictors of the sum of PT and 

OT costs per day than for either PT or 

OT costs separately. These analyses 

used a variety of items from the MDS as 

independent variables and used PT, OT, 

and SLP costs per day as dependent 

variables. In the proposed rule, we 

referred readers to section 3.3.1. of the 

SNF PMR technical report that 

accompanied the ANPRM available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html for more 

information on these analyses. 

Given the results of this analytic 

work, as well as feedback from multiple 

stakeholders, we proposed three 

separate case-mix adjusted components, 

one corresponding to each therapy 

discipline: PT, OT, and SLP. In the 

original RCS–I model presented in the 

ANPRM, we stated that we were 

considering addressing PT and OT 

services through a single component, 

given the strong correlation between PT 

and OT costs and our finding that very 

similar predictors explained variation in 

the utilization of both therapy 

disciplines. However, as we explained 

in the proposed rule (83 FR 21042), 

commenters on the ANPRM stated that 

having a single combined PT and OT 

component could encourage providers 

to inappropriately substitute PT for OT 

and vice versa. We stated that this belief 

comports with feedback received from 

professional organizations and other 

stakeholders during technical expert 

panels (TEPs). The TEP commenters 

stated that PT and OT services should 

be addressed via separate components 

given the different aims of the two 

therapy disciplines and differences in 

the clinical characteristics of the 

resident subpopulations for which PT or 

OT services are warranted. For example, 

clinicians consulted during 

development of PDPM advised that 

personal hygiene, dressing, and upper 

extremity motion may bear a closer 

clinical relationship to OT utilization, 

while lower extremity motion may be 

more closely related to PT utilization. 

We stated in the proposed rule that 

while we do not believe that RCS–I, 

which included two separate 

components for PT/OT and SLP, 

contained stronger incentives for 

substitution across therapy disciplines 

compared to RUG–IV, which reimburses 

all three therapy disciplines through a 

single therapy component, we concur 

with the TEP commenters that PT and 

OT have different aims and that there 

are clinically relevant differences 

between residents who could benefit 

from PT, residents who could benefit 

from OT, and residents who could 

benefit from both disciplines. For the 

foregoing reasons, we decided to 

separate the combined PT/OT 

component presented in the ANPRM 

into two separate case-mix adjusted 

components in the proposed PDPM. As 

we stated in the proposed rule, because 

of the strong correlation between the 

dependent variables used for both 

components and the similarity in 

predictors, we decided to maintain the 

same case-mix classification model for 


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both components. We stated that in 

practice, this means that the same 

resident characteristics will determine a 

resident’s classification for PT and OT 

payment. However, we stated that each 

resident would be assigned separate 

case-mix groups for PT and OT 

payment, which correspond to separate 

case-mix indexes and payment rates. We 

explained that we believe providing 

separate case-mix-adjusted payments for 

PT and OT may allay concerns about 

inappropriate substitution across 

disciplines and encourage provision of 

these services according to clinical 

need. We further noted that as clinical 

practices evolve independently of 

incentives created by the current RUG– 

IV payment model, we would reevaluate the different sets of resident 

characteristics that are predictive of PT 

and OT utilization after the PDPM is 

implemented. We stated that if based on 

this re-evaluation we determine that 

different sets of characteristics are 

predictive of PT and OT resource 

utilization, we could consider revising 

the payment model to better reflect 

clinical differences between residents 

who receive PT services and those who 

receive OT services. 

After delineating the three separate 

case-mix adjusted therapy components, 

we continued our analysis, as described 

in the proposed rule (83 FR 21043), by 

identifying resident characteristics that 

were best predictive of PT and OT costs 

per day. To accomplish this, we 

conducted cost regressions with a host 

of variables from the MDS assessment, 

the prior inpatient claims, and the SNF 

claims that were believed to be 

potentially predictive of relative 

increases in PT and OT costs. As we 

stated in the proposed rule, the 

variables were selected with the goal of 

being as inclusive as possible with 

respect to characteristics related to the 

SNF stay and the prior inpatient stay. 

The selection also incorporated clinical 

input. We explained that these initial 

costs regressions were exploratory and 

meant to identify a broad set of resident 

characteristics that are predictive of PT 

and OT resource utilization. The results 

were used to inform which variables 

should be investigated further and 

ultimately included in the payment 

system. A table of all of the variables 

considered as part of this analysis 

appears in the appendix of the SNF 

PMR technical report that accompanied 

the ANPRM available at https://

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

research.html. As explained in the 

proposed rule, based on our regression 

analyses, we found that the three most 

relevant categories of predictors of PT 

and OT costs per day were the clinical 

reasons for the SNF stay, the resident’s 

functional status, and the presence of a 

cognitive impairment. More information 

on this analysis can be found in section 

3.4.1. of the SNF PDPM technical report 

available at https://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/SNFPPS/therapy

research.html. 

Under the RUG–IV case-mix model, 

residents are first categorized based on 

being a rehabilitation resident or a nonrehabilitation resident, then categorized 

further based on additional aspects of 

the resident’s care. As explained in the 

proposed rule (83 FR 21043), under the 

proposed PDPM, for the purposes of 

determining the resident’s PT and OT 

groups and, as will be discussed below, 

the resident’s SLP group, the resident 

would first be categorized based on the 

clinical reasons for the resident’s SNF 

stay. We stated that empirical analyses 

demonstrated that the clinical basis for 

the resident’s stay (that is, the primary 

reason the resident is in the SNF) is a 

strong predictor of therapy costs. For 

example, we explained that all of the 

clinical categories (described below) 

developed to characterize the primary 

reason for a SNF stay (except the 

clinical category used as the reference 

group) were found to be statistically 

significant predictors of therapy costs 

per day. More detail on these analyses 

can be found in section 3.4.1. of the SNF 

PMR technical report that accompanied 

the ANPRM (available at https://

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

research.html). In consultation with 

stakeholders (industry representatives, 

beneficiary representatives, clinicians, 

and payment policy experts) at multiple 

technical expert panels (TEPs), we 

created a set of ten inpatient clinical 

categories that we believe capture the 

range of general resident types which 

may be found in a SNF. These proposed 

clinical categories were provided in 

Table 14 of the proposed rule (83 FR 

21043) and are reflected in Table 14. 

TABLE 14—PDPM CLINICAL

CATEGORIES

Major Joint Replacement or Spinal Surgery. 

Non-Surgical Orthopedic/Musculoskeletal. 

Orthopedic Surgery (Except Major Joint Replacement or Spinal Surgery). 

Acute Infections. 

Medical Management. 

Cancer. 

Pulmonary. 

Cardiovascular and Coagulations. 

Acute Neurologic. 

Non-Orthopedic Surgery. 

We proposed to categorize a resident 

into a PDPM clinical category using 

item I8000 on the MDS 3.0. We stated 

in the proposed rule (83 FR 21043) that 

providers would use the first line in 

item I8000 to report the ICD–10–CM 

code that represents the primary reason 

for the resident’s Part A SNF stay. We 

further stated that this code would be 

mapped to one of the ten clinical 

categories provided in Table 14 of the 

proposed rule (set forth at Table 14 of 

this final rule). The mapping between 

ICD–10–CM codes and the ten clinical 

categories is available at https://

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

research.html. As explained in the 

proposed rule, the mapping indicates 

that in some cases, a single ICD–10–CM 

code maps to more than one clinical 

category because the care plan for a 

resident with this diagnosis may differ 

depending on the inpatient procedure 

history. In these cases, we explained 

that a resident may be categorized into 

a surgical clinical category if the 

resident received a surgical procedure 

during the immediately preceding 

inpatient stay that relates to the primary 

reason for the Part A SNF stay and 

typically requires extensive postsurgical rehabilitation or nursing care. If 

the resident did not receive a related 

surgical procedure during the prior 

inpatient stay that typically requires 

extensive post-surgical rehabilitation or 

nursing care, the resident may be 

categorized into a non-surgical clinical 

category. For example, we explained 

that certain wedge compression 

fractures that were treated with an 

invasive surgical procedure such as a 

fusion during the prior inpatient stay 

would be categorized as Major Joint 

Replacement or Spinal Surgery, but if 

these cases were not treated with a 

surgical procedure they would be 

categorized as Non-Surgical Orthopedic/ 

Musculoskeletal. For residents who 

received a related surgical procedure 

during the prior inpatient stay, we 

stated that a provider would need to 

indicate the type of surgical procedure 

performed for the resident to be 

appropriately classified under PDPM. 

Thus, in these cases we proposed to 

require providers to record the type of 

inpatient surgical procedure performed 

during the prior inpatient stay so that 

residents can be appropriately classified 

into a PDPM clinical category for 

purposes of PT, OT, and SLP 

classification. We proposed that 

providers record the type of surgical 

procedure performed during the prior 

inpatient stay by coding an ICD–10–PCS 

code that corresponds to the inpatient 


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surgical procedure in the second line of 

item I8000 in cases where inpatient 

surgical information is required to 

appropriately categorize a resident 

under PDPM. We noted that if we were 

to use the second line of item I8000 to 

record inpatient surgical information, 

we would provide a list of ICD–10–PCS 

codes that map to the surgical clinical 

categories. We stated that we believe 

this approach would allow for patients 

to be appropriately classified under the 

PDPM because it would provide 

sufficient information on the primary 

reason for SNF care and inpatient 

surgical procedures to assign a resident 

to the appropriate surgical or nonsurgical clinical category. We invited 

comments on this proposal. In addition, 

we solicited comments on alternative 

methods for recording the type of 

inpatient surgical procedure to 

appropriately classify a patient into a 

clinical category. We explained that the 

clinical category into which the resident 

is classified would be used to classify 

the resident into a PT and OT category 

as discussed below, as well as an SLP 

category, as explained in section 

V.D.3.c. of the proposed rule. 

As discussed above, we proposed to 

categorize a resident into a PDPM 

clinical category for purposes of PT, OT, 

and SLP classification using the ICD– 

10–CM code in the first line of item 

I8000, and if applicable, the ICD–10 PCS 

code in the second line of item I8000. 

As an alternative to using item I8000 to 

classify a resident into a clinical 

category, we stated in the proposed rule 

(83 FR 21044) that we were considering 

using a resident’s primary diagnosis as 

reflected in MDS item I0020 as the basis 

for assigning the resident to a clinical 

category, and were evaluating the 

categories provided in item I0020 to 

determine if there is sufficient overlap 

between the categories used in item 

I0020 and the proposed PDPM clinical 

categories provided in Table 14 that this 

item could serve as the basis for a 

resident’s initial classification into a 

clinical category under PDPM. We 

stated that the MDS item I0020 would 

require facilities to select a primary 

diagnosis from a pre-populated list of 

primary diagnoses representing the most 

common types of beneficiaries treated in 

a SNF, while item I8000, if used to 

assign residents to clinical categories, 

would require facilities to code a 

specific ICD–10–CM code that 

corresponds to the primary reason for 

the resident’s Part A SNF stay. As 

indicated above, we also proposed that 

providers would code a specific ICD– 

10–PCS code in the second line of item 

I8000 when surgical information from 

the prior inpatient stay is necessary to 

assign a resident to a clinical category. 

We explained that if we were to use 

item I0020 to categorize residents under 

PDPM, we would not require providers 

to record additional information on 

inpatient surgical procedures as we 

expect the primary diagnosis 

information provided through item 

I0020 to be adequate to appropriately 

assign a resident to a clinical category. 

We invited comments on our proposal 

to categorize a resident into a PDPM 

clinical category using the ICD–10–CM 

code recorded in the first line of item 

I8000 on the MDS 3.0, and the ICD–10– 

PCS code recorded on the second line 

of item I8000 on the MDS 3.0. In 

addition, we solicited comments on the 

alternative of using item I0020 on the 

MDS 3.0, as discussed above, as the 

basis for resident classification into one 

of the ten clinical categories in Table 14. 

Commenters submitted the following 

comments related to the proposed rule’s 

discussion of the clinical category 

assignments under PDPM. A discussion 

of these comments, along with our 

responses, appears below. 

Comment: Several commenters 

expressed concern about ICD–10 coding 

requirements under PDPM. Some 

commenters are concerned that these 

requirements, especially ICD–10–PCS 

coding requirements, would create 

compliance risks because of SNFs’ 

limited expertise in using ICD codes. A 

few commenters request that CMS offer 

ICD–10 coding training for clinicians, 

billers, coders, and other SNF 

personnel, prior and subsequent to 

PDPM implementation. Another 

commenter requested that CMS provide 

case studies and other resources as part 

of its educational strategy with respect 

to ICD–10 coding in the SNF setting. 

This commenter also recommended that 

CMS develop explicit instructions for 

how providers should record diagnosis 

and procedure information in MDS item 

I8000 for resident classification 

purposes under PDPM. One commenter 

recommends requiring the employment 

of credentialed medical record staff to 

ensure accurate coding. One commenter 

seeks clarification about potential 

consequences of ICD–10 coding errors 

during RAC audits. Another commenter 

questioned if the proposed ICD–10 

coding is considered a transaction under 

the HIPPA transaction coding 

requirement. 

Response: We appreciate the 

commenters’ concerns regarding ICD–10 

coding, but do not concur with 

stakeholder claims that SNF providers 

are unfamiliar with ICD–10 coding 

practices. While ICD–10 codes are not, 

in most instances, a factor in 

determining payment under the current 

SNF Part A benefit, ICD–10 has been an 

aspect of Medicare since FY 2016. 

Moreover, ICD–10 provides the most 

accurate coding and diagnosis 

information on patients, which can only 

serve to improve provider 

understanding of their patient’s 

condition and resultant care plan. 

Finally, we believe that given the type 

of homogeneity of care currently 

provided by SNF providers (as 

evidenced by the existing case-mix 

distribution that has over 90 percent of 

patient billed days in one of 23 RUGs 

that utilize therapy service utilization as 

the primary determinant), moving to a 

system that utilizes the primary patient 

diagnosis as the key determinant of 

payment will help to ensure that the 

patient’s unique condition and goals is 

the primary driver of care planning and 

care delivery and case mix 

classification, rather than the patient’s 

ability to tolerate a high volume of 

therapy services. 

With regard to the comment that CMS 

offer ICD–10 coding training for 

clinicians and other personnel, we do 

not believe it is the role of CMS to offer 

this type of professional training, as it 

is the responsibility of the provider to 

ensure that their staff is properly trained 

to perform these types of more general 

tasks that are not specific to a given 

payer or requirement. With regard to the 

comment that CMS provide case studies 

and other resources as part of an 

educational strategy, we appreciate this 

comment and will take it into 

consideration as we develop the 

educational materials for PDPM. In 

terms of the explicit instructions for 

how providers record diagnosis and 

procedure information, we do intend to 

provide such information in the MDS 

RAI manual. 

With regard to the comment that we 

should require that providers employ 

credentialed medical record staff to 

ensure accurate coding, we agree that 

the emphasis on ICD–10 could cause 

changes in staffing at some providers. 

However, we do not believe it would be 

appropriate for CMS, in this instance, to 

specifically identify the type of staff that 

providers must employ to ensure 

accurate coding, as this is a decision 

best left to the provider. With regard to 

the potential consequences of ICD–10 

coding errors on RAC audits, as under 

the current payment system, the 

information reported to CMS must be 

accurate. Inaccuracies in the data 

reported to CMS, or a failure to 

document the basis for such data, will 

necessitate the same types of 

administrative actions as occur today. 


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Finally, with regard to the question of 

whether the reporting of ICD–10 coding 

information constitutes a HIPAA 

transaction, we note that while some 

HIPAA Administrative Simplification 

requirements at 45 CFR part 162 require 

the use of ICD–10 codes, reporting ICD– 

10 codes does not in and of itself 

constitute a HIPAA transaction. 

Comment: One commenter stated that 

CMS’s proposal to use the first line of 

I8000 to capture the primary reason for 

SNF stay, the second line to capture 

procedure code, and the remaining 

spaces to capture comorbidities is 

overly complex. The commenter 

expressed concern that coding a 

procedure code in the second line of 

I8000 would not follow current RAI 

coding instructions. Some commenters 

support using MDS item I0020 to record 

the primary diagnosis, stating this will 

reduce provider burden. Other 

commenters opposed using item I0020 

for this purpose because this item is 

designed for the Quality Reporting 

Program and does not align well with 

the PDPM clinical categories. One 

commenter stated that coding primary 

reason for SNF care in both item I8000 

and item I0020 for different purposes 

will be confusing and will lead to errors. 

Another commenter sought clarity on 

whether providers would still be 

required to code ICD–10 diagnosis or 

procedure codes in item I8000 if item 

I0020 is used for resident classification. 

This commenter also questioned what 

providers should do if a resident does 

not fall into one of the I0020 categories. 

A few commenters suggest instead 

adding checkboxes in section I of the 

MDS to indicate the ten PDPM clinical 

categories. One commenter 

recommended the use of MDS item 

J2000 for procedure information, 

because SNFs have minimal experience 

with ICD–10–PCS codes and it can be 

difficult to obtain precise information 

on procedures performed during the 

preceding inpatient stay. 

Response: We appreciate these 

comments regarding the complexity of 

the proposed methodology for collecting 

diagnosis and procedure information 

and appreciate the suggestions for ways 

to improve coding without 

compromising the overall integrity of 

the information reported. We agree with 

commenters who stated that the I0020 

categories are not currently aligned with 

the clinical categories used under 

PDPM, specifically that the categories 

used under I0020 do not match the 

clinical categories that we use under 

PDPM, which means that using I0020 at 

this time would not be appropriate. We 

will continue to work to determine if 

refinements may be made in that item 

in the future which could allow for a 

transition to this item. With regard to 

comments concerning the potential for 

confusion associated with coding the 

patient’s primary diagnosis in both 

I8000 and I0020 for different purposes, 

we believe this both affords the 

potential to confirm the primary 

diagnosis coding on the MDS (to the 

extent that we can identify areas of 

alignment between the two items) and 

helps us to refine the categories for a 

potential future transition to item I0020 

under PDPM. With regard to the 

question of what providers should do if 

a patient does not fall into one of the 

I0020 categories, we would recommend 

that the provider refer to the I0020 

coding instructions in the MDS manual 

for guidance on this issue. 

With regard to suggestions of using a 

checkbox for recording diagnosis 

information, we believe that the use of 

such checkboxes for recording diagnosis 

information may not provide sufficient 

granularity for CMS to monitor properly 

the effects of PDPM implementation or 

to accurately classify patients for 

payment purposes, nor provide enough 

information for the SNF in terms of care 

planning. Given the use of ICD–10 

diagnosis coding in other Medicare 

payment systems and given efforts to 

align payment across multiple postacute care payment systems, we believe 

that using the actual diagnosis code, 

rather than a checkbox for a category, 

will provide greater consistency 

between payment systems and would 

provide a smoother transition to the 

extent such payment systems are 

aligned further in the future. 

With regard to the comment that CMS 

consider using item J2000 to report 

procedural information, we believe that 

while the actual ICD–10 code is 

important in the case of diagnosis 

coding, we agree with the commenter 

that the procedural information may be 

coded at a more aggregated level, as this 

information is only being used to 

augment the patient’s classification 

rather than as the primary basis for the 

classification. However, we believe that 

item J2000 (which requires providers to 

report if the patient experienced a 

surgical procedure in the preceding 100 

days) would not adequately link to the 

care being delivered in the SNF, 

potentially close to 100 days after the 

surgical event. To address this, 

consistent with this commenter’s 

suggestion, and in response to other 

concerns about the complexity of the 

proposed methodology, we believe that 

it would be appropriate and sufficient to 

develop subitems for item J2000 that 

would allow providers to report, 

through a checkbox-style mechanism, if 

a surgical procedure occurred during 

the preceding hospital stay (as opposed 

to the previous 100 days, as is used for 

J2000), and then provide a series of 

procedural categories, related to the 

PDPM clinical categories, that providers 

could select using a checkbox style 

mechanism, that would allow the 

provider to report on the relevant 

procedural information (rather than 

recording the specific ICD–10–PCS 

code). We believe this is a substantial 

improvement to the procedure we 

proposed for recording surgical 

procedure information, as it reduces the 

burden and complexity of provider 

reporting on procedural information 

while maintaining payment accuracy 

and integrity. Moreover, similar to how 

PDPM utilizes the procedural 

information to augment the patient’s 

clinical category classification, we 

believe that using a checkbox 

mechanism also augments care-planning 

by helping ensure that the procedural 

history information from the hospital is 

properly taken into account in 

determining the resident’s care needs 

and care plan. Therefore, we are 

developing sub-items for item J2000, 

which will allow providers to report the 

patient’s procedural information in a 

way that uses a checkbox mechanism, 

and this procedural information will be 

used in concert with the patient’s 

diagnosis information, as was discussed 

above and in the FY 2019 SNF PPS 

proposed rule, to classify the patient 

into a clinical category. We will provide 

both the subitems under item J2000, and 

the instructions regarding their use, for 

this purpose in the RAI manual. 

Comment: One commenter was 

opposed to PDPM’s focus on one 

primary diagnosis, as SNF residents can 

be admitted with complex medical 

conditions and multiple diagnoses. The 

commenter recommends that SNFs 

should select all resident conditions and 

allow the software to select the highest 

case-mix index achieved. In a similar 

vein, another commenter requested that 

CMS clarify which inpatient procedure 

SNFs should select for purposes of 

resident classification and payment 

under PDPM when the patient record 

includes multiple procedure codes. 

Response: While we agree with the 

commenter that a SNF patient may 

suffer from multiple conditions, we 

believe that one of these reasons 

prompted transfer to the SNF. This 

reason would function as the patient’s 

primary diagnosis, as it represents the 

primary reason for the patient being in 

the SNF. We would also note that 

primary diagnosis, as a concept, is used 

throughout the Medicare program as the 

basis for payment and, in each area in 


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which it is used, patients have the 

potential to present with multiple 

conditions and multiple diagnoses. 

Therefore, we do not believe it would be 

appropriate for providers simply to 

report all conditions and be paid for the 

highest case-mix index, but rather that 

providers should determine the primary 

reason for the patient’s stay, as this 

should also be the primary motivation 

behind the patient’s SNF care. 

With regard to the comment related to 

multiple inpatient surgical procedures, 

we expect that the checkbox mechanism 

discussed above, which would include 

more aggregated procedural groupings, 

should address much of this possibility, 

as often times multiple procedures may 

be done of the same type. In the case of 

different types of procedures, providers 

should code or check-off all information 

supportable by the patient’s medical 

record. 

Comment: One commenter stated that 

ICD–10 codes do not contain adequate 

specificity to indicate whether a 

condition is active/stable or active/nonstable. This information, according to 

the commenter, is needed to identify 

relevant comorbidities. As a result, the 

commenter states that SNFs may 

inappropriately use active/stable 

conditions to achieve higher 

reimbursement although these 

conditions may not indicate higher 

resource utilization. 

Response: We do not agree with the 

commenter that the ICD–10 codes do 

not contain this degree of specificity. 

Further, to the extent that providers 

would code conditions solely for 

purposes of achieving higher 

reimbursement, this type of behavior 

can be identified through medical 

record reviews, which could prompt 

additional administrative action. 

Comment: One commenter stated that 

chronic conditions may not be coded 

consistently year over year. Specifically, 

a chronic condition may be coded one 

year but not the following year for a 

long term care resident moving in and 

out of post-acute stays or a post-acutecare patient with more than one spell of 

illness. For example, the commenter 

noted that care may have been provided 

to the patient but the provider did not 

accurately capture it in reporting. The 

commenter further stated that such 

coding inconsistencies may lead to 

unexpected payment changes. The 

commenter recommended that CMS 

should clarify how chronic conditions 

should be reported and handled by 

medical reviewers as PDPM is 

implemented. 

Response: We do not believe that any 

of the PDPM-related policies should 

affect the reporting of chronic 

conditions. Care should be properly 

documented, regardless of whether it is 

for a chronic or acute condition. Failure 

to document and code such information 

accurately could lead not only to 

payment errors, but also to patient care 

errors. We encourage providers to 

ensure the accuracy and completeness 

of their documentation. 

Comment: Several commenters 

expressed concern about potential 

logistical issues arising from the time 

lag in SNFs receiving clinical 

information on admitted patients from 

the prior inpatient stay. Specifically, 

they state that it is difficult for SNF 

providers to obtain diagnosis and 

procedure information, as well as other 

clinical information such as discharge 

summaries, from the facility where a 

resident was treated during their prior 

inpatient stay. A commenter 

recommended that CMS require 

hospitals to provide diagnostic and 

procedural information within 48 hours 

of discharge to the receiving facility. 

This commenter requested that CMS 

clarify which medical records SNFs may 

rely upon to determine the principal 

reason for a SNF stay or which inpatient 

procedures were performed. The 

commenter questioned how SNFs 

should assess this information if they 

lack adequate documentation. 

Additionally, commenters stated that 

ICD–10–CM and ICD–10–PCS coding 

require a high level of clinical detail 

that may be difficult to obtain without 

clinical information from the prior 

inpatient stay. 

Response: For case-mix classification 

under the PDPM, SNFs will not be 

required to collect any information from 

the hospital where the prior inpatient 

stay took place beyond that which is 

required under the current RUG–IV 

system, except for the procedural 

information discussed above. The 

information that SNFs already collect 

from hospitals should already include 

sufficient information for the SNF to be 

able to properly care plan and provide 

care based on the patient’s condition. In 

order to do this effectively, SNFs should 

already be receiving documentation and 

records from the hospital that 

substantiate the need for care and the 

type of care that is required for that 

patient. This level of information, that is 

essential in developing an appropriate 

care plan for the patient, should be 

sufficient for addressing the payment 

requirements under PDPM. For proper 

classification and payment under 

PDPM, facilities will only be required to 

record the primary reason for SNF care 

at the time of SNF admission and record 

the associated ICD–10–CM code and 

procedural information. As discussed in 

Chapter 8 of the Medicare Benefit Policy 

Manual, a beneficiary in a Medicare Part 

A SNF stay must require skilled nursing 

care for a condition that was treated 

during the qualifying hospital stay, or 

for a condition that arose while in the 

SNF for treatment of a condition for 

which the beneficiary was previously 

treated in the hospital. However, CMS 

recognizes that in many cases, the 

primary reason for SNF care may not be 

the same as the primary reason for the 

prior inpatient stay. For example, a 

beneficiary may be treated in a SNF for 

a secondary condition that arose during 

the prior inpatient stay but that is 

different from the condition that 

precipitated the acute inpatient stay in 

the first place. PDPM requires facilities 

to code the diagnosis that corresponds 

most closely to the primary reason for 

SNF care (in this case, the secondary 

condition that arose during the hospital 

stay) rather than the primary reason for 

the prior hospitalization. Facilities 

currently must assess beneficiaries’ 

health status and reason for SNF care at 

admission in order to treat them 

appropriately and formulate a patientcentered care plan. PDPM does not 

require a level of data collection that 

exceeds the requirements of the existing 

admission and care planning processes. 

Therefore, PDPM does not require SNFs 

to obtain additional clinical information 

from the inpatient setting, beyond the 

surgical procedure information 

discussed above. 

Comment: One commenter 

recommended that CMS allow providers 

to correct the diagnosis or procedure 

information recorded at admission any 

time prior to discharge and to direct 

Medicare Administrative Contractors, 

Recovery Audit Contractors, and other 

contractors to assign low priority to 

reviewing ICD–10 codes in the medical 

review process. 

Response: We appreciate the 

commenter’s concern and would note 

that there are existing processes for 

modifying and correcting MDS 

assessments, as described in Chapter 5 

of the MDS RAI manual. With regard to 

the comment on CMS directing 

contractor review activities, we see no 

reason to assign low priority to any 

issues at this time. 

Comment: One commenter requested 

additional information about codes 

listed as ‘‘Return to Provider’’ in the 

PDPM Clinical Category Mapping. 

Specifically, the commenter requested 

that CMS provide clarity on why these 

codes are not accepted as valid primary 

diagnoses for the purposes of resident 

classification. Additionally, the 

commenter requests clarification on 


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what actions providers are required to 

take when a code is returned. 

Response: As discussed above and in 

the proposed rule (83 FR 21043), PDPM 

would use ICD–10–CM diagnosis codes 

entered in the first line of section I8000 

on the MDS assessment to assign 

residents to clinical categories for 

classification and payment purposes in 

three PDPM payment components (PT, 

OT, and SLP). Codes listed in the PDPM 

Clinical Category Mapping as ‘‘Return to 

Provider’’ are not deemed appropriate to 

enter as the primary reason for SNF 

care. Such codes either lack certainty 

and specificity required to properly 

categorize a resident under PDPM or the 

underlying condition cannot be the 

main reason of care in SNFs. Therefore, 

these codes cannot be used to assign a 

resident to a clinical category for 

payment purposes under PDPM. When 

a code is returned to a provider, the 

provider is to select an appropriate ICD– 

10–CM diagnosis code from the SNF 

PDPM Clinical Category Mapping 

available at CMS’ website. 

Comment: Another commenter stated 

that the PDPM Clinical Category 

Mapping file inappropriately includes 

ICD–10–CM codes that correspond to an 

initial encounter. The commenter states 

that initial encounter codes include ‘‘A’’ 

as the 7th character and can only occur 

in a hospital where the initial treatment 

is completed. According to the 

commenter, initial encounter codes 

cannot be used in the SNF setting and 

should be excluded from the clinical 

category mapping. Additionally, the 

commenter states that Z codes are not 

appropriate to assign to patients 

receiving aftercare for traumatic 

fractures. These issues, state the 

commenter, lead to non-traumatic major 

joint replacements being assigned to 

Major Joint Replacement while major 

joint replacements as a result of 

traumatic injury are assigned to 

Orthopedic Surgery (Except Major Joint 

Replacement or Spinal Surgery). The 

commenter stated that this is 

inappropriate because aftercare of a 

traumatic injury resulting in hip 

replacement needs higher complexity of 

care than a scheduled non-traumatic hip 

replacement. 

Response: We do not agree with the 

commenter’s assertion that initial 

encounter codes cannot be used in the 

SNF and should be excluded from the 

clinical category mapping. Particularly 

given the increased focus of some 

commenters on the ability of PDPM to 

allow alignment across different payer 

types, we believe it is possible that some 

conditions could result as an initial 

encounter in the SNF. Moreover, as SNF 

services may be covered for conditions 

that arise in the hospital or arise in the 

SNF, we believe that it is important to 

allow for initial encounter codes to be 

coded within the SNF and mapped to 

clinical categories in case such a 

condition serves as the primary 

diagnosis for a SNF stay. 

With regard to the comment that Z 

codes are not appropriate for traumatic 

fractures, as detailed in the ICD–10–CM 

Official Guidelines for Coding and 

Reporting, the aftercare codes cover 

situations when the initial treatment of 

a disease has been performed and the 

patient requires continued care during 

the healing or recovery phase, or for the 

long-term consequences of the disease. 

The aftercare Z codes should not be 

used if treatment is directed at a current, 

acute disease. Therefore, the aftercare Z 

codes should not be used for aftercare 

for traumatic fractures. For aftercare of 

a traumatic fracture, providers are 

instructed to assign the acute fracture 

code with the appropriate 7th character. 

We agree with the commenter and will 

update the PDPM mapping accordingly. 

Comment: Some commenters 

expressed concern over the use of MS– 

DRGs to develop the PDPM clinical 

categories. Commenters noted that 

hospital MS–DRGs are unrelated to the 

reason for SNF admission and are poor 

predictors of cost in post-acute care. 

These commenters stated that if SNF 

MDS coding produces a substantially 

different set of case-mix adjustments 

from the case-mix derived from hospital 

DRG assignments, then the model will 

produce inappropriate payment rates for 

the cases which deviate from the 

‘‘predicted’’ case mix rate. They 

suggested that CMS should consider 

retroactively evaluating this case-mix 

adjustment as soon as it has SNF data 

following PDPM implementation to 

correct any inaccurate payments in 

future updates of the PDPM. A 

commenter states that PDPM will need 

significant recalibration due to payment 

inaccuracies based on the discrepancy 

between inpatient hospital and SNF 

reason for admission. 

Response: We appreciate the 

commenters’ concerns with the use of 

MS–DRGs to develop the PDPM clinical 

categories. We would note, however, 

that while the MS–DRGs were used to 

identify patient categories in the SNF, 

they were not used to determine the cost 

of treating these types of patients. Given 

this distinction, while we might expect 

some difference in the distribution of 

SNF case-mix based on the potential 

differences between the prior hospital 

MS–DRG and SNF-generated diagnosis 

information under PDPM, we do not 

believe that using the MS–DRGs 

compromised the integrity of the 

clinical categories themselves. In 

developing PDPM clinical categories, 

we used MS–DRGs from the prior 

inpatient stay to define the primary 

reason for SNF care and assign residents 

to clinical categories. As stated in 

section 3.4.1 of the SNF PDPM technical 

report, we selected this source of 

diagnosis information because of data 

quality concerns relating to the 

principal diagnosis from the SNF claim. 

At the time the clinical categories were 

developed, we found that 47 percent of 

SNF claims assigned generic ICD–9–CM 

codes, with roughly a third assigned 

V57.89 ‘‘care involving other specified 

rehabilitation procedure’’, as the 

principal diagnosis, limiting the 

usefulness of diagnoses from SNF 

claims in classifying residents. Per the 

Medicare Benefit Policy Manual, the 

SNF reason for admission must be 

related to a condition treated during the 

qualifying inpatient stay. Therefore, we 

believe it is reasonable to use clinical 

information from the prior inpatient 

stay to characterize the major types of 

beneficiaries who receive SNF care. 

Additionally, the clinical categories 

were validated by multiple clinicians 

consulted by CMS and participants at 

technical expert panels. Therefore, we 

believe the proposed clinical categories 

are appropriate to use to classify major 

clinical types found in the SNF setting. 

With regard to the possibility that the 

actual case-mix distribution may be 

distinct from the ‘‘predicted’’ case-mix 

distribution, we intend to monitor for 

these types of effects and may make 

adjustments to the payment rates as may 

be appropriate. We also appreciate the 

commenter’s suggestion to recalibrate 

PDPM in the future. 

Accordingly, after considering the 

comments received, for the reasons 

discussed above and in the proposed 

rule, we are finalizing our proposals 

discussed above relating to PT and OT 

case-mix classification under the PDPM, 

with the modification discussed below. 

As discussed above, rather than 

requiring providers to record the type of 

inpatient surgical procedure performed 

during the prior inpatient hospital stay 

by coding an ICD–10–PCS code in the 

second line of item I8000 as we 

proposed, we will instead require 

providers to select, as necessary, a 

surgical procedure category in a subitem within Item J2000 which would 

identify the relevant surgical procedure 

that occurred during the patient’s 

preceding hospital stay and which 

would augment the patient’s PDPM 

clinical category. 


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(i) Clinical Categories 

Once we identified these clinical 

categories as being generally predictive 

of resource utilization in a SNF, we then 

undertook the necessary work to 

identify those categories predictive of 

PT and OT costs specifically. As we 

discussed in the proposed rule (83 FR 

21044), we conducted additional 

regression analyses to determine if any 

of these categories predicted similar 

levels of PT and OT as other categories, 

which may provide a basis for 

combining categories. As a result of this 

analysis, for the RCS–I model presented 

in the ANPRM, we found that the ten 

inpatient clinical categories could be 

collapsed into five clinical categories, 

which predict varying degrees of PT and 

OT costs. However, as explained in the 

proposed rule, we received comments 

on the ANPRM regarding the number of 

possible case-mix group combinations 

under RCS–I, so we sought to try and 

reduce this number of possible case-mix 

group combinations by further 

simplifying the model. As part of that 

effort, we observed similar PT and OT 

resource utilization patterns in the 

clinical categories of Non-Orthopedic 

Surgery and Acute Neurologic and, 

therefore, proposed to collapse these 

categories for the purpose of PT and OT 

classification. Additionally, as reflected 

in the RCS–I model presented in the 

ANPRM, we proposed that under 

PDPM, the remaining clinical categories 

would be collapsed as follows: Acute 

infections, cancer, pulmonary, 

cardiovascular and coagulations, and 

medical management would be 

collapsed into one clinical category 

entitled ‘‘Medical Management’’ 

because their residents had similar PT 

and OT costs. Similarly, we proposed 

that orthopedic surgery (except major 

joint replacement or spinal surgery) and 

non-surgical orthopedic/

musculoskeletal would be collapsed 

into a new ‘‘Other Orthopedic’’ category 

for equivalent reasons. Finally, the 

remaining category, Major Joint 

Replacement, showed a distinct PT and 

OT cost profile and, thus, we proposed 

to retain it as an independent category. 

More information on this analysis can 

be found in section 3.4.2. of the SNF 

PMR technical report that accompanied 

the ANPRM and in section 3.4.2. of the 

SNF PDPM technical report, both 

available at https://www.cms.gov/

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

therapyresearch.html. These proposed 

collapsed categories, which would be 

used to categorize a resident initially 

under the proposed PT and OT case-mix 

components, were presented in Table 15 

of the proposed rule (and are reflected 

in Table 15 of this final rule). 

TABLE 15—COLLAPSED CLINICAL CATEGORIES FOR PT AND OT CLASSIFICATION

PDPM clinical category Collapsed PT and OT clinical category 

Major Joint Replacement or Spinal Surgery ............................................ Major Joint Replacement or Spinal Surgery.

Non-Orthopedic Surgery ........................................................................... Non-Orthopedic Surgery and Acute Neurologic. 

Acute Neurologic. 

Non-Surgical Orthopedic/Musculoskeletal ................................................ Other Orthopedic. 

Orthopedic Surgery (Except Major Joint Replacement or Spinal Surgery). 

Medical Management ............................................................................... Medical Management. 

Acute Infections. 

Cancer. 

Pulmonary. 

Cardiovascular and Coagulations. 

We received several comments 

regarding the collapsed PT and OT 

clinical categories. These comments, 

along with our responses, appear below. 

Comment: A commenter disagreed 

with the decision to collapse the initial 

10 clinical categories into five clinical 

groupings for purposes of resident 

classification and payment in the PT 

and OT components. The commenter 

stated that the five clinical categories 

used for resident classification in the PT 

and OT components are too broad and 

not representative of the clinical needs 

of residents. Another commenter 

recommends that CMS not finalize the 

proposal to combine the Acute 

Neurologic and Non-Orthopedic Surgery 

residents into a single category because 

patients should be classified based on 

clinically coherent categories, not on 

similar cost patterns observed under the 

current SNF case-mix classification 

model, for the latter is reflective of 

current reimbursement incentives to 

provide therapy based on financial 

considerations. A commenter suggests 

that CMS consider separate clinical 

category for elective major joint 

replacement of the lower extremity 

because its cost profile is different from 

other episode types. The commenter 

suggests that joint replacements as a 

result of a fracture could possibly be 

combined into the Other Orthopedic 

category. 

Response: As described in section 

3.4.2 of the SNF PMR technical report 

that accompanied the 2017 ANPRM, in 

developing RCS–I (the predecessor to 

PDPM), we created 10 broad clinical 

categories to characterize the major 

patient types found in the SNF setting. 

In using the CART algorithm to develop 

resident groups for PT and OT payment, 

we included the 10 clinical categories as 

a categorical variable. Allowing the 

CART algorithm to group the 10 clinical 

categories into a smaller number of 

groups resulted in fewer resident groups 

but a similar R-squared value for 

predicting costs. In building PDPM we 

first retained these five collapsed 

clinical categories to characterize major 

patient types relevant to predicting PT 

and OT utilization. As detailed in the 

proposed rule, we then further 

collapsed the clinical categories into 

four categories, in response to 

comments on the ANPRM regarding the 

number of possible case-mix group 

combinations under RCS–I. Based on 

the greater simplicity achieved in using 

fewer clinical categories for PT and OT 

classification and the maintenance in 

predictive accuracy, we believe using 

the collapsed four categories is a 

superior option to capture variation in 

PT and OT utilization and to 

characterize the major types of clinical 

conditions relevant to PT and OT 

utilization in the SNF population. NonOrthopedic Surgery and Acute 

Neurologic are combined into one 

category based on their similar PT and 

OT resource utilization pattern, as 

shown in section 3.4.2 and Table 16 of 

the SNF PDPM technical report. We 

recognize that the observed data are 

reflective of current reimbursement 

incentives to provide therapy based on 

financial considerations, which may 

disguise the relationship between 


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clinical traits and patient need based on 

best practice assumptions. We will 

monitor closely the resource utilization 

pattern of the 10 clinical categories after 

the implementation of PDPM. Regarding 

the elective major joint replacement 

comment, as detailed in section 3.4.1 of 

the SNF PMR technical report, we 

observed that MS–DRG groups with a 

high percentage of elective surgeries 

correspond to two types of procedures: 

Major joint replacements and spinal 

surgeries, while MS–DRG groups with a 

high percentage of emergent surgeries 

include other types of orthopedic 

surgeries involving extremities, often 

related to falls. We discovered that 

average therapy costs per day were 

similar for resident in a given surgical 

orthopedic MS–DRG group regardless of 

whether they received elective or 

emergent surgery. 

Accordingly, after considering the 

comments received, for the reasons 

discussed above and in the proposed 

rule, we are finalizing our proposals 

without modification relating to the 

collapsed clinical categories for the PT 

and OT components. 

(ii) Functional Status 

As discussed previously in this 

section and in the proposed rule (83 FR 

21044), regression analyses 

demonstrated that the resident’s 

functional status is also predictive of PT 

and OT costs in addition to the 

resident’s initial clinical categorization. 

In the RCS–I model discussed in the 

ANPRM, we presented a function score 

similar to the existing ADL score to 

measure functional abilities for the 

purposes of PT and OT payment. In 

response to the ANPRM, we received 

comments requesting that we consider 

replacing the functional items used to 

build the RCS–I function score with 

newer, IMPACT Act-compliant items 

from section GG. Therefore, we 

constructed, and proposed as discussed 

below, a new function score for PT and 

OT payment based on section GG 

functional items. 

Under the RUG–IV case-mix system, a 

resident’s ADL or function score is 

calculated based on a combination of 

self-performance and support items 

coded by SNFs in section G of the MDS 

3.0 for four ADL areas: Transfers, eating, 

toileting, and bed mobility. These four 

areas are referred to as late-loss ADLs 

because they are typically the last 

functional abilities to be lost as a 

resident’s function declines. Each ADL 

is assigned a score of up to four points, 

with a potential total score as high as 16 

points. Under the proposed PDPM, we 

proposed that section G items would be 

replaced with functional items from 

section GG of the MDS 3.0 (Functional 

Abilities and Goals) as the basis for 

calculating the function score for 

resident classification used under 

PDPM. We explained that section GG 

offers standardized and more 

comprehensive measures of functional 

status and therapy needs. Additionally, 

we stated that the use of section GG 

items better aligns the payment model 

with other quality initiatives. SNFs have 

been collecting section GG data since 

October 2016 as part of the requirements 

for the IMPACT Act. We stated that 

given the advantages of section GG and 

of using a more comprehensive measure 

of functional abilities, we received 

numerous comments in response to the 

ANPRM requesting the incorporation of 

section GG items and of early ADLs 

items into the function score. 

As explained in the proposed rule (83 

FR 21045), multiple stakeholders 

commented on the ANPRM that lateloss items do not adequately reflect 

functional abilities on their own. These 

commenters stated that early-loss ADL 

items also capture essential clinical 

information on functional status. 

Therefore, we stated in the proposed 

rule that in building a new function 

score based on section GG items, we 

also investigated the incorporation of 

early-loss items. To explore the 

incorporation of section GG items, we 

evaluated each item’s relationship with 

PT and OT costs. We ran individual 

regressions using each of the 12 section 

GG items assessed at admission to 

separately predict PT and OT costs per 

day. As explained in the proposed rule, 

the regression results showed that earlyloss items are indeed strong predictors 

of PT and OT costs, with the exception 

of two wheeling items. Both wheeling 

items were excluded from the functional 

measure due to their weak predictive 

relationship with PT and OT costs. We 

observed high predictive ability among 

the remaining items. In total, we 

selected ten items for inclusion in the 

functional measure for the PT and OT 

components based on the results of the 

analysis. Thus, under the proposed 

functional measure for the PT and OT 

components, a resident’s function 

would be measured using four late-loss 

ADL activities (bed mobility, transfer, 

eating, and toileting) and two early-loss 

ADL activities (oral hygiene and 

walking). Specifically, the proposed 

measure includes: Two bed mobility 

items, three transfer items, one eating 

item, one toileting item, one oral 

hygiene item, and two walking items 

that were all found to be highly 

predictive of PT and OT costs per day. 

A list of proposed section GG items that 

would be included in the functional 

measure for the PT and OT components 

was included in Table 18 of the 

proposed rule (and is shown in Table 18 

of this final rule). Section 3.4.1. in the 

SNF PDPM technical report (available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html) provides 

more detail on these analyses. 

We explained in the proposed rule (83 

FR 21045) that, similar to the RUG–IV 

ADL score, each of these ADL areas 

would be assigned a score of up to 4 

points. However, in contrast to the 

RUG–IV ADL score, we stated that 

points were assigned to each response 

level to track functional independence 

rather than functional dependence. In 

other words, higher points are assigned 

to higher levels of independence. We 

stated that this approach is consistent 

with functional measures in other care 

settings, such as the IRF PPS. Further, 

under the RUG–IV model, if the SNF 

codes that the ‘‘activity did not occur’’ 

or ‘‘occurred only once,’’ these items are 

assigned the same point value as 

‘‘independent.’’ However, as explained 

in the proposed rule, we observed that 

residents who were unable to complete 

an activity had similar PT and OT costs 

as dependent residents. Therefore, we 

stated that when the activity cannot be 

completed, the equivalent section GG 

responses (‘‘Resident refused,’’ ‘‘Not 

applicable,’’ ‘‘Not attempted due to 

medical condition or safety concerns’’) 

are grouped with ‘‘dependent’’ for the 

purpose of point assignment. For the 

two walking items, we proposed an 

additional response level to reflect 

residents who skip the walking 

assessment due to their inability to 

walk. We stated that we believe this is 

appropriate because this allows us to 

assess the functional abilities of 

residents who cannot walk and assign 

them a function score. We explained 

that without this modification, we could 

not calculate a function score for 

residents who cannot walk because they 

would not be assessed on the two 

walking items included in the function 

score. We further stated that residents 

who are coded as unable to walk receive 

the same score as dependent residents 

to match with clinical expectations. In 

Tables 16 and 17 of the proposed rule 

(set forth at Tables 16 and 17 in this 

final rule), we provided the proposed 

scoring algorithm for the PT and OT 

functional measure. 


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TABLE 16—PT AND OT FUNCTION SCORE CONSTRUCTION

[Except walking items] 

Response Score 

05, 06—Set-up assistance, Independent ............................................................................................................................................ 4 

04—Supervision or touching assistance ............................................................................................................................................. 3 

03—Partial/moderate assistance ......................................................................................................................................................... 2 

02—Substantial/maximal assistance ................................................................................................................................................... 1 

01, 07, 09, 88—Dependent, Refused, N/A, Not Attempted ................................................................................................................ 0 

TABLE 17—PT AND OT FUNCTION SCORE CONSTRUCTION FOR WALKING ITEMS

Response Score 

05, 06—Set-up assistance, Independent ............................................................................................................................................ 4 

04—Supervision or touching assistance ............................................................................................................................................. 3 

03—Partial/moderate assistance ......................................................................................................................................................... 2 

02—Substantial/maximal assistance ................................................................................................................................................... 1 

01, 07, 09, 88—Dependent, Refused, N/A, Not Attempted, Resident Cannot Walk * ........................................................................ 0 

* Coded based on response to GG0170H1 (Does the resident walk?). 

We explained in the proposed rule (83 

FR 21046) that, unlike section G, section 

GG measures functional areas with more 

than one item. We noted that this results 

in substantial overlap between the two 

bed mobility items, the three transfer 

items, and the two walking items. 

Because of this overlap, we stated that 

a simple sum of all scores for each item 

may inappropriately overweight 

functional areas measured by multiple 

items. Therefore, to adjust for this 

overlap, we proposed to calculate an 

average score for these related items. 

That is, we would average the scores for 

the two bed mobility items, the three 

transfer items, and the two walking 

items. We stated that the average bed 

mobility, transfer, and walking scores 

would then be summed with the scores 

for eating, oral hygiene, and toileting 

hygiene, resulting in equal weighting of 

the six activities. This proposed scoring 

algorithm produces a function score that 

ranges from 0 to 24. In section 3.4.1. of 

the SNF PDPM technical report 

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

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

therapyresearch.html), we provide 

additional information on the analyses 

that led to the construction of this 

proposed function score. 

TABLE 18—SECTION GG ITEMS INCLUDED IN PT AND OT FUNCTIONAL MEASURE

Section GG item Score 

GG0130A1—Self-care: Eating ...................................................................................................................................... 0–4. 

GG0130B1—Self-care: Oral Hygiene ........................................................................................................................... 0–4. 

GG0130C1—Self-care: Toileting Hygiene .................................................................................................................... 0–4. 

GG0170B1—Mobility: Sit to lying ................................................................................................................................. 0–4 (average of 2 items). 

GG0170C1—Mobility: Lying to sitting on side of bed. 

GG0170D1—Mobility: Sit to stand ................................................................................................................................ 0–4 (average of 3 items). 

GG0170E1—Mobility: Chair/bed-to-chair transfer. 

GG0170F1—Mobility: Toilet transfer. 

GG0170J1—Mobility: Walk 50 feet with 2 turns .......................................................................................................... 0–4 (average of 2 items). 

GG0170K1—Mobility: Walk 150 feet. 

We received comments on the use of 

section GG items as the basis for 

determining the patient’s PDPM 

functional score for purposes of 

classifying under the PT and OT 

components. Those comments, along 

with our responses, appear below. 

Comment: Some comments welcomed 

the use of IMPACT-Act compliant 

section GG data to build new function 

scores for the PT, OT, and nursing 

components of PDPM, which was a 

recommendation provided by many 

commenters on the ANPRM. However, 

commenters also expressed concern 

about using section GG data, stating that 

this data should first be validated and 

that the results of this validation should 

be made public. Commenters stated that 

the first year of section GG data likely 

contains inaccuracies as providers 

adjust to the new items. Some 

commenters therefore stated that it is 

inappropriate to base resident 

classification and payment on a single 

year of section GG data and request that 

CMS collect a minimum of two years of 

section GG data to ensure reliability and 

validity before using this data to 

determine payment. One commenter 

suggested that, due to the issues with 

section GG, CMS should continue to use 

section G as the basis for functional 

assessment under the payment system. 

Another commenter sought clarification 

regarding whether CMS compared the 

first 6 months of section GG data to the 

second 6 months of section GG data to 

determine whether there were any 

changes in assessment practices for the 

new assessment items. 

Response: We conducted several 

investigations to validate the section GG 

data. First, we verified that the 

relationship between section G 

responses and PT and OT utilization 

was very similar to the relationship 

between corresponding section GG 

responses and PT and OT utilization. 

Second, we determined that section GG 

items performed similarly to section G 

items in predicting PT and OT 

utilization. Finally, we compared 

coding of section GG items during the 

first 6 months of FY 2017 to coding of 

these items during the second 6 months 

of FY 2017 and found only small 


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changes in the frequency of responses. 

Based on the results of these checks, we 

believe the FY 2017 section GG data are 

valid and reliable, and therefore, 

appropriate to use as a basis of resident 

classification and payment under 

PDPM. 

Comment: One commenter stated that 

the proposed PDPM function scores 

ignore missing values for section GG 

assessment items and urged CMS to 

map missing values to a function score. 

Another commenter stated that the 

function score should incorporate the 

new response ‘‘10. Not attempted due to 

environmental limitations’’. A few 

commenters requested that CMS 

consider assigning a score of 1 to 

‘‘dependent’’ responses instead of 0, 

stating that this scoring aligns better 

with the SNF Quality Reporting 

Program. These commenters also seek 

clarification on the rationale for 

grouping ‘‘dependent’’ responses with 

‘‘resident refused,’’ ‘‘not applicable,’’ 

and ‘‘not attempted due to medical 

conditions or safety concerns.’’ One 

commenter pointed out that the MDS 

item GG0170H1 (Does the resident 

walk) will be retired on September 30, 

2018, and recommended that CMS 

adopt MDS item GG0170I (Walk 10 feet) 

as a substitute for retired item 

GG0170H1. 

Response: We appreciate the 

comment that missing values for section 

GG assessments items are not currently 

mapped to a point value for computing 

function score. CMS will follow this 

suggestion to map all values to a 

function score by assigning missing 

section GG responses to receive zero 

points for the function score calculation 

as other incomplete responses are also 

assigned zero points. This is also 

consistent with the current RUG–IV 

ADL scoring methodology, which 

assigns the same point value for missing 

responses and other incomplete 

responses. Similarly, we will map the 

new response of 10: ‘‘Not attempted due 

to environmental limitations,’’ which 

was highlighted by another commenter, 

to receive zero points for function score 

assignment to make sure every response 

has a corresponding point value. We 

believe these point value assignments 

are appropriate as they are consistent 

with other similar responses that receive 

zero points for function score 

assignment, including ‘‘resident 

refused,’’ ‘‘not applicable,’’ and ‘‘not 

attempted due to medical condition or 

safety concerns’’. In response to the 

comment requesting us to consider 

assigning 1 point to ‘‘dependent’’ 

responses instead of 0, this suggested 

scoring would group ‘‘dependent’’ 

responses with ‘‘substantial/maximal 

assistance’’ responses. However, we 

found that dependent residents have 

different levels of PT and OT resource 

utilization than residents receiving 

substantial/maximal assistance. As 

described in section 3.4.1 the SNF 

PDPM technical report, we observed 

that residents who were unable to 

complete an activity had similar PT and 

OT costs as dependent residents. 

Therefore, we grouped the equivalent 

section GG responses (‘‘resident 

refused,’’ ‘‘not applicable,’’ and ‘‘not 

attempted due to medical condition or 

safety concerns’’) with ‘‘dependent’’ 

responses for the purpose of point 

assignment in constructing the function 

score for PT and OT classification and 

payment. In terms of alignment with the 

SNF QRP quality measures, the PDPM 

function score uses similar scoring logic 

as the QRP functional outcome measure. 

As with the PDPM function score, the 

QRP Change in Self-Care score assigns 

higher points to higher levels of 

functional independence and assigns 

the same point value to ‘‘dependent’’ 

and incomplete responses. The QRP 

functional outcome measure, however, 

differs in scale. Whereas the PDPM 

function score ranges from 0–4, the QRP 

Change in Self-Care score ranges from 

1–6. The QRP functional outcome 

measure assigns 1 point to ‘‘dependent’’ 

and all ‘‘activity was not attempted’’ 

codes (‘‘resident refused,’’ ‘‘not 

applicable,’’ and ‘‘not attempted due to 

medical condition or safety concerns’’), 

and 2 points to ‘‘substantial/maximal 

assistance’’. This score assignment is 

very similar to that of the PDPM 

function score. Additionally, one item 

currently used to compute function 

score, MDS GG0170H1 (Does the 

resident walk), which is used to 

determine if the resident can walk 

before proceeding to assess GG0170J1 

(Walk 50 Feet with Two Turns) and 

GG0170K1 (Walk 150 Feet), is set to be 

retired on September 30, 2018 with the 

introduction of the newer, more detailed 

SNF QRP mobility and self-care 

outcome measure items. CMS concurs 

with the commenter’s suggestion to 

select a replacement for PDPM 

implementation. Consistent with the 

commenter’s suggestion, MDS item 

GG0170I1 (Walk 10 feet) will be used as 

the substitute for MDS GG0170H1 since 

the inability to walk at least 10 feet or 

to complete the assessment for this item 

suggests a significant mobility 

impairment that is essentially 

equivalent to the definition of the 

retired ‘‘cannot walk’’ MDS item. 

Responses 07: ‘‘resident refused,’’ 09: 

‘‘not applicable,’’ 10: ‘‘not attempted 

due to environmental limitations,’’ or 

88: ‘‘not attempted due to medical 

condition or safety concerns’’ from MDS 

item GG0170I1 will be used to identify 

residents who cannot walk. 

Comment: Commenters also stated 

that the proposed function scores 

should be updated to reflect new section 

GG items for FY 2019. Specifically, they 

stated that toileting, dressing, and 

bathing are important activities of daily 

living that are addressed by 

occupational therapy, and therefore, 

should be considered in measuring 

residents’ functional status under 

PDPM. 

Response: In constructing the 

function score for PT and OT payment, 

we investigated the use of all existing 

section GG items. Toileting is one of the 

items included in the proposed function 

scores for the PT, OT, and nursing 

components of PDPM. We are aware 

that additional section GG items are 

scheduled to be implemented in FY 

2019, including items that measure a 

resident’s dressing and bathing abilities. 

However, because these new items have 

not yet been implemented, there is no 

data available on resource utilization 

associated with these items. Therefore, 

it is not appropriate to include these 

items in the calculation of the PDPM 

function scores at this time. We will 

consider adding section GG items that 

are demonstrated to have a meaningful 

relationship with utilization of SNF 

resources as new items are added and 

an appropriate amount of data (for 

example, one year) is available to assess 

this relationship. We will also consider 

other changes to the function score as 

necessary to reflect additional updates 

to the section GG items, for example, the 

addition, deletion, or modification of 

particular items or responses. 

Comment: One commenter advised 

CMS to account for weight bearing 

restrictions among residents who are 

categorized into the Major Joint 

Replacement or Spinal Surgery or Other 

Orthopedic clinical categories. The 

commenter stated that patients who 

cannot bear weight have a more 

complicated post-surgical recovery. 

Response: We appreciate the concern 

of the commenter regarding postsurgical residents who cannot bear 

weight. However, we believe the ability 

of a resident to bear weight is 

adequately captured by the mobility 

items in MDS item GG0170, which are 

included in the function score used for 

classification and payment in the PT 

and OT components. Therefore, we do 

not believe additional modifications are 

necessary at this time. 

Comment: One commenter noted that 

in some cases, PT and OT payment is 

higher for case-mix groups with higher 


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functional independence. The 

commenter said this is counterintuitive 

because it implies that some residents 

who are more dependent require less 

therapy. Another commenter sought 

clarification on the relationship between 

function score and average PT and OT 

costs per day. 

Response: The commenter is correct 

that in some cases payment is higher for 

residents who have higher levels of 

functional independence. This reflects 

the finding that PT and OT utilization 

is highest for residents with moderate 

functional independence and lower for 

residents with both the highest levels of 

functional dependence and 

independence. In the first case, this 

likely reflects residents whose 

functional abilities are too impaired to 

receive intensive therapy, while the 

second case likely corresponds to 

residents who require less therapy 

because they already have a high level 

of functional independence. Therefore, 

we believe PDPM appropriately assigns 

payment according to the observed 

relationship between functional 

independence and PT/OT utilization. 

Comment: One commenter expressed 

concern regarding the potential for 

gaming the function score and 

recommended that CMS remove the 

function score from use as a patient 

classifier. 

Response: We appreciate this concern 

for gaming of the function score and 

plan to monitor closely for any changes 

in functional coding before and after 

implementation of PDPM. That being 

said, we do believe that a patient’s 

functional score is relevant in terms of 

predicting payment accurately, as 

described elsewhere in this section. 

Therefore, we believe it is important to 

keep function as an aspect of patient 

classification for payment. 

Accordingly, after considering the 

comments received, for the reasons 

discussed in the proposed rule and in 

this final rule, we are finalizing our 

proposals relating to the use of the 

section GG items as the basis for 

determining the patient’s PDPM 

functional score and for classifying the 

patient under PDPM PT and OT 

components, with modifications. As 

discussed above, in response to 

comments, all missing values for section 

GG assessment items will receive zero 

points as a function score. Similarly, the 

function score will incorporate a new 

response ‘‘10. Not attempted due to 

environmental limitations’’ and we will 

assign it a point value of zero. 

Furthermore, consistent with a 

commenter’s suggestion, we will adopt 

MDS item GG0170I1 (Walk 10 feet) as a 

substitute for retired item GG0170H1 

(Does the resident walk), and we will 

use responses 07: ‘‘resident refused,’’ 

09: ‘‘not applicable,’’ 10: ‘‘not attempted 

due to environmental limitations,’’ or 

88: ‘‘not attempted due to medical 

condition or safety concerns’’ from MDS 

item GG0170I1 to identify residents who 

cannot walk. 

(iii) Cognitive Status 

Under the RCS–I case-mix model 

presented in the ANPRM, we used 

cognitive status to classify residents 

under the PT and OT components in 

addition to the primary reason for SNF 

care and functional ability. As 

explained in the proposed rule (83 FR 

21046) and in greater detail below, after 

publication of the ANPRM, we removed 

cognitive status as a determinant of 

resident classification for the PT and OT 

components. Still, although cognitive 

status was not ultimately selected as a 

determinant of PT and OT classification, 

it was considered as a possible element 

in developing the proposed resident 

groups for these components via the 

Classification and Regression Trees 

(CART) algorithm described in greater 

detail in the proposed rule and below. 

Because we included cognitive status as 

an independent variable in the CART 

analysis used to develop case-mix 

groups for PT and OT, we stated that we 

believed it was appropriate to discuss 

construction of the proposed new 

cognitive measure here even though it 

was not ultimately selected as a 

determinant of payment for PT and OT. 

Thus, we discussed construction of the 

instrument used to measure cognitive 

status under the proposed PDPM in the 

section addressing case-mix 

classification under the PT and OT 

components, rather than introducing it 

when discussing SLP classification, in 

which we proposed cognitive status as 

a determinant of resident classification. 

Under the current SNF PPS, cognitive 

status is used to classify a small portion 

of residents that fall into the Behavioral 

Symptoms and Cognitive Performance 

RUG–IV category. For all other 

residents, cognitive status is not used in 

determining the appropriate payment 

for a resident’s care. However, as we 

explained in the proposed rule, industry 

representatives and clinicians at 

multiple TEPs suggested that a 

resident’s cognitive status can have a 

significant impact on a resident’s PT 

and OT costs. Based on this feedback, 

we explored a resident’s cognitive status 

as a predictor of PT and OT costs. 

Under the RUG–IV model, cognitive 

status is assessed using the Brief 

Interview for Mental Status (BIMS) on 

the MDS 3.0. The BIMS is based on 

three items: ‘‘repetition of three words,’’ 

‘‘temporal orientation,’’ and ‘‘recall.’’ 

These items are summed to produce the 

BIMS summary score. The BIMS score 

ranges from 0 to 15, with 0 assigned to 

residents with the worst cognitive 

performance and 15 assigned to 

residents with the highest performance. 

Residents with a BIMS score less than 

or equal to 9 classify for the Behavioral 

Symptoms and Cognitive Performance 

category. Residents with a summary 

score greater than 9 but not 99 (resident 

interview was not successful) are 

considered cognitively intact for the 

purpose of classification under RUG–IV. 

As we explained in the proposed rule 

(83 FR 21046), in approximately 15 

percent of 5-day MDS assessments, the 

BIMS is not completed: in 12 percent of 

cases the interview is not attempted, 

and for 3 percent of cases the interview 

is attempted but cannot be completed. 

The MDS directs assessors to skip the 

BIMS if the resident is rarely or never 

understood (this is scored as 

‘‘skipped’’). In these cases, the MDS 

requires assessors to complete the Staff 

Assessment for Mental Status (items 

C0700 through C1000). The Cognitive 

Performance Scale (CPS) is then used to 

assess cognitive function based on the 

Staff Assessment for Mental Status and 

other MDS items (‘‘Comatose’’ (B0100), 

‘‘Makes Self Understood’’ (B0700), and 

the self-performance items of the four 

late-loss ADLs). The Staff Assessment 

for Mental Status consists of four items: 

‘‘Short-term Memory OK,’’ ‘‘Long-term 

Memory OK,’’ ‘‘Memory/Recall Ability,’’ 

and ‘‘Cognitive Skills for Daily Decision 

Making.’’ Only ‘‘Short-term Memory 

OK’’ and ‘‘Cognitive Skills for Daily 

Decision Making’’ are currently used for 

payment. In MDS 2.0, the CPS was used 

as the sole measure of cognitive status. 

A resident was assigned a CPS score 

from 0 to 6 based on the Staff 

Assessment for Mental Status and other 

MDS items, with 0 indicating the 

resident was cognitively intact and 6 

indicating the highest level of cognitive 

impairment. In addition to the items on 

the Staff Assessment for Mental Status, 

MDS items ‘‘Comatose’’ (B0100), 

‘‘Makes Self Understood’’ (B0700), and 

the self-performance items of the four 

late-loss ADLs factored into the CPS 

score. Any score of 3 or above was 

considered cognitively impaired. The 

CPS on the current version of the MDS 

(3.0) functions very similarly. Instead of 

assigning a score to each resident, a 

resident is determined to be cognitively 

impaired if he or she meets the criteria 

to receive a score of 3 or above on the 

CPS, based on the MDS items 

mentioned above. In other words, 

whereas the MDS 2.0 assigned a CPS 


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score to each resident, the MDS 3.0 only 

determines whether a resident’s score is 

greater than or equal to 3 and does not 

assign a specific score to each resident 

for whom the CPS is used to assess 

cognitive status. Residents who are 

determined to be cognitively impaired 

based on the CPS are classified in the 

Behavioral Symptoms and Cognitive 

Performance category under RUG–IV, if 

they do not meet the criteria for a 

higher-paying category. 

We stated in the proposed rule (83 FR 

21047) that given that the 15 percent of 

residents who are not assessed on the 

BIMS must be assessed using a different 

scale that relies on a different set of 

MDS items, there is currently no single 

measure of cognitive status that allows 

comparison across all residents. To 

address this issue, Thomas et al., in a 

2015 paper, proposed use of a new 

cognitive measure, the Cognitive 

Function Scale (CFS), which combines 

scores from the BIMS and CPS into one 

scale that can be used to compare 

cognitive function across all residents 

(Thomas KS, Dosa D, Wysocki A, Mor 

V; The Minimum Data Set 3.0 Cognitive 

Function Scale. Med Care. https://

www.ncbi.nlm.nih.gov/pubmed/?term=

25763665). Following a suggestion from 

the June 2016 TEP, we explored using 

the CFS as a measure of cognition and 

found that there is a relationship 

between the different levels of the 

cognitive scale and resident costs. 

Specifically, we observed that as 

cognitive function declines, PT and OT 

costs per day decrease, while SLP costs 

per day more than double. More 

information on this analysis can be 

found in section 3.4.1. of the SNF PMR 

technical report that accompanied the 

ANPRM available at https://

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

therapyresearch.html. Based on these 

initial investigations, we used the CFS 

as a cognitive measure in the RCS–I 

payment model described in the 

ANPRM. As we noted above, the RUG– 

IV system incorporates both the BIMS 

and CPS score separately, but the CFS 

blends them together into one measure 

of cognitive status. Details on how the 

BIMS score and CPS score are 

determined using the MDS assessment 

are described above. The CFS uses these 

scores to place residents into one of four 

cognitive performance categories, as 

shown in Table 19 of the proposed rule 

(set forth in Table 19 of this final rule). 

After publication of the ANPRM, we 

received stakeholder comments 

questioning this scoring methodology, 

specifically the classification of a CPS 

score of 0 as ‘‘mildly impaired.’’ Based 

on a subsequent analysis showing that 

residents with a CPS score of 0 were 

similar to residents classified as 

‘‘cognitively intact’’ under the CFS 

methodology, as well as clinical 

feedback, we determined that it was 

appropriate to reclassify residents with 

a CPS score of 0 as cognitively intact, 

consistent with ANPRM feedback. This 

analysis is described in more detail in 

section 3.4.1. of the SNF PDPM 

technical report, available at https://

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

therapyresearch.html. The scoring 

methodology for the proposed PDPM 

cognitive measure was shown in Table 

20 of the proposed rule (set forth in 

Table 20 of this final rule). We would 

note once again that while we discussed 

this scoring methodology in section 

V.D.3.b of the proposed rule (83 FR 

21046 through 21047) and this section 

of the final rule because cognitive status 

was considered in developing the PT 

and OT classification, the cognitive 

score was not proposed as a factor in 

classification for the PT and OT 

components under PDPM, as further 

discussed in the proposed rule (83 FR 

21047) and below. 

TABLE 19—COGNITIVE FUNCTION SCALE (CFS) SCORING METHODOLOGY

Cognitive level BIMS score CPS score 

Cognitively Intact ..................................................................................................................................................... 13–15 ........................

Mildly Impaired ......................................................................................................................................................... 8–12 0–2 

Moderately Impaired ................................................................................................................................................ 0–7 3–4 

Severely Impaired .................................................................................................................................................... ........................ 5–6 

TABLE 20—PDPM COGNITIVE MEASURE CLASSIFICATION METHODOLOGY

Cognitive level BIMS score CPS score 

Cognitively Intact ..................................................................................................................................................... 13–15 0 

Mildly Impaired ......................................................................................................................................................... 8–12 1–2 

Moderately Impaired ................................................................................................................................................ 0–7 3–4 

Severely Impaired .................................................................................................................................................... ........................ 5–6 

(iv) PT and OT Case-Mix Groups 

As explained in the proposed rule (83 

FR 21047), once each of these 

variables—clinical reasons for the SNF 

stay, the resident’s functional status, 

and the presence of a cognitive 

impairment—was identified, we then 

used a statistical regression technique 

called Classification and Regression 

Trees (CART) to explore the most 

appropriate splits in PT and OT casemix groups using these three variables. 

In other words, CART was used to 

investigate how many PT and OT casemix groups should exist under the 

proposed PDPM and what types of 

residents or score ranges should be 

combined to form each of those PT and 

OT case-mix groups. CART is a nonparametric decision tree learning 

technique that produces either 

classification or regression trees, 

depending on whether the dependent 

variable is categorical or numeric, 

respectively. We stated that using the 

CART technique to create payment 

groups is advantageous because it is 

resistant to both outliers and irrelevant 

parameters. The CART algorithm has 

been used to create payment groups in 

other Medicare settings. For example, it 

was used to determine Case Mix Groups 

(CMGs) splits within rehabilitation 

impairment groups (RICs) when the 

inpatient rehabilitation facility (IRF) 

PPS was developed. This methodology 

is more thoroughly explained in section 

3.4.2. of the SNF PDPM technical report 

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

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

therapyresearch.html). 

As explained in the proposed rule (83 

FR 21047), we used CART to develop 

splits within the four collapsed clinical 

categories shown in Table 15 of the 

proposed rule (set forth in Table 15 of 


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this final rule). Splits within each of 

these four collapsed clinical categories 

were based on the two independent 

variables included in the algorithm: 

Function score and cognitive status. The 

CART algorithm split residents into 18 

groups for the PT component and 14 

groups for the OT component. These 

splits are primarily based on differences 

in resident function. As stated in the 

proposed rule, in the CART-generated 

groups, cognitive status plays a role in 

categorizing less than half of the PT 

groups and only two of the 14 OT 

groups. In addition, we stated that to 

create the proposed resident 

classification for the PT and OT 

components, we made certain 

administrative decisions that further 

refined the PT and OT case-mix 

classification groups beyond those 

produced through use of the CART 

algorithm. For example, while CART 

may have created slightly different 

breakpoints for the function score in 

different clinical categories, we state 

that we believe using a consistent split 

in scores across clinical categories 

improves the simplicity of the case-mix 

model without compromising its 

accuracy. Therefore, we used the splits 

created by the CART algorithm as the 

basis for the consistent splits selected 

for the case-mix groups, simplifying the 

CART output while retaining important 

features of the CART-generated splits. In 

our proposed classification for the PT 

and OT components, we retained 

function as the sole determinant of 

resident categorization within each of 

the four collapsed clinical categories. 

We created function score bins based on 

breakpoints that recurred in the CART 

splits, such as 5, 9, and 23. As noted in 

the proposed rule (83 FR 21048) and 

above, we dropped cognitive status as a 

determinant of classification because of 

the reduced role it played in 

categorizing residents within the CARTgenerated groups. Finally, we used the 

same function score bins to categorize 

residents within each of the four 

collapsed clinical categories for both the 

PT and OT components. As shown in 

section 3.4.2. of the SNF PDPM 

technical report (available at https://

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

therapyresearch.htm), and as explained 

in the proposed rule, using the proposed 

case-mix groups for the PT and OT 

components results in a reduction of 

0.005 in the R-squared values for both 

PT and OT classification models. We 

stated that this shows that although the 

proposed case-mix groups improve 

simplicity by removing one predictor 

revealed to be less important in 

categorizing residents (cognitive status) 

and grouping residents similarly (using 

the same function score bins) across 

clinical categories, these decisions have 

only a minor negative impact on 

predictive accuracy. These analyses are 

described in further detail in section 

3.4.2. of the SNF PDPM technical report 

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

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

therapyresearch.html). 

Based on the CART results and the 

administrative decisions described 

above, we proposed 16 case-mix groups 

to classify residents for PT and OT 

payment. We noted in the proposed rule 

(83 FR 21048) that this represents a 

marked reduction in the number of casemix groups for PT and OT classification 

under the RCS–I model discussed in the 

ANPRM. As discussed in the proposed 

rule and throughout the sections above, 

after publication of the ANPRM, we 

received feedback from stakeholders 

that the RCS–I payment model was 

overly complex. In particular, 

commenters expressed concern about 

the relatively large number of possible 

combinations of case-mix groups. Based 

on this feedback, we sought to reduce 

the number of resident groups in the PT 

and OT components. First, as discussed 

in the proposed rule and in this final 

rule, because we observed similar PT 

and OT resource utilization patterns in 

the clinical categories of NonOrthopedic Surgery and Acute 

Neurologic, we decided to collapse 

these categories for the purpose of PT 

and OT classification. In addition, as 

discussed in the proposed rule and in 

this final rule, we replaced the section 

G-based functional measure from RCS– 

I with a new functional measure based 

on section GG items. We found that the 

inclusion of the section GG-based 

functional measure in the CART 

algorithm resulted in case-mix groups in 

which cognitive function played a less 

important role in classification. Based 

on these results, we determined that we 

could remove cognitive function as a 

determinant of PT and OT classification 

without a notable loss in the predictive 

ability of the payment model, as 

discussed above. We also consulted 

with clinicians who advised CMS 

during development of PDPM, who 

confirmed the appropriateness of this 

decision. We stated in the proposed rule 

that the decisions to collapse NonOrthopedic Surgery and Acute 

Neurologic into one clinical category 

and remove cognitive status resulted in 

a large reduction in the number of PT 

and OT case-mix groups, from the 30 in 

RCS–I to the 16 in the proposed PDPM 

provided in Table 21 of the proposed 

rule (and set forth in Table 21 of this 

final rule). We provided the criteria for 

each of these groups along with its CMI 

for both the PT and OT components in 

Table 21. As shown in Table 21, two 

factors would be used to classify each 

resident for PT and OT payment: 

Clinical category and function score. 

Each case-mix group corresponds to one 

clinical category and one function score 

range. We proposed classifying each 

SNF resident into one of the 16 groups 

shown in Table 21 based on these two 

factors. 

To help ensure that payment reflects 

the average relative resource use at the 

per diem level, we stated in the 

proposed rule (83 FR 21048) that CMIs 

would be set to reflect relative case-mix 

related differences in costs across 

groups. We stated that this method 

helps ensure that the share of payment 

for each case-mix group would be equal 

to its share of total costs of the 

component. We further explained that 

CMIs for the PT and OT components 

were calculated based on two factors. 

One factor was the average per diem 

costs of a case-mix group relative to the 

population average. The other factor 

was the average variable per diem 

adjustment factor of the group relative 

to the population average. In this 

calculation, average per diem costs 

equaled total PT or OT costs in the 

group divided by number of utilization 

days in the group. Similarly, the average 

variable per diem adjustment factor 

equaled the sum of variable per diem 

adjustment factors corresponding to a 

given component (PT or OT) for all 

utilization days in the group divided by 

the number of utilization days in the 

group. We calculated CMIs such that 

they equal the ratio of relative average 

per diem costs for a group to the relative 

average variable per diem adjustment 

factor for the group. In this calculation, 

relative average per diem costs and the 

relative average variable per diem 

adjustment factor were weighted by 

length of stay to account for the 

different length of stay distributions 

across case-mix groups (as further 

discussed in section 3.11.1. of the SNF 

PDPM technical report, available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html). The 

relative average variable per diem 

adjustment factors for a given PT group 

and the corresponding OT group were 

the same because residents were 

classified into the same case-mix group 

under both components. However, 

relative average per diem costs were 

different across the two corresponding 


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PT and OT groups, therefore the 

resulting CMIs calculated for each group 

were different, as shown in Table 21. 

After calculating CMIs as described 

above, we then applied adjustments to 

help ensure that the distribution of 

resources across payment components is 

aligned with the statutory base rates. We 

stated that the base rates implicitly 

allocate resources to case-mix 

components in proportion to the relative 

magnitude of the respective component 

base rates. For example, if the base rate 

for one component were twice as large 

as the base rate for another component, 

this would imply that the component 

with the larger base rate should receive 

double the resources of the other 

component. To ensure that the 

distribution of resources across payment 

components was aligned with the 

statutory base rates, in the proposed 

rule, we set CMIs such that the average 

product of the CMI and the variable per 

diem adjustment factor for a day of care 

equals 1.0 for each of the five case-mixadjusted components in PDPM. If the 

average product of the CMI and the 

variable per diem adjustment factor for 

a day of care were different across casemix components, this would result in 

allocating resources in a manner 

inconsistent with the distribution of 

resources implied by the statutory base 

rates. 

After adjusting the CMIs to align the 

distribution of resources across payment 

components with the statutory base 

rates, a parity adjustment was then 

applied by multiplying the CMIs by the 

ratio of case-mix-related payments in 

RUG–IV over estimated case-mix-related 

payments in PDPM, as further discussed 

in section V.J. of the proposed rule. 

More information on the variable per 

diem adjustment factors is discussed in 

section V.D.4. of the proposed rule. The 

full methodology used to develop CMIs 

is presented in section 3.11. of the SNF 

PDPM technical report (available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html). 

TABLE 21—PT AND OT CASE-MIX CLASSIFICATION GROUPS

Clinical category Section GG 

function score 

PT OT casemix group PT case-mix 

index 

OT case-mix 

index 

Major Joint Replacement or Spinal Surgery .................................................... 0–5 TA 1.53 1.49 

Major Joint Replacement or Spinal Surgery .................................................... 6–9 TB 1.69 1.63 

Major Joint Replacement or Spinal Surgery .................................................... 10–23 TC 1.88 1.68 

Major Joint Replacement or Spinal Surgery .................................................... 24 TD 1.92 1.53 

Other Orthopedic ............................................................................................. 0–5 TE 1.42 1.41 

Other Orthopedic ............................................................................................. 6–9 TF 1.61 1.59 

Other Orthopedic ............................................................................................. 10–23 TG 1.67 1.64

Other Orthopedic ............................................................................................. 24 TH 1.16 1.15 

Medical Management ...................................................................................... 0–5 TI 1.13 1.17 

Medical Management ...................................................................................... 6–9 TJ 1.42 1.44 

Medical Management ...................................................................................... 10–23 TK 1.52 1.54 

Medical Management ...................................................................................... 24 TL 1.09 1.11 

Non-Orthopedic Surgery and Acute Neurologic .............................................. 0–5 TM 1.27 1.30 

Non-Orthopedic Surgery and Acute Neurologic .............................................. 6–9 TN 1.48 1.49 

Non-Orthopedic Surgery and Acute Neurologic .............................................. 10–23 TO 1.55 1.55 

Non-Orthopedic Surgery and Acute Neurologic .............................................. 24 TP 1.08 1.09 

We stated in the proposed rule that, 

under the proposed PDPM, all residents 

would be classified into one and only 

one of these 16 PT and OT case-mix 

groups for each of the two components. 

We explained that as opposed to the 

RUG–IV system that determines therapy 

payments based only on the amount of 

therapy provided, these groups classify 

residents based on the two resident 

characteristics shown to be most 

predictive of PT and OT utilization: 

Clinical category and function score. 

Thus, we believe that the PT and OT 

case-mix groups better reflect relative 

resource use of clinically relevant 

resident subpopulations, and therefore, 

provide for more appropriate payment 

under the SNF PPS. 

Commenters submitted the following 

additional comments related to the 

proposed rule’s discussion of the 

Physical and Occupational Therapy 

Case-Mix Classification. A discussion of 

these comments, along with our 

responses, appears below. 

Comment: Several commenters 

expressed concern that CMS did not 

include cognition or swallowing 

disorders as determinants of payment 

for the OT component. One commenter 

stated that the removal of cognitive 

status as a determinant of PT and OT 

payment will lead to underpayment 

because cognitive impairment leads to 

longer recovery time and an increased 

need for therapy services, particularly 

occupational therapy. 

Response: As discussed in the 

proposed rule (83 FR 21046) and in 

section 3.4.2 of the SNF PDPM technical 

report, cognitive status was initially 

considered as a determinant of resident 

classification and payment in the PT 

and OT components of PDPM. However, 

after replacing the section G-based 

function score for PT and OT 

classification with a function score 

based on new, IMPACT Act-compliant 

section GG items, we reran the CART 

analysis used to develop possible casemix groups. We found that after 

including the section GG-based function 

score, cognitive status played a minimal 

role in resident classification. As noted 

in the proposed rule (83 FR 21047), 

cognition played a role in categorizing 

less than half of the 18 CART-generated 

PT groups and only two of the 14 CARTgenerated OT groups. Based on the 

reduced role of cognition in resident 

classification for PT and OT payment, 

we decided to remove cognitive status 

as a determinant of payment for these 

components. This decision also allowed 

us to substantially reduce the number of 

case-mix groups for the PT and OT 

components from the 30 presented in 

the 2017 ANPRM to the 16 presented in 

the proposed rule, contributing to a 

simplification of the payment model, 

which was requested by a number of 

commenters responding to the ANPRM. 

We also confirmed that the decision to 

remove cognitive status as a 

determinant of PT and OT classification 

had only a minor negative impact on 

predictive accuracy, reducing the Rsquared values of the both the PT and 

OT classification models by only 0.005. 

Comment: One commenter expressed 

concern about the reliability of the 

cognitive measure used in PDPM. 


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Response: As detailed in section 3.4.1 

of the SNF PDPM technical report, the 

PDPM cognitive measure was built 

based on two existing cognitive 

measures: The Brief Interview for 

Mental Status (BIMS) and the Cognitive 

Performance Scale (CPS). Both measures 

are used in the current RUG–IV system 

to determine cognitive impairment. 

BIMS is used when the resident is able 

to complete the interview, while CPS is 

used when the resident is unable to 

complete the interview and the staff 

assessment has to be conducted. Thus, 

the PDPM cognitive measure is based on 

cognitive measures that have been 

validated and used for years. It 

combines the existing scores from BIMS 

and CPS into one scale that can be used 

to compare cognitive function across all 

residents. 

Comment: Some commenters stated 

that CMS should consider including 

comorbidities related to PT or OT 

utilization, in particular conditions 

associated with high therapy intensity 

or duration. Commenters stated 

coronary artery disease, congestive heart 

failure, diabetes, chronic obstructive 

pulmonary disease (COPD), asthma, 

chronic wounds, depression, 

swallowing disorders and multiple 

sclerosis are conditions that could be 

considered as possible comorbidities for 

the PT or OT components. 

Response: As described in section 

3.4.1 of the SNF PDPM technical report, 

we investigated the impact of a broad 

list of conditions on PT and OT 

utilization. These conditions were 

selected for investigation based on 

comments received in response to the 

2017 ANPRM, clinical input, and a 

literature search. This broad list 

included several of the conditions 

mentioned by commenters, including 

congestive heart failure, diabetes, 

depression, and swallowing disorders. 

To focus on conditions that have nonnegligible impact on increasing costs, 

only those that had a positive impact on 

PT or OT costs per day of $2 or more 

were selected for further investigation. 

None of the conditions mentioned by 

commenters that were included in this 

investigation (congestive heart failure, 

diabetes, depression, swallowing 

disorders, and multiple sclerosis) met 

this criterion; therefore, they were not 

selected for inclusion in the payment 

model. Additionally, as mentioned in 

section 3.4.1 of the SNF PDPM technical 

report, we investigated the impact of an 

even broader range of MDS items, 

diagnosis-related groups (DRGs), and 

hierarchical condition categories (HCCs) 

on PT and OT utilization. Among the 

conditions included in this analysis 

were coronary artery disease, COPD, 

asthma, and various types of wounds/

wound care including wound infection, 

surgical wounds, and surgical wound 

care. Based on this analysis, we 

determined that all of these conditions 

had either a small or statistically 

insignificant impact on PT costs per day 

and OT costs per day. As previously 

stated, because the current system is 

heavily based on service provision and 

most residents are classified into the 

Ultra-High therapy category, there is 

currently little variance available in PT 

and OT costs per day to be explained by 

the presence of comorbidities. For the 

foregoing reasons, we do not believe it 

is appropriate to include the conditions 

mentioned by commenters as 

comorbidities for PT or OT payment at 

this time. However, as care practices 

change over time, we may consider 

adding comorbidities that have a strong 

impact on PT or OT utilization. 

Comment: Many commenters 

supported the proposed separation of 

the PT and OT components, as 

compared to the RCS–I model that 

combined these components into a 

single component. One commenter 

questioned if therapy would be covered 

for pain management and wound care 

treatments as these types of treatments 

are not explicitly covered under the 

clinical categories. 

Response: We appreciate the support 

for the decision to separate the PT and 

OT components. With regard to the 

question of therapy coverage for certain 

conditions, we would note that neither 

the clinical categories, nor any other 

aspects of PDPM implementation, 

should be taken to change any coverage 

guidelines. 

Accordingly, after considering the 

comments received, for the reasons 

discussed in the proposed rule and in 

the final rule, we are finalizing the 

proposed PT and OT components under 

the PDPM and our proposals relating to 

the methodology for classifying 

residents under the PT and OT 

components, effective October 1, 2019, 

with the modifications discussed in this 

section. As discussed above, in response 

to comments, rather than requiring 

providers to record the type of inpatient 

surgical procedure performed during the 

prior inpatient hospital stay by coding 

an ICD–10–PCS code in the second line 

of item I8000 as we proposed, we will 

instead require providers to select, as 

necessary, a surgical procedure category 

in a sub-item within Item J2000 which 

would identify the relevant surgical 

procedure that occurred during the 

patient’s preceding hospital stay and 

which would augment the patient’s 

PDPM clinical category. For purposes of 

calculating the function score, all 

missing values for section GG 

assessment items will receive zero 

points. Similarly, the function score will 

incorporate a new response ‘‘10. Not 

attempted due to environmental 

limitations’’ and we will assign it a 

point value of zero. Furthermore, 

consistent with a commenter’s 

suggestion, we will adopt MDS item 

GG0170I1 (Walk 10 feet) as a substitute 

for retired item GG0170H1 (Does the 

resident walk), and we will use 

responses 07: ‘‘resident refused,’’ 09: 

‘‘not applicable,’’ 10: ‘‘not attempted 

due to environmental limitations,’’ or 

88: ‘‘not attempted due to medical 

condition or safety concerns’’ from MDS 

item GG0170I1 to identify residents who 

cannot walk. 

c. Speech-Language Pathology Case-Mix 

Classification 

As discussed above and in the 

proposed rule (83 FR 21049), many of 

the resident characteristics that we 

found to be predictive of increased PT 

and OT costs were predictive of lower 

SLP costs. We stated that as a result of 

this inverse relationship, using the same 

set of predictors to case-mix adjust all 

three therapy components would 

obscure important differences in 

variables predicting variation in costs 

across therapy disciplines and make any 

model that attempts to predict total 

therapy costs inherently less accurate. 

Therefore, we stated that we believe it 

is appropriate to have a separately 

adjusted case-mix SLP component that 

is specifically designed to predict 

relative differences in SLP costs. As 

discussed in the proposed rule and in 

the prior section of this final rule, costs 

derived from the charges on claims and 

CCRs on facility cost reports were used 

as the measure of resource use to 

develop an alternative payment model. 

Costs are reflective of therapy utilization 

as they are correlated to therapy 

minutes recorded for each therapy 

discipline. 

Following the same methodology we 

used to identify predictors of PT and OT 

costs, we explained in the proposed rule 

that our project team conducted cost 

regressions with a host of variables from 

the MDS assessment, prior inpatient 

claims, and SNF claims that were 

identified as likely to be predictive of 

relative increases in SLP costs. The 

variables were selected with the goal of 

being as inclusive of the measures 

recorded on the MDS assessment as 

possible and also included diagnostic 

information from the prior inpatient 

stay. The selection process also 

incorporated clinical input from TEP 

panelists, the contractor’s clinical staff, 

and CMS clinical staff. We stated that 


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these initial costs regressions were 

exploratory and meant to identify a 

broad set of resident characteristics that 

are predictive of SLP resource 

utilization. The results were used to 

inform which variables should be 

investigated further and ultimately 

included in the payment system. A table 

of all of the variables considered in this 

analysis appears in the appendix of the 

SNF PMR technical report that 

accompanied the ANPRM (available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html). 

As we stated in the proposed rule (83 

FR 21049), based on these cost 

regressions, we identified a set of three 

categories of predictors relevant in 

predicting relative differences in SLP 

costs: Clinical reasons for the SNF stay, 

presence of a swallowing disorder or 

mechanically-altered diet, and the 

presence of an SLP-related comorbidity 

or cognitive impairment. We explained 

that a model using these predictors to 

predict SLP costs per day accounted for 

14.5 percent of the variation in SLP 

costs per day, while a very extensive 

model using 1,016 resident 

characteristics only predicted 19.3 

percent of the variation. We stated that 

this shows that these predictors alone 

explain a large share of the variation in 

SLP costs per day that can be explained 

with resident characteristics. 

As with the proposed PT and OT 

components, we began with the set of 

clinical categories identified in Table 14 

of the proposed rule (set forth in Table 

14 of this final rule) meant to capture 

general differences in resident resource 

utilization and ran cost regressions to 

determine which categories may be 

predictive of generally higher relative 

SLP costs. Through this analysis, we 

found that one clinical category, the 

Acute Neurologic group, was 

particularly predictive of increased SLP 

costs. More detail on this investigation 

can be found in section 3.5.2. of the SNF 

PMR technical report that accompanied 

the ANPRM, available at https://

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

therapyresearch.html. Therefore, to 

determine the initial resident 

classification into an SLP group under 

the proposed PDPM, we stated that 

residents would first be categorized into 

one of two groups using the clinical 

reasons for the resident’s SNF stay 

recorded on the first line of Item I8000 

on the MDS assessment: Either the 

‘‘Acute Neurologic’’ clinical category or 

a ‘‘Non-Neurologic’’ group that includes 

the remaining clinical categories in 

Table 14 (Major Joint Replacement or 

Spinal Surgery; Non-Surgical 

Orthopedic/Musculoskeletal; 

Orthopedic Surgery (Except Major Joint 

Replacement or Spinal Surgery); Acute 

Infections; Cancer; Pulmonary; NonOrthopedic Surgery; Cardiovascular and 

Coagulations; and Medical 

Management). 

In addition to the clinical reason for 

the SNF stay, based on cost regressions 

and feedback from TEP panelists, we 

stated in the proposed rule (83 FR 

21050) that we also identified the 

presence of a swallowing disorder or a 

mechanically-altered diet (which refers 

to food that has been altered to make it 

easier for the resident to chew and 

swallow to address a specific resident 

need) as a predictor of relative increases 

in SLP costs. First, we stated that 

residents who exhibited the signs and 

symptoms of a swallowing disorder, as 

identified using K0100Z on the MDS 

3.0, demonstrated significantly higher 

SLP costs than those who did not 

exhibit such signs and symptoms. 

Therefore, we considered including the 

presence of a swallowing disorder as a 

component in predicting SLP costs. 

However, when this information was 

presented during the October 2016 TEP, 

stakeholders indicated that the signs 

and symptoms of a swallowing disorder 

may not be as readily observed when a 

resident is on a mechanically-altered 

diet and requested that we also consider 

evaluating the presence of a 

mechanically-altered diet, as 

determined by item K0510C2 on the 

MDS 3.0, as an additional predictor of 

increased SLP costs. As we further 

explained in the proposed rule, our 

project team conducted this analysis 

and found that there was an associated 

increase in SLP costs when a 

mechanically-altered diet was present. 

Moreover, we stated that this analysis 

revealed that while SLP costs may 

increase when either a swallowing 

disorder or mechanically-altered diet is 

present, resident SLP costs increased 

even more when both of these items 

were present. More detail on this 

investigation and these analyses can be 

found in section 3.5.3. of the SNF PDPM 

technical report, available at https://

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

therapyresearch.html. As a result, we 

agreed with the stakeholders that both 

swallowing disorder and mechanicallyaltered diet are important components 

of predicting relative increases in 

resident SLP costs, and thus, in addition 

to the clinical categorization, we 

proposed classifying residents as having 

either a swallowing disorder, being on 

a mechanically altered diet, both, or 

neither for the purpose of classifying the 

resident under the SLP component. We 

also noted that we plan to monitor 

specifically for any increases in the use 

of mechanically altered diet among the 

SNF population that may suggest that 

beneficiaries are being prescribed such 

a diet based on facility financial 

considerations, rather than for clinical 

need. 

As a final aspect of the proposed SLP 

component case-mix adjustment, we 

explored how SLP costs vary according 

to cognitive status and the presence of 

an SLP-related comorbidity. As we 

explained in the proposed rule, we 

observed that SLP costs were notably 

higher for residents who had a mild to 

severe cognitive impairment as defined 

by the PDPM cognitive measure 

methodology described in Table 20 of 

the proposed rule (set forth in Table 20 

of this final rule) or who had an SLPrelated comorbidity present. We stated 

that for each condition or service 

included as an SLP-related comorbidity, 

the presence of the condition or service 

was associated with at least a 43 percent 

increase in average SLP costs per day. 

The presence of a mild to severe 

cognitive impairment was associated 

with at least a 100 percent increase in 

average SLP costs per day. Similar to the 

analysis conducted in relation to the PT 

and OT components, the project team 

ran cost regressions on a broad list of 

possible conditions. As we stated in the 

proposed rule (83 FR 21050), based on 

that analysis, and in consultation with 

stakeholders during our TEPs and 

clinicians, we identified the conditions 

listed in Table 22 of the proposed rule 

(set forth in Table 22 of this final rule) 

as SLP-related comorbidities which we 

believe best predict relative differences 

in SLP costs. As discussed in the 

proposed rule, we used diagnosis codes 

on the most recent inpatient claim and 

the first SNF claim, as well as MDS 

items on the 5-day assessment for each 

SNF stay to identify these diagnoses and 

found that residents with these 

conditions had much higher SLP costs 

per day. Further, we stated that rather 

than accounting for each SLP-related 

comorbidity separately, all conditions 

were combined into a single flag. If the 

resident has at least one SLP-related 

comorbidity, the combined flag is 

turned on. We explained in the 

proposed rule that we combined all 

SLP-related comorbidities into a single 

flag because we found that the 

predictive ability of including a 

combined SLP comorbidity flag is 

comparable to the predictive ability of 

including each SLP-related comorbidity 

as an individual predictor. Additionally, 

we stated that using a combined SLPVerDate Sep<11>2014 20:44 Aug 07, 2018 Jkt 244001 PO 00000 Frm 00051 Fmt 4701 Sfmt 4700 E:\FR\FM\08AUR2.SGM 08AUR2

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related comorbidity flag greatly 

improves the simplicity of the payment 

model. More detail on these analyses 

can be found in section 3.5.1. of the SNF 

PMR technical report that accompanied 

the ANPRM (available at https://

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

therapyresearch.html). 

TABLE 22—SLP-RELATED

COMORBIDITIES

Aphasia. 

CVA, TIA, or Stroke. 

Hemiplegia or Hemiparesis. 

Traumatic Brain Injury. 

Tracheostomy Care (While a Resident). 

Ventilator or Respirator (While a Resident). 

Laryngeal Cancer. 

Apraxia. 

Dysphagia. 

ALS. 

Oral Cancers. 

Speech and Language Deficits. 

Once each of these variables—clinical 

reasons for the SNF stay, presence of a 

swallowing disorder or mechanicallyaltered diet, and the presence of an SLPrelated comorbidity or cognitive 

impairment—found to be useful in 

predicting resident SLP costs was 

identified, as we discussed in the 

proposed rule (83 FR 21050), we used 

the CART algorithm, as we discussed 

above in relation to the PT and OT 

components, to determine appropriate 

splits in SLP case-mix groups based on 

CART output breakpoints using these 

three variables. We stated we then 

further refined the SLP case-mix 

classification groups beyond those 

produced by the CART algorithm. We 

used consistent criteria to group 

residents into 18 payment groups across 

the two clinical categories determined 

to be relevant to SLP utilization (Acute 

Neurologic and Non-Neurologic). These 

groups simplified the SLP case-mix 

classification by reducing the number of 

groups while maintaining the CART 

predictive power in terms of R-squared. 

This methodology and the results of our 

analysis are more thoroughly explained 

in sections 3.4.2. and 3.5.2. of the SNF 

PMR technical report that accompanied 

the ANPRM (available at https://

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

therapyresearch.html). 

Under the original RCS–I SLP 

component, a resident could be 

classified into one of 18 possible casemix groups. Comments received in 

response to the ANPRM expressed 

concern over the complexity of the 

payment model due to the high number 

of possible combinations of case-mix 

groups. We stated in the proposed rule 

(83 FR 21051) that, to reduce the 

number of possible SLP case-mix 

groups, we simplified the consistent 

splits model selected for RCS–I. To 

accomplish this, we combined clinical 

category (Acute Neurologic or NonNeurologic), cognitive impairment, and 

the presence of an SLP-related 

comorbidity into a single predictor due 

to the clinical relationship between 

acute neurologic conditions, cognition, 

and SLP comorbidities. We explained in 

the proposed rule that these three 

predictors are highly interrelated as 

acute neurologic conditions may often 

result in cognitive impairment or SLPrelated comorbidities such as speech 

and language deficits. As we discussed 

in the proposed rule, using this 

combined variable along with presence 

of a swallowing disorder or 

mechanically-altered diet results in 12 

groups. We compared the predictive 

ability of the simplified model with 

more complex classification options, 

including the original RCS–I SLP model. 

We explained that regression results 

showed that the reduction in case-mix 

groups by collapsing independent 

variables had little to no effect on 

payment accuracy. Specifically, we 

noted that the proposed PDPM SLP 

model has an R-squared value almost 

identical to that of the original RCS–I 

SLP model, while reducing the number 

of resident groups from 18 to 12. 

Therefore, we determined that 12 casemix groups would be necessary to 

classify residents adequately in terms of 

their SLP costs in a manner that 

captures sufficient variation in SLP 

costs without creating unnecessarily 

granular separations. More information 

on this analysis can be found in section 

3.5.2. of the SNF PDPM technical report 

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

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

therapyresearch.html). We provided the 

criteria for each of these groups along 

with its CMI in Table 23 of the proposed 

rule (set forth in Table 23 of this final 

rule). 

To help ensure that payment reflects 

the average relative resource use at the 

per diem level, we stated in the 

proposed rule (83 FR 21051) that CMIs 

would be set to reflect relative case-mix 

related differences in costs across 

groups. We stated that this method 

helps ensure that the share of payment 

for each case-mix group would be equal 

to its share of total costs of the 

component. We further explained that 

CMIs for the SLP component were 

calculated based on the average per 

diem costs of a case-mix group relative 

to the population average. Relative 

average differences in costs were 

weighted by length of stay to account for 

the different length of stay distributions 

across case-mix groups (as further 

discussed in section 3.11.1. of the SNF 

PDPM technical report, available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html). In this 

calculation, average per diem costs 

equaled total SLP costs in the group 

divided by number of utilization days in 

the group. Because the SLP component 

does not have a variable per diem 

schedule (as further discussed in section 

3.9.1. of the SNF PDPM technical report, 

available at https://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/SNFPPS/therapy

research.html), variable per diem 

adjustment factors were not involved in 

SLP CMI calculation. We further stated 

that a parity adjustment was then 

applied by multiplying the CMI by the 

ratio of case-mix-related payments in 

RUG–IV over estimated case-mix-related 

payments in PDPM, as further discussed 

in section V.J. of the proposed rule. We 

stated that this method helps ensure 

that the share of payment for each casemix group is equal to its share of total 

costs of the component and that PDPM 

is budget neutral relative to RUG–IV. 

The full methodology used to develop 

CMIs is presented in section 3.11. of the 

SNF PDPM technical report (available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html). 

TABLE 23—SLP CASE-MIX CLASSIFICATION GROUPS

Presence of acute neurologic condition, SLP-related 

comorbidity, or cognitive impairment Mechanically altered diet or swallowing disorder SLP case-mix group 

SLP case-mix 

index 

None ............................................................................. Neither .......................................................................... SA 0.68 

None ............................................................................. Either ............................................................................ SB 1.82 

None ............................................................................. Both .............................................................................. SC 2.66 


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TABLE 23—SLP CASE-MIX CLASSIFICATION GROUPS—Continued 

Presence of acute neurologic condition, SLP-related 

comorbidity, or cognitive impairment Mechanically altered diet or swallowing disorder SLP case-mix group 

SLP case-mix 

index 

Any one ........................................................................ Neither .......................................................................... SD 1.46 

Any one ........................................................................ Either ............................................................................ SE 2.33 

Any one ........................................................................ Both .............................................................................. SF 2.97 

Any two ......................................................................... Neither .......................................................................... SG 2.04 

Any two ......................................................................... Either ............................................................................ SH 2.85 

Any two ......................................................................... Both .............................................................................. SI 3.51 

All three ........................................................................ Neither .......................................................................... SJ 2.98 

All three ........................................................................ Either ............................................................................ SK 3.69 

All three ........................................................................ Both .............................................................................. SL 4.19 

As with the PT and OT components, 

we stated that all residents would be 

classified into one and only one of these 

12 SLP case-mix groups under the 

PDPM. We explained that, as opposed to 

the RUG–IV system that determines 

therapy payments based only on the 

amount of therapy provided, under the 

PDPM, residents would be classified 

into SLP case-mix groups based on 

resident characteristics shown to be 

predictive of SLP utilization. Thus, we 

stated that believe the SLP case-mix 

groups will provide a better measure of 

resource use and will provide for more 

appropriate payment under the SNF 

PPS. 

We invited comments on the 

approach we proposed above to classify 

residents for SLP payment under the 

proposed PDPM. 

Commenters submitted the following 

comments related to the proposed rule’s 

discussion of the classification of 

residents for SLP payment under the 

PDPM. A discussion of these comments, 

along with our responses, appears 

below. 

Comment: Some commenters agreed 

with the SLP-related patient classifiers. 

Some commenters suggested using a 

different assessment of cognition than 

that currently used on the MDS, such as 

the Montreal Cognitive Assessment 

(MOCA). One commenter expressed 

concerns regarding the use of cognition 

as a first tier classification criterion, as 

changes in cognition can be difficult to 

identify and this could impact on the 

possibility of late or missed IPAs. This 

commenter suggested moving cognition 

into the second tier classification 

criteria. 

Response: We appreciate the support 

for the SLP component classification 

criteria. With regard to the comment on 

using a different assessment for 

assessing cognition, we are not opposed 

to this idea and would encourage 

stakeholders to work with CMS in 

developing potential revisions to the 

MDS to improve care planning and 

management. That being said, as the 

MOCA is not currently in use on the 

MDS, we must utilize the data and 

assessment tools to which we currently 

have access. Finally, with regard to the 

concern about the interplay between 

cognition and the IPA, we expect that 

this concern would be addressed by 

having the IPA be completed on an 

optional basis, as described in section 

V.D.1 of this final rule. 

Comment: One commenter expressed 

concern that having a separate SLP 

component could result in the 

overutilization of SLP services, 

specifically for treating cognitive 

impairments. The commenter advised 

CMS to limit the overutilization of SLP 

services for cognitive impairment 

issues. 

Response: As discussed above, we 

found that cognitive impairment is a 

relevant characteristic in predicting SLP 

resource utilization and costs. However, 

we understand the concern regarding 

the potential for providers to overutilize 

SLP services in certain instances and 

will monitor the use of SLP services 

under PDPM to identify any potential 

consequences of using this payment 

classifier as part of the SLP component. 

Comment: A commenter questioned 

the accuracy of using the same primary 

diagnosis to assign clinical category 

across the PT, OT, and SLP components. 

This commenter states that multiple 

diagnoses can contribute to the reason 

for the SNF stay and proposes 

distinguishing between PT/OT and SLP 

diagnoses. Specifically, the commenter 

suggests allowing providers to enter the 

clinical reason for PT/OT services in the 

first two lines of MDS item I8000 and 

the clinical reason for SLP services in 

the third line of item I8000. This 

commenter points to our decision to 

separate therapy disciplines into 

different payment components based on 

our observation that different sets of 

resident characteristics were predictive 

of PT and OT costs, on one hand, and 

SLP costs, on the other. Given that 

utilization of PT and OT resources and 

utilization of SLP services are explained 

by a different set of predictors, this 

commenter concludes that the clinical 

reasons for receiving SLP services are 

distinct from those motivating PT/OT 

services. 

Response: As detailed in the proposed 

rule (83 FR 21043) and section 3.4.1 of 

the SNF PDPM technical report, when 

constructing the ten clinical categories, 

we explored conditions that are 

clinically relevant to general SNF 

resource utilization. Within each 

component, we further consolidated the 

ten clinical categories into groups that 

have significant impact on componentspecific resource utilization. We found 

that the clinical reason for a SNF stay 

as represented by the clinical categories 

was highly predictive of PT, OT, and 

SLP utilization, and thus we do not 

believe it is necessary to enter separate 

clinical reasons for PT/OT and SLP 

services, as suggested by the 

commenter. For this reason, we believe 

it is appropriate to include the clinical 

categories as determinants of resident 

classification and payment for all three 

components. We would also emphasize 

that clinical category is the only 

predictor shared by the PT/OT and SLP 

components. The other independent 

variables are unique to the PT and OT 

or SLP components and capture other 

clinical reasons for PT/OT and SLP 

services. As a result, in many cases, a 

resident’s cognitive status and the 

presence of SLP-related comorbidities 

may be as relevant as primary diagnosis 

in determining resident classification 

and payment. 

Comment: A few commenters stated 

that the proposed SLP-related 

comorbidity list is an incomplete 

reflection of all comorbidities that 

require SLP treatment. One commenter 

stated that the SLP comorbidity list 

should include progressive neurologic 

disorders that increase SLP resource 

use. This commenter suggests relabeling 

the ‘‘ALS’’ MDS checkbox item as 

‘‘Progressive Neurologic Diseases’’ and 

updating the MDS manual definition for 


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this item to meet the criteria of specific 

progressive neurologic diseases. 

Response: We appreciate commenters’ 

concerns regarding additional 

conditions that may be related to SLP 

utilization. We may consider adding 

conditions that have a demonstrated 

relationship to SLP resource use in 

future revisions to the payment model. 

To examine the impact of PDPM on 

residents with chronic neurological 

conditions, we included this 

subpopulation in our resident impact 

analysis and found that PDPM is 

estimated to slightly increase the 

payment associated with these 

residents. 

Comment: Some commenters agreed 

with the use of mechanically altered 

diet as a payment classifier. One 

commenter requested that CMS provide 

evidence that a mechanically altered 

diet is associated with higher SLP 

utilization than other nutritional 

approaches such as personal assistance 

with feeding. One commenter requested 

that CMS monitor the use of 

mechanically altered diets under PDPM 

to identify any potentially inappropriate 

use of such diets. One commenter stated 

that overutilization of such diets can 

have negative repercussions for patient 

care. 

Response: As described in section 

3.5.1 and 3.5.2 of the SNF PMR 

technical report, besides mechanically 

altered diet, we additionally explored 

feeding tube as a determinant of 

classification and payment for the SLP 

component. We used CART to test 

several SLP models with different 

variables related to swallowing and 

nutritional approach. This investigation 

found that mechanically altered diet 

notably increased the predictive power 

of the models, whereas feeding tube 

only had a small impact on predictive 

ability. While feeding tube was 

associated with an increase in SLP costs 

per day, we did not include feeding tube 

in the payment model because it only 

had a small impact on the predictive 

accuracy of the model relative to 

mechanically altered diet. We also 

explored the MDS item Eating SelfPerformance (G0110H1) as a potential 

predictor of SLP utilization. While 

increased eating dependence was 

associated with higher SLP utilization, 

when we included Eating SelfPerformance as an independent variable 

in the CART analysis used to explore 

possible case-mix groups, Eating SelfPerformance was only selected as a 

determinant of classification for half of 

the 18 groups created by the CART 

algorithm. As a result, we determined 

that we could remove Eating SelfPerformance from the SLP classification 

without notably sacrificing predictive 

ability. As shown in section 3.5.2 of the 

SNF PMR technical report, removing 

Eating Self-Performance and combining 

various independent variables to 

simplify the classification reduced the 

R-squared value of the classification by 

only 0.005. As a result, this 

classification was used as the basis for 

the proposed PDPM SLP component. 

With regard to the possibility of some 

providers prescribing mechanically 

altered diets inappropriately or the 

possibility of overutilization, we do 

plan to monitor the use of these diets as 

part of our general PDPM monitoring 

strategy. 

Accordingly, after considering the 

comments received, for the reasons 

discussed in the proposed rule and in 

this final rule, we are finalizing, without 

modification, the proposed SLP 

component of PDPM and our proposals 

relating to the classification of residents 

under the SLP component. 

d. Nursing Case-Mix Classification 

As we explained in the proposed rule 

(83 FR 21051 through 21052), the RUG– 

IV classification system first divides 

residents into ‘‘rehabilitation residents’’ 

and ‘‘non-rehabilitation residents’’ 

based on the amount of therapy a 

resident receives. We stated that 

differences in nursing needs can be 

obscured for rehabilitation residents, 

where the primary driver of payment 

classification is the intensity of therapy 

services that a resident receives. For 

example, for two residents classified 

into the RUB RUG–IV category, which 

would occur on the basis of therapy 

intensity and ADL score alone, the 

nursing component for each of these 

residents would be multiplied by a CMI 

of 1.56. We stated that this reflects that 

residents in that group were found, 

during our previous Staff time 

measurement (STM) work, to have 

nursing costs 56 percent higher than 

residents with a 1.00 index. We noted 

that while this CMI also includes 

adjustments made in FY 2010 and FY 

2012 for budget-neutrality purposes, 

what is clear is that two residents, who 

may have significantly different nursing 

needs, are nevertheless deemed to have 

the very same nursing costs, and SNFs 

would receive the same nursing 

payment for each. Given the discussion 

above and in the proposed rule, which 

noted that approximately 60 percent of 

resident days are billed using one of 

three Ultra-High Rehabilitation RUGs 

(two of which have the same nursing 

index), we stated that the current casemix model effectively classifies a 

significant portion of SNF therapy 

residents as having exactly the same 

degree of nursing needs and requiring 

exactly the same amount of nursing 

resources. As such, we stated we 

believed that further refinement of the 

case-mix model would be appropriate to 

better differentiate among patients, 

particularly those who receive therapy 

services with different nursing needs. 

We further explained in the proposed 

rule (83 FR 21052) that an additional 

concern in the RUG–IV system is the 

use of therapy minutes to determine not 

only therapy payments but also nursing 

payments. For example, residents 

classified into the RUB RUG fall in the 

same ADL score range as residents 

classified into the RVB RUG. The only 

difference between those residents is the 

number of therapy minutes that they 

received. However, as we stated in the 

proposed rule, the difference in 

payment that results from this 

difference in therapy minutes impacts 

not only the RUG–IV therapy 

component but also the nursing 

component: Nursing payments for RUB 

residents are 40 percent higher than 

nursing payments for RVB residents. We 

stated that as a result of this feature of 

the RUG–IV system, the amount of 

therapy minutes provided to a resident 

is one of the main sources of variation 

in nursing payments, while other 

resident characteristics that may better 

reflect nursing needs play a more 

limited role in determining payment. 

As discussed in the proposed rule (83 

FR 21052), the more nuanced and 

resident-centered classifications in 

current RUG–IV non-rehabilitation 

categories are obscured under the 

current payment model, which utilizes 

only a single RUG–IV category for 

payment purposes and has over 90 

percent of resident days billed using a 

rehabilitation RUG. The RUG–IV nonrehabilitation groups classify residents 

based on their ADL score, the use of 

extensive services, the presence of 

specific clinical conditions such as 

depression, pneumonia, or septicemia, 

and the use of restorative nursing 

services, among other characteristics. 

These characteristics are associated with 

nursing utilization, and the STRIVE 

study accounted for relative differences 

in nursing staff time across groups. 

Therefore, we proposed to use the 

existing RUG–IV methodology for 

classifying residents into nonrehabilitation RUGs to develop a 

proposed nursing classification that 

helps ensure nursing payment reflects 

expected nursing utilization rather than 

therapy utilization. 

For example, in the proposed rule (83 

FR 21052), we considered two residents. 

The first patient classifies into the RUB 

rehabilitation RUG (on the basis of the 


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resident’s therapy minutes) and into the 

CC1 non-rehabilitation RUG (on the 

basis of having pneumonia), while the 

second classifies into the RUB 

rehabilitation RUG (on the basis of the 

resident’s therapy minutes) and the HC1 

non-rehabilitation RUG (on the basis of 

the resident having quadriplegia and a 

high ADL score). Under the current 

RUG–IV based payment model, the 

billing for both residents would utilize 

only the RUB rehabilitation RUG, 

despite clear differences in their 

associated nursing needs and resident 

characteristics. We proposed an 

approach where, for the purpose of 

determining payment under the nursing 

component, the first resident would be 

classified into CC1, while the second 

would be classified into HC1 under the 

PDPM. We stated that believe 

classifying the residents in this manner 

for payment purposes would capture 

variation in nursing costs in a more 

accurate and granular way than relying 

on the rehabilitation RUG’s nursing 

CMI. 

While resident classification in the 

proposed PDPM nursing component is 

guided by RUG–IV methodology, we 

proposed to make several modifications 

to the RUG–IV nursing RUGs and 

classification methodology under the 

proposed PDPM. First, we proposed 

under the PDPM to reduce the number 

of nursing RUGs by decreasing 

distinctions based on function. We 

stated that under RUG–IV, residents 

with a serious medical condition/

service such as septicemia or respiratory 

therapy are classified into one of eight 

nursing RUGs in the Special Care High 

category. The specific RUG into which 

a resident is placed depends on the 

resident’s ADL score and whether the 

resident is depressed. RUG–IV groups 

ADL score into bins for simplicity (for 

example, 2–5 and 6–10). For example, 

under RUG–IV, a resident in the Special 

Care High category who has depression 

and an ADL score of 3 would fall into 

the 2–5 ADL score bin, and therefore, be 

classified into the HB2 RUG, which 

corresponds to Special Care High 

residents with depression and an ADL 

score between 2 and 5 (a mapping of 

clinical traits and ADL score to RUG–IV 

nursing groups is shown in the 

appendix of the SNF PDPM technical 

report, available at https://

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

research.html). To explore options to 

reduce the number of nursing RUGs, we 

explained in the proposed rule that we 

compared average nursing utilization 

across all 43 RUG–IV nursing RUGs. 

The dependent variable used in this 

investigation was the average wageweighted staff time (WWST) for each 

nursing RUG from the STRIVE study. 

WWST is a measure of nursing resource 

utilization used in the STRIVE study. As 

discussed in more detail in the 

proposed rule (83 FR 21052) and in 

section 3.2.1. of the PDPM technical 

report (available at https://

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

research.html), we were unable to 

construct a measure of nursing 

utilization based on current data 

because facilities do not report residentspecific nursing costs. As discussed in 

the proposed rule, we observed that 

nursing resource use as measured by 

WWST does not vary markedly between 

nursing case-mix groups defined by 

contiguous ADL score bins (for example, 

11–14 and 15–16) but otherwise sharing 

the same clinical traits (for example, 

classified into Special Care High and 

depressed). We explained that this 

suggests that collapsing contiguous ADL 

score bins for RUGs that are otherwise 

defined by the same set of clinical traits 

is unlikely to notably affect payment 

accuracy. Section 3.6.1. of the SNF 

PDPM technical report (available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html) provides 

more detail on this analysis. 

In the Special Care High, Special Care 

Low, Clinically Complex, and Reduced 

Physical Function classification groups 

(RUGs beginning with H, L, C, or P), for 

nursing groups that were otherwise 

defined with the same clinical traits (for 

example, extensive services, medical 

conditions, depression, restorative 

nursing services received), we proposed 

to combine the following pairs of 

second characters due to their 

contiguous ADL score bins: (E, D) and 

(C, B). These characters correspond to 

ADL score bins (15 to 16, 11 to 14) and 

(6 to 10, 2 to 5), respectively. We 

observed that nursing utilization did not 

vary notably across these contiguous 

ADL score bins; therefore, we stated that 

we believe it is appropriate to collapse 

pairs of RUGs in these classification 

groups that correspond to contiguous 

ADL score bins but are otherwise 

defined by the same clinical traits. For 

example, HE2 and HD2, which are both 

in the Special Care High group and both 

indicate the presence of depression, 

would be collapsed into a single nursing 

case-mix group. Similarly, we stated 

that PC1 and PB1 (Reduced Physical 

Function and 0 to 1 restorative nursing 

services) also would be combined into 

a single nursing case-mix group. Section 

3.6.1. of the SNF PDPM technical report 

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

Medicare/Medicare-Fee-for-ServicePayment/SNFPPS/therapy

research.html) provides more detail on 

this analysis. In the Behavioral and 

Cognitive Performance classification 

group (RUGs beginning with B), for 

RUGs that are otherwise defined by the 

same number of restorative nursing 

services (0 to1 or 2 or more), we 

proposed to combine RUGs with the 

second character B and A, which 

correspond to contiguous ADL score 

bins 2 to 5 and 0 to 1, respectively. We 

observed that nursing utilization did not 

vary notably across these contiguous 

ADL score bins; therefore, we stated that 

we believe it is appropriate to collapse 

pairs of RUGs in this classification 

group that correspond to contiguous 

ADL score bins but are otherwise 

defined by the same clinical traits. In 

other words, BB2 and BA2 would be 

combined into a single nursing group, 

and BB1 and BA1 would also be 

combined into a single nursing group. 

Section 3.6.1. of the SNF PDPM 

technical report (available at https://

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

research.html) provides more detail on 

this analysis. We proposed to maintain 

CA1, CA2, PA1, and PA2 as separate 

case-mix groups under the nursing 

component of the PDPM. We observed 

that these RUGs do not share similar 

levels of nursing resource use with 

RUGs in adjacent ADL score bins that 

are otherwise defined by the same 

clinical traits (for example, medical 

conditions, depression, restorative 

nursing services received). Rather, we 

noted that CA1, CA2, PA1, and PA2 are 

associated with distinctly lower nursing 

utilization compared to RUGs that 

otherwise have the same clinical traits 

(for example, medical conditions, 

depression, restorative nursing services 

received) but higher ADL score bins. 

Section 3.6.1. of the SNF PDPM 

technical report (available at https://

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

research.html) provides more detail on 

this analysis. We further stated that ES3, 

ES2, and ES1 also would be maintained 

as separate case-mix groups under the 

nursing component of the proposed 

PDPM because, although they are 

defined by the same ADL score bin, they 

are defined by different clinical traits 

unlike the pairs of RUGs that were 

combined. Specifically, ES3, ES2, and 

ES1 are defined by different 

combinations of extensive services. We 

stated that we believe collapsing casemix groups based on ADL score for the 

RUGs specified above would reduce 


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model complexity by decreasing the 

number of nursing case-mix groups from 

43 to 25, which thereby decreases the 

total number of possible combinations 

of case-mix groups under the proposed 

PDPM. Table 26 of the proposed rule 

(set forth in Table 26 of this final rule) 

shows the proposed 25 case-mix groups 

for nursing payment. Section 3.6.1. of 

the SNF PDPM technical report 

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

Medicare/Medicare-Fee-for-ServicePayment/SNFPPS/therapy

research.html) provides more detail on 

the analyses and data supporting these 

proposals. 

As explained in the proposed rule (83 

FR 21053), the second modification to 

the RUG–IV nursing classification 

methodology would update the nursing 

ADL score to incorporate section GG 

items. Currently, the RUG–IV ADL score 

is based on four late-loss items from 

section G of MDS 3.0: eating, toileting, 

transfer, and bed mobility. We stated 

that under the proposed PDPM, these 

section G items would be replaced with 

an eating item, a toileting item, three 

transfer items, and two bed mobility 

items from the admission performance 

assessment of section GG. In contrast to 

the RUG–IV ADL score, the proposed 

PDPM score assigns higher points to 

higher levels of independence. 

Therefore, an ADL score of 0 

(independent) corresponds to a section 

GG-based function score of 16, while an 

ADL score of 16 (dependent) 

corresponds to a section GG-based 

function score of 0. We explained that 

this scoring methodology is consistent 

with the proposed PDPM PT and OT 

function score, as well as functional 

scores in other care settings, such as the 

IRF PPS. The proposed nursing scoring 

methodology also assigns 0 points when 

an activity cannot be completed 

(‘‘Resident refused,’’ ‘‘Not applicable,’’ 

‘‘Not attempted due to medical 

condition or safety concerns’’). As 

described in section V.D.3.c. (PT and 

OT Case-Mix Classification) of the 

proposed rule, grouping these responses 

with ‘‘dependent’’ aligns with clinical 

expectations of resource utilization for 

residents who cannot complete an ADL 

activity. The proposed scoring 

methodology is shown in Table 24 of 

the proposed rule (set forth in Table 24 

of this final rule). As discussed in 

section V.D.3.c. of the proposed rule, 

section GG measures functional areas 

with more than one item, which results 

in substantial overlap between the two 

bed mobility items and the three 

transfer items. To address overlap, we 

proposed to calculate an average score 

for each of these related items. That is, 

we stated we would average the scores 

for the two bed mobility items and for 

the three transfer items. This averaging 

approach was also used in the proposed 

PT and OT function scores and is 

illustrated in Table 25 of the proposed 

rule (set forth in Table 25 of this final 

rule). We stated that the final score 

sums the average bed mobility and 

transfer scores with eating and toileting 

scores, resulting in a nursing function 

score that ranges from 0 to 16. 

TABLE 24—NURSING FUNCTION SCORE CONSTRUCTION

Response ADL score 

05, 06—Set-up assistance, Independent ............................................................................................................................................ 4 

04—Supervision or touching assistance ............................................................................................................................................. 3 

03—Partial/moderate assistance ......................................................................................................................................................... 2 

02—Substantial/maximal assistance ................................................................................................................................................... 1 

01, 07, 09, 88—Dependent, Refused, N/A, Not Attempted ................................................................................................................ 0 

TABLE 25—SECTION GG ITEMS INCLUDED IN NURSING FUNCTIONAL MEASURE

Section GG item ADL score 

GG0130A1—Self-care: Eating ........................................................................................................................................ 0–4. 

GG0130C1—Self-care: Toileting Hygiene ...................................................................................................................... 0–4. 

GG0170B1—Mobility: Sit to lying ................................................................................................................................... 0–4 (average of 2 items). 

GG0170C1—Mobility: Lying to sitting on side of bed.

GG0170D1—Mobility: Sit to stand ................................................................................................................................. 0–4 (average of 3 items). 

GG0170E1—Mobility: Chair/bed-to-chair transfer.

GG0170F1—Mobility: Toilet transfer.

In addition to proposing to replace the 

nursing ADL score with a function score 

based on section GG items and to 

collapse certain nursing RUGs, we also 

proposed (83 FR 21054) to update the 

existing nursing CMIs using the STRIVE 

staff time measurement data that were 

originally used to create these indexes. 

We explained that under the current 

payment system, non-rehabilitation 

nursing indexes were calculated to 

capture variation in nursing utilization 

by using only the staff time collected for 

the non-rehabilitation population. We 

stated we believe that, to provide a more 

accurate reflection of the relative 

nursing resource needs of the SNF 

population, the nursing indexes should 

reflect nursing utilization for all 

residents. To accomplish this, we stated 

in the proposed rule that we replicated 

the methodology described in the FY 

2010 SNF PPS rule (74 FR 22236 

through 22238) but classified the full 

STRIVE study population under nonrehabilitation RUGs using the RUG–IV 

classification rules. The methodology 

set forth in the proposed rule for 

updating resource use estimates for each 

nursing RUG proceeded according to the 

following steps: 

(1) Calculate average wage-weighted 

staff time (WWST) for each STRIVE 

study resident using FY 2015 SNF 

wages. 

(2) Assign the full STRIVE population 

to the appropriate non-rehabilitation 

RUG. 

(3) Apply sample weights to WWST 

estimates to allow for unbiased 

population estimates. The reason for 

this weighting is that the STRIVE study 

was not a random sample of residents. 

Certain key subpopulations, such as 

residents with HIV/AIDS, were oversampled to ensure that there were 

enough residents to draw conclusions 

on the subpopulations’ resource use. As 

a result, STRIVE researchers also 

developed sample weights, equal to the 

inverse of each resident’s probability of 

selection, to permit calculation of 

unbiased population estimates. 


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Applying the sample weights to a 

summary statistic results in an estimate 

that is representative of the actual 

population. The sample weight method 

is explained in Phase I of the STRIVE 

study. A link to the STRIVE study is 

available at https://www.cms.gov/ 

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

(4) Smooth WWST estimates that do 

not match RUG hierarchy in the same 

manner as the STRIVE study. RUG–IV, 

from which the nursing RUGs are 

derived, is a hierarchical classification 

in which payment should track clinical 

acuity. It is intended that residents who 

are more clinically complex or who 

have other indicators of acuity, 

including a higher ADL score, 

depression, or restorative nursing 

services, would receive higher payment. 

When STRIVE researchers estimated 

WWST for each RUG, several inversions 

occurred because of imprecision in the 

means. These are defined as WWST 

estimates that are not in line with 

clinical expectations. The methodology 

used to smooth WWST estimates is 

explained in Phase II of the STRIVE 

study. A link to the STRIVE study is 

available at https://www.cms.gov/

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

(5) Calculate nursing indexes, which 

reflect the average WWST for each of 

the 25 nursing case-mix groups divided 

by the average WWST for the study 

population used throughout our 

research. To impute WWST for each 

stay in the population, we assigned each 

resident the average WWST of the 

collapsed nursing RUG into which they 

are categorized. To derive the average 

WWST of each collapsed RUG, we first 

estimate the average WWST of the 

original 43 nursing RUGs based on steps 

1 through 4 above, then calculate a 

weighted mean of the average WWST of 

the two RUGs that form the collapsed 

RUG. More details on this analysis can 

be found in section 3.6.3. of the SNF 

PDPM technical report (available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html). 

Through this refinement, we stated 

that we believe the nursing indexes 

under the proposed PDPM better reflect 

the varied nursing resource needs of the 

full SNF population. In Table 26 of the 

proposed rule (set forth in Table 26 of 

this final rule), we provided the nursing 

indexes under the proposed PDPM. 

To help ensure that payment reflects 

the average relative resource use at the 

per diem level, we stated that the 

nursing CMIs would be set to reflect 

case-mix related relative differences in 

WWST across groups. We further stated 

that Nursing CMIs would be calculated 

based on the average per diem nursing 

WWST of a case-mix group relative to 

the population average. In this 

calculation, average per diem WWST 

equaled total WWST in the group 

divided by number of utilization days in 

the group. We further explained that 

because the nursing component does 

not have a variable per diem schedule 

(as further discussed in section 3.9.1. of 

the SNF PDPM technical report, 

available at https://www.cms.gov/

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

therapyresearch.html), variable per 

diem adjustment factors were not 

involved in nursing CMI calculation. 

We then applied a parity adjustment by 

multiplying the CMI by the ratio of casemix-related payments in RUG–IV over 

estimated case-mix-related payments in 

PDPM, as discussed further in section 

V.J. of the proposed rule. The full 

methodology used to develop CMIs is 

presented in section 3.11. of the SNF 

PDPM technical report (available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html). 

TABLE 26—NURSING INDEXES UNDER PDPM CLASSIFICATION MODEL

RUG–IV nursing 

RUG Extensive services Clinical conditions Depression 

Number of 

restorative 

nursing 

services 

GGbased 

function 

score 

PDPM 

nursing 

case-mix 

group 

Nursing 

case-mix 

index 

ES3 .................. Tracheostomy & Ventilator................................................................................... .................... .................... 0–14 ES3 4.04 

ES2 .................. Tracheostomy or Ventilator................................................................................... .................... .................... 0–14 ES2 3.06 

ES1 .................. Infection .......................... .................................................................................. .................... .................... 0–14 ES1 2.91 

HE2/HD2 ......... ......................................... Serious medical conditions e.g. comatose, septicemia, respiratory therapy.Yes ............. .................... 0–5 HDE2 2.39 

HE1/HD1 ......... ......................................... Serious medical conditions e.g. comatose, septicemia, respiratory therapy.No ............... .................... 0–5 HDE1 1.99 

HC2/HB2 ......... ......................................... Serious medical conditions e.g. comatose, septicemia, respiratory therapy.Yes ............. .................... 6–14 HBC2 2.23 

HC1/HB1 ......... ......................................... Serious medical conditions e.g. comatose, septicemia, respiratory therapy.No ............... .................... 6–14 HBC1 1.85 

LE2/LD2 ........... ......................................... Serious medical conditions e.g. radiation therapy or 

dialysis.

Yes ............. .................... 0–5 LDE2 2.07 

LE1/LD1 ........... ......................................... Serious medical conditions e.g. radiation therapy or 

dialysis.

No ............... .................... 0–5 LDE1 1.72 

LC2/LB2 ........... ......................................... Serious medical conditions e.g. radiation therapy or 

dialysis.

Yes ............. .................... 6–14 LBC2 1.71 

LC1/LB1 ........... ......................................... Serious medical conditions e.g. radiation therapy or 

dialysis.

No ............... .................... 6–14 LBC1 1.43 

CE2/CD2 ......... ......................................... Conditions requiring complex medical care e.g. 

pneumonia, surgical wounds, burns.

Yes ............. .................... 0–5 CDE2 1.86 

CE1/CD1 ......... ......................................... Conditions requiring complex medical care e.g. 

pneumonia, surgical wounds, burns.

No ............... .................... 0–5 CDE1 1.62 

CC2/CB2 ......... ......................................... Conditions requiring complex medical care e.g. 

pneumonia, surgical wounds, burns.

Yes ............. .................... 6–14 CBC2 1.54 

CA2 .................. ......................................... Conditions requiring complex medical care e.g. 

pneumonia, surgical wounds, burns.

Yes ............. .................... 15–16 CA2 1.08 

CC1/CB1 ......... ......................................... Conditions requiring complex medical care e.g. 

pneumonia, surgical wounds, burns.

No ............... .................... 6–14 CBC1 1.34 

CA1 .................. ......................................... Conditions requiring complex medical care e.g. 

pneumonia, surgical wounds, burns.

No .............. .................... 15–16 CA1 0.94 

BB2/BA2 .......... ......................................... Behavioral or cognitive symptoms ........................... .................... 2 or more ... 11–16 BAB2 1.04 

BB1/BA1 .......... ......................................... Behavioral or cognitive symptoms ........................... .................... 0–1 ............. 11–16 BAB1 0.99 

PE2/PD2 .......... ......................................... Assistance with daily living and general supervision .................... 2 or more ... 0–5 PDE2 1.57 


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TABLE 26—NURSING INDEXES UNDER PDPM CLASSIFICATION MODEL—Continued 

RUG–IV nursing 

RUG Extensive services Clinical conditions Depression 

Number of 

restorative 

nursing 

services 

GGbased 

function 

score 

PDPM 

nursing 

case-mix 

group 

Nursing 

case-mix 

index 

PE1/PD1 .......... ......................................... Assistance with daily living and general supervision .................... 0–1 ............. 0–5 PDE1 1.47 

PC2/PB2 .......... ......................................... Assistance with daily living and general supervision .................... 2 or more ... 6–14 PBC2 1.21 

PA2 .................. ......................................... Assistance with daily living and general supervision .................... 2 or more ... 15–16 PA2 0.70 

PC1/PB1 .......... ......................................... Assistance with daily living and general supervision .................... 0–1 ............. 6–14 PBC1 1.13 

PA1 .................. ......................................... Assistance with daily living and general supervision .................... 0–1 ............. 15–16 PA1 0.66 

As with the previously discussed 

components, we stated that all residents 

would be classified into one and only 

one of these 25 nursing case-mix groups 

under the proposed PDPM. As 

explained in the proposed rule (83 FR 

21055), we also used the STRIVE data 

to quantify the effects of an HIV/AIDS 

diagnosis on nursing resource use. We 

controlled for case mix by including the 

proposed PDPM resident groups (in this 

case, the nursing RUGs) as independent 

variables. The results showed that even 

after controlling for nursing RUG, HIV/ 

AIDS status is associated with a positive 

and significant increase in nursing 

utilization. Based on the results of 

regression analyses, we found that 

wage-weighted nursing staff time is 18 

percent higher for residents with HIV/

AIDS. (The estimate of average wageweighted nursing staff time for the SNF 

population was adjusted to account for 

the deliberate over-sampling of certain 

sub-populations in the STRIVE study. 

Specifically, we applied sample weights 

from the STRIVE dataset equal to the 

inverse of each resident’s probability of 

selection to permit calculation of an 

unbiased estimate.) Based on these 

findings, as discussed in the proposed 

rule, we concluded that the proposed 

PDPM nursing groups may not fully 

capture the additional nursing costs 

associated with HIV/AIDS residents. 

More information on this analysis can 

be found in section 3.8.2. of the SNF 

PDPM technical report (available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html). Thus, 

as part of the case-mix adjustment of the 

nursing component, we proposed an 18 

percent increase in payment for the 

nursing component for residents with 

HIV/AIDS. We stated that this 

adjustment would be applied based on 

the presence of ICD–10–CM code B20 

on the SNF claim. In cases where a 

resident is coded as having this 

diagnosis, we stated that the nursing 

component per diem rate for this 

resident would be multiplied by 1.18, to 

account for the 18 percent increase in 

nursing costs for residents with this 

diagnosis. We also discussed this 

proposal, as well as its relation to the 

existing AIDS add-on payment under 

RUG–IV, in section V.I. of the proposed 

rule. 

We invited comments on the 

approach we proposed to classify 

residents for nursing payment under the 

proposed PDPM. 

Commenters submitted the following 

comments related to the proposed rule’s 

discussion of the classification of 

residents for nursing payment under the 

PDPM. A discussion of these comments, 

along with our responses, appears 

below. 

Comment: One commenter supported 

the nursing case-mix classification 

model that would be used under PDPM, 

specifically citing the nursing function 

score refinements and using a separate 

function score for the therapy 

components than would be used for the 

nursing component. This commenter 

also requested that CMS consider 

aligning the nursing classification under 

PDPM with certain hospice criteria. 

Finally, one commenter expressed 

concern regarding the collapsing of 

nursing groups to only 25 groups and 

that these groups may not accurately 

account for the variety of patient 

conditions. 

Response: We appreciate the support 

for the nursing component classification 

criteria. We can examine the hospice 

criteria specified by the commenter for 

future consideration. With regard to the 

comment on the collapsed nursing 

groups, we believe that, given that we 

collapsed groups primarily based on 

functional score bins and did not 

collapse any of the general nursing 

group categories (such as extensive 

services and special care high), we 

believe that the level of granularity in 

the nursing classifications is not 

significantly impacted. As stated in the 

proposed rule (83 FR 21052) and in 

section 3.6.1 of the SNF PDPM technical 

report, we collapsed groups based on 

function score due to the observation 

that among nursing RUGs defined by the 

same clinical traits, nursing resource 

use is similar across contiguous 

functional score bins (for example, 11– 

14 and 15–16). Since WWST does not 

vary markedly between nursing RUGs 

defined by contiguous functional score 

bins, collapsing groups based on 

functional score bins simplifies the 

payment model without a notable loss 

in accuracy. Therefore, we believe that 

25 nursing rugs sufficiently captures 

variation in patient conditions. 

Comment: Several commenters 

questioned the appropriateness of using 

staff-time measurement data from the 

STRIVE study to estimate relative 

differences in nursing utilization across 

the nursing groups given the age of the 

data, methodological flaws in the 

collection of therapy minutes, and small 

sample sizes for certain resident groups 

used to estimate CMIs. Additionally, 

one commenter stated that the STRIVE 

study underestimates the nursing needs 

of residents by only measuring the usual 

nursing time provided to residents in 

the sampled homes. The commenter 

further stated that the STRIVE study did 

not take into account nursing time 

needed to assure resident safety and 

maintain resident well-being. The 

commenter expressed concern that 

basing nursing payment on STRIVE data 

will provide inadequate reimbursement, 

which will result in understaffing. A 

couple of commenters recommended 

replacing STRIVE with the Schnelle et 

al. 2016 simulation model to estimate 

nursing resource requirements. 

Response: Unlike the therapy and 

NTA charges, nursing charges are 

reported on SNF claims as part of 

routine revenue centers, which also 

include non-case mix services such as 

room and board, rather than revenue 

centers specific to nursing. Due to the 

lack of resident-specific nursing 

charges, we used WWST from STRIVE 

data as a measure of nursing resource 

use in limited instances. Specifically, 

STRIVE data was not used to select 

determinants of payment for the nursing 

component. We only used STRIVE data 

to update case-mix indexes for the 

nursing component, so that nursing 

CMIs were calculated based on the 

entire SNF population rather than only 

on non-rehabilitation residents. We 

conducted a series of investigations into 

possible changes in resident 

characteristics from the time of the 

STRIVE study (2006) to fiscal year 2014 


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to determine if resident characteristics 

had changed in a manner that would 

suggest it would not be appropriate to 

use data from the STRIVE study in 

designing payment alternatives. The 

resident characteristics investigated 

include, but not limited to, most 

common Major Diagnostic Categories 

(MDC), percent of stays with 

complications or comorbidities in the 

qualifying inpatient stay, and frequency 

of MDS section I active diagnoses. The 

result of the investigations suggest that 

although there are small changes in 

prior inpatient hospital stay and SNF 

stay lengths, there have not been notable 

changes in resident characteristics or 

acuity over time. Given the stability of 

resident characteristics over time, there 

is no strong evidence of change in the 

relative resource utilization pattern 

among nursing groups since the time of 

STRIVE study in 2006. 

In response to the concern about the 

methodology in collecting therapy 

minutes, we note that we only used 

nursing time to estimate CMIs for the 

nursing component under PDPM. 

Because therapy minutes were not 

included in the nursing staff time 

measure, concerns about how the 

STRIVE study collected therapy 

utilization data are not relevant to our 

use of STRIVE data to estimate nursing 

CMIs under PDPM. 

As for the comments on the small 

sample sizes of certain resident groups 

in the STRIVE study, as detailed in 

section 4.1.2 of the STRIVE Phase II 

Report available at https://

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

TimeStudy.html, the STRIVE study used 

several procedures to address these 

concerns. First, STRIVE researchers 

deliberately over-sampled certain 

vulnerable resident groups to obtain 

more robust estimates of resource 

utilization for these subpopulations. 

Second, the STRIVE authors applied 

sample weights to obtain reliable 

population estimates. Because the 

proportion of facilities included in the 

study varied from state to state, the 

study population was not truly random. 

To account for this, the study developed 

sampling weights equal to the inverse of 

a resident’s probability of selection for 

inclusion in the study population. The 

use of sampling weights allows the 

calculation of unbiased population 

estimates from the sample data, as 

described in section 4.1.2 of the STRIVE 

Phase II Report. 

With regard to the comment stating 

concerns about how the STRIVE study 

measured nursing time, it is unclear 

what the commenter means by ‘‘usual 

nursing time’’ and ‘‘nursing time needed 

to assure resident safety and maintain 

resident well-being.’’ As discussed in 

the STRIVE Phase I and Phase II reports 

available at https://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/SNFPPS/TimeStudy.html, the 

STRIVE study collected three kinds of 

staff time: Resident Specific Time (RST), 

Non-Resident Specific Time (NRST), 

and Non-Study Time (NST). It was not 

appropriate to include NST in the 

dependent variable used to measure 

nursing utilization because these 

minutes did not benefit residents in the 

study population. As for NRST, while 

these minutes did benefit the study 

population, there are numerous 

methodological issues involved in 

including these minutes in the 

dependent variable. As noted in the 

STRIVE Phase II Report available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/TimeStudy.html, for many 

types of NRST, it is not clear how to 

allocate these non-resident specific 

minutes to specific residents. The 

STRIVE authors note that during 

development of RUG–III, NRST was 

allocated to individual residents in 

proportion to a resident’s RST, based on 

the assumption that a resident’s 

utilization of NRST was proportional to 

their utilization of RST. However, as the 

STRIVE authors note, this assumption 

may not be accurate. Accurate allocation 

of NRST would have involved extensive 

additional data collection that was 

beyond the scope of the STRIVE study. 

Without confidence in the allocation 

methodology, including NRST in the 

dependent variable for nursing would 

have introduced substantial noise into 

the dependent variable that could 

obscure the relationships between 

resident characteristics and resource 

utilization. As a result, the STRIVE 

authors decided to set relative payment 

weights based on RST alone. However, 

we disagree with the commenter if they 

are suggesting that excluding NRST 

leads us to underestimate nursing 

utilization. As noted in the STRIVE 

Phase II Report, the STRIVE study was 

only used to allocate nursing resources 

based on estimated relative resource 

utilization. It did not determine 

aggregate nursing resources, which are 

largely determined based on the 

methodology for setting and updating 

the federal per diem rates as specified 

in the Act. Therefore, it is incorrect to 

assert that relying on the STRIVE data 

for case-mix adjustment leads to 

inadequate nursing reimbursement 

since STRIVE is used to determine 

allocation of nursing resources rather 

than total nursing resources. 

In response to the alternative data 

source proposed by commenters, the 

Schnelle et al. simulation model 

estimates resource use for nurse aides 

only; therefore, it is not a 

comprehensive or appropriate measure 

of nursing utilization. 

Accordingly, after considering the 

comments received, for the reasons 

discussed in the proposed rule and in 

this final rule, we are finalizing our 

proposals, without modification, 

relating to the methodology, as 

described in this section, for classifying 

patients under the nursing component 

of PDPM. 

e. Non-Therapy Ancillary Case-Mix 

Classification 

Under the current SNF PPS, payments 

for NTA costs incurred by SNFs are 

incorporated into the nursing 

component. This means that the CMIs 

used to adjust the nursing component of 

the SNF PPS are intended to reflect not 

only differences in nursing resource use 

but also NTA costs. However, as we 

explained in the proposed rule (83 FR 

21055), there have been concerns that 

the current nursing CMIs do not 

accurately reflect the basis for or the 

magnitude of relative differences in 

resident NTA costs. In its March 2016 

Report to Congress, MedPAC wrote: 

‘‘Almost since its inception, the SNF 

PPS has been criticized for encouraging 

the provision of unnecessary 

rehabilitation therapy services and not 

accurately targeting payments for 

nontherapy ancillary (NTA) services 

such as drugs (Government 

Accountability Office 2002, Government 

Accountability Office 1999, White et al. 

2002)’’ (available at http://medpac.gov/ 

docs/default-source/reports/chapter-7- 

skilled-nursing-facility-services-march2016-report-.pdf). In the proposed rule, 

we stated that while the proposed PT, 

OT, and SLP components were designed 

to address the issue related to provision 

of therapy services raised by MedPAC 

above, the proposed NTA component 

was designed to address the issue 

related to accurately targeting payments 

for NTA services—specifically, that the 

current manner of using the RUG–IV 

case-mix system to determine NTA 

payment levels inadequately adjusts for 

relative differences in resident NTA 

costs. 

As noted in the quotation from 

MedPAC above, MedPAC is not the only 

group to offer this critique of the SNF 

PPS. We stated in the proposed rule that 

just as the aforementioned criticisms 

that MedPAC cited have existed almost 

since the inception of the SNF PPS 

itself, ideas for addressing this concern 

have a similarly long history. In 


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response to comments on the 1998 

interim final rule which served to 

establish the SNF PPS, we published a 

final rule on July 30, 1999 (64 FR 

41644). In this 1998 interim final rule, 

we acknowledged the commenters’ 

concerns about the new system’s ability 

to account accurately for NTA costs, 

stating that there were a number of 

comments expressing concern with the 

adequacy of the PPS rates to cover the 

costs of ancillary services other than 

occupational, physical, and speech 

therapy (non-therapy ancillaries), 

including such things as drugs, 

laboratory services, respiratory therapy, 

and medical supplies. We stated in the 

1998 interim final rule that prescription 

drugs or medication therapy were 

frequently noted areas of concern due to 

their potentially high cost for particular 

residents. Some commenters suggested 

that the RUG–III case-mix classification 

methodology did not adequately 

provide for payments that account for 

the variation in, or the real costs of, 

these services provided to their 

residents. (64 FR 41647) 

In response to those comments, we 

stated in the 1998 interim final rule that 

‘‘we are funding substantial research to 

examine the potential for refinements to 

the case-mix methodology, including an 

examination of medication therapy, 

medically complex patients, and other 

nontherapy ancillary services’’ (64 FR 

41648). In the FY 2019 SNF PPS 

proposed rule (83 FR 21055 through 

21056), we proposed a methodology that 

we believe would case-mix adjust SNF 

PPS payments more appropriately to 

reflect differences in NTA costs. 

Following the same methodology we 

used for the proposed PT, OT, and SLP 

components, the project team ran cost 

regression models to determine which 

resident characteristics may be 

predictive of relative increases in NTA 

costs. As explained in the proposed 

rule, the three categories of cost-related 

resident characteristics identified 

through this analysis were resident 

comorbidities, the use of extensive 

services (services provided to residents 

that are particularly expensive and/or 

invasive), and resident age. However, as 

discussed in the proposed rule, we 

removed age from further consideration 

as part of the NTA component based on 

concerns shared by TEP panelists 

during the June 2016 TEP. Particularly, 

some panelists expressed concern that 

including age as a determinant of NTA 

payment could create access issues for 

older populations. Additionally, we 

state that the CART algorithm used to 

explore potential resident groups for the 

NTA component only selected age as a 

determinant of classification for 2 of the 

7 groups created. We noted that we also 

tested a classification option that used 

age as a determinant of classification for 

every NTA group. This only led to a 5 

percent increase in the R-squared value 

of the NTA classification. More 

information on these analyses can be 

found in section 3.7.1. of the SNF PMR 

technical report available at https://

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

therapyresearch.html. 

As we explained in the proposed rule 

(83 FR 21056), with regard to capturing 

comorbidities and extensive services 

associated with high NTA utilization, 

we used multiple years of data (FY 2014 

to FY 2017) to estimate the impact of 

comorbidities and extensive services on 

NTA costs. This was in response to 

comments on the ANPRM that the 

design of the NTA component should be 

more robust and remain applicable in 

light of potential changes in the SNF 

population and care practices over time. 

We explained in the proposed rule that 

conditions and services were defined in 

three ways. First, clinicians identified 

MDS items that correspond to 

conditions/extensive services likely 

related to NTA utilization. However, we 

stated that since many conditions/

extensive services related to NTA 

utilization are not included on the MDS 

assessment, we then mapped ICD–10 

diagnosis codes from the prior inpatient 

claim, the first SNF claim, and section 

I8000 of the 5-day MDS assessment to 

condition categories from the Part C risk 

adjustment model (CCs) and the Part D 

risk adjustment model (RxCCs). The CCs 

and RxCCs define conditions by 

aggregating related diagnosis codes into 

a single condition flag. We use the 

condition flags defined by the CCs and 

RxCCs to predict Part A and B 

expenditures or Part D expenditures, 

respectively for Medicare beneficiaries. 

The predicted relationship between the 

conditions defined in the respective 

models and Medicare expenditures is 

then used to risk-adjust capitated 

payments to Part C and Part D sponsors. 

Similarly, we explained that our 

comorbidities investigation aimed to use 

a comprehensive list of conditions and 

services to predict resource utilization 

for beneficiaries in Part A-covered SNF 

stays. As we stated in the proposed rule, 

ultimately, the predicted relationship 

between these conditions/services and 

utilization of NTA services would be 

used to case-mix adjust payments to 

SNF providers, in a process similar to 

risk adjustment of capitated payments. 

Given these similarities, we decided to 

use the diagnosis-defined conditions 

from the Part C and Part D risk 

adjustment models to define conditions 

and services that were not defined on 

the MDS. Because the CCs were 

developed to predict utilization of Part 

A and B services, while the RxCCs were 

developed to predict Part D drug costs, 

the largest component of NTA costs, we 

stated that believe using both sources 

allows us to define the conditions and 

services potentially associated with 

NTA utilization more comprehensively. 

Lastly, we used ICD–10 diagnosis codes 

to define additional conditions that 

clinicians who advised CMS during 

PDPM development identified as being 

potentially associated with increased 

NTA service utilization but are not fully 

reflected in either the MDS or the CCs/ 

RxCCs. The resulting list was meant to 

encompass as many diverse and 

expensive conditions and extensive 

services as possible from the MDS 

assessment, the CCs, the RxCCs, and 

diagnoses. As discussed in the proposed 

rule, using cost regressions, we found 

that certain comorbidity conditions and 

extensive services were highly 

predictive of relative differences in 

resident NTA costs. These conditions 

and services were identified in Table 27 

of the proposed rule (set forth in Table 

27 in this final rule). More information 

on this analysis can be found in section 

3.7.1. of the SNF PDPM technical report 

available at https://www.cms.gov/

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

therapyresearch.html. We noted in the 

proposed rule that certain conditions 

that were associated with higher NTA 

utilization were nevertheless excluded 

from the list because of clinical 

concerns. Esophageal reflux was 

excluded because it is a very common 

condition in the SNF population and 

clinicians noted that coding can be 

discretionary. Migraine headache was 

also excluded due to clinicians’ 

concerns about coding reliability. 

Additionally, we noted that clinicians 

stated that in many cases migraine 

headache is not treated by medication, 

the largest component of NTA costs. 

Having identified the list of relevant 

conditions and services for adjusting 

NTA payments, in the proposed rule (83 

FR 21056 through 21057), we 

considered different options for how to 

capture the variation in NTA costs 

explained by these identified conditions 

and services. We stated that one such 

method would be merely to count the 

number of comorbidities and services a 

resident receives and assign a score to 

that resident based on this count. We 

found that this option accounts for the 

additive effect of having multiple 

comorbidities and extensive services but 


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did not adequately reflect the relative 

differences in the impact of certain 

higher-cost conditions and services. We 

also considered a tier system similar to 

the one used in the IRF PPS, where SNF 

residents would be placed into payment 

tiers based on the costliest comorbidity 

or extensive service. However, we found 

that this option did not account for the 

additive effect noted above. To address 

both of these issues, we proposed basing 

a resident’s NTA score, which would be 

used to classify the resident into an 

NTA case-mix classification group, on a 

weighted-count methodology. 

Specifically, as shown in Table 27, each 

of the comorbidities and services that 

factored into a resident’s NTA 

classification was assigned a certain 

number of points based on its relative 

impact on a resident’s NTA costs. Those 

conditions and services with a greater 

impact on NTA costs were assigned 

more points, while those with less of an 

impact were assigned fewer points. The 

relative impacts are estimated based the 

coefficients of an ordinary least squares 

(OLS) regression that used the selected 

conditions and extensive services to 

predict NTA costs per day. Points were 

assigned by grouping together 

conditions and extensive services with 

similar OLS regression estimates. More 

information on this methodology and 

analysis can be found in section 3.7.1. 

of the SNF PDPM technical report 

available at https://www.cms.gov/

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

therapyresearch.html. We stated that the 

effect of this methodology was that the 

NTA component would adequately 

reflect relative differences in the NTA 

costs for each condition or service, as 

well as the additive effect of having 

multiple comorbidities. 

We stated in the proposed rule (83 FR 

21057) that a resident’s total 

comorbidity score, which would be the 

sum of the points associated with all of 

a resident’s comorbidities and services, 

would be used to classify the resident 

into an NTA case-mix group. For 

conditions and services where the 

source is indicated as MDS item I8000, 

SNF PDPM NTA Comorbidity Mapping 

(which accompanied the FY 2019 SNF 

PPS proposed rule) (available at https:// 

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

therapyresearch.html) provides a 

crosswalk between the listed condition 

and the ICD–10–CM codes which may 

be coded to qualify that condition to 

serve as part of the resident’s NTA 

classification. MDS item I8000 is an 

open-ended item in the MDS assessment 

where the assessment provider can fill 

in additional active diagnoses that are 

not explicitly on the MDS for the 

resident in the form of ICD–10 codes. In 

the case of Parenteral/IV Feeding, we 

stated that we observed that NTA costs 

per day increase as the amount of intake 

through parenteral or tube feeding 

increases. For this reason, we proposed 

to separate this item into a high 

intensity item and a low intensity item, 

similar to how it is defined in the RUG– 

IV system. In order for a resident to 

qualify for the high intensity category, 

the percent of calories taken in by the 

resident by parenteral or tube feeding, 

as reported in item K0710A2 on the 

MDS 3.0, must be greater than 50 

percent. We further stated that in order 

to qualify for the low intensity category, 

the percent of calories taken in by the 

resident by parenteral or tube feeding, 

as reported in item K0710A2 on the 

MDS 3.0, must be greater than 25 

percent but less than or equal to 50 

percent, and the resident must receive 

an average fluid intake by IV or tube 

feeding of at least 501cc per day, as 

reported in item K0710B2 of the MDS 

3.0. 

We also noted that the source of the 

HIV/AIDS diagnosis is listed as the SNF 

claim. We explained in the proposed 

rule that this is because 16 states have 

state laws that prevent the reporting of 

HIV/AIDS diagnosis information to CMS 

through the current assessment system 

and/or prevent CMS from seeing such 

diagnosis information within that 

system, should that information be 

mistakenly reported. We noted that the 

states are Alabama, Alaska, California, 

Colorado, Connecticut, Idaho, Illinois, 

Massachusetts, Nevada, New 

Hampshire, New Jersey, New Mexico, 

South Carolina, Texas, Washington, and 

West Virginia. Given this restriction, it 

would not be possible to have SNFs 

utilize the MDS 3.0 as the vehicle to 

report HIV/AIDS diagnosis information 

for purposes of determining a resident’s 

NTA classification. We noted that the 

current SNF PPS uses a claims reporting 

mechanism as the basis for the 

temporary AIDS add-on payment which 

exists under RUG–IV. To address the 

issue discussed above with respect to 

reporting of HIV/AIDS diagnosis 

information under the proposed PDPM, 

we proposed to utilize this existing 

claims reporting mechanism to 

determine a resident’s HIV/AIDS status 

for the purpose of NTA classification. 

More specifically, we explained that 

HIV/AIDS diagnosis information 

reported on the MDS would be ignored 

by the GROUPER software used to 

classify a resident into an NTA case-mix 

group. Instead, we stated that providers 

would be instructed to locate the HIPPS 

code provided to the SNF on the 

validation report associated with that 

assessment and report it to CMS on the 

associated SNF claim. Following current 

protocol, the provider would then enter 

ICD–10–CM code B20 on the associated 

SNF claim as if it were being coded to 

receive payment through the current 

AIDS add-on payment. The PRICER 

software, which we use to determine the 

appropriate per diem payment for a 

provider based on their wage index and 

other factors, would make the 

adjustment to the resident’s NTA casemix group based on the presence of the 

B20 code on the claim, as well as adjust 

the associated per diem payment based 

on the adjusted resident HIPPS code. 

Again, we noted that this methodology 

follows the same logic that the SNF PPS 

currently uses to pay the temporary 

AIDS add-on adjustment but merely 

changes the target and type of 

adjustment from the SNF PPS per diem 

to the NTA component of the proposed 

PDPM. We explained that the difference 

is that while under the current system, 

the presence of the B20 code would lead 

to a 128 percent increase in the per 

diem rate, under the proposed PDPM, 

the presence of the B20 code would 

mean the addition of 8 points (as 

determined by the OLS regression 

described above) to the resident’s NTA 

score, the categorization of the resident 

into the appropriate NTA group, and an 

adjustment to the nursing component, 

as described in section V.D.3.d. of the 

proposed rule. Section 1888(e)(12) of 

the Act enacted a temporary 128 percent 

increase in the PPS per diem payment 

for SNF residents with HIV/AIDS and 

stipulated that the temporary 

adjustment was to be applied only until 

the Secretary certifies that there is an 

appropriate case-mix adjustment to 

compensate for the increased costs 

associated with this population. As we 

explained in the proposed rule, based 

on this language, we conducted an 

analysis similar to that used to 

determine the HIV/AIDS add-on for the 

nursing component to examine the 

adequacy of payment for ancillary 

services (all non-nursing services: PT, 

OT, SLP, and NTA) for residents with 

HIV/AIDS under the proposed PDPM. 

This analysis determined that after 

accounting for the 8 points assigned for 

HIV/AIDS in the NTA component and 

controlling for case-mix classification 

across the three therapy components 

and NTA component, HIV/AIDS was 

not associated with an increase in 

ancillary costs. We noted that nursing 

costs were not included in this 

regression because we separately 


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investigated the increased nursing 

utilization associated with HIV/AIDS, as 

described in section V.D.3.d. of the 

proposed rule. Based on the results of 

this investigation, we concluded that 

the four ancillary case-mix components 

(PT, OT, SLP, and NTA) adequately 

reimburse costs associated with 

residents with HIV/AIDS. Therefore, we 

stated that we do not believe an HIV/

AIDS add-on is warranted for the 

ancillary cost components. More 

information on this analysis can be 

found in section 3.8.2. of the PDPM 

technical report available at https://

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

therapyresearch.html. 

Table 27 provides the proposed list of 

conditions and extensive services that 

would be used for NTA classification, 

the source of that information, and the 

associated number of points for that 

condition. 

TABLE 27—CONDITIONS AND EXTENSIVE SERVICES USED FOR NTA CLASSIFICATION

Condition/extensive service Source Points 

HIV/AIDS ....................................................................................................................................... SNF Claim ............................... 8 

Parenteral IV Feeding: Level High ................................................................................................ MDS Item K0510A2, K0710A2 7 

Special Treatments/Programs: Intravenous Medication Post-admit Code ................................... MDS Item O0100H2 ................ 5 

Special Treatments/Programs: Ventilator or Respirator Post-admit Code ................................... MDS Item O0100F2 ................. 4 

Parenteral IV feeding: Level Low .................................................................................................. MDS Item K0510A2, K0710A2, 

K0710B2.

3 

Lung Transplant Status ................................................................................................................. MDS Item I8000 ....................... 3 

Special Treatments/Programs: Transfusion Post-admit Code ..................................................... MDS Item O0100I2 .................. 2 

Major Organ Transplant Status, Except Lung .............................................................................. MDS Item I8000 ....................... 2 

Active Diagnoses: Multiple Sclerosis Code .................................................................................. MDS Item I5200 ....................... 2 

Opportunistic Infections ................................................................................................................. MDS Item I8000 ....................... 2 

Active Diagnoses: Asthma COPD Chronic Lung Disease Code .................................................. MDS Item I6200 ....................... 2 

Bone/Joint/Muscle Infections/Necrosis—Except Aseptic Necrosis of Bone ................................. MDS Item I8000 ....................... 2 

Chronic Myeloid Leukemia ............................................................................................................ MDS Item I8000 ....................... 2 

Wound Infection Code .................................................................................................................. MDS Item I2500 ....................... 2 

Active Diagnoses: Diabetes Mellitus (DM) Code .......................................................................... MDS Item I2900 ....................... 2 

Endocarditis ................................................................................................................................... MDS Item I8000 ....................... 1 

Immune Disorders ......................................................................................................................... MDS Item I8000 ....................... 1 

End-Stage Liver Disease .............................................................................................................. MDS Item I8000 ....................... 1 

Other Foot Skin Problems: Diabetic Foot Ulcer Code .................................................................. MDS Item M1040B .................. 1 

Narcolepsy and Cataplexy ............................................................................................................ MDS Item I8000 ....................... 1 

Cystic Fibrosis ............................................................................................................................... MDS Item I8000 ....................... 1 

Special Treatments/Programs: Tracheostomy Care Post-admit Code ......................................... MDS Item O0100E2 ................ 1 

Active Diagnoses: Multi-Drug Resistant Organism (MDRO) Code .............................................. MDS Item I1700 ....................... 1 

Special Treatments/Programs: Isolation Post-admit Code ........................................................... MDS Item O0100M2 ................ 1 

Specified Hereditary Metabolic/Immune Disorders ....................................................................... MDS Item I8000 ....................... 1 

Morbid Obesity .............................................................................................................................. MDS Item I8000 ....................... 1 

Special Treatments/Programs: Radiation Post-admit Code ......................................................... MDS Item O0100B2 ................ 1 

Highest Stage of Unhealed Pressure Ulcer—Stage 4 ................................................................. MDS Item M0300X1 ................ 1 

Psoriatic Arthropathy and Systemic Sclerosis .............................................................................. MDS Item I8000 ....................... 1 

Chronic Pancreatitis ...................................................................................................................... MDS Item I8000 ....................... 1 

Proliferative Diabetic Retinopathy and Vitreous Hemorrhage ...................................................... MDS Item I8000 ....................... 1 

Other Foot Skin Problems: Foot Infection Code, Other Open Lesion on Foot Code, Except Diabetic Foot Ulcer Code.MDS Item M1040A, M1040B, 

M1040C.

1 

Complications of Specified Implanted Device or Graft ................................................................. MDS Item I8000 ....................... 1 

Bladder and Bowel Appliances: Intermittent Catheterization ....................................................... MDS Item H0100D .................. 1 

Inflammatory Bowel Disease ........................................................................................................ MDS Item I8000 ....................... 1 

Aseptic Necrosis of Bone .............................................................................................................. MDS Item I8000 ....................... 1 

Special Treatments/Programs: Suctioning Post-admit Code ....................................................... MDS Item O0100D2 ................ 1 

Cardio-Respiratory Failure and Shock .......................................................................................... MDS Item I8000 ....................... 1 

Myelodysplastic Syndromes and Myelofibrosis ............................................................................ MDS Item I8000 ....................... 1 

Systemic Lupus Erythematosus, Other Connective Tissue Disorders, and Inflammatory 

Spondylopathies.

MDS Item I8000 ....................... 1 

Diabetic Retinopathy—Except Proliferative Diabetic Retinopathy and Vitreous Hemorrhage ..... MDS Item I8000 ....................... 1

Nutritional Approaches While a Resident: Feeding Tube ............................................................. MDS Item K0510B2 ................. 1 

Severe Skin Burn or Condition ..................................................................................................... MDS Item I8000 ....................... 1 

Intractable Epilepsy ....................................................................................................................... MDS Item I8000 ....................... 1 

Active Diagnoses: Malnutrition Code ............................................................................................ MDS Item I5600 ....................... 1 

Disorders of Immunity—Except: RxCC97: Immune Disorders ..................................................... MDS Item I8000 ....................... 1 

Cirrhosis of Liver ........................................................................................................................... MDS Item I8000 ....................... 1 

Bladder and Bowel Appliances: Ostomy ...................................................................................... MDS Item H0100C .................. 1 

Respiratory Arrest ......................................................................................................................... MDS Item I8000 ....................... 1 

Pulmonary Fibrosis and Other Chronic Lung Disorders ............................................................... MDS Item I8000 ....................... 1 

Given the NTA scoring methodology 

described in the proposed rule (83 FR 

21058 through 21059) and above, and 

following the same methodology used 

for the PT, OT, and SLP components, 

we used the CART algorithm to 

determine the most appropriate splits in 

resident NTA case-mix groups. This 

methodology is more thoroughly 

explained in sections 3.4.2. and 3.7.2. of 

the SNF PDPM technical report 

available at https://www.cms.gov/

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

therapyresearch.html. Based on the 


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breakpoints generated by the CART 

algorithm, we determined that 6 casemix groups would be necessary to 

classify residents adequately in terms of 

their NTA costs in a manner that 

captures sufficient variation in NTA 

costs without creating unnecessarily 

granular separations. As discussed in 

the proposed rule, we made certain 

administrative decisions that further 

refined the NTA case-mix classification 

groups beyond those produced through 

use of the CART algorithm but 

maintained the CART output predictive 

accuracy. We explained that the 

proposed NTA case-mix classification 

departs from the CART comorbidity 

score bins in grouping residents with a 

comorbidity score of 1 with residents 

with scores of 2 instead of with 

residents with scores of 0. This is to 

maintain the distinction between 

residents with no comorbidities and the 

rest of the population. In addition, we 

grouped residents with a score of 5 

together with residents with scores of 3 

to 4 based on their similarity in average 

NTA costs per day. More information on 

this analysis can be found in section 

3.7.2. of the SNF PDPM technical report 

available at https://www.cms.gov/

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

therapyresearch.html. We provided the 

criteria for each of these groups along 

with its CMI in Table 28 of the proposed 

rule (set forth in Table 28 of this final 

rule). 

We stated in the proposed rule (83 FR 

21059) that to help ensure payment 

reflects the average relative resource use 

at the per diem level, CMIs would be set 

to reflect relative case-mix related 

differences in costs across groups. We 

further stated that this method helps 

ensure that the share of payment for 

each case-mix group would be equal to 

its share of total costs of the component. 

CMIs for the NTA component were 

calculated based on two factors. One 

factor was the average per diem costs of 

a case-mix group relative to the 

population average. The other factor 

was the average variable per diem 

adjustment factor of the group relative 

to the population average. In this 

calculation, average per diem costs 

equaled total NTA costs in the group 

divided by number of utilization days in 

the group. Similarly, the average 

variable per diem adjustment factor 

equaled the sum of NTA variable per 

diem adjustment factors for all 

utilization days in the group divided by 

the number of utilization days in the 

group. We calculated CMIs such that 

they equaled the ratio of relative average 

per diem costs for a group to the relative 

average variable per diem adjustment 

factor for the group. In this calculation, 

relative average per diem costs and the 

relative average variable per diem 

adjustment factor were weighted by 

length of stay to account for the 

different length of stay distributions 

across case-mix groups (as further 

discussed in section 3.11.1. of the SNF 

PDPM technical report, available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html). After 

calculating CMIs as described above, we 

then applied adjustments to ensure that 

the distribution of resources across 

payment components was aligned with 

the statutory base rates as discussed in 

section V.D.3.b. of the proposed rule. 

We also applied a parity adjustment by 

multiplying the CMIs by the ratio of 

case-mix-related payments in RUG–IV 

over estimated case-mix-related 

payments in PDPM, as further discussed 

in section V.J. of the proposed rule. 

More information on the variable per 

diem adjustment factor is discussed in 

section V.D.4. of the proposed rule. The 

full methodology used to develop CMIs 

is presented in section 3.11. of the SNF 

PDPM technical report (available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html). 

TABLE 28—NTA CASE-MIX

CLASSIFICATION GROUPS

NTA score range 

NTA 

case-mix 

group 

NTA 

case-mix 

index 

12+ .................... NA 3.25 

9–11 .................. NB 2.53 

6–8 .................... NC 1.85 

3–5 .................... ND 1.34 

1–2 .................... NE 0.96 

0 ........................ NF 0.72 

We stated in the proposed rule (83 FR 

21059) that as with the previously 

discussed components, all residents 

would be classified into one and only 

one of these 6 NTA case-mix groups 

under the proposed PDPM. We 

explained that the proposed PDPM 

would create a separate payment 

component for NTA services, as 

opposed to combining NTA and nursing 

into one component as in the RUG–IV 

system. This separation would allow 

payment for NTA services to be based 

on resident characteristics that predict 

NTA resource utilization rather than 

nursing staff time. Thus, we stated that 

we believe the proposed NTA case-mix 

groups would provide a better measure 

of resource utilization and lead to more 

accurate payments under the SNF PPS. 

We invited comments on the 

approach proposed above to classify 

residents for NTA payment under the 

proposed PDPM. 

Commenters submitted the following 

comments related to the proposed rule’s 

discussion of the classification of 

residents for NTA payment under the 

PDPM. A discussion of these comments, 

along with our responses, appears 

below. 

Comment: A few commenters 

recommended CMS include additional 

conditions as comorbidities for NTA 

classification and payment, including: 

Parkinson’s disease, non-refractory 

epilepsy/seizure disorders, and mental 

health conditions that bear a strong 

relationship to NTA utilization. One 

commenter recommended that CMS 

include all conditions associated with 

higher NTA costs, not only the 50 

costliest comorbidities. Another 

commenter suggested implementing a 

periodic review process to update the 

NTA comorbidity list based on changes 

in care practices. One commenter 

recommended CMS add cardiorespiratory failure and shock, 

respiratory arrest, pulmonary fibrosis or 

other chronic lung disorders, oxygen 

therapy, and non-invasive ventilation 

(for example, BiPAP/CPAP) to the NTA 

comorbidity list, as these conditions/

services reflect medical complexity and 

high acuity. Another commenter stated 

that NTA comorbidities should include 

wound care and all pressure ulcers, not 

only stage 4 pressure ulcers. 

Response: As described in section 

3.7.1 of the SNF PDPM technical report, 

we investigated a broad list of 

conditions and services as potential 

NTA comorbidities, defined using MDS 

items, ICD–10–CM diagnoses, and CCs 

and RxCCs from the Medicare Parts C 

and D risk adjustment models. We used 

MDS item I5300 to identify residents 

with Parkinson’s disease, RxCC 164 to 

identify residents with non-refractory 

epilepsy, CC 84 to identify residents 

with cardio-respiratory failure and 

shock, CC 83 to identify residents with 

respiratory arrest, CC 112 and RxCC 227 

to identify residents with pulmonary 

fibrosis or other chronic lung disorders, 

MDS item M1200F to identify residents 

receiving wound care, and MDS item 

M0300X1 to identify residents with a 

pressure ulcer. For mental health 

conditions, we used RxCC 135 to 

identify residents with anxiety, RxCC 

133 to identify residents with specified 

anxiety, personality, and behavior 

disorders, RxCC 132 and 134 to identify 

residents with depression, CC 58 to 

identify residents with Major 

Depressive, Bipolar, and Paranoid 

Disorder, CC 57, RxCC 130 to identify 


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residents with schizophrenia, CC 54 to 

identify residents with drug or alcohol 

psychosis, and CC 55 to identify 

residents with drug or alcohol 

dependence. Neither Parkinson’s 

disease, non-refractory epilepsy, 

pulmonary fibrosis or other chronic 

lung disorders, nor any mental health 

condition were among the top 50 

costliest conditions/services in terms of 

NTA utilization. Non-refractory 

epilepsy was associated with an 

increase of about $1.60 in NTA costs per 

day, while Parkinson’s disease was 

associated with an increase of about 

$2.50 in NTA costs per day and 

pulmonary fibrosis or other chronic 

lung disorders were associated with an 

increase of about $4 per day in NTA 

costs. Wound care was associated with 

an increase of about $2 in NTA costs per 

day, while stage 3 pressure ulcers (the 

next highest level of severity after stage 

4) were associated with an increase of 

about $1 in NTA costs per day. Among 

mental health conditions, major 

depression was the most costly and 

associated with an increase of about $4 

per day in NTA costs. The other mental 

health conditions were associated with 

less than $2 in NTA costs per day. In 

contrast, the least costly comorbidity 

included in the final list of included 

comorbidities for NTA classification 

and payment was associated with an 

increase of about $4.50 in NTA costs per 

day. Therefore, these conditions were 

not included as NTA comorbidities. On 

the other hand, cardio-respiratory 

failure and shock, as well as respiratory 

arrest were found to be among the 50 

costliest conditions in terms of NTA 

utilization. Therefore, these two 

conditions were included in the final 

list of NTA comorbidities. As for oxygen 

therapy and non-invasive ventilation 

such as BiPAP and CPAP, clinicians 

advised CMS that it was not appropriate 

to include these services in the payment 

model because their inclusion would 

likely lead to inappropriate provision of 

these services in excess of clinical need. 

We do not believe it is appropriate to 

include conditions/services that do not 

have a notable impact on NTA costs per 

day, and therefore, we only included the 

50 costliest comorbidities. 

Comment: A commenter states that 

the points assigned to ventilator care 

should be much higher because this 

service requires 24-hour assistance. 

Additionally, this commenter requests 

CMS modify the term ‘‘ventilator/

respirator’’ to only ‘‘ventilator’’ as the 

term ‘‘respirator’’ is outdated. Another 

commenter recommended further 

evaluation of the proposed point 

assignment, particularly for pressure 

ulcers, diabetic ulcers, respiratory 

failure, severe burns, multi-drug 

resistant organisms, and morbid obesity. 

According to the commenter, these 

items require higher resource utilization 

compared to other conditions/services 

that are assigned the same number of 

points. 

Response: As described in section 

3.7.1 of the SNF PDPM technical report, 

after determining the 50 costliest 

comorbidities in terms of NTA 

utilization, we ran an OLS regression to 

estimate the increase in NTA costs 

associated with each included condition 

or service. We then assigned points to 

each condition/service in proportion to 

the associated increase in NTA costs by 

dividing the coefficient for each 

condition or service by 10 and then 

rounding to the nearest integer. Based 

on this procedure, we assigned 4 points 

to ventilator/respirator care to reflect 

our finding that this service was 

associated with an increase of about $40 

in NTA costs per day. Using the same 

procedure, we assigned 1 point to stage 

4 pressure ulcers, diabetic foot ulcers, 

respiratory failure, severe burns, multidrug resistant organisms, and morbid 

obesity as each of these conditions was 

associated with an increase of roughly 

$10 in NTA costs per day. Therefore, 

our analysis does not support increasing 

the points assigned to these services. 

The nomenclature used to refer to 

ventilator/respirator care under PDPM is 

consistent with the description of this 

service on the current version of the 

MDS 3.0 assessment. We appreciate the 

feedback on the appropriateness of the 

current name and will consider 

modifying the name of this item as 

appropriate to reflect current usage. 

Comment: One commenter states that 

given the theoretical maximum NTA 

score is 83, the highest NTA score bin 

should not be 12+. This commenter 

suggests creating additional score bins 

at the upper end of the score, such as 

12–14, 15–17, and 18+, to more 

accurately reflect residents with highly 

complex conditions and multiple 

extensive services. 

Response: While it is true that some 

stays have very high NTA costs, we find 

that stays with an NTA comorbidity 

score of 12 or above are very rare (about 

1 percent of all stays). As the number of 

stays included in each group declines, 

the magnitude of the standard error 

associated with the estimate of a group’s 

resource utilization increases, raising 

concerns about the precision of these 

estimates. For the foregoing reasons, we 

do not believe it is appropriate to add 

additional NTA groups to include 

residents with extraordinarily high NTA 

utilization at this time. We will also 

consider revisiting both the list of 

included NTA comorbidities and the 

points assigned to each condition/

service based on changes in the resident 

population and care practices over time. 

Comment: Another commenter 

expressed concern that NTA costs, 

especially high-cost cases, are 

impossible to predict through use of 

existing administrative data due to the 

small sample size of these high-cost 

outliers. Since PDPM was developed on 

data that may fail to account for highcost outliers, the commenter believes 

that PDPM is not sufficient to explain 

NTA utilization and will underpay the 

actual high-cost cases that cannot be 

predicted. One commenter questioned 

the validity of current NTA data, stating 

that providers do not accurately record 

NTA costs because these services are 

not important determinants of payment 

under RUG–IV. As a result, current data 

may underestimate NTA costs. 

Therefore, PDPM may not accurately 

reimburse NTA utilization. 

Response: As shown in section 3.7.1 

of the SNF PDPM technical report, 

average NTA costs per day by 

comorbidity score varies from around 

$30 to near $180, which indicates the 

data being used captures great variations 

of NTA costs and includes many 

expensive cases. The NTA comorbidity 

list as shown in Table 27 of the 

proposed rule (83 FR 21058) captures 

comorbidities and services with high 

NTA costs. Moreover the selected 

comorbidities and services meet clinical 

expectations of conditions that are 

expected to require high NTA 

utilization. Although the data available 

may be limited in capturing high-cost 

cases due to the small sample size of 

less common comorbidities, the 

proposed rule (83 FR 21073 through 

21077) and section 3.12 of the SNF 

PDPM technical report show that 

payments for beneficiaries with high 

NTA costs will increase notably under 

PDPM compared with RUG IV. In 

particular, our impact analysis finds 

that payment increases by 27.2 percent 

for residents with 12 or more conditions 

under PDPM compared to RUG–IV. 

Regarding the concern that current 

administrative data may not fully 

capture NTA utilization for the SNF 

population, first, as described in Section 

3.2.2. of the SNF PDPM technical report, 

we checked the quality of self-reported 

NTA utilization data by comparing 

charges from cost reports and charges 

from claims and verifying that these 

were generally consistent. Second, we 

used four years of data (FYs 2014–2017) 

to identify the conditions and services 

associated with high NTA utilization 

and assign points to these comorbidities 


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reflective of their impact on resource 

use. Using several years of data 

addresses a key concern of commenters 

responding to the 2017 ANPRM and 

ensures a higher level of robustness 

compared to using a single year of data. 

Third, if NTA utilization is indeed 

underreported overall, this should not 

affect relative NTA resource use across 

different types of residents, therefore 

PDPM should still assign payment 

appropriately based on observed relative 

differences in NTA utilization. Fourth, 

clinicians reviewed the proposed NTA 

classification and verified that it accords 

with clinical expectations regarding 

conditions and services that are 

associated with high NTA utilization. 

Finally, as SNF care practices and 

reporting patterns change in response to 

the new payment model and other 

factors, we will consider revising 

elements of PDPM, including the NTA 

comorbidities, to reflect changes in 

relative resource use. 

Comment: One commenter requested 

clarification on the NTA comorbidity 

list change from RCS–I to PDPM. 

Response: The change in the 

comorbidity list from RCS–I to PDPM is 

due to the following: first, we used 4 

years of data (FY2014–FY2017) under 

PDPM instead of a single year of data 

under RCS–I to make the list more 

robust to changes in the SNF population 

and care practices over time; second, we 

added Part D condition categories to 

better capture conditions associated 

with high medication costs; finally, we 

expanded the list to the top 50 

comorbidities to include more 

conditions. 

Comment: One commenter 

recommended that PDPM include an 

NTA default category to accommodate 

new conditions and services for greater 

flexibility. 

Response: We are not clear on how 

such a default category would operate, 

nor what level of reimbursement would 

be appropriate to set for the addition of 

new conditions and services. We would 

need additional information on how 

such a default category could be 

constructed. 

Comment: One commenter expressed 

concern regarding access to novel 

therapies, and encouraged CMS to 

consider adding a new technology addon payment, similar to that done for 

inpatient hospitals, and make additional 

payments to SNFs when new treatment 

options become available. One 

commenter also stated that PDPM does 

not account for new classes of expensive 

medications. 

Response: The points associated with 

each NTA comorbidity under the PDPM 

are based on existing cost data, which 

may be updated in future years to reflect 

the costs of new technologies and 

treatments or new classes of 

medications. Rather than merely 

incentivizing new treatments, we expect 

providers to utilize the best treatments 

for a given patient, which may or may 

not be more costly than existing 

treatments. Further, we note that the 

inpatient hospital PPS’s new technology 

add-on payment is specifically 

authorized by sections 1886(d)(5)(K) 

and (L) of the Act, whereas no similar 

statutory authority exists under the SNF 

PPS. 

Comment: One commenter expressed 

concern that using a patient’s NTA score 

as a first tier classification criterion 

could put providers at risk of late or 

missing IPAs. 

Response: As discussed in section V.D 

of this final rule, the IPA would be an 

optional assessment and, as such, not 

susceptible to late or missed assessment 

penalties. 

Accordingly, after considering the 

comments received, for the reasons 

discussed in the proposed rule and in 

this final rule, we are finalizing the 

proposed NTA component of the PDPM 

and the proposed classification 

methodology for the NTA component, 

without modification. 

f. Payment Classifications Under PDPM 

RUG–IV classifies each resident into a 

single RUG, with a single payment for 

all services. By contrast, the PDPM 

classifies each resident into five 

components (PT, OT, SLP, NTA, and 

nursing) and provide a single payment 

based on the sum of these individual 

classifications. The payment for each 

component would be calculated by 

multiplying the CMI for the resident’s 

group first by the component federal 

base payment rate, then by the specific 

day in the variable per diem adjustment 

schedule (as discussed in section V.D.4 

of the proposed rule and in section 

V.D.4 of this final rule). Additionally, 

for residents with HIV/AIDS indicated 

on their claim, the nursing portion of 

payment would be multiplied by 1.18 

(as discussed in section V.D.3.d. of the 

proposed rule and section V.H of this 

final rule). These payments would then 

be added together along with the noncase-mix component payment rate to 

create a resident’s total SNF PPS per 

diem rate under the PDPM. This section 

describes how two hypothetical 

residents would be classified into 

payment groups under the current 

RUG–IV model and PDPM. To begin, 

consider two residents, Resident A and 

Resident B, with the resident 

characteristics identified in Table 29. 

TABLE 29—HYPOTHETICAL RESIDENT CHARACTERISTICS

Resident characteristics Resident A Resident B 

Rehabilitation Received? ............................................................................................... Yes ..................................... Yes. 

Therapy Minutes ............................................................................................................ 730 ..................................... 730. 

Extensive Services ........................................................................................................ No ....................................... No. 

ADL Score ..................................................................................................................... 9 ......................................... 9. 

Clinical Category ............................................................................................................ Acute Neurologic ................ Major Joint Replacement. 

PT and OT Function Score ........................................................................................... 10 ....................................... 10. 

Nursing Function Score ................................................................................................. 7 ......................................... 7. 

Cognitive Impairment ..................................................................................................... Moderate ............................ Intact. 

Swallowing Disorder? .................................................................................................... No ....................................... No. 

Mechanically Altered Diet? ............................................................................................ Yes ..................................... No. 

SLP Comorbidity? .......................................................................................................... No ....................................... No. 

Comorbidity Score ......................................................................................................... 7 (IV Medication and DM) .. 1 (Chronic Pancreatitis). 

Other Conditions ............................................................................................................ Dialysis ............................... Septicemia. 

Depression? ................................................................................................................... No ....................................... Yes. 

Currently under the SNF PPS, 

Resident A and Resident B would be 

classified into the same RUG–IV group. 

They both received rehabilitation, did 

not receive extensive services, received 

730 minutes of therapy, and have an 


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ADL score of 9. This places the two 

residents into the ‘‘RUB’’ RUG–IV group 

and SNFs would be paid at the same 

rate, despite the many differences 

between these two residents in terms of 

their characteristics, expected care 

needs, and predicted costs of care. 

Under the PDPM, however, these two 

residents would be classified very 

differently. With regard to the PT and 

OT components, Resident A would fall 

into group TO, as a result of his 

categorization in the Acute Neurologic 

group and a function score within the 

10 to 23 range. Resident B, however, 

would fall into group TC for the PT and 

OT components, as a result of his 

categorization in the Major Joint 

Replacement group and a function score 

within the 10 to 23 range. For the SLP 

component, Resident A would be 

classified into group SH, based on his 

categorization in the Acute Neurologic 

group, the presence of moderate 

cognitive impairment, and the presence 

of Mechanically-Altered Diet, while 

Resident B would be classified into 

group SA, based on his categorization in 

the Non-Neurologic group, the absence 

of cognitive impairment or any SLPrelated comorbidity, and the lack of any 

swallowing disorder or mechanicallyaltered diet. For the Nursing 

component, following the existing 

nursing case-mix methodology, Resident 

A would fall into group LBC1, based on 

his use of dialysis services and a 

nursing function score of 7, while 

Resident B would fall into group HBC2, 

due to the diagnosis of septicemia, 

presence of depression, and a nursing 

function score of 7. Finally, with regard 

to NTA classification, Resident A would 

be classified in group NC, with an NTA 

score of 7, while Resident B would be 

classified in group NE, with an NTA 

score of 1. This demonstrates that, 

under the PDPM, more aspects of a 

resident’s unique characteristics and 

needs factor into determining the 

resident’s payment classification, which 

makes for a more resident-centered casemix model while also eliminating, or 

greatly reducing, the number of servicebased factors which are used to 

determine the resident’s payment 

classification. Because this system is 

based on specific resident 

characteristics predictive of resource 

utilization for each component, we 

expect that payments will be better 

aligned with resident need. 

4. Variable per Diem Adjustment 

Factors and Payment Schedule 

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

provides that payments must be 

adjusted for case mix, based on a 

resident classification system which 

accounts for the relative resource 

utilization of different types of 

residents. Additionally, section 

1888(e)(1)(B) of the Act specifies that 

payments to SNFs through the SNF PPS 

must be made on a per-diem basis. 

Currently under the SNF PPS, each RUG 

is paid at a constant per diem rate, 

regardless of how many days a resident 

is classified in that particular RUG. 

However, we explained in the proposed 

rule (83 FR 21060) that during the 

course of the SNF PMR project, analyses 

on cost over the stay for each of the 

case-mix adjusted components revealed 

different trends in resource utilization 

over the course of the SNF stay. These 

analyses utilized costs derived from 

claim charges as a measure of resource 

utilization. Costs were derived by 

multiplying charges from claims by the 

CCRs on facility-level costs reports. As 

described in section V.B.3.b. of the 

proposed rule, costs better reflect 

differences in the relative resource use 

of residents as opposed to charges, 

which partly reflect decisions made by 

providers about how much to charge 

payers for certain services. In examining 

costs over a stay, we stated we found 

that for certain categories of SNF 

services, notably PT, OT and NTA 

services, costs declined over the course 

of a stay. Based on the claim submission 

schedule and variation in the point 

during the month when a stay began, we 

were able to estimate resource use for a 

specific day in a stay. Facilities are 

required to submit monthly claims. 

Each claim covers the period from the 

first day during the month a resident is 

in the facility to the end of the month. 

If a resident was admitted on the first 

day of the month, remains in the 

facility, and continues to have Part A 

SNF coverage until the end of the 

month, the claim for that month will 

include all days in the month. However, 

if a resident is admitted after the first 

day of the month, the first claim 

associated with the resident’s stay will 

be shorter than a month. We stated in 

the proposed rule that to estimate 

resource utilization for each day in the 

stay, we used the marginal estimated 

cost from claims of varying length based 

on random variation in the day of a 

month when a stay began. Using this 

methodology, we observed a decline in 

the marginal estimated cost of each 

additional day of SNF care over the 

course of the stay. We further stated that 

to supplement this analysis, we also 

looked at changes in the number of 

therapy minutes reported in different 

assessments throughout the stay. 

Because therapy minutes are recorded 

on the MDS, the presence of multiple 

assessments throughout the stay 

provided information on changes in 

resource use. For example, it was clear 

whether the number of therapy minutes 

a resident received changed from the 5- 

day assessment to the 14-day 

assessment. We explained that the 

results from this analysis were 

consistent with the cost from claims 

analysis and showed that, on average, 

the number of therapy minutes is lower 

for assessments conducted later in the 

stay. This finding was consistent across 

different lengths of stay. More 

information on these analyses can be 

found in section 3.9. of the SNF PDPM 

technical report and section 3.9. of the 

SNF PMR technical report that 

accompanied the ANPRM, both 

available at https://www.cms.gov/

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

therapyresearch.html. 

As discussed in the proposed rule (83 

FR 21060 through 21061), analyses of 

the SLP component revealed that the 

per diem costs remain relatively 

constant over time, while the PT, OT, 

and NTA component cost analyses 

indicate that the per diem cost for these 

three components decline over the 

course of the stay. We stated in the 

proposed rule that in the case of the PT 

and OT components, costs start higher 

at the beginning of the stay and decline 

slowly over the course of the stay. By 

comparison, the NTA component cost 

analyses indicated significantly 

increased NTA costs at the beginning of 

a stay that then drop to a much lower 

level that holds relatively constant over 

the remainder of the SNF stay. This is 

consistent with how most SNF drug 

costs are typically incurred at the outset 

of a SNF stay. We stated that these 

results indicate that resource utilization 

for PT, OT, and NTA services changes 

over the course of the stay. More 

information on these analyses can be 

found in section 3.9.1. of the SNF PMR 

technical report that accompanied the 

ANPRM available at https://

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

therapyresearch.html. As we stated in 

the proposed rule, we were unable to 

assess potential changes in the level of 

nursing costs over a resident’s stay, in 

particular because nursing charges are 

not separately identifiable in SNF 

claims, and nursing minutes are not 

reported on the MDS assessments. 

However, stakeholders (industry 

representatives and clinicians) at 

multiple TEPs indicated that nursing 

costs tend to remain relatively constant 

over the course of a resident’s stay. 

We explained in the proposed rule 

that constant per diem rates, by 


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definition, do not track variations in 

resource use throughout a SNF stay. We 

stated we believe this may lead to too 

few resources being allocated for SNF 

providers at the beginning of a stay. 

Given the trends in resource utilization 

over the course of a SNF stay discussed 

above, and that section 1888(e)(4)(G)(i) 

of the Act requires the case-mix 

classification system to account for 

relative resource use, we proposed 

adjustments to the PT, OT, and NTA 

components in the proposed PDPM to 

account for changes in resource 

utilization over a stay. These 

adjustments were referred to as the 

variable per diem adjustments. We did 

not propose such adjustments to the 

SLP and nursing components based on 

findings and stakeholder feedback, as 

discussed above, that resource use tends 

to remain relatively constant over the 

course of a SNF stay. 

As noted above and in the proposed 

rule (83 FR 21061), and discussed more 

thoroughly in section 3.9. of the SNF 

PMR technical report that accompanied 

the ANPRM (available at https://

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

therapyresearch.html), PT and OT costs 

decline at a slower rate than the decline 

in NTA costs. Therefore, in addition to 

proposing a variable per diem 

adjustment, we further proposed 

separate adjustment schedules and 

indexes for the PT and OT components 

and the NTA component to reflect more 

closely the rate of decline in resource 

utilization for each component. Table 30 

of the proposed rule provided the 

adjustment factors and schedule that we 

proposed for the PT and OT 

components, while Table 31 of the 

proposed rule provided the adjustment 

factors and schedule that we proposed 

for the NTA component. 

In Table 30 of the proposed rule, the 

adjustment factor for the PT and OT 

components was 1.00 for days 1 to 20. 

We explained that this was because the 

analyses described above indicated that 

PT and OT costs remain relatively high 

for the first 20 days and then decline. 

The estimated daily rates of decline for 

PT and OT costs relative to the initial 

20 days were both 0.3 percent. Thus, we 

stated that a convenient and appropriate 

way to reflect this was to bin days in the 

PT and OT variable per diem 

adjustment schedules such that 

payment declines at less frequent 

intervals, while still reflecting a 0.3 

percent daily rate of decline in PT and 

OT costs. Therefore, we proposed to set 

the adjustment factors such that 

payment would decline 2 percent every 

7 days after day 20 (0.3 * 7 = 2.1). We 

explained that the 0.3 percent rate of 

decline was derived from a regression 

model that estimates the level of 

resource use for each day in the stay 

relative to the beginning of the stay. The 

regression methodology and results are 

presented in section 3.9. of the SNF 

PDPM technical report, available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html. 

As described previously in this 

section and in the proposed rule (83 FR 

21061), NTA resource utilization 

exhibits a somewhat different pattern. 

The analyses described above indicate 

that NTA costs are very high at the 

beginning of the stay, drop rapidly after 

the first 3 days, and remain relatively 

stable from the fourth day of the stay. 

We stated that starting on day 4 of a 

stay, the per diem costs drop to roughly 

one-third of the per diem costs in the 

initial 3 days. We explained that this 

suggests that many NTA services are 

provided in the first few days of a SNF 

stay. Therefore, we proposed setting the 

NTA adjustment factor to 3.00 for days 

1 to 3 to reflect the extremely high 

initial costs, then setting it at 1.00 (twothirds lower than the initial level) for 

subsequent days. We explained that the 

value of the adjustment factor was set at 

3.00 for the first 3 days and 1.00 after 

(rather than, for example, 1.00 and 0.33, 

respectively) for simplicity. The results 

are presented in section 3.9. of the SNF 

PDPM technical report, available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html. 

As we described in the proposed rule 

(83 FR 21061), case-mix adjusted federal 

per diem payment for a given 

component and a given day would be 

equal to the base rate for the relevant 

component (either urban or rural), 

multiplied by the CMI for that resident, 

multiplied by the variable per diem 

adjustment factor for that specific day, 

as applicable. Additionally, as described 

in further detail in section V.D.3.d. of 

the proposed rule, we stated that an 

additional 18 percent would be added to 

the nursing per-diem payment to 

account for the additional nursing costs 

associated with residents who have 

HIV/AIDS. We further explained that 

these payments would then be added 

together along with the non-case-mix 

component payment rate to create a 

resident’s total SNF PPS per diem rate 

under the proposed PDPM. We invited 

comments on the proposed variable per 

diem adjustment factors and payment 

schedules discussed in this section. 

Commenters submitted the following 

comments related to the proposed rule’s 

discussion of the variable per diem 

adjustment factors and payment 

schedules. A discussion of these 

comments, along with our responses, 

appears below. 

Comment: Some commenters 

supported the use of the variable per 

diem adjustment under PDPM. Several 

commenters stated that PDPM, 

specifically the variable per diem 

payment adjustments included in the 

PT, OT, and NTA components, may 

negatively affect access for beneficiaries 

with long stays and complex medical 

needs. These commenters stated that the 

variable per diem payment adjustments 

will encourage early discharges and the 

provision of fewer services. One 

commenter stated that residents with 

chronic conditions may not exhibit a 

trend of declining NTA utilization over 

a stay and that resource utilization for 

these patients is sustained at a relatively 

constant level throughout the stay. The 

commenter states that in these cases, 

variable per diem payment adjustments 

will incentivize facilities to provide less 

expensive medications later in the stay, 

which the commenter states may be 

harmful to the patient. Finally, one 

commenter seeks clarification on the 

rationale for beginning the decline in 

payment for the PT and OT components 

after day 20 of a stay. 

Response: We note that we 

investigated the impact of PDPM on 

various resident subpopulations, 

including residents with many 

expensive comorbidities, multiple 

extensive services, severe cognitive 

impairment, long stays (utilization days 

= 100), stroke, IV medication, diabetes, 

wound infection, amputation/prosthesis 

care, Alzheimer’s, or the presence of 

addictions, bleeding disorders, 

behavioral issues, chronic neurological 

conditions, or bariatric care. CMS 

investigated the potential impact of the 

proposed payment model on these 

subpopulations based on comments 

received in response to the 2017 

ANPRM. For almost all of these 

subpopulations with complex medical 

needs, we found that PDPM is estimated 

to increase payment associated with 

these residents compared to RUG–IV, as 

discussed in the proposed rule (83 FR 

21075) and section 3.12 of the SNF 

PDPM technical report. Thus, we do not 

believe the variable per diem payment 

will negatively affect access for 

beneficiaries with expensive 

comorbidities or complex medical 

needs. We estimated that payment 

associated with very long stays 

(utilization = 100 days) would decline 

by 1.9 percent under PDPM, and we 

obtained similar results for stays longer 

than 90 days. However, this decline in 

payment is a reflection of the lower 

resource utilization per day associated 


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with longer stays. We observed that 

stays longer than 90 days have lower 

therapy and NTA costs per day than 

their shorter counterparts. However, the 

majority of such long stays are 

categorized as ultra-high rehabilitation 

groups in the current case-mix 

classification suggesting potential 

overpayment. Nevertheless, given the 

potential payment reduction for long 

stays, we plan to monitor provider 

behavior closely to identify facilities 

whose beneficiaries experience 

inappropriate early discharge or 

provision of fewer services. 

Regarding the concern about resource 

utilization patterns of residents with 

chronic conditions, we would note that 

as discussed above, we estimated that 

PDPM would actually increase overall 

per-stay payment for many resident 

subpopulations with chronic 

conditions. Further, while payment 

would be highest during the early part 

of a stay, facilities would have 

flexibility to allocate this payment to 

cover costs later in a stay, as they do 

now. Our research, discussed in the 

proposed rule (83 FR 21061) and section 

3.9 of the SNF PDPM technical report, 

revealed that for the average SNF stay, 

NTA utilization declines dramatically 

after the first 3 days of a stay. Of course, 

we acknowledge that there are cases that 

may not match this resource utilization 

pattern exactly. However, we believe 

that PDPM, because it is based on the 

observed relationship between patient 

characteristics and resource utilization, 

represents an improvement over the 

current payment model in terms of 

payment accuracy. Further, as stated, 

our investigations show that for many of 

the specific cases cited by commenters 

as potential concerns, we expect PDPM 

actually to increase associated payment 

compared to RUG–IV. While the 

variable per diem schedule decreases 

pay throughout the stay, the overall 

increase in payment accounts for the 

treatment cost of chronic conditions, 

which is costly due to the sustained 

level of care needed to manage chronic 

conditions. 

As discussed in the proposed rule (83 

FR 21060 through 21061) and section 

3.9 of the SNF PDPM technical report, 

we developed a methodology to 

estimate per-diem resource use over a 

stay for PT, OT, and NTA. Based on this 

methodology, we observed that 

estimated per-diem PT and OT costs 

remain high for the first 20 days of a 

stay and decline thereafter. Therefore, 

we established a variable per diem 

payment adjustment schedule for the PT 

and OT components that begins to 

adjust payment downward beginning on 

day 21. 

Comment: Some commenters 

suggested that CMS consider creating a 

waiver from the variable per diem 

adjustment for NTAs to mitigate 

potential access issues for patients in 

SNF stays that exceed 90 days. 

Additionally, these commenters 

expressed concern that, for long stays, 

the variable per diem payment 

adjustment may erode payments to the 

point where payment for the stay is 

below the cost of providing the 

associated services. Some commenters 

believe that decreasing payment for PT 

and OT over the course of the stay 

without exceptions is not patientcentered and urged CMS to identify 

certain diagnoses associated with longer 

duration of high-intensity therapy 

services as exceptions to the variable 

per diem schedule. Several commenters 

requested clarification on if and how 

CMS intends to monitor the impact of 

the variable per diem adjustment on 

patient access and length of stay, 

expressing concerns that the variable 

per diem adjustment could have a 

disproportionate impact on patients 

with chronic conditions. Finally, one 

commenter believed that reducing 

payments over time through the variable 

per diem adjustment will reduce 

treatment options for stroke and trauma 

victims. 

Response: With regard to the waiver 

for either the PT and OT variable per 

diem adjustment or the NTA variable 

per diem adjustment in cases of long 

stays, we do not believe that such a 

waiver is necessary. While payments do 

reduce over time, as discussed above, 

this reduction is to reflect the decrease 

in patient costs over time. Therefore, 

given the parallel reductions in costs 

and payments, over the course of the 

stay, providers should be adequately 

reimbursed for the provision of care, 

even in cases of long stays. With regard 

to the commenters’ concern regarding 

the impact on stroke and trauma 

patients, as well as those with chronic 

conditions, we do plan to monitor 

closely these types of SNF patients 

under PDPM to identify any adverse 

trends which may result from 

application of the variable per diem 

adjustment. That being said, given that 

we proposed to implement PDPM in a 

budget neutral manner, this means that 

while the overall sum of monies paid 

out under the SNF benefit would not 

change under PDPM, the allocation and 

distribution of that money to individual 

SNFs could change. Given that PT, OT, 

and NTA costs at the beginning of a stay 

tend to be higher than those at the 

middle or end of a stay, most notably in 

the case of long stay patients, 

maintaining a constant per diem rate 

will allocate too few funds at the 

beginning of the stay, thereby increasing 

the chance that the early portions of a 

stay may not be adequately reimbursed. 

By aligning the payments with the cost 

trends, this produces the best chance to 

ensure that providers receive adequate 

and appropriate reimbursement at every 

point in the stay. Finally, as stated 

above, we do plan to monitor the impact 

of this policy and may consider 

revisions to the policy if there is 

evidence of adverse trends either 

systemically or within certain patient 

populations. 

Comment: One commenter questioned 

if CMS would expect the variable per 

diem adjustment to continue until the 

payment reaches zero, for purposes of 

calculating the UPL for the PT and OT 

components. 

Response: As the variable per diem 

adjustment was developed based on 

Medicare Part A data, we cannot speak 

to the ability of the adjustment factor to 

be drawn out past the point of the 

Medicare Part A stay. Moreover, as 

coverage for a Medicare Part A stay 

cannot be longer than 100 days, the 

variable per diem adjustment, for 

purposes of calculating the UPL, would 

go as far as Day 100 in Table 30. 

Accordingly, after considering the 

comments received, for the reasons 

discussed in the proposed rule and in 

this final rule, we are finalizing our 

proposal without modification to apply 

a variable per diem adjustment as part 

of the PDPM effective October 1, 2019. 

Table 30 sets forth the final PDPM 

Variable Per Diem Payment Adjustment 

Factors and Schedule for the PT and OT 

components, and Table 31 sets for the 

final PDPM Variable Per Diem Payment 

Adjustment Factors and Schedule for 

the NTA component. 

TABLE 30—VARIABLE PER-DIEM ADJUSTMENT FACTORS AND SCHEDULE—PT AND OT 

Medicare payment days Adjustment 

factor 

1–20 ...................................... 1.00 

21–27 .................................... 0.98 

28–34 .................................... 0.96 

35–41 .................................... 0.94 

42–48 .................................... 0.92 

49–55 .................................... 0.90 

56–62 .................................... 0.88 

63–69 .................................... 0.86 

70–76 .................................... 0.84 

77–83 .................................... 0.82 

84–90 .................................... 0.80 

91–97 .................................... 0.78 

98–100 .................................. 0.76 


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TABLE 31—VARIABLE PER-DIEM ADJUSTMENT FACTORS AND SCHEDULE—NTA 

Medicare payment days Adjustment 

factor 

1–3 ........................................ 3.0 

4–100 .................................... 1.0 

D. Use of the Resident Assessment 

Instrument—Minimum Data Set, 

Version 3 

1. Revisions to Minimum Data Set 

(MDS) Completion Schedule 

Consistent with section 1888(e)(6)(B) 

of the Act, to classify residents under 

the SNF PPS, we use the MDS 3.0 

Resident Assessment Instrument. 

Within the SNF PPS, there are two 

categories of assessments, scheduled 

and unscheduled. In terms of scheduled 

assessments, SNFs are currently 

required to complete assessments on or 

around days 5, 14, 30, 60, and 90 of a 

resident’s Part A SNF stay, including 

certain grace days. Payments based on 

these assessments depend upon 

standard Medicare payment windows 

associated with each scheduled 

assessment. More specifically, each of 

the Medicare-required scheduled 

assessments has defined days within 

which the Assessment Reference Date 

(ARD) must be set. The ARD is the last 

day of the observation (or ‘‘look-back’’) 

period that the assessment covers for the 

resident. The facility is required to set 

the ARD on the MDS form itself or in 

the facility software within the 

appropriate timeframe of the assessment 

type being completed. The clinical data 

collected from the look-back period is 

used to determine the payment 

associated with each assessment. For 

example, the ARD for the 5-day PPS 

Assessment is any day between days 1 

to 8 (including Grace Days). The clinical 

data collected during the look-back 

period for that assessment is used to 

determine the SNF payment for days 1 

to 14. Unscheduled assessments, such 

as the Start of Therapy (SOT) Other 

Medicare Required Assessment 

(OMRA), the End of Therapy OMRA 

(EOT OMRA), the Change of Therapy 

(COT) OMRA, and the Significant 

Change in Status Assessment (SCSA or 

Significant Change), may be required 

during the resident’s Part A SNF stay 

when triggered by certain defined 

events. 

For example, if a resident is being 

discharged from therapy services, but 

remaining within the facility to 

continue the Part A stay, then the 

facility may be required to complete an 

EOT OMRA. Each of the unscheduled 

assessments affects payment in different 

and defined manners. A description of 

the SNF PPS scheduled and 

unscheduled assessments, including the 

criteria for using each assessment, the 

assessment schedule, payment days 

covered by each assessment, and other 

related policies, are set forth in the MDS 

3.0 RAI manual on the CMS website 

(available at https://downloads.cms.gov/ 

files/MDS-30-RAI-Manual-v115- 

October-2017.pdf). 

Table 32 outlines when each of the 

current SNF PPS assessments is 

required to be completed and its effect 

on SNF PPS payment. 

TABLE 32—CURRENT PPS ASSESSMENT SCHEDULE

Medicare MDS 

assessment schedule type Assessment reference date 

Assessment 

reference 

date grace 

days 

Applicable 

standard medicare 

payment days 

Scheduled PPS assessments 

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

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

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

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

90-day ..................................................................... Days 87–89 ............................................................ 90–93 91 through 100. 

Unscheduled PPS assessments 

Start of Therapy OMRA ................... 5–7 days after the start of therapy .. Date of the first day of therapy through the end of the standard 

payment period. 

End of Therapy OMRA .................... 1–3 days after all therapy has 

ended.

First non-therapy day through the end of the standard payment period. 

Change of Therapy OMRA .............. Day 7 (last day) of the COT observation period.The first day of the COT observation period until end of standard 

payment period, or until interrupted by the next COT–OMRA assessment or scheduled or unscheduled PPS Assessment. 

Significant Change in Status Assessment.No later than 14 days after significant change identified.ARD of Assessment through the end of the standard payment period. 

As we explained in the proposed rule 

(83 FR 21062), an issue which has been 

raised in the past with regard to the 

existing SNF PPS assessment schedule 

is that the sheer number of assessments, 

as well as the complex interplay of the 

assessment rules, significantly increases 

the administrative burden associated 

with the SNF PPS. We stated that casemix classification under the proposed 

SNF PDPM relies to a much lesser 

extent on characteristics that may 

change very frequently over the course 

of a resident’s stay (for example, therapy 

minutes may change due to resident 

refusal or unexpected changes in 

resident status), but instead relies on 

more stable predictors of resource 

utilization by tying case-mix 

classification, to a much greater extent, 

to resident characteristics such as 

diagnosis information. We explained 

that in view of the greater reliance of the 

proposed SNF PDPM (as compared to 

the RUG–IV model) on resident 

characteristics that are relatively stable 

over a stay and our general focus on 

reducing administrative burden for 

providers across the Medicare program, 

we are making an effort to reduce the 

administrative burden on providers by 

concurrently proposing to revise the 

assessments that would be required 

under the proposed SNF PDPM. 

Specifically, we proposed to use the 5- 

day SNF PPS scheduled assessment to 

classify a resident under the proposed 

SNF PDPM for the entirety of his or her 

Part A SNF stay effective beginning FY 


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2020 in conjunction with the 

implementation of the proposed PDPM, 

except as described below. We stated 

that if we were to finalize this proposal, 

we would propose revisions to the 

regulations at § 413.343(b) during the 

FY 2020 rulemaking cycle so that such 

regulations would no longer reflect the 

RUG–IV SNF PPS assessment schedule 

as of the proposed conversion to the 

PDPM on October 1, 2019. 

We also stated in the proposed rule 

(83 FR 21062) that we understand 

Medicare beneficiaries are each unique 

and can experience clinical changes 

which may require a SNF to reassess the 

resident to capture changes in the 

resident’s condition. Therefore, to allow 

SNFs to capture these types of changes, 

effective October 1, 2019 in conjunction 

with the proposed implementation of 

the PDPM, we proposed to require 

providers to reclassify residents as 

appropriate from the initial 5-day 

classification using a new assessment 

called an Interim Payment Assessment 

(IPA), which would be comprised of the 

5-day SNF PPS MDS Item Set (Item Set 

NP). We stated that providers would be 

required to complete an IPA in cases 

where the following two criteria are 

met: 

(1) There is a change in the resident’s 

classification in at least one of the first 

tier classification criteria for any of the 

components under the proposed PDPM 

(which are those clinical or nursing 

payment criteria identified in the first 

column in Tables 21, 23, 26, and 27 of 

the proposed rule), such that the 

resident would be classified into a 

classification group for that component 

that differs from that provided by the 5- 

day scheduled PPS assessment, and the 

change in classification group results in 

a change in payment either in one 

particular payment component or in the 

overall payment for the resident; and 

(2) The change(s) are such that the 

resident would not be expected to 

return to his or her original clinical 

status within a 14-day period. 

In addition, we proposed that the 

Assessment Reference Date (ARD) for 

the IPA would be no later than 14 days 

after a change in a resident’s first tier 

classification criteria is identified. We 

stated that the IPA is meant to capture 

substantial changes to a resident’s 

clinical condition and not everyday, 

frequent changes. We believe 14 days 

gives the facility an adequate amount of 

time to determine whether the changes 

identified are in fact routine or 

substantial. To clarify, we explained 

that the change in classification group 

described above refers not only to a 

change in one of the first tier 

classification criteria in any of the 

proposed payment components, but also 

to one that would be sufficient to 

change payment in either one 

component or in the overall payment for 

the resident. For example, we stated that 

given the collapsed categories under the 

PT and OT components, this would 

mean that a change from the medical 

management group to the cancer group 

would not necessitate an IPA, as they 

are both collapsed under the medical 

management group for purposes of the 

PT and OT components. However, we 

stated a change from the major joint 

replacement group to the medical 

management group would necessitate an 

IPA, as this would change the resident’s 

clinical category group for purposes of 

categorization under the PT and OT 

components and would result in a 

change in payment. 

We stated that we believe the 

proposed requirement to complete an 

IPA balances the need to ensure 

accurate payment and monitor for 

changes in the resident’s condition with 

the importance of ensuring a more 

streamlined assessment approach under 

the proposed PDPM. 

In cases where the IPA is required and 

a facility fails to complete one, we 

proposed that the facility would follow 

the guidelines for late and missed 

unscheduled MDS assessments which 

are explained in Chapters 2.13 and 6.8 

of the MDS RAI Manual (https://

downloads.cms.gov/files/MDS-30-RAIManual-v115-October-2017.pdf). 

Specifically, we stated in the proposed 

rule (83 FR 21063) that if the SNF fails 

to set the ARD within the defined ARD 

window for an IPA, and the resident is 

still in a Part A stay, the SNF would be 

required to complete a late assessment. 

The ARD can be no earlier than the day 

the error was identified. We explained 

that if the ARD on the late assessment 

is set for a date that is prior to the end 

of the time period during which the 

assessment would have controlled the 

payment, had the ARD been set timely, 

the SNF would bill the default rate for 

the number of days that the assessment 

is out of compliance. This is equal to the 

number of days between the day 

following the last day of the available 

ARD window and the late ARD 

(including the late ARD). We provided 

an example where a SNF Part A 

resident, who is in the major joint 

replacement payment category for the 

PT and OT components, develops a skin 

ulcer of such a nature that, in terms of 

developing a care and treatment plan for 

this resident, the skin ulcer takes 

precedence as the resident’s primary 

diagnosis. As a result, the resident’s 

primary diagnosis, as coded in item 

I8000, is for this skin ulcer, which 

would cause him to be classified into 

the medical management category for 

these components. The facility notes 

this clinical change on November 10, 

2018. However, they do not complete 

the IPA until November 26, 2018 which 

is 16 days after the change in criteria 

was identified and two days after the 

ARD window. The facility would bill 

the default rate for the two days that it 

was out of compliance. We stated that 

if the SNF fails to set the ARD for an IPA 

within the defined ARD window for that 

assessment, and the resident has been 

discharged from Part A, the assessment 

is missed and cannot be completed. We 

noted that all days that would have been 

paid by the missed assessment (had it 

been completed timely) are considered 

provider-liable. Taking the example 

above, we stated that if the facility 

recognized the IPA needed to be 

completed after the resident has left the 

building, the facility would be liable for 

all days from November 10, 2018 until 

the date of the resident’s Part A 

Discharge. 

In addition to proposing to require 

completion of the IPA as described 

above, we also considered the 

implications of a SNF completing an 

IPA on the variable per diem adjustment 

schedule described in section V.D.4. the 

proposed rule. More specifically, in the 

proposed rule, we considered whether 

an SNF completing an IPA should cause 

a reset in the variable per diem 

adjustment schedule for the associated 

resident. In examining costs over a stay, 

we found that for certain categories of 

SNF services, notably PT, OT, and NTA 

services, costs declined over the course 

of a stay. Our analyses showed that, on 

average, the number of therapy minutes 

is lower for assessments conducted later 

in the stay. Additionally, we stated that 

we were concerned that by providing for 

the variable per diem adjustment 

schedule to be reset after an IPA is 

completed, providers may be 

incentivized to conduct multiple IPAs 

during the course of a resident’s stay to 

reset the variable per diem adjustment 

schedule each time the adjustment is 

reduced. Therefore, in cases where an 

IPA is completed, we proposed that this 

assessment would reclassify the resident 

for payment purposes as outlined in 

Table 33 of the proposed rule, but that 

the resident’s variable per diem 

adjustment schedule would continue 

rather than being reset on the basis of 

completing the IPA. 

Finally, we stated that believe, 

regardless of the payment system or 

case-mix classification model used, 

residents should continue to receive 

therapy that is appropriate to their care 

needs, and this includes both the 


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intensity and modes of therapy utilized. 

However, we recognized that because 

the initial 5-day PPS assessment would 

classify a resident for the entirety of his 

or her Part A SNF stay (except in cases 

where an IPA is completed) as outlined 

above, there would be no mechanism by 

which SNFs are required to report the 

amount of therapy provided to a 

resident over the course of the stay or 

by which we may monitor that they are 

in compliance with the proposed 25 

percent group and concurrent therapy 

limit as described in section V.F. of the 

proposed rule. Therefore, for these 

reasons, under the proposed PDPM, we 

proposed to require that SNFs continue 

to complete the PPS Discharge 

Assessment, as appropriate (including 

the proposed therapy items discussed in 

section V.E.3. of the proposed rule), for 

each SNF Part A resident at the time of 

Part A or facility discharge (see section 

V.E. of this proposed rule for a 

discussion of our proposed revisions to 

this assessment to include therapy 

items). Under the current instructions in 

the MDS 3.0 RAI manual, the Part A 

PPS Discharge assessment is completed 

when a resident’s Medicare Part A stay 

ends, but the resident remains in the 

facility (MDS 3.0 RAI Manual Chapter 

2.5). However, we proposed to require 

this assessment to be completed at the 

time of facility discharge for Part A 

residents as well. Thus, we would 

continue to collect data on therapy 

provision as proposed in section V.F. of 

the proposed rule, to assure that 

residents are receiving therapy that is 

reasonable, necessary, and specifically 

tailored to meet their unique needs. We 

stated that we believe the combination 

of the 5-day Scheduled PPS Assessment, 

the IPA Assessment, and PPS Discharge 

Assessment would provide flexibility 

for providers to capture and report 

accurately the resident’s condition, as 

well as accurately reflect resource 

utilization associated with that resident, 

while minimizing the administrative 

burden on providers under the proposed 

SNF PDPM. 

In addition to these proposed 

changes, we also examined in the 

proposed rule (83 FR 21064) the current 

use of grace days in the MDS assessment 

schedule. Grace days have been a 

longstanding part of the SNF PPS. They 

were created in order to allow clinical 

flexibility when setting ARD dates of 

scheduled PPS assessments. In the FY 

2012 final rule (76 FR 48519), we 

discussed that in practice, there is no 

difference between regular ARD 

windows and grace days and we 

encouraged the use of grace days if their 

use would allow a facility more clinical 

flexibility or would more accurately 

capture therapy and other treatments. 

Thus, we do not intend to penalize any 

facility that chooses to use the grace 

days for assessment scheduling or to 

audit facilities based solely on their 

regular use of grace days. We may 

explore the option of incorporating the 

grace days into the regular ARD window 

in the future; nevertheless, we will 

retain them as part of the assessment 

schedule at the present time consistent 

with the current policy and the new 

assessment schedule proposed in the 

proposed rule. 

We proposed, effective beginning 

October 1, 2019, in conjunction with the 

proposed implementation of the PDPM, 

to incorporate the grace days into the 

existing assessment window. We 

explained that this proposal would 

eliminate grace days as such from the 

SNF PPS assessment calendar and 

provide for only a standard assessment 

window. We stated that, as discussed, 

there is no practical difference between 

the regular assessment window and 

grace days and there is no penalty for 

using grace days. Accordingly, we stated 

that we believe it would be appropriate 

to eliminate the use of grace days in PPS 

assessments. 

Table 33 of the proposed rule, set 

forth at Table 33 of this final rule, sets 

forth the proposed SNF PPS assessment 

schedule, incorporating the proposed 

revisions discussed above, which we 

stated would be effective October 1, 

2019 concurrently with the proposed 

PDPM. 

TABLE 33—PPS ASSESSMENT SCHEDULE UNDER PDPM 

Medicare MDS assessment schedule type Assessment reference date Applicable standard Medicare payment days 

5-day Scheduled PPS Assessment ................... Days 1–8 .......................................................... All covered Part A days until Part A discharge 

(unless an IPA is completed). 

Interim Payment Assessment (IPA) ................... No later than 14 days after change in resident’s first tier classification criteria is identified.ARD of the assessment through Part A discharge (unless another IPA assessment is 

completed). 

PPS Discharge Assessment .............................. PPS Discharge: Equal to the End Date of the 

Most Recent Medicare Stay (A2400C) or 

End Date.

N/A. 

We noted in the proposed rule (83 FR 

21064) that, as in previous years, we 

intend to continue to work with 

providers and software developers to 

assist them in understanding changes 

we proposed to the MDS. Further, we 

noted that none of the proposals related 

to changes to the MDS assessment 

schedule should be understood to 

change any assessment requirements 

which derive from the Omnibus Budget 

Reconciliation Act of 1987 (OBRA 87), 

which establishes assessment 

requirements for all nursing home 

residents, regardless of payer. We 

invited comments on our proposals to 

revise the SNF PPS assessment schedule 

and related policies as discussed above. 

We also solicited comment on the 

extent to which implementing these 

proposals would reduce provider 

burden. 

Commenters submitted the following 

comments related to the proposed 

changes to the MDS assessment 

schedule and related assessment 

policies as discussed above. A 

discussion of these comments, along 

with our responses, appears below. 

Comment: One commenter expressed 

approval of the proposal to incorporate 

grace days into the existing assessment 

window. This commenter agrees that 

this will simplify things and reduce 

burden, cost and time for providers. 

Many commenters agreed with using the 

5-day assessment to establish per diem 

payment for the stay. However, several 

commenters were concerned that the 

timing of 5-day assessments may still be 

difficult for SNFs. These commenters 

stated that securing clinician sign off 

and all needed information, such as lab 

results, will be challenging for SNFs. 

Several commenters requested an 

allowance for 5-day assessments to be 

submitted up until Day 14 of a SNF stay. 

Response: We appreciate the support 

for incorporating grace days into the 

existing assessment window and for 

using the 5-day assessment to establish 

per diem payment for the entirety of the 

stay, assuming that an IPA is not 

completed. Regarding the timing of the 


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5-day assessment under the current 

RUG–IV system, the 5-day assessment 

window (which goes until Day 8 of a 

SNF stay) is no different than that 

proposed under PDPM. FY 2017 MDS 

data show that almost 98 percent of 5- 

day assessments were completed timely. 

This demonstrates that facilities have 

been able to complete this assessment 

with minimal difficulty until now and 

we do not foresee the new system 

adding an amount of complexity that 

would prevent them from completing it 

going forward. Regarding the suggestion 

to allow providers to have until Day 14 

to submit the initial assessment, we do 

not believe this is necessary or 

appropriate, given that, as the data 

above indicate, there is sufficient time 

for coding the 5-day assessment and 

because the 5-day assessment provides 

a snapshot of the resident closer to the 

point of admission. 

Comment: One commenter questioned 

if on the 5-day Assessment a facility 

were to establish a RUG in the Ultra 

High category for a patient, would that 

RUG be maintained throughout the 

entire stay regardless of whether there is 

a drop in the amount of minutes of 

therapy provided in an assessment 

window. 

Response: We would note that the 

proposed changes to the assessment 

schedule would take place upon 

implementation of PDPM, and under 

PDPM, patients would no longer be 

classified into RUG–IV categories. They 

would instead be classified into case 

mix groups (CMGs) based on PDPM 

classification as described in the 

proposed rule (83 FR 21034–21061). 

Once a patient is classified into a CMG, 

that payment group would be 

maintained through the entire stay 

unless an Interim Payment Assessment 

(IPA), as discussed below, is completed 

and reclassifies the patient into a 

different CMG. 

Comment: Several commenters were 

concerned with the proposed reduction 

in payment assessments. They believe 

that the reduction in assessments could 

limit the ability of CMS and surveyors 

to track changes in status and progress 

of patients and reduce the amount of 

data CMS has available to use as a basis 

for future payment adjustments on. 

These commenters urged CMS to keep 

the existing PPS assessments as they 

are. Several commenters recommended 

that CMS revise the assessment period 

and ARD to align more closely with 

other PAC providers in order to 

implement standardized patient data 

elements as required by the IMPACT 

Act. 

Response: We appreciate commenters’ 

concern that a reduction in assessments 

could limit the ability of CMS and 

surveyors to track status changes and 

could reduce the amount of data 

available for use in future payment 

policy development. However, PDPM 

relies on stable characteristics that we 

do not expect to change significantly 

over the course of the stay. Therefore, 

additional SNF PPS payment 

assessments would not necessarily 

capture different data throughout the 

stay. Additionally, the OBRA 

assessment schedule will remain the 

same and those assessments would 

provide needed information and data for 

surveyors and research purposes. 

Moreover, if clinical characteristics do 

change, we would expect facilities to 

elect the option (as discussed further 

below) to complete the IPA to track 

these changes. 

We appreciate the recommendation to 

revise the assessment period and ARD 

to align more closely with other PAC 

providers in order to implement 

standardized patient data elements 

required by the IMPACT Act. We 

believe that many of the policies being 

finalized as part of PDPM serve to 

improve alignment with other PAC 

settings such as the utilization of 

functional measures similar to those in 

IRFs, and the interrupted stay policy 

which is similar to the IRF and IPF 

policies, and we hope to continue to 

improve this alignment in future 

refinements. As such, we may consider 

these recommendations in the future. 

Comment: Most commenters 

supported CMS reducing the number of 

assessments that are required for SNF 

payment. These commenters expressed 

that their support for the reduction of 

the number of payment assessments is 

due to burden relief and a desire to align 

with other PAC settings such as IRFs 

and Home Health that require far fewer 

patient assessments than SNFs require. 

One commenter was concerned that 

while the number of assessments have 

been reduced, the MDS itself has 

become more complex with new 

reporting requirements and items, 

leaving administrative burden 

unchanged. Additionally, most 

commenters conveyed confusion about 

the proposed IPA. The first area of 

confusion arose from which criteria 

CMS wants SNFs to use to determine 

whether an IPA needs to be completed. 

Commenters noted that in the proposed 

rule (83 FR 21063) we stated that there 

must be a change in the resident’s 

classification in at least one of the first 

tier classification criteria for any of the 

components under the proposed PDPM 

(which are those clinical or nursing 

payment criteria identified in the first 

column in Tables 21, 23, 26, and 27), 

such that the resident would be 

classified into a classification group for 

that component that differs from that 

provided by the 5-day scheduled PPS 

assessment, and the change in 

classification group must result in a 

change in payment either in one 

particular payment component or in the 

overall payment for the resident. 

Additionally, the commenter stated that 

later in the proposed rule, we clarified 

that the change in classification group 

described above refers to not only a 

change in one of the first tier 

classification criteria in any of the 

proposed payment components, but also 

to one that would be sufficient to 

change payment in either one 

component or in the overall payment for 

the resident (83 FR 21063). Commenters 

questioned whether an IPA would be 

required when there is any clinical 

change that would cause a payment 

change for a SNF patient. Many 

commenters requested a general 

simplification and more guidance 

surrounding the IPA criterion. 

Additionally, several commenters 

believed that there should be guidance 

about whether an IPA is needed when 

a patient’s functional status and need 

for specific services changes and 

whether the IPA should include section 

GG in order to capture function change. 

Most commenters were concerned 

about the complexity of the proposed 

IPA. They believed it would create more 

burden for providers to have to monitor 

the clinical changes and subsequent 

payment changes that would trigger the 

IPA on a daily basis. Several 

commenters doubted whether the 

proposed changes would support CMS’ 

Patients over Paperwork initiative and 

related Medicare Simplifying Document 

Requirements. One commenter stated 

that monitoring the first tier changes in 

each of the case-mix adjusted 

components would be just as 

burdensome as the current assessment 

schedule and is too high a bar, 

particularly for NTAs. Furthermore, 

some commenters communicated that 

the complexities and uncertainties of 

the IPA would cause providers not to do 

them and the aim of CMS to provide 

SNFs with satisfactory reimbursement 

would not come to fruition. Similarly, 

some commenters expressed that 

because of the confusion and burden 

related to the IPA, this would 

unnecessarily increase the risk of 

provider error and potential medical 

review. This, in turn, would cause 

facilities to complete fewer IPAs and 

consequently this could lead to less 

quality care provided to patients who 

otherwise would have needed it had it 


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been identified appropriately using the 

IPA. Some commenters are concerned 

that the IPA will likely require MDS 

coordinators to take on more of a care 

coordination role which would require 

additional operating costs for SNFs. 

Response: We are pleased that so 

many commenters support the proposal 

to reduce the number of payment 

assessments in SNFs. We agree that 

alignment across PAC settings is very 

important and anticipate that the 

reduction of assessments will further 

this alignment. We also agree that the 

reduction of assessments will 

significantly decrease the burden for 

providers. 

We disagree with the commenter that 

stated that even though the number of 

assessments have been reduced, the 

MDS itself has become more complex 

with new reporting requirements and 

items, leaving administrative burden 

unchanged. Section VII. of this final rule 

discusses burden associated with the 

changes we are making and our 

calculations show that there is a 

significant reduction in administrative 

burden to providers under PDPM. 

We thank the commenters for calling 

our attention to their questions and 

confusion about the IPA. We continue to 

believe that it is necessary for SNFs to 

continually monitor the clinical status 

of each and every patient in the facility 

regularly regardless of payment or 

assessment requirements and we believe 

that there should be a mechanism in 

place that would allow facilities to do 

this. However, we also believe that 

providers may be best situated, as in the 

case of the Significant Change in Status 

Assessment, to determine when a 

change has occurred that should be 

reported through the IPA. Therefore, to 

further ease the administrative burden 

associated with PDPM and improve 

clarity on when an IPA should be 

completed, we have decided to make 

the IPA an optional assessment. 

Facilities will be able to determine 

when IPAs will be completed for their 

patients to address potential changes is 

clinical status and what criteria should 

be used to decide when an IPA would 

be necessary. We are not finalizing the 

proposed criteria for the triggering of the 

IPA, but rather we will seek additional 

stakeholder input on this issue. We note 

that we are finalizing the proposal 

surrounding IPA completions and the 

variable per diem adjustment schedule 

(including the NTA variable per diem, 

that is, the completion of an IPA will 

not reset the variable per diem 

adjustment schedule)) even though the 

IPA will now be optional. However, 

because the IPA will be optional and 

providers can determine their own 

criteria for when an IPA is completed, 

we are revising the ARD criteria we 

proposed. The ARD for the IPA will be 

the date the facility chooses to complete 

the assessment relative to the triggering 

event that causes a facility to choose to 

complete the IPA. Payment based on the 

IPA will begin the same day as the ARD. 

The IPA will not be susceptible to 

assessment penalties, given the optional 

nature of the assessment. We reiterate 

that we expect facilities to complete 

IPAs as they deem necessary to address 

clinical changes throughout a SNF stay 

and that the removal of the requirement 

to complete these assessments does not 

in any way negate the need to provide 

excellent skilled nursing and 

rehabilitative care and continually 

monitor and document patient status. 

Comment: Many comments addressed 

the IPA criteria that ‘‘. . . the resident 

would not be expected to return to his 

or her original clinical status within a 

14-day period.’’ Commenters stated that 

this is a very subjective determination 

and that it is difficult for providers to 

predict the course of recovery for 

patients who have an acute clinical 

change and providers would not 

necessarily know if this episode would 

or would not resolve in a 2-week period. 

On the other hand, several other 

commenters expressed that the 14-day 

period seemed excessive since the 

average of most SNF stays is currently 

around 19 or 20 days and CMS 

estimates the majority of the stays under 

PDPM will be between 1–15 days. Some 

commenters recommend that CMS 

shorten the timeframe to 3 days 

consistent with the proposed 

interrupted stay policy. Other 

commenters suggested that this time 

period should be reduced to 7 days. One 

commenter recommended that CMS 

should use an approach similar to the 

change in status policy in the home 

health setting (https://www.cms.gov/

medicare/quality-initiatives-patientassessment-instruments/oasis/

downloads/qandadocument0909.pdf). 

Many comments requested more 

examples that show various scenarios in 

which an IPA would be required. 

Additionally, several commenters 

requested CMS to describe when an IPA 

would be used versus a Significant 

Change in Status Assessment. 

Response: Given that the IPA will 

now be an optional assessment under 

PDPM and we are not finalizing criteria 

for when an IPA should be completed, 

but rather, will seek additional 

stakeholder input on this issue, we will 

take all of the comments regarding these 

criteria under consideration for future 

policy making. 

Comment: One commenter requested 

clarification on the nursing 

classification change that would trigger 

an IPA. This commenter questioned 

what constitutes a substantial change 

versus a titration of services. Another 

commenter requested clarification as to 

what would constitute a first tier change 

in the nursing component. Another 

commenter requested clarification on 

what a first tier change in the SLP CaseMix classification would look like. 

Response: We appreciate the requests 

for clarification on the IPA triggers. 

However, because the IPA will now be 

an optional assessment, we will allow 

facilities to determine on their own 

when IPAs are necessary. As such, we 

will seek additional stakeholder 

feedback on this issue in the future. 

Comment: Many commenters 

supported the addition of the IPA; with 

several commenters supporting the 

variable per diem adjustment policy 

relating to the IPA, stating that this 

would reduce the incentive for 

providers to complete multiple IPAs 

over the course of a SNF stay each time 

payment was reduced based on the 

adjustment. Some commenters 

disagreed and stated that the variable 

per diem for the NTA component 

should be reset following the 

completion of an IPA, while other 

commenters supported the variable per 

diem adjustment but had concerns 

about the NTA per diem rate following 

the completion of an IPA. These 

commenters suggested the variable per 

diem rate be reset for NTA services 

when an IPA is completed. Some 

commenters stated they recognize CMS’ 

concern that providers might be 

incentivized to complete multiple IPAs 

in order to reset the NTA rate during 

one SNF stay. However, these 

commenters were concerned that in 

cases where IPAs are legitimately 

completed and the result is a change in 

NTA use, the potential financial loss 

could be significant or could result in 

re-hospitalization if facilities do not end 

up providing NTAs that patients need 

because of financial considerations. 

Commenters offered several solutions to 

this concern. One commenter suggested 

that the NTA variable per diem 

adjustment schedule be reset for 

patients who experience adverse 

changes in status resulting in the 

completion of an IPA. Another 

commenter suggested that CMS use the 

points associated with NTAs to develop 

a threshold of additional NTA points 

that would allow facilities to reset the 

NTA variable per diem rate to Day 1. 

One commenter suggested a physician 

verified post-stay process for patients to 

dispute the variable per diem 


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adjustment when their need for PT, OT, 

or NTAs would substantially increase 

from what was originally anticipated. 

Response: We are pleased that so 

many commenters supported the 

addition of the IPA, and appreciate the 

support for not resetting the variable per 

diem adjustment when an IPA is 

completed. We disagree with those 

commenters who suggested that the 

variable per diem be reset every time an 

IPA is completed. As stated in the 

proposed rule (83 FR 21060), in 

examining costs over a stay, we found 

that for certain categories of SNF 

services, notably PT, OT and NTA 

services, costs declined over the course 

of a stay. Our analyses showed that, on 

average, the number of therapy minutes 

is lower for assessments conducted later 

in the stay. 

We believe that the ability to reset the 

variable per diem would incentivize 

providers to complete IPAs every time 

the variable per diem was reduced. We 

also believe it is possible that providers 

may refrain from coding certain 

conditions on an initial assessment and 

then code other conditions on later 

assessments to justify the variable per 

diem adjustment reset. 

With regard to the ideas presented by 

commenters for when the variable per 

diem should be reset, we do not believe 

that the variable per diem should be 

reset except in cases of an entirely new 

SNF stay (we also refer readers to 

section V.F. of this final rule for a 

discussion of our interrupted stay 

policy). We understand that some 

commenters are concerned that unless 

the variable per diem adjustment 

schedule is reset, a patient’s per diem 

rate may not reflect changes in NTA use 

identified in an IPA that is completed 

during a patient’s stay. However, we 

note that if a new condition is coded on 

an IPA during a SNF stay, the SNF PPS 

per diem payment for the patient may 

in fact increase to reflect changes in the 

patient’s clinical condition if the new 

condition results in a change to the 

patient’s case-mix group. Thus, a 

patient’s case-mix group and associated 

payment could change within a stay to 

reflect a change in NTA use on the IPA. 

However, we do not think that resetting 

the variable per diem adjustment would 

be appropriate each time such a change 

occurs. As we explained above, we 

found that for PT, OT, and NTA 

services, costs generally decline over the 

course of a stay and we believe the 

variable per diem adjustment 

appropriately accounts for this decline 

in costs. Furthermore, as the SNF PPS 

is a prospective payment system, it is 

not intended to reimburse for each 

additional condition or service 

separately, but rather provides a 

predictive payment based on a snapshot 

of the patient’s condition. Resetting the 

variable per diem adjustment in each 

case of a change in the patient’s 

condition would be more akin to a 

traditional fee-for-service model, 

providing additional payment for each 

additional service or condition, which is 

precisely the opposite of the goals of 

implementing PDPM. 

Commenters were also concerned that 

there might be financial implications to 

not re-setting the variable per diem for 

NTAs and that this might result in 

facilities not providing the drugs that 

patients require because of financial 

reasons. However, we do not believe 

that the variable per diem adjustment 

creates new financial implications that 

would affect patient care, as this 

incentive also exists under the current 

payment system that utilizes a constant 

per diem rate and we have no evidence 

that SNF patients are being denied 

necessary medications or services. 

Further, we would note that there are 

quality safeguards in place such as 

readmission penalties and quality 

metrics such as the SNF QRP quality 

measures that should provide a 

disincentive against providers engaging 

in this type of stinting behavior. 

Comment: Several commenters 

requested that CMS consider adding 

additional assessments to capture 

changes in patient need during the SNF 

stay. These commenters explained their 

concern that PDPM does not 

differentiate between processes 

designed to adjust payment and the 

continuous need to assess patient care 

needs. Additionally, these commenters 

believe that status changes-especially of 

the functional nature-that may not rise 

to the level of a required IPA might be 

missed, especially in longer stay 

patients. These commenters stated that 

therapy assessments may not be 

documented frequently enough to 

capture serious status changes of 

patients under PDPM. Specifically, they 

noted that patient care needs must be 

documented through an additional 

assessment after day 20 and they are 

apprehensive that the change in the 

variable per diem payment after Day 20 

of a SNF stay may directly affect patient 

care if these assessments are not 

completed. These commenters 

suggested that CMS add an additional 

assessment after Day 20 of the stay that 

would specifically capture therapy 

needs. 

Response: We appreciate the 

commenters’ concerns regarding how 

assessments relate to functional change, 

the ongoing need to assess patient care 

needs, and the necessity to capture 

therapy needs throughout the stay, 

especially during long stays. It is our 

expectation that the optional nature of 

the IPA will allow facilities to capture 

all of these changes as they occur during 

a SNF stay. Facilities will determine 

when IPAs should be completed, and 

we expect them to pay special attention 

to clinical and functional changes. It 

should be noted that, even absent an 

IPA requirement, we expect SNFs to 

constantly evaluate, capture, document 

and treat clinical and functional 

changes that occur in patients 

throughout a SNF stay. We defer to the 

judgment of clinicians and expect that 

the care they are providing is always 

evaluative in nature, meaning that 

therapists are continually assessing the 

needs of the patient and changing 

interventions as needed throughout the 

course of the therapy regimen, and we 

note that the absence or presence of a 

required assessment tool should not 

change this. 

Accordingly, after considering the 

comments received, for the reasons 

discussed in the proposed rule and in 

this final rule, we are finalizing our 

proposed changes to the MDS 

assessment schedule and related 

assessment policies as discussed in the 

proposed rule, with the following 

modifications. As discussed above, 

rather than making the IPA a required 

assessment as we proposed, this 

assessment will be optional, and 

providers may determine whether and 

when an IPA is completed. In addition, 

because the IPA is an optional 

assessment and providers can determine 

their own criteria for when an IPA is 

completed, we are revising the ARD 

criteria such that the ARD will be the 

date the facility chooses to complete the 

IPA relative to the triggering event that 

causes the facility to choose to complete 

the IPA. Payment based on the IPA 

would begin the same day as the ARD. 

These changes will be effective October 

1, 2019 in conjunction with the 

implementation of the PDPM. 

2. Item Additions to the Swing Bed PPS 

Assessment 

As noted previously in section IV.C of 

this final rule, section 1883 of the Act 

permits certain small, rural hospitals to 

enter into a Medicare swing-bed 

agreement, under which the hospital 

can use its beds to provide either acute 

or SNF care, as needed. For critical 

access hospitals (CAHs), Part A pays on 

a reasonable cost basis for SNF services 

furnished under a swing-bed agreement. 

However, in accordance with section 

1888(e)(7) of the Act, such services 

furnished by non-CAH rural hospitals 

are paid under the SNF PPS, effective 


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with cost reporting periods beginning 

on or after July 1, 2002. A more detailed 

discussion of this provision appears in 

section IV.C of the proposed rule. 

For purposes of the proposed PDPM, 

we proposed to add three items to the 

Swing Bed PPS Assessment. Until now, 

these additional items have not been 

part of the Swing Bed PPS Assessment 

form because they have not been used 

for payment. However, we stated in the 

proposed rule (83 FR 21064) that 

presence of each of these items would 

be used to classify swing bed residents 

under the proposed SNF PDPM as 

explained in section V.D. of the 

proposed rule. Thus, we stated that 

believed it was necessary and 

appropriate to include these items in the 

Swing Bed PPS Assessment beginning 

October 1, 2019, in conjunction with the 

proposed implementation of the PDPM. 

The items we proposed to add to the 

Swing Bed PPS assessment are provided 

in Table 34 of the proposed rule (also 

set forth in Table 34). 

Commenters submitted the following 

comments related to the proposed 

addition of three items to the Swing Bed 

PPS assessment. A discussion of these 

comments, along with our responses, 

appears below. 

Comment: Commenters supported the 

addition of the three proposed items to 

the Swing Bed PPS assessment and 

stated that these items will be important 

to establish the SLP and NTA 

component case-mix rates. 

Response: We are pleased that 

commenters support the addition of 

these items to the Swing Bed PPS 

Assessment. We agree that these items 

are necessary to determine the SLP and 

NTA case-mix rates. We will continue to 

consider additions to the Swing Bed 

PPS Assessment as it becomes necessary 

to ensure consistency between swing 

bed and non-swing bed providers. 

Accordingly, after considering the 

comments received, for the reasons 

discussed in the proposed rule and in 

this final rule, we are finalizing the 

addition of the items in Table 34 to the 

Swing Bed PPS Assessment as proposed 

without modification, effective October 

1, 2019 in conjunction with the 

implementation of the PDPM. 

TABLE 34—ITEMS TO ADD TO SWING BED PPS ASSESSMENT

MDS Item No. Item name 

Related 

PDPM 

payment 

component 

K0100 ................ Swallowing Disorder ............................................................................................................................................... SLP 

I4300 ................. Active Diagnoses: Aphasia .................................................................................................................................... SLP 

O0100D2 ........... Special Treatments, Procedures and Programs: Suctioning, While a Resident ................................................... NTA 

3. Items To Be Added to the PPS 

Discharge Assessment 

Under the MDS 3.0, the Part A PPS 

Discharge assessment is completed 

when a resident’s Medicare Part A stay 

ends, but the resident remains in the 

facility (MDS 3.0 RAI Manual Chapter 

2.5). The PPS Discharge Assessment 

uses the Item Set NPE and does not 

currently contain section O of the MDS 

3.0. The therapy items in section O of 

the MDS allow CMS to collect data from 

providers on the volume, type (physical 

therapy, occupational therapy and 

speech-language pathology), and mode 

(individual, concurrent, or group 

therapy) of the therapy provided to SNF 

residents. As noted in comments 

received on the ANPRM in relation to 

therapy provision, this data would be 

particularly important to monitor. 

Specifically, a significant number of 

commenters expressed concerns that the 

amount of therapy provided to SNF 

residents, were RCS–I to have been 

implemented, would drop considerably 

as compared to the amount currently 

delivered under RUG–IV. Commenters 

noted that this is because the incentive 

to provide a high volume of therapy 

services to SNF residents (to achieve the 

highest resident therapy group 

classification) would no longer exist 

under RCS–I, potentially leading 

providers to reduce significantly the 

amount of therapy provided to SNF 

residents. 

We stated in the proposed rule (83 FR 

21065) that, given that the RCS–I model 

and PDPM both present the potential for 

providers to reduce significantly the 

amount of therapy provided to SNF 

residents as compared to RUG–IV, we 

believe that the same potential result 

may occur under the proposed PDPM as 

commenters identified with RCS–I. To 

better track therapy utilization under 

PDPM, and to better ensure that 

residents continue to receive an 

appropriate amount of therapy 

commensurate with their needs, given 

the reduction in the frequency of 

resident assessments required under the 

proposed PDPM, we proposed to add 

therapy collection items to the PPS 

Discharge assessment and to require 

providers to complete these items 

beginning October 1, 2019, in 

conjunction with the proposed 

implementation of the PDPM. 

Specifically, we proposed to add the 

items listed in Table 35 of the proposed 

rule (as set forth in Table 35 of this final 

rule) to the PPS Discharge Assessment. 

TABLE 35—ITEMS TO ADD TO SNF PPS DISCHARGE ASSESSMENT

MDS Item No. Item name 

O0400A5 .......... Special Treatments, Procedures and Programs: Speech-Language Pathology and Audiology Services: Therapy Start Date. 

O0400A6 .......... Special Treatments, Procedures and Programs: Speech-Language Pathology and Audiology Services: Therapy End Date. 

O0400A7 .......... Special Treatments, Procedures and Programs: Speech-Language Pathology and Audiology Services: Total Individual Minutes. 

O0400A8 .......... Special Treatments, Procedures and Programs: Speech-Language Pathology and Audiology Services: Total Concurrent Minutes. 

O0400A9 .......... Special Treatments, Procedures and Programs: Speech-Language Pathology and Audiology Services: Total Group Minutes. 

O0400A10 ........ Special Treatments, Procedures and Programs: Speech-Language Pathology and Audiology Services: Total Days. 

O0400B5 .......... Special Treatments, Procedures and Programs: Occupational Therapy: Therapy Start Date. 

O0400B6 .......... Special Treatments, Procedures and Programs: Occupational Therapy: Therapy End Date. 

O0400B7 .......... Special Treatments, Procedures and Programs: Occupational Therapy: Total Individual Minutes. 

O0400B8 .......... Special Treatments, Procedures and Programs: Occupational Therapy: Total Concurrent Minutes. 


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TABLE 35—ITEMS TO ADD TO SNF PPS DISCHARGE ASSESSMENT—Continued 

MDS Item No. Item name 

O0400B9 .......... Special Treatments, Procedures and Programs: Occupational Therapy: Total Group Minutes. 

O0400B10 ........ Special Treatments, Procedures and Programs: Occupational Therapy: Total Days. 

O0400C5 .......... Special Treatments, Procedures and Programs: Physical Therapy: Therapy Start Date. 

O0400C6 .......... Special Treatments, Procedures and Programs: Physical Therapy: Therapy End Date. 

O0400C7 .......... Special Treatments, Procedures and Programs: Physical Therapy: Total Individual Minutes. 

O0400C8 .......... Special Treatments, Procedures and Programs: Physical Therapy: Total Concurrent Minutes. 

O0400C9 .......... Special Treatments, Procedures and Programs: Physical Therapy: Total Group Minutes. 

O0400C10 ........ Special Treatments, Procedures and Programs: Physical Therapy: Total Days. 

We stated that for the proposed items, 

which refer to the total number of 

minutes for each therapy discipline and 

each therapy mode, this would allow 

CMS both to conduct reviews of changes 

in the volume and intensity of therapy 

services provided to SNF residents 

under the proposed PDPM compared to 

that provided under RUG–IV, as well as 

to assess compliance with the proposed 

group and concurrent therapy limit 

discussed in section V.F of the FY 2019 

SNF PPS proposed rule. We further 

stated that the proposed ‘‘total days’’ 

items for each discipline and mode of 

therapy would further support our 

monitoring efforts for therapy, as 

requested by commenters on the 

ANPRM, by allowing us to monitor not 

just the total minutes of therapy 

provided to SNF residents under the 

proposed PDPM, but also assess the 

daily intensity of therapy provided to 

SNF residents under the proposed 

PDPM, as compared to that provided 

under RUG–IV. As we explained in the 

proposed rule, ultimately, these 

proposed items would allow facilities to 

easily report therapy minutes provided 

to SNF residents and allow us to 

monitor the volume and intensity of 

therapy services provided to SNF 

residents under the proposed PDPM, as 

suggested by commenters on the 

ANPRM. We stated that if we 

discovered that the amount of therapy 

provided to SNF residents did change 

significantly under the proposed PDPM, 

if implemented, then we would assess 

the need for additional policies to 

ensure that SNF residents continued to 

receive sufficient and appropriate 

therapy services consistent with their 

unique needs and goals. 

Commenters submitted the following 

comments related to the proposed rule’s 

discussion of the SNF PPS Discharge 

Assessment. A discussion of these 

comments, along with our responses, 

appears below. 

Comment: Several commenters 

opposed the addition of items and the 

reporting of therapy services in section 

O of the SNF PPS Discharge 

Assessment. These commenters 

acknowledged that the fundamental 

design of PDPM (which will no longer 

tie payment to the amount of therapy a 

patient receives, as occurs under the 

current RUG–IV payment system) could 

perhaps cause some patients 

appropriately to receive less therapy. 

The commenters stated that this would 

be a positive anticipated outcome for 

many residents considering that the 

recurring concern of RUG–IV has been 

that the model may incentivize SNFs to 

provide therapy services beyond what 

patients need. These commenters noted 

that while they recognize the 

importance of monitoring the impacts of 

policy changes especially in the initial 

stages of the implementation, they were 

disappointed that CMS appears to be 

interested in collecting this data merely 

in order to monitor changes in volume 

of services and that CMS did not discuss 

evaluating this aspect of PDPM in 

relation to quality and outcomes 

measures (such as through the SNF 

Quality Reporting Program) that are 

normally associated with effective 

therapy provision. These commenters 

noted that the MDS should be used for 

care-planning and case-mix payment 

determination and that since therapy 

time is not relevant to the case-mix 

methodology under PDPM, this 

proposed addition of therapy collection 

of items serves no purpose on the MDS. 

These commenters suggested that 

instead of collecting therapy provision 

information on the MDS, facilities 

should gather and report therapy 

provision information on claims on a 

line-item, date-of-service basis that 

would be in line with Medicare Part B 

and other payers and limit provider 

burden. 

Response: We agree with commenters 

that it is possible that, in some cases, 

less therapy will be provided under 

PDPM than under RUG–IV and that this 

would be a positive development in 

those cases where therapy was provided 

regardless of patient need and simply 

because of higher payments for higher 

volumes of therapy. However, we 

continue to be concerned that under 

PDPM, providers may reduce the 

amount of therapy provided to SNF 

patients because of financial 

considerations. We agree with 

commenters that quality and outcomes 

measures (like those in the SNF Quality 

Reporting Program) would be a positive 

way to evaluate the efficacy of therapy 

provision, and we will take this into 

consideration for future policy 

development. However, we disagree that 

the collection of these items is not 

relevant to case-mix determination. 

While the days and minutes of therapy 

provided will not be a determining 

factor in the therapy case-mix 

classification under PDPM, the need to 

ensure beneficiary protection under this 

payment system is very relevant to the 

therapy case-mix classification, and the 

ability to collect this data will safeguard 

the integrity of the case-mix 

classification and help ensure that 

patients receive an appropriate amount 

of therapy services. Should we discover 

that the amount of therapy under PDPM 

is distinctly different from the amount 

of therapy under RUG–IV, we will 

evaluate the potential reasons for this 

change and consider potential actions, 

either at the provider or systemic level, 

to address these issues. 

We appreciate the commenters’ 

suggestion of using claims information 

as the basis for therapy reporting, but 

would note that this mechanism would 

be more complicated and not provide 

the same level of detail in the data as 

is currently reported in section O of the 

MDS. Further, as providers are already 

familiar with the section O items, we 

believe that this method will provide 

the simplest transition for providers. 

Comment: Many commenters 

supported the proposal to add therapy 

collection items to the SNF PPS 

Discharge Assessment in order to 

monitor compliance with the group and 

concurrent therapy limits. One 

commenter stated that they believed this 

proposal may protect against therapists 

being pressured to provide an 

unreasonable amount of group or 

concurrent therapy. Several 

commenters, however, were concerned 

that the monitoring effort proposed is 


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not strong enough to enforce the 

aforementioned limits. One commenter 

suggested that based on CMS’ assertion 

that ‘‘services furnished to SNF 

residents may be considered reasonable 

and necessary insomuch as services are 

consistent with ‘the individual’s 

particular medical needs,’ ’’ (83 FR 

21068) they question whether excessive 

group and concurrent therapy serves as 

justification to deny SNF coverage. This 

commenter proposed that rather than a 

‘‘warning edit’’ that would notify 

providers that they have exceeded the 

group and concurrent threshold, CMS 

should decide whether these 

occurrences violate coverage 

requirements and if it is determined that 

they do, payment should be denied for 

the claim. Many commenters suggested 

that in addition to monitoring the 

therapy provision, CMS should monitor 

resident outcomes. One commenter 

recommended that CMS utilize the four 

new SNF QRP section GG outcome 

measures, and current readmission 

measures and qualitatively measure the 

current the effectiveness of therapy 

provided in the SNF. 

Response: We appreciate the 

comments we received in support of the 

proposal to add therapy collection items 

to the SNF PPS Discharge Assessment. 

We agree that this proposal would 

enable us to monitor group and 

concurrent therapy compliance and will 

hopefully help prevent therapists from 

feeling pressured to provide an 

unreasonable amount of group and/or 

concurrent therapy. We appreciate the 

concern that the monitoring effort 

proposed is not strict enough to enforce 

the concurrent and group therapy limits. 

We would note that the monitoring plan 

is intended for this exact reason. As 

stated in the proposed rule (83 CFR 

21067), as part of our regular monitoring 

efforts on SNF Part A services, we 

would monitor group and concurrent 

therapy utilization under the proposed 

PDPM and consider making future 

proposals to address abuses of this 

proposed policy or flag providers for 

additional review should an individual 

provider be found to consistently 

exceed the proposed threshold after the 

implementation of the proposed PDPM. 

We appreciate the suggestion to deny 

claims if the threshold is exceeded and 

we may consider this option further in 

the future. As stated in the FY 2019 SNF 

PPS proposed rule (83 FR 21068), 

services furnished to SNF residents may 

be considered reasonable and necessary 

insomuch as the services are consistent 

with the individual’s particular medical 

needs and that excessive levels of group 

and/or concurrent therapy could 

constitute a reason to deny SNF 

coverage for such stays. We appreciate 

the suggestion to monitor patient 

outcomes in addition to collecting 

therapy provision data, as well as the 

recommendation to specifically use the 

four new SNF QRP section GG outcome 

measures and current readmission 

measures to measure the effectiveness of 

therapy provided in SNFs. We may 

consider these suggestions in future 

policy making decisions. 

Accordingly, after considering the 

comments received, for the reasons 

discussed in the proposed rule and in 

this final rule, we are finalizing the 

addition of the items in Table 35 to the 

PPS Discharge Assessment as proposed, 

without modification, effective October 

1, 2019 in conjunction with the 

implementation of the PDPM. 

E. Revisions to Therapy Provision 

Policies Under the SNF PPS 

Currently, almost 90 percent of 

residents in a Medicare Part A SNF stay 

receive therapy services. Under the 

current RUG–IV model, therapy services 

are case mix-adjusted primarily based 

on the therapy minutes reported on the 

MDS. As discussed in the proposed rule 

(83 FR 21065), when the original SNF 

PPS model was developed, most therapy 

services were furnished on an 

individual basis, and the minutes 

reported on the MDS served as a proxy 

for the staff resource time needed to 

provide the therapy care. Over the years, 

we have monitored provider behavior 

and have made policy changes as it 

became apparent that, absent safeguards 

like quality measurement to ensure that 

the amount of therapy provided did not 

exceed the resident’s actual needs, there 

were certain inherent incentives for 

providers to furnish as much therapy as 

possible. Thus, for example, in the SNF 

PPS FY 2010 final rule (74 FR 40315 

through 40319), we decided to allocate 

concurrent therapy minutes for 

purposes of establishing the RUG–IV 

group to which the patient belongs, and 

to limit concurrent therapy to two 

patients at a time who were performing 

different activities. 

As we explained in the proposed rule 

(83 FR 21066), following the decision to 

allocate concurrent therapy, using 

STRIVE data as a baseline, we found 

two significant provider behavior 

changes with regard to therapy 

provision under the RUG–IV payment 

system. First, there was a significant 

decrease in the amount of concurrent 

therapy that was provided in SNFs. 

Simultaneously, we observed a 

significant increase in the provision of 

group therapy, which was not subject to 

allocation at that time. We concluded 

that the manner in which group therapy 

minutes were counted in determining a 

patient’s RUG–IV group created a 

payment incentive to provide group 

therapy rather than individual therapy 

or concurrent therapy, even in cases 

where individual therapy (or concurrent 

therapy) was more appropriate for the 

resident. Thus, we stated that we made 

two policy changes regarding group 

therapy in the FY 2012 SNF PPS final 

rule (76 FR 48511 through 48517). We 

defined group therapy as exactly four 

residents who are performing the same 

or similar therapy activities. 

Additionally, we allocated group 

therapy among the four patients 

participating in group therapy— 

meaning that the total amount of time 

that a therapist spent with a group will 

be divided by 4 (the number of patients 

that comprise a group) to establish the 

RUG–IV group to which the patient 

belongs. 

We stated in the proposed rule (83 FR 

21066) that since we began allocating 

group therapy and concurrent therapy, 

these modes of therapy (group and 

concurrent) represent less than one 

percent of total therapy provided to SNF 

residents. Table 36, which appeared in 

the FY 2014 SNF PPS Proposed Rule (78 

FR 26464) (and was also presented in 

the FY 2019 SNF PPS proposed rule) 

and sets forth our findings with respect 

to the effect of policies finalized in the 

FY 2012 SNF PPS Final Rule, 

demonstrates the change in therapy 

provision between the STRIVE study 

and the implementation of the therapy 

policy changes in FY 2012. As we noted 

in the proposed rule, the distribution of 

therapy modes presented in Table 36 

reflecting therapy provision in FY 2012 

is also an accurate reflection of current 

therapy provision based on resident 

data collected in the QIES Database and 

continued monitoring of therapy 

utilization. 


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TABLE 36—MODE OF THERAPY PROVISION

STRIVE 

(%) 

FY 2011 

(%) 

FY 2012 

(%) 

Individual ...................................................................................................................................... 74 91.8 99.5 

Concurrent ................................................................................................................................... 25 0.8 0.4 

Group ........................................................................................................................................... <1 7.4 0.1 

As we explained in the proposed rule 

(83 FR 21066), based on our prior 

experience with the provision of 

concurrent and group therapy in SNFs, 

we again were concerned that if we 

were to implement the proposed SNF 

PDPM, providers may base decisions 

regarding the particular mode of therapy 

to use for a given resident on financial 

considerations rather than on the 

clinical needs of SNF residents. We 

stated that because the proposed SNF 

PDPM would not use the minutes of 

therapy provided to a resident to 

classify the resident for payment 

purposes, we were concerned that SNFs 

may once again become incentivized to 

emphasize group and concurrent 

therapy, over the kind of individualized 

therapy which is tailored to address 

each beneficiary’s specific care needs 

which we believe is generally the most 

appropriate mode of therapy for SNF 

residents. As we stated in the FY 2012 

proposed rule (76 FR 26387), while 

group therapy can play an important 

role in SNF patient care, group therapy 

is not appropriate for either all patients 

or for all conditions, and is primarily 

effective as a supplement to individual 

therapy, which we maintain should be 

considered the primary therapy mode 

and standard of care in therapy services 

provided to SNF residents. We stated in 

the FY 2012 proposed rule that, as 

evidenced by the application of a cap on 

the amount of group therapy services 

that may be provided to SNF residents, 

we do not believe that a SNF providing 

the preponderance of therapy in the 

form of group therapy would be 

demonstrating the intensity of therapy 

appropriate to this most frail and 

vulnerable nursing home population. 

We stated in the FY 2019 SNF PPS 

proposed rule (83 FR 21066) that since 

the inception of the SNF PPS, we have 

limited the amount of group therapy 

provided to each SNF Part A resident to 

25 percent of the therapy provided to 

them by discipline. We referred to the 

FY 2000 final rule (64 FR 41662), where 

we stated that although we recognize 

that receiving PT, OT, or ST as part of 

a group has clinical merit in select 

situations, we do not believe that 

services received within a group setting 

should account for more than 25 percent 

of the Medicare resident’s therapy 

regimen during the SNF stay. 

We explained that although we 

recognize that group and concurrent 

therapy may have clinical merit in 

specific situations, we also continue to 

believe that individual therapy is 

generally the best way of providing 

therapy to a resident because it is most 

tailored to that specific resident’s care 

needs. As such, we stated that 

individual therapy should represent the 

majority of the therapy services received 

by SNF residents both from a clinical 

and payment perspective. As we stated 

in the FY 2012 proposed rule (76 CFR 

26372), even under the previous RUG– 

53 model, it was clear that the 

predominant mode of therapy that the 

payment rates were designed to address 

was individual therapy rather than 

concurrent or group therapy. 

We stated in the proposed rule (83 FR 

21066) that to help ensure that SNF 

residents would receive the majority of 

therapy services on an individual basis, 

if we were to implement the proposed 

PDPM, we believed concurrent and 

group therapy combined should be 

limited to no more than 25 percent of 

a SNF resident’s therapy minutes by 

discipline. In combination, this limit 

would ensure that at least 75 percent of 

a resident’s therapy minutes are 

provided on an individual basis. We 

stated that because the change in how 

therapy services would be used to 

classify residents under the proposed 

PDPM gives rise to the concern that 

providers may begin to utilize more 

group and concurrent therapy due to 

financial considerations, we proposed to 

set a combined 25 percent limit on 

concurrent therapy and group therapy 

for each discipline of therapy provided. 

For example, if a resident received 800 

minutes of physical therapy, no more 

than 200 minutes of this therapy could 

be provided on a concurrent or group 

basis. Finally, we noted that under 

RUG–IV, we currently allocate minutes 

of therapy because we pay for therapy 

based on therapy minutes and not 

resident characteristics. We stated that 

given that therapy minutes would no 

longer be a factor in determining 

payment classifications for residents 

under the proposed PDPM, we would 

utilize the total, unallocated number of 

minutes by therapy mode reported on 

the MDS, to determine compliance with 

the proposed limit. We explained that 

utilizing unallocated therapy minutes 

also serves to underscore the patientdriven nature of the PDPM, as it focuses 

the proposed limit on concurrent and 

group therapy on the way in which the 

therapy is received by the beneficiary, 

rather than furnished by the therapist, 

and would better ensure that individual 

therapy represents at least a vast 

majority of the therapy services received 

by a resident. 

In the proposed rule (83 FR 21067), 

we considered other possible limits, and 

even no limit, on group and concurrent 

therapy. For example, we considered 

placing no limit on group or concurrent 

therapy, in order to afford providers the 

greatest degree of flexibility in designing 

a therapy program for each SNF 

resident. However, even in response to 

this option to have no limit on 

concurrent and group therapy, many 

commenters on the ANPRM expressed 

concerns regarding the lack of 

appropriate safeguards for ensuring that 

SNF residents continue to receive an 

appropriate level of therapy under the 

revised case-mix model. We stated in 

the proposed rule that we agree with 

these commenters and believe that there 

should be some limit on the amount of 

group and concurrent therapy that is 

provided to residents in order to ensure 

that residents receive an appropriate 

amount of individual therapy that is 

tailored to their specific needs. Also, in 

the ANPRM, we discussed the 

possibility of proposing a 25 percent 

limit on each of concurrent and group 

therapy, allowing for up to 50 percent 

of therapy services provided in the SNF 

to be provided in a non-individual 

modality. We stated in the proposed 

rule that this option sought to balance 

the flexibility afforded to therapists in 

designing an appropriate therapy plan 

that meets the needs and goals of the 

specific resident with the importance of 

ensuring that SNF residents receive an 

appropriate level of individual therapy. 

However, we were concerned that a 

separate 25 percent limit for group and 

concurrent therapy would not provide 

sufficient assurance that at least a 

majority of a resident’s therapy would 

be provided on an individual basis. 


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Therefore, we stated that we believe the 

separate 25 percent limits on concurrent 

and group therapy discussed in the 

ANPRM, or any option which would 

impose a higher limit on group and 

concurrent therapy, would not provide 

the necessary protection for SNF 

residents. By contrast, we stated that we 

believe a combined 25 percent limit on 

group and concurrent therapy would 

provide sufficient assurance that at least 

a majority of each resident’s therapy 

would be provided on an individual 

basis, consistent with our position that 

individual therapy is generally the best 

way of providing therapy to SNF 

residents because it is most tailored to 

their care needs. We noted that, 

assuming that existing therapy delivery 

patterns (as set forth in Table 36) are 

accurate and they reflect the 

individually-tailored needs of SNF 

residents currently being treated under 

the SNF benefit, the number of group 

and concurrent minutes that have been 

reported by SNFs thus far are 

significantly lower than the limit 

described in our proposal. In other 

words, we stated that, based on the data 

presented in Table 36, the proposed 

limit on group and concurrent therapy 

affords a significantly greater degree of 

flexibility on therapy modality than 

appears to be required to meet the needs 

of SNF residents, given that less than 

one percent of therapy currently being 

delivered is either group or concurrent 

therapy. Therefore, we concluded that a 

combined limit of 25 percent for group 

and concurrent therapy should provide 

SNFs with more than enough flexibility 

with respect to therapy mode to meet 

the care needs of their residents. 

As discussed in the proposed rule (83 

FR 21067), we believe that individual 

therapy is usually the best mode of 

therapy provision as it permits the 

greatest degree of interaction between 

the resident and therapist, and should 

therefore represent, at a minimum, the 

majority of therapy provided to an SNF 

resident. However, we recognized that, 

in very specific clinical situations, 

group or concurrent therapy may be the 

more appropriate mode of therapy 

provision, and therefore, we stated we 

would want to allow providers the 

flexibility to be able to utilize these 

modes. We continued to stress that 

group and concurrent therapy should 

not be utilized to satisfy therapist or 

resident schedules, and that all group 

and concurrent therapy should be well 

documented in a specific way to 

demonstrate why they are the most 

appropriate mode for the resident and 

reasonable and necessary for his or her 

individual condition. 

Currently the RUG–IV grouper 

calculates the percentage of group 

therapy each resident receives in the 

SNF based on the algorithms described 

in section 6.6 of the MDS RAI Manual 

(found at https://downloads.cms.gov/

files/MDS-30-RAI-Manual-v115- 

October-2017.pdf). When a resident is 

found to have exceeded the 25 percent 

group therapy limit, the minutes of 

therapy received in excess are not 

counted towards the calculation of the 

RUG–IV therapy classification. We 

explained that because the proposed 

PDPM would not use the minutes of 

therapy provided to a resident to 

classify the resident for payment 

purposes, we would need to determine 

a way under the proposed PDPM to 

address situations in which facilities 

exceed the combined 25 percent group 

and concurrent therapy limit. 

Therefore, we proposed that at a 

component level (PT, OT, SLP), when 

the amount of group and concurrent 

therapy exceeds 25 percent within a 

given therapy discipline, that providers 

would receive a non-fatal warning edit 

on the validation report that the 

provider receives when submitting an 

assessment which would alert the 

provider that the therapy provided to 

that resident exceeded the threshold. To 

explain, a fatal error in the QIES ASAP 

system occurs when one or more items 

in the submitted record fail to pass the 

requirements identified in the MDS data 

submission specifications. A warning 

error occurs when an item or 

combination of items in the submitted 

record trigger a non-fatal edit in the 

QIES ASAP system. We stated that the 

non-fatal warning would serve as a 

reminder to the facility that they are out 

of compliance with the proposed limit 

for group and concurrent therapy. We 

also stated that, as part of our regular 

monitoring efforts on SNF Part A 

services, we would monitor group and 

concurrent therapy utilization under the 

proposed PDPM and consider making 

future proposals to address abuses of 

this proposed policy or flag providers 

for additional review should an 

individual provider consistently be 

found to exceed the proposed threshold 

after the implementation of the 

proposed PDPM. We noted that as the 

proportion of group and/or concurrent 

therapy (which are, by definition, nonindividual modes of therapy provision) 

increases, the chances that the provider 

is still meeting the individualized needs 

of each resident would diminish. We 

stated that given that meeting the 

individualized needs of the resident is 

a component of meeting the coverage 

requirements for SNF Part A services, as 

described in section 1814(a)(2)(B) of the 

Act and further described in section 30 

of Chapter 8 of the Medicare Benefit 

Policy Manual (accessible at https://

www.cms.gov/Regulations-andGuidance/Guidance/Manuals/

downloads/bp102c08.pdf), where it 

states that services furnished to SNF 

residents may be considered reasonable 

and necessary insomuch as the services 

are consistent with ‘‘the individual’s 

particular medical needs’’, excessive 

levels of group and/or concurrent 

therapy could constitute a reason to 

deny SNF coverage for such stays. We 

invited comments on this proposed 

compliance mechanism. 

Commenters submitted the following 

comments related to the proposed 

revisions to the therapy policies under 

the PDPM. A discussion of these 

comments, along with our responses, 

appears below. 

Comment: The vast majority of 

commenters supported the proposal to 

limit concurrent and group therapy to 

25 percent. Several stated that the 

combined limit is not restrictive enough 

and recommended that CMS implement 

further real-time efforts (beyond the 

warning edit outlined in the proposed 

rule) to ensure that patients are 

receiving the therapy they need, 

monitor compliance, and have stricter 

enforcement outcomes. Conversely, 

several commenters supported the 

notion that CMS could possibly raise 

the group and concurrent therapy limit 

following close monitoring of utilization 

and determining that patients are 

indeed receiving the individualized 

therapy they need even in group and 

concurrent sessions, and that SNFs are 

not taking advantage of the financial 

incentives that providing group and 

concurrent therapy offer. These 

commenters stated that they were in 

favor of the idea that providers would 

be reporting and counting the patients’ 

time in therapy rather than the 

therapists’ allocated time to determine 

compliance with the proposed group 

and concurrent therapy limit under 

PDPM since this is more consistent with 

the concept of patient-centered care and 

best clinical practice. 

Response: We are pleased that the 

vast majority of commenters supported 

the proposal to limit concurrent and 

group therapy to 25 percent. We 

appreciate both the concern that 25 

percent may not be restrictive enough 

and the concern that it is too restrictive, 

and we will continue to track the 

amount of therapy provided via the 

different modes in conjunction with our 

monitoring efforts described throughout 

section V. of this final rule. We will 

determine whether group and 


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concurrent therapy are being over or 

underutilized and we will consider 

revising the policy and enforcement 

efforts as necessary. Because therapy 

minutes would no longer be a factor in 

determining case-mix classification 

under the PDPM, as it is under RUG–IV, 

we agree with the commenters that 

using the total, unallocated number of 

minutes by therapy mode reported on 

the MDS versus therapists’ allocated 

time makes the most sense in 

determining compliance with the group 

and concurrent therapy limit, and we 

appreciate that the commenters 

recognized the patient-centered nature 

of the proposal. 

Comment: Several commenters stated 

that the current policy regarding group 

and concurrent therapy allocation has 

increased provider costs. Specifically, 

these comments stated that concurrent 

and group therapy are more costeffective modes than individual therapy 

and that the 25 percent drop in the 

delivery of concurrent and group 

therapy from FY 2011 until now 

demonstrates a significant increase in 

provider costs. These commenters 

believe that restoring flexibility in 

therapy service under PDPM will permit 

SNFs to develop more cost-effective 

innovative approaches to care. 

Response: We disagree with the 

assertion that the current policy to 

allocate group and concurrent therapy 

increases cost. As we stated in the FY 

2012 final rule (76 FR 48515), to fulfill 

our responsibilities to ensure 

appropriate payment based on resource 

utilization and cost, we proposed the 

allocation of group therapy minutes, 

which equalizes the reimbursement 

incentives across modes of therapy. 

Although case-mix classification under 

PDPM is not based primarily on volume 

of services provided, as is the case with 

the RUG–IV payment system, it is still 

important that there are equal financial 

incentives to provide the different 

modes of therapy. Further, given that 

the payment incentives are equal among 

the various therapy modes because of 

the allocation of minutes and that over 

99 percent of therapy minutes are 

reported as individual therapy, this 

provides evidence that the mode of 

therapy that providers believe is most 

effective in addressing a beneficiary’s 

needs is individual therapy. Regarding 

the need to restore flexibility in therapy 

service under PDPM, we think that the 

25 percent cap will allow for flexibility 

in therapy services. As mentioned 

above, since currently, over 99 percent 

of therapy minutes are delivered 

individually, SNFs should continue to 

have adequate leeway to provide the 

mode of therapy which is most 

appropriate for the patients even with 

the revised cap. Nevertheless, to the 

extent that provider costs have 

increased, these cost increases have 

been captured as part of the data 

analysis used to set the case-mix 

weights under PDPM. To the extent that 

these costs change as a result of PDPM, 

more specifically changes in the mode 

of therapy service delivery, we can 

consider revising the case-mix weights 

to reflect these changes in provider 

costs. 

Comment: Several commenters 

opposed the proposed limitations on 

group and concurrent therapy and 

expressed concern that even though 

there is a lack of data demonstrating 

what the most appropriate threshold is 

for each individual patient, the 

combined 25 percent group and 

concurrent therapy limit is an arbitrary 

amount and would restrict therapists’ 

ability to make appropriate treatment 

decisions. These commenters also stated 

that setting a limit on group and 

concurrent therapy may also restrict 

some patients from receiving the most 

appropriate mode of therapy for their 

individual need and that group or 

concurrent therapy might indeed be the 

most appropriate mode of therapy for a 

patient. These commenters stressed the 

importance of trusting the professional 

judgment of therapists in deciding 

which combination of each mode of 

therapy is appropriate for each patient 

in conjunction with Medicare 

guidelines for skilled therapy and 

medical necessity. 

Response: We agree that therapists are 

the most appropriate professionals to 

determine the mode of therapy a patient 

should receive and that professional 

judgment must be trusted and used in 

SNFs. However we do not agree that 25 

percent is an arbitrary amount. As stated 

in the proposed rule, (83 FR 21066), 

since we began allocating group therapy 

and concurrent therapy, these modes of 

therapy (group and concurrent) 

represent less than one percent of total 

therapy provided to SNF residents. 

Further, we do not agree that data do 

not exist with regard to the appropriate 

threshold for each individual patient, as 

over 99 percent of therapy services are 

currently reported as individual. This 

would suggest that a much lower 

threshold for concurrent and group 

therapy would likely be acceptable and 

appropriate, though we also believe that 

added flexibility is important under a 

new payment system. Therefore, we 

believe it is appropriate to use the 25 

percent combined therapy limit for 

concurrent and group therapy. 

We also do not agree that setting a 

limit on group and concurrent therapy 

may restrict some patients from 

receiving the most appropriate mode of 

therapy for their individual needs. We 

currently have a 25 percent limit in 

place for group therapy and, based on 

our data, this limit has not restricted 

patients from receiving what we assume 

is the most appropriate amount of 

therapy for their individual needs. 

Given the stakeholders’ comments that 

individual therapy is the most costly 

form of therapy along with the evidence 

of therapy being furnished to SNF 

patients on the basis of financial 

considerations rather than patient need, 

the extremely high prevalence of 

individual therapy would indicate that 

the amount of individual therapy, 

despite being the most costly, is the 

most effective for beneficiaries, which 

would comport with our reasons for 

supporting either the limit we proposed 

or a lower such limit. To hold otherwise 

would indicate that the minutes 

currently being reported are an 

inaccurate representation of the way in 

which therapy is currently being 

delivered, which could potentially 

constitute fraud on the part of some SNF 

providers. Based on the MDS 

assessment data mentioned above that 

demonstrate that almost no group or 

concurrent therapy is being reported on 

the MDS currently, the commenters’ 

characterization of the proposed limit 

(which is far above the current level of 

furnishing such services) as 

insufficiently flexible would actually 

beg the question of why commenters 

would appear to believe that group and 

concurrent therapy would be better 

suited to address patient needs under 

PDPM rather than under RUG–IV. 

Given the historical precedent of 25 

percent as a therapy threshold and the 

very limited amount that group and 

concurrent therapy that has actually 

been reported in SNFs, we believe it is 

an appropriate threshold. That being 

said, using the new items in section O 

of the PPS Discharge Assessment, we 

will monitor therapy provision as 

discussed in section V.D of this final 

rule and we will consider policy 

changes as we receive data and see how 

therapy is being furnished under PDPM. 

Comment: Some commenters 

suggested that CMS revise the group 

therapy definition to include two to four 

participants while many commenters 

suggested that CMS revise the definition 

to include two to six participants doing 

the same or similar activities. In 

addition to better aligning with other 

settings such as Inpatient Rehabilitation 

Facilities (IRFs), commenters stated that 

this revision would allow increased 

flexibility so that patients in smaller 

SNFs could utilize and benefit from 


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group therapy. One commenter stated 

that the CMS definition of concurrent 

therapy is arbitrary and does not reflect 

therapists’ preferred practice. This 

commenter urged us to redefine 

concurrent therapy. Several commenters 

requested that CMS reconsider the 

‘‘rigid’’ documentation requirements 

that accompany group therapy 

provision, stating a preference as a 

practitioner to use group therapy when 

patients can benefit from it. One 

commenter requested that we provide 

additional guidance to providers and 

MACs related to the level of appropriate 

documentation required for 

participation in group or concurrent 

therapy. 

Response: We recognize the 

importance of alignment across settings. 

We may consider changing the 

definition of group therapy and/or 

concurrent therapy to align with other 

PAC settings in future rulemaking 

efforts. 

With regard to the ‘‘rigid’’ 

documentation requirements, we would 

like to remind the commenter that we 

did not impose new documentation 

requirements on SNFs with regard to 

concurrent and group therapy. Rather, 

in the FY 2012 proposed rule, we 

simply clarified certain alreadyestablished documentation standards 

(76 FR 26387 through 26388). As we 

wrote in the FY 2012 final rule in 

response to comments, since we simply 

clarified existing expectations, we did 

not agree that these documentation 

guidelines would increase or create 

undue burden on therapists, or that 

these guidelines create a disincentive 

for clinicians to perform group therapy 

due to increased paperwork. We stated 

that there should be no additional 

burden to provide this documentation, 

as it should be a standard part of any 

documentation. We agreed with those 

commenters who stated that 

rehabilitation professionals need to 

support the work they do through 

documentation, and that the 

documentation should reflect the need 

for skilled care and the mode of therapy 

provided, as well as demonstrate how 

the therapy provision will support 

patients’ needs and goals. (76 FR 

48516). 

We continue to believe that it is vital 

for SNFs to document services 

appropriately in order to demonstrate 

the skilled nature and the fact that the 

services are reasonable and necessary. 

This will be especially important when 

the 25 percent cap on concurrent and 

group therapy is in place after the 

implementation of PDPM. We will 

monitor the mode of therapy given and 

we will be interested to see how 

facilities document the therapy used so 

we can determine whether we will 

increase, decrease or maintain the limit 

following extensive monitoring. 

Regarding the request to provide 

additional guidance related to 

documentation of group and concurrent 

therapy, we remind commenters of the 

guidance provided in the FY2012 

proposed rule (76 FR 26388) regarding 

group therapy: Because group therapy is 

not appropriate for either all patients or 

all conditions, and in order to verify 

that group therapy is medically 

necessary and appropriate to the needs 

of each beneficiary, SNFs should 

include in the patient’s plan of care an 

explicit justification for the use of 

group, rather than individual or 

concurrent, therapy. This description 

should include, but need not be limited 

to, the specific benefits to that particular 

patient of including the documented 

type and amount of group therapy; that 

is, how the prescribed type and amount 

of group therapy will meet the patient’s 

needs and assist the patient in reaching 

the documented goals. In addition, we 

believe that the above documentation is 

necessary to demonstrate that the SNF 

is providing services to attain or 

maintain the highest practicable 

physical, mental, and psychosocial 

well-being of each resident in 

accordance with section 1819(b)(2) of 

the Act. 

While the above guidance was 

provided in relation to group therapy, 

we believe that it applies to concurrent 

therapy as well. 

Comment: Some commenters 

disagreed with the proposal of a 

combined limit of 25 percent for 

concurrent and group therapy, with one 

commenter stating that this contradicted 

the discussion in the ANPRM that 

considered a 25 percent limit on 

concurrent therapy and a separate 25 

percent limit on group therapy. This 

commenter pointed out that we stated, 

we believe that individual therapy is 

usually the best mode of therapy 

provision as it permits the greatest 

degree of interaction between the 

resident and therapist, and should 

therefore represent, at a minimum, the 

majority of therapy provided to an SNF 

resident (82 FR 21004). This commenter 

and several others requested that CMS 

return to the separate 25 percent caps 

for concurrent therapy and for group 

therapy, as discussed in the ANPRM. 

According to these commenters, prior to 

CMS allocating concurrent and group 

therapy in FY 2011 and FY 2012, 

respectively, the average amount of 

concurrent and group therapy that was 

furnished to all residents combined was 

about 26 percent. These commenters 

believe this means that there were many 

residents who received higher amounts 

than an average of 25 percent group and 

concurrent therapy and others who 

received lower amounts based on their 

clinical status and need. According to 

these commenters, CMS has not 

produced any evidence the quality of 

care changed dramatically since FY 

2011 and FY 2012, which would suggest 

the quality of care furnished in FY 2010 

and earlier was meeting individual 

resident needs of patients. One 

commenter suggested that we 

implement a 25 percent combined cap 

for group and concurrent therapy at a 

facility level rather than at a per-patient 

level. One commenter requested that 

CMS consider having providers report 

‘‘individual’’ and ‘‘non-individual’’ 

therapy, rather than separately reporting 

group and concurrent therapy. 

Response: We do not agree that there 

is a contradiction between the ANPRM 

and our current proposal. We continue 

to believe that individual therapy 

should represent a majority of therapy 

provided in a SNF. We continue to 

contend that although group and 

concurrent therapy may have clinical 

merit in specific situations, we believe 

that individual therapy is generally the 

best way of providing therapy to a 

resident because it is most tailored to 

that specific resident’s care needs. As 

such, we believe that individual therapy 

should represent at least the majority of 

the therapy services received by SNF 

residents. (82 FR 21004). 

Our latest (FY 2017) data indicate that 

individual therapy was provided 99.77 

percent of the time, meaning that group 

and concurrent therapy combined was 

reported as having been provided 0.23 

percent of the time. If therapy continues 

to be provided in the same way, there 

is no reason to believe that a combined 

25 percent limit on group and 

concurrent therapy is not a generous 

limit given the amount of group and 

concurrent therapy that has been 

provided under RUG IV. Therefore, we 

do not agree with the request to 

implement the separate 25 percent caps 

for group and concurrent therapy 

discussed in the ANPRM. We further 

disagree that CMS put restrictions on 

the ‘‘ability to furnish concurrent and 

group therapy.’’ We did not change any 

restrictions in FY 2011 and FY 2012 on 

the amount or type of therapy provided. 

The 25 percent cap on group therapy 

was in place since the inception of the 

SNF PPS. Rather, we allocated first 

concurrent therapy in FY 2011 (74 FR 

40315–40319) and then group therapy 

in FY 2012 (76 FR 48511–48517) as a 

way to equalize payment across therapy 

modes and remove any financial 


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incentives for providing a certain 

therapy mode, which appeared to drive 

at least some portion of the 

approximately 1,000 percentage 

increase in the amount of group therapy 

provided under the SNF Part A benefit 

in FY 2011. This was not an effort to 

restrict any mode of therapy. As we 

wrote in the FY 2012 final rule (76 FR 

48513, 48514), by allocating group 

therapy among the four group therapy 

participants, we are also equalizing the 

reimbursement incentive across the 

modes of therapy. We stated we believe 

this would once again encourage 

clinicians to choose the mode of therapy 

based on clinical rather than financial 

reasons. We stated in the FY 2012 final 

rule that the purpose of our allocation 

policy is to provide payment that better 

reflects resource utilization and cost, 

and that we do not believe this policy 

should affect clinical determinations 

regarding the appropriate mode of 

therapy provided to a patient. 

We appreciate the suggestion to 

implement a combined 25 percent group 

and concurrent therapy limit at the 

facility level rather than the patient 

level; however, given that a significant 

part of the reason we proposed a limit 

on group and concurrent therapy is so 

that patients receive therapy that 

reflects their individualized needs, we 

believe that implementing a facility 

based limit on concurrent and group 

therapy would defeat the purpose. With 

regard to a facility level limit, as 

opposed to the patient-level limit, we 

believe that therapy decisions should be 

driven by clinical standards and 

judgment related to an individual 

patient and not in relation to all patients 

within a facility. Utilizing a facilitylevel cap may allow for certain patients 

to receive excessive levels of group or 

concurrent therapy, which we do not 

believe would be advisable for any 

patient. 

With regard to the comment that 

providers not be required to report 

group and concurrent therapy 

separately, while we have a combined 

cap, we believe that it is important to 

understand which of the two modes of 

therapy, concurrent or group therapy, is 

actually occurring in relation to this 

cap. Given that some commenters 

requested separate caps on group and 

concurrent therapy, we would not be in 

a position to assess the need for this 

separation in the future if group and 

concurrent therapy were reported under 

a single heading. 

Comment: Several commenters 

expressed concern with how the 

combined group and concurrent therapy 

limit would interplay with student 

supervision in SNFs. One commenter 

stated the following, ‘‘Students’ minutes 

are often counted as concurrent therapy 

when the clinical instructor is also 

treating a patient and we anticipate 

residents being treated by students will 

quickly exceed the 25 percent 

threshold.’’ The commenters went on to 

explain that the 25 percent limitation on 

group and concurrent therapy minutes 

could make it inefficient for the treating 

therapist or assistant and could deter 

facilities from taking students. One 

commenter was concerned that ‘‘CMS 

currently requires that student treatment 

must be labeled as ‘‘concurrent,’’ and 

therefore, this would fall under the 25 

percent limitation on group and 

concurrent therapy. They stated that 

positive clinical education experiences 

in post-acute settings often translate into 

quality therapists and assistants getting 

jobs in those settings upon graduation. 

One commenter explained that if a SNF 

accepts more students, ‘‘the average of 

1 percent for group and concurrent 

therapy represented in CMS data may 

not prove accurate.’’ They described a 

scenario where SNFs that prefer to have 

higher than average volumes of students 

may deliver concurrent therapy in 

excess of 25 percent and that the 

combined 25 percent limit of group and 

concurrent therapy could be a deterrent 

to SNFs taking therapy students One 

commenter recommended that CMS 

create a reporting requirement that 

would delineate between student and 

therapist/assistant minutes so that those 

minutes could be separated from the 

total of group and concurrent therapy 

minutes. 

Response: We appreciate the concern 

that these commenters raised. We agree 

that our policies should not deter SNFs 

from taking students, and we agree that 

the therapy student internship is crucial 

to ensuring that students gain valuable 

SNF experience that would cause 

quality therapist and assistant graduates 

to pursue employment at SNFs when 

they eventually graduate. We appreciate 

the candor with which the commenters 

have described how they provide 

concurrent therapy at the same time as 

their therapy students consistent with 

current policy allowances. We would 

like to clarify that CMS does not require 

that student therapy be labeled as 

concurrent. The following is written in 

the MDS 3.0 RAI Manual (Chapter 3, 

section O): 

When a therapy student is involved with 

the treatment, and one of the following 

occurs, the minutes may be coded as 

concurrent therapy: The therapy student is 

treating one resident and the supervising 

therapist/assistant is treating another 

resident, and both residents are in line of 

sight of the therapist/assistant or student 

providing their therapy. 

This instruction is describing one 

possible scenario. We would like to 

reiterate that CMS does not require 

students to do concurrent therapy. As 

stated in the FY 2012 final rule (76 FR 

48511), as the therapy student is under 

the direction of the supervising 

therapist (even if no longer required to 

be under line-of-sight supervision), the 

time the student spends with a patient 

will continue to be billed as if it were 

the supervising therapist alone 

providing the therapy. In other words, 

the therapy student, for the purpose of 

billing, is treated as simply an extension 

of the supervising therapist rather than 

being counted as an additional 

practitioner. 

We suspect that, as noted in the FY 

2012 final rule referenced above, 

because we do not allow facilities to 

count therapy students’ independent 

time on the MDS, many facilities rely on 

the MDS instructions above (allowing a 

therapist or assistant and a student to 

treat one patient each while both 

residents are in line of sight of the 

therapist/assistant or student providing 

their therapy) to permit them to count 

student concurrent therapy time. 

However, this should in no way be 

considered mandatory practice and like 

all concurrent therapy, should be used 

sparingly. 

Further, as mentioned above, our 

most recent (FY 2017) data show that 

individual therapy was provided 99.77 

percent of the time, meaning that group 

and concurrent therapy combined was 

reported as having been provided 0.23 

percent of the time. It concerns us that 

commenters have stated that they are 

providing so much concurrent therapy 

with students that the 25 percent cap 

would be too low for them, because this 

would suggest that either the comments 

were provided mistakenly or that 

facilities are falsely reporting concurrent 

therapy as individual therapy. While we 

agree with commenters that the 

opportunity to supervise student 

therapists in SNFs is valuable to the 

education of future therapists and 

assistants, our data indicate that a 25 

percent combined cap on group and 

concurrent therapy should not deter 

facilities from taking more therapy 

students. We believe the 

recommendation to monitor student 

therapy minutes along with just 

therapist/assistant minutes has merit 

and it is something we will consider for 

future policy making. 

Comment: Some commenters 

expressed concern with CMS’ 

implication that clinical decisions about 


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therapy are principally driven by ‘‘. . . 

financial considerations rather than the 

clinical needs of the SNF residents’’. 

Response: The available data support 

our assertion that at least some SNFs 

principally utilize financial 

considerations, rather than relying on 

clinical judgment, when making 

decisions regarding the manner and 

amount of care to provide to SNF 

residents. In 2016, CMS released the 

Skilled Nursing Facility Utilization and 

Payment Public Use File (Skilled 

Nursing Facility PUF) (https://

www.cms.gov/Research-Statistics-Dataand-Systems/Statistics-Trends-andReports/Medicare-Provider-ChargeData/SNF.html). The Skilled Nursing 

Facility PUF contained information on 

utilization, payment (allowed amount, 

Medicare payment and standard 

payment), submitted charges, and 

beneficiary demographic and chronic 

condition indicators organized by CMS 

Certification Number (6-digit provider 

identification number), Resource 

Utilization Group (RUG), and state of 

service. The SNF PUF included 

information on the number of provider 

assessments where residents were 

classified into an Ultra-High 

Rehabilitation RUG or a Very-High 

Rehabilitation RUG. It also included the 

percentage of those assessments that 

were within ten minutes of the 

minimum threshold used to classify a 

resident into that Rehabilitation RUG 

category (that is, between 500–510 

minutes for RV RUGs and 720–730 

minutes for RU RUGs). Based on this 

information, we found the following: 

• 51 percent of all RV assessments 

showed therapy provided between 500 

and 510 minutes. 

• 65 percent of all RU assessments 

showed therapy provided between 720 

and 730 minutes. 

• For 88 providers, all of their RV 

assessments showed therapy provided 

between 500 and 510 minutes. 

• For 215 providers, all of their RU 

assessments showed therapy provided 

between 720 and 730 minutes. 

• More than one in five providers had 

more than 75 percent of both RU and RV 

assessments that showed therapy 

provided within 10 minutes of the 

minimum threshold. 

This clear evidence of thresholding 

behavior supports our assertion 

regarding SNFs that are driven by 

payment considerations rather than 

therapy needs of patients. Furthermore, 

we received a significant number of 

comments from stakeholders on the 

proposed rule who believe that the 

quality and volume of therapy services 

are likely to diminish under PDPM. This 

belief is, itself, predicated on the notion 

that SNFs will continue to utilize 

financial considerations as the basis for 

care planning decisions. However, with 

better and more reliable patient 

diagnosis and characteristic data and 

given the removal of therapy service 

volume as a component of the payment 

system, we expect that we will be better 

positioned under PDPM to exercise our 

authority to make case-mix creep 

adjustments under section 1888(e)(4)(F) 

of the Act, as may be appropriate, to 

address any changes in payment which 

are merely the result of changes in the 

coding or classification of SNF patients 

that do not reflect actual changes in case 

mix. This type of analysis will also be 

a part of CMS monitoring efforts under 

PDPM. 

Comment: One commenter 

recommended that, in the future, CMS 

consider whether it would be reasonable 

to track rehabilitative versus 

maintenance therapy, similar to how it 

is done in the home health setting. 

Response: We appreciate this 

suggestion and may take it into 

consideration for future policy making 

decisions. 

Accordingly, after considering the 

comments received, for the reasons 

discussed in the proposed rule and in 

this final rule, we are finalizing our 

proposal, without modification, to set a 

combined 25 percent limit on group and 

concurrent therapy per discipline. 

Additionally, we are finalizing our 

proposal, without modification, to 

implement a non-fatal warning edit on 

the validation report upon submission 

when the amount of group and 

concurrent therapy exceeds 25 percent 

within a given therapy discipline, 

which would alert the provider to the 

fact that the therapy provided to that 

resident exceeded the threshold. 

F. Interrupted Stay Policy 

Under section 1812(a)(2)(A) of the 

Act, Medicare Part A covers a maximum 

of 100 days of SNF services per spell of 

illness, or ‘‘benefit period.’’ A benefit 

period starts on the day the beneficiary 

begins receiving inpatient hospital or 

SNF benefits under Medicare Part A. 

(See section 1861(a) of the Act; 

§ 409.60). SNF coverage also requires a 

prior qualifying, inpatient hospital stay 

of at least 3 consecutive days’ duration 

(counting the day of inpatient admission 

but not the day of discharge). (See 

section 1861(i) of the Act; 

§ 409.30(a)(1)). Once the 100 available 

days of SNF benefits are used, the 

current benefit period must end before 

a beneficiary can renew SNF benefits 

under a new benefit period. For the 

current benefit period to end so a new 

benefit period can begin, a period of 60 

consecutive days must elapse 

throughout which the beneficiary is 

neither an inpatient of a hospital nor 

receiving skilled care in a SNF. (See 

section 1861(a) of the Act; § 409.60). 

Once a benefit period ends, the 

beneficiary must have another 

qualifying 3-day inpatient hospital stay 

and meet the other applicable 

requirements before Medicare Part A 

coverage of SNF care can resume. (See 

section 1861(i); § 409.30) 

While the majority of SNF benefit 

periods, approximately 77 percent, 

involve a single SNF stay, it is possible 

for a beneficiary to be readmitted 

multiple times to a SNF within a single 

benefit period, and such cases represent 

the remaining 23 percent of SNF benefit 

periods. For instance, a resident can be 

readmitted to a SNF within 30 days after 

a SNF discharge without requiring a 

new qualifying 3-day inpatient hospital 

stay or beginning a new benefit period. 

SNF admissions that occur between 31 

and 60 days after a SNF discharge 

require a new qualifying 3-day inpatient 

hospital stay, but fall within the same 

benefit period. (See sections 1861(a) and 

(i) of the Act; §§ 409.30, 409.60) 

Other Medicare post-acute care (PAC) 

benefits have ‘‘interrupted stay’’ policies 

that provide for a payment adjustment 

when the beneficiary temporarily goes 

to another setting, such as an acute care 

hospital, and then returns within a 

specific timeframe. In the inpatient 

rehabilitation facility (IRF) and 

inpatient psychiatric facility (IPF) 

settings, for instance, an interrupted 

stay occurs when a patient returns to the 

same facility (or in the case of an IPF, 

the same or another IPF) within 3 days 

of discharge. The interrupted stay policy 

for long-term care hospitals (LTCHs) is 

more complex, consisting of several 

policies depending on the length of the 

interruption and, at times, the discharge 

destination: An interruption of 3 or 

fewer days is always treated as an 

interrupted stay, which is similar to the 

IRF PPS and IPF PPS policies; if there 

is an interruption of more than 3 days, 

the length of the gap required to trigger 

a new stay varies depending on the 

discharge setting. In these three settings, 

when a beneficiary is discharged and 

returns to the facility within the 

interrupted stay window, Medicare 

treats the two segments as a single stay. 

As we explained in the proposed rule 

(83 FR 21068), while other Medicare 

PAC benefit categories have interrupted 

stay policies, the SNF benefit under the 

RUG–IV case-mix model had no need 

for such a policy because, given a 

resident’s case-mix group, payment did 

not change over the course of a stay. In 

other words, assuming no change in a 


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patient’s condition or treatment, the 

payment rate was the same on Day 1 of 

a covered SNF stay as it is at Day 7. 

Accordingly, a beneficiary’s 

readmission to the SNF—even if only a 

few days may have elapsed since a 

previous discharge—could essentially 

be treated as a new and different stay 

without affecting the payment rates. 

However, as described in section V.D 

of the proposed rule (83 FR 21068) and 

section V.C.4 of this final rule, we stated 

that the PDPM would adjust the per 

diem rate across the length of a stay (the 

variable per diem adjustment) to better 

reflect how and when costs are incurred 

and resources used over the course of 

the stay, such that earlier days in a 

given stay receive higher payments, 

with payments trending lower as the 

stay continues. In other words, the 

adjusted payment rate on Day 1 and Day 

7 of a SNF stay may not be the same. 

Although we stated that we believe this 

variable per diem adjustment schedule 

more accurately reflects the increased 

resource utilization in the early portion 

of a stay for single-stay benefit periods 

(which represent the majority of cases), 

we considered whether and how such 

an adjustment should be applied to 

payment rates for cases involving 

multiple stays per benefit period. In 

other words, in the proposed rule, we 

considered instances in which a 

resident has a Part A stay in a SNF, 

leaves the facility for some reason, and 

then is readmitted to the same SNF or 

a different SNF; and how this 

readmission should be viewed in terms 

of both resident classification and the 

variable per diem adjustment schedule 

under the proposed PDPM. We 

explained that application of the 

variable per diem adjustment is of 

particular concern because providers 

may consider discharging a resident and 

then readmitting the resident shortly 

thereafter to reset the resident’s variable 

per diem adjustment schedule and 

maximize the payment rates for that 

resident. 

We stated in the proposed rule (83 FR 

21068) that, given the potential harm 

which may be caused to the resident if 

discharged inappropriately, and other 

concerns outlined previously in this 

section and in the proposed rule, we 

discussed in last year’s FY 2018 

ANPRM the possibility of adopting an 

interrupted stay policy under the SNF 

PPS in conjunction with the 

implementation of the RCS–I case-mix 

model. Several commenters expressed 

support for this interrupted stay policy 

in responding to the ANPRM, saying 

that the interrupted stay policy is in 

alignment with similar policies in other 

post-acute settings, and that a similar 

policy would likely be implemented 

under any cross-setting PAC payment 

system. 

Thus, we proposed to implement an 

interrupted stay policy as part of the 

SNF PPS, effective beginning FY 2020 

in conjunction with the proposed 

implementation of the SNF PDPM. 

Specifically, in cases where a resident is 

discharged from a SNF and returns to 

the same SNF by 12:00 a.m. at the end 

of the third day of the interruption 

window (as defined below), we 

proposed treating the resident’s stay as 

a continuation of the previous stay for 

purposes of both resident classification 

and the variable per diem adjustment 

schedule. In cases where the resident’s 

absence from the SNF exceeds this 3- 

day interruption window (as defined 

below), or in any case where the 

resident is readmitted to a different 

SNF, we proposed treating the 

readmission as a new stay, in which the 

resident would receive a new 5-day 

assessment upon admission and the 

variable per diem adjustment schedule 

for that resident would reset to Day 1. 

We stated in the proposed rule (83 FR 

21068 through 21069) that, consistent 

with the existing interrupted stay 

policies for the IRF and IPF settings, we 

would define the interruption window 

as the 3-day period starting with the 

calendar day of discharge and 

additionally including the 2 

immediately following calendar days. 

We stated that for the purposes of the 

interrupted stay policy, the source of the 

readmission would not be relevant. That 

is, the beneficiary may be readmitted 

from the community, from an 

intervening hospital stay, or from a 

different kind of facility, and the 

interrupted stay policy would operate in 

the same manner. We explained that the 

only relevant factors in determining if 

the interrupted stay policy would apply 

are the number of days between the 

resident’s discharge from a SNF and 

subsequent readmission to a SNF, and 

whether the resident is readmitted to 

the same or a different SNF. 

In the proposed rule (83 FR 21069), 

we presented the following examples, 

which we believed aided in clarifying 

how this policy would be implemented: 

Example A: A beneficiary is 

discharged from a SNF on Day 3 of the 

stay. Four days after the date of 

discharge, the beneficiary is then 

readmitted (as explained above, this 

readmission would be in the same 

benefit period) to the same SNF. The 

SNF would conduct a new 5-day 

assessment at the start of the second 

admission and reclassify the beneficiary 

accordingly. In addition, for purposes of 

the variable per diem adjustment 

schedule, the payment schedule for the 

second admission would reset to Day 1 

payment rates for the beneficiary’s new 

case-mix classification. 

Example B: A beneficiary is 

discharged from a SNF stay on Day 7 

and is readmitted to the same SNF 

within the 3-day interruption window. 

For the purposes of classification and 

payment, this would be considered a 

continuation of the previous stay (an 

interrupted stay). The SNF would not 

conduct a new 5-day assessment to 

reclassify the patient and for purposes 

of the variable per diem adjustment 

schedule, the payment schedule would 

continue where it left off at the rate for 

the day of discharge; we stated in the 

proposed rule that, in this case, the first 

day of the second stay would be paid at 

the Day 8 per diem rates under that 

schedule. 

Example C: A beneficiary is 

discharged from a SNF stay on Day 7 

and is readmitted to a different SNF 

within the 3-day interruption window. 

The SNF would conduct a new 5-day 

assessment at the start of the second 

admission and classify the beneficiary 

accordingly. In addition, for purposes of 

the variable per diem adjustment 

schedule, the payment schedule for the 

second admission would reset to Day 1 

payment rates for the beneficiary’s new 

case-mix classification. 

We note two clarifications to the 

preceding examples. In each of the 

above examples, when the beneficiary is 

discharged from the SNF stay, the SNF 

would complete the required PPS 

Discharge Assessment (see Table 33: 

PPS Assessment Schedule under 

PDPM). Additionally, in Example B, we 

inadvertently indicated in the proposed 

rule that the first day of the second stay 

would be paid at the Day 8 per diem 

rates. However, the first day of the 

second stay would actually be paid at 

the rate for the day of discharge, Day 7. 

These points are further addressed in 

our responses to comments below. 

We also stated in the proposed rule 

(83 FR 21069) that we considered 

alternative ways of structuring the 

interrupted stay policy. For example, we 

considered possible ranges for the 

interrupted stay window other than the 

3 calendar day window proposed. For 

example, we considered windows of 

fewer than 3 days (for example, 1 or 2 

day windows for readmission), as well 

as windows of more than 3 days (for 

example, 4 or 5 day windows for 

readmission). However, we stated we 

believe that 3 days represents a 

reasonable window after which it is 

more likely that a resident’s condition 

and resource needs will have changed. 

We also stated that we believe 


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consistency with other payment 

systems, like that of IRF and IPF, is 

helpful in providing clarity and 

consistency to providers in 

understanding Medicare payment 

systems, as well as making progress 

toward standardization among PAC 

payment systems. 

In addition, we explained that, to 

determine how best to operationalize an 

interrupted stay policy within the SNF 

setting, we considered three broad 

categories of benefit periods consisting 

of multiple stays. The first type of 

scenario, SNF-to-SNF transfers, is one in 

which a resident is transferred directly 

from one SNF to a different SNF. The 

second case we considered, and the 

most common of all three multiple-stay 

benefit period scenarios, is a benefit 

period that includes a readmission 

following a new hospitalization between 

the two stays—for instance, a resident 

who was discharged from a SNF back to 

the community, re-hospitalized at a later 

date, and readmitted to a SNF (the same 

SNF or a different SNF) following the 

new hospital stay. The last case we 

considered was a readmission to the 

same SNF or a different SNF following 

a discharge to the community, with no 

intervening re-hospitalization. 

We further explained that, to simplify 

the analysis, we primarily examined 

benefit periods with two stays. We 

stated that benefit periods with exactly 

two stays account for a large majority 

(70 percent) of all benefit periods with 

multiple stays, and benefit periods with 

more than two stays represent a very 

small portion (less than 7 percent) of all 

benefit periods overall. We therefore 

assume the data for cases where there 

are exactly two stays in a benefit period 

are representative of all benefit periods 

with multiple stays. We noted that, of 

cases where there are exactly two stays 

in a benefit period, over three quarters 

(76.4 percent) consist of rehospitalization and readmission (to the 

same SNF or a different SNF). Discharge 

to the community and readmission 

without re-hospitalization cases 

represent approximately 14 percent of 

cases, while direct SNF-to-SNF transfers 

represent approximately 10 percent. 

For each of these case types, in which 

a resident was readmitted to a SNF after 

discharge, we explained that we 

examined whether (1) the variable per 

diem adjustment schedule should be 

‘‘reset’’ back to the Day 1 rates at the 

outset of the second stay versus 

‘‘continuing’’ the variable per diem 

adjustment schedule at the point at 

which the previous stay ended, and (2) 

a new 5-day assessment and resident 

classification should be required at the 

start of the subsequent SNF stay. 

With regard to the first question 

above, specifically whether or not a 

readmission to a SNF within the 

proposed 3-day interruption window 

would reset the resident’s variable per 

diem adjustment schedule, we stated 

that in each of the cases described 

above, we were concerned generally that 

an interrupted stay policy that ‘‘restarts’’ 

the variable per diem adjustment 

schedule to Day 1 after readmissions 

could incentivize unnecessary 

discharges with quick readmissions. We 

explained that this concern is 

particularly notable in the second and 

third cases described above, as the 

beneficiary may return to the same 

facility. As we discussed in the 

proposed rule (83 FR 21069), to 

investigate this question, we conducted 

linear regression analyses to examine 

changes in costs in terms of both PT/OT 

and NTA costs per day from the first to 

second admission for the three scenarios 

described above (SNF-to-SNF direct 

transfers, readmissions following rehospitalization, and readmissions 

following community discharge). As 

discussed in section V.D.4. of the 

proposed rule (83 FR 21060 through 

21061) and in section V.C.4 of this final 

rule, investigations revealed that 

utilization of PT, OT, and NTA services 

changes over the course of a stay. Based 

on both empirical analysis and feedback 

from multiple technical expert panels, 

we determined that SLP and nursing 

utilization remained fairly constant over 

a stay. Therefore, we proposed variable 

per diem adjustment schedules for the 

PT, OT, and NTA components but not 

for the SLP or nursing components. We 

stated in the proposed rule that, because 

the analysis of changes in costs across 

two stays in a single benefit period is 

relevant to determining how the 

variable per diem payment adjustments 

should apply to benefit periods with 

multiple stays, we restricted our 

analysis to the three payment 

components for which we are proposing 

variable per diem adjustments (PT, OT, 

and NTA). For this analysis, both the rehospitalization and community 

discharge cases were separated into two 

sub-cases: When the resident returns to 

the same SNF, and when the resident is 

admitted to a different SNF. By 

definition, SNF-to-SNF transfer cases 

always have different providers for the 

first and second stays. We stated in the 

proposed rule that the regression results 

showed that PT/OT costs from the first 

to second admission were very similar 

for SNF-to-SNF transfers and for 

readmissions to a different provider 

following re-hospitalization or discharge 

to community, suggesting that the 

second admission is comparable to a 

new stay. NTA costs from the first to 

second admission also were very similar 

for SNF-to-SNF transfers. We stated 

that, for readmissions following rehospitalization or discharge to 

community, NTA costs for readmissions 

to the same provider were notably less 

than NTA costs for readmissions to a 

different provider. We explained that, 

overall, these results suggest that a 

readmission to a different SNF, 

regardless of whether it was a direct 

SNF-to-SNF transfer, or whether the 

beneficiary was re-hospitalized or 

discharged to the community before the 

second admission, are more comparable 

to a new stay than an interrupted stay. 

Thus, we proposed to always reset the 

variable per diem adjustment schedule 

to Day 1 whenever residents are 

discharged and readmitted to a different 

SNF. We acknowledged that this could 

lead to patterns of inappropriate 

discharges and readmissions that could 

be inconsistent with the intent of this 

policy; for example, we stated we would 

be concerned about patients in SNF A 

consistently being admitted to SNF B to 

the exclusion of other SNFs in the area. 

We explained that should we discover 

such behavior, we would flag these 

facilities for additional scrutiny and 

review and consider potential policy 

changes in future rulemaking. However, 

based on the results of our regression 

analyses, and because of the concern 

that a SNF provider could discharge and 

promptly readmit a resident to reset the 

variable per diem adjustment schedule 

to Day 1, we stated that in cases where 

a resident returns to the same provider 

we were proposing to allow the 

payment schedule to reset only when 

the resident has been out of the facility 

for at least 3 days. As previously 

mentioned, we stated that believe 3 days 

represents a reasonable window after 

which it is more likely that a resident’s 

condition and resource needs will have 

changed, and this 3-day requirement is 

also consistent with the interrupted stay 

policies of similar Medicare PAC 

benefits. Moreover, we stated that while 

we found that PT and OT costs for cases 

where the gap is longer than 3 days are 

similar to PT and OT costs for cases 

where the gap is shorter than 3 days, 

NTA costs are notably higher for cases 

where the gap is longer than 3 days. We 

explained that this provides further 

support for resetting the variable per 

diem schedule for cases where the gap 

is longer than 3 days (as costs tend to 

be higher, similar to a new stay). More 

information on these analyses can be 

found in section 3.10.3. of the SNF PMR 

technical report available at https:// 


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

therapyresearch.html. 

We explained in the proposed rule (83 

FR 21070) that with regard to the 

question of whether or not SNFs would 

be required to complete a new 5-day 

assessment and reclassify the resident 

after returning to the SNF within the 

proposed 3-day interruption window, 

we investigated changes in resident 

characteristics from the first to the 

second stay within a benefit period. 

First, we looked at changes in clinical 

categories from the first to second stay 

for residents with an intervening rehospitalization. We explained that this 

analysis could only be conducted for 

residents with a re-hospitalization 

because, as described in section 3.10.2. 

of the SNF PMR technical report, for 

research purposes, classification into 

clinical categories was based on the 

diagnosis from the prior inpatient stay. 

We stated that for those residents who 

had a re-hospitalization and were 

readmitted to a SNF (either the same or 

a different SNF), and therefore, could be 

reclassified into a new clinical category 

(because of new diagnostic information 

as a result of the intervening rehospitalization), we found that a 

majority had the same clinical category 

for both the first and second admission. 

We further explained that because we 

could not conduct this investigation for 

SNF-to-SNF transfers or community 

discharge cases (as they lack a new 

hospitalization), we separately 

investigated changes in function from 

the first to second stay for SNF-to-SNF 

transfers and for readmissions following 

community discharge. We found that in 

a large majority of cases, there was no 

change in function from the first to 

second stay, regardless of whether the 

second provider was the same or 

different as the first provider. Thus, we 

stated we believe it would be 

appropriate to maintain the 

classification from the first stay for 

those residents returning to the same 

SNF no more than 3 calendar days after 

discharge from the same facility. 

However, we stated that because we 

proposed to exclude from the 

interrupted stay policy readmissions to 

a different SNF (regardless of the 

number of days between admissions) 

and readmissions to the same SNF when 

the gap between admissions is longer 

than 3 days, and to treat these 

readmissions as new stays for purpose 

of the variable per diem adjustment 

schedule, we believe it would be 

appropriate and consistent to treat these 

cases as new stays for purposes of 

clinical classification and to require a 

new 5-day PPS assessment. More 

information on these analyses can be 

found in section 3.10.2. of the SNF PMR 

technical report available at https://

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

therapyresearch.html. Additionally, we 

noted that under the approach 

discussed in section V.E.1. of the 

proposed rule, providers would be 

afforded the flexibility to use the IPA, 

which would allow for resident 

reclassification under certain 

circumstances. 

We also noted that we believe that 

frequent SNF readmissions may be 

indicative of poor quality care being 

provided by the SNF. Given this belief, 

we stated we plan to monitor the use of 

this policy closely to identify those 

facilities whose beneficiaries experience 

frequent readmission, particularly 

facilities where the readmissions occur 

just outside the 3-day window used as 

part of the proposed interrupted stay 

policy. We stated that should we 

discover such behavior, we would flag 

these facilities for additional scrutiny 

and review and consider potential 

policy changes in future rulemaking. 

We invited comments on the 

proposals outlined above. Commenters 

submitted the following comments 

related to the proposed rule’s discussion 

of the proposed interrupted stay policy 

under the PDPM. A discussion of these 

comments, along with our responses, 

appears below. 

Comment: Several commenters 

pointed out a potential adverse 

incentive associated with the interaction 

between the interrupted stay policy, the 

proposed Interim Payment Assessment 

(IPA), and the variable per diem 

adjustment. Specifically, these 

comments were concerned with issues 

that could arise because an IPA does not 

return the NTA component to day 1 

payment rates under the variable per 

diem adjustment schedule. Commenters 

stated that if a patient requires a new 

high cost medication or piece of 

equipment, the inability to return to day 

1 of the variable per diem adjustment 

schedule could result in an array of 

unintended issues. Commenters noted 

that these unintended issues include 

incentivizing unnecessary discharges to 

a hospital followed by quick 

readmissions (which, the commenter 

pointed out, was a risk CMS had 

specifically considered and attempted to 

avoid in crafting the proposed 

interrupted stay policy) and reluctance 

to admit patients who are at high risk of 

changes in care needs. One commenter 

stated that CMS has not aligned the 

planned monitoring of unnecessary 

discharges with existing quality 

measures, and instead has created an 

incentive for unnecessary discharges 

and readmissions just outside the 3-day 

interruption window by prohibiting 

providers from returning patients to 

days one through three of the variable 

per diem adjustment schedule for 

typically high cost NTAs when an IPA 

is conducted or in the instance of 

interrupted stays of 3 or less days. 

Response: While we appreciate the 

commenters’ concerns regarding the 

potential for an adverse incentive, we 

believe that frequent SNF readmissions 

may be indicative of poor quality care 

being provided by the SNF. CMS plans 

to monitor the use of this policy closely 

to identify those facilities whose 

beneficiaries experience frequent 

readmission, particularly facilities 

where the readmissions occur just 

outside the 3-day window used as part 

of the proposed interrupted stay policy. 

Should we discover such behavior, we 

will flag these facilities for additional 

scrutiny and review and consider 

potential policy changes in future 

rulemaking. 

We do not believe that facilities have 

cause for reluctance to admit patients 

who are at high risk of changes in care 

needs. The optional IPA allows for 

patients to be reclassified in cases of 

significant changes in care needs. 

With regard to the question of the IPA 

resetting the variable per diem 

adjustment, this issue is addressed in 

our responses to comments in section 

V.D. of this final rule. 

With regard to the question of 

interruptions of 3 or less days resetting 

the variable per diem adjustment, as we 

stated in the proposed rule, our analyses 

found that some costs, specifically NTA 

costs, are notably higher for cases where 

the gap is longer than 3 days, compared 

to cases where the interruption is 3 or 

less days, where costs are more similar 

to uninterrupted stays. We believe this 

supports the use of a 3-day gap as the 

metric for when to reset the variable per 

diem adjustment. 

Regarding any current alignment of 

quality measures and the monitoring of 

unnecessary discharges, we interpret the 

commenter to be suggesting that CMS 

does not currently have in place quality 

measures that address unnecessary 

discharges to the hospital during the 

SNF Stay. We disagree with this 

assertion in that CMS has developed 

and implemented a hospital 

readmission measure for SNF. 

Comment: Commenters requested 

clarification as to whether the 

readmission of a patient under the 

interrupted stay policy (for example, 

within the 3-day window) would trigger 

an IPA. 


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Response: As discussed in section 

V.D. of this final rule, the IPA under 

PDPM would be an optional assessment. 

Therefore, readmission after an 

interrupted stay would not trigger an 

IPA. If the provider believes, even in the 

case of a short absence from the facility, 

that an IPA is warranted, then we would 

encourage the provider to complete an 

IPA in that instance. 

Comment: Several commenters 

requested clarification about completing 

initial evaluations for therapy upon 

readmission of a patient in an 

interrupted stay under the interrupted 

stay policy. Commenters questioned 

whether CMS has an expectation that 

therapists will always complete a new 

evaluation upon the resident’s return to 

a SNF as currently instructed in the 

MDS RAI Manual, or whether CMS 

would defer to the clinical judgment of 

the therapist in a way that is more like 

the EOT/EOT–R practice. Commenters 

also questioned whether CMS would 

require SNFs to indicate on the claim 

form when a resident has been 

readmitted and/or when an evaluation 

was complete after the resident was 

readmitted. Commenters pointed out 

that, per the current instruction in 

section O of the MDS RAI Manual, ‘‘If 

a resident returns from a hospital stay, 

an initial evaluation must be performed 

after entry to the facility, and only those 

therapies that occurred since admission/ 

reentry to the facility and after the 

initial evaluation shall be counted.’’ 

(MDS 3.0 Chapter 3, section O, V1.15, 

page O–19). On the other hand, 

commenters pointed out that the 

premise for the interrupted stay policy 

is similar to the policy for the End-of 

Therapy (EOT) Other Medicare 

Required Assessment (OMRA), which 

leaves it to the clinician’s judgment 

whether or not a new therapy evaluation 

should be completed. Commenters 

stated that when therapy is the primary 

skill, and the patient misses 3 

consecutive calendar days of therapy, 

the provider must complete an EOT 

OMRA, which effectively changes the 

payment resource utilization group 

(RUG). Commenters pointed out that in 

cases where therapy resumes after the 

EOT–OMRA is performed and the 

resumption of therapy date is no more 

than 5 consecutive calendar days after 

the last day of therapy provided, and the 

therapy services have resumed at the 

same RUG–IV classification level, and 

with the same therapy plan of care that 

had been in effect prior to the EOT 

OMRA, an EOT OMRA with 

Resumption (EOT–R) may be 

completed. Commenters noted that in 

these cases, it is left to the clinician’s 

judgment whether or not a new therapy 

evaluation should be completed. 

Response: Given that an interrupted 

stay does not prompt the need for a new 

5-day PPS assessment and continues the 

stay from the point when the 

interruption occurred, providers should 

not be required to always complete an 

evaluation upon the resident’s 

readmission after an interrupted stay. 

Per the proposed interrupted stay 

policy, a new 5-day assessment must be 

completed only if the interruption lasts 

longer than 3 days (or if the beneficiary 

is readmitted to a different SNF). If the 

interruption was less than 3 days but 

patient care needs have changed 

significantly, clinicians may complete 

an IPA at their discretion. The 

instructions in the MDS RAI Manual 

will be updated accordingly as part of 

the implementation of PDPM. 

With regard to whether providers 

would be required to report on the claim 

form when a patient is readmitted or an 

evaluation is completed for such a 

patient, we do not anticipate such 

changes in claims reporting, though we 

would have providers report on the 

claim when an interrupted stay 

occurred. 

Comment: Many commenters had 

questions and concerns related to 

discharge practices under the 

interrupted stay policy, and requested 

clarification of the requirements 

surrounding the PPS Part A Discharge 

(NPE) when beneficiaries meet the 

criteria of an interrupted stay. One 

commenter stated that it is unclear in 

the proposed rule whether the NPE 

would be completed in example B in the 

FY 2019 SNF PPS proposed rule (83 FR 

21069). Assuming that an NPE would be 

required once the resident has been out 

of the facility for 24 hours, whether the 

resident returns within 1 day or 3 days, 

commenters questioned how the facility 

would manage the assessment schedule 

versus the payment schedule. Other 

commenters questioned whether CMS 

expects SNFs to wait to see whether the 

beneficiary returns before completing 

the discharge assessment. Commenters 

questioned what the implications would 

be for setting the Assessment Reference 

Date (ARD) approximately 4 to 5 days 

after discharge in cases when the 

beneficiary does not return within the 3- 

day window. Commenters stated that as 

currently defined, doing this would be 

considered a late assessment, and could 

subject the SNF to penalties. 

Commenters also stated that if this 

discharge assessment is required, then 

this adds to the administrative burden, 

which is contradictory to CMS’ stated 

goals. 

Response: As is the current policy, 

SNFs would be expected to complete 

the PPS discharge assessment and/or 

OBRA discharge assessment upon any 

discharge and within currently 

established timeframes, regardless of 

any expectation as to whether or not a 

patient might be readmitted and/or 

whether the readmission would be 

considered an interrupted stay. This 

does not add administrative burden 

beyond what SNFs are currently 

expected to do. This information is also 

important in our ability to assess 

instances in which facilities may abuse 

the interrupted stay policy. 

With regard to managing the 

assessment schedule and payment 

schedule, we would refer commenters to 

the assessment schedule discussed in 

section V.D of this final rule, which 

outlines both the assessment calendar 

and payment timeline for each 

assessment under PDPM. 

Comment: Some commenters sought 

clarification as to how the SNF should 

count the total volume, mode, and type 

of therapy to report in section O of the 

MDS for purposes of the discharge 

assessment when a resident’s stay 

included one or more interrupted stays. 

Would they count it from Day 1, the 

original admission date, even though 

there was an interrupted stay, or would 

this discharge assessment only include 

the volume, mode, and type of therapy 

delivered since the time of return to 

discharge? 

Response: In cases where a resident is 

discharged and then readmitted to a 

SNF in a manner that triggers an 

interrupted stay under the interrupted 

stay policy, only those therapies that 

occurred since the readmission would 

be included in section O of the MDS for 

each discharge assessment. 

Comment: A commenter expressed 

concerns related to the use of the length 

of an interruption in days (for example, 

less than or equal to 3 days) as the 

trigger for a 5-day assessment. The 

commenter stated appreciation for CMS 

efforts to reduce the number of 5-day 

assessments, but stated that no 

reduction in burden is achieved by not 

requiring a 5-day assessment for 

patients returning following 3 or fewer 

days, assuming that SNFs must still 

conduct a patient assessment upon 

readmission for all patients. Also, the 

commenter believes not performing a 5- 

day assessment for all returning patients 

creates unneeded risk for patients and 

SNFs. The commenter recommended 

performing the 5-day assessment after 

every readmission, the result of which— 

not the number of days in the 

interruption—should determine 

whether the patient’s condition has 


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changed and new care needs are present 

that would warrant resetting the 

variable per diem rate. Commenters 

stated that the number of days in an 

interruption is irrelevant to costs of 

treatment and it is the patient’s 

condition upon return from the 

interruption that should determine 

whether the payment resets to day 1 per 

diem rates or not. 

Response: Contrary to the 

commenter’s assertion, we believe that a 

reduction in burden is, in fact, achieved 

by not requiring a 5-day assessment for 

patients returning following 3 or fewer 

days. While SNFs may be required to 

complete OBRA assessments and other 

statutorily required assessments beyond 

the scope of SNF PPS payment, it will 

no longer be the case that SNFs must 

conduct a patient assessment upon 

readmission for all patients for the 

purposes of PPS payment. As discussed 

above, in conjunction with the 

implementation of the PDPM, CMS will 

reduce the assessment schedule 

significantly to ease provider burden 

(see section V. E. and Table 33 of the 

proposed rule). The Start of Therapy 

OMRA, the assessment that would have 

previously been required for PPS 

payment upon a readmission, is no 

longer required. The new schedule 

utilizes the 5-day Assessment and PPS 

Discharge Assessments as the only 

required assessments, with IPAs being 

optional at clinician discretion. 

We disagree that not performing an 

assessment for all returning patients 

creates unneeded risk. We believe that 

the new assessment schedule we 

proposed achieves efficiencies in terms 

of provider burden while still providing 

enough data to accurately monitor 

provider behavior, changes in patient 

condition, and outcomes via the 5-day 

assessment, IPA assessments, and 

discharge assessments. While a 5-day 

assessment would not be required upon 

readmission in the case of an 

interrupted stay, the provider has the 

option of completing an IPA as it 

determines appropriate to assess 

whether the patient’s condition and care 

needs have changed. 

While we appreciate the commenter’s 

concern, we believe the use of the 

number of days between discharge and 

readmission to determine whether there 

is an interrupted stay is appropriate. As 

described in the proposed rule, our 

analyses found that some types of costs, 

notably NTA costs, tend to be higher for 

cases where the gap is longer than 3 

days, suggesting that such stays are 

more like new stays than continuing 

stays and thus supporting the 3-day 

metric for resetting the variable per 

diem schedule. The length of the 

interruption is also used in determining 

whether there is an interrupted stay in 

other Medicare post-acute payment 

systems and we expect that its use here 

will be just as effective. 

With regard to the commenters’ 

recommendation that a 5-day 

assessment be completed upon 

readmission after an interrupted stay, 

we believe that this would constitute an 

unnecessary burden on providers, 

particularly given the provider’s option 

to complete an IPA upon readmission to 

the SNF. We also do not believe a 5-day 

assessment is necessary upon 

readmission after an interrupted stay of 

3 days or less. While we found that PT 

and OT costs for cases where the gap is 

longer than 3 days are similar to PT and 

OT costs for cases where the gap is 

shorter than 3 days, NTA costs are 

notably higher for cases where the gap 

is longer than 3 days. We explained that 

this provides further support for 

resetting the variable per diem schedule 

for cases where the gap is longer than 

3 days (as costs tend to be higher, 

similar to a new stay). As discussed in 

section 3.10 of the SNF PMR technical 

report, our analyses also showed that 

clinical category (in cases with an 

intervening re-hospitalization) and 

functional status (in cases involving 

SNF-to-SNF transfers and readmissions 

following community discharge) tended 

not to change between the first stay and 

the second stay in an interrupted stay of 

3 days or less. Thus, we believe our 

research suggests that stays with 

interruptions of 3 days or less are more 

similar in cost to uninterrupted stays 

and are less likely to involve significant 

changes in patient condition or 

function. Therefore, we do not agree 

that a 5-day assessment should be 

required upon readmission after an 

interrupted stay, or that it is appropriate 

to reset the variable per diem 

adjustment schedule to day 1 after an 

interrupted stay. 

We agree with the commenter that the 

patient’s condition should be the most 

relevant factor in determining the need 

for a new assessment, and CMS has 

given providers the option of 

performing an IPA at their discretion 

based on changing conditions. As we 

explained previously, if a new condition 

is coded on an IPA, the SNF PPS per 

diem payment for the patient could 

increase to reflect changes in the 

patient’s clinical condition if there is a 

change in the patient’s case-mix group. 

Comment: A commenter stated that 

CMS does not explicitly discuss 

discharge to the community and the 

interrupted stay policy, and requested 

clarification. 

Response: In the FY 2019 SNF PPS 

proposed rule (83 FR 21068 through 

21069), we discussed discharge to the 

community and the interrupted stay 

policy. The beneficiary may be 

readmitted from the community, from 

an intervening hospital stay, or from a 

different kind of facility, and the 

interrupted stay policy would operate in 

the same manner. The interrupted stay 

policy would operate in the same 

manner for discharges to the 

community. 

Comment: One commenter 

commented that the RAI User’s Manual 

instructions for A2400A, on page A–32, 

are to code 1, yes, if the resident has had 

a Medicare Part A covered SNF stay 

since the most recent admission/entry 

or reentry. The commenter stated that 

providers also use the Medicare Stay 

End Date Algorithm on page A–37 of the 

RAI User’s Manual to correctly code 

A2400C, the end of the Medicare SNF 

stay. A2400C is also used to determine 

whether the PPS Part A Discharge 

assessment is required. The commenter 

referenced Example B on page 21069 of 

the proposed rule, which describes a 

beneficiary who is discharged on day 7 

and is readmitted to the same SNF 

within the 3-day interruption window. 

The example states a SNF would not 

conduct a new 5-day assessment, and 

for the purposes of payment, this would 

be considered a continuation of the 

previous stay. The commenter 

expressed concern that, even though the 

Example B beneficiary is considered a 

continuation of the previous stay for 

payment purposes, A2400 on the MDS 

would still be coded as two separate 

Medicare stays. The commenter stated 

that when the resident is discharged on 

day 7, this date would be considered the 

end of the Medicare stay at A2400C. The 

entry record completed when the 

resident returned would have a new 

Medicare start date (A2400B) that would 

equal the reentry date. The commenter 

stated that this could lead to unmatched 

stays and inaccurate SNF QRP 

measures. 

Response: We appreciate the 

comments on the potential revisions 

needed to the MDS manual or any 

technical specifications associated with 

SNF programs to implement the 

interrupted stay policy, and will 

consider these issues when making 

revisions to these materials as part of 

implementing the PDPM and related 

policies. With regard to the commenter’s 

concern about the alignment of 

individual stays in the SNF QRP and the 

PDPM, we are aware of the issue and 

will revise the codes so that a hospital 

admission and return to the SNF does 


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not trigger a new Medicare stay for 

purposes of the SNF QRP. 

Comment: A commenter expressed 

concern regarding how the interrupted 

stay policy will operate in situations 

where the SNF provided the resident 

with the Notice of Medicare NonCoverage (NOMNC), which is required 

to be provided prior to a discharge to 

the community. The commenter 

requested clarification on how or if 

issuance of the NOMNC or SNFABN 

would have any effect on the 

interrupted stay policy. Their concern 

was that if a resident meets the criteria 

of an interrupted stay following a 

discharge where denial notices were 

issued, the resident would be 

considered a new admission to the SNF. 

The commenter stated the cost of an 

admission in this situation is more like 

that of a new admission than a 

readmission. They recommended that 

the interrupted stay policy not be 

applied following a discharge with 

issuance of denial notices. 

Response: The basic purpose of the 

interrupted stay policy is to ensure that 

when two segments of a resident’s stay 

in the facility are separated by only a 

brief absence, the variable per diem 

payment adjustment is not 

inappropriately reset to Day 1 upon the 

resident’s return. We do not believe that 

the mere issuance of a denial notice 

such as a NOMNC or SNFABN prior to 

the resident’s departure would, in itself, 

have any effect on the nature of the care 

needed by the resident upon subsequent 

resumption of SNF care, the costs of 

readmission, or the way in which 

providers would be paid under the 

PDPM, and, accordingly, we are not 

adopting the commenter’s suggestion. 

Comment: A commenter expressed 

concern about the impact an OBRA 

Discharge Return Not Anticipated 

assessment would have on the 

interrupted stay policy. The commenter 

stated that currently, when a resident 

discharges to the community with the 

intent not to return, the SNF is required 

to complete the OBRA Discharge Return 

Not Anticipated assessment and would 

combine this assessment with the PPS 

Part A Discharge. The commenter stated 

that the OBRA Discharge Return Not 

Anticipated ends the resident’s 

‘‘episode of care.’’ The commenter 

stated that if this resident were to be 

readmitted to the SNF within the 

interruption window, this would be 

considered a new admission, require an 

admission type of entry record, and start 

a new ‘‘episode of care.’’ Furthermore, 

the commenter stated that this discharge 

would end all of the resident’s orders, 

meaning that a new admission order is 

required, along with new physician 

certification of skilled care and new 

therapy evaluations. The commenter 

was highly concerned that the 

interrupted stay policy would apply 

following an OBRA Discharge Return 

Not Anticipated assessment, when the 

resident is considered a ‘‘new 

admission’’ for all other regulations. The 

commenter stated that the cost of an 

admission in this situation is more like 

that of a new admission than a 

readmission. The commenter 

recommended that the interrupted stay 

policy not be applied following a 

Discharge Return Not Anticipated. 

Response: We appreciate this concern 

though we do not agree that the 

interrupted stay policy should not apply 

in cases where the resident is 

discharged return not anticipated. While 

the provider may have prepared a 

discharge plan for this patient based on 

the notion that the patient would not 

return, the patient’s return to the SNF 

within that 3-day window would 

suggest that either the patient was not 

adequately prepared for discharge or 

may have been discharged too early 

from the facility. Further, providers 

should consider the possibility that a 

patient may return before finalizing the 

precise discharge type coded on the 

MDS. Finally, we believe that 

exempting such discharges from the 

interrupted stay policy could 

incentivize providers to merely code 

discharges in this manner only for this 

purpose and without sufficient basis. 

Comment: One commenter stated that 

currently a Medicare Part A stay in the 

SNF will end if the resident has been 

discharged to the community, has been 

admitted to the hospital, or is on a 

hospital observation stay or emergency 

room visit that spans midnight and 

exceeds 24 hours. The commenter stated 

that the interrupted stay policy would 

consider any readmission within the 

3-day interruption window as a 

continuation of the previous stay, 

therefore changing the number of 

Medicare stays the facility would have 

had prior to this proposal. One 

commenter expressed concern that the 

reduction in Medicare stays has the 

potential to affect the SNF QRP 

measures adversely by resulting in a 

higher number of unmatched stays and 

potential errors with SNF QRP measure 

calculation. The commenter referenced 

the Skilled Nursing Facility Quality 

Reporting Program Measure Calculation 

and Reporting User’s Manual 1.0 

(https://www.cms.gov/Medicare/

Quality-Initiatives-Patient-AssessmentInstruments/NursingHomeQualityInits/

Downloads/SNF-QM-Users-ManualV10-FINAL-5-22-17.pdf) and the 

instructions on how to identify a 

Medicare Part A stay for SNF QRP: Start 

by sorting assessments in reverse order 

during the 12-month target period. If the 

most recent assessment is a PPS Part A 

Discharge assessment, look for the next 

qualifying assessment; if the assessment 

is a 5-day, this is a matched assessment, 

and if not a 5-day, the stay is 

unmatched. The commenter expressed 

concern for potential negative impact to 

the SNF QRP measures, regardless of 

whether the Discharge Assessment NPE 

is required with the discharge prior to 

the interrupted stay, with the following 

reasoning. 

The commenter described a sequence 

of assessments and events that the 

commenter stated would occur under 

the current payment system if Example 

B on page 21069 were to occur: 5-day 

assessment, NPE, discharge of less than 

3 days, 5-day assessment, and final NPE. 

This would be counted as two Medicare 

stays for SNF QRP. 

The commenter then described how 

this sequence might differ under the 

new system, depending on whether the 

NPE is required or not. In Example B, 

if the NPE was required on day 7 when 

the resident was discharged, but a new 

5-day assessment was not required 

when the resident returned within the 

interruption window, then the sequence 

of assessments and events would be: 

5-day assessment, NPE, interrupted stay, 

NPE. This would result in one 

unmatched stay (between the return 

from the interrupted stay to the final 

NPE) and one matched stay. 

In Example B, if the NPE is not 

required on day 7 when the resident 

discharges for less than 3 days, the 

sequence would be: 5-day assessment, 

interrupted stay, NPE. This would result 

in only one Medicare stay. 

The commenter requested 

clarification on how the Medicare stays 

will be calculated with the interrupted 

stay policy, presumably for the purposes 

of the QRP, and recommended 

evaluation by the SNF QRP CMS team 

to evaluate any further risks, errors, or 

concerns that may arise from this 

proposed policy. 

Response: We agree with the 

commenter’s description of how the 

current matching occurs for 

assessments. As previously discussed, 

we are aware that admissions and 

discharges are currently coded for 

purposes of the SNF QRP in a way that 

might conflict with how stays will be 

captured under the new PDPM. We 

intend to revise the codes so that a 

Medicare stay is captured the same way 

for purposes of the SNF QRP and the 

PDPM. 

Comment: One commenter stated 

concerns with the suggestion that CMS 


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would monitor this interrupted stay 

policy for frequent readmission, 

particularly facilities where the 

readmissions occur just outside the 

3-day window used as part of the 

proposed interrupted stay policy. The 

commenter stated that SNFs already are 

the most highly regulated and 

monitored profession in health care. 

They stated a new policy with 

additional scrutiny and risk increases 

provider burden. They pointed out that 

CMS has programs in place to monitor 

and penalize SNFs for rehospitalization. 

The commenter stated that the SNF 

Rehospitalization VPB Program reduces 

all SNF rates by 2 percent. The 

commenter further stated that SNFs may 

earn a portion of these funds back by 

keeping rehospitalization rates low. 

Also, the commenter pointed out that 

SNF performance on return to 

community and related quality 

measures under the SNF QRP are 

publicly reported. The commenter 

stated that SNFs that perform poorly on 

QRP measures are less likely to be 

included in Medicare Advantage Plan or 

Accountable Care Organization provider 

networks. Thus, the commenter 

concluded that heightened scrutiny for 

poor performance already is in place. 

They recommended that SNF readmissions to hospitals under the 

existing program—presumably meaning 

the SNF Rehospitalization VPB 

Program—should serve as the 

monitoring tool. They stated that, as 

with the SNF VBP Program, QRP 

performance also will serve a 

monitoring tool. They added that poorly 

performing SNFs will be penalized by 

the market, so that no additional 

government action is needed. 

Response: We acknowledge that these 

monitoring tools exist and will utilize 

these existing tools to the fullest extent 

possible, but will also monitor 

specifically for inappropriate behavior 

in the context of the interrupted stay 

policy and decide the appropriate form 

of administrative action for whatever 

behavior is identified. 

Comment: One commenter stated that 

CMS should develop a policy specific to 

the interrupted stay and the calculation 

of group/concurrent minutes. An 

interrupted stay could prevent the 

individual therapy minutes from being 

provided, and therefore, result in 

exceeding the 25 percent threshold. For 

example, if a resident is admitted to a 

facility and receives 100 percent group 

therapy on Day 1 of their SNF stay, with 

the full intent to move the resident to 

individual therapy in the days that 

follow, and then an interrupted stay 

occurs on Day 2 of the resident’s stay; 

what would be the resulting impact to 

the facility from the resident receiving 

over the allowed 25 percent group 

therapy? 

Response: As noted in section V.E of 

this final rule, there currently is no 

penalty associated with the group and 

concurrent therapy limits; instead, 

providers will receive a non-fatal 

warning edit on the validation report. 

We stated that we would monitor and 

evaluate how group and concurrent 

therapy are used under PDPM and 

consider making future proposals to 

address abuses of this policy or flag 

providers for additional review should a 

provider be found to consistently 

exceed the threshold. That being said, in 

terms of calculating adherence with the 

concurrent and group therapy limit, 

such a calculation is, as described in 

section V.E. of this final rule, completed 

at the stay level. Therefore, in cases of 

an interrupted stay, the therapy minutes 

over the course of the entire stay, both 

before and after the interruption, would 

be used to calculate the proportion of 

therapy time furnished within a 

concurrent or group setting. We believe 

this is the fairest option, as to calculate 

the proportion of such minutes based on 

only one portion of the stay may unduly 

identify a given provider as having 

failed to adhere to the established limit 

only because that particular portion of 

the stay had a larger amount of a given 

therapy mode. 

Comment: Several commenters 

pointed out a discrepancy in the 

Medicare days count in Example B in 

the FY 2019 SNF PPS proposed rule (83 

FR 21069). Specifically, commenters 

highlighted that Example B states that 

the resident is discharged on day 7 and 

that ‘‘the first day of the second stay 

would be paid at the Day 8 per diem 

rates under that schedule.’’ This implies 

that if a SNF resident has an interrupted 

stay, for the purposes of determining 

day in the stay for the per diem 

payment, when the patient returns to 

the SNF after the interruption, the stay 

resumes on the next day of the stay. For 

example, if a SNF resident is on day 7 

of a stay which is then interrupted, 

when the resident returns within a 

certain time frame the day in the stay 

would be day 8. If the resident is 

discharged on day 7 of the stay, the SNF 

would be unable to bill for this day, 

resulting in the beneficiary using only 6 

of the Medicare days. This would be 

unfair for both the resident and the SNF. 

Commenters recommended that CMS 

clarify the policy so that providers are 

paid for the day when a resident leaves 

a SNF in the case of an interrupted stay. 

Commenters said that under the policy 

as proposed, providers would not be 

paid for the day the resident leaves the 

SNF and so would lose one day of 

reimbursement. 

Response: We agree with commenters 

regarding this typographical error and 

that payments should resume at the rate 

of the day of discharge, rather than the 

day after discharge. In other words, if a 

SNF resident is on day 7 of a stay which 

is interrupted, when the resident is 

readmitted, the payment rate would 

resume at day 7, not day 8, as Example 

B incorrectly stated. 

The day of discharge in an interrupted 

stay would not be counted against the 

beneficiary’s count of 100 days of 

covered Part A care in a benefit period. 

SNFs are not currently paid for the day 

of discharge, even with an anticipated 

leave of absence, unless the patient 

returns to the SNF before midnight of 

the same day. We do not believe there 

is anything about the interrupted stay 

policy that warrants changing this. 

Comment: Multiple commenters 

expressed general support for the 

interrupted stay policy as proposed. 

Commenters supported the 

implementation of a SNF interrupted 

stay policy that is consistent with the 

policies in other post-acute care 

settings. Commenters recognized that 

with the proposed changes under the 

PDPM, which include variable per diem 

payment adjustments that provide 

higher payments at the beginning of the 

stay, implementing an interrupted stay 

policy will be appropriate for SNFs. As 

a further point of support, commenters 

noted that under the current system, 

rates of discharge to institutions (such 

as acute hospital or emergency 

department) are monitored very closely. 

Commenters expected that the proposed 

interrupted stay policy would allow for 

short term discharges where medically 

necessary while allowing for 

appropriate payment across a patient’s 

stay. 

Response: We agree with the 

commenters that the PDPM will benefit 

from the interrupted stay policy 

proposed. 

Accordingly, after considering the 

comments received, for the reasons 

discussed in the proposed rule and in 

this final rule, we are finalizing our 

proposed interrupted stay policy 

without modification, to be effective 

October 1, 2019 in conjunction with the 

implementation of the PDPM. 

G. Relationship of the PDPM to Existing 

Skilled Nursing Facility Level of Care 

Criteria 

As discussed in the proposed rule (83 

FR 21070), the establishment of the SNF 

PPS did not change Medicare’s 

fundamental requirements for SNF 

coverage. However, because the caseVerDate Sep<11>2014 20:44 Aug 07, 2018 Jkt 244001 PO 00000 Frm 00090 Fmt 4701 Sfmt 4700 E:\FR\FM\08AUR2.SGM 08AUR2

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mix adjustment aspect of the SNF PPS 

has been based, in part, on the 

beneficiary’s need for skilled nursing 

care and therapy, we have coordinated 

claims review procedures with the 

existing resident assessment process 

and case-mix classification system. 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 

system to assist in making certain SNF 

level of care determinations. 

As further discussed below, in the 

proposed rule (83 FR 21070–72), we 

proposed to adopt a similar approach 

under the PDPM effective October 1, 

2019, by retaining an administrative 

presumption mechanism that would 

utilize the initial assignment of one of 

the case-mix classifiers that we 

designate for this purpose to assist in 

making certain SNF level of care 

determinations. This designation would 

reflect an administrative presumption 

under the PDPM that beneficiaries who 

are correctly assigned one of the 

designated case-mix classifiers on the 

initial 5-day, Medicare-required 

assessment are automatically classified 

as meeting the SNF level of care 

definition up to and including the 

assessment reference date on the 5-day 

Medicare required assessment. 

We stated that, as under the existing 

RUG–IV administrative presumption, a 

beneficiary who is not assigned one of 

the designated classifiers would not 

automatically be classified as either 

meeting or not meeting the level of care 

definition, but instead would receive an 

individual level of care determination 

using the existing administrative 

criteria. We stated that the use of the 

administrative presumption reflects the 

strong likelihood that those 

beneficiaries who are assigned one of 

the designated classifiers during the 

immediate post-hospital period require 

a covered level of care, which would be 

less likely for other beneficiaries. 

In the ANPRM (82 FR 21007), we 

discussed some potential adaptations of 

the RUG–IV model’s administrative 

presumption to accommodate specific 

features of the RCS–I model, including 

the possible designation of the following 

case-mix classifiers for purposes of the 

administrative presumption: 

• Continued designation of the same 

nursing (non-rehabilitation) groups that 

currently comprise the Extensive 

Services, Special Care High, Special 

Care Low, and Clinically Complex 

categories under RUG–IV, as those 

groups would crosswalk directly from 

RUG–IV to the RCS–I model we were 

considering; 

• In addition, designation of the most 

intensive functional score (14 to 18) 

under the RCS–I model’s combined PT/ 

OT component, as well as the 

uppermost comorbidity score (11+) 

under its NTA component. 

In response, a number of comments 

expressed concern that the possible 

adaptations of the presumption could 

adversely affect access to care for some 

beneficiaries. Others questioned 

whether using the PT/OT component’s 

highest functional score bin (14 to 18) 

as a trigger for the presumption would 

be appropriate, inasmuch as the 

residents that typically require the most 

therapy are those with only moderate 

functional impairments. In addition, 

commenters questioned the discussion’s 

inclusion of the RCS–I model’s NTA 

component as a possible classifier under 

the presumption, as well as its omission 

of RCS–I’s SLP component. 

Regarding the commenters’ concerns 

about access to care, we noted in the 

proposed rule that we have indicated in 

the ANPRM and in previous rulemaking 

that the actual purpose of the level of 

care presumption has always been to 

afford a streamlined and simplified 

administrative procedure for readily 

identifying those beneficiaries with the 

greatest likelihood of meeting the level 

of care criteria; however, we have also 

emphasized that in focusing on such 

beneficiaries, this approach in no way 

serves to disadvantage other 

beneficiaries who may also meet the 

level of care criteria. As we noted in the 

ANPRM, an individual beneficiary’s 

inability to qualify for the 

administrative presumption would not 

in itself serve to disqualify that resident 

from receiving SNF coverage. While 

such residents are not automatically 

presumed to require a skilled level of 

care, neither are they automatically 

classified as requiring nonskilled care; 

rather, any resident who does not 

qualify for the presumption would 

instead receive an individual level of 

care determination using the existing 

administrative criteria (82 FR 21007). As 

we further explained in the FY 2016 

SNF PPS final rule (80 FR 46406, 

August 4, 2015), structuring the 

presumption in this manner serves 

specifically to ensure that the 

presumption does not disadvantage 

such residents, by providing them with 

an individualized level of care 

determination that fully considers all 

pertinent factors. 

As for concerns about the 

appropriateness of certain classifiers, 

including the possible use of the PT/OT 

component’s highest functional score 

bin (14 to 18) for this purpose under 

RCS–I, we noted in the proposed rule 

that the case-mix classification model 

for PT and OT that we were proposing 

in connection with the PDPM would 

essentially reconfigure the PT/OT 

component from the RCS–I model. As 

discussed in section V.D.3.b. of the 

proposed rule, the proposed PDPM 

would divide the RCS–I model’s 

combined PT/OT component into two 

separate case-mix adjusted components, 

under which each resident would be 

assigned separate case-mix groups for 

PT and OT payment. Those groups 

would classify residents based on 

clinical category and function score, the 

two resident characteristics shown to be 

most predictive of PT and OT 

utilization. 

The proposed rule’s discussion also 

cited section III.B.4. of the ANPRM 

(‘‘Variable Per Diem Adjustment Factors 

and Payment Schedule’’), as well as 

section V.D.4. of the proposed rule 

itself, which indicated that our initial 

analyses revealed that in contrast to the 

SLP component—where per diem costs 

remain relatively constant over time— 

costs for the PT, OT, and NTA 

components typically are highest at the 

outset and then decline over the course 

of the stay. The proposed rule noted that 

our research to date continues to show 

a strong correlation between the 

dependent variables used for the 

proposed separate PT and OT 

components and a similarity in 

predictors, in that the associated costs 

for both therapy disciplines remain 

highest in the initial (and typically most 

intensive) portion of the SNF stay. We 

stated that this heightened resource 

intensity during the initial part of the 

SNF stay under the PT, OT, and NTA 

components, in turn, more closely 

reflects the distinctive utilization 

patterns that served as the original 

foundation for the level of care 

presumption itself—that is, the 

tendency as noted in the FY 2000 SNF 

PPS final rule for SNF stays to be at 

their most intensive and unstable 

immediately following admission as 

justifying a presumption of coverage at 

the very outset of the SNF stay (64 FR 

41667, July 30, 1999). We also stated 

that we believe this would make the 

most intensive classifiers within each of 

these three proposed components wellsuited to serve as clinical proxies for 

identifying those beneficiaries with the 

most intensive care needs and greatest 

likelihood of requiring an SNF level of 

care. 

Accordingly, for purposes of the 

administrative presumption under the 

proposed PDPM, we proposed to 

continue utilizing the same designated 

nursing (non-rehabilitation) categories 

under the PDPM as had been used to 


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date under RUG–IV. We noted that the 

most direct crosswalk between the 

existing RUG–IV model and the 

proposed PDPM would involve nursing 

services, for which, under the proposed 

PDPM, each resident would continue to 

be classified into one of the groups that 

fall within the existing nonrehabilitation RUG–IV categories. (As 

explained in section V.D.3.d. of the 

proposed rule, while the PDPM would 

streamline the total number of nursing 

case-mix groups from the current 43 

under RUG–IV down to 25 through the 

consolidation of similar groups within 

individual categories, the overall 

number and structure of the nursing 

categories themselves would remain the 

same.) Under our proposal, effective in 

conjunction with the proposed 

implementation of the PDPM (that is, as 

of October 1, 2019), we stated that the 

administrative presumption would 

apply to those groups encompassed by 

the same nursing categories as have 

been designated for this purpose under 

the existing RUG–IV model: 

• Extensive Services; 

• Special Care High; 

• Special Care Low; and, 

• Clinically Complex. 

In addition, along with the continued 

use of the RUG–IV nursing categories 

above, we also proposed to apply the 

administrative presumption using those 

other classifiers under the proposed 

PDPM that we identified as relating the 

most directly to identifying a patient’s 

need for skilled care at the outset of the 

SNF stay. We proposed to designate 

such classifiers for this purpose based 

on their ability to fulfill the 

administrative presumption’s role as 

described in the FY 2000 SNF PPS final 

rule (64 FR 41668 through 41669, July 

30, 1999)—that is, to identify those 

situations that involve a high 

probability of the need for skilled care 

when taken in combination with the 

characteristic tendency for an SNF 

resident’s condition to be at its most 

unstable and intensive state at the outset 

of the SNF stay. 

Specifically, we additionally 

proposed to designate for this purpose 

proposed PT and OT case-mix groups 

TB, TC, TD, TF, and TG, the groups 

displayed in Table 21 of the proposed 

rule that collectively accounted for the 

five highest case-mix indexes for PT, as 

well as for OT and, thus, would 

consistently be associated with the most 

resource-intensive care across both of 

these therapy disciplines. We also 

proposed to designate the uppermost 

comorbidity group under the NTA 

component, in the belief that this 

particular classifier would serve to 

identify those cases that are the most 

likely to involve the kind of complex 

medication regimen (for example, a 

highly intensive drug requiring 

specialized expertise to administer, or 

an exceptionally large and diverse 

assortment of medications posing an 

increased risk of adverse drug 

interactions) that would require skilled 

oversight to manage safely and 

effectively. As discussed in section 

V.D.3.e of this final rule, the specific 

value assigned to the NTA component’s 

uppermost comorbidity score (which 

was 11+ under the RCS–I model and is 

12+ under PDPM) might change once 

again in the future if the NTA score bins 

are reconfigured to reflect changes in 

the resident population and care 

practices over time. 

We further explained that under this 

proposed approach, those residents not 

classifying into a case-mix group in one 

of the designated nursing RUG 

categories under the proposed PDPM on 

the initial, 5-day Medicare-required 

assessment could nonetheless still 

qualify for the administrative 

presumption on that assessment by 

being placed in one of the designated 

case-mix groups for either the PT or OT 

components, or by receiving the 

uppermost comorbidity score under the 

NTA component. We indicated that 

these particular case-mix classifiers 

would appropriately serve to fulfill the 

administrative presumption’s role of 

identifying those cases with the highest 

probability of requiring an SNF level of 

care throughout the initial portion of the 

SNF stay. We additionally noted that in 

order to help improve the accuracy of 

these newly-designated groups in 

serving this function, we would 

continue to review the new designations 

going forward and may make further 

adjustments to the proposed 

designations over time as we gain actual 

operating experience under the new 

classification model. As discussed 

above, this proposed administrative 

presumption mechanism would take 

effect October 1, 2019 in conjunction 

with the proposed PDPM itself. We 

invited comments on our proposed 

administrative presumption mechanism 

under the proposed PDPM. 

Commenters submitted the following 

comments related to the proposed rule’s 

discussion on our proposed 

administrative presumption mechanism 

under the proposed PDPM. A discussion 

of these comments, along with our 

responses, appears below. 

Comment: One commenter mistakenly 

assumed that under the PDPM, the 

administrative presumption would 

change from its current use of the 

initial, 5-day Medicare-required 

assessment to using the initial MDS 

assessment (that is, the OBRA-required 

Admission assessment) instead, and 

expressed concern that the timeframes 

associated with the latter would be 

inappropriate for this purpose. 

Response: We note that consistent 

with the discussion in the proposed rule 

(83 FR 21070–21072), the presumption’s 

current use of the initial, 5-day 

Medicare-required assessment will, in 

fact, continue under the PDPM. 

Comment: Several commenters urged 

us to designate other therapy groups, in 

addition to those set forth in the 

proposed rule, as appropriately serving 

to identify a level of acuity that would 

qualify for the presumption. They 

equated the omission of a given casemix classifier from the presumption 

with a restriction on access and 

coverage, and characterized the 

individual level of care determinations 

that SNFs would routinely conduct 

absent the presumption as an added 

administrative burden. The commenters 

specifically cited as a concern the 

proposed rule’s omission of any PT and 

OT groups for non-orthopedic 

conditions, as well as of any groups at 

all from the SLP component. One 

commenter took issue with the 

proposed rule’s stated rationale for the 

omission of SLP (that is, that such 

services, unlike PT and OT, remain 

relatively constant over time and are not 

concentrated in the initial portion of the 

stay), noting that nursing services 

similarly do not taper off over the 

course of the stay and yet have been 

utilized under the presumption ever 

since its inception. The commenter 

pointed out that as with the other 

components, it is possible to identify 

individual groups within the SLP 

component that have relatively high 

service intensity. Along with the groups 

from the PT and OT components that 

were already proposed for designation 

under the presumption, the commenter 

recommended the designation of several 

additional PT and OT groups (that is, 

TA, TE, TJ, TK, TN, and TO), as well as 

a number of groups (that is, SC, SE, SF, 

SH, SI, SJ, SK, and SL) from the SLP 

component, and presented these 

particular groups as reflecting the most 

intensive therapy needs within their 

respective clinical categories. The 

commenter also suggested that the 

proposed designation of the NTA’s 

uppermost comorbidity group might not 

actually be necessary, as anyone 

assigned to that group would likely 

qualify for the presumption already, 

based on their classification under the 

nursing component. Another 

commenter recommended that all of the 

PT and OT groups in the Other 

Orthopedic category should be 


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designated for use under the 

presumption, and pointed out that 

under PDPM, the NTA component’s 

uppermost comorbidity score is actually 

12+ rather than 11+ as indicated in the 

proposed rule. 

Response: We agree with the 

commenters that the administrative 

presumption should encompass all of 

the groups that serve to fulfill the basic 

purpose of this provision—that is, 

readily identifying those beneficiaries 

with the greatest likelihood of meeting 

the level of care criteria. With one 

exception, we also concur with the 

commenters’ analysis that the additional 

therapy groups recommended for 

designation under the presumption 

would appropriately serve to reflect the 

most intensive therapy needs within 

their respective clinical categories, as 

evidenced by the relatively high CMI 

that is associated with each of the 

recommended groups. However, 

regarding the recommendation to 

designate all PT and OT groups in the 

Other Orthopedic category, we note that 

one such group, TH, has a significantly 

lower CMI than all of the other 

recommended groups and, thus, is not 

being selected for designation under the 

presumption. Accordingly, we are 

adopting the remainder of the 

commenters’ recommendations 

regarding the designation of additional 

groups from the PT and OT 

components, as well as all of the 

recommended groups from the SLP 

component. In addition, we are 

finalizing as proposed the use of the 

designated classifiers from the nursing 

component along with the uppermost 

comorbidity score of the NTA 

component. Regarding the latter, we 

appreciate the comment pointing out 

that the specific value assigned to the 

NTA component’s uppermost 

comorbidity score under the PDPM is, 

in fact, 12+ and not 11+ as incorrectly 

indicated in the proposed rule’s 

discussion of the presumption. We also 

appreciate another commenter’s concern 

that the proposed NTA classifier might 

in some instances prove redundant in 

relation to the nursing groups; however, 

because we believe, as stated above, that 

the presumption should encompass all 

appropriate classifiers, we are finalizing 

the use of this particular classifier as we 

believe this particular classifier would 

serve to identify those cases that are the 

most likely to involve the kind of 

complex medication regimen that would 

require skilled oversight to manage 

safely and effectively. We also will 

evaluate the use of this classifier in 

actual operation and confirm whether 

there are instances in which it 

appropriately serves this function 

independently of the nursing groups. As 

we indicated in the proposed rule (83 

FR 21072) regarding the NTA and other 

components, we will continue to review 

the new designations going forward and 

make further adjustments over time as 

we gain actual operating experience 

under the new classification model. 

However, we would also note in this 

context that we do not share and cannot 

support the view that would essentially 

equate a given case-mix classifier’s nondesignation under the administrative 

presumption with a restriction on access 

or a denial of SNF coverage, or an 

increase in administrative burden. SNF 

coverage ultimately is based not on 

whether a beneficiary is assigned one of 

the designated classifiers, but on 

whether the SNF level of care criteria 

are met. As further explained in the 

proposed rule (83 FR 21071), the 

purpose of the administrative 

presumption is solely to afford a 

streamlined and simplified 

administrative procedure for readily 

identifying those beneficiaries with the 

greatest likelihood of meeting the level 

of care criteria, which in no way serves 

to disadvantage other beneficiaries who 

may also meet the level of care criteria. 

In fact, far from creating an overall 

increase in administrative burden from 

the non-designated classifiers, we 

expect that the presumption’s 

framework of streamlined and 

simplified initial determinations for the 

designated classifiers will actually serve 

to free up staff resources, which can 

then be used for assessing coverage in 

the other cases. 

Accordingly, for the reasons set forth 

in the proposed rule and in this final 

rule, we are finalizing our proposed 

classifiers for purposes of applying the 

administrative presumption under the 

PDPM with the following modifications. 

As discussed above, we are adding the 

following PT and OT classifiers to those 

we proposed: TA, TE, TJ, TK, TN and 

TO. We are also adding the following 8 

SLP classifiers: SC, SE, SF, SH, SI, SJ, 

SK, and SL. Thus, effective October 1, 

2019, we are designating the classifiers 

shown below for purposes of the 

administrative presumption under the 

PDPM: 

• The case-mix classifiers in the 

following nursing categories: Extensive 

Services, Special Care High, Special 

Care Low, and Clinically Complex; 

• The following PT and OT groups: 

TA, TB, TC, TD, TE, TF, TG, TJ, TK, TN, 

and TO; 

• The following SLP groups: SC, SE, 

SF, SH, SI, SJ, SK, and SL; and 

• The NTA component’s uppermost 

comorbidity group (which, as finalized 

in this final rule, is 12+). 

H. Effect of PDPM on Temporary AIDS 

Add-On Payment 

As discussed in section V.I. of the 

proposed rule (83 FR 21072) and also in 

section III.E. of the ANPRM (82 FR 

21007), section 511(a) of the MMA 

amended section 1888(e)(12) of the Act 

to provide for a temporary increase of 

128 percent in the PPS per diem 

payment for any SNF residents with 

Acquired Immune Deficiency Syndrome 

(AIDS), effective with services furnished 

on or after October 1, 2004. This special 

add-on for SNF residents with AIDS was 

intended to be of limited duration, as 

the MMA legislation specified that it 

was to remain in effect only 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 temporary 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, August 11, 

2009), we did not address this 

certification 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 time being. 

In the House Ways and Means 

Committee Report that accompanied the 

MMA, the explanation of the MMA’s 

temporary AIDS adjustment notes the 

following under Reason for Change: 

‘‘According to prior work by the Urban 

Institute, AIDS patients have much 

higher costs than other patients in the 

same resource utilization groups in 

skilled nursing facilities. The 

adjustment is based on that data 

analysis’’ (H. Rep. No. 108–178, Part 2 

at 221). The data analysis from that 

February 2001 Urban Institute study 

(entitled ‘‘Medicare Payments for 

Patients with HIV/AIDS in Skilled 

Nursing Facilities’’), in turn, had been 

conducted under a Report to Congress 

mandated under a predecessor 

provision, section 105 of the BBRA. 

This earlier BBRA provision, which 

ultimately was superseded by the 

temporary AIDS add-on provision 

required by the MMA, had amended 

section 1888(e)(12) of the Act to provide 

for special consideration for facilities 

serving specialized patient populations 

(that is, those who are ‘‘immunocompromised secondary to an infectious 


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disease, with specific diagnoses as 

specified by the Secretary’’). 

As we noted in the ANPRM and in the 

proposed rule, at that point over a 

decade and a half had elapsed since the 

Urban Institute conducted its study on 

AIDS patients in SNFs, a period that has 

seen major advances in the state of 

medical practice in treating this 

condition. We stated that these 

advances have notably included the 

introduction of powerful new drugs and 

innovative prescription regimens that 

have dramatically improved the ability 

to manage the viral load (the amount of 

human immunodeficiency virus (HIV) 

in the blood). We noted that the 

decrease in viral load secondary to 

medications has contributed to a shift 

from intensive nursing services for 

AIDS-related illnesses to an increase in 

antiretroviral therapy. We further stated 

that this phenomenon, in turn, is 

reflected in our recent analysis of 

differences in SNF resource utilization, 

which indicates that while the overall 

historical disparity in costs between 

AIDS and non-AIDS patients has not 

entirely disappeared, that disparity is 

now far greater with regard to drugs 

than it is for nursing. Specifically, as 

explained in the proposed rule, NTA 

costs per day for residents with AIDS 

were 151 percent higher than those for 

other residents while the difference in 

wage-weighted nursing staff time 

between the two groups was only 19 

percent, as discussed in section 3.8.3. of 

the SNF PMR technical report (available 

at https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html), which 

the ANPRM referenced for further 

information on the underlying data 

analysis (82 FR 21007 through 21008). 

In the ANPRM, we also described how 

the RCS–I model would account for 

those NTA costs, including drugs, 

which specifically relate to residents 

with AIDS (82 FR 20997 through 

20999). We additionally discussed in 

the ANPRM the possibility of making a 

specific 19 percent AIDS adjustment as 

part of the case-mix adjustment of the 

nursing component (82 FR 20995 

through 20997). We further expressed 

our belief in the ANPRM (82 FR 21008) 

that when taken collectively, these 

adjustments would appropriately serve 

to justify issuing the certification 

prescribed under section 511(a) of the 

MMA, which would permit the MMA’s 

existing, temporary AIDS add-on to be 

replaced by a permanent adjustment in 

the case mix that appropriately 

compensates for the increased costs 

associated with these residents. 

As discussed in the proposed rule, in 

response to the ANPRM, we received 

comments expressing concerns that a 

projected 40 percent drop in overall 

payments for SNF residents with AIDS 

under the RCS–I model could adversely 

affect access to care for this patient 

population. Regarding those concerns, 

we noted in the proposed rule that the 

special add-on for SNF residents with 

AIDS itself was never meant to be 

permanent, and does not serve as a 

specific benchmark for use in 

establishing either the appropriate 

methodology or level of payment for 

this patient population. Rather, we 

stated that, as discussed in the ANPRM, 

it was designed to be only a temporary 

measure, representing a general 

approximation that reflected the current 

state of research and clinical practice at 

the time (82 FR 21007 through 21008). 

As such, we stated that the special addon would not account for the significant 

changes in the care and treatment of this 

condition that have occurred over the 

intervening years. We further noted that 

as a simple across-the-board multiplier, 

the MMA adjustment by its very nature 

is not accurately targeted at those 

particular rate components that actually 

account for the disparity in cost 

between AIDS patients and others. 

As discussed in section V.D.3.e. of the 

proposed rule (83 FR 21058), our 

updated investigations into the 

adequacy of payments under the 

proposed PDPM for residents with HIV/ 

AIDS indicated that the four proposed 

ancillary payment components (PT, OT, 

SLP, and NTA) would adequately 

reimburse ancillary costs associated 

with HIV/AIDS residents (see section 

3.8.2. of the SNF PDPM technical report, 

available at https://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/SNFPPS/therapyresearch.

html). Therefore, we stated that we 

believe it would be appropriate to issue 

the prescribed certification under 

section 511(a) of the MMA on the basis 

of the proposed PDPM’s ancillary casemix adjustment alone, as effectively 

providing the required appropriate 

adjustment in the case mix to 

compensate for the increased costs 

associated with such residents. 

However, to further ensure that the 

proposed PDPM would account as fully 

as possible for any remaining disparity 

with regard to nursing costs, as 

discussed in section V.D.3.d. of the 

proposed rule (83 FR 21055), we 

additionally proposed to include a 

specific AIDS adjustment as part of the 

case-mix adjustment of the nursing 

component. As discussed in section 

V.D.3.d. of the proposed rule, we used 

the STRIVE data to quantify the effects 

of HIV/AIDS diagnosis on nursing 

resource use. Regression analyses found 

that wage-weighted nursing staff time is 

18 percent higher for residents with 

HIV/AIDS, controlling for the nonrehabilitation RUG of the resident. We 

noted that this figure is slightly lower 

than the 19 percent increase in wageweighted nursing staff time reported in 

the ANPRM and the SNF PRM technical 

report because the updated investigation 

uses a FY 2017 study population and is 

based on the PDPM case-mix groups, 

while the earlier analysis was based on 

a FY 2014 study population and the 

RCS–I case-mix groups. More 

information on this analysis can be 

found in section 3.8.2. of the SNF PDPM 

technical report (available at https://

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

therapyresearch.html). Thus, we 

proposed an 18 percent increase in 

payment for the nursing component for 

residents with HIV/AIDS under the 

proposed PDPM to account for the 

increased nursing costs for such 

residents. We stated that similar to the 

proposed NTA adjustment for residents 

with HIV/AIDS, this adjustment would 

be identified by ICD–10–CM code B20 

on the SNF claim and would be 

processed through the PRICER software 

used by CMS to set the appropriate 

payment rate for a resident’s SNF stay. 

We also explained (83 FR 21073) that 

the 18 percent adjustment would be 

applied to the unadjusted base rate for 

the nursing component, and then this 

amount would be further case-mix 

adjusted per the resident’s PDPM 

nursing classification. 

In the proposed rule, we expressed 

the belief that when taken collectively, 

these adjustments under the proposed 

PDPM would appropriately serve to 

justify issuing the certification 

prescribed under section 511(a) of the 

MMA effective with the proposed 

conversion to the PDPM on October 1, 

2019, thus permitting the MMA’s 

existing, temporary AIDS add-on to be 

replaced by a permanent adjustment in 

the case mix (as proposed under the 

PDPM) that appropriately compensates 

for the increased costs associated with 

these residents, and we invited 

comments on this proposal. At the same 

time, we acknowledged that even with 

an accurately targeted model that 

compensates for the increased costs of 

SNF residents with AIDS, an abrupt 

conversion to an altogether different 

payment methodology might 

nevertheless be potentially disruptive 

for facilities, particularly those that 

serve a significant number of patients 

with AIDS and may have become 

accustomed to operating under the 


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existing payment methodology for those 

patients. Accordingly, we also invited 

comments on possible ways to help 

mitigate any potential disruption 

stemming from the proposed 

replacement of the special add-on 

payment with the permanent case-mix 

adjustments for SNF residents with 

AIDS under the proposed PDPM. 

Commenters submitted the following 

comments related to the proposed rule’s 

discussion on the Effect of the Proposed 

PDPM on Temporary AIDS Add-on 

Payment. A discussion of these 

comments, along with our responses, 

appears below. 

Comment: Several commenters 

expressed concern about the adequacy 

of payments under the PDPM for SNF 

residents with AIDS, once again citing 

the projected decrease in payments 

relative to the RUG–IV model (which 

currently includes the MMA’s 

temporary 128 percent adjustment for 

such residents). One commenter 

specifically questioned the adequacy of 

the PDPM’s NTA component in 

addressing the drug costs of AIDS 

patients, and cited a 2017 MedPAC 

report that characterized the SNF PPS’s 

NTA payments as poorly targeted. 

Response: We note that as with the 

previous comments on the 

corresponding aspect of the ANPRM, 

most of the commenters’ concerns in 

this area stemmed from comparing the 

projected payment levels under the 

PDPM to those under the existing RUG– 

IV model’s temporary 128 percent AIDS 

adjustment, and focused specifically on 

the contrast in payment levels between 

the two models. However, as noted 

above and explained in the proposed 

rule (83 FR 21073), it is not appropriate 

to use the MMA adjustment as a 

benchmark in assessing the accuracy of 

the PDPM’s payment methodology, as 

the special add-on for SNF residents 

with AIDS itself was never meant to be 

permanent, and does not serve as a 

specific benchmark for use in 

establishing either the appropriate 

methodology or level of payment for 

this patient population. Rather, it was 

designed to be only a temporary 

measure, representing a general 

approximation that reflected the current 

state of research and clinical practice at 

the time. As such, the special add-on 

would not account for the significant 

changes in the care and treatment of this 

condition that have occurred over the 

intervening years. Moreover, as a simple 

across-the-board multiplier, the MMA 

adjustment by its very nature is not 

accurately targeted at those particular 

rate components that actually account 

for the disparity in cost between AIDS 

patients and others. 

Regarding that final point about the 

imprecision of applying an across-theboard multiplier in this context, we 

further noted in the proposed rule (83 

FR 20180) that our research found that 

HIV/AIDS was associated with a 

negative and statistically significant 

decrease in PT, OT and SLP costs per 

day. This means inherently that, to the 

extent that the existing add-on is 

applied against the full SNF PPS per 

diem payment, the magnitude of the 

add-on payment increases with 

increases in therapy payment, which 

conflicts with the data described above 

regarding the relationship between 

therapy costs and the presence of an 

AIDS diagnosis. As a result, maintaining 

the current add-on would create an 

inconsistency between how SNF 

payments would be made and the data 

regarding AIDS diagnoses and resident 

therapy costs. 

Furthermore, to the extent that the 

RUG–IV model’s case-mix classification 

system may have included inherent 

incentives toward the overprovision of 

therapy services, the MMA adjustment’s 

operation as an across-the-board 

multiplier would actually serve to 

magnify the effects of any such 

incentives, by inflating the resulting 

payment levels even further beyond the 

patient’s actual therapy care needs. In 

this context, we note that the specific 

standard prescribed for the Secretary’s 

required certification under section 

511(a) of the MMA is that ‘‘. . . there is 

an appropriate adjustment in the case 

mix . . . to compensate for the 

increased costs’’ associated with SNF 

residents with AIDS. As set forth in the 

proposed rule, we believe that the 

PDPM’s payment methodology for 

patients with AIDS clearly meets this 

statutory standard of appropriately 

accounting for the actual costs incurred 

in caring for such patients. In fact, we 

believe it provides a far more accurate 

and current accounting of those costs 

than the temporary MMA adjustment 

that it would replace, which represents 

only a very broad approximation that 

was developed at a time when the 

treatment regimens for this condition 

differed dramatically from what they are 

currently. Finally, it is worth noting that 

the cited 2017 MedPAC report, which 

characterized the SNF PPS’s NTA 

payments as poorly targeted, reflected 

that the SNF PPS has always included 

NTA costs within its nursing 

component rather than accounting for 

them separately, and the longstanding 

concerns about that approach were, in 

fact, the very impetus behind our 

development of a separate component 

for NTA costs under the PDPM. 

Accordingly, for the reasons 

discussed in the proposed rule and in 

this final rule, the Secretary is certifying 

that there is an appropriate adjustment 

in the PDPM to compensate for the 

increased costs associated with 

residents with AIDS, and thus we are 

finalizing our proposal without 

modification to replace the temporary 

MMA add-on with the PDPM’s 

permanent adjustment in the case mix 

that appropriately accounts for the 

increased costs of patients with AIDS, 

effective with the conversion to the 

PDPM on October 1, 2019. 

I. Potential Impacts of Implementing the 

PDPM and Parity Adjustment 

This section outlines the projected 

impacts of implementing the PDPM 

effective October 1, 2019 under the SNF 

PPS and the related policies finalized in 

sections V of this final rule that would 

be effective in conjunction with the 

PDPM. This impact analysis makes a 

series of assumptions, as described 

below (as were discussed in the 

proposed rule (83 FR 21073 through 

21080)). First, the impacts presented 

here assume consistent provider 

behavior in terms of how care is 

provided under RUG–IV and how care 

might be provided under the PDPM, as 

we do not make any attempt to 

anticipate or predict provider reactions 

to the implementation of the PDPM. 

That being said, we acknowledge the 

possibility that implementing the PDPM 

could substantially affect resident care 

and coding behaviors. Most notably, 

based on the concerns raised during a 

number of TEPs, we acknowledge the 

possibility that, as therapy payments 

under the PDPM would not have the 

same connection to service provision as 

they do under RUG–IV, it is possible 

that some providers may choose to 

reduce their provision of therapy 

services to increase margins under the 

PDPM. However, we do not have any 

basis on which to assume the 

approximate nature or magnitude of 

these behavioral responses, nor have we 

received any sufficiently specific 

guidance on the likely nature or 

magnitude of behavioral responses from 

ANPRM commenters, TEP panelists, or 

other sources of feedback. As a result, 

lacking an appropriate basis to forecast 

behavioral responses, we do not adjust 

our analyses of resident and provider 

impacts discussed in this section for 

projected changes in provider behavior. 

However, we do intend to monitor 

behavior which may occur in response 

to the implementation of PDPM, and 

may consider proposing policies in the 

future to address such behaviors to the 

extent determined appropriate. 


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Additionally, we acknowledge that a 

number of states utilize some form of 

the RUG–IV case-mix classification 

system as part of their Medicaid 

programs and that any change in 

Medicare policy can have an impact on 

state programs. Again, we do not have 

any basis on which to assume the 

approximate nature or magnitude of 

these responses, for the same reasons 

cited above. Additionally, we do not 

expect impacts on state Medicaid 

programs resulting from PDPM 

implementation to have a notable 

impact on payments for Medicarecovered SNF stays, which are the basis 

for the impact analyses discussed in this 

section. Therefore, we do not consider 

possible changes to state Medicaid 

programs when conducting these 

analyses. We invited comments on our 

assumptions that behavior would 

remain unchanged under the proposed 

PDPM and that changes in state 

Medicaid programs resulting from 

PDPM implementation would not have 

a notable impact on payments for 

Medicare-covered SNF stays. We also 

invited comment on the impact of these 

policy proposals on state Medicaid 

programs. These comments are 

addressed among the general comments 

in section V.A. of this final rule. 

As with prior system transitions, we 

proposed to implement the PDPM casemix system, along with the other policy 

changes discussed throughout this 

section, in a budget neutral manner 

through application of a parity 

adjustment to the case-mix weights 

under the proposed PDPM, as further 

discussed below. We proposed to 

implement the PDPM in a budget 

neutral manner because, as with prior 

system transitions, in proposing changes 

to the case-mix methodology, we do not 

intend to change the aggregate amount 

of Medicare payments to SNFs. Rather, 

we aim to utilize a case-mix 

methodology to classify residents in 

such a manner as to best ensure that 

payments made for specific residents 

are an accurate reflection of resource 

utilization without introducing 

potential incentives which could 

encourage inappropriate care delivery, 

as we believe may exist under the 

current case-mix methodology. 

Therefore, the impact analysis presented 

here assumes implementation of these 

proposed changes in a budget neutral 

manner. We invited comments on the 

proposal, as further discussed below, to 

implement the PDPM in a budget 

neutral manner. In addition, we 

solicited comment on whether it would 

be appropriate to implement the 

proposed PDPM in a manner that is not 

budget neutral. 

As discussed above, the impact 

analysis presented here assumes 

implementation of these changes in a 

budget neutral manner without a 

behavioral change. The prior sections 

describe how case-mix weights are set to 

reflect relative resource use for each 

case-mix group. We stated in the 

proposed rule that the proposed PDPM 

payment before application of a parity 

adjustment would be calculated using 

the unadjusted CMI for each 

component, the variable per diem 

payment adjustment schedule, the 

unadjusted urban and rural federal per 

diem rates shown in Tables 12 and 13, 

the labor-related share, and the 

geographic wage indexes. In applying a 

parity adjustment to the case-mix 

weights, we stated in the proposed rule 

that we would maintain the relative 

value of each CMI but would multiply 

every CMI by a ratio to achieve parity 

in overall SNF PPS payments under the 

PDPM and under the RUG–IV case-mix 

model. The parity adjustment multiplier 

was calculated through the following 

steps, as described in the proposed rule 

(83 FR 21074). First, we calculated 

RUG–IV total payment. Total RUG–IV 

payments were calculated by adding 

total allowed amounts across all FY 

2017 SNF claims. The total allowed 

amount in the study population was the 

summation of Medicare and nonMedicare payments for Medicarecovered days. More specifically, it was 

the sum of Medicare claim payment 

amount, National Claim History (NCH) 

primary payer claim paid amount, NCH 

beneficiary inpatient deductible 

amount, NCH beneficiary Part A 

coinsurance liability amount, and NCH 

beneficiary blood deductible liability 

amount. Second, we calculated what 

total payment would have been under 

the proposed PDPM in FY 2017 before 

application of the parity adjustment. 

Total estimated payments under PDPM 

were calculated by summing the 

predicted payment for each case-mix 

component together for all FY 2017 SNF 

stays. This represented the total allowed 

amount if PDPM had been in place in 

FY 2017. Total estimated FY 2017 

payments under the PDPM were 

calculated using resident information 

from FY 2017 SNF claims, the MDS 

assessment, and other Medicare claims, 

as well as the unadjusted CMI for each 

component, the variable per diem 

payment adjustment schedule, the 

unadjusted urban and rural federal per 

diem rates shown in Tables 12 and 13, 

the labor-related share, and the 

geographic wage indexes. After 

calculating total actual RUG–IV 

payments and total estimated case-mixrelated PDPM payments, we subtracted 

non-case-mix component payments 

from total RUG–IV payments, as this 

component does not change across 

systems. This subtraction did not 

include the temporary add-on for 

residents with HIV/AIDS in the RUG–IV 

system, which PDPM replaces with 

additional payments for residents with 

HIV/AIDS through the NTA and nursing 

components (as discussed in section V.I. 

of the proposed rule and section V.H. of 

this final rule). By retaining the portion 

of non-case-mix component payments 

associated with the temporary HIV/

AIDS add-on in total RUG–IV payments, 

all payments associated with the add-on 

under RUG–IV were re-allocated to the 

case-mix-adjusted components in 

PDPM. This was appropriate because, as 

discussed, under the PDPM, additional 

payments for residents with HIV/AIDS 

are made exclusively through the casemix-adjusted components (that is, the 

nursing and NTA components). Lastly, 

in calculating budget neutrality, we set 

total estimated case-mix-related 

payment under PDPM such that it 

equals total allowable Medicare 

payments under RUG–IV. To do this, we 

divided the remaining total RUG–IV 

payments over the remaining total 

estimated PDPM payments prior to the 

parity adjustment. This division yielded 

a ratio (parity adjustment) of 1.46 by 

which the PDPM CMIs were multiplied 

so that total estimated payments under 

the PDPM would be equal to total actual 

payments under RUG–IV, assuming no 

changes in the population, provider 

behavior, and coding. We stated in the 

proposed rule that, if this parity 

adjustment had not been applied, total 

estimated payments under the PDPM 

would be 46 percent lower than total 

actual payments under RUG–IV, 

therefore the implementation of the 

PDPM would not be budget neutral. 

More details regarding this calculation 

and analysis are described in section 

3.11.2. of the SNF PDPM technical 

report (available at https://

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

therapyresearch.html). The impact 

analysis presented in this section (and 

in the proposed rule) focuses on how 

payments under the PDPM would be reallocated across different resident 

groups and among different facility 

types, assuming implementation in a 

budget neutral manner. 

The projected resident-level impacts 

are presented in Table 37. The first 

column identifies different resident 

subpopulations and the second column 


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shows what percent of SNF stays in FY 

2017 are represented by the given 

subpopulation. The third column shows 

the projected change in total payments 

for residents in a given subpopulation, 

represented as a percentage change in 

actual FY 2017 payments made for that 

subpopulation under RUG–IV versus 

estimated payments which would have 

been made to that subpopulation in FY 

2017 had the PDPM been in place. Total 

RUG–IV payments are calculated by 

adding total allowed amounts across all 

FY 2017 SNF claims associated with a 

resident subpopulation. The total 

allowed amount in the study population 

is the summation of Medicare and nonMedicare payments for Medicarecovered days. More specifically, it is the 

summation of Medicare claim payment 

amount, NCH primary payer claim paid 

amount, NCH beneficiary inpatient 

deductible amount, NCH beneficiary 

Part A coinsurance liability amount, and 

NCH beneficiary blood deductible 

liability amount. Payments 

corresponding to the non-case-mix 

component are subtracted from the 

RUG–IV total payments, not including 

the portion of non-case-mix payments 

corresponding to the temporary add-on 

for residents with HIV/AIDS. Total 

estimated payments under PDPM are 

calculated by summing the predicted 

payment for each case-mix component 

together for all FY 2017 SNF stays 

associated with a resident 

subpopulation. Positive changes in this 

column represent a projected positive 

shift in payments for that subpopulation 

under the PDPM, while negative 

changes in this column represent 

projected negative shifts in payment for 

that subpopulation. More information 

on the construction of current payments 

under RUG–IV and payments under the 

PDPM for purposes of this impact 

analysis can be found in section 3.12. of 

the SNF PDPM technical report 

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

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

therapyresearch.html). Based on the 

data presented in Table 37, we observe 

that the most significant shift in 

payments created by implementation of 

the PDPM would be to redirect 

payments away from residents who are 

receiving very high amounts of therapy 

under the current SNF PPS, which 

strongly incentivizes the provision of 

therapy, to residents with more complex 

clinical needs. For example, we project 

that for residents whose most common 

therapy level is RU (ultra-high 

therapy)—the highest therapy level, 

there would be a reduction in associated 

payments of 8.4 percent, while 

payments for residents currently 

classified as non-rehabilitation would 

increase by 50.5 percent. Other resident 

types for which there may be higher 

relative payments under the PDPM are: 

Residents who have high NTA costs, 

receive extensive services, are dually 

enrolled in Medicare and Medicaid, use 

IV medication, have ESRD, diabetes, or 

a wound infection, receive amputation/ 

prosthesis care, and/or have longer prior 

inpatient stays. Additionally, we 

received several comments in response 

to the 2017 ANPRM requesting that we 

estimate the impact of RCS–1 on the 

following potentially vulnerable 

subpopulations: Residents with 

addictions, bleeding disorders, 

behavioral issues, chronic neurological 

conditions, and bariatric care. In 

response to these comments, we added 

these subpopulations to our PDPM 

impact analysis. Table 37 shows that the 

PDPM is projected to increase the 

proportion of total payment associated 

with each of those subpopulations. 

TABLE 37—PDPM IMPACT ANALYSIS, RESIDENT-LEVEL

Resident characteristics Percent of 

stays 

Percent 

change 

All Stays ................................................................................................................................................................... 100.0 0.0 

Sex: 

Female .............................................................................................................................................................. 60.3 ¥0.8 

Male .................................................................................................................................................................. 39.7 1.2 

Age: 

Below 65 years ................................................................................................................................................. 10.3 7.2 

65–74 years ...................................................................................................................................................... 24.1 3.1 

75–84 years ...................................................................................................................................................... 32.5 ¥0.4 

85–89 years ...................................................................................................................................................... 17.6 ¥3.1 

Over 90 years ................................................................................................................................................... 15.6 ¥4.3 

Race/Ethnicity: 

White ................................................................................................................................................................. 83.8 ¥0.2 

Black ................................................................................................................................................................. 11.2 0.8 

Hispanic ............................................................................................................................................................ 1.7 0.9 

Asian ................................................................................................................................................................. 1.3 ¥0.6 

Native American ............................................................................................................................................... 0.5 7.1 

Other or Unknown ............................................................................................................................................ 1.5 0.8 

Medicare/Medicaid Dual Status: 

Dually Enrolled ................................................................................................................................................. 34.7 3.3 

Not Dually Enrolled ........................................................................................................................................... 65.3 ¥2.1 

Original Reason for Medicare Enrollment: 

Aged ................................................................................................................................................................. 74.6 ¥1.7 

Disabled ............................................................................................................................................................ 24.5 4.8 

ESRD ................................................................................................................................................................ 0.9 10.5 

Utilization Days: 

1–15 days ......................................................................................................................................................... 35.4 13.7 

16–30 days ....................................................................................................................................................... 33.8 0.0 

31+ days ........................................................................................................................................................... 30.9 ¥2.5 

Utilization Days = 100: 

No ..................................................................................................................................................................... 98.4 0.1 

Yes .................................................................................................................................................................... 1.6 ¥1.9 

Length of Prior Inpatient Stay: 

0–2 days ........................................................................................................................................................... 2.2 1.3 

3 days ............................................................................................................................................................... 22.5 ¥3.3 

4–30 days ......................................................................................................................................................... 73.6 0.7 


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TABLE 37—PDPM IMPACT ANALYSIS, RESIDENT-LEVEL—Continued 

Resident characteristics Percent of 

stays 

Percent 

change 

31+ days ........................................................................................................................................................... 1.7 6.7 

Most Common Therapy Level: 

RU ..................................................................................................................................................................... 58.4 ¥8.4 

RV ..................................................................................................................................................................... 22.4 11.4 

RH ..................................................................................................................................................................... 6.8 27.4 

RM .................................................................................................................................................................... 3.3 41.1 

RL ..................................................................................................................................................................... 0.1 67.5 

Non-Rehab ....................................................................................................................................................... 9.1 50.5 

Number of Therapy Disciplines Used: 

0 ........................................................................................................................................................................ 2.3 63.1 

1 ........................................................................................................................................................................ 2.4 44.2 

2 ........................................................................................................................................................................ 51.6 1.6 

3 ........................................................................................................................................................................ 43.7 ¥3.1 

Physical Therapy Utilization: 

No ..................................................................................................................................................................... 3.7 50.9 

Yes .................................................................................................................................................................... 96.3 ¥0.7 

Occupational Therapy Utilization: 

No ..................................................................................................................................................................... 4.5 47.7 

Yes .................................................................................................................................................................... 95.5 ¥0.8 

Speech Language Pathology Utilization: 

No ..................................................................................................................................................................... 55.0 2.8 

Yes .................................................................................................................................................................... 45.0 ¥2.5 

Therapy Utilization: 

PT+OT+SLP ..................................................................................................................................................... 43.7 ¥3.1 

PT+OT Only ..................................................................................................................................................... 50.8 1.3 

PT+SLP Only .................................................................................................................................................... 0.4 27.3 

OT+SLP Only ................................................................................................................................................... 0.4 30.1 

PT Only ............................................................................................................................................................. 1.3 41.3 

OT Only ............................................................................................................................................................ 0.6 47.9 

SLP Only .......................................................................................................................................................... 0.5 46.8 

Non-Therapy ..................................................................................................................................................... 2.3 63.1 

NTA Costs ($): 

0–10 .................................................................................................................................................................. 13.7 ¥3.5 

10–50 ................................................................................................................................................................ 44.5 ¥3.2 

50–150 .............................................................................................................................................................. 32.2 4.2 

150+ .................................................................................................................................................................. 9.6 18.7 

NTA Comorbidity Score: 

0 ........................................................................................................................................................................ 23.5 ¥10.4 

1–2 .................................................................................................................................................................... 30.5 ¥4.7 

3–5 .................................................................................................................................................................... 31.0 4.0 

6–8 .................................................................................................................................................................... 9.9 15.0 

9–11 .................................................................................................................................................................. 3.6 24.4 

12+ .................................................................................................................................................................... 1.4 27.2 

Extensive Services Level: 

Tracheostomy and Ventilator/Respirator .......................................................................................................... 0.3 22.2 

Tracheostomy or Ventilator/Respirator ............................................................................................................. 0.6 7.3 

Infection Isolation .............................................................................................................................................. 1.1 9.1 

Neither .............................................................................................................................................................. 98.0 ¥0.3 

CFS Level: 

Cognitively Intact .............................................................................................................................................. 58.5 ¥0.3 

Mildly Impaired ................................................................................................................................................. 20.7 ¥0.2 

Moderately Impaired ......................................................................................................................................... 16.8 ¥0.7 

Severely Impaired ............................................................................................................................................. 3.9 8.8 

Clinical Category: 

Acute Infections ................................................................................................................................................ 6.5 3.4 

Acute Neurologic .............................................................................................................................................. 6.4 ¥3.7 

Cancer .............................................................................................................................................................. 4.6 ¥3.2 

Cardiovascular and Coagulations .................................................................................................................... 9.8 0.5 

Major Joint Replacement or Spinal Surgery .................................................................................................... 8.6 ¥2.1 

Medical Management ....................................................................................................................................... 30.4 0.0 

Non-Orthopedic Surgery ................................................................................................................................... 10.8 5.7 

Non-Surgical Orthopedic/Musculoskeletal ........................................................................................................ 5.9 ¥6.1 

Orthopedic Surgery (Except Major Joint Replacement or Spinal Surgery) ..................................................... 8.9 ¥2.4 

Pulmonary ......................................................................................................................................................... 8.1 5.4 

Level of Complications in MS–DRG of Prior Inpatient Stay: 

No Complication ............................................................................................................................................... 35.8 ¥3.1 

CC/MCC ........................................................................................................................................................... 64.2 1.7 

Stroke: 

No ..................................................................................................................................................................... 90.9 0.0 

Yes .................................................................................................................................................................... 9.1 0.3 

HIV/AIDS: 


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TABLE 37—PDPM IMPACT ANALYSIS, RESIDENT-LEVEL—Continued 

Resident characteristics Percent of 

stays 

Percent 

change 

No ..................................................................................................................................................................... 99.7 0.3 

Yes .................................................................................................................................................................... 0.3 ¥40.5 

IV Medication: 

No ..................................................................................................................................................................... 91.7 ¥2.1 

Yes .................................................................................................................................................................... 8.3 23.5 

Diabetes: 

No ..................................................................................................................................................................... 64.0 ¥3.0 

Yes .................................................................................................................................................................... 36.0 5.4 

Wound Infection: 

No ..................................................................................................................................................................... 98.9 ¥0.3 

Yes .................................................................................................................................................................... 1.1 22.2 

Amputation/Prosthesis Care: 

No ..................................................................................................................................................................... 100.0 0.0 

Yes .................................................................................................................................................................... 0.0 6.4 

Presence of Dementia: 

No ..................................................................................................................................................................... 70.9 0.5 

Yes .................................................................................................................................................................... 29.1 ¥1.2 

MDS Alzheimer’s: 

No ..................................................................................................................................................................... 95.2 0.0 

Yes .................................................................................................................................................................... 4.8 ¥0.3 

Unknown ........................................................................................................................................................... 0.0 5.0 

Presence of Addictions: 

No ..................................................................................................................................................................... 94.6 ¥0.1 

Yes .................................................................................................................................................................... 5.4 1.8 

Presence of Bleeding Disorders: 

No ..................................................................................................................................................................... 90.9 ¥0.1 

Yes .................................................................................................................................................................... 9.1 1.5 

Presence of Behavioral Issues: 

No ..................................................................................................................................................................... 53.1 ¥0.9 

Yes .................................................................................................................................................................... 46.9 1.0 

Presence of Chronic Neurological Conditions: 

No ..................................................................................................................................................................... 74.4 ¥0.2 

Yes .................................................................................................................................................................... 25.6 0.6 

Presence of Bariatric Care: 

No ..................................................................................................................................................................... 91.3 ¥0.6 

Yes .................................................................................................................................................................... 8.7 6.5 

The projected provider-level impacts 

are presented in Table 38. The first 

column identifies different facility 

subpopulations and the second column 

shows what percentage of SNFs in FY 

2017 are represented by the given 

subpopulation. The third column shows 

the projected change in total payments 

for facilities in a given subpopulation, 

represented as a percentage change in 

actual FY 2017 payments made for that 

subpopulation under RUG–IV versus 

estimated payments which would have 

been made to that subpopulation in FY 

2017 had the PDPM been in place. Total 

RUG–IV payments are calculated by 

adding total allowed amounts across all 

FY 2017 SNF claims associated with a 

facility subpopulation. The total 

allowed amount in the study population 

is the summation of Medicare and nonMedicare payments for Medicarecovered days. More specifically, it is the 

summation of Medicare claim payment 

amount, NCH primary payer claim paid 

amount, NCH beneficiary inpatient 

deductible amount, NCH beneficiary 

Part A coinsurance liability amount, and 

NCH beneficiary blood deductible 

liability amount. Payments 

corresponding to the non-case-mix 

component are subtracted from the 

RUG–IV total payments, not including 

the portion of non-case-mix payments 

corresponding to the temporary add-on 

for residents with HIV/AIDS. Total 

estimated payments under PDPM are 

calculated by summing the predicted 

payment for each case-mix component 

together for all FY 2017 SNF stays 

associated with a facility subpopulation. 

Positive changes in this column 

represent a projected positive shift in 

payments for that subpopulation under 

the PDPM, while negative changes in 

this column represent projected 

negative shifts in payment for that 

subpopulation. More information on the 

construction of current payments under 

RUG–IV and payments under the PDPM 

for purposes of this impact analysis can 

be found in section 3.12. of the SNF 

PDPM technical report (available at 

https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

SNFPPS/therapyresearch.html). Based 

on the data presented in Table 38, we 

observe that the most significant shift in 

Medicare payments created by 

implementation of the PDPM would be 

from facilities with a high proportion of 

rehabilitation residents (particularly 

facilities with high proportions of UltraHigh Rehabilitation residents) to 

facilities with high proportions of nonrehabilitation residents. We project that 

payments to facilities that bill 0 to 10 

percent of utilization days as RU (ultrahigh rehabilitation) would increase an 

estimated 27.6 percent under the PDPM 

while facilities that bill 90 to 100 

percent of utilization days as RU would 

see an estimated decrease in payments 

of 9.8 percent. Other facility types that 

may see higher relative payments under 

the PDPM are small facilities, non-profit 

facilities, government-owned facilities, 

and hospital-based and swing-bed 

facilities. 


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TABLE 38—PDPM IMPACT ANALYSIS, FACILITY-LEVEL

Provider characteristics Percent of 

providers 

Percent 

change 

All Stays ............................................................................................................................................................ 100.0 0.0 

Ownership: 

For profit ........................................................................................................................................................... 72.0 ¥0.7 

Non-profit .......................................................................................................................................................... 22.6 1.9 

Government ...................................................................................................................................................... 5.4 4.2 

Number of Certified SNF Beds: 

0–49 .................................................................................................................................................................. 10.0 3.5 

50–99 ................................................................................................................................................................ 38.2 0.6 

100–149 ............................................................................................................................................................ 34.7 ¥0.2 

150–199 ............................................................................................................................................................ 11.1 ¥0.3 

200+ .................................................................................................................................................................. 5.9 ¥1.8 

Location: 

Urban ................................................................................................................................................................ 72.7 ¥0.7 

Rural ................................................................................................................................................................. 27.3 3.8 

Facility Type: 

Freestanding ..................................................................................................................................................... 96.2 ¥0.3 

Hospital-Based/Swing Bed ............................................................................................................................... 3.8 16.7 

Location by Facility Type: 

Urban | Freestanding: 70.6 ¥1.0 

Urban | Hospital-Based/Swing Bed .................................................................................................................. 2.2 15.3 

Rural | Freestanding ......................................................................................................................................... 25.6 3.2 

Rural | Hospital-Based/Swing Bed ................................................................................................................... 1.6 21.1 

Census Division: 

New England .................................................................................................................................................... 5.9 2.0 

Middle Atlantic .................................................................................................................................................. 10.8 ¥2.6 

East North Central ............................................................................................................................................ 20.6 0.7 

West North Central ........................................................................................................................................... 12.5 6.7 

South Atlantic ................................................................................................................................................... 15.7 ¥0.4 

East South Central ........................................................................................................................................... 6.6 1.0 

West South Central .......................................................................................................................................... 13.1 ¥1.0 

Mountain ........................................................................................................................................................... 4.7 1.1 

Pacific ............................................................................................................................................................... 10.1 ¥0.8 

Location by Region: 

Urban | New England ....................................................................................................................................... 5.1 1.8 

Urban | Middle Atlantic ..................................................................................................................................... 9.5 ¥2.9 

Urban | East North Central ............................................................................................................................... 14.4 ¥0.1 

Urban | West North Central .............................................................................................................................. 6.0 4.6 

Urban | South Atlantic ...................................................................................................................................... 12.6 ¥1.1 

Urban | East South Central .............................................................................................................................. 3.6 0.3 

Urban | West South Central ............................................................................................................................. 8.7 ¥1.2 

Urban | Mountain .............................................................................................................................................. 3.4 0.1 

Urban | Pacific .................................................................................................................................................. 9.5 ¥0.9 

Rural | New England ........................................................................................................................................ 0.8 4.0 

Rural | Middle Atlantic ...................................................................................................................................... 1.3 2.7 

Rural | East North Central ................................................................................................................................ 6.2 3.6 

Rural | West North Central ............................................................................................................................... 6.5 10.5 

Rural | South Atlantic ........................................................................................................................................ 3.1 4.2 

Rural | East South Central ............................................................................................................................... 3.0 2.1 

Rural | West South Central .............................................................................................................................. 4.4 ¥0.1 

Rural | Mountain ............................................................................................................................................... 1.3 6.2 

Rural | Pacific ................................................................................................................................................... 0.6 2.2 

% Stays with Maximum Utilization Days = 100: 

0–10 .................................................................................................................................................................. 94.4 0.1 

10–25 ................................................................................................................................................................ 5.1 ¥2.8 

25–100 .............................................................................................................................................................. 0.4 ¥3.6 

% Medicare/Medicaid Dual Enrollment: 

0–10 .................................................................................................................................................................. 8.6 ¥1.3 

10–25 ................................................................................................................................................................ 17.5 ¥1.3 

25–50 ................................................................................................................................................................ 36.0 0.3 

50–75 ................................................................................................................................................................ 26.5 1.3 

75–90 ................................................................................................................................................................ 8.2 0.4 

90–100 .............................................................................................................................................................. 3.1 1.6 

% Utilization Days Billed as RU: 

0–10 .................................................................................................................................................................. 8.9 27.6 

10–25 ................................................................................................................................................................ 8.0 15.5 

25–50 ................................................................................................................................................................ 24.1 7.0 

50–75 ................................................................................................................................................................ 39.2 ¥0.4 

75–90 ................................................................................................................................................................ 17.2 ¥6.0 

90–100 .............................................................................................................................................................. 2.6 ¥9.8 

% Utilization Days Billed as Non-Rehab: 

0–10 .................................................................................................................................................................. 79.8 ¥1.5 


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TABLE 38—PDPM IMPACT ANALYSIS, FACILITY-LEVEL—Continued 

Provider characteristics Percent of 

providers 

Percent 

change 

10–25 ................................................................................................................................................................ 16.6 8.6 

25–50 ................................................................................................................................................................ 2.7 23.1 

50–75 ................................................................................................................................................................ 0.4 35.8 

75–90 ................................................................................................................................................................ 0.2 41.8 

90–100 .............................................................................................................................................................. 0.4 33.6 

We proposed to implement the PDPM 

effective beginning in FY 2020 (that is, 

October 1, 2019). This effective date 

would incorporate a 1-year period to 

allow time for provider education and 

training, internal system transitions, and 

to allow states to make any Medicaid 

program changes which may be 

necessary based on the changes related 

to PDPM. 

With regard to the changes finalized 

in this rule, we provide our reasons for 

each change throughout the subsections 

above. Below in this section, we discuss 

alternatives we considered which relate 

generally to implementation of the 

PDPM. 

When making major system changes, 

CMS often considers possible transition 

options for providers and other 

stakeholders between the former system 

and the new system. For example, when 

we updated OMB delineations used to 

establish a provider’s wage index under 

the SNF PPS in FY 2015, we utilized a 

blended rate in the first year of 

implementation, whereby 50 percent of 

the provider’s payment was derived 

from their former OMB delineation and 

50 percent from their new OMB 

delineation (79 FR 45644–45646). 

However, due to the fundamental 

nature of the change from the current 

RUG–IV case-mix model to the PDPM, 

which includes differences in resident 

assessment, payment algorithms, and 

other policies, as we stated in the 

proposed rule (83 FR 21079), we believe 

that proposing a blended rate for the 

whole system (that would require two 

full case-mix systems—RUG–IV and the 

PDPM—to run concurrently) is not 

advisable as part of any transition 

strategy for implementing the PDPM, 

due to the significant administrative and 

logistical issues that would be 

associated with such a transition 

strategy. Specifically, CMS and 

providers would be required to manage 

both the RUG–IV payment model and 

PDPM simultaneously, creating 

significant burden and undue 

complexity for all involved parties. 

Furthermore, providers would be 

required to follow both sets of MDS 

assessment rules, each of which carries 

with it its own level of complexity. CMS 

would also be required to process 

assessments and claims under each 

system, which would entail a significant 

amount of resources and burden for 

CMS, MACs, and providers. Finally, a 

blended rate option would also mitigate 

some of the burden reduction associated 

with implementing PDPM, estimated to 

save SNFs close to $200 million per year 

as compared to estimated burden under 

RUG–IV, given that the current 

assessment schedule would need to 

continue until full implementation of 

PDPM was achieved. As we stated in the 

proposed rule, we believe these issues 

also would be implicated in any 

alternative transition strategy which 

would require both case-mix systems to 

exist concurrently, such as giving 

providers a choice in the first year of 

implementation of operating under 

either the RUG–IV or PDPM. Therefore, 

we did not pursue any alternatives 

which required concurrent operation of 

both the RUG–IV and PDPM. 

As discussed in the proposed rule (83 

FR 21079), we then considered 

alternative effective dates for 

implementing the PDPM, and other 

associated policy changes. We 

considered implementing the new casemix model effective beginning in FY 

2019, but we believe that this would not 

permit sufficient time for providers and 

other stakeholders, including CMS, to 

make the necessary preparations for a 

change of this magnitude in the SNF 

PPS. We also believe that such a quick 

transition would not be in keeping with 

how similar types of SNF PPS changes 

have been implemented in the past. We 

also considered implementing PDPM 

more than one year after being finalized, 

such as implementing the PDPM 

effective beginning October 1, 2020 (FY 

2021). However, we believe that setting 

the effective date of PDPM this far out 

is not necessary, based on our prior 

experience with similar SNF PPS 

changes. As is customary, we plan to 

continue to provide free software to 

providers which can be used to group 

residents under the PDPM, as well as 

providing data specifications for this 

grouper software as soon as is 

practicable, thereby mitigating potential 

concerns around software vendors 

having sufficient time to develop 

products for PDPM. Moreover, given the 

issues identified throughout the 

proposed rule and this final rule with 

the current RUG–IV model, notably the 

issues surrounding the burden and 

complexity of the current SNF PPS 

assessment schedule and concerns 

around the incentives for therapy 

overprovision under the RUG–IV 

system, we believe it appropriate to 

implement the PDPM as soon as is 

practicable. 

Finally, we considered alternatives 

related to the proposal discussed in 

section V.I. of this final rule, specifically 

the proposed certification that we have 

met the requirements set forth in section 

511(a) of the MMA, which would permit 

us to use the PDPM’s permanent casemix adjustments for SNF residents with 

AIDS to replace the temporary special 

add-on in the PPS per diem payment for 

such residents. As noted in section V.I. 

of this final rule, this special add-on for 

SNF residents with AIDS was intended 

to be of limited duration, as the MMA 

legislation specified that it was to 

remain in effect only until the Secretary 

certifies that there is an appropriate 

adjustment in the case mix to 

compensate for the increased costs 

associated with such residents. We 

considered maintaining this adjustment 

under the PDPM. However, given the 

adjustment incorporated into the NTA 

and nursing components under the 

PDPM to account for the increased costs 

of treating residents with AIDS, this 

would result in a substantial increase in 

payment for such residents beyond even 

the current add-on payment. Moreover, 

as discussed in section V.I. of this final 

rule, we believe that the PDPM provides 

a tailored case-mix adjustment that 

more accurately accounts for the 

additional costs and resource use of 

residents with AIDS, as compared to an 

undifferentiated add-on which simply 

applies an across-the-board multiplier to 

the full SNF PPS per diem. Finally, as 

stated in section 3.8.2. of the SNF PDPM 

technical report (available at https://

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

therapyresearch.html), HIV/AIDS was 

associated with a negative and 


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statistically significant decrease in PT, 

OT and SLP costs per day. This means 

inherently that, to the extent that the 

existing add-on is applied against the 

full SNF PPS per diem payment, the 

magnitude of the add-on payment 

increases with increases in therapy 

payment, which conflicts with the data 

described above regarding the 

relationship between therapy costs and 

the presence of an AIDS diagnosis. As 

a result, maintaining the current add-on 

would create an inconsistency between 

how SNF payments would be made and 

the data regarding AIDS diagnoses and 

resident therapy costs. Therefore, we 

proposed (and are finalizing in this rule) 

replacing this add-on payment with 

appropriate case-mix adjustments for 

the increased costs of care for this 

population of residents through the 

NTA and nursing components of the 

PDPM. 

We invited comments on the 

projected impacts and on the proposals 

and alternatives discussed throughout 

this section. 

Commenters submitted the following 

comments related to the proposed rule’s 

discussion of the Potential Impacts of 

Implementing the Proposed PDPM and 

Proposed Parity Adjustment. A 

discussion of these comments, along 

with our responses, appears below. 

Comment: Commenters agreed that 

PDPM should be implemented in a 

budget neutral manner. With regard to 

the impact analysis, several commenters 

suggest that CMS run the entire PDPM 

model on a second year of data (or 

partial 2018 data) to examine the impact 

on individual providers and 

beneficiaries. Commenters state that 

using only one year of data does not 

allow analysis of the impact of changing 

patient populations over time. 

Response: We appreciate the support 

for our proposed budget neutral 

implementation. With regards to the 

comment that CMS should use more 

than one year of data for the impact 

analysis, we would note that while CMS 

did not specifically examine the impact 

of PDPM on individual providers and 

beneficiaries across multiple years, we 

did take several steps to ensure 

robustness of our results. First, to ensure 

that the classification would be relevant 

for the current SNF population, we used 

the latest complete year of data 

available, FY 2017, to construct the 

payment model. Second, based on 

comments received in response to the 

2017 ANPRM, we used four years of 

data (FYs 2014–2017) to determine 

which comorbidities to include in the 

NTA component and the number of 

points to assign to each condition/

service for purposes of resident 

classification and payment. Third, as 

discussed in section 1.3 of the SNF 

PDPM technical report, we conducted a 

series of investigations to test the 

robustness of our results across multiple 

years. We found that: The distribution 

of stays and resource utilization by each 

classifier used in the payment model 

(for example, clinical category, cognitive 

status, etc.), the case-mix groups 

generated by the CART algorithm, the 

costliest NTA comorbidities, and the 

distribution of stays across nursing 

RUGs was very similar across multiple 

years. Fourth, we examined changes in 

SNF resident characteristics over time 

in response to concerns raised by 

participants in technical expert panels, 

focusing on specific resident 

characteristics that TEP panelists 

identified as indicators of increasing 

acuity. These investigations generally 

found that resident characteristics 

changed little over time. 

Finally, while we did not analyze the 

impact of PDPM on individual 

providers and beneficiaries across 

multiple years, we note that we also 

examined the impact of the RCS–I 

payment model, which has substantially 

similar classification criteria as PDPM, 

on various resident and provider 

subpopulations using FY 2014 data. The 

results of this analysis, shown in section 

3.13 of the SNF PMR technical report 

and the 2017 ANPRM (82 FR 21008 

through 21012), were consistent with 

the resident and provider subpopulation 

impact analysis conducted for PDPM 

(section 3.12 of the SNF PDPM technical 

report) in showing that a payment 

model based on the set of resident 

characteristics used to construct PDPM 

would be expected to increase payment 

associated with resident subpopulations 

with complex clinical needs, such as 

extensive services, high NTA 

utilization, IV medications, ESRD, 

diabetes, wound infections, amputation/ 

prosthesis care, and longer inpatient 

stays. For all of the foregoing reasons, 

we expect PDPM to be robust and to 

have similar impacts on residents and 

providers across multiple years. 

Comment: One commenter stated that 

there are several methodological issues 

that may affect the accuracy of PDPM 

impact calculations under budget 

neutrality. This includes: 

(1) The use of hospital MS–DRGs in 

developing clinical categories will likely 

result in an inaccurate estimation of 

payment. Payment rates were set and 

impacts predicted based on using the 

MS–DRG assignment of the patient, 

whereas PDPM when implemented will 

rely on MDS responses. If SNFs report 

patients at a net lower acuity level in 

MDS data than the predicted clinical 

categorization, then the budget 

neutrality assumptions made by PDPM 

will be invalid. 

(2) The conversion of charges to costs 

will likely result in an underestimation 

of payment. Because SNF charges have 

not driven payments under the SNF PPS 

before, it is possible SNFs will 

systematically re-evaluate their charges 

practices to bring them more in line 

with the cost information within their 

accounting systems. As a result, the use 

of SNF charges may need to be rapidly 

reevaluated once PDPM is implemented. 

(3) The quality of FY 2017 section GG 

data is questionable due to the likely 

inaccuracies in newly implemented 

items. Thus, PDPM impacts may need to 

be re-run once more stable section GG 

data are available to ensure PDPM 

accurately accounts for patient 

functional characteristics. 

Response: As stated in the proposed 

rule (83 FR 21074) and section 3.11.2 of 

the SNF PDPM technical report, the 

budget neutrality assumption refers to 

having total payments if PDPM had 

been in place be equal to total actual 

RUG–IV payments in FY 2017. It does 

not account for provider behavior 

change after the implementation of 

PDPM. We appreciate the concerns 

raised, and we will monitor the 

reporting of MDS clinical categories, 

charges, and section GG items under 

PDPM. 

Comment: One commenter stated that 

PDPM does not adequately account for 

residents with behavioral health issues. 

The commenter stated that SNFs are 

treating younger patients with longer 

stays and complex behavioral needs. 

Further, the commenter said 

representatives of geriatric behavioral 

health services were not included in the 

TEPs that were convened during PDPM 

development. A few commenters 

requested that CMS study the impact of 

PDPM on beneficiaries with long stays, 

such as those exceeding 84 days in 

length to determine whether the 

payment model creates potential access 

issues for such beneficiaries. 

Response: While our TEPs did not 

include a specific representative of 

geriatric behavioral health services, in 

response to the feedback received from 

TEP panelists, we investigated the 

impact of PDPM on residents with 

behavioral health issues. As discussed 

in section 3.12 of the SNF PDPM 

technical report, we found that PDPM is 

predicted to slightly increase payment 

associated with residents who have 

behavioral issues. Therefore, we believe 

the proposed payment model 

appropriately accounts for the resource 

needs of this subpopulation. 

Additionally, we found that PDPM is 


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expected to notably increase payment 

associated with younger residents 

(below 65 and 65–74 years of age). 

However, we also estimated that 

payment associated with very long stays 

(utilization = 100 days) would decline 

by 1.9 percent under PDPM. We do plan 

to monitor the impact of PDPM on many 

different subpopulations, including 

those with long SNF stays. 

Comment: Another commenter raised 

concerns about the provider-specific 

impact analysis included in the 

supplementary materials that were 

designed to aid stakeholders in 

reviewing and commenting on the 

proposed rule. The commenter stated 

that there were large differences in the 

estimated payment impact on 

individual providers between the 

provider-level impact file that 

accompanied the 2017 ANPRM and the 

provider-level impact file that 

accompanied the FY 2019 proposed 

rule. Additionally, the commenter 

stated that some providers have impact 

estimates in the RCS–I provider-level 

impact file (which accompanied the 

2017 ANPRM) but are missing estimates 

in the PDPM provider-level impact file 

(which accompanied the FY 2019 SNF 

PPS proposed rule). According to the 

commenter, these discrepancies raise 

concerns about the reliability, accuracy, 

and completeness of the data used to 

develop PDPM. 

Response: The commenter that raised 

concerns about changes in the providerlevel impacts between the RCS–I and 

the PDPM provider-level impact files 

correctly notes that the provider-level 

impacts changed across the two files. 

There are two main reasons for changes 

in provider-level impacts across these 

two files that do not raise concerns 

about the quality of the data used to 

conduct the provider-specific impact 

analysis or to develop PDPM. First, the 

year of analysis is different across the 

two files. The RCS–I analysis uses data 

from FY 2014, which was also the year 

of data used to develop RCS–I, while the 

PDPM analysis uses data from FY 2017. 

Changes in the resident population of 

specific providers could contribute to 

changes in the estimated provider-level 

impact of the payment models. 

Second, the two provider-level files 

provide impacts for two different 

payment models: The first displays 

impacts for RCS–I, while the second 

displays impacts for PDPM. While the 

two payment models are similar, 

differences between the two models also 

contribute to changes in estimated 

provider-level impacts. For the 

foregoing reasons, we should not expect 

the estimated payment impact for each 

provider be the same across the two 

payment models and data years. We 

further note that at the population level, 

the estimated impact on specific types 

of providers and residents was similar 

under RCS–I and PDPM, reflecting the 

similarity of the payment models. 

Specifically, for both models we 

estimate that payment would shift from 

stays receiving high amounts of therapy 

and providers that provide high 

amounts of therapy to stays associated 

with medically complex beneficiaries 

and providers that serve these 

beneficiaries. 

Regarding providers that were 

included in the RCS–I provider-specific 

file but not in the PDPM providerspecific file, this occurs for three 

reasons: (1) The provider had no stays 

in FY 2017, the year of analysis for the 

PDPM file, (2) after applying matching 

and validity restrictions, the provider 

had no stays remaining in the dataset, 

or had fewer than 11 stays (and 

therefore could not be included for 

confidentiality reasons), or (3) after 

excluding stays that did not have 

sufficient information to be classified 

into a case-mix group for each PDPM 

component, the provider had fewer than 

11 stays. Of the roughly 1,100 providers 

that were included in the RCS–I file but 

not included in the PDPM file, about 60 

percent were excluded for reason (3); of 

the remaining excluded providers, about 

half were excluded for reason (1) and 

half were excluded for reason (2). It 

should also be noted that in total, there 

are about 700 fewer providers in the 

PDPM file than there are in the RCS–I 

file. Because this number is less than 

the number of providers included in the 

RCS–I file but not included in the PDPM 

file, this indicates that there are also a 

number of providers that are included 

in the PDPM file but not in the RCS–I 

file. To confirm the representativeness 

of our PDPM study population, we 

compared resident characteristics for 

the study population and the Medicare 

Part A SNF population, as shown in 

section 3.1.5 of the SNF PDPM technical 

report. As noted in the technical report, 

the two populations are similar in most 

respects, although the study population 

contains a higher proportion of stays 

from for-profit and freestanding 

facilities and a lower proportion of stays 

from non-profit, government, hospitalbased, and swing bed facilities. Given 

the similarity of the two populations, 

we do not believe our population 

restrictions compromised the 

representativeness of our study 

population or the reliability of our 

results. 

Comment: One commenter stated that 

there are apparent errors in the PDPM 

provider-specific impact file. The 

commenter states that the total numbers 

of days and stays shown in the file do 

not match the sum of the values in the 

respective columns. Additionally, the 

commenter states that the percentages of 

stays shown in the case-mix group 

distribution does not sum to 500 percent 

(as they should because 100 percent of 

days are assigned to a case-mix group 

within each of the five components) for 

three specific facilities. The commenter 

notes that all other rows in this tab 

correctly sum to 500 percent. The 

commenter recommends CMS research 

these issues and publish a corrected file 

as necessary. 

Response: The commenter that stated 

the total stays and days shown in 

provider-specific file do not match the 

sum of the values in the respective 

columns is correct. The reason for this 

apparent discrepancy is that, while the 

total stays and days shown in this file 

include providers with fewer than 11 

stays, these providers are not shown 

separately in the file for confidentiality 

reasons. As a result, the displayed totals 

across all facilities do not match the 

totals calculated from summing across 

rows. Regarding the three instances the 

commenter cites in which the 

percentages for the case-mix group 

distribution do not sum to 500 percent, 

we were unable to replicate this issue. 

We verified that the case-mix group 

distribution shown in the providerspecific file for each of these three 

providers does in fact sum to 500 

percent and further verified that the 

case-mix group distribution sums to 500 

percent for all providers shown in the 

file. Therefore, we do not believe a 

correction is warranted. 

Comment: Some commenters 

supported CMS’ decision not to propose 

a blended rate transition between RUG– 

IV and PDPM, but rather to make a full 

transition from one system to the other. 

Some commenters expressed support for 

a transition, requesting that CMS 

conduct a feasibility study to examine 

the impact of PDPM, particularly the 

therapy components, on access to 

medically necessary therapy. One 

commenter requested that CMS phase-in 

any negative impacts on providers from 

implementing PDPM. One commenter 

stated that, given the similarities 

between the RCS–I model and the 

PDPM, CMS should move forward with 

implementing PDPM in FY 2019. One 

commenter requested clarification on 

how a patient’s reimbursement would 

be affected if the stay began under RUG– 

IV and ended under PDPM. 

Response: We appreciate the support 

for our decision not to implement a 

transition strategy such as a blended 

rate option. We do not believe that such 


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a transition, or one that would phase in 

negative impacts, would be beneficial 

for SNFs or their patients given the 

complexity of operating two systems 

simultaneously. With regard to the 

suggestion that CMS conduct a 

feasibility study to examine the impact 

of PDPM, we believe that the monitoring 

program we plan to undertake with 

implementation of PDPM will provide 

all of the necessary information in an 

efficient and expeditious manner that 

would negate the reasons for conducting 

a feasibility study. Finally, with regard 

to the comment that CMS implement 

PDPM in FY 2019, despite the 

similarities between RCS–I and PDPM, 

the education and training efforts 

necessary to ensure successful 

implementation of PDPM will likely 

require more time than such an 

implementation date would permit. 

With regard to the comment about a 

patient that begins a stay under RUG– 

IV but ends under PDPM, given that 

there will be no transition period 

between RUG–IV and PDPM, providers 

would bill under RUG–IV for all days 

up to and including September 30, 2019 

and then bill under PDPM for all days 

beginning October 1, 2019. Further, 

RUG–IV assessment scheduling and 

other RUG–IV payment-related policies 

would be in effect until September 30, 

2019. Beginning on October 1, 2019, all 

PDPM related assessment scheduling 

and other PDPM payment-related 

policies would take effect. 

Comment: One commenter stated that 

PDPM would require a minimum of 12 

months for programming, testing, 

validating and deploying of software 

updates and tools. This commenter 

requested that CMS allow for our 

systems to report to providers RUG–IV 

payment data, such as associated HIPPS 

codes, up to 60 days after 

implementation of PDPM. 

Response: We agree with the 

commenter regarding the timeframe for 

software development, which is part of 

the reason we are implementing PDPM 

on October 1, 2019, rather than in 2018. 

With regard to the comment that we 

report RUG–IV payment data after 

implementation of PDPM, we will 

consider this suggestion as part of 

transition planning. 

Comment: Many commenters stressed 

the importance of provider education 

and training to support successful 

implementation of the PDPM. These 

commenters suggested that extensive 

education and training of all involved 

parties will be needed because PDPM is 

such a significant change from the 

existing system. These commenters 

recommend that CMS immediately 

begin work with stakeholders to identify 

and to plan for meeting these needs and 

to provide the necessary tools to 

implement the new system smoothly. 

Further, commenters suggested that, in 

Fall 2018, CMS should convene a PDPM 

Implementation Technical Expert Panel 

(TEP) comprised of SNF PPS 

stakeholders, representatives from 

states, referral sources, and payer 

representatives, and that the TEP Report 

should be made public and serve as the 

basis for a PDPM Transition Plan. 

Finally, several commenters urged CMS 

to release any technical specifications 

and manual revisions as soon as 

possible, to give providers and vendors 

as much time as possible to adapt to any 

PDPM-related changes. 

Response: We agree with the 

comments regarding the importance of 

provider education and training and 

will be providing extensive 

opportunities and resources to 

accomplish this task. With regard to the 

suggestion for a TEP related to PDPM 

implementation, we appreciate this 

suggestion and will consider several 

methods to engage the stakeholder 

community in preparing for PDPM 

implementation. With regard to the 

comments on the need for transition 

planning and for CMS’ timely release of 

any technical specifications and manual 

revisions, we agree with commenters 

and intend to release technical 

specifications and manual revisions as 

soon as possible, which will include 

specific instructions on operationalizing 

the transition from RUG–IV to PDPM. 

Comment: A few commenters 

requested that CMS establish a formal 

and transparent process and timeline for 

refining the PDPM therapy components 

after implementation of PDPM. 

Response: While we agree with using 

a transparent process for refining PDPM, 

as was used during its development, we 

believe it is premature at this time to 

provide such a timeframe for revisions 

to the model, until we are able to 

observe the impact of implementing this 

model. 

Comment: One commenter requested 

that CMS consider providing additional 

funding during initial implementation 

of PDPM, given that providers will be 

under financial pressures associated 

with training, software purchases, as 

well as changes associated with other 

CMS initiatives. 

Response: We do not believe that 

additional funding would be warranted 

for the activities described by the 

commenter. Given that CMS provides 

free grouper software, as well as a 

myriad of training and education 

resources, we believe that additional 

costs, such as software purchases, are 

private business decisions that exist 

outside the scope of SNF payments. 

Accordingly, after considering the 

comments received, for the reasons 

discussed throughout section V of the 

FY 2019 SNF PPS proposed rule and for 

the reasons presented in this final rule, 

we are finalizing our proposals to 

implement the PDPM, as well as the 

other PDPM related changes discussed 

in this final rule, with the modifications 

previously discussed in this final rule, 

effective beginning October 1, 2019. 

Specifically, in section V.B of this final 

rule, we finalized our proposal, without 

modification, for updating the federal 

base payment rates and for adjusting the 

per diem rates for geographic 

differences under the PDPM. In section 

V.C.3.b of this final rule, we finalized 

the proposed PT and OT components 

under the PDPM and our proposals 

relating to the methodology for 

classifying residents under the PT and 

OT components, effective October 1, 

2019, with the modifications discussed 

in that section. More specifically, in 

response to comments, rather than 

requiring providers to record the type of 

inpatient surgical procedure performed 

during the prior inpatient hospital stay 

by coding an ICD–10–PCS code in the 

second line of item I8000 as we 

proposed, we will instead require 

providers to select, as necessary, a 

surgical procedure category in a subitem within Item J2000 which would 

identify the relevant surgical procedure 

that occurred during the patient’s 

preceding hospital stay and which 

would augment the patient’s PDPM 

clinical category. For purposes of 

calculating the function score, all 

missing values for section GG 

assessment items will receive zero 

points. Similarly, the function score will 

incorporate a new response ‘‘10. Not 

attempted due to environmental 

limitations’’ and we will assign it a 

point value of zero. Furthermore, 

consistent with a commenter’s 

suggestion, we will adopt MDS item 

GG0170I1 (Walk 10 feet) as a substitute 

for retired item GG0170H1 (Does the 

resident walk), and we will use 

responses 07: ‘‘resident refused,’’ 09: 

‘‘not applicable,’’ 10: ‘‘not attempted 

due to environmental limitations,’’ or 

88: ‘‘not attempted due to medical 

condition or safety concerns’’ from MDS 

item GG0170I1 to identify residents who 

cannot walk. In section V.C.3.b of this 

final rule, we finalized, without 

modification, the proposed SLP 

component of PDPM and our proposals 

relating to the classification of residents 

under the SLP component. In section 

V.C.3.d of this final rule, we finalized, 


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without modification, our proposals 

relating to the methodology for 

classifying patients under the nursing 

component of PDPM. In section V.C.3.e 

of this final rule, we finalized, without 

modification, our proposed NTA 

component of the PDPM and the 

proposed classification methodology for 

the NTA component. In section V.C.4 of 

this final rule, we finalized, without 

modification, to apply a variable per 

diem adjustment as part of the PDPM, 

utilizing the adjustment factors and 

schedule for the PT and OT components 

found in Table 30 and the adjustment 

factors and schedule for the NTA 

component found in Table 31. In section 

V.D.1 of this final rule, we finalized our 

proposed changes to the MDS 

assessment schedule and related 

assessment policies as discussed in the 

proposed rule, with the following 

modifications. As discussed in that 

section, rather than making the IPA a 

required assessment as we proposed, 

this assessment will be optional, and 

providers may determine whether and 

when an IPA is completed. In addition, 

because the IPA is an optional 

assessment and providers can determine 

their own criteria for when an IPA is 

completed, we are revising the ARD 

criteria such that the ARD will be the 

date the facility chooses to complete the 

assessment relative to the triggering 

event that makes the facility complete 

the IPA. Payment based on the IPA 

would begin the same day as the ARD. 

In section V.D.2 of this final rule, we 

finalized, without modification, our 

proposed additions to the Swing Bed 

PPS Assessment found in Table 34 of 

this final rule. In section V.D.3 of this 

final rule, we finalized, without 

modification, the proposed additions to 

the PPS Discharge Assessment found in 

Table 35 of this final rule. In section V.E 

of this final rule, we finalized, without 

modification, our proposed application 

of a combined 25 percent limit on group 

and concurrent therapy, per therapy 

discipline, as well as our proposal to 

implement a non-fatal warning edit on 

a provider’s validation report when the 

amount of group and concurrent therapy 

exceeds 25 percent within a given 

therapy discipline. In section V.F of this 

final rule, we finalized, without 

modification, our proposed interrupted 

stay policy. In section V.G of this final 

rule, we finalized our proposed 

classifiers for purposes of applying the 

administrative presumption, with the 

following modification. As discussed in 

that section, we added 6 PT and OT 

classifiers and 8 SLP classifiers. In 

section V.H of this final rule, we 

finalized our proposal to replace the 

existing MMA add-on for patients with 

AIDS with the PDPM permanent 

adjustment in the case-mix that 

appropriate accounts for the increased 

costs of patients with AIDS. 

As we proposed and as discussed in 

section V.I of this final rule, we will 

implement the PDPM and the other 

PDPM-related changes finalized in this 

rule in a budget neutral manner. 

VI. Other Issues 

A. Other Revisions to the Regulation 

Text 

Along with our revisions to the 

regulations as discussed elsewhere in 

this final rule, we also proposed (83 FR 

21080) to make two other revisions in 

the regulation text. The first involves 

§ 411.15(p)(3)(iv), which specifies that 

whenever a beneficiary is formally 

discharged (or otherwise departs) from 

the SNF, this event serves to end that 

beneficiary’s status as a ‘‘resident’’ of 

the SNF for purposes of consolidated 

billing (the SNF ‘‘bundling’’ 

requirement), unless he or she is 

readmitted (or returns) to that or another 

SNF ‘‘by midnight of the day of 

departure.’’ In initially establishing this 

so-called ‘‘midnight rule,’’ the FY 2001 

SNF PPS final rule (65 FR 46770, July 

31, 2000) noted in this particular 

context that, as we explained in the 

proposed rule, a patient ‘‘day’’ begins at 

12:01 a.m. and ends the following 

midnight, so that the phrase ‘‘midnight 

of the day of departure’’ refers to the 

midnight that immediately follows the 

actual moment of departure, rather than 

to the midnight that immediately 

precedes it (65 FR 46792). 

However, the Medicare program’s 

standard practice for counting inpatient 

days is actually one in which an 

inpatient day would begin at midnight 

(see, for example, § 20.1 in the Medicare 

Benefit Policy Manual, Chapter 3, which 

specifies that in counting inpatient 

days, ‘‘. . . a day begins at midnight 

and ends 24 hours later’’ (emphasis 

added)). Accordingly, in order to ensure 

consistency with that approach, we 

proposed to revise § 411.15(p)(3)(iv) to 

specify that for consolidated billing 

purposes, a beneficiary’s ‘‘resident’’ 

status ends whenever he or she is 

formally discharged (or otherwise 

departs) from the SNF, unless he or she 

is readmitted (or returns) to that or 

another SNF ‘‘before the following 

midnight.’’ We further noted that this 

revision would not alter the underlying 

principle that a beneficiary’s SNF 

‘‘resident’’ status in this context ends 

upon departure from the SNF unless he 

or she returns to that or another SNF 

later on that same day; rather, it would 

simply serve to conform the actual 

wording of the applicable regulations 

text with the Medicare manual’s 

standard definition of the starting point 

of a patient ‘‘day.’’ 

We also proposed a technical 

correction to § 424.20(a)(1)(i) (which 

describes the required content of the 

SNF level of care certification) in order 

to conform it more closely to that of the 

corresponding statutory requirements at 

section 1814(a)(2)(B) of the Act. This 

statutory provision defines the SNF 

level of care in terms of skilled services 

furnished on a daily basis which, as a 

practical matter, can only be provided 

on an inpatient basis in a SNF. In 

addition, it provides that the SNF-level 

care must be for either: 

• An ongoing condition that was one 

of the conditions that the beneficiary 

had during the qualifying hospital stay; 

or 

• A new condition that arose while 

the beneficiary was in the SNF for 

treatment of that ongoing condition. 

In setting forth the SNF level of care 

definition itself, the implementing 

regulations at § 409.31 reflect both of the 

above two criteria (at paragraphs 

(b)(2)(i) and (b)(2)(ii), respectively); 

however, as we stated in the proposed 

rule (83 FR 21080), the regulations 

describing the content of the initial level 

of care certification at § 424.20(a)(1)(i) 

have inadvertently omitted the second 

criterion. Further, while that criterion 

admittedly might not be relevant in 

those instances where the initial 

certification is obtained promptly ‘‘at 

the time of admission’’ in accordance 

with the regulations at 42 CFR 

424.20(b)(1), that same provision 

alternatively allows this requirement to 

be met ‘‘as soon thereafter as is 

reasonable and practicable.’’ 

Accordingly, in order to rectify this 

omission, we proposed to revise 

§ 424.20(a)(1)(i) so that it more 

accurately tracks the language in the 

corresponding statutory authority at 

section 1814(a)(2)(B) of the Act. 

We invited comments on our 

proposed revisions to § 411.15(p)(3)(iv) 

and § 424.20(a)(1)(i), but received no 

comments on either revision. 

Accordingly, in this final rule, we are 

finalizing both revisions as proposed, 

without further modification. 

B. Skilled Nursing Facility (SNF) 

Quality Reporting Program (QRP) 

1. Background 

The Skilled Nursing Facility Quality 

Reporting Program (SNF QRP) is 

authorized by section 1888(e)(6) of the 

Act and it applies to freestanding SNFs, 

SNFs affiliated with acute care facilities, 


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3See, for example, United States Department of 

Health and Human Services. ‘‘Healthy People 2020: 

Disparities. 2014.’’ Available at http://

www.healthypeople.gov/2020/about/foundationhealth-measures/Disparities; or National Academies 

of Sciences, Engineering, and Medicine. Accounting 

for Social Risk Factors in Medicare Payment: 

Identifying Social Risk Factors. Washington, DC: 

National Academies of Sciences, Engineering, and 

Medicine 2016. 

4 Department of Health and Human Services 

Office of the Assistant Secretary for Planning and 

Evaluation (ASPE), ‘‘Report to Congress: Social Risk 

Factors and Performance Under Medicare’s ValueBased Purchasing Programs.’’ December 2016. 

Available at https://aspe.hhs.gov/pdf-report/reportcongress-social-risk-factors-and-performanceunder-medicares-value-based-purchasingprograms. 

and all non-CAH swing-bed rural 

hospitals. Under the SNF QRP, the 

Secretary reduces by 2 percentage 

points the annual market basket 

percentage update described in section 

1888(e)(5)(B)(i) of the Act applicable to 

a SNF for a fiscal year, after application 

of section 1888(e)(5)(B)(ii) of the Act 

(the MFP adjustment) and section 

1888(e)(5)(B)(iii) of the Act (the 1 

percent market basket increase for FY 

2018), in the case of a SNF that does not 

submit data in accordance with sections 

1888(e)(6)(B)(i) of the Act for that fiscal 

year. For more information on the 

requirements we have adopted for the 

SNF QRP, we refer readers to the FY 

2016 SNF PPS final rule (80 FR 46427 

through 46429), FY 2017 SNF PPS final 

rule (81 FR 52009 through 52010) and 

FY 2018 SNF PPS final rule (82 FR 

36566). 

Although we have historically used 

the preamble to the SNF PPS proposed 

and final rules each year to remind 

stakeholders of all previously finalized 

program requirements, we have 

concluded that repeating the same 

discussion each year is not necessary for 

every requirement, especially if we have 

codified it in our regulations. 

Accordingly, the following discussion is 

limited as much as possible to a 

discussion of our proposals, responses 

to comments submitted on those 

proposals, and policies we are finalizing 

for future years of the SNF QRP after 

consideration of the comments, and it 

represents the approach we intend to 

use in our rulemakings for this program 

going forward. 

2. General Considerations Used for the 

Selection of Measures for the SNF QRP 

a. Background 

For a detailed discussion of the 

considerations we historically used for 

the selection of SNF QRP quality, 

resource use, and other measures, we 

refer readers to the FY 2016 SNF PPS 

final rule (80 FR 46429 through 46431). 

We received several comments 

generally related to the SNF QRP. The 

comments and our responses are 

discussed below. 

Comment: Several commenters 

expressed general support for CMS’s 

proposals related to the SNF QRP, 

acknowledging CMS’s goal of improving 

the quality of health care for Medicare 

beneficiaries through improvements to 

patient assessments and quality 

reporting. One commenter highlighted 

the need for additional transparency 

from CMS through this ongoing process. 

Another commenter requested that CMS 

ensure that the SNF QRP efforts do not 

negatively impact specialty populations. 

Response: We appreciate commenters’ 

general support for the SNF QRP 

proposals. To foster transparency, we 

continue to seek stakeholder input and 

will take into consideration the impact 

of specialty populations in the ongoing 

measure development and maintenance 

efforts of the SNF QRP. 

Comment: One commenter expressed 

support for the IMPACT Act’s 

objectives. However, the commenter 

expressed concern over the rapid 

development and implementation of the 

standardized patient assessment data 

element (SPADE) work, suggesting that 

further evaluation is necessary. 

Response: We understand the 

concerns raised by commenters 

pertaining to the development and 

implementation of the SPADEs. As 

discussed in the FY 2018 SNF PPS Final 

Rule, we agreed that further evaluation 

of the data elements was necessary. 

Specifically, we thought that more time 

was needed to develop, test, to think 

through the implementation, and to 

reflect on how to maximize the time 

SNFs have to prepare for the reporting 

of standardized resident assessment 

data in these categories. We have 

worked to be responsive to the concerns 

raised by stakeholders while meeting 

our obligation to require the reporting of 

standardized resident assessment data 

with respect to the categories described 

in section 1899B(b)(1)(B) of the Act. 

Therefore, as outlined in the FY 2018 

SNF PPS final rule, we did not finalize 

the standardized assessment data 

elements we proposed for three of the 

five categories under section 

1899B(b)(1)(B) of the Act: Cognitive 

Function and Mental Status; Special 

Services, Treatments, and Interventions; 

and Impairments in that we felt this 

work needed more time for 

development and evaluation. Since the 

time of this proposal work, we have 

worked closely with stakeholders, 

solicited comments, reconvened our 

TEP, and are currently re-testing the 

SPADEs in a national field test (also 

known as the Alpha test). For more 

information on our prior proposal 

addressed in the FY 2018 SNF PPS final 

rule (82 FR 36568 through 36570, 36597 

through 36605), we refer the reader to 

that detailed discussion. For more 

information on our national field test 

and associated work for SPADEs, please 

see: https://www.cms.gov/Medicare/

Quality-Initiatives-Patient-AssessmentInstruments/Post-Acute-Care-QualityInitiatives/IMPACT-Act-of-2014/- 

IMPACT-Act-Standardized-AssessmentNational-Testing-.html. 

b. Accounting for Social Risk Factors in 

the SNF QRP 

In the FY 2018 SNF PPS final rule (82 

FR 36567 through 36568), we discussed 

the importance of improving beneficiary 

outcomes including reducing health 

disparities. We also discussed our 

commitment to ensuring that medically 

complex residents, as well as those with 

social risk factors, receive excellent 

care. We discussed how studies show 

that social risk factors, such as being 

near or below the poverty level as 

determined by HHS, belonging to a 

racial or ethnic minority group, or living 

with a disability, can be associated with 

poor health outcomes and how some of 

this disparity is related to the quality of 

health care.3 Among our core objectives, 

we aim to improve health outcomes, 

attain health equity for all beneficiaries, 

and ensure that complex residents, as 

well as those with social risk factors 

receive excellent care. Within this 

context, reports by the Office of the 

Assistant Secretary for Planning and 

Evaluation (ASPE) and the National 

Academy of Medicine have examined 

the influence of social risk factors in our 

value-based purchasing programs.4 As 

we noted in the FY 2018 SNF PPS final 

rule (82 FR 36567 through 36568), 

ASPE’s report to Congress, which was 

required by the IMPACT Act, found 

that, in the context of value-based 

purchasing programs, dual eligibility 

was the most powerful predictor of poor 

health care outcomes among those 

social risk factors that they examined 

and tested. ASPE is continuing to 

examine this issue in its second report 

required by the IMPACT Act, which is 

due to Congress in the fall of 2019. In 

addition, as we noted in the FY 2018 

SNF PPS final rule (82 FR 36567), the 

National Quality Forum (NQF) 

undertook a 2-year trial period in which 

certain new measures and measures 

undergoing maintenance review have 

been assessed to determine if risk 

adjustment for social risk factors is 


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5Available at http://www.qualityforum.org/SES_

Trial_Period.aspx. 

6Available at http://www.qualityforum.org/

WorkArea/linkit.aspx?LinkIdentifier= 

id&ItemID=86357. 

7We refer readers to the FY 2016 SNF PPS final 

rule (80 FR 46431 through 46432) for more 

information on the factors we consider for removing 

measures. 

appropriate for these measures.5 The 

trial period ended in April 2017 and a 

final report is available at http://

www.qualityforum.org/SES_Trial_

Period.aspx. The trial concluded that 

‘‘measures with a conceptual basis for 

adjustment generally did not 

demonstrate an empirical relationship’’ 

between social risk factors and the 

outcomes measured. This discrepancy 

may be explained in part by the 

methods used for adjustment and the 

limited availability of robust data on 

social risk factors. NQF has extended 

the socioeconomic status (SES) trial,6

allowing further examination of social 

risk factors in outcome measures. 

In the FY 2018/CY 2018 proposed 

rules for our quality reporting and 

value-based purchasing programs, we 

solicited feedback on which social risk 

factors provide the most valuable 

information to stakeholders and the 

methodology for illuminating 

differences in outcomes rates among 

patient groups within a provider that 

would also allow for a comparison of 

those differences, or disparities, across 

providers. Feedback we received across 

our quality reporting programs included 

encouraging us to explore whether 

factors that could be used to stratify or 

risk adjust the measures (beyond dual 

eligibility); to consider the full range of 

differences in resident backgrounds that 

might affect outcomes; to explore risk 

adjustment approaches; and to offer 

careful consideration of what type of 

information display would be most 

useful to the public. 

We also sought public comment on 

confidential reporting and future public 

reporting of some of our measures 

stratified by resident dual eligibility. In 

general, commenters noted that 

stratified measures could serve as tools 

for SNFs to identify gaps in outcomes 

for different groups of residents, 

improve the quality of health care for all 

residents, and empower consumers to 

make informed decisions about health 

care. Commenters encouraged us to 

stratify measures by other social risk 

factors such as age, income, and 

educational attainment. With regard to 

value-based purchasing programs, 

commenters also cautioned CMS to 

balance fair and equitable payment 

while avoiding payment penalties that 

mask health disparities or discouraging 

the provision of care to more medically 

complex patients. Commenters also 

noted that value-based payment 

program measure selection, domain 

weighting, performance scoring, and 

payment methodology must account for 

social risk. 

As a next step, we are considering 

options to improve health disparities 

among patient-groups within and across 

hospitals by increasing the transparency 

of disparities as shown by quality 

measures. We also are considering how 

this work applies to other CMS quality 

programs in the future. We refer readers 

to the FY 2018 IPPS/LTCH PPS final 

rule (82 FR 38403 through 38409) for 

more details, where we discuss the 

potential stratification of certain 

Hospital Inpatient Quality Reporting 

(IQR) Program outcome measures. 

Furthermore, we continue to consider 

options to address equity and disparities 

in our value-based purchasing 

programs. 

We plan to continue working with 

ASPE, the public, and other key 

stakeholders on this important issue to 

identify policy solutions that achieve 

the goals of attaining health equity for 

all beneficiaries and minimizing 

unintended consequences. 

Comment: Several commenters 

supported CMS’ continuing evaluation 

of how social risk factors could impact 

SNF QRP measure rates and encouraged 

CMS to consider strategies and solutions 

in this area. Specific comments noted 

that lack of adjustment for social risk 

factors may negatively impact facility 

measure rates, and CMS should 

incorporate risk adjustment for 

sociodemographic and socioeconomic 

status into appropriate SNF QRP 

measures. We also received comments 

about the public display of measure 

information related to social risk factors, 

suggesting stratified measures be used 

and expressing concerns that publicly 

reported outcome measures could be 

misleading to consumers. 

Response: We thank commenters for 

their comments and will take these 

comments into account as we further 

consider how to appropriately account 

for social risk factors in the SNF QRP. 

We also refer the reader to the FY 2018 

SNF PPS final rule (82 FR 36567 

through 36568) where we discussed in 

depth many of the issues raised by these 

commenters. 

3. New Measure Removal Factor for 

Previously Adopted SNF QRP Measures 

As a part of our Meaningful Measures 

Initiative discussed in section I.D. of 

this final rule, we strive to put patients 

first, ensuring that they, along with their 

clinicians, are empowered to make 

decisions about their own healthcare 

using data-driven information that is 

increasingly aligned with a 

parsimonious set of meaningful quality 

measures. We began reviewing the SNF 

QRP’s measures in accordance with the 

Meaningful Measures Initiative, and we 

are working to identify how to move the 

SNF QRP forward in the least 

burdensome manner possible while 

continuing to incentivize improvement 

in the quality of care provided to 

patients. 

Specifically, we believe the goals of 

the SNF QRP and the measures used in 

the program cover most of the 

Meaningful Measures Initiative 

priorities, including making care safer, 

strengthening person and family 

engagement, promoting coordination of 

care, promoting effective prevention and 

treatment, and making care affordable. 

We also evaluated the appropriateness 

and completeness of the SNF QRP’s 

current measure removal factors. We 

have previously finalized that we would 

use notice and comment rulemaking to 

remove measures from the SNF QRP 

based on the following factors 7

• Factor 1. Measure performance 

among SNFs is so high and unvarying 

that meaningful distinctions in 

improvements in performance can no 

longer be made. 

• Factor 2. Performance or 

improvement on a measure does not 

result in better resident outcomes. 

• Factor 3. A measure does not align 

with current clinical guidelines or 

practice. 

• Factor 4. A more broadly applicable 

measure (across settings, populations, or 

conditions) for the particular topic is 

available. 

• Factor 5. A measure that is more 

proximal in time to desired resident 

outcomes for the particular topic is 

available. 

• Factor 6. A measure that is more 

strongly associated with desired 

resident outcomes for the particular 

topic is available. 

• Factor 7. Collection or public 

reporting of a measure leads to negative 

unintended consequences other than 

resident harm. 

We continue to believe that these 

measure removal factors are appropriate 

for use in the SNF QRP. However, even 

if one or more of the measure removal 

factors applies, we may nonetheless 

choose to retain the measure for certain 

specified reasons. Examples of such 

instances could include when a 

particular measure addresses a gap in 

quality that is so significant that 

removing the measure could in turn 


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result in poor quality, or in the event 

that a given measure is statutorily 

required. We note further that, 

consistent with other quality reporting 

programs, we apply these factors on a 

case-by-case basis. 

In the FY 2019 SNF PPS proposed 

rule (83 FR 21082), we proposed to 

adopt an additional factor to consider 

when evaluating potential measures for 

removal from the SNF QRP measure set: 

• Factor 8. The costs associated with 

a measure outweigh the benefit of its 

continued use in the program. 

As we discussed in section I.D. of this 

final rule, with respect to our new 

Meaningful Measures Initiative, we are 

engaging in efforts to ensure that the 

SNF QRP measure set continues to 

promote improved health outcomes for 

beneficiaries while minimizing the 

overall costs associated with the 

program. We believe these costs are 

multifaceted and include not only the 

burden associated with reporting, but 

also the costs associated with 

implementing and maintaining the 

program. We have identified several 

different types of costs, including, but 

not limited to: (1) The provider and 

clinician information collection burden 

and burden associated with the 

submission/reporting of quality 

measures to CMS; (2) the provider and 

clinician cost associated with 

complying with other programmatic 

requirements; (3) the provider and 

clinician cost associated with 

participating in multiple quality 

programs, and tracking multiple similar 

or duplicative measures within or across 

those programs; (4) the cost to CMS 

associated with the program oversight of 

the measure including measure 

maintenance and public display; and (5) 

the provider and clinician cost 

associated with compliance with other 

federal and/or state regulations (if 

applicable). 

For example, it may be needlessly 

costly and/or of limited benefit to retain 

or maintain a measure which our 

analyses show no longer meaningfully 

supports program objectives (for 

example, informing beneficiary choice). 

It may also be costly for health care 

providers to track the confidential 

feedback, preview reports, and publicly 

reported information on a measure 

where we use the measure in more than 

one program. CMS may also have to 

expend unnecessary resources to 

maintain the specifications for the 

measure, as well as the tools we need to 

collect, validate, analyze, and publicly 

report the measure data. Furthermore, 

beneficiaries may find it confusing to 

see public reporting on the same 

measure in different programs. 

When these costs outweigh the 

evidence supporting the continued use 

of a measure in the SNF QRP, we 

believe it may be appropriate to remove 

the measure from the program. 

Although we recognize that one of the 

main goals of the SNF QRP is to 

improve beneficiary outcomes by 

incentivizing health care providers to 

focus on specific care issues and making 

data public related to those issues, we 

also recognize that those goals can have 

limited utility where, for example, the 

publicly reported data is of limited use 

because it cannot be easily interpreted 

by beneficiaries and used to influence 

their choice of providers. In these cases, 

removing the measure from the SNF 

QRP may better accommodate the costs 

of program administration and 

compliance without sacrificing 

improved health outcomes and 

beneficiary choice. 

We proposed that we would remove 

measures based on this factor on a caseby-case basis. We might, for example, 

decide to retain a measure that is 

burdensome for health care providers to 

report if we conclude that the benefit to 

beneficiaries justifies the reporting 

burden. Our goal is to move the program 

forward in the least burdensome manner 

possible, while maintaining a 

parsimonious set of meaningful quality 

measures and continuing to incentivize 

improvement in the quality of care 

provided to patients. 

We invited public comment on our 

proposal to adopt an additional measure 

removal Factor 8. The costs associated 

with a measure outweigh the benefit of 

its continued use in the program. 

We also proposed to add a new 

§ 413.360(b)(3) that would codify the 

removal factors we have previously 

finalized for the SNF QRP, as well as the 

new measure removal factor that we 

proposed to adopt in the proposed rule. 

We sought comments on these 

proposals. A discussion of these 

comments, along with our responses, 

appears below. 

Comment: Several commenters 

expressed support for an additional 

factor to consider when evaluating 

potential measures for removal from the 

SNF QRP measure set: Factor 8. The 

costs associated with a measure 

outweigh the benefit of its continued 

use in the program. One commenter 

acknowledged that removal of a 

measure from the program may be 

appropriate when the costs outweigh 

the evidence supporting its continued 

use. Another commenter supported the 

addition of the new measure removal 

factor because it reduces unnecessary 

administrative burden. 

Response: We appreciate the 

commenters’ support. 

Comment: One commenter supported 

CMS’ proposal to codify the proposed 

measure removal factor in the regulatory 

text. 

Response: We appreciate the 

commenter’s support. 

Comment: Some commenters 

expressed concerns related to the new 

measure removal factor. One commenter 

did not support the addition of the 

factor, suggesting that the costs and 

benefits considered under this factor are 

not equivalent, as costs are typically 

imposed on providers while benefits are 

rendered to beneficiaries. This 

commenter expressed the concern that 

providers may argue for removal of a 

measure that is costly to collect and 

report despite its benefits. Another 

commenter suggested that using 

administrative cost to CMS as a basis for 

removal may be problematic if 

clinicians or patients believe the 

measure is important. Another 

commenter added that the proposed 

measure removal factor is subjective and 

recommended clearer guidelines and 

criteria for determining the costs and 

benefits of a measure before it is 

removed. 

Response: We agree that it is possible 

that providers may recommend removal 

of measures they do not support based 

on the argument that these measures are 

costly to report. However, input from 

providers is only one element of our 

case-by-case analysis of measures that 

we would take into account when 

weighing the costs associated with a 

measure against the benefit of retaining 

the measure in a program. We will 

weigh input we receive from all 

stakeholders with our own analysis of 

each measure to make our case-by-case 

determination of whether it would be 

appropriate to remove a measure based 

on its costs outweighing the benefit of 

its continued use in the program. We 

wish to clarify that it is not our intent 

to remove measures that continue to 

benefit residents or providers solely 

because these measures incur 

administrative costs to CMS; this is only 

one example of costs that would be 

weighed against the benefits when 

considering each measure on a case-bycase basis. 

Regarding concern over the 

subjectivity of the new measure removal 

factor and the suggestion for clearer 

guidelines and criteria for determining 

the costs and benefits of a measure 

before it is removed, we intend to be 

transparent in our assessment of 

measures under this measure removal 

factor. As described above, there are 

various considerations of costs and 


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benefits, direct and indirect, financial 

and otherwise, that we will evaluate in 

applying removal Factor 8, and we will 

take into consideration the perspectives 

of multiple stakeholders. However, 

because we intend to evaluate each 

measure on a case-by-case basis, and 

each measure has been adopted to fill 

different needs in the SNF QRP, we do 

not believe it would be meaningful to 

identify a specific set of assessment 

criteria to apply to all measures. We 

believe costs include costs to 

stakeholders such as patients, 

caregivers, providers, CMS, and other 

entities. In addition, we note that the 

benefits we will consider center around 

benefits to residents and caregivers as 

the primary beneficiaries of our quality 

reporting program. When we propose 

through rulemaking to remove a 

measure under this measure removal 

factor, we will provide information on 

the costs and benefits we considered in 

evaluating the measure. 

Comment: One commenter noted that 

the existing seven removal factors are 

sufficient for appropriate measure 

evaluation. 

Response: While we acknowledge that 

there are seven factors currently 

adopted that may be used for 

considering measure removal from the 

SNF QRP, we believe the proposed new 

measure removal factor adds a new 

criterion that is not captured in the 

other seven factors. The proposed new 

measure removal factor will help 

advance the goals of the Meaningful 

Measures Initiative, which aims to 

improve outcomes for patients, their 

families, and health care providers 

while reducing burden and costs for 

clinicians and providers. We are also 

making minor grammatical edits to the 

SNF QRP measure removal factor 

language to align with the language of 

other CMS quality programs. 

After considering the comments, we 

are finalizing our proposal to add an 

additional measure removal factor: 

Factor 8. The costs associated with a 

measure outweigh the benefit of its 

continued use in the program. We are 

also finalizing our proposal to the 

updates to the regulatory text and to 

codify the seven removal factors we 

have previously finalized for the SNF 

QRP, as well as the new measure 

removal factor, Factor 8 at new 

§ 413.360(b)(3). We are also making 

minor grammatical edits to the SNF 

QRP measure removal factor language to 

align with the language of other CMS 

quality programs. 

4. Quality Measures Currently Adopted 

for the FY 2020 SNF QRP 

The SNF QRP currently has 12 

measures for the FY 2020 program year, 

which are outlined in Table 39. 

TABLE 39—QUALITY MEASURES CURRENTLY ADOPTED FOR THE FY 2020 SNF QRP 

Short name Measure name and data source 

Resident Assessment Instrument Minimum Data Set 

Pressure Ulcer ................................ Percent of Residents or Patients With Pressure Ulcers That Are New or Worsened (Short Stay) (NQF 

#0678).* 

Pressure Ulcer/Injury ...................... Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/Injury. 

Application of Falls .......................... Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF 

#0674). 

Application of Functional Assessment/Care Plan.Application of Percent of Long-Term Care Hospital (LTCH) Patients with an Admission and Discharge 

Functional Assessment and a Care Plan That Addresses Function (NQF #2631). 

Change in Mobility Score ................ Application of IRF Functional Outcome Measure: Change in Mobility Score for Medical Rehabilitation Patients (NQF #2634). 

Discharge Mobility Score ................ Application of IRF Functional Outcome Measure: Discharge Mobility Score for Medical Rehabilitation Patients (NQF #2636). 

Change in Self-Care Score ............. Application of the IRF Functional Outcome Measure: Change in Self-Care Score for Medical Rehabilitation 

Patients (NQF #2633). 

Discharge Self-Care Score ............. Application of IRF Functional Outcome Measure: Discharge Self-Care Score for Medical Rehabilitation Patients (NQF #2635). 

DRR ................................................ Drug Regimen Review Conducted With Follow-Up for Identified Issues—Post Acute Care (PAC) Skilled 

Nursing Facility (SNF) Quality Reporting Program (QRP). 

Claims-Based 

MSPB SNF ...................................... Medicare Spending Per Beneficiary (MSPB)—Post Acute Care (PAC) Skilled Nursing Facility (SNF) Quality 

Reporting Program (QRP). 

DTC ................................................. Discharge to Community—Post Acute Care (PAC) Skilled Nursing Facility (SNF) Quality Reporting Program (QRP). 

PPR ................................................. Potentially Preventable 30-Day Post-Discharge Readmission Measure for Skilled Nursing Facility (SNF) 

Quality Reporting Program (QRP). 

* The measure will be replaced with the Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/Injury measure, effective October 1, 2018. 

Comment: While we did not solicit 

comment on currently adopted or future 

measures for the SNF QRP, we received 

multiple comments suggesting the 

removal or modification of measures 

finalized in previous rules as well as 

recommendations for future measure 

development. 

Response: We thank commenters for 

their comments. We did not propose 

any changes to our previously finalized 

measures or to adopt any new measures 

for the SNF QRP. We will take these 

comments into consideration as we 

engage in future measure development 

and selection activities for the SNF 

QRP. The SNF QRP measures described 

in Table 39 were adopted in the FY 

2016 SNF PPS final rule (80 FR 46432 

through 46453), FY 2017 SNF PPS final 

rule (81 FR 52012 through 52039), or FY 

2018 SNF PPS final rule (82 FR 36570 

through 36594), and we refer the reader 

to those detailed discussions. 

5. IMPACT Act Implementation Update 

In the FY 2018 SNF PPS final rule (82 

FR 36596 through 36597), we stated that 

we intended to specify two measures 

that would satisfy the domain of 


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accurately communicating the existence 

and provision of the transfer of health 

information and care preferences under 

section 1899B(c)(1)(E) of the Act no later 

than October 1, 2018, and intended to 

propose to adopt them for the FY 2021 

SNF QRP, with data collection 

beginning on or about October 1, 2019. 

As stated in the FY 2019 SNF PPS 

proposed rule (83 FR 21083), as a result 

of the input provided during a public 

comment period between November 10, 

2016 and December 11, 2016, input 

provided by a technical expert panel 

(TEP), and pilot measure testing 

conducted in 2017, we are engaging in 

continued development work on these 

two measures, including supplementary 

measure testing and providing the 

public with an opportunity for comment 

in 2018. We stated that we would 

reconvene a TEP for these measures in 

mid-2018 which occurred in April 2018. 

We stated that we now intend to specify 

the measures under section 

1899B(c)(1)(E) of the Act no later than 

October 1, 2019 and intend to propose 

to adopt the measures for the FY 2022 

SNF QRP, with data collection 

beginning with residents admitted as 

well as discharged on or after October 

1, 2020. For more information on the 

pilot testing, we refer readers to https:// 

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/Post-Acute-Care-QualityInitiatives/IMPACT-Act-of-2014/

IMPACT-Act-Downloads-andVideos.html. 

Comment: A few commenters 

supported the delayed implementation 

of the measures. One commenter 

supported the continued evaluation and 

testing of the measures prior to 

adoption. The commenter believed that 

this delay is appropriate as it allows 

more time for thorough measure 

development, continued field testing of 

the measures, and public input on the 

draft measures. This commenter noted 

that continued development of the 

measures will help to ensure they are 

measuring the domain of interest and 

will have a meaningful impact on the 

quality of care. 

Response: We appreciate the 

commenters support. 

6. Form, Manner, and Timing of Data 

Submission Under the SNF QRP 

Under our current policy, SNFs report 

data on SNF QRP assessment-based 

measures and standardized resident 

assessment data by reporting the 

designated data elements for each 

applicable resident on the Minimum 

Data Set (MDS) resident assessment 

instrument and then submitting 

completed instruments to CMS using 

the Quality Improvement Evaluation 

System Assessment Submission and 

Processing (QIES ASAP) system. We 

refer readers to the FY 2018 SNF PPS 

final rule (82 FR 36601 through 36603) 

for the data collection and submission 

time frames for assessment-based 

measures and standardized resident 

assessment data that we finalized for the 

SNF QRP. 

7. Changes to the SNF QRP 

Reconsideration Requirements 

Section 413.360(d)(1) of our 

regulations states, in part, that SNFs that 

do not meet the SNF QRP requirements 

for a program year will receive a letter 

of non-compliance through the QIES 

ASAP system, as well as through the 

United States Postal Service. 

In the FY 2019 SNF PPS proposed 

rule (83 FR 21083), we proposed to 

revise § 413.360(d)(1) to expand the 

methods by which we would notify a 

SNF of non-compliance with the SNF 

QRP requirements for a program year. 

Revised § 413.360(d)(1) would state that 

we would notify SNFs of noncompliance with the SNF QRP 

requirements via a letter sent through at 

least one of the following notification 

methods: The QIES ASAP system; the 

United States Postal Service; or via an 

email from the Medicare Administrative 

Contractor (MAC). We believe that this 

change will address feedback from 

providers who requested additional 

methods for notification. 

In addition, § 413.360(d)(4) currently 

states that we will make a decision on 

the request for reconsideration and 

provide notice of the decision to the 

SNF through the QIES ASAP system 

and via letter sent through the United 

States Postal Service. 

We proposed to revise § 413.360(d)(4) 

to state that we will notify SNFs, in 

writing, of our final decision regarding 

any reconsideration request via a letter 

sent through at least one of the 

following notification methods: The 

QIES ASAP system, the United States 

Postal Service, or via an email from the 

Medicare Administrative Contractor 

(MAC). 

We invited public comments on these 

proposals. 

Comment: Several commenters 

expressed support for CMS’ efforts to 

expand the methods for notifying 

providers of non-compliance and 

decisions on reconsideration requests. 

One commenter acknowledged that the 

addition of email notifications from the 

Medicare Administrative Contractor 

(MAC) as a third notification method 

may help reduce burden, adding that 

providers should be notified via at least 

two of the three methods and that letters 

should require return receipt to ensure 

notifications are not lost in the mail. 

Another commenter recommended that 

CMS either specify a notification 

method that will always be used, allow 

providers to select a preferred method, 

or consistently use all three methods to 

ensure that notifications are received by 

appropriate organization leaders. 

Several commenters suggested that CMS 

provide additional information 

regarding how to specify appropriate 

recipients of email notifications from 

the Medicare Administrative Contractor 

(MAC). Another commenter 

recommended selecting a consistent 

notification process, using the same 

methods for all SNFs, noting that 

consistent and predictable notification 

will reduce provider burden and lower 

the risk of missing a notification. 

Response: We thank commenters for 

their support. We will use at least one 

method of notification, and providers 

will be notified regarding the specific 

method of communication that CMS 

will use via the SNF QRP 

Reconsideration and Exception and 

Extension website at https://

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/NursingHomeQualityInits/

Skilled-Nursing-Facility-QualityReporting-Program/SNF-QRReconsideration-and-Exception-andExtension.html and announcements via 

the PAC listserv. The announcements 

will be posted annually following the 

May 15th data submission deadline— 

prior to the distribution of the initial 

notices of non-compliance 

determination in late spring/early 

summer. Messaging will include the 

method of communication for the 

notices, instructions for sending a 

reconsideration request, and the final 

deadline for submitting the request. 

This policy would be effective October 

1, 2018. 

With regard to the comment about 

specifying the recipient of notification 

for a facility, our notifications are sent 

to the point of contact on file in the 

QIES database. This information is 

populated via ASPEN. It is the 

responsibility of the facility to ensure 

that this information is up-to-date. For 

information regarding how to update 

provider information in QIES, we refer 

providers to contact their Medicare 

Administrative Contractor or CMS 

Regional Office at https://www.cms.gov/ 

About-CMS/Agency-Information/

RegionalOffices/index.html. Downloads 

of contact information for each Regional 

Office are available at the bottom of the 

web page. 

We disagree with the 

recommendation that CMS notify all 


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SNFs using the same method in order to 

account for circumstances that are 

beyond our control, such as technical 

issues that may impede the delivery of 

electronic notifications. As discussed, 

providers will be notified in advance of 

the specific method of communication 

that CMS will use. 

We are finalizing our proposal to 

revise § 413.360(d)(1) to state that we 

will notify a SNF of non-compliance 

with the SNF QRP requirements for a 

program year via a letter sent through at 

least one of the following notification 

methods: The QIES ASAP system; the 

United States Postal Service; or via an 

email from the Medicare Administrative 

Contractor (MAC). 

We are also finalizing our proposal, to 

revise § 413.360(d)(4) to state that we 

will notify SNFs, in writing, of our final 

decision regarding any reconsideration 

request via a letter sent through at least 

one of the following notification 

methods: The QIES ASAP system, the 

United States Postal Service, or via an 

email from the Medicare Administrative 

Contractor (MAC). 

8. Policies Regarding Public Display for 

the SNF QRP 

Section 1899B(g) of the Act requires 

the Secretary to establish procedures for 

the public reporting of SNFs’ 

performance on measures under 

sections 1899B(c)(1) and 1899B(d)(1) of 

the Act. SNF QRP measure data will be 

displayed on the Nursing Home 

Compare website, an interactive web 

tool that assists individuals by 

providing information on SNF quality of 

care to those who need to select a SNF. 

In the FY 2018 SNF PPS final rule (82 

FR 36606 through 36607), we finalized 

that we would publicly display the 

Medicare Spending Per Beneficiary-PAC 

SNF QRP and Discharge to CommunityPAC SNF QRP measures in calendar 

year 2018 based on discharges from 

October 1, 2016 through September 30, 

2017. In the FY 2019 SNF PPS proposed 

rule (83 FR 21084), we proposed to 

increase the number of years of data 

used to calculate the Medicare Spending 

Per Beneficiary-PAC SNF QRP and 

Discharge to Community-PAC SNF QRP 

measures for purposes of display from 1 

year to 2 years. Under this proposal, 

data on these measures would be 

publicly reported in CY 2019, or as soon 

thereafter as operationally feasible, 

based on discharges from October 1, 

2016 through September 30, 2018. 

Increasing the measure calculation 

and public display periods from 1 to 2 

years of data increases the number of 

SNFs with enough data adequate for 

public reporting for the Medicare 

Spending Per Beneficiary-PAC SNF QRP 

measure from 86 percent (based on 2016 

Medicare FFS claims data) to 95 percent 

(based on 2015 through 2016 Medicare 

FFS claims data), and for the Discharge 

to Community-PAC SNF QRP measure 

from 83 percent (based on 2016 

Medicare FFS claims data) to 94 percent 

(based on 2015 through 2016 Medicare 

FFS claims data). Increasing measure 

public display periods to 2 years also 

aligns with the public display periods of 

these measures in the IRF QRP and 

LTCH QRP. 

We also proposed to begin publicly 

displaying data in CY 2020, or as soon 

thereafter as is operationally feasible, on 

the following four assessment-based 

measures: (1) Application of IRF 

Functional Outcome Measure: Change 

in Self-Care Score for Medical 

Rehabilitation Patients (NQF #2633) 

(Change in Self-Care Score); (2) 

Application of IRF Functional Outcome 

Measure: Change in Mobility Score for 

Medical Rehabilitation Patients (NQF 

#2634) (Change in Mobility Score); (3) 

Application of IRF Functional Outcome 

Measure: Discharge Self-Care Score for 

Medical Rehabilitation Patients (NQF 

#2635) (Discharge Self-Care Score); and 

(4) Application of IRF Functional 

Outcome Measure: Discharge Mobility 

Score for Medical Rehabilitation 

Patients (NQF #2636) (Discharge 

Mobility Score). SNFs are required to 

submit data on these four assessmentbased measures with respect to 

admissions as well as discharges 

occurring on or after October 1, 2018. 

We proposed to display data for these 

assessment-based measures based on 4 

rolling quarters of data, initially using 4 

quarters of discharges from January 1, 

2019 through December 31, 2019. To 

ensure the statistical reliability of the 

measure rates for these four assessmentbased measures, we also proposed that 

if a SNF has fewer than 20 eligible cases 

during any 4 consecutive rolling 

quarters of data that we are displaying 

for any of these measures, then we 

would note in our public display of that 

measure that with respect to that SNF, 

the number of cases/resident stays is too 

small to publicly report. 

Comment: One commenter supported 

the proposal to publicly display the four 

SNF functional outcome measures on 

the SNF Compare website in CY 2020. 

Response: We thank the commenter 

for the support. 

Comment: Several commenters, 

including MedPAC, supported 

increasing the number of years of data 

used to calculate the Medicare Spending 

per Beneficiary-PAC SNF QRP and 

Discharge to Community-PAC SNF QRP 

measures from 1 year to 2 years to 

increase the number of providers that 

can be included in public reporting and 

also to align the measurement period 

with that used in other PAC settings. 

One commenter was concerned that 

increasing the measurement period to 2 

years would penalize facilities that 

showed improvement in a one-year 

period, as the data would be aggregated 

across 2 years. Two commenters agreed 

with increasing the measurement period 

from 1 to 2 years but questioned the 

usefulness of a measure that they stated 

required a significant adjustment in 

collection methods to acquire data 

necessary to calculate a rate. 

Response: We thank MedPAC and the 

other commenters for their support to 

increase the number of years of data 

used to calculate the Medicare Spending 

per Beneficiary-PAC SNF QRP measure 

and Discharge to Community-PAC SNF 

QRP measure from 1 to 2 years. We 

appreciate the commenter’s concern 

about the impact of aggregating data 

across 2 years on the ability to 

demonstrate improvement in a 1-year 

period; however, we believe that the 

benefit of increasing the number of 

SNFs in public reporting outweighs the 

expressed concern associated with 

increasing the measurement period to 2 

years because it would provide more 

information to consumers who may 

have a limited number of SNFs in their 

area. Further, improvements in 1-year 

period will be included in the 2-year 

data, so providers’ efforts to improve 

can still be reflected in their measure 

scores. The proposed change will also 

align with the measurement period of 

the three claims-based measures 

(Medicare Spending per Beneficiary, 

Discharge to Community, and 

Potentially Preventable Readmissions) 

across the IRF, LTCH, and SNF QRPs. 

Comment: MedPAC suggested that if 

CMS increases the measurement period 

for the Medicare Spending per 

Beneficiary PAC SNF QRP measure and 

Discharge to Community PAC SNF QRP 

measure to 2 years, CMS could consider 

giving more weight to the most recent 

performance year. MedPAC also 

suggested that CMS reconsider the 

approach to establishing minimum 

counts of episodes for public reporting 

of the Medicare Spending per 

Beneficiary-PAC SNF QRP measure to 

ensure accurate representation of a 

provider’s performance. 

Response: We thank MedPAC for its 

suggestion to consider greater weighting 

of the most recent year of data and to 

reconsider the approach to establishing 

minimum counts of episodes for public 

reporting. We will consider testing these 

suggestions in the future. 

Comment: A commenter noted the 

importance of understanding the 


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relationship between the Medicare 

Spending per Beneficiary-PAC SNF QRP 

measure, quality, and beneficiary out-ofpocket expenses. The commenter also 

noted the importance of educating 

consumers on this measure. The 

commenter suggested that CMS analyze 

these relationships further and define a 

strategy for interpreting the results 

before making the measure results 

public. Another commenter noted that 

facilities should not be penalized for 

decisions made by physicians that are 

beyond providers’ control. 

Response: We thank the commenters 

for the suggestions for additional 

analyses on the relationship between 

the Medicare Spending per BeneficiaryPAC SNF QRP measure, quality, and 

out-of-pocket spending. We will 

consider analyses on these topics in the 

future. Regarding beneficiary education 

for interpreting results, we will continue 

to work to develop language to support 

beneficiary understanding of the 

measures in public reporting. Regarding 

the comment on facility penalty for 

physician decision-making, the measure 

is intended to promote care 

coordination and improve efficiency by 

creating a continuum of accountability 

between Medicare providers. 

Comment: Some commenters 

suggested that the public reporting of 

the SNF functional outcome measures: 

(1) Change in Self-Care Score; (2) 

Change in Mobility Score; (3) Discharge 

Self-Care Score; and (4) Discharge 

Mobility Score, on the SNF Compare 

website be delayed beyond CY 2020. 

One commenter suggested that the 

reporting be delayed until additional 

measures that address the maintenance 

of functional abilities are also developed 

and reported alongside the functional 

improvement measures and also 

encouraged the development of 

measures related to other nursing goals. 

Other commenters suggested that CMS 

reconsider publicly reporting the SNF 

functional quality measures in CY 2020 

if these measures do not receive NQF 

endorsement prior to public display. 

Response: We thank the commenters 

for their suggestions. We addressed the 

importance of measuring functional 

maintenance for SNF residents in the 

FY 2018 SNF PPS final rule (82 FR 

36588). We interpret the commenter’s 

recommendation of ‘‘at least one 

nursing goals measure’’ to refer to the 

development of new measures relating 

to functional status for SNF residents. 

We support future quality measurement 

work that will address the development 

of other measures that focus on 

maintaining function and the slowing of 

functional decline. We agree that the 

NQF endorsement process is an 

important part of measure development. 

The four functional outcome quality 

measures that we proposed to publicly 

report are NQF-endorsed for the IRF 

setting, and we plan to submit these 

four assessment-based measures to NQF 

for endorsement consideration in the 

SNF setting as soon as feasible. 

After consideration of public 

comments we received, we are 

finalizing our proposal, to increase the 

number of years of data used to 

calculate the Medicare Spending per 

Beneficiary-PAC SNF QRP measure and 

Discharge to Community-PAC SNF QRP 

measure for purposes of public display 

from 1 to 2 years, starting in CY 2019 

or as soon thereafter as operationally 

feasible. We are also finalizing our 

proposal to begin publicly displaying 

data in CY 2020, or as soon thereafter 

as is operationally feasible, on the 

following four assessment-based 

measures: (1) Application of IRF 

Functional Outcome Measure: Change 

in Self-Care Score for Medical 

Rehabilitation Patients (NQF #2633); (2) 

Application of IRF Functional Outcome 

Measure: Change in Mobility Score for 

Medical Rehabilitation Patients (NQF 

#2634); (3) Application of IRF 

Functional Outcome Measure: Discharge 

Self-Care Score for Medical 

Rehabilitation Patients (NQF #2635); 

and (4) Application of IRF Functional 

Outcome Measure: Discharge Mobility 

Score for Medical Rehabilitation 

Patients (NQF #2636). 

C. Skilled Nursing Facility Value-Based 

Purchasing Program (SNF VBP) 

1. Background 

Section 215(b) of the Protecting 

Access to Medicare Act of 2014 (PAMA) 

(Pub. L. 113–93) authorized the SNF 

VBP Program (the ‘‘Program’’) by adding 

section 1888(h) to the Act. As a 

prerequisite to implementing the SNF 

VBP Program, in the FY 2016 SNF PPS 

final rule (80 FR 46409 through 46426), 

we adopted an all-cause, all-condition 

hospital readmission measure, as 

required by section 1888(g)(1) of the 

Act. In the FY 2017 SNF PPS final rule 

(81 FR 51986 through 52009), we 

adopted an all-condition, risk-adjusted 

potentially preventable hospital 

readmission measure for SNFs, as 

required by section 1888(g)(2) of the 

Act. In the FY 2018 SNF PPS final rule 

(82 FR 36608 through 36623), we 

adopted additional policies for the 

Program, including an exchange 

function methodology for disbursing 

value-based incentive payments. 

Section 1888(h)(1)(B) of the Act 

requires that the SNF VBP Program 

apply to payments for services 

furnished on or after October 1, 2018. 

The SNF VBP Program applies to 

freestanding SNFs, SNFs affiliated with 

acute care facilities, and all non-CAH 

swing-bed rural hospitals. We believe 

the implementation of the SNF VBP 

Program is an important step towards 

transforming how care is paid for, 

moving increasingly towards rewarding 

better value, outcomes, and innovations 

instead of merely rewarding volume. 

For additional background 

information on the SNF VBP Program, 

including an overview of the SNF VBP 

Report to Congress and a summary of 

the Program’s statutory requirements, 

we refer readers to the FY 2016 SNF 

PPS final rule (80 FR 46409 through 

46410). We also refer readers to the FY 

2017 SNF PPS final rule (81 FR 51986 

through 52009) for discussion of the 

policies that we adopted related to the 

potentially preventable hospital 

readmission measure, scoring, and other 

topics. Finally, we refer readers to the 

FY 2018 SNF PPS final rule (82 FR 

36608 through 36623) for discussions of 

the policies that we adopted related to 

value-based incentive payments, the 

exchange function, and other topics. 

We proposed additional requirements 

for the FY 2021 SNF VBP Program in 

the FY 2019 SNF PPS proposed rule (83 

FR 21084 through 21089). We received 

several general comments on the SNF 

VBP Program. 

Comment: One commenter supported 

our goal of reducing preventable 

hospital readmissions, noting that those 

readmissions increase costs for the 

Medicare program, significantly affect 

beneficiaries, and increase the 

likelihood of medical errors related to 

care coordination. 

Response: We thank the commenter 

for this support. 

Comment: A commenter suggested 

that we consider developing an 

integrated approach that provides 

incentives to SNFs to accept more 

medically complex patients and 

promotes readmission prevention. The 

commenter suggested that, while the 

PDPM and SNF VBP Programs are 

authorized separately, integrating them 

might be helpful to that end, and could 

include payments for telemedicine, 

post-discharge care coordination, and 

training on readmission prevention 

protocols and refinements to Interrupted 

Stay policies. The commenter stated 

that readmissions prevention strategies 

can be very effective at saving Medicare 

spending and improving the patient 

experience, but can also require initial 

investments in technology and staff 

training. 

Response: We agree that readmission 

prevention strategies can be effective at 


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8Available at http://www.qualityforum.org/

Publications/2016/02/MAP_2016_Considerations_

for_Implementing_Measures_in_Federal_Programs_

-_PAC-LTC.aspx. 

saving Medicare spending and 

improving the patient experience. At 

this time, we do not believe it is 

possible to integrate the PDPM and SNF 

VBP Program given their separate 

authorities and purposes. However, we 

will continue to monitor the effects of 

the SNF VBP Program and the case-mix 

classification methodology in the SNF 

prospective payment system, including 

the PDPM. 

Comment: One commenter 

encouraged us to make public as much 

SNF VBP data as possible on Nursing 

Home Compare and data.medicare.gov, 

including individual facilities’ baseline 

and performance period readmissions 

rates, achievement and improvement 

points, performance scores, rankings, 

and value-based incentive payment 

percentages. The commenter noted that 

CMS has provided most of this type of 

information for other programs, and that 

the public should expect the same level 

of transparency from SNF VBP. 

Response: We agree with the 

comment and intend to be as 

transparent as possible in order to 

inform consumer decision-making, 

quality improvement initiatives, and 

high quality patient care. As required by 

section 1888(h)(9) of the Act, we will 

publish facility performance 

information, including SNF 

performance scores and rankings, the 

range of SNF performance scores, the 

number of SNFs receiving value-based 

incentive payments, and the range and 

total amounts of those payments, on the 

Nursing Home Compare website. 

Comment: One commenter requested 

that we ensure that specialty 

populations such as children, patients 

with HIV/AIDS, ventilator-dependent 

patients, and those with Huntington’s 

disease or other neurodegenerative 

disorders, do not experience unintended 

negative results based on the SNF VBP 

Program’s incentives. 

Response: We monitor numerous 

aspects of the SNF VBP Program, 

including trends in measure rates, SNF 

performance scores, and starting with 

FY 2019, value-based incentive payment 

percentages and their effects on SNFs’ 

care quality and on beneficiaries’ access 

to care. We understand the commenter’s 

concerns about specialty patient 

populations, and we will continue 

working to ensure that such populations 

do not experience unintended 

consequences because of the SNF VBP 

Program. 

2. Measures 

For background on the measures we 

have adopted for the SNF VBP Program, 

we refer readers to the FY 2016 SNF 

PPS final rule (80 FR 46419), where we 

finalized the Skilled Nursing Facility 

30-Day All-Cause Readmission Measure 

(SNFRM) (NQF #2510) that we are 

currently using for the SNF VBP 

Program. We also refer readers to the FY 

2017 SNF PPS final rule (81 FR 51987 

through 51995), where we finalized the 

Skilled Nursing Facility 30-Day 

Potentially Preventable Readmission 

Measure (SNFPPR) that we will use for 

the SNF VBP Program instead of the 

SNFRM as soon as practicable, as 

required by statute. 

We did not propose any changes to 

the Program’s measures. However, we 

received several comments on the 

Program’s measures. 

Comment: One commenter requested 

that we announce when we will 

transition the SNF VBP Program to a 

measure of potentially preventable 

readmissions rather than the current allcause readmissions measure. One 

commenter recommended that we not 

replace the SNFRM with the SNFPPR 

before FY 2021 to allow SNFs time to 

adjust to the SNFRM and other 

measures of readmissions. Another 

commenter encouraged us to transition 

the Program to the measure of 

potentially preventable readmissions, 

stating that the PPR will exclude 

planned readmissions that are not 

considered a negative outcome, and 

therefore, should not be counted against 

SNFs. Other commenters urged us to 

seek NQF endorsement and input from 

the Measure Applications Partnership as 

soon as possible on the SNFPPR, and 

requested that we provide a timeline for 

when we will replace the all-cause 

measure with the SNFPPR. Another 

commenter requested that we consider 

standardizing and consolidating various 

SNF hospitalization measures used in 

Medicare to focus SNFs’ quality 

improvement efforts. The commenter 

noted that state initiatives may also 

have similar measures based on 

different data, and that the multitude of 

hospitalization measures may be 

confusing for consumers and may dilute 

provider improvement efforts. 

Response: We sought input from the 

MAP on the SNFPPR prior to proposing 

it for adoption in the SNF VBP. The 

MAP published its views in a February 

2016 report, as we described in the FY 

2017 SNF PPS final rule (81 FR 51989 

through 51990). In that report,8 MAP 

noted the statutory requirement that we 

specify a measure of potentially 

preventable readmissions for the SNF 

VBP Program, and explained support for 

the importance of the measure and its 

acknowledgement that ‘‘readmission for 

the SNF setting is not an occasional 

occurrence.’’ MAP’s report also noted 

public commenters’ input, including 

general support for the recommendation 

to ‘‘encourage continued development’’ 

of the SNFPPR and some concerns about 

the measure’s specifications and MAP’s 

making a recommendation on a measure 

that is not fully tested. Regarding 

submission of the SNFPPR for 

consensus endorsement, we currently 

plan to submit the measure for NQF 

endorsement in 2019 upon completion 

of additional testing. We plan to 

propose transitioning to this measure 

after the completion of the endorsement 

process. 

We also acknowledge the 

commenter’s concern about the number 

of hospitalization measures in Medicare 

and in other quality programs, including 

those used by the states. We will 

consider how we might further 

streamline our quality programs, 

particularly under the Meaningful 

Measures Initiative. However, we note 

that all rehospitalization measures share 

the same underlying care focus—that is, 

avoiding rehospitalizations—even if 

they vary somewhat in the specifics of 

which hospitalizations they measure. 

We continue to believe that SNFs 

working to improve care quality and 

minimize rehospitalizations for their 

patients will perform well on 

hospitalization measures. 

We continue to determine when it is 

practicable to transition the Program to 

the measure of potentially preventable 

readmissions, and we will propose that 

transition in future rulemaking, which 

we believe will provide sufficient notice 

to SNFs about the quality measure that 

will form the basis for the SNF VBP 

Program. We intend to take all of the 

views expressed by public commenters 

into account when we make that 

decision, as well as the operational 

necessities of the Program (such as the 

time needed to calculate measure rates 

on the SNFPPR and how that time 

interacts with the Program’s 

performance and baseline periods). 

However, we would like to clarify that 

the SNFRM currently excludes certain 

planned readmissions. 

Comment: One commenter stated that 

the SNF VBP Program should consist of 

more than just one hospital 

readmissions measure, and encouraged 

us to work with Congress to include 

additional measures in the Program, 

potentially including those currently 

displayed on Nursing Home Compare, 

were part of the SNF VBP 

demonstration, or are part of the SNF 

QRP. The commenter also specifically 


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9See, for example United States Department of 

Health and Human Services. ‘‘Healthy People 2020: 

Disparities. 2014.’’ Available at http://

www.healthypeople.gov/2020/about/foundationhealth-measures/Disparities; or National Academies 

of Sciences, Engineering, and Medicine. Accounting 

for Social Risk Factors in Medicare Payment: 

Identifying Social Risk Factors. Washington, DC: 

National Academies of Sciences, Engineering, and 

Medicine 2016. 

10 Department of Health and Human Services 

Office of the Assistant Secretary for Planning and 

Evaluation (ASPE), ‘‘Report to Congress: Social Risk 

Factors and Performance Under Medicare’s ValueBased Purchasing Programs.’’ December 2016. 

Available at https://aspe.hhs.gov/pdf-report/reportcongress-social-risk-factors-and-performanceunder-medicares-value-based-purchasingprograms. 

11Available at http://www.qualityforum.org/SES_

Trial_Period.aspx. 

12Available at http://www.qualityforum.org/

WorkArea/linkit.aspx?LinkIdentifier=id& 

ItemID=86357. 

suggested measures including turnover 

as a percentage of nursing staff, total 

CNA hours per patient day, and total 

licensed nursing hours per patient day, 

noting that higher staffing levels are 

correlated with higher quality of care 

outcomes. 

Response: We thank the commenter 

for these suggestions. As the commenter 

noted, any changes to expand the SNF 

VBP Program’s measure set would 

require Congressional action. 

Comment: One commenter expressed 

concern about the data elements that 

SNFs must document to track their 

performance on the SNFRM, noting that 

they are different than those used for the 

CMS Star Ratings. The commenter also 

urged us to better align the measures 

between the SNF QRP and SNF VBP 

Programs, stating that SNFs want 

harmonization in what they are required 

to collect, document, and extract for 

performance tracking and improvement 

purposes. 

Response: SNFs may choose to track 

readmissions to the hospitals as part of 

their quality improvement efforts, and 

we note that the measures that we have 

specified for the SNF VBP program 

impose no data collection requirements 

on SNFs. Additionally, while we 

understand the potential benefits of 

quality measure alignment between the 

SNF QRP and SNF VBP Programs, we 

do not believe that this type of 

alignment meets the SNF VBP Program’s 

needs at this time. While we generally 

agree that aligning measures across 

programs is ideal, we hesitate to do so 

when it is inappropriate to the programs 

and does not align with statutory 

direction. In this case, aligning with the 

SNF QRP readmission measure would 

require the SNF VBP Program to ignore 

readmissions that occur during the SNF 

stay, and we believe this is 

inappropriate to a value-based 

purchasing program intended to reduce 

readmissions among SNF patients in 

accordance with the statute. Likewise, 

the SNF QRP readmission measure must 

follow a statutory requirement to align 

with readmission measures in other 

post-acute QRPs that are not compatible 

with the needs of the SNF VBP program. 

We thank the commenters for their 

feedback on SNF VBP measures. 

a. Accounting for Social Risk Factors in 

the SNF VBP Program 

In the FY 2018 SNF PPS final rule (82 

FR 36611 through 36613), we discussed 

the importance of improving beneficiary 

outcomes including reducing health 

disparities. We also discussed our 

commitment to ensuring that medically 

complex patients, as well as those with 

social risk factors, receive excellent 

care. We discussed how studies show 

that social risk factors, such as being 

near or below the poverty level as 

determined by HHS, belonging to a 

racial or ethnic minority group, or living 

with a disability, can be associated with 

poor health outcomes and how some of 

this disparity is related to the quality of 

health care.9 Among our core objectives, 

we aim to improve health outcomes, 

attain health equity for all beneficiaries, 

and ensure that complex patients, as 

well as those with social risk factors, 

receive excellent care. Within this 

context, reports by the Office of the 

Assistant Secretary for Planning and 

Evaluation (ASPE) and the National 

Academy of Medicine have examined 

the influence of social risk factors in our 

value-based purchasing programs.10 As 

we noted in the FY 2018 SNF PPS final 

rule (82 FR 36611), ASPE’s report to 

Congress found that, in the context of 

value-based purchasing programs, dual 

eligibility for Medicare and Medicaid 

was the most powerful predictor of poor 

health care outcomes among those 

social risk factors that they examined 

and tested. In addition, as noted in the 

FY 2018 SNF PPS final rule, the 

National Quality Forum (NQF) 

undertook a 2-year trial period in which 

certain new measures and measures 

undergoing maintenance review have 

been assessed to determine if risk 

adjustment for social risk factors is 

appropriate for these measures.11 The 

trial period ended in April 2017 and a 

final report is available at http://

www.qualityforum.org/SES_Trial_

Period.aspx. The trial concluded that 

‘‘measures with a conceptual basis for 

adjustment generally did not 

demonstrate an empirical relationship’’ 

between social risk factors and the 

outcomes measured. This discrepancy 

may be explained in part by the 

methods used for adjustment and the 

limited availability of robust data on 

social risk factors. NQF has extended 

the socioeconomic status (SES) trial,12

allowing further examination of social 

risk factors in outcome measures. 

In the FY 2018/CY 2018 proposed 

rules for our quality reporting and 

value-based purchasing programs, we 

solicited feedback on which social risk 

factors provide the most valuable 

information to stakeholders and the 

methodology for illuminating 

differences in outcomes rates among 

patient groups within a provider that 

would also allow for a comparison of 

those differences, or disparities, across 

providers. Feedback we received across 

our quality reporting programs included 

encouraging CMS to explore whether 

factors could be used to stratify or risk 

adjust the measures (beyond dual 

eligibility); to consider the full range of 

differences in patient backgrounds that 

might affect outcomes; to explore risk 

adjustment approaches; and to offer 

careful consideration of what type of 

information display would be most 

useful to the public. 

We also sought public comment on 

confidential reporting and future public 

reporting of some of our measures 

stratified by patient dual eligibility. In 

general, commenters noted that 

stratified measures could serve as tools 

for hospitals to identify gaps in 

outcomes for different groups of 

patients, improve the quality of health 

care for all patients, and empower 

consumers to make informed decisions 

about health care. Commenters 

encouraged us to stratify measures by 

other social risk factors such as age, 

income, and educational attainment. 

With regard to value-based purchasing 

programs, commenters also cautioned 

CMS to balance fair and equitable 

payment while avoiding payment 

penalties that mask health disparities, or 

discouraging the provision of care to 

more medically complex patients. 

Commenters also noted that value-based 

payment program measure selection, 

domain weighting, performance scoring, 

and payment methodology must 

account for social risk. 

We stated in the FY 2019 SNF VBP 

PPS proposed rule that as a next step, 

we are considering options to improve 

health disparities among patient groups 

within and across hospitals, SNFs, and 

other health care providers by 

increasing the transparency of 

disparities as shown by quality 

measures. We also stated that we are 

considering how this work applies to 

other CMS quality programs in the 

future. We refer readers to the FY 2018 


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IPPS/LTCH PPS final rule (82 FR 38403 

through 38409) for more details, where 

we discuss the potential stratification of 

certain Hospital Inpatient Quality 

Reporting Program outcome measures. 

Furthermore, we stated that we continue 

to consider options to address equity 

and disparities in our value-based 

purchasing programs. 

We plan to continue working with 

ASPE, the public, and other key 

stakeholders on this important issue to 

identify policy solutions that achieve 

the goals of attaining health equity for 

all beneficiaries and minimizing 

unintended consequences. 

We received several comments on our 

discussion of social risk factors. 

Comment: One commenter suggested 

that we consider adjusting for social risk 

factors through peer grouping to avoid 

masking disparities in clinical 

performance. The commenter also 

suggested that we target technical 

assistance resources to low-performing 

providers and support research to 

reduce measurement bias. Another 

commenter was concerned that we had 

not yet adjusted the SNF Readmission 

Measure based on socioeconomic 

factors. The commenter expressed 

concern that we would score SNFs 

unfairly due to more challenging case 

mixes, and stated that we must adjust 

readmission scores to avoid unfair 

payment penalties for those SNFs 

serving patient populations with lower 

socioeconomic status. One commenter 

acknowledged that we are required by 

statute to adopt a measure of all-cause 

readmissions, but expressed concerns 

about the SNFRM due to its lack of risk 

adjustment for socioeconomic status, its 

lacking focus on preventable 

readmissions, and some design 

elements. The commenter encouraged 

us to create a socioeconomic status risk 

adjustment for this measure, noting that 

SNFs in underserved areas 

predominantly caring for low-income, 

dual-eligible residents may be penalized 

by measures of all-cause readmissions. 

Another commenter urged us to include 

risk adjustment for socioeconomic 

status for any readmission measures 

adopted under the SNF VBP Program. 

The commenter concurred with the 

December 2016 Report to Congress on 

Social Risk Factors’ conclusion that 

social risk factors are essential 

determinants of health and stated that 

the IMPACT Act provides CMS with a 

wealth of patient-specific data that it 

can use to develop additional risk 

adjustment policies. The commenter 

encouraged us to use those data to 

adjust SNF VBP measures and provide 

incentives to SNFs caring for patients 

with social risk factors. 

Response: We thank the commenters 

for these suggestions and will take them 

into account as we develop additional 

policies on social risk factors in the 

future. However, in response to the 

commenter who expressed concern 

about the current SNF Readmission 

Measure, we note that the SNF 

Readmission Measure includes the 

following case-mix adjustments that we 

believe promote fairness in the 

application of financial penalties: 

Demographic characteristics (age and 

sex), principal diagnosis from the 

Medicare claim corresponding to the 

prior proximal hospitalization as 

categorized by AHRQ’s Clinical 

Classification Software (CCS) groupings, 

length of stay during the patient’s prior 

proximal hospitalization, length of stay 

in the intensive care unit (ICU), endstage renal disease (ESRD) status, the 

patient’s disability status, the number of 

prior hospitalizations in the previous 

365 days, system-specific surgical 

indicators, individual comorbidities as 

grouped by Hierarchical Condition 

Categories (HCCs) or other comorbidity 

indices, and a variable counting the 

number of comorbidities if the patient 

had more than two HCCs. We refer 

readers to the FY 2016 SNF PPS final 

rule (80 FR 46411 through 46419) for 

additional technical details on the 

SNFRM. 

Comment: One commenter 

encouraged us to continue using 

findings from the NQF 

Sociodemographic Status trial to inform 

our efforts to address equity and 

disparities in our VBP Programs, but 

recommended that we not add SES 

covariates to the SNFRM risk 

adjustment model as that action may 

create biases in reporting, undermine 

system-based approaches to providing 

high quality care, and create access to 

care problems. 

Response: We remain concerned 

about the possibility that additional risk 

adjustment may mask important 

performance differences for providers 

and suppliers that treat patients with 

additional comorbidities or 

complications, and we will continue 

studying the issue. We intend to 

monitor NQF’s ongoing work on this 

topic carefully. 

Comment: One commenter agreed 

with recommendations to incorporate 

social risk factors in risk adjustment, but 

was not sure about which risk 

characteristics are available in the 

Medicare eligibility files and whether 

those characteristics have been 

evaluated independently. The 

commenter also suggested that we 

coordinate research efforts with states 

that may already be conducting work in 

this area. One commenter urged us to 

incorporate risk adjustment for 

sociodemographic and socioeconomic 

status into SNF VBP measures, but 

expressed support for the continued use 

of unadjusted data for measures related 

to items that are within the SNF’s 

control. The commenter urged us to 

make unadjusted performance measure 

data available to the public to ensure 

that analysis of health care disparities 

can continue, and until risk-adjusted 

measures are available, to report 

stratified measure rates to the public. 

The commenter also expressed support 

for alternative payment mechanisms 

that account for the complexities of 

extremely disadvantaged patients, and 

called on us to monitor the effects of our 

quality improvement programs 

carefully. Another commenter 

supported our continued evaluation of 

social determinants of health, including 

providers’ commitments to caring for 

the Medicaid population, and their 

impact on our payment systems. The 

commenter encouraged us to ensure that 

our payment methodologies are updated 

consistently to account for these factors 

and maintain equitable access to care. 

Response: We intend to continue 

working with states and other 

stakeholders to the greatest extent 

possible to understand the challenges 

associated with additional risk 

adjustment for socioeconomic and 

sociodemographic status in quality 

measurement programs, including 

assessing the appropriateness of 

incorporating specific risk factors in the 

risk adjustment models. That work 

includes identifying appropriate data 

sources for social risk factors, and we 

will consider the commenter’s point 

about the Medicare eligibility files as a 

potential data source. 

We agree with the commenters that 

studying health care disparities is 

critically important for the health care 

system, and we will continue to do so. 

We will also take that point under 

consideration as we consider social risk 

factors adjustment policies for the SNF 

VBP Program in the future. We will 

continue monitoring the SNF VBP 

Program to ensure that Medicare 

beneficiaries maintain access to needed 

SNF care. 

We thank the commenters for this 

feedback, and will take it account as we 

consider the appropriateness of 

accounting for social risk factors in the 

SNF VBP Program. 

3. Performance Standards 

a. FY 2021 Performance Standards 

We refer readers to the FY 2017 SNF 

PPS final rule (81 FR 51995 through 


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51998) for a summary of the statutory 

provisions governing performance 

standards under the SNF VBP Program 

and our finalized performance standards 

policy, as well as the numerical values 

for the achievement threshold and 

benchmark for the FY 2019 program 

year. We also responded to public 

comments on these policies in that final 

rule. 

We published the final numerical 

values for the FY 2020 performance 

standards in the FY 2018 SNF PPS final 

rule (82 FR 36613), and for reference, 

we are displaying those values again in 

Table 40. 

TABLE 40—FINAL FY 2020 SNF VBP PROGRAM PERFORMANCE STANDARDS

Measure ID Measure description Achievement 

threshold Benchmark 

SNFRM .......... SNF 30-Day All-Cause Readmission Measure (NQF #2510) .................................................... 0.80218 0.83721 

We will continue to use the 

achievement threshold and benchmark 

as previously finalized in the FY 2018 

SNF PPS final rule. However, due to 

timing constraints associated with the 

compilation of the FY 2017 MedPAR 

file to include 3 months of data 

following the last discharge date, we 

were unable to provide estimated 

numerical values for the FY 2021 

Program year’s performance standards 

in the proposed rule. As discussed 

further below, we proposed to adopt FY 

2017 as the baseline period for the FY 

2021 program year. While we did not 

expect either the achievement threshold 

or benchmark to change significantly 

from what was finalized for the FY 2020 

Program year, we stated our intent to 

publish the final numerical values for 

the performance standards based on the 

FY 2017 baseline period in the FY 2019 

SNF PPS final rule. 

We welcomed public comment on 

this approach. 

Comment: One commenter urged us 

to score SNFs on achievement only, 

stating that Medicare’s quality programs 

should reward providers based on clear, 

absolute, and prospectively set 

performance targets. 

Response: While we appreciate this 

suggestion, we note that we are required 

by section 1888(h)(3)(B) of the Act to 

establish performance standards that 

include levels of achievement and 

improvement, and to use to the higher 

of either improvement or achievement 

when calculating the SNF performance 

score. 

Comment: One commenter stated its 

understanding of the timing constraints 

that we discussed with respect to the 

MedPAR file for performance standards 

calculations, and reiterated its prior 

support for the Program’s switch to 

fiscal year instead of calendar year 

performance periods. 

Response: We appreciate the 

continued support for the policy we 

finalized in the FY 2018 SNF PPS final 

rule (82 FR 36613 through 36614) to 

change the SNF VBP Program’s 

performance and baseline periods from 

calendar years to fiscal years. 

Additionally, as we note further below, 

we are finalizing FY 2019 (October 1, 

2018 through September 30, 2019) as 

the performance period for the FY 2021 

SNF VBP Program year. 

Comment: One commenter supported 

our efforts to measure improvement and 

encouraged us to reward providers that 

consistently achieve high performance 

under the SNF VBP Program. 

Response: We believe that the 

performance standards that we are 

adopting, which include levels of 

achievement and improvement as 

required by the SNF VBP Program’s 

statute, continue to offer opportunities 

for us to recognize both SNFs that 

achieve high performance and those 

SNFs that improve over time. 

After consideration of the public 

comments, we are finalizing the 

numerical values for the FY 2021 SNF 

VBP Program based on the FY 2017 

baseline period. Those values follow 

below in Table 41. 

TABLE 41—FINAL FY 2021 SNF VBP PROGRAM PERFORMANCE STANDARDS

Measure ID Measure description Achievement 

threshold Benchmark 

SNFRM .......... SNF 30-Day All-Cause Readmission Measure (NQF #2510) .................................................... 0.79476 0.83212 

b. Correction of Performance Standard 

Numerical Values in Cases of Errors 

As noted previously, section 

1888(h)(3)(C) of the Act requires that we 

establish and announce the performance 

standards for a fiscal year not later than 

60 days prior to the performance period 

for the fiscal year involved. However, 

we currently do not have a policy that 

would address the situation where, 

subsequent to publishing the numerical 

values for the finalized performance 

standards for a program year, we 

discover an error that affects those 

numerical values. Examples of the types 

of errors that we could subsequently 

discover are inaccurate variables on 

Medicare claims, programming errors, 

excluding data should have been 

included in the performance standards 

calculations, and other technical errors 

that resulted in inaccurate achievement 

threshold and benchmark calculations. 

While we do not have reason to believe 

that the SNF VBP Program has 

previously published inaccurate 

numerical values for performance 

standards, in the FY 2019 SNF PPS 

proposed rule (83 FR 21086), we stated 

our concern about the possibility that 

we would discover an error in the future 

and have no ability to correct the 

numerical values. 

We are aware that SNFs rely on the 

performance standards that we publicly 

display in order to target quality 

improvement efforts, and we do not 

believe that it would be fair to SNFs to 

repeatedly update our finalized 

performance standards if we were to 

identify multiple errors. In order to 

balance the need of SNFs to know what 

performance standards they will be held 

accountable to for a SNF VBP program 

year with our obligation to provide 

SNFs with the most accurate 

performance standards that we can 

based on the data available at the time, 

we proposed that if we discover an error 

in the calculations subsequent to having 

published the numerical values for the 

performance standards for a program 

year, we would update the numerical 

values to correct the error. We also 


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proposed that we would only update the 

numerical values one time, even if we 

subsequently identified a second error, 

because we believe that a one-time 

correction would allow us to 

incorporate new information into the 

calculations without subjecting SNFs to 

multiple updates. Any update we would 

make to the numerical values based on 

a calculation error would be announced 

via the CMS website, listservs, and other 

available channels to ensure that SNFs 

are made fully aware of the update. 

We welcomed public comments on 

this proposal. 

Comment: One commenter supported 

our proposal to adopt correction 

authority for performance standards and 

agreed that making multiple changes to 

the performance standards in a given 

program year would be difficult for 

SNFs’ quality improvement efforts. The 

commenter also urged us to be 

transparent if we find additional 

technical errors. 

Response: We thank the commenter 

for the support, and we intend to be as 

transparent as possible if we identify 

any errors in the calculation of the 

numerical values of the SNF VBP 

Program’s performance standards. 

After consideration of the public 

comments we have received, we are 

finalizing our policy to correct 

performance standard numerical values 

in cases of errors as proposed. 

4. FY 2021 Performance Period and 

Baseline Period and for Subsequent 

Years 

a. Background 

We refer readers to the FY 2016 SNF 

PPS final rule (80 FR 46422) for a 

discussion of our considerations for 

determining performance periods under 

the SNF VBP Program. Based on those 

considerations, as well as public 

comment, we adopted CY 2017 as the 

performance period for the FY 2019 

SNF VBP Program, with a 

corresponding baseline period of CY 

2015. 

Additionally, in the FY 2018 SNF PPS 

final rule (82 FR 36613 through 36614), 

we adopted FY 2018 as the performance 

period for the FY 2020 SNF VBP 

Program, with a corresponding baseline 

period of FY 2016. We refer readers to 

that rule for a discussion of the need to 

shift the Program’s measurement 

periods from the calendar year to the 

fiscal year. 

b. FY 2021 Performance and Baseline 

Periods 

As we discussed with respect to the 

FY 2019 and FY 2020 SNF VBP Program 

years, we continue to believe that a 12- 

month duration for the performance and 

baseline period is the most appropriate 

for the SNF VBP Program. Therefore, we 

proposed to adopt FY 2019 (October 1, 

2018 through September 30, 2019) as 

the performance period for the FY 2021 

SNF VBP Program year. We also 

proposed to adopt FY 2017 (October 1, 

2016 through September 30, 2017) 

hospital discharges as the baseline 

period for the FY 2021 SNF VBP 

Program year. 

We welcomed public comment on 

these proposals. 

Comment: One commenter expressed 

concern about our proposal to use FY 

2019 as the performance period for the 

FY 2021 SNF VBP Program year, stating 

that SNFs need more time to improve 

their data collection, reporting, and 

evaluation efforts. The commenter 

requested that we align our measures 

with the SNF QRP and other quality 

programs, which will allow SNFs 

additional time for performance tracking 

and improvement activities. The 

commenter also requested that we 

provide SNFs with more timely 

performance feedback to help them 

identify areas for improvement efforts. 

One commenter expressed concern 

about the proposed performance period, 

stating that SNFs do not believe they are 

ready for FY 2019 to be used as the 

performance period and indicated that 

the collection and reporting of quality 

measures is a significant administrative 

burden. The commenter urged us to 

move to an automated system to reduce 

the reporting burden on SNFs and 

requested that we provide SNFs with 

timely performance feedback that they 

can use to identify areas where they 

need to focus their improvement efforts. 

Response: We would like to clarify for 

the commenter that the SNF VBP 

Program’s measure is calculated based 

on hospital claims, and therefore, does 

not require data collection or impose 

any reporting burden on SNFs, though 

SNFs may choose to track readmissions 

to the hospital for their patients as part 

of their care coordination and quality 

improvement efforts. We do not believe 

that SNFs need additional time to track 

readmissions to the hospital for their 

patients or to undertake quality 

improvement efforts to minimize those 

readmissions because SNFs have had 

ample notice about the SNF VBP 

Program’s operations and its focus on 

measures of hospital readmissions. We 

will, however, strive to provide as much 

timely information to SNFs as possible 

on their measured performance, but we 

note that the measure that we have 

specified for the Program includes 

significant calculations, including 

detailed risk adjustment, that 

complicates our intention to provide 

feedback more promptly than on a 

quarterly basis to SNFs. 

Comment: One commenter supported 

our performance and baseline period 

proposals and agreed that 12-month 

periods are appropriate for both the 

SNFRM and the SNFPPR. 

Response: We thank the commenter 

for the support. 

After consideration of the public 

comments that we received, we are 

finalizing the performance period and 

baseline period for FY 2021 as 

proposed. 

c. Performance Periods and Baseline 

Periods for Subsequent Program Years 

As we have described in previous 

rules (see, for example, the FY 2016 

SNF PPS final rule, 80 FR 46422), we 

strive to link performance furnished by 

SNFs as closely as possible to the 

program year to ensure clear 

connections between quality 

measurement and value-based payment. 

We also strive to measure performance 

using a sufficiently reliable population 

of patients that broadly represent the 

total care provided by SNFs. 

Therefore, we proposed that 

beginning with the FY 2022 program 

year and for subsequent program years, 

we would adopt for each program year, 

a performance period that is the 1-year 

period following the performance 

period for the previous program year. 

We also proposed that beginning with 

the FY 2022 program year and for 

subsequent program years, we would 

adopt for each program year a baseline 

period that is the 1-year period 

following the baseline period for the 

previous year. Under this policy, the 

performance period for the FY 2022 

program year would be FY 2020 (the 1- 

year period following the proposed FY 

2021 performance period of FY 2019), 

and the baseline period for the FY 2022 

program year would be FY 2018 (the 1- 

year period following the proposed FY 

2021 baseline period of FY 2017). We 

believe adopting this policy will 

provide SNFs with certainty about the 

performance and baseline periods 

during which their performance will be 

assessed for future program years. 

We welcomed public comments on 

this proposal. 

Comment: One commenter supported 

our proposal to adopt performance and 

baseline periods automatically for 

subsequent program years. 

Response: We thank the commenter 

for the support. 

After consideration of the public 

comments that we have received, we are 

finalizing our policy to adopt 

performance periods and baseline 


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periods for subsequent program years as 

proposed. 

5. SNF VBP Performance Scoring 

a. Background 

We refer readers to the FY 2017 SNF 

PPS final rule (81 FR 52000 through 

52005) for a detailed discussion of the 

scoring methodology that we have 

finalized for the Program, along with 

responses to public comments on our 

policies and examples of scoring 

calculations. We also refer readers to the 

FY 2018 SNF PPS final rule (82 FR 

36614 through 36616) for discussion of 

the rounding policy we adopted, our 

request for comments on SNFs with zero 

readmissions, and our request for 

comments on a potential extraordinary 

circumstances exception policy. 

b. Scoring Policy for SNFs Without 

Sufficient Baseline Period Data 

In some cases, a SNF will not have 

sufficient baseline period data available 

for scoring for a Program year, whether 

due to the SNF not being open during 

the baseline period, only being open for 

a small portion of the baseline period, 

or other reasons (such as receiving an 

extraordinary circumstance exception, 

which we finalize below). The 

availability of baseline data for each 

SNF is an integral component of our 

scoring methodology, and we are 

concerned that the absence of sufficient 

baseline data for a SNF will preclude us 

from being able to score that SNF on 

improvement for a program year. As 

discussed further below, with respect to 

the proposed scoring adjustment for a 

SNF without sufficient data in the 

performance period to create a reliable 

SNF performance score, we are 

concerned that measuring SNFs with 

fewer than 25 eligible stays (or index 

SNF stays that would be included in the 

calculation of the SNF readmission 

measure) during the baseline period 

may result in unreliable improvement 

scores, and as a result, unreliable SNF 

performance scores. We considered 

policy options to address this issue. 

We continue to believe it is important 

to compare SNF performance during the 

same periods to control for factors that 

may not be attributable to the SNF, such 

as increased patient case-mix acuity 

during colder weather periods when 

influenza, pneumonia, and other 

seasonal conditions and illnesses are 

historically more prevalent in the 

beneficiary population. Using a 12- 

month performance and baseline period 

for all SNFs ensures that, to the greatest 

extent possible, differences in 

performance can be attributed to the 

SNF’s care quality rather than to 

exogenous factors. 

Additionally, because we have 

proposed that for FY 2021 and future 

Program years, the start of the 

performance period for a Program year 

would begin exactly 12-months after the 

end of the baseline period for that 

Program year and there would not be 

sufficient time to compute riskstandardized readmission rates from 

another 12-month baseline period before 

the performance period if a SNF had 

insufficient data during the baseline 

period. For the FY 2021 Program, for 

example, the proposed baseline period 

would conclude at the end of FY 2017 

(September 30, 2017) and the proposed 

performance period would begin on the 

first day of FY 2019 (October 1, 2018). 

We also do not believe it would be 

equitable to score SNFs without 

sufficient baseline period data using 

data from a different period. Doing so 

would, in our view, impede our ability 

to compare SNFs’ performance on the 

Program’s quality measure fairly, as 

additional factors that may affect SNFs’ 

care could arise when comparing 

performance during different time 

periods. Therefore, we have concluded 

that it is not operationally feasible or 

equitable to use different baseline 

periods for purposes of awarding 

improvement scores to SNFs for a 

Program year. 

We believe that SNFs without 

sufficient data from a single baseline 

period, which we would define for this 

purpose as SNFs with fewer than 25 

eligible stays during the baseline period 

for a fiscal year based on an analysis of 

Pearson correlation coefficients at 

various denominator counts, should not 

be measured on improvement for that 

Program year. Accordingly, we are 

proposing to score these SNFs based 

only on their achievement during the 

performance period for any Program 

year for which they do not have 

sufficient baseline period data. The 

analysis of Pearson correlation 

coefficients at various denominator 

counts used in developing this proposal 

is available on our website at https://

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/Value-Based-Programs/

Other-VBPs/SNFRM-Reliability-TestingMemo.pdf. 

We proposed to codify this proposal 

by adding § 413.338(d)(1)(iv). We 

welcomed public comment on this 

proposal. 

Comment: One commenter agreed 

with our proposal to not score SNFs on 

improvement when they do not have 

sufficient data during the baseline 

period for appropriate year-over-year 

comparisons. However, the commenter 

expressed concern that this approach is 

different for this group of low-volume 

SNFs compared to SNFs that are 

consistently low-volume. The 

commenter expressed continued 

concerns with the readmission rates 

awarded to SNFs when they have low 

case volume. 

Response: We note that the policies 

that we have proposed for SNFs without 

sufficient baseline period data and for 

low-volume adjustment are intended to 

address separate permutations of the 

SNFRM reliability issue. In the first 

case, our intent is to ensure that we 

compare sufficiently-reliable SNFRM 

rates when assessing SNFs’ 

improvement over time. That 

assessment relies on SNFRM rates being 

sufficiently reliable in both the baseline 

period and performance period to make 

the comparison that we use to award 

improvement points. In contrast, the 

low-volume scoring adjustment 

proposal focuses on the SNFRM’s 

reliability during the performance 

period, which is necessary for both 

achievement and improvement scoring. 

We believe that these proposals ensure 

that SNFRM rates are sufficiently 

reliable for purposes of SNF VBP 

scoring, and as the commenter 

requested, ensure that SNFs are not 

scored on the SNFRM when the 

measure’s case count is too low to 

produce sufficiently reliable scores. 

Comment: One commenter supported 

our proposal to score SNFs without 

sufficient baseline period data on 

achievement only, agreeing with our 

view that measure results in those cases 

are susceptible to random variation and 

may not reliably represent quality in 

that facility. 

Response: We thank the commenter 

for the support. 

After consideration of the public 

comments that we received, we are 

finalizing our scoring policy for SNFs 

without sufficient baseline period data 

as proposed. We are also finalizing our 

regulation text on this policy as 

proposed. 

c. SNF VBP Scoring Adjustment for 

Low-Volume SNFs 

In previous rules, we have discussed 

and sought comment on policies related 

to SNFs with zero readmissions during 

the performance period. For example, in 

the FY 2018 SNF PPS rule (82 FR 36615 

through 36616), we sought comment on 

policies we should consider for SNFs 

with zero readmissions during the 

performance period because under the 

risk adjustment and the statistical 

approach used to calculate the SNFRM, 

outlier values are shifted towards the 


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mean, especially for smaller SNFs. As a 

result, SNFs with observed readmission 

rates of zero may receive riskstandardized readmission rates that are 

greater than zero. We continue to be 

concerned about the effects of the 

SNFRM’s risk adjustment and statistical 

approach on the scores that we award to 

SNFs under the Program. We are 

specifically concerned that as a result of 

this approach, the SNFRM is not 

sufficiently reliable to generate accurate 

performance scores for SNFs with a low 

number of eligible stays during the 

performance period. We would like to 

ensure that the Program’s scoring 

methodology results in fair and reliable 

SNF performance scores because those 

scores are linked to a SNF’s ranking and 

payment. 

Therefore, we considered whether we 

should make changes to our 

methodology for assessing the total 

performance of SNFs for a Program year 

that better accounts for SNFs with zero 

or low numbers of eligible stays during 

the performance period. Because the 

number of eligible SNF stays makes up 

the denominator of the SNFRM, we 

have concluded that the reliability of a 

SNF’s measure rate and resulting 

performance score is adversely 

impacted if the SNF has less than 25 

eligible stays during the performance 

period, as the Pearson correlation 

coefficient is lower at denominator 

counts of 5, 10, 15, and 20 eligible stays 

in comparison to 25 eligible stays. The 

analysis of Pearson correlation 

coefficients at various denominator 

counts used in developing this proposal 

is available on our website at https://

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/Value-Based-Programs/

Other-VBPs/SNFRM-Reliability-TestingMemo.pdf. 

We believe that the most appropriate 

way to ensure that low-volume SNFs 

(which we define for purposes of the 

SNF VBP Program as SNFs with fewer 

than 25 eligible stays during the 

performance period) receive sufficiently 

reliable SNF performance scores is to 

adopt an adjustment to the scoring 

methodology we use for the SNF VBP 

Program. We proposed that if a SNF has 

less than 25 eligible stays during a 

performance period for a Program year, 

we would assign a performance score to 

the SNF for that Program year. That 

assigned performance score would, 

when used to calculate the value-based 

incentive payment amount for the SNF, 

result in a value-based incentive 

payment amount that is equal to the 

adjusted Federal per diem rate that the 

SNF would have received for the fiscal 

year in the absence of the Program. The 

actual performance score that we would 

assign to an individual low-volume SNF 

for a Program year would be identified 

based on the distribution of all SNFs’ 

performance scores for that Program 

year after calculating the exchange 

function. We would then assign that 

score to an individual low-volume SNF, 

and we would notify the low-volume 

SNF that it would be receiving an 

assigned performance score for the 

Program year in the SNF Performance 

Score Report that we provide not later 

than 60 days prior to the fiscal year 

involved. 

We believe this scoring adjustment 

policy would appropriately ensure that 

our SNF performance score 

methodology is fair and reliable for 

SNFs with fewer than 25 eligible stays 

during the performance period for a 

Program year. 

In section X.A.6. of the proposed rule, 

we estimated that $527.4 million would 

be withheld from SNFs’ payments for 

the FY 2019 Program year based on the 

most recently available data. 

Additionally, the 60 percent payback 

percentage would result in an estimated 

$316.4 million being paid to SNFs in the 

form of value-based incentive payments 

with respect to FY 2019 services. Of the 

$316.4 amount, we estimated that $8.6 

million will be paid to low-volume 

SNFs. However, if our proposal to adopt 

a scoring adjustment for low-volume 

SNFs were finalized, we estimated that 

we would redistribute an additional 

$6.7 million in value-based incentive 

payments to low-volume SNFs with 

respect to FY 2019 services, for a total 

of $15.3 million of the estimated $527.4 

million available for value-based 

incentive payments for that Program 

year. The additional $6.7 million in 

value-based incentive payments that 

would result from finalizing this 

proposal would increase the 60 percent 

payback percentage for FY 2019 by 

approximately 1.28 percent, which 

would result in a payback percentage 

61.28 percent of withheld funds. The 

payback percentage would similarly 

increase for all other Program years, 

however the actual amount of the 

increase for a particular Program year 

would vary based on the number of lowvolume SNFs that we identify for that 

Program year and the distribution of all 

SNFs’ performance scores for that 

Program year. 

As an alternative, we considered 

assigning a performance score to SNFs 

with fewer than 25 eligible stays during 

the performance period that would 

result in a value-based incentive 

payment percentage of 1.2 percent, or 60 

percent of the 2 percent withhold. This 

amount would match low-volume SNFs’ 

incentive payment percentages with the 

finalized SNF VBP Program payback 

percentage of 60 percent, and would 

represent a smaller adjustment to lowvolume SNFs’ incentive payment 

percentages than the proposed policy 

described above. We estimated that this 

alternative would redistribute an 

additional $1 million with respect to FY 

2019 services to low-volume SNFs. We 

also estimated that this alternative 

would increase the 60 percent payback 

percentage for FY 2019 by 

approximately 0.18 percent of the 

approximately $527.4 million of the 

total withheld from SNFs’ payments, 

which would result in a payback 

percentage of 60.18 percent of the 

estimated $527.4 million in withheld 

funds for that Program year. However, 

as with the proposal above, we stated 

that the specific amount by which the 

payback percentage would increase for 

each Program year would vary based on 

the number of low-volume SNFs that we 

identify for each Program year and the 

distribution of all SNFs’ performance 

scores for that Program year. 

We welcomed public comments on 

this proposal and on the alternative that 

we considered. We also proposed to 

codify the definition of low-volume SNF 

at § 413.338(a)(16), and the definition of 

eligible stay at § 413.338(a)(17). We 

proposed to codify the low-volume 

scoring adjustment proposal at 

§ 413.338(d)(3). We also proposed a 

conforming edit to the payback 

percentage policy at § 413.338(c)(2)(i). 

Comment: One commenter expressed 

support for our proposed low-volume 

adjustment that would provide SNFs 

with a neutral value-based incentive 

payment percentage. 

Response: We thank the commenter 

and appreciate the support. 

Comment: One commenter requested 

clarification on how the SNF VBP will 

affect newly certified facilities that have 

no data from either the performance 

period or baseline period for the FY 

2019 SNF VBP Program year. 

Response: SNFs with zero eligible 

stays during both the baseline and 

performance periods are not covered by 

the low-volume adjustment policy. For 

the purposes of the SNF readmission 

measure, an eligible stay is an index 

SNF admission that would be included 

in the denominator of the measure. We 

will notify all SNFs of their incentive 

multipliers for the Program year, 

including SNFs with zero eligible stays 

during the baseline and performance 

periods. These SNFs will receive an 

incentive multiplier that results in the 

adjusted Federal per diem rate under 

the Medicare SNF PPS that they would 


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otherwise have received absent the 

Program. 

Comment: Commenter suggested as an 

alternative to our low-volume 

adjustment proposal that we consider 

adopting a 2-year performance period 

for low-volume SNFs only and weight 

the most recent year more highly. 

Response: We thank the commenter 

for this feedback and will consider this 

in future rulemaking. 

Comment: One commenter suggested 

that we consider assigning a 2 percent 

payment penalty to low-volume SNFs 

instead of adopting the low-volume 

scoring adjustment as proposed. The 

commenter suggested that this policy 

would encourage low-volume SNFs to 

increase their Medicare cases sizes, 

which would enable Medicare to 

adequately measure their care quality 

and hold all SNFs accountable for their 

care. 

Response: We do not believe the 

intent of the SNF VBP was to 

incentivize SNFs to increase their 

Medicare case volume. We wish to 

avoid increasing possible healthcare 

disparities for smaller facilities when 

payment differences are driven solely by 

smaller measure denominators, and not 

quality of care as reflected in measure 

performance. Finally, we are concerned 

about the possibility of gaming this kind 

of policy, as SNFs might seek out 

Medicare cases to avoid the 2 percent 

penalty the commenter suggests. 

Comment: One commenter expressed 

support for our proposed low-volume 

adjustment and opposition to the 

alternative that we presented, stating 

that performance scores under the 

Program can be skewed by a single 

readmission and that the alternative 

would reduce Medicare rates for lowvolume SNFs regardless of their 

performance and with no opportunity to 

earn additional incentive payments. 

Another commenter supported our 

proposal to adopt a low-volume scoring 

adjustment, noting that the evidence 

shows that the SNFRM is not a reliable 

quality indicator when facilities have 

fewer than 25 qualifying admissions. 

The commenter also agreed with our 

proposal to adjust the Program’s 

payback percentage to account for this 

policy. 

Response: We thank the commenters 

for the support. 

Comment: One commenter stated that 

low-volume SNFs should be excluded 

from the SNF VBP Program since they 

have no realistic opportunity to earn 

value-based incentive payments. 

Response: We believe that the lowvolume scoring adjustment policy 

ensures that these SNFs are adequately 

protected from being scored on 

insufficiently-reliable SNFRM rates. 

Comment: One commenter 

appreciated our efforts to address lowvolume SNFs and SNFs without 

baseline period data. However, the 

commenter was concerned that CMS 

had not provided enough information 

on these topics and requested additional 

clarity. 

Response: We believe we have 

provided as much clarity as possible on 

the effects of the low-volume scoring 

adjustment policy in both the preamble 

of the proposed rule and the Regulatory 

Impact Analysis that was included in 

the proposed rule. We have also 

provided additional clarity in this final 

rule and in the Regulatory Impact 

Analysis that is included in this final 

rule. We will also ensure that affected 

SNFs are made fully aware when their 

SNF performance scores were assigned 

as a result of the policy and notify them 

of their value-based incentive payment 

percentage for the fiscal year, as 

required by section 1888(h)(7) of the 

Act. We believe that notification will 

ensure that SNFs are aware of the effects 

that this policy has on their SNF 

performance scores and incentive 

payments. 

After consideration of the public 

comments that we have received, we are 

finalizing our scoring adjustment for 

low-volume SNFs as proposed. We are 

also finalizing our regulation text on 

this policy as proposed. 

d. Extraordinary Circumstances 

Exception Policy for the SNF VBP 

Program 

In the FY 2018 SNF PPS final rule (82 

FR 36616), we summarized public 

comments that we received on the topic 

of a possible extraordinary 

circumstances exception policy for the 

SNF VBP Program. As we stated in that 

rule, in other value-based purchasing 

and quality reporting programs, we have 

adopted Extraordinary Circumstances 

Exceptions (ECE) policies intended to 

allow facilities to receive relief from 

program requirements due to natural 

disasters or other circumstances beyond 

the facility’s control that may affect the 

facility’s ability to provide high-quality 

health care. 

In other programs, we have defined a 

‘‘disaster’’ as any natural or man-made 

catastrophe which causes damages of 

sufficient severity and magnitude to 

partially or completely destroy or delay 

access to medical records and associated 

documentation or otherwise affect the 

facility’s ability to continue normal 

operations. Natural disasters could 

include events such as hurricanes, 

tornadoes, earthquakes, volcanic 

eruptions, fires, mudslides, snowstorms, 

and tsunamis. Man-made disasters 

could include such events as terrorist 

attacks, bombings, flood caused by manmade actions, civil disorders, and 

explosions. A disaster may be 

widespread and impact multiple 

structures or be isolated and affect a 

single site only. As a result of either a 

natural or man-made disaster, we are 

concerned that SNFs’ care quality and 

subsequent impact on measure 

performance in the SNF VBP Program 

may suffer, and as a result, SNFs might 

be penalized under the Program’s 

quality measurement and scoring 

methodology. However, we do not wish 

to penalize SNFs in these 

circumstances. For example, we 

recognize that SNFs might receive 

patients involuntarily discharged from 

hospitals facing mandatory evacuation 

due to probable flooding, and these 

patients might be readmitted to 

inpatient acute care hospitals and result 

in poorer readmission measure 

performance in the SNF VBP Program. 

We therefore proposed to adopt an ECE 

policy for the SNF VBP Program to 

provide relief to SNFs affected by 

natural disasters or other circumstances 

beyond the facility’s control that affect 

the care provided to the facility’s 

patients. We proposed that if a SNF can 

demonstrate that an extraordinary 

circumstance affected the care that it 

provided to its patients and subsequent 

measure performance, we would 

exclude from the calculation of the 

measure rate for the applicable baseline 

and performance periods the calendar 

months during which the SNF was 

affected by the extraordinary 

circumstance. Under this proposal, a 

SNF requesting an ECE would indicate 

the dates and duration of the 

extraordinary circumstance in its 

request, along with any available 

evidence of the extraordinary 

circumstance, and if approved, we 

would exclude the corresponding 

calendar months from that SNF’s 

measure rate for the applicable 

measurement period and by extension, 

its SNF performance score. 

We further proposed that SNFs must 

submit this ECE request to CMS by 

filling out the ECE request form that we 

will place on the QualityNet website to 

the SNFVBPinquiries@cms.hhs.gov 

mailbox within 90 days following the 

extraordinary circumstance. 

To accompany an ECE request, SNFs 

must provide any available evidence 

showing the effects of the extraordinary 

circumstance on the care they provided 

to their patients, including, but not 

limited to, photographs, newspaper and 

other media articles, and any other 


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materials that would aid CMS in making 

its decision. We stated that we will 

review exception requests, and at our 

discretion based on our evaluation of 

the impact of the extraordinary 

circumstances on the SNF’s care, 

provide a response to the SNF as 

quickly as feasible. 

We stated our intent for this policy to 

offer relief to SNFs whose care provided 

to patients suffered as a result of the 

disaster or other extraordinary 

circumstance, and we believe that 

excluding calendar months affected by 

extraordinary circumstances from SNFs’ 

measure performance under the 

Program appropriately ensures that such 

circumstances do not unduly affect 

SNFs’ performance rates or performance 

scores. We developed this process to 

align with the ECE process adopted by 

the SNF Quality Reporting Program to 

the greatest extent possible and to 

minimize burden on SNFs. This policy 

is not intended to preclude us from 

granting exceptions to SNFs that have 

not requested them when we determine 

that an extraordinary circumstance, 

such as an act of nature, affects an entire 

region or locale. If we made the 

determination to grant an exception to 

all SNFs in a region or locale, we 

proposed to communicate this decision 

through routine communication 

channels to SNFs and vendors, 

including but not limited to, issuing 

memos, emails, and notices on our SNF 

VBP website at https://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/Value-BasedPrograms/Other-VBPs/SNF-VBP.html. 

We noted that if we finalize this 

policy, we would score any SNFs 

receiving ECEs on achievement and 

improvement for any remaining months 

during the performance period, 

provided the SNF had at least 25 

eligible stays during both of those 

periods. If a SNF should receive an 

approved ECE for 6 months of the 

performance period, for example, we 

would score the SNF on its achievement 

during the remaining 6 months on the 

Program’s measure as long as the SNF 

met the proposed 25 eligible stay 

threshold during the performance 

period. We would also score the SNF on 

improvement as long as it met the 

proposed 25 eligible stay threshold 

during the applicable baseline period. 

We welcomed public comments on 

this proposal. We also proposed to 

codify this proposal at § 413.338(d)(4). 

Comment: Two commenters 

expressed appreciation and support for 

our proposal to adopt an ECE policy for 

the SNF VBP Program. The commenters 

acknowledged that these exceptions are 

provided in other programs and agreed 

that we should align our ECE policy 

with the Hospital VBP Program as much 

as possible. A third commenter 

reiterated its previous support for an 

ECE policy in the SNF VBP Program. 

Response: We thank the commenters 

for the support. 

After consideration of the public 

comments that we received, we are 

finalizing our Extraordinary 

Circumstances Exception policy as 

proposed. We are also finalizing our 

regulation text on this policy as 

proposed. 

6. SNF Value-Based Incentive Payments 

We refer readers to the FY 2018 SNF 

PPS final rule (82 FR 36616 through 

36621) for discussion of the exchange 

function methodology that we have 

adopted for the Program, as well as the 

specific form of the exchange function 

(logistic, or S-shaped curve) that we 

finalized, and the payback percentage of 

60 percent. We adopted these policies 

for FY 2019 and subsequent fiscal years. 

As required by section 1888(h)(7) of 

the Act, we will inform each SNF of the 

adjustments to its Medicare payments as 

a result of the SNF VBP Program that we 

will make not later than 60 days prior 

to the fiscal year involved. We will 

fulfill that requirement via SNF 

Performance Score Reports that we will 

circulate to SNFs using the QIES– 

CASPER system, which is also how we 

distribute the quarterly confidential 

feedback reports that we are required to 

provide to SNFs under section 

1888(g)(5) of the Act. The SNF 

Performance Score Reports will contain 

the SNF’s performance score, ranking, 

and value-based incentive payment 

adjustment factor that will be applied to 

claims submitted for the applicable 

fiscal year. Additionally, as we finalized 

in the FY 2018 SNF PPS final rule (82 

FR 36622 through 36623), the provision 

of the SNF Performance Score Report 

will trigger the Phase Two Review and 

Corrections Process, and SNFs will have 

30 days from the date we post the report 

on the QIES–CASPER system to submit 

corrections to their SNF performance 

score and ranking to the 

SNFVBPinquiries@cms.hhs.gov 

mailbox. 

Finally, as we discussed in the FY 

2018 SNF PPS final rule (82 FR 36618), 

beginning with FY 2019 (October 1, 

2018) payments, we intend to make the 

2 percent reduction and the SNFspecific value-based incentive payment 

adjustment to SNF claims 

simultaneously. Beginning with FY 

2019, we will identify the adjusted 

federal per diem rate for each SNF for 

claims under the SNF PPS. We will then 

reduce that amount by 2 percent by 

multiplying the per diem amount by 

0.98, in accordance with the 

requirements in section 1888(h)(6) of 

the Act. We will then multiply the 

result of that calculation by each SNF’s 

specific value-based incentive payment 

adjustment factor, which will be based 

on each SNF’s performance score for the 

program year and will be calculated by 

the exchange function, to generate the 

value-based incentive payment amount 

that applies to the SNF for the fiscal 

year. Finally, we will add the valuebased incentive payment amount to the 

reduced rate, resulting in a new 

adjusted federal per diem rate that 

applies to the SNF for the fiscal year. 

At the time of the publication of the 

proposed rule, we had not completed 

SNF performance score calculations for 

the FY 2019 program year. However, we 

stated our intent to provide the range of 

value-based incentive payment 

adjustment factors applicable to the FY 

2019 program year in this final rule. For 

the FY 2019 SNF VBP Program Year, 

and incorporating the 2 percent 

reduction to SNFs’ payments, we 

estimate the value-based incentive 

payment adjustment factors that we will 

award to SNFs range from 0.9802915381 

to 1.02326809. That is, we estimate that 

SNFs may receive incentive payment 

percentages ranging from approximately 

¥1.97 percent to approximately +2.33 

percent, on a net basis. 

We proposed to codify the SNF VBP 

Program’s payment adjustments at 

§ 413.337(f). 

Comment: Two commenters urged us 

to revisit the payback percentage policy 

that we adopted in the FY 2018 SNF 

PPS final rule (82 FR 36619 through 

36621), stating that we should distribute 

70 percent of the funds withheld from 

SNFs’ Medicare payments through the 

SNF VBP Program, the maximum 

amount allowable under the statute. 

One commenter requested that we 

return the remaining 30 percent of funds 

for SNF quality improvement initiatives, 

including programs to improve SNFs’ 

performance when they have high 

readmission rates, while the other 

commenter stated that we should remit 

100 percent of the Program’s funds as is 

done in the Hospital Value-Based 

Purchasing Program. 

Response: As we discussed in the FY 

2018 SNF PPS final rule (82 FR 36621), 

we are not authorized to distribute the 

30 percent of SNFs’ Medicare payments 

that would remain after the payment 

withhold is determined for any 

purposes. Those funds are retained in 

the Medicare Trust Fund and used for 

other Medicare Program purposes 

authorized by statute. We are not 

allowed under current law to distribute 


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100 percent of the withheld funds for 

SNF VBP purposes. 

Further, we do not believe it is 

appropriate to revisit the payback 

percentage policy at this time, with the 

exception of the low-volume policy, 

which we view as a narrow exception to 

the 60 percent payback percentage that 

would have no effect on the majority of 

facilities. At the time of the publication 

of this final rule, the SNF VBP Program 

will not yet have delivered its first 

incentive payments based on measured 

performance, and we do not believe we 

should consider whether to change the 

payback percentage further until we are 

able to more fully assess the effects that 

it has on the quality of care provided in 

SNFs. We refer readers to the FY 2018 

SNF PPS final rule (82 FR 36619 

through 36621) for our full discussion of 

the payback percentage policy that we 

have adopted for the SNF VBP Program. 

We thank the commenters for their 

feedback. As noted in section III.B.5. of 

this final rule, we are finalizing the 

codification of the SNF VBP program 

payment adjustment as proposed. 

D. Request for Information on Promoting 

Interoperability and Electronic 

Healthcare Information Exchange 

Through Possible Revisions to the CMS 

Patient Health and Safety Requirements 

for Skilled Nursing Facility Providers 

and Suppliers 

In the FY 2019 SNF PPS proposed 

rule, we included a Request for 

Information (RFI) related to promoting 

interoperability and electronic 

healthcare information exchange (83 FR 

21089). We received 22 comments on 

this RFI, and appreciate the input 

provided by commenters. 

VII. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995 (PRA) (44 U.S.C. 3501 et seq.), 

we are required to publish a 60-day 

notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. 

To fairly evaluate whether an 

information collection should be 

approved by OMB, PRA section 

3506(c)(2)(A) requires that we solicit 

comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our burden 

estimates. 

• The quality, utility, and clarity of 

the information to be collected. 

• Our effort to minimize the 

information collection burden on the 

affected public, including the use of 

automated collection techniques. 

In our May 8, 2018 proposed rule (83 

FR 21018), we solicited public comment 

on each of the section 3506(c)(2)(A)- 

required issues for the following 

information collection requirements 

(ICRs).We did not receive any comments 

on the ICR section of the proposed rule. 

A. Wages 

To derive average costs, we used data 

from the U.S. Bureau of Labor Statistics’ 

May 2017 National Occupational 

Employment and Wage Estimates for all 

salary estimates (as compared to the FY 

2019 SNF PPS proposed rule when we 

used May 2016 estimates) (http://

www.bls.gov/oes/current/oes_nat.htm). 

In this regard, Table 42 presents the 

mean hourly wage, the cost of fringe 

benefits and overhead (calculated at 100 

percent of salary), and the adjusted 

hourly wage. We are using the adjusted 

wages to derive our cost estimates. 

TABLE 42—NATIONAL OCCUPATIONAL EMPLOYMENT AND WAGE ESTIMATES

Occupation 

title 

Occupation 

code 

Mean hourly 

wage 

($/hr) 

Fringe 

benefits and 

overhead 

($/hr) 

Adjusted 

hourly wage 

($/hr) 

Health Information Technician ......................................................................... 29–2071 20.59 20.59 41.18

Registered Nurse ............................................................................................. 29–1141 35.36 35.36 70.72 

As indicated, we are adjusting our 

employee hourly wage estimates by a 

factor of 100 percent. This is necessarily 

a rough adjustment, both because fringe 

benefits and overhead costs vary 

significantly from employer to 

employer, and because methods of 

estimating these costs vary widely from 

study to study. We believe that doubling 

the hourly wage to estimate total cost is 

a reasonably accurate estimation 

method. 

B. Information Collection Requirements 

(ICRs) 

1. ICRs Regarding the SNF PPS 

Assessment Schedule Under the PDPM 

The following sets out the 

requirements and burden associated 

with the MDS assessment schedule that 

will be effective October 1, 2019 under 

the SNF PPS in conjunction with 

implementation of the PDPM. The 

requirements and burden will be 

submitted to OMB for approval under 

control number 0938–1140 (CMS– 

10387). 

Section V.D. of this final rule finalizes 

revisions to the current SNF PPS 

assessment schedule to require only two 

scheduled assessments (as opposed to 

the current requirement for five 

scheduled assessments) for each SNF 

stay: A 5-day scheduled PPS assessment 

and a discharge assessment. 

The current 5-day scheduled PPS 

assessment will be used as the 

admission assessment under this rule’s 

finalized PDPM and set the resident’s 

case-mix classification for the resident’s 

SNF stay. The PPS discharge assessment 

(which is already required for all SNF 

Part A residents) will serve as the 

discharge assessment and be used for 

monitoring purposes. In section V.D. of 

this final rule, we discuss that while we 

proposed to require SNFs to reclassify 

residents under the PDPM using the 

Interim Payment Assessment (IPA) if 

certain criteria are met, we have decided 

in this final rule to make this 

assessment optional, thereby leaving 

completion of this assessment at the 

discretion of the individual provider. 

Thus, the 5-day SNF PPS scheduled 

assessment will be the only PPS 

assessment required to classify a 

resident under the PDPM for payment 

purposes, while the IPA may also be 

completed, as discussed in section V.D. 

of this final rule. This eliminates the 

requirement for the following 

assessments under the SNF PPS: 14-day 

scheduled PPS assessment, 30-day 

scheduled PPS assessment, 60-day 

scheduled PPS assessment, 90-day 

scheduled PPS assessment, Start of 

Therapy Other Medicare Required 


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Assessment (OMRA), End of Therapy 

OMRA, and Change of Therapy OMRA. 

In estimating the amount of time to 

complete a PPS assessment, we utilize 

the OMRA assessment, or the NO/SO 

item set (this is consistent with the 

current information collection request 

as approved by OMB on July 28, 2017; 

see https://www.reginfo.gov/public/do/

PRAViewDocument?ref_nbr=201703- 

0938-018) as a proxy for all assessments. 

In section V.D. of this final rule, we 

finalized the addition of 18 items to the 

PPS discharge assessment in order to 

calculate and monitor the total amount 

of therapy provided during a SNF stay. 

These items are listed in Table 35 under 

section V.D. of this final rule. Given that 

the PPS OMRA assessment has 272 

items (as compared to 125 items 

currently on the PPS discharge 

assessment) we believe the items that 

we are adding to the PPS discharge 

assessment, while increasing burden for 

each of the respective assessments, is 

accounted for by using the longer PPS 

OMRA assessment as a proxy for the 

time required to complete all 

assessments. 

When calculating the burden for each 

assessment, we estimated that it will 

take 40 minutes (0.6667 hours) at 

$70.72/hr for an RN to collect the 

information necessary for preparing the 

assessment, 10 minutes (0.1667 hours) 

at $55.95/hr (the average hourly wage 

for RN ($70.72/hr) and health 

information technician ($41.18/hr)) for 

staff to code the responses, and 1 

minute (0.0167 hours) at $41.18/hr for a 

health information technician to 

transmit the results. In total, we 

estimate that it would take 51 minutes 

(0.85 hours) to complete a single PPS 

assessment. Based on the adjusted 

hourly wages for the noted staff, we 

estimate that it would cost $57.17 

[($70.72/hr × 0.6667 hr) + ($55.95/hr × 

0.1667 hr) + ($41.18/hr × 0.0167 hr)] to 

prepare, code, and transmit each PPS 

assessment. 

The ongoing burden associated with 

the revisions to the SNF PPS assessment 

schedule is the time and effort it would 

take each Medicare Part A SNF to 

complete the 5-day PPS and discharge 

assessments. Based on our most current 

data, there are 15,471 Medicare Part A 

SNFs (as opposed to the 15,455 

discussed in the proposed rule). Based 

on FY 2017 data, we estimate that 

2,406,401 5-day PPS assessments will be 

completed and submitted by Part A 

SNFs each year under the PDPM. We 

used the same number of assessments 

(2,406,401) as a proxy for the number of 

PPS discharge assessments that would 

be completed and submitted each year, 

since all residents who require a 5-day 

PPS assessment will also require a 

discharge assessment under the SNF 

PDPM. 

As compared to the FY 2019 SNF PPS 

proposed rule, in which we used the 

Significant Change in Status Assessment 

(SCSA) as a proxy to estimate the 

number of IPAs (83 FR 21093), we have 

eliminated this portion of our burden 

estimate as this assessment would not 

be required, per the discussion in 

section V.D. of this final rule. Therefore, 

we estimate that the total number of 5- 

day scheduled PPS assessments, and 

PPS discharge assessments that would 

be completed across all facilities is 

4,812,802 assessments (2,406,401 + 

2,406,401, respectively) instead of 

4,905,042 assessments (2,406,401 + 

92,240 + 2,406,401) that was set out in 

the proposed rule. For all assessments 

under the PDPM, we estimated a burden 

of 4,090,882 hours (4,812,802 

assessments × 0.85 hr/assessment) at a 

cost of $275,147,890 (4,812,802 

assessments × $57.17/assessment). 

Based on the same FY 2017 data, 

there were 5,833,476 non-discharge 

related assessments (scheduled and 

unscheduled PPS assessments) 

completed under the RUG- IV payment 

system. To this number we add the 

same proxy as above for the number of 

discharge assessments (2,406,401), since 

every resident under RUG–IV who 

required a 5-day scheduled PPS 

assessment would also require a 

discharge assessment. This brings the 

total number of estimated assessments 

under RUG–IV to 8,239,877. Using the 

same wage and time figures (per 

assessment), we estimated a burden of 

7,003,895 hours (8,239,877 assessments 

× 0.85 hr/assessment) at a cost of 

$471,073,768 (8,239,877 assessments × 

$57.17/assessment). 

When comparing the currently 

approved RUG–IV burden with the 

PDPM burden, we estimate a savings of 

2,913,013 administrative hours 

(7,003,895 RUG–IV hours ¥ 4,090,882 

PDPM hours) or approximately 188 

hours per provider per year (2,913,013 

hours/15,471 providers). As depicted in 

Table 43, we also estimate a cost savings 

of $195,925,878 ($471,073,768 RUG–IV 

costs ¥ $275,147,890 PDPM costs) or 

$12,664 per provider per year 

($195,925,878/15,471 providers). This 

represents a significant decrease in 

administrative burden to providers 

under PDPM. 

TABLE 43—PDPM SAVINGS

Burden reconciliation Respondents * Responses 

(assessments) 

Burden per 

response 

(hours) 

Total annual 

burden 

(hours) 

Cost 

($) 

RUG–IV ............................................................................... 15,455 ............ 8,239,877 0.85 ................ 7,003,895 471,073,768 

PDPM .................................................................................. 15,471 ............ 4,812,802 0.85 ................ 4,090,882 275,147,890 

SAVINGS ............................................................................. (16) ................ (3,427,075) No change ..... (2,913,013) (195,925,878) 

* The RUG–IV number of respondents is based on the last approved PRA package in 2017. Numbers of respondents changes from year to 

year. 

Finally, in section V.D. of this final 

rule, we finalized the addition of 3 

items, as listed in Table 34 of this final 

rule), to the MDS 3.0 for Nursing Homes 

and Swing Bed Providers. Based on the 

small number of items being added and 

the small percentage of assessments that 

Swing Bed providers make up, we do 

not believe this action will cause any 

measurable adjustments to our currently 

approved burden estimates. 

Consequently, we are not revising any of 

those estimates. 

2. ICRs Regarding the SNF VBP Program 

In section VI.C.5.d. of this final rule, 

we are adopting an Extraordinary 

Circumstances Exception (ECE) process 

for the SNF VBP. Because the same CMS 

Extraordinary Circumstances Exceptions 

(ECE) Request Form would be used 

across ten quality programs: Hospital 

IQR Program, Hospital Outpatient 

Reporting Program, Inpatient 

Psychiatric Facility Quality Reporting 

Program, PPS-Exempt Cancer Hospital 

Quality Reporting Program, Ambulatory 

Surgical Center Quality Reporting 

Program, Hospital VBP Program, 

Hospital-Acquired Condition Reduction 

Program, Hospital Readmissions 

Reduction Program, End Stage Renal 

Disease Quality Incentive Program, and 


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Skilled Nursing Facility Value-Based 

Purchasing Program—the form and its 

associated requirements/burden will be 

submitted to OMB for approval under 

one information collection request 

(CMS–10210, OMB control number: 

0938–1022) and in association with our 

IPPS final rule (CMS–1694–F; RIN 

0938–AT27). To avoid double counting 

we are not setting out the form’s SNFrelated burden in this final rule. 

Separately, we are not removing or 

adding any new or revised SNF VBP 

measure-related requirements or burden 

in this rule. Consequently, this final rule 

does not set out any new VBP-related 

collections of information that would be 

subject to OMB approval under the 

authority of the PRA. 

3. ICRs for the SNF Quality Reporting 

Program (QRP) 

We are not removing or adding any 

new or revised SNF QRP measurerelated requirements or burden in this 

rule. Consequently, this final rule does 

not set out any new QRP-related 

collections of information that would be 

subject to OMB approval under the 

authority of the PRA. 

C. Summary of Requirements and 

Annual Burden Estimates 

TABLE 44—INFORMATION COLLECTION REQUIREMENTS AND BURDEN ESTIMATES

Requirement OMB control 

No. Respondents 

Responses 

(per 

respondent) 

Total 

responses 

Time per 

response 

(hr) 

Total time 

(hr) 

Labor cost per 

hour 

($/hr) 

Annualized cost 

($) 

SNF PPS Assessment 

Schedule.

0938–1140 15,471 (311) (4,812,802) 0.85 (4,090,882) Varies ............. (275,147,890) 

VIII. Economic Analyses 

A. Regulatory Impact Analysis 

1. Statement of Need 

This final rule will update the FY 

2018 SNF prospective payment rates 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 

FY, 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 on 

these issues. We did not include the 

impacts of the proposed PDPM and 

related policies in the sections that 

follow, as we have included this 

discussion in section V.I. of this final 

rule. 

2. 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), the Congressional 

Review Act (5 U.S.C. 804(2)), and 

Executive Order 13771 on Reducing 

Regulation and Controlling Regulatory 

Costs (January 30, 2017). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This rule 

has been designated an economically 

significant rule, under section 3(f)(1) of 

Executive Order 12866. Accordingly, we 

have prepared a regulatory impact 

analysis (RIA) as further discussed 

below. Also, the rule has been reviewed 

by OMB. 

Executive Order 13771, titled 

Reducing Regulation and Controlling 

Regulatory Costs, was issued on January 

30, 2017. OMB’s implementation 

guidance, issued on April 5, 2017, 

explains that ‘‘Federal spending 

regulatory actions that cause only 

income transfers between taxpayers and 

program beneficiaries (for example, 

regulations associated with . . . 

Medicare spending) are considered 

‘transfer rules’ and are not covered by 

E.O. 13771. . . . However . . . such 

regulatory actions may impose 

requirements apart from transfers . . . 

In those cases, the actions would need 

to be offset to the extent they impose 

more than de minimis costs. Examples 

of ancillary requirements that may 

require offsets include new reporting or 

recordkeeping requirements.’’ As 

discussed in section VII. of this final 

rule, we estimate that this final rule will 

lead to paperwork cost savings of 

approximately $196 million per year, or 

$171 million per year on an ongoing 

basis discounted at 7 percent relative to 

year 2016, over a perpetual time 

horizon. This final rule is considered an 

E.O. 13771 deregulatory action. 

3. Overall Impacts 

This final rule sets forth updates of 

the SNF PPS rates contained in the SNF 

PPS final rule for FY 2018 (82 FR 

36530). We estimate that the aggregate 

impact will be an increase of 

approximately $820 million in 

payments to SNFs in FY 2019, resulting 

from the SNF market basket update to 

the payment rates, as required by 

section 53111 of the BBA 2018. Absent 

the application of section 53111 of the 

BBA 2018, as discussed in section 

III.A.2. of this final rule, the aggregate 

impact from the 2.0 percentage point 

market basket increase factor would 

have been approximately $680 million. 

We note that these impact numbers do 

not incorporate the SNF VBP reductions 

that we estimate will total $527.4 

million for FY 2019. 

We would note that events may occur 

to limit the scope or accuracy of our 

impact analysis, as this analysis is 

future-oriented, and thus, very 

susceptible to forecasting errors due to 

events that may occur within the 

assessed impact time period. In 

accordance with sections 1888(e)(4)(E) 

and 1888(e)(5) of the Act, we update the 

FY 2018 payment rates by a factor equal 

to the market basket index percentage 

change adjusted by the MFP adjustment 

to determine the payment rates for FY 

2019. As discussed previously, section 

53111 of the BBA 2018 stipulates a 

market basket increase factor of 2.4 

percent. The impact to Medicare is 

included in the total column of Table 

45. In updating the SNF PPS rates for 

FY 2019, we made a number of standard 

annual revisions and clarifications 


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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 2019. Accordingly, the analysis of 

the impact of the annual update that 

follows only describes the impact of this 

single year. Furthermore, in accordance 

with the requirements of the Act, we 

will publish a rule or notice for each 

subsequent FY that will provide for an 

update to the payment rates and include 

an associated impact analysis. 

4. Detailed Economic Analysis 

The FY 2019 SNF PPS payment 

impacts appear in Table 45. Using the 

most recently available data, in this case 

FY 2017, we apply the current FY 2018 

wage index and labor-related share 

value to the number of payment days to 

simulate FY 2018 payments. Then, 

using the same FY 2017 data, we apply 

the proposed FY 2019 wage index and 

labor-related share value to simulate FY 

2019 payments. We tabulate the 

resulting payments according to the 

classifications in Table 45 (for example, 

facility type, geographic region, facility 

ownership), and compare the simulated 

FY 2018 payments to the simulated FY 

2019 payments to determine the overall 

impact. The breakdown of the various 

categories of data Table 45 follows: 

• The first column shows the 

breakdown of all SNFs by urban or rural 

status, hospital-based or freestanding 

status, census region, and ownership. 

• The first row of figures describes 

the estimated effects of the various 

changes on all facilities. The next six 

rows show the effects on facilities split 

by hospital-based, freestanding, urban, 

and rural categories. The 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. The 

total impact of this change is 0 percent; 

however, there are distributional effects 

of the change. 

• The fourth column shows the effect 

of all of the changes on the FY 2019 

payments. The update of 2.4 percent 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 2.4 

percent, assuming facilities do not 

change their care delivery and billing 

practices in response. 

As illustrated in Table 45, 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 

urban Pacific region will experience a 

3.4 percent increase in FY 2019 total 

payments. 

TABLE 45—IMPACT TO THE SNF PPS FOR FY 2019 

Number of 

facilities 

FY 2019 

(%) 

Update wage 

data 

(%) 

Total change 

(%) 

Group: 

Total ...................................................................................................................................... 15,471 0.0 2.4 

Urban .................................................................................................................................... 11,042 0.0 2.4 

Rural ..................................................................................................................................... 4,429 0.1 2.5 

Hospital-based urban ........................................................................................................... 498 0.0 2.4 

Freestanding urban .............................................................................................................. 10,544 0.0 2.4 

Hospital-based rural ............................................................................................................. 555 0.0 2.4 

Freestanding rural ................................................................................................................ 3,874 0.2 2.6 

Urban by region: 

New England ........................................................................................................................ 790 ¥0.7 1.7 

Middle Atlantic ...................................................................................................................... 1,481 0.0 2.4 

South Atlantic ....................................................................................................................... 1,869 ¥0.1 2.3 

East North Central ................................................................................................................ 2,127 ¥0.4 2.0 

East South Central ............................................................................................................... 555 ¥0.2 2.2 

West North Central ............................................................................................................... 920 ¥0.4 2.0 

West South Central .............................................................................................................. 1,346 0.3 2.7 

Mountain ............................................................................................................................... 527 ¥0.8 1.6 

Pacific ................................................................................................................................... 1,421 1.0 3.4 

Outlying ................................................................................................................................. 6 ¥0.5 1.9 

Rural by region: 

New England ........................................................................................................................ 134 ¥0.7 1.6 

Middle Atlantic ...................................................................................................................... 215 0.1 2.5 

South Atlantic ....................................................................................................................... 494 0.1 2.5 

East North Central ................................................................................................................ 931 0.1 2.5 

East South Central ............................................................................................................... 523 ¥0.3 2.1 

West North Central ............................................................................................................... 1,074 0.3 2.7 

West South Central .............................................................................................................. 734 1.0 3.5 

Mountain ............................................................................................................................... 229 0.2 2.6 

Pacific ................................................................................................................................... 95 ¥0.5 1.9 

Ownership: 

Government .......................................................................................................................... 10,887 0.0 2.4 

Profit ..................................................................................................................................... 3,570 ¥0.1 2.3 

Non-Profit .............................................................................................................................. 1,014 0.0 2.4 

Note: The Total column includes the 2.4 percent market basket increase required by section 53111 of the BBA 2018. Additionally, we found no 

SNFs in rural outlying areas. 


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5. Impacts for the SNF QRP 

We did not propose to add, remove, 

or revise any measures in the SNF QRP. 

Consequently, this final rule does not 

set out any new QRP-related impacts 

associated with the SNF QRP. 

6. Impacts for the SNF VBP Program 

In Table 44 of the FY 2019 SNF PPS 

proposed rule (83 FR 21096 through 

20197), we estimated the impacts of the 

FY 2019 SNF VBP Program without 

taking into account our low-volume 

scoring adjustment proposal. We 

modeled SNFs’ performance in the 

Program using SNFRM data from CY 

2014 as the baseline period and FY 2016 

as the performance period. 

Additionally, we modeled a logistic 

exchange function with a payback 

percentage of 60 percent, as we finalized 

in the FY 2018 SNF PPS final rule (82 

FR 36619 through 36621), and based the 

following analyses on payments to SNFs 

in FY 2016. We estimated the total 

reductions to payments required by 

section 1888(h)(6) of the Act, to be 

$527.4 million for FY 2019. Based on 

the 60 percent payback percentage, we 

estimated that we would disburse 

approximately $316.4 million in valuebased incentive payments to SNFs in FY 

2019, which we estimated would result 

in approximately $211 million in 

savings to the Medicare program in FY 

2019. 

In Table 45 of the FY 2019 SNF PPS 

proposed rule (83 FR 21097), we also 

modeled the estimated impacts of the 

FY 2019 SNF VBP Program and 

included in that model the impacts of 

our proposed scoring adjustment for 

low-volume SNFs. We estimated that 

the scoring adjustment policy proposal 

would redistribute an additional $6.7 

million to the group of low volume 

SNFs. As we discuss further in section 

II.E.3.e. of this final rule, we are 

finalizing our low-volume scoring 

adjustment policy, and our estimated 

FY 2019 SNF VBP impacts, which we 

described in Table 45 of the proposed 

rule, are reproduced as Table 46 below. 

We continue to estimate that this 

policy will result in increasing lowvolume SNFs’ value-based incentive 

payment percentages by approximately 

0.99 percent, on average, from the valuebased incentive payment percentage 

that they would receive in the absence 

of the low-volume adjustment. An 

increase in value-based incentive 

payment percentages by 0.99 percent is 

needed to bring low-volume SNFs back 

to the 2.0 percent that was withheld 

from their payments. We also continue 

to estimate that we will pay an 

additional $6.7 million in incentive 

payments to low-volume SNFs, which 

would increase the 60 percent payback 

percentage for FY 2019 by 

approximately 1.28 percent, making the 

new payback percentage for FY 2019 

equal to 61.28 percent of the estimated 

$527.4 million in withheld funds for 

that fiscal year. 

Our detailed analysis of the impacts 

of the FY 2019 SNF VBP Program, 

including the finalized low-volume 

scoring adjustment policy, follows in 

Table 46. 

TABLE 46—ESTIMATED SNF VBP PROGRAM IMPACTS INCLUDING EFFECTS OF THE FINALIZED LOW-VOLUME SCORING

ADJUSTMENT

Category Criterion Number of 

facilities 

RSRR 

(mean) 

Mean SNF 

performance 

score 

Mean 

incentive 

multiplier 

(60% payback) 

Percent 

of 

proposed 

payback 

Group .................................. Total ................................... 12,845 0.18912 41.371 1.192 99.9 * 

Urban .................................. 9,604 0.18957 40.956 1.177 84.4 

Rural ................................... 3,241 0.18779 41.011 1.181 15.4 

Urban by Region ................. Total ................................... 9,604 ........................ ........................ ........................ ........................

01=Boston .......................... 713 0.19089 37.26777 1.059 4.9 

02=New York ...................... 836 0.19029 40.90383 1.165 11.8 

03=Philadelphia .................. 1,040 0.18601 45.31896 1.325 10.1 

04=Atlanta .......................... 1,767 0.19332 37.28735 1.052 13.3 

05=Chicago ........................ 1,961 0.18784 43.06368 1.246 16.0 

06=Dallas ........................... 1,134 0.19416 34.53275 0.949 6.1 

07=Kansas City .................. 510 0.19057 39.26278 1.132 2.6 

08=Denver .......................... 241 0.17832 57.62596 1.790 2.9 

09=San Francisco .............. 1,098 0.18908 40.80722 1.176 12.5 

10=Seattle .......................... 304 0.17808 56.67839 1.713 4.2 

Rural by Region .................. Total ................................... 3,241 ........................ ........................ ........................ ........................

01=Boston .......................... 115 0.18133 51.89294 1.568 0.9 

02=New York ...................... 77 0.18366 50.48193 1.569 0.5 

03=Philadelphia .................. 240 0.18789 42.12621 1.218 1.3 

04=Atlanta .......................... 764 0.19283 36.51452 1.032 3.3 

05=Chicago ........................ 818 0.18397 47.85089 1.399 4.5 

06=Dallas ........................... 557 0.19355 34.00868 0.952 1.7 

07=Kansas City .................. 421 0.18634 42.64769 1.236 1.2 

08=Denver .......................... 132 0.18000 52.38900 1.544 0.7 

09=San Francisco .............. 48 0.17780 61.50419 1.931 0.6 

10=Seattle .......................... 69 0.17628 60.70084 1.836 0.7 

Ownership Type .................. Total ................................... 12,847 ........................ ........................ ........................ ........................

Government ........................ 688 0.18529 46.450 1.380 5.2 

Profit ................................... 9,250 0.19039 39.526 1.127 72.0 

Non-Profit ........................... 2,909 0.18597 46.038 1.353 22.9 

Number of Beds .................. Total ................................... 12,847 ........................ ........................ ........................ ........................

1st Quartile: ........................ 3,222 0.18760 42.466 1.226 24.6 

2nd Quartile: ....................... 3,221 0.18878 40.971 1.175 24.4 

3rd Quartile: ....................... 3,197 0.19048 40.242 1.153 23.3 

4th Quartile: ........................ 3,207 0.18963 41.800 1.212 27.7 

* This category does not add to 100% because a small number of SNFs did not have urban/rural designations in our data. 


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7. Alternatives Considered 

As described in this section, we 

estimated that the aggregate impact for 

FY 2019 under the SNF PPS will be an 

increase of approximately $820 million 

in payments to SNFs, resulting from the 

SNF market basket update to the 

payment rates, as required by section 

53111 of the BBA 2018. Absent 

application of section 53111 of the BBA 

2018, as discussed in section III.A.2. of 

this final rule, the market basket 

increase factor of 2.0 percent would 

have resulted in an aggregate increase in 

payments to SNFs of approximately 

$680 million. 

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 base 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 for this process. 

As discussed in section VI.C. of this 

final rule, we also considered an 

alternative SNF VBP low-volume 

scoring policy. This alternative scoring 

assignment would result in a valuebased incentive payment percentage of 

1.2 percent, or 60 percent of the 2 

percent withhold. This amount would 

match low-volume SNFs’ incentive 

payment percentages with the finalized 

SNF VBP Program payback percentage 

of 60 percent, and would represent a 

smaller adjustment to low-volume 

SNFs’ incentive payment percentages 

than the proposed policy described 

above. We estimated that this alternative 

would redistribute an additional $1 

million with respect to FY 2019 services 

to low-volume SNFs. We also estimated 

that this alternative would increase the 

60 percent payback percentage for FY 

2019 by approximately 0.18 percent of 

the approximately $527.4 million of the 

total withheld from SNFs’ payments, 

which would result in a payback 

percentage of 60.18 percent of the 

estimated $527.4 million in withheld 

funds for that Program year. We 

estimated that this alternative would 

pay back SNFs about $5.7 million less 

than the proposed low-volume scoring 

methodology adjustment in total 

estimated payments on an annual basis. 

However, under this alternative, like the 

policy we are finalizing, the specific 

amount by which the payback 

percentage would increase for each 

Program year would vary based on the 

number of low-volume SNFs that we 

identify for each Program year and the 

distribution of all SNFs’ performance 

scores for that Program year. 

We discussed the comments that we 

received on this alternative and our 

responses to those comments in section 

II.E.3.e. of this final rule in our 

discussion of the low-volume scoring 

adjustment policy. 

8. Accounting Statement 

As required by OMB Circular A–4 

(available online at https://

obamawhitehouse.archives.gov/omb/

circulars_a004_a-4/), in Tables 48 and 

49, we have prepared an accounting 

statement showing the classification of 

the expenditures associated with the 

provisions of this final rule for FY 2019. 

Tables 45 and 48 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 15,471 SNFs 

in our database. Tables 46 and 49 

provide our best estimate of the possible 

changes in Medicare payments under 

the SNF VBP as a result of the policies 

in this final rule. 

TABLE 47—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM THE 2018 SNF PPS FISCAL

YEAR TO THE 2019 SNF PPS FISCAL YEAR

Category Transfers 

Annualized Monetized Transfers ....................................................................................... $820 million.* 

From Whom To Whom? .................................................................................................... Federal Government to SNF Medicare Providers. 

* The net increase of $820 million in transfer payments is a result of the market basket increase of $820 million. 

TABLE 48—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES FOR THE FY 2019 SNF VBP 

PROGRAM

Category Transfers 

Annualized Monetized Transfers ....................................................................................... $316.4 million.* 

From Whom To Whom? .................................................................................................... Federal Government to SNF Medicare Providers. 

* This estimate does not include the two percent reduction to SNFs’ Medicare payments (estimated to be $527.4 million) required by statute. 

9. Conclusion 

This final rule sets forth updates of 

the SNF PPS rates contained in the SNF 

PPS final rule for FY 2018 (82 FR 

36530). Based on the above, we estimate 

the overall estimated payments for SNFs 

in FY 2019 are projected to increase by 

approximately $820 million, or 2.4 

percent, compared with those in FY 

2018. We estimate that in FY 2019 

under RUG–IV, SNFs in urban and rural 

areas will experience, on average, a 2.4 

percent increase and 2.5 percent 

increase, respectively, in estimated 

payments compared with FY 2018. 

Providers in the urban rural West South 

Central region will experience the 

largest estimated increase in payments 

of approximately 3.5 percent. Providers 

in the urban Mountain and rural New 

England regions will experience the 

smallest estimated increase in payments 

of 1.6 percent. 

B. Regulatory Flexibility Act Analysis 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, nonVerDate Sep<11>2014 20:44 Aug 07, 2018 Jkt 244001 PO 00000 Frm 00127 Fmt 4701 Sfmt 4700 E:\FR\FM\08AUR2.SGM 08AUR2

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profit organizations, and small 

governmental jurisdictions. Most SNFs 

and most other providers and suppliers 

are small entities, either by reason of 

their non-profit status or by having 

revenues of $27.5 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, for the purposes 

of the RFA, we estimate that almost all 

SNFs are small entities as that term is 

used in the RFA, according to the Small 

Business Administration’s latest size 

standards (NAICS 623110), with total 

revenues of $27.5 million or less in any 

1 year. (For details, see the Small 

Business Administration’s website at 

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

navigation-structure/contracting/ 

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

20 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 2018 (82 FR 

36530). Based on the above, we estimate 

that the aggregate impact for FY 2019 

will be an increase of $820 million in 

payments to SNFs, resulting from the 

SNF market basket update to the 

payment rates. While it is projected in 

Table 45 that providers will 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 2019 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. In their March 2017 Report to 

Congress (available at http://

medpac.gov/docs/default-source/ 

reports/mar17_medpac_ch8.pdf), 

MedPAC states that Medicare covers 

approximately 11 percent of total 

patient days in freestanding facilities 

and 21 percent of facility revenue 

(March 2017 MedPAC Report to 

Congress, 202). 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 45. As indicated in 

Table 45, the effect on facilities is 

projected to be an aggregate positive 

impact of 2.4 percent for FY 2019. 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 previously, 

the Secretary has determined that this 

final rule will not have a significant 

impact on a substantial number of small 

entities for FY 2019. 

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 

an MSA and has fewer than 100 beds. 

This final rule will affect small rural 

hospitals that (1) furnish SNF services 

under a swing-bed agreement or (2) have 

a hospital-based SNF. We anticipate that 

the impact on small rural hospitals will 

be similar to the impact on SNF 

providers overall. Moreover, as noted in 

previous SNF PPS final rules (most 

recently, the one for FY 2018 (82 FR 

36530)), the category of small rural 

hospitals is included within the analysis 

of the impact of this final rule on small 

entities in general. As indicated in Table 

45, the effect on facilities for FY 2019 

is projected to be an aggregate positive 

impact of 2.4 percent. As the overall 

impact on the industry as a whole is less 

than the 3 to 5 percent threshold 

discussed above, the Secretary has 

determined that this final rule will not 

have a significant impact on a 

substantial number of small rural 

hospitals for FY 2019. 

C. Unfunded Mandates Reform Act 

Analysis 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 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 2018, that threshold is approximately 

$150 million. This final rule will 

impose no mandates on state, local, or 

tribal governments or on the private 

sector. 

D. Federalism Analysis 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it issues a final rule 

that imposes substantial direct 

requirement costs on state and local 

governments, preempts state law, or 

otherwise has federalism implications. 

This final rule will have no substantial 

direct effect on state and local 

governments, preempt state law, or 

otherwise have federalism implications. 

E. Congressional Review Act 

This final regulation is subject to the 

Congressional Review Act provisions of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 (5 

U.S.C. 801 et seq.) and has been 

transmitted to the Congress and the 

Comptroller General for review. 

F. Regulatory Review Costs 

If regulations impose administrative 

costs on private entities, such as the 

time needed to read and interpret this 

final rule, we should estimate the cost 

associated with regulatory review. Due 

to the uncertainty involved with 

accurately quantifying the number of 

entities that will review the rule, we 

assume that the total number of unique 

commenters on last year’s proposed rule 

will be the number of reviewers of this 

year’s proposed rule. We acknowledge 

that this assumption may understate or 

overstate the costs of reviewing this 

rule. It is possible that not all 

commenters reviewed last year’s rule in 

detail, and it is also possible that some 

reviewers chose not to comment on the 

proposed rule. For these reasons, we 

thought that the number of past 

commenters is a fair estimate of the 

number of reviewers of this rule. In the 

FY 2019 SNF PPS proposed rule (83 FR 

21099), we welcomed any comments on 

the approach in estimating the number 

of entities which will review the 

proposed rule. 

We also recognize that different types 

of entities are in many cases affected by 

mutually exclusive sections of this final 

rule, and therefore, for the purposes of 

our estimate we assume that each 

reviewer reads approximately 50 

percent of the rule. We sought 

comments on this assumption in the FY 

2019 SNF PPS proposed rule (83 FR 

21099). 

Using the wage information from the 

BLS for medical and health service 

managers (Code 11–9111), we estimate 

that the cost of reviewing this rule is 

$107.38 per hour, including overhead 

and fringe benefits https://www.bls.gov/ 

oes/current/oes_nat.htm. Assuming an 

average reading speed, we estimate that 

it would take approximately 4 hours for 

the staff to review half of the proposed 

rule. For each SNF that reviews the rule, 

the estimated cost is $429.52 (4 hours × 

$107.38). Therefore, we estimate that 

the total cost of reviewing this 

regulation is $124,561 ($429.52 × 247 

reviewers). 

In accordance with the provisions of 

Executive Order 12866, this final rule 


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Federal Register / Vol. 83, No. 153 / Wednesday, August 8, 2018 / Rules and Regulations 39289 

was reviewed by the Office of 

Management and Budget. 

List of Subjects 

42 CFR Part 411 

Diseases, Medicare, Reporting and 

recordkeeping requirements. 

42 CFR Part 413 

Health facilities, Diseases, Medicare, 

Reporting and recordkeeping 

requirements. 

42 CFR Part 424 

Emergency medical services, Health 

facilities, Health professions, 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 411—EXCLUSIONS FROM 

MEDICARE AND LIMITATIONS ON 

MEDICARE PAYMENT 

■ 1. The authority citation for part 411 

is revised to read as follows: 

Authority: 42 U.S.C. 1302, 1395w–101 

through 1395w–152, 1395hh, and 1395nn. 

§ 411.15 [Amended] 

■ 2. Section 411.15 is amended in 

paragraph (p)(3)(iv) by removing the 

phrase ‘‘by midnight of the day of 

departure’’ and adding in its place the 

phrase ‘‘before the following midnight’’. 

PART 413—PRINCIPLES OF 

REASONABLE COST 

REIMBURSEMENT; PAYMENT FOR 

END-STAGE RENAL DISEASE 

SERVICES; PROSPECTIVELY 

DETERMINED PAYMENT RATES FOR 

SKILLED NURSING FACILITIES; 

PAYMENT FOR ACUTE KIDNEY 

INJURY DIALYSIS 

■ 3. The authority citation for part 413 

is revised to read as follows: 

Authority: 42 U.S.C. 1302, 1395d(d), 

1395f(b), 1395g, 1395l(a), (i), and (n), 

1395x(v), 1395hh, 1395rr, 1395tt, and 

1395ww; and sec. 124 of Public Law 106– 

113, 113 Stat. 1501A–332; sec. 3201 of Public 

Law 112–96, 126 Stat. 156; sec. 632 of Public 

Law 112–240, 126 Stat. 2354; sec. 217 of 

Public Law 113–93, 129 Stat. 1040; and sec. 

204 of Public Law 113–295, 128 Stat. 4010; 

and sec. 808 of Public Law 114–27, 129 Stat. 

362. 

■ 4. Section 413.337 is amended by 

revising paragraph (d)(1)(v) and adding 

paragraphs (d)(1)(vi) and (vii) and (f) to 

read as follows: 

§ 413.337 Methodology for calculating the 

prospective payment rates. 

* * * * * 

(d) * * * 

(1) * * * 

(v) For each subsequent fiscal year, 

the unadjusted Federal payment rate is 

equal to the rate computed for the 

previous fiscal year increased by a factor 

equal to the SNF market basket index 

percentage change for the fiscal year 

involved, except as provided in 

paragraphs (d)(1)(vi) and (vii) of this 

section. 

(vi) For fiscal year 2018, the 

unadjusted Federal payment rate is 

equal to the rate computed for the 

previous fiscal year increased by a SNF 

market basket index percentage change 

of 1 percent (after application of 

paragraphs (d)(2) and (3) of this section). 

(vii) For fiscal year 2019, the 

unadjusted Federal payment rate is 

equal to the rate computed for the 

previous fiscal year increased by a SNF 

market basket index percentage change 

of 2.4 percent (after application of 

paragraphs (d)(2) and (3) of this section). 

* * * * * 

(f) Adjustments to payment rates 

under the SNF Value-Based Purchasing 

Program. Beginning with payment for 

services furnished on October 1, 2018, 

the adjusted Federal per diem rate (as 

defined in § 413.338(a)(2)) otherwise 

applicable to a SNF for the fiscal year 

is reduced by the applicable percent (as 

defined in § 413.338(a)(3)). The 

resulting amount is then adjusted by the 

value-based incentive payment amount 

(as defined in § 413.338(a)(14)) based on 

the SNF’s performance score for that 

fiscal year under the SNF Value-Based 

Purchasing Program, as calculated 

under § 413.338. 

■ 5. Section 413.338 is amended by— 

■ a. Revising the section heading; 

■ b. Adding paragraphs (a)(16) and (17); 

■ c. Revising paragraph (c)(2)(i); and 

■ d. Adding paragraphs (d)(1)(iv) and 

(d)(3) and (4). 

The additions and revision read as 

follows: 

§ 413.338 Skilled nursing facility valuebased purchasing program. 

(a) * * * 

(16) Low-volume SNF means a SNF 

with fewer than 25 eligible stays 

included in the SNF readmission 

measure denominator during the 

performance period for a fiscal year. 

(17) Eligible stay means, for purposes 

of the SNF readmission measure, an 

index SNF admission that would be 

included in the denominator of that 

measure. 

* * * * * 

(c) * * * 

(2) * * * 

(i) Total amount available for a fiscal 

year. The total amount available for 

value-based incentive payments for a 

fiscal year is at least 60 percent of the 

total amount of the reduction to the 

adjusted SNF PPS payments for that 

fiscal year, as estimated by CMS, and 

will be increased as appropriate for each 

fiscal year to account for the assignment 

of a performance score to low-volume 

SNFs under paragraph (d)(3) of this 

section. 

(d) * * * 

(1) * * * 

(iv) CMS will not award points for 

improvement to a SNF that has fewer 

than 25 eligible stays during the 

baseline period. 

* * * * * 

(3) If CMS determines that a SNF is 

a low-volume SNF with respect to a 

fiscal year, CMS will assign a 

performance score to the SNF for the 

fiscal year that, when used to calculate 

the value-based incentive payment 

amount (as defined in paragraph (a)(14) 

of this section), results in a value-based 

incentive payment amount that is equal 

to the adjusted Federal per diem rate (as 

defined in paragraph (a)(2) of this 

section) that would apply to the SNF for 

the fiscal year without application of 

§ 413.337(f). 

(4)(i) A SNF may request and CMS 

may grant exceptions to the SNF ValueBased Purchasing Program’s 

requirements under this section for one 

or more calendar months when there are 

certain extraordinary circumstances 

beyond the control of the SNF. 

(ii) A SNF may request an exception 

within 90 days of the date that the 

extraordinary circumstances occurred 

by sending an email to 

SNFVBPinquiries@cms.hhs.gov that 

includes a completed Extraordinary 

Circumstances Request form (available 

on the SNF VBP section of QualityNet 

at https://www.qualitynet.org/) and any 

available evidence of the impact of the 

extraordinary circumstances on the care 

that the SNF furnished to patients, 

including, but not limited to, 

photographs, newspaper, and other 

media articles. 

(iii) Except as provided in paragraph 

(d)(4)(iv) of this section, CMS will not 

consider an exception request unless the 

SNF requesting such exception has 

complied fully with the requirements in 

this paragraph (d). 

(iv) CMS may grant exceptions to 

SNFs without a request if it determines 

that an extraordinary circumstance 

affects an entire region or locale. 

(v) CMS will calculate a SNF 

performance score for a fiscal year for a 

SNF for which it has granted an 

exception request that does not include 

its performance on the SNF readmission 


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39290 Federal Register / Vol. 83, No. 153 / Wednesday, August 8, 2018 / Rules and Regulations 

measure during the calendar months 

affected by the extraordinary 

circumstance. 

* * * * * 

■ 6. Section 413.360 is amended by 

adding paragraph (b)(3) and revising 

paragraphs (d)(1) and (4) to read as 

follows: 

§ 413.360 Requirements under the Skilled 

Nursing Facility (SNF) Quality Reporting 

Program (QRP). 

* * * * * 

(b) * * * 

(3) CMS may remove a quality 

measure from the SNF QRP based on 

one or more of the following factors: 

(i) Measure performance among SNFs 

is so high and unvarying that 

meaningful distinctions in 

improvements in performance can no 

longer be made. 

(ii) Performance or improvement on a 

measure does not result in better 

resident outcomes. 

(iii) A measure does not align with 

current clinical guidelines or practice. 

(iv) The availability of a more broadly 

applicable (across settings, populations, 

or conditions) measure for the particular 

topic. 

(v) The availability of a measure that 

is more proximal in time to desired 

resident outcomes for the particular 

topic. 

(vi) The availability of a measure that 

is more strongly associated with desired 

resident outcomes for the particular 

topic. 

(vii) Collection or public reporting of 

a measure leads to negative unintended 

consequences other than resident harm. 

(viii) The costs associated with a 

measure outweigh the benefit of its 

continued use in the program. 

* * * * * 

(d) * * * 

(1) SNFs that do not meet the 

requirements in paragraph (b) of this 

section for a program year will receive 

a written notification of non-compliance 

through at least one of the following 

methods: Quality Improvement 

Evaluation System (QIES) Assessment 

Submission and Processing (ASAP) 

system, the United States Postal Service, 

or via an email from the Medicare 

Administrative Contractor (MAC). A 

SNF may request reconsideration no 

later than 30 calendar days after the date 

identified on the letter of noncompliance. 

* * * * * 

(4) CMS will notify SNFs, in writing, 

of its final decision regarding any 

reconsideration request through at least 

one of the following notification 

methods: QIES ASAP system, the 

United States Postal Service, or via 

email from the Medicare Administrative 

Contractor (MAC). 

* * * * * 

PART 424—CONDITIONS FOR 

MEDICARE PAYMENT 

■ 7. The authority citation for part 424 

is revised to read as follows: 

Authority: 42 U.S.C. 1302 and 1395hh. 

■ 8. Section 424.20 is amended by 

revising paragraph (a)(1)(i) to read as 

follows: 

§ 424.20 Requirements for posthospital 

SNF care. 

* * * * * 

(a) * * * 

(1) * * * 

(i) The individual needs or needed on 

a daily basis skilled nursing care 

(furnished directly by or requiring the 

supervision of skilled nursing 

personnel) or other skilled rehabilitation 

services that, as a practical matter, can 

only be provided in an SNF or a swingbed hospital on an inpatient basis, and 

the SNF care is or was needed for a 

condition for which the individual 

received inpatient care in a participating 

hospital or a qualified hospital, as 

defined in § 409.3 of this chapter, or for 

a new condition that arose while the 

individual was receiving care in the 

SNF or swing-bed hospital for a 

condition for which he or she received 

inpatient care in a participating or 

qualified hospital; or. 

* * * * * 

Dated: July 26, 2018. 

Seema Verma, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: July 26, 2018. 

Alex M. Azar II, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2018–16570 Filed 7–31–18; 4:15 pm] 

BILLING CODE 4120–01–P 


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