[Federal Register Volume 88, Number 227 (Tuesday, November 28, 2023)]
[Rules and Regulations]
[Pages 83031-83034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25998]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 51

RIN 2900-AR62


Payments Under State Home Care Agreements for Nursing Home Care

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

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SUMMARY: The Department of Veterans Affairs (VA) adopts as final, with 
one change, a proposed rule amending its State home per diem regulation 
to provide a new formula for calculating the prevailing rate VA would 
pay a State home that enters into a State home care agreement to 
provide nursing home care to eligible veterans.

DATES: This rule is effective December 28, 2023.

FOR FURTHER INFORMATION CONTACT: Colette Alvarez, Chief of Staff Home 
Per Diem Program, Geriatrics and Extended Care (12GEC), Veterans Health 
Administration, Department of Veterans Affairs, 810 Vermont Avenue NW, 
Washington, DC 20420, (202) 461-6750. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: In a document published in the Federal 
Register (FR) on December 21, 2022, VA proposed to amend its per diem 
regulations in part 51 of title 38, Code of Federal Regulations (CFR) 
to provide a new formula for calculating the prevailing rate VA will 
pay a State home that enters into a State home care agreement to 
provide nursing home care to eligible veterans. 87 FR 78038. VA 
provided a 60-day comment period, which ended on February 21, 2023. Two 
comments were received, one of which included multiple issues, and 
these comments are addressed below by topic. VA makes one change to the 
rule based on the comments received.

U.S. Public Health Service (USPHS) and Eligibility for Care in a State 
Home

    One commenter questioned whether veterans of the USPHS are eligible 
for care in State homes even if the State does not recognize service in 
the USPHS for veteran status. The commenter further asserts that USPHS 
veterans are veterans by Federal law and eligible for all VA benefits, 
and if a State home is receiving funding from VA then a USPHS veteran 
should be eligible for care in that State home even if the State does 
not recognize a USPHS veteran for other State benefits.
    While VA considers this comment outside of the scope of the 
rulemaking, we clarify that an individual is a veteran under 38 United 
States Code (U.S.C.) 101(2) if the individual ``served in the active 
military, naval, air, or space service and . . . was discharged or 
released therefrom under conditions other than dishonorable.'' ``Active 
military, naval, air, or space service'' includes ``active duty'' and 
certain periods of ``active duty for training'' and ``inactive duty 
training'' which are all defined by 38 U.S.C. 101(21)-(24). These terms 
prescribe the type of service an individual needs to have had to be 
eligible for VA health care benefits under 38 U.S.C. 1710 and 1705 and 
are inclusive of service in the USPHS. 38 Code of Federal Register 
(CFR) 17.31 generally incorporates the 38 U.S.C. 101 definitions of 
active service, active duty, active duty for training, and inactive 
duty training, as well as certain other service recognized as active 
service under 38 U.S.C. 106. In short, Sec.  17.31 addresses the duty 
periods considered under active service for eligibility for VA medical 
benefits, and it is inclusive of service in the USPHS. Thus, an 
individual with full-time service in the USPHS may qualify as a 
``veteran'' for purposes of health care benefits administered by VA.
    However, the designation of veteran for purposes of VA health care 
benefits does not require a State home to accept a veteran into State 
home. The VA State home program pays per diem to State homes for three 
types of care provided to eligible veterans: nursing home care, 
domiciliary care, and adult day health care (ADHC). The statutory 
authority for the payment program is set forth at 38 U.S.C. 1741-43 and 
VA has published regulations governing this program at 38 CFR part 51. 
Sections 51.50 through 51.52 address which veterans are eligible for 
purposes of payment of per diem for nursing home care, domiciliary 
care, and ADHC, respectively. An important distinction is that while VA 
can pay per diem to State homes for care provided to eligible veterans, 
State homes are not obligated to accept all eligible veterans. VA does 
not have management authority over State homes. State homes are owned 
and operated by State governments and each State establishes 
eligibility and admission criteria for its homes. State homes may have 
additional admission requirements such as age, wartime service, years 
of service, and residency requirements. Therefore, VA is unable to 
dictate which eligible veterans for purposes of payment of per diem may 
be admitted to a State home. VA makes no changes based on this comment.

State Home Responsibilities Under the Prevailing Rate

    One commenter raised concerns that VA is proposing to continue to 
use the Centers for Medicare and Medicaid Services (CMS) Prospective 
Payment System (PPS) for creating the baseline for the prevailing rate 
without utilizing Medicare's consolidated billing guidelines to confirm 
which services are covered under the rate. Specifically, the commenter 
referred to the Medicare Claims Processing Manual Chapter 6--Skilled 
Nursing Facility (SNF) Inpatient Part A Billing and SNF Consolidated 
Billing (Medicare Manual).\1\ The commenter stated that all services 
considered within the scope and capability of nursing home care are 
paid under the PPS rate and that the Medicare Manual lists which 
services are included and excluded under the PPS rate. Further, the 
commenter suggested that VA should use the Medicare Manual to confirm 
which services are covered under the prevailing rate because State 
homes are finding more instances where there is an expectation for 
State homes to pay for services that have been specifically excluded 
under PPS. The commenter specifically mentioned psychologist and 
psychiatric services, and high-cost medications (e.g., high-intensity 
anti-cancer drugs). The commenter also stated that all drugs not listed 
on the most recent VA formulary should qualify for an exclusion from 
the prevailing rate calculation since these medications are not 
routinely administered in a SNF or are exceptionally expensive. 
Finally, the commenter requested a guide for State homes and VA staff 
to determine the

[[Page 83032]]

financial responsibility for the full coordination of care.
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    \1\ U.S. Department of Health and Human Services, Centers for 
Medicare and Medicaid Services, Medicare Claims Processing Manual 
Chapter 6--SNF Inpatient Part A Billing and SNF Consolidated Billing 
(Rev. 11109, 11-04-21), https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c06.pdf (last visited 
April 11, 2023).
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    We interpret that this commenter is expressing concern that State 
homes are not being adequately compensated by VA under the prevailing 
rate for certain care (such as psychologist and psychiatric services, 
and high-cost medications as mentioned in the comment) by virtue of VA 
not using the Medicare Manual to confirm which services are covered and 
which services are excluded. Further we interpret that this commenter 
believes that if VA uses the Medicare Manual to confirm covered and 
excluded services, then State homes would be allowed to seek payment 
for excluded services in addition to the prevailing rate. However, VA 
has no clear indication that State homes are being inadequately 
compensated for care, even when drugs and medications, and psychologist 
and psychiatric services are furnished. We also believe that VA's 
current payment structure for State home care will remedy inadequate 
compensation were it to become an issue. Under Sec.  51.41, payment by 
VA to State homes for care of a veteran is payment in full for care the 
State home provides that veteran. 38 U.S.C. 1745(a)(3). In accordance 
with 38 U.S.C. 1745(a)(2), VA has developed a payment methodology to 
adequately reimburse State homes for the care provided under agreements 
with VA, where VA has established two methods of payment in 38 CFR 
51.41, one each for State home contracts and State home care 
agreements, respectively. State homes that enter into contracts will be 
compensated at the rate negotiated in the contract. On the other hand, 
State homes that enter into State home care agreements will be 
compensated using the prevailing rate, which is calculated to 
compensate State homes for the average cost of providing nursing home 
care to the veterans whose care is covered under 38 CFR 51.41, 
including, as indicated in Sec.  51.41(c)(2), the cost of drugs and 
medicines. Although the costs of all drugs and medications, including 
those that are not on the VA formulary, as well as psychologist and 
psychiatric services are not payable separately from general payments 
under State home care agreements, if a State home cannot accept the 
prevailing rate that VA offers in a State home care agreement, that 
State home has the option to request a contract under Sec.  51.41 and 
would then be able to negotiate with VA for a specific contract rate.
    We otherwise do not find that using the Medicare Manual the 
commenter references would be appropriate or necessarily transferrable 
to the determination of which services are covered and which services 
are excluded under the prevailing rate as that Medicare Manual is used 
for care in a SNF that is measured in only limited benefit periods, 
whereas VA's payments are not so limited. In the cited Medicare Manual, 
in each benefit period, Medicare Part A covers up to 20 full days of 
care, after that Medicare Part A covers up to an additional 80 days 
with the beneficiary paying coinsurance for each day, and after 100 
days, the SNF coverage exhausts and the beneficiary pays for all care, 
except for certain Medicare Part B services.\2\ The benefit period 
begins on the day a Medicare beneficiary is admitted to a hospital or 
SNF as an inpatient and ends after the beneficiary has not been a 
hospital inpatient or received skilled care in a SNF for 60 consecutive 
days.\3\ Once the benefit period ends, a new benefit period begins when 
the beneficiary is admitted to a hospital or SNF.\4\ Further, a new 
benefit period does not begin due to a change in diagnosis, condition, 
or calendar year.\5\ However, unlike Medicare part A coverage, under 
Sec.  51.41, VA will pay a State home the prevailing rate for the 
duration that a State home provides care to a veteran, even if it 
exceeds Medicare's 100 day benefit period. Therefore, VA believes that 
because the Medicare Manual referenced by the commenter is premised on 
a limited benefit period, it is not applicable or relevant to the 
payment VA provides to State homes under the prevailing rate for an 
indefinite period of time.
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    \2\ U.S. Department of Health and Human Services, Centers for 
Medicare and Medicaid Services, Medicare Learning Network: Skilled 
Nursing Facility Billing Reference, ICN MLN006846 (May 2022), 
https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/EnrollmentResources/provider-resources/snf-billing-reference.html (last visited April 11, 2023).
    \3\ Id.
    \4\ Id.
    \5\ Id.
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    For the reasons stated above VA makes no changes based on this 
comment.

Prevailing Rate for ADHC

    One commenter stated that the ADHC prevailing rate includes 
transportation to and from the ADHC program and is a key element of the 
service to veterans and their caregivers. The commenter asserted that 
due to the Coronavirus Disease-2019 (COVID-19), the cost of ambulette 
transportation has tripled in labor, gas, vehicle maintenance, and 
insurance and that these costs have grown much higher than the typical 
inflationary increase in the SNF Consumer Price Index (CPI), which the 
commenter asserted was used by VA to calculate the proposed rate 
change. To the extent the commenter is concerned that the CPI index for 
medical care that includes an item for nursing home and adult day care 
services \6\ is not sufficient to cover the cost of ambulette 
transportation, VA did not use any CPI index as a factor in the 
proposed change to the prevailing rate for nursing home care. As stated 
in the proposed rule, VA believes that the CMS SNF Market Basket rate 
would more accurately reflect actual costs than would an alternate 
method such as a component of the CPI. 87 FR 78040 (December 21, 2022). 
VA makes no changes based on this comment.
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    \6\ U.S. Department of Labor, U.S. Bureau of Labor Statistics, 
Consumer Price Index, Measuring Price Change in the CPI: Medical 
Care (Feb. 10, 2023), https://www.bls.gov/cpi/factsheets/medical-care.htm (last visited April 7, 2023).
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    One commenter raised concerns regarding the proposed non-
substantive change for the title of Sec.  51.41(c) from ``Payments 
under State home agreements.'' to Payments for nursing home care under 
State home care agreements.'' The commenter noted that the calculation 
of the prevailing rate for nursing home care is also the foundation for 
the prevailing rate paid for ADHC and that it is equally important to 
ensure the rate paid for ADHC is representative of the services being 
provided. VA agrees with the commenter that Sec.  51.41(c) is the 
current foundation for the prevailing rate paid for ADHC. On March 27, 
2018, the State Veterans Home Adult Day Health Care Improvement Act of 
2017 (ADHC Improvement Act), Public Law 115-159, was signed into law. 
The ADHC Improvement Act added a new paragraph (d) to 38 U.S.C. 1745 
authorizing VA to pay State homes for providing medical supervision 
adult day health care to eligible veterans. A proposed rule to 
implement the ADHC Improvement Act is currently being developed which 
will be made available to the public for comment. Any changes to the 
title of Sec.  51.41(c), if necessary, will be addressed in that 
rulemaking; therefore, VA will not finalize the proposed revision to 
the title of Sec.  51.41(c) and the title will remain as ``Payments 
under State home care agreements.''
    Based on the rationale set forth in this document, VA is adopting 
the proposed rule as final with one change as noted above.

[[Page 83033]]

Executive Orders 12866, 13563 and 14094

    Executive Orders 12866 (Regulatory Planning and Review) directs 
agencies to assess the costs and benefits of available regulatory 
alternatives and, when regulation is necessary, to select regulatory 
approaches that maximize net benefits (including potential economic, 
environmental, public health and safety effects, and other advantages; 
distributive impacts; and equity). Executive Order 13563 (Improving 
Regulation and Regulatory Review) emphasizes the importance of 
quantifying both costs and benefits, reducing costs, harmonizing rules, 
and promoting flexibility. Executive Order 14094 (Executive Order on 
Modernizing Regulatory Review) supplements and reaffirms the 
principles, structures, and definitions governing contemporary 
regulatory review established in Executive Order 12866 of September 30, 
1993 (Regulatory Planning and Review), and Executive Order 13563 of 
January 18, 2011 (Improving Regulation and Regulatory Review). The 
Office of Information and Regulatory Affairs has determined that this 
rulemaking is not a significant regulatory action under Executive Order 
12866, as amended by Executive Order 14094. The Regulatory Impact 
Analysis associated with this rulemaking can be found as a supporting 
document at www.regulations.gov.

Regulatory Flexibility Act

    The Secretary hereby certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities 
as they are defined in the Regulatory Flexibility Act (5 U.S.C. 601-
612). The rulemaking revises the formula VA uses to calculate the per 
diem it pays State homes for nursing home care of certain veterans. The 
effect of the rule is to change VA payments to State homes. Therefore, 
this rule only affects veterans and State homes.
    All State homes are owned, operated, and managed by State 
governments, except for a small number operated by entities under 
contract with State governments. Neither these contractors nor State 
governments are small entities as defined in 5 U.S.C. 601. State homes 
subject to this final rulemaking are State homes that are currently 
under a State home care agreement, those that enter into a new 
agreement, and any facility that begins an agreement for the first 
time. The rule will impose no direct costs on the State homes. 
Therefore, pursuant to 5 U.S.C. 605(b), the initial and final 
regulatory flexibility analysis requirements of 5 U.S.C. 603 and 604 do 
not apply.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in the expenditure by 
State, local, and Tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year. This final rule will have no such effect on 
State, local, and Tribal governments, or on the private sector.

Paperwork Reduction Act

    Although this action relates to provisions constituting collections 
of information at 38 CFR 51.41, under the provisions of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501-3521), no new or proposed revised 
collections of information would be associated with this final rule. 
The information collection requirements for Sec.  51.41(e) are 
currently approved by the Office of Management and Budget (OMB) and 
have been assigned OMB control numbers 2900-0091 and 2900-0160.

Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as not a major rule, as defined by 5 U.S.C. 804(2).

List of Subjects in 38 CFR Part 51

    Administrative practice and procedure, Claims, Adult Day Health 
Care, Dental health, Domiciliary, Government contracts, Health care, 
Health facilities, Health professions, Health records, Mental health 
programs, Nursing homes, Reporting and recordkeeping requirements, 
Travel and transportation expenses, Veterans.

Signing Authority

    Denis McDonough, Secretary of Veterans Affairs, signed and approved 
this document on November 16, 2023, and authorized the undersigned to 
sign and submit the document to the Office of the Federal Register for 
publication electronically as an official document of the Department of 
Veterans Affairs.

Luvenia Potts,
Regulation Development Coordinator, Office of Regulation Policy & 
Management, Office of General Counsel, Department of Veterans Affairs.

    For the reasons described in the preamble, Department of Veterans 
Affairs amends 38 CFR part 51 as follows:

PART 51--PER DIEM FOR NURSING HOME, DOMICILIARY, OR ADULT DAY 
HEALTH CARE OF VETERANS IN STATE HOMES

0
1. The general authority citation for part 51 continues to read as 
follows:

    Authority: 38 U.S.C. 101, 501, 1710, 1720, 1741-1743, 1745, and 
as follows.
* * * * *

0
2. In Sec.  51.41 revise paragraph (c)(1) to read as follows:


Sec.  51.41  Contracts and State home care agreements for certain 
veterans with service-connected disabilities.

* * * * *
    (c) * * *
    (1) State homes must sign an agreement to receive payment from VA 
for providing care to certain eligible veterans under a State home care 
agreement. A State home care agreement for nursing home care under this 
section will provide for payments at the rate determined by the 
following formula.
    (i) Determine whether the Resource Utilization Groups (RUG) or 
Skilled Nursing Facility Prospective Payment System (SNF-PPS) applies.
    (A) For State homes in a metropolitan statistical area, use the 
published fiscal year Centers for Medicare and Medicaid Services (CMS) 
RUG case-mix levels for the applicable metropolitan statistical area.
    (B) For State homes in a rural area, use the published fiscal year 
CMS SNF-PPS case-mix levels for the applicable rural area.
    (ii) Compute the daily rate for each State home, using the 
following formula in the order described:
    (A) Multiply the labor component by the State home wage index for 
each of the applicable case-mix levels.
    (B) Add to that amount the non-labor component.
    (C) Divide the sum of the results of these calculations by the 
number of applicable case-mix levels.
    (D) Add to this quotient the amount based on the CMS payment 
schedule for physician services. The amount for physician services, 
based on information published by CMS, is the average hourly rate for 
all physicians, with the rate modified by the applicable urban or rural 
geographic index for physician work, then multiplied by 12, then 
divided by the number of days in the year. The resulting sum is the per 
diem baseline rate for the State home.
    (E) Multiply the per diem baseline rate from the previous year by 
the CMS Skilled Nursing Facilities (SNF) Market Basket increase in 
effect as of December 28, 2023. The sum establishes the reference total 
per diem baseline rate

[[Page 83034]]

from which subsequent fiscal year per diem rates will be calculated. 
For calculation of SNF per diem rates for subsequent fiscal years VA 
will apply the CMS SNF Market Basket increase to the total per diem 
each year.

    Note 1 to paragraph (c)(1): The amount calculated under this 
formula reflects the prevailing rate payable in the geographic area 
in which the State home is located for nursing home care furnished 
in a State home. The amount calculated under this formula applies to 
both new and existing facilities with State home care agreements. 
Further, the formula for establishing these rates includes CMS 
information that is published in the Federal Register every year and 
is effective beginning October 1 for the entire fiscal year. 
Accordingly, VA will adjust the rates annually.

* * * * *


Sec.  51.70  [Amended]

0
3. In Sec.  51.70, in paragraph (n), remove ``51.110(d)(2)(ii) of this 
part'' and add in its place ``51.110(e)(2)(ii)''.


Sec.  51.110  [Amended]

0
4. In Sec.  51.110, in paragraph (d), remove ``Version 2.0'' and add in 
its place ``Version 3.0''.


Sec.  51.300  [Amended]

0
5. In Sec.  51.300, in paragraph (d)(3), remove ``(a)(2)(i) through 
(vii)'' and add in its place ``(d)(2)(i) through (vii)''.

[FR Doc. 2023-25998 Filed 11-27-23; 8:45 am]
BILLING CODE 8320-01-P