[Federal Register Volume 80, Number 75 (Monday, April 20, 2015)]
[Proposed Rules]
[Pages 22044-22086]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-08944]



[[Page 22043]]

Vol. 80

Monday,

No. 75

April 20, 2015

Part IV





Department of Health and Human Services





-----------------------------------------------------------------------





Centers for Medicare & Medicaid Services





-----------------------------------------------------------------------





42 CFR Part 483





Medicare Program; Prospective Payment System and Consolidated Billing 
for Skilled Nursing Facilities (SNFs) for FY 2016, SNF Value-Based 
Purchasing Program, SNF Quality Reporting Program, and Staffing Data 
Collection; Proposed Rule

Federal Register / Vol. 80 , No. 75 / Monday, April 20, 2015 / 
Proposed Rules

[[Page 22044]]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 483

[CMS-1622-P]
RIN 0938-AS44


Medicare Program; Prospective Payment System and Consolidated 
Billing for Skilled Nursing Facilities (SNFs) for FY 2016, SNF Value-
Based Purchasing Program, SNF Quality Reporting Program, and Staffing 
Data Collection

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

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule would update the payment rates used under 
the prospective payment system (PPS) for skilled nursing facilities 
(SNFs) for fiscal year (FY) 2016. In addition, it includes a proposal 
to specify a SNF all-cause all-condition hospital readmission measure, 
as well as a proposal to adopt that measure for a new SNF Value-Based 
Purchasing (VBP) Program and a discussion of SNF VBP Program policies 
we are considering for future rulemaking to promote higher quality and 
more efficient health care for Medicare beneficiaries. Additionally, 
this proposed rule proposes to implement a new quality reporting 
program for SNFs as specified in the Improving Medicare Post-Acute Care 
Transformation Act of 2014 (IMPACT Act). It also would amend the 
requirements that a long-term care (LTC) facility must meet to qualify 
to participate as a skilled nursing facility (SNF) in the Medicare 
program, or a nursing facility (NF) in the Medicaid program. These 
requirements implement the provision in the Affordable Care Act 
regarding the submission of staffing information based on payroll data.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 19, 2015.

ADDRESSES: In commenting, please refer to file code CMS-1622-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Within the search bar, enter 
the Regulation Identifier Number associated with this regulation, 0938-
AS44, and then click on the ``Comment Now'' box
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1622-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1622-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. Centers for Medicare & Medicaid Services, Department of Health 
and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue SW., Washington, DC 20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal Government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. Centers for Medicare & Medicaid Services, Department of Health 
and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
    Penny Gershman, (410) 786-6643, for information related to SNF PPS 
clinical issues (excluding any issues raised in Section V of this 
proposed rule).
    John Kane, (410) 786-0557, for information related to the 
development of the payment rates and case-mix indexes.
    Kia Sidbury, (410) 786-7816, for information related to the wage 
index.
    Bill Ullman, (410) 786-5667, for information related to level of 
care determinations, consolidated billing, and general information.
    Shannon Kerr, (410) 786-0666, for information related to skilled 
nursing facility value-based purchasing.
    Camillus Ezeike, (410) 786-8614, for information related to skilled 
nursing facility quality reporting.
    Lorelei Chapman, (410) 786-9254, for information related to 
staffing data collection.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Availability of Certain Tables Exclusively Through the Internet on the 
CMS Web Site

    As discussed in the FY 2015 SNF PPS final rule (79 FR 45628), 
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 
Web site. The wage index tables for this proposed rule can be accessed 
on the SNF PPS Wage Index home page, at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/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.

[[Page 22045]]

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of Major Provisions
    C. Summary of Cost and Benefits
II. Background on SNF PPS
    A. Statutory Basis and Scope
    B. Initial Transition for the SNF PPS
    C. Required Annual Rate Updates
III. SNF PPS Rate Setting Methodology and FY 2016 Update
    A. Federal Base Rates
    B. SNF Market Basket Update
    1. SNF Market Basket Index
    2. Use of the SNF Market Basket Percentage
    3. Forecast Error Adjustment
    4. Multifactor Productivity Adjustment
    a. Incorporating the Multifactor Productivity Adjustment Into 
the Market Basket Update
    5. Market Basket Update Factor for FY 2016
    C. Case-Mix Adjustment
    D. Wage Index Adjustment
    E. Adjusted Rate Computation Example
IV. Additional Aspects of the SNF PPS
    A. SNF Level of Care--Administrative Presumption
    B. Consolidated Billing
    C. Payment for SNF-Level Swing-Bed Services
V. Other Issues
    A. Skilled Nursing Facility Value-Based Purchasing Program (SNF 
VBP)
    1. Background
    a. Overview
    b. SNF VBP Report to Congress
    2. Statutory Basis for the SNF VBP Program
    3. Skilled Nursing Facility 30-Day All-Cause Readmission Measure 
(SNFRM)
    a. Overview
    b. Measure Calculation
    c. Exclusions
    d. Eligible Readmissions
    e. Risk Adjustment
    f. Measurement Period
    g. Stakeholder/MAP Input
    h. Feedback Reports to SNFs
    4. Performance Standards
    a. Background
    i. Hospital Value Based Purchasing Program
    ii. Hospital-Acquired Conditions Reduction Program
    iii. Hospital Readmissions Reduction Program (HRRP)
    iv. End-Stage Renal Disease Quality Incentive Program (ESRD QIP)
    b. Measuring Improvement
    i. Improvement Points
    ii. Measure Rate Increases
    iii. Ranking Increases
    iv. Performance Score Increases
    5. FY 2019 Performance Period and Baseline Period Considerations
    a. Performance Period
    b. Baseline Period
    6. SNF Performance Scoring
    a. Considerations
    i. Hospital Value-Based Purchasing
    ii. Hospital-Acquired Conditions Reduction Program
    iii. Other Considerations
    b. Notification Procedures
    c. Exchange Function
    7. SNF Value-Based Incentive Payments
    8. SNF VBP Public Reporting
    a. SNF-specific Performance Information
    b. Aggregate Performance Information
    B. Advancing Health Information Exchange
    C. Skilled Nursing Facility (SNF) Quality Reporting Program 
(QRP)
    1. Background and Statutory Authority
    2. General Considerations Used for Selection of Quality Measures 
for the SNF QRP
    3. Policy for Retaining SNF QRP Measures for Future Payment 
Determinations
    4. Proposed Process for Adoption of Changes to SNF QRP Program 
Measures
    5. Proposed New Quality Measures for FY 2018 and Subsequent 
Payment Determinations
    a. Quality Measure Addressing the Domain of Skin Integrity and 
Changes in Skin Integrity
    b. Quality Measure Addressing the Domain of the Incidence of 
Major Falls
    c. Quality Measure Addressing the Domain of Functional Status, 
Cognitive Function, and Changes in Function and Cognitive Function
    6. SNF QRP Quality Measures and Under Consideration for Future 
Years
    7. Form, Manner, and Timing of Quality Data Submission
    a. Participation/Timing for New SNFs
    b. Data Collection Timelines and Requirements for FY 2018 
Payment Determination and Subsequent Years
    8. SNF QRP Data Completion Thresholds for FY 2018 Payment 
Determination and Subsequent Years
    9. SNF QRP Data Validation Requirements for the FY 2018 Payment 
Determination and Subsequent Years
    10. SNF QRP Submission Exception and Extension Requirements for 
the FY 2018 Payment Determination and Subsequent Years
    11. SNF QRP Reconsideration and Appeals Procedures for the FY 
2018 Payment Determination and Subsequent Years
    12. Public Display of Quality Measure Data for the SNF QRP
    13. Mechanism for Providing Feedback Reports to SNFs
    D. Staffing Data Collection
    1. Background and Statutory Authority
    2. Consultation on Specifications
    3. Provisions of the Proposed Rule
    a. Submission Requirements
    b. Distinguishing Employee From Agency and Contract Staff
    c. Data Format
    d. Submission Schedule
    4. Compliance and Enforcement
    5. Conclusion
VI. Collection of Information Requirements
VII. Response to Comments
VIII. Economic Analyses
Regulation Text

Acronyms

    In addition, because of the many terms to which we refer by acronym 
in this proposed rule, we are listing these abbreviations and their 
corresponding terms in alphabetical order below:

AIDS Acquired Immune Deficiency Syndrome
ARD Assessment reference date
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999, Pub. L. 106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Pub. L. 106-554
CAH Critical access hospital
CASPER Certification and Survey Provider Enhanced Reports
CBSA Core-based statistical area
CCN CMS Certification Number
CFR Code of Federal Regulations
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
COT Change of therapy
ECI Employment Cost Index
EHR Electronic health record
EOT End of therapy
EOT-R End of therapy--resumption
ESRD-QIP End-Stage Renal Disease Quality Incentive Program
FAQ Frequently Asked Questions
FFS Fee-for-service
FR Federal Register
FY Fiscal year
GAO Government Accountability Office
HAC Hospital-Acquired Conditions
HACRP Hospital-Acquired Condition Reduction Program
HCPCS Healthcare Common Procedure Coding System
HIQR Hospital Inpatient Quality Reporting
HOQR Hospital Outpatient Quality Reporting
HRRP Hospital Readmissions Reduction Program
HVBP Hospital Value-Based Purchasing
ICR Information Collection Requirements
IGI IHS (Information Handling Services) Global Insight, Inc.
IMPACT Improving Medicare Post-Acute Care Transformation Act of 2014
IPPS Inpatient prospective payment system
IRF Inpatient Rehabilitation Facility
LTC Long-term care
LTCH Long-term care hospital
MAP Measures Application Partnership
MDS Minimum data set
MFP Multifactor productivity
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Pub. L. 108-173
MSA Metropolitan statistical area
NAICS North American Industrial Classification System
NF Nursing facility
NH Nursing Homes
NQF National Quality Forum
OMB Office of Management and Budget
OMRA Other Medicare Required Assessment
PAC Post-acute care
PAMA Protecting Access to Medicare Act of 2014, Pub. L 113-93
PPS Prospective Payment System
PQRS Physician Quality Reporting System
QIES Quality Improvement Evaluation System
QIES ASAP Quality Improvement and Evaluation System Assessment 
Submission and Processing
QRP Quality Reporting Program

[[Page 22046]]

RAI Resident assessment instrument
RAVEN Resident assessment validation entry
RFA Regulatory Flexibility Act, Pub. L. 96-354
RIA Regulatory impact analysis
RUG-III Resource Utilization Groups, Version 3
RUG-IV Resource Utilization Groups, Version 4
RUG-53 Refined 53-Group RUG-III Case-Mix Classification System
SCHIP State Children's Health Insurance Program
sDTI Suspected deep tissue injuries
SNF Skilled nursing facility
SNFRM Skilled Nursing Facility 30-Day All-Cause Readmission Measure
STM Staff time measurement
STRIVE Staff time and resource intensity verification
TEP Technical expert panel
UMRA Unfunded Mandates Reform Act, Pub. L. 104-4
VBP Value-based purchasing

I. Executive Summary

A. Purpose

    This proposed rule would update the SNF prospective payment rates 
for FY 2016 as required under section 1888(e)(4)(E) of the Social 
Security Act (the Act). It would also respond to section 1888(e)(4)(H) 
of the Act, which requires the Secretary to provide for publication in 
the Federal Register before the August 1 that precedes the start of 
each fiscal year, certain specified information relating to the payment 
update (see section II.C.). In addition, it proposes to implement a new 
quality reporting program for SNFs under section 1888(e)(6) of the Act. 
Furthermore, this proposed rule would establish new regulatory 
reporting requirements for SNFs and NFs to implement the statutory 
obligation to submit staffing information based on payroll data under 
section 1128I(g) of the Act, specify a SNF all-cause all-condition 
hospital readmission measure under section 1888(g)(1) of the Act and 
adopt that measure for a new SNF value-based purchasing (VBP) program 
under section 1888(h) of the Act. The proposed rule also seeks comment 
on other policies under consideration for a SNF VBP Program, under 
which value-based incentive payments will be made in a fiscal year to 
SNFs beginning with payment for services furnished on or after October 
1, 2018.

B. Summary of Major Provisions

    In accordance with sections 1888(e)(4)(E)(ii)(IV) and 1888(e)(5) of 
the Act, the federal rates in this proposed rule would reflect an 
update to the rates that we published in the SNF PPS final rule for FY 
2015 (79 FR 45628) which reflects the SNF market basket index, as 
adjusted by the applicable forecast error correction and by the 
multifactor productivity adjustment for FY 2016. We also propose to 
specify a SNF all-cause all-condition hospital readmission measure 
under section 1888(g) of the Act, as well as adopt that measure for a 
new SNF Value-Based Purchasing (VBP) Program under section 1888(h) of 
the Act. We also seek comment on other policies for the SNF VBP Program 
that we are considering for adoption in future rulemaking to promote 
higher quality and more efficient health care for Medicare 
beneficiaries. We are also proposing to implement a new quality 
reporting program for SNFs under section 1888(e)(6) of the Act, which 
was added by section 2(c)(4) of the IMPACT Act of 2014 (Pub. L. 113-
85).
    For payment determinations beginning with FY 2018, we propose to 
adopt measures meeting three quality domains specified in section 
1899B(c)(1) of the Act: Functional status, skin integrity, and 
incidence of major falls.
    In addition, we propose adding new language at 42 CFR part 483 to 
implement section 1128I(g) of the Act. Specifically, we propose that, 
beginning on July 1, 2016, LTC facilities that participate in Medicare 
or Medicaid will be required to electronically submit direct care 
staffing information (including information for agency and contract 
staff) based on payroll and other verifiable and auditable data in a 
uniform format. We invite public comment on CMS' proposed changes to 42 
CFR part 483 to ensure compliance with this requirement.

C. Summary of Cost and Benefits

------------------------------------------------------------------------
    Provision description                   Total transfers
------------------------------------------------------------------------
Proposed FY 2016 SNF PPS       The overall economic impact of this
 payment rate update.           proposed rule would be an estimated
                                increase of $500 million in aggregate
                                payments to SNFs during FY 2016.
------------------------------------------------------------------------

II. Background on SNF PPS

A. Statutory Basis and Scope

    As amended by section 4432 of the Balanced Budget Act of 1997 (BBA, 
Pub. L. 105-33, enacted on August 5, 1997), section 1888(e) of the Act 
provides for the implementation of a PPS for SNFs. This methodology 
uses prospective, case-mix adjusted per diem payment rates applicable 
to all covered SNF services defined in section 1888(e)(2)(A) of the 
Act. The SNF PPS is effective for cost reporting periods beginning on 
or after July 1, 1998, and covers all costs of furnishing covered SNF 
services (routine, ancillary, and capital-related costs) other than 
costs associated with approved educational activities and bad debts. 
Under section 1888(e)(2)(A)(i) of the Act, covered SNF services include 
post-hospital extended care services for which benefits are provided 
under Part A, as well as those items and services (other than a small 
number of excluded services, such as physician services) for which 
payment may otherwise be made under Part B and which are furnished to 
Medicare beneficiaries who are residents in a SNF during a covered Part 
A stay. A comprehensive discussion of these provisions appears in the 
May 12, 1998 interim final rule (63 FR 26252). In addition, a detailed 
discussion of the legislative history of the SNF PPS is available 
online at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_07302013.pdf.
    Section 215(a) of PAMA added section 1888(g) to the Act requiring 
the Secretary to specify certain quality measures for the skilled 
nursing facility setting. Additionally, section 215(b) of PAMA added 
section 1888(h) to the Act requiring the Secretary to implement a 
value-based purchasing program for skilled nursing facilities. Finally, 
section 2(a) of the IMPACT Act added section 1899B to the Act that, 
among other things, requires SNFs to report standardized data for 
measures in specified quality and resource use domains. In addition, 
the IMPACT Act added section 1888(e)(6) to the Act, which requires the 
Secretary to implement a quality reporting program for SNFs, which 
includes a requirement that SNFs report certain data to receive their 
full payment under the SNF PPS.

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

[[Page 22047]]

transition extended through the facility's first three cost reporting 
periods under the PPS, up to and including the one that began in FY 
2001. Thus, the SNF PPS is no longer operating under the transition, as 
all facilities have been paid at the full federal rate effective with 
cost reporting periods beginning in FY 2002. As we now base payments 
for SNFs entirely on the adjusted federal per diem rates, we no longer 
include adjustment factors under the transition related to facility-
specific rates for the upcoming FY.

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 
2015 (79 FR 45628, August 5, 2014).
    Section 1888(e)(4)(H) of the Act specifies that we provide for 
publication annually in the Federal Register of the following:
    <bullet> The unadjusted federal per diem rates to be applied to 
days of covered SNF services furnished during the upcoming FY.
    <bullet> The case-mix classification system to be applied for these 
services during the upcoming FY.
    <bullet> The factors to be applied in making the area wage 
adjustment for these services.
    Along with other revisions discussed later in this preamble, this 
proposed rule would provide the required annual updates to the per diem 
payment rates for SNFs for FY 2016.

III. SNF PPS Rate Setting Methodology and FY 2016 Update

A. Federal Base Rates

    Under section 1888(e)(4) of the Act, the SNF PPS uses per diem 
federal payment rates based on mean SNF costs in a base year (FY 1995) 
updated for inflation to the first effective period of the PPS. We 
developed the federal payment rates using allowable costs from 
hospital-based and freestanding SNF cost reports for reporting periods 
beginning in FY 1995. The data used in developing the federal rates 
also incorporated a Part B add-on, which is an estimate of the amounts 
that, prior to the SNF PPS, would have been payable under Part B for 
covered SNF services furnished to individuals during the course of a 
covered Part A stay in a SNF.
    In developing the rates for the initial period, we updated costs to 
the first effective year of the PPS (the 15-month period beginning July 
1, 1998) using a SNF market basket index, and then standardized for 
geographic variations in wages and for the costs of facility 
differences in case mix. In compiling the database used to compute the 
federal payment rates, we excluded those providers that received new 
provider exemptions from the routine cost limits, as well as costs 
related to payments for exceptions to the routine cost limits. Using 
the formula that the BBA prescribed, we set the federal rates at a 
level equal to the weighted mean of freestanding costs plus 50 percent 
of the difference between the freestanding mean and weighted mean of 
all SNF costs (hospital-based and freestanding) combined. We computed 
and applied separately the payment rates for facilities located in 
urban and rural areas, and adjusted the portion of the federal rate 
attributable to wage-related costs by a wage index to reflect 
geographic variations in wages.

B. SNF Market Basket Update

1. SNF Market Basket Index
    Section 1888(e)(5)(A) of the Act requires us to establish a SNF 
market basket index that reflects changes over time in the prices of an 
appropriate mix of goods and services included in covered SNF services. 
Accordingly, we have developed a SNF market basket index that 
encompasses the most commonly used cost categories for SNF routine 
services, ancillary services, and capital-related expenses. We use the 
SNF market basket index, adjusted in the manner described below, to 
update the federal rates on an annual basis. In the SNF PPS final rule 
for FY 2014 (78 FR 47939 through 47946), we revised and rebased the 
market basket, which included updating the base year from FY 2004 to FY 
2010.
    For the FY 2016 proposed rule, the FY 2010-based SNF market basket 
growth rate is estimated to be 2.6 percent, which is based on the IHS 
Global Insight, Inc. (IGI) first quarter 2015 forecast with historical 
data through fourth quarter 2014. In section III.B.5. of this proposed 
rule, we discuss the specific application of this adjustment to the 
forthcoming annual update of the SNF PPS payment rates.
2. Use of the SNF Market Basket Percentage
    Section 1888(e)(5)(B) of the Act defines the SNF market basket 
percentage as the percentage change in the SNF market basket index from 
the midpoint of the previous FY to the midpoint of the current FY. For 
the federal rates set forth in this proposed rule, we use the 
percentage change in the SNF market basket index to compute the update 
factor for FY 2016. This is based on the IGI first quarter 2015 
forecast (with historical data through the fourth quarter 2014) of the 
FY 2016 percentage increase in the FY 2010-based SNF market basket 
index for routine, ancillary, and capital-related expenses, which is 
used to compute the update factor in this proposed rule. As discussed 
in sections III.B.3. and III.B.4. of this proposed rule, this market 
basket percentage change would be reduced by the applicable forecast 
error correction (as described in Sec.  413.337(d)(2)) and by the 
multifactor productivity adjustment as required by section 
1888(e)(5)(B)(ii) of the Act. Finally, as discussed in section II.B. of 
this proposed rule, we no longer compute update factors to adjust a 
facility-specific portion of the SNF PPS rates, because the initial 
three-phase transition period from facility-specific to full federal 
rates that started with cost reporting periods beginning in July 1998 
has expired.
3. Forecast Error Adjustment
    As discussed in the June 10, 2003 supplemental proposed rule (68 FR 
34768) and finalized in the August 4, 2003, final rule (68 FR 46057 
through 46059), the regulations at Sec.  413.337(d)(2) provide for an 
adjustment to account for market basket forecast error. The initial 
adjustment for market basket forecast error applied to the update of 
the FY 2003 rate for FY 2004, and took into account the cumulative 
forecast error for the period from FY 2000 through FY 2002, resulting 
in an increase of 3.26 percent to the FY 2004 update. Subsequent 
adjustments in succeeding FYs take into account the forecast error from 
the most recently available FY for which there is final data, and apply 
the difference between the forecasted and actual change in the market 
basket when the difference exceeds a specified threshold. We originally 
used a 0.25 percentage point threshold for this purpose; however, for 
the reasons specified in the FY 2008 SNF PPS final rule (72 FR 43425, 
August 3, 2007), we adopted a 0.5 percentage point threshold effective 
for FY 2008 and subsequent fiscal years. As we stated in the final rule 
for FY 2004 that first issued the market basket forecast error 
adjustment (68 FR 46058, August 4, 2003), the adjustment will reflect 
both upward and downward adjustments, as appropriate.
    For FY 2014 (the most recently available FY for which there is 
final data), the estimated increase in the market basket index was 2.3 
percentage points, while the actual increase for FY 2014 was 1.7 
percentage points, resulting in the actual increase being 0.6

[[Page 22048]]

percentage point lower than the estimated increase. Accordingly, as the 
difference between the estimated and actual amount of change in the 
market basket index exceeds the 0.5 percentage point threshold and 
because the estimated amount of change exceeded the actual amount of 
change, the FY 2016 market basket percentage change of 2.6 percent 
would be adjusted downward by the forecast error correction of 0.6 
percentage point, resulting in a SNF market basket increase of 2.0 
percent, before application of the productivity adjustment discussed in 
this section. Table 1 shows the forecasted and actual market basket 
amounts for FY 2014.

   Table 1--Difference Between the Forecasted and Actual Market Basket
                          Increases for FY 2014
------------------------------------------------------------------------
                                    Forecasted   Actual FY
              Index                  FY 2014        2014       FY 2014
                                    increase *  increase **   difference
------------------------------------------------------------------------
SNF..............................         2.3          1.7         -0.6
------------------------------------------------------------------------
* Published in Federal Register; based on second quarter 2013 IGI
  forecast (2010-based index).
** Based on the first quarter 2015 IGI forecast, with historical data
  through the fourth quarter 2014 (2010-based index).

4. Multifactor Productivity Adjustment
    Section 3401(b) of the Affordable Care Act requires that, in FY 
2012 (and in subsequent FYs), the market basket percentage under the 
SNF payment system as described in section 1888(e)(5)(B)(i) of the Act 
is to be reduced annually by the productivity adjustment described in 
section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) 
of the Act, added by section 3401(a) of the Affordable Care Act, sets 
forth the definition of this productivity adjustment. The statute 
defines the productivity adjustment to be equal to the 10-year moving 
average of changes in annual economy-wide private nonfarm business 
multi-factor productivity (as projected by the Secretary for the 10-
year period ending with the applicable fiscal year, year, cost-
reporting period, or other annual period) (the MFP adjustment). The 
Bureau of Labor Statistics (BLS) is the agency that publishes the 
official measure of private nonfarm business multifactor productivity 
(MFP). We refer readers to the BLS Web site 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. In 
section III.F.3. of the FY 2012 SNF PPS final rule (76 FR 48527 through 
48529), we identified each of the major MFP component series employed 
by the BLS to measure MFP as well as provided the corresponding 
concepts determined to be the best available proxies for the BLS 
series.
    Beginning with the FY 2016 rulemaking cycle, the MFP adjustment is 
calculated using a revised series developed by IGI to proxy the 
aggregate capital inputs. Specifically, IGI has replaced the Real 
Effective Capital Stock used for Full Employment GDP with a forecast of 
BLS aggregate capital inputs recently developed by IGI using a 
regression model. This series provides a better fit to the BLS capital 
inputs as measured by the differences between the actual BLS capital 
input growth rates and the estimated model growth rates over the 
historical time period. Therefore, we are using IGI's most recent 
forecast of the BLS capital inputs series in the MFP calculations 
beginning with the FY 2016 rulemaking cycle. A complete description of 
the MFP projection methodology is available on our Web site at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html. Although 
we discuss the IGI changes to the MFP proxy series in this proposed 
rule, in the future, when IGI makes changes to the MFP methodology, we 
will announce them on our Web site rather than in the annual 
rulemaking.
a. Incorporating the Multifactor Productivity Adjustment Into the 
Market Basket Update
    According to section 1888(e)(5)(A) of the Act, the Secretary shall 
establish a skilled nursing facility market basket index that reflects 
changes over time in the prices of an appropriate mix of goods and 
services included in covered skilled nursing facility services. Section 
1888(e)(5)(B)(ii) of the Act, added by section 3401(b) of the 
Affordable Care Act, requires that for FY 2012 and each subsequent FY, 
after determining the market basket percentage described in section 
1888(e)(5)(B)(i) of the Act, the Secretary shall reduce such percentage 
by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) (which we refer to as the MFP adjustment). 
Section 1888(e)(5)(B)(ii) of the Act further states that the reduction 
of the market basket percentage by the MFP adjustment may result in the 
market basket percentage being less than zero for a FY, and may result 
in payment rates under section 1888(e) of the Act for a FY being less 
than such payment rates for the preceding FY. Thus, if the application 
of the MFP adjustment to the market basket percentage calculated under 
section 1888(e)(5)(B)(i) of the Act results in an MFP-adjusted market 
basket percentage that is less than zero, then the annual update to the 
unadjusted federal per diem rates under section 1888(e)(4)(E)(ii) of 
the Act would be negative, and such rates would decrease relative to 
the prior FY.
    For the FY 2016 update, the MFP adjustment is calculated as the 10-
year moving average of changes in MFP for the period ending September 
30, 2016, which is 0.6 percent. Consistent with section 
1888(e)(5)(B)(i) of the Act and Sec.  413.337(d)(2) of the regulations, 
the market basket percentage for FY 2016 for the SNF PPS is based on 
IGI's first quarter 2015 forecast of the SNF market basket update (2.6 
percent) as adjusted by the forecast error adjustment (0.6 percentage 
point), and is estimated to be 2.0 percent. In accordance with section 
1888(e)(5)(B)(ii) of the Act (as added by section 3401(b) of the 
Affordable Care Act) and Sec.  413.337(d)(3), this market basket 
percentage is then reduced by the MFP adjustment (the 10-year moving 
average of changes in MFP for the period ending September 30, 2016) of 
0.6 percent, which is calculated as described above and based on IGI's 
first quarter 2015 forecast. The resulting MFP-adjusted SNF market 
basket update is equal to 1.4 percent, or 2.0 percent less 0.6 
percentage point.
5. Market Basket Update Factor for FY 2016
    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 2016 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, 2014 through September 30, 
2015 to the average market basket level for the period of October 1, 
2015 through September 30, 2016. This process yields a percentage 
change in the market basket of 2.6 percent.
    As further explained in section III.B.3. of this proposed rule, as 
applicable, we adjust the market basket percentage change by the 
forecast error from the most recently available FY for which

[[Page 22049]]

there is final data and apply this adjustment whenever the difference 
between the forecasted and actual percentage change in the market 
basket exceeds a 0.5 percentage point threshold. Since the forecasted 
FY 2014 SNF market basket percentage change exceeded the actual FY 2014 
SNF market basket percentage change (FY 2014 is the most recently 
available FY for which there is historical data) by more than 0.5 
percentage point, the FY 2016 market basket percentage change of 2.6 
percent would be adjusted downward by the applicable difference, which 
for FY 2014 is 0.6 percent.
    In addition, for FY 2016, section 1888(e)(5)(B)(ii) of the Act 
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, 2016) of 0.6 percent, as described in section 
III.B.4. of this proposed rule. The resulting net SNF market basket 
update would equal 1.4 percent, or 2.6 percent less the 0.6 percentage 
point forecast error adjustment, less the 0.6 percentage point MFP 
adjustment. We propose that if more recent data become available (for 
example, a more recent estimate of the FY 2010-based SNF market basket 
and/or MFP adjustment), we would use such data, if appropriate, to 
determine the FY 2016 SNF market basket percentage change, labor-
related share relative importance, forecast error adjustment, and MFP 
adjustment in the FY 2016 SNF PPS final rule.
    We used the SNF market basket, adjusted as described above, to 
adjust each per diem component of the federal rates forward to reflect 
the change in the average prices for FY 2016 from average prices for FY 
2015. We would further adjust the rates by a wage index budget 
neutrality factor, described later in this section. Tables 2 and 3 
reflect the updated components of the unadjusted federal rates for FY 
2016, prior to adjustment for case-mix.

                             Table 2--FY 2016 Unadjusted Federal Rate per Diem Urban
----------------------------------------------------------------------------------------------------------------
                                                                         Therapy--non-case-
       Rate component          Nursing--case-mix    Therapy--case-mix           mix              Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount.............             $171.46              $129.15               $17.01               $87.50
----------------------------------------------------------------------------------------------------------------


                             Table 3--FY 2016 Unadjusted Federal Rate per Diem Rural
----------------------------------------------------------------------------------------------------------------
                                                                         Therapy--non-case-
       Rate component          Nursing--case-mix    Therapy--case-mix           mix              Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount.............             $163.80              $148.91               $18.17               $89.12
----------------------------------------------------------------------------------------------------------------

C. Case-Mix Adjustment

    Under section 1888(e)(4)(G)(i) of the Act, the federal rate also 
incorporates an adjustment to account for facility case-mix, using a 
classification system that accounts for the relative resource 
utilization of different patient types. The statute specifies that the 
adjustment is to reflect both a resident classification system that the 
Secretary establishes to account for the relative resource use of 
different patient types, as well as resident assessment data and other 
data that the Secretary considers appropriate. In the interim final 
rule with comment period that initially implemented the SNF PPS (63 FR 
26252, May 12, 1998), we developed the RUG-III case-mix classification 
system, which tied the amount of payment to resident resource use in 
combination with resident characteristic information. Staff time 
measurement (STM) studies conducted in 1990, 1995, and 1997 provided 
information on resource use (time spent by staff members on residents) 
and resident characteristics that enabled us not only to establish RUG-
III, but also to create case-mix indexes (CMIs). The original RUG-III 
grouper logic was based on clinical data collected in 1990, 1995, and 
1997. As discussed in the SNF PPS proposed rule for FY 2010 (74 FR 
22208), we subsequently conducted a multi-year data collection and 
analysis under the Staff Time and Resource Intensity Verification 
(STRIVE) project to update the case-mix classification system for FY 
2011. The resulting Resource Utilization Groups, Version 4 (RUG-IV) 
case-mix classification system reflected the data collected in 2006-
2007 during the STRIVE project, and was finalized in the FY 2010 SNF 
PPS final rule (74 FR 40288) to take effect in FY 2011 concurrently 
with an updated new resident assessment instrument, version 3.0 of the 
Minimum Data Set (MDS 3.0), which collects the clinical data used for 
case-mix classification under RUG-IV.
    We note that case-mix classification is based, in part, on the 
beneficiary's need for skilled nursing care and therapy services. The 
case-mix classification system uses clinical data from the MDS to 
assign a case-mix group to each patient that is then used to calculate 
a per diem payment under the SNF PPS. As discussed in section IV.A. of 
this proposed rule, the clinical orientation of the case-mix 
classification system supports the SNF PPS's use of an administrative 
presumption that considers a beneficiary's initial case-mix 
classification to assist in making certain SNF level of care 
determinations. Further, because the MDS is used as a basis for 
payment, as well as a clinical assessment, we have provided extensive 
training on proper coding and the time frames for MDS completion in our 
Resident Assessment Instrument (RAI) Manual. For an MDS to be 
considered valid for use in determining payment, the MDS assessment 
must be completed in compliance with the instructions in the RAI Manual 
in effect at the time the assessment is completed. For payment and 
quality monitoring purposes, the RAI Manual consists of both the Manual 
instructions and the interpretive guidance and policy clarifications 
posted on the appropriate MDS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/MDS30RAIManual.html.
    In addition, we note that section 511 of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (MMA, Pub. L. 108-173) 
amended section 1888(e)(12) of the Act to provide for a temporary 
increase of 128 percent in the PPS per diem payment for any SNF 
residents with Acquired Immune Deficiency Syndrome (AIDS), effective 
with services furnished on or after October 1, 2004. This special add-
on for SNF residents with AIDS was to remain in effect until the 
Secretary certifies that there is an appropriate adjustment in the case 
mix to compensate for the increased costs associated with such

[[Page 22050]]

residents. The add-on for SNF residents with AIDS is also discussed in 
Program Transmittal #160 (Change Request #3291), issued on April 30, 
2004, which is available online at www.cms.gov/transmittals/downloads/r160cp.pdf. In the SNF PPS final rule for FY 2010 (74 FR 40288), we did 
not address the certification of the add-on for SNF residents with AIDS 
in that final rule's implementation of the case-mix refinements for 
RUG-IV, thus allowing the add-on payment required by section 511 of the 
MMA to remain in effect. For the limited number of SNF residents that 
qualify for this add-on, there is a significant increase in payments. 
For example, using FY 2013 data, we identified fewer than 4,800 SNF 
residents with a diagnosis code of 042 (Human Immunodeficiency Virus 
(HIV) Infection). For FY 2016, an urban facility with a resident with 
AIDS in RUG-IV group ``HC2'' would have a case-mix adjusted per diem 
payment of $428.57 (see Table 4) before the application of the MMA 
adjustment. After an increase of 128 percent, this urban facility would 
receive a case-mix adjusted per diem payment of approximately $977.14.
    Currently, we use the International Classification of Diseases, 9th 
revision, Clinical Modification (ICD-9-CM) code 042 to identify those 
residents for whom it is appropriate to apply the AIDS add-on 
established by section 511 of the MMA. In this context, we note that 
the Department published a final rule in the September 5, 2012 Federal 
Register (77 FR 54664) which requires us to stop using ICD-9-CM on 
September 30, 2014, and begin using the International Classification of 
Diseases, 10th revision, Clinical Modification (ICD-10-CM), on October 
1, 2014. Regarding the above-referenced ICD-9-CM diagnosis code of 042, 
in the FY 2014 SNF PPS proposed rule (78 FR 26444, May 6, 2013), we 
proposed to transition to the equivalent ICD-10-CM diagnosis code of 
B20 upon the overall conversion to ICD-10-CM on October 1, 2014, and we 
subsequently finalized that proposal in the FY 2014 SNF PPS final rule 
(78 FR 47951 through 47952).
    However, on April 1, 2014, the Protecting Access to Medicare Act of 
2014 (PAMA) (Pub. L. 113-93) was enacted. Section 212 of PAMA, titled 
``Delay in Transition from ICD-9 to ICD-10 Code Sets,'' provides that 
the Secretary of Health and Human Services may not, prior to October 1, 
2015, adopt ICD-10 code sets as the standard for code sets under 
section 1173(c) of the Act (42 U.S.C. 1320d-2(c)) and section 162.1002 
of title 45, Code of Federal Regulations. In the FY 2015 SNF PPS final 
rule (79 FR 45633), we stated that the Department expected to release 
an interim final rule in the near future that would include a new 
compliance date that would require the use of ICD-10 beginning October 
1, 2015. In light of this, in the FY 2015 SNF PPS final rule, we stated 
that the effective date of the change from ICD-9-CM code 042 to ICD-10-
CM code B20 for purposes of applying the AIDS add-on is October 1, 
2015, and that until that time we would continue to use the ICD-9-CM 
code 042 for this purpose. On August 4, 2014, the U.S. Department of 
Health and Human Services released a final rule in the Federal Register 
(79 FR 45128 through 45134) that included a new compliance date that 
requires the use of ICD-10 beginning October 1, 2015. The August 4, 
2014 final rule is available for viewing on the Internet at http://www.gpo.gov/fdsys/pkg/FR-2014-08-04/pdf/2014-18347.pdf. That final rule 
also requires HIPAA covered entities to continue to use ICD-9-CM 
through September 30, 2015. Thus, as we finalized in the FY 2015 SNF 
PPS final rule, the effective date of the change from ICD-9-CM code 042 
to ICD-10-CM code B20 for the purpose of applying the AIDS add-on 
enacted by section 511 of the MMA is October 1, 2015.
    Under section 1888(e)(4)(H), each update of the payment rates must 
include the case-mix classification methodology applicable for the 
upcoming FY. The payment rates set forth in this proposed rule reflect 
the use of the RUG-IV case-mix classification system from October 1, 
2015, through September 30, 2016. We list the proposed case-mix 
adjusted RUG-IV payment rates, provided separately for urban and rural 
SNFs, in Tables 4 and 5 with corresponding case-mix 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. These tables do not reflect the add-on for SNF residents with 
AIDS enacted by section 511 of the MMA, which we apply only after 
making all other adjustments (such as wage index and case-mix).

                                         TABLE 4--RUG-IV Case-Mix Adjusted Federal Rates and Associated Indexes
                                                                          URBAN
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Non-case     Non-case
                       RUG-IV Category                           Nursing      Therapy      Nursing      Therapy    mix therapy      mix       Total rate
                                                                  index        index      component    component       comp      component
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUX..........................................................         2.67         1.87      $457.80      $241.51  ...........       $87.50      $786.81
RUL..........................................................         2.57         1.87       440.65       241.51  ...........        87.50       769.66
RVX..........................................................         2.61         1.28       447.51       165.31  ...........        87.50       700.32
RVL..........................................................         2.19         1.28       375.50       165.31  ...........        87.50       628.31
RHX..........................................................         2.55         0.85       437.22       109.78  ...........        87.50       634.50
RHL..........................................................         2.15         0.85       368.64       109.78  ...........        87.50       565.92
RMX..........................................................         2.47         0.55       423.51        71.03  ...........        87.50       582.04
RML..........................................................         2.19         0.55       375.50        71.03  ...........        87.50       534.03
RLX..........................................................         2.26         0.28       387.50        36.16  ...........        87.50       511.16
RUC..........................................................         1.56         1.87       267.48       241.51  ...........        87.50       596.49
RUB..........................................................         1.56         1.87       267.48       241.51  ...........        87.50       596.49
RUA..........................................................         0.99         1.87       169.75       241.51  ...........        87.50       498.76
RVC..........................................................         1.51         1.28       258.90       165.31  ...........        87.50       511.71
RVB..........................................................         1.11         1.28       190.32       165.31  ...........        87.50       443.13
RVA..........................................................         1.10         1.28       188.61       165.31  ...........        87.50       441.42
RHC..........................................................         1.45         0.85       248.62       109.78  ...........        87.50       445.90
RHB..........................................................         1.19         0.85       204.04       109.78  ...........        87.50       401.32
RHA..........................................................         0.91         0.85       156.03       109.78  ...........        87.50       353.31
RMC..........................................................         1.36         0.55       233.19        71.03  ...........        87.50       391.72
RMB..........................................................         1.22         0.55       209.18        71.03  ...........        87.50       367.71

[[Page 22051]]

 
RMA..........................................................         0.84         0.55       144.03        71.03  ...........        87.50       302.56
RLB..........................................................         1.50         0.28       257.19        36.16  ...........        87.50       380.85
RLA..........................................................         0.71         0.28       121.74        36.16  ...........        87.50       245.40
ES3..........................................................         3.58  ...........       613.83  ...........        17.01        87.50       718.34
ES2..........................................................         2.67  ...........       457.80  ...........        17.01        87.50       562.31
ES1..........................................................         2.32  ...........       397.79  ...........        17.01        87.50       502.30
HE2..........................................................         2.22  ...........       380.64  ...........        17.01        87.50       485.15
HE1..........................................................         1.74  ...........       298.34  ...........        17.01        87.50       402.85
HD2..........................................................         2.04  ...........       349.78  ...........        17.01        87.50       454.29
HD1..........................................................         1.60  ...........       274.34  ...........        17.01        87.50       378.85
HC2..........................................................         1.89  ...........       324.06  ...........        17.01        87.50       428.57
HC1..........................................................         1.48  ...........       253.76  ...........        17.01        87.50       358.27
HB2..........................................................         1.86  ...........       318.92  ...........        17.01        87.50       423.43
HB1..........................................................         1.46  ...........       250.33  ...........        17.01        87.50       354.84
LE2..........................................................         1.96  ...........       336.06  ...........        17.01        87.50       440.57
LE1..........................................................         1.54  ...........       264.05  ...........        17.01        87.50       368.56
LD2..........................................................         1.86  ...........       318.92  ...........        17.01        87.50       423.43
LD1..........................................................         1.46  ...........       250.33  ...........        17.01        87.50       354.84
LC2..........................................................         1.56  ...........       267.48  ...........        17.01        87.50       371.99
LC1..........................................................         1.22  ...........       209.18  ...........        17.01        87.50       313.69
LB2..........................................................         1.45  ...........       248.62  ...........        17.01        87.50       353.13
LB1..........................................................         1.14  ...........       195.46  ...........        17.01        87.50       299.97
CE2..........................................................         1.68  ...........       288.05  ...........        17.01        87.50       392.56
CE1..........................................................         1.50  ...........       257.19  ...........        17.01        87.50       361.70
CD2..........................................................         1.56  ...........       267.48  ...........        17.01        87.50       371.99
CD1..........................................................         1.38  ...........       236.61  ...........        17.01        87.50       341.12
CC2..........................................................         1.29  ...........       221.18  ...........        17.01        87.50       325.69
CC1..........................................................         1.15  ...........       197.18  ...........        17.01        87.50       301.69
CB2..........................................................         1.15  ...........       197.18  ...........        17.01        87.50       301.69
CB1..........................................................         1.02  ...........       174.89  ...........        17.01        87.50       279.40
CA2..........................................................         0.88  ...........       150.88  ...........        17.01        87.50       255.39
CA1..........................................................         0.78  ...........       133.74  ...........        17.01        87.50       238.25
BB2..........................................................         0.97  ...........       166.32  ...........        17.01        87.50       270.83
BB1..........................................................         0.90  ...........       154.31  ...........        17.01        87.50       258.82
BA2..........................................................         0.70  ...........       120.02  ...........        17.01        87.50       224.53
BA1..........................................................         0.64  ...........       109.73  ...........        17.01        87.50       214.24
PE2..........................................................         1.50  ...........       257.19  ...........        17.01        87.50       361.70
PE1..........................................................         1.40  ...........       240.04  ...........        17.01        87.50       344.55
PD2..........................................................         1.38  ...........       236.61  ...........        17.01        87.50       341.12
PD1..........................................................         1.28  ...........       219.47  ...........        17.01        87.50       323.98
PC2..........................................................         1.10  ...........       188.61  ...........        17.01        87.50       293.12
PC1..........................................................         1.02  ...........       174.89  ...........        17.01        87.50       279.40
PB2..........................................................         0.84  ...........       144.03  ...........        17.01        87.50       248.54
PB1..........................................................         0.78  ...........       133.74  ...........        17.01        87.50       238.25
PA2..........................................................         0.59  ...........       101.16  ...........        17.01        87.50       205.67
PA1..........................................................         0.54  ...........        92.59  ...........        17.01        87.50       197.10
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                         TABLE 5--RUG-IV Case-Mix Adjusted Federal Rates and Associated Indexes
                                                                          RURAL
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Non-case     Non-case
                       RUG-IV Category                           Nursing      Therapy      Nursing      Therapy    mix therapy      mix       Total rate
                                                                  index        index      component    component       comp      component
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUX..........................................................         2.67         1.87      $437.35      $278.46  ...........       $89.12      $804.93
RUL..........................................................         2.57         1.87       420.97       278.46  ...........        89.12       788.55
RVX..........................................................         2.61         1.28       427.52       190.60  ...........        89.12       707.24
RVL..........................................................         2.19         1.28       358.72       190.60  ...........        89.12       638.44
RHX..........................................................         2.55         0.85       417.69       126.57  ...........        89.12       633.38
RHL..........................................................         2.15         0.85       352.17       126.57  ...........        89.12       567.86
RMX..........................................................         2.47         0.55       404.59        81.90  ...........        89.12       575.61
RML..........................................................         2.19         0.55       358.72        81.90  ...........        89.12       529.74
RLX..........................................................         2.26         0.28       370.19        41.69  ...........        89.12       501.00
RUC..........................................................         1.56         1.87       255.53       278.46  ...........        89.12       623.11
RUB..........................................................         1.56         1.87       255.53       278.46  ...........        89.12       623.11
RUA..........................................................         0.99         1.87       162.16       278.46  ...........        89.12       529.74
RVC..........................................................         1.51         1.28       247.34       190.60  ...........        89.12       527.06
RVB..........................................................         1.11         1.28       181.82       190.60  ...........        89.12       461.54

[[Page 22052]]

 
RVA..........................................................         1.10         1.28       180.18       190.60  ...........        89.12       459.90
RHC..........................................................         1.45         0.85       237.51       126.57  ...........        89.12       453.20
RHB..........................................................         1.19         0.85       194.92       126.57  ...........        89.12       410.61
RHA..........................................................         0.91         0.85       149.06       126.57  ...........        89.12       364.75
RMC..........................................................         1.36         0.55       222.77        81.90  ...........        89.12       393.79
RMB..........................................................         1.22         0.55       199.84        81.90  ...........        89.12       370.86
RMA..........................................................         0.84         0.55       137.59        81.90  ...........        89.12       308.61
RLB..........................................................         1.50         0.28       245.70        41.69  ...........        89.12       376.51
RLA..........................................................         0.71         0.28       116.30        41.69  ...........        89.12       247.11
ES3..........................................................         3.58  ...........       586.40  ...........       $18.17        89.12       693.69
ES2..........................................................         2.67  ...........       437.35  ...........        18.17        89.12       544.64
ES1..........................................................         2.32  ...........       380.02  ...........        18.17        89.12       487.31
HE2..........................................................         2.22  ...........       363.64  ...........        18.17        89.12       470.93
HE1..........................................................         1.74  ...........       285.01  ...........        18.17        89.12       392.30
HD2..........................................................         2.04  ...........       334.15  ...........        18.17        89.12       441.44
HD1..........................................................         1.60  ...........       262.08  ...........        18.17        89.12       369.37
HC2..........................................................         1.89  ...........       309.58  ...........        18.17        89.12       416.87
HC1..........................................................         1.48  ...........       242.42  ...........        18.17        89.12       349.71
HB2..........................................................         1.86  ...........       304.67  ...........        18.17        89.12       411.96
HB1..........................................................         1.46  ...........       239.15  ...........        18.17        89.12       346.44
LE2..........................................................         1.96  ...........       321.05  ...........        18.17        89.12       428.34
LE1..........................................................         1.54  ...........       252.25  ...........        18.17        89.12       359.54
LD2..........................................................         1.86  ...........       304.67  ...........        18.17        89.12       411.96
LD1..........................................................         1.46  ...........       239.15  ...........        18.17        89.12       346.44
LC2..........................................................         1.56  ...........       255.53  ...........        18.17        89.12       362.82
LC1..........................................................         1.22  ...........       199.84  ...........        18.17        89.12       307.13
LB2..........................................................         1.45  ...........       237.51  ...........        18.17        89.12       344.80
LB1..........................................................         1.14  ...........       186.73  ...........        18.17        89.12       294.02
CE2..........................................................         1.68  ...........       275.18  ...........        18.17        89.12       382.47
CE1..........................................................         1.50  ...........       245.70  ...........        18.17        89.12       352.99
CD2..........................................................         1.56  ...........       255.53  ...........        18.17        89.12       362.82
CD1..........................................................         1.38  ...........       226.04  ...........        18.17        89.12       333.33
CC2..........................................................         1.29  ...........       211.30  ...........        18.17        89.12       318.59
CC1..........................................................         1.15  ...........       188.37  ...........        18.17        89.12       295.66
CB2..........................................................         1.15  ...........       188.37  ...........        18.17        89.12       295.66
CB1..........................................................         1.02  ...........       167.08  ...........        18.17        89.12       274.37
CA2..........................................................         0.88  ...........       144.14  ...........        18.17        89.12       251.43
CA1..........................................................         0.78  ...........       127.76  ...........        18.17        89.12       235.05
BB2..........................................................         0.97  ...........       158.89  ...........        18.17        89.12       266.18
BB1..........................................................         0.90  ...........       147.42  ...........        18.17        89.12       254.71
BA2..........................................................         0.70  ...........       114.66  ...........        18.17        89.12       221.95
BA1..........................................................         0.64  ...........       104.83  ...........        18.17        89.12       212.12
PE2..........................................................         1.50  ...........       245.70  ...........        18.17        89.12       352.99
PE1..........................................................         1.40  ...........       229.32  ...........        18.17        89.12       336.61
PD2..........................................................         1.38  ...........       226.04  ...........        18.17        89.12       333.33
PD1..........................................................         1.28  ...........       209.66  ...........        18.17        89.12       316.95
PC2..........................................................         1.10  ...........       180.18  ...........        18.17        89.12       287.47
PC1..........................................................         1.02  ...........       167.08  ...........        18.17        89.12       274.37
PB2..........................................................         0.84  ...........       137.59  ...........        18.17        89.12       244.88
PB1..........................................................         0.78  ...........       127.76  ...........        18.17        89.12       235.05
PA2..........................................................         0.59  ...........        96.64  ...........        18.17        89.12       203.93
PA1..........................................................         0.54  ...........        88.45  ...........        18.17        89.12       195.74
--------------------------------------------------------------------------------------------------------------------------------------------------------

D. Wage Index Adjustment

    Section 1888(e)(4)(G)(ii) of the Act requires that we adjust the 
federal rates to account for differences in area wage levels, using a 
wage index that the Secretary determines appropriate. Since the 
inception of the SNF PPS, we have used hospital inpatient wage data in 
developing a wage index to be applied to SNFs. We propose to continue 
this practice for FY 2016, as we continue to believe that in the 
absence of SNF-specific wage data, using the hospital inpatient wage 
index data is appropriate and reasonable for the SNF PPS. As explained 
in the update notice for FY 2005 (69 FR 45786), the SNF PPS does not 
use the hospital area wage index's occupational mix adjustment, as this 
adjustment serves specifically to define the occupational categories 
more clearly in a hospital setting; moreover, the collection of the 
occupational wage data also excludes any wage data related to SNFs. 
Therefore, we believe that using the updated wage data exclusive of the 
occupational mix adjustment continues to be appropriate for SNF 
payments. For FY 2016, the updated wage data are for hospital cost 
reporting periods beginning on or after October 1, 2011 and before 
October 1, 2012 (FY 2012 cost report data).
    We note that section 315 of the Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection

[[Page 22053]]

Act of 2000 (BIPA, Pub. L. 106-554, enacted on December 21, 2000) 
authorized us to establish a geographic reclassification procedure that 
is specific to SNFs, but only after collecting the data necessary to 
establish a SNF wage index that is based on wage data from nursing 
homes. However, to date, this has proven to be unfeasible due to the 
volatility of existing SNF wage data and the significant amount of 
resources that would be required to improve the quality of that data.
    In addition, we propose 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 2016 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 2016, 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 2016, the only urban area without wage 
index data available is CBSA 25980, Hinesville-Fort Stewart, GA. The 
proposed wage index applicable to FY 2016 is set forth in Table A 
available on the CMS Web site at http://cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.
    Once calculated, we would apply the wage index adjustment to the 
labor-related portion of the federal rate. Each year, we calculate a 
revised labor-related share, based on the relative importance of labor-
related cost categories (that is, those cost categories that are labor-
intensive and vary with the local labor market) in the input price 
index. In the SNF PPS final rule for FY 2014 (78 FR 47944 through 
47946), we finalized a proposal to revise the labor-related share to 
reflect the relative importance of the revised FY 2010-based SNF market 
basket cost weights for the following cost categories: Wages and 
salaries; employee benefits; the labor-related portion of nonmedical 
professional fees; administrative and facilities support services; all 
other--labor-related 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 2016. 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 2016 than the base year weights 
from the SNF market basket.
    We calculate the labor-related relative importance for FY 2016 in 
four steps. First, we compute the FY 2016 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 
2016 price index level for that cost category by the total market 
basket price index level. Third, we determine the FY 2016 relative 
importance for each cost category by multiplying this ratio by the base 
year (FY 2010) weight. Finally, we add the FY 2016 relative importance 
for each of the labor-related cost categories (wages and salaries, 
employee benefits, the labor-related portion of non-medical 
professional fees, administrative and facilities support services, all 
other: labor-related services, and a portion of capital-related 
expenses) to produce the FY 2016 labor-related relative importance. 
Table 6 summarizes the proposed updated labor-related share for FY 
2016, compared to the labor-related share that was used for the FY 2015 
SNF PPS final rule.
    We are proposing for FY 2016 and subsequent fiscal years, to report 
and apply the SNF PPS labor-related share at a tenth of a percentage 
point (rather than at a thousandth of a percentage point) consistent 
with the manner in which we report and apply the market basket update 
percentage under the SNF PPS and the IPPS and the manner in which we 
report and apply the IPPS labor-related share. The level of precision 
specified for the IPPS labor-related share is three decimal places or a 
tenth of a percentage point (0.696 or 69.6 percent), which we believe 
provides a reasonable level of precision. We believe it is appropriate 
to maintain such consistency across all payment systems so that the 
level of precision specified is both reasonable and similar for all 
providers. We invite public comments on this proposal.

                         Table 6--Labor-Related Relative Importance, FY 2015 and FY 2016
----------------------------------------------------------------------------------------------------------------
                                                                  Relative importance,     Relative importance,
                                                                 labor-related, FY 2015   labor-related, FY 2016
                                                                   14:2 forecast \1\        15:1 forecast \2\
----------------------------------------------------------------------------------------------------------------
Wages and salaries............................................                   48.816                     48.9
Employee benefits.............................................                   11.365                     11.4
Nonmedical Professional fees: labor-related...................                    3.450                      3.4
Administrative and facilities support services................                    0.502                      0.5
All Other: Labor-related services.............................                    2.276                      2.3
Capital-related (.391)........................................                    2.771                      2.7
                                                               -------------------------------------------------
    Total.....................................................                   69.180                     69.2
----------------------------------------------------------------------------------------------------------------
\1\ Published in the Federal Register; based on second quarter 2014 IGI forecast.
\2\ Based on first quarter 2015 IGI forecast, with historical data through fourth quarter 2014.

    Tables 7 and 8 show the RUG-IV case-mix adjusted federal rates by 
labor-related and non-labor-related components.

[[Page 22054]]



         Table 7--RUG-IV Case-Mix Adjusted Federal Rates for Urban SNFs by Labor and Non-Labor Component
----------------------------------------------------------------------------------------------------------------
                    RUG-IV category                          Total rate       Labor portion    Non-labor portion
----------------------------------------------------------------------------------------------------------------
RUX....................................................             786.81            $544.47            $242.34
RUL....................................................             769.66             532.60             237.06
RVX....................................................             700.32             484.62             215.70
RVL....................................................             628.31             434.79             193.52
RHX....................................................             634.50             439.07             195.43
RHL....................................................             565.92             391.62             174.30
RMX....................................................             582.04             402.77             179.27
RML....................................................             534.03             369.55             164.48
RLX....................................................             511.16             353.72             157.44
RUC....................................................             596.49             412.77             183.72
RUB....................................................             596.49             412.77             183.72
RUA....................................................             498.76             345.14             153.62
RVC....................................................             511.71             354.10             157.61
RVB....................................................             443.13             306.65             136.48
RVA....................................................             441.42             305.46             135.96
RHC....................................................             445.90             308.56             137.34
RHB....................................................             401.32             277.71             123.61
RHA....................................................             353.31             244.49             108.82
RMC....................................................             391.72             271.07             120.65
RMB....................................................             367.71             254.46             113.25
RMA....................................................             302.56             209.37              93.19
RLB....................................................             380.85             263.55             117.30
RLA....................................................             245.40             169.82              75.58
ES3....................................................             718.34             497.09             221.25
ES2....................................................             562.31             389.12             173.19
ES1....................................................             502.30             347.59             154.71
HE2....................................................             485.15             335.72             149.43
HE1....................................................             402.85             278.77             124.08
HD2....................................................             454.29             314.37             139.92
HD1....................................................             378.85             262.16             116.69
HC2....................................................             428.57             296.57             132.00
HC1....................................................             358.27             247.92             110.35
HB2....................................................             423.43             293.01             130.42
HB1....................................................             354.84             245.55             109.29
LE2....................................................             440.57             304.87             135.70
LE1....................................................             368.56             255.04             113.52
LD2....................................................             423.43             293.01             130.42
LD1....................................................             354.84             245.55             109.29
LC2....................................................             371.99             257.42             114.57
LC1....................................................             313.69             217.07              96.62
LB2....................................................             353.13             244.37             108.76
LB1....................................................             299.97             207.58              92.39
CE2....................................................             392.56             271.65             120.91
CE1....................................................             361.70             250.30             111.40
CD2....................................................             371.99             257.42             114.57
CD1....................................................             341.12             236.06             105.06
CC2....................................................             325.69             225.38             100.31
CC1....................................................             301.69             208.77              92.92
CB2....................................................             301.69             208.77              92.92
CB1....................................................             279.40             193.34              86.06
CA2....................................................             255.39             176.73              78.66
CA1....................................................             238.25             164.87              73.38
BB2....................................................             270.83             187.41              83.42
BB1....................................................             258.82             179.10              79.72
BA2....................................................             224.53             155.37              69.16
BA1....................................................             214.24             148.25              65.99
PE2....................................................             361.70             250.30             111.40
PE1....................................................             344.55             238.43             106.12
PD2....................................................             341.12             236.06             105.06
PD1....................................................             323.98             224.19              99.79
PC2....................................................             293.12             202.84              90.28
PC1....................................................             279.40             193.34              86.06
PB2....................................................             248.54             171.99              76.55
PB1....................................................             238.25             164.87              73.38
PA2....................................................             205.67             142.32              63.35
PA1....................................................             197.10             136.39              60.71
----------------------------------------------------------------------------------------------------------------


         Table 8--RUG-IV Case-Mix Adjusted Federal Rates for Rural SNFs by Labor and Non-Labor Component
----------------------------------------------------------------------------------------------------------------
                    RUG-IV category                          Total rate       Labor portion    Non-labor portion
----------------------------------------------------------------------------------------------------------------
RUX....................................................             804.93            $557.01            $247.92

[[Page 22055]]

 
RUL....................................................             788.55             545.68             242.87
RVX....................................................             707.24             489.41             217.83
RVL....................................................             638.44             441.80             196.64
RHX....................................................             633.38             438.30             195.08
RHL....................................................             567.86             392.96             174.90
RMX....................................................             575.61             398.32             177.29
RML....................................................             529.74             366.58             163.16
RLX....................................................             501.00             346.69             154.31
RUC....................................................             623.11             431.19             191.92
RUB....................................................             623.11             431.19             191.92
RUA....................................................             529.74             366.58             163.16
RVC....................................................             527.06             364.73             162.33
RVB....................................................             461.54             319.39             142.15
RVA....................................................             459.90             318.25             141.65
RHC....................................................             453.20             313.61             139.59
RHB....................................................             410.61             284.14             126.47
RHA....................................................             364.75             252.41             112.34
RMC....................................................             393.79             272.50             121.29
RMB....................................................             370.86             256.64             114.22
RMA....................................................             308.61             213.56              95.05
RLB....................................................             376.51             260.54             115.97
RLA....................................................             247.11             171.00              76.11
ES3....................................................             693.69             480.03             213.66
ES2....................................................             544.64             376.89             167.75
ES1....................................................             487.31             337.22             150.09
HE2....................................................             470.93             325.88             145.05
HE1....................................................             392.30             271.47             120.83
HD2....................................................             441.44             305.48             135.96
HD1....................................................             369.37             255.60             113.77
HC2....................................................             416.87             288.47             128.40
HC1....................................................             349.71             242.00             107.71
HB2....................................................             411.96             285.08             126.88
HB1....................................................             346.44             239.74             106.70
LE2....................................................             428.34             296.41             131.93
LE1....................................................             359.54             248.80             110.74
LD2....................................................             411.96             285.08             126.88
LD1....................................................             346.44             239.74             106.70
LC2....................................................             362.82             251.07             111.75
LC1....................................................             307.13             212.53              94.60
LB2....................................................             344.80             238.60             106.20
LB1....................................................             294.02             203.46              90.56
CE2....................................................             382.47             264.67             117.80
CE1....................................................             352.99             244.27             108.72
CD2....................................................             362.82             251.07             111.75
CD1....................................................             333.33             230.66             102.67
CC2....................................................             318.59             220.46              98.13
CC1....................................................             295.66             204.60              91.06
CB2....................................................             295.66             204.60              91.06
CB1....................................................             274.37             189.86              84.51
CA2....................................................             251.43             173.99              77.44
CA1....................................................             235.05             162.65              72.40
BB2....................................................             266.18             184.20              81.98
BB1....................................................             254.71             176.26              78.45
BA2....................................................             221.95             153.59              68.36
BA1....................................................             212.12             146.79              65.33
PE2....................................................             352.99             244.27             108.72
PE1....................................................             336.61             232.93             103.68
PD2....................................................             333.33             230.66             102.67
PD1....................................................             316.95             219.33              97.62
PC2....................................................             287.47             198.93              88.54
PC1....................................................             274.37             189.86              84.51
PB2....................................................             244.88             169.46              75.42
PB1....................................................             235.05             162.65              72.40
PA2....................................................             203.93             141.12              62.81
PA1....................................................             195.74             135.45              60.29
----------------------------------------------------------------------------------------------------------------

    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

[[Page 22056]]

adjustment had not been made. For FY 2016 (federal rates effective 
October 1, 2014), we would apply an adjustment to fulfill the budget 
neutrality requirement. 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 2015 to the weighted average wage adjustment 
factor for FY 2016. For this calculation, we use the same FY 2014 
claims utilization data for both the numerator and denominator of this 
ratio. We define the wage adjustment factor used in this calculation as 
the labor share of the rate component multiplied by the wage index plus 
the non-labor share of the rate component. The budget neutrality factor 
for FY 2016 would be 0.9989.
    In the SNF PPS final rule for FY 2006 (70 FR 45026, August 4, 
2005), we adopted the changes discussed in the OMB Bulletin No. 03-04 
(June 6, 2003), available online at www.whitehouse.gov/omb/bulletins/b03-04.html, which announced revised definitions for MSAs and the 
creation of micropolitan statistical areas and combined statistical 
areas.
    In adopting the CBSA geographic designations, we provided for a 
one-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 one-year transition on 
September 30, 2006, we have used the full CBSA-based wage index values.
    On February 28, 2013, OMB issued OMB Bulletin No. 13-01, announcing 
revisions to the delineation of MSAs, Micropolitan Statistical Areas, 
and Combined Statistical Areas, and guidance on uses of the delineation 
of these areas. A copy of this bulletin is available online at http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. 
This bulletin states that it provides the delineations of all 
Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan 
Statistical Areas, Combined Statistical Areas, and New England City and 
Town Areas in the United States and Puerto Rico based on the standards 
published on June 28, 2010, in the Federal Register (75 FR 37246-37252) 
and Census Bureau data.
    While the revisions OMB published on February 28, 2013 are not as 
sweeping as the changes made when we adopted the CBSA geographic 
designations for FY 2006, the February 28, 2013 bulletin does contain a 
number of significant changes. For example, there are new CBSAs, urban 
counties that became rural, rural counties that became urban, and 
existing CBSAs that were split apart.
    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. Because the 1-year transition period expires at the end of FY 
2015, the proposed SNF PPS wage index for FY 2016 is fully based on the 
revised OMB delineations adopted in FY 2015. As noted above, the 
proposed wage index applicable to FY 2016 is set forth in Table A 
available on the CMS Web site at http://cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.

E. Adjusted Rate Computation Example

    Using the hypothetical SNF XYZ described below, Table 9 shows the 
adjustments made to the federal per diem rates to compute the 
provider's actual per diem PPS payment. We derive the Labor and Non-
labor columns from Table 7. The wage index used in this example is 
based on the proposed wage index, which may be found in Table A as 
referenced above. As illustrated in Table 9, SNF XYZ's total PPS 
payment would equal $45,462.10.

                                                       Table 9--Adjusted Rate Computation Example
                                                  SNF XYZ: Located in Frederick, MD (Urban CBSA 43524)
                                                                   Wage Index: 0.9681
                                                        [See Proposed Wage Index in Table A] \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Adjusted                  Adjusted     Percent      Medicare
                  RUG-IV Group                       Labor      Wage index     labor      Non-labor       rate      adjustment      days       Payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
RVX.............................................      $484.62       0.9681      $469.16      $215.70      $684.86      $684.86           14    $9,588.04
ES2.............................................       389.12       0.9681       376.71       173.19       549.90       549.90           30    16,497.00
RHA.............................................       244.49       0.9681       236.69       108.82       345.51       345.51           16     5,528.16
CC2*............................................       225.38       0.9681       218.19       100.31       318.50       726.18           10     7,261.80
BA2.............................................       155.37       0.9681       150.41        69.16       219.57       219.57           30     6,587.10
 
                                                                                                                                        100    45,462.10
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Reflects a 128 percent adjustment from section 511 of the MMA.
\1\ Available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.

IV. Additional Aspects of the SNF PPS

A. SNF Level of Care--Administrative Presumption

    The establishment of the SNF PPS did not change Medicare's 
fundamental requirements for SNF coverage. However, because the case-
mix classification is based, in part, on the beneficiary's need for 
skilled nursing care and therapy, we have attempted, where possible, to 
coordinate claims review procedures with the existing resident 
assessment process and case-mix classification system discussed in 
section III.C. of this proposed rule. This approach includes an 
administrative presumption that utilizes a beneficiary's initial 
classification in one of the upper 52 RUGs of the 66-group RUG-IV case-
mix classification system to assist in making certain SNF level of care 
determinations.
    In accordance with section 1888(e)(4)(H)(ii) of the Act and the 
regulations at Sec.  413.345, we include in each update of the federal 
payment rates in the Federal Register the designation of those specific 
RUGs under the classification system that represent the required SNF 
level of care, as provided in Sec.  409.30. As set forth in the FY 2011 
SNF PPS update notice (75 FR 42910), this designation reflects an 
administrative presumption under the

[[Page 22057]]

66-group RUG-IV system that beneficiaries who are correctly assigned to 
one of the upper 52 RUG-IV groups on the initial five-day, Medicare-
required assessment are automatically classified as meeting the SNF 
level of care definition up to and including the assessment reference 
date on the five-day Medicare-required assessment.
    A beneficiary assigned to any of the lower 14 RUG-IV groups is not 
automatically classified as either meeting or not meeting the 
definition, but instead receives an individual level of care 
determination using the existing administrative criteria. This 
presumption recognizes the strong likelihood that beneficiaries 
assigned to one of the upper 52 RUG-IV groups during the immediate 
post-hospital period require a covered level of care, which would be 
less likely for those beneficiaries assigned to one of the lower 14 
RUG-IV groups.
    In the July 30, 1999 final rule (64 FR 41670), we indicated that we 
would announce any changes to the guidelines for Medicare level of care 
determinations related to modifications in the case-mix classification 
structure. In this proposed rule, we would continue to designate the 
upper 52 RUG-IV groups for purposes of this administrative presumption, 
consisting of all groups encompassed by the following RUG-IV 
categories:
    <bullet> Rehabilitation plus Extensive Services.
    <bullet> Ultra High Rehabilitation.
    <bullet> Very High Rehabilitation.
    <bullet> High Rehabilitation.
    <bullet> Medium Rehabilitation.
    <bullet> Low Rehabilitation.
    <bullet> Extensive Services.
    <bullet> Special Care High.
    <bullet> Special Care Low.
    <bullet> Clinically Complex.
    However, we note that this administrative presumption policy does 
not supersede the SNF's responsibility to ensure that its decisions 
relating to level of care are appropriate and timely, including a 
review to confirm that the services prompting the beneficiary's 
assignment to one of the upper 52 RUG-IV groups (which, in turn, serves 
to trigger the administrative presumption) are themselves medically 
necessary. As we explained in the FY 2000 SNF PPS final rule (64 FR 
41667), the administrative presumption:

. . . is itself rebuttable in those individual cases in which the 
services actually received by the resident do not meet the basic 
statutory criterion of being reasonable and necessary to diagnose or 
treat a beneficiary's condition (according to section 1862(a)(1) of 
the Act). Accordingly, the presumption would not apply, for example, 
in those situations in which a resident's assignment to one of the 
upper . . . groups is itself based on the receipt of services that 
are subsequently determined to be not reasonable and necessary.

Moreover, we want to stress the importance of careful monitoring for 
changes in each patient's condition to determine the continuing need 
for Part A SNF benefits after the assessment reference date of the 5-
day assessment.

B. Consolidated Billing

    Sections 1842(b)(6)(E) and 1862(a)(18) of the Act (as added by 
section 4432(b) of the BBA) require a SNF to submit consolidated 
Medicare bills to its Medicare Administrative Contractor for almost all 
of the services that its residents receive during the course of a 
covered Part A stay. In addition, section 1862(a)(18) places the 
responsibility with the SNF for billing Medicare for physical therapy, 
occupational therapy, and speech-language pathology services that the 
resident receives during a noncovered stay. Section 1888(e)(2)(A) of 
the Act excludes a small list of services from the consolidated billing 
provision (primarily those services furnished by physicians and certain 
other types of practitioners), which remain separately billable under 
Part B when furnished to a SNF's Part A resident. These excluded 
service categories are discussed in greater detail in section V.B.2. of 
the May 12, 1998 interim final rule (63 FR 26295 through 26297).
    A detailed discussion of the legislative history of the 
consolidated billing provision is available on the SNF PPS Web site at 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_07302013.pdf. In particular, section 103 
of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999 (BBRA) (Pub. L. 106-113, enacted on November 29, 1999) amended 
section 1888(e)(2)(A) of the Act by further excluding a number of 
individual high-cost, low probability services, identified by 
Healthcare Common Procedure Coding System (HCPCS) codes, within several 
broader categories (chemotherapy items, chemotherapy administration 
services, radioisotope services, and customized prosthetic devices) 
that otherwise remained subject to the provision. We discuss this BBRA 
amendment in greater detail in the SNF PPS proposed and final rules for 
FY 2001 (65 FR 19231 through 19232, April 10, 2000, and 65 FR 46790 
through 46795, July 31, 2000), as well as in Program Memorandum AB-00-
18 (Change Request #1070), issued March 2000, which is available online 
at www.cms.gov/transmittals/downloads/ab001860.pdf.
    As explained in the FY 2001 proposed rule (65 FR 19232), the 
amendments enacted in section 103 of the BBRA not only identified for 
exclusion from this provision a number of particular service codes 
within four specified categories (that is, chemotherapy items, 
chemotherapy administration services, radioisotope services, and 
customized prosthetic devices), but also gave the Secretary the 
authority to designate additional, individual services for exclusion 
within each of the specified service categories. In the proposed rule 
for FY 2001, we also noted that the BBRA Conference report (H.R. Rep. 
No. 106-479 at 854 (1999) (Conf. Rep.)) characterizes the individual 
services that this legislation targets for exclusion as high-cost, low 
probability events that could have devastating financial impacts 
because their costs far exceed the payment SNFs receive under the 
prospective payment system. According to the conferees, section 103(a) 
of the BBRA is an attempt to exclude from the PPS certain services and 
costly items that are provided infrequently in SNFs. By contrast, we 
noted that the Congress declined to designate for exclusion any of the 
remaining services within those four categories (thus, leaving all of 
those services subject to SNF consolidated billing), because they are 
relatively inexpensive and are furnished routinely in SNFs.
    As we further explained in the final rule for FY 2001 (65 FR 
46790), and as our longstanding policy, any additional service codes 
that we might designate for exclusion under our discretionary authority 
must meet the same statutory criteria used in identifying the original 
codes excluded from consolidated billing under section 103(a) of the 
BBRA: They must fall within one of the four service categories 
specified in the BBRA; and they also must meet the same standards of 
high cost and low probability in the SNF setting, as discussed in the 
BBRA Conference report. Accordingly, we characterized this statutory 
authority to identify additional service codes for exclusion as 
essentially affording the flexibility to revise the list of excluded 
codes in response to changes of major significance that may occur over 
time (for example, the development of new medical technologies or other 
advances in the state of medical practice) (65 FR 46791). In this 
proposed rule, we specifically invite public comments identifying HCPCS 
codes in any of these four service categories (chemotherapy items, 
chemotherapy administration services, radioisotope services, and

[[Page 22058]]

customized prosthetic devices) representing recent medical advances 
that might meet our criteria for exclusion from SNF consolidated 
billing. We may consider excluding a particular service if it meets our 
criteria for exclusion as specified above. Commenters should identify 
in their comments the specific HCPCS code that is associated with the 
service in question, as well as their rationale for requesting that the 
identified HCPCS code(s) be excluded.
    We note that the original BBRA amendment (as well as the 
implementing regulations) identified a set of excluded services by 
means of specifying HCPCS codes that were in effect as of a particular 
date (in that case, as of July 1, 1999). Identifying the excluded 
services in this manner made it possible for us to utilize program 
issuances as the vehicle for accomplishing routine updates of the 
excluded codes, to reflect any minor revisions that might subsequently 
occur in the coding system itself (for example, the assignment of a 
different code number to the same service). Accordingly, in the event 
that we identify through the current rulemaking cycle any new services 
that would actually represent a substantive change in the scope of the 
exclusions from SNF consolidated billing, we would identify these 
additional excluded services by means of the HCPCS codes that are in 
effect as of a specific date (in this case, as of October 1, 2015). By 
making any new exclusions in this manner, we could similarly accomplish 
routine future updates of these additional codes through the issuance 
of program instructions.

C. Payment for SNF-Level Swing-Bed Services

    Section 1883 of the Act permits certain small, rural hospitals to 
enter into a Medicare swing-bed agreement, under which the hospital can 
use its beds to provide either acute- or SNF-level care, as needed. For 
critical access hospitals (CAHs), Part A pays on a reasonable cost 
basis for SNF-level services furnished under a swing-bed agreement. 
However, in accordance with section 1888(e)(7) of the Act, these 
services furnished by non-CAH rural hospitals are paid under the SNF 
PPS, effective with cost reporting periods beginning on or after July 
1, 2002. As explained in the FY 2002 final rule (66 FR 39562), this 
effective date is consistent with the statutory provision to integrate 
swing-bed rural hospitals into the SNF PPS by the end of the transition 
period, June 30, 2002.
    Accordingly, all non-CAH swing-bed rural hospitals have now come 
under the SNF PPS. Therefore, all rates and wage indexes outlined in 
earlier sections of this proposed rule for the SNF PPS also apply to 
all non-CAH swing-bed rural hospitals. A complete discussion of 
assessment schedules, the MDS, and the transmission software (RAVEN-SB 
for Swing Beds) appears in the FY 2002 final rule (66 FR 39562) and in 
the FY 2010 final rule (74 FR 40288). As finalized in the FY 2010 SNF 
PPS final rule (74 FR 40356-57), effective October 1, 2010, non-CAH 
swing-bed rural hospitals are required to complete an MDS 3.0 swing-bed 
assessment which is limited to the required demographic, payment, and 
quality items. The latest changes in the MDS for swing-bed rural 
hospitals appear on the SNF PPS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html.

V. Other Issues

A. Skilled Nursing Facility Value-Based Purchasing Program (SNF VBP 
Program)

1. Background
a. Overview
    In recent years, we have undertaken a number of initiatives to 
promote higher quality and more efficient health care for Medicare 
beneficiaries. These initiatives, which include demonstration projects, 
quality reporting programs, and value-based purchasing programs, have 
been implemented in various health care settings, including physician 
offices, ambulatory surgical centers (ASCs), hospitals, nursing homes, 
home health agencies (HHAs), and dialysis facilities. Many of these 
programs link a portion of Medicare payments to provider reporting or 
performance on quality measures. The overarching goal of these 
initiatives is to transform Medicare from a passive payer of claims to 
an active purchaser of quality health care for its beneficiaries.
    We view value-based purchasing as an important step toward 
revamping how care is paid for, moving increasingly toward rewarding 
better value, outcomes, and innovations instead of merely volume.
b. SNF VBP Report to Congress
    Section 3006(a) of the Affordable Care Act required the Secretary 
to develop a plan to implement a value-based purchasing program under 
the Medicare program for SNFs (as defined in section 1819(a) of the 
Act) and to submit that plan to Congress. In developing the plan, this 
section required the Secretary to consider several issues, including 
the ongoing development, selection, and modification process for 
measures, the reporting, collection, and validation of quality data, 
the structure of value-based payment adjustments, methods for public 
disclosure of SNF performance, and any other issues determined 
appropriate by the Secretary. The Secretary was also required to 
consult with relevant affected parties and consider experience with 
demonstrations relevant to the SNF VBP Program.
    HHS submitted the Report to Congress required under section 3006 of 
the Affordable Care Act in March 2012. The report explains that a 
significant number of elderly Americans receive care in SNFs/NFs, 
either as short-term post-acute care or as long-term custodial care, 
and that quality of care is a significant concern for a subset of SNFs/
NFs. The report also states that the SNF PPS does not strongly 
incentivize SNFs to furnish high quality care to this very fragile 
patient population. The report concludes that if HHS harnesses the 
significant and growing purchasing power of Medicare in this sector, it 
can incentivize SNFs to improve the quality of care for their patients.
    In the report, we explained our belief that the implementation of a 
SNF VBP Program is a central step in revamping Medicare's payments for 
health care services to reward better value, outcome, and innovations, 
rather than the volume of care. We also explained our belief that a SNF 
VBP Program should promote the development and use of robust quality 
measures, including measures that assess functional status, to promote 
timely, safe, and high-quality care for Medicare beneficiaries. We 
noted that the creation of a SNF VBP Program would align with numerous 
HHS and CMS efforts to improve care coordination, and would be 
consistent with the National Quality Strategy and its aims of Better 
Care, Healthy People and Communities, and Affordable Care.
    The full report is available on our Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/SNF-VBP-RTC.pdf.
2. Statutory Basis for the SNF VBP Program
    Section 215 of PAMA added sections 1888(g) and (h) to the Act. 
Section 1888(g)(1) of the Act requires the Secretary to specify a 
skilled nursing facility all-cause all-condition hospital readmission 
measure (or any successor to such a measure) not later than

[[Page 22059]]

October 1, 2015. Section 1888(g)(2) of the Act requires the Secretary 
to specify an all-condition risk-adjusted potentially preventable 
hospital readmission rate for SNFs not later than October 1, 2016. 
Section 1888(g)(3) of the Act directs the Secretary to develop a 
methodology to achieve high reliability and validity for these 
measures, especially for SNFs with a low volume of readmissions. 
Section 1888(g)(4) of the Act makes the pre-rulemaking Measure 
Applications Partnership process of Section 1890A of the Act optional 
for these measures. Under section 1888(g)(5) of the Act, the Secretary 
is directed to provide quarterly confidential feedback reports to SNFs 
on their performance on the readmission or resource use measure 
beginning on October 1, 2016. Under section 1888(g)(6) of the Act, not 
later than October 1, 2017, the Secretary must establish procedures for 
making performance data on readmission and resource use measures public 
on Nursing Home Compare or a successor Web site. That paragraph also 
requires that the procedures ensure that a SNF has the opportunity to 
review and submit corrections to the information that is to be made 
public for it before that information is made public.
    Section 1888(h)(1)(A) of the Act requires the Secretary to 
establish a SNF value-based purchasing program under which value-based 
incentive payments are made in a fiscal year to SNFs, and section 
1888(h)(1)(B) of the Act requires that the Program apply to payments 
for services furnished on or after October 1, 2018. Under section 
1888(h)(2)(A) of the Act, the Secretary must apply the readmission 
measure specified under section 1888(g)(1) of the Act for purposes of 
the Program, and section 1888(h)(1)(B) of the Act requires the 
Secretary to apply the resource use measure specified under section 
1888(g)(2) of the Act instead of the readmission measure specified 
under section 1888(g)(1) as soon as practicable. Sections 1888(h)(3)(A) 
and (B) of the Act require the Secretary to establish performance 
standards for the measure applied under section 1888(h)(2) of the Act 
for a performance period for a fiscal year and that those performance 
standards include levels of achievement and improvement. In addition, 
in calculating the SNF performance score for the measure under the 
Program, section 1888(h)(3)(B) of the Act requires the Secretary to use 
the higher of achievement or improvement scores. Further, the 
performance standards established under section 1888(h)(3) of the Act 
must, under section 1888(h)(3)(C), be established and announced by the 
Secretary not later than 60 days prior to the beginning of the 
performance period for the fiscal year involved.
    Section 1888(h)(4) of the Act directs the Secretary to develop a 
methodology to assess each SNF's total performance based on the 
performance standards for the applicable measure for each performance 
period. Under section 1888(h)(4)(B) of the Act, SNF performance scores 
for the performance period for each fiscal year must be ranked from low 
to high.
    Section 1888(h)(5) of the Act outlines several requirements for 
value-based incentive payments under the SNF VBP Program. Under section 
1888(h)(5)(A) of the Act, the Secretary is directed to increase the 
adjusted federal per diem rate determined under section 1888(e)(4)(G) 
for services furnished by a skilled nursing facility by the value-based 
incentive payment amount determined under section 1888(h)(5)(B). This 
section also directs that the value-based incentive payment amount be 
equal to the product of the adjusted federal per diem rate and the 
value-based incentive payment percentage specified under section 
1888(h)(5)(C) of the Act for the SNF for the fiscal year. Section 
1888(h)(5)(C) requires the Secretary to specify a value-based incentive 
payment percentage for a SNF for a fiscal year, which may include a 
zero percentage. The Secretary is further directed under section 
1888(h)(5)(C) to ensure that such percentage is based on the SNF 
performance score for the performance period for the fiscal year, that 
the application of all such percentages in a fiscal year results in an 
appropriate distribution of value-based incentive payments, and that 
the total amount of value-based incentive payments for all SNFs for a 
fiscal year be greater than or equal to 50 percent, but not greater 
than 70 percent, of the total amount of the reductions to payments for 
the fiscal year under section 1888(h)(6), as estimated by the 
Secretary.
    Section 1888(h)(6) of the Act requires the Secretary to reduce the 
adjusted federal per diem rate for SNFs otherwise applicable to each 
SNF for services furnished by that SNF during the applicable fiscal 
year by the applicable percent, which is defined in paragraph (b) as 
two percent for FY 2019 and subsequent years. Section 1888(h)(7) of the 
Act requires the Secretary to inform each SNF of its payment 
adjustments under the Program not later than 60 days prior to the 
fiscal year involved, and under section 1888(h)(8) of the Act, the 
value-based incentive payments calculated for a fiscal year apply only 
for that fiscal year.
    Section 1888(h)(9)(A) of the Act requires the Secretary to publish 
SNF-specific performance information on the Nursing Home Compare Web 
site or a successor Web site, including SNF performance scores and 
rankings. Section 1888(h)(9)(B) of the Act requires the Secretary to 
post aggregate information on the SNF VBP Program, including the range 
of SNF performance scores and the number of SNFs receiving value-based 
incentive payments and the range and total amount of those payments.
3. Skilled Nursing Facility 30-Day All-Cause Readmission Measure 
(SNFRM) (NQF #2510; Measure Steward: CMS)
a. Overview
    Reducing hospital readmissions is important for quality of care and 
patient safety. Readmission to a hospital may be an adverse event for 
patients and in many cases imposes a financial burden on the health 
care system. Successful efforts to reduce preventable readmission rates 
will improve the quality of care furnished to beneficiaries while 
simultaneously decreasing the cost of that care. Hospitals and other 
health care providers can work with their communities to lower 
readmission rates and improve patient care in a number of ways, such as 
by ensuring that patients are clinically ready to be discharged, 
reducing infection risk, reconciling medications, improving 
communication with community providers responsible for post-discharge 
patient care, improving care transitions, and ensuring that patients 
understand their care plans upon discharge.
    Many studies have demonstrated the effectiveness of these types of 
in-hospital and post-discharge interventions in reducing the risk of 
readmission, confirming that hospitals and their partners have the 
ability to lower readmission rates.<SUP>1 2 3</SUP> These types of 
efforts during and after a hospitalization have been shown to be 
effective in reducing readmission rates

[[Page 22060]]

in geriatric populations generally,<SUP>4 5</SUP> as well as for 
multiple specific conditions. Moreover, such interventions can result 
in cost saving. Financial incentives to reduce readmissions will in 
turn promote improvement in care transitions and care coordination, as 
these are important means of reducing preventable readmissions.\6\ In 
its 2007 Report to Congress on Promoting Better Efficiency in 
Medicare,\7\ MedPAC noted the potential benefit to patients of lowering 
readmissions and suggested payment strategies that would incentivize 
hospitals to reduce these rates. Readmission rates are important 
markers of quality of care, particularly of the care of a patient in 
transition from an acute care setting to a non-acute care setting, and 
improving readmissions can positively influence patient outcomes and 
the cost of care.
---------------------------------------------------------------------------

    \1\ Gwadry-Sridhar FH, Flintoft V, Lee DS, Lee H, Guyatt GH: A 
systematic review and meta-analysis of studies comparing readmission 
rates and mortality rates in patients with heart failure. Arch 
Intern Med. 2004;164(21):2315-2320.
    \2\ McAlister FA, Lawson FM, Teo KK, Armstrong PW.: A systematic 
review of randomized trials of disease management programs in heart 
failure. AmJMed. 2001;110(5):378-384.
    \3\ Krumholz HM, Amatruda J, Smith GL, et al.: Randomized trial 
of an education and support intervention to prevent readmission of 
patients with heart failure. J Am Coll Cardiol. 2002;39(1):83-89.
    \4\ Coleman EA, Parry C, Chalmers S, Min SJ.: The care 
transitions intervention: Results of a randomized controlled trial. 
Arch Intern Med. 2006;166:1822-8.
    \5\ Naylor MD, Brooten D, Campbell R, Jacobsen BS, Mezey MD, 
Pauly MV, Schwartz JS.: Comprehensive discharge planning and home 
follow-up of hospitalized elders: A randomized clinical trial. JAMA. 
1999;281:613-20. 186
    \6\ Coleman EA.: 2005. Background Paper on Transitional Care 
Performance Measurement. Appendix I. In: Institute of Medicine, 
Performance Measurement: Accelerating Improvement. Washington, DC: 
National Academy Press.
    \7\ Medicare Payment Advisory Commission (MedPAC). Report to 
Congress: Promoting Greater Efficiency in Medicare; 2007. Available 
at http://www.medpac.gov/documents/Jun07_EntireReport.pdf. Accessed 
January 10, 2011.
---------------------------------------------------------------------------

    We are proposing to specify the Skilled Nursing Facility 30-Day 
All-Cause Readmission Measure (SNFRM) (NQF #2510) as the skilled 
nursing facility all-cause, all-condition hospital readmission measure 
under section 1888(g)(1) of the Act. This measure assesses the risk-
standardized rate of all-cause, all-condition, unplanned inpatient 
hospital readmissions of Medicare fee-for-service (FFS) SNF patients 
within 30 days of discharge from an admission to an inpatient 
prospective payment system (IPPS) hospital, critical access hospital 
(CAH), or psychiatric hospital. This measure is claims-based, requiring 
no additional data collection or submission burden for SNFs.
    We are also proposing to apply this measure for purposes of the SNF 
VBP Program under section 1888(h)(2)(A) of the Act. We believe that 
this measure will (1) incentivize SNFs to make quality improvements 
that result in successful transitions of care for patients discharged 
from the hospital (IPPS, CAH or psychiatric hospital) setting to a SNF, 
and subsequently to the community or to another post-acute care 
setting, (2) reduce unplanned readmission rates of these patients to 
hospitals; and (3) align the SNF VBP Program with the National Quality 
Strategy priorities of safer, better coordinated care and lower 
costs.\8\
---------------------------------------------------------------------------

    \8\ Wilson, N. U.S. Department of Health and Human Services, 
Agency for Healthcare Research and Quality. (2014). National quality 
strategy: Overview.
---------------------------------------------------------------------------

    We developed this measure based upon the NQF-endorsed Hospital-Wide 
All-Cause Unplanned Readmission Measure (HWR) (NQF #1789) (http://www.qualityforum.org/QPS/1789) \9\ implemented in the Hospital 
Inpatient Quality Reporting Program. To the extent methodologically and 
clinically appropriate, we harmonized the SNFRM with the HWR measure 
specifications.
---------------------------------------------------------------------------

    \9\ Adopted for the Hospital IQR Program in the FY 2013 IPPS/
LTCH PPS Final Rule (77 FR 53521 through 53528).
---------------------------------------------------------------------------

b. Measure Calculation
    The SNFRM estimates the risk-standardized rate of all-cause, 
unplanned, hospital readmissions for SNF Medicare FFS beneficiaries 
within 30 days of discharge from their prior proximal acute 
hospitalization. The SNF admission must have occurred within one day 
after discharge from the prior proximal hospitalization. The prior 
proximal hospitalization is defined as an inpatient admission to an 
IPPS, CAH, or a psychiatric hospital. Because the measure denominator 
is based on SNF admissions, each Medicare beneficiary may be included 
in the measure multiple times within a given year if they have more 
than one SNF stay meeting all measure inclusion criteria including a 
prior proximal hospitalization.
    Patient readmissions included in the measure are identified by 
examining Medicare claims data for readmissions of SNF Medicare FFS 
beneficiaries to an IPPS hospital or CAH occurring within 30 days of 
discharge from the prior proximal hospitalization. If the patient was 
admitted to the SNF within 1 day of discharge from the prior proximal 
hospitalization and the hospital readmission occurred within the 30-day 
risk window, it is counted in the numerator regardless of whether the 
patient is readmitted directly from the SNF or has been discharged from 
the SNF. Because patients differ in complexity and morbidity, the 
measure is risk-adjusted for patient case-mix. The measure also 
excludes planned readmissions, because these are not considered to be 
indicative of poor quality of care by the SNF. Details regarding how 
readmissions are identified are available in our SNFRM Technical 
Report.\10\
---------------------------------------------------------------------------

    \10\ Available on the Nursing Home Quality Initiative Web site 
at https://www.cms.gov/Medicare/Quality-nitiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/index.html?redirect=/nursinghomequalityinits/.
---------------------------------------------------------------------------

    The SNFRM (NQF # 2510) assesses readmission rates while accounting 
for patient demographics, principal diagnosis in the prior 
hospitalization, comorbidities, and other patient factors. While 
estimating the predictive power of patient characteristics, the model 
also estimates a facility-specific effect common to patients treated at 
that SNF.
    The SNFRM is calculated based on the ratio, for each SNF, of the 
number of risk-adjusted all-cause, unplanned readmissions to an IPPS 
hospital or CAH that occurred within 30 days of discharge from the 
prior proximal hospitalization, including the estimated facility 
effect, to the estimated number of risk-adjusted predicted unplanned 
inpatient hospital readmissions for the same patients treated at the 
average SNF. A ratio above 1.0 indicates a higher than expected 
readmission rate, or lower level of quality, while a ratio below 1.0 
indicates a lower than expected readmission rate, or higher level of 
quality. This ratio is referred to as the standardized risk ratio or 
SRR. The SRR is then multiplied by the overall national raw readmission 
rate for all SNF stays. The resulting rate is the risk-standardized 
readmission rate (RSRR). The full methodology is detailed in the SNFRM 
Technical Report.
    The patient population includes SNF patients who:
    <bullet> Had a prior hospital discharge (IPPS, CAH or psychiatric 
hospital) within one day of their admission to a SNF.
    <bullet> Had at least 12 months of Medicare Part A, FFS coverage 
prior to their discharge date from the prior proximal hospitalization.
    <bullet> Had Medicare Part A, FFS coverage during the 30 days (the 
30-day risk window) following their discharge date from the prior 
proximal hospitalization.
c. Exclusions
    Patients whose prior proximal hospitalization was for the medical 
treatment for cancer are excluded. Analyses of this population during 
measure development showed them to have a different trajectory of 
illness and mortality than other patient populations, which is 
consistent with

[[Page 22061]]

findings in studies in other patient populations.\11\
---------------------------------------------------------------------------

    \11\ National Quality Forum. ``Patient Outcomes: All-Cause 
Readmissions Expedited Review 2011''. July 2012. pp12.
---------------------------------------------------------------------------

    SNF stays excluded from the measure are:
    <bullet> SNF stays where the patient had one or more intervening 
post-acute care (PAC) admissions (inpatient rehabilitation facility 
(IRF), long-term care hospital (LTCH), or another SNF) which occurred 
either between the prior proximal hospital discharge and SNF admission 
(from which the patient was readmitted) or after the SNF discharge but 
before the readmission, within the 30-day risk window.
    <bullet> SNF stays with a gap of greater than 1 day between 
discharge from the prior proximal hospitalization and the SNF 
admission.
    <bullet> SNF stays in which the patient was discharged from the SNF 
against medical advice (AMA).
    <bullet> SNF stays in which the principal diagnosis for the prior 
proximal hospitalization was for rehabilitation care; fitting of 
prostheses and for the adjustment of devices.
    <bullet> SNF stays in which the prior proximal hospitalization was 
for pregnancy.
    <bullet> SNF stays in which data were missing on any variable used 
in the SNFRM construction.
    Readmissions within the 30-day risk window that are usually 
considered planned due to the nature of the procedures and principal 
diagnoses of the readmission are also excluded from the measure. In 
addition to the list of planned procedures is a list of diagnoses 
(provided in the SNFRM Technical Report), which, if found as the 
principal diagnosis on the readmission claim, would indicate that the 
usually planned procedure occurred during an unplanned acute 
readmission. In addition to the HWR Planned Readmission Algorithm, the 
SNFRM incorporates procedures that are considered planned in post-acute 
care settings as identified in consultation with technical expert 
panels. Full details on the planned readmissions criteria used, 
including the additional procedures considered planned for post-acute 
care may be found in the SNFRM Technical Report. Details regarding the 
TEP proceedings can be found in the SNFRM TEP Report.
d. Eligible Readmissions
    An eligible SNF admission is considered to be in the 30-day risk 
window from the date of discharge from the proximal acute 
hospitalization until: (1) The 30-day period ends; or (2) the patient 
is readmitted to an IPPS hospital or CAH. If the readmission is 
unplanned, it is counted as a readmission in the numerator of the 
measure. If the readmission is planned, the readmission is not counted 
in the numerator of the measure. The occurrence of a planned 
readmission ends further tracking for readmissions in the 30-day risk 
window.
e. Risk Adjustment
    Readmission rates are risk-adjusted for patient case-mix 
characteristics, independent of quality. The risk adjustment modeling 
estimates the effects of patient characteristics, comorbidities, and 
select health status variables on the probability of readmission. More 
specifically, the risk-adjustment model for SNFs accounts for 
demographic characteristics (age and sex), principal diagnosis during 
the prior proximal hospitalization, comorbidities based on the 
secondary medical diagnoses listed on the patient's prior proximal 
hospital claim and diagnoses from prior hospitalizations that occurred 
in the previous 365 days, length of stay during the patient's prior 
proximal hospitalization, length of stay in the intensive care unit 
(ICU), body system specific surgical indicators, end-stage renal 
disease status, whether the patient was disabled, and the number of 
prior hospitalizations in the previous 365 days.
f. Measurement Period
    The SNFRM utilizes 1 year of data to calculate the measure rate. 
Given that there are more than 2 million Medicare FFS SNF admissions 
per year in more than 15,000 SNFs, 1 year of data is sufficient to 
calculate this measure with a model in which the risk adjusters have 
sufficient sample size to have good precision. The relevant reliability 
testing may be found in the SNFRM Technical Report.
g. Stakeholder/MAP Input
    Our measure development contractor convened a technical expert 
panel (TEP) which provided input on the technical specifications of 
this quality measure. The TEP was supportive of the design of this 
measure. We also solicited stakeholder feedback on the development of 
this measure through a public comment process from July 15th to 29th, 
2013. In December 2014, the NQF endorsed the Skilled Nursing Facility 
30-Day All-Cause Readmission Measure (NQF #2510).
    We also considered input from the Measures Application Partnership 
(MAP) when selecting measures under the CMS SNF VBP Program. The MAP is 
composed of multi-stakeholder groups convened by the NQF, our current 
contractor under section 1890(a) of the Act. The MAP has noted the need 
for care transition measures in PAC/Long term care (LTC) performance 
measurement programs and stated that setting-specific admission and 
readmission measures under consideration would address this need.\12\ 
We included the SNFRM on the December 1, 2014 List of Measures under 
Consideration (MUC List), and the MAP supported the measure. A 
spreadsheet of MAP's 2015 Final Recommendations is available at NQF's 
Web site at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78711.
---------------------------------------------------------------------------

    \12\ National Quality Forum. Measure Applications Partnership 
Pre-Rulemaking Report: 2013 Recommendations of Measures Under 
Consideration by HHS: February 2013. Available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738.
---------------------------------------------------------------------------

    We invite public comment on our proposal to adopt the Skilled 
Nursing Facility 30-Day All-Cause Readmission Measure (SNFRM) (NQF 
#2510) for use in the SNF VBP Program.
h. Feedback Reports to SNFs
    Section 1888(g)(5) of the Act requires that beginning October 1, 
2016, SNFs be provided quarterly confidential feedback reports on their 
performance on measures specified under sections 1888(g)(1) or (2) of 
the Act.
    We intend to address this topic in future rulemaking. However, we 
request public comment on the best means by which to communicate these 
reports to SNFs. For example, we could consider providing confidential, 
downloadable feedback reports to SNFs through a secure portal, such as 
QualityNet. We also seek comment on the level of detail that would be 
most helpful to SNFs in understanding their performance on the new 
quality measures.
4. Performance Standards
a. Background
    Section 1888(h)(3) of the Act requires the Secretary to establish 
performance standards for the SNF VBP Program. The performance 
standards must include levels of achievement and improvement, and must 
be established and announced not later than 60 days prior to the 
beginning of the performance period for the fiscal year involved. To 
assist us in developing our proposals to establish performance 
standards for the SNF VBP program, we reviewed a number of innovative 
health care programs and demonstration

[[Page 22062]]

projects, both public and private, to discover if any could serve as a 
prototype for the SNF VBP program. One methodology of important note 
that provides us an analogous framework for implementation of 
performance standards is the Performance Assessment Model, implemented 
for our Hospital VBP program. We also reviewed the Hospital Acquired 
Conditions Reduction Program, as well as the Hospital Readmissions 
Reduction Program and the End-Stage Renal Disease Quality Incentive 
Program (ESRD QIP). We seek comment on several potential approaches for 
calculating performance standards under the SNF VBP Program.
i. Hospital Value-Based Purchasing Program
    Under the Hospital VBP Program, a hospital's Total Performance 
Score is determined by aggregating and weighting domain scores, which 
are calculated based on hospital performance on measures within each 
domain. The domain scores are then weighted to calculate a TPS that 
ranges between 0 and 100 points. At this time, we do not anticipate 
proposing to adopt quality measurement domains akin to other CMS 
quality programs under the SNF VBP Program due to fact that this 
program is based on only one measure.
    To calculate HVBP measure scores, hospital performance on specified 
quality measures is compared to performance standards established by 
the Secretary. These performance standards include levels of 
achievement and improvement and enable us to award between 0 and 10 
points to each hospital based on its performance on each measure during 
the performance period. An achievement threshold, generally defined as 
the median of all hospital performance on most measures during a 
specified baseline period, is the minimum level of performance required 
to receive achievement points. The benchmark, generally defined as the 
mean of the top decile of all hospital performance on a measure during 
the baseline period, is the performance level required for receiving 
the maximum number of points on a given measure. The Program also 
establishes an improvement threshold for each measure, set at each 
individual hospital's performance on the measure during the baseline 
period, to award points for improvement over time.
    We believe that the Hospital VBP Program's performance standards 
methodology is a well-understood methodology under which health care 
providers and suppliers can be rewarded both for providing high-quality 
care and for improving their performance over time. The statutory 
authority for the Hospital VBP Program is structured similarly to the 
statutory authority for the SNF VBP Program, and we are considering 
adoption of a similar methodology for establishing performance 
standards under the SNF VBP Program. We also seek to align our pay-for-
performance and quality reporting programs as much as possible. 
Specifically, we could consider adopting performance standards based on 
all SNF performance during the baseline period on the measure specified 
under section 1888(g)(1) or (2) of the Act in the form of the 
achievement threshold--median of all SNF performance during a baseline 
period--and the benchmark--mean of the top decile of all SNF 
performance during a baseline period. We could then consider awarding 
points along a continuum relative to those performance levels.
ii. Hospital-Acquired Conditions Reduction Program
    We also considered whether we should adopt any components of the 
scoring methodology that we have finalized for the HAC Reduction 
Program under the SNF VBP Program. The HAC Reduction Program requires 
the Secretary to reduce eligible hospitals' Medicare payments to 99 
percent of what would otherwise have been paid for discharges when 
hospitals rank in the worst performing quartile for risk-adjusted HAC 
quality measures. These quality measures comprise efforts to promote 
quality of care by reducing the number of HACs in the acute inpatient 
hospital setting.
    We determine a hospital's Total HAC Score by first assigning each 
hospital a score of between 1 and 10 for each measure based on the 
hospital's relative performance ranking in 10 groups (or deciles) for 
that measure. Second, the measure score is used to calculate the domain 
score. We discuss other details of the HAC Reduction Program's scoring 
methodology in further detail below.
    Although the HACRP statutory authority is not structured the same 
as the SNF VBP statutory authority, we view the HACRP's use of decile-
based performance standards as one conceptual possibility for 
constructing performance standards under the SNF VBP Program. 
Specifically, we could consider setting performance standards based on 
SNFs' ranked performance on the measures specified under sections 
1888(g)(1) or (2) of the Act during the performance period. We could 
divide SNFs' performance on the measures into deciles and award between 
1 and 10 points to all SNFs within each decile. While this type of 
performance standards calculation would measure and reward achievement, 
we are concerned that it would not incorporate improvement, and we seek 
comment on the best means by which we could include improvement in this 
type of calculation.
iii. Hospital Readmissions Reduction Program (HRRP)
    We also considered aspects of the Hospital Readmissions Reduction 
Program (HRRP) for adaptation under the SNF VBP Program. HRRP reduces 
Medicare payments to hospitals with a higher number of readmissions for 
applicable conditions over a specified time period.
    Hospital readmissions are defined as Medicare patients that are 
readmitted to the same or another hospital within 30 days of a 
discharge from the same or another hospital, which includes short-term 
inpatient acute care hospitals. The initial hospital inpatient 
admission (the discharge from which starts the 30-day potential penalty 
clock) is termed the index admission. The hospital inpatient 
readmission (which can be used to determine application of a penalty if 
the readmission occurs within 30 days of the index inpatient admission 
stay) can be for any cause, that is, it does not have to be for the 
same cause as the index admission.
    Using historical data, we determine whether eligible IPPS hospitals 
have readmission rates that are higher than expected, given the 
hospital's case mix, while accounting for the patient risk factors, 
including age, and chronic medical conditions identified from inpatient 
and outpatient claims for the 12 months prior to the hospitalization. A 
hospital's excess readmission ratio for each condition is a measure of 
a hospital's readmission performance compared to the national average 
for the hospital's set of patients with that applicable condition. If 
the hospital's actual readmission rate, based on the hospital's actual 
performance, for the year is greater than its CMS-expected readmission 
rate, the hospital incurs a penalty up to the maximum cap. If a 
hospital performs better than an average hospital that admitted similar 
patients, the hospital will not be subjected to a payment reduction. If 
a hospital performs worse than average (below a 1.000 score), the 
poorer performance triggers a payment reduction. For FY 2013, the 
reduction was capped at 1 percent, for FY 2014 at 2 percent, and at 3 
percent for FY 2015 and for subsequent years.

[[Page 22063]]

    We view the Hospital Readmissions Reduction Program as a potential 
model for the SNF VBP Program because that program does not weight 
scores based on domains. That is, under the HRRP, hospitals' risk-
adjusted readmissions ratios form the basis for Medicare payment 
adjustments. Under SNF VBP (and as discussed further in this section), 
the Program's statute requires us to select only one measure to form 
the basis for the SNF Performance Score. We believe that this 
conceptual similarity stands distinct from certain other CMS quality 
programs that incorporate quality measurement domains and domain 
weighting into the scoring calculations. However, the HRRP sets an 
effective performance standard based on the average readmissions 
adjustment factor of 1.000. We seek comment on whether or not we should 
adopt a similar form of performance standard under the SNF VBP Program. 
This performance standard could take the form of the median or mean 
performance on the specified quality measure during the performance 
period. However, we believe we would also need to consider more 
granular delineations in SNF scoring to ensure an appropriate 
distribution of value-based incentive payments under the Program, and 
we seek comment on what additional policies we should consider adopting 
in this topic area.
iv. End-Stage Renal Disease Quality Incentive Program (ESRD QIP)
    The End-Stage Renal Disease Quality Incentive Program (ESRD QIP) is 
authorized by section 1881(h) of the Act. The program promotes patient 
health by providing a financial incentive for renal dialysis facilities 
to deliver high-quality care to their patients.
    Section 1881(h)(3)(A)(i) of the Act requires the Secretary to 
develop a methodology for assessing the total performance of each 
provider and facility based on performance standards. For each clinical 
measure adopted under the ESRD QIP, we assess performance on both 
achievement and improvement. For the achievement score, facility 
performance on a measure during a performance period is compared 
against national facility performance on that measure during a 
specified baseline period. To calculate the improvement score, we 
compare a facility's performance during the performance period to its 
performance during a specified baseline period. In determining a 
clinical measure score for each measure, we take the higher of the 
improvement or achievement score.
    For each reporting measure, we assess performance based on whether 
the facility completed the reporting for that measure as specified. If 
a facility reports data according to the specifications we have 
adopted, then the facility earns the maximum number of points on the 
measure. If the facility partially reports data according to the 
specifications we have adopted, the hospital earns some points on the 
measure, but less than the maximum.
    We believe that the ESRD QIP performance standards methodology is a 
well-understood methodology under which health care providers and 
suppliers can be rewarded both for providing high-quality care and for 
improving their performance over time. The scoring methodology rewards 
achievement and improvement, and is generally aligned with other pay-
for-performance and quality reporting programs. Like the Hospital VBP 
Program statutory language, the ESRD QIP statutory language is 
structured similar to the SNF VBP Program statutory language, and we 
are considering adoption of a similar methodology for calculating 
performance standards under the SNF VBP Program. Specifically, we could 
consider adopting performance standards based on all SNF performance 
during the baseline period on the measure specified under sections 
1888(g)(1) or (2) of the Act in the forms of the achievement 
threshold--median of all SNF performance--and the benchmark--mean of 
the top decile of all SNF performance. We could then consider awarding 
points for those performance levels.
b. Measuring Improvement
    We are considering several methodologies for improvement scoring 
under the SNF VBP Program, and we welcome public comments on these 
options or others that we should consider as we develop our SNF VBP 
Program policies for future rulemaking.
    Section 1888(h)(4)(B) of the Act specifically requires us to 
construct a ranking of SNF performance scores. While we view such a 
ranking system as fairly straightforward when based on achievement 
scoring--for example, ranking SNFs based on their performance on a 
measure during the performance period could be achieved by ordering SNF 
performance rates on the measure specified for the Program year--we are 
considering several approaches for including improvement in the SNF 
scoring methodology because we are limited to one measure for each SNF 
Program year. These approaches include:
    <bullet> Improvement points, awarded using a similar methodology as 
the one we use to award improvement points in the Hospital VBP Program.
    <bullet> Measure rate increases, in which a SNF's performance rate 
on a measure would be increased as a result of its improvement over 
time.
    <bullet> Ranking increases, in which a SNF's ranking relative to 
other SNFs would be increased as a result of improvement.
    <bullet> Performance score increases, in which a SNF's performance 
score would be increased as a result of improvement.
    We discuss each of these options in further detail below.
i. Improvement Points
    The Hospital VBP Program calculates both achievement and 
improvement points for participating hospitals with sufficient data on 
each measure adopted under the Program, and the score a hospital 
receives on a measure is the higher of the achievement and improvement 
score. We could consider adopting a similar methodology under the SNF 
VBP Program, in which points would be calculated for SNFs for both 
achievement (in comparison to all SNFs during the performance period) 
and for improvement (in comparison to that individual SNF's performance 
during the baseline period). Points awarded could be, similar to the 
HVBP Program, between 0 and 10 points, or we could consider awarding 
points on a broader range, such as from 0 to 50, or 0 to 100.
    We believe that adapting the Hospital VBP Program's performance 
standards methodology presents certain advantages, in that it is well 
understood by the public and reflects a fair means to fulfill the 
statutory requirement at section 1888(h)(3)(B) of the Act to include 
both achievement and improvement. However, since there is only one 
measure in the SNF VBP Program, such a policy could result in 
significant differences in SNF value-based incentive payments between 
SNFs with relatively small differences in measured performance. We seek 
comment on whether or not we should adopt improvement points in a 
similar form to that which we have adopted for the Hospital VBP 
Program.
ii. Measure Rate Increases
    Given the limited number of measures that we may select for the SNF 
VBP Program, we are considering whether we should include improvement 
in the program by way of increasing a SNF's performance rate on the 
Program's measure by a certain amount. Such a measure rate increase 
could take several forms, and could rely on any number of

[[Page 22064]]

qualifying criteria. For example, an increase of 10 percent of measured 
performance could be awarded to any SNF's measure rate that rises 
between the baseline and performance periods. We could also consider 
limiting this increase to SNFs whose improvement on the Program's 
measure placed them in the top 50 percent of improving SNFs between the 
baseline and performance period. Additionally, we could consider 
incorporating a penalty into the scoring methodology if a SNF's 
performance on the measure selected under the Program should decline 
significantly, and we seek comment on whether or not we should consider 
such a policy.
    However, we are concerned about the methodological implications to 
quality measurement of awarding increases in measured performance rates 
to recognize improvement. We understand that quality measures are 
developed with robust considerations for the clinical topic covered, 
the recommended care provided, and in many cases, for the health of the 
underlying patient population, and we seek comment on whether such an 
adjustment would be methodologically sound.
iii. Ranking Increases
    Another possibility for rewarding improvement is to adopt certain 
elements of the Hospital VBP Program's scoring methodology--that is, 0 
to 10 points for measured performance--and increase a SNF's relative 
placement as a result of improvement. Under this type of scenario, SNF 
performance would be rank-ordered, and each SNF would be placed in a 
cohort numbered from 0 to 10, which would correspond to the points that 
would be awarded to that SNF for achievement along a 0 to 10 point 
scale of SNF performance scores based on their measured performance. 
Once SNF performance has been ranked from 0 to 10, we could consider 
increasing SNFs' ranking, and basing value-based incentive payments 
under the program on the resulting adjusted ranking. For example, a SNF 
whose performance on a measure resulted in a score of 3 on the 0 to 10 
point scale, but whose performance improved, could have its score 
increased to 4. We could also consider limiting this increase to only 
those SNFs whose improvement places them in the top 50 percent of 
improving SNFs between the baseline and performance period.
    However, we are concerned that this type of ranking may not provide 
us with enough granularity to meaningfully differentiate performance 
between groups of SNFs, and may result in substantial differences in 
value-based incentive payments between SNFs with relatively small 
differences in measured performance. We are also concerned about 
comparability once this type of ranking increase has been performed, 
because comparing two SNFs that both ended at a given point on the 0 to 
10 scale may not be meaningful if one of them reached that point via 
improvement. Because we are limited in the number of measures that we 
may adopt, we believe that we may need to consider adopting a scoring 
methodology that allows additional granularity to capture improvement 
appropriately. We seek comment on this issue.
iv. Performance Score Increases
    This option is a variation on the HVBP improvement points scenario 
described further above. Under this option, we would construct SNF 
performance scores based on measured performance during the performance 
period, and would award an increased performance score to SNFs whose 
measured performance rose between the baseline and performance periods. 
This option could take the form of a percentage-based increase--such as 
a 25 percent increase to a SNF performance score if the SNF improved 
over time--and could also be limited to top improvers, as described 
above in reference to other options.
    This option would not result in direct adjustments to quality 
measure rates. We would instead be adjusting the SNF performance score, 
and given the broad authority that the SNF VBP statute provides us in 
calculating the SNF performance score, we believe this option be to 
operationally feasible. However, we remain concerned about the 
challenges associated with comparability between SNFs with different 
performance rates on the measure but the same SNF performance score. We 
specifically seek comment on how, if at all, we should differentiate 
SNFs' performance scores when based on achievement or improvement to 
address this issue.
5. FY 2019 Performance Period and Baseline Period Considerations
a. Performance Period
    We intend to specify a performance period for a payment year with 
an end date as close as feasibly possible to the payment year's start 
date. We strive to link performance furnished by SNFs as closely as 
possible to the payment 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. As such, we 
anticipate that our annual performance period end date must provide 
sufficient time for SNFs to submit claims for the patients included in 
our measure population. In other programs, such as HRRP and the 
Hospital Inpatient Quality Reporting Program (HIQR), this time lag 
between care delivered to patients who are included in the readmission 
measures and application of a payment consequence linked to reporting 
or performance on those measures has historically been close to one 
year. We also recognize that other factors contribute to this time lag, 
including the processing time we need to calculate measure rates using 
multiple sources of claims needed for statistical modeling, time for 
providers to review their measure rates and included patients, and 
processing time we need to determine whether a payment adjustment needs 
to be made to a provider's reimbursement rate under the applicable PPS 
based on its reporting or performance on measures.
    For the FY 2019 SNF VBP Program's performance period, we are also 
considering the necessary timeline we need to complete measure scoring 
to announce the net result of the Program's adjustments to Medicare 
payments not later than 60 days prior to the fiscal year, in accordance 
with section 1888(h)(7) of the Act. We are also considering the number 
of SNF stays typically covered by Medicare each year. As discussed 
previously, Medicare typically covers more than two million Medicare 
Part A stays per year in more than 15,000 SNFs, and we therefore 
believe that one year of SNFRM data is sufficient to ensure that the 
measure rates are statistically reliable.
    We intend to propose a performance period for the FY 2019 SNF VBP 
Program in future rulemaking. However, we seek public comment on the 
most appropriate performance period length.
b. Baseline Period
    As described previously, in other Medicare quality programs such as 
the Hospital Value-Based Purchasing Program and the End-Stage Renal 
Disease Quality Incentive Program, we generally adopt a baseline period 
that occurs prior to the performance period for a fiscal year to 
measure improvement and establish performance standards.
    We view the SNF VBP Program as necessitating a similarly-adopted 
baseline period for each fiscal year to measure improvement (as 
required by section 1888(h)(3)(B) of the Act) and to

[[Page 22065]]

enable us to calculate performance standards that we must establish and 
announce prior to the performance period (as required by section 
1888(h)(3)(A) of the Act). As with the Hospital VBP Program, we intend 
to adopt baseline periods that are as close as possible in duration as 
the performance period specified for a fiscal year. However, we may 
occasionally need to adopt a baseline period that is shorter than the 
performance period to meet operational timelines. We also intend to 
adopt baseline periods that are seasonally aligned with the performance 
periods to avoid any effects on quality measurement that may result 
from tracking SNF performance during different times of the calendar 
year.
    We intend to propose a baseline period for purposes of calculating 
performance standards and measuring improvement in future rulemaking. 
We seek public comment on the most appropriate baseline period for the 
FY 2019 Program, including what considerations we should take into 
account when developing this policy for future rulemaking.
6. SNF Performance Scoring
a. Considerations
    As with our performance standards policy considerations described 
above, we considered how other Medicare quality programs score eligible 
facilities. Specifically, we considered how the Hospital Value-Based 
Purchasing Program and the Hospital-Acquired Conditions Reduction 
Program score eligible hospitals. We discussed the Hospital 
Readmissions Reduction Program's scoring above in relation to 
performance standards.
i. Hospital Value-Based Purchasing
    A Hospital VBP domain score is calculated by combining the measure 
scores within that domain, weighting each measure equally. The domain 
score reflects the number of points the hospital has earned based on 
its performance on the measures within that domain for which it is 
eligible to receive a score. After summing the weighted domain scores, 
the TPS is translated using a linear exchange function into the 
percentage multiplier to be applied to each Medicare discharge claim 
submitted by the hospital during the applicable fiscal year. (We 
discuss the Exchange Function in further detail below).
    Unlike the Hospital VBP Program, the SNF VBP program focuses on a 
single readmission measure, one that will be replaced by a single 
resource use measure as soon as is practicable. As described above, we 
do not anticipate adopting quality measure domains akin to other CMS 
quality programs under the SNF VBP Program. We therefore seek comment 
on how, if at all, we should adapt the HVBP Program's scoring 
methodology to accommodate both the smaller number of measures and the 
ranking required under the SNF VBP Program.
ii. Hospital-Acquired Conditions Reduction Program
    The Hospital-Acquired Conditions (HAC) Reduction Program scores 
measures that have been categorized into domains, in a manner that is 
similar to the HVBP Program's domain structure. For Domain 1, the 
points awarded to the single assigned measure yield the Domain 1 score, 
since Domain 1 only contains one measure. For Domain 2, the points 
awarded for the domain measures are averaged to yield a Domain 2 score. 
A hospital's Total HAC Score is determined by the sum of weighted 
Domain 1 and Domain 2 scores. Higher scores indicate worse performance 
relative to the performance of all other eligible hospitals. Hospitals 
with a Total HAC Score above the 75th percentile of the Total HAC Score 
distribution are subject to a payment reduction.
    Unlike the Hospital VBP program, referenced above, there is no 
requirement in the HAC Reduction Program that measures or performance 
standards must incorporate improvement and achievement scores. As with 
the HVBP Program above, we seek public comments on the extent to which, 
if at all, we should adopt components of the HAC Reduction Program's 
scoring methodology for purposes of the SNF VBP Program. We 
specifically seek comment on whether or not we should set an absolute 
level of performance that must be reached to receive a positive SNF 
value-based incentive payment.
iii. Other Considerations
    We intend to consider several additional factors when developing 
the performance scoring methodology. We believe that it is important to 
ensure that the performance scoring methodology is straightforward and 
transparent to SNFs, patients, and other stakeholders. SNFs must be 
able to clearly understand performance scoring methods and performance 
expectations to maximize their quality improvement efforts. The public 
must understand the scoring methodology to make the best use of the 
publicly reported information when choosing a SNF. We also believe that 
scoring methodologies for all Medicare value-based purchasing programs 
should be aligned as appropriate given their specific statutory 
requirements. This alignment will facilitate the public's understanding 
of quality information disseminated in these programs and foster more 
informed consumer decision making about health care. We believe that 
differences in performance scores must reflect true differences in 
performance. To ensure that these beliefs are appropriately reflected 
in the SNF VBP Program, we intend to assess the quantitative 
characteristics of the measures specified under sections 1888(g)(1) and 
(2) of the Act, including the current state of measure development, to 
ensure an appropriate distribution of value-based incentive payments as 
required by the SNF VBP statute.
    We seek public comment on what other considerations we should take 
into account when developing our proposed scoring methodology for the 
SNF VBP Program in future rulemaking.
b. Notification Procedures
    As described above, we intend to address the topic of quarterly 
feedback reports to SNFs related to measures specified under sections 
1888(g)(1) and (2) of the Act in future rulemaking. We also intend to 
address how to notify SNFs of the adjustments to their PPS payments 
based on their performance scores and ranking under the SNF VBP 
Program, in accordance with the requirement in section 1888(h)(7) of 
the Act, in future rulemaking.
    However, we seek public comment on the best means by which to so 
notify SNFs.
c. Exchange Function
    As described above in reference to the Hospital VBP Program's 
scoring methodology, we use a linear exchange function to translate a 
hospital's Total Performance Score under that Program into the 
percentage multiplier to be applied to each Medicare discharge claim 
submitted by the hospital during the applicable fiscal year. We refer 
readers to the Hospital Inpatient VBP Program Final Rule (76 FR 26531 
through 26534) for detailed discussion of the Hospital VBP Program's 
Exchange Function, as well as responses to public comments on this 
issue.
    We believe we could consider adopting a similar exchange function 
methodology to translate SNF performance scores into value-based 
incentive payments under the SNF VBP Program, and we seek comment on 
whether or not we should do so. However, as we did for the Hospital

[[Page 22066]]

VBP Program, we believe we would need to consider the appropriate form 
and slope of the exchange function to determine how best to reward high 
performance and encourage SNFs to improve the quality of care provided 
to Medicare beneficiaries. As illustrated in figure 1, we could 
consider the following four mathematical exchange function options: 
Straight line (linear); concave curve (cube root function); convex 
curve (cube function); and S-shape (logistic function), and we seek 
comment on what form of the exchange function we should consider 
implementing if we adopt such a function under the SNF VBP Program.
[GRAPHIC] [TIFF OMITTED] TP20AP15.005

    We also seek comment on what considerations we should take into 
account when determining the appropriate form of the exchange function 
under the SNF VBP Program. We intend to consider how such options would 
distribute the value-based incentive payments among SNFs, the potential 
differences between the value-based incentive payment amounts for SNFs 
that perform poorly and SNFs that perform very well, the different 
marginal incentives created by the different exchange function slopes, 
and the relative importance of having the exchange function be as 
simple and straightforward as possible. We request public comments on 
what additional considerations, if any, we should take into account.
7. SNF Value-Based Incentive Payments
    Sections 1888(h)(5) and (6) of the Act outline several requirements 
for value-based incentive payments under the SNF VBP Program, including 
the value-based incentive payment percentage that must be determined 
for each SNF and the funding available for value-based incentive 
payments.
    We intend to address this topic in future rulemaking.
8. SNF VBP Public Reporting
a. SNF-Specific Performance Information
    Section 1888(h)(9)(A) of the Act requires the Secretary to post 
information on the performance of individual SNFs under the SNF VBP 
Program on the Nursing Home Compare Web site or its successor. This 
information is to include the SNF performance score for the facility 
for the applicable fiscal year and the SNF's ranking for the 
performance period for such fiscal year.
    We intend to address this topic in future rulemaking. However, we 
seek public comment on how we should display this SNF-specific 
performance information, whether or not we should allow SNFs an 
opportunity to review and correct the SNF-specific performance 
information that we will post on Nursing Home Compare, and how such a 
review and correction process should operate.
b. Aggregate Performance Information
    Section 1888(h)(9)(B) of the Act requires the Secretary to post 
aggregate information on the SNF VBP Program on the Nursing Home 
Compare Web site, or a successor Web site, to include the range of SNF 
performance scores and the number of SNFs that received value-based 
incentive payments and the range and total amount of such value-based 
incentive payments.
    We intend to address this topic in future rulemaking. However, we 
seek public comment on the most appropriate form for posting this

[[Page 22067]]

aggregate information to make such information easily understandable 
for the public.

B. Advancing Health Information Exchange

    HHS has a number of initiatives designed to encourage and support 
the adoption of health information technology and to promote nationwide 
health information exchange to improve health care. As discussed in the 
August 2013 Statement ``Principles and Strategies for Accelerating 
Health Information Exchange'' (available at http://www.healthit.gov/sites/default/files/acceleratinghieprinciples_strategy.pdf), HHS 
believes that all individuals, their families, their healthcare and 
social service providers, and payers should have consistent and timely 
access to health information in a standardized format that can be 
securely exchanged between the patient, providers, and others involved 
in the individual's care. Health IT that facilitates the secure, 
efficient and effective sharing and use of health-related information 
when and where it is needed is an important tool for settings across 
the continuum of care, including SNFs and NFs. While these facilities 
are not eligible for the Medicare and Medicaid EHR Incentive Programs, 
effective adoption and use of health information exchange and health IT 
tools will be essential as these settings seek to improve quality and 
lower costs through initiatives such as value-based purchasing.
    The Office of the National Coordinator for Health Information 
Technology (ONC) has released a document entitled ``Connecting Health 
and Care for the Nation: A Shared Nationwide Interoperability Roadmap 
Draft Version 1.0 (draft Roadmap) (available at http://www.healthit.gov/sites/default/files/nationwide-interoperability-roadmap-draft-version-1.0.pdf) which describes barriers to 
interoperability across the current health IT landscape, the desired 
future state that the industry believes will be necessary to enable a 
learning health system, and a suggested path for moving from the 
current state to the desired future state. In the near term, the draft 
Roadmap focuses on actions that will enable a majority of individuals 
and providers across the care continuum to send, receive, find and use 
a common set of electronic clinical information at the nationwide level 
by the end of 2017. The Roadmap's goals also align with the IMPACT Act 
of 2014 which requires assessment data to be standardized and 
interoperable to allow for exchange of the data. Moreover, the vision 
described in the draft Roadmap significantly expands the types of 
electronic health information, information sources and information 
users well beyond clinical information derived from electronic health 
records (EHRs). This shared strategy is intended to reflect important 
actions that both public and private sector stakeholders can take to 
enable nationwide interoperability of electronic health information 
such as: (1) Establishing a coordinated governance framework and 
process for nationwide health IT interoperability; (2) improving 
technical standards and implementation guidance for sharing and using a 
common clinical data set; (3) enhancing incentives for sharing 
electronic health information according to common technical standards, 
starting with a common clinical data set; and (4) clarifying privacy 
and security requirements that enable interoperability.
    In addition, ONC has released the draft version of the 2015 
Interoperability Standards Advisory (available at http://www.healthit.gov/standards-advisory), which provides a list of the best 
available standards and implementation specifications to enable 
priority health information exchange functions. Providers, payers, and 
vendors are encouraged to take these ``best available standards'' into 
account as they implement interoperable health information exchange 
across the continuum of care, including care settings such as 
behavioral health, long-term and post-acute care, and home and 
community-based service providers.
    We encourage stakeholders to utilize health information exchange 
and certified health IT to effectively and efficiently help providers 
improve internal care delivery practices, support management of care 
across the continuum, enable the reporting of electronically specified 
clinical quality measures (eCQMs), and improve efficiencies and reduce 
unnecessary costs. As adoption of certified health IT increases and 
interoperability standards continue to mature, HHS will seek to 
reinforce standards through relevant policies and programs.

C. Skilled Nursing Facility (SNF) Quality Reporting Program (QRP)

1. Background and Statutory Authority
    We seek to promote higher quality and more efficient health care 
for Medicare beneficiaries, and our efforts are furthered by quality 
reporting programs coupled with public reporting of that information. 
Such quality reporting programs already exist for various settings such 
as the Hospital Inpatient Quality Reporting (HIQR) Program, the 
Hospital Outpatient Quality Reporting (HOQR) Program, the Physician 
Quality Reporting System, the Long-Term Care Hospital (LTCH) Quality 
Reporting Program (QRP), the Inpatient Rehabilitation Facility (IRF) 
Quality Reporting Program (QRP), the Home Health Quality Reporting 
Program (HHQRP), and the Hospice Quality Reporting Program (HQRP). We 
have also implemented quality reporting programs for home health 
agencies (HHAs) that are based on conditions of participation, and an 
End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP) and a 
Hospital Value-Based Purchasing (HVBP) Program that link payment to 
performance.
    SNFs are providers that meet conditions of participation for 
Medicare. Some SNFs are also certified under Medicaid as nursing 
facilities, and these types of long-term care facilities furnish 
services to both Medicare beneficiaries and Medicaid enrollees. SNFs 
provide short-term skilled nursing services, including but not limited 
to rehabilitative therapy, physical therapy, occupational therapy, and 
speech-language pathology services. Such services are provided to 
beneficiaries who are recovering from surgical procedures, such as hip 
and knee replacements, or from medical conditions, such as stroke and 
pneumonia. SNF services are provided when needed to maintain or improve 
a beneficiary's current condition, or to prevent a condition from 
worsening. The care provided in a SNF (as a free-standing facility or 
part of a hospital), is aimed at enabling the beneficiary to maintain 
or improve his/her health and to function independently. SNF care is a 
benefit under Medicare Part A and such care is covered for up to 100 
days in a benefit period if all coverage requirements are met.\13\ In 
2014, 2.6 million covered stays occurred within 15,421 SNFs.
---------------------------------------------------------------------------

    \13\ Section 1812(a)(2) and (b)(2) of the Social Security Act; 
42 CFR 409.61; http://www.medicare.gov/Pubs/pdf/10153.pdf.
---------------------------------------------------------------------------

    Section 1888(e)(6)(B)(i)(II) of the Act requires that each SNF 
submit, for fiscal years (FYs) beginning on or after the specified 
application date (as defined in section 1899B(a)(2)(E) of the Act), 
data on quality measures specified under section 1899B(c)(1) of the Act 
and data on resource use and other measures specified under section 
1899B(d)(1) of the Act in a manner and within the timeframes specified 
by the Secretary. In addition, section 1888(e)(6)(B)(i)(III) of the Act 
requires, for FYs beginning on or after October 1, 2018, that each SNF

[[Page 22068]]

submit standardized patient assessment data required under section 
1899B(b)(1) of the Act in a manner and within the timeframes specified 
by the Secretary. Section 1888(e)(6)(A)(i) of the Act requires that, 
for FYs beginning with FY 2018, if a SNF does not submit data, as 
applicable, on quality and resource use and other measures in 
accordance with section 1888(e)(6)(B)(i)(II) of the Act and 
standardized patient assessment in accordance with section 
1888(e)(6)(B)(i)(III) of the Act for such FY, the Secretary reduce the 
market basket percentage described in section 1888(e)(5)(B)(ii) of the 
Act by 2 percentage points.
    The IMPACT Act adds section 1899B to the Act that imposes new data 
reporting requirements for certain PAC providers, including SNFs. 
Sections 1899B(c)(1) and 1899B(d)(1) of the Act collectively require 
that the Secretary specify quality measures and resource use and other 
measures with respect to certain domains not later than the specified 
application date that applies to each measure domain and PAC provider 
setting. Section 1899B(a)(2)(E) of the Act delineates the specified 
application dates for each measure domain and PAC provider. The IMPACT 
Act also added section 1886(e)(6) to the Act, to require the Secretary 
to reduce the otherwise applicable PPS payment to a SNF that does not 
report the new data in a form and manner, and at a time, specified by 
the Secretary. For SNFs, new section 1886(e)(6)(A)(i) of the Act would 
require the Secretary to reduce the payment update for any SNF that 
does not satisfactorily submit the new required data.
    Under the SNF QRP, we are proposing that the general timeline and 
sequencing of measure implementation would occur as follows: 
Specification of measures; proposal and finalization of measures 
through notice-and-comment rulemaking; SNF submission of data on the 
adopted measures; analysis and processing of the submitted data; 
notification to SNFs regarding their quality reporting compliance with 
respect to a particular fiscal year; consideration of any 
reconsideration requests; and imposition of a payment reduction in a 
particular fiscal year for failure to satisfactorily submit data with 
respect to that fiscal year. We are also proposing that any payment 
reductions that are taken with respect to a fiscal would year begin 
approximately one year after the end of the data submission period for 
that fiscal year and approximately two years after we first adopt the 
measure.
    This timeline, which is followed in the other quality reporting 
programs, reflects operational and other practical constraints, 
including the time needed to specify and adopt valid and reliable 
measures, collect the data, and determine whether a SNF has complied 
with our quality reporting requirements. It also takes into 
consideration our desire to give SNFs enough notice of new data 
reporting obligations so that they are prepared to timely start 
reporting the data. Therefore, we intend to follow the same timing and 
sequence of events for measures specified under section 1899B(c)(1) and 
(d)(1) of the Act that we currently follow for the other quality 
reporting programs. We intend to specify each of these measures no 
later than the specified application dates set forth in section 
1899B(a)(2)(E) of the Act and propose to adopt them consistent with the 
requirements in the Act and Administrative Procedure Act. To the extent 
that we finalize a proposal to adopt a measure for the SNF QRP that 
satisfies an IMPACT Act measure domain, we intend to require SNFs to 
report data on the measure for the fiscal year that begins 2 years 
after the specified application date for that measure. Likewise, we 
intend to require SNFs to begin reporting any other data specifically 
required under the IMPACT Act for the fiscal year that begins 2 years 
after we adopt requirements that would govern the submission of that 
data.
    As provided at section 1888(e)(6)(A)(ii) of the Act, depending on 
the market basket percentage for a particular year, the 2 percentage 
point reduction under section 1888(e)(6)(A)(i) of the Act may result in 
this percentage, after application of the productivity adjustment under 
section 1888(e)(5)(B)(ii) of the Act, being less than 0.0 percent for a 
FY and may result in payment rates under the SNF PPS being less than 
payment rates for the preceding FY. In addition, as set forth at 
section 1888(e)(6)(A)(iii) of the Act, any reduction based on failure 
to comply with the SNF QRP reporting requirements applies only to the 
particular FY involved, and any such reduction must not be taken into 
account in computing the SNF PPS payment rates for subsequent FYs.
    For purposes of meeting the reporting requirements under the SNF 
QRP, section 1888(e)(6)(B)(ii) of the Act states that SNFs (or other 
facilities described in section 1888(e)(7)(B) of the Act, other than a 
CAH) may submit the resident assessment data required under section 
1819(b)(3) of the Act using the standard instrument designated by the 
state under section 1819(e)(5) of the Act. Currently, the resident 
assessment instrument is titled the MDS 3.0. To the extent data 
required for submission under subclause (II) or (III) of section 
1888(e)(6)(B)(i) of the Act duplicates other data required to be 
submitted under clause (i)(I), section 1888(e)(6)(B)(iii) provides that 
the submission of data under subclause (II) or (III) is to be in lieu 
of the submission of such data under clause (I), unless the Secretary 
makes a determination that such duplication is necessary to avoid delay 
in the implementation of section 1899B of the Act taking into account 
the different specified application dates under section 1899B(a)(2)(E) 
of the Act.
    In addition to requiring a quality reporting program for SNFs under 
new section 1888(e)(6), the IMPACT Act requires feedback to SNFs and 
public reporting of their performance. More specifically, section 
1899B(f)(1) of the Act requires the Secretary to provide confidential 
feedback reports to SNFs on their performance on the quality measures 
and resource use and other measures specified under that section. The 
Secretary must make such confidential feedback reports available to 
SNFs beginning one year after the specified application date that 
applies to the measures in that section and, to the extent feasible, no 
less frequently than on a quarterly basis, except in the case of 
measures reported on an annual basis, as to which the confidential 
feedback reports may be made available annually.
    Section 1899B(g)(1) of the Act requires the Secretary to provide 
for the public reporting of SNF performance on the quality measures 
specified under section 1899B(c)(1) of the Act and the resource use and 
other measures specified under section 1899B(d)(1) of the Act by 
establishing procedures for making the performance data available to 
the public. Such procedures must ensure, including through a process 
consistent with the process applied under section 
1886(b)(3)(B)(viii)(VII) of the Act, that SNFs have the opportunity to 
review and submit corrections to the data and other information before 
it is made public as required by section 1899B(g)(2) of the Act. 
Section 1899B(g)(3) of the Act requires that the data and information 
is made publicly available beginning no later than two years after the 
specified application date applicable to such a measure and SNFs. 
Finally, section 1899B(g)(4)(B) of the Act requires that such 
procedures must provide that the data and information described in 
section 1899B(g)(1) of the Act with respect to quality and resource use 
measures be made publicly available consistent with sections 1819(i) 
and 1919(i) of the Act.

[[Page 22069]]

2. General Considerations Used for Selection of Quality Measures for 
the SNF QRP
    We strive to promote high quality and efficiency in the delivery of 
health care to the beneficiaries we serve. Performance improvement 
leading to the highest quality health care requires continuous 
evaluation to identify and address performance gaps and reduce the 
unintended consequences that may arise in treating a large, vulnerable, 
and aging population. Quality reporting programs, coupled with public 
reporting of quality information, are critical to the advancement of 
health care quality improvement efforts.
    Valid, reliable, relevant quality measures are fundamental to the 
effectiveness of our quality reporting programs. Therefore, selection 
of quality measures is a priority for CMS in all of its quality 
reporting programs.
    We are proposing to adopt for the SNF QRP three measures that we 
are specifying under section 1899(B)(c)(1) of the Act for purposes of 
meeting the following three domains: Functional status, cognitive 
function, and changes in function and cognitive function; skin 
integrity and changes in skin integrity; and incidence of major falls. 
These measures align with the CMS Quality Strategy,\14\ which 
incorporates the three broad aims of the National Quality Strategy: 
\15\
---------------------------------------------------------------------------

    \14\ http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html
    \15\ http://www.ahrq.gov/workingforquality/nqs/nqs2011annlrpt.htm
---------------------------------------------------------------------------

    <bullet> Better Care: Improve the overall quality of care by making 
healthcare more patient-centered, reliable, accessible, and safe.
    <bullet> Healthy People, Healthy Communities: Improve the health of 
the U.S. population by supporting proven interventions to address 
behavioral, social, and environmental determinants of health in 
addition to delivering higher-quality care.
    <bullet> Affordable Care: Reduce the cost of quality healthcare for 
individuals, families, employers, and government.
    In deciding to propose these measures, we also took into account 
national priorities, including those established by the National 
Priorities Partnership (http://www.qualityforum.org/Setting_Priorities/NPP/National_Priorities_Partnership.aspx), and the HHS Strategic Plan 
(http://www.hhs.gov/secretary/about/priorities/priorities.html).
    These measures also incorporate common standards and definitions 
that can be used across post-acute care settings to allow for the 
exchange of data among post-acute care providers, to provide access to 
longitudinal information for such providers to facilitate coordinated 
and improved outcomes, and to enable comparison of such assessment data 
across all such providers as required by section 1899B(a) of the Act.
    We initiated an Ad Hoc MAP process to obtain input on the measures 
that we are proposing to adopt in this proposed rule. On February 5th, 
2015, we made publicly available a list of Measures Under Consideration 
(called the ``List of Ad Hoc Measures Under Consideration for the 
Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 
2014'') (MUC list) as part of an Ad Hoc Measures Application 
Partnership (MAP) convened by the National Quality Forum (NQF). The MAP 
Post-Acute Care/Long-Term Care Workgroup convened on February 9, 2015 
to ``review the measures technical properties as they are adapted for 
use in new settings and whether the new settings impact the measures' 
adherence to the NQF Scientific Acceptability criterion.'' \16\ The NQF 
published the MUC list on our behalf for public comment from February 
11, 2015 through February 19, 2015 on its Web site. The MAP 
Coordinating Committee convened on February 27, 2015 to discuss the 
public comments received, and those public comments are listed here 
http://public.qualityforum.org/MAP/MAP%20Coordinating%20Committee/MAP_CC%20Feb%2027_Discussion_Guide.html#agenda.
---------------------------------------------------------------------------

    \16\ . Ad-hoc Review: Expansion of Settings. (n.d.). Retrieved 
March 5, 2015, from http://www.qualityforum.org/Projects/a-b/Ad_Hoc_Reviews/CMS/Ad_Hoc_Reviews-CMS.aspx
---------------------------------------------------------------------------

    The MAP issued a pre-rulemaking report on March 6, 2015 Pre-
Rulemaking Report, which is available for download at http://www.qualityforum.org/Project_Pages/MAP_Post-Acute_CareLong-Term_Care_Workgroup.aspx. The MAP's input for each of the proposed 
measures is discussed in this section.
    Section 1899B(j) of the Act requires that we allow for stakeholder 
input as part of the pre-rulemaking process. Therefore, we sought 
stakeholder input on the measures we are proposing to adopt in this 
proposed rule as follows: We convened a technical expert panel that 
included stakeholder experts and patient representatives on February 3, 
2015; we sought public input during the February 2015 ad hoc MAP 
process; and we implemented a public mail box for the submission of 
comments in January 2015, <a href="/cdn-cgi/l/email-protection#7d2d3c3e2c081c1114090434131409141c09140b183d1e100e5315150e531a120b"><span class="__cf_email__" data-cfemail="e9b9a8aab89c8885809d90a087809d80889d809f8ca98a849ac781819ac78e869f">[email protected]</span></a> which is 
located on our post-acute care quality initiatives Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html. In addition, we held a National 
Stakeholder Special Open Door Forum on February 25, 2015 for the 
purpose of seeking input on these measures. Lastly, we held two 
separate listening sessions on February 10 and March 24, 2015, 
respectively.
3. Policy for Retaining SNF QRP Measures for Future Payment 
Determinations
    For the SNF QRP, for the purpose of streamlining the rulemaking 
process, we are proposing that when we adopt a measure for the SNF QRP 
for a payment determination, this measure would be automatically 
retained for all subsequent payment determinations unless we propose to 
remove, suspend, or replace the measure.
    Section 1899B(h)(1) of the Act provides that the Secretary may 
remove, suspend or add a quality measure or resource use or other 
measure specified under section 1899B(c)(1) or (d)(1) of the Act so 
long as the Secretary publishes a justification for the action in the 
Federal Register with a notice and comment period. Consistent with the 
policies of other quality reporting programs including the HIQR 
Program, the HOQR Program, LTCH QRP, and the IRF QRP, we are proposing 
that quality measures would be considered for removal if: (1) Measure 
performance among SNFs is so high and unvarying that meaningful 
distinctions in improvements in performance can no longer be made in 
which case the measure may be removed or suspended; (2) performance or 
improvement on a measure does not result in better resident outcomes; 
(3) a measure does not align with current clinical guidelines or 
practice; (4) a more broadly applicable measure (across settings, 
populations, or conditions) for the particular topic is available; (5) 
a measure that is more proximal in time to desired resident outcomes 
for the particular topic is available; (6) a measure that is more 
strongly associated with desired resident outcomes for the particular 
topic is available; or (7) collection or public reporting of a measure 
leads to negative unintended consequences other than resident harm.
    We also note that under section 1899B(h)(2) of the Act, in the case 
of a quality measure or resource use or other measure for which there 
is a reason to

[[Page 22070]]

believe that the continued collection raises possible safety concerns 
or would cause other unintended consequences, the Secretary may 
promptly suspend or remove the measure and publish the justification 
for the suspension or removal in the Federal Register during the next 
rulemaking cycle.
    For any measure that meets this criteria (that is, a measure that 
raises safety concerns), we will take immediate action to remove the 
measure from SNF QRP, and, in addition to publishing a justification in 
the next rulemaking cycle, will immediately notify SNFs and the public 
through the usual communication channels, including listening session, 
memos, email notification, and web postings. We are inviting public 
comment on these proposals and policies.
4. Proposed Process for Adoption of Changes to SNF QRP Program Measures
    Quality measures selected for the SNF QRP must be endorsed by the 
NQF unless they meet the statutory criteria for exception. The NQF is a 
voluntary consensus standard-setting organization with a diverse 
representation of consumer, purchaser, provider, academic, clinical, 
and other healthcare stakeholder organizations. The NQF was established 
to standardize healthcare quality measurement and reporting through its 
consensus development process (http://www.qualityforum.org/About_NQF/Mission_and_Vision.aspx). The NQF undertakes review of: (a) New quality 
measures and national consensus standards for measuring and publicly 
reporting on performance, (b) regular maintenance processes for 
endorsed quality measures, (c) measures with time-limited endorsement 
for consideration of full endorsement, and (d) ad hoc review of 
endorsed quality measures, practices, consensus standards, or events 
with adequate justification to substantiate the review (http://www.qualityforum.org/Measuring_Performance/Ad_Hoc_Reviews/Ad_Hoc_Review.aspx).
    The NQF solicits information from measure stewards for annual 
reviews and in order to review measures for continued endorsement in a 
specific 3-year cycle. In this measure maintenance process, the measure 
steward is responsible for updating and maintaining the currency and 
relevance of the measure and for confirming existing specifications to 
the NQF on an annual basis. As part of the ad hoc review process, the 
ad hoc review requester and the measure steward are responsible for 
submitting evidence for review by a NQF Technical Expert panel which, 
in turn, provides input to the Consensus Standards Approval Committee 
which then makes a decision on endorsement status and/or specification 
changes for the measure, practice, or event.
    The NQF regularly maintains its endorsed measures through annual 
and triennial reviews, which may result in the NQF making updates to 
the measures. We believe that it is important to have in place a 
subregulatory process to incorporate nonsubstantive updates made by the 
NQF into the measure specifications as we have adopted for the Hospital 
IQR Program so that these measures remain up-to-date. We also recognize 
that some changes the NQF might make to its endorsed measures are 
substantive in nature and might not be appropriate for adoption using a 
subregulatory process.
    Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504 
through 53505), we finalized a policy under which we use a 
subregulatory process to make nonsubstantive updates to measures used 
for the Hospital IQR Program. For what constitutes substantive versus 
nonsubstantive changes, we expect to make this determination on a case-
by-case basis. Examples of nonsubstantive changes to measures might 
include updated diagnosis or procedure codes, medication updates for 
categories of medications, broadening of age ranges, and exclusions for 
a measure (such as the addition of a hospice exclusion to the 30-day 
mortality measures). We believe that nonsubstantive changes may include 
updates to NQF-endorsed measures based upon changes to guidelines upon 
which the measures are based.
    Therefore, we propose to use rulemaking to adopt substantive 
updates made to measures as we have for the Hospital IQR Program. 
Examples of changes that we might consider to be substantive would be 
those in which the changes are so significant that the measure is no 
longer the same measure, or when a standard of performance assessed by 
a measure becomes more stringent (for example, changes in acceptable 
timing of medication, procedure/process, or test administration). 
Another example of a substantive change would be where the NQF has 
extended its endorsement of a previously endorsed measure to a new 
setting, such as extending a measure from the inpatient setting to 
hospice. These policies regarding what is considered substantive versus 
nonsubstantive would apply to all measures in the SNF QRP. We also note 
that the NQF process incorporates an opportunity for public comment and 
engagement in the measure maintenance process.
    We believe this policy adequately balances our need to incorporate 
updates to the SNF QRP measures in the most expeditious manner possible 
while preserving the public's ability to comment on updates that so 
fundamentally change an endorsed measure that it is no longer the same 
measure that we originally adopted.
    We are inviting public comment on this proposal.
5. Proposed New Quality Measures for FY 2018 and Subsequent Payment 
Determinations
    For the FY 2018 SNF QRP and subsequent years, we are proposing to 
adopt three post-acute care (PAC) cross-setting quality measures. These 
measures address the following domains: (1) Skin integrity and changes 
in skin integrity; (2) incidence of major falls; and (3) functional 
status, cognitive function, and changes in function and cognitive 
function, which are all required under section 1899B(c)(1) of the Act. 
The proposed quality measure addressing skin integrity and changes in 
skin integrity is the NQF-endorsed measure, Percent of Residents or 
Patients with Pressure Ulcers That Are New or Worsened (Short Stay) 
(NQF #0678) (http://www.qualityforum.org/QPS/0678). The proposed 
quality measure addressing the incidence of major falls is an 
application of the NQF-endorsed Percent of Residents Experiencing One 
or More Falls with Major Injury (Long Stay) (NQF #0674) (http://www.qualityforum.org/QPS/0674). Finally, the proposed quality measure 
addressing functional status, cognitive function, and changes in 
function and cognitive function is an application of the Percent of 
Long-Term Care Hospital Patients With an Admission and Discharge 
Functional Assessment and a Care Plan that Addresses Function (NQF 
#2631; under NQF review) (http://www.qualityforum.org/QPS/2631).
    The proposed quality measures addressing the domains of incidence 
of major falls and functional status, as well as cognitive function, 
and changes in function and cognitive function, are not currently NQF-
endorsed for the SNF population. We reviewed the NQF's endorsed 
measures and were unable to identify any NQF-endorsed cross-setting 
quality measures that focused on these domains. We are also unaware of 
any other cross-setting quality measures that have been endorsed or 
adopted by another consensus organization.

[[Page 22071]]

a. Quality Measure Addressing the Domain of Skin Integrity and Changes 
in Skin Integrity: Percent of Residents or Patients With Pressure 
Ulcers That Are New or Worsened (Short Stay) (NQF #0678)
    We are proposing to adopt for the SNF QRP, beginning with the FY 
2018 payment determination, NQF #0678, Percent of Residents or Patients 
with Pressure Ulcers that are New or Worsened (Short Stay) as a cross-
setting quality measure that satisfies the skin integrity and changes 
in skin integrity domain. This measure assesses the percentage of 
short-stay residents or patients in SNFs, IRFs, and LTCHs with Stage 2 
through 4 pressure ulcers that are new or worsened since a prior 
assessment.
    Pressure ulcers are a serious medical condition that result in 
pain, decreased quality of life, and increased mortality in aging 
populations.\17\ \18\ \19\ \20\ Pressure ulcers typically are the 
result of prolonged periods of uninterrupted pressure on the skin, soft 
tissue, muscle, and bone.\21\ \22\ \23\ Elderly individuals in SNFs are 
prone to a wide range of medical conditions that increase their risk of 
developing pressure ulcers. These include impaired mobility or 
sensation, malnutrition or undernutrition, obesity, stroke, diabetes, 
dementia, cognitive impairments, circulatory diseases, dehydration, the 
use of wheelchairs, medical devices, and a history of pressure ulcers 
or a pressure ulcer at admission.\24\ \25\ \26\ \27\ \28\ \29\ \30\ 
\31\ \32\ \33\ \34\
---------------------------------------------------------------------------

    \17\ Casey, G. (2013). ``Pressure ulcers reflect quality of 
nursing care.'' Nurs N Z 19(10): 20-24.
    \18\ Gorzoni, M. L. and S. L. Pires (2011). ``Deaths in nursing 
homes.'' Rev Assoc Med Bras 57(3): 327-331.
    \19\ Thomas, J. M., et al. (2013). ``Systematic review: Health-
related characteristics of elderly hospitalized adults and nursing 
home residents associated with short-term mortality.'' J Am Geriatr 
Soc 61(6): 902-911.
    \20\ White-Chu, E. F., et al. (2011). ``Pressure ulcers in long-
term care.'' Clin Geriatr Med 27(2): 241-258.
    \21\ Bates-Jensen BM. Quality indicators for prevention and 
management of pressure ulcers in vulnerable elders. Ann Int Med. 
2001;135 (8 Part 2), 744-51.
    \22\ Institute for Healthcare Improvement (IHI). Relieve the 
pressure and reduce harm. May 21, 2007. Available from http://www.ihi.org/IHI/Topics/PatientSafety/SafetyGeneral/ImprovementStories/FSRelievethePressureandReduceHarm.htm
    \23\ Russo CA, Steiner C, Spector W. Hospitalizations related to 
pressure ulcers among adults 18 years and older, 2006 (Healthcare 
Cost and Utilization Project Statistical Brief No. 64). December 
2008. Available from http://www.hcupus.ahrq.gov/reports/statbriefs/sb64.pdf.
    \24\ Agency for Healthcare Research and Quality (AHRQ). Agency 
news and notes: pressure ulcers are increasing among hospital 
patients. January 2009. Available from http://www.ahrq.gov/research/jan09/0109RA22.htm.=
    \25\ Bates-Jensen BM. Quality indicators for prevention and 
management of pressure ulcers in vulnerable elders. Ann Int Med. 
2001;135 (8 Part 2), 744-51.
    \26\ Cai, S., et al. (2013). ``Obesity and pressure ulcers among 
nursing home residents.'' Med Care 51(6): 478-486.
    \27\ Casey, G. (2013). ``Pressure ulcers reflect quality of 
nursing care.'' Nurs N Z 19(10): 20-24.
    \28\ Hurd D, Moore T, Radley D, Williams C. Pressure ulcer 
prevalence and incidence across post-acute care settings. Home 
Health Quality Measures & Data Analysis Project, Report of Findings, 
prepared for CMS/OCSQ, Baltimore, MD, under Contract No. 500-2005-
000181 TO 0002. 2010.
    \29\ MacLean DS. Preventing & managing pressure sores. Caring 
for the Ages. March 2003;4(3):34-7. Available from http://www.amda.com/publications/caring/march2003/policies.cfm.
    \30\ Michel, J. M., et al. (2012). ``As of 2012, what are the 
key predictive risk factors for pressure ulcers? Developing French 
guidelines for clinical practice.'' Ann Phys Rehabil Med 55(7): 454-
465
    \31\ National Pressure Ulcer Advisory Panel (NPUAP) Board of 
Directors; Cuddigan J, Berlowitz DR, Ayello EA (Eds). Pressure 
ulcers in America: Prevalence, incidence, and implications for the 
future. An executive summary of the National Pressure Ulcer Advisory 
Panel Monograph. Adv Skin Wound Care. 2001;14(4):208-15
    \32\ Park-Lee E, Caffrey C. Pressure ulcers among nursing home 
residents: United States, 2004 (NCHS Data Brief No. 14). 
Hyattsville, MD: National Center for Health Statistics, 2009. 
Available from http://www.cdc.gov/nchs/data/databriefs/db14.htm
    \33\ Reddy, M. (2011). ``Pressure ulcers.'' Clin Evid (Online) 
2011.
    \34\ Teno, J. M., et al. (2012). ``Feeding tubes and the 
prevention or healing of pressure ulcers.'' Arch Intern Med 172(9): 
697-701.
---------------------------------------------------------------------------

    Section 1899B(a)(1)(B) of the Act requires that the data submitted 
on quality measures under section 1899B(c)(1) of the Act be 
standardized and interoperable across PAC settings, and section 
1899B(c)(2)(A) of the Act requires that the measures be reported 
through the use of a PAC assessment instrument. These requirements are 
in line with the NQF Steering Committee report, which stated that to 
understand the impact of pressure ulcers across settings, quality 
measures addressing prevention, incidence, and prevalence of pressure 
ulcers must be harmonized and aligned. This measure has been 
implemented in nursing homes for resident population with stays of less 
than 100 days under CMS's Nursing Home Quality Initiative. We also 
adopted the measure for use in the LTCH QRP (76 FR 51753 through 51756) 
beginning with the FY 2014 payment determination, and for use in the 
IRF QRP (76 FR 24254) beginning with the FY 2014 payment determination. 
We have not, to date, adopted the measure for the home health setting. 
More information on the NQF endorsed measure, the Percent of Residents 
or Patients with Pressure Ulcers That Are New or Worsened (Short Stay), 
is available at http://www.qualityforum.org/QPS/0678.
    A TEP convened by our measure development contractor provided input 
on the technical specifications of this quality measure, including the 
feasibility of implementing the measure across PAC settings. The TEP 
supported the measure's implementation across PAC settings and was also 
supportive of our efforts to standardize the measure for cross-setting 
development. The MAP also supported the use of NQF #0678, Percent of 
Residents or Patients with Pressure Ulcers that are New or Worsened 
(Short Stay) in the SNF QRP as a cross-setting quality measure.
    We are proposing that the data for this quality measure would be 
collected using the MDS 3.0, currently submitted by SNFs through the 
Quality Improvement and Evaluation System (QIES) Assessment Submission 
and Processing (ASAP) system. We believe that this data collection 
method will minimize the reporting burden on SNFs because SNFs are 
already required to submit MDS data for payment purposes. For more 
information on SNF submission using the QIES ASAP system, readers are 
referred to http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/NHQIMDS30TechnicalInformation.html.
    The data items that we would use to calculate the proposed quality 
measure include: M0800A (Worsening in Pressure Ulcer Status Since Prior 
Assessment (OBRA or scheduled PPS assessment) or Last Admission/Entry 
or Reentry, Stage 2), M0800B (Worsening in Pressure Ulcer Status Since 
Prior Assessment (OBRA or scheduled PPS assessment) or Last Admission/
Entry or Reentry, Stage 3), and M0800C (Worsening in Pressure Ulcer 
Status Since Prior Assessment (OBRA or scheduled PPS assessment) or 
Last Admission/Entry or Reentry, Stage 4). This measure would be 
calculated at two points in time, at admission and discharge (see 
Proposed Form, Manner, and Timing of Quality Data Submission). The 
specifications and data items for the Percent of Residents or Patients 
with Pressure Ulcers that are New or Worsened (Short Stay), are 
available in the MDS 3.0 Quality Measures User's Manual available on 
our Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/NHQIQualityMeasures.html.
    We invite public comment on our proposal to adopt NQF #0678 Percent 
of Residents or Patients with Pressure Ulcers that are New or Worsened 
(Short Stay) for the SNF QRP for the FY 2018

[[Page 22072]]

payment determination and subsequent years.
    As part of our ongoing measure development efforts, we are 
considering a future update to the numerator of the quality measure NQF 
#0678, Percent of Residents or Patients with Pressure Ulcers that are 
New or Worsened (Short Stay). This update would require PAC providers 
to report the development of unstageable pressure ulcers and suspected 
deep tissue injuries (sDTIs). Under this potential change we are 
considering, the numerator of the quality measure would be updated to 
include unstageable pressure ulcers, including sDTIs that are new/
developed in the facility, as well as Stage 1 or 2 pressure ulcers that 
become unstageable due to slough or eschar (indicating progression to a 
stage 3 or 4 pressure ulcer) after admission. SNFs are already required 
to complete the unstageable pressure ulcer items on the MDS 3.0. As 
such, this update would require a change in the way the measure is 
calculated but would not increase the data collection burden for SNFs.
    A TEP convened by our measure development contractor strongly 
recommended that CMS update the specifications for the measure to 
include these pressure ulcers in the numerator, although it 
acknowledged that unstageable pressure ulcers and sDTIs cannot and 
should not be assigned a numeric stage. The TEP also recommended that a 
Stage 1 or 2 pressure ulcer that becomes unstageable due to slough or 
eschar should be considered worsened because the presence of slough or 
eschar indicates a full thickness (equivalent to Stage 3 or 4) 
wound.\35\ \36\ These recommendations were supported by technical and 
clinical advisors and the National Pressure Ulcer Advisory Panel.\37\ 
Additionally, exploratory data analysis conducted by our measure 
development contractor suggests that the addition of unstageable 
pressure ulcers, including sDTIs, will increase the observed incidence 
of new or worsened pressure ulcers at the facility level and may 
improve the ability of the quality measure to discriminate between 
poor- and high-performing facilities.
---------------------------------------------------------------------------

    \35\ Schwartz, M., Nguyen, K.H., Swinson Evans, T.M., Ignaczak, 
M.K., Thaker, S., and Bernard, S.L.: Development of a Cross-Setting 
Quality Measure for Pressure Ulcers: OY2 Information Gathering, 
Final Report. Centers for Medicare & Medicaid Services, November 
2013. Available: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Quality-Measure-for-Pressure-Ulcers-Information-Gathering-Final-Report.pdf
    \36\ Schwartz, M., Ignaczak, M.K., Swinson Evans, T.M., Thaker, 
S., and Smith, L.: The Development of a Cross-Setting Pressure Ulcer 
Quality Measure: Summary Report on November 15, 2013, Technical 
Expert Panel Follow-Up Webinar. Centers for Medicare & Medicaid 
Services, January 2014. Available: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Pressure-Ulcer-Quality-Measure-Summary-Report-on-November-15-2013-Technical-Expert-Pa.pdf.
    \37\ Schwartz, M., Nguyen, K.H., Swinson Evans, T.M., Ignaczak, 
M.K., Thaker, S., and Bernard, S.L.: Development of a Cross-Setting 
Quality Measure for Pressure Ulcers: OY2 Information Gathering, 
Final Report. Centers for Medicare & Medicaid Services, November 
2013. Available: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Quality-Measure-for-Pressure-Ulcers-Information-Gathering-Final-Report.pdf.
---------------------------------------------------------------------------

    We invite public comment to inform our consideration of the 
inclusion of unstageable pressure ulcers and sDTIs in the numerator of 
the quality measure NQF #0678 Percent of Residents or Patients with 
Pressure Ulcers that are New or Worsened (Short Stay) as part of our 
future measure development efforts.
b. Quality Measure Addressing the Domain of the Incidence of Major 
Falls: An Application of the Measure Percent of Residents Experiencing 
One or More Falls With Major Injury (Long Stay) (NQF #0674)
    We are proposing to adopt beginning with the FY 2018 SNF QRP an 
application to the SNF setting of the Percent of Residents Experiencing 
One or More Falls with Major Injury (Long Stay) (NQF #0674) measure 
that satisfies the incidence of major falls domain. This outcome 
measure reports the percentage of residents who have experienced falls 
with major injury over a 3-month period. This measure was developed by 
CMS and is NQF-endorsed for long-stay residents of nursing facilities.
    Research indicates that fall-related injuries are the most common 
cause of accidental death in people aged 65 and older, responsible for 
approximately 41 percent of accidental deaths annually.\38\ Rates 
increase to 70 percent of accidental deaths among individuals aged 75 
and older.\39\ In addition to death, falls can lead to fracture, soft 
tissue or head injury, fear of falling, anxiety, and depression.\40\ 
Research also indicates that approximately 75 percent of nursing 
facility residents fall at least once a year. This is twice the rate of 
their counterparts in the community.\41\ Further, it is estimated that 
10 percent to 25 percent of nursing facility resident falls result in 
fractures and/or hospitalization.\42\
---------------------------------------------------------------------------

    \38\ Currie LM. Fall and injury prevention. Annu Rev Nurs Res. 
2006;24:39-74.
    \39\ Fuller GF. Falls in the elderly. Am Fam Physician. Apr 1 
2000;61(7):2159-2168, 2173-2154.
    \40\ Premier Inc. Causes of Falls. 2013. Available: https://www.premierinc.com/quality-safety/toolsservices/safety/topics/falls/causes_of_falls.jsp.
    \41\ Rubenstein LZ, Josephson KR, Robbins AS. Falls in the 
nursing home. Ann Intern Med. 1994 Sep 15; 121(6):442-51.
    \42\ Vu MQ, Weintraub N, Rubenstein LZ. Falls in the nursing 
home: are they preventable? J Am Med Dir Assoc. 2004 Nov-Dec; 
5(6):401-6. Review.
---------------------------------------------------------------------------

    Falls also represent a significant cost burden to the entire health 
care system, with injurious falls accounting for 6 percent of medical 
expenses among those age 65 and older.\43\ In their 2006 work, Sorensen 
et al. estimate the costs associated with falls of varying severity 
among nursing home residents. Their work suggests that acute care costs 
incurred for falls among nursing home residents range from $979 for a 
typical case with a simple fracture to $14,716 for a typical case with 
multiple injuries.\44\ A similar study of hospitalizations of nursing 
home residents due to serious fall-related injuries (intracranial 
bleed, hip fracture, other fracture) found an average cost of 
$23,723.\45\ Among the SNF population, the average 6-month cost of a 
resident with a hip fracture was estimated at $11,719 in 1996 U.S. 
dollars.\46\
---------------------------------------------------------------------------

    \43\ Tinetti ME, Williams CS. The effect of falls and fall 
injuries on functioning in community-dwelling older persons. J 
Gerontol A Biol Sci Med Sci. 1998 Mar;53(2):M112-9.
    \44\ Sorensen SV, de Lissovoy G, Kunaprayoon D, Resnick B, 
Rupnow MF, Studenski S. A taxonomy and economic consequence of 
nursing home falls. Drugs Aging. 2006;23(3):251-62.
    \45\ Quigley PA, Campbell RR, Bulat T, Olney RL, Buerhaus P, 
Needleman J. Incidence and cost of serious fall-related injuries in 
nursing homes. Clin Nurs Res. Feb 2012;21(1):10-23.
    \46\ Kramer AM, Steiner JF, Schlenker RE, et al. Outcomes and 
costs after hip fracture and stroke: a comparison of rehabilitation 
settings. JAMA. 1997;277(5):396-404.
---------------------------------------------------------------------------

    According to Morse, 78 percent of falls are anticipated physiologic 
falls, which are falls among individuals who scored high on a risk 
assessment scale, meaning their risk could have been identified in 
advance of the fall.\47\ To date, studies have identified a number of 
risk factors for falls.<SUP>48 49 50 51 52 53 54 55 56</SUP>

[[Page 22073]]

The identification of such risk factors suggests the potential for 
health care facilities to reduce and prevent the incidence of falls.
---------------------------------------------------------------------------

    \47\ Ibid. Ibid.Morse, J. M. (1996). Preventing patient falls. 
Sage.
    \48\ Rothschild JM, Bates DW, Leape LL. Preventable medical 
injuries in older patients. Arch Intern Med. 2000 Oct 9; 
160(18):2717-28.
    \49\ Morris JN, Moore T, Jones R, et al. Validation of long-term 
and post-acute care quality indicators. CMS Contract No: 500-95-
0062/T.O. #4. Cambridge, MA: Abt Associates, Inc., June 2003.

    \50\ Avidan AY, Fries BE, James ML, Szafara KL, Wright GT, 
Chervin RD. Insomnia and hypnotic use, recorded in the minimum data 
set, as predictors of falls and hip fractures in Michigan nursing 
homes. J Am Geriatr Soc. 2005 Jun; 53(6):955-62.
    \51\ Fonad E, Wahlin TB, Winblad B, Emami A, Sandmark H. Falls 
and fall risk among nursing home residents. J Clin Nurs. 2008 Jan; 
17(1):126- 34.
    \52\ Currie LM. Fall and injury prevention. Annu Rev Nurs Res. 
2006;24:39-74.

    \53\ Ellis AA, Trent RB. Do the risks and consequences of 
hospitalized fall injuries among older adults in California vary by 
type of fall? J Gerontol A Biol Sci Med Sci. Nov 2001;56(11):M686-
692.
    \54\ Chen XL, Liu YH, Chan DK, Shen Q, Van Nguyen H. Chin Med J 
(Engl). Characteristics associated with falls among the elderly 
within aged care wards in a tertiary hospital: a retrospective. 2010 
Jul;123(13):1668-72.
    \55\ Frisina PG, Guellnitz R, Alverzo J. A time series analysis 
of falls and injury in the inpatient rehabilitation setting. Rehabil 
Nurs. 2010 JulAug;35(4):141-6, 166.
    \56\ Lee JE, Stokic DS. Risk factors for falls during inpatient 
rehabilitant Am J Phys Med Rehabil. 2008 May;87(5):341-50; quiz 351, 
422.
---------------------------------------------------------------------------

    The Percent of Residents Experiencing One or More Falls with Major 
Injury (Long Stay) (NQF #0674) quality measure is NQF-endorsed and has 
been successfully implemented in nursing facilities for long-stay 
residents since 2011. In addition, the quality measure is currently 
publicly reported on CMS' Nursing Home Compare Web site at http://www.medicare.gov/nursinghomecompare/search.html. Further, an 
application of the quality measure was adopted for use in the LTCH QRP 
in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50290).
    Although NQF #0674 is not currently endorsed for the SNF setting, 
we reviewed the NQF's consensus endorsed measures and were unable to 
identify any NQF-endorsed cross-setting quality measures for that 
setting that are focused on falls with major injury. We are aware of 
one NQF-endorsed measure, Falls with Injury (NQF #0202), which is a 
measure designed for adult acute inpatient and rehabilitation patients 
capturing ``all documented patient falls with an injury level of minor 
or greater on eligible unit types in a calendar quarter, reported as 
injury falls per 100 days.'' \57\ NQF #0202 is not appropriate to meet 
the IMPACT Act domain as it includes minor injury in the numerator 
definition. Additionally, including all falls could result in providers 
limiting the freedom of activity for individuals at higher risk for 
falls. We are unaware of any other cross-setting quality measures for 
falls with major injury that have been endorsed or adopted by another 
consensus organization for the SNF setting. Therefore, we are proposing 
to adopt this measure under the Secretary's authority to specify non-
NQF-endorsed measures under section 1899B.
---------------------------------------------------------------------------

    \57\ American Nurses Association (2014, April 9). Falls with 
injury. Retrieved from http://www.qualityforum.org/QPS/0202.
---------------------------------------------------------------------------

    A TEP convened by our measure development contractor provided input 
on the technical specifications of this quality measure, including the 
feasibility of implementing the measure across PAC settings. The TEP 
was supportive of the implementation of this measure across PAC 
settings and was also supportive of our efforts to standardize this 
measure for cross-setting development. The MAP conditionally supported 
the use of an application of NQF #0674 Percent of Residents 
Experiencing One or More Falls with Major Injury (Long Stay) in the SNF 
QRP as a cross-setting quality measure. More information about the 
MAP's recommendations for this measure is available in the report 
entitled MAP Off-Cycle Deliberations 2015: Measures under 
Considerations to Implement Provisions of the IMPACT Act, which can be 
found at http://www.qualityforum.org/Project_Pages/MAP_Post-Acute_CareLong-Term_Care_Workgroup.aspx.
    More information on the NQF endorsed measure, the Percent of 
Residents Experiencing One or More Falls with Major Injury (Long Stay) 
is available at http://www.qualityforum.org/QPS/0674.
    We are proposing that data for this quality measure will be 
collected using the MDS 3.0, currently submitted by SNFs through the 
QIES ASAP system for the reason noted previously.
    The data items that we would use to calculate this proposed quality 
measure include: J1800 (Any Falls Since Admission/Entry (OBRA or 
Scheduled PPS) or Reentry or Prior Assessment, whichever is more 
recent), and J1900 (Number of Falls Since Admission/Entry (OBRA or 
Scheduled PPS) or Reentry or Prior Assessment, whichever is more 
recent). This measure would be calculated at the time of discharge (see 
Proposed Form, Manner, and Timing of Quality Data Submission). The 
specifications for the application of the measure, the Percent of 
Residents Experiencing One or More Falls with Major Injury (Long Stay), 
for the SNF population are available on our SNF QRP measures and 
technical Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    We refer readers to the Form, Manner, and Timing of Quality Data 
Submission section of this proposed rule for more information on the 
proposed data collection and submission timeline for this proposed 
quality measure.
    We invite public comment on our proposal to adopt an application of 
Percent of Residents Experiencing One or More Falls with Major Injury 
(Long Stay) (NQF #0674) measure for the SNF QRP beginning with the FY 
2018 payment determination.
c. Quality Measure Addressing the Domain of Functional Status, 
Cognitive Function, and Changes in Function and Cognitive Function: 
Application of Percent of Long-Term Care Hospital Patients With an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; Under NQF Review)
    We are proposing to adopt beginning with the FY 2018 SNF QRP an 
application of the quality measure Percent of Long-Term Care Hospital 
Patients with an Admission and Discharge Functional Assessment and a 
Care Plan that Addresses Function (NQF #2631; under NQF review) as a 
cross-setting quality measure that satisfies the functional status, 
cognitive function, and changes in functional status and cognitive 
function domain. This quality measure reports the percent of patients 
or residents with both an admission and a discharge functional 
assessment and an activity (self-care or mobility) a goal that 
addresses function.
    The National Committee on Vital and Health Statistics' Subcommittee 
on Health,\58\ noted that ``information on functional status is 
becoming increasingly essential for fostering healthy people and a 
healthy population. Achieving optimal health and well-being for 
Americans requires an understanding across the life span of the effects 
of people's health conditions on their ability to do basic activities 
and participate in life situations in other words, their functional 
status.'' This is supported by research showing that patient and 
resident functioning is associated with important outcomes such as 
discharge destination and length of stay in inpatient settings,\59\ as 
well as the risk of nursing home placement and hospitalization of older 
adults living in the community.\60\
---------------------------------------------------------------------------

    \58\ Subcommittee on Health National Committee on Vital and 
Health Statistics, ``Classifying and Reporting Functional Status'' 
(2001).
    \59\ Reistetter TA, Graham JE, Granger CV, Deutsch A, 
Ottenbacher KJ. Utility of Functional Status for Classifying 
Community Versus Institutional Discharges after Inpatient 
Rehabilitation for Stroke. Archives of Physical Medicine and 
Rehabilitation, 2010; 91:345-350.
    \60\ Miller EA, Weissert WG. Predicting Elderly People's Risk 
for Nursing Home Placement, Hospitalization, Functional Impairment, 
and Mortality: A Synthesis. Medical Care Research and Review, 57; 3: 
259-297.

---------------------------------------------------------------------------

[[Page 22074]]

    The majority of individuals who receive PAC services, including 
care provided by SNFs, HHAs, IRFs, and LTCHs, have functional 
limitations and many of these individuals are at risk for further 
decline in function due to limited mobility and ambulation.\61\ The 
patient and resident populations treated by SNFs, HHAs, IRFs, and LTCHs 
vary in terms of their functional abilities at the time of the PAC 
admission and their goals of care. For IRF patients and many SNF 
residents, treatment goals may include fostering the person's ability 
to manage his or her daily activities so that he or she can complete 
self-care and/or mobility activities as independently as possible, and 
if feasible, return to a safe, active, and productive life in a 
community-based setting. For home health patients, achieving 
independence within the home environment and promoting community 
mobility may be the goal of care. For other home care patients, the 
goal of care may be to slow the rate of functional decline in order to 
allow the person to remain at home and avoid institutionalization.\62\ 
Lastly, in addition to having complex medical care needs for an 
extended period of time, LTCH patients often have limitations in 
functioning because of the nature of their conditions, as well as 
deconditioning due to prolonged bed rest and treatment requirements 
(for example, ventilator use). The clinical practice guideline 
Assessment of Physical Function \63\ recommends that clinicians 
document functional status at baseline and over time to validate 
capacity, decline, or progress. Therefore, assessment of functional 
status at admission and discharge and establishing a functional goal 
for discharge as part of the care plan is an important aspect of 
patient or resident care in all of these PAC settings.
---------------------------------------------------------------------------

    \61\ Kortebein P, Ferrando A, Lombebeida J, Wolfe R, Evans WJ. 
Effect of 10 days of bed rest on skeletal muscle in health adults. 
JAMA; 297(16):1772-4.
    \62\ Ellenbecker CH, Samia L, Cushman MJ, Alster K. Patient 
safety and quality in home health care. Patient Safety and Quality: 
An Evidence-Based Handbook for Nurses. Vol 1.
    \63\ Kresevic DM. Assessment of physical function. In: Boltz M, 
Capezuti E, Fulmer T, Zwicker D, editor(s). Evidence-based geriatric 
nursing protocols for best practice. 4th ed. New York (NY): Springer 
Publishing Company; 2012. p. 89-103.
---------------------------------------------------------------------------

    Given the variation in patient or resident populations across the 
PAC settings, the functional activities that are typically assessed by 
clinicians for each type of PAC provider may vary. For example, rolling 
left and right in bed is an example of a functional activity that may 
be most relevant for low-functioning patients or residents who are 
chronically critically ill. However, certain functional activities such 
as eating, oral hygiene, lying to sitting on the side of the bed, 
toilet transfers, and walking or wheelchair mobility are important 
activities for patients or residents in each PAC setting.
    Although, functional assessment data are currently collected by all 
four PAC providers and in NFs, this data collection has employed 
different assessment instruments, scales, and item definitions. The 
data cover similar topics, but are not standardized across PAC 
settings. The different sets of functional assessment items coupled 
with different rating scales makes communication about patient and 
resident functioning challenging when patients and residents transition 
from one type of setting to another. Collection of standardized 
functional assessment data across SNFs, HHAs, IRFs, and LTCHs using 
common data items would establish a common language for patient and 
resident functioning, which may facilitate communication and care 
coordination as patients and residents transition from one type of 
provider to another. The collection of standardized functional status 
data may also help improve patient and resident functioning during an 
episode of care by ensuring that basic daily activities are assessed 
for all PAC residents at the start and end of care and that at least 
one functional goal is established.
    The functional assessment items included in the proposed functional 
status quality measure were originally developed and tested as part of 
the Post-Acute Care Payment Reform Demonstration version of the 
Continuity Assessment Record and Evaluation (CARE) Item Set, which was 
designed to standardize the assessment of a person's status, including 
functional status, across acute and post-acute settings (SNFs, HHAs, 
IRFs, and LTCHs). The functional status items on the CARE Item Set are 
daily activities that clinicians typically assess at the time of 
admission and/or discharge in order to determine patient's or 
resident's needs, evaluate patient or resident progress, and prepare 
patients, residents, and their families for a transition to home or to 
another setting.
    The development of the CARE Item Set and a description and 
rationale for each item is described in a report entitled ``The 
Development and Testing of the Continuity Assessment Record and 
Evaluation (CARE) Item Set: Final Report on the Development of the CARE 
Item Set: Volume 1 of 3.'' \64\ Reliability and validity testing were 
conducted as part of CMS's Post-Acute Care Payment Reform 
Demonstration, and we concluded that the functional status items have 
acceptable reliability and validity. A description of the testing 
methodology and results are available in several reports, including the 
report entitled ``The Development and Testing of the Continuity 
Assessment Record And Evaluation (CARE) Item Set: Final Report On 
Reliability Testing: Volume 2 of 3'' \65\ and the report entitled ``The 
Development and Testing of The Continuity Assessment Record And 
Evaluation (CARE) Item Set: Final Report on Care Item Set and Current 
Assessment Comparisons: Volume 3 of 3.'' \66\ These reports are 
available on our Post-Acute Care Quality Initiatives Web page at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
---------------------------------------------------------------------------

    \64\ Barbara Gage et al., ``The Development and Testing of the 
Continuity Assessment Record and Evaluation (CARE) Item Set: Final 
Report on the Development of the CARE Item Set'' (RTI International, 
2012).
    \65\ Ibid.
    \66\ Ibid.
---------------------------------------------------------------------------

    The functional status quality measure we are proposing to adopt 
beginning with the FY 2018 SNF QRP is a process quality measure that is 
an application of the quality measure, Percent of Long-Term Care 
Hospital Patients with an Admission and Discharge Functional Assessment 
and a Care Plan that Addresses Function'' (NQF #2631; under NQF 
review). This quality measure reports the percent of patients or 
residents with both an admission and a discharge functional assessment 
and a treatment goal that addresses function.
    This process measure requires the collection of admission and 
discharge functional status data by clinicians using standardized 
clinical assessment items, or data elements, which assess specific 
functional activities, that is, self-care and mobility activities. The 
self-care and mobility function activities are coded using a 6-level 
rating scale that indicates the resident's level of independence with 
the activity at both admission and discharge. A higher score indicates 
more independence.
    For this quality measure, there must be documentation at the time 
of admission that at least one activity performance (function) goal is 
recorded for at least one of the standardized self-care or mobility 
function items using the 6-level rating scale. This indicates that an 
activity goal(s) has been established. Following this initial 
assessment, the clinical best practice would be to ensure that the 
resident's

[[Page 22075]]

care plan reflected and included a plan to achieve such an activity 
goal(s). At the time of discharge, goal setting and establishment of a 
care plan to achieve the goal, is reassessed using the same 6-level 
rating scale, enabling the ability to evaluate success in achieving the 
resident's activity performance goals.
    To the extent that a resident has an unplanned discharge, for 
example, for the purpose of being admitted to an acute care facility, 
the collection of discharge functional status data might not be 
feasible. Therefore, for patients or residents with unplanned 
discharges, admission functional status data and at least one treatment 
goal must be reported, but discharge functional status data are not 
required to be reported.
    A TEP convened by the measure development contractor for CMS 
provided input on the technical specifications of this quality measure, 
including the feasibility of implementing the measure across PAC 
settings. The TEP was supportive of the implementation of this measure 
across PAC settings and was also supportive of our efforts to 
standardize this measure for cross-setting use. Additionally, the MAP 
conditionally supported the use of an application of the Percent of 
Long-Term Care Hospital Patients With an Admission and Discharge 
Functional Assessment and a Care Plan that Addresses Function (NQF 
#2631; under NQF review) for use in the SNF QRP as a cross-setting 
measure. The MAP noted that this functional status measure addresses an 
IMPACT Act domain and a MAP PAC/LTC core concept. The MAP conditionally 
supported this measure pending NQF-endorsement and resolution of 
concerns about the use of two different functional status scales for 
quality reporting and payment purposes. Finally, the MAP reiterated its 
support for adding measures addressing function, noting the group's 
special interest in this PAC/LTC core concept. More information about 
the MAP's recommendations for this measure is available in the report 
entitled MAP Off-Cycle Deliberations 2015: Measures under 
Considerations to Implement Provisions of the IMPACT Act, which can be 
found at http://www.qualityforum.org/Project_Pages/MAP_Post-Acute_CareLong-Term_Care_Workgroup.aspx.
    The proposed measure is derived from the Percent of Long-Term Care 
Hospital Patients With an Admission and Discharge Functional Assessment 
and a Care Plan that Addresses Function quality measure, and we intend 
to submit the proposed measure to NQF for endorsement. The 
specifications are available for review at the SNF QRP measures and 
technical Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    We reviewed the NQF's endorsed measures and were unable to identify 
any NQF-endorsed cross-setting quality measures focused on assessment 
of function for PAC patients and residents. We are also unaware of any 
other cross-setting quality measures for functional assessment that 
have been endorsed or adopted by another consensus organization. 
Therefore, we are proposing to adopt this function measure for use in 
the SNF QRP for the FY 2018 payment determination and subsequent years 
under the Secretary's authority to select non-NQF-endorsed measures.
    We are proposing that data for the proposed quality measure would 
be collected through the MDS 3.0, which SNFs currently submit through 
the QIES ASAP system. We refer readers to section V.C.7. of this 
proposed rule for more information on the proposed data collection and 
submission timeline for this proposed quality measure.
    The calculation algorithm of the proposed measure is: (1) For each 
SNF stay, records of residents discharged during the 12-month target 
time period are identified and counted. This count is the denominator; 
(2) The records of residents with complete stays are identified and the 
number of these resident stays with complete admission functional 
assessment data and at least one self-care or mobility activity goal 
and complete discharge functional assessment data is counted; (3) The 
records of residents with incomplete stays are identified, and the 
number of these resident records with complete admission functional 
status data and at least one self-care or mobility goal is counted; (4) 
The counts from step 2 (complete SNF stays) and step 3 (incomplete SNF 
stays) are summed. The sum is the numerator count; and (5) the 
numerator count is divided by the denominator count to calculate this 
quality measure. This measure would be calculated at two points in 
time, at admission and discharge.
    For purposes of assessment data collection, we propose to add new 
functional status items to the MDS 3.0. The items would assess specific 
self-care and mobility activities, and would be based on functional 
items included in the Post-Acute Care Payment Reform Demonstration 
version of the CARE Item Set. The items have been developed and tested 
for reliability and validity in SNFs, HHAs, IRFs, and LTCHs. More 
information pertaining to item testing is available on our Post-Acute 
Care Quality Initiatives Web page at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
    The proposed function items that we would add to the MDS for 
purposes of the calculation of this proposed quality measure do not 
duplicate existing items currently collected in that assessment 
instrument for other purposes. The currently used MDS function items 
evaluate a resident's greatest dependence on three or more occasions, 
whereas the proposed functional items would evaluate an individual's 
usual performance at the time of admission and at the time of discharge 
for goal setting purposes. Additionally, there are several key 
differences between the existing and new proposed function items that 
may result in variation in the resident assessment results including: 
(1) The data collection and associated data collection instructions; 
(2) the rating scales used to score a resident's level of independence; 
and (3) the item definitions. A description of these differences is 
provided with the measure specifications on our SNF QRP measures and 
technical Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    Because of the differences between the current function assessment 
items (section G of the MDS 3.0) and the proposed function assessment 
items that we would collect for purposes of calculating the proposed 
measure, we would require that SNFs submit data on both sets of items. 
Data collection for the new proposed function items do not substitute 
for the data collection under the current Section G.
    We invite public comments on our proposal to adopt beginning with 
the FY 2018 SNF QRP an application of the quality measure Percent of 
Long-Term Care Hospital Patients with an Admission and Discharge 
Functional Assessment and a care Plan that Addresses Function (NQF 
#2631; under review).
6. SNF QRP Quality Measures Under Consideration for Future Years

[[Page 22076]]



 Table 10--SNF QRP Quality Measures and Concepts Under Consideration for
                              Future Years
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Impact Act Domain.................  Measures to reflect all-condition
                                     risk-adjusted potentially
                                     preventable hospital readmission
                                     rates.
Measures..........................  (NQF #2510): Skilled Nursing
                                     Facility 30-Day All-Cause
                                     Readmission Measure (SNFRM).
                                    (NQF #2512; NQF #2502): Application
                                     of the LTCH/IRF All-Cause Unplanned
                                     Readmission Measure for 30 Days
                                     Post Discharge from LTCHs/IRFs.
Impact Act Domain.................  Resource Use, including total
                                     estimated Medicare spending per
                                     beneficiary.
Measure...........................  Application of the Payment
                                     Standardized Medicare Spending Per
                                     Beneficiary (MSPB).
Impact Act Domain.................  Discharge to community.
Measure...........................  Percentage residents/patients at
                                     discharge assessment, who are
                                     discharged to a higher level of
                                     care or to the community. Measure
                                     assesses if the patient/resident
                                     went to the community and whether
                                     they stayed there. Ideally, this
                                     measure would be paired with the 30-
                                     day all-cause readmission measure.
------------------------------------------------------------------------

    We invite comment on the measure domains and associated measures 
and measure concepts listed in Table 10. In addition, in alignment with 
the requirements of the IMPACT Act to develop quality measures and 
standardize data for comparative purposes, we believe that evaluating 
outcomes across the post-acute settings using standardized data is an 
important priority. Therefore, in addition to proposing a process-based 
measure for the domain in the IMPACT Act of ``Functional status, 
cognitive function, and changes in function and cognitive function'', 
which is included in this year's proposed rule, we also intend to 
develop outcomes-based quality measures, including functional status 
and other quality outcome measures to further satisfy this domain. 
These measures will be proposed in future rulemaking in order to assess 
functional change for each care setting as well as across care 
settings.
7. Form, Manner, and Timing of Quality Data Submission
a. Participation/Timing for New SNFs
    Beginning with the submission of data required for the FY 2018 
payment determination, we propose that a new SNF would be required to 
begin reporting data on any quality measures finalized for that program 
year by no later than the first day of the calendar quarter subsequent 
to 30 days after the date on its CMS Certification Number (CCN) 
notification letter. For example, for FY 2018 payment determinations, 
if a SNF received its CCN on August 28, 2016, and 30 days are added 
(for example, August 28 + 30 days = September 27), the SNF would be 
required to submit data for residents who are admitted beginning on 
October 1, 2016.
    We invite public comment on this proposed timing for new SNFs to 
begin reporting quality data under the SNF QRP.
b. Data Collection Timelines and Requirements for the FY 2018 Payment 
Determination and Subsequent Years
    As discussed previously, we are proposing that SNFs would submit 
data on the proposed functional status, skin integrity, and incidence 
of major falls measures by completing items on the MDS and then 
submitting the MDS to CMS through the Quality Improvement and 
Evaluation System (QIES), Assessment Submission and Processing System 
(ASAP) system. We seek comment on this proposed method of data 
collection.
    Currently, there is no discharge assessment required when a 
resident is discharged from the SNF Medicare Part A coverage stay but 
does not leave the facility, and we are aware that this affects nearly 
30 percent of all SNF residents. To collect the data at the time these 
beneficiaries are discharged from the SNF Part A coverage stay, we 
propose to add an item set in addition to the 5-Day PPS Assessment. 
Further, to collect the data elements required to calculate the 
function quality measure (an application of Percent of Long-Term Care 
Hospital Patients With an Admission and Discharge Functional Assessment 
and a Care Plan that Addresses Function [NQF #2631; under NQF review]) 
at the time of a residents admission, we also propose to add the 
necessary items to the 5-day PPS Assessment.
    A list of the data items that we are proposing to add to the SNF 
PPS Part A Discharge and the 5-Day PPS Assessments is available on our 
Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html. We recognize that 
there may be instances where SNFs want to combine the SNF PPS Part A 
Discharge Assessment with other required assessments, as happens with 
other PPS and OBRA assessments, or scenarios in which the end of the 
Part A coverage stay occurs at the same time as a scheduled PPS 
assessment. Therefore, we invite comment on any situations where 
assessments may be combined or interact, which should be considered in 
implementing the SNF PPS Part A Discharge Assessment with a view toward 
addressing any issues that we may identify through the public comment 
process as requiring additional clarification.
    For the FY 2018 payment determination, we are proposing that SNFs 
submit data on the three proposed quality measures for residents who 
are admitted to the SNF on and after October 1, 2016 and discharged 
from the SNF up to and including December 31, 2016, using the data 
submission schedule that we are proposing in this section.
    We are proposing to collect a single quarter of data for FY 2018 to 
remain consistent with the usual October release schedule for the MDS, 
to give SNFs a sufficient amount of time to update their systems so 
that they can comply with the new data reporting requirements, and to 
give CMS a sufficient amount of time to determine compliance for the FY 
2018 program. The proposed use of one quarter of data for the initial 
year of quality reporting is consistent with the approach we used to 
implement a number of other quality reporting programs, including the 
LTCH, IRF, and Hospice QRPs.
    We also propose that following the close of the reporting quarter, 
October 1, 2016 through December 31, 2016 for the FY 2018 payment 
determination, SNFs would have an additional 5\1/2\ months to correct 
and/or submit their quality data. Consistent with the IRF QRP, we 
propose that the final deadline for submitting data for the FY 2018 
payment determination would be May 15, 2017. We further propose that 
for the FY 2019 payment determination, we would collect data from the 
2nd through 4th quarters of FY 2017 (that is, data for residents who 
are admitted from January 1st and discharged up to and including 
September 30th) to determine whether a SNF has met its quality 
reporting requirements with respect to that fiscal year. Beginning with 
the FY

[[Page 22077]]

2020 payment determination, we propose to move to a full year of fiscal 
year data collection. We intend to propose the FY 2019 payment 
determination quality reporting data submission deadlines in future 
rulemaking.

    Table 11--Proposed Measures, Data Collection Source, Data Collection Period and Data Submission Deadlines
                                   Affecting the FY 2018 Payment Determination
----------------------------------------------------------------------------------------------------------------
                                                                                       Proposed data submission
          Quality measure             Data collection source        Proposed data        deadline for FY 2018
                                                                  collection period      payment determination
----------------------------------------------------------------------------------------------------------------
NQF #0678: Percent of Patients or   MDS.......................     10/01/16-12/31/16  May 15, 2017.
 Residents with Pressure Ulcers
 that are New or Worsened.
NQF #0674: Application of Percent   MDS.......................     10/01/16-12/31/16  May 15, 2017.
 of Residents Experiencing One or
 More Falls with Major Injury
 (Long Stay).
NQF #2631*: Application of Percent  MDS.......................     10/01/16-12/31/16  May 15, 2017.
 of Long-Term Care Hospital
 Patients with an Admission and
 Discharge Functional Assessment
 and a Care Plan that Addresses
 Function.
----------------------------------------------------------------------------------------------------------------
* Status: under review at NQF, please see: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867, see
  NQF #2631.

    We seek public comment on these proposals.
8. SNF QRP Data Completion Thresholds for the FY 2018 Payment 
Determination and Subsequent Years
    We are proposing that, beginning with the FY 2018 payment 
determination, SNFs must report all of the data necessary to calculate 
the proposed quality measures on at least eighty percent of the MDS 
assessments that they submit. We are proposing that a SNF has reported 
all of the data necessary to calculate the measures if the data 
actually can be used for purposes of calculating the quality measures, 
as opposed to, for example, the use of a dash [-], to indicate that the 
SNF was unable to perform a pressure ulcer assessment.
    We believe that because SNFs have long been required to submit MDS 
assessments for other purposes, SNFs should easily be able to meet this 
proposed requirement for the SNF QRP. Our proposal to set reporting 
thresholds is consistent with policies we have adopted for the Long-
Term Care Hospital (79 FR 50314), Inpatient-Rehabilitation Hospital (79 
FR 45923) and Home Health (79 FR 66079) Quality Reporting Programs.
    Although we are proposing to adopt an 80 percent threshold 
initially, we intend to propose to raise the threshold level for 
subsequent program years through future rulemaking.
    We are also proposing that for the FY 2018 SNF QRP, any SNF that 
does not meet the proposed requirement that 80 percent of all MDS 
assessments submitted contain 100 percent of all data items necessary 
to calculate the SNF QRP measures would be subject to a reduction of 2 
percentage points to its FY 2018 market basket percentage.
    We invite comment on the proposed SNF QRP data completion 
requirements.
9. SNF QRP Data Validation Requirements for the FY 2018 Payment 
Determination and Subsequent Years
    To ensure the reliability and accuracy of the data submitted under 
the SNF QRP, we intend to propose to adopt policies and processes for 
validating the data submitted under the SNF QRP in future rulemaking. 
At this time, we are seeking comment on what elements we should 
consider including in such a process.
10. SNF QRP Submission Exception and Extension Requirements for the FY 
2018 Payment Determination and Subsequent Years
    Our experience with other quality reporting programs has shown that 
there are times when providers are unable to submit quality data due to 
extraordinary circumstances beyond their control (for example, natural, 
or man-made disasters). Other extenuating circumstances are reviewed on 
a case-by-case basis. 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. 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, floods caused by 
man-made actions, civil disorders, and explosions. A disaster may be 
widespread and impact multiple structures or be isolated and impact a 
single site only.
    In certain instances of either natural or man-made disasters, a SNF 
may have the ability to conduct a full resident assessment, and record 
and save the associated data either during or before the occurrence of 
the extraordinary event. In this case, the extraordinary event has not 
caused the facility's data files to be destroyed, but it could hinder 
the SNF's ability to meet the quality reporting program's data 
submission deadlines. In this scenario, the SNF would potentially have 
the ability to report the data at a later date, after the emergency has 
passed. In such cases, a temporary extension of the deadlines for 
reporting might be appropriate.
    In other circumstances of natural or man-made disaster, a SNF may 
not have had the ability to conduct a full resident assessment, or to 
record and save the associated data before the occurrence of the 
extraordinary event. In such a scenario, the facility may not have 
complete data to submit to CMS. We believe that it may be appropriate, 
in these situations, to grant a full exception to the reporting 
requirements for a specific period of time.
    We do not wish to penalize SNFs in these circumstances or to unduly 
increase their burden during these times. Therefore, we are proposing a 
process for SNFs to request and for us to grant exceptions and 
extensions with respect to the quality data reporting requirements of 
the SNF QRP for one or more quarters, beginning with the FY 2018 
payment determination, when there are certain extraordinary 
circumstances beyond the control of the SNF. When an exception or 
extension is granted, we would not reduce the SNF's PPS payment for 
failure to comply with the requirements of the SNF QRP.
    We are proposing that if a SNF seeks to request an exception or 
extension

[[Page 22078]]

with respect to the SNF QRP, the SNF should request an exception or 
extension within 90 days of the date that the extraordinary 
circumstances occurred. The SNF may request an exception or extension 
for one or more quarters by submitting a written request to CMS that 
contains the information noted below, via email to the SNF Exception 
and Extension mailbox at <a href="/cdn-cgi/l/email-protection#b0e3fef6e1e2e0e2d5d3dfdec3d9d4d5c2d1c4d9dfdec3f0d3ddc39ed8d8c39ed7dfc6"><span class="__cf_email__" data-cfemail="1e4d50584f4c4e4c7b7d71706d777a7b6c7f6a7771706d5e7d736d3076766d30797168">[email protected]</span></a>. Requests 
sent to CMS through any other channel will not be considered as valid 
requests for an exception or extension from the SNF QRP's reporting 
requirements for any payment determination.
    We note that the subject of the email must read ``SNF QRP Exception 
or Extension Request'' and the email must contain the following 
information:
    <bullet> SNF CCN;
    <bullet> SNF name;
    <bullet> CEO or CEO-designated personnel contact information 
including name, telephone number, email address, and mailing address 
(the address must be a physical address, not a post office box);
    <bullet> SNF's reason for requesting an exception or extension;
    <bullet> Evidence of the impact of extraordinary circumstances, 
including but not limited to photographs, newspaper and other media 
articles; and
    <bullet> A date when the SNF believes it will be able to again 
submit SNF QRP data and a justification for the proposed date.
    We are proposing that exception and extension requests be signed by 
the SNF's CEO or CEO designated personnel, and that if the CEO 
designates an individual to sign the request, the CEO-designated 
individual has the appropriate authority to submit such a request on 
behalf of the SNF. Following receipt of the email, we will: (1) Provide 
a written acknowledgement, using the contact information provided in 
the email, to the CEO or CEO-designated contact notifying them that the 
request has been received; and (2) provide a formal response to the CEO 
or any CEO-designated SNF personnel, using the contact information 
provided in the email, indicating our decision.
    This proposal does not preclude us from granting exceptions or 
extensions 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 make the determination to grant an 
exception or extension to all SNFs in a region or locale, we are 
proposing 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 QRP Web site once it is available 
at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-QR-Reconsideration-and-ExceptionExtension.html.
    We are also proposing that we may grant an exception or extension 
to SNFs if we determine that a systemic problem with one of our data 
collection systems directly affected the ability of the SNF to submit 
data. Because we do not anticipate that these types of systemic errors 
will happen often, we do not anticipate granting an exception or 
extension on this basis frequently.
    If a SNF is granted an exception, we will not require that the SNF 
submit any measure data for the period of time specified in the 
exception request decision. If we grant an extension to a SNF, the SNF 
will still remain responsible for submitting quality data collected 
during the timeframe in question, although we will specify a revised 
deadline by which the SNF must submit this quality data.
    We also propose that any exception or extension requests submitted 
for purposes of the SNF QRP will apply to that program only, and not to 
any other program we administer for SNFs such as survey and 
certification. MDS requirements, including electronic submission, 
during Declared Public Health Emergencies can be found at FAQs K-5, K-6 
and K-9 on the following link: http://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertEmergPrep/downloads/AllHazardsFAQs.pdf.
    We intend to provide additional information pertaining to 
exceptions and extensions for the SNF QRP, including any additional 
guidance, on the SNF QRP Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-QR-Reconsideration-and-ExceptionExtension.html.
    We invite public comment on these proposals for seeking and being 
granted exceptions and extensions to the quality reporting 
requirements.
11. SNF QRP Reconsideration and Appeals Procedures for the FY 2018 
Payment Determination and Subsequent Years
    At the conclusion of the required quality data reporting and 
submission period, we will review the data received from each SNF 
during that reporting period to determine if the SNF met the quality 
data reporting requirements. SNFs that are found to be noncompliant 
with the reporting requirements for the applicable fiscal year will 
receive a 2 percentage point reduction to their market basket 
percentage update for that fiscal year.
    We are aware that some of our other quality reporting programs, 
such as the HIQR Program, the LTCHQR Program, and the IRF QRP include 
an opportunity for the providers to request a reconsideration of our 
initial non-compliance determination. Therefore, to be consistent with 
other established quality reporting programs and to provide an 
opportunity for SNFs to seek reconsideration of our initial non-
compliance decision, we are proposing a process that will enable a SNF 
to request reconsideration of our initial non-compliance decision in 
the event that it believes that it was incorrectly identified as being 
non-compliant with the SNF QRP reporting requirements for a particular 
fiscal year.
    For the FY 2018 payment determination, and that of subsequent 
years, we are proposing that a SNF would receive a notification of 
noncompliance if we determine that the SNF did not submit data in 
accordance with the data reporting requirements with respect to the 
applicable FY. The purpose of this notification is to put the SNF on 
notice of the following: (1) That the SNF has been identified as being 
non-compliant with the SNF QRP's reporting requirements for the 
applicable fiscal year; (2) that the SNF will be scheduled to receive a 
reduction in the amount of two percentage points to its market basket 
percentage update for the applicable fiscal year; (3) that the SNF may 
file a request for reconsideration if it believes that the finding of 
noncompliance is erroneous, has submitted a request for an extension or 
exception that has not yet been decided, or has been granted an 
extension or exception; and (4) that the SNF must follow a defined 
process on how to file a request for reconsideration, which will be 
described in the notification. We would only consider requests for 
reconsideration after an SNF has been found to be noncompliant.
    Notifications of noncompliance and any subsequent notifications 
from CMS would be sent via a traceable delivery method, such as 
certified U.S. mail or registered U.S. mail, or through other 
practicable notification processes, such as a report from CMS to the 
provider as a Certification and Survey Provider Enhanced Reports 
(CASPER) report, that will provide information pertaining to their 
compliance with the reporting requirements for the given reporting 
cycle. To obtain the CASPER report, providers should access the CASPER

[[Page 22079]]

Reporting Application. Information on how to access the CASPER 
Reporting Application is available on the Quality Improvement 
Evaluation System (QIES) Technical Support Office Web site (direct 
link), https://web.qiesnet.org/qiestosuccess/. Once access is 
established providers can select ``CASPER Reports'' link. The ``CASPER 
Reports'' link will connect a SNF to the QIES National System Login 
page for CASPER Reporting.
    We seek comments on the most preferable delivery method for the 
notice of non-compliance, such as U.S. Mail, email, CASPER, etc.
    We propose to disseminate communications regarding the availability 
of compliance reports in the CASPER reports through routine channels to 
SNFs and vendors, including, but not limited to issuing memos, emails, 
Medicare Learning Network (MLN) announcements, and notices on our SNF 
QRP Web site once it is available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-QR-Reconsideration-and-ExceptionExtension.html.
    A SNF would have 30 days from the date of the initial notification 
of noncompliance to submit to us a request for reconsideration. This 
proposed time frame allows us to balance our desire to ensure that SNFs 
have the opportunity to request reconsideration with our need to 
complete the process and provide SNFs with our reconsideration decision 
in a timely manner. We are proposing that a SNF may withdraw its 
request at any time and may file an updated request within the proposed 
30-day deadline. We are also proposing that, in very limited 
circumstances, we may grant a request by a SNF to extend the proposed 
deadline for reconsideration requests. It would be the responsibility 
of a SNF to request an extension and demonstrate that extenuating 
circumstances existed that prevented the filing of the reconsideration 
request by the proposed deadline.
    We also are proposing that as part of the SNF's request for 
reconsideration, the SNF would be required to submit all supporting 
documentation and evidence demonstrating full compliance with all SNF 
QRP reporting requirements for the applicable fiscal year, that the SNF 
has requested an extension or exception for which a decision has not 
yet been made, that the SNF has been granted an extension or exception, 
or has experienced an extenuating circumstance as defined in section 
V.C.10 of this rule but failed to file a timely request of exception. 
We propose that we would not review any reconsideration request that 
fails to provide the necessary documentation and evidence along with 
the request.
    The documentation and evidence may include copies of any 
communications that demonstrate the SNF's compliance with the SNF QRP, 
as well as any other records that support the SNF's rationale for 
seeking reconsideration, but should not include any protected health 
information (PHI). We intend to provide a sample list of acceptable 
supporting documentation and evidence, as well as instructions for SNFs 
on how to retrieve copies of the data submitted to CMS for the 
appropriate program year in the future on our SNF QRP Web site at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-QR-Reconsideration-and-ExceptionExtension.html.
    We are proposing that a SNF wishing to request a reconsideration of 
our initial noncompliance determination would be required to do so by 
submitting an email to the following email address: 
<a href="/cdn-cgi/l/email-protection#e4b7aaa2b5b6b4b681878b8a978d80819685908d8b8a97a4878997ca8c8c97ca838b92"><span class="__cf_email__" data-cfemail="a2f1ece4f3f0f2f0c7c1cdccd1cbc6c7d0c3d6cbcdccd1e2c1cfd18ccacad18cc5cdd4">[email protected]</span></a>. Any request for reconsideration 
submitted to us by a SNF would be required to follow the guidelines 
outlined on our SNF QRP Web site once it is available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-QR-Reconsideration-and-ExceptionExtension.html.
    All emails must contain a subject line that reads ``SNF QRP 
Reconsideration Request.'' Electronic email submission is the only form 
of reconsideration request submission that will be accepted by us. Any 
reconsideration requests communicated through another channel 
including, but not limited to, U.S. Postal Service or phone, will not 
be considered as a valid reconsideration request.
    We are proposing that a reconsideration request include the 
following information:
    <bullet> SNF CMS Certification Number (CCN);
    <bullet> SNF Business Name;
    <bullet> SNF Business Address;
    <bullet> The CEO contact information including name, email address, 
telephone number and physical mailing address; or
    The CEO-designated representative contact information including 
name, title, email address, telephone number and physical mailing 
address; and
    <bullet> CMS identified reason(s) for non-compliance from the non-
compliance notification; and
    <bullet> The reason(s) for requesting reconsideration.
    The request for reconsideration must be accompanied by supporting 
documentation demonstrating compliance. Following receipt of a request 
for reconsideration, we will provide an email acknowledgment, using the 
contact information provided in the reconsideration request, to the CEO 
or CEO-designated representative that the request has been received. 
Once we have reached a decision regarding the reconsideration request, 
an email will be sent to the SNF CEO or CEO-designated representative, 
using the contact information provided in the reconsideration request, 
notifying the SNF of our decision.
    We also propose that the notifications of our decision regarding 
reconsideration requests may be made available through the use of 
CASPER reports or through a traceable delivery method, such as 
certified U.S. mail or registered U.S. mail. If the SNF is dissatisfied 
with the decision rendered at the reconsideration level, the SNF may 
appeal the decision to the PRRB under 42 CFR 405.1835. We believe this 
proposed process is more efficient and less costly for CMS and for SNFs 
because it decreases the number of PRRB appeals by resolving issues 
earlier in the process. Additional information about the 
reconsideration process including details for submitting a 
reconsideration request will be posted in the future to our SNF QRP Web 
site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-QR-Reconsideration-and-ExceptionExtension.html.
    We invite public comment on the proposed procedures for 
reconsideration and appeals.
12. Public Display of Quality Measure Data for the SNF QRP
    Section 1899B(g)(1) of the Act requires the Secretary to provide 
for the public reporting of SNF provider performance on the quality 
measures specified under subsection (c)(1) and the resource use and 
other measures specified under subsection (d)(1) by establishing 
procedures for making available to the public data and information on 
the performance of individual SNFs with respect to the measures. Under 
section 1899B(g)(2) of the Act, such procedures must be consistent with 
those under section 1886(b)(3)(B)(viii)(VII) of the Act and also allow 
SNFs the opportunity to review and submit corrections to the data and 
other information before it is made public. Section 1899B(g)(3) of the

[[Page 22080]]

Act requires that the data and information be made publicly available 
not later than 2 years after the specified application date applicable 
to such a measure and provider. Finally, section 1899B(g)(4)(B) of the 
Act requires such procedures be consistent with Sections 1819(i) and 
1919(i) of the Act. We intend to propose details related to the public 
display of quality measures in the future.
13. Mechanism for Providing Feedback Reports to SNFs
    Section 1899B(f) of the Act requires the Secretary to provide 
confidential feedback reports to post-acute care providers on their 
performance with respect to the measures specified under subsections 
(c)(1) and (d)(1), beginning 1 year after the specified application 
date that applies to such measures and PAC providers. We intend to 
provide detailed procedures to SNFs on how to obtain their confidential 
feedback reports on the SNF QRP Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting.html.

D. Staffing Data Collection

1. Background and Statutory Authority
    Section 1819(d)(1)(A) of the Act for SNFs and section 1919(d)(1)(A) 
of the Act for NFs each state that, in general, a facility must be 
administered in a manner that enables it to use its resources 
effectively and efficiently to attain or maintain the highest 
practicable physical, mental, and psychosocial well-being of each 
resident. Sections 1819(d)(4)(B) and 1919(d)(4)(B) of the Act give the 
Secretary authority to issue rules, for SNFs and NFs respectively, 
relating to the health, safety and well-being of residents and relating 
to the physical facilities thereof.
    Section 6106 of the Affordable Care Act of 2010 (Pub. L. 111-148, 
March 23, 2010) added a new section 1128I to the Act to promote greater 
accountability for LTC facilities (defined under section 1128I(a) of 
the Act as skilled nursing facilities and nursing facilities). Section 
1128I(g) pertains to the submission of staffing data by LTC facilities, 
and specifies that the Secretary, after consulting with state long-term 
care ombudsman programs, consumer advocacy groups, provider stakeholder 
groups, employees and their representatives and other parties the 
Secretary deems appropriate, shall require a facility to electronically 
submit to the Secretary direct care staffing information, including 
information for agency and contract staff, based on payroll and other 
verifiable and auditable data in a uniform format according to 
specifications established by the Secretary in consultation with such 
programs, groups, and parties. The statute further requires that the 
specifications established by the Secretary specify the category of 
work a certified employee performs (such as whether the employee is a 
registered nurse, licensed practical nurse, licensed vocational nurse, 
certified nursing assistant, therapist, or other medical personnel), 
include resident census data and information on resident case mix, be 
reported on a regular schedule, and include information on employee 
turnover and tenure and on the hours of care provided by each category 
of certified employees per resident per day. Section 1128I(g) of the 
Act establishes that the Secretary may require submission of 
information for specific categories, such as nursing staff, before 
other categories of certified employees, and requires that information 
for agency and contract staff be kept separate from information on 
employee staffing.
2. Consultation on Specifications
    We have adopted a two-pronged strategy to comply with section 
1128I(g) of the Act's consultation requirement. First, through this 
notice of proposed rulemaking, we are soliciting input from all 
interested parties, including, without limitation, state long-term care 
ombudsman programs, consumer advocacy groups, provider stakeholder 
groups, employees and their representatives. Second, we are engaged in 
ongoing consultation with the statutorily identified entities regarding 
the sub-regulatory reporting specifications that we will establish. For 
example, in 2012, we conducted a 6-month pilot in which facilities 
submitted staffing information electronically based on payroll data, 
and which allowed participants and other stakeholders to provide 
feedback on the computerized system we are considering using to collect 
data. Following the pilot, we continue to receive feedback on the 
collection and reporting of staffing information from stakeholders in 
anticipation of establishing the specifications for the required 
submission by all facilities. Over the next few months, we intend to 
increase the level of engagement with stakeholders, including industry 
associations, consumer advocacy groups, and long-term care facilities, 
to solicit their input on these specifications in advance of the 
proposed mandatory submission date. We anticipate activities to solicit 
feedback will include Open Door Forums, general question and answer 
sessions, and a voluntary submission period whereby facilities can 
submit staffing information on a voluntary basis to become familiar 
with the system and to provide feedback to CMS on systems issues in 
advance of the mandatory submission date. Through this proposed rule, 
we invite public comment on our proposed methods for consultation on 
the submission specifications.
3. Provisions of the Proposed Rule
    We propose to modify current regulations applicable to LTC 
facilities that participate in Medicare and Medicaid to implement the 
new statutory requirement in section 1128I(g) of the Act. Specifically, 
we propose to amend the requirements for the administration of a LTC 
facility at Sec.  483.75 by adding a new paragraph (u), Mandatory 
submission of staffing information based on payroll data in a uniform 
format.
    The proposed regulation would require facilities to electronically 
submit to CMS complete and accurate direct care staffing information, 
including information for agency and contract staff, based on payroll 
and other verifiable and auditable data, beginning on July 1, 2016.
a. Submission Requirements
    We are proposing to add a new Sec.  483.75(u)(1) to establish the 
categories of information a facility must submit. This provision would 
implement the requirements in sections 1128I(g)(1), (2) and (4) of the 
Act, which require that a facility's submission of staffing information 
specify the category of work a certified employee performs, include 
resident census data and information on resident case mix, and include 
information on employee turnover and tenure and on the hours of care 
provided by each category of certified employees per resident per day. 
In keeping with Congress's clear intent, CMS is interpreting the 
statutory terms ``Certified employee'' and ``employee'' in section 
1128Ig(1) and (4) of the Act to include contract and agency staff as 
well as direct employees.
    The proposed rule also adopts certain approaches to minimize 
industry burden and duplication and to provide clarity for long-term 
care facilities that we believe are consistent with the intent, and 
meet the requirements, of the statute. For example, this rule does not 
propose to require the collection of resident case mix information as 
specified at section 1128I(g)(2) of the

[[Page 22081]]

Act because we already collect such information under Sec.  483.20, per 
which LTC facilities are required to conduct resident assessments by 
completing the Minimum Data Set (MDS) and submit the MDS data 
electronically to CMS. Because the MDS data is used to calculate a 
facility's resident case mix, long-term care facilities are already 
required to meet this statutory requirement.
    Additionally, for purposes of implementing the statutory reporting 
requirements in section 1128I(g)(4) of the Act, we proposed text for 
the new Sec.  483.75(u)(1)(iii) to specify that the staffing 
information a facility would need to submit must include each 
individual's start date, end date (if applicable) and hours worked. 
Although the statute does not specifically require reporting each 
individual's start and end dates, we believe that requiring submission 
of these data elements is necessary to satisfy section 1128I(g)(4) of 
the Act's requirement that facilities submit information on turnover 
and retention.
    Finally, although the proposed text for the new Sec.  
483.75(u)(1)(iii) would require facilities to submit each individual's 
hours worked, we note that section 1128I(g)(4) of the Act requires LTC 
facilities to report on the hours of care provided by each category of 
certified employees per resident per day. We believe the obligation to 
submit information on ``hours of care'' is satisfied by requiring 
facilities to submit hours worked by staff. In contrast with the 
statutory reference to ``direct care staffing information,'' which we 
believe is intended to establish that information must be submitted for 
the categories of individuals who render direct care, we believe 
Congress's intent in referring to ``hours of care'' was to require 
submission of information regarding the hours worked by individuals in 
those categories of staff providing direct care services. One of the 
primary objectives of the statute is for facilities to submit staffing 
information that is based on payroll and other verifiable and auditable 
data. We believe that most payroll or employee time and attendance 
systems capture the hours worked by individuals, and do not typically 
distinguish between hours spent doing different tasks (unless the tasks 
require different levels of pay). If we were to assume that ``hours or 
care'' was a subset of the hours worked by individuals, we would not be 
able to verify or audit the data submitted. As such, we believe that 
requiring facilities to report data on hours worked will yield the 
information Congress intended regarding ``hours of care provided.''
b. Distinguishing Employees From Agency and Contract Staff
    Under section 1128I(g) of the Act's requirement that information 
for agency and contract staff be kept separate from information on 
employee staffing, we are proposing to add a new Sec.  483.75(u)(2) to 
establish that, when reporting direct care staffing information for an 
individual, a facility must specify whether the individual is an 
employee of the facility or is engaged by the facility as contract or 
agency staff. We believe the statute's intent is to require LTC 
facilities to submit staffing information in a manner that can enable 
us to distinguish those staff that are employed by the facility from 
those that are engaged by the facility under a contract or through an 
agency. We do not believe the statute requires such data to be 
submitted at separate times or through separate systems, which would 
merely engender unnecessary costs and burden, so we intend to collect 
all facility staffing information at the same time and through the same 
system, employing a mechanism by which LTC facilities will clearly 
specify whether staff members are employees of the facility, or engaged 
under contract or through an agency.
c. Data Format
    We are proposing to add a new Sec.  483.75(u)(3) to establish that 
a facility must submit direct care staffing information in the format 
specified by CMS. This provision would implement the requirement in 
section 1128I(g) of the Act that facilities submit direct care staffing 
information in a uniform format. As noted, we are consulting with 
stakeholders on potential format specifications. The data that we 
propose be required to be submitted are similar to those already 
submitted by LTC facilities to CMS on the forms CMS-671 and CMS-672 (we 
intend for this proposed new information collection to eventually 
supplant the data collections via the CMS-671 and CMS-672). In advance 
of the proposed July 1, 2016 implementation date, we will publicize the 
established format specifications and will offer training to help 
facilities and other interested parties (for example, payroll vendors) 
prepare to meet the requirement.
d. Submission Schedule
    Section 1128I(g)(3) of the Act requires that facilities submit 
direct care staffing information on a regular reporting schedule. LTC 
facilities now submit staffing information to CMS about once a year. 
Because staffing levels may change throughout the course of a year 
(based on, among other things, a facility's census and residents' 
needs), to have a more continuous and accurate reflection of facility 
staffing, we believe it is preferable for facilities to submit staffing 
information quarterly. Therefore, the proposed new Sec.  483.75(u)(4) 
would establish that a facility must submit direct care staffing 
information on the schedule specified by CMS, but no less frequently 
than quarterly.
4. Compliance and Enforcement
    This proposed new Sec.  483.75(u) would implement the provisions of 
section 1128I(g) of the Act as requirements a LTC facility must meet to 
qualify to participate as a SNF in the Medicare program or a NF in the 
Medicaid program. As such, we plan to enforce the requirements under 
this new regulation through 42 CFR part 488. Should a facility fail to 
meet the reporting requirements of, or report inaccurate information 
under, the proposed Sec.  483.75(u), CMS or the state may impose one or 
more remedies available to address noncompliance with the requirements 
for LTC facilities.
5. Conclusion
    This proposed rule would implement the new requirements regarding 
the submission of staffing information based on payroll and other 
verifiable and auditable data by establishing that such submissions are 
requirements that a LTC facility must meet to qualify to participate as 
a SNF in the Medicare program or a NF in the Medicaid program. While 
section 1128I(g) of the Act does not make explicit that submission of 
staffing information based on these data is a condition of 
participation for Medicare or Medicaid, we believe that it is 
implicitly authorized by the terms of section 6106 of the Affordable 
Care Act. Moreover, it is explicitly permitted by the general 
rulemaking authority of sections 1819(d)(4)(B) and 1919(d)(4)(B) of the 
Act, which permit the Secretary to issue rules relating to the health, 
safety and well-being of residents. It is critical for both CMS and 
consumers to have access to accurate LTC staffing information to 
evaluate the quality of care rendered by such facilities. Several 
studies have looked at the relationship between staffing and the 
quality of care delivered by long term care facilities, and it is clear 
that staffing has an impact on the quality of care received by 
residents. This new collection and reporting of staffing data should 
enable us to have greater insight on the relationship between staffing 
and quality, and can be

[[Page 22082]]

used to inform future programs or policies.

VI. Collection of Information Requirements

    As indicated below, this rule only proposes information collection 
requirements that are exempt from the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3501 et seq.).
    Specifically, section V.D. of this preamble proposes to add Sec.  
483.75(u) to implement the provisions of section 1128I(g) of the Act as 
requirements a LTC facility must meet in order to qualify to 
participate as a SNF in the Medicare program or a NF in the Medicaid 
program. As such, nursing homes would be required to electronically 
submit direct care staffing information (including information with 
respect to agency and contract staff) based on payroll and other 
verifiable and auditable data. This requirement is exempt from the 
Paperwork Reduction Act (PRA) in accordance with the 1987 Omnibus 
Budget Reconciliation Act (OBRA) for SNF and NF information collection 
activities (Pub. L. 100-203, section 4204(b) and section 4214(d)). 
Under sections 4204(b) and 4214(d) of OBRA 1987, requirements related 
to the submission and retention of resident assessment data are not 
subject to the Paperwork Reduction Act (PRA).
    Section V.C.5. of this preamble proposes the following three new 
quality measures for the SNF QRP beginning with the FY 2018 program 
year: Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (Short Stay) (NQF #0678), NQF-endorsed Percent of 
Residents Experiencing One or More Falls with Major Injury (Long Stay) 
(NQF #0674), and an application of the Percent of Long-Term Care 
Hospital Patients With an Admission and Discharge Functional Assessment 
and a Care Plan that Addresses Function (NQF #2631; under NQF review).
    While the reporting of quality measures is an information 
collection, the requirement is exempt from the PRA in accordance with 
the IMPACT Act 2014. More specifically, section 1899B(m) and section 
1899B(a)(2)(B) of the Act, exempt modifications that are intended to 
achieve the standardization of patient assessment data.
    With regard to quality reporting during extraordinary 
circumstances, section V.C.10. of this rule proposes that SNFs may 
request an exception or extension from the FY 2018 payment 
determination and that of subsequent payment determinations. The 
request must be submitted by email within 90 days from the date that 
the extraordinary circumstances occurred.
    While the preparation and submission of the request is an 
information collection, the requirement is exempt from the PRA in 
accordance with the IMPACT Act 2014. More specifically, section 
1899B(m) of the Act and the sections referenced in section 
1899B(a)(2)(B) of the Act, as added by the IMPACT Act 2014, exempt 
modifications that are intended to achieve the standardization of 
patient assessment data.
    In section V.C.7.b. of this preamble we propose to require the 
collection of data--by means of a SNF PPS Part A Discharge Assessment--
at the time of transition from a SNF PPS Part A stay; specifically, 
when the resident has not physically been discharged from the facility. 
Under this section we also propose to add data items to the scheduled 
Medicare required PPS Admission/Entry Assessment (5-day).
    While the reporting of quality measures is an information 
collection, the requirements are exempt from the PRA in accordance with 
the IMPACT Act 2014. More specifically, section 1899B(m) of the Act and 
the sections referenced in subsection 1899B(a)(2)(B) of the Act, as 
added by the IMPACT Act 2014, exempt modifications that are intended to 
achieve the standardization of patient assessment data.
    As discussed in section V.C.11. of this preamble, this rule 
proposes a process that will enable SNFs to request reconsideration of 
our initial non-compliance decision if the SNF believes that it was 
incorrectly identified as not having met its reporting requirements for 
the applicable fiscal year. Because the reconsideration and appeals 
requirements are associated with an administrative action (5 CFR 
1320.4(a)(2) and (c)), they are exempt from the requirements of the 
PRA.
    If you wish to comment on any of the aforementioned assumptions, 
please submit your comments as specified under the DATES and ADDRESSES 
captions of this proposed rule.

VII. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

VIII. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA, 
September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA, March 
22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 
4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated an economically significant 
rule, under section 3(f)(1) of Executive Order 12866. Accordingly, we 
have prepared a regulatory impact analysis (RIA) as further discussed 
below. Also, the rule has been reviewed by OMB.
2. Statement of Need
    This proposed rule would update the SNF prospective payment rates 
for FY 2015 as required under section 1888(e)(4)(E) of the Act. It also 
responds to section 1888(e)(4)(H) of the Act, which requires the 
Secretary to provide for publication in the Federal Register before the 
August 1 that precedes the start of each fiscal year, the unadjusted 
federal per diem rates, the case-mix classification system, and the 
factors to be applied in making the area wage adjustment. As these 
statutory provisions prescribe a detailed methodology for calculating 
and disseminating payment rates under the SNF PPS, we do not have the 
discretion to adopt an alternative approach.
3. Overall Impacts
    This proposed rule sets forth proposed updates of the SNF PPS rates 
contained in the SNF PPS final rule for FY 2015 (79 FR 45628). Based on 
the above, we estimate that the aggregate impact would be an increase 
of $500

[[Page 22083]]

million in payments to SNFs, resulting from the SNF market basket 
update to the payment rates, as adjusted by the applicable forecast 
error adjustment and by the MFP adjustment. The impact analysis of this 
proposed rule represents the projected effects of the changes in the 
SNF PPS from FY 2015 to FY 2016. Although the best data available are 
utilized, there is no attempt to predict behavioral responses to these 
changes, or to make adjustments for future changes in such variables as 
days or case-mix.
    Certain events may occur to limit the scope or accuracy of our 
impact analysis, as this analysis is future-oriented and, thus, very 
susceptible to forecasting errors due to certain events that may occur 
within the assessed impact time period. Some examples of possible 
events may include newly-legislated general Medicare program funding 
changes by the Congress, or changes specifically related to SNFs. In 
addition, changes to the Medicare program may continue to be made as a 
result of previously-enacted legislation, or new statutory provisions. 
Although these changes may not be specific to the SNF PPS, the nature 
of the Medicare program is such that the changes may interact and, 
thus, the complexity of the interaction of these changes could make it 
difficult to predict accurately the full scope of the impact upon SNFs.
    In accordance with sections 1888(e)(4)(E) and 1888(e)(5) of the 
Act, we update the FY 2015 payment rates by a factor equal to the 
market basket index percentage change adjusted by the FY 2014 forecast 
error and the MFP adjustment to determine the payment rates for FY 
2016. As discussed previously, for FY 2012 and each subsequent FY, as 
required by section 1888(e)(5)(B) of the Act as amended by section 
3401(b) of the Affordable Care Act, the market basket percentage is 
reduced by the MFP adjustment. The special AIDS add-on established by 
section 511 of the MMA remains in effect until such date as the 
Secretary certifies that there is an appropriate adjustment in the case 
mix. We have not provided a separate impact analysis for the MMA 
provision. Our latest estimates indicate that there are fewer than 
4,800 beneficiaries who qualify for the add-on payment for residents 
with AIDS. The impact to Medicare is included in the total column of 
Table 12. In updating the SNF PPS rates for FY 2016, we made a number 
of standard annual revisions and clarifications mentioned elsewhere in 
this proposed rule (for example, the update to the wage and market 
basket indexes used for adjusting the federal rates).
    The annual update set forth in this proposed rule applies to SNF 
PPS payments in FY 2016. Accordingly, the analysis that follows only 
describes the impact of this single year. In accordance with the 
requirements of the Act, we will publish a notice or rule for each 
subsequent FY that will provide for an update to the SNF PPS payment 
rates and include an associated impact analysis.
    In accordance with sections 1888(g) and (h)(2)(A) of the Act, we 
are proposing to specify a Skilled Nursing Facility 30-Day All-Cause 
Readmission Measure (SNFRM) and adopt that measure for the SNF VBP 
Program. Because this proposed measure is claims-based, its adoption 
under the SNF VBP Program would not result in any increased costs to 
SNFs.
    However, we do not yet have preliminary data with which we could 
project economic impacts associated with the measure. We intend to make 
additional proposals for the SNF VBP Program in future rulemaking, and 
we will assess the impacts of the SNFRM and any associated SNF VBP 
Program proposals at that time.
    We believe that the burden associated with the SNF QRP is the time 
and effort associated with data collection and reporting. In this 
proposed rule, we propose three quality measures to meet the 
requirements of section 1888(e)(6)(B)(II) of the Act.
    Our burden calculations take into account all ``new'' items 
required on the MDS 3.0 to support data collection and reporting for 
these three proposed measures. New items will be included on the 
following assessments: SNF PPS 5-Day, Swing Bed PPS 5-Day, OMRA--Start 
of Therapy Discharge, OMRA--Other Discharge, OBRA Discharge, Swing Bed 
OMRA--Start of Therapy Discharge, Swing Bed OMRA--Other Discharge, and 
Swing Bed Discharge on the MDS 3.0. The SNF QRP also requires the 
addition of a SNF PPS Part A Discharge Assessment which will also 
include new items. New items include data elements required to identify 
whether pressure ulcers were present on admission, to inform future 
development of the Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (Short Stay) (NQF #0678), as well as 
changes in function and occurrence of falls with major injury. To the 
extent applicable, we will use standardized items to collect data for 
the three measures. For a copy of the data collection instrument, 
please visit: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting-Program-Measures-and-Technical-Information.html.
    We estimate a total additional burden of $27.47 per Medicare-
covered SNF stay, based on the most recent data available, in this case 
FY 2014, that 15,421 SNFs had a total of 2,599,656 Medicare-covered 
stays for fee-for-service beneficiaries. This would equate to 
1,012,566.13 total added hours or 66 hours per SNF annually.
    We believe that the additional MDS items we are proposing will be 
completed by Registered Nurses (RN), Occupational Therapists (OT), and/
or Physical Therapists (PT), depending on the item. We identified the 
staff type per item based on past LTCH and IRF burden calculations in 
conjunction with expert opinion. Our assumptions for staff type was 
based on the categories generally necessary to perform assessment: 
Registered Nurse (RN), Occupational Therapy (OT), and Physical Therapy 
(PT). Individual providers determine the staffing resources necessary, 
therefore, we averaged the national average for these labor types and 
established a composite cost estimate. We obtained mean hourly wages 
for these staff from the U.S. Bureau of Labor Statistics' May 2013 
National Occupational Employment and Wage Estimates (http://www.bls.gov/oes/current/oes_nat.htm), and to account for overhead and 
fringe benefits, we have doubled the mean hourly wage. The mean hourly 
wage for an RN is $33.13, doubled to $66.26 to account for overhead and 
fringe benefits. The mean hourly wage for an OT is $37.45, doubled to 
$74.90 to account for overhead and fringe benefits. The mean hourly 
wage for a PT is $39.51, doubled to $79.02 to account for overhead and 
fringe benefits.
    To calculate the added burden, we first identified the total number 
of new items to be added into assessment instruments. We assume that 
each new item accounts for 0.5 minutes of nursing facility staff time. 
This assumption is consistent with burden calculations in past IRF and 
LTCH federal regulations. For each staff type, we then multiply the 
added burden in minutes with the number of times we believe that each 
item will be completed annually. To identify the number of times an 
item would be completed annually, we noted the number of total SNF FFS 
Medicare-covered stays in FY 2014, the most recent data available to 
us. We assume that if an item was added to all discharge assessments 
that that item would be completed at least one time per SNF FFS 
Medicare-covered stay. For example, the time it takes to complete an 
item added to all discharge

[[Page 22084]]

assessments (0.5 minutes) would be multiplied by the number of SNF FFS 
Medicare-covered stays in FY 2014 to identify the total added burden in 
minutes associated with that item. Items added only to the SNF PPS Part 
A Discharge were weighted to reflect the proportion of SNF stays for 
residents who switch payers, but are not physically discharged from the 
facility. Added burden in minutes per staff type was then converted to 
hours and multiplied by the doubled hourly wage to identify the annual 
cost per staff type. Given these wages and time estimates, the total 
cost related to the SNF PPS Part A Discharge Assessment and SNF QRP 
measures is estimated at $4,630.20 per SNF annually, or $71,402,283.86 
for all SNFs annually.
4. Detailed Economic Analysis
    The FY 2016 SNF PPS payment impacts appear in Table 12. Using the 
most recently available data, in this case FY 2014, we apply the 
current FY 2015 wage index and labor-related share value to the number 
of payment days to simulate FY 2015 payments. Then, using the same FY 
2014 data, we apply the proposed FY 2016 wage index and labor-related 
share value to simulate FY 2015 payments. We tabulate the resulting 
payments according to the classifications in Table 12 (for example, 
facility type, geographic region, facility ownership), and compare the 
difference between current and proposed payments to determine the 
overall impact. The breakdown of the various categories of data in the 
table follows.
    The first column shows the breakdown of all SNFs by urban or rural 
status, hospital-based or freestanding status, census region, and 
ownership.
    The first row of figures describes the estimated effects of the 
various changes on all facilities. The next six rows show the effects 
on facilities split by 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 zero percent; however, 
there are distributional effects of the change.
    The fourth column shows the effect of all of the changes on the FY 
2016 payments. The update of 1.4 percent (consisting of the market 
basket increase of 2.6 percentage points, reduced by the 0.6 percentage 
point forecast error adjustment and further reduced by the 0.6 
percentage point MFP adjustment) is constant for all providers and, 
though not shown individually, is included in the total column. It is 
projected that aggregate payments will increase by 1.4 percent, 
assuming facilities do not change their care delivery and billing 
practices in response.
    As illustrated in Table 12, the combined effects of all of the 
changes vary by specific types of providers and by location. For 
example, due to changes proposed in this rule, providers in the rural 
Pacific region would experience a 1.6 percent increase in FY 2016 total 
payments.

                              Table 12--Projected Impact to the SNF PPS for FY 2016
----------------------------------------------------------------------------------------------------------------
                                                             Number of
                                                           facilities FY     Update wage data   Total change (%)
                                                                2016               (%)
----------------------------------------------------------------------------------------------------------------
Group:
    Total..............................................             15,421                0.0                1.4
    Urban..............................................             10,887                0.1                1.5
    Rural..............................................              4,534               -0.5                0.8
    Hospital based urban...............................                546                0.1                1.5
    Freestanding urban.................................             10,341                0.1                1.5
    Hospital based rural...............................                626               -0.6                0.8
    Freestanding rural.................................              3,908               -0.5                0.9
Urban by region:
    New England........................................                801                0.7                2.1
    Middle Atlantic....................................              1,485                0.7                2.1
    South Atlantic.....................................              1,853               -0.1                1.3
    East North Central.................................              2,068               -0.2                1.2
    East South Central.................................                543                0.0                1.4
    West North Central.................................                899               -0.4                1.0
    West South Central.................................              1,310               -0.1                1.3
    Mountain...........................................                501               -0.1                1.3
    Pacific............................................              1,420                0.2                1.6
    Outlying...........................................                  7               -1.5               -0.1
Rural by region:
    New England........................................                142               -0.7                0.7
    Middle Atlantic....................................                222               -1.2                0.2
    South Atlantic.....................................                510               -0.1                1.3
    East North Central.................................                937               -0.2                1.2
    East South Central.................................                535               -0.7                0.7
    West North Central.................................              1,089               -0.7                0.7
    West South Central.................................                764               -1.1                0.3
    Mountain...........................................                232               -0.6                0.8
    Pacific............................................                103                0.2                1.6
Ownership:
    Government.........................................                881                0.1                1.5
    Profit.............................................             10,862                0.0                1.4
    Non-profit.........................................              3,678                0.0                1.4
----------------------------------------------------------------------------------------------------------------
Note: The Total column includes the 2.6 percent market basket increase, reduced by the 0.6 percentage point
  forecast error adjustment and further reduced by the 0.6 percentage point MFP adjustment. Additionally, we
  found no SNFs in rural outlying areas.


[[Page 22085]]

5. Alternatives Considered
    As described in this section, we estimate that the aggregate impact 
for FY 2016 would be an increase of $500 million in payments to SNFs, 
resulting from the SNF market basket update to the payment rates, as 
adjusted by the applicable forecast error adjustment and by the MFP 
adjustment.
    Section 1888(e) of the Act establishes the SNF PPS for the payment 
of Medicare SNF services for cost reporting periods beginning on or 
after July 1, 1998. This section of the statute prescribes a detailed 
formula for calculating payment rates under the SNF PPS, and does not 
provide for the use of any alternative methodology. It specifies that 
the base year cost data to be used for computing the SNF PPS payment 
rates must be from FY 1995 (October 1, 1994, through September 30, 
1995). In accordance with the statute, we also incorporated a number of 
elements into the SNF PPS (for example, case-mix classification 
methodology, a market basket index, a wage index, and the urban and 
rural distinction used in the development or adjustment of the federal 
rates). Further, section 1888(e)(4)(H) of the Act specifically requires 
us to disseminate the payment rates for each new FY through the Federal 
Register, and to do so before the August 1 that precedes the start of 
the new FY. Accordingly, we are not pursuing alternatives for the 
payment methodology as discussed previously.
6. Accounting Statement
    As required by OMB Circular A-4 (available online at 
www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf), in Table 13, we have prepared an 
accounting statement showing the classification of the expenditures 
associated with the provisions of this proposed rule. Table 13 provides 
our best estimate of the possible changes in Medicare payments under 
the SNF PPS as a result of the policies in this proposed rule, based on 
the data for 15,421 SNFs in our database. All expenditures are 
classified as transfers to Medicare providers (that is, SNFs).

       Table 13--Accounting Statement: Classification of Estimated
   Expenditures, From the 2015 SNF PPS Fiscal Year to the 2016 SNF PPS
                               Fiscal Year
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $500 million.*
From Whom To Whom?                          Federal Government to SNF
                                             Medicare Providers.
------------------------------------------------------------------------
* The net increase of $500 million in transfer payments is a result of
  the forecast error and MFP adjusted market basket increase of $500
  million.

7. Conclusion
    This proposed rule sets forth updates of the SNF PPS rates 
contained in the SNF PPS final rule for FY 2015 (79 FR 45628). Based on 
the above, we estimate the overall estimated payments for SNFs in FY 
2016 are projected to increase by $500 million, or 1.4 percent, 
compared with those in FY 2015. We estimate that in FY 2016 under RUG-
IV, SNFs in urban and rural areas would experience, on average, a 1.5 
and 0.8 percent increase, respectively, in estimated payments compared 
with FY 2015. Providers in the urban New England and Middle Atlantic 
regions would experience the largest estimated increase in payments of 
approximately 2.1 percent. Providers in the urban Outlying region would 
experience a small decrease in payments of 0.1 percent.

B. Regulatory Flexibility Act Analysis

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, non-profit organizations, and small 
governmental jurisdictions. Most SNFs and most other providers and 
suppliers are small entities, either by 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, we estimate 
approximately 91 percent of SNFs are considered small businesses 
according to the Small Business Administration's latest size standards 
(NAICS 623110), with total revenues of $27.5 million or less in any 1 
year. (For details, see the Small Business Administration's Web site at 
http://www.sba.gov/category/navigation-structure/contracting/contracting-officials/eligibility-size-standards). In addition, 
approximately 25 percent of SNFs classified as small entities are non-
profit organizations. Finally, individuals and states are not included 
in the definition of a small entity.
    This proposed rule sets forth updates of the SNF PPS rates 
contained in the SNF PPS final rule for FY 2015 (79 FR 45628). Based on 
the above, we estimate that the aggregate impact would be an increase 
of $500 million in payments to SNFs, resulting from the SNF market 
basket update to the payment rates, as adjusted by the MFP adjustment 
and forecast error adjustment. While it is projected in Table 12 that 
most providers would experience a net increase in payments, we note 
that some individual providers within the same region or group may 
experience different impacts on payments than others due to the 
distributional impact of the FY 2016 wage indexes and the degree of 
Medicare utilization.
    Guidance issued by the Department of Health and Human Services on 
the proper assessment of the impact on small entities in rulemakings, 
utilizes a cost or revenue impact of 3 to 5 percent as a significance 
threshold under the RFA. According to MedPAC, Medicare covers 
approximately 12 percent of total patient days in freestanding 
facilities and 22 percent of facility revenue (Report to the Congress: 
Medicare Payment Policy, March 2015, available at http://medpac.gov/documents/reports/chapter-8-skilled-nursing-facility-services-(march-
2015-report).pdf). However, it is worth noting that the distribution of 
days and payments is highly variable. That is, the majority of SNFs 
have significantly lower Medicare utilization (Report to the Congress: 
Medicare Payment Policy, March 2015, available at http://medpac.gov/documents/reports/chapter-8-skilled-nursing-facility-services-(march-
2015-report).pdf). As a result, for most facilities, when all payers 
are included in the revenue stream, the overall impact on total 
revenues should be substantially less than those impacts presented in 
Table 12. As indicated in Table 12, the effect on facilities is 
projected to be an aggregate positive impact of 1.4 percent. As the 
overall impact on the industry as a whole, and thus on small entities 
specifically, is less than the 3 to 5 percent threshold discussed 
previously, the Secretary has determined that this proposed rule would 
not have a significant impact on a substantial number of small 
entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of

[[Page 22086]]

a substantial number of small rural hospitals. This analysis must 
conform to the provisions of section 603 of the RFA. For purposes of 
section 1102(b) of the Act, we define a small rural hospital as a 
hospital that is located outside of a Metropolitan Statistical Area and 
has fewer than 100 beds. This proposed rule would affect small rural 
hospitals that (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 would be similar to the impact on SNF providers 
overall. Moreover, as noted in previous SNF PPS final rules (most 
recently the one for FY 2014 (78 FR 47968)), the category of small 
rural hospitals would be included within the analysis of the impact of 
this proposed rule on small entities in general. As indicated in Table 
12, the effect on facilities is projected to be an aggregate positive 
impact of 1.4 percent. As the overall impact on the industry as a whole 
is less than the 3 to 5 percent threshold discussed above, the 
Secretary has determined that this proposed rule would not have a 
significant impact on a substantial number of small rural hospitals.

C. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2015, that 
threshold is approximately $144 million. This proposed rule would not 
impose spending costs on state, local, or tribal governments in the 
aggregate, or by the private sector, of $144 million.

D. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a proposed rule (and subsequent final 
rule) that imposes substantial direct requirement costs on state and 
local governments, preempts state law, or otherwise has federalism 
implications. This proposed rule would have no substantial direct 
effect on state and local governments, preempt state law, or otherwise 
have federalism implications.

E. Congressional Review Act

    This proposed 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.
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 483

    Grant programs--health, Health facilities, Health professions, 
Health records, Medicaid, Medicare, Nursing homes, Nutrition, Reporting 
and recordkeeping requirements, Safety.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth 
below:

PART 483--REQUIREMENTS FOR STATES AND LONG TERM CARE FACILITIES

0
1. The authority citation for part 483 is revised to read as follows:

    Authority: Secs. 1102, 1128I, 1819, 1871 and 1919 of the Social 
Security Act, (42 U.S.C. 1302, 1320a-7, 1395i, 1395hh and 1396r).

0
2. Section 483.75 is amended by adding paragraph (u) to read as 
follows:


Sec.  483.75  Administration.

* * * * *
    (u) Mandatory submission of staffing information based on payroll 
data in a uniform format. Long-term care facilities must electronically 
submit to CMS complete and accurate direct care staffing information, 
including information for agency and contract staff, based on payroll 
and other verifiable and auditable data in a uniform format according 
to specifications established by CMS.
    (1) Submission requirements. The facility must electronically 
submit to CMS complete and accurate direct care staffing information, 
including the following:
    (i) The category of work for each individual that performs direct 
care (including, but not limited to, whether the individual is a 
registered nurse, licensed practical nurse, licensed vocational nurse, 
certified nursing assistant, therapist, or other type of medical 
personnel as specified by CMS);
    (ii) Resident census data; and
    (iii) Information on staff turnover and tenure, and on the hours of 
care provided by each category of staff per resident per day 
(including, but not limited to, start date, end date (as applicable), 
and hours worked for each individual).
    (2) Distinguishing employee from agency and contract staff. When 
reporting direct care staffing information for an individual, the 
facility must specify whether the individual is an employee of the 
facility, or is engaged by the facility under contract or through an 
agency.
    (3) Data format. The facility must submit direct care staffing 
information in the format specified by CMS.
    (4) Submission schedule. The facility must submit direct care 
staffing information on the schedule specified by CMS, but no less 
frequently then quarterly.

    Dated: April 7, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: April 13, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-08944 Filed 4-15-15; 4:15 pm]
 BILLING CODE 4120-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>