2010 Changes to Prospective Payment Rates for Skilled Nursing Facilities: CMS Says "More Accurate Payment Rates"

05 August 2009 Publication

American Health Lawyers Association

By Jeffrey R. Bates

On July 31, 2009, the Centers for Medicare & Medicaid Services (CMS) issued a final rule implementing changes to the Prospective Payment System for Skilled Nursing Facilities (SNFs) for fiscal year (FY) 2010. The rule is scheduled to be published in the August 11, 2009, edition of the Federal Register, but was placed on display at the Office of Federal Register. In its accompanying July 31, 2009, press release, CMS said these adjustments for FY 2010 payment rates would better reflect the costs of caring for Medicare beneficiaries in nursing homes.

Among other changes, the rule:

  • Calls for payments to Medicare SNFs to be reduced by $360 million, or 1.1% lower than the payments in FY 2009. The 1.1% reduction is a result of the combination of a payment decrease of 3.3% due to a recalibration of the case-mix indexes (CMIs), and a market basket increase of 2.2%.
  • CMS stated that the 3.3% reduction due to a recalibration of the CMIs is to correct for a projection error regarding the Resource Utilization Groups (RUGs) into which patients are classified. In a previous adjustment, CMS projected that 19% of SNF patients would be classified into one of the newly created, higher-paying RUG groups. However, CMS found that the actual utilization under the refined case-mix system differed significantly from the projections on which the adjustment was based. CMS found that patients were being classified into one of the newly created, higher-paying RUG groups more than 30% of the time, thus triggering Medicare payments well in excess of the original projections. The 3.3% reduction is to correct for this projection error.
  • The market basket update of 2.2% is based on the change in prices of a market basket of goods and services included in covered SNF stays. When the market basket update of 2.2% is combined with the 3.3% reduction due to the CMI recalibration, the overall effect is a 1.1% reduction in Medicare payment for SNFs.

CMS also established a schedule for implementation of a revised case-mix classification methodology known as RUG-IV. This revised methodology is to reflect updated staff time measurement data derived from the recently completed Staff Time and Resource Intensity Verification (STRIVE) project. The RUG-IV will be implemented on October 1, 2010.

In addition, CMS included information on the transition to the Minimum Data Set, Version 3.0 (MDS 3.0). The MDS 3.0 is a redesigned nursing home resident assessment instrument, and it will also be implemented on October 1, 2010. Under MDS 3.0, services provided prior to the resident's admission to the SNF will no longer be counted for classification to a RUG category. Only services provided in the SNF will be reported on the MDS 3.0 and taken into consideration for the assignment of a resident to a particular RUG. 

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