Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities; Updates to the Quality Reporting Program and Value-Based Purchasing Program for Federal Fiscal Year 2024

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 411, 413, 488, and 489

[CMS-1779-F]

RIN 0938-AV02

Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities; Updates to the Quality Reporting Program and Value-Based Purchasing Program for Federal Fiscal Year 2024

AGENCY:

Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS).

ACTION:

Final rule.

SUMMARY:

This final rule updates payment rates, including implementing the second phase of the Patient Driven Payment Model (PDPM) parity adjustment recalibration. This final rule also updates the diagnosis code mappings used under PDPM, the SNF Quality Reporting Program (QRP), and the SNF Value-Based Purchasing (VBP) Program. We are also eliminating the requirement for facilities to actively waive their right to a hearing in writing, treating as a constructive waiver when the facility does not submit a request for hearing.

DATES:

These regulations are effective October 1, 2023, except for the amendments to §§ 411.15 and 489.20 in instructions 2 and 11, which are effective January 1, 2024.

FOR FURTHER INFORMATION CONTACT:

PDPM@cms.hhs.gov

for issues related to the SNF PPS.

Heidi Magladry, (410) 786-6034, for information related to the skilled nursing facility quality reporting program.

Alexandre Laberge, (410) 786-8625, for information related to the skilled nursing facility value-based purchasing program.

Lorelei Kahn, (443) 803-8643, for information related to the Civil Money Penalties Waiver of Hearing.

SUPPLEMENTARY INFORMATION:

Availability of Certain Tables Exclusively Through the Internet on the CMS Website

As discussed in the FY 2014 SNF PPS final rule (78 FR 47936), tables setting forth the Wage Index for Urban Areas Based on CBSA Labor Market Areas and the Wage Index Based on CBSA Labor Market Areas for Rural Areas are no longer published in the

Federal Register

. Instead, these tables are available exclusively through the internet on the CMS website. The wage index tables for this final rule can be accessed on the SNF PPS Wage Index home page, at

https://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 Burwell at (410) 786-7816.

To assist readers in referencing sections contained in this document, we are providing the following Table of Contents.

Table of Contents

I. Executive Summary

A. Purpose

B. Summary of Major Provisions

C. Summary of Cost and Benefits

D. Advancing Health Information Exchange

II. Background on SNF PPS

A. Statutory Basis and Scope

B. Initial Transition for the SNF PPS

C. Required Annual Rate Updates

III. Analysis and Responses to Public Comments on the FY 2024 SNF PPS Proposed Rule

A. General Comments on the FY 2024 SNF PPS Proposed Rule

IV. SNF PPS Rate Setting Methodology and FY 2024 Update

A. Federal Base Rates

B. SNF Market Basket Update

C. Case-Mix Adjustment

D. Wage Index Adjustment

E. SNF Value-Based Purchasing Program

F. Adjusted Rate Computation Example

V. Additional Aspects of the SNF PPS

A. SNF Level of Care—Administrative Presumption

B. Consolidated Billing

C. Payment for SNF-Level Swing-Bed Services

D. Revisions to the Regulation Text

VI. Other SNF PPS Issues

A. Technical Updates to PDPM ICD-10 Mappings

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

A. Background and Statutory Authority

B. General Considerations Used for the Selection of Measures for the SNF QRP

C. SNF QRP Quality Measures

D. Principles for Selecting and Prioritizing SNF QRP Quality Measures and Concepts Under Consideration for Future Years: Request for Information (RFI)

E. Health Equity Update

F. Form, Manner, and Timing of Data Submission Under the SNF QRP

G. Policies Regarding Public Display of Measure Data for the SNF QRP

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

A. Statutory Background

B. SNF VBP Program Measures

C. SNF VBP Performance Period and Baseline Periods

D. SNF VBP Performance Standards

E. SNF VBP Performance Scoring Methodology

F. Updates to the Extraordinary Circumstances Exception Policy Regulation Text

G. Updates to the Validation Process for the SNF VBP Program

H. SNF Value-Based Incentive Payments for FY 2024

I. Public Reporting on the Provider Data Catalog website

IX. Civil Money Penalties: Waiver of Hearing, Automatic Reduction of Penalty Amount

X. Waiver of Proposed Rulemaking

XI. Collection of Information Requirements

XII. Economic Analyses

A. Regulatory Impact Analysis

B. Regulatory Flexibility Act Analysis

C. Unfunded Mandates Reform Act Analysis

D. Federalism Analysis

E. Regulatory Review Costs

I. Executive Summary

A. Purpose

This final rule updates the SNF prospective payment rates for fiscal year (FY) 2024, as required under section 1888(e)(4)(E) of the Social Security Act (the Act). It also responds to section 1888(e)(4)(H) of the Act, which requires the Secretary to provide for publication of certain specified information relating to the payment update (see section II.C. of the FY 2024 SNF PPS proposed rule) in the

Federal Register

before the August 1 that precedes the start of each FY. In addition, this final rule includes requirements for the Skilled Nursing Facility Quality Reporting Program (SNF QRP) for the FY 2025 and FY 2026 program years. This final rule will add two new measures to the SNF QRP, remove three measures from the SNF QRP, and modify one measure in the SNF QRP. This final rule will also make policy changes to the SNF QRP, and begin public reporting of four measures. In addition, this final rule includes a summary of comments received in response to our request for information on principles we will use to select and prioritize SNF QRP quality measures in future years and on the update on our health equity efforts. Finally, this final rule includes requirements for the Skilled Nursing Facility Value-Based Purchasing (SNF VBP) Program, including adopting new quality measures for the SNF VBP Program, finalizing several updates to the Program's scoring methodology, including a Health Equity Adjustment, and finalizing new processes to validate SNF VBP data. We are also changing the current long-term care (LTC) facility requirements that will simplify and streamline the current requirements and thereby increase provider flexibility and reduce unnecessary administrative burden, while also allowing facilities to focus on providing healthcare to

residents to meet their needs. This proposal was previously proposed and published in the July 18, 2019

Federal Register

in the proposed rule entitled, “Medicare and Medicaid Programs; Requirements for Long-Term Care Facilities: Regulatory Provisions to Promote Efficiency, and Transparency” (84 FR 34718). We are finalizing this revision for a facility to waive its hearing rights and receive a reduction in civil money penalties. This change to the current LTC requirements will simplify and streamline the current requirements and thereby increase provider flexibility and reduce excessively burdensome regulations, while also allowing facilities to focus on providing high-quality healthcare to their residents.

B. Summary of Major Provisions

In accordance with sections 1888(e)(4)(E)(ii)(IV) and (e)(5) of the Act, the Federal rates in this final rule update the annual rates that we published in the SNF PPS final rule for FY 2023 (87 FR 47502, August 3, 2022). In addition, this final rule includes a forecast error adjustment for FY 2024 and includes the second phase of the PDPM parity adjustment recalibration. This final rule also updates the diagnosis code mappings used under the PDPM.

Beginning with the FY 2025 SNF QRP, we are modifying the COVID-19 Vaccination Coverage among Healthcare Personnel measure, adopting the Discharge Function Score measure, and removing the (1) Application of Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function measure, (2) the Application of IRF Functional Outcome Measure: Change in Self-Care Score for Medical Rehabilitation Patients measure, and (3) the Application of IRF Functional Outcome Measure: Change in Mobility Score for Medical Rehabilitation Patients measure. Beginning with the FY 2026 SNF QRP, we are adopting the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date measure. We are also changing the SNF QRP data completion thresholds for the Minimum Data Set (MDS) data items beginning with the FY 2026 SNF QRP and making certain revisions to regulation text at § 413.360. This final rule also contains updates pertaining to the public reporting of the (1) Transfer of Health Information to the Patient-Post-Acute Care (PAC) measure, (2) the Transfer of Health Information to the Provider-PAC measure, (3) the Discharge Function Score measure, and (4) the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date measure. In addition, we summarize comments received in response to the Request for Information (RFI) on principles for selecting and prioritizing SNF QRP quality measures and concepts and the update on our continued efforts to close the health equity gap, including under the SNF QRP.

We are finalizing several updates for the SNF VBP Program. We are adopting a Health Equity Adjustment that rewards top tier performing SNFs that serve higher proportions of SNF residents with dual eligibility status, effective with the FY 2027 program year and adopting a variable payback percentage to maintain an estimated payback percentage for all SNFs of no less than 60 percent. We are adopting four new quality measures to the SNF VBP Program, one taking effect beginning with the FY 2026 program year and three taking effect beginning with the FY 2027 program year. We are also refining the Skilled Nursing Facility 30-Day Potentially Preventable Readmission (SNFPPR) measure specifications and updating the name to the Skilled Nursing Facility Within-Stay Potentially Preventable Readmission (SNF WS PPR) measure effective with the FY 2028 program year. We are adopting new processes to validate SNF VBP program data.

In addition, we are finalizing our proposal to eliminate the requirement for facilities facing a civil money penalty to actively waive their right to a hearing in writing in order to receive a penalty reduction. We are creating, in its place, a constructive waiver process that will operate by default when CMS has not received a timely request for a hearing. The accompanying 35 percent penalty reduction will remain. This will streamline and reduce the administrative burden for CMS, and result in lower administrative costs for most LTC facilities facing civil money penalties (CMPs). The accompanying 35 percent penalty reduction will remain for now, although we plan to revisit this in a future rulemaking. The move to a constructive waiver process in this rule purely reflects the need to reduce costs and paperwork burden for CMS in order to prioritize current limited Survey and Certification resources for enforcement actions, and we continue to consider whether the existing penalty reduction is appropriate given this final policy. The operational change finalized here will streamline and reduce the administrative burden for CMS.

C. Summary of Cost and Benefits

Table 1—Cost and Benefits

Provision description

Total transfers/costs

FY 2024 SNF PPS payment rate update

The overall economic impact of this final rule is an estimated increase of $1.4 billion in aggregate payments to SNFs during FY 2024.

FY 2025 SNF QRP changes

The overall economic impact of this final rule to SNFs is an estimated benefit of $1,037,261 to SNFs during FY 2025.

FY 2026 SNF QRP changes

The overall economic impact of this final rule to SNFs is an estimated increase in aggregate cost from FY 2025 of $778,591.

FY 2024 SNF VBP changes

The overall economic impact of the SNF VBP Program is an estimated reduction of $184.85 million in aggregate payments to SNFs during FY 2024.

FY 2026 SNF VBP changes

The overall economic impact of the SNF VBP Program is an estimated reduction of $196.50 million in aggregate payments to SNFs during FY 2026.

FY 2027 SNF VBP changes

The overall economic impact of the SNF VBP Program is an estimated reduction of $166.86 million in aggregate payments to SNFs during FY 2027.

FY 2028 SNF VBP changes

The overall economic impact of the SNF VBP Program is an estimated reduction of $170.98 million in aggregate payments to SNFs during FY 2028.

FY 2024 Enforcement Provisions for LTC Facilities Requirements Changes

The overall impact of this regulatory change is an estimated administrative cost savings of $2,299,716 to LTC facilities and $772,044 to the Federal Government during FY 2024.

D. Advancing Health Information Exchange

The Department of Health and Human Services (HHS) has a number of initiatives designed to encourage and support the adoption of interoperable health information technology and to promote nationwide health information exchange to improve health care and patient access to their digital health information.

To further interoperability in post-acute care settings, CMS and the Office of the National Coordinator for Health Information Technology (ONC) participate in the Post-Acute Care Interoperability Workgroup (PACIO) to facilitate collaboration with interested parties to develop Health Level Seven International® (HL7) Fast Healthcare Interoperability Resource® (FHIR) standards. These standards could support the exchange and reuse of patient assessment data derived from the post-acute care (PAC) setting assessment tools, such as the minimum data set (MDS), inpatient rehabilitation facility -patient assessment instrument (IRF-PAI), Long-Term Care Hospital (LTCH) continuity assessment record and evaluation (CARE) Data Set (LCDS), outcome and assessment information set (OASIS), and other sources.

1 2

The PACIO Project has focused on HL7 FHIR implementation guides for: functional status, cognitive status and new use cases on advance directives, re-assessment timepoints, and Speech, language, swallowing, cognitive communication and hearing (SPLASCH) pathology.

3

We encourage PAC provider and health IT vendor participation as the efforts advance.

1

HL7 FHIR Release 4. Available at

https://www.hl7.org/fhir/.

2

HL7 FHIR. PACIO Functional Status Implementation Guide. Available at

https://paciowg.github.io/functional-status-ig/.

3

PACIO Project. Available at

http://pacioproject.org/about/.

The CMS Data Element Library (DEL) continues to be updated and serves as a resource for PAC assessment data elements and their associated mappings to health IT standards such as Logical Observation Identifiers Names and Codes (LOINC) and Systematized Nomenclature of Medicine Clinical Terms (SNOMED).

4

The DEL furthers CMS' goal of data standardization and interoperability. Standards in the DEL can be referenced on the CMS website and in the ONC Interoperability Standards Advisory (ISA). The 2023 ISA is available at

https://www.healthit.gov/sites/isa/files/inline-files/2023%20Reference%20Edition_ISA_508.pdf.

4

Centers for Medicare & Medicaid Services. Newsroom. Fact sheet: CMS Data Element Library Fact Sheet. June 21, 2018. Available at

https://www.cms.gov/newsroom/fact-sheets/cms-data-element-library-fact-sheet.

We are also working with ONC to advance the United States Core Data for Interoperability (USCDI), a standardized set of health data classes and constituent data elements for nationwide, interoperable health information exchange.

5

We are collaborating with ONC and other Federal agencies to define and prioritize additional data standardization needs and develop consensus on recommendations for future versions of the USCDI. We are also directly collaborating with ONC to build requirements to support data standardization and alignment with requirements for quality measurement. ONC has launched the USCDI+ initiative to support the identification and establishment of domain specific datasets that build on the core USCDI foundation.

6

The USCDI+ quality measurement domain currently being developed aims to support defining additional data specifications for quality measurement that harmonize, where possible, with other Federal agency data needs and inform supplemental standards necessary to support quality measurement, including the needs of programs supporting quality measurement for long-term and post-acute care.

5

USCDI. Available at

https://www.healthit.gov/isa/united-states-core-data-interoperability-uscdi.

6

USCDI+. Available at

https://www.healthit.gov/topic/interoperability/uscdi-plus.

The 21st Century Cures Act (Cures Act) (Pub. L. 114-255, enacted December 13, 2016) required HHS and ONC to take steps to promote adoption and use of electronic health record (EHR) technology. Specifically, section 4003(b) of the Cures Act required ONC to take steps to advance interoperability through the development of a Trusted Exchange Framework and Common Agreement aimed at establishing full network-to network exchange of health information nationally. On January 18, 2022, ONC announced a significant milestone by releasing the Trusted Exchange Framework

7

and Common Agreement Version 1.

8

The Trusted Exchange Framework is a set of non-binding principles for health information exchange, and the Common Agreement is a contract that advances those principles. The Common Agreement and the Qualified Health Information Network Technical Framework Version 1 (incorporated by reference into the Common Agreement) establish the technical infrastructure model and governing approach for different health information networks and their users to securely share clinical information with each other, all under commonly agreed to terms. The technical and policy architecture of how exchange occurs under the Common Agreement follows a network-of-networks structure, which allows for connections at different levels and is inclusive of many different types of entities at those different levels, such as health information networks, healthcare practices, hospitals, public health agencies, and Individual Access Services (IAS) Providers.

9

On February 13, 2023, HHS marked a new milestone during an event at HHS headquarters,

10

which recognized the first set of applicants accepted for onboarding to the Common Agreement as Qualified Health Information Networks (QHINs). QHINs will be entities that will connect directly to each other to serve as the core for nationwide interoperability.

11

For more information, we refer readers to

https://www.healthit.gov/topic/interoperability/trusted-exchange-framework-and-common-agreement.

7

The Trusted Exchange Framework (TEF): Principles for Trusted Exchange (Jan. 2022). Available at

https://www.healthit.gov/sites/default/files/page/2022-01/Trusted_Exchange_Framework_0122.pdf.

8

Common Agreement for Nationwide Health Information Interoperability Version 1 (Jan. 2022). Available at

https://www.healthit.gov/sites/default/files/page/2022-01/Common_Agreement_for_Nationwide_Health_Information_Interoperability_Version_1.pdf.

9

The Common Agreement defines Individual Access Services (IAS) as “with respect to the Exchange Purposes definition, the services provided utilizing the Connectivity Services, to the extent consistent with Applicable Law, to an Individual with whom the QHIN, Participant, or Subparticipant has a Direct Relationship to satisfy that Individual's ability to access, inspect, or obtain a copy of that Individual's Required Information that is then maintained by or for any QHIN, Participant, or Subparticipant.” The Common Agreement defines “IAS Provider” as: “Each QHIN, Participant, and Subparticipant that offers Individual Access Services.”

See

Common Agreement for Nationwide Health Information Interoperability Version 1, at 7 (Jan. 2022),

https://www.healthit.gov/sites/default/files/page/2022-01/Common_Agreement_for_Nationwide_Health_Information_Interoperability_Version_1.pdf.

10

“Building TEFCA,” Micky Tripathi and Mariann Yeager, Health IT Buzz Blog. February 13, 2023.

https://www.healthit.gov/buzz-blog/electronic-health-and-medical-records/interoperability-electronic-health-and-medical-records/building-tefca.

11

The Common Agreement defines a QHIN as “to the extent permitted by applicable SOP(s), a Health Information Network that is a U.S. Entity that has been Designated by the RCE and is a party to the Common Agreement countersigned by the RCE.”

See

Common Agreement for Nationwide Health Information Interoperability Version 1, at 10 (Jan. 2022),

https://www.healthit.gov/sites/default/files/page/2022-01/Common_Agreement_for_Nationwide_Health_Information_Interoperability_Version_1.pdf.

We invite providers to learn more about these important developments and how they are likely to affect SNFs.

II. Background on SNF PPS

A. Statutory Basis and Scope

As amended by section 4432 of the Balanced Budget Act of 1997 (BBA 1997) (Pub. L. 105-33, enacted 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 virtually all costs of furnishing covered SNF services (routine, ancillary, and capital-related costs) other than costs associated with approved educational activities and bad debts. Under section 1888(e)(2)(A)(i) of the Act, covered SNF services include post-hospital extended care services for which benefits are provided under Part A, as well as those items and services (other than a small number of excluded services, such as physicians' services) for which payment may otherwise be made under Part B and which are furnished to Medicare beneficiaries who are residents in a SNF during a covered Part A stay. A comprehensive discussion of these provisions appears in the May 12, 1998 interim final rule (63 FR 26252). In addition, a detailed discussion of the legislative history of the SNF PPS is available online at

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_2018-10-01.pdf.

Section 215(a) of the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113-93, enacted April 1, 2014) added section 1888(g) to the Act requiring the Secretary to specify an all-cause all-condition hospital readmission measure and an all-condition risk-adjusted potentially preventable hospital readmission measure for the SNF setting. Additionally, section 215(b) of PAMA added section 1888(h) to the Act requiring the Secretary to implement a VBP program for SNFs. Finally, section 2(c)(4) of the Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014 (Pub. L. 113-185, enacted October 6, 2014) amended section 1888(e)(6) of the Act, which requires the Secretary to implement a QRP for SNFs under which SNFs report data on measures and resident assessment data. Finally, section 111 of the Consolidated Appropriations Act, 2021 (CAA, 2021) amended section 1888(h) of the Act, authorizing the Secretary to apply up to nine additional measures to the VBP program for SNFs.

B. Initial Transition for the SNF PPS

Under sections 1888(e)(1)(A) and (e)(11) of the Act, the SNF PPS included an initial, three-phase transition that blended a facility-specific rate (reflecting the individual facility's historical cost experience) with the Federal case-mix adjusted rate. The transition extended through the facility's first 3 cost reporting periods under the PPS, up to and including the one that began in FY 2001. Thus, the SNF PPS is no longer operating under the transition, as all facilities have been paid at the full Federal rate effective with cost reporting periods beginning in FY 2002. As we now base payments for SNFs entirely on the adjusted Federal per diem rates, we no longer include adjustment factors under the transition related to facility-specific rates for the upcoming FY.

C. Required Annual Rate Updates

Section 1888(e)(4)(E) of the Act requires the SNF PPS payment rates to be updated annually. The most recent annual update occurred in a final rule that set forth updates to the SNF PPS payment rates for FY 2023 (87 FR 47502, August 3, 2022).

Section 1888(e)(4)(H) of the Act specifies that we provide for publication annually in the

Federal Register

the following:

• The unadjusted Federal per diem rates to be applied to days of covered SNF services furnished during the upcoming FY.

• The case-mix classification system to be applied for these services during the upcoming FY.

• The factors to be applied in making the area wage adjustment for these services.

Along with other revisions discussed later in this preamble, this final rule provides the required annual updates to the per diem payment rates for SNFs for FY 2024.

III. Analysis and Responses to Public Comments on the FY 2024 SNF PPS Proposed Rule

In response to the publication of the FY 2024 SNF PPS proposed rule, we received 81 public comments from individuals, providers, corporations, government agencies, private citizens, trade associations, and major organizations. The following are brief summaries of each proposed provision, a summary of the public comments that we received related to that proposal, and our responses to the comments.

A. General Comments on the FY 2024 SNF PPS Proposed Rule

In addition to the comments we received on specific proposals contained within the proposed rule (which we address later in this final rule), commenters also submitted the following, more general, observations on the SNF PPS and SNF care generally. A discussion of these comments, along with our responses, appears below.

Comment:

Several commenters raised concerns with therapy treatment under PDPM, specifically reductions in the amount of therapy furnished to SNF patients since PDPM was implemented. Some of these commenters stated that CMS should revise the existing limit on concurrent and group therapy to provide a financial penalty in cases where the facility exceeds this limit. These commenters also recommended that CMS direct its review contractors to examine the practices of facilities that changed their therapy service provision after PDPM was implemented. Additionally, commenters want CMS to release the results of any monitoring efforts around therapy provision. Finally, several commenters recommended that CMS reinstate a more frequent assessment schedule to discourage gaming.

Response:

We appreciate commenters raising these concerns around therapy provision under PDPM, as compared the RUG-IV. We agree with commenters that the amount of therapy that is furnished to patients under PDPM is less than that delivered under RUG-IV. As we stated in the FY 2020 SNF PPS final rule, we believe that close, real-time monitoring is essential to identifying any adverse trends under PDPM. While we have identified the same reduction in therapy services and therapy staff, we believe that these findings must be considered within the context of patient outcomes. To the extent that facilities are able to maintain or improve patient outcomes, we believe that this supersedes changes in service provision, whether this be in the amount of therapy furnished or the mode in which it is furnished. We continue to monitor all aspects of PDPM and advise our review contractors on any adverse trends.

With regard to implementing a specific penalty for exceeding the group and concurrent therapy threshold, based on our current data, we have not identified any widespread misuse of this limit. Should we identify such misuse, either at a provider-level or at

a broader level, we will pursue an appropriate course of action.

Finally, with regard to the recommendation that we reinstate something akin to the assessment schedule that was in effect under RUG-IV, given that PDPM does not reimburse on the basis of therapy minutes, we do not believe that such an increase in administrative burden on providers would have an impact on therapy provision. That being said, we strongly encourage interested parties to continue to provide suggestions on how to ensure that SNF patients receive the care they need based on their unique characteristics and goals.

Comment:

One commenter stated that CMS should undertake an analysis of the impact of waiving the 3-day stay requirement during the PHE as compared to the impact on patient cost and outcomes once the requirement has been reinstated. This commenter requests that CMS release the results of such an analysis.

Response:

We appreciate this suggestion. We have previously conducted analyses of the associated cost of removing the 3-day stay requirement and found that it would significantly increase Medicare outlays. We have not yet been able to perform such an analysis which would compare the impact of waiving this requirement during the PHE to the impact of it being re-implemented, but we believe it would likely lead to the same result.

Comment:

One commenter requested that we consider including recreational therapy time provided to SNF residents by recreational therapists into the case-mix adjusted therapy component of PDPM, rather than having it be considered part of the nursing component. This commenter further suggested that CMS begin collecting data, as part of a demonstration project, on the utilization of recreational therapy, as a distinct and separate service, and its impact on patient care cost and quality.

Response:

We appreciate the commenter raising this issue, but we do not believe there is sufficient evidence at this time regarding the efficacy of recreational therapy interventions or, more notably, data which would substantiate a determination of the effect on payment of such interventions, as such services were not considered separately, as were physical, occupational and speech-language pathology services, when the PDPM was being developed. That being said, we would note that Medicare Part A originally paid for institutional care in various provider settings, including SNF, on a reasonable cost basis, but now makes payment using PPS methodologies, such as the SNF PPS. To the extent that one of these SNFs furnished recreational therapy to its inpatients under the previous, reasonable cost methodology, the cost of the services would have been included in the base payments when SNF PPS payment rates were derived. Under the PPS methodology, Part A makes a comprehensive payment for the bundled package of items and services that the facility furnishes during the course of a Medicare-covered stay. This package encompasses nearly all services that the beneficiary receives during the course of the stay—including any medically necessary recreational therapy—and payment for such services is included within the facility's comprehensive SNF PPS payment for the covered Part A stay itself. With regard to developing a demonstration project focused on this particular service, we do not believe that creating such a project would substantially improve the accuracy of the SNF PPS payment rates. Moreover, in light of comments discussed above on the impact of PDPM implementation on therapy provision more generally, we believe that carving out recreational therapy as a separate discipline will not have a significant impact on access to recreational therapy services for SNF patients.

Comment:

One commenter raised concerns regarding the perceived lack of adequate financial reporting and cost report auditing. This commenter stated that CMS does not do enough to ensure that the funds paid to providers under the SNF PPS are used appropriately for patient care. Further, this commenter suggested that CMS impose penalties for inaccurate, incomplete and fraudulent SNF ownership and cost data. Finally, this commenter urged CMS to establish a medical-loss ratio for SNFs to ensure that Medicare funds are used for patient care.

Response:

We appreciate the commenter raising these concerns. With regard to the need for regulation and penalties associated with incomplete and fraudulent ownership and cost data, we would contend that there are consequences for providers when they are found to have incomplete cost reports or if the data they are reporting to CMS is found to be fraudulent. That being said, we focus on patient outcomes as the basis for assessing if the care provided to SNF patients is appropriate, as well as the Medicare funding used as the basis for that care. Ultimately, it is the responsibility of each SNF provider to ensure that the care provided to their patients, using the funds provided under the SNF PPS, is appropriate and sufficient to meet the unique needs, goals and characteristics of each patient. We encourage interested parties to provide future recommendations and suggestions for how to use SNF cost reports and other data sources to improve CMS auditing and enforcement activities.

IV. SNF PPS Rate Setting Methodology and FY 2024 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 be payable under Part B for covered SNF services furnished to individuals during the course of a covered Part A stay in a SNF.

In developing the rates for the initial period, we updated costs to the first effective year of the PPS (the 15-month period beginning July 1, 1998) using a SNF market basket, and then standardized for geographic variations in wages and for the costs of facility differences in case-mix. In compiling the database used to compute the Federal payment rates, we excluded those providers that received new provider exemptions from the routine cost limits, as well as costs related to payments for exceptions to the routine cost limits. Using the formula that the BBA 1997 prescribed, we set the Federal rates at a level equal to the weighted mean of freestanding costs plus 50 percent of the difference between the freestanding mean and weighted mean of all SNF costs (hospital-based and freestanding) combined. We computed and applied separately the payment rates for facilities located in urban and rural areas and adjusted the portion of the Federal rate attributable to wage-related costs by a wage index to reflect geographic variations in wages.

B. SNF Market Basket Update

1. SNF Market Basket

Section 1888(e)(5)(A) of the Act requires us to establish a SNF market basket 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 that encompasses the most commonly used

cost categories for SNF routine services, ancillary services, and capital-related expenses. In the SNF PPS final rule for FY 2018 (82 FR 36548 through 36566), we rebased and revised the SNF market basket, which included updating the base year from FY 2010 to 2014. In the SNF PPS final rule for FY 2022 (86 FR 42444 through 42463), we rebased and revised the SNF market basket, which included updating the base year from 2014 to 2018.

The SNF market basket is used to compute the market basket percentage increase that is used to update the SNF Federal rates on an annual basis, as required by section 1888(e)(4)(E)(ii)(IV) of the Act. This market basket percentage increase is adjusted by a forecast error adjustment, if applicable, and then further adjusted by the application of a productivity adjustment as required by section 1888(e)(5)(B)(ii) of the Act and described in section IV.B.4. of this final rule.

As outlined in the proposed rule, we proposed a FY 2024 SNF market basket percentage increase of 2.7 percent based on IHS Global Inc.'s (IGI's) fourth quarter 2022 forecast of the 2018-based SNF market basket (before application of the forecast error adjustment and productivity adjustment). We also proposed that if more recent data subsequently became available (for example, a more recent estimate of the market basket and/or the productivity adjustment), we would use such data, if appropriate, to determine the FY 2024 SNF market basket percentage increase, labor-related share relative importance, forecast error adjustment, or productivity adjustment in the SNF PPS final rule.

Since the proposed rule, we have updated the FY 2024 market basket percentage increase based on IGI's second quarter 2023 forecast with historical data through the first quarter of 2023. The FY 2024 growth rate of the 2018-based SNF market basket is estimated to be 3.0 percent.

2. Market Basket Update Factor for FY 2024

Section 1888(e)(5)(B) of the Act defines the SNF market basket percentage increase as the percentage change in the SNF market basket from the midpoint of the previous FY to the midpoint of the current FY. For the Federal rates outlined in this final rule, we use the percentage change in the SNF market basket to compute the update factor for FY 2024. This factor is based on the FY 2024 percentage increase in the 2018-based SNF market basket reflecting routine, ancillary, and capital-related expenses. Sections 1888(e)(4)(E)(ii)(IV) and (e)(5)(B)(i) of the Act require that the update factor used to establish the FY 2024 unadjusted Federal rates be at a level equal to the SNF market basket percentage increase. Accordingly, we determined the total growth from the average market basket level for the period of October 1, 2022 through September 30, 2023 to the average market basket level for the period of October 1, 2023 through September 30, 2024. As outlined in the proposed rule, we proposed a FY 2024 SNF market basket percentage increase of 2.7 percent. For this final rule, based on IGI's second quarter 2023 forecast with historical data through the first quarter of 2023, the FY 2024 growth rate of the 2018-based SNF market basket is estimated to be 3.0 percent.

As further explained in section IV.B.3. of this final rule, as applicable, we adjust the percentage increase by the forecast error adjustment from the most recently available FY for which there is final data and apply this adjustment whenever the difference between the forecasted and actual percentage increase in the market basket exceeds a 0.5 percentage point threshold in absolute terms. Additionally, section 1888(e)(5)(B)(ii) of the Act requires us to reduce the market basket percentage increase by the productivity adjustment (the 10-year moving average of changes in annual economy-wide private nonfarm business total factor productivity (TFP) for the period ending September 30, 2024) which is estimated to be 0.2 percentage point, as described in section IV.B.4. of this final rule.

We also note that section 1888(e)(6)(A)(i) of the Act provides that, beginning with FY 2018, SNFs that fail to submit data, as applicable, in accordance with sections 1888(e)(6)(B)(i)(II) and (III) of the Act for a fiscal year will receive a 2.0 percentage point reduction to their market basket update for the fiscal year involved, after application of section 1888(e)(5)(B)(ii) of the Act (the productivity adjustment) and section 1888(e)(5)(B)(iii) of the Act (the market basket increase). In addition, section 1888(e)(6)(A)(ii) of the Act states that application of the 2.0 percentage point reduction (after application of section 1888(e)(5)(B)(ii) and (iii) of the Act) may result in the market basket percentage change being less than zero for a fiscal year and may result in payment rates for a fiscal year being less than such payment rates for the preceding fiscal year. Section 1888(e)(6)(A)(iii) of the Act further specifies that the 2.0 percentage point reduction is applied in a noncumulative manner, so that any reduction made under section 1888(e)(6)(A)(i) of the Act applies only to the fiscal year involved, and that the reduction cannot be taken into account in computing the payment amount for a subsequent fiscal year.

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), § 413.337(d)(2) provides for an adjustment to account for market basket forecast error. The initial adjustment for market basket forecast error applied to the update of the FY 2003 rate for FY 2004 and took into account the cumulative forecast error for the period from FY 2000 through FY 2002, resulting in an increase of 3.26 percent to the FY 2004 update. Subsequent adjustments in succeeding FYs take into account the forecast error from the most recently available FY for which there is final data and apply the difference between the forecasted and actual change in the market basket when the difference exceeds a specified threshold. We originally used a 0.25 percentage point threshold for this purpose; however, for the reasons specified in the FY 2008 SNF PPS final rule (72 FR 43425), we adopted a 0.5 percentage point threshold effective for FY 2008 and subsequent FYs. As we stated in the final rule for FY 2004 that first issued the market basket forecast error adjustment (68 FR 46058), the adjustment will reflect both upward and downward adjustments, as appropriate.

For FY 2022 (the most recently available FY for which there is final data), the forecasted or estimated increase in the SNF market basket was 2.7 percent, and the actual increase for FY 2022 is 6.3 percent, resulting in the actual increase being 3.6 percentage points higher than the estimated increase. Accordingly, as the difference between the estimated and actual amount of change in the market basket exceeds the 0.5 percentage point threshold, under the policy previously described (comparing the forecasted and actual market basket percentage increase), the FY 2024 market basket percentage increase of 3.0 percent would be adjusted upward to account for the forecast error adjustment of 3.6 percentage points, resulting in a SNF market basket percentage increase of 6.6 percent, which is then reduced by the productivity adjustment of 0.2 percentage point, discussed in section IV.B.4. of this final rule. This results in a SNF market basket update for FY 2024 of 6.4 percent.

Table 2 shows the forecasted and actual market basket increases for FY 2022.

Table 2—Difference Between the Actual and Forecasted Market Basket Increases for FY 2022

Index

Forecasted

FY 2022 increase *

Actual

FY 2022 increase **

FY 2022 difference

SNF

2.7

6.3

3.6

* Published in

Federal Register

; based on second quarter 2021 IGI forecast (2018-based SNF market basket).

** Based on the second quarter 2023 IGI forecast (2018-based SNF market basket).

4. Productivity Adjustment

Section 1888(e)(5)(B)(ii) of the Act, as added by section 3401(b) of the Patient Protection and Affordable Care Act (Affordable Care Act) (Pub. L. 111-148, enacted March 23, 2010) requires that, in FY 2012 and in subsequent FYs, the market basket percentage under the SNF payment system (as described in section 1888(e)(5)(B)(i) of the Act) is to be reduced annually by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the Act, in turn, defines the productivity adjustment to be equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable FY, year, cost-reporting period, or other annual period).

The U.S. Department of Labor's Bureau of Labor Statistics (BLS) publishes the official measure of productivity for the U.S. We note that previously the productivity measure referenced at section 1886(b)(3)(B)(xi)(II) of the Act was published by BLS as private nonfarm business multifactor productivity. Beginning with the November 18, 2021 release of productivity data, BLS replaced the term MFP with TFP. BLS noted that this is a change in terminology only and will not affect the data or methodology. As a result of the BLS name change, the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act is now published by BLS as private nonfarm business total factor productivity. We refer readers to the BLS website at

www.bls.gov

for the BLS historical published TFP data. A complete description of the TFP projection methodology is available on our website at

https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.

In addition, in the FY 2022 SNF final rule (86 FR 42429) we noted that, effective with FY 2022 and forward, we changed the name of this adjustment to refer to it as the “productivity adjustment,” rather than the “MFP adjustment.”

Per section 1888(e)(5)(A) of the Act, the Secretary shall establish a SNF market basket that reflects changes over time in the prices of an appropriate mix of goods and services included in covered SNF services. Section 1888(e)(5)(B)(ii) of the Act, added by section 3401(b) of the Affordable Care Act, requires that for FY 2012 and each subsequent FY, after determining the market basket percentage described in section 1888(e)(5)(B)(i) of the Act, the Secretary shall reduce such percentage by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 1888(e)(5)(B)(ii) of the Act further states that the reduction of the market basket percentage by the productivity adjustment may result in the market basket percentage being less than zero for a FY and may result in payment rates under section 1888(e) of the Act being less than such payment rates for the preceding fiscal year. Thus, if the application of the productivity adjustment to the market basket percentage calculated under section 1888(e)(5)(B)(i) of the Act results in a productivity-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.

Based on the data available for the FY 2024 SNF PPS proposed rule, the proposed productivity adjustment (the 10-year moving average of changes in annual economy-wide private nonfarm business TFP for the period ending September 30, 2024) was projected to be 0.2 percentage point. We note that, as we typically do, we have updated our data between the FY 2024 SNF PPS proposed rule and this final rule. Based on IGI's second quarter 2023 forecast, the estimated 10-year moving average of changes in annual economy-wide private nonfarm business TFP for the period ending September 30, 2024 is estimated to be 0.2 percentage point.

Consistent with section 1888(e)(5)(B)(i) of the Act and § 413.337(d)(2), and as discussed previously in section IV.B.1. of this final rule, the market basket percentage for FY 2024 for the SNF PPS is based on IGI's second quarter 2023 forecast of the SNF market basket percentage increase, which is estimated to be 3.0 percent. This market basket update is then increased by 3.6 percentage points, due to application of the forecast error adjustment discussed earlier in section IV.B.3. of this final rule. Finally, as discussed earlier in section IV.B.4. of this final rule, we are applying a 0.2 percentage point productivity adjustment to the FY 2024 SNF market basket percentage increase. Therefore, the resulting productivity-adjusted FY 2024 SNF market basket update is equal to 6.4 percent, which reflects a market basket percentage increase of 3.0 percent, plus the 3.6 percentage points forecast error adjustment, and less the 0.2 percentage point productivity adjustment. Thus, we apply a net SNF market basket update factor of 6.4 percent in our determination of the FY 2024 SNF PPS unadjusted Federal per diem rates.

A discussion of the public comments received on the FY 2024 SNF market basket percentage increase to the SNF PPS rates, along with our responses, can be found below.

Comment:

One commenter suggested CMS consider allowing SNFs to use different labor percentages for geographic areas with wage indexes less than or greater than 1, similar to IPPS hospitals. They believe this methodological change would allow for the wage index adjustment to match more closely with the provider's costs.

Response:

We continue to believe it is technically appropriate and consistent with our interpretation of the statute to use the market basket cost weights, reflecting the national average of SNF costs, to determine the labor-related share applicable for all SNFs. In addition, our analysis of the 2018 SNF Medicare cost report data used to determine the 2018-based SNF market

basket cost weights, shows that the compensation cost weights for urban (accounting for about 70 percent of freestanding SNF costs) and rural SNFs, in aggregate, are both 60 percent—consistent with the 2018-based SNF market basket compensation cost weight.

Comment:

One commenter requested that CMS work with interested parties to explore updates to the SNF market basket methodology, potentially with new proxies or alternative data. One commenter identified a few detailed methodological issues for CMS to consider regarding the SNF market basket.

Response:

We welcome commenters' input on the SNF market basket and appreciate the suggestions provided. We will consider them for future rulemaking when we propose to rebase and revise the SNF market basket.

Comment:

One commenter appreciated the forecast error adjustments during the last two rulemaking cycles but stated that the current methodology may not capture impacts such as the entirety of the cost changes during times of high healthcare resource utilization (for example, during COVID-19 pandemic). The commenter further noted that applying the forecast error adjustment to future payments does not account for inflation that can alter the time-value of money. The commenter requested that CMS consider ways to evaluate the impact of addressing these potential shortcomings of the forecast error adjustment. One commenter recommended that CMS strongly consider including additional labor and cost data into the market basket updates prospectively, rather than retroactively, to adjust for the market basket projections' inability to accurately project rate increases during high inflation periods. One commenter (MedPAC) noted that CMS is not required by statute to make automatic forecast error corrections and in this instance the forecast error correction results in making a larger payment increase in addition to the statutory increases for FY 2024.

Response:

The SNF market basket is a price index that measures the change in price, over time, of the same mix of goods and services purchased in the base period. As noted by the commenter, due to the availability of data and rates being set by CMS on a prospective basis, there is a 2-year lag between the forecast error adjustment and its application to the payment rate. For example, as stated in section IV.B.3. of this final rule, the FY 2024 SNF PPS payment rate update includes an adjustment for the FY 2022 market basket forecast error.

Subsequent to the initial cumulative adjustment implemented in FY 2004, the forecast error adjustment has been based on the forecast error from the most recently available FY for which there is final data, and the difference between the forecasted and actual change in the market basket is applied when the difference exceeds a specified threshold. The forecast error adjustment (when it exceeds the threshold of 0.5 percentage point (in absolute terms)) is intended to adjust for when historical price changes differ substantially from the forecasted price changes in order to appropriately pay providers for services provided, rather than typical minor variances that are inherent in statistical measurements. The forecast error adjustment is specifically defined to only account for errors in price forecasts and would appropriately not take into account differences in non-price factors affecting costs.

Therefore, we disagree with the commenter that the CMS forecast error adjustment is inadequate or that it should reflect other factors (such as changes in utilization due to case mix or other non-price factors or the time value of money). We use the most complete and available data for purposes of determining the market basket forecast, forecast error adjustment, and productivity adjustment as well as the most recent claims data when determining the SNF PPS payment rates. We do not forecast changes in the case-mix index.

Comment:

Several commenters supported the net payment update of 3.7 percent reflecting a 2.7 percent market basket update. Numerous commenters also recommended that CMS use the most recently available data when determining the market basket update for the final rule.

Several commenters stated that the proposed 3.7 percent net payment update is inadequate when considering the financial hardship and increased costs many health care providers are facing as a result of the PHE and labor shortages. They recommended that CMS use data that better reflects the input price inflation that SNFs have experienced and are projected to experience in 2024. They believe CMS should reassess market basket data and how it weighs wage and benefits data, as they do not believe the updates to the market basket data reasonably reflect the reality of these associated costs. Similarly, one commenter stated that they believe the 2018-based SNF market basket alone no longer serves as an appropriate price proxy due to the growing expenditures in labor, which has driven a recent disproportionate increase in the labor share portion of the market basket. They recommended that CMS use more recent and supplemental labor cost data to accurately reflect a recent increase of the market basket's labor.

One commenter cited a report stating that the average hourly nursing wage increased over 17 percent from 2019 to 2022 as reported on the Medicare cost reports. They stated that the Medicare market basket update had only increased per-stay payments by less than 6 percent during that same time period. The commenter acknowledged that CMS will refresh the market basket update in the final rule with more recent data but expressed concern that the revised update will still be insufficient relative to input cost inflation as illustrated by the discrepancy between input costs and the market basket update in FY 2022.

Several commenters requested CMS exercise its existing authority or conditional funding opportunities to revise the proposed update to annual rates (either though an updated market basket or other allowable means) to account for the rapid rise of costs.

Response:

We recognize the various comments on the proposed net payment update of 3.7 percent. Section 1888(e)(5)(A) of the Act states 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. The 2018-based SNF market basket is a fixed-weight, Laspeyres-type price index that measures the change in price, over time, of the same mix of goods and services purchased in the base period. Any changes in the quantity or mix of goods and services (that is, intensity) purchased over time relative to a base period that would determine change in costs are not measured. For the compensation cost weight in the 2018-based SNF market basket (which includes salaried and contract labor employees), we use the Employment Cost Indexes (ECIs) for wages and salaries and benefits for private industry workers in nursing care facilities to proxy the price increase of SNF labor. The ECI (published by the Bureau of Labor Statistics, or BLS) measures the change in the hourly labor cost to employers, independent of the influence of employment shifts among occupations and industry categories. Therefore, we believe the ECI for private industry workers in nursing care facilities, which only reflects the price

change associated with the labor used to provide SNF care and appropriately does not reflect other factors that might affect labor costs, is an appropriate measure to use in the SNF market basket.

We disagree with the commenter's statement that the 2018-based SNF market basket is not adequately reflecting growing expenditures in labor, which has driven a recent disproportionate increase in the labor share portion of the market basket. Our preliminary analysis of the 2021 Medicare cost report data shows the compensation cost weight for freestanding SNFs is 59.9 percent—relatively unchanged from 2018 with 60.2 percent as increases in the contract labor cost weight were accompanied by decreasing wages and salaries and benefit cost weights. We will continue to analyze more recent freestanding skilled nursing Medicare cost report data to assess whether the SNF market basket should be rebased and revised. Any changes to the SNF market basket will be proposed in future rulemaking.

While the forecasted productivity-adjusted market basket update was 2.4 percent in FY 2020, 2.2 percent in FY 2021, and 2.0 percent in FY 2022, the increases in FY 2023 and FY 2024 reflect additional increases from forecast errors over this period (CMS provided a forecast error adjustment for FY 2021 of 1.5 percentage points in the FY 2023 SNF net payment update and a forecast error adjustment for FY 2022 of 3.6 percentage points, which is being applied to the FY 2024 SNF net payment update in this final rule).

While the average hourly wage for nursing from the reported SNF Medicare cost report data increased roughly 17 percent from 2019 to 2021 (the most complete data available), the hourly wages of nearly all other medical occupational categories, which make up approximately 15 percent of wages and salaries, have not increased by nearly as much. We found that the combined average wage for all other medical occupational categories, weighted by each occupation's percentage of total Adjusted Salaries as indicated on Worksheet S-3, Part V, Column 3 of the Medicare cost report, increased by less than 1 percent over the same time period. The compensation price proxy used in the SNF market basket would reflect trends in all occupations combined, which would partly explain why the ECI for wages and salaries for private industry workers in nursing care facilities has not increased at the pace of nursing wages alone.

As proposed, for this final rule, we are updating the SNF market basket percentage increase to reflect more recent data. Based on IGI's second quarter 2023 forecast with historical data through the first quarter of 2023, we are finalizing a 2018-based SNF market basket percentage increase of 3.0 percent which reflects a projected increase in compensation prices of 3.4 percent. This is faster projected price growth compared to the proposed FY 2024 market basket increase of 2.7 percent, which reflected a 3.0 percent compensation price growth. Both of the final FY 2024 increases are faster than the 10-year historical average price growth (2.6 percent for the 2018-based SNF market basket, with compensation prices increasing 2.7 percent).

As noted previously, 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. This market basket percentage update is adjusted by a forecast error correction, if applicable, and then further adjusted by the application of a productivity adjustment as required by section 1888(e)(5)(B)(ii) of the Act. Section 1888(e)(5)(A) of the Act does not provide the Secretary with the authority to apply a different update factor to SNF PPS payment rates for FY 2024. Additionally, MedPAC annually conducts an analysis of payment adequacy for SNF providers. In its March 2023 Report to Congress (

https://www.medpac.gov/document/march-2023-report-to-the-congress-medicare-payment-policy/

) MedPAC noted the combination of Federal relief policies and the implementation of the new case-mix system resulted in overall improved financial performance for SNFs and recommended a 3 percent reduction to the SNF base payment rates.

Comment:

Given that CMS is required by statute to implement a productivity adjustment to the market basket update, several commenters urged CMS to closely monitor the impact of such productivity adjustments and requested that the agency work with Congress to permanently eliminate or offset this reduction to SNF payments. Further, they requested that CMS use its exceptions authority under section 1888(e)(3)(A) of the Act to remove the productivity adjustment for any fiscal year that was covered under PHE determination (that is, 2020 (0.4 percent), 2021 (0.0 percent), 2022 (0.7 percent), and 2023 (0.3 percent)) from the calculation of the market basket for FY 2024 and any year thereafter.

Response:

Section 1888(e)(5)(B)(ii) of the Act requires the application of the productivity adjustment described in section 1886(b)(3)(xi)(II) of the Act to the SNF PPS market basket increase factor. As required by statute, the FY 2024 productivity adjustment is derived based on the 10-year moving average growth in economy-wide productivity for the period ending in FY 2024. We recognize the concerns of the commenters regarding the appropriateness of the productivity adjustment; however, we are required pursuant to section 1888(e)(5)(B)(ii) of the Act to apply the specific productivity adjustment described here.

Comment:

MedPAC commented that while they understand that CMS is required to implement the statutory payment update, the combination of Federal relief policies and the implementation of the new case-mix system resulted in overall improved financial performance for SNFs. Thus, they recommended a 3 percent reduction to the SNF base payment rates.

Response:

We thank the commenter for their recommendation. However, we are required to update SNF PPS payments by the market basket percentage increase, as directed by section 1888(e)(4)(E)(ii)(IV) of the Act. This market basket percentage increase is adjusted by a forecast error correction, if applicable, and then further adjusted by the application of a productivity adjustment as required by section 1888(e)(5)(B)(ii) of the Act.

Comment:

While many commenters were appreciative of the forecast error adjustment, one commenter noted that the application of the forecast error correction results in making a larger payment increase in addition to the statutory increase for FY 2024, even though the aggregate Medicare margin for SNFs is already high.

Response:

As most recently discussed in the FY 2023 SNF PPS final rule (87 FR 47502), forecast error adjustments for the SNF market basket were introduced in the FY 2004 SNF PPS final rule (68 FR 46035), with the intended goal “to pay the appropriate amount, to the correct provider, for the proper service, at the right time”. We note that since implementation, forecast errors have generally been relatively small and clustered near zero and that for FY 2008 and subsequent years, we increased the threshold at which adjustments are triggered from 0.25 to 0.5 percentage

point. Our intent in raising the threshold was to distinguish typical statistical variances from more major unanticipated impacts and unforeseen disruptions of the economy (such as the recent PHE), or unexpected inflationary patterns (either at lower or higher than anticipated rates).

Comment:

One commenter suggested that the forecast error adjustment be adopted and utilized across every CMS payment program.

Response:

We appreciate the commenter's suggestion and will share this recommendation with our colleagues in other settings.

5. Unadjusted Federal Per Diem Rates for FY 2024

As discussed in the FY 2019 SNF PPS final rule (83 FR 39162), in FY 2020 we implemented a new case-mix classification system to classify SNF patients under the SNF PPS, the PDPM. As discussed in section V.B.1. of that final rule (83 FR 39189), under PDPM, the unadjusted Federal per diem rates are divided into six components, five of which are case-mix adjusted components (Physical Therapy (PT), Occupational Therapy (OT), Speech-Language Pathology (SLP), Nursing, and Non-Therapy Ancillaries (NTA)), and one of which is a non-case-mix component, as existed under the previous RUG-IV model. We proposed to use the SNF market basket, adjusted as described previously in sections IV.B.1. through IV.B.4. of this final rule, to adjust each per diem component of the Federal rates forward to reflect the change in the average prices for FY 2024 from the average prices for FY 2023. We also proposed to further adjust the rates by a wage index budget neutrality factor, described in section IV.D. of this final rule.

Further, in the past, we used the revised Office of Management and Budget (OMB) delineations adopted in the FY 2015 SNF PPS final rule (79 FR 45632, 45634), with updates as reflected in OMB Bulletin Nos. 15-01 and 17-01, to identify a facility's urban or rural status for the purpose of determining which set of rate tables would apply to the facility. As discussed in the FY 2021 SNF PPS proposed and final rules, we adopted the revised OMB delineations identified in OMB Bulletin No. 18-04 (available at

https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf

) to identify a facility's urban or rural status effective beginning with FY 2021.

Tables 3 and 4 reflect the updated unadjusted Federal rates for FY 2024, prior to adjustment for case-mix.

Table 3—FY 2024 Unadjusted Federal Rate Per Diem—URBAN

Rate component

PT

OT

SLP

Nursing

NTA

Non-case-mix

Per Diem Amount

$70.27

$65.41

$26.23

$122.48

$92.41

$109.69

Table 4—FY 2024 Unadjusted Federal Rate Per Diem—RURAL

Rate component

PT

OT

SLP

Nursing

NTA

Non-case-mix

Per Diem Amount

$80.10

$73.56

$33.05

$117.03

$88.29

$111.72

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 FY 2019 final rule (83 FR 39162, August 8, 2018), we finalized a new case-mix classification model, the PDPM, which took effect beginning October 1, 2019. The previous RUG-IV model classified most patients into a therapy payment group and primarily used the volume of therapy services provided to the patient as the basis for payment classification, thus creating an incentive for SNFs to furnish therapy regardless of the individual patient's unique characteristics, goals, or needs. PDPM eliminates this incentive and improves the overall accuracy and appropriateness of SNF payments by classifying patients into payment groups based on specific, data-driven patient characteristics, while simultaneously reducing the administrative burden on SNFs.

The PDPM uses clinical data from the MDS to assign case-mix classifiers to each patient that are then used to calculate a per diem payment under the SNF PPS, consistent with the provisions of section 1888(e)(4)(G)(i) of the Act. As discussed in section V.A. of this final rule, the clinical orientation of the case-mix classification system supports the SNF PPS's use of an administrative presumption that considers a beneficiary's initial case-mix classification to assist in making certain SNF level of care determinations. Further, because the MDS is used as a basis for payment, as well as a clinical assessment, we have provided extensive training on proper coding and the timeframes for MDS completion in our Resident Assessment Instrument (RAI) Manual. As we have stated in prior rules, for an MDS to be considered valid for use in determining payment, the MDS assessment should be completed in compliance with the instructions in the RAI Manual in effect at the time the assessment is completed. For payment and quality monitoring purposes, the RAI Manual consists of both the Manual instructions and the interpretive guidance and policy clarifications posted on the appropriate MDS website at

https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/MDS30RAIManual.html.

Under section 1888(e)(4)(H) of the Act, each update of the payment rates must include the case-mix classification methodology applicable for the upcoming FY. The FY 2024 payment rates set forth in this final rule reflect the use of the PDPM case-mix classification system from October 1, 2023, through September 30, 2024. The case-mix adjusted PDPM payment rates for FY 2024 are listed separately for urban and rural SNFs, in Tables 5 and 6 with corresponding case-mix values.

Given the differences between the previous RUG-IV model and PDPM in terms of patient classification and billing, it was important that the format of Tables 5 and 6 reflect these differences. More specifically, under both RUG-IV and PDPM, providers use a Health Insurance Prospective Payment System (HIPPS) code on a claim to bill

for covered SNF services. Under RUG-IV, the HIPPS code included the three-character RUG-IV group into which the patient classified, as well as a two-character assessment indicator code that represented the assessment used to generate this code. Under PDPM, while providers still use a HIPPS code, the characters in that code represent different things. For example, the first character represents the PT and OT group into which the patient classifies. If the patient is classified into the PT and OT group “TA”, then the first character in the patient's HIPPS code would be an A. Similarly, if the patient is classified into the SLP group “SB”, then the second character in the patient's HIPPS code would be a B. The third character represents the Nursing group into which the patient classifies. The fourth character represents the NTA group into which the patient classifies. Finally, the fifth character represents the assessment used to generate the HIPPS code.

Tables 5 and 6 reflect the PDPM's structure. Accordingly, Column 1 of Tables 5 and 6 represents the character in the HIPPS code associated with a given PDPM component. Columns 2 and 3 provide the case-mix index and associated case-mix adjusted component rate, respectively, for the relevant PT group. Columns 4 and 5 provide the case-mix index and associated case-mix adjusted component rate, respectively, for the relevant OT group. Columns 6 and 7 provide the case-mix index and associated case-mix adjusted component rate, respectively, for the relevant SLP group. Column 8 provides the nursing case-mix group (CMG) that is connected with a given PDPM HIPPS character. For example, if the patient qualified for the nursing group CBC1, then the third character in the patient's HIPPS code would be a “P.” Columns 9 and 10 provide the case-mix index and associated case-mix adjusted component rate, respectively, for the relevant nursing group. Finally, columns 11 and 12 provide the case-mix index and associated case-mix adjusted component rate, respectively, for the relevant NTA group.

Tables 5 and 6 do not reflect adjustments which may be made to the SNF PPS rates as a result of the SNF VBP Program, discussed in section VII. of this final rule, or other adjustments, such as the variable per diem adjustment. Further, in the past, we used the revised OMB delineations adopted in the FY 2015 SNF PPS final rule (79 FR 45632, 45634), with updates as reflected in OMB Bulletin Nos, 15-01 and 17-01, to identify a facility's urban or rural status for the purpose of determining which set of rate tables would apply to the facility. As discussed in the FY 2021 SNF PPS final rule (85 FR 47594), we adopted the revised OMB delineations identified in OMB Bulletin No. 18-04 (available at

https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf

) to identify a facility's urban or rural status effective beginning with FY 2021.

In the FY 2023 SNF PPS final rule (87 FR 47502), we finalized a proposal to recalibrate the PDPM parity adjustment over 2 years starting in FY 2023, which means that, for each of the PDPM case-mix adjusted components, we lowered the PDPM parity adjustment factor from 46 percent to 42 percent in FY 2023 and we will further lower the PDPM parity adjustment factor from 42 percent to 38 percent in FY 2024. Following this methodology, which is further described in the FY 2023 SNF PPS final rule (87 FR 47525 through 47534), Tables 5 and 6 incorporate the second phase of the PDPM parity adjustment recalibration.

Table 5—PDPM Case-Mix Adjusted Federal Rates and Associated Indexes—URBAN (Including the Parity Adjustment Recalibration)

PDPM group

PT CMI

PT rate

OT CMI

OT rate

SLP CMI

SLP rate

Nursing CMG

Nursing CMI

Nursing rate

NTA CMI

NTA rate

A

1.45

$101.89

1.41

$92.23

0.64

$16.79

ES3

3.84

$470.32

3.06

$282.77

B

1.61

113.13

1.54

100.73

1.72

45.12

ES2

2.90

355.19

2.39

220.86

C

1.78

125.08

1.60

104.66

2.52

66.10

ES1

2.77

339.27

1.74

160.79

D

1.81

127.19

1.45

94.84

1.38

36.20

HDE2

2.27

278.03

1.26

116.44

E

1.34

94.16

1.33

87.00

2.21

57.97

HDE1

1.88

230.26

0.91

84.09

F

1.52

106.81

1.51

98.77

2.82

73.97

HBC2

2.12

259.66

0.68

62.84

G

1.58

111.03

1.55

101.39

1.93

50.62

HBC1

1.76

215.56

H

1.10

77.30

1.09

71.30

2.7

70.82

LDE2

1.97

241.29

I

1.07

75.19

1.12

73.26

3.34

87.61

LDE1

1.64

200.87

J

1.34

94.16

1.37

89.61

2.83

74.23

LBC2

1.63

199.64

K

1.44

101.19

1.46

95.50

3.5

91.81

LBC1

1.35

165.35

L

1.03

72.38

1.05

68.68

3.98

104.40

CDE2

1.77

216.79

M

1.20

84.32

1.23

80.45

CDE1

1.53

187.39

N

1.40

98.38

1.42

92.88

CBC2

1.47

180.05

O

1.47

103.30

1.47

96.15

CA2

1.03

126.15

P

1.02

71.68

1.03

67.37

CBC1

1.27

155.55

Q

CA1

0.89

109.01

R

BAB2

0.98

120.03

S

BAB1

0.94

115.13

T

PDE2

1.48

181.27

U

PDE1

1.39

170.25

V

PBC2

1.15

140.85

W

PA2

0.67

82.06

X

PBC1

1.07

131.05

Y

PA1

0.62

75.94

Table 6—PDPM Case-Mix Adjusted Federal Rates and Associated Indexes—RURAL (Including the Parity Adjustment Recalibration)

PDPM group

PT CMI

PT rate

OT CMI

OT rate

SLP CMI

SLP rate

Nursing CMG

Nursing CMI

Nursing rate

NTA CMI

NTA rate

A

1.45

$116.15

1.41

$103.72

0.64

$21.15

ES3

3.84

$449.40

3.06

$270.17

B

1.61

128.96

1.54

113.28

1.72

56.85

ES2

2.90

339.39

2.39

211.01

C

1.78

142.58

1.60

117.70

2.52

83.29

ES1

2.77

324.17

1.74

153.62

D

1.81

144.98

1.45

106.66

1.38

45.61

HDE2

2.27

265.66

1.26

111.25

E

1.34

107.33

1.33

97.83

2.21

73.04

HDE1

1.88

220.02

0.91

80.34

F

1.52

121.75

1.51

111.08

2.82

93.20

HBC2

2.12

248.10

0.68

60.04

G

1.58

126.56

1.55

114.02

1.93

63.79

HBC1

1.76

205.97

H

1.10

88.11

1.09

80.18

2.7

89.24

LDE2

1.97

230.55

I

1.07

85.71

1.12

82.39

3.34

110.39

LDE1

1.64

191.93

J

1.34

107.33

1.37

100.78

2.83

93.53

LBC2

1.63

190.76

K

1.44

115.34

1.46

107.40

3.5

115.68

LBC1

1.35

157.99

L

1.03

82.50

1.05

77.24

3.98

131.54

CDE2

1.77

207.14

M

1.20

96.12

1.23

90.48

CDE1

1.53

179.06

N

1.40

112.14

1.42

104.46

CBC2

1.47

172.03

O

1.47

117.75

1.47

108.13

CA2

1.03

120.54

P

1.02

81.70

1.03

75.77

CBC1

1.27

148.63

Q

CA1

0.89

104.16

R

BAB2

0.98

114.69

S

BAB1

0.94

110.01

T

PDE2

1.48

173.20

U

PDE1

1.39

162.67

V

PBC2

1.15

134.58

W

PA2

0.67

78.41

X

PBC1

1.07

125.22

Y

PA1

0.62

72.56

Commenters submitted the following comments related to the proposed Federal per diem rates for FY 2024. A discussion of these comments, along with our responses, appears below.

Comment:

One commenter stated that the case-mix adjusted rates for PT, OT, SLP, and nursing categories are higher in urban areas than in rural areas, which exacerbate inequalities between rural and urban SNFs.

Response:

We disagree with the commenter's statement that the case-mix adjusted rates for the PT, OT and SLP components are higher in urban than rural areas as shown in Tables 5 and 6. As most recently noted in the FY 2023 SNF PPS final rule (87 FR 47502), the Federal per diem rates were established separately for urban and rural areas using allowable costs from FY 1995 cost reports, and therefore, account for and reflect the relative costs differences between urban and rural facilities. We note that the SNF PPS payment rates are updated annually by an increase factor that reflects changes over time in the prices of an appropriate mix of goods and services included in the covered SNF services and a portion of these rates are further adjusted by a wage index to reflect geographic variations in wages. We will continue to monitor our SNF payment policies to ensure they reflect as accurately as possible the current costs of care in the SNF setting.

Comment:

One commenter was appreciative of the increase in payment for FY 2024 and encouraged CMS to maximize support for rural SNFs.

Response:

We thank the commenter for their support of the payment rate update for FY 2024 and note that rural SNFs are expected to experience, on average, a 3.3 percent increase in payments compared with FY 2023.

Comment:

Commenters encouraged CMS to continue to monitor the impact of the PDPM on beneficiaries' access to appropriate SNF services, including therapy services to address any emerging problems affecting SNF residents.

Response:

We thank the commenter for their suggestion. We will continue to monitor the impact of the PDPM implementation on patient outcomes and other metrics to identify any adverse trends accompanying the revisions to the PPS.

Comment:

Commenters generally expressed appreciation that the parity adjustment was phased in over 2 years but expressed concern that there would be a reduction to the SNF payment rates for FY 2024 due to this adjustment. A few commenters requested that the PDPM parity adjustment be delayed, reduced, cancelled or be phased in over an additional 2 years. One commenter indicated that they support implementing the remainder of the recalibrated parity adjustment in FY 2024 to prevent continued SNF payments in excess of the intended budget neutral implementation of the PDPM.

Response:

We thank the commenters for their support of the phase in of the parity adjustment. We believe the 2-year phase-in was sufficient to mitigate adverse payment impacts while also ensuring that payment rates for all SNFs are set accurately and appropriately. As such, we do not believe it would be appropriate to expand the phase-in period beyond than what was finalized in the FY 2023 SNF PPS final rule. We refer readers to the FY 2023 SNF PPS final rule (87 FR 47502), for a full discussion of the rationale related to the implementation of this policy.

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 will continue this practice for FY 2024, 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 under the inpatient prospective payment system (IPPS) 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. As in previous years, we would continue to use the pre-reclassified IPPS hospital wage data, without applying the occupational mix, rural floor, or outmigration adjustment, as the basis for the SNF PPS wage index. For FY 2024, the updated wage data are for hospital cost reporting periods beginning on or after October 1, 2019 and before October 1, 2020 (FY 2020 cost report data).

We note that section 315 of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554, enacted December 21, 2000) gave the Secretary the discretion to establish a geographic reclassification procedure specific to SNFs, but only after collecting the data necessary to establish a SNF PPS wage index that is based on wage data from nursing homes. 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 the data. More specifically, auditing all SNF cost reports, similar to the process used to audit inpatient hospital cost reports for purposes of the IPPS wage index, would place a burden on providers in terms of recordkeeping and completion of the cost report worksheet. Adopting such an approach would require a significant commitment of resources by CMS and the Medicare Administrative Contractors (MACs), potentially far in excess of those required under the IPPS, given that there are nearly five times as many SNFs as there are inpatient hospitals. While we continue to believe that the development of such an audit process could improve SNF cost reports, which is determined to be adequately accurate for cost development purposes, in such a manner as to permit us to establish a SNF-specific wage index, we do not believe this undertaking is feasible.

In addition, we will continue to use the same methodology discussed in the SNF PPS final rule for FY 2008 (72 FR 43423) to address those geographic areas in which there are no hospitals, and thus, no hospital wage index data on which to base the calculation of the FY 2022 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 will continue using the average wage index from all contiguous Core-Based Statistical Areas (CBSAs) as a reasonable proxy. For FY 2024, there are no rural geographic areas that do not have hospitals, and thus, this methodology will not be applied. For rural Puerto Rico, we will not apply this methodology due to the distinct economic circumstances there; due to the close proximity of almost all of Puerto Rico's various urban and non-urban areas, this methodology will produce a wage index for rural Puerto Rico that is higher than that in half of its urban areas. Instead, we will continue using the most recent wage index previously available for that area. For urban areas without specific hospital wage index data, we will continue using the average wage indexes of all urban areas within the State to serve as a reasonable proxy for the wage index of that urban CBSA. For FY 2024, the only urban area without wage index data available is CBSA 25980, Hinesville-Fort Stewart, GA.

In the SNF PPS final rule for FY 2006 (70 FR 45026, August 4, 2005), we adopted the changes discussed in OMB Bulletin No. 03-04 (June 6, 2003), which announced revised definitions for MSAs and the creation of micropolitan statistical areas and combined statistical areas. In adopting the CBSA geographic designations, we provided for a 1-year transition in FY 2006 with a blended wage index for all providers. For FY 2006, the wage index for each provider consisted of a blend of 50 percent of the FY 2006 MSA-based wage index and 50 percent of the FY 2006 CBSA-based wage index (both using FY 2002 hospital data). We referred to the blended wage index as the FY 2006 SNF PPS transition wage index. As discussed in the SNF PPS final rule for FY 2006 (70 FR 45041), after the expiration of this 1-year transition on September 30, 2006, we used the full CBSA-based wage index values.

In the FY 2015 SNF PPS final rule (79 FR 45644 through 45646), we finalized changes to the SNF PPS wage index based on the newest OMB delineations, as described in OMB Bulletin No. 13-01, beginning in FY 2015, including a 1-year transition with a blended wage index for FY 2015. OMB Bulletin No. 13-01 established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas in the United States and Puerto Rico based on the 2010 Census, and provided guidance on the use of the delineations of these statistical areas using standards published in the June 28, 2010

Federal Register

(75 FR 37246 through 37252). Subsequently, on July 15, 2015, OMB issued OMB Bulletin No. 15-01, which provided minor updates to and superseded OMB Bulletin No. 13-01 that was issued on February 28, 2013. The attachment to OMB Bulletin No. 15-01 provided detailed information on the update to statistical areas since February 28, 2013. The updates provided in OMB Bulletin No. 15-01 were based on the application of the 2010 Standards for Delineating Metropolitan and Micropolitan Statistical Areas to Census Bureau population estimates for July 1, 2012 and July 1, 2013 and were adopted under the SNF PPS in the FY 2017 SNF PPS final rule (81 FR 51983, August 5, 2016). In addition, on August 15, 2017, OMB issued Bulletin No. 17-01 which announced a new urban CBSA, Twin Falls, Idaho (CBSA 46300) which was adopted in the SNF PPS final rule for FY 2019 (83 FR 39173, August 8, 2018).

As discussed in the FY 2021 SNF PPS final rule (85 FR 47594), we adopted the revised OMB delineations identified in OMB Bulletin No. 18-04 (available at

https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf

) beginning October 1, 2020, including a 1-year transition for FY 2021 under which we applied a 5 percent cap on any decrease in a hospital's wage index compared to its wage index for the prior fiscal year (FY 2020). The updated OMB delineations more accurately reflect the contemporary urban and rural nature of areas across the country, and the use of such delineations allows us to determine more accurately the appropriate wage index and rate tables to apply under the SNF PPS.

In the FY 2023 SNF PPS final rule (87 FR 47521 through 47525), we finalized a policy to apply a permanent 5 percent cap on any decreases to a provider's wage index from its wage index in the prior year, regardless of the circumstances causing the decline. Additionally, we finalized a policy that a new SNF would be paid the wage index for the area in which it is geographically located for its first full or partial FY with no cap applied because a new SNF would not have a wage index in the prior FY. We amended the SNF PPS regulations at 42 CFR 413.337(b)(4)(ii) to reflect this permanent cap on wage index decreases. A full discussion of the adoption of this policy is found in the FY 2023 SNF PPS final rule.

As we previously stated in the FY 2008 SNF PPS proposed and final rules (72 FR 25538 through 25539, and 72 FR

43423), this and all subsequent SNF PPS rules and notices are considered to incorporate any updates and revisions set forth in the most recent OMB bulletin that applies to the hospital wage data used to determine the current SNF PPS wage index. OMB issued further revised CBSA delineations in OMB Bulletin No. 20-01, on March 6, 2020 (available on the web at

https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf

). However, we determined that the changes in OMB Bulletin No. 20-01 do not impact the CBSA-based labor market area delineations adopted in FY 2021. Therefore, we did not propose to adopt the revised OMB delineations identified in OMB Bulletin No. 20 01 for FY 2022 or 2023, and for these reasons we are likewise not making such a requirement for FY 2024. The wage index applicable to FY 2024 is set forth in Tables A and B available on the CMS website at

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.

Once calculated, we will apply the wage index adjustment to the labor-related portion of the Federal rate. Each year, we calculate a 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 2022 (86 FR 42437), we finalized a proposal to revise the labor-related share to reflect the relative importance of the 2018-based SNF market basket cost weights for the following cost categories: Wages and Salaries; Employee Benefits; Professional Fees: Labor-Related; Administrative and Facilities Support services; Installation, Maintenance, and Repair Services; All Other: Labor-Related Services; and a proportion of Capital-Related expenses. The methodology for calculating the labor-related portion beginning in FY 2022 is discussed in detail in the FY 2022 SNF PPS final rule (86 FR 42461 through 42463).

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 2024. 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 2024 than the base year weights from the SNF market basket. We calculate the labor-related relative importance for FY 2024 in four steps. First, we compute the FY 2024 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 2024 price index level for that cost category by the total market basket price index level. Third, we determine the FY 2024 relative importance for each cost category by multiplying this ratio by the base year (2018) weight. Finally, we add the FY 2024 relative importance for each of the labor-related cost categories (Wages and Salaries; Employee Benefits; Professional Fees: Labor-Related; Administrative and Facilities Support Services; Installation, Maintenance, and Repair Services; All Other: Labor-Related Services; and a portion of Capital-Related expenses) to produce the FY 2024 labor-related relative importance.

For the proposed rule, the labor-related share for FY 2024 was based on IGI's fourth quarter 2022 forecast of the 2018-based SNF market basket with historical data through the third quarter of 2022. As outlined in the proposed rule, we noted that if more recent data became available (for example, a more recent estimate of the labor-related share relative importance) we would use such data, if appropriate, for the SNF final rule. For this final rule, we base the labor-related share for FY 2024 on IGI's second quarter 2023 forecast, with historical data through the first quarter of 2023 of the 2018-based SNF market basket.

Table 7 summarizes the labor-related share for FY 2024, based on IGI's second quarter 2023 forecast of the 2018-based SNF market basket, compared to the labor-related share that was used for the FY 2023 SNF PPS final rule.

Table 7—Labor-Related Share, FY 2023 and FY 2024

Relative importance,

labor-related share,

FY 2023

22:2 forecast

1

Relative importance,

labor-related share,

FY 2024

23:2 forecast

2

Wages and salaries

51.9

52.5

Employee benefits

9.5

9.3

Professional fees: Labor-related

3.5

3.4

Administrative & facilities support services

0.6

0.6

Installation, maintenance & repair services

0.4

0.4

All other: Labor-related services

2.0

2.0

Capital-related (.391)

2.9

2.9

Total

70.8

71.1

1

Published in the

Federal Register

; Based on the second quarter 2022 IHS Global Inc. forecast of the 2018-based SNF market basket.

2

Based on the second quarter 2023 IHS Global Inc. forecast of the 2018-based SNF market basket.

To calculate the labor portion of the case-mix adjusted per diem rate, we will multiply the total case-mix adjusted per diem rate, which is the sum of all five case-mix adjusted components into which a patient classifies, and the non-case-mix component rate, by the FY 2024 labor-related share percentage provided in Table 7. The remaining portion of the rate would be the non-labor portion. Under the previous RUG-IV model, we included tables which provided the case-mix adjusted RUG-IV rates, by RUG-IV group, broken out by total rate, labor portion and non-labor portion, such as Table 9 of the FY 2019 SNF PPS final rule (83 FR 39175). However, as we discussed in the FY 2020 final rule (84 FR 38738), under PDPM, as the total rate is calculated as a combination of six different component rates, five of which are case-mix adjusted, and given the sheer volume of possible combinations of these five case-mix adjusted components, it is not feasible to provide tables similar to those that existed in the prior rulemaking.

Therefore, to aid interested parties in understanding the effect of the wage

index on the calculation of the SNF per diem rate, we have included a hypothetical rate calculation in Table 9.

Section 1888(e)(4)(G)(ii) of the Act also requires that we apply this wage index in a manner that does not result in aggregate payments under the SNF PPS that are greater or less than would otherwise be made if the wage adjustment had not been made. For FY 2024 (Federal rates effective October 1, 2023), we apply an adjustment to fulfill the budget neutrality requirement. We meet this requirement by multiplying each of the components of the unadjusted Federal rates by a budget neutrality factor, equal to the ratio of the weighted average wage adjustment factor for FY 2023 to the weighted average wage adjustment factor for FY 2024. For this calculation, we will use the same FY 2022 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 portion of the rate component multiplied by the wage index plus the non-labor portion of the rate component. The finalized budget neutrality factor for FY 2024 is 0.9997.

We note that if more recent data become available (for example, revised wage data), we would use such data, as appropriate, to determine the wage index budget neutrality factor in the SNF PPS final rule.

We solicited public comment on the proposed SNF wage adjustment for FY 2024. The following is a summary of the comments we received and our responses.

Comment:

One commenter did not support any increases in the labor-related share as any facility that has a wage index less than 1.0 will suffer financially from a rise in the labor-related share. They stated that across the country, there is a growing disparity between the high-wage and low-wage States.

Response:

We appreciate the commenter's concern. However, each year we calculate a labor-related share based on the relative importance of labor-related cost categories, to account historical and projected price changes between the base year and the payment year (FY 2024 in this rule). 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. As shown in Table 7, the slight increase in the labor-related share is due to an increase in the wages and salaries relative importance cost weight, reflecting the faster wage prices compared to other nonwage prices in the SNF market basket. This increase is consistent with comments we have received during this rulemaking about faster wage prices.

As discussed above, based on IGI's second quarter 2023 forecast with historical data through the first quarter of 2023, we are finalizing the FY 2024 labor-related share of 71.1 percent based on the relative importance of each of the labor-related cost categories in the 2018-based SNF market basket.

Comment:

Commenters stated support of the permanent 5-percent cap on wage index decreases. One commenter encouraged CMS to implement these caps in a non-budget neutral manner to stabilize provider reimbursement and avoid further unexpected reductions for other providers.

Response:

We appreciate the commenters' support of the permanent cap on wage index decreases. As for budget neutrality, we do not believe that the permanent 5-percent cap policy for the SNF wage index should be applied in a non-budget-neutral manner. The statute at section 1888(e)(4)(G)(ii) of the Act requires that adjustments for geographic variations in labor costs for a FY are made in a budget-neutral. We refer readers to the FY 2023 SNF PPS final rule (87 FR 47521 through 47523) for a detailed discussion and for responses to these and other comments relating to the wage index cap policy.

Comment:

While commenters support the current wage index methodology for FY 2024, including not requiring the commitment of resources needed to do audits on cost reports at this time, others encourage CMS to continue to reform the wage index policies (for example, SNF-specific wage index utilizing SNF audited cost report and nursing wage data).

Response:

We appreciate the commenters' support of the proposed wage index policies for FY 2024. In the absence of a SNF-specific wage index, we believe the use of the pre-reclassified and pre-floor hospital wage data (without the occupational mix adjustment) continue to be an appropriate and reasonable proxy for the SNF PPS. For a detailed discussion of the rationale for our current wage index policies and for responses to these recurring comments, we refer readers to the FY 2023 SNF PPS final rule (87 FR 47513 through 47516) and the FY 2016 SNF PPS final rule (80 FR 46401 through 46402).

Comment:

One commenter recommended that CMS should, as a matter of policy, require that SNFs provide wages on parity with hospitals for nursing staff. This commenter stated that, given that the SNF wage index is based on hospital wages, CMS should require that SNFs pay the same wages as the hospitals for nursing staff.

Response:

We appreciate the commenter's suggestion. While we continue to believe that the pre-reclassified and pre-floor hospital wage index serves as an appropriate proxy for the SNF PPS, we do not believe that it would be appropriate for us to require SNFs to pay a certain amount to their staff. How a SNF chooses to reimburse their staff is a private financial arrangement between the facility and its staff, which means that we believe it would be inappropriate to establish regulations that govern this matter since there is no statutory authority present.

After consideration of public comments, we are finalizing our proposal regarding the wage index adjustment for FY 2024.

E. SNF Value-Based Purchasing Program

Beginning with payment for services furnished on October 1, 2018, section 1888(h) of the Act requires the Secretary to reduce the adjusted Federal per diem rate determined under section 1888(e)(4)(G) of the Act otherwise applicable to a SNF for services furnished during a fiscal year by 2 percent, and to adjust the resulting rate for a SNF by the value-based incentive payment amount earned by the SNF based on the SNF's performance score for that fiscal year under the SNF VBP Program. To implement these requirements, we finalized in the FY 2019 SNF PPS final rule the addition of § 413.337(f) to our regulations (83 FR 39178).

Please see section VIII. of this final rule for further discussion of the updates we are finalizing for the SNF VBP Program.

F. Adjusted Rate Computation Example

Tables 8 through 10 provide examples generally illustrating payment calculations during FY 2024 under PDPM for a hypothetical 30-day SNF stay, involving the hypothetical SNF XYZ, located in Frederick, MD (Urban CBSA 23224), for a hypothetical patient who is classified into such groups that the patient's HIPPS code is NHNC1. Table 8 shows the adjustments made to the Federal per diem rates (prior to application of any adjustments under the SNF VBP Program as discussed previously and taking into account the second phase of the parity adjustment recalibration discussed in section IV.C. of this final rule) to compute the provider's case-mix adjusted per diem rate for FY 2024, based on the patient's PDPM classification, as well as how the variable per diem (VPD) adjustment

factor affects calculation of the per diem rate for a given day of the stay. Table 9 shows the adjustments made to the case-mix adjusted per diem rate from Table 8 to account for the provider's wage index. The wage index used in this example is based on the FY 2024 SNF PPS wage index that appears in Table A available on the CMS website at

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.

Finally, Table 10 provides the case-mix and wage index adjusted per-diem rate for this patient for each day of the 30-day stay, as well as the total payment for this stay. Table 10 also includes the VPD adjustment factors for each day of the patient's stay, to clarify why the patient's per diem rate changes for certain days of the stay. As illustrated in Table 10, SNF XYZ's total PPS payment for this particular patient's stay would equal $21,717.98.

Table 8—PDPM Case-Mix Adjusted Rate Computation Example

Per diem rate calculation

Component

Component

group

Component

rate

VPD

adjustment

factor

VPD

adj. rate

PT

N

$98.38

1.00

$98.38

OT

N

92.88

1.00

92.88

SLP

H

70.82

1.00

70.82

Nursing

N

180.05

1.00

180.05

NTA

C

160.79

3.00

482.37

Non-Case-Mix

109.69

109.69

Total PDPM Case-Mix Adj. Per Diem

1,034.19

Table 9—Wage Index Adjusted Rate Computation Example

PDPM wage index adjustment calculation

HIPPS code

PDPM

case-mix

adjusted

per diem

Labor

portion

Wage index

Wage index

adjusted rate

Non-labor

portion

Total case

mix and wage

index adj. rate

NHNC1

$1,034.19

$735.31

0.9637

$708.62

$298.88

$1,007.50

Table 10—Adjusted Rate Computation Example

Day of stay

NTA VPD

adjustment

factor

PT/OT VPD adjustment factor

Case mix and wage Index adjusted per diem rate

1

3.0

1.0

$1,007.50

2

3.0

1.0

1,007.50

3

3.0

1.0

1,007.50

4

1.0

1.0

694.22

5

1.0

1.0

694.22

6

1.0

1.0

694.22

7

1.0

1.0

694.22

8

1.0

1.0

694.22

9

1.0

1.0

694.22

10

1.0

1.0

694.22

11

1.0

1.0

694.22

12

1.0

1.0

694.22

13

1.0

1.0

694.22

14

1.0

1.0

694.22

15

1.0

1.0

694.22

16

1.0

1.0

694.22

17

1.0

1.0

694.22

18

1.0

1.0

694.22

19

1.0

1.0

694.22

20

1.0

1.0

694.22

21

1.0

0.98

690.49

22

1.0

0.98

690.49

23

1.0

0.98

690.49

24

1.0

0.98

690.49

25

1.0

0.98

690.49

26

1.0

0.98

690.49

27

1.0

0.98

690.49

28

1.0

0.96

686.77

29

1.0

0.96

686.77

30

1.0

0.96

686.77

Total Payment

21,717.98

V. 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 the FY 2024 SNF PPS proposed rule. This approach includes an administrative presumption that utilizes a beneficiary's correct assignment, at the outset of the SNF stay, of one of the case-mix classifiers designated for this purpose to assist in making certain SNF level of care determinations.

In accordance with § 413.345, we include in each update of the Federal payment rates in the

Federal Register

a discussion of the resident classification system that provides the basis for case-mix adjustment. We also designate those specific classifiers under the case-mix classification system that represent the required SNF level of care, as provided in 42 CFR 409.30. This designation reflects an administrative presumption that those beneficiaries who are correctly assigned one of the designated case-mix classifiers on the initial Medicare assessment are automatically classified as meeting the SNF level of care definition up to and including the assessment reference date (ARD) for that assessment.

A beneficiary who does not qualify for the presumption is not automatically classified as either meeting or not meeting the level of care definition, but instead receives an individual determination on this point using the existing administrative criteria. This presumption recognizes the strong likelihood that those beneficiaries who are correctly assigned one of the designated case-mix classifiers during the immediate post-hospital period would require a covered level of care, which would be less likely for other beneficiaries.

In the July 30, 1999 final rule (64 FR 41670), we indicated that we would announce any changes to the guidelines for Medicare level of care determinations related to modifications in the case-mix classification structure. The FY 2018 final rule (82 FR 36544) further specified that we would henceforth disseminate the standard description of the administrative presumption's designated groups via the SNF PPS website at

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html

(where such designations appear in the paragraph entitled “Case Mix Adjustment”), and would publish such designations in rulemaking only to the extent that we actually intend to propose changes in them. Under that approach, the set of case-mix classifiers designated for this purpose under PDPM was finalized in the FY 2019 SNF PPS final rule (83 FR 39253) and is posted on the SNF PPS website (

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html

), in the paragraph entitled “Case Mix Adjustment.”

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 any services prompting the assignment of one of the designated case-mix classifiers (which, in turn, serves to trigger the administrative presumption) are themselves medically necessary. As we explained in the FY 2000 SNF PPS final rule (64 FR 41667), the administrative presumption is itself rebuttable in those individual cases in which the services actually received by the resident do not meet the basic statutory criterion of being reasonable and necessary to diagnose or treat a beneficiary's condition (according to section 1862(a)(1) of the Act). Accordingly, the presumption would not apply, for example, in those situations where the sole classifier that triggers the presumption is itself assigned through the receipt of services that are subsequently determined to be not reasonable and necessary. Moreover, we want to stress the importance of careful monitoring for changes in each patient's condition to determine the continuing need for Part A SNF benefits after the ARD of the initial Medicare assessment.

B. Consolidated Billing

Sections 1842(b)(6)(E) and 1862(a)(18) of the Act (as added by section 4432(b) of the BBA 1997) require a SNF to submit consolidated Medicare bills to its Medicare Administrative Contractor (MAC) for almost all of the services that its residents receive during the course of a covered Part A stay. In addition, section 1862(a)(18) of the Act places the responsibility with the SNF for billing Medicare for physical therapy, occupational therapy, and 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).

Effective with services furnished on or after January 1, 2024, section 4121(a)(4) of the CAA, 2023 added marriage and family therapists and mental health counselors to the list of practitioners at section 1888(e)(2)(A)(ii) of the Act whose services are excluded from the consolidated billing provision. We note that there are no rate adjustments required to the per diem to offset these exclusions, as payments for services made under section 1888(e)(2)(A)(ii) of the Act are not specified under the requirement at section 1888(e)(4)(G)(iii) of the Act as services for which the Secretary must “provide for an appropriate proportional reduction . . .equal to the aggregate increase in payments attributable to the exclusion”. See section IV.D. of the FY 2024 SNF PPS

proposed rule for a discussion of the proposed regulatory updates implementing this change.

A detailed discussion of the legislative history of the consolidated billing provision is available on the SNF PPS website at

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_2018-10-01.pdf.

In particular, section 103 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA 1999) (Pub. L. 106-113, enacted November 29, 1999) amended section 1888(e)(2)(A)(iii) of the Act by further excluding a number of individual high-cost, low probability services, identified by 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 1999 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 1999 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 these four specified service categories. In the proposed rule for FY 2001, we also noted that the BBRA 1999 Conference report (H.R. Conf. Rep. No. 106-479 at 854 (1999)) characterizes the individual services that this legislation targets for exclusion as high-cost, low probability events that could have devastating financial impacts because their costs far exceed the payment SNFs receive under the PPS. According to the conferees, section 103(a) of the BBRA 1999 is an attempt to exclude from the PPS certain services and costly items that are provided infrequently in SNFs. By contrast, the amendments enacted in section 103 of the BBRA 1999 do not designate for exclusion any of the remaining services within those four categories (thus, leaving all of those services subject to SNF consolidated billing), because they are relatively inexpensive and are furnished routinely in SNFs.

As we further explained in the final rule for FY 2001 (65 FR 46790), and as is consistent with our longstanding policy, any additional service codes that we might designate for exclusion under our discretionary authority must meet the same statutory criteria used in identifying the original codes excluded from consolidated billing under section 103(a) of the BBRA 1999: they must fall within one of the four service categories specified in the BBRA 1999; and they also must meet the same standards of high cost and low probability in the SNF setting, as discussed in the BBRA 1999 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).

Effective with items and services furnished on or after October 1, 2021, section 134 in Division CC of the CAA, 2021 established an additional category of excluded codes in section 1888(e)(2)(A)(iii)(VI) of the Act, for certain blood clotting factors for the treatment of patients with hemophilia and other bleeding disorders along with items and services related to the furnishing of such factors under section 1842(o)(5)(C) of the Act. Like the provisions enacted in the BBRA 1999, section 1888(e)(2)(A)(iii)(VI) of the Act gives the Secretary the authority to designate additional items and services for exclusion within the category of items and services related to blood clotting factors, as described in that section. Finally, as noted previously in this final rule, section 4121(a)(4) of Division FF of CAA, 2023 amended section 1888(e)(2)(A)(ii) of the Act to exclude marriage and family therapist services and mental health counselor services from consolidated billing effective January 1, 2024.

In the proposed rule, we specifically solicited public comments identifying HCPCS codes in any of these five service categories (chemotherapy items, chemotherapy administration services, radioisotope services, customized prosthetic devices, and blood clotting factors) 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 previously. We requested that commenters 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 and the CAA, 2021 identified a set of excluded items and services by means of specifying individual HCPCS codes within the designated categories that were in effect as of a particular date (in the case of the BBRA 1999, July 1, 1999, and in the case of the CAA, 2021, July 1, 2020), as subsequently modified by the Secretary. In addition, as noted in this section of the preamble, the statute (sections 1888(e)(2)(A)(iii)(II) through (VI) of the Act) gives the Secretary authority to identify additional items and services for exclusion within the five specified categories of items and services described in the statute, which are also designated by HCPCS code. Designating the excluded services in this manner makes it possible for us to utilize program issuances as the vehicle for accomplishing routine updates to the excluded codes to reflect any minor revisions that might subsequently occur in the coding system itself, such as the assignment of a different code number to a service already designated as excluded, or the creation of a new code for a type of service that falls within one of the established exclusion categories and meets our criteria for exclusion.

Accordingly, in the event that we identify through the current rulemaking cycle any new services that will actually represent a substantive change in the scope of the exclusions from SNF consolidated billing, we will identify these additional excluded services by means of the HCPCS codes that are in effect as of a specific date (in this case, October 1, 2023). By making any new exclusions in this manner, we can similarly accomplish routine future updates of these additional codes through the issuance of program instructions. The latest list of excluded codes can be found on the SNF Consolidated Billing website at

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

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment:

Several commenters requested that CMS create a new exclusion category that excludes expensive items and services based on a price threshold. Another commenter requested that CMS review the statute and change the statute to provide equal access and payment for DME items for residents in a SNF. Some commenters

suggested that CMS exclude expensive antibiotics. Finally, some commenters requested that CMS add clinical social workers to the SNF exclusion list.

Response:

As we noted in the proposed rule, sections 1888(e)(2)(A)(iii)(II) through (VI) of the Act give the Secretary authority to identify additional items and services for exclusion only within the categories of items and services described in the statute. Accordingly, it is beyond the statutory authority of CMS to exclude services that do not fit these categories, or to create additional categories of excluded services. The changes requested by these commenters are beyond the scope of CMS authority and would require Congressional action.

Comment:

A commenter requested that CMS add Altuviio, a new class of factor VIII therapy for adults and children with hemophilia A, the list of blood clotting factor exclusions. Altuviio is currently billed using the miscellaneous J code—J 7199, Hemophilia Clotting Factor, not otherwise classified, and has not been assigned its own J code.

Response:

As we noted in the proposed rule, we are only able to add services to the exclusion list once they have actually been assigned a HCPCS code. The approach that Congress adopted to identify the individual blood clotting factor drugs being designated for exclusion consisted of listing them by HCPCS code in the statute itself (section 1888(e)(2)(A)(iii)(VI) of the Act). Thus, a blood clotting factor drug's assignment to its own specific code serves as the mechanism of designating it for exclusion, as well as the means by which the claims processing system is able to recognize that exclusion. Accordingly, the assignment of a blood clotting factor drug to its own code is a necessary prerequisite to consider that service for exclusion from consolidated billing under the SNF PPS. We cannot add a miscellaneous non-descriptive code such as J7199. When the code is assigned, we will review it as part of our standard review of new HCPCS codes for exclusion.

Comment:

Several commenters named specific suggestions of drugs for exclusion in the chemotherapy category, including: Tecvayli; Denosumab, Leuprolide, and Keytruda; Ponatinib, Gilteritinib, Idhifa, Onureg, Midostaurin, Sprycel, Venetoclax, Promacta, Fulphila, Neulasta, Zarxio, Udenyca; Imatinib, Dasatinib, Nilotinib, Cabozantinib, Sunitinib, and Lenalidomide.

Response:

For the reasons discussed previously in this final rule as well as prior rulemaking, the particular drugs cited in these comments remain subject to consolidated billing.

In the case of leuprolide acetate and denosumab, we have addressed these when suggested in past rulemaking cycles, most recently in the SNF PPS final rules for FY 2023 (87 FR 47502, August 3, 2022). In those rules, we explained that these drugs are unlikely to meet the criterion of “low probability” specified in the BBRA.

With regard to all other specific drugs mentioned, these are not actually chemotherapy drugs, but rather either immunotherapy or other non-chemotherapy treatments for cancer, or non-chemotherapy services related to or used in conjunction with chemotherapy or in treatment of chemotherapy symptoms. As such, these services do not fit the chemotherapy category or any existing exclusion categories. As we noted in the proposed rule, sections 1888(e)(2)(A)(iii)(II) through (VI) of the Act give the Secretary authority to identify additional items and services for exclusion only within the categories of items and services described in the statute. Accordingly, it is beyond the statutory authority of CMS to exclude services that do not fit these categories, or to create additional categories of excluded services. Such changes would require Congressional action. Additionally, some of these drugs do not have unique HCPCS codes assigned, which as we explained in the preceding comment, is a necessary prerequisite to consider that service for exclusion from consolidated billing under the SNF PPS.

Comment:

A commenter noted that CMS website and manual materials contain out of date material with regard to the exclusion of blood clotting factors enacted in the Consolidated Appropriations Act (CAA) of 2021 and implemented by the FY 2022 SNF Final Rule (86 FR 42442).

Response:

We appreciate the commenter bringing this to our attention and will update our online materials accordingly.

Comment:

One commenter requested a copy of the consolidated billing exclusion list or instructions on how to find it. The statutory language specifying exclusion categories is set out in sections 1888(e)(2)(A)(ii) and (iii) of the Act.

Response:

The consolidated billing exclusion list is available online at:

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

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, SNF-level services furnished by non-CAH rural hospitals are paid under the SNF PPS, effective with cost reporting periods beginning on or after July 1, 2002. As explained in the FY 2002 final rule (66 FR 39562), this effective date is consistent with the statutory provision to integrate swing-bed rural hospitals into the SNF PPS by the end of the transition period, June 30, 2002.

Accordingly, all non-CAH swing-bed rural hospitals have now come under the SNF PPS. Therefore, all rates and wage indexes outlined in earlier sections of this final rule for the SNF PPS also apply to all non-CAH swing-bed rural hospitals. As finalized in the FY 2010 SNF PPS final rule (74 FR 40356 through 40357), effective October 1, 2010, non-CAH swing-bed rural hospitals are required to complete an MDS 3.0 swing-bed assessment which is limited to the required demographic, payment, and quality items. As discussed in the FY 2019 SNF PPS final rule (83 FR 39235), revisions were made to the swing bed assessment to support implementation of PDPM, effective October 1, 2019. A discussion of the assessment schedule and the MDS effective beginning FY 2020 appears in the FY 2019 SNF PPS final rule (83 FR 39229 through 39237). The latest changes in the MDS for swing-bed rural hospitals appear on the SNF PPS website at

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html.

D. Revisions to the Regulation Text

We proposed to make the following revisions in the regulation text. Section 4121(a)(4) of Division FF of the CAA, 2023 requires Medicare to exclude marriage and family therapist (MFT) services and mental health counselor services (MHC) from SNF consolidated billing for services furnished on or after January 1, 2024. Exclusion from consolidated billing allows these services to be billed separately by the performing clinician rather than being included in the SNF payment. To reflect the recently-enacted exclusion of MFT services and MHC services from SNF consolidated billing at section 1888(e)(2)(A)(ii) of the Act (as discussed in section V.B of the proposed rule), we proposed to redesignate current § 411.15(p)(2)(vi) through (xviii) as § 411.15(p)(2)(viii) through (xx),

respectively. In addition, we proposed to redesignate § 489.20(s)(6) through (18) as § 489.20(s)(8) through (20), respectively. We also proposed to add new regulation text at §§ 411.15(p)(2)(vi) and (vii) and 489.20(s)(6) and (7). Specifically, proposed new §§ 411.15(p)(2)(vi) and 489.20(s)(6) would reflect the exclusion of services performed by an MFT, as defined in section 1861(lll)(2) of the Act. Proposed new §§ 411.15(p)(2)(vii) and 489.20(s)(7) would reflect the exclusion of services performed by an MHC, as defined in section 1861(lll)(4) of the Act.

Subsequently, we identified the need for additional conforming changes to the regulatory text. In addition to adding the two new exclusions themselves to the regulation text as set forth in the proposed rule, the existing exclusion for certain telehealth services will need to be revised as well, because it cross-refers to subparagraphs that are now being renumbered as a result of adding the new exclusions. Specifically, a conforming change is needed in the consolidated billing exclusion provision on telehealth services at existing § 411.15(p)(2)(xii) (which, as a result of the other regulation text changes finalized in this rule, will be redesignated § 411.15(p)(2)(xiv)) and in the parallel provider agreement provision on telehealth services at existing § 489.20(s)(12) (which, as a result of the other regulation text changes finalized in this rule, will be redesignated § 489.20(s)(14)). As these additional conforming edits serve to ensure effective implementation of this new exclusion, and because these new conforming edits additionally serve to expand access to telehealth services, we are confident in making these additional changes in this final rule.

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment:

Commenters agreed and appreciated the new exclusion of MFT and MHC services. A few commenters stated that, in light of the exclusion of MFT and MHC services, CMS should consider also excluding services furnished by clinical social workers (CSW). One commenter cited a recent nursing home study which recommended that nursing homes should retain more clinical social workers and CMS should allow for Medicare reimbursement for services furnished by these practitioners.

Response:

We appreciate the support that we received in relation to the proposed regulatory text changes. With regard to the additional exclusion of CSW services, we would note that unlike the services of certain other types of practitioners (such as physicians and clinical psychologists), CSW services do not appear in the list of services that the law specifies in section 1888(e)(2)(A)(ii) through (iv) of the Act as being excluded from the consolidated billing requirement. Adding CSW services to the statutory list of services that are excluded from SNF consolidated billing would require legislation by Congress to amend the law itself.

In light of the comments received on this issue, we are finalizing the additions as proposed, with the additional conforming edits that we identified during the comment period.

VI. Other SNF PPS Issues

A. Technical Updates to the PDPM ICD-10 Mappings

1. Background

In the FY 2019 SNF PPS final rule (83 FR 39162), we finalized the implementation of the Patient Driven Payment Model (PDPM), effective October 1, 2019. The PDPM utilizes the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM, hereafter referred to as ICD-10) codes in several ways, including using the patient's primary diagnosis to assign patients to clinical categories under several PDPM components, specifically the PT, OT, SLP, and NTA components. While other ICD-10 codes may be reported as secondary diagnoses and designated as additional comorbidities, the PDPM does not use secondary diagnoses to assign patients to clinical categories. The PDPM ICD-10 code to clinical category mapping, ICD-10 code to SLP comorbidity mapping, and ICD-10 code to NTA comorbidity mapping (hereafter collectively referred to as the PDPM ICD-10 code mappings) are available on the CMS website at

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM.

In the FY 2020 SNF PPS final rule (84 FR 38750), we outlined the process by which we maintain and update the PDPM ICD-10 code mappings, as well as the SNF Grouper software and other such products related to patient classification and billing, to ensure that they reflect the most up to date codes. Beginning with the updates for FY 2020, we apply nonsubstantive changes to the PDPM ICD-10 code mappings through a subregulatory process consisting of posting the updated PDPM ICD-10 code mappings on the CMS website at

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM.

Such nonsubstantive changes are limited to those specific changes that are necessary to maintain consistency with the most current PDPM ICD-10 code mappings.

On the other hand, substantive changes that go beyond the intention of maintaining consistency with the most current PDPM ICD-10 code mappings, such as changes to the assignment of a code to a clinical category or comorbidity list, would be through notice and comment rulemaking because they are changes that affect policy. We note that, in the case of any diagnoses that are either currently mapped to Return to Provider or that we are finalizing to classify into this category, this is not intended to reflect any judgment on the importance of recognizing and treating these conditions. Rather, we believe that there are more specific or appropriate diagnoses that would better serve as the primary diagnosis for a Part-A covered SNF stay.

2. Clinical Category Changes for New ICD-10 Codes for FY 2023

Each year, we review the clinical category assigned to new ICD-10 diagnosis codes and propose changing the assignment to another clinical category if warranted. This year, we proposed changing the clinical category assignment for the following five new ICD-10 codes that were effective on October 1, 2022:

• D75.84

Other platelet-activating anti-platelet factor 4 (PF4) disorders

was mapped to the clinical category of Return to Provider. Patients with anti-PF4 disorders have blood clotting disorders. Examples of disorders to be classified with D75.84 are spontaneous heparin-induced thrombocytopenia (without heparin exposure), thrombosis with thrombocytopenia syndrome, and vaccine-induced thrombotic thrombocytopenia. Due to the similarity of this code to other anti-PF4 disorders, we proposed changing the assignment to Medical Management.

• F43.81

Prolonged grief disorder

and F43.89

Other reactions to severe stress

were mapped to the clinical category of Medical Management. However, while we believe that SNFs serve an important role in providing services to those beneficiaries suffering from mental illness, the SNF setting is not the setting that would be most beneficial to treat a patient for whom these diagnoses are coded as the patient's primary diagnosis. For this reason, we proposed changing the clinical category of both codes to Return to Provider. We would encourage providers to continue reporting these codes as secondary diagnoses, to ensure that we are able to

identify these patients and that they are receiving appropriate care.

• G90.A

Postural orthostatic tachycardia syndrome (POTS)

was mapped to the clinical category of Acute Neurologic. POTS is a type of orthostatic intolerance that causes the heart to beat faster than normal when transitioning from sitting or lying down to standing up, causing changes in blood pressure, increase in heart rate, and lightheadedness. The treatment for POTS involves hydration, physical therapy, and vasoconstrictor medications, which are also treatments for codes such as E86.0

Dehydration

and E86.1

Hypovolemia

that are mapped to the Medical Management category. Since the medical interventions are similar, we proposed changing the assignment for POTS to Medical Management.

• K76.82

Hepatic encephalopathy

was mapped to the clinical category of Return to Provider. Hepatic encephalopathy is a condition resulting from severe liver disease, where toxins build up in the blood that can affect brain function and lead to a change in medical status. Prior to the development of this code, multiple codes were used to characterize this condition such as K76.6

Portal hypertension,

K76.7

Hepatorenal syndrome,

and K76.89

Other unspecified diseases of liver,

which are mapped to the Medical Management category. Since these codes describe similar liver conditions, we proposed changing the assignment to Medical Management.

We solicited comments on the proposed substantive changes to the PDPM ICD-10 code mappings discussed in this section, as well as comments on additional substantive and nonsubstantive changes that commenters believe are necessary.

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment:

Several commenters stated that they appreciate the ongoing refinements to the PDPM ICD-10 code mappings and the opportunity to provide input to the proposals. Some commenters stated that they would like CMS to identify effective dates on the PDPM website along with educational materials and resources.

Response:

We appreciate the positive comments that we received supporting our efforts to map diagnoses more accurately under the PDPM. We also appreciate the suggestion to develop additional educational materials and resources, which we will consider as we update the CMS website at

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM.

Comment:

Some commenters did not support the proposal to change the assignment of F43.81

Prolonged grief disorder

and F43.89

Other reactions to severe stress

to Return to Provider instead of Medical Management. Their rationale was that a subset of SNFs that specialize in behavioral and mental health treatment may require use of these two new diagnosis codes as the primary diagnosis codes to meet beneficiary needs.

Response:

We believe that even in such cases as the commenters described, there are many other behavioral and mental health diagnoses available that would serve as a more appropriate primary diagnosis for a SNF stay and, therefore, assigning these two codes to Return to Provider would not impede access to care for beneficiaries.

Comment:

Several commenters suggested additional changes to the PDPM ICD-10 code mappings that were outside the scope of this rulemaking. Specifically, they requested that we consider changing M62.81

Muscle weakness (generalized)

from Return to Provider to the Non-surgical orthopedic/musculoskeletal clinical category; adding several dysphasia codes to the SLP comorbidity mapping (namely, R13.14

Dysphagia, pharyngoesophageal phase,

R13.11

Dysphagia, oral phase,

R13.12

Dysphagia, oropharyngeal phase,

R13.13

Dysphagia, pharyngeal phase,

and R13.19

Other dysphagia

); and adding a range of ICD-10 codes from J00

Acute nasopharyngitis [common cold]

to J06.9

Acute upper respiratory infection, unspecified

to the SLP comorbidity mapping.

Response:

We note that the changes suggested by these commenters are outside the scope of this rulemaking, and will not be addressed in this rule. We will further consider the suggested changes to the ICD-10 code mappings and may implement them in the future as appropriate. To the extent that such changes are non-substantive, we may issue them in a future subregulatory update if appropriate; however, if such changes are substantive changes, in accordance with the update process established in the FY 2020 SNF PPS final rule, such changes must undergo full notice and comment rulemaking, and thus may be included in future rulemaking. See the discussion of the update process for the ICD-10 code mappings in the FY 2020 SNF PPS final rule (84 FR 38750) for more information.

After consideration of public comments, we are finalizing the changes as proposed.

3. Clinical Category Changes for Unspecified Substance Use Disorder Codes

Effective with stays beginning on and after October 1, 2022, ICD-10 diagnosis codes F10.90

Alcohol use, unspecified, uncomplicated,

F10.91

Alcohol use, unspecified, in remission,

F11.91

Opioid use, unspecified, in remission,

F12.91

Cannabis use, unspecified, in remission,

F13.91

Sedative, hypnotic or anxiolytic use, unspecified, in remission,

and F14.91

Cocaine use, unspecified, in remission

went into effect and were mapped to the clinical category of Medical Management. We reviewed these 6 new substance use disorder (SUD) codes and changed the assignment from Medical Management to Return to Provider because the codes are not specific as to if they refer to abuse or dependence, and there are other specific codes available for each of these conditions that would be more appropriate as a primary diagnosis for a SNF stay. For example, diagnosis code F10.90

Alcohol use, unspecified, uncomplicated

is not specific as to whether the patient has alcohol abuse or alcohol dependence. There are more specific codes that could be used instead, such as F10.10

Alcohol abuse, uncomplicated

or F10.20

Alcohol dependence, uncomplicated,

that may serve as the primary diagnosis for a SNF stay and are appropriately mapped to the clinical category of Medical Management.

Moreover, we believe that increased accuracy of coding a patient's primary diagnosis aligns with CMS' broader efforts to ensure better quality of care. Therefore, we reviewed all 458 ICD-10 SUD codes from code categories F10 to F19 and finalized reassigning 162 additional unspecified SUD codes to Return to Provider from Medical Management because the codes are not specific as to if they refer to abuse or dependence. We would note that this policy change would not affect a large number of SNF stays. Our data from FY 2021 show that the 162 unspecified SUD codes were used as primary diagnoses for only 323 SNF stays (0.02 percent) and as secondary diagnoses for 9,537 SNF stays (0.54 percent). The purpose of enacting this policy is to continue an ongoing effort to refine the PDPM ICD-10 code mappings each year to ensure more accurate coding of primary diagnoses. We would encourage providers to continue reporting these codes as secondary diagnoses, to ensure that we are able to identify these patients and that they are receiving appropriate care.

Table 1,

Proposed Clinical Category Changes for Unspecified Substance Use Disorder Codes,

which lists all 168 codes included in this proposal, was posted on the CMS website at

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM.

We solicited comments on the proposed substantive changes to the PDPM ICD-10 code mappings discussed in this section, as well as comments on additional substantive and nonsubstantive changes that commenters believe are necessary.

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment:

Commenters supported the PDPM clinical category changes for unspecified SUD codes as proposed. However, several commenters did not agree with the use of F10.10

Alcohol abuse, uncomplicated

or F10.20

Alcohol dependence, uncomplicated,

as these examples do not align with the ICD-10-CM Official Guidelines for Coding and Reporting and the SNF provider would not be able to assign a code such as F10.10 or F10.20 without physician documentation to support that alcohol abuse or dependence was present.

Response:

We appreciate the positive comments that we received supporting our efforts to map SUD diagnoses more accurately under the PDPM. We would note that the examples provided for alcohol abuse and dependence diagnosis were not intended to be diagnostic guidance, and the facility should assess the patient to identify the specific primary diagnosis that requires daily skilled care.

Comment:

Some commenters opposed the PDPM clinical category changes for unspecified SUD codes due to concerns about administrative burden. While they acknowledged that there are more appropriate codes that can be used to indicate whether the patient has substance abuse or dependence, they believe that it is the responsibility of the referring physician to code at the highest level of specificity, and query rules make it complex for SNFs to recommend more specific codes to the physician.

Response:

We appreciate that commenters agree there are more appropriate codes that can be used to indicate whether the patient has substance abuse or dependence. We continue to believe that appropriate treatment requires specificity in the coding of the diagnoses, which aligns with CMS' broader efforts to ensure better quality of care. Moreover, we believe that the plan of care for a patient should not only depend upon the diagnoses of the referring physician, but also on the assessment of the SNF care team, which includes the clinicians caring for the patient at the facility.

After consideration of public comments, we are finalizing the changes as proposed.

4. Clinical Category Changes for Certain Subcategory Fracture Codes

Each year, we solicit comments on additional substantive and nonsubstantive changes that commenters believe are necessary to the PDPM ICD-10 code mappings. In the FY 2023 final rule (87 FR 47524), we described how one commenter recommended that CMS consider revising the PDPM ICD-10 code mappings to reclassify certain subcategory S42.2—humeral fracture codes. The commenter highlighted that certain encounter codes for humeral fractures, such as those ending in the 7th character of A for an initial encounter for fracture, are permitted the option to be mapped to a surgical clinical category, denoted on the PDPM ICD-10 code mappings as May be Eligible for One of the Two Orthopedic Surgery Categories (that is, major joint replacement or spinal surgery, or orthopedic surgery) if the patient had a major procedure during the prior inpatient stay that impacts the SNF care plan. However, the commenter noted that other encounter codes within the same code family, such as those ending in the 7th character of D for subsequent encounter for fracture with routine healing, are mapped to the Non-Surgical Orthopedic/Musculoskeletal without the surgical option. The commenter requested that we review all subcategory S42.2—fracture codes to ensure that the appropriate surgical clinical category could be selected for joint aftercare. Since then, the commenter has also contacted CMS with a similar suggestion for M84.552D

Pathological fracture in neoplastic disease, left femur,

subsequent encounter for fracture with routine healing.

We have since reviewed the suggested code subcategories to determine the most efficient manner for addressing this discrepancy. We proposed adding the surgical option that allows 45 subcategory S42.2—codes for displaced fractures to be eligible for one of two orthopedic surgery categories. However, we noted that this does not extend to subcategory S42.2—codes for nondisplaced fractures, which typically do not require surgery. We also proposed adding the surgical option to subcategory 46 M84.5—codes for pathological fractures to certain major weight-bearing bones to be eligible for one of two orthopedic surgery categories.

Table 2,

Proposed Clinical Category Changes for S42.2 and M84.5 Fracture Codes,

which lists all 91 codes included in this proposal, was posted on the CMS website at

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM.

We solicited comments on the proposed substantive changes to the PDPM ICD-10 code mappings discussed in this section, as well as comments on additional substantive and nonsubstantive changes that commenters believe are necessary.

We did not receive public comments on this provision, and therefore, we are finalizing the changes as proposed.

5. Clinical Category Changes for Unacceptable Principal Diagnosis Codes

In the FY 2023 final rule (87 FR 47525), we described how several commenters referred to instances when SNF claims were denied for including a primary diagnosis code that was listed on the PDPM ICD-10 code mappings as a valid code, but was not accepted by some Medicare Administrative Contractors (MACs) that use the Hospital Inpatient Prospective Payment System (IPPS) Medicare Code Editor (MCE) lists when evaluating the primary diagnosis codes listed on SNF claims. In the IPPS, a patient's diagnosis is entered into the Medicare claims processing systems and subjected to a series of automated screens called the MCE. The MCE lists are designed to identify cases that require further review before classification into an MS-DRG. We noted that all codes on the MCE lists are able to be reported; however, a code edit may be triggered that the MAC may either choose to bypass or return to the provider to resubmit. Updates to the MCE lists are proposed on an annual basis and discussed through IPPS rulemaking when new codes or policies involving existing codes are introduced.

Commenters recommended that CMS seek to align the PDPM ICD-10 code mappings with the MCE in treating diagnoses that are Return to Provider, specifically referring to the

Unacceptable Principal Diagnosis

edit code list in the Definition of Medicare Code Edits, which was posted on the CMS website at

https://www.cms.gov/medicare/medicare-fee-for-service-payment/acuteinpatientpps/ms-drg-classifications-and-software.

The

Unacceptable Principal Diagnosis

edit code list contains selected codes that describe a circumstance that influences an individual's health status but not a current illness or injury, or codes that are not specific manifestations but may be due to an underlying cause, and

which are considered unacceptable as a principal diagnosis.

We identified 95 codes from the MCE

Unacceptable Principal Diagnosis

edit code list that were mapped to a valid clinical category on the PDPM ICD-10 code mappings, and that were coded as primary diagnoses for 14,808 SNF stays (0.84 percent) in FY 2021. Table 3,

Proposed Clinical Category Changes for Unacceptable Principal Diagnosis Codes,

which lists all 95 codes included in this proposal, was posted on the CMS website at

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM.

As stated previously in this section of this final rule, we note that reporting these codes as a primary diagnosis for a SNF stay may trigger an edit that the MAC may either choose to bypass or return to the provider to resubmit, and therefore not all of these 14,808 stays were denied by the MACs.

After clinical review, we concurred that the 95 codes listed in Table 3 on the CMS website should be assigned to Return to Provider. For the diagnosis codes listed in Table 3 on the CMS website that are from the category B95 to B97 range and contain the suffix “as the cause of diseases classified elsewhere”, the ICD-10 coding convention for such etiology and manifestation codes, where certain conditions have both an underlying etiology and multiple body system manifestations due to the underlying etiology, dictates that the underlying condition should be sequenced first, followed by the manifestation. The ICD-10 coding guidelines also state that codes from subcategory G92.0—

Immune effector cell-associated neurotoxicity syndrome,

subcategory R40.2—

Coma scale,

and subcategory S06.A—

Traumatic brain injury

should only be reported as secondary diagnoses, as there are more specific codes that should be sequenced first. Additionally, the ICD-10 coding guidelines state that diagnosis codes in categories Z90 and Z98 are status codes, indicating that a patient is either a carrier of a disease or has the sequelae or residual of a past disease or condition, and are not reasons for a patient to be admitted to a SNF. Lastly, our clinicians determined that diagnosis code Z43.9

Encounter for attention to unspecified artificial opening

should be assigned to the clinical category Return to Provider because there are more specific codes that identify the site for the artificial opening.

Therefore, we proposed to reassign the 95 codes listed in Table 3 on the CMS website from the current default clinical category on the PDPM ICD-10 code mappings to Return to Provider. We also proposed to make future updates to align the PDPM ICD-10 code mappings with the MCE

Unacceptable Principal Diagnosis

edit code list on a subregulatory basis going forward. Moreover, we solicited comment on aligning with the MCE

Manifestation codes not allowed as principal diagnosis

edit code list, which contains diagnosis codes that are the manifestation of an underlying disease, not the disease itself, and therefore should not be used as a principal diagnosis, and the

Questionable admission codes

edit code list, which contains diagnoses codes that are not usually sufficient justification for admission to an acute care hospital. While these MCE lists were not mentioned by commenters, we believed that some MACs may be applying these edit lists to SNF claims and this could cause continued differences between the PDPM ICD-10 code mappings and the IPPS MCE. Finally, we proposed to make future updates to align the PDPM ICD-10 code mappings with the MCE

Manifestation codes not allowed as principal diagnosis

edit code list and the

Questionable admission codes

edit code list on a subregulatory basis going forward.

We solicited comments on the proposed substantive changes to the PDPM ICD-10 code mappings discussed in this section, as well as comments on additional substantive and nonsubstantive changes that commenters believe are necessary. We did not receive public comments on this provision, and therefore, we are finalizing as proposed.

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

A. Background and Statutory Authority

The Skilled Nursing Facility Quality Reporting Program (SNF QRP) is authorized by section 1888(e)(6) of the Act, and it applies to freestanding SNFs, SNFs affiliated with acute care facilities, and all non-critical access hospital (CAH) swing-bed rural hospitals. Section 1888(e)(6)(A)(i) of the Act requires the Secretary to reduce by 2 percentage points the annual market basket percentage increase described in section 1888(e)(5)(B)(i) of the Act applicable to a SNF for a fiscal year (FY), after application of section 1888(e)(5)(B)(ii) of the Act (the productivity adjustment) and section 1888(e)(5)(B)(iii) of the Act, in the case of a SNF that does not submit data in accordance with sections 1888(e)(6)(B)(i)(II) and (III) of the Act for that FY. Section 1890A of the Act requires that the Secretary establish and follow a pre-rulemaking process, in coordination with the consensus-based entity (CBE) with a contract under section 1890(a) of the Act, to solicit input from certain groups regarding the selection of quality and efficiency measures for the SNF QRP. We have codified our program requirements in our regulations at 42 CFR part 413.

In the proposed rule, we proposed to adopt three new measures, remove three existing measures, and modify one existing measure. Second, we sought information on principles we could use to select and prioritize SNF QRP quality measures in future years. Third, we provided an update on our health equity efforts. Fourth, we proposed several administrative changes, including a change to the SNF QRP data completion thresholds and a new data submission method for the proposed CoreQ: Short Stay Discharge questionnaire. Finally, we proposed to begin the public reporting of four measures.

B. General Considerations Used for the Selection of Measures for the SNF QRP

For a detailed discussion of the considerations we use for the selection of SNF QRP quality, resource use, or other measures, we refer readers to the FY 2016 SNF PPS final rule (80 FR 46429 through 46431).

1. Quality Measures Currently Adopted for the FY 2024 SNF QRP

The SNF QRP currently has 16 measures for the FY 2024 SNF QRP, which are listed in Table C1. For a discussion of the factors used to evaluate whether a measure should be removed from the SNF QRP, we refer readers to § 413.360(b)(2).

Table 11—Quality Measures Currently Adopted for the FY 2024 SNF QRP

Short name

Measure name & data source

Resident Assessment Instrument Minimum Data Set (Assessment-Based)

Pressure Ulcer/Injury

Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/Injury.

Application of Falls

Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay).

Application of Functional Assessment/Care Plan

Application of Percent of Long-Term Care Hospital (LTCH) Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function.

Change in Mobility Score

Application of IRF Functional Outcome Measure: Change in Mobility Score for Medical Rehabilitation Patients.

Discharge Mobility Score

Application of IRF Functional Outcome Measure: Discharge Mobility Score for Medical Rehabilitation Patients.

Change in Self-Care Score

Application of the IRF Functional Outcome Measure: Change in Self-Care Score for Medical Rehabilitation Patients.

Discharge Self-Care Score

Application of IRF Functional Outcome Measure: Discharge Self-Care Score for Medical Rehabilitation Patients.

DRR

Drug Regimen Review Conducted With Follow-Up for Identified Issues-Post-Acute Care (PAC) Skilled Nursing Facility (SNF) Quality Reporting Program (QRP).

TOH-Provider *

Transfer of Health (TOH) Information to the Provider Post-Acute Care (PAC).

TOH-Patient *

Transfer of Health (TOH) Information to the Patient Post-Acute Care (PAC).

Claims-Based

MSPB SNF

Medicare Spending Per Beneficiary (MSPB)—Post Acute Care (PAC) Skilled Nursing Facility (SNF) Quality Reporting Program (QRP).

DTC

Discharge to Community (DTC)—Post Acute Care (PAC) Skilled Nursing Facility (SNF) Quality Reporting Program (QRP).

PPR

Potentially Preventable 30-Day Post-Discharge Readmission Measure for Skilled Nursing Facility (SNF) Quality Reporting Program (QRP).

SNF HAI

SNF Healthcare-Associated Infections (HAI) Requiring Hospitalization.

NHSN

HCP COVID-19 Vaccine

COVID-19 Vaccination Coverage among Healthcare Personnel (HCP).

HCP Influenza Vaccine

Influenza Vaccination Coverage among Healthcare Personnel (HCP).

* In response to the public health emergency (PHE) for the Coronavirus Disease 2019 (COVID-19), we released an Interim Final Rule (85 FR 27595 through 27597) which delayed the compliance date for collection and reporting of the Transfer of Health (TOH) Information measures for at least 2 full fiscal years after the end of the PHE. The compliance date for the collection and reporting of the Transfer of Health Information measures was revised to October 1, 2023 in the FY 2023 SNF PPS final rule (87 FR 47547 through 47551).

C. SNF QRP Quality Measure Updates

In the proposed rule, we included SNF QRP proposals for the FY 2025 and FY 2026 program years. We proposed to add new measures to the SNF QRP as well as remove measures from the SNF QRP. Beginning with the FY 2025 SNF QRP, we proposed to (1) modify the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure, (2) adopt the Discharge Function Score measure,

12

which we specified under section 1888(e)(6)(B)(i) of the Act, and (3) remove three current measures: (i) the Application of Percent of Long-Term Care Hospital (LTCH) Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function measure, (ii) the Application of IRF Functional Outcome Measure: Change in Self-Care Score f

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