Medicare and Medicaid Programs; New Payment Methodology for Routine Extended Care Services Provided in a Swing-Bed Hospital

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 413

[BPD-805-F]

RIN 0938-AG68

Medicare and Medicaid Programs; New Payment Methodology for

Routine Extended Care Services Provided in a Swing-Bed Hospital

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final rule.

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SUMMARY: This final rule revises the regulations governing the

methodology for payment of routine extended care services furnished in

a swing-bed hospital. Medicare payment for these services is determined

based on the average rate per patient day paid by Medicare for these

same services provided in freestanding skilled nursing facilities

(SNFs) in the region in which the hospital is located. The reasonable

cost for these services is the higher of the reasonable cost rates in

effect for the current calendar year or for the previous calendar year.

In addition, this final rule revises the regulations concerning the

method used to allocate hospital general routine inpatient service

costs for purposes of determining payments to swing-bed hospitals.

These changes are necessary to conform the regulations to section 1883

of the Social Security Act (the Act), and section 4008(j) of the

Omnibus Budget Reconciliation Act of 1990.

EFFECTIVE DATE: These regulations are effective on November 4, 1996.

FOR FURTHER INFORMATION CONTACT: John Davis (410) 786-0008.

SUPPLEMENTARY INFORMATION:

I. Background

Before the enactment of the Omnibus Budget Reconciliation Act of

1980 (Public Law 96-499), small rural hospitals had difficulty in

establishing separately identifiable units for Medicare and Medicaid

long-term care because of limitations in their physical plant and

accounting capabilities. These hospitals often had an excess of

hospital beds, while their communities had a scarcity of long-term care

beds in Medicare and Medicaid participating facilities. To alleviate

this problem, Congress enacted section 904 of Public Law 96-499, known

as the ``swing-bed provision,'' which authorized a cost-efficient means

of providing nursing home care in rural communities. This provision

added sections 1883 and 1913 of the Social Security Act (the Act),

under which certain rural hospitals with fewer than 50 beds could use

their inpatient facilities to furnish long-term care services to

Medicare and Medicaid patients. These hospitals were paid at rates that

were deemed appropriate for those services and were generally lower

than hospital rates. Medicare payment for routine SNF services was made

at the average Statewide Medicaid rate for the previous calendar year.

Payment for ancillary services was made based on reasonable cost.

[[Page 51612]]

On December 22, 1987, the Omnibus Budget Reconciliation Act of 1987

(OBRA 1987) (Public Law 100-203) was enacted. Section 4005(b) of OBRA

1987 amended section 1883(b)(1) of the Act to provide for an expansion

of the existing Medicare swing-bed program to include rural hospitals

with more than 49 but fewer than 100 beds, effective for swing-bed

agreements entered into after March 31, 1988. Although rural hospitals

having more than 49 beds but fewer than 100 beds can be swing-bed

hospitals, they are subject to additional payment limitations that do

not apply to the smaller swing-bed hospitals.

Also, sections 4201(a)(3), 4204, 4211(h)(9), and 4214 of OBRA 1987

provide that effective with services furnished on or after October 1,

1990, the terms ``skilled nursing facilities'' (SNFs) and

``intermediate care facilities'' (ICFs) are no longer to be used for

the purpose of certifying a facility for the Medicaid program. Instead,

they are replaced by the term ``nursing facility'' (NF). Thus, for

purposes of the Medicaid program, facilities are no longer certified as

ICFs but instead are certified only as NFs, and can provide services as

defined in section 1919(a)(1) of the Act. Effective October 1, 1990,

these long-term care services furnished by swing-bed hospitals to

Medicaid and to other non-Medicare patients have been referred to as

NF-type services.

On November 5, 1990, the Omnibus Budget Reconciliation Act of 1990

(OBRA 1990) (Public Law 101-508) was enacted. Section 4008(j) of OBRA

1990 amended section 1883(a)(2)(B)(ii)(II) of the Act to provide for a

new methodology to pay for routine SNF services provided in a swing-bed

hospital. Effective for services furnished on or after October 1, 1990,

Medicare payment for routine SNF services in a swing-bed hospital is

based on the average rate per patient day paid by Medicare for routine

services provided in freestanding SNFs in the region in which the

hospital is located. The rates are calculated using the regions as

defined in section 1886(d)(2)(D) of the Act.

Section 4008(j)(2) of OBRA 1990 also provides for a ``hold-harmless

harmless'' provision. Under this provision, if the reasonable cost of

routine SNF services furnished by a hospital during a calendar year is

less than the reasonable cost of these services determined for the

prior calendar year, payment is to be based on the reasonable cost

determination for the prior calendar year.

II. Provisions of the Proposed Rule

On April 22, 1996, we published a proposed rule in the Federal

Register (61 FR 17677), in which we included the following provisions.

New Payment Rate Methodology

We proposed to implement in regulations a revised methodology for

Medicare payment of routine SNF services provided in a swing-bed

hospital. Under the proposed rule, Medicare payment to a swing-bed

hospital for routine SNF services would be based on the average rate

per patient day paid by Medicare for routine SNF services provided in a

freestanding SNF in the region in which the hospital is located. These

rates would be determined prospectively based on the most current SNF

settled cost reporting data available (increased in a compounded

manner, using the increase applicable to the SNF routine cost limits,

up to and including the calendar year for which the rates are in

effect). Rates would be calculated using the regions as defined in

section 1886(d)(2)(D) of the Act (that is, one of the nine census

divisions established by the Bureau of the Census). Payment for

ancillary services furnished as SNF services in swing-bed hospitals

would continue to be paid on a reasonable cost basis.

We published the rates applicable to calendar years 1990 through

1994 (see below), which had been published in section 2231 of the

Provider Reimbursement Manual (HCFA Pub. 15-1). We stated our intent to

continue to publish annual updates in that manual.

We described the methodology for calculating the Medicare swing-bed

rates, and provided the rates for services furnished on or after

October 1, 1990, and before December 31, 1990, as well as for services

furnished in calendar years 1991, 1992, 1993, 1994, and 1995.

In accordance with section 4008(j)(2) of OBRA 1990, we also

proposed a hold-harmless provision for Medicare swing-bed payments. As

noted above, this provision would allow for payment of the higher of

the payment rate in effect for the current calendar year or the payment

rate received by the swing-bed hospital for the prior calendar year.

Development of Medicare Swing Bed Rates Effective for Services

Furnished on or after October 1, 1990 and before January 1, 1995

--Data--In developing the Medicare payment rates for swing-bed care, we

used the actual freestanding SNF inpatient routine service payments

obtained from settled Medicare cost reports. For fiscal years 1990-

1993, cost reports used were for periods ending on or after June 30,

1989 and through May 31, 1990; for 1994, cost reports used were for

periods ending on or after September 30, 1990 through August 31, 1991;

and for 1995, cost reports used were for periods ending on or after

October 31, 1992 through September 30, 1993. The data consist of

routine service payments that were adjusted for utilization review,

primary payor amounts, and application of lower of cost or charges. For

proprietary providers, the return on equity portion of the swing-bed

rate was adjusted to include only the routine portion (that is, the

return on equity component related to ancillary services costs was

removed).

HCFA adjusts these data, using the SNF market basket index (the

annual percent increase in SNF expenditures, considering inflation plus

an allowance for new technology) to inflate costs from the cost

reporting periods in the data base to the midpoint of the applicable

year to which the rates apply.

--Group Means--HCFA calculated the means of adjusted routine service

payments and the routine portion of return on equity for each census

region as shown in Tables A through D.

(We noted that effective October 1, 1993, section 13503(c) of the

Omnibus Budget Reconciliation Act of 1993 amended sections

1861(v)(1)(B) and 1878(f)(2) of the Act to eliminate return on equity

capital for SNF services furnished in a proprietary hospital. The

return on equity capital component was not added to the routine payment

rate for the months of October, November, and December of 1993 (Table

D) nor for any subsequent years.)

[[Page 51613]]

Table A.--Medicare Swing Bed Rates--for Services Furnished on or After

October 1, 1990 and Before December 31, 1990

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

Routine Return on

Region payment equity \1\

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

1. New England (CT, ME, MA, NH, RI, VT)....... $86.51 $1.42

2. Middle Atlantic (PA, NJ, NY)............... 86.39 1.27

3. South Atlantic (DE, DC, FL, GA, MD, NC, SC,

VA, WV)...................................... 75.28 1.48

4. East North Central (IL, IN, MI, OH, WI).... 75.03 1.18

5. East South Central (AL, KY, MS, TN)........ 65.79 1.21

6. West North Central (IA, KS, MN, MO, NB, ND,

SD).......................................... 74.09 1.34

7. West South Central (AR, LA, OK, TX)........ 67.85 1.87

8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY).. 81.32 1.47

9. Pacific (AK, CA, HI, OR, WA)............... 86.73 1.07

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

\1\ The return of equity component is included only in the rate paid to

proprietary hospitals.

Table B.--Medicare Swing Bed Rates--for Services Furnished on or After

January 1, 1991 and Before December 31, 1991

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

Routine Return on

Region payment equity \2\

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

1. New England (CT, ME, MA, NH, RI, VT)....... $90.92 $1.42

2. Middle Atlantic (PA, NJ, NY)............... 90.73 1.27

3. South Atlantic (DE, DC, FL, GA, MD, NC, SC,

VA, WV)...................................... 79.03 1.28

4. East North Central (IL, IN, MI, OH, WI).... 78.78 1.18

5. East South Central (AL, KY, MS, TN)........ 69.14 1.21

6. West North Central (IA, KS, MN, MO, NB, ND,

SD).......................................... 77.83 1.34

7. West South Central (AR, LA, OK, TX)........ 71.22 1.87

8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY).. 85.34 1.47

9. Pacific (AK, CA, HI, OR, WA)............... 91.10 1.07

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

\2\ The reutrn on equity component is included in the rate paid to

propriety hospitals.

Table C.--Medicare Swing Bed Rates--for Services Furnished on or After

January 1, 1992 and Before December 31, 1992

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

Routine Return on

Region payment equity \3\

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

1. New England (CT, ME, MA, NH, RI, VT)....... $95.10 $1.42

2. Middle Atlantic (PA, NJ, NY)............... 94.91 1.27

3. South Atlantic (DE, DC, FL, GA, MD, NC, SC,

VA, WV)...................................... 82.67 1.48

4. East North Central (IL, IN, MI, OH, WI).... 82.40 1.18

5. East South Central (AL, KY, MS, TN)........ 72.32 1.21

6. West North Central (IA, KS, MN, MO, NB, ND,

SD).......................................... 81.41 1.34

7. West South Central (AR, LA, OK, TX)........ 74.50 1.87

8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY).. 89.27 1.47

9. Pacific (AK, CA, HI, OR, WA)............... 95.29 1.07

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

\3\ The return on equity component is included only in the rate paid to

proprietary hospitals.

Table D.--Medicare Swing Bed Rates--for Services Furnished on or After

January 1, 1993 and Before December 31, 1993

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

Routine Return on

Region payment equity \4\

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

1. New England (CT, ME, MA, NH, RI, VT)....... $100.05 $1.42

2. Middle Atlantic (PA, NJ, NY)............... 99.84 1.27

3. South Atlantic (DE, DC, FL, GA, MD, NC, SC,

VA, WV)...................................... 86.97 1.48

4. East North Central (IL, IN, MI, OH, WI).... 86.69 1.18

5. East South Central (AL, KY, MS, TN)........ 76.08 1.21

6. West North Central (IA, KS, MN, MO, NB, ND,

SD).......................................... 85.64 1.34

7. West South Central (AR, LA, OK, TX)........ 78.37 1.87

8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY).. 93.91 1.47

9. Pacific (AK, CA, HI, OR, WA)............... 100.24 1.07

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

\4\ The return on equity component should be included in the rate paid

to proprietary hospitals only for the months of January through

September of this calendar year.

[[Page 51614]]

Table E.--Medicare Swing Bed Rates--for Services Furnished on or After

January 1, 1994 and Before December 31, 1994

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

Routine

Region payment

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

1. New England (CT, ME, MA, NH, RI, VT).................... $108.48

2. Middle Atlantic (PA, NJ, NY)............................ 104.33

3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)..... 89.47

4. East North Central (IL, IN, MI, OH, WI)................. 88.76

5. East South Central (AL, KY, MS, TN)..................... 79.44

6. West North Central (IA, KS, MN, MO, NB, ND, SD)......... 83.84

7. West South Central (AR, LA, OK, TX)..................... 84.97

8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............... 100.11

9. Pacific (AK, CA, HI, OR, WA)............................ 104.58

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

Table F.--Medicare Swing Bed Rates--for Services Furnished on or After

January 1, 1995 and Before December 31, 1995

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

Routine

Region payment

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

1. New England (CT, ME, MA, NH, RI, VT).................... $121.71

2. Middle Atlantic (PA, NJ, NY)............................ 117.28

3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)..... 105.22

4. East North Central (IL, IN, MI, OH, WI)................. 105.73

5. East South Central (AL, KY, MS, TN)..................... 94.61

6. West North Central (IA, KS, MN, MO, NB, ND, SD)......... 99.75

7. West South Central (AR, LA, OK, TX)..................... 99.63

8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............... 117.21

9. Pacific (AK, CA, HI, OR, WA)............................ 125.80

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

Table G.--Medicare Swing Bed Rates--for Services Furnished on or After

January 1, 1996 and Before December 31, 1996

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

Routine

Region payment

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

1. New England (CT, ME, MA, NH, RI, VT).................... $126.65

2. Middle Atlantic (PA, NJ, NY)............................ 121.74

3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)..... 109.04

4. East North Central (IL, IN, MI, OH, WI)................. 109.51

5. East South Central (AL, KY, MS, TN)..................... 99.11

6. West North Central (IA, KS, MN, MO, NB, ND, SD)......... 103.38

7. West South Central (AR, LA, OK, TX)..................... 102.89

8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............... 121.31

9. Pacific (AK, CA, HI, OR, WA)............................ 130.62

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The Carve-Out Method

In a swing-bed hospital, acute care services and long-term care

services are furnished interchangeably. To determine payment for

inpatient hospital services in a swing-bed hospital, section 1883(e) of

the Act provides that the costs attributable to routine long-term care

(SNF-type and ICF-type) services for all classes of patients are to be

subtracted (``carved out'') from the total allowable inpatient cost for

general inpatient routine services. The resulting amount represents the

general inpatient routine costs applicable to hospital routine care.

Once amounts attributable to SNF-type and ICF-type services have been

carved out, the average per diem cost of general routine hospital

services for swing-bed hospitals not subject to the prospective payment

system is then determined by dividing the remaining amount by the total

number of inpatient general routine hospital days (excluding SNF days

and ICF days). This method was chosen to avoid imposing a burdensome

cost finding process to allocate general routine service costs between

hospital and long-term care.

Swing-bed hospitals subject to the prospective payment system (PPS)

are paid for SNF-type services in the same manner as any other swing-

bed hospital. The carve-out method would be used primarily to determine

proper payment of pass-through costs. The prospective payment rates

based on diagnosis related groups (DRGs) for inpatient hospital

services under PPS are unaffected by the carve-out method.

As stated above, with the enactment of OBRA 1987, effective October

1, 1990, the distinction between SNFs and ICFs was eliminated under the

Medicaid program and the two types of facility were combined under the

term ``nursing facility'' (NF). This presented a problem in attempting

to determine the amount of the carve-out. Since Medicaid payment is now

determined based on a NF rate, the carve-out method could not be used

as previously defined.

The proposed rule revised Sec. 413.53(a)(2) to set forth our

current policy regarding the carve-out method (presently explained in

section 2230.5B of the Provider Reimbursement Manual) for SNF and NF

services furnished on or after October 1, 1990. Under the revised

carve-out method, the reasonable cost of hospital routine services is

determined

[[Page 51615]]

by subtracting the reasonable costs attributable to routine SNF-type

and NF-type services from total inpatient routine service costs. For

swing-bed SNF days covered by Medicare, the amount subtracted, or

carved out, is based on the regional Medicare swing-bed SNF rate. If,

under the hold-harmless provision explained above, a swing-bed hospital

is paid based on the swing-bed SNF rate that was in effect during the

prior calendar year, that higher rate would also be used for purposes

of calculating the reasonable cost of routine Medicare SNF days, to be

subtracted from total routine costs under the carve-out method. For all

non-Medicare swing-bed days, the amount subtracted is based on the

average statewide rate paid for routine services in NFs under the State

Medicaid plan during the prior calendar year, adjusted to approximate

the average NF rate for the current calendar year. (The NF rate is used

for non-Medicare covered swing-bed days because such services may

encompass services that were formerly known as ICF and SNF-type

services.)

Definitions

As discussed above, effective for services furnished on or after

October 1, 1990, the terms SNFs and ICFs were no longer to be used for

the purpose of certifying a facility for the Medicaid program, in

accordance with the provisions of OBRA 1987. Instead, they were

replaced by the term ``nursing facility'' (NF). Effective October 1,

1990, extended care services furnished by swing-bed hospitals to

Medicaid and to other non-Medicare patients have been referred to as

NF-type services.

To reflect the above provisions, we are making changes to the

definitions in Sec. 413.53(b) by (1) Revising the definition of

``average cost per diem for general routine services''; (2) removing

the definition of ``ICF-type services;'' (3) adding a definition of

``nursing facility (NF)-type services;'' and (4) revising the

definition of ``SNF-type services.''

III. Analysis of and Responses to Public Comments

In response to the April 22, 1996 proposed rule, we received one

item of correspondence from the American Health Care Association. The

Association essentially supports the proposed rule in that it modifies

the regulations to conform with policies that have been in existence

since 1990, and that are contained in the Provider Reimbursement

Manual. However, the commenter points out that rural hospitals with

more than 49 beds but less than 100 beds are subject to an additional

payment limitation. The Medicare payment for SNF services by the

hospital may not be made for more than five days (excluding weekends

and holidays), after a bed in a SNF becomes available in the geographic

region, unless the patient's physician certifies within the five-day

period that the transfer is not medically appropriate. The commenter is

concerned that hospitals are not strictly adhering to the five-day

rule.

Response: We are not currently aware of any hospital that is

violating the five-day rule. However, the hospital is subject to a

periodic certification survey. It is during this survey that a sampling

of the records for swing-bed patients is examined to ensure that the

five-day rule is being followed correctly. Violators would endanger

their continued certification as a swing-bed facility.

In addition to this periodic certification survey, if someone is

aware that a hospital is violating the five-day rule, he or she can

contact the State Department of Licensure and Certification and request

that a complaint survey be done. A complaint survey is done within a

matter of weeks or months, which is much faster than the three to six

years that a periodic one takes.

IV. Provisions of the Final Regulations

This final rule incorporates the provisions of the proposed rule.

The rates applicable to calendar year 1996 were not published in the

proposed rule, but have been published in the Provider Reimbursement

Manual. For the convenience of the reader, we are including them as

Table G above in this final rule. Subsequent updates will be provided

in the Provider Reimbursement Manual.

V. Impact Statement

For final rules such as this, we generally prepare a regulatory

flexibility analysis that is consistent with the Regulatory Flexibility

Act (RFA) (5 U.S.C. 601 through 612). For purposes of a RFA, States and

individuals are not considered small entities. However, providers are

considered to be small entities.

In addition, section 1102(b) of the Act requires us to prepare a

regulatory flexibility analysis for any final rule that may have a

significant impact on the operations of a substantial number of small

rural hospitals. Such an analysis must conform to the provisions of

section 604 of the RFA. With the exception of hospitals located in

certain rural counties adjacent to urban ares, for purposes of section

1102(b) of the Act, we define a small rural hospital as a hospital that

is located outside of a Metropolitan Statistical Area and has fewer

than 50 beds.

In accordance with the provisions of section 1883 of the Act, as

amended by section 4008(j) of OBRA 1990, this final rule revises the

regulations to incorporate a new methodology for payment of routine

extended care services provided in a swing-bed hospital. As the statute

specifies, Medicare payment for these services is determined based on

the average rate per patient day paid by Medicare for these same

services provided in freestanding skilled nursing facilities (SNFs) in

the region in which the hospital is located, during the most recent

year for which cost reporting data are available. This final rule also

provides that the reasonable cost for these services is the higher of

the reasonable cost rates in effect for the current calendar year or

for the previous calendar year.

In addition to the changes mandated by section 4008(j) of OBRA 1990

regarding payment for routine extended care services, we are changing

to the out method of determining routine inpatient hospital costs of

swing-bed hospitals. As discussed above, with the enactment of OBRA

1987, the distinction between SNFs and ICFs was eliminated under the

Medicaid program. Thus, the carve-out out method as described in

Sec. 413.53(a)(2) for computing costs associated with routine SNF and

ICF-type services cannot be used. This final rule codifies in

regulations existing policy concerning the carve-out out method as set

forth in section 2230.5B of the Provider Reimbursement Manual.

As noted above, the major provisions of this final rule are

required by section 1883 of the Act, as amended by section 4008(j) of

OBRA 1990. Thus, a majority of the costs associated with these final

rules are the result of legislation, and this rule, in and of itself,

has little or no independent effect or burden. Although we are unable

to provide a quantifiable estimate of impact, we note that the only

discretionary aspect of this rule is to set forth in regulations our

current policy concerning the carve-out out method. Codifying this

existing policy would have no economic impact.

Thus, we have determined, and we certify, that this final rule does

not have a significant impact on the operations of a substantial number

of small entities or on small rural hospitals. Therefore, we have not

prepared a regulatory flexibility analysis or an analysis of the

effects of this rule on small rural hospitals.

[[Page 51616]]

In accordance with the provisions of Executive Order 12866, this

final rule was not reviewed by the Office of Management and Budget.

This is not a major rule as defined by U.S.C. 804(2).

V. Collection of Information Requirements

This document does not impose information collection and

recordkeeping requirements. Consequently, it need not be reviewed by

the Office of Management and Budget under the authority of the

Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

List of Subjects in 42 CFR Part 413

Health facilities, Kidney diseases, Medicare, Puerto Rico,

Reporting and recordkeeping requirements.

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR

END-STAGE RENAL DISEASE SERVICES

1. The authority citation for part 413 continues to read as

follows:

Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social

Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).

Subpart D--Apportionment

2. Section 413.53 is amended by revising paragraph (a)(1)(ii)(C)

and (a)(2); under paragraph (b), definition of ``average cost per diem

for general routine services'', paragraph (2) is revised; the

definition of ``ICF-type services'' is removed; a new definition of

``nursing facility (NF) type services'' is added; and the definition of

``SNF-type services'' is revised, to read as follows:

Sec. 413.53 Determination of cost of services to beneficiaries.

(a) Principle. * * *

(1) Departmental method

* * * * *

(ii) Exception: Indirect cost of private rooms. For cost reporting

periods starting on or after October 1, 1982, except with respect to a

hospital receiving payment under part 412 of this chapter (relating to

the prospective payment system), the additional cost of furnishing

services in private room accommodations is apportioned to Medicare only

if these accommodations are furnished to program beneficiaries, and are

medically necessary. To determine routine service cost applicable to

beneficiaries--

* * * * *

(C) Effective October 1, 1990, do not include private rooms

furnished for SNF-type and NF-type services under the swing-bed

provision in the number of days in paragraphs (a)(1)(ii)(A) and (B) of

this section.

(2) Carve-out out method--(i) The carve-out out method is used to

allocate hospital inpatient general routine service costs in a

participating swing-bed hospital, as defined in Sec. 413.114(b). Under

this method, effective for services furnished on or after October 1,

1990, the reasonable costs attributable to the inpatient routine SNF-

type and NF-type services furnished to all classes of patients are

subtracted from total inpatient routine service costs before computing

the average cost per diem for inpatient routine hospital care.

(ii) The cost per diem attributable to the routine SNF-type

services covered by Medicare is based on the regional Medicare swing-

bed SNF rate in effect for a given calendar year, as described in

Sec. 413.114(c). The Medicare SNF rate applies only to days covered and

paid as Medicare days. When Medicare coverage runs out, the Medicare

rate no longer applies.

(iii) The cost per diem attributable to all non-Medicare swing-bed

days is based on the average statewide Medicaid NF rate for the prior

calendar year, adjusted to approximate the average NF rate for the

current calendar year.

(iv) The sum of total Medicare SNF-type days multiplied by the cost

per diem attributable to Medicare SNF-type services and the total NF-

type days multiplied by the cost per diem attributable to all non-

Medicare days is subtracted from total inpatient general routine

service costs. The cost per diem for inpatient routine hospital care is

computed based on the remaining inpatient routine service costs.

* * * * *

(b) Definitions. As used in this section--

* * * * *

Average cost per diem for general routine services means the

following:

* * * * *

(2) For swing-bed hospitals, the amount computed by--(i)

Subtracting the routine costs associated with Medicare SNF-type days

and non-Medicare NF-type days from the total allowable inpatient cost

for routine services (excluding the cost of services provided in

intensive care units, coronary care units, and other intensive care

type inpatient hospital units and nursery costs); and

(ii) Dividing the remainder (excluding the total private room cost

differential) by the total number of inpatient hospital days of care

(excluding Medicare SNF-type days and non-Medicare NF-type days of

care, days of care in intensive care units, coronary care units, and

other intensive care type inpatient hospital units; and newborn days;

but including total private room days).

* * * * *

Nursing facility (NF)-type services, formerly known as ICF and SNF-

type services, are routine services furnished by a swing-bed hospital

to Medicaid and other non-Medicare patients. Under the Medicaid

program, effective October 1, 1990, facilities are no longer certified

as SNFs or ICFs but instead are certified only as NFs and can provide

services as defined in section 1919(a)(1) of the Act.

* * * * *

Skilled nursing facility (SNF)-type services are routine services

furnished by a swing-bed hospital that would constitute extended care

services if furnished by an SNF. SNF-type services include routine SNF

services furnished in the distinct part SNF of a hospital complex that

is combined with the hospital general routine service area cost center

under Sec. 413.24(d)(5). Effective October 1, 1990, only Medicare

covered services are included in the definition of SNF-type services.

* * * * *

Subpart F--Specific Categories of Costs

3. In Sec. 413.114, paragraphs (c)(1) and (2) are removed,

paragraph (c)(3) is redesignated as paragraph (c)(2), and a new

paragraph (c)(1) is added to read as follows:

Sec. 413.114 Payment for posthospital SNF care furnished by a swing-

bed hospital.

* * * * *

(c) Principle. The reasonable cost of posthospital SNF care

furnished by a swing-bed hospital is determined as follows:

(1) The reasonable cost of routine SNF services is based on the

average Medicare rate per patient day for routine services provided in

freestanding SNFs in the region where the swing-bed hospital is

located. The rates are calculated using the regions as defined in

section 1886(d)(2)(D) of the Social Security Act. The rates are based

on the most recent year for which settled cost reporting period data

are available, increased in a compounded manner, using the increase

applicable to the SNF routine cost limits, up to and including the

calendar year for which the rates are in effect. If the current

Medicare swing-bed rate for routine extended care services furnished by

a swing-bed

[[Page 51617]]

hospital during a calendar year is less than the rate for the prior

calendar year, payment is made based on the prior calendar year's rate.

* * * * *

(Catalog of Federal Domestic Assistance Program No. 93.773,

Medicare--Hospital Insurance;) Catalog of Federal Domestic

Assistance Program No. 93.778, Medical Assistance Program)

Dated: September 3, 1996.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

[FR Doc. 96-25282 Filed 10-2-96; 8:45 am]

BILLING CODE 4120-01-P