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-P]

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: Proposed Rule.

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SUMMARY: This proposed rule would revise 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 proposed rule would revise 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.

DATES: Comments will be considered if we receive them at the

appropriate address, as provided below, no later than 5 p.m. on June

21, 1996.

ADDRESSES: Mail written comments (1 original and 3 copies) to the

following address: Health Care Financing Administration, Department of

Health and Human Services, Attention: BPD-805-P, P.O. Box 7517,

Baltimore, MD 21207.

If you prefer, you may deliver your written comments (1 original

and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW,

Washington, DC 20201, or

Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.

Because of staffing and resource limitations, we cannot accept

comments by facsimile (FAX) transmission. In commenting, please refer

to file code BPD-805-P. Comments received timely will be available for

public inspection as they are received, generally beginning

approximately 3 weeks after publication of a document, in Room 309-G of

the Department's offices at 200 Independence Avenue, SW, Washington,

DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.

(phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Katie Walker (410) 786-7278.

SUPPLEMENTARY INFORMATION:

I. Background

Frequently, hospitals participating in Medicare and Medicaid,

particularly those located in rural areas, have provided both inpatient

acute and long-term care in the same facility. However, Medicaid

regulations at 42 CFR 440.40 require that long-term care be provided in

a separately identifiable ``distinct-part'' unit.

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 are thus permitted to

vary the level of care they provide in response to changing patient

needs by using the same bed to furnish hospital services at one time

and SNF services at another.

Hospitals with approved swing-bed programs that furnished long-term

care services 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.

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.

Specifically, section 1883(d) of the Act states that Medicare

payment for SNF services furnished by hospitals with more than 49 beds

but fewer than 100 beds may not be made either for: (1) extended care

services that are furnished to a swing-bed hospital SNF patient more

than 5 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 5-day period that the transfer of the

patient is not medically appropriate; or (2) days of SNF care in a cost

reporting period once Medicare covered days of SNF care exceed 15

percent of the product of the number of days in the period and the

average number of licensed beds in the hospital during that period.

Payment will, however, continue to be made for patients who are

receiving SNF care at the time the limit is reached.

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) would no longer be used for the

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

they would be replaced by the term ``nursing facility'' (NF). Before

that date, under the Medicaid program, a swing-bed hospital could

furnish SNF-type, as well as ICF-type, services to non-Medicare

patients. Now, the NF level of care encompasses services that were

previously known as SNF-type and ICF-type services. 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

[[Page 17678]]

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'' 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 This Proposed Rule

A. New Payment Rate Methodology

In accordance with section 1883 of the Act, as amended by section

4008(j) of OBRA 1990, this proposed rule would implement in regulations

a revised methodology for Medicare payment of routine SNF services

provided in a swing-bed hospital. Presently, under Sec. 413.114(c)(1),

the reasonable cost of routine SNF services is based on the average

Statewide rate per patient day paid under the State Medicaid plan for

routine services furnished by SNFs in that State during the previous

calendar year. Under this proposed rule, Medicare payment to a swing-

bed hospital for routine 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.

The rates applicable to calendar years 1990 through 1994, listed

below, have been published in section 2231 of the Provider

Reimbursement Manual (HCFA Pub. 15-1). We will continue to publish

annual updates in that manual.

Section B below describes the methodology for calculating the

Medicare swing-bed rates. Tables A through E provide the Medicare

swing-bed 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. (These rates were applied

beginning October 1, 1990. Implementation of the rates was accomplished

by means of HCFA administrative issuances, as addressed above.) If

there are additional changes in the methodology, these revisions would

be published through notice and comment rulemaking in the Federal

Register.

In accordance with section 4008(j)(2) of OBRA 1990, this proposed

rule also includes 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.

B. Development of Medicare Swing-Bed Rates Effective for Services

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

1. Data--In developing the Medicare payment rates for swing-bed

care, we use 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.

2. 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 note 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.)

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

October 1, 1990 and Before December 31, 1990

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Routine Return on

Region payment equity 1

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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

[[Page 17679]]

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

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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

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Routine Return on

Region payment equity \2\

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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

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

proprietary 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\

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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

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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

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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

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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.

Table E.--Medicare Swing Bed Rates--For Services Furnished On or After

January 1, 1994 and Before December 31, 1994

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

Routine

Region payment

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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

[[Page 17680]]

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

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Table F.--Medicare Swing Bed Rates--For Services Furnished On or After

January 1, 1995 and Before December 31, 1995

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Routine

Region payment

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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

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C. 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.

This proposed rule would revise 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 would be

determined 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, would be 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 would be 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 would be used for non-Medicare

covered swing-bed days because such services may encompass services

that were formerly known as ICF and SNF-type services.)

D. 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. Impact Statement

For proposed 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,

[[Page 17681]]

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 proposed 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 proposed rule would

revise the regulations to incorporate a new methodology for payment of

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

statute specifies, we are proposing that Medicare payment for these

services be 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 proposed rule would also provide 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 proposing

a change to the carve 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 method as

described in Sec. 413.53(a)(2) for computing costs associated with

routine SNF and ICF-type services cannot be used. This proposed rule

would codify in regulations existing policy concerning the carve out

method as set forth in section 2230.5B of the Provider Reimbursement

Manual.

As noted above, the major provisions of this proposed 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 proposed

regulations 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 method. Codifying this

existing policy would have no economic impact.

Thus, we have determined, and we certify, that this proposed rule

would 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.

In accordance with the provisions of Executive Order 12866, this

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

IV. 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 1980 (44 U.S.C. 3501 et seq.).

V. Response to Comments

Because of the large number of items of correspondence we normally

receive on Federal Register documents published for comment, we are not

able to acknowledge or respond to them individually. We will consider

all comments we receive by the date and time specified in the ``DATES''

section of this preamble, and, if we proceed with a subsequent

document, we will respond to the comments in the preamble to that

document.

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. * * *

(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 method--(i) The carve 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. * * *

Average cost per diem for general routine services * * *

(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

[[Page 17682]]

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. * * *

(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 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)

Note: This document received at the Office of the Federal

Register on April 11, 1996.

Dated: September 29, 1995.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

[FR Doc. 96-9347 Filed 4-19-96; 8:45 am]

BILLING CODE 4120-01-P