Medicare Program; Adjustments to Cost Limits for Skilled Nursing Facility Inpatient Routine Service Costs

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

[BPD-896-PN]

RIN 0938-AL14

Medicare Program; Adjustments to Cost Limits for Skilled Nursing

Facility Inpatient Routine Service Costs

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

ACTION: Proposed notice.

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

SUMMARY: This notice proposes to eliminate an adjustment that we make

to the Medicare cost limits for skilled nursing facility (SNF) routine

services if the final rate of change in the market basket index for a

calendar year that we use to set the limits differs from the estimated

rate of change in the index by at least 0.3 percentage points.

Elsewhere in this issue of the Federal Register is a separate final

notice with comment period that explains the methodology we use to

develop the cost limits and sets forth the cost limits applicable to

cost reporting periods occurring on or after October 1, 1997.

COMMENT PERIOD: Written comments will be considered if we receive them

at the appropriate address, as provided below, no later than 5:00 p.m.

on December 1, 1997.

ADDRESSES: Mail written comments (one original and three copies) to the

following address: Health Care Financing Administration, Department of

Health and Human Services, Attention: BPD-896-PN, P.O. Box 7517,

Baltimore, MD 21244-0517.

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

and three 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.

Comments may also be submitted electronically to the following E-

mail address: [email protected] E-mail comments must include the

full name and address of the sender and must be submitted to the

referenced address in order to be considered. All comments must be

incorporated in the E-mail message because we may not be able to access

attachments. Electronically submitted comments will be available for

public inspection at the Independence Avenue address, below.

Because of staffing and resource limitations, we cannot accept

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

to file code BPD-896-PN. 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).

Copies: To order copies of the Federal Register containing this

document, send your request to: New Orders, Superintendent of

Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date

of the issue requested and enclose a check or money order payable to

the Superintendent of Documents, or enclose your Visa or Master Card

number and expiration date. Credit card orders can also be placed by

calling the order desk at (202) 512-1800 or by faxing to (202) 512-

2250. The cost for each copy is $8.00. As an alternative, you can view

and photocopy the Federal Register document at most libraries

designated as Federal Depository Libraries and at many other public and

academic libraries throughout the country that receive the Federal

Register.

FOR FURTHER INFORMATION CONTACT: Robert Kuhl, (410) 786-4597.

SUPPLEMENTARY INFORMATION:

I. Background

Sections 1861(v)(1)(A) and 1888 of the Act authorize the Secretary

to set limits on allowable costs incurred by a provider of services for

which payment may be made under Medicare. These limits are based on

estimates of the costs necessary for the efficient delivery of needed

health services. Section 1888(a) of the Act directs the Secretary to

set limits on per diem inpatient routine service costs for hospital-

based and freestanding SNFs by urban or rural area. Implementing

regulations appear at 42 CFR 413.30.

Elsewhere is this issue of the Federal Register, we are issuing a

final notice with comment period that announces, for cost reporting

periods beginning in FY 1998 (1) an updated schedule of limits on SNF

routine service costs for which payment may be made under the Medicare

program; and (2) an updated schedule of prospectively determined

payment rates for low Medicare volume SNFs that have elected to receive

prospective payments for routine service costs, as required under

section 1888(a) of the Act. The cost limits have been updated to

reflect changes to the wage data, the Metropolitan Statistical Area

(MSA) designations, and inflation data since the limits were last

issued.

The cost limits set forth in the separate notice are based on the

FY 1997 cost limits, trended to cost reporting periods beginning in FY

1998, using the most recent projections of the rates of inflation or

increase in the costs included in the SNF market basket index. The

market basket index is used to adjust the SNF cost data to reflect cost

increases occurring between the cost reporting periods represented in

the data collection and the midpoints of the cost reporting periods to

which the cost limits and rates apply. The market basket index is

comprised of the most commonly used categories of SNF routine service

expenses. The categories are based primarily on those used by the

National Center for Health Statistics in its National Nursing Home

Surveys.

The categories of expenses are weighted according to the estimated

proportion of SNF routine service costs attributable to each category.

A detailed description of the market basket index is described in the

October 7, 1992 Federal Register notice for cost limits (57 FR 46177).

II. Provisions of the Proposed Notice

In developing the market basket index, we obtain historical and

projected (estimated) rates of change in the price of goods and

services in each category. For cost limit purposes only, estimated

rates of change may be revised, retroactively, based on actual (final)

rates of change.

As described in all previous schedules of cost limits, if the final

rate of change in the market basket index for a calendar year differs

from the estimated rate of change by at least 0.3 percentage points, we

adjust the limits. We are proposing to eliminate this provision to

adjust the limits based on the following justification:

In the past, our determination to make this adjustment was made 6

months after the end of last calendar year where an estimate of change

was used. Since 1984, we have made several adjustments to the cost

limits because our estimates differed from the actual rates of change

by at least 0.3 percentage points. In some cases, the retroactive

adjustment was made to cost reports that had been settled for Medicare

reimbursement purposes for more than 2 years. We believe that the

original intent behind setting cost limits was to help providers

determine their cost limits prior to the beginning of the affected cost

reporting period. In addition, for the most part, these adjustments

have not been significant in relation to the financial insecurity

placed on providers and the administrative burden placed on the

Medicare fiscal intermediaries to

[[Page 51552]]

implement the adjustments. We believe that this retroactive adjustment

has not served a useful purpose based on past experience. Accordingly,

we believe it is administratively feasible to propose the elimination

of this provision. If, based on our analysis of public comments we

receive, we finalize the elimination of the adjustment, the effect of

that elimination will be made on a prospective basis.

III. Impact Statement

For proposed notices 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) unless we certify that

a proposed notice would not have a significant economic impact on a

substantial number of small entities. For purposes of the RFA, all SNFs

are considered to be small entities. Individuals and States are not

included in the definition of a small entity.

We have determined, and we certify, that a regulatory flexibility

analysis under the RFA is not required. As stated earlier in this

notice, we believe it is administratively feasible to propose

elimination of the adjustment provision to the cost limits. For the

most part, these adjustments have not been significant in relation to

the financial insecurity placed on providers and the administrative

burden placed on the Medicare fiscal intermediaries to implement the

adjustments. In addition, based on past experience, the retroactive

adjustments have not served a useful purpose.

Section 1102(b) of the Act requires us to prepare a regulatory

impact analysis if a notice such as this 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. 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.

We have not prepared a rural impact statement since we have

determined that this proposed notice would not have a significant

economic impact on the operations of a substantial number of small

rural hospitals.

In accordance with the provisions of Executive Order 12866, this

notice was reviewed by the Office of Management and Budget.

IV. 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 notice, and, if we proceed with a subsequent document,

we will respond to the comments in that document.

Authority: (Secs. 1102, 1814(b), 1861(v)(1), 1866(a), 1871, and

1888 of the Social Security Act (42 U.S.C. 1302, 1395f(b),

1395x(v)(1), 1395cc(a), 1395hh, and 1395yy); section 13503 of Pub.

L. 103-66 (42 U.S.C. 1395x(v)(1)(B) and 1395yy (note)) and 42 CFR

413.1, 413.24, 413.300 through 413.321).

(Catalog of Federal Domestic Assistance Program No. 93.773,

Medicare--Hospital Insurance)

Dated: September 25, 1997.

Nancy-Ann Min DeParle,

Deputy Administrator, Health Care Financing Administration.

Dated: September 25, 1997.

Donna E. Shalala,

Secretary.

[FR Doc. 97-25986 Filed 9-30-97; 8:45 am]

BILLING CODE 4120-01-P