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

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URL: https://www.frixlaw.com/law-library/documents/fr%3A97-25986

## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** October 1, 1997
- **Citation:** 62 FR 51551

## Text

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.

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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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A97-25986. Public record. Not legal advice.